File Nos. 333-20621
811-08031
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. 2 |X|
Post-Effective Amendment No. __ |_|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 2 |X|
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SELIGMAN VALUE FUND SERIES, INC.
(Exact name of registrant as specified in charter)
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100 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices)
Registrant's Telephone Number: 212-850-1864 or Toll Free: 800-221-2450
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SELIGMAN VALUE FUND SERIES, INC.
(Exact name of registrant as specified in charter)
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100 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices)
Registrant's Telephone Number: 212-850-1864 or Toll Free: 800-221-2450
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THOMAS G. ROSE, Treasurer,
100 Park Avenue
New York, New York 10017
(Name and address of agent for service)
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Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this
Registration Statement
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It is proposed that this filing will become effective (check appropriate box):
|_| upon filing pursuant to paragraph (b)
|_| on (date) pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(1)
|_| on (date) pursuant to paragraph (a)(1)
|_| 75 days after filing pursuant to paragraph (a)(2) of rule 485
|_| on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant elects to register an indefinite amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2(a)(1).
<PAGE>
SELIGMAN VALUE FUND SERIES, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Part A of Form N-1A
Item No. Location in Prospectus
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<S> <C>
1. Cover Page Cover Page
2. Synopsis Summary of Series Expenses
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Cover Page; Organization and Capitalization
5. Management of the Fund Management Services
5a. Manager's Discussion of Fund Not Applicable
Performance
6. Capital Stock and Other Securities Organization and Capitalization
7. Purchase of Securities Being Offered Alternative Distribution System; Purchase of Shares; Administration,
Shareholder Services and Distribution Plan
8. Redemption or Repurchase Telephone Transactions; Redemption of Shares; Exchange Privilege
9. Pending Legal Proceedings Not Applicable
<CAPTION>
Part B of Form N-1A
Item No. Location in Statement of Additional Information or Prospectus
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<S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History General Information; Organization and Capitalization (Prospectus);
Appendix B
13. Investment Objectives and Policies Investment Objectives, Policies And Risks; Investment Limitations
14. Management of the Registrant Management and Expenses
15. Control Persons and Principal Directors and Officers
Holders of Securities
16. Investment Advisory and Other Services Management and Expenses; Distribution Services
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Other Securities General Information; Organization and Capitalization (Prospectus)
19. Purchase, Redemption and Pricing Purchase and Redemption of Fund Shares;
of Securities being Offered Valuation
20. Tax Status Federal Income Taxes (Prospectus)
21. Underwriter Distribution Services
22. Calculation of Performance Data Performance
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
SELIGMAN VALUE FUND SERIES, INC.
Seligman Large-Cap Value Fund
Seligman Small-Cap Value Fund
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
April 23, 1997
SELIGMAN LARGE-CAP VALUE FUND (the "Large-Cap Value Fund") seeks long-term
capital appreciation. The Large-Cap Value Fund seeks to achieve this objective
by investing primarily in equity securities of companies with large market
capitalizations deemed to be "value" companies by the investment manager.
SELIGMAN SMALL-CAP VALUE FUND (the "Small-Cap Value Fund") seeks long-term
capital appreciation. The Small-Cap Value Fund seeks to achieve this objective
by investing primarily in equity securities of companies with small market
capitalizations deemed to be "value" companies by the investment manager.
The Large-Cap Value Fund and the Small-Cap Value Fund (each, individually, a
"Series") are each a separate series of Seligman Value Fund Series, Inc. (the
"Fund"), an open-end, diversified management investment company. The Fund may
offer additional series in the future. For a description of each Series' in-
vestment objective and policies, including the risk factors associated with an
investment in the Fund, see "Investment Objectives, Policies and Risks." There
can be no assurance that a Series' investment objective will be achieved.
Investment advisory and management services are provided to the Fund by
J.&W. Seligman & Co. Incorporated (the "Manager") and, to the extent requested
by the Manager in respect of foreign assets, Seligman Henderson Co. (the
"Subadviser"). The Fund's distributor is Seligman Financial Services, Inc.
Each Series offers three classes of shares. Class A shares are sold subject
to an initial sales load of up to 4.75% and an annual service fee currently
charged at a rate of up to .25% of the average daily net asset value of the
Class A shares. Class A shares purchased in an amount of $1,000,000 or more
are sold without an initial sales load but are subject to a contingent de-
ferred sales load ("CDSL") of 1% on redemptions within eighteen months of pur-
chase. Class B shares are sold without an initial sales load but are subject
to a CDSL of 5% on redemptions in the first year after purchase of such
shares, declining to 1% in the sixth year and 0% thereafter, an annual distri-
bution fee of .75% and an annual service fee of up to .25% of the average
daily net asset value of the Class B shares. 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 purchase. Class D shares are sold without
an initial sales load but are subject to a CDSL of 1% imposed on redemptions
within one year of purchase, 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 the
Class D shares. Any CDSL payable upon redemption of shares will be assessed on
the lesser of the current net asset value or the original purchase price of
the shares redeemed. No CDSL will be imposed on shares acquired through the
reinvestment of dividends or distributions received from any class of shares.
See "Alternative Distribution System." Shares of the Fund may be purchased
through any authorized investment dealer.
This Prospectus sets forth concisely the information a prospective investor
should know about the Fund and the Series before investing. Please read it
carefully before you invest and keep it for future reference. Additional in-
formation about the Fund, including a Statement of Additional Information, has
been filed with the Securities and Exchange Commission. The Statement of Addi-
tional Information is available upon request without charge by calling or
writing the Fund at the telephone numbers or the address set forth above. The
Statement of Additional Information is dated the same date as this Prospectus
and is incorporated herein by reference in its entirety.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
SUMMARY OF SERIES EXPENSES
<TABLE>
<CAPTION>
LARGE-CAP VALUE FUND SMALL-CAP VALUE FUND
---------------------------------------------------- ----------------------------------------------------
CLASS A CLASS B CLASS D CLASS A CLASS B CLASS D
------------------- --------------- ---------------- ------------------- --------------- ----------------
SHAREHOLDER (INITIAL SALES (DEFERRED SALES (DEFERRED SALES (INITIAL SALES (DEFERRED SALES (DEFERRED SALES
TRANSACTION LOAD LOAD LOAD LOAD LOAD LOAD
EXPENSES ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE)
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales
Load Imposed on
Purchases (as a
percentage of
offering
price)......... 4.75% None None 4.75% None None
Sales Load on
Reinvested
Dividends...... None None None None None None
Deferred Sales
Load (as a
percentage of
original
purchase price
or redemption
proceeds, None; except 1% 5% in 1st year 1% in first year None; except 1% 5% in 1st year 1% in first year
whichever is in first 18 months 4% in 2nd year None thereafter in first 18 months 4% in 2nd year None thereafter
lower)......... if initial 3% in 3rd and if initial 3% in 3rd and
sales load was 4th years sale load was 4th years
waived in full due 2% in 5th year waived in full due 2% in 5th year
to size of purchase 1% in 6th year to size of purchase 1% in 6th year
None thereafter None thereafter
Redemption Fees. None None None None None None
Exchange Fees... None None None None None None
ANNUAL SERIES
OPERATING
EXPENSES
(as a percentage
of average net
assets) CLASS A CLASS B CLASS D CLASS A CLASS B CLASS D
------------------- --------------- ---------------- ------------------- --------------- ----------------
Management Fees. .80% .80% .80% 1.00% 1.00% 1.00%
12b-1 Fees...... .25% 1.00%** 1.00%** .25% 1.00%** 1.00%**
Other Expenses*. .61% .61% .61% .74% .74% .74%
---- --- --- --- --- ---
Total Fund
Operating
Expenses....... 1.66% 2.41% 2.41% 1.99% 2.74% 2.74%
==== ==== ==== ==== ==== ====
</TABLE>
The purpose of this table is to assist investors in understanding the vari-
ous costs and expenses which shareholders of the Fund bear directly or indi-
rectly. "Other Expenses" are based on estimated amounts for the current fiscal
year. The sales load on Class A shares is a one-time charge paid at the time
of purchase of shares. Reductions in initial sales loads are available in cer-
tain circumstances. Class A shares are not subject to an initial sales load
for purchases of $1,000,000 or more; however, such shares are subject to a
CDSL, a one time charge, only if the shares are redeemed within eighteen
months of purchase. The CDSLs on Class B and Class D shares are one-time
charges paid only if shares are redeemed within six years or one year of pur-
chase, respectively. For more information concerning reductions in sales loads
and for a more complete description of the various costs and expenses, see
"Purchase of Shares," "Redemption of Shares" and "Management Services" herein.
The Fund's Administration, Shareholder Services and Distribution Plan to which
the caption "12b-1 Fees" relates, is discussed under "Administration, Share-
holder Services and Distribution Plan" herein.
<TABLE>
<CAPTION>
LARGE-CAP SMALL-CAP
VALUE FUND VALUE FUND
EXAMPLE --------------- ---------------
1 YEAR 3 YEARS 1 YEAR 3 YEARS
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
You would pay the following expenses
on a $1,000 investment, assuming (1)
5% annual return and (2) redemption
at the end of each time period:..... Class A $64 $ 97 $67 $107
Class B+ $74 $105 $78 $115
Class D $34++ $ 75 $38++ $ 85
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EX-
PENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN AND THE 5% AN-
NUAL RETURN USED IN THIS EXAMPLE IS A HYPOTHETICAL RATE.
* Estimated.
** Includes an annual distribution fee of up to .75% and an annual service fee
of up to .25%. Pursuant to the Rules of the National Association of Securi-
ties Dealers, Inc., the aggregate deferred sales loads and annual distribu-
tion fees on Class B and Class D shares of each Series may not exceed 6.25%
of total gross sales, subject to certain exclusions. The maximum sales
charge rule is applied separately to each class. The 6.25% limitation is
imposed on each Series rather than on a per shareholder basis. Therefore, a
long-term Class B or Class D shareholder of a Series may pay more in total
sales loads (including distribution fees) than the economic equivalent of
6.25% of such shareholder's investment in such shares.
+ Assuming (1) a 5% annual return and (2) no redemption at the end of the pe-
riod, the expenses on a $1,000 investment would be: Large-Cap Value Fund--
$24 for 1 year and $75 for 3 years; Small-Cap Value Fund --$28 for 1 year
and $85 for 3 years.
++ Assuming (1) a 5% annual return and (2) no redemption at the end of one
year, the expenses on a $1,000 investment would be: Large-Cap Value Fund--
$24; Small-Cap Value Fund--$28.
2
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEM
Each Series offers three classes of shares. Class A shares are sold to in-
vestors who have concluded that they would prefer to pay an initial sales load
and have the benefit of lower continuing fees. Class B shares are sold to in-
vestors choosing to pay no initial sales sold, a higher distribution fee and a
CDSL with respect to redemptions within six years of purchase and who desire
shares to convert automatically to Class A shares after eight years. Class D
shares are sold to investors choosing to pay no initial sales load, a higher
distribution fee and, with respect to redemptions within one year of purchase,
a CDSL. The Alternative Distribution System allows investors to choose the
method of purchasing shares that is most beneficial in light of the amount of
the purchase, the length of time the shares are expected to be held and other
relevant circumstances. Investors should determine whether under their partic-
ular circumstances it is more advantageous to incur an initial sales load and
be subject to lower ongoing fees, as discussed below, or to have the entire
initial purchase price invested in a Series with the investment thereafter be-
ing subject to higher ongoing fees and either a CDSL for a six-year period
with automatic conversion to Class A shares after eight years or a CDSL for a
one-year period with no automatic conversion to Class A shares.
Investors who expect to maintain their investment for an extended period of
time might choose to purchase Class A shares because over time the accumulated
continuing distribution fees of Class B and Class D shares may exceed the ini-
tial sales load and lower ongoing fee of Class A shares. This consideration
must be weighed against the fact the amount invested in a Series will be re-
duced by the initial sales load on Class A shares deducted at the time of pur-
chase. Furthermore, the higher distribution fees on Class B and Class D shares
will be offset to the extent any return is realized on the additional funds
initially invested therein that would have been equal to the amount of the
initial sales load on Class A shares. Investors who qualify for reduced ini-
tial sales loads, as described under "Purchase of Shares" below, might also
choose to purchase Class A shares because the sales load deducted at the time
of purchase would be less. However, investors should consider the effect of
the 1% CDSL imposed on shares on which the initial sales load was waived be-
cause the amount of Class A shares purchased reached $1,000,000 or more. In
addition, Class B shares will be converted automatically to Class A shares af-
ter a period of approximately eight years, and thereafter investors will be
subject to lower ongoing fees. Shares purchased through reinvestment of divi-
dends and distributions on Class B shares also will convert automatically to
Class A shares along with the underlying shares on which they were earned.
Alternatively, some investors might choose to have all of their funds in-
vested initially in Class B or Class D shares, although remaining subject to a
higher continuing distribution fee and, for a six-year or one-year period, a
CDSL as described below. For example, an investor who does not qualify for re-
duced sales loads would have to hold Class A shares for more than 6.33 years
for the Class B or Class D distribution fee to exceed the initial sales load
plus the distribution fee on Class A shares. This example does not take into
account the time value of money, which further reduces the impact of the Class
B and Class D shares' 1% distribution fee, other expenses charged to each
class, fluctuations in net asset value or the effect of the return on the in-
vestment over this period of time.
Investors should bear in mind that total asset based sales charges (i.e.,
the higher continuing distribution fee plus the CDSL) on Class B shares that
are redeemed may exceed the total asset based sales charges that would be pay-
able on a purchase of the same amount of Class A or Class D shares, particu-
larly if the Class B shares are redeemed shortly after purchase or if the in-
vestor qualifies for a reduced sales load on the Class A shares.
Investors should understand that the purpose and function of the initial
sales load (and deferred sales load, when applicable) with respect to Class A
shares is the same as those of the deferred sales loads and higher distribu-
tion fees with respect to Class B and Class D shares in that the sales loads
and distribution fees applicable to each class provide for the financing of
the distribution of the shares of the Series.
3
<PAGE>
Class B and Class D shares are subject to the same ongoing distribution fees
but Class D shares are subject to a CDSL for a shorter period of time (one
year as opposed to six years) than Class B shares. However, unlike Class D
shares, Class B shares automatically convert to Class A shares after eight
years, which are subject to lower ongoing fees.
The three classes of shares of a Series represent interests in the same
portfolio of investments, have the same rights and are generally identical in
all respects except that each class bears its separate distribution and, po-
tentially, certain other class expenses and has exclusive voting rights with
respect to any matter to which a separate vote of any class is required by the
Investment Company Act of 1940, as amended (the "1940 Act"), or Maryland law.
The net income attributable to each class and dividends payable on the shares
of each class will be reduced by the amount of distribution and other expenses
of each class. Class B and Class D shares bear higher distribution fees, which
will cause the Class B and Class D shares to pay lower dividends than the
Class A shares. The three classes also have separate exchange privileges.
The Directors of the Fund believe that no conflict of interest currently ex-
ists between the Class A, Class B and Class D shares of each Series. On an on-
going basis, the Directors, in the exercise of their fiduciary duties under
the 1940 Act and Maryland law, will seek to ensure that no such conflict aris-
es. For this purpose, the Directors will monitor the Fund for the existence of
any material conflict among the classes and will take such action as is rea-
sonably necessary to eliminate any such conflicts that may develop.
DIFFERENCES BETWEEN CLASSES. The primary differences between Class A, Class
B and Class D shares are their sales load structures and ongoing expenses as
set forth below. The primary differences between Class B and Class D shares
are that Class D shares are subject to a shorter CDSL period and a lower CDSL
rate but Class B shares automatically convert to Class A shares after eight
years, resulting in a reduction in ongoing fees. Investors in Class B shares
should take into account whether they intend to redeem their shares within the
CDSL period and, if not, whether they intend to remain invested until the end
of the conversion period and thereby take advantage of the reduction in ongo-
ing fees resulting from the conversion to Class A shares. Other investors,
however, may elect to purchase Class D shares if they determine that it is ad-
vantageous to have all their assets invested initially and they are uncertain
as to the length of time they intend to hold their assets in the Fund or an-
other mutual fund in the Seligman Group for which the exchange privilege is
available. Although Class D shareholders are subject to a shorter CDSL period
at a lower rate, they forgo the Class B automatic conversion feature, making
their investment subject to higher distribution fees for an indefinite period
of time. Each class has advantages and disadvantages for different investors,
and investors should choose the class that best suits their circumstances and
their objectives.
<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
INITIAL (AS A % OF AVERAGE OTHER
SALES LOAD DAILY NET ASSETS) INFORMATION
---------- ------------------ ------------------
<S> <C> <C> <C>
CLASS A Maximum Service fee Initial sales load
initial of .25%. waived or reduced
sales load for
of 4.75% of certain purchases.
the public CDSL of 1% on
offering redemptions within
price. 18 months of
purchase on shares
on which initial
sales load was
waived in full due
to the size of the
purchase.
CLASS B None Service fee CDSL of:
of .25% 5% in 1st year 4%
Distribution in 2nd year 3% in
fee of .75% 3rd and 4th years
until 2% in 5th year 1%
conversion* in 6th year
0% after 6th year.
CLASS D None Service fee CDSL of 1% on
of .25% redemptions within
Distribution one year of
fee of .75%. purchase.
</TABLE>
- -------
* Conversion occurs at the end of the month which precedes the 8th anniversary
of the purchase date. If Class B shares of the Fund are exchanged for Class
B shares of another Seligman Mutual Fund, the conversion period applicable
to the Class B shares acquired in the exchange will apply, and the holding
period of the shares exchanged will be tacked onto the holding period of the
shares acquired.
4
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISKS
The Large-Cap Value Fund and the Small-Cap Value Fund are each a series of
Seligman Value Fund Series, Inc., an open-end diversified management investment
company, as defined in the 1940 Act, or mutual fund, incorporated in Maryland
on January 27, 1997. The Fund is a newly organized investment company with no
previous operating history.
SELIGMAN LARGE-CAP VALUE FUND. The investment objective of the Large-Cap
Value Fund is long-term capital appreciation. The investment objective is a
fundamental policy and may not be changed without shareholder approval. The Se-
ries seeks to achieve this objective by investing at least 65% of its total as-
sets in equity securities of companies with large market capitalization (i.e.,
market capitalization of $2 billion or more) at the time of purchase by the Se-
ries and identified by the Manager as value companies. There can be no assur-
ance that the Series will meet its investment objective.
SELIGMAN SMALL-CAP VALUE FUND. The investment objective of the Small-Cap
Value Fund is long-term capital appreciation. The investment objective is a
fundamental policy and may not be changed without shareholder approval. The Se-
ries seeks to achieve this objective by investing at least 65% of its total as-
sets in equity securities of companies with small market capitalization (i.e.,
market capitalization of up to $1 billion) at the time of purchase by the Se-
ries and identified by the Manager as value companies. There can be no assur-
ance that the Series will meet its investment objective.
A value company, as determined by the Manager, is a company that typically
displays, among other things, a relatively low price-to-book and/or price-to-
earnings ratio. The Manager, in selecting securities for inclusion in each Se-
ries' portfolio, may also consider, among other factors, evaluation of a
company's growth prospects, quality of management, and liquidity. The Manager
will also look for companies in which new management or proposed restructuring
plans are expected by the Manager to have a positive impact on the company's
overall business operations and productivity.
Under normal market conditions, each Series anticipates that it will be in-
vested primarily in equity securities of domestic issuers, including common
stock, preferred stock and stock convertible into or exchangeable for such se-
curities. Each Series expects that no more than 15% of its assets will be in-
vested in cash or fixed-income securities except for temporary defensive pur-
poses.
SMALL COMPANY INVESTMENT RISK FACTORS. Investments in smaller companies may
involve greater risks than larger companies, such as limited product lines,
markets and financial or managerial resources. Less frequently traded securi-
ties may be subject to more abrupt price movements than securities of larger
companies.
DERIVATIVES. Each Series may invest in financial instruments commonly known
as "derivatives" only for hedging or investment purposes. A Series will not in-
vest in derivatives for speculative purposes, i.e., where the derivative in-
vestment exposes the Series to undue risk of loss, such as where the risk of
loss is greater than the cost of the investment.
A derivative is generally defined as an instrument whose value is derived
from, or based upon, some underlying index, reference rate (e.g., interest
rates or currency exchange rates), security, commodity or other asset. A Series
will not invest in a specific type of derivative without prior approval from
the Fund's Board of Directors, after consideration of, among other things, how
the derivative instrument serves the Series' investment objective, and the risk
associated with the investment. The only types of derivatives in which each Se-
ries is currently permitted to invest are stock purchase rights and warrants,
and, as described more fully below, put options.
OPTIONS TRANSACTIONS. Each Series may purchase put options on portfolio secu-
rities in an attempt to hedge against a decrease in the price of a security
held by such Series. A Series will not purchase options for speculative purpos-
es. Purchasing a put option gives a Series the right to sell, and obligates the
writer to buy, the underlying security at the exercise price at any time during
the option period.
5
<PAGE>
When a Series purchases an option, it is required to pay a premium to the
party writing the option and a commission to the broker selling the option. If
the option is exercised by the Series, the premium and the commission paid may
be greater than the amount of the brokerage commission charged if the security
were to be purchased or sold directly. See "Investment Objectives, Policies and
Risks" in the Statement of Additional Information.
ILLIQUID SECURITIES. Each Series may invest up to 15% of its net assets in
illiquid securities, including restricted securities (i.e., securities not
readily marketable without registration under the Securities Act of 1933 (the
"1933 Act")) and other securities that are not readily marketable. Each Series
may purchase restricted securities that can be offered and sold to "qualified
institutional buyers" under Rule 144A of the 1993 Act, and the Manager, acting
pursuant to procedures approved by the Fund's Board of Directors, may
determine, when appropriate, that specific Rule 144A securities are liquid and
not subject to the 15% limitation on illiquid securities. Should this determi-
nation be made, the Manager, acting pursuant to such procedures, will carefully
monitor the security (focusing on such factors, among others, as trading activ-
ity and availability of information) to determine that the Rule 144A security
continues to be liquid. It is not possible to predict with assurance exactly
how the market for Rule 144A securities will further evolve. This investment
practice could have the effect of increasing the level of illiquidity in the
Series, if, and to the extent that, qualified institutional buyers become for a
time uninterested in purchasing Rule 144A securities.
FOREIGN SECURITIES. Each Series may invest in commercial paper and certifi-
cates of deposit issued by foreign banks and may invest in other securities of
foreign issuers directly or through American Depositary Receipts ("ADRs"), Eu-
ropean Depositary Receipts ("EDRs") or Global Depositary Receipts ("GDRs")
(collectively, "Depositary Receipts").
Foreign investments may be affected favorably or unfavorably by changes in
currency rates and ex- change control regulations. There may be less infor-
mation available about a foreign company than about a U.S. company and foreign
companies may not be subject to reporting standards and requirements comparable
to those applicable to U.S. companies. Foreign securities may not be as liquid
as U.S. securities. Securities of foreign companies may involve greater market
risk than securities of U.S. companies, and foreign brokerage commissions and
custody fees are generally higher than those in the United States. Investments
in foreign securities may also be subject to local economic or political risks,
political instability and possible nationalization of issuers. Depositary Re-
ceipts are instruments generally issued by domestic banks or trust companies
that represent the deposits of a security of a foreign issuer. ADRs may be pub-
licly traded on exchanges or over-the-counter in the United States and are
quoted and settled in dollars at a price that generally reflects the dollar
equivalent of the home country share price. EDRs and GDRs are typically traded
in Europe and in both Europe and the United States, respectively. Depositary
Receipts may be issued under sponsored or unsponsored programs. In sponsored
programs, the issuer has made arrange-ments to have its securities traded in
the form of a Depositary Receipt. In unsponsored programs, the issuers may not
be directly involved in the creation of the program. Although regulatory re-
quirements with respect to sponsored and unsponsored Depositary Receipt pro-
grams are generally similar, the issuers of securities represented by
unsponsored Depositary Receipts are not obligated to disclose material informa-
tion in the United States, and therefore, the import of such information may
not be reflected in the market value of such receipts. Each Series may invest
up to 10% of its total assets in foreign securities that it holds directly, but
this 10% limit does not apply to foreign securities held through Depositary Re-
ceipts which are traded in the United States or to commercial paper and certif-
icates of deposit issued by foreign banks.
FIXED-INCOME SECURITIES. The fixed-income securities in which each Series may
invest are not required to be rated by a recognized rating agency. As a
6
<PAGE>
matter of policy, each Series will invest only in "invest- ment grade" debt se-
curities or, in the case of unrated securities, debt securities that are, in
the opinion of the Manager, of equivalent quality to "investment grade" securi-
ties. "Investment grade" debt securities are rated within the four highest rat-
ing categories as determined by Moody's Investors Service, Inc. ("Moody's") or
Standard and Poor's Rating Service ("S&P"). A description of the debt securi-
ties ratings appears in Appendix A to the Statement of Additional Information.
BORROWING. Each Series may borrow money only from banks and only for tempo-
rary or emergency purposes in an amount not to exceed 15% of the value of its
total assets. The Fund may pledge its assets only to the extent necessary to
effect permitted borrowings on a secured basis.
Investment gains realized with additional funds borrowed will generally cause
the net asset value of a Series' shares to rise faster than could be the case
without borrowings. Conversely, if investment results fail to cover the cost of
borrowings, the net asset value of such Series' shares could decrease faster
than if there had been no borrowings. Borrowing, when used in this manner, is a
speculative practice known as "leveraging."
REPURCHASE AGREEMENTS. Each Series may enter into repurchase agreements with
commercial banks or broker/dealers under which the Series acquires a U.S. Gov-
ernment or a short-term money market instrument subject to resale at a mutually
agreed-upon price and time. The resale price reflects an agreed upon interest
rate effective for the period the Series holds the instrument that is unrelated
to the interest rate on the instrument.
A Series' repurchase agreements will at all times be fully collateralized,
and the Series will make payment for such securities only upon physical deliv-
ery or evidence of book entry transfer to the account of its custodian. Repur-
chase agreements could involve certain risks in the event of bankruptcy or
other default of the seller, including possible delays and expenses in liqui-
dating the underlying security, decline in the value of the underlying security
and loss of interest.
TEMPORARY INVESTMENTS. When the Manager believes that market conditions war-
rant a temporary defensive position, a Series may invest up to 100% of its as-
sets in short-term instruments such as commercial paper, bank certificates of
deposit, bankers' acceptances, or repurchase agreements for such securi-ties
and securities of the U.S. Government and its agencies and instrumentalities,
as well as cash and cash equivalents denominated in foreign currencies. Invest-
ments in domestic bank certificates of deposit and bankers' acceptances will be
limited to banks that have total assets in excess of $500 million and are sub-
ject to regulatory supervision by the U.S. Government or state governments. A
Series' investments in commercial paper of U.S. issuers will be limited to (a)
obligations rated Prime-1 by Moody's or A-1 by S&P or (b) unrated obligations
issued by companies having an outstanding unsecured debt issue currently rated
A or better by S&P. A description of various commercial paper ratings appears
in Appendix A to the Statement of Additional Information. A Series' investments
in foreign short-term instruments will be limited to those that, in the opinion
of the Manager, equate generally to the standards established for U.S. short-
term instruments.
Except as noted above, the foregoing investment policies are not fundamental
and the Fund's Board of Directors may change such policies, including the pa-
rameters by which "large" and "small" market capitalizations are defined, with-
out the vote of a majority of a Series' outstanding voting securities. A more
detailed description of the Series' investment policies, including a list of
those restrictions on the Series' investment activities which cannot be changed
without such a vote, appears in the Statement of Additional Information. Under
the 1940 Act, a "vote of a majority of the outstanding voting securities" of a
Series means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Series or (2) 67% or more of the shares present at a
shareholders' meeting
7
<PAGE>
if more than 50% of the outstanding shares are represented at the meeting in
person or by proxy.
MANAGEMENT SERVICES
THE MANAGER. The Board of Directors provides broad supervision over the af-
fairs of the Fund. Pursuant to a Management Agreement between the Fund, on be-
half of each Series, and the Manager, the Manager manages the investments of
the Fund and admin-isters the business and other affairs of the Fund. The ad-
dress of the Manager is 100 Park Avenue, New York, NY 10017.
The Manager also serves as manager of seventeen other investment companies
which, together with the Fund, comprise the "Seligman Group." These companies
are: Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc., Selig-
man Common Stock Fund, Inc., Seligman Communications and Information Fund,
Inc., Seligman Frontier Fund, Inc., Seligman Growth Fund, Inc., Seligman Hen-
derson 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., and Tri-Continental Corpora-
tion. The aggregate assets of the Seligman Group were approximately $14.2 bil-
lion at March 31, 1997. The Manager also provides investment management or ad-
vice to institutional accounts having an aggregate value at March 31, 1997 of
approximately $4.2 billion.
Mr. William C. Morris is Chairman of the Manager and Chairman of the Board
and Chief Executive Officer of the Fund. Mr. Morris owns a majority of the
outstanding voting securities of the Manager.
The Manager provides senior management for Seligman Data Corp., a wholly-
owned subsidiary of certain investment companies in the Seligman Group, which
performs, at cost, certain recordkeeping functions for the Fund, maintains the
records of shareholder accounts and furnishes dividend paying, redemption and
related services.
The Manager is entitled to receive a management fee from each Series, calcu-
lated daily and payable monthly, equal to an annual rate of .80% of the Large-
Cap Value Fund's average daily net assets and 1.00% of the Small-Cap Value
Fund's average daily net assets.
The Fund pays all of its expenses other than those assumed by the Manager,
including fees for necessary professional and brokerage services, costs of
regulatory compliance, costs associated with maintaining corporate existence,
custody and shareholder service, shareholder relations and insurance costs and
fees and expenses of directors of the Fund not employed by (or serving as a
Director of) the Manager or its affiliates.
THE SUBADVISER. The Subadviser may provide investment management services to
the Fund with respect to all or a portion of each Series' foreign investments,
as designated by the Manager ("Qualifying Assets"). Each Series has a non-fun-
damental policy under which it may invest up to 10% of its total assets in
foreign securities that are held directly. The 10% limit does not apply to
foreign securities held through Depositary Receipts which are traded in the
United States or to commercial paper and certificates of deposit issued by
foreign banks. Pursuant to a Subadvisory Agreement between the Manager and the
Subadviser, the Subadviser, with respect to the Qualifying Assets, provides
investment management services including investment research, advice and su-
pervision, determines which securities will be purchased or sold, makes pur-
chases and sales on behalf of the Series and determines how voting and other
rights with respect to securities held by a Series shall be exercised, subject
in each case to the control of the Fund's Board of Directors and in accordance
with the Series' investment objectives, policies and principles. For this
service, the Subadviser receives a fee, payable monthly, from the Manager in
respect of each
8
<PAGE>
Series. The subadvisory fee rate, which is applied to the average monthly net
Qualifying Assets of each Series (i.e., the Qualifying Assets less any liabili-
ties as designated by the Manager), is the same as the overall rate paid to the
Manager by each Series.
The Subadviser was founded in 1991 as a joint venture between the Manager and
Henderson International, Inc., a controlled affiliate of Henderson plc. The
Subadviser, headquartered in New York, was created to provide international and
global investment advice to institutional and individual investors and invest-
ment companies. The Subadviser currently serves as subadviser to Seligman Capi-
tal Fund, Inc., Seligman Common Stock Fund, Inc., Seligman Communications and
Information Fund, Inc., Seligman Frontier Fund, Inc., Seligman Growth Fund,
Inc., each series of Seligman Henderson Global Fund Series, Inc., Seligman In-
come Fund, Inc., certain portfolios of Seligman Portfolios, Inc., and Tri-Con-
tinental Corporation. The address of the Subadviser is 100 Park Avenue, New
York, NY 10017.
PORTFOLIO MANAGERS. Mr. Neil T. Eigen is Vice President of the Fund and Port-
folio Manager of each Series. Mr. Eigen joined the Manager on January 3, 1997
as a Managing Director and Head of the Manager's Value Investment Team. Before
joining the Manager, Mr. Eigen served as Senior Managing Director, Chief In-
vestment Officer and Director of Equity Investing at Bear Stearns Asset Manage-
ment.
Mr. Richard S. Rosen is Co-Portfolio Manager of each Series. Mr. Rosen joined
the Manager on January 3, 1997 as a Senior Vice President, Investment Officer.
Before joining the Manager, Mr. Rosen served as a Managing Director and
Portfolio Manager at Bear Stearns Asset Management.
The Manager's discussion of each Series' performance as well as a line graph
illustrating comparative performance information between each Series and appro-
priate broad-based indices will be included in the Fund's Annual Report to
Shareholders.
PORTFOLIO TRANSACTIONS. The Management Agreement and Subadvisory Agreement
each recognize that in the purchase and sale of portfolio securities, the Man-
ager and the Subadviser will seek the most favorable price and execution and,
consistent with that policy, may give consideration to the research, statisti-
cal and other services furnished by brokers or dealers to the Manager and
Subadviser. The use of brokers who provide investment and market research and
securities and economic analysis may result in higher brokerage charges than
the use of brokers selected on the basis of the most favorable brokerage com-
mission rates, and re search and analysis received may be useful to the Manager
and Subadviser in connection with its services to other clients as well as to
the Series. In over-the-counter markets, orders are placed with responsible
primary market makers unless a more favorable execution or price is believed to
be obtainable.
Consistent with the Rules of the National Association of Securities Dealers,
Inc., and subject to seeking the most favorable price and execution available
and such other policies as the Directors of the Fund may determine, the Manager
and Subadviser may consider sales of shares of the Series and, if permitted by
applicable laws, may consider sales of shares of the other mutual funds in the
Seligman Group as a factor in the selection of brokers or dealers to execute
portfolio transactions for the Series.
PORTFOLIO TURNOVER. A change in securities held by a Series is known as
"portfolio turnover" which may result in the payment by such Series of dealer
spreads or underwriting commissions and other transaction costs on the sale of
securities as well as on the reinvestment of the proceeds in other securities.
Although it is the policy of each Series to hold securities for investment,
changes in securities held by a Series will be made from time to time when the
Manager believes such changes will strengthen such Series portfolio. The
portfolio turnover of each Series is not expected to exceed 100%.
PURCHASE OF SHARES
Seligman Financial Services, Inc. ("SFSI"), an affiliate of the Manager, acts
as general distributor of the Series' shares. Its address is 100 Park Avenue,
New York, NY 10017.
9
<PAGE>
Each Series issues three classes of shares: Class A shares are sold to in-
vestors choosing the initial sales load alternative; Class B shares are sold to
investors choosing to pay no initial sales load, a higher distribution fee and
a CDSL with respect to redemptions within six years of purchase and who desire
shares to convert automatically to Class A shares after eight years; and Class
D shares are sold to investors choosing no initial sales load, a higher distri-
bution fee and a CDSL on redemptions within one year of purchase. See "Alterna-
tive Distribution System" above.
Shares of the Series may be purchased through any authorized investment deal-
er. All orders will be executed at the net asset value per share next computed
after receipt of the purchase order plus, in the case of Class A shares, a
sales load which, except for shares purchased under one of the reduced sales
load plans, will vary with the size of the purchase as shown in the schedule
under "Class A Shares--Initial Sales Load" below.
THE MINIMUM AMOUNT FOR INITIAL INVESTMENT IN A SERIES IS $1,000; SUBSEQUENT
INVESTMENTS MUST BE IN THE MINIMUM AMOUNT OF $100 (EXCEPT FOR INVESTMENT OF
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS). THE FUND RESERVES THE RIGHT TO RE-
TURN INVESTMENTS THAT DO NOT MEET THESE MINIMUMS. EXCEPTIONS TO THESE MINIMUMS
ARE AVAILABLE FOR FUND ACCOUNTS BEING ESTABLISHED CONCURRENTLY WITH THE INVEST-
A-CHECK (R) SERVICE. THE MINIMUM AMOUNT FOR INITIAL INVESTMENT IN THE SELIGMAN
TIME HORIZON MATRIX SM ASSET ALLOCATION PROGRAM IS $10,000. FOR INFORMATION
ABOUT THIS PROGRAM, CONTACT YOUR FINANCIAL ADVISOR.
No purchase order may be placed for Class B shares for an amount of $250,000
or more.
Orders received by an authorized dealer before the close of the New York
Stock Exchange ("NYSE") (normally, 4:00 p.m. Eastern time) and accepted by SFSI
before the close of business (5:00 p.m. Eastern time) on the same day will be
executed at the Series' net asset value determined as of the close of the NYSE
on that day plus, in the case of Class A shares, any applicable sales load. Or-
ders accepted by dealers after the close of the NYSE, or received by SFSI after
the close of business, will be executed at the Series' net asset value as next
determined plus, in the case of Class A shares, any applicable sales load. The
au- thorized dealer through which a shareholder purchases shares is responsible
for forwarding the order to SFSI promptly.
Payment for dealer purchases may be made by check or by wire. To wire pay-
ments, dealer orders must first be placed through SFSI's order desk and as-
signed a purchase confirmation number. Funds in payment of the purchase may
then be wired to Mellon Bank, N.A., ABA #043000261, A/C (Name of Series) (A, B
or D), A/C #107-1011. WIRE TRANSFERS MUST INCLUDE THE PURCHASE CONFIRMATION
NUMBER AND CLIENT ACCOUNT REGISTRATION AND ACCOUNT NUMBER. Persons other than
dealers who wish to wire payment should contact Seligman Data Corp. for spe-
cific wire instructions. Although the Fund makes no charge for this service,
the transmitting bank may impose a wire service fee.
Current shareholders may purchase additional shares of the Series at any time
through any authorized dealer or by sending a check payable to the "Seligman
Group of Funds" in our postage-paid return envelope or directly to P.O. BOX
3947, NEW YORK, NY 10008-3947. Checks for investment must be in U.S. dollars
drawn on a domestic bank. Credit Card convenience checks and third party checks
(i.e., checks made payable to someone other than the "Seligman Group of Funds")
may not be used to open a new fund account or purchase additional shares of the
Fund. The check should be accompanied by an investment slip (provided on the
bottom of shareholder account statements) and include the shareholder's name,
address, account number, Series' name and class of shares (A, B or D). If a
shareholder does not provide the required information, Seligman Data Corp. will
seek further clarification and may be forced to return the check to the share-
holder. Orders sent directly to
10
<PAGE>
Seligman Data Corp. will be executed at the Series' net asset value next deter-
mined after the order is accepted plus, in the case of Class A shares, any ap-
plicable sales load.
Seligman Data Corp. may charge a $10.00 service fee for checks returned to it
as uncollectable. This charge will be deducted from the shareholder's account.
For the protection of the Fund and its shareholders, no redemption proceeds
will be remitted to a shareholder with respect to shares purchased by check
(unless certified) until Seligman Data Corp. receives notice that the check has
cleared, which may be up to 15 days from the credit of the shares to the share-
holder's account.
VALUATION. The net asset value of a Series' shares is determined each day,
Monday through Friday, as of the close of trading on the NYSE (normally, 4:00
p.m. Eastern time) on each day that the NYSE is open for business. Net asset
value is calculated separately for each class of a Series. Securities traded on
a U.S. or foreign exchange or over-the-counter market are valued at the last
sales price on the primary exchange or market on which they are traded. United
Kingdom securities and securities for which there are no recent sales transac-
tions are valued based on quotations provided by primary market makers in such
securities. Any securities for which recent market quotations are not readily
available are valued at fair value determined in accordance with procedures ap-
proved by the Fund's Board of Directors. Short-term holdings maturing in 60
days or less are generally valued at amortized cost if their original maturity
was 60 days or less. Short-term holdings with more than 60 days remaining to
maturity will be valued at current market value until the 61st day prior to ma-
turity, and will then be valued on an amortized cost basis based on the value
as of such date unless the Board determines that amortized cost value does not
represent fair market value.
Although the legal rights of Class A, Class B and Class D shares are substan-
tially identical, the different expenses borne by each class will result in
different net asset values and dividends. The net asset values of Class B and
Class D shares will generally be lower than the net asset value of Class A
shares as a result of the higher distribution fees charged to Class B and Class
D shares. In addition, net asset value per share of the three classes will be
affected to the extent any other expenses differ among classes.
CLASS A SHARES--INITIAL SALES LOAD. Class A shares are subject to an initial
sales load which varies with the size of the purchase as shown in the following
schedule, and an annual service fee of up to .25% of the average daily net as-
set value of Class A shares. See "Administration, Shareholder Services and Dis-
tribution Plans" below.
CLASS A SHARES--SALES LOAD SCHEDULE
<TABLE>
<CAPTION>
SALES LOAD AS A
PERCENTAGE OF
-------------------
REGULAR
DEALER
NET AMOUNT DISCOUNT
INVESTED AS A % OF
AMOUNT OF OFFERING (NET ASSET OFFERING
PURCHASE PRICE VALUE) PRICE
------------------------------------ ---------- ---------
<S> <C> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.25%
$ 50,000- 99,999 4.00 4.17 3.50
100,000- 249,999 3.50 3.63 3.00
250,000- 499,999 2.50 2.56 2.25
500,000- 999,999 2.00 2.04 1.75
1,000,000 or more* 0 0 0
</TABLE>
-------
* Shares acquired at net asset
value pursuant to the above
schedule will be subject to a
CDSL of 1% if redeemed within 18
months of purchase. See
"Purchase of Shares--Contingent
Deferred Sales Load."
There is no initial sales load on purchases of Class A shares of $1,000,000
or more ("NAV sales"); however, such shares are subject to a CDSL of 1% if re-
deemed within eighteen months of purchase.
SFSI shall pay broker/dealers, from its own resources, a fee on NAV sales,
calculated as follows 1.00% of NAV sales up to but not including $2 million;
.80% of NAV sales from $2 million up to but not including $3 million; .50% of
NAV sales from $3 million up to but not including $5 million; and .25% of NAV
sales
11
<PAGE>
from $5 million and above. The calculation of the fee will be based on assets
held by a "single person" as defined below.
SFSI shall also pay broker/dealers, from its own resources, a fee on assets
of certain investments in Class A shares of the Seligman Mutual Funds partici-
pating in an "eligible employee benefit plan" (as defined below under "Special
Programs") that are attributable to the particular broker/dealer. The shares
eligible for the fee are those on which an initial front-end sales load was not
paid because either the participating eligible employee benefit plan has at
least (i) $500,000 invested in the Seligman Mutual Funds or (ii) 50 eligible
employees to whom such plan is made available. Class A shares representing only
an initial purchase of Seligman Cash Management Fund are not eligible for the
fee. Such shares will become eligible for the fee once they are exchanged for
shares of another Seligman Mutual Fund. The payment is based on cumulative
sales during a single calendar year, or portion thereof. The payment schedule,
for each calendar year, is as follows: 1.00% of sales up to but not including
$2 million; .80% of sales from $2 million up to but not including $3 million;
.50% of sales from $3 million up to but not including $5 million; and .25% of
sales from $5 million and above.
Through May 31, 1997, dealers will receive the full sales load in accordance
with the sales load schedule for Class A shares of the Series for sales of up
to $1,000,000.
REDUCED SALES LOADS. Reductions in sales loads apply to purchases of Class A
shares by a "single person," including an individual, members of a family unit
comprising husband, wife and minor children purchasing securities for their own
account, or a trustee or other fiduciary purchasing for a single fiduciary ac-
count or single trust. Purchases made by a trustee or other fiduciary for a fi-
duciary account may not be aggregated with purchases made on behalf of any
other fiduciary or individual account.
Class A shares purchased without an initial sales load in accordance with the
sales load schedule or pursuant to a Volume Discount, Right of Accumulation or
Letter of Intent are subject to a CDSL of 1% on redemptions within eighteen
months of purchase.
. VOLUME DISCOUNTS are provided if the total amount being invested in Class A
shares of the Fund alone, or in any combination of shares of the Seligman Mu-
tual Funds that are sold with an initial sales load, reaches levels indicated
in the above sales load schedule.
. THE RIGHT OF ACCUMULATION allows an investor to combine the amount being in-
vested in shares of the other Seligman Mutual Funds sold with an initial sales
load with the total net asset value of shares of those Seligman Mutual Funds
already owned that were sold with an initial sales load and the total net asset
value of shares of Seligman Cash Management Fund that were acquired by the in-
vestor through an exchange of shares of another Seligman Mutual Fund on which
there was an initial sales load to determine reduced sales loads in accordance
with the sales load schedule. An investor or a dealer purchasing shares on be-
half of an investor must indicate that the investor has existing accounts when
making investments or opening new accounts.
. A LETTER OF INTENT allows an investor to purchase Class A shares over a 13-
month period at reduced initial sales loads, based upon the total amount the
investor intends to purchase plus the total net asset value of shares of the
Seligman Mutual Funds already owned that were sold with an initial sales load
and the total net asset value of shares of Seligman Cash Management Fund that
were acquired through an exchange of shares of another Seligman Mutual Fund on
which there was an initial sales load. An investor or a dealer purchasing
shares on behalf of an investor must indicate that the investor has existing
accounts when making investments or opening new accounts. For more information
concerning terms of Letters of Intent, see "Terms and Conditions" on page 27.
12
<PAGE>
SPECIAL PROGRAMS. The Fund may sell Class A shares at net asset value to
present and retired directors, trustees, officers, employees and their spouses
(and family members of the foregoing) of the Fund, the other investment compa-
nies in the Seligman Group, the Manager and other companies affiliated with the
Manager. Family members are defined to include lineal descendants and lineal
ancestors, siblings (and their spouses and children) and any company or or-
ganization controlled by any of the foregoing. Such sales also may be made to
employee benefit and thrift plans for such persons and to any investment advi-
sory, custodial, trust or other fiduciary account managed or advised by the
Manager or any affiliate.
Class A shares also may be issued without an initial sales load in connection
with the acquisition of cash and securities owned by other investment companies
and personal holding companies; to any registered unit investment trust which
is the issuer of periodic payment plan certificates, the net proceeds of which
are invested in Fund shares; to separate accounts established and maintained by
an insurance company which are exempt from registration under Section 3(c)(11)
of the 1940 Act; to registered representatives and employees (and their spouses
and minor children) of any dealer that has a sales agreement with SFSI; to
shareholders of mutual funds with objectives and policies similar to the Fund
who purchase shares with redemption proceeds of such funds (not to exceed the
dollar value of such redemption proceeds); to financial institution trust de-
partments; to registered investment advisers exercising discretionary invest-
ment authority with respect to the purchase of Fund shares; to accounts of fi-
nancial institutions or broker/dealers that charge account management fees,
provided the Manager or one of its affiliates has entered into an agreement
with respect to such accounts; pursuant to sponsored arrangements with organi-
zations which make recommendations to or permit group solicitations of, its em-
ployees, members or participants in connection with the purchase of shares of
the Fund; to other investment companies in the Seligman Group in connection
with a deferred fee arrangement for outside directors; and to "eligible em-
ployee benefit plans" which have at least (i) $500,000 invested in the Seligman
Mutual Funds or (ii) 50 eligible employees to whom such plan is made available.
"Eligible employee benefit plan" means any plan or arrangement, whether or not
tax qualified, which provides for the purchase of Fund shares. Sales of shares
to such plans must be made in connection with a payroll deduction system of
plan funding or other system acceptable to Seligman Data Corp.
Section 403(b) plans sponsored by public educational institutions are not el-
igible for net asset value purchases based on the aggregate investment made by
the plan or number of eligible employees. Employee benefit plans eligible for
net asset value sales, as described above, will be subject to a CDSL of 1% for
terminations at the plan level only, on redemptions of shares purchased within
eighteen months prior to plan termination. Sales pursuant to a 401(k) alliance
program which has an agreement with SFSI are available at net asset value and
are not subject to a CDSL.
CLASS B SHARES. Class B shares are sold without an initial sales load but are
subject to a CDSL if the shares are redeemed within six years of purchase at
rates set forth in the table below, charged as a percentage of the current net
asset value or the original purchase price, whichever is less.
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE CDSL
- -------------------- ----
<S> <C>
less than 1 year........................................................... 5%
1 year or more but less than 2 years....................................... 4%
2 years or more but less than 3 years...................................... 3%
3 years or more but less than 4 years...................................... 3%
4 years or more but less than 5 years...................................... 2%
5 years or more but less than 6 years...................................... 1%
6 years or more............................................................ 0%
</TABLE>
Class B shares are also subject to an annual distribution fee of .75% and an
annual service fee of up to .25% of the average daily net asset value of the
Class B shares. SFSI will make a 4% payment to dealers in respect of purchases
of Class B shares. Approximately eight years after purchase, Class B shares
will convert automatically to Class A shares, which are
13
<PAGE>
subject to an annual service fee of .25% but no distribution fee. Shares pur-
chased through reinvestment of dividends and distributions on Class B shares
also will convert automatically to Class A shares along with the underlying
shares on which they were earned. Conversion occurs at the end of the month
which precedes the eighth anniversary of the purchase date. If Class B shares
of a Series are exchanged for Class B shares of another Seligman Mutual Fund,
the conversion period applicable to the Class B shares acquired in the exchange
will apply, and the holding period of the shares exchanged will be tacked onto
the holding period of the shares acquired. Class B shareholders of a Series ex-
ercising the exchange privilege will continue to be subject to such Series'
CDSL schedule if such schedule is higher or longer than the CDSL schedule re-
lating to the new Class B shares. In addition, Class B shares of a Series ac-
quired by exchange will be subject to such Series' CDSL schedule if such sched-
ule is higher or longer than the CDSL schedule relating to the Class B shares
of the fund from which the exchange has been made.
CLASS D SHARES. Class D shares are sold without an initial sales load but are
subject to a CDSL if the shares are redeemed within one year, an annual dis-
tribution fee of up to .75% and an annual service fee of up to .25%, of the av-
erage daily net asset value of the Class D shares. SFSI will make a 1% payment
to dealers in respect of purchases of Class D shares. Unlike Class B shares,
Class D shares do not automatically convert to Class A shares after eight
years.
CONTINGENT DEFERRED SALES LOAD. A CDSL will be imposed on any redemption of
Class B or Class D shares which were purchased during the preceding six years
(for Class B shares) or twelve months (for Class D shares). The amount of any
CDSL will initially be used by SFSI to defray the expense of the payment of 4%
(in the case of Class B shares) or 1% (in the case of Class D shares) made by
it to Service Organizations (as defined under "Administration, Shareholder
Services and Distribution Plan") at the time of sale. Pursuant to an agreement
with FEP Capital, L.P. ("FEP") to fund payments in respect of Class B shares,
SFSI has agreed to pay any Class B CDSL to FEP.
A CDSL of 1% will also be imposed on any redemption of Class A shares pur-
chased during the preceding eighteen months if such shares were acquired at net
asset value pursuant to the sales load schedule provided under "Class A
Shares--Initial Sales Load." Employee benefit plans eligible for net asset
value sales as described above under "Special Programs" may be subject to a
CDSL of 1% for terminations at the plan level only, on redemptions of shares
purchased within eighteen months prior to plan termination.
The 1% CDSL normally imposed on redemptions of certain Class A shares (i.e.,
those purchased during the preceding eighteen months at net asset value pursu-
ant to the sales load schedule provided under "Class A Shares--Initial Sales
Load") will be waived on shares that were purchased through Dean Witter Reyn-
olds, Inc. ("Dean Witter") by certain Chilean institutional investors (i.e.,
pension plans, insurance companies and mutual funds). Upon redemption of such
shares within an eighteen month period, Dean Witter will reimburse SFSI a pro
rata portion of the fee it received from SFSI at the time of sale of such
shares.
To minimize the application of a CDSL to a redemption, shares acquired pursu-
ant to the investment of dividends and distributions (which are not subject to
a CDSL) will be redeemed first; followed by shares held for a period of time
longer than the applicable CDSL period. Shares held for the longest period of
time within the applicable CDSL period will then be redeemed. Additionally, for
those shares determined to be subject to a CDSL, the CDSL will be assessed on
the current net asset value or original purchase price, whichever is less. No
CDSL will be imposed on shares acquired through the investment of dividends or
distributions from any Class A, Class B or Class D shares of Seligman Mutual
Funds.
For example, assume an investor purchased 100 Class D shares in January at a
price of $10.00 per
14
<PAGE>
share. During the first year, 5 additional Class D shares were acquired through
investment of dividends and distributions. In January of the following year, an
additional 50 Class D shares are purchased at a price of $12.00 per share. In
March of that year, the investor chooses to redeem $1,500.00 from the account
which now holds 155 Class D shares with a total value of $1,898.75 ($12.25 per
share). The CDSL for this transaction would be calculated as follows:
<TABLE>
<S> <C>
Total shares to be redeemed
(122.449 @ $12.25) as follows:...................................... $1,500.00
=========
Dividend/Distribution shares
(5 @ $12.25)........................................................ $ 61.25
Shares held more than 1 year
(100 @ $12.25)...................................................... 1,225.00
</TABLE>
<TABLE>
<S> <C>
Shares held less than 1 year subject to CDSL (17.449 @ $12.25)....... 213.75
---------
Gross proceeds of redemption........................................ $1,500.00
Less CDSL (17.449 shares @
$12.00 = $209.39 X 1% = $2.09)..................................... (2.09)
---------
Net proceeds of redemption.......................................... $1,497.91
=========
</TABLE>
For federal income tax purposes, the amount of the CDSL will reduce the gain
or increase the loss, as the case may be, on the amount recognized on the re-
demption of shares.
The CDSL will be waived or reduced in the following instances:
(a) on redemptions following the death or disability of a shareholder, as de-
fined in section 72(m)(7) of the Internal Revenue Code of 1986, as amended (the
"Code"); (b) in connection with (i) distributions from retirement plans quali-
fied under section 401(a) of the Code when such redemptions are necessary to
make distributions to plan participants (such payments include, but are not
limited to death, disability, retirement, or separation of service), (ii) dis-
tributions from a custodial account under section 403(b)(7) of the Code or an
individual retirement account ("IRA") due to death, disability, or attainment
of age 59 1/2, and (iii) a tax-free return of an excess contribution to an IRA;
(c) in whole or in part, in connection with shares sold to current and retired
Directors of the Fund; (d) in whole or in part, in connection with shares sold
to any state, county, or city or any instrumentality, department, authority, or
agency thereof, which is prohibited by applicable investment laws from paying a
sales load or commission in connection with the purchase of shares of any reg-
istered investment management company; (e) pursuant to an automatic cash with-
drawal service; and (f) in connection with the redemption of shares of the Fund
if the Fund is combined with another mutual fund in the Seligman Group, or an-
other similar reorganization transaction.
If, with respect to a redemption of any Class A, Class B or Class D shares
sold by a dealer, the CDSL is waived because the redemption qualifies for a
waiver as set forth above, the dealer shall remit to SFSI promptly upon notice
an amount equal to the payment or a portion of the payment made by SFSI at the
time of sale of such shares.
SFSI may from time to time assist dealers by, among other things, providing
sales literature to, and holding informational programs for the benefit of,
dealers' registered representatives. Dealers may limit the participation of
registered representatives in such informational programs by means of sales in-
centive programs which may require the sale of minimum dollar amounts of shares
of the Seligman Mutual Funds. SFSI may from time to time pay a bonus or other
incentive to dealers that sell shares of the mutual funds in the Seligman
Group. In some instances, these bonuses or incentives may be offered only to
certain dealers which employ registered representatives who have sold or may
sell a significant amount of shares of the Fund and/or certain other mutual
funds managed by the Manager during a specified period of time. Such bonus or
other incentive may take the form of payment for travel expenses, including
lodging, incurred in connection with trips taken by qualifying registered rep-
resentatives and members of their families to places within or outside the
United States. The cost to SFSI of such promotional activities and payments
shall be consistent with the Rules of the National Association of Securities
Dealers, Inc., as then in effect.
15
<PAGE>
TELEPHONE TRANSACTIONS
A shareholder with telephone transaction privileges, AND THE SHAREHOLDER'S
BROKER/DEALER REPRESENTATIVE, will have the ability to effect the following
transactions via telephone: (i) redemption of Series shares, (ii) exchange of
Series shares for shares of the same class of another Seligman Mutual Fund,
(iii) change of a dividend and/or capital gain distribution option, and (iv)
change of address. All telephone transactions are effected through Seligman
Data Corp. at (800) 221-2450.
For investors who purchase shares by completing and submitting an Account Ap-
plication (except those accounts registered as trusts (unless the trustee and
sole beneficiary are the same person), corporations or group retirement plans):
Unless an election is made otherwise on the Account Application, a shareholder
and the shareholder's broker/dealer of record as designated on the Account Ap-
plication, will automatically receive telephone services.
For investors who purchase shares through a broker/dealer: Telephone services
for a shareholder and the shareholder's representative may be elected by com-
pleting a supplemental election application available from the broker/dealer of
record.
For accounts registered as IRAs. Telephone services will include only ex-
changes or address changes.
For accounts registered as trusts (unless the trustee and sole beneficiary
are the same person), corporations or group retirement plans: Telephone redemp-
tions are not permitted. Group retirement plans that may allow plan partici-
pants to place telephone exchanges directly with the Fund, must first provide a
letter of authorization signed by the plan custodian or trustee, and provide a
telephone services election form signed by each plan participant. Additionally,
group retirement plans are not permitted to change a dividend or gain distribu-
tion option.
All Seligman Mutual Fund accounts with the same account number (i.e., regis-
tered exactly the same) as an existing account, including any new fund in which
the shareholder invests in the future, will automatically include telephone
services if the existing account has telephone services. Telephone services may
also be elected at any time on a supplemental telephone services election form.
For accounts registered jointly (such as joint tenancies, tenants in common
and community property registrations), each owner, by accepting or requesting
telephone services, authorizes each of the other owners to effect telephone
transactions on his or her behalf.
During times of drastic economic or market changes, a shareholder or the
shareholder's representative may experience difficulty in contacting Seligman
Data Corp. to request a redemption or exchange of Series shares via telephone.
In these circumstances, the shareholder or the shareholder's representative
should consider using other redemption or exchange procedures. (See "Redemption
of Shares" below.) Use of these other redemption or exchange procedures will
result in the request being processed at a later time than if a telephone
transaction had been used, and the Series' net asset value may fluctuate during
such periods.
The Fund and Seligman Data Corp. will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. These will include:
recording all telephone calls requesting account activity, requiring that the
caller provide certain requested personal and/or account information at the
time of the call for the purpose of establishing the caller's identity, and
sending a written confirmation of redemptions, exchanges or address changes to
the address of record each time activity is initiated by telephone. As long as
the Fund and Seligman Data Corp. follow instructions communicated by telephone
that were reasonably believed to be genuine at the time of their receipt, nei-
ther they nor any of their affiliates will be liable for any loss to the share-
holder caused by an unauthorized transaction. In any instance where the Fund or
Seligman Data Corp. is not reasonably satisfied that instructions received by
telephone are genuine, the requested transaction will not be executed, and nei-
ther they nor any of their affiliates will be liable
16
<PAGE>
for any losses which may occur due to a delay in implementing the transaction.
If the Fund or Seligman Data Corp. does not follow the procedures described
above, the Fund or Seligman Data Corp. may be liable for any losses due to un-
authorized or fraudulent instructions. Telephone transactions must be effected
through a representative of Seligman Data Corp., i.e., requests may not be com-
municated via Seligman Data Corp.'s automated telephone answering system.
Shareholders, of course, may refuse or cancel telephone services. Telephone
services may be terminated by a shareholder at any time by sending a written
request to Seligman Data Corp. TELEPHONE SERVICES MAY NOT BE ESTABLISHED BY A
SHAREHOLDER'S BROKER/DEALER WITHOUT THE WRITTEN AUTHORIZATION OF THE SHAREHOLD-
ER. Written acknowledgment of the addition of telephone services to an existing
account or termination of telephone services will be sent to the shareholder at
the address of record.
REDEMPTION OF SHARES
A shareholder may redeem shares held in book credit ("uncertificated") form
without charge (except a CDSL, if applicable) at any time by SENDING A WRITTEN
REQUEST to Seligman Data Corp., P.O. Box 3947, New York, NY 10008-3947; or if
request is being sent by overnight delivery service, to 100 Park Avenue, New
York, NY, 10017. The redemption request must be signed by all persons in whose
name the shares are registered. A shareholder may redeem shares that are not in
book credit form without charge (except a CDSL, if applicable) by surrendering
certificates in proper form to the same address. Certificates should be sent by
registered mail. Share certificates must be endorsed for transfer or accompa-
nied by an endorsed stock power signed by all share owners exactly as their
name(s) appear(s) on the account registration. The shareholder's letter of in-
struction or endorsed stock power should specify the Series name, account num-
ber, class of shares (A, B or D) and the number of shares or dollar amount to
be redeemed. The Fund cannot accept conditional redemption requests (i.e., re-
quests to sell shares at a specific price or on a future date).
If the redemption proceeds are (i) $50,000 or more, (ii) to be paid to some-
one other than the shareholder of record (regardless of the amount) or (iii) to
be mailed to other than the address of record (regardless of the amount), the
signature(s) of the shareholder(s) must be guaranteed by an eligible financial
institution including, but not limited to, the following: banks, trust compa-
nies, credit unions, securities brokers and dealers, savings and loan associa-
tions and participants in the Securities Transfer Association Medallion Program
(STAMP), the Stock Exchanges Medallion Program (SEMP) or the New York Stock Ex-
change Medallion Signature Program (MSP). The Fund reserves the right to reject
a signature guarantee where it is believed that the Fund will be placed at risk
by accepting such guarantee. A signature guarantee is also necessary in order
to change the account registration. Notarization by a notary public is not an
acceptable signature guarantee. ADDITIONAL DOCUMENTATION MAY ALSO BE REQUIRED
BY SELIGMAN DATA CORP. IN THE EVENT OF A REDEMPTION BY A CORPORATION, EXECUTOR,
ADMINISTRATOR, TRUSTEE, CUSTODIAN OR RETIREMENT PLANS. FOR FURTHER INFORMATION
WITH RESPECT TO REDEMPTION REQUIREMENTS, PLEASE CONTACT THE SHAREHOLDER SERV-
ICES DEPARTMENT OF SELIGMAN DATA CORP. FOR ASSISTANCE.
In the case of Class A shares (except for shares purchased without an initial
sales load due to the size of the purchase), and in the case of Class B shares
redeemed after six years and Class D shares redeemed after one year, a share-
holder will receive the net asset value per share next determined after receipt
of a request in good order. If Class A shares which were purchased without an
initial sales load because the purchase amount was $1,000,000 or more are re-
deemed within eighteen months of purchase, a shareholder will receive the net
asset value per share next determined after receipt of a request in good order,
less a CDSL of 1% as described under "Purchase of Shares--Class A Shares--Ini-
tial Sales Load" above. If Class B shares are redeemed within six years of pur-
chase, a shareholder will receive the net asset value per share next determined
after receipt of the request in good order less the applicable CDSL, as de-
scribed under "Purchase of Shares--Class B
17
<PAGE>
Shares" above. If Class D shares are redeemed within one year of purchase, a
shareholder will receive the net asset value per share next determined after
receipt of the request in good order, less a CDSL of 1% as described under
"Purchase of Shares--Class D Shares" above.
A shareholder also may "sell" shares to the Fund through an investment dealer
and, in that way, be certain, providing the order is timely, of receiving the
net asset value established at the end of the day on which the dealer is given
the repurchase order (less any applicable CDSL). The Fund makes no charge for
this transaction, but the dealer may charge you a service fee. "Sell" or repur-
chase orders received from an authorized dealer before the close of the NYSE
and received by SFSI, the repurchase agent, before the close of business on the
same day will be executed at the net asset value per share determined as of the
close of the NYSE on that day, less any applicable CDSL. Repurchase orders re-
ceived from authorized dealers after the close of the NYSE or not received by
SFSI prior to the close of business will be executed at the net asset value de-
termined as of the close of the NYSE on the next trading day, less any applica-
ble CDSL. Shares held in a "street name" account with a broker/dealer may be
sold to the Fund only through a broker/dealer.
TELEPHONE REDEMPTIONS. Telephone redemptions of uncertificated shares payable
to the address of record may be made once per day, in an amount of up to
$50,000 per fund account. Telephone redemption requests received by Seligman
Data Corp. at (800) 221-2450 between 8:30 a.m. and 4:00 p.m. Eastern time on
any business day will be processed as of the close of business on that day. Re-
demption requests by telephone will not be accepted within 30 days following an
address change. Qualified Plans, IRAs or other retirement plans are not eligi-
ble for telephone redemptions. The Fund reserves the right to suspend or termi-
nate its telephone redemption service at any time without notice.
For more information about telephone redemptions and the circumstances under
which a share-holder may bear the risk of loss for a fraudulent transaction,
see "Telephone Transactions" above.
GENERAL. With respect to shares redeemed, a check for the proceeds will be
sent to the shareholder's address of record within seven calendar days after
acceptance of the redemption order and will be made payable to all of the reg-
istered owners on the account. With respect to shares repurchased by the Fund,
a check for the proceeds will be sent to the investment dealer within seven
calendar days after acceptance of the repurchase order and will be made payable
to the investment dealer. Payment of redemption proceeds will be delayed on re-
demptions of shares purchased by check (unless certified) until Seligman Data
Corp. receives notice that the check has cleared, which may be up to 15 days
from the credit of such shares to the shareholder's account. The proceeds of a
redemption or repurchase may be more or less than the shareholder's cost.
The Fund reserves the right to redeem shares owned by a shareholder whose in-
vestment in a Series has a value of less than a minimum amount specified by the
Fund's Board of Directors, which is presently $500. Shareholders would be sent
a notice before the redemption is processed stating that the value of the in-
vestment in the Series is less than the specified minimum and that they have
sixty days to make an additional investment.
REINSTATEMENT PRIVILEGE. If a shareholder redeems Class A shares and then de-
cides to reinvest them, or to shift the investment to one of the other Seligman
Mutual Funds, the shareholder may, within 120 calendar days of the date of the
redemption, use all or any part of the proceeds of the redemption to reinstate,
free of an initial sales load, all or any part of the investment in shares of
the Series or in shares of any of the other Seligman Mutual Funds. If a share-
holder redeems shares and the redemption was subject to a CDSL, the shareholder
may reinstate all or any part of the investment in shares of the same class of
a Series or of any of the other Seligman Mutual Funds within 120 calendar days
of the date of redemp -
18
<PAGE>
tion and receive a credit for the applicable CDSL paid. Such investment will be
reinstated at the net asset value per share established as of the close of the
NYSE on the day the request is received. Seligman Data Corp. must be informed
that the purchase represents a reinstated investment. REINSTATED SHARES MUST BE
REGISTERED EXACTLY AND BE OF THE SAME CLASS AS THE SHARES PREVIOUSLY REDEEMED;
AND THE MINIMUM INITIAL INVESTMENT MUST BE MET AT THE TIME OF REINSTATEMENT.
Generally, exercise of the Reinstatement Privilege does not alter the federal
income tax status of any capital gain realized on a sale of Series shares, but
to the extent that any shares are sold at a loss and the proceeds are rein-
vested in shares of the same Series, some or all of the loss will not be al-
lowed as a deduction, depending upon the percentage of the proceeds reinvested.
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLANS
Under each Series' Administration, Shareholder Services and Distribution Plan
(the "Plans"), each Series may pay to SFSI an administration, shareholder serv-
ices and distribution fee in respect of such Series' Class A, Class B and Class
D shares. Payments under the Plans may include, but are not limited to: (i)
compensation to securities dealers and other organizations ("Service Organiza-
tions") for providing distribution assistance with respect to assets invested
in the Series, (ii) compensation to Service Organizations for providing admin-
istration, accounting and other shareholder services with respect to Series
shareholders, and (iii) otherwise promoting the sale of shares of the Series,
including paying for the preparation of advertising and sales literature and
the printing and distribution of such promotional materials and prospectuses to
prospective investors and defraying SFSI's costs incurred in connection with
its marketing efforts with respect to shares of the Series. The Manager, in its
sole discretion, may also make similar payments to SFSI from its own resources,
which may include the management fee that the Manager receives from each Se-
ries.
Under the Plans, each Series reimburses SFSI for its expenses with respect to
Class A shares at an annual rate of up to .25% of the average daily net asset
value of Class A shares. It is expected that the proceeds from the fee in re-
spect of Class A shares will be used primarily to compensate Service Organiza-
tions which enter into agreements with SFSI. Such Service Organizations will
receive from SFSI a continuing fee of up to .25% on an annual basis, payable
quarterly, of the average daily net assets of Class A shares attributable to
the particular Service Organization for providing personal service and/or the
maintenance of shareholder accounts. The fee payable from time to time is,
within such limit, determined by the Directors of the Fund.
Under the Plans, each Series reimburses SFSI for its expenses with respect to
Class B and Class D shares at an annual rate of up to 1% of the respective av-
erage daily net asset value of the Class B and Class D shares. Proceeds from
the Class B distribution fees are used to pay Service Organizations a continu-
ing fee of up to .25% on an annual basis of the average net asset value of
Class B shares attributable to particular Service Organizations for providing
personal service and/or maintenance of shareholder accounts and will also be
used by SFSI to defray the expense of the payment of 4% made by it to Service
Organizations at the time of sale of Class B shares. In that connection, SFSI
has assigned to FEP its interest in most of the fee payable to it in respect of
the Class B shares, other than the portion payable to Service Organizations on
a continuing basis. Proceeds from the Class D distribution fees are used pri-
marily to compensate Service Organizations for administration, shareholder
services and distribution assistance (including a continuing fee of up to .25%
on an annual basis of the average daily net asset value of Class D shares at-
tributable to particular Service Organizations for providing personal services
and/or the maintenance of shareholder accounts) and will initially be used by
SFSI to defray the expense of the payment of 1% made by it to Service
19
<PAGE>
Organizations at the time of the sale of Class D shares. The amounts expended
by SFSI in any one year upon the initial purchase of Class B and Class D shares
may exceed the amounts received by it from Plan payments retained. Expenses of
administration, shareholder services and distribution of Class B and Class D
shares in one fiscal year of the Fund may be paid from Class B and Class D Plan
fees, respectively, received from the Fund in any other fiscal year. The Plans
are reviewed by the Fund's Directors annually.
Seligman Services, Inc. ("SSI"), an affiliate of the Manager, is a limited
purpose broker/dealer. SSI acts as a broker/dealer of record for most share-
holder accounts that do not have a designated broker/dealer of record and re-
ceives compensation for providing personal service and account maintenance to
such accounts of record.
EXCHANGE PRIVILEGE
A shareholder may, without charge, exchange at net asset value any part or
all of an investment in a Series for shares of any of the other Seligman Mutual
Funds. Exchanges may be made by mail, or by telephone if the shareholder has
telephone services.
Class A, Class B or Class D shares may be exchanged only for Class A, Class B
or Class D shares, respectively, of another Seligman Mutual Fund on the basis
of relative net asset value.
If shares that are subject to a CDSL are exchanged for shares of another
fund, for purposes of assessing the CDSL payable upon disposition of the ex-
changed shares, the applicable holding period shall be reduced by the holding
period of the original shares.
Class B shareholders of a Series exercising the exchange privilege will con-
tinue to be subject to such Series' CDSL schedule if such schedule is higher or
longer than the CDSL schedule of the new Class B shares. In addition, Class B
shares of a Series acquired by exchange will be subject to such Series' CDSL
schedule if such schedule is higher or longer than the CDSL schedule relating
to the Class B shares of the fund from which such shares were exchanged.
The Seligman Mutual Funds available under the Exchange Privilege are:
. SELIGMAN CAPITAL FUND, INC. seeks aggressive capital appreciation. Current
income is not an objective.
. SELIGMAN CASH MANAGEMENT FUND, INC. invests in high quality money market
instruments. Shares are sold at net asset value.
. SELIGMAN COMMON STOCK FUND, INC. seeks favorable current income and long-
term growth of both income and capital value without exposing capital to undue
risk.
. SELIGMAN COMMUNICATIONS AND INFORMATION FUND, INC. invests in shares of
companies in the communications, information and related industries to produce
capital gain. Income is not an objective.
. SELIGMAN FRONTIER FUND, INC. seeks to produce growth in capital value; in-
come may be considered but will only be incidental to the Fund's investment ob-
jective.
. SELIGMAN GROWTH FUND, INC. seeks longer-term growth in capital value and an
increase in future income.
. SELIGMAN HENDERSON GLOBAL FUND SERIES, INC. consists of the Seligman Hen-
derson International Fund, the Seligman Henderson Emerging Markets Growth Fund,
the Seligman Henderson Global Growth Opportunities Fund, the Seligman Henderson
Global Smaller Companies Fund and the Seligman Henderson Global Technology
Fund, which seek long-term capital appreciation primarily by investing in com-
panies either globally or internationally.
. SELIGMAN HIGH INCOME FUND SERIES seeks high current income by investing in
debt securities. The Fund consists of the Seligman U.S. Government Securities
Series and the Seligman High-Yield Bond Series.
20
<PAGE>
. SELIGMAN INCOME FUND, INC. seeks high current income and the possibility of
improvement of future income and capital value.
. SELIGMAN MUNICIPAL FUND SERIES, INC. consists of several State Series and a
National Series. The National Municipal Series seeks to provide maximum income
exempt from regular federal income taxes; individual state series, each seeking
to maximize income exempt from regular federal income taxes and from personal
income taxes in designated states, are available for Colorado, Georgia, Louisi-
ana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New York, Ohio,
Oregon and South Carolina. (Does not currently offer Class B shares.)
. SELIGMAN MUNICIPAL SERIES TRUST includes the California Municipal Quality
Series, the California Municipal High-Yield Series, the Florida Municipal Se-
ries and the North Carolina Municipal Series, each of which invests in munici-
pal securities of its designated state. (Does not currently offer Class B
shares.)
. SELIGMAN NEW JERSEY MUNICIPAL FUND, INC. invests in investment grade New
Jersey municipal securities. (Does not currently offer Class B shares.)
. SELIGMAN PENNSYLVANIA MUNICIPAL FUND SERIES invests in investment grade
Pennsylvania municipal securities. (Does not currently offer Class B shares.)
All permitted exchanges will be based on the net asset values of the respec-
tive funds determined at the close of the NYSE on that day. Telephone requests
for exchanges received between 8:30 a.m. and 4:00 p.m. Eastern time, on any
business day, by Seligman Data Corp. at (800) 221-2450, will be processed as of
the close of business on that day. The registration of an account into which an
exchange is made must be identical to the registration of the account from
which shares are exchanged. When establishing a new account by an exchange of
shares, the shares being exchanged must have a value of at least the minimum
initial investment required by the mutual fund into which the exchange is being
made. THE METHOD OF RECEIVING DISTRIBUTIONS, UNLESS OTHERWISE INDICATED, WILL
BE CARRIED OVER TO THE NEW FUND ACCOUNT, AS WILL TELEPHONE SERVICES. ACCOUNT
SERVICES, SUCH AS INVEST-A-CHECK (R) SERVICE, DIRECTED DIVIDENDS AND AUTOMATIC
CASH WITHDRAWAL SERVICE WILL NOT BE CARRIED OVER TO THE NEW FUND ACCOUNT UNLESS
SPECIFICALLY REQUESTED AND PERMITTED BY THE NEW FUND. Exchange orders may be
placed to effect an exchange of a specific number of shares, an exchange of
shares equal to a specific dollar amount or an exchange of all shares held.
Shares for which certificates have been issued may not be exchanged via tele-
phone and may be exchanged only upon receipt of a written exchange request to-
gether with certificates representing shares to be exchanged in proper form.
The Exchange Privilege via mail is generally applicable to investments in
group retirement plans, although some restrictions may apply. The terms of the
exchange offer described herein may be modified at any time; and not all of the
mutual funds in the Seligman Group are available to residents of all states.
Before making any exchange, a shareholder should contact an authorized invest-
ment dealer or Seligman Data Corp. to obtain prospectuses of any of the Selig-
man Mutual Funds.
A broker/dealer representative of record will be able to effect exchanges on
behalf of a shareholder only if the shareholder has telephone services or if
the broker/dealer has entered into a Telephone Exchange Agreement with SFSI
wherein the broker/dealer must agree to indemnify SFSI and the Seligman Mutual
Funds from any loss or liability incurred as a result of the acceptance of tel-
ephone exchange orders. Written confirmation of all exchanges will be forwarded
to the shareholder to whom the exchanged shares are registered and a duplicate
confirmation will be sent to the dealer of record listed on the account.
SFSI reserves the right to reject a telephone exchange request. Any rejected
telephone exchange order may be processed by mail. For more information about
telephone exchange privileges, which unless objected to, are assigned to most
shareholders automatically, and the circumstances under which share
21
<PAGE>
holders may bear the risk of loss for a fraudulent transaction, see "Telephone
Transactions" above.
Exchanges of shares are sales, and may result in a gain or loss for federal
income tax purposes.
FURTHER INFORMATION ABOUT TRANSACTIONS IN THE SERIES
Because excessive trading (including short-term, "market timing" trading) can
hurt a Series' performance, the Fund, on behalf of a Series, may refuse any ex-
change (1) from any shareholder account from which there have been two ex-
changes in the preceding three month period, or (2) where the exchanged shares
equal in value the lesser of $1,000,000 or 1% of the Series' net assets. The
Fund may also refuse any exchange or purchase order from any shareholder ac-
count if the shareholder or the shareholder's broker/dealer has been advised
that previous patterns of purchases and redemptions or exchanges have been con-
sidered excessive. Accounts under common ownership or control, including those
with the same Taxpayer Identification Number and those administered so as to
redeem or purchase shares based upon certain predetermined market indicators,
will be considered one account for this purpose. Additionally, the Fund re-
serves the right to refuse any order for the purchase of shares.
DIVIDENDS AND DISTRIBUTIONS
Dividends payable from each Series' net investment income are distributed at
least annually. Payments vary in amount depending on income received from port-
folio securities and the costs of operations. Each Series distributes substan-
tially all of any taxable net long-term and short-term gain realized on invest-
ments to shareholders at least annually. Dividends and distributions will gen-
erally be taxable to shareholders in the year in which they are declared by the
Fund if paid before February 1 of the following year.
Shareholders may elect: (1) to receive both dividends and gain distributions
in shares; (2) to receive dividends in cash and gain distributions in shares;
(3) to receive both dividends and gain distributions in cash. Cash dividends
and gain distributions are paid by check. In the case of prototype retirement
plans, dividends and gain distributions are reinvested in additional shares.
Unless another election is made, dividends and capital gain distributions will
be credited to shareholder accounts in additional shares. Shares acquired
through a dividend or gain distribution and credited to a shareholder's account
are not subject to an initial sales load or a CDSL. Dividends and gain distri-
butions paid in shares are invested on the payable date using the net asset
value of the ex-dividend date. Shareholders may elect to change their dividend
and gain distribution options by writing Seligman Data Corp. at the address
listed below. If the shareholder has telephone services, changes may also be
telephoned to Seligman Data Corp. between 8:30 a.m. and 6:00 p.m. Eastern time,
by either the shareholder or the broker/dealer of record on the account. For
information about telephone services, see "Telephone Transactions." These elec-
tions must be received by Seligman Data Corp. before the record date for the
dividend or distribution in order to be effective for such dividend or distri-
bution.
The per share dividends from net investment income on Class B and Class D
shares will be lower than the per share dividends on Class A shares as a result
of the higher distribution fees applicable with respect to Class B and Class D
shares. Per share dividends of the three classes may also differ as a result of
differing class expenses. Distributions of net capital gains, if any, will be
paid in the same amount for Class A, Class B and Class D shares. See "Purchase
of Shares--Valuation."
Shareholders exchanging shares of a fund for shares of another Seligman Mu-
tual Fund will continue to receive dividends and gains as elected prior to such
exchange unless otherwise specified. In the event that a shareholder redeems,
transfers or exchanges all shares in an account between the record date and the
payable date, the value of dividends or gain distributions declared will be
paid in cash regardless of the existing election.
22
<PAGE>
FEDERAL INCOME TAXES
Each Series intends to qualify as a regulated investment company under the
Code. For each year so qualified, each Series will not be subject to federal
income taxes on its net investment income and capital gains, if any, realized
during any taxable year, which it distributes to its shareholders, provided
that at least 90% of its net investment income and net short-term capital gains
are distributed to shareholders each year.
Dividends from net investment income and distributions from net short-term
capital gains are taxable as ordinary income to the shareholders, whether re-
ceived in cash or reinvested in additional shares, and, to the extent desig-
nated as derived from a Series' dividend income that would be eligible for the
dividends received deduction if the Series were not a regulated investment com-
pany, they are eligible, subject to certain restrictions, for the 70% dividends
received deduction for corporations.
Distributions of net capital gain, i.e., the excess of net long-term capital
gains over any net short-term losses, are taxable as long-term capital gain,
whether received in cash or invested in additional shares, regardless of how
long shares have been held by the shareholders; such distributions are not eli-
gible for the dividends received deduction allowed to corporate shareholders.
Any gain or loss realized upon a sale or redemption of shares in a Series by
a shareholder who is not a dealer in securities will generally be treated as a
long-term capital gain or loss if the shares have been held for more than one
year and otherwise as a short-term capital gain or loss. However, if shares on
which a long-term capital gain distribution has been received are subsequently
sold or redeemed and such shares have been held for six months or less, any
loss realized will be treated as long-term capital loss to the extent that it
offsets the long-term capital gain distribution. In addition, no loss will be
allowed on the sale or other disposition of shares of a Series if, within a pe-
riod beginning 30 days before the date of such sale or disposition and ending
30 days after such date, the holder acquires (such as through dividend rein-
vestment) securities that are substantially identical to the shares of such Se-
ries.
In determining gain or loss on shares of a Series that are sold or exchanged
within 90 days after acquisition, a shareholder generally will not be permitted
to include in the tax basis attributable to such shares the sales load incurred
in acquiring such shares to the extent of any subsequent reduction of the sales
load by reason of the Exchange or Reinstatement Privilege offered by the Fund.
Any sales load not taken into account in determining the tax basis of shares
sold or exchanged within 90 days after acquisition will be added to the share-
holder's tax basis in the shares acquired pursuant to the Exchange or Rein-
statement Privilege.
A Series will generally be subject to an excise tax of 4% on the amount of
any income or capital gains, above certain permitted levels, distributed to
shareholders on a basis such that such income or gain is not taxable to share-
holders in the calendar year in which it was earned. Furthermore, dividends de-
clared in October, November or December payable to shareholders of record on a
specified date in such a month and paid in the following January will be
treated as having been paid by the Series and received by each shareholder in
December. Under this rule, therefore, shareholders may be taxed in one year on
dividends or distributions actually received in January of the following year.
Shareholders are urged to consult their tax advisors concerning the effect of
federal income taxes in their individual circumstances.
UNLESS A SHAREHOLDER INCLUDES A CERTIFIED TAXPAYER IDENTIFICATION NUMBER (SO-
CIAL SECURITY NUMBER FOR INDIVIDUALS) ON THE ACCOUNT APPLICATION AND CERTIFIES
THAT THE SHAREHOLDER IS NOT SUBJECT TO BACKUP WITHHOLDING, THE FUND IS REQUIRED
TO WITHHOLD AND REMIT TO THE U.S. TREASURY A PORTION OF DISTRIBUTIONS AND OTHER
REPORTABLE PAYMENTS TO THE SHAREHOLDER. THE RATE OF BACKUP WITHHOLDING IS
23
<PAGE>
31%. SHAREHOLDERS SHOULD BE AWARE THAT, UNDER REGULATIONS PROMULGATED BY THE
INTERNAL REVENUE SERVICE, THE FUND MAY BE FINED $50 ANNUALLY FOR EACH ACCOUNT
FOR WHICH A CERTIFIED TAXPAYER IDENTIFICATION NUMBER IS NOT PROVIDED. IN THE
EVENT THAT SUCH A FINE IS IMPOSED, THE FUND MAY CHARGE A SERVICE FEE OF UP TO
$50 WHICH MAY BE DEDUCTED FROM THE SHAREHOLDER'S ACCOUNT AND OFFSET AGAINST ANY
UNDISTRIBUTED DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. THE FUND ALSO RESERVES
THE RIGHT TO CLOSE ANY ACCOUNT WHICH DOES NOT HAVE A CERTIFIED TAXPAYER IDENTI-
FICATION NUMBER.
SHAREHOLDER INFORMATION
Shareholders will be sent reports semi-annually regarding the Fund. General
information about the Fund may be requested by writing the Corporate Communica-
tions/ Investor Relations Department, J. & W. Seligman & Co. Incorporated, 100
Park Avenue, New York, NY 10017 or by telephoning the Corporate
Communications/Investor Relations Department toll-free at (800) 221-7844 from
all continental United States, except New York or (212) 850-1864 in New York
State and the Greater New York City area. Information about shareholder ac-
counts may be requested by writing Shareholders Services, Seligman Data Corp.
at the same address or by toll-free telephone by dialing (800) 221-2450 from
all continental United States, or (212) 682-7600 outside the continental United
States. Seligman Data Corp. may be telephoned Monday through Friday (except
holidays), between the hours of 8:30 a.m. and 6:00 p.m. Eastern time, and calls
will be answered by a service representative.
24 HOUR TELEPHONE ACCESS IS AVAILABLE BY DIALING (800) 622-4597 ON A
TOUCHTONE PHONE, WHICH PROVIDES INSTANT ACCESS TO PRICE, YIELD, ACCOUNT BAL-
ANCE, MOST RECENT TRANSACTION AND OTHER INFORMATION. IN ADDITION, ACCOUNT
STATEMENTS AND FORM 1099-DIVS CAN BE ORDERED. TO INSURE PROMPT DELIVERY OF DIS-
TRIBUTION CHECKS, ACCOUNT STATEMENTS AND OTHER INFORMATION, SELIGMAN DATA CORP.
SHOULD BE NOTIFIED IMMEDIATELY IN WRITING OF ANY ADDRESS CHANGE. ADDRESS
CHANGES MAY BE TELEPHONED TO SELIGMAN DATA CORP. IF THE SHAREHOLDER HAS ELECTED
TELEPHONE SERVICES. FOR MORE INFORMATION ABOUT TELEPHONE SERVICES, SEE "TELE-
PHONE TRANSACTIONS" ABOVE.
ACCOUNT SERVICES. Shareholders are sent confirmation of financial transac-
tions in their Account.
Other investor services are available. These include:
. INVEST-A-CHECK(R) SERVICE enables a shareholder to authorize additional pur-
chases of shares automatically by electronic funds transfer from the sharehold-
er's savings or checking account, if the bank that maintains the account is a
member of the Automated Clearing House ("ACH"), or by preauthorized checks to
be drawn on the shareholder's checking account at regular monthly intervals in
fixed amounts of $100 or more per fund, or regular quarterly intervals in fixed
amounts of $250 or more per fund, to purchase shares. Accounts may be estab-
lished concurrently with the Invest-A-Check(R) Service only if accompanied by a
$100 minimum in conjunction with the monthly investment option, or a $250 mini-
mum in conjunction with the quarterly investment option. For investments in the
Seligman Time Horizon Matrix SM Asset Allocation Program, the minimum amount is
$500 at regular monthly intervals or $1,000 at regular quarterly intervals.
(See "Terms and Conditions" on page 27).
. AUTOMATIC DOLLAR-COST-AVERAGING SERVICE permits a shareholder of Seligman
Cash Management Fund to exchange a specified amount, at regular monthly inter-
vals in fixed amounts of $100 or more per fund, or regular quarterly intervals
in fixed amounts of $250 or more per fund, from shares of any class of the Cash
Management Fund into shares of the same class of any other Seligman Mutual Fund
registered in the same name. For exchanges into the Seligman Time Horizon
Matrix SM Asset Allocation Program, the minimum amount is $500 at regular
monthly intervals or $1,000 at regular quarterly intervals. The shareholder's
Cash Management Fund account must have a
24
<PAGE>
value of at least $5,000 at the initiation of the service and all shares must
be in "book credit" form. Exchanges will be made at the public offering price.
. DIVIDENDS FROM OTHER INVESTMENTS permits a shareholder to order dividends
payable on shares of other companies to be paid to and invested in additional
shares of the Fund or another Seligman Mutual Fund. (Dividend checks must meet
or exceed the required minimum purchase amount and include the shareholder's
name, account number, the name of the fund and the class of shares in which the
investment is to be made.)
. AUTOMATIC CD TRANSFER SERVICE permits a shareholder to instruct a bank to in-
vest the proceeds of a maturing bank certificate of deposit ("CD") in shares of
any designated Seligman Mutual Fund. Shareholders who wish to use this service
should contact Seligman Data Corp. or a broker to obtain the necessary documen-
tation. Banks may charge a penalty on CD assets withdrawn prior to maturity.
Accordingly, it will not normally be advisable to liquidate a CD before its ma-
turity.
. AUTOMATIC CASH WITHDRAWAL SERVICE permits payments at regular intervals to be
made to a shareholder who owns or purchases shares worth $5,000 or more held as
book credits. Holders of Class A shares purchased at net asset value because
the purchase amount was $1,000,000 or more should bear in mind that withdrawals
may be subject to a 1% CDSL if made within eighteen months of purchase of such
shares. Holders of Class B shares may elect to use this service immediately,
although certain withdrawals may be subject to a CDSL. Please contact Seligman
Data Corp. at (800) 221-2450 for more information. Holders of Class D shares
may elect to use this service with respect to shares that have been held for at
least one year. (See "Terms and Conditions" on page 27.)
. DIRECTED DIVIDENDS allows a shareholder to pay dividends to another person or
to direct the payment of such dividends to another Seligman Mutual Fund for
purchase at net asset value. Dividends on Class A, Class B and Class D shares
may only be directed to shares of the same class of another Seligman Mutual
Fund.
. OVERNIGHT DELIVERY to service shareholder requests is available for a $15.00
fee which will be deducted from a shareholder's account, if requested.
. COPIES OF ACCOUNT STATEMENTS will be sent to each shareholder free of charge
for the current year and most recent prior year. Copies of year-end statements
for prior years will be available for a fee of $10.00 per year, per account,
with a maximum charge of $150 per account. Statement requests should be for-
warded, along with a check, to Seligman Data Corp.
TAX-DEFERRED RETIREMENT PLANS. Shares of the Fund may be purchased for:
--Individual Retirement Accounts (IRAs);
--Savings Incentive Match Plans for Employees (SIMPLE IRAs);
--Simplified Employee Pension Plans (SEPs);
--Section 401(k) Plans for corporations and their employees;
--Section 403(b)(7) Plans for employees of public school systems and certain
non-profit organizations who wish to make deferred compensation arrangements;
and
--Money Purchase Pension and Profit Sharing Plans for sole proprietorships,
corporations, and partnerships.
These types of plans may be established only upon receipt of a written appli-
cation form. The Fund may register an IRA investment for which an account ap-
plication has not been received as an ordinary taxable account.
For more information, write Retirement Plan Services, Seligman Data Corp.,
100 Park Avenue, New York, NY 10017 or telephone toll-free (800) 445-1777 from
all continental United States. You also may receive information through an au-
thorized dealer.
25
<PAGE>
ADVERTISING A SERIES' PERFORMANCE
From time to time a Series may advertise its "total return" and "average an-
nual total return," each of which are calculated separately for Class A, Class
B and Class D shares. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE
NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" shows what an
investment in shares of Class A, Class B and Class D of a Series would have
earned over a specified period of time (for example, one, five and ten-year pe-
riods or since inception) assuming the payment of the maximum sales load, if
any (or CDSL upon redemption, if applicable), when the investment was made and
that all distributions and dividends paid by such Series were reinvested on the
reinvestment dates during the period. The "average annual total return" is the
annual rate required for the initial payment to grow to the amount which would
be received at the end of the specified period (one, five and ten-year periods
or since inception); i.e., the average annual compound rate of return. Total
return and average annual total return may also be presented without the effect
of the initial sales load or CDSL, as applicable.
From time to time, reference may be made in advertising or promotional mate-
rial to performance information, including mutual fund rankings, prepared by
Lipper Analytical Service, Inc. ("Lipper"), an independent reporting service
which monitors the performance of mutual funds. In calculating the total return
of the Series' Class A, Class B and Class D shares, the Lipper analysis assumes
investment of all dividends and distributions paid but does not take into ac-
count applicable sales loads. The Fund may also refer in advertisements or in
other promotional material to articles, comments, listings and columns in the
financial press pertaining to a Series' performance. Examples of such financial
and other press publications include Barron's, Business Week, CDA/Weisenberger
Mutual Funds Investment Report, Christian Science Monitor, Financial Planning,
Financial Times, Financial World, Forbes, Fortune, Individual Investor, Invest-
ment Advisor, Investors Business Daily, Kiplinger's, Los Angeles Times, MONEY
Magazine, Morningstar, Inc., Pensions and Investments, Smart Money, The New
York Times, USA Today, U.S. News and World Report, The Wall Street Journal,
Washington Post, Worth Magazine and Your Money.
ORGANIZATION AND CAPITALIZATION
The Large-Cap Value Fund and the Small-Cap Value Fund are each separate se-
ries of Seligman Value Fund Series, Inc., an open-end, diversified management
investment company incorporated under the laws of the State of Maryland on Jan-
uary 27, 1997. The Directors of the Fund are authorized to issue, create and
classify shares of capital stock in separate series without further action by
shareholders. Shares of capital stock of each Series have a par value of $.001
and are divided into three classes. Each share of a Series' Class A, Class B
and Class D common stock is equal as to earnings, assets and voting privileges,
except that each class bears its own separate distribution and, potentially,
certain other class expenses and has exclusive voting rights with respect to
any matter to which a separate vote of any class is required by the 1940 Act or
Maryland law. The Fund has adopted a Plan (the "Multiclass Plan") pursuant to
Rule 18f-3 under the 1940 Act permitting the issuance and sale of multiple
classes of common stock. In accordance with the Articles of Incorporation, the
Board of Directors may authorize the creation of additional classes of common
stock with such characteristics as are permitted by the Multiclass Plan and
Rule 18f-3. The 1940 Act requires that where more than one class exists, each
class must be preferred over all other classes in respect of assets specifi-
cally allocated to such class. Shares have non-cumulative voting rights for the
election of directors. Each outstanding share will be fully paid and non-as-
sessable, and freely transferable. There are no liquidation, conversion or pre-
scriptive rights.
26
<PAGE>
TERMS AND CONDITIONS
GENERAL ACCOUNT INFORMATION
Investments will be made in as many shares, including fractions to the third
decimal place, as can be purchased at the net asset value plus a sales load,
if applicable, at the close of business on the day payment is received. If a
check in payment of a purchase of shares is dishonored for any reason, Selig-
man Data Corp. will cancel the purchase and may redeem additional shares, if
any, held in the shareholder's account in an amount sufficient to reimburse
the Fund for any loss it may have incurred and charge a $10.00 return check
fee. Shareholders will receive dividends from investment income and any dis-
tributions from gain realized on investments in shares or in cash according to
the option elected. Dividend and gain options may be changed by notifying Se-
ligman Data Corp. These option changes must be received by Seligman Data Corp.
before the record date for the dividend or distribution in order to be effec-
tive for such dividend or distribution. Stock certificates will not be issued,
unless requested. Replacement stock certificates will be subject to a surety
fee.
INVEST-A-CHECK(R) SERVICE
The Invest-A-Check(R) Service is available to all shareholders. The applica-
tion is subject to acceptance by the shareholder's bank and Seligman Data
Corp. The electronic funds transfer ("ACH debit") or preauthorized check in
the amount specified will be drawn automatically on the shareholder's bank on
the fifth day (unless otherwise specified) of each month (or on the prior
business day if such day of the month falls on a weekend or holiday) in which
an investment is scheduled and invested at the close of business on the same
date. After the initial investment, the value of shares held in a sharehold-
er's account must equal not less than two regularly scheduled investments. If
an ACH debit or preauthorized check is not honored by the shareholder's bank,
or if the value of shares held falls below the required minimum, the Invest-A-
Check(R) Service may be suspended. In the event that a check or ACH debit is
returned uncollectable, Seligman Data Corp. will cancel the purchase, redeem
shares held in the shareholder's account for an amount sufficient to reimburse
the Fund for any loss it may have incurred as a result, and charge a $10.00
return check fee. This fee may be deducted to the shareholder's account. The
Invest-A-Check(R) Service may be reinstated upon written request indicating
that the cause of interruption has been corrected. The Invest-A-Check(R) Serv-
ice may be terminated by the shareholder or Seligman Data Corp. at any time by
written notice. The shareholder agrees to hold the Fund and its agents free
from all liability which may result from acts done in good faith and pursuant
to these terms. Instructions for establishing Invest-A-Check(R) Service are
given on the Account Application. In the event a shareholder exchanges all of
the shares from one mutual fund in the Seligman Group to another, the Invest-
A-Check(R) Service will be terminated in the Seligman Mutual Fund that was
closed as a result of the exchange of all shares and the shareholder must re-
apply for the Invest-A-Check(R) Service in the Seligman Mutual Fund into which
the exchange was made. In the event of a partial exchange, the Invest-A-
Check(R) Service will be continued, subject to the above conditions, in the
Seligman Mutual Fund from which the exchange was made. Accounts established in
connection with the Invest-A-Check(R) Service must be accompanied by a minimum
initial investment of at least $100 in connection with the monthly investment
option or $250 in connection with the quarterly investment option. If a share-
holder uses the Invest-A-Check(R) Service to make an IRA investment, the pur-
chase will be credited as a current year contribution. If a shareholder uses
the Invest-A-Check(R) Service to make an investment in a pension or profit
sharing plan, the purchase will be credited as a current year employer contri-
bution.
AUTOMATIC CASH WITHDRAWAL SERVICE
The Automatic Cash Withdrawal Service is available to Class A shareholders,
to Class B shareholders and to Class D shareholders with respect to Class D
shares held for one year or more. A sufficient number of full and fractional
shares will be redeemed to provide the amount required for a scheduled payment
and any applicable CDSL. Redemptions will be made at the asset value at the
close of business on the specific day designated by the shareholder of each
month (or on the prior business day if the day specified falls on a weekend or
holiday). Redemptions of Class A shares which were purchased at net asset
value because the purchase amount was $1,000,000 or more may be subject to a
CDSL if made within 18 months of purchase of such shares. Redemptions of Class
B shares may also be subject to a CDSL. A shareholder may change the amount of
scheduled payments or may suspend payments by written notice to Seligman Data
Corp. at least ten days prior to the effective date of such a change or sus-
pension. Service may be terminated by the shareholder or Seligman Data Corp.
at any time by written notice. It will be terminated upon proper notification
of the death or legal incapacity of the shareholder. This Service is consid-
ered terminated in the event a withdrawal of shares, other than to make sched-
uled withdrawal payments, reduces the value of shares remaining on deposit to
less than $5,000. Continued payments in excess of dividend income invested
will reduce and ultimately exhaust capital. Withdrawals, concurrent with pur-
chases of shares of this or any other investment company, will be disadvanta-
geous because of the payment of duplicative sales loads, if applicable. For
this reason, additional purchases of Fund shares are discouraged when the
Withdrawal Service is in effect.
LETTER OF INTENT--CLASS A SHARES ONLY
Seligman Financial Services, Inc. will hold in escrow shares equal to 5% of
the minimum purchase amount specified. Dividends and distributions on the
escrowed shares will be paid to the shareholder or credited to their account.
Upon completion of the specified minimum purchase within the thirteen-month
period, all shares held in escrow will be deposited into the shareholder's ac-
count or delivered to the shareholder. A shareholder may include toward com-
pletion of a Letter of Intent the total asset value of shares of the Seligman
Mutual Funds on which an initial sales load was paid as of the date of the
Letter. If the total amount invested within the thirteen-month period does not
equal or exceed the specified minimum purchase, a shareholder will be re-
quested to pay the difference between the amount of the sales load paid and
the amount of the sales load applicable to the total purchase made. If, within
20 days following the mailing of a written request, a shareholder has not paid
this additional sales load to Seligman Financial Services, Inc. sufficient
escrowed shares will be redeemed for payment of the additional sales load.
Shares remaining in escrow after this payment will be released to the account.
The intended purchase amount may be increased at any time during the thirteen-
month period by filing a revised Agreement for the same period, provided that
the Dealer furnishes evidence that an amount representing the reduction in
sales load under the new Agreement, which becomes applicable on purchases al-
ready made under the original Agreement, will be refunded to the Fund and that
the required additional escrowed shares will be purchased by the shareholder.
Shares of Seligman Cash Management Fund, Inc. which have been acquired by an
exchange of shares of another Seligman Mutual Fund on which there is a front-
end sales load may be taken into account in completing a Letter of Intent, or
for Right of Accumulation. However, shares of the Seligman Cash Management
Fund which have been purchased directly may not be used for purposes of deter-
mining reduced sales loads on additional purchases of the other Seligman Mu-
tual Funds.
4/97
27
<PAGE>
BACK COVER
Seligman Value
Fund Series, Inc.
Seligman Large-Cap Value Fund
Seligman Small-Cap Value Fund
100 Park Avenue
New York, New York 10017
<TABLE>
<CAPTION>
Table of Contents
Page
<S> <C>
Summary of Series Expenses................. 2
Alternative Distribution System............ 3
Investment Objectives, Policies and Risks.. 5
Management Services........................ 8
Purchase of Shares......................... 9
Telephone Transactions..................... 16
Redemption of Shares....................... 17
Administration, Shareholder Services
and Distribution Plans..................... 19
Exchange Privilege......................... 20
Further Information about
Transactions in the Funds.................. 22
Dividends and Distributions................ 22
Federal Income Taxes....................... 23
Shareholder Information.................... 24
Advertising a SeriesO Performance.......... 26
Organization and Capitalization............ 26
</TABLE>
EQVA 4/97
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
April 23, 1997
SELIGMAN LARGE-CAP VALUE FUND
SELIGMAN SMALL-CAP VALUE FUND
series of
SELIGMAN VALUE FUND SERIES, 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, dated April 23, 1997, which
covers the Seligman Large-Cap Value Fund (the "Large-Cap Value Fund") and the
Seligman Small-Cap Value Fund (the "Small-Cap Value Fund"), each a separate
series (individually, a "Series") of Seligman Value Fund Series, Inc., (the
"Fund"). It should be read in conjunction with the Fund's 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.
Each Series of the Fund offers three classes of shares. Class A shares may
be purchased at net asset value plus a sales load of up to 4.75%. Class A shares
purchased in an amount of $1,000,000 or more are sold without an initial sales
load but are subject to a contingent deferred sales load ("CDSL") of 1% (of the
current net asset value or the original purchase price, whichever is less) if
such shares are redeemed within eighteen months of purchase. Class B shares may
be purchased at net asset value and are subject to a CDSL, if applicable, in the
following amount (as a percentage of the current net asset value of the original
purchase price, whichever is less, if redemption occurs within the indicated
number of years of purchase of such shares: 5% (less than one year), 4% (1 but
less than 2 years), 3% (2 but less than 4 years), 2% (4 but less than 5 years)
1% (5 but less than six years) and 0% (6 or more years). Class B shares
automatically convert to Class A shares after approximately eight years
resulting in lower ongoing fees. Shares purchased through reinvestment of
dividends and distributions on Class B shares also will convert automatically to
Class A shares along with the underlying shares on which they were earned. Class
D shares may be purchased at net asset value and are subject to a CDSL of 1% (of
the current net asset value or the original purchase price, whichever is less)
if redeemed within one year of purchase.
Each Series' Class A, Class B and Class D share represents an identical
legal interest in the investment portfolio of the Series and has the same rights
except for certain class expenses and except that Class B and Class D shares
bear higher distribution fees that generally will cause the Class B and Class D
shares to have higher expense ratios and pay lower dividends than 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, Policies and Risks............ 2
Investment Limitations............................... 3
Directors and Officers............................... 4
Management and Expenses ............................. 7
Administration, Shareholder Services and
Distribution Plans................................ 9
Portfolio Transactions............................... 9
Purchase and Redemption of Series Shares............. 10
Distribution Services................................ 12
Valuation............................................ 12
Performance.......................................... 13
General Information.................................. 13
Financial Statements................................. 14
Appendix A........................................... 16
Appendix B........................................... 19
EQFR1A
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISKS
The Large-Cap Value Fund and the Small-Cap Value Fund are each a separate
series of Seligman Value Fund Series, Inc. The Large-Cap Value Fund seeks
maximum capital appreciation primarily by investing in equity securities of
companies with large market capitalization. The Small-Cap Value Fund seeks
maximum capital appreciation by primarily investing in equity securities of
companies with small market capitalization. The following information regarding
the Series' investment policies supplements the information contained in the
Prospectus.
Purchasing Put Options on Securities. A Series may purchase put options to
protect its portfolio holdings in an underlying security against a decline in
market value. This hedge protection is provided during the life of the put
option since a Series, as holder of the put option, can sell the underlying
security at the put exercise price regardless of any decline in the underlying
security's market price. In order for a put option to be profitable, the market
price of the underlying security must decline sufficiently below the exercise
price to cover the premium and transaction costs. By using put options in this
manner, a Series will reduce any profit it might otherwise have realized in the
underlying security by the premium paid for the put option and by transaction
costs.
Because a purchased put option gives the purchaser a right and not an
obligation, the purchaser is not required to exercise the option. If the
underlying position incurs a gain, a Series would let the put option expire
resulting in a reduced profit on the underlying security equal to the cost of
the put option. The cost of the put option is limited to the premium plus
commission paid. A Series' maximum financial exposure will be limited to these
costs.
A Series may purchase options listed on public exchanges as well as
over-the-counter. Options listed on an exchange are generally considered very
liquid. OTC options are considered less liquid, and therefore, will only be
considered where there is not a comparable listed option. Because options will
be used solely for hedging, and due to their relatively low cost and short
duration, liquidity is not a significant concern.
A Series' ability to engage in option transactions may be limited by tax
considerations.
Rights and Warrants. A Series may invest in common stock rights and warrants
believed by the Manager to provide capital appreciation opportunities. Each
Series may not invest in rights and if, at the time of acquisition by the
Series, the investment in rights and warrants would exceed 5% of such Series net
assets, valued at the lower of cost or market.
Repurchase Agreements. A Series may enter into repurchase agreements with
commercial banks and with broker/dealers to invest cash for the short-term. A
repurchase agreement is an agreement under which a Series acquires a money
market instrument, generally a U.S. Government obligation, subject to resale at
an agreed upon price and date. Such resale price reflects an agreed upon
interest rate effective for the period of time the instrument is held by the
Series and is unrelated to the interest rate on the instrument. Repurchase
agreements could involve certain risks in the event of bankruptcy or other
default by the seller, including possible delays and expenses in liquidating the
securities underlying the agreement, decline in value of the underlying
securities and loss of interest. Repurchase agreements usually are for short
periods, such as one week or less, but may be for longer periods. However, as a
matter of fundamental policy, a Series will not enter into repurchase agreements
of more than one week's duration if more than 10% of its net assets would be so
invested. Each Series has no present intention of entering into repurchase
agreements.
Illiquid Securities. A Series may invest up to 15% of its net assets in illiquid
securities, including restricted securities (i.e., securities not readily
marketable without registration under the Securities Act of 1933 (the "1933
Act") and other securities that are not readily marketable. Each Series does not
currently expect to invest more than 5% of its assets in such securities. A
Series may purchase restricted securities that can be offered and sold to
"qualified institutional buyers" under Rule 144A of the 1933 Act, and the
Manager, acting pursuant to procedures approved by the Fund's Board of
Directors, may determine, when appropriate, that specific Rule 144A securities
are liquid and not subject to the 15% limitation on illiquid securities. Should
this determination be made, the Manager, acting pursuant to such procedures,
will carefully monitor the security (focusing on such factors, among others, as
trading activity and availability of information) to determine that the Rule
144A security continues to be liquid. It is not possible to predict with
assurance exactly how the market for Rule 144A securities will further evolve.
This investment practice could have the effect of increasing the level of
illiquidity in the Series to the extent that qualified institutional buyers
become for a time uninterested in purchasing Rule 144A securities.
-2-
<PAGE>
Borrowing. A Series may from time to time borrow money for temporary,
extraordinary or emergency purposes in an amount up to 5% of its total assets
from banks at prevailing interest rates and invest the funds in additional
securities. A Series' borrowings are limited so that immediately after such
borrowing the value of the Series' assets (including borrowings) less its
liabilities (not including borrowings) is at least three times the amount of the
borrowings. Should a Series, for any reason, have borrowings that do not meet
the above test, then within three business days, such Series must reduce such
borrowings so as to meet the foregoing test. Under these circumstances, a Series
may have to liquidate portfolio securities at a time when it is disadvantageous
to do so. Gains made with additional funds borrowed will generally cause the net
asset value of a Series' shares to rise faster than could be the case without
borrowings. Conversely, if investment results fail to cover the cost of
borrowings, the net asset value of a Series
Except as otherwise specifically noted above and below, the Series'
investment policies are not fundamental and the Board of Directors of the Fund
may change such policies without the vote of a majority of a Series' outstanding
voting securities, as defined below.
Portfolio Turnover. A Series' portfolio turnover rate is calculated by dividing
the lesser of purchases or sales of portfolio securities for the fiscal year by
the monthly average value of the portfolio securities owned during the fiscal
year. Securities with remaining maturities of one year or less at the date of
acquisition are excluded from the calculation. The portfolio turnover for either
Series is not expected to exceed 100%.
INVESTMENT LIMITATIONS
Under each Series' fundamental policies, which cannot be changed except by
vote of a majority of a Series' outstanding voting securities, each Series may
not:
o Issue senior securities or borrow money, except for temporary or emergency
purposes in an amount not to exceed 15% of the value of its total assets. A
Series will not purchase any securities while outstanding borrowings are
greater than 5% of the value of its total assets;
o Mortgage or pledge any of its assets, except to the extent necessary to
effect permitted borrowings on a secured basis;
o Make "short sales" of securities, or purchase securities on "margin", or
write or purchase put or call options, except a Series may purchase put
options for hedging purposes as approved by the Fund's Board of Directors
and as described in the Prospectus and herein;
o As to 75% of the value of its total assets, invest more than 5% of its
total assets (taken at market) in securities of any one issuer, other than
the U.S. Government, its agencies or instrumentalities, buy more than 10%
of the outstanding voting securities of any issuer, or invest to control or
manage any company;
o Invest more than 25% of total assets at market value in the securities of
issuers of any one industry, except securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities;
o Purchase securities of open-end or closed-end investment companies, except
as permitted by the Investment Company Act of 1940, as amended (the "1940
Act"), and other applicable law;
o Purchase or hold any real estate, except each Series may invest in
securities secured by real estate or interests therein or issued by persons
(including real estate investment trusts) which deal in real estate or
interests therein.
o Purchase or hold the securities of any issuer (other than shares of the
Series), if to the Fund's knowledge, those directors or officers of the
Fund individually own beneficially more than 0.5% of the outstanding
securities of such issuer, together own beneficially more than 5% of such
outstanding securities;
o Purchase or sell commodities and commodity futures contracts;
o Underwrite securities of other issuers, except insofar as a Series may be
deemed an underwriter when purchasing or selling portfolio securities; or
-3-
<PAGE>
o Make loans, except loans of portfolio securities and except to the extent
the purchase of notes, bonds or other evidences of indebtedness, the entry
into repurchase agreements or deposits with banks may be considered loans.
Under the 1940 Act, a "vote of a majority of the outstanding voting
securities" of a Series means the affirmative vote of the lesser of (l) more
than 50% of the outstanding shares of the Series or (2) 67% or more of the
shares present at a shareholders' meeting if more than 50% of the outstanding
shares are represented at the meeting in person or by proxy.
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
(58) Executive Officer and Chairman of the
Executive Committee
Chairman, J. & W. Seligman & Co.
Incorporated, investment managers and
advisers; Chairman and Chief Executive
Officer, the Seligman Group of
Investment Companies; Chairman, Seligman
Advisors, Inc., advisers; 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, 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,
President, J. & W. Seligman & Co.
Incorporated; Chairman, Seligman
Securities, Inc., broker/dealer and J. &
W. Seligman Trust Company, trust
company; and Director, Daniel Industries
Inc., manufacturer of oil and gas
metering equipment.
BRIAN T. ZINO* Director, President and Member of the
(44) Executive Committee
Director and President, J. & W. Seligman
& Co. Incorporated, investment managers
and advisers; President (with the
exception of Seligman Quality Municipal
Fund, Inc. and Seligman Select Municipal
Fund, Inc.) and Director or Trustee, the
Seligman Group of Investment Companies;
and Seligman Advisors, Inc., advisers;
Chairman and President, Seligman Data
Corp., shareholder service agent;
Director, Seligman Financial Services,
Inc., broker/dealer; Seligman Services,
Inc., broker/dealer; and Seligman
Henderson Co., advisers; formerly,
Director, Seligman Securities, Inc.,
broker/dealer and J. & W. Seligman Trust
Company, trust company.
JOHN R. GALVIN Director
(67)
Dean, Fletcher School of Law and
Diplomacy at Tufts University; Director
or Trustee, the Seligman Group of
Investment Companies; Chairman, American
Council on Germany; a Governor of the
Center for Creative Leadership;
Director, USLIFE Corporation, life
insurance; Raytheon Co., electronics;
National Defense University; and the
Institute for Defense Analysis;
formerly, Ambassador, U.S. State
Department for negotiations in Bosnia;
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
(61)
President, Sarah Lawrence College;
Director or Trustee, the Seligman Group
of Investment Companies; NYNEX,
telephone company; and the Committee for
Economic Development; and Chairman, The
Rockefeller Foundation, charitable
foundation; formerly, Trustee, The
Markle Foundation, philanthropic
organization; and Director,
International Research and Exchange
Board, intellectual exchanges. Sarah
Lawrence College, Bronxville, New York
10708
FRANK A. McPHERSON Director
(63)
Director, various corporations; Director
or Trustee, the Seligman Group of
Investment Companies; Director,
Kimberly-Clark Corporation, consumer
products, Bank of Oklahoma Holding
Company, Oklahoma City Chamber of
Commerce, Baptist Medical Center,
Oklahoma Chapter of the Nature
Conservancy, Oklahoma Medical Research
Foundation and National Boys and Girls
Clubs of America; Chairman, Oklahoma
City Public Schools Foundation; and a
Member of the Business Roundtable and
National Petroleum Council; formerly,
Chairman of the Board and Chief
Executive Officer, Kerr-McGee
Corporation, energy and chemicals. 123
Robert S. Kerr Avenue, Oklahoma City, OK
73102
JOHN E. MEROW* Director
(67)
Retired Chairman and Senior Partner,
Sullivan & Cromwell, law firm; Director
or Trustee, the Seligman Group of
Investment Companies; Director,
Commonwealth Aluminum Corporation,
Municipal Art Society of New York, and
the United States-New Zealand Council;
Trustee, the United States Council for
International Business Chairman,
American Australian Association; Member
of the American Law Institute and
Council on Foreign Relations; and a
Member of the Board of Governors of
Foreign Policy Association and New York
Hospital. 125 Broad Street, New York, NY
10004
BETSY S. MICHEL Director
(54)
Attorney; Director or Trustee, the
Seligman Group of Investment Companies;
Trustee, Geraldine R. Dodge Foundation,
charitable foundation; and Chairman of
the Board of Trustees of St. George's
School (Newport, RI); formerly,
Director, the National Association of
Independent Schools (Washington, DC).
St. Bernard's Road, P.O. Box 449,
Gladstone, NJ 07934
JAMES C. PITNEY Director
(69)
Retired Partner, Pitney, Hardin, Kipp &
Szuch, law firm; Director or Trustee,
the Seligman Group of Investment
Companies and Director, Public Service
Enterprise Group, public utility. Park
Avenue at Morris County, P.O. Box 1945,
Morristown, NJ 07962-1945
JAMES Q. RIORDAN Director
(69)
Director, various corporations; Director
or Trustee, the Seligman Group of
Investment Companies; The Houston
Exploration Company; 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, Tesoro
Petroleum Companies, Inc.; and Director
and President, Bekaert Corporation. 675
Third Avenue, Suite 3004, New York, NY
10017
-5-
<PAGE>
RICHARD R. SCHMALTZ* Director
(56)
Managing Director, Director of
Investments, J. & W. Seligman & Co.
Incorporated; Director of Seligman
Henderson Co., Home State Insurance
Company and Quaker State Insurance
Company; and Trustee Emeritus of Colby
College; formerly, Director of Research
at Neuberger & Berman from 1993 to 1996
and Executive Vice President of McGlinn
Capital form 1987 to 1993.
ROBERT L. SHAFER Director
(64)
Director, various corporations, Director
or Trustee, the Seligman Group of
Investment Companies and Director,
USLIFE Corporation, life insurance;
formerly, Vice President, Pfizer Inc.,
pharmaceuticals. 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; and Director, Red Man Pipe
and Supply Company, piping and other
materials; and C-SPAN. 300 Crescent
Court, Suite 700, Dallas, TX 75202
NEIL T. EIGEN Vice President and Portfolio Manager
(54)
Managing Director, J. & W. Seligman and
Co., Incorporated; formerly, Senior
Managing Director, Chief Investment
Officer and Director of Equity
Investing, Bear Stearns Asset
Management.
LAWRENCE P. VOGEL Vice President
(40)
Senior Vice President, Finance, J. & W.
Seligman & Co. Incorporated, investment
managers and advisers; Seligman
Financial Services, Inc., broker/dealer;
Seligman Advisors, Inc., advisers and
Seligman Data Corp., shareholder service
agent; Vice President, the Seligman
Group of Investment Companies; and
Seligman Services, Inc., broker/dealer;
and Treasurer, Seligman Holdings, Inc.,
holding company and Seligman Henderson
Co. advisers.
FRANK J. NASTA Secretary
(32)
Senior Vice President, Law and
Regulation and Corporate Secretary, J. &
W. Seligman & Co. Incorporated,
investment managers and advisers; and
Seligman Advisors, Inc., advisers;
Secretary, the Seligman Group of
Investment Companies, and Corporate
Secretary, Seligman Financial Services,
Inc., broker/dealer; Seligman Henderson
Co., advisers; Seligman Services, Inc.,
broker/dealer; and Seligman Data Corp.,
shareholder service agent; formerly, an
attorney at Seward & Kissel, law firm.
THOMAS G. ROSE Treasurer
(39)
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
Aggregate Retirement Benefits Total Compensation
Compensation Accrued as part of from Fund and
Position With Fund from Fund (1) Fund Expenses Fund Complex (1)(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
Richard R. Schmaltz, Director N/A N/A N/A
John R. Galvin, Director $1,085.44 N/A $66,000.00
Alice S. Ilchman, Director 1,085.44 N/A 66,000.00
Frank A. McPherson, Director 1,085.44 N/A 66,000.00
John E. Merow, Director 1,085.44 N/A 66,000.00
Betsy S. Michel, Director 1,085.44 N/A 66,000.00
James C. Pitney, Director 1,085.44 N/A 66,000.00
James Q. Riordan, Director 1,085.44 N/A 66,000.00
Robert L. Shafer, Director 1,085.44 N/A 66,000.00
James N. Whitson, Director 1,085.44(d) N/A 66,000.00(d)
</TABLE>
- ---------------------
(1) Estimated based on remunerations to be received by the Directors during the
first fiscal year of the Fund.
(2) As defined in the Fund's Prospectus, the Seligman Group of Investment
Companies consists of eighteen investment companies.
(d) Deferred.
The Fund has a compensation arrangement under which outside directors may
elect to defer receiving their fees. Under this arrangement, interest will be
accrued on the deferred balances. The annual cost of such interest will be
included in the directors' fees and expenses, and the accumulated balance
thereof will be included in "Liabilities" in the Fund's financial statements.
The Fund has applied for, and expects to receive, exemptive relief that would
permit a director who has elected deferral of his or her fees to choose a rate
of return equal to either (i) the interest rate on short-term Treasury bills, or
(ii) the rate of return on the shares of any of the investment companies advised
by the Manager, as designated by the director. The Fund may, but is not
obligated to, purchase shares of such investment companies to hedge its
obligations in connection with this deferral arrangement.
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.
No Directors or officers of the Fund own any shares of the Fund's Capital Stock
as of the date of this Prospectus.
MANAGEMENT AND EXPENSES
Under the Management Agreement, dated March 20, 1997, subject to the
control of the Board of Directors, J. & W. Seligman & Co. Incorporated ( the
"Manager") manages the investment of the assets of the Series, including making
purchases and sales of portfolio securities consistent with each Series'
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 of the officers and
employees of the Fund. The Manager also provides senior management for Seligman
Data Corp., the Fund's shareholder service agent.
Each Series pays the Manager a management fee for its services, calculated
daily and payable monthly, equal to .80% of the Large-Cap Value Fund's average
daily net assets and 1.00% of the Small-Cap Value Fund's average daily net
assets.
-7-
<PAGE>
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 shareholders,
expenses of printing and filing reports and other documents with governmental
agencies, expenses of shareholders' meetings, expenses of corporate data
processing and related services, shareholder recordkeeping 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 between the Series in a
manner determined by the Directors to be fair and equitable.
The Management Agreement provides that the Manager will not be liable to
the Fund for any error of judgment or mistake of law, or for any loss arising
out of any investment, or for any act or omission in performing its duties under
the Agreement, except for willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations and duties under the Agreement.
The Management Agreement was initially approved by the Board of Directors
on March 20, 1997 and by the sole shareholder of each Series on April 7, 1997.
The Management Agreement will continue in effect until December 31, 1998 and
thereafter from year to year, if (1) such continuance is approved in the manner
required by the 1940 Act (i.e., by a vote of a majority of the Board of
Directors or of the outstanding voting securities of each Series 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) 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 any
Series, without penalty, on 60 days' written notice to the Manager and will
terminate automatically in the event of its assignment. Each Series 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.
Under the Subadvisory Agreement, dated March 20, 1997, the Subadviser may
supervise and direct a portion of each Series' investment in foreign securities
and Depositary Receipts, as designated by the Manager, consistent with the
Series' investment objectives, policies and principles. For these services, the
Subadviser is paid a fee, by the Manager, as described in the Fund's Prospectus.
The Subadvisory Agreement was initially approved by the Board of Directors at a
meeting held on March 20, 1997 and by the sole shareholder of each Series of the
Fund on April 7, 1997. The Subadvisory Agreement will continue in effect until
December 31, 1998 and thereafter from year to 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 Subadvisory
Agreement or interested persons of any such party) and (2) the Subadviser shall
not have notified the Manager in writing at least 60 days prior to December 31
of any year that it does not desire such continuance. The Subadvisory Agreement
may be terminated at any time in respect of a Series, without payment of penalty
by the Series, on 60 days' written notice to the Subadviser, by vote of the
Board of Directors of the Fund or by vote of a majority of the outstanding
voting securities of such Series (as defined by the 1940 Act). The failure of
the Board of Directors of the Fund or holders of securities of any Series to
approve the continuance of the subadvisory Agreement with respect to such
Series, shall be without prejudice to the effectiveness of this Agreement with
respect to the other Series. This Agreement will automatically terminate in the
event of its assignment (as defined by the 1940 Act) or upon the termination of
the Management Agreement.
The Subadviser is a New York general partnership formed by the Manager and
Henderson International, Inc., a controlled affiliate of Henderson plc.
Henderson plc, headquartered in London, is one of the largest independent money
managers in Europe. The Firm manages approximately $18.1 billion in assets as of
December 31, 1996 and is recognized as a specialist in global equity investing.
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
-8-
<PAGE>
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.
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 PLANS
Each Series of the Fund has adopted an Administration, Shareholder Services
and Distribution Plan for each Class of such Series (the "Plans") in accordance
with Section 12(b) of the 1940 Act and Rule 12b-1 thereunder.
The Plans were approved on March 20, 1997 by the Board of Directors of the
Fund, including a majority of the Directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund and who have no direct or indirect
financial interest in the operation of the Plans or in any agreement related to
the Plans (the "Qualified Directors") and by the sole shareholder of each Series
on April 7, 1997. The Plans will continue in effect through December 31 of each
year so long as such continuance is approved annually 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 Plans may not be
amended to increase materially the amounts payable to Service Organizations with
respect to a Class without the approval of a majority of the outstanding voting
securities of the Class. If the amount payable in respect of Class A shares
under the Plans 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 Plans 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 Plans may be made except by a majority of both the
Directors and Qualified Directors.
The Plans require 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 therefore) under the Plans. 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.
PORTFOLIO TRANSACTIONS
The Management Agreement recognizes that in the purchase and sale of
portfolio securities the Manager will seek the most favorable price and
execution, and, consistent with that policy, may give consideration to the
research, statistical and other services furnished by brokers or dealers to the
Manager for its use, as well as to the general attitude toward and support of
investment companies demonstrated by such broker or dealers. Such services
include supplemental investment research, analysis and reports concerning
issuers, industries and securities deemed by the Manager to be beneficial to the
Series. In addition, the Manager is authorized to place orders with brokers who
provide supplemental investment and market research and security and economic
analysis although the use of such brokers may result in a higher brokerage
-9-
<PAGE>
charge to the Fund that the use of brokers selected solely on the basis of
seeking the most favorable price and execution and although such research and
analysis may be useful to the Manager in connection with its services to clients
other than the Fund.
In over-the-counter markets, the Fund deals with primary market makers
unless a more favorable execution or price is believed to be obtainable. Each
Series may buy securities from or sell securities to dealers acting as
principal, except dealers with which the Fund's directors and/or officers are
affiliated.
When two or more of the investment companies in the Seligman Group or other
investment advisory clients of the Manager desire to buy or sell the same
security at the same time the securities purchased or sold are allocated by the
Manager in a manner believed to be equitable to each. There may be possible
advantages or disadvantages of such transactions with respect to price or the
size of positions readily obtainable or saleable.
PURCHASE AND REDEMPTION OF SERIES SHARES
Each Series issues three classes of shares: Class A shares may be purchased
at a price equal to the next determined net asset value per share, plus a sales
load. Class B shares may be purchased at a price equal to the next determined
net asset value without an initial sales load, but a CDSL may be charged on
redemptions within 6 years of purchase. Class D shares may be purchased at a
price equal to the next determined net asset value without an initial sales
load, but a CDSL may be charged on redemptions within one year of purchase. See
"Alternative Distribution System," "Purchase of Shares," and "Redemption of
Shares" in the Prospectus.
Class A Shares - Reduced Initial Sales Loads
Reductions Available. Shares of any Seligman Mutual Fund sold with an initial
sales load in a continuous offering will be eligible for the following
reductions:
Volume Discounts are provided if the total amount being invested in Class A
shares of a Series alone, or in any combination of shares of the other mutual
funds in the Seligman Group which are sold with an initial sales load, reaches
levels indicated in the sales load schedule set forth in the Prospectus.
The Right of Accumulation allows an investor to combine the amount being
invested in Class A shares of a Series and shares of the other mutual funds in
the Seligman Group that were sold with an initial sales load with the total net
asset value of shares of those Seligman Mutual Funds already owned that were
sold with an initial sales load and the total net asset value of shares of
Seligman Cash Management Fund which were acquired through an exchange of shares
of another mutual fund in the Seligman Group on which there was an initial sales
load at the time of purchase to determine reduced sales loads in accordance with
the schedule in the Prospectus. The value of the shares owned, including the
value of shares of Seligman Cash Management Fund acquired in an exchange of
shares of another mutual fund in the Seligman Group on which there was an
initial sales load at the time of purchase will be taken into account in orders
placed through a dealer, however, only if Seligman Financial Services, Inc.
("SFSI") is notified by an investor or a dealer of the amount owned by the
investor at the time the purchase is made and is furnished sufficient
information to permit confirmation.
A Letter of Intent allows an investor to purchase Class A shares over a
13-month period at reduced initial sales loads in accordance with the schedule
in the Prospectus, based on the total amount of Class A shares of the Series
that the letter states the investor intends to purchase plus the total net asset
value of shares that were sold with an initial sales load of the other Mutual
Funds in the Seligman Group already owned and the total net asset value of
shares of Seligman Cash Management Fund which were acquired through an exchange
of shares of another Mutual Fund in the Seligman Group on which there was an
initial sales load at the time of purchase. Reduced sales loads also may apply
to purchases made within a 13-month period starting up to 90 days before the
date of execution of a letter of intent. For more information concerning the
terms of the letter of intent see "Terms and Conditions - Letter of Intent -
Class A Shares Only" in the back of the Prospectus.
Class A shares purchased without an initial sales load in accordance with
the sales load schedule in the Fund's prospectus, or pursuant to a Volume
Discount, Right of Accumulation or Letter of Intent are subject to a CDSL of 1%
on redemptions of such shares within eighteen months of purchase.
-10-
<PAGE>
Persons Entitled To Reductions. Reductions in initial sales loads apply to
purchases of Class A shares by a "single person," including an individual;
members of a family unit comprising husband, wife and minor children; or a
trustee or other fiduciary purchasing for a single fiduciary account. Employee
benefit plans qualified under Section 401 of the Internal Revenue Code, of 1986,
as amended (the "Code"), organizations tax exempt under Section 501 (c)(3) or
(13)of the Code, and non-qualified employee benefit plans that satisfy uniform
criteria are considered "single persons" for this purpose. The uniform criteria
are as follows:
1. Employees must authorize the employer, if requested by the Fund, to
receive in bulk and to distribute to each participant on a timely basis the Fund
Prospectus, reports and other shareholder communications.
2. Employees participating in a plan will be expected to make regular
periodic investments (at least annually). A participant who fails to make such
investments may be dropped from the plan by the employer or the Fund 12 months
and 30 days after the last regular investment in his account. In such event, the
dropped participant would lose the discount on share purchases to which the plan
might then be entitled.
3. The employer must solicit its employees for participation in such an
employee benefit plan or authorize and assist an investment dealer in making
enrollment solicitations.
Eligible Employee Benefit Plans. The table of sales loads in the Prospectus
applies to sales to "eligible employee benefit plans" (as defined in the
Prospectus), except that the Fund may sell shares at net asset value to
"eligible employee benefit plans" which have at least (i) $500,000 invested in
the Seligman Group of Mutual Funds or (ii) 50 eligible employees to whom such
plan is made available. Such sales must be made in connection with a payroll
deduction system of plan funding or other systems acceptable to Seligman Data
Corp., the Fund's shareholder service agent. Such sales are believed to require
limited sales effort and sales-related expenses and therefore are made at net
asset value. Contributions or account information for plan participation also
should be transmitted to Seligman Data Corp. by methods which it accepts.
Additional information about "eligible employee benefit plans" is available from
investment dealers or SFSI.
Payment in Securities. In addition to cash, the Fund may accept securities in
payment for Fund shares sold at the applicable public offering price (net asset
value and, if applicable, any sales load), although the Fund does not presently
intend to accept securities in payment for Fund shares. Generally, the Fund will
only consider accepting securities (l) to increase its holdings in a portfolio
security, or (2) if the Manager determines that the offered securities are a
suitable investment for the Fund and in a sufficient amount for efficient
management. Although no minimum has been established, it is expected that the
Fund would not accept securities with a value of less than $100,000 per issue in
payment for shares. The Fund may reject in whole or in part offers to pay for
Fund shares with securities, may require partial payment in cash for applicable
sales loads, and may discontinue accepting securities as payment for Fund shares
at any time without notice. The Fund will not accept restricted securities in
payment for shares. The Fund will value accepted securities in the manner
provided for valuing portfolio securities of the Fund. (See "Valuation".)
Further Types of Reductions. Class A shares may be issued without an
initial sales load in connection with the acquisition of cash and securities
owned by other investment companies and personal holding companies; to any
registered unit investment trust which is the issuer of periodic payment plan
certificates, the net proceeds of which are invested in fund shares; to separate
accounts established and maintained by an insurance company which are exempt
from registration under Section 3(c)(11) of the 1940 Act; to registered
representatives and employees (and their spouses and minor children) of any
dealer that has a sales agreement with SFSI; to shareholders of mutual funds
with objectives and policies similar to the Fund who purchase shares with
redemption proceeds of such funds (not to exceed the dollar value of such
redemption proceeds); to financial institution trust departments; to registered
investment advisers exercising discretionary investment authority with respect
to the purchase of Fund shares; to accounts of financial institutions or
broker/dealers that charge account management fees, provided the manager or one
of its affiliates has entered into an agreement with respect to such accounts;
pursuant to sponsored arrangements with organizations which make recommendations
to or permit group solicitations of, its employees, members or participants in
connection with the purchase of shares of the Fund; to other investment
companies in the Seligman Group in connection with a deferred fee arrangement
for outside directors; and to "eligible employee benefit plans" which have at
least (i) $500,000 invested in the Seligman Mutual Funds or (ii) 50 eligible
employees to whom such plan is made available. "Eligible employee benefit plan"
means any plan or arrangement, whether or not tax qualified, which provides for
the purchase of Fund shares. Sales of shares to such plans must be made in
connection with a payroll deduction system of plan funding or other system
acceptable to Seligman Data Corp.
-11-
<PAGE>
The Fund may also sell Class A shares at net asset value to present and
retired directors, trustees, officers, employees and their spouses (and family
members of the foregoing) of the Fund, the other investment companies in the
Seligman Group, the Manager, and other companies affiliated with the Manager.
Family members are defined to include lineal descendants and lineal ancestors,
siblings (and their spouses and children) and any company or organization
controlled by any of the foregoing. Such sales also may be made to employee
benefit and thrift plans for such persons and to any investment advisory,
custodial, trust or other fiduciary account managed or advised by the Manager or
any affiliate. The sales may be made for investment purposes only, and shares
may be resold only to the Fund.
Class A shares may be sold at net asset value to these persons since such
sales require less sales effort and lower sales related expenses as compared
with sales to the general public.
More About Redemptions. The procedures for redemption of Series shares under
ordinary circumstances are set forth in the Prospectus. In unusual
circumstances, payment may be postponed, or the right of redemption postponed
for more than seven days, if the orderly liquidation of portfolio securities is
prevented by the closing of, or restricted trading on the NYSE during periods of
emergency, or such other periods as ordered by the Securities and Exchange
Commission. Under these circumstances, redemption proceeds may be made in
securities. If payment is made in securities, a shareholder may incur brokerage
expenses in converting these securities to cash.
DISTRIBUTION SERVICES
SFSI, an affiliate of the Manager, acts as general distributor of the
shares of the Series and of the other mutual funds in the Seligman Group on a
best efforts basis. The Fund and SFSI are parties to a Distributing Agreement,
dated March 20, 1997. As general distributor of the Fund's Capital Stock, SFSI
allows commissions to all dealers, as indicated in the Prospectus. Pursuant to
agreements with the Fund, certain dealers may also provide sub-accounting and
other services for a fee. SFSI receives the balance of sales loads and any CDSLs
on Class A or Class D shares paid by investors. SFSI has sold its rights to
collect any CDSL imposed on redemptions of Class B shares to FEP Capital, L.P.
("FEP") in connection with an agreement with FEP to provide funding to SFSI to
enable it to pay commissions to dealers at the time of the sale of related Class
B shares.
Seligman Services, Inc. ("SSI"), an affiliate of the Manager, is eligible
to receive commissions from certain sales of Fund shares, as well as
distribution and service fees pursuant to the Plan.
VALUATION
Net asset value per share of each class of a Series of the Fund is
determined as of the close of trading on the NYSE, (normally, 4:00 p.m. Eastern
time), on each day that the NYSE is open. The NYSE is currently closed on New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. The Fund will also determine net asset
value for each class of a Series on each day in which there is a sufficient
degree of trading in the Series' portfolio securities that the net asset value
of Series shares might be materially affected. Net asset value per share for a
class of a Series is computed by dividing such class' share of the value of the
net assets of the Series (i.e., the value of its assets less liabilities) by the
total number of outstanding shares of such class. All expenses of a Series,
including the Manager's fee, are accrued daily and taken into account for the
purpose of determining net asset value. The net asset value of Class B and Class
D shares will generally be lower than the net asset value of Class A shares of
such Series as a result of the higher distribution fee with respect to such
shares.
Portfolio securities, including open short positions and options written,
are valued at the last sale price on the securities exchange or securities
market on which such securities primarily are traded. Securities traded on a
foreign exchange or over-the-counter market are valued at the last sales price
on the primary exchange or market on which they are traded. United Kingdom
securities and securities for which there are no recent sales transactions are
valued based on quotations provided by primary market makers in such securities.
Any securities for which recent market quotations are not readily available,
including restricted securities, are valued at fair value as determined in
accordance with procedures approved by the Board of Directors. Short-term
obligations with less than sixty days remaining to maturity are generally valued
at amortized cost. Short-term obligations with more than sixty days remaining to
maturity will be valued on an amortized cost basis based on the value of such
date unless the Board determines that this amortized cost value does not
represent fair market value. Expenses and fees, including the investment
management fee, are accrued daily and taken into account for the
-12-
<PAGE>
purpose of determining the net asset value of Fund shares. Premiums received on
the sale of call options will be included in the net asset value, and the
current market value of the options sold by the Fund will be subtracted from net
asset value.
Generally, trading in foreign securities, as well as U.S. Government
securities, money market instruments and repurchase agreements, is substantially
completed each day at various times prior to the close of the NYSE. The values
of such securities used in computing the net asset value of the shares of the
Fund are determined prior to the close of the NYSE, which will not be reflected
in the computation of net asset value. If during such periods events occur which
materially affect the value of such securities, the securities will be valued at
their fair market value as determined in accordance with procedures approved by
the Fund's Board of Directors.
For purposes of determining the net asset value per share of a Series, all
assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars at the mean between the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank that is a regular
participant in the foreign exchange market or on the basis of a pricing service
that takes into account the quotes provided by a number of such major banks.
PERFORMANCE
Each Series may from time to time advertise its total return and average
total return in advertisements or in information furnished to present or
prospective shareholders. These returns are computed by assuming that all of the
dividends and distributions paid by a Series' were reinvested over the relevant
time period. It is then assumed that at the end of each period, the entire
amount was redeemed. The average annual total return is determined by
calculating the annual rate required for the initial payment to grow to the
amount which would have been received upon redemption (i.e., the average annual
compound rate of return).
GENERAL INFORMATION
The Fund was incorporated under the laws of the State of Maryland on
January 27, 1997. It is the intention of the Fund not to hold Annual Meetings of
Shareholders. The Directors may call Special Meetings of Shareholders for action
by shareholder vote as may be required by the 1940 Act or the Articles of
Incorporation.
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 Series
or classes without further action by shareholders. To date, shares of two series
have been authorized, which shares constitute interests in the Seligman
Large-Cap Value Fund and the Seligman Small-Cap Value Fund. The 1940 Act
requires that where more than one series or class exists, each series or class
must be preferred over all other series or classes in respect of assets
specifically allocated to such series or class.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted by the provisions of the 1940 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 or series affected by such matter. Rule 18f-2 further provides that a
class or series shall be deemed to be affected by a matter unless it is clear
that the interests of each class or Series in the matter are substantially
identical or that the matter does not affect any interest of such class or
series. However, the Rule exempts the selection of independent public
accountants, the approval of principal distributing contracts and the election
of directors from the separate voting requirements of the Rule.
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 each Series of 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.
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<PAGE>
FINANCIAL STATEMENTS
The Fund's statements of assets and liabilities presented below have been
audited by Deloitte & Touche LLP, independent auditors.
SELIGMAN VALUE FUND SERIES, INC.
STATEMENTS OF ASSETS AND LIABILITIES
April 9, 1997
<TABLE>
<CAPTION>
LARGE-CAP SMALL-CAP
ASSETS VALUE FUND VALUE FUND
---------- -----------
<S> <C> <C>
Cash ........................................................................... $ 50,001 $ 50,001
Deferred registration fees ..................................................... 50,800 50,800
Deferred organizational expenses ............................................... 22,500 22,500
-------- --------
Total Assets .................................... 123,301 123,301
-------- --------
LIABILITIES
Registration fees and organizational expenses payable .......................... 73,300 73,300
-------- --------
Net assets equivalent to $7.14 per share (applicable to 7,003 Class A shares
each of Capital Stock, $.001 par value;
2,000,000,000 shares authorized) ........................................... $ 50,001 $ 50,001
======== ========
</TABLE>
Note 1. Organization
Seligman Value Fund Series, Inc. (the "Fund") was incorporated in the State
of Maryland on January 27, 1997 as an open-end, diversified management
investment company. The Fund consists of two separate series: the Seligman
Large-Cap Value Fund and the Seligman Small-Cap Value Fund. Each series of the
Fund offers three classes of shares -- Class A shares, Class B shares and Class
D shares. The Fund had no operations other than those related to organizational
matters and for each series, the sale and issuance to Seligman Financial
Services, Inc. (the "Distributor") of 7,003 Class A shares of Capital Stock for
$50,001 on April 4, 1997. A portion of the costs incurred and to be incurred in
connection with the organization and initial registration of the Fund will be
paid by J. & W. Seligman & Co. Incorporated (the "Manager"); however, the Fund
will reimburse the Manager for such costs. Organizational expenses estimated at
$45,000 will be deferred and amortized on a straight-line basis over a period of
sixty months from the date the Fund commences operations. The Fund has agreed
with the Distributor that if any of the initial shares of the Fund are redeemed
during the amortization period, the Fund will reduce the redemption proceeds for
the then unamortized organizational expenses in the same ratio as the number of
redeemed shares bears to the number of shares at the time of such redemption.
Registration fees estimated at $101,600 will be deferred and amortized on a
straight-line basis over a twelve-month period from the date the Fund commences
operations.
Note 2. Agreement
Under the Management Agreement, the Seligman Large-Cap Value Fund and the
Seligman Small-Cap Value Fund pay the Manager management fees for its services,
calculated daily and payable monthly, equal to 0.80% and 1.00% per annum,
respectively, of their average daily net assets. The Management Agreement
provides for full or partial fee waivers in certain circumstances.
Note 3. Income Taxes
The Fund intends to meet the requirements of the Internal Revenue Code
of 1986, as amended, applicable to regulated investment companies and intends to
distribute substantially all of its taxable income. As such, the Fund will not
be subject to federal income tax.
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<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholder of
Seligman Value Fund Series, Inc.:
We have audited the accompanying statements of assets and liabilities of
Seligman Value Fund Series, Inc. (the "Fund") as of April 9, 1997. These
financial statements are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements of assets and liabilities are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statements of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
statements of assets and liabilities presentation. We believe that our audit of
the statements of assets and liabilities provides a reasonable basis for our
opinion.
In our opinion, the statements of assets and liabilities referred to above
present fairly, in all material respects, the financial position of Seligman
Value Fund Series, Inc. as of April 9, 1997 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
April 9, 1997
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<PAGE>
APPENDIX A
Moody's Investors Service, Inc. ("Moody's")
Debt Securities
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk. Interest payments are protected by
a large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds which are rated Aa are judged 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 fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be characteristically lacking or may be unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact may have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers (1, 2 and 3) in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; modifier 2 indicates a mid-range ranking; and modifier 3
indicates that the issuer ranks in the lower end of its generic rating category.
Commercial Paper
Moody's Commercial Paper Ratings are opinions of the ability of issuers to
repay punctually promissory senior debt obligations not having an original
maturity in excess of one year. Issuers rated "Prime-1" or "P-1" indicate the
highest quality repayment ability of the rated issue.
The designation "Prime-2" or "P-2" indicates that the issuer has a strong
ability for repayment of senior short-term promissory obligations. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization
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<PAGE>
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternative liquidity is maintained.
The designation "Prime-3" or "P-3" indicates that the issuer has an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
Issues rated "Not Prime" do not fall within any of the Prime rating
categories.
Standard & Poor's Rating Service ("S&P")
Debt Securities
AAA: Debt issues rated AAA are highest grade obligations. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt issues rated AA have a very high degree of safety and very strong
capacity to pay interest and repay principal and differ from the highest rated
issues only in small degree.
A: Debt issues rated A are regarded as upper medium grade. They have a
strong degree of safety and capacity to pay interest and repay principal
although it is somewhat more susceptible in the long term to the adverse effects
of changes in circumstances and economic conditions than debt in higher rated
categories.
BBB: Debt issues rated BBB are regarded as having a satisfactory degree of
safety and capacity to pay interest and re-pay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
re-pay principal for bonds in this category than for bonds in higher rated
categories.
BB, B, CCC, CC: Debt issues rated BB, B, CCC and CC are regarded on
balance, as predominantly speculative with respect to capacity to pay interest
and pre-pay principal in accordance with the terms of the bond. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposure to adverse
conditions.
C: The rating C is reserved for income bonds on which no interest is being
paid.
D: Debt issues rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of bond as a matter of policy.
Commercial Paper
S&P Commercial Paper ratings are current assessments of the likelihood of timely
payment of debts having an original maturity of no more than 365 days.
A-1: The A-1 designation indicates that the degree of safety regarding
timely payment is very strong.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B: Issues rated "B" are regarded as having only a speculative capacity for
timely payment.
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<PAGE>
C: This rating is assigned to short-term debt obligations with a doubtful
capacity of payment.
D: Debt rated "D" is in payment default.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of bond as a matter of policy.
The ratings assigned by S&P may be modified by the addition of a plus (+)
or minus (-) sign to show relative standing within its major rating categories.
-18-
<PAGE>
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.
o 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.
...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.
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<PAGE>
...1950-1989
o Develops new open-end investment companies. Today, manages more than 40
mutual fund portfolios.
o Helps pioneer state-specific, municipal bond funds, today managing a
national and 18 state-specific municipal funds.
o Establishes J. & W. Seligman Trust Company, and J. & W. Seligman Valuations
Corporation.
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 to the public Seligman Frontier Fund, Inc., a small
capitalization mutual fund.
o Launches Seligman Henderson Global Fund Series, Inc., which today offers
five separate series: Seligman Henderson International Fund, Seligman
Henderson Global Growth Opportunities Fund, Seligman Henderson Global
Smaller Companies Fund, Seligman Henderson Global Technology Fund and
Seligman Henderson Emerging Markets Growth Fund.
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<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A: None
Part B: Statements of Assets and Liabilities for Seligman Large-Cap Value
Fund and Seligman Small-Cap Value Fund as of April 9, 1997.
(b) Exhibits:
(1) Articles of Incorporation of Registrant. (Incorporated by reference to
the Registration Statement of the Registrant filed on Form N-1A on
January 31, 1997.
(2) By-laws of Registrant.
(5)(a) Management Agreement between Registrant and J. & W. Seligman & Co.
Incorporated.
(5)(b) Subadvisory Agreement between J.& W. Seligman & Co. Incorporated and
Seligman Henderson Co.
(6)(a) Distributing Agreement between Registrant and Seligman Financial
Services, Inc.
(6)(b) Sales Agreement between Seligman Financial Services, Inc. and Dealers.
(7)(a) Matched Accumulation Plan of J. & W. Seligman & Co. Incorporated.
(Incorporated by reference to Post-Effective Amendment No. 21 to the
Registration Statement of Seligman Frontier Fund, Inc. (File No.
2-92487), filed January 29, 1997.)
(7)(b) Deferred Compensation Plan for Directors of Seligman Group of Funds.
(8) Form of Custody and Investment Accounting Agreement between Registrant
and Investors Fiduciary Trust Company.
(10) Opinion and Consent of Counsel.
(11) Consent of Independent Auditors.
(13) Investment Letter between Registrant and Seligman Financial Services,
Inc.
(14)(a) The Seligman IRA Plan Agreement and Disclosure Statement.
(14)(b) The Seligman Simple IRA Plan documents for employers.
(14)(c) The Seligman Simple IRA Plan Agreement and Disclosure Statement for
participants.
(15)(a) Administration, Shareholder Services and Distribution Plan of Seligman
Large-Cap Value Fund
(15)(b) Administration, Shareholder Services and Distribution Plan of Seligman
Small-Cap Value Fund
(15)(c) Form of Administration, Shareholder Services and Distribution
Agreement between Seligman Financial Services, Inc. and Dealers.
(16) Performance Data Computation Schedule: Not applicable
(17) Financial Data Schedules: Not applicable
(18) Seligman Group of Funds Multiclass Plan pursuant to Rule 18f-3.
Other Exhibits: Powers of Attorney
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant - None
Item 26. Number of Holders of Securities
(1) (2)
Number of Record Holders
Title of Class as of the date of this Registration Statement
Seligman Large-Cap Value Fund
Class A Common Stock 1
Class B Common Stock 0
Class D Common Stock 0
Seligman Small-Cap Value Fund
Class A Common Stock 1
Class B Common Stock 0
Class D Common Stock 0
Item 27. Indemnification
Reference is made to the provisions of Article Twelfth of Registrant's
Articles of Incorporation filed as Exhibit 24(b)(1) of the Registrant's
Registration Statement, filed on Form N-1A on January 29, 1997 and Article
VII of Registrant's By-laws filed as Exhibit 24(b)(2) to this Pre-Effective
Amendment No. 2 to the Registration Statement.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised by the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act as is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
J. & W. Seligman & Co. Incorporated, a Delaware corporation ("Manager"), is
the Registrant's investment adviser. The Manager also serves as investment
adviser to several associated investment companies. They are: 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., and
Tri-Continental Corporation.
Seligman Henderson Co. ("Subadviser") is the Registrant's subadviser. The
Subadviser also serves as subadviser to several other associated investment
companies. They are Seligman Capital 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 Income Fund, Inc., the Global Growth
Opportunities, Global Smaller Companies, Global Technology and
International Portfolios of Seligman Portfolios, Inc. and Tri-Continental
Corporation.
<PAGE>
The Manager and Subadviser each have an investment advisory service
division which provides investment management or advice to private clients.
The list required by this Item 28 of officers and directors of the Manager
and Subadviser, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Forms ADV, filed by the Manager and
Subadviser pursuant to the Investment Advisers Act of 1940 (SEC File Nos.
801-5798 and 801-4067, respectively) which were filed on August 7, 1996 and
October 3, 1996, respectively.
Item 29. Principal Underwriters
(a) The names of each investment company (other than the Registrant) for
which Registrant's principal underwriter currently distributing securities
of the Registrant also acts as a principal underwriter, depositor or
investment adviser follow:
Seligman Cash Management Fund, Inc.
Seligman Capital 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.
(b) Name of each director, officer or partner of Registrant's principal
underwriter named in the answer to Item 21:
<TABLE>
<CAPTION>
Seligman Financial Services, Inc.
As of March 31, 1997
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
William C. Morris* Director Chairman of the Board and Chief
Executive Officer
Brian T. Zino* Director President and Director
Ronald T. Schroeder* Director None
Fred E. Brown* Director None
William H. Hazen* Director None
Thomas G. Moles* Director None
David F. Stein* Director None
Stephen J. Hodgdon* President None
Lawrence P. Vogel* Senior Vice President, Finance Vice President
Ed Lynch* Senior Vice President, Director None
of Marketing
Mark R. Gordon* Senior Vice President,National None
Sales Manager
Gerald I. Cetrulo, III Senior Vice President of Sales None
140 West Parkway
Pompton Plains, NJ 07444
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Seligman Financial Services, Inc.
As of March 31, 1997
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Bradley W. Larson Senior Vice President of Sales None
367 Bryan Drive
Danville, CA 94526
D. Ian Valentine Senior Vice President of Sales None
307 Braehead Drive
Fredericksburg, VA 22401
Bradley F. Hanson Senior Vice President of Sales, None
9707 Xylon Court Regional Sales Manager
Bloomington, MN 55438
Karen J. Bullot* Vice President, Retirement Plans None
John Carl* Vice President, Marketing None
Marsha E. Jacoby* Vice President, National Accounts None
Manager
William W. Johnson* Vice President, Order Desk None
Helen Simon* Vice President, Sales None
Administration Manager
James R. Besher Regional Vice President None
14000 Margaux Lane
Town & Country, MO 63017
Richard B. Callaghan Regional Vice President None
7821 Dakota Lane
Orland Park, IL 60462
Bradford C. Davis Regional Vice President None
255 4th Avenue, #2
Kirkland, WA 98033
Christopher J. Derry Regional Vice President None
2380 Mt. Lebanon Church Road
Alvaton, KY 42122
Jonathan G. Evans Regional Vice President None
222 Fairmont Way
Ft. Lauderdale, FL 33326
Michael C. Forgea Regional Vice President None
32 W. Anapamu Street # 186
Santa Barbara, CA 93101
David L. Gardner Regional Vice President None
2504 Clublake Trail
McKinney, TX 75070
Carla A. Goehring Regional Vice President None
11426 Long Pine
Houston, TX 77077
Mark Lien Regional Vice President None
5904 Mimosa
Sedalia, MO 65301
Judith L. Lyon Regional Vice President None
163 Haynes Bridge Road, Ste 205
Alpharetta, CA 30201
David L. Meyncke Regional Vice President None
4718 Orange Grove Way
Palm Harbor, FL 34684
Tim O'Connell Regional Vice President None
14872 Summerbreeze Way
San Diego, CA 92128
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Seligman Financial Services, Inc.
As of March 31, 1997
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Juliana Perkins Regional Vice President None
2348 Adrian Street
Newbury Park, CA 91320
David K. Petzke Regional Vice President None
1673 Montelena Court
Carson City, NV 89703
Robert H. Ruhm Regional Vice President None
167 Derby Street
Melrose, MA 02176
Diane H. Snowden Regional Vice President None
11 Thackery Lane
Cherry Hill, NJ 08003
Bruce M. Tuckey Regional Vice President None
41644 Chathman Drive
Novi, MI 48375
Andrew S. Veasey Regional Vice President None
14 Woodside
Rumson, NJ 07760
Kelli A. Wirth-Dumser Regional Vice President None
8618 Hornwood Court
Charlotte, NC 28215
Frank J. Nasta* Secretary Secretary
Aurelia Lacsamana* Treasurer None
Jeffrey S. Dean* Assistant Vice President, None
Annuity Product Manager
Sandra Floris* Assistant Vice President, Order Desk None
Keith Landry* Assistant Vice President, Order Desk None
Gail S. Cushing* Assistant Vice President, None
National Accounts Manager
Frank P. Marino* Assistant Vice President, Mutual
Fund Product Manager None
Joseph M. McGill* Assistant Vice President and None
Compliance Officer
Jack Talvy* Assistant Vice President, Internal None
Marketing Services Manager
Joyce Peress* Assistant Secretary None
</TABLE>
* The principal business address of each of these directors and/or officers
is 100 Park Avenue, New York, NY 10017.
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts, books and documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder are kept in the possession of J.& W. Seligman & Co. Incorporated
at its offices at 100 Park Avenue, New York, NY 10017 or at the following
locations:
(1) Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105 is custodian of the Registrant's cash and securities.
It also is agent to perform certain accounting and recordkeeping
functions relating to portfolio transactions and to calculate the net
asset value of the Registrant.
(2) Seligman Data Corp., 100 Park Avenue, New York, NY 10017, as
shareholder servicing agent, maintains shareholder records for the
Registrant.
<PAGE>
Item 31. Management Services
Seligman Data Corp. ("SDC") the Registrant's shareholder servicing agent,
has an agreement with First Data Investor Services Group ("FDISG") pursuant
to which FDISG provides a data processing system for certain shareholder
accounting and recordkeeping functions performed by SDC.
Item 32. Undertakings
The Registrant undertakes:
1. to file a post-effective amendment , using financial statements which
need not be certified within four to six months from the effective
date of its Registration Statement under the Securities Act of 1933.
2. to call a meeting of shareholders for the purpose of voting upon the
removal of a director or directors and to assist in communications
with other shareholders as required by Section 16(c) of the Investment
Company Act of 1940.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, The Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the 17th day of
April, 1997.
SELIGMAN VALUE FUND SERIES, INC.
By:/s/William C. Morris
---------------------------------
William C. Morris, Chairman
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940 this Registration Statement has been signed below
by the following persons in the capacities indicated on April 17, 1997.
Signature Title
--------- -----
/s/ William C. Morris Chairman of the Board
- ------------------------- (Principal executive officer)
William C. Morris* and Director
/s/ Brian T. Zino Director and President
- -------------------------
Brian T. Zino
/s/ Thomas G. Rose Treasurer
- -------------------------
Thomas G. Rose
John R. Galvin, Director )
Alice S. Ilchman, Director )
Frank A. McPherson, Director )
John E. Merow, Director )
Betsy S. Michel, Director ) /s/ Brian T. Zino
-------------------------------
James C. Pitney, Director ) *Brian T. Zino, Attorney-in-fact
James Q. Riordan, Director )
Richard R. Schmaltz, Director )
Robert L. Shafer, Director )
James N. Whitson, Director )
<PAGE>
SELIGMAN VALUE FUND SERIES, INC.
Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-1A
EXHIBIT INDEX
ITEM NO. DESCRIPTION
- -------- -----------
24(b)(2) By-Laws
24(b)(5)(a) Management Agreement
24(b)(5)(b) Subadvisory Agreement
24(b)(6)(a) Distributing Agreement
24(b)(6)(b) Sales Agreement
24(b)(7)(a) Matched Accumulation Plan
24(b)(7)(b) Deferred Compensation Plan for Directors
24(b)(8) Form of Custody and Investment Accounting Agreement
24(b)(10) Opinion and Consent of Counsel
24(b)(11) Consent of Independent Auditors
24(b)(13) Investment Letter
24(b)(14)(a) The Seligman IRA Plan Agreement and Disclosure Statement
24(b)(14)(b) The Seligman Simple IRA Plan documents for employers
24(b)(14)(c) The Seligman Simple IRA Plan Agreement and Disclosure
Statement for participants
24(b)(15)(a) Administration Shareholder Services and Distribution Plan of
Seligman Large-Cap Value Fund
24(b)(15)(b) Administration Shareholder Services and Distribution Plan of
Seligman Small-Cap Value Fund
24(b)(15)(c) Form of Administration Shareholder Services and Distribution
Agreement
24(b)(18) Multiclass Plan pursuant to Rule 18f-3
Other Exhibits: Powers of Attorney
SELIGMAN VALUE FUND SERIES, INC.
By-Laws
ARTICLE I
Shareholders
Section 1. Place of Meeting. All meetings of the Shareholders shall be held
at the principal office of the Corporation in the City of Baltimore or at such
other place within the United States as may from time to time be designated by
the Directors and stated in the notice of such meeting.
Section 2. Annual Meetings. The annual meeting of the shareholders of the
Corporation shall be held during the 31-day period commencing May 1 of each year
on such day and at such hour as may from time to time be designated by the Board
of Directors and stated in the notice of such meeting, for the transaction of
such business as may properly be brought before the meeting; provided, however,
that an annual meeting of shareholders shall not be required to be held in any
year in which none of the following is required to be acted on by shareholders
pursuant to the Investment Company Act of 1940: election of directors; approval
of the investment advisory agreement; ratification of the selection of
independent public accountants and approval of a distribution agreement.
Section 3. Special Meetings. Special meetings of the Shareholders for any
purpose or purposes may be called by the Chairman of the Board, the President, a
majority of the Directors or a majority of the Executive Committee, and shall be
called by the Secretary upon receipt of the request in writing signed by
Shareholders holding not less than twenty-five percent (25%) of the Shares
issued and outstanding and entitled to vote thereat. Such request shall state
the purpose or purposes of the proposed meeting. The Secretary shall inform such
Shareholders of the reasonably estimated costs of preparing and mailing such
notice of meeting and upon payment to the Corporation of such costs, the
Secretary shall give notice stating the purpose of purposes of the meeting as
required in this Article and By-Laws to all Shareholders entitled to notice of
such meeting. No special meeting need be called upon the request of the holders
of Shares entitled to cast less than a majority of all votes entitled to be cast
at such meeting to consider any matter which is substantially the same as a
matter
<PAGE>
voted upon at any special meeting of Shareholders held during the preceding
twelve months.
Section 4. Notice of Meetings. Not less than ten days' or more than ninety
days' written or printed notice of every meeting of Shareholders, stating the
time and place thereof (and the general nature of the business proposed to be
transacted at any special meeting), shall be given to each Shareholder entitled
to vote thereat by leaving the same with him or at his residence or usual place
of business or by mailing it, postage prepaid, and addressed to him at his
address as it appears upon the books of the Corporation. If mailed, notice shall
be deemed to be given when deposited in the United States mail addressed to the
Shareholder as aforesaid.
No notice of the time, place or purpose of any meeting of Shareholders need
be given to any Shareholder who attends in person or by proxy or to any
Shareholder who executes a written waiver of such notice, either before or after
the meeting is held, and which notice is filed with the records of the meeting.
Section 5. Record Dates. The Directors may fix, in advance, a date not more
than ninety (90) or less than ten (10) days preceding the date of any meeting of
Shareholders as a record date for the determination of the Shareholders entitled
to notice of and to vote at such meeting; and only Shareholders of record on
such date shall be entitled to notice of and to vote at such meeting.
Section 6. Quorum and Adjournment of Meetings. The presence in person or by
proxy of the holders of record of one-third of the Shares of all Series and
Classes of the Corporation issued and outstanding and entitled to vote thereat
shall constitute a quorum at all meetings of the Shareholders except as
otherwise provided in the Articles of Incorporation and except that where the
holders of Shares of any Series or Class are entitled to a separate vote as a
Series or Class (a "Separate Class") or where the holders of Shares of two or
more (but not all) Series or Classes are required to vote as a single Series or
Class (a "Combined Class"), the presence in person or by proxy of the holders of
one-third of the Shares of that Separate Class or Combined Class, as the case
may be, issued and outstanding and entitled to vote thereat shall constitute a
quorum for such vote. If, however, a quorum with respect to all Series and
Classes, a Separate Class or a Combined Class, as the case may be, shall not be
present or represented at any meeting of the Shareholders, the holders of a
majority of the Shares of all Series and Classes, such Separate Class or such
Combined Class, as the case may be, present in person or by proxy and entitled
to vote shall have power to adjourn the meeting from time to time as to all
Series and Classes, such Separate Class or such Combined Class, as the case may
be, without notice other than announcement at the meeting, until the requisite
number of Shares entitled to vote at such meeting shall be present. At such
meeting at which the requisite number of Shares
2
<PAGE>
entitled to vote thereat shall be represented any business may be transacted
which might have been transacted at the meeting as originally notified.
Section 7. Voting and Inspectors. At all meetings, Shareholders of record
entitled to vote thereat shall have one vote for each Share standing in his name
on the books of the Corporation (and such Shareholders of record holding
fractional shares, if any, shall have proportionate voting rights) on the date
of the determination of Shareholders entitled to vote at such meeting
irrespective of the Series thereof and all Shares of all Series shall vote as a
single class ("Single Class Voting"); provided, however, that (a) as to any
matter with respect to which a separate vote of any Series is required by the
Investment Company Act of 1940 or would be required under the Maryland General
Corporation Law, such requirements as to a separate vote by that Series shall
apply in lieu of Single Class Voting as described above; (b) in the event that
the separate vote requirements referred to in (a) above apply with respect to
one or more Series, then, subject to (c) below, the Shares of all other Series
shall vote as a single class; and (c) as to any matter which does not affect the
interest of a particular Series, only the holders of Shares of the one or more
affected Series shall be entitled to vote. Such vote may be made either in
person or by proxy appointed by instrument in writing subscribed by such
Shareholder or his duly authorized attorney. No proxy shall be valid eleven
months after its date. Pursuant to a resolution of a majority of the Directors,
proxies may be solicited in the name of one or more Directors or officers of the
Corporation.
All elections shall be had and all questions decided by a majority of the
votes cast at a duly constituted meeting, except as otherwise provided by
statute or by the Articles of Incorporation or by these By-Laws.
At any election of Directors, the Chairman of the meeting may, and upon the
request of the holders of ten percent (10%) of the Shares entitled to vote at
such election shall, appoint two inspectors of election who shall first
subscribe an oath or affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after the election make a certificate of the result of the
vote taken. No candidate for the office of Director shall be appointed such
inspector.
Section 8. Conduct of Meetings. Every meeting of the Shareholders shall be
presided over by the Chairman, or if he is not present, by the President, or if
none of them is present, by a Chairman to be elected at the meeting. The
Secretary of the Corporation, if present, shall act as a Secretary of such
meeting, or if he is not present, an Assistant Secretary shall so act; if
neither the Secretary nor any Assistant Secretary is present, then the meeting
shall elect its Secretary.
3
<PAGE>
Section 9. Concerning Validity of Proxies, Ballots, etc. At every meeting
of the Shareholders, all proxies shall be required and taken in charge of and
all ballots shall be required and canvassed by the Secretary of the meeting, who
shall decide all questions touching the qualification of voters, the validity of
the proxies and the acceptance or rejection of votes, unless inspectors of
election shall have been appointed by the Chairman of the meeting, in which
event such inspectors of election shall decide all such questions.
Section 10. Action Without Meetings. Except as otherwise provided by law,
the provisions of these By-Laws relating to notices and meetings to the contrary
notwithstanding, any action required or permitted to be taken at any meeting of
Shareholders may be taken without a meeting if all of the Shareholders entitled
to vote upon the action consent to the action in writing and such consents are
filed with the records of the Corporation. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
ARTICLE II
Directors
Section 1. Number and Tenure of Office. The property of the Corporation
shall be controlled by and the business and affairs of the Corporation shall be
conducted and managed by not less than three or more than twenty Directors, as
may be fixed from time to time by vote of a majority of the Directors then in
office, provided that (a) if there is no stock of the Corporation outstanding
the number of Directors may be less than three but not less than one and (b) if
there is stock of the Corporation outstanding and so long as there are fewer
than three Shareholders of record, the number of Directors may be less than
three but not less than the number of Shareholders of record. Subject to the
foregoing, until changed by the Board of Directors, the number of Directors
shall initially be two. Directors need not be Shareholders. The tenure of office
of each Director shall be set by resolution of the Directors, except that any
Director may resign his office or be removed from office for cause pursuant to
the provisions of the Articles of Incorporation.
Section 2. Vacancies. In the case of any vacancy or vacancies in the office
of Director through death, resignation or other cause, other than an increase in
the number of Directors, a majority of the remaining Directors, although a
majority is less than a quorum, by an affirmative vote, or the sole remaining
Director, may elect a successor or successors, as the case may be, to hold
office.
4
<PAGE>
Section 3. Increase or Decrease in Number of Directors. The Directors, by
the vote of a majority of all the Directors then in office, may increase the
number of Directors and may elect Directors to fill the vacancies created by any
such increase in the number of Directors. The Directors, by the vote of a
majority of all the Directors then in office, may likewise decrease the number
of Directors to a number not less than two.
Section 4. Place of Meeting. The Directors may hold their meetings, have
one or more offices, and keep the books of the Corporation, outside the State of
Maryland, at any office or offices of the Corporation or at any other place as
they may from time to time by resolution determine, or in the case of meetings,
as they may from time to time by resolution determine or as shall be specified
or fixed in the respective notices or waivers of notice thereof.
Section 5. Regular Meetings. Regular meetings of the Directors shall be
held at such time and on such notice as the Directors may from time to time
determine.
Section 6. Special Meetings. Special meetings of the Directors may be held
from time to time upon call of the Chairman, the Secretary or two or more of the
Directors, by oral or telegraphic or written notice duly served on or sent or
mailed to each Director not less than one day before such meeting. No notice of
any special meeting need be given to any Director who attends in person or to
any Director who executes a written waiver of such notice, either before or
after the meeting is held, and which notice is filed with the records of the
meeting. Such notice or waiver of notice need not state the purpose or purposes
of such meeting.
Section 7. Quorum. One-third of the Directors then in office shall
constitute a quorum for the transaction of business, provided that a quorum
shall in no case be less than two Directors. If at any meeting of Directors
there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum shall have been obtained.
The act of the majority of the Directors present at any meeting at which there
is a quorum shall be the act of the Directors, except as otherwise specifically
provided by statute or by the Articles of Incorporation or by these By-Laws.
Section 8. Committees. The Directors, by the majority vote of all the
Directors then in office, may appoint from the Directors committees which shall
in each case consist of such number of Directors (not less than two) and shall
have and may exercise such powers as the Directors may determine in the
resolution appointing them. A majority of all the members of any such committee
may determine its action and fix the time and place of its meetings, unless the
Directors shall otherwise provide.
5
<PAGE>
The Directors shall have power at any time to change the members and powers of
any such committee, to fill vacancies and to discharge any such committee.
Section 9. Telephone Meetings. Directors or a committee of the Directors
may participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
Section 10. Action Without a Meeting. Any action required or permitted to
be taken at any meeting of the Directors or any committee thereof may be taken
without a meeting, if a written consent to such action is signed by all the
Directors then in office or all members of such committee, as the case may be,
and such written consent is filed with the minutes of the proceedings of the
Directors or committee.
Section 11. Compensation. No director shall receive any stated salary or
fees from the Corporation for his services as such if such Director is,
otherwise than by reason of being such Director, an interested person (as such
term is defined under the Investment Company Act of 1940) of the Corporation or
of its investment adviser or principal underwriter. Except as provided in the
preceding sentence, Directors shall be entitled to receive such compensation
from the Corporation for their services, and may be reimbursed for
transportation and other expenses, as may from time to time be voted by the
Directors.
ARTICLE III
Offices
Section 1. Executive Officers. The executive officers of the Corporation
shall be chosen by the Directors. These shall include a Chairman (who shall be a
Director), a President, one or more Vice-Presidents (the number thereof to be
determined by the Directors), a Secretary and a Treasurer. The Directors may
also in their discretion appoint Assistant Secretaries, Assistant Treasurers and
other officers, agents and employees, who shall have such authority and perform
such duties as the Directors may determine. The Directors may fill any vacancy
which may occur in any office. Any two offices may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more than
one capacity, if such instrument is required by law or these By-Laws to be
executed, acknowledged or verified by two or more officers.
-6-
<PAGE>
Section 2. Term of Office. The term of office of all officers shall be one
year and until their respective successors are chosen and qualified. Any officer
may be removed from office at any time with or without cause by the vote of a
majority of all the Directors then in office.
Section 3. Powers and Duties. The officers of the Corporation shall have
such powers and duties as generally pertain to their respective offices, as well
as such powers and duties as may from time to time be conferred by the
Directors.
ARTICLE IV
Share Interests
Section 1. Certificates for Shares. Shareholders are not entitled to
receive certificates evidencing their Share ownership, unless the Directors
shall by resolution otherwise determine.
Section 2. Transfer of Shares. Shares of the Corporation shall be
transferable on the register of the Corporation by the holder thereof in person
or by his agent duly authorized in writing, upon delivery to the Directors or
the Transfer Agent of a duly executed instrument of transfer, together with such
evidence of the genuineness of each such execution and authorization of such
other matters as the Corporation or its agents may reasonably require.
Section 3. Register of Shares. A register of the Corporation, containing
the names and addresses of the Shareholders and the number of Shares held by
them respectively and a record of all transfers thereof, shall be kept at the
principal offices of the Corporation or, if the Corporation employs a Transfer
Agent, at the offices of the Transfer Agent of the Corporation.
-7-
<PAGE>
ARTICLE V
Seal
The Directors may provide for a suitable seal, in such form and bearing
such inscriptions as they may determine.
ARTICLE VI
Fiscal Year
The fiscal year of the Corporation shall begin on the first day of January
and shall end on the last day of December in each year.
ARTICLE VII
Indemnification
A representative of the Corporation shall be indemnified by the Corporation
with respect to each proceeding against such representative, except a proceeding
brought by or on behalf of the Corporation, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such representative in connection with such proceeding,
provided that such representative acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of any proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation and, with respect to any
criminal proceeding, had reasonable cause to believe that his conduct was
unlawful.
A representative of the Corporation shall be indemnified by the
Corporation, with respect to each proceeding brought by or on behalf of the
Corporation to obtain a judgment or decree in its favor, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such proceeding, if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as
-8-
<PAGE>
to which such representative has been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation, unless and only to
the extent that the court in which the proceeding was brought, or a court of
equity in the county in which the Corporation has its principal office,
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such corporate representative is fairly
and reasonably entitled to indemnity for the expenses which the court considers
proper.
To the extent that the representative of the Corporation has been
successful on the merits or otherwise in defense of any proceeding referred to
in the preceding two paragraphs, or in defense of any claim, issue or matter
therein, the Corporation shall indemnify him against all expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
Except as provided in the preceding paragraph any indemnification under the
first two paragraphs of this Article (unless ordered by a court) shall be made
by the Corporation only as authorized in the specific case upon a determination
that indemnification of the representative of the Corporation is proper in the
circumstances because he has met the applicable standard of conduct set forth in
such paragraphs. The determination shall be made (1) by the Directors by a
majority vote of a quorum consisting of Directors who were not parties to the
proceeding, or (2) if a quorum is not obtainable or if a quorum of disinterested
Directors so directs, by independent legal counsel in a written opinion, or (3)
by the Shareholders.
Expenses (including attorneys' fees) incurred in defending a proceeding may
be paid by the Corporation in advance of the final disposition thereof if (1)
authorized by the Directors in the specific case, and (2) the Corporation
receives an undertaking by or on behalf of the representative of the Corporation
to repay the advance if it is not ultimately determined that he is entitled to
be indemnified by the Corporation as authorized in this Article.
The indemnification provided by this Article shall not be deemed exclusive
of any other rights to which a representative of the Corporation or other person
may be entitled under any agreement, vote of Shareholders or disinterested
Directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding the office, and shall continue as to a
person who has cased to be a Director, officer, employee or agent and inure to
the benefit of his heirs and personal representatives.
The Corporation may purchase and maintain insurance on behalf of any person
who is or was a Director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a trustee, director,
officer,
-9-
<PAGE>
employee or agent of another trust, corporation, partnership, joint venture or
other enterprise against any liability asserted against him and incurred by him
in any such capacity or arising out of his status as such, regardless of whether
the Corporation would have the power to indemnify him against the liability
under the provisions of this Article.
Nothing contained in this Section shall be construed to indemnify any
representative of the Corporation against any liability to the Corporation or to
its security holders to which he would otherwise be subject by reason of
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
As used in this Article "representative of the Corporation" means an
individual (1) who is a present or former Director, officer, agent or employee
of the Corporation or who serves or has served another corporation, trust,
partnership, joint venture or other enterprise in one of such capacities at the
request of the Corporation, and (2) who by reason of his position is, has been
or is threatened to be made a party to a proceeding; and "proceeding" includes
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
ARTICLE VIII
Custodian
Section 1. The Corporation shall have as custodian or custodians one or
more trust companies or banks of good standing, each having a capital, surplus
and undivided profits aggregating not less than fifty million dollars
($50,000,000), and, to the extent required by the Investment Company Act of
1940, the funds and securities held by the Corporation shall be kept in the
custody of one or more such custodians, provided such custodian or custodians
can be found ready and willing to act, and further provided that the Corporation
may use as subcustodians, for the purpose of holding any foreign securities and
related funds of the Corporation such foreign banks as the Directors may approve
and as shall be permitted by law.
Section 2. The Corporation shall upon the resignation or inability to serve
of its custodian or upon change of the custodian:
(i) in case of such resignation or inability to serve, use its best
efforts to obtain a successor custodian;
-10-
<PAGE>
(ii) require that the cash and securities owned by the Corporation be
delivered directly to the successor custodian; and
(iii) in the event that no successor custodian can be found, submit to
the Shareholders before permitting delivery of the cash and securities
owned by the Corporation otherwise than to a successor custodian, the
question whether the Corporation shall be liquidated or shall function
without a custodian.
ARTICLE IX
Amendment of By-Laws
The Board of Directors is authorized and empowered to make, alter or repeal
the By-Laws of the Corporation, in any manner not inconsistent with the laws of
the State of Maryland or the Articles of Incorporation of the Corporation.
-11-
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT, dated as of March 20, 1997, between SELIGMAN VALUE
FUND SERIES, INC., a Maryland corporation (the "Corporation"), on behalf of
Seligman Large-Cap Value Fund and Seligman Small-Cap Value Fund (collectively,
together with any future series, the "Series") and J. & W. SELIGMAN & CO.
INCORPORATED, a Delaware corporation (the "Manager").
In consideration of the mutual agreements herein made, the parties hereto
agree as follows:
1. Duties of the Manager. The Manager shall manage the affairs of the
Corporation including, but not limited to, continuously providing the
Corporation with investment management services, including investment research,
advice and supervision, determining which securities shall be purchased or sold
by the Series, making purchases and sales of securities on behalf of the Series
and determining how voting and other rights with respect to securities of the
Corporation shall be exercised, subject in each case to the control of the Board
of Directors of the Corporation and in accordance with the objectives, policies
and principles set forth in the Registration Statement and Prospectus of the
Series and the requirements of the Investment Company Act of 1940 (the "1940
Act") and other applicable law. The Manager will enter into an agreement dated
the date hereof (the "Subadvisory Agreement") with Seligman Henderson Co. (the
"Subadviser") pursuant to which the Subadviser may provide the Series with the
type of investment management services described above with respect to a portion
of the Series' assets. The Manager will continue to have responsibility for
investment management services provided under the Subadvisory Agreement. In the
event the Subadviser ceases to provide such investment management services to
the Series, they shall be provided by the Manager or by such other form as may
be selected by the Corporation and approved in accordance with applicable
requirements. In performing such duties, the Manager shall provide such office
space, such bookkeeping, accounting, internal legal, clerical, secretarial and
administrative services (exclusive of, and in addition to, any such services
provided by any others retained by the Series) and such executive and other
personnel as shall be necessary for the operations of the Series. The
Corporation understands that the Manager also acts as the manager of all of the
investment companies in the Seligman Group.
Subject to Section 36 of the Act, the Manager shall not be liable to the
Series for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the management of the Series and
the performance of its duties under this Agreement except for willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under this
Agreement.
2. Expenses. The Manager shall pay all of its expenses arising from the
performance of its obligations under Section 1, including the fee of the
Subadviser, and shall pay any salaries, fees and expenses of the directors of
the Corporation who are employees of the Manager or its affiliates. The Manager
shall not be required to pay any other expenses of the Series, including, but
not limited to, direct charges relating to the purchase and sale of portfolio
securities, interest charges, fees and expenses of independent attorneys and
auditors, taxes and governmental fees, cost of stock certificates and any other
expenses (including clerical
<PAGE>
expenses) of issue, sale, repurchase or redemption of shares, expenses of
registering and qualifying shares for sale, expenses of printing and
distributing reports, notices and proxy materials to shareholders, expense of
corporate data processing and related services, shareholder recordkeeping and
shareholder account services, expenses of printing and filing reports and other
documents filed with governmental agencies, expenses of printing and
distributing prospectuses, expenses of annual and special shareholders'
meetings, fees and disbursements of transfer agents and custodians, expenses of
disbursing dividends and distributions, fees and expenses of directors of the
Corporation who are not employees of the Manager or its affiliates, membership
dues in the Investment Company Institute, insurance premiums and extraordinary
expenses such as litigation expenses.
3. Compensation. (a) As compensation for the services performed and the
facilities and personnel provided by the Manager pursuant to Section 1, each
Series will pay to the Manager promptly after the end of each month a fee,
calculated on each day during such month as indicated on the attached fee
schedule.
(b) If the Manager shall serve hereunder for less than the whole of any
month, the fee hereunder shall be prorated.
4. Purchase and Sale of Securities. The Manager or, pursuant to the
Subadvisory Agreement, the Subadviser, shall purchase securities from or through
and sell securities to or through such persons, brokers or dealers (including
the Manager or an affiliate of the Manager) as the Manager and or Subadviser
shall deem appropriate in order to carry out the policy with respect to
portfolio transactions as set forth in the Registration Statement and
Prospectus(es) of the Series or as the Board of Directors of the Corporation may
direct from time to time. In providing the Series with investment management and
supervision, it is recognized that the Manager or the Subadviser will seek the
most favorable price and execution, and, consistent with such policy, may give
consideration to the research, statistical and other services furnished by
brokers or dealers to the Manager or the Subadvisor for its use, to the general
attitude of brokers or dealers toward investment companies and their support of
them, and to such other considerations as the Board of Directors of the
Corporation may direct or authorize from time to time.
Notwithstanding the above, it is understood that it is desirable for the
Series that the Manager or the Subadvisor have access to supplemental investment
and market research and security and economic analysis provided by brokers who
execute brokerage transactions at a higher cost to the Corporation than may
result when allocating brokerage to other brokers on the basis of seeking the
most favorable price and execution. Therefore, the Manager and the Subadvisor
are authorized to place orders for the purchase and sale of securities for the
Series with such brokers, subject to review by the Corporation's Board of
Directors from time to time with respect to the extent and continuation of this
practice. It is understood that the services provided by such brokers may be
useful to the Manager and the Subadvisor in connection with its services to
other clients as well as the Series.
The placing of purchase and sale orders may be carried out by the Manager
or the Subadvisor or any wholly-owned subsidiary of the Manager.
2
<PAGE>
If, in connection with purchases and sales of securities for the Series,
the Manager or any subsidiary of the Manager may, without material risk, arrange
to receive a soliciting dealer's fee or other underwriter's or dealer's discount
or commission, the Manager shall, unless otherwise directed by the Board of
Directors of the Corporation, obtain such fee, discount or commission and the
amount thereof shall be applied to reduce the compensation to be received by the
Manager pursuant to Section 3 hereof.
Nothing herein shall prohibit the Board of Directors of the Corporation
from approving the payment by the Series of additional compensation to others
for consulting services, supplemental research and security and economic
analysis.
5. Term of Agreement. This Agreement shall continue in full force and
effect until December 31, 1998, and from year to year thereafter if such
continuance is approved in the manner required by the 1940 Act if the Manager
shall not have notified the Series in writing at least 60 days prior to such
December 31 or prior to December 31 of any year thereafter that it does not
desire such continuance. This Agreement may be terminated at any time in respect
of any Series, without payment of penalty by the Series, on 60 days' written
notice to the Manager, by vote of the Board of Directors of the Corporation or
by vote of a majority of the outstanding voting securities of such Series (as
defined by the 1940 Act). The failure of the Board of Directors of the
Corporation or holders of securities of any Series to approve the continuance of
this Agreement with respect to such Series, shall be without prejudice to the
effectiveness of this Agreement with respect to any other Series. This Agreement
shall automatically terminate in the event of its assignment (as defined by the
1940 Act).
6. Right of Manager In Corporate Name. The Manager and the Series each
agree that the word "Seligman", which comprises a component of each Series'
name, is a property right of the Manager. Each Series agrees and consents that
(i) it will only use the word "Seligman" as a component of its corporate name
and for no other purpose, (ii) it will not purport to grant to any third party
the right to use the word "Seligman" for any purpose, (iii) the Manager or any
corporate affiliate of the Manager may use or grant to others the right to use
the word "Seligman", or any combination or abbreviation thereof, as all or a
portion of a corporate or business name or for any commercial purpose, including
a grant of such right to any other investment company, and at the request of the
Manager, each Series will take such action as may be required to provide its
consent to the use of the word "Seligman", or any combination or abbreviation
thereof, by the Manager or any corporate affiliate of the Manager, or by any
person to whom the Manager or an affiliate of the Manager shall have granted the
right to such use; and (iv) upon the termination of any management agreement
into which the Manager and a Series may enter, such Series shall, upon request
by the Manager, promptly take such action, at its own expense, as may be
necessary to change its corporate name to one not containing the word "Seligman"
and following such change, shall not use the word "Seligman", or any combination
thereof, as a part of its corporate name or for any other commercial purpose,
and shall use its best efforts to cause its officers, directors and stockholders
to take any and all actions which the Manager may request to effect the
foregoing and to reconvey to the Manager any and all rights to such word.
3
<PAGE>
7. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to require, or
to impose any duty upon either of the parties, to do anything in violation of
any applicable laws or regulations.
IN WITNESS WHEREOF, the Corporation, on behalf of the Series, and the
Manager have caused this Agreement to be executed by their duly authorized
officers as of the date first above written.
SELIGMAN VALUE FUND SERIES, INC.
By /s/ William C. Morris
-----------------------------
William C. Morris
J. & W. SELIGMAN & CO. INCORPORATED
By /s/ Brian T. Zino
-----------------------------
Brian T. Zino
4
<PAGE>
FEE SCHEDULE
Series Annual Rate
------ -----------
Seligman Large-Cap Value Fund .80% of the Series' average
daily net assets.
Seligman Small-Cap Value Fund 1.00% of the Series' average
daily net assets.
5
SUBADVISORY AGREEMENT
Seligman Value Fund Series, Inc.
SUBADVISORY AGREEMENT, dated as of March 20, 1997 between J. & W. SELIGMAN & CO.
INCORPORATED, a Delaware corporation (the "Manager") and SELIGMAN HENDERSON CO.,
a New York general partnership (the "Subadviser").
WHEREAS, the Manager has entered into a Management Agreement dated March 20,
1997 (the "Management Agreement") with Seligman Value Fund Series, Inc. (the
"Fund"), an open-end diversified management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), on behalf of
Seligman Large-Cap Value Fund and Seligman Small-Cap Value Fund (collectively,
together with any future series, the "Series") pursuant to which the Manager
will render investment management services to the Fund, and to administer the
business and other affairs of the Fund; and
WHEREAS, the Manager desires to retain the Subadviser to provide investment
management services to the Fund, and the Subadviser is willing to render such
investment management services.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
parties hereto agree as follows:
1. Duties of the Subadviser. The Subadviser will provide the Fund with
investment management services with respect to assets of the Series if, and to
the extent, designated by the Manager (such designated assets, "Qualifying
Assets"). Such services shall include investment research, advice and
supervision, determining which securities shall be purchased or sold by the
Series, making purchases and sales of securities on behalf of the Series and
determining how voting and other rights with respect to securities of the Series
shall be exercised, subject in each case to the control of the Board of
Directors of the Fund and in accordance with the objectives, policies and
principles set forth in the Registration Statement and Prospectus(es) of the
Fund and the requirements of the 1940 Act and other applicable law.
Subject to Section 36 of the 1940 Act, the Subadviser shall not be liable to the
Fund for any error of judgment or mistake of law or for any loss arising out of
any investment or for any act or omission in the management of the Fund and the
performance of its duties under this Agreement except for willful misfeasance,
bad faith or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under this Agreement.
2. Expenses. The Subadviser shall pay all of its expenses arising from the
performance of its obligations under Section 1.
<PAGE>
3. Compensation
(a) As compensation for the services performed and the facilities and
personnel provided by the Subadviser pursuant to Section 1, the
Manager will pay to the Subadviser each month a fee, equal to the
applicable percentage of the average monthly Net Qualifying Assets of
each Series.
(b) As used herein:
(1) The term "Applicable Percentage" means the percentage fee rate
that the Manager receives from each Series pursuant to the
Management Agreement, as indicated on the attached Fee Schedule.
(2) The term "Net Qualifying Assets" means the Qualifying Assets less
related liabilities as designated by the Manager.
(c) Average monthly Net Qualifying Assets shall be determined, for any
month, by taking the average of the value of the Net Qualifying Assets
as of the (i) opening of business on the first day of such month and
(ii) close of business on the last day of such month.
(d) If the Subadviser shall serve hereunder for less than the whole of any
month, the fee hereunder shall be prorated.
4. Purchase and Sale of Securities. The Subadviser shall purchase securities
from or through and sell securities to or through such persons, brokers or
dealers as the Subadviser shall deem appropriate in order to carry out the
policy with respect to allocation of portfolio transactions as set forth in the
Registration Statement and Prospectus(es) of the Fund or as the Board of
Directors of the Fund may direct from time to time. In providing the Fund with
investment management and supervision, it is recognized that the Subadviser will
seek the most favorable price and execution, and, consistent with such policy,
may give consideration to the research, statistical and other services furnished
by brokers or dealers to the Subadviser for its use, to the general attitude of
brokers or dealers toward investment companies and their support of them, and to
such other considerations as the Board of Directors of the Fund may direct or
authorize from time to time.
Notwithstanding the above, it is understood that it is desirable for the Fund
that the Subadviser have access to supplemental investment and market research
and security and economic analysis provided by brokers who execute brokerage
transactions at a higher cost to the Fund than may result when allocating
brokerage to other brokers on the basis of seeking the most favorable price and
execution. Therefore, the Subadviser is authorized to place orders for the
purchase and sale of securities of the Fund with such brokers, subject to review
by the Fund's Board of Directors from time to time with respect to the extent
and continuation of this practice. It is understood that the services provided
by such brokers may be useful to the Subadviser in connection with its services
to other clients as well as the Fund.
If, in connection with purchases and sales of securities for the Fund, the
Subadviser may, without material risk, arrange to receive a soliciting dealer's
fee or other underwriter's or
2
<PAGE>
dealer's discount or commission, the Subadviser shall, unless otherwise directed
by the Board of Directors of the Fund, obtain such fee, discount or commission
and the amount thereof shall be applied to reduce the compensation to be
received by the Subadviser pursuant to Section 3 hereof.
Nothing herein shall prohibit the Board of Directors of the Fund from approving
the payment by the Fund of additional compensation to others for consulting
services, supplemental research and security and economic analysis.
5. Term of Agreement. This Agreement shall continue in full force and effect
until December 31, 1998, and from year to year thereafter if such continuance is
approved in the manner required by the 1940 Act, and if the Subadviser shall not
have notified the Manager in writing at least 60 days prior to such date or
prior to December 31 of any year thereafter that it does not desire such
continuance. This Agreement may be terminated at any time in respect of any
Series, without payment of penalty by the Series, on 60 days' written notice to
the Subadviser, by vote of the Board of Directors of the Fund or by vote of a
majority of the outstanding voting securities of such Series (as defined by the
1940 Act). The failure of the Board of Directors of the Fund or holders of
securities of any Series to approve the continuance of this Agreement with
respect to such Series, shall be without prejudice to the effectiveness of this
Agreement with respect to any other Series. This Agreement will automatically
terminate in the event of its assignment (as defined by the 1940 Act) or upon
the termination of the Management Agreement.
6. Amendments. This Agreement may be amended by consent of the parties hereto
provided that the consent of the Fund is obtained in accordance with the
requirements of the 1940 Act.
7. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to require, or
to impose any duty upon either of the parties, to do anything in violation of
any applicable laws or regulations.
IN WITNESS WHEREOF, the Manager and the Subadviser have caused this
Agreement to be executed by their duly authorized officers as of the date first
above written.
J. & W. SELIGMAN & CO. INCORPORATED
By /s/ Brian T. Zino
--------------------------
Brian T. Zino
SELIGMAN HENDERSON CO.
By /s/ David F. Stein
--------------------------
David F. Stein
3
<PAGE>
FEE SCHEDULE
Series Annual Rate
------ -----------
Seligman Large-Cap Value Fund .80% of the Series' average
daily net assets.
Seligman Small-Cap Value Fund 1.00% of the Series' average
daily net assets.
4
DISTRIBUTING AGREEMENT
DISTRIBUTING AGREEMENT, dated as of March 20, 1997 between SELIGMAN VALUE
FUND SERIES, INC., a Maryland corporation (the "Fund"), and SELIGMAN FINANCIAL
SERVICES, INC., a Delaware corporation ("Seligman Financial Services").
In consideration of the mutual agreements herein made, the parties hereto
agree as follows:
1. Exclusive Distributor. The Fund hereby agrees that Seligman Financial
Services shall be for the period of this Agreement exclusive agent for
distribution within the United States and its territories, and Seligman
Financial Services agrees to use its best efforts during such period to
effect such distribution of shares of Capital Stock ("Shares") of the Fund;
provided, however, that nothing herein shall prevent the Fund, if it so
elects, from selling or otherwise distributing its Shares directly to any
persons other than dealers. The Fund understands that Seligman Financial
Services also acts as agent for distribution of the shares of capital stock
or beneficial interest of other open-end investment companies which have
entered into management agreements with J. & W. Seligman & Co. Incorporated
(the "Manager").
2. Sales of Shares. Seligman Financial Services is authorized, as agent for
the Fund and not as principal, (a) to sell Shares of the Fund to such
dealers as Seligman Financial Services may select pursuant to the terms of
written sales agreements (which may also relate to sales of shares of
capital stock or shares of beneficial interest of other open-end investment
companies which have entered into management agreements with the Manager),
in form or forms approved by the Fund, and (b) to sell Shares of the Fund
to other purchasers on such terms as may be provided in the then current
prospectus of the Fund relating to such Shares; provided, however, that no
sales of Shares shall be confirmed by Seligman Financial Services at any
time when, according to advice received by Seligman Financial Services from
the Fund, the officers of the Fund have for any reason sufficient to them
temporarily or permanently suspended or discontinued the sale and issuance
of the Shares. Each sale of Shares shall be effected by Seligman Financial
Services only at the applicable price determined by the Fund in the manner
prescribed in its then current prospectus relating to such Shares. Seligman
Financial Services shall comply with all applicable laws, rules and
regulations including, without limiting the generality of the foregoing,
all rules or regulations made or adopted pursuant to Section 22 of the
Investment Company Act of 1940 (the
<PAGE>
"1940 Act") by the Securities and Exchange Commission or any securities
association registered under the Securities Exchange Act of 1934.
The Fund agrees, as long as its Shares may legally be issued, to fill all
orders confirmed by Seligman Financial Services in accordance with the
provisions of this Agreement.
3. Repurchase Agent. Seligman Financial Services is authorized, as agent for
the Fund and not as principal, to accept offers for resale to the Fund and
to repurchase on behalf of the Fund Shares of the Fund at net asset values
determined by the Fund in conformity with its then current prospectus
relating to such Shares.
4. Compensation. As compensation for the services of Seligman Financial
Services under this Agreement, Seligman Financial Services shall be
entitled to receive the sales charge, determined in conformity with the
Fund's then current prospectus relating to such Shares, on all sales of
Shares of the Fund confirmed by Seligman Financial Services hereunder and
for which payment has been received, less the dealers' concession allowed
in respect of such sales. In addition, in accordance with the terms of the
Fund's Administration, Shareholder Services and Distribution Plan (the
"Plan"), the Fund may make payments from time to time to Seligman Financial
Services in accordance with the terms and limitations of, and for the
purposes set forth in the Plan.
5. Expenses. Seligman Financial Services agrees promptly to pay or reimburse
the Fund for all expenses (except expenses incurred by the Fund in
connection with the preparation, printing and distribution of any
prospectus or report or other communication to shareholders, to the extent
that such expenses are incurred to effect compliance with any Federal or
State law or to enable such distribution to shareholder(s)) (a) of printing
and distributing copies of any prospectus and of preparing, printing and
distributing any other material used by Seligman Financial Services in
connection with offering Shares of the Fund for sale, and (b) of
advertising in connection with such offering. The Fund agrees to pay all
expenses in connection with the registration of Shares of the Fund under
the Securities Act of 1933 (the "Act"), all fees and related expenses which
may be incurred in connection with the qualification of Shares of the Fund
for sale in such States (as well as the District of Columbia, Puerto Rico
and other
2
<PAGE>
territories) as Seligman Financial Services may designate, and all expenses
in connection with maintaining facilities for the issue and transfer of its
Shares, of supplying information, prices and other data to be furnished by
it hereunder, and through Seligman Data Corp., of all data processing and
related services related to the share distribution activity contemplated
hereby.
The Fund agrees to execute such documents and to furnish such information
as may be reasonably necessary, in the discretion of the Directors of the
Fund, in connection with the qualification of Shares of the Fund for sale
in such States (as well as the District of Columbia, Puerto Rico and other
territories) as Seligman Financial Services may designate. Seligman
Financial Services also agrees to pay all fees and related expenses
connected with its own qualification as a broker or dealer under Federal or
State laws and, except as otherwise specifically provided in this Agreement
or agreed to by the Fund, all other expenses incurred by Seligman Financial
Services in connection with the sale of Shares of the Fund as contemplated
in this Agreement (including the expenses of qualifying the Fund as a
dealer or broker under the laws of such States as may be designated by
Seligman Financial Services, if deemed necessary or advisable by the Fund).
It is understood and agreed that any payments made to Seligman Financial
Services pursuant to the Plan may be used to defray some or all of the
expenses incurred by Seligman Financial Services pursuant to this
Agreement.
6. Prospectus and Other Information. The Fund represents and warrants to and
agrees with Seligman Financial Services that:
(a) A registration statement, including one or more prospectuses relating
to the Shares, has been filed by the Fund under the Act and has become
effective. Such registration statement, as now in effect and as from
time to time hereafter amended, and also any other registration
statement relating to the Shares which may be filed by the Fund under
the Act which shall become effective, is herein referred to as the
"Registration Statement", and any prospectus or prospectuses filed by
the Fund as a part of the Registration Statement, as the "Prospectus".
(b) At all times during the term of this Agreement, except when the
officers of the Fund have suspended or discontinued the sale
3
<PAGE>
and issuance of Shares of the Fund as contemplated by Section 2
hereof, the Registration Statement and Prospectus will conform in all
respects to the requirements of the Act and the rules and regulations
of the Securities and Exchange Commission, and neither of such
documents will include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary
to make the statement therein not misleading, except that the
foregoing does not apply to any statements or omissions in either of
such documents based upon written information furnished to the Fund by
Seligman Financial Services specifically for use therein.
The Fund agrees to prepare and furnish to Seligman Financial Services from
time to time a copy of its Prospectus, and authorizes Seligman Financial
Services to use such Prospectus, in the form furnished to Seligman
Financial Services from time to time, in connection with the sale of the
Fund's Shares. The Fund also agrees to furnish Seligman Financial Services
from time to time, for use in connection with the sale of such Shares, such
information with respect to the Fund and its Shares as Seligman Financial
Services may reasonably request.
7. Reports. Seligman Financial Services will prepare and furnish to the
Directors of the Fund at least quarterly a written report complying with
the requirements of Rule 12b-1 under the 1940 Act setting forth all amounts
expended under the Plan and the purposes for which such expenditures were
made.
8. Indemnification. (a) The Fund will indemnify and hold harmless Seligman
Financial Services and each person, if any, who controls Seligman Financial
Services within the meaning of the Act against any losses, claims, damages
or liabilities to which Seligman Financial Services or such controlling
person may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Fund's Registration Statement
or Prospectus or any other written sales material prepared by the Fund
which is utilized by Seligman Financial Services in connection with the
sale of Shares or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
(in the case of the Registration Statement and Prospectus) necessary to
make the statements therein not misleading or (in the case of such other
4
<PAGE>
sales material) necessary to make the statements therein not misleading in
the light of the circumstances under which they were made; and will
reimburse Seligman Financial Services and each such controlling person for
any legal or other expenses reasonably incurred by Seligman Financial
Services or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Fund will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement or Prospectus in
conformity with written information furnished to the Fund by Seligman
Financial Services specifically for use therein; and provided, further,
that nothing herein shall be so construed as to protect Seligman Financial
Services against any liability to the Fund or its security holders to which
Seligman Financial Services would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence, in the performance of its
duties, or by reason of the reckless disregard by Seligman Financial
Services of its obligations and duties under this Agreement. This indemnity
agreement will be in addition to any liability which the Fund may otherwise
have.
(b) Seligman Financial Services will indemnify and hold harmless the Fund,
each of its Directors and officers and each person, if any, who
controls the Fund within the meaning of the Act, against any losses,
claims, damages or liabilities to which the Fund or any such Director,
officer or controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement or Prospectus or any sales material not
prepared by the Fund which is utilized in connection with the sale of
Shares or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or (in the case of the Registration Statement and Prospectus)
necessary to make the statements therein not misleading or (in the
case of such other sales material) necessary to make the statements
therein not misleading in the light of the circumstances under which
they were made, in the case of the Registration Statement and
Prospectus to the extent, but only to the extent, that such untrue
statement or
5
<PAGE>
alleged untrue statement or omission or alleged omission was made in
conformity with written information furnished to the Fund by Seligman
Financial Services specifically for use therein; and Seligman
Financial Services will reimburse any legal or other expenses
reasonably incurred by the Fund or any such Director, officer or
controlling person in connection with investigating or defending any
such loss, claim, damage, liability or action. This indemnity
agreement will be in addition to any liability which Seligman
Financial Services may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying
party under this Section, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from liability which it may have to any
indemnified party otherwise than under this Section. In case any such
action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein and, to the extent that it may
wish, to assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to
such indemnified party of its election to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party
under this Section for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
9. Effective Date. This Agreement shall become effective upon its execution by
an authorized officer of the respective parties to this Agreement, but in
no event prior to shareholder approval of the Plan.
10. Term of Agreement. This Agreement shall continue in effect until December
31, 1998 and through December 31 of each year thereafter if such
continuance is approved in the manner required by the 1940 Act and the
rules thereunder and Seligman Financial Services shall not have notified
the Fund in writing at least 60 days prior to the anniversary date of the
previous continuance that it does not desire such continuance. This
Agreement may be terminated at any time, without payment of penalty on 60
days' written notice to the other party by vote of a majority of the
Directors of the Fund
6
<PAGE>
who are not interested persons (as defined in the 1940 Act) of the Fund and
have no direct or indirect financial interest in the operation of the Plan
or any agreement related thereto, or by vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act).
This Agreement shall automatically terminate in the event of its assignment
(as defined in the 1940 Act).
11. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to require,
or to impose any duty upon, either of the parties to do anything in
violation of any applicable laws or regulations.
IN WITNESS WHEREOF, the Fund and Seligman Financial Services have caused
this Agreement to be executed by their duly authorized officers as of the date
first above written.
SELIGMAN VALUE FUND SERIES, INC.
By /s/ Brian T. Zino
-----------------------------
Brian T. Zino, President
SELIGMAN FINANCIAL SERVICES, INC.
By /s/ Stephen J. Hodgdon
-----------------------------
Stephen J. Hodgdon, President
7
ADDENDUM
TO
Sales Agreement
covering shares of capital stock
or shares of beneficial interest of
the Seligman Mutual Funds
between
SELIGMAN FINANCIAL SERVICES, INC.
and
DEALER
Dear Dealer:
Your Sales Agreement with Seligman Financial Services, Inc. ("SFSI") is
hereby amended to include the following provisions in connection with the
offering by certain of the Seligman Mutual Funds of Class B shares as described
in each applicable prospectus:
1. Dealer agrees to comply with the attached "Policies and Procedures" with
respect to sales of Seligman Mutual Funds offering three classes of shares.
2. SFSI shall be entitled to a contingent deferred sales load ("CDSL") on
redemptions within six years of purchase on any Class B shares sold and
within one year of purchase on any Class D shares sold. With respect to
omnibus accounts in which Class B shares or Class D shares are held at
Seligman Data Corp. ("SDC") in Dealer's name, Dealer agrees that by the
tenth day of each month it will furnish to SDC a report of each redemption
in the preceding month to which a CDSL was applicable, accompanied by a
check payable to SFSI in payment of the CDSL due.
3. If, with respect to a redemption of any Class B shares or Class D shares
sold by Dealer, the CDSL is waived because the redemption qualifies for a
waiver set forth in the Fund's prospectus, Dealer shall promptly remit to
SFSI an amount equal to the payment made by SFSI to Dealer at the time of
sale with respect to such Class B shares or Class D Shares.
4. The Dealer will comply in all respects with Notice to Members 95-80 of the
National Association of Securities Dealers, Inc. regarding members
obligations and responsibilities regarding mutual fund sales practices.
The sale of any Class A,Class B or Class D shares of a Seligman Mutual Fund
will constitute Dealer's acceptance of and agreement with the terms set forth
herein.
<PAGE>
Exhibit C
POLICIES AND PROCEDURES
In connection with the offering by the Funds of three classes of shares,
one subject to a front-end sales load and a service fee ("Class A Shares"), one
subject to a service fee, a distribution fee, no front-end sales load and a
contingent deferred sales load on redemptions within six years of purchase
("Class B Shares") and one subject to a service fee, a distribution fee, no
front-end sales load and a contingent deferred sales load on redemptions within
one year of purchase ("Class D Shares"), it is important for an investor to
choose the method of purchasing shares which best suits his or her particular
circumstances. To assist investors in these decisions, Seligman Financial
Services has instituted the following policies with respect to orders for
Shares:
1. No purchase order may be placed for Class B Shares or Class D Shares
for amounts of $4,000,000 or more.
2. Any purchase order for less than $4,000,000 may be for either Class A,
Class B or Class D Shares in light of the relevant facts and
circumstances, including:
a. the specific purchase order dollar amount;
b. the length of time the investor expects to hold his Shares; and
c. any other relevant circumstances such as the availability of
purchases under a Letter of Intent, Volume Discount, or Right of
Accumulation.
There are instances when one method of purchasing Shares may be more
appropriate than another. For example, an investor who would qualify for a
significant discount from the maximum sales load on Class A Shares may determine
that payment of such a reduced front-end sales load and service fee is
preferable to payment of higher ongoing distribution fee. On the other hand, an
investor whose order would not qualify for such a discount may wish to have all
of his or her funds invested in Class B or Class D Shares. An investor who
expects to hold his or her shares for longer than eight years might prefer Class
B Shares over Class D Shares because of the conversion feature; once the Class B
Shares have converted to Class A Shares, the ongoing distribution fees will be
reduced. Class D Shares may remain a more attractive choice for shorter-term
investors because of the contingent deferred sales load on such shares is only
1%, and it does not apply if the investor owns his or her shares for at least
one year. If an investor anticipates that he or she will redeem his or her Class
B Shares or Class D Shares while still subject to a contingent deferred sales
charge, the investor may, depending on the amount of the purchase, pay an amount
greater than the sales load and service fee attributable to Class A Shares.
Appropriate supervisory personnel within your organization must ensure that
all employees receiving investor inquiries about the purchase of Shares of a
Fund advise the investor of then available pricing structures offered by the
Fund, and the impact of choosing one method over another. In some instances it
may be appropriate for a supervisory person to discuss a purchase with the
investor.
Questions relating to this policy should be directed to Stephen J. Hodgdon,
President, Seligman Financial Services at (212) 850-1217.
<PAGE>
SALES AGREEMENT
covering shares of capital stock
and/or shares of beneficial interest of
THE SELIGMAN MUTUAL FUNDS
Seligman Capital 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 Value Fund Series, Inc.
between
SELIGMAN FINANCIAL SERVICES, INC.
and
Dealer
The Dealer named above and Seligman Financial Services, Inc., exclusive agent
for distribution of shares of capital stock of Seligman Capital 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 Income Fund, Inc., Seligman
Municipal Fund Series, Inc., and Seligman New Jersey Municipal Fund, Inc., and
shares of beneficial interest of Seligman High Income Fund Series, Seligman
Municipal Series Trust, Seligman Pennsylvania Municipal Fund Series, and
Seligman Value Fund Series, Inc., agree to the terms and conditions set forth in
this agreement.
Dealer Signature Seligman Financial Services, Inc. Acceptance
- ---------------------------- ----------------------------
Principal Officer Stephen J. Hodgdon, President
SELIGMAN FINANCIAL SERVICES, INC.
100 Park Avenue
- ---------------------------- New York, New York 10017
Address
- ---------------------------- ----------------------------
Employer Identification No. Date
<PAGE>
The Dealer and Seligman Financial Services, Inc. ("Seligman Financial
Services"), as exclusive agent for distribution of Class A and Class D Shares
(as described in the "Policies and Procedures," as set forth below) of the
Capital Stock and/or Class A and Class D Shares of beneficial interest
(collectively, the "Shares") of Seligman Capital 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,
and Seligman Value Fund Series, Inc., and or any other mutual fund for which
Seligman Financial Services is exclusive agent for distribution (herein called
the Funds), agree as follows:
1. The Dealer agrees to comply with the attached "Policies and Procedures"
with respect to sales of Seligman Mutual Funds offering two classes of
shares, as set forth below.
2. An order for Shares of one or more of the Funds, placed by the Dealer with
Seligman Financial Services, will be confirmed at the public offering price
as described in each Fund's current prospectus. Unless otherwise agreed
when an order is placed, the Dealer shall remit the purchase price to the
Fund, or Funds, with issuing instruction, within the period of time
prescribed by existing regulations. No wire orders under $1,000 may be
placed for initial purchases.
3. Shares of the Funds shall be offered for sale and sold by the Dealer only
at the applicable public offering price currently in effect, determined in
the manner prescribed in each Fund's prospectus. Seligman Financial
Services will make a reasonable effort to notify the Dealer of any
redetermination or suspension of the current public offering price, but
Seligman Financial Services shall be under no liability for failure to do
so.
4. On each purchase of Shares by the Dealer, the Dealer shall be entitled,
based on the Class of Shares purchased and except as provided in each
Fund's current prospectus, to a concession determined as a percentage of
the price to the investor as set forth in each Fund's current prospectus.
On each purchase of Class A Shares, Seligman Financial Services reserves
the right to receive a minimum concession of $.75 per transaction. No
concessions will be paid to the Dealer for the investment of dividends in
additional shares.
5. Except for sales to and purchases from the Dealer's retail customers, all
of which shall be made at the applicable current public offering price or
the current price bid by Seligman Financial Services on behalf of the Fund,
the Dealer agrees to buy Shares only through Seligman Financial Services
and not from any other sources and to sell shares only to Seligman
Financial Services, the Fund or its redemption agent and not to any other
purchasers.
6. By signing this Agreement, both Seligman Financial Services and the Dealer
warrant that they are members of the National Association of Securities
Dealers, Inc., and agree that termination of such membership at any time
shall terminate this Agreement forthwith regardless of the provisions of
paragraph 10 hereof. Each party further agrees to comply with all rules and
regulations of such Association and specifically to observe the following
provisions:
(a) Neither Seligman Financial Services nor the Dealer shall withhold
placing customers' orders for Shares so as to profit itself as a
result of such withholding.
(b) Seligman Financial Services shall not purchase Shares from any of the
Funds except for the purpose of covering purchase orders already
received, and the Dealer shall not purchase Shares of any of the Funds
through Seligman Financial Services other than for investment, except
for the purpose of covering purchase orders already received.
<PAGE>
(c) Seligman Financial Services shall not accept a conditional order for
Shares on any basis other than at a specified definite price. The
Dealer shall not, as principal, purchase Shares of any of the Funds
from a recordholder at a price lower than the bid price, if any, then
quoted by or for the Fund, but the Dealer shall not be prevented from
selling Shares for the account of a record owner to Seligman Financial
Services, the Fund or its redemption agent at the bid price currently
quoted by or for such Fund, and charging the investor a fair
commission for handling the transaction.
(d) If Class A Shares are repurchased by a Fund or by Seligman Financial
Services as its agent, or are tendered for redemption within seven
business days after confirmation by Seligman Financial Services of the
original purchase order of the Dealer for such Shares, (i) the Dealer
shall forthwith refund to Seligman Financial Services the full
concession allowed to the Dealer on the original sales and (ii)
Seligman Financial Services shall forthwith pay to the Fund Seligman
Financial Services' share of the "sales load" on the original sale by
Seligman Financial Services, and shall also pay to the Fund the refund
which Seligman Financial Services received under (i) above. The Dealer
shall be notified by Seligman Financial Services of such repurchase or
redemption within ten days of the date that such redemption or
repurchase is placed with Seligman Financial Services, the Fund or its
authorized agent. Termination or cancellation of this Agreement shall
not relieve the Dealer or Seligman Financial Services from the
requirements of this clause (d).
7. (a) Seligman Financial Services shall be entitled to a contingent deferred
sales load ("CDSL") on redemptions within one year of purchase on any
Class D Shares sold. With respect to omnibus accounts in which Class D
Shares are held at Seligman Data Corp. ("SDC") in the Dealer's name,
the Dealer agrees that by the tenth day of each month it will furnish
to SDC a report of each redemption in the preceding month to which a
CDSL was applicable, accompanied by a check payable to Seligman
Financial Services in payment of the CDSL due.
(b) If, with respect to a redemption of any Class D Shares sold by the
Dealer, the CDSL is waived because the redemption qualifies for a
waiver set forth in the Fund's prospectus, the Dealer shall promptly
remit to Seligman Financial Services an amount equal to the payment
made by Seligman Financial Services to the Dealer at the time of sale
with respect to such Class D Shares.
8. In all transactions between Seligman Financial Services and the Dealer
under this Agreement, the Dealer will act as principal in purchasing from
or selling to Seligman Financial Services. The dealer is not for any
purposes employed or retained as or authorized to act as broker, agent or
employee of any Fund or of Seligman Financial Services and the Dealer is
not authorized in any manner to act for any Fund or Seligman Financial
Services or to make any representations on behalf of Seligman Financial
Services. In purchasing and selling Shares of any Fund under this
Agreement, the Dealer shall be entitled to rely only upon matters stated in
the current offering prospectus of the applicable Fund and upon such
written representations, if any, as may be made by Seligman Financial
Services to the Dealer over the signature of Seligman Financial Services.
9. Seligman Financial Services will furnish to the Dealer, without charge,
reasonable quantities of the current offering prospectus of each Fund and
sales material issued from time to time by Seligman Financial Services.
10. Either Party to this Agreement may cancel this Agreement by written notice
to the other party. Such cancellation shall be effective at the close of
business on the 5th day following the date on which such notice was given.
Seligman Financial Services may modify this Agreement at any time by
written notice to the Dealer. Such notice shall be deemed to have been
given on the date upon which it was either delivered personally to the
other party or any officer or member thereof, or was mailed postage-paid,
or delivered to a telegraph office for transmission to the other party at
his or its address as shown herein.
<PAGE>
11. This Agreement shall be construed in accordance with the laws of the State
of New York and shall be binding upon both parties hereto when signed by
Seligman Financial Services and by the Dealer in the spaces provided on the
cover of this Agreement. This Agreement shall not be applicable to Shares
of a Fund in a state in which such Fund Shares are not qualified for sale.
POLICIES AND PROCEDURES
In connection with the offering by the Funds of three classes of shares,
one subject to a front-end sales load and a service fee ("Class A Shares"), one
subject to a service fee, a distribution fee, no front-end sales load and a
contingent deferred sales load on redemptions within six years of purchase
("Class B Shares") and one subject to a service fee, a distribution fee, no
front-end sales load and a contingent deferred sales load on redemptions within
one year of purchase ("Class D Shares"), it is important for an investor to
choose the method of purchasing shares which best suits his or her particular
circumstances. To assist investors in these decisions, Seligman Financial
Services has instituted the following policies with respect to orders for
Shares:
1. No purchase order may be placed for Class B Shares or Class D Shares
for amounts of $4,000,000 or more.
2. Any purchase order for less than $4,000,000 may be for either Class A,
Class B or Class D Shares in light of the relevant facts and
circumstances, including:
a. the specific purchase order dollar amount;
b. the length of time the investor expects to hold his Shares; and
c. any other relevant circumstances such as the availability of
purchases under a Letter of Intent, Volume Discount, or Right of
Accumulation.
There are instances when one method of purchasing Shares may be more
appropriate than another. For example, an investor who would qualify for a
significant discount from the maximum sales load on Class A Shares may determine
that payment of such a reduced front-end sales load and service fee is
preferable to payment of higher ongoing distribution fee. On the other hand, an
investor whose order would not qualify for such a discount may wish to have all
of his or her funds invested in Class B or Class D Shares. An investor who
expects to hold his or her shares for longer than eight years might prefer Class
B Shares over Class D Shares because of the conversion feature; once the Class B
Shares have converted to Class A Shares, the ongoing distribution fees will be
reduced. Class D Shares may remain a more attractive choice for shorter-term
investors because of the contingent deferred sales load on such shares is only
1%, and it does not apply if the investor owns his or her shares for at least
one year. If an investor anticipates that he or she will redeem his or her Class
B Shares or Class D Shares while still subject to a contingent deferred sales
charge, the investor may, depending on the amount of the purchase, pay an amount
greater than the sales load and service fee attributable to Class A Shares.
Appropriate supervisory personnel within your organization must ensure that
all employees receiving investor inquiries about the purchase of Shares of a
Fund advise the investor of then available pricing structures offered by the
Fund, and the impact of choosing one method over another. In some instances it
may be appropriate for a supervisory person to discuss a purchase with the
investor.
Questions relating to this policy should be directed to Stephen J. Hodgdon,
President, Seligman Financial Services at (212) 850-1217.
J. & W. SELIGMAN & CO. INCORPORATED
MATCHED ACCUMULATION PLAN
(As amended and restated to include
all amendments through January 1, 1995)
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
PREAMBLE ................................................... 1
ARTICLE I Definitions .................................... 1
1.1 Definitions ...................... 1
1.2 Gender ........................... 17
ARTICLE II Participation .................................. 17
2.1 Initial Participation ............ 17
2.2 Reemployment ..................... 17
ARTICLE III Profit Sharing Contributions ................... 17
3.1 Amount of Profit Sharing
Contributions .................... 17
3.2 Participants Eligible for
Profit Sharing Contributions ..... 18
3.3 Allocation of Profit Sharing
Contributions .................... 18
3.4 Cash Election .................... 19
ARTICLE IV Salary Reduction, Voluntary, Matching
and Rollover Contributions ..................... 19
4.1. Salary Reduction Contributions ... 19
4.2 Limitation on Optional Deferrals
and Salary Reduction
Contributions .................... 20
<PAGE>
4.3 Voluntary Contributions .......... 22
4.4 Changes in Rates of Salary
Reduction Contributions and/or
Voluntary Contributions .......... 22
4.5 Matching Contributions ........... 23
4.6 Limitation on Voluntary
Contributions and Matching
Contributions .................... 23
4.7 Rollover Contributions ........... 26
4.8 Maximum Annual Addition .......... 26
ARTICLE V Investment of the Trust Fund ................... 28
5.1 Funds ............................ 28
5.2 Investment of Prospective
Contributions .................... 28
5.3 Investment In Funds .............. 29
5.4 Transfers Among Funds ............ 29
5.5 Reinvestments of Income
and Gains ........................ 30
5.6 Limitation on Investments
in a Fund ........................ 30
ARTICLE VI Vesting ........................................ 30
6.1 Certain Participants Hired Before
May 31, 1993 ..................... 30
6.2 Other Participants ............... 30
<PAGE>
ARTICLE VII Withdrawals During Service ..................... 32
7.1 In-Service Withdrawals (Other
Than for Hardship) ............... 32
7.2 Hardship Withdrawals ............. 33
7.3 Complete Withdrawal .............. 35
7.4 Payments ......................... 35
7.5 Rollover Contributions ........... 35
ARTICLE VIII Loans ......................................... 35
8.1 Amount of Loans .................. 35
8.2 Payment of Loan .................. 36
8.3 Terms of Loan .................... 36
8.4 Repayment of Loan ................ 36
8.5 Default .......................... 37
8.6 Termination of Service or Plan ... 37
8.7 Maximum Number of Loans .......... 37
ARTICLE IX Distributions Upon Termination
of Service ..................................... 37
9.1 Termination of Service ........... 37
9.2 Deferred Distributions ........... 38
9.3 Commencement of Benefits ......... 38
ARTICLE X Payments of Distributions and
<PAGE>
Withdrawals .................................... 39
10.1 Distributions .................... 39
10.2 Payments ......................... 39
10.3 Designation of Beneficiary ....... 39
10.4 Death Benefits ................... 39
10.5 Payments to Minors or Other
Persons Under a Disability ....... 40
10.6 Dividends or Capital Gain
Distributions .................... 40
10.7 Predecessor Plan ................. 40
10.8 Direct Rollovers ................. 40
ARTICLE XI The Trust Fund ................................. 41
11.1 Trust Fund ....................... 41
11.2 Trustee .......................... 41
11.3 Prohibition Against Diversion .... 41
11.4 Recordkeeping .................... 41
11.5 Expenses ......................... 42
11.6 Voting ........................... 42
ARTICLE XII Valuation of Interests and Statements
of Accounts .................................... 42
12.1 Valuation ........................ 42
<PAGE>
12.2 Changes in Valuation ............. 42
12.3 Statement of Account ............. 42
ARTICLE XIII Administration ................................ 43
13.1 Appointment of Committee ........ 43
13.2 Powers of the Committee ......... 43
13.3 Procedures of the Committee ..... 43
13.4 Delegation of Duties ............ 43
13.5 Payment of Expenses ............. 44
13.6 Duties and Responsibilities
of the Committee ................ 44
13.7 Indemnification ................. 44
ARTICLE XIV Claims Procedure .............................. 45
ARTICLE XV Amendment or Termination of the Plan
or Discontinuance of Employer
Contributions ................................. 46
15.1 Amendment ....................... 46
15.2 Termination ..................... 46
15.3 Merger, Consolidation or
Transfer of Assets or
Liabilities ..................... 46
15.4 Withdrawal of Employer .......... 46
ARTICLE XVI General Provisions............................. 47
16.1 Plan Is Not a Contract of
Employment ...................... 47
16.2 Plan Is for the Exclusive
Benefit of Beneficiaries ........ 47
16.3 Nonalienation of Benefits ....... 47
16.4 Applicable Law .................. 47
EXHIBIT A .................................................. 48
<PAGE>
PREAMBLE
J. & W. Seligman & Co. Incorporated, in order to establish a systematic
method by which its employees may both share in current profits and earn and
accumulate benefits payable upon termination of employment or retirement,
adopted this profit-sharing plan now known as the J. & W. Seligman & Co.
Incorporated Matched Accumulation Plan, effective January 1, 1981.
The Plan was amended from time to time and was last restated effective
January 1, 1989. Effective January 1, 1994, the Plan is again restated in this
Plan document. Except where the context expressly provides otherwise, this Plan,
as amended and restated as of January 1, 1994, applies to employees of an
Employer employed on or after such date; changes effected by any amendments
included in this restated Plan shall not be applicable to any Participant who
retired or died or whose employment otherwise terminated prior to January 1,
1994; all rights and benefits payable with respect to him shall be determined in
accordance with the provisions of the Plan and Trust as in effect on such date
of termination of employment.
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ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Wherever used herein, unless the context otherwise
indicates, the following terms shall have the meanings set forth below:
Accounts: The account or accounts established and maintained in
the Trust Fund pursuant to Article V on behalf of
each Participant, representing his interest in one or
more of the Funds established hereunder.
Act: The Employee Retirement Income Security Act of 1974.
All references to any section of the Act shall be
deemed to refer not only to such section but also to
any amendment thereof and any successor statutory
provision.
Affiliate: (a) Any corporation or other business entity (other
than the Corporation) that is included in a
controlled group of corporations within which the
Corporation is also included, as provided in Section
414(b) of the Code, or which is a trade or business
under common control with the Corporation, as
provided in Section 414(c) of the Code, determined
for purposes of Section 4.8, as if the phrase
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"more than 50 percent" was substituted for the phrase
"at least 80 percent" each place it appears in
Section 1563(a)(1) of the Code, (b) Union Data
Service Center, Inc., (c) any organization (whether
or not incorporated) which is a member of an
affiliated service group (as defined in Section
414(m) of the Code) which includes the Corporation
and any other entity required to be aggregated with
the Corporation pursuant to regulations under Section
414(o) of the Code and (d) any other corporation or
entity which has been so designated by the Board for
one or more purposes under the Plan.
Agent: Union Data Service Center, Inc.
Anniversary Year: A period of 365 days beginning on the date an
individual first receives credit for an Hour of
Service beginning with his initial Service or his
reemployment date following a Break in Service.
Average Contribution: With respect to any group of eligible Employees for
Percentage: a Year, the average of the ratios (calculated
separately for each eligible Employee in the
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group) of (a) the aggregate of Voluntary
Contributions and Matching Contributions (excluding
any amounts used to satisfy the minimum allocation
described in Article II of Appendix A) made on behalf
of such eligible Employees for such Year to (b) such
eligible Employees' 414(s) Compensation for such
Year. Such Average Contribution Percentage shall be
computed to the nearest one-hundredth of one percent
of the eligible Employee's 414(s) Compensation.
Average Deferral With respect to any specified group of
Percentage: eligible Employees for a Year, the average of the
ratios (calculated separately for each eligible
Employee in the group) of (a) the Optional Deferrals
and Salary Reduction Contributions contributed on
behalf of such eligible Employees for such Year to
(b) such eligible Employees' 414(s) Compensation.
Such Average Deferral Percentage shall be computed to
the nearest one-hundredth of one percent of the
eligible Employee's 414(s) Compensation.
Beneficiary: The person or persons designated by a Participant as
his beneficiary
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in accordance with Section 10.3.
Board: The board of directors of the Corporation.
Break in Service: An Anniversary Year during which an individual is
credited with no more than 500 Hours of Service.
Solely for the purpose of determining whether a Break
in Service has occurred, the individual shall be
credited with one Hour of Service (up to 501 such
hours) for each hour for which he is absent from work
because of (a) pregnancy, (b) birth of a child, (c)
placement of a child in connection with his adoption
by the individual or (d) caring for a child
immediately following such child's birth or placement
for adoption. Such hours shall be credited in the
Anniversary Year in which the absence from work began
if necessary to prevent a Break in Service in that
year or, in any other case, in the next following
Anniversary Year.
Cash Distribution: The amount that a Participant elects to receive in
cash rather than to have contributed to the Plan as
an Optional Deferral pursuant to Section 3.4.
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Code: The Internal Revenue Code of 1986. All references to
any section of the Code shall be deemed to refer not
only to such section but also to any amendment
thereof and any successor statutory provision.
Committee: The committee appointed by the Board pursuant to
Article XIII.
Compensation: The aggregate cash remuneration (exclusive of any
commissions from sales, institutional advisory,
brokerage or wrap fee incentive plans, bonuses,
overtime or any payment made under this Plan or any
other employee benefit plan) received by an
individual from an Employer during the Year for
services rendered for the portion of a Year during
which he is a Participant; PROVIDED, HOWEVER, that if
commissions from sales and/or incentive payments are
part of an individual's compensation arrangement,
Compensation for such individual shall include such
commissions from sales and/or incentive payments
although, except as provided in the following
sentence, Compensation for such Employees shall not
exceed $100,000 ($75,000 prior to 1993) for any Year.
Solely for the purpose of determining
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the maximum amount of Salary Reduction Contributions
and/or Voluntary Contributions that may be made on
behalf of or by a Participant, the $100,000 limit
included in the preceding sentence shall not apply.
In any event, effective January 1, 1994, Compensation
for any Participant shall not exceed $150,000, as
adjusted by the Secretary of the Treasury or his
delegate at the same time and in the same manner as
under Section 415(d) of the Code.
Continuous Service: An Employee's employment with one or more Employers
or Affiliates commencing on the date an Employee
completes one Hour of Service, measured in years and
completed months, and any period of time included in
any leave of absence of up to two years authorized by
an Employer or an Affiliate and any absence due to
service in the armed forces, provided that the
individual returns to service with an Employer or
Affiliate immediately after the expiration of such
leave of absence or within 90 days after discharge
from the armed forces (but, if he does not so return,
his Continuous Service shall be deemed to have
terminated at the commencement
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of such period). In the case of an Employee's
severance from the Service of an Employer or
Affiliate by reason of the resignation, discharge,
retirement, or death, of such Employee, Continuous
Service of the Employee will end on the date of such
severance. In the case of an Employee's severance
from the Service of an Employer or Affiliate for any
reason other than those described in the preceding
sentence (including, without limitation, the
disability, vacation, or layoff of the Employee),
Continuous Service of the Employee will end on the
first anniversary of the date of such severance if
the Employee has not performed an Hour of Service
during such period.
Corporation: J. & W. Seligman & Co. Incorporated, a Delaware
corporation, and any successor thereto.
Disability:
Physical or mental incapacity which is likely to be
permanent and which prevents an Employee from
engaging in any occupation or performing any work for
compensation or profit for which he is qualified by
education, training or experience, as
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determined by the Committee in its sole discretion on
the basis of medical evidence certified by a
physician or physicians designated by it.
Effective Date: January 1, 1981.
Employee: Any individual who is employed by an Employer other
than any individual who (a) is designated as a
temporary employee by the Committee based on uniform
rules consistently applied to all persons similarly
situated or (b) has an employment agreement in effect
which provides that he will not be eligible for the
Plan.
Employer: The Corporation, any Affiliate or other subsidiary
that (a) has been designated by the Board as an
Employer, (b) has adopted the Plan with the approval
of its board or directors and (c) has not ceased to
be an Employer. In adopting the Plan for the benefit
of its Employees, an entity may limit the application
of the Plan to specified employees or a group of
employees of one or more of its locations, operations
or divisions. In designating an entity as an
Employer, the Board may limit the participation of
all or a
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portion of the Employees of such Employer so that
they are eligible only for (a) Profit Sharing
Contributions as described in Article III or (b)
Salary Reduction Contributions, Voluntary
Contributions, Matching Contributions and Rollover
Contributions as described in Article IV.
Employer Contributions: For any Year, the sum of Profit
Sharing Contributions, Matching Contributions and
Salary Reduction Contributions contributed under the
Plan by one or more Employers on behalf of a
Participant as provided in Articles III and IV.
Family Member: With respect to any Highly Compensated Employee who
is in the group consisting of the ten employees who
receive the highest total pay from the Corporation or
any Affiliate for the Year (determined without regard
to Sections 125 and 402(e)(3) of the Code), or a Five
Percent Shareholder, such individual's spouse, lineal
ascendants or descendants and the spouses of any
lineal ascendants or descendants.
Fiduciary: Any person to the extent that he (a) exercises any
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discretionary authority or discretionary control
respecting management of the Plan or exercises any
authority or control respecting management or
disposition of its assets, (b) renders investment
advice for a fee or other compensation, direct or
indirect, with respect to any moneys or other
property of the Plan, or has any authority or
responsibility to do so, or (c) has any discretionary
authority or responsibility in the administration of
the Plan. Such term includes persons designated by
fiduciaries named in the Plan to carry out fiduciary
responsibilities under the Plan.
Five Percent Shareholder: Any person who owned (or is
considered to own within the meaning of Code Section
318) more than five percent of the outstanding stock
of an Employer or stock possessing more than five
percent of the total combined voting power of all
stock of an Employer.
414(s) Compensation: The total pay paid to an Employee by an Employer or
Affiliate for the portion of a Year during which he
was eligible to be a Participant hereunder prior to
reduction
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for any contributions made on a salary reduction
basis and excluded from income under Code Sections
125 and 402(e)(3); provided, however, that the
Committee may select another definition of 414(s)
Compensation so long as such definition complies with
Section 414(s) of the Code.
Fund: One of the funds established pursuant to Section 5.1,
and Funds shall mean all such funds.
Highly Compensated For any Year, an eligible
Employee: Employee who:
(a) in the previous Year:
(i) was a Five Percent Shareholder;
(ii) had compensation in excess of $75,000;
(iii) had compensation in excess of $50,000
and was in the group consisting of the top 20%
of employees of an Employer or Affiliate
(excluding for such purpose all employees
described in Code Section 414(g)(8)) when
ranked in order of compensation for the
previous Year; or
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(iv) was an officer of an Employer or an
Affiliate and had compensation in excess of 50
percent of the dollar limitation in effect
under Section 415(b)(1)(A) of the Code;
provided, however, that no more than 50
employees (or, if lesser, the greater of three
employees or 10 percent of the employees)
shall be treated as officers; or
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(b) in the current Year:
(i) is a Five Percent Shareholder; or
(ii) is one of the 100 employees of an
Employer or Affiliate with the greatest
compensation for such Year and is described in
subparagraphs (a)(ii)-(iv) above for the
current Year. The $75,000 and $50,000
thresholds in the preceding sentence shall be
adjusted at the same time and in the same
manner as the dollar limit on benefits under a
defined benefit plan is adjusted pursuant to
Section 415(d) of the Code. The dollar
threshold for a particular look-back year is
based on the dollar threshold in effect for
the look-back year.
A former Employee shall be considered a Highly
Compensated Employee if he was a Highly
Compensated Employee for either the Year in
which his separation from Service began or for
any Year ending on or after the former
Employee's 55th birthday.
The determination of who is a Highly
Compensated Employee, including the
determinations of the number and identity of
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Employees in the top-paid group, the top 100
Employees, the number of Employees treated as
officers and the compensation that is
considered, will be made in accordance with
Section 414(q) of the Code and the regulations
thereunder.
Hours of Service: An individual shall be credited with Hours of
Service as follows: (a) if a record is kept of
his actual hours of Service, one Hour of
Service for each hour for which he is directly
or indirectly paid or entitled to payment
(including such time as paid vacations,
holidays, sickness or layoffs and including
back pay, if any, irrespective of mitigation
of damages) from the Corporation or an
Affiliate; (b) if no record is kept of his
actual hours of Service, 45 Hours of Service
for each week for which he would otherwise be
entitled to receive credit for an Hour of
Service under (a) above; and (c) 40 Hours of
Service for each week included in any leave of
absence of up to two years authorized by the
Corporation or an Affiliate and in any absence
due to service in the armed forces of the
United States, provided that he returns to
Service
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with the Corporation or an Affiliate
immediately after the expiration of such leave
of absence or within 90 days after discharge
from the armed forces. In the event he does
not so return, his Service shall be deemed to
have terminated at the commencement of such
period. The foregoing shall be construed so as
to avoid duplication of Hours of Service for a
single hour. The rules issued by the U.S.
Department of Labor relating to the
determination of Hours of Service for reasons
other than the performance of duties and the
crediting of Hours of Service to computation
periods, found in DOL Regulation
2530.20Ob-2(b) and (c), are hereby
incorporated by reference.
Matching Contributions: Contributions made by the
Employers on behalf of Participants in respect
of Salary Reduction Contributions and
Voluntary Contributions made after May 1,
1993, pursuant to Section 4.5.
Nonhighly Compensated For any Year an eligible
Employee: Employee who is not a Highly Compensated
Employee.
Notice to the Committee: Written notice on a form provided by the
Committee which is properly completed
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and delivered to the Committee or any member
thereof by hand or mail. Notice to the
Committee shall be deemed to have been given
when it is actually received by the Committee
or any member thereof.
Nonelective Deferral: The portion of the Profit Sharing Contribution
for any Year made on behalf of a Participant
that is not subject to an election to receive
a Cash Distribution.
Optional Deferral: The portion of the Profit Sharing
Contribution for any Year made on behalf of a
Participant that is paid to the Trust Fund by
reason of his failure to elect to receive a
Cash Distribution.
Participant: An Employee who is at the time participating
in the Plan as provided in Article II or where
required by the context, an individual who
formerly participated in the Plan.
Plan: The J. & W. Seligman & Co. Incorporated
Matched Accumulation Plan, as set forth in
this document and as it may be amended from
time to time.
Predecessor Plan: The J. & W. Seligman & Co. Profit Sharing
Plan, and,
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where the context requires, the Union Service
Corporation Employees' Thrift Plan.
Profit Sharing Contributions made by Employers on behalf of
Contributions: Participants pursuant to Article III including
Optional Deferrals and contributions not
subject to an election to receive a Cash
Distribution. Profit Sharing Contributions
made by or on behalf of each Employer shall be
divided by the Board between Basic
Contributions and Supplemental Contributions.
Profits: In respect of any Year, the current or
accumulated profits of the Corporation and its
subsidiaries, as determined under generally
accepted accounting principles, before (a)
provision for Federal, state or local income
taxes based on net income and (b) any
contributions under the Plan.
Retirement: Retirement of a Participant on or after
attainment of an age established pursuant to
the uniform policy of his Employer.
Rollover Contributions: Contributions transferred or contributed to
the Trust Fund pursuant to Section 4.7.
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Salary Reduction Contributions made on behalf
Contributions:of Participants pursuant to
Section 4.1.
Service: Service by an individual as an employee of the
Corporation or an Affiliate (including service
prior to the time it became such to the extent
determined by the Board or as otherwise
required by law) or as a leased employee
within the meaning of Section 414(n)(2) of the
Code if the Corporation or an Affiliate was
the recipient of such leased employee's
services.
Trust Agreement: The agreement of trust as in effect at any
time between the Corporation and the Trustee
relating to the Plan, which Trust Agreement
shall form a part of the Plan.
Trust Fund: The property which is from time to time held
by the Trustee under the Trust Agreement, as
provided in Article XI.
Trustee: The trustee or trustees under the Trust
Agreement at the particular time.
Valuation Date: The end of each business day.
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Voluntary Contributions: After-tax contributions made by Participants
pursuant to Section 4.3.
Year: A calendar year.
Year of Vesting Service: An Anniversary Year during which an individual
is credited with at least 1,000 Hours of
Service, whether or not he performs Service
throughout such Anniversary Year. If an
individual who was a leased employee within
the meaning of Section 414(n)(2) of the Code
becomes an Employee, and an Employer or
Affiliate was the recipient of such
individual's services as a leased employee,
his period of service as a leased employee
shall be counted in determining his Years of
Vesting Service, provided that the requirement
described in the preceding sentence would have
been satisfied if he had been an Employee
during such period. If an individual has a
Break in Service, his Years of Vesting Service
before such break shall be disregarded unless
either (a) at the time of the Break in
Service, he was vested in any portion of his
Account attributable to Profit Sharing
Contributions or Matched Contributions or (b)
the number of consecutive
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one-year Breaks in Service was less than the
greater of five or the number of his Years of
Vesting Service prior to such Break in
Service.
1.2 GENDER. Wherever used herein, words in the masculine form shall be
deemed to refer to females as well as to males.
ARTICLE II
PARTICIPATION
2.1 INITIAL PARTICIPATION. An individual who was an Employee on the
Effective Date and who was a participant in a Predecessor Plan became a
Participant on such Date. Thereafter, except as provided in the following
sentence, an Employee shall become a Participant on the first day of the month
coinciding with or next following his completion of six months of Continuous
Service. In the case of an Employee whose participation is limited to the
contributions made under Article IV, he shall be eligible to become a
Participant on the first day of any month coinciding with or next following his
completion of six months of Continuous Service. Solely for the purposes of this
Article II, the term "Service" shall include service with an entity that had
adopted a Predecessor Plan.
2.2 REEMPLOYMENT. A Participant shall remain such until his
termination of Service. An Employee who was (or was eligible to be) a
Participant and whose Service resumes shall again become a Participant on the
date on which he again becomes an Employee. Each other Employee who resumes
employment shall be eligible to become a Participant upon the first day of the
month in which he meets the requirements of Section 2.1.
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ARTICLE III
PROFIT SHARING CONTRIBUTIONS
3.1 AMOUNT OF PROFIT SHARING CONTRIBUTIONS. Subject to the right of
the Board to modify, amend or terminate the Plan, the rights of the Employers to
modify, suspend or discontinue their respective Profit Sharing Contributions
under the Plan and the provisions of this Article III, each Employer shall
contribute to the Plan for each Year out of Profits the amount that the Board
shall determine to be its Profit Sharing Contribution for such Year; PROVIDED,
HOWEVER, that any Profit Sharing Contribution for such Year shall not be greater
than the amount which is allowable as a deduction for Federal income tax
purposes. Notwithstanding the foregoing, if any Employer, which with any other
Employer is includible in an "affiliated group" of corporations within the
meaning of Section 1504(a) of the Code, is prevented from making a contribution
which it would otherwise have made under the Plan by reason of having no current
or accumulated earnings or profits because such earnings or profits are less
than the contribution which it would otherwise have made, then so much of the
Employer Contribution which such Employer was so prevented from making shall be
made for the benefit of the Participants who are Employees of such Employer by
any other Employer or Affiliates includible in such "affiliated group" to the
extent of their respective current or accumulated earnings or profits. Such
Profit Sharing Contributions shall be allocated in accordance with Sections 3.2,
3.3 and 3.4.
3.2 PARTICIPANTS ELIGIBLE FOR PROFIT SHARING CONTRIBUTIONS. Basic
Contributions and Supplemental Contributions for any Year shall be allocated as
of December 31 of such Year, in the manner provided in Section 3.3, to
individuals who are Participants on such December 31, or whose Service as
Participants terminated during such Year by Retirement, Disability or death;
provided, however, that Supplemental Contributions shall
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only be allocated to a Participant or former Participant who is not entitled to
receive a bonus for such Year, as determined by his Employer. In the case of any
such individual whose Service terminated during such Year by Retirement,
Disability or death and the value of whose Accounts has been paid pursuant to
Article IX prior to the end of such Year, he (or his Beneficiary) shall receive
a distribution of the amount equal to his allocable share of Profit Sharing
Contributions for such Year. In the case of each other such individual, his
allocable share of Profit Sharing Contributions (less his Cash Distribution, if
any) for such Year shall be credited to his Accounts.
3.3 ALLOCATION OF PROFIT SHARING CONTRIBUTIONS. Subject to Sections
3.4 and 4.2, the Basic Contribution and Supplemental Contribution of each
Employer for any Year shall be allocated among the individuals employed by such
Employer and described in Section 3.2 as entitled to receive an allocation of
Basic Contributions and/or Supplemental Contributions, respectively, in an
amount which bears the same ratio to each such Contribution as the Compensation
for such Year of each such individual as a Participant bears to the total
Compensation of all such individuals as Participants and Employees of such
Employer for such Year.
3.4 CASH ELECTION. Each Participant, in lieu of having his entire
share of Profit Sharing Contributions for any Year paid to the Trust Fund and
applied for his benefit as provided in Article V, may elect, by Notice to the
Committee not later than December 31 of such Year or such other date as the
Committee may in its discretion determine, to receive a Cash Distribution in an
amount equal to 33-l/3%, 50% or 66-2/3% of his share of Basic Contributions
and/or 33-1/3%, 50%, 66-2/3% or 100% of his share of Supplemental Contributions.
Cash Distributions shall be paid by the Employers to Participants who have
elected in any Year to receive them as soon as practicable after the close of
such Year. An election to receive a Cash Distribution for any Year shall be
irrevocable. Upon the death of a Participant prior to the payment of a Cash
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Distribution which he has elected, such Cash Distribution shall be payable to
his Beneficiary.
ARTICLE IV
SALARY REDUCTION, VOLUNTARY, MATCHING
AND ROLLOVER CONTRIBUTIONS
4.1 SALARY REDUCTION CONTRIBUTIONS. (a) Effec- tive May 1, 1993,
subject to the limits specified below and in Sections 4.2 and 4.8, each
Participant may elect to have his Compensation for each pay period reduced from
1% to 10% (in whole integers) and such amount shall be contributed to the Trust
Fund by his Employer on his behalf. At any time, the Committee may reduce the
rate of future Salary Reduction Contributions to be made on behalf of Highly
Compensated Employees in order to satisfy the test described in Section 4.2.
(b) In any event, the aggregate of a Partici- pant's Salary Reduction
Contributions, Optional Deferrals and any other elective deferral contributions
(within the meaning of Code Section 402(g)(3)) contributed on behalf of a
Participant for any Year under the Plan or any other plan maintained by the
Corporation or an Affiliate may not exceed $7,000 (or such greater amount as may
be permitted pursuant to Code Section 402(g)(5)). In the event a Participant's
Optional Deferrals and Salary Reduction Contributions exceeds the applicable
limit described in the preceding sentence, such excess (plus any income or minus
any loss allocable thereto, calculated in accordance with regulations issued by
the Secretary of the Treasury) shall be returned to the Participant by April
15th of the following Year.
(c) Salary Reduction Contributions for any pay period will be paid by
the Participant's Employer to the
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Trust Fund as soon as feasible after the end of each pay period.
4.2 LIMITATION ON OPTIONAL DEFERRALS AND SALARY REDUCTION
CONTRIBUTIONS. (a) If the aggregate of Optional Deferrals and Salary Reduction
Contributions made on behalf of Highly Compensated Employees for any Year is in
excess of the amount permitted under the following provisions for such Highly
Compensated Employees, such excess amounts plus the pro rata share of income and
losses thereon determined in accordance with regulations issued by the Secretary
of the Treasury, shall be distributed to such Highly Compensated Employees by
March 15 of the following Year.
(b) All or a portion of the aggregate of Optional Deferrals and Salary
Reduction Contributions for the Highly Compensated Employees shall be deemed to
be excessive for any Year unless one of the following tests is satisfied:
(i) the Average Deferral Percentage of Highly Compensated Employees is
not more than the Average Deferral Percentage of Nonhighly Compensated
Employees multiplied by 1.25, or
(ii) the Average Deferral Percentage of Highly Compensated Employees
is not more than the Average Deferral Percentage of Nonhighly Compensated
Employees multiplied by 2.0; provided, however, that the Average Deferral
Percentage for the Highly Compensated Employees may not exceed the Average
Deferral Percentage for the Nonhighly Compensated Employees by more than
two percentage points.
(c) In the event any portion of a Participant's Optional Deferrals and
Salary Reduction Contributions are returned pursuant to Section 4.1(b) as a
result of the $7,000 (as adjusted by the Secretary of the Treasury) limit
applicable to such contributions, (i) any excess Optional Deferrals and Salary
Reduction Contributions required to be returned pursuant to this Section 4.2
shall be reduced by
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the amount of such excess deferrals and (ii) such Participant's Average Deferral
Percentage shall be determined before such excess deferral is returned;
PROVIDED, HOWEVER, that excess deferrals made on behalf of Nonhighly Compensated
Employees under plans of the Corporation or an Affiliate shall be excluded in
determining such Employee's Average Deferral Percentage.
The amount of Optional Deferrals and Salary Reduction Contributions to
be distributed shall be determined by reducing the maximum amount of Optional
Deferrals and Salary Reduction Contributions to an adjusted maximum percentage,
which shall be the percentage that would cause one of the tests described in
Section 4.2(b) to be satisfied if each Highly Compensated Employee who
designated a percentage greater than such adjusted maximum percentage had
instead designated such percentage. The deferral percentage for each Highly
Compensated Employee shall be the lesser of the percentage otherwise applicable
or the adjusted maximum percentage determined under this subparagraph.
In the event a Participant's Salary Reduction Contributions and/or
Optional Deferrals are distributed to the Participant pursuant to Section 4.1(b)
as a result of being in excess of the dollar limitation applicable to such
contributions or pursuant to this Section 4.2, the value of the related Matching
Contributions plus the pro rata share of income and losses thereon, determined
in accordance with regulations issued by the Secretary of the Treasury, shall be
distributed to the Participant.
In determining the Average Deferral Percentage of a Highly Compensated
Employee who has a Family Member who is an Employee, the Average Deferral
Percentage for the family group (which is treated as one Highly Compensated
Employee) shall be the Average Deferral Percentage determined by combining the
Optional Deferrals, Salary Reduction Contributions and 414(s) Compensation for
all the eligible Family Members. The determination of the Average Deferral
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Percentage and the treatment of excess deferrals of Highly Compensated Employees
with Family Members who are Employees shall satisfy such other requirements as
may be prescribed in regulations issued by the Secretary of the Treasury.
The Average Deferral Percentage for any Highly Compensated Employee
for any Year who is eligible to have pre-tax contributions allocated to his
account under one or more plans described in Code Section 401(k) (other than an
employee stock ownership plan described in Code Section 4975(a)(7)) maintained
by the Corporation or an Affiliate in addition to this Plan shall be determined
as if all such contributions were made to this Plan. In the event this Plan must
be combined with one or more plans (other than an employee stock ownership plan
described in Code Section 4975(e)(7)) in order to satisfy the requirements of
Sections 401(a)(4) or 410(b) of the Code (other than the average benefits test
described in Code Section 410(b)(1) (A)(ii)), then all cash or deferred
arrangements that are included in such plans shall be treated as a single
arrangement for purposes of this Section 4.2.
4.3 VOLUNTARY CONTRIBUTIONS. (a) Effective May 1, 1993, subject to the
limits specified below and in Sections 4.6 and 4.8, each Participant may elect
to make Voluntary Contributions to the Plan equal to 1% to 10% of his
Compensation (in whole integers) for each pay period; provided, however, that in
no event may a Participant's Voluntary Contributions exceed the difference
between (i) 10% of his Compensation and (ii) the percentage of his Compensation
contributed as a Salary Reduction Contribution. At any time, the Committee may
reduce the rate of future Contributions to be made by Highly Compensated
Employees in order to satisfy the test described in Section 4.6.
(b) Voluntary Contributions for any pay period will be paid by the
Participant's Employer to the Trust Fund as soon as feasible after the end of
each pay period.
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28
4.4 CHANGES IN RATES OF SALARY REDUCTION CONTRIBUTIONS AND/OR
VOLUNTARY CONTRIBUTIONS. A Participant may change the percentage of his
Compensation contributed as a Salary Reduction Contribution and/or Voluntary
Contribution; PROVIDED, HOWEVER, that such change may not be made more
frequently than once in any calendar quarter. In addition, such a Participant
may completely suspend Salary Reduction Contributions and/or Voluntary
Contributions at any time, PROVIDED, HOWEVER, that in the event a Participant
suspends making Basic Contributions he shall not be eligible to resume any
contribution until his Basic Contributions have been suspended for at least
three months. Such changes shall be effective with the first payroll period
commencing at least five days after receipt of the Participant's election by the
Committee. If the Compensation of a Participant is changed, the dollar amount of
his Salary Reduction Contributions and Voluntary Contributions will
automatically be changed so that the percentage contributed is not changed.
4.5 MATCHING CONTRIBUTIONS. Subject to Section 4.6 and 4.8 and to the
right of the Board to modify, amend or terminate the Plan and to the right of
the Employers to modify, suspend or discontinue their respective Matching
Contributions under the Plan, each Employer shall contribute to the Plan for
each pay period on behalf of each Participant in its employ an amount equal to
100% of the first 3% of his Compensation contributed on behalf of or by a
Participant as a Salary Reduction Contribution or Voluntary Contribution for
such pay period; PROVIDED, HOWEVER, that in the case of a Participant for whom
commissions from sales and/or incentive payments are part of his compensation
arrangement, Compensation used to determine the maximum amount of his Matching
Contributions shall not exceed $100,000 for any Year.
4.6 LIMITATION ON VOLUNTARY CONTRIBUTIONS AND MATCHING CONTRIBUTIONS.
(a) If the aggregate of Voluntary Contributions and Matching Contributions made
on behalf of the Highly Compensated Employees for any Year is in excess
<PAGE>
29
of the amount permitted under the following provisions for such Highly
Compensated Employees, such excess contributions plus the pro rata share of
income and losses thereon determined in accordance with regulations issued by
the Secretary of the Treasury shall be returned or distributed to such Highly
Compensated Employees to the extent required to satisfy such limitations by
March 15 of the following Year.
(b) All or a portion of the aggregate of Voluntary Contributions and
Matching Contributions for the Highly Compensated Employees shall be deemed to
be excessive for any Year unless one of the following tests is satisfied:
(i) the Average Contribution Percentage of Highly Compensated
Employees is not more than the Average Contribution Percentage of Nonhighly
Compensated Employees multiplied by 1.25, or
(ii) the Average Contribution Percentage of Highly Compensated
Employees is not more than the Average Contribution Percentage of Nonhighly
Compensated Employees multiplied by 2.0; provided, however, that the
Average Contribution Percentage for the Highly Compensated Employees may
not exceed the Average Contribution Percentage for the Nonhighly
Compensated Employees by more than two percentage points.
To the extent permitted by law and to the extent elected by the
Corporation, Optional Deferrals and Salary Reduction Contributions (in excess of
the amount of such contributions used to satisfy the test described in Section
4.2) allocated to a Participant's Account may be aggregated with the Voluntary
Contributions and Matching Contributions allocated to his Account in determining
his Average Contribution Percentage provided that the requirements contained in
Treas. Reg. Section 1.401(m)-1(b)(5) are satisfied. An eligible Employee's
Average Contribution Percentage for purposes of this Section 4.6 <PAGE>
30
shall be determined after a Participant's excess Optional Deferrals and Salary
Reduction Contributions are distributed to the Participant.
(c) The amount of Voluntary Contributions and Matching Contributions
to be distributed shall be determined by reducing the maximum amount of
Voluntary Contributions and Matching Contributions to an adjusted maximum
percentage, which shall be the percentage that would cause the requirements
described in Section 4.6(b) to be satisfied if each Highly Compensated
Employee's Average Contribution Percentage was reduced to such percentage. The
contribution percentage for each Highly Compensated Employee shall be the lesser
of the percentage otherwise applicable or the adjusted maximum percentage
determined under this subparagraph. A Highly Compensated Employee's contribution
percentage shall be reduced by distributing (i) first, unmatched Voluntary
Contributions, (ii) second, matched Voluntary Contributions and the related
Matching Contributions and (iii) third, other Matching Contributions.
In determining the Average Contribution Percentage of a Highly
Compensated Employee who has a Family Member who is an Employee, the Average
Contribution Percentage for the family group (which is treated as one Highly
Compensated Employee) shall be the Average Contribution Percentage determined by
combining Voluntary Contributions, Matching Contributions, 414(s) Compensation
and, to the extent elected by the Corporation, Optional Deferrals and Salary
Reduction Contributions, of all the eligible Family Members. The determination
of the Average Contribution Percentage and the treatment of excess contributions
of Highly Compensated Employees with Family Members who are Employees shall
satisfy such other requirements as may be prescribed in regulations issued by
the Secretary of the Treasury.
The Average Contribution Percentage for any Highly Compensated
Employee for any Year who is eligible to have matching employer contributions
made on his behalf or to make after-tax contributions under one or more plans
<PAGE>
31
described in Code Section 401(a) (other than an employee stock ownership plan
described in Code Section 4975(e)(7)) maintained by the Corporation or an
Affiliate in addition to this Plan shall be determined as if all such
contributions were made to this Plan. In the event that this Plan must be
combined with one or more other plans (other than an employee stock ownership
plan described in Code Section 4975(e)(7)) in order to satisfy the requirements
of Code Section 401(a)(4) or 410(b) (other than the average benefits test
described in Code Section 410(b)(2)(A)(ii)), all employee and matching
contributions are treated as made under a single plan for purposes of Section
401(m) of the Code.
(d) In the event that both of the tests described in Sections 4.2(b)
and 4.6(b) are satisfied only by using the "2.0/two point" test described in
Sections 4.2(b)(i) and 4.6(b)(i) respectively, the Average Contribution
Percentage for Highly Compensated Employees shall be reduced to the extent
necessary to satisfy the aggregate limit described in the following sentence.
The aggregate limit shall equal the greater of (i) or (ii):
(i) the sum of (A) 1.25 multiplied by the greater of the Average
Contribution Percentage or the Average Deferral Percentage for the Year for
Nonhighly Compensated Employees plus (B) the lesser of the Average
Contribution Percentage or the Average Deferral Percentage for the Year for
Nonhighly Compensated Employees plus two percentage points; provided,
however, that the amount determined under this clause may not exceed the
product of 2.0 multiplied by the lesser of the Average Contribution
Percentage or the Average Deferral Percentage for Nonhighly Compensated
Employees; or
(ii) the sum of (A) 1.25 multiplied by the lesser of the Average
Contribution Percentage or the Average Deferral Percentage for the Year for
Nonhighly Compensated Employees plus (B) the greater of the
<PAGE>
32
Average Contribution Percentage or the Average Deferral Percentage for the
Year for Nonhighly Compensated Employees plus two percentage points;
provided, however, that the amount determined under this clause (B) may not
exceed the product of 2.0 multiplied by the greater of the Average
Contribution Percentage or the Average Deferral Percentage for Nonhighly
Compensated Employees.
4.7 ROLLOVER CONTRIBUTIONS. Subject to procedures established by the
Committee, each Employee shall be entitled to transfer to the Trust Fund all or
part of his balance in excess of his own contributions from an employees' trust
described in Section 401(a) of the Code if such transfer is made (a) within 60
days of the day he receives such balance from such trust or from an individual
retirement account described in Section 408(a) of the Code or an individual
retirement annuity described in Section 408(b) of the Code to which he had
contributed part or all of such balance within 60 days following the day he
received such balance or (b) pursuant to a direct rollover of an eligible
rollover distribution (as defined in Code Section 402(c)(4)) other than a
distribution which the Employee is entitled to receive as a beneficiary. Except
for purposes of Section 7.1, Rollover Contributions shall be treated as Profit
Sharing Contributions. An Employee who has made a Rollover Contribution shall be
considered a Participant for all purposes hereunder except that he shall not be
eligible to share in Profit Sharing Contributions, to have Salary Reduction
Contributions made on his behalf or to make Voluntary Contributions until he
becomes a Participant in accordance with Section 2.1.
4.8 MAXIMUM ANNUAL ADDITION. Notwithstanding anything to the contrary
in the Plan, the maximum "annual addition" (as hereinafter defined) on behalf of
any Participant for any Year shall not exceed (and, if necessary, shall be
reduced to) the lesser of $30,000 (or, if greater, 25% of the dollar limitation
in effect under Section 415(b)(1)(A) of the Code for the Year) or 25% of his
<PAGE>
33
total compensation (within the meaning of Code Section 415(c)(3)) for such Year.
The 25% of compensation limitation shall not apply to any contributions
considered "annual additions" pursuant to Code Section 419A(d)(2) after the
Participant's separation from service or Code Section 415(l)(1). The "annual
addition" for a Participant in a Year shall be the sum of (a) the Employer
Contributions allocated to his Account on his behalf for such Year, (b) the
Participant's Voluntary Contributions for such Year and (c) any other amounts
considered an "annual addition" pursuant to Code Section 415(c)(2) under any
plan qualified under Code Section 401(a) maintained by an Employer or Affiliate
or under Code Sections 415(l)(1) and 419A(d)(2).
In any case where a Participant also participates in a defined benefit
plan (as defined in Section 414(j) of the Code) of the Corporation or an
Affiliate in addition to being a Participant in this Plan, the sum of his
defined benefit plan fraction and the defined contribution plan fraction (both
as defined hereinafter) for any Year may not exceed 1.0. The defined benefit
plan fraction for any Year is a fraction the numerator of which is the projected
annual benefit of the Participant under such plan (determined as of the close of
the Year), and the denominator of which is the lesser of:
(a) the product of 1.25, multiplied by the dollar limitation in effect
under Section 415(b)(1)(A) of the Code for such Year; or
(b) the product of 1.4, multiplied by the amount which may be taken
into account under Section 415(b)(1) (B) of the Code with respect to the
Participant under the plan for such Year.
<PAGE>
34
The defined contribution plan fraction for any Year is a fraction the numerator
of which is the sum of the annual additions to the Participant's Account as of
the close of the Year, and the denominator of which is the sum of the lesser of
the following amounts determined for such Year and for each prior year of
Service with the Corporation or an Affiliate:
(i) the product of 1.25, multiplied by the dollar limitation in effect
under Section 415(c)(1)(A) of the Code for such Year; or
(ii) the product of 1.4, multiplied by the amount which may be taken
into account under Section 415(c)(1)(B) of the Code with respect to the
Participant under the Plan for such Year.
Prior to the end of each Year, the Committee shall determine whether, and to
what extent, the limitation of this Section 4.8 will prohibit the making of
Voluntary Contributions by a Participant or, after all such Voluntary
Contributions by a Participant have been prevented from being made, of Employer
Contributions for such Year on behalf of such Participant. The Committee shall
advise any affected Participant accordingly. Employer Contributions for any Year
which cannot be allocated to Participants and credited to their Accounts within
the limitation of this Section 4.8 shall not be contributed by the Employer for
such Year.
If as a result of a reasonable error in determining the amount of a
Participant's Compensation, the annual addition for a Participant would exceed
the limits described in this Section 4.8, the amount in excess of the
permissible annual addition shall be distributed to the Participant. In
addition, Optional Deferrals, Salary Reduction Contributions and Voluntary
Contributions may be distributed or returned to a Participant to the extent
necessary so that the limitation on annual additions is satisfied.
<PAGE>
35
ARTICLE V
INVESTMENT OF THE TRUST FUND
5.1 FUNDS. The Trustee shall maintain such Funds, as are selected by
the Committee; provided that the Corporation must serve as manager and provide
investment management and administrative services to each Fund available under
the Plan.
5.2 INVESTMENT OF PROSPECTIVE CONTRIBUTIONS. Upon first becoming a
Participant, an individual shall select (a) one or more of Funds in which all
his Profit Sharing Contributions shall be invested, (b) one or more Funds in
which his Salary Reduction Contributions shall be invested, (c) one or more
Funds in which his Matching Contributions shall be invested and (d) one or more
Funds in which his Voluntary Contributions shall be invested. Each investment
direction shall be made in 5% increments and a minimum of l0% of any specified
type of contribution must be invested in any one Fund. It shall be the
responsibility of the Committee and not the Trustee, to ensure compliance with
such limits. Any investment direction given by a Participant shall be deemed to
be a continuing direction with respect to all subsequent contributions until
changed. Not more than once in any calendar quarter with respect to each
investment election, a Participant may change his investment direction with
respect to future contributions by Notice to the Committee. In the absence of an
investment direction by the Participant, his Salary Reduction Contributions,
Matching Contributions, Participant Contributions and Rollover Contributions
shall be invested in the Seligman Cash Management Fund (or any successor fund
with similar investments as selected by the Committee).
<PAGE>
36
5.3 INVESTMENT IN FUNDS. As soon as practicable after the end of each
Year, in respect of Profit Sharing Contributions, and as soon as practicable
after the end of each pay period, in respect of Salary Reduction Contributions,
Matching Contributions, and Voluntary Contributions in accordance with the
investment directions of Participants, each Employer shall:
(i) except as provided in subparagraph (ii) below, forward the
contributions made by or on behalf of Participants in its employ, to the
respective Funds on behalf of the Trustee and the Trustee will be advised
by the Agent of the total amount contributed to each such Fund and the
number of shares in each such Fund to be credited to the Accounts of
Participants; and
(ii) in the event that the Tri-Continental Fund is available under the
Plan, with respect to such Fund, forward the contributions made by or on
behalf of Participants in its employ, to the Trustee for investment in such
Fund, in accordance with the methods of purchase described in the current
prospectus of Tri-Continental Corporation, whereupon the Trustee shall
advise the Agent as to the number of shares of common stock of
Tri-Continental Corporation purchased and the value of such shares and
shall deliver such shares to the Agent, and the Agent shall determine the
number of such shares to be credited to the Accounts of Participants, shall
so credit such shares and shall advise the Trustee that it has so credited
such shares.
5.4 TRANSFERS AMONG FUNDS. A Participant may, by Notice to the
Committee given at least five business days in advance of any Valuation Date,
direct the Trustee to convert all or any part of his interest in any one or more
Funds into an interest equivalent in value in one or more other Funds; provided,
however, that any transfer involving the Tri-Continental Fund shall be made as
soon as practicable following receipt of such notice. Except as provided in
<PAGE>
37
Sections 5.6 and 7.4, such direction to the Trustee to convert may be given at
any time but not more than once during any calendar quarter.
5.5 REINVESTMENT OF INCOME AND GAINS. Income and gains from
investments in each Fund will be reinvested by the Trustee in the same Fund.
5.6 LIMITATION ON INVESTMENTS IN A FUND. Anything herein to the
contrary notwithstanding, the Committee shall not permit the investment or
reinvestment of moneys in any Fund if to do so would result in the Trustee's
holdings of securities in such Fund to exceed 5% of the total number of such
securities then outstanding. It shall be the responsibility of the Committee and
not the Trustee to ensure that such limit is not exceeded. Whenever it shall
appear to any Employer that the Trustee could not, by reason of the preceding
sentence, be able to invest the contributions to be made to any Fund in the next
succeeding pay period, or to make a transfer permitted by Section 5.4, each
Participant who shall have directed the investment of contributions in such Fund
or the transfer of all or any part of his Account to such Fund shall be notified
by the Committee and shall change his direction with respect to the investment
of future contributions in such Fund, or shall withdraw or change his direction
to transfer all or any part of his interest to such Fund. A change of direction
pursuant to this Section 5.6 shall not in itself disqualify a Participant from
again changing his investment direction in the same quarter.
<PAGE>
38
ARTICLE VI
VESTING
6.1 CERTAIN PARTICIPANTS HIRED BEFORE MAY 31, 1993. Each Participant
employed by the Corporation or an Affiliate before May 31, 1993, who elects to
have Salary Reduction Contributions made on his behalf and/or to make Voluntary
Contributions by May 31, 1993, or when first eligible, if later, shall at all
times have a fully vested and nonforfeitable interest in his Accounts.
6.2 OTHER PARTICIPANTS. (a) Except as provided in this Section 6.2,
the interest of any Participant not described in Section 6.1 in the portion of
his Accounts attributable to Matching Contributions shall be vested in
accordance with the following schedule:
MONTHS OF PARTICIPATION VESTED PERCENTAGE
At least 12 but less than 24 33-l/3%
At least 24 but less than 36 66-2/3%
At least 36 or more 100%
A Participant shall receive credit for one "month of participation" for each
calendar month for which he elects to have Salary Reduction Contributions
contributed on his behalf and/or to make Voluntary Contributions (or elects to
have similar contributions made under the Union Data Service Center Inc.
Employees' Thrift Plan) for any part of such month. However, the interest of any
Participant in the portion of his Accounts attributable to Matching
Contributions who is credited with at least five Years of Vesting Service or who
dies, incurs a Disability or attains age 65 while in the employ of the
Corporation or an Affiliate shall be fully vested and nonforfeitable. In any
event, the interest of any Participant in his Accounts attributable to Profit
Sharing Contributions, Salary Reduction Contributions, Rollover Contributions
and
<PAGE>
39
Voluntary Contributions shall at all times be fully vested and nonforfeitable.
(b) The unvested portion of a former Participant's Account shall be
forfeited as of the earlier of the date as of which the former Participant
received a distribution of the vested portion of his Accounts pursuant to
Article IX or he incurs five consecutive one-year Breaks in Service. If 100% of
the vested portion of his Accounts is zero, the individual shall be deemed to
have received a distribution of such amount. All such forfeited amounts, reduced
by any forfeited amounts restored to Participant's Accounts pursuant to
paragraph (c) below, shall be applied to reduce future contributions required of
participating Employers.
(c) Following his termination of Service, if a Participant receives a
distribution from his Account in an amount less than 100% of the balance in that
Account and he subsequently resumes employment with an Employer, he may repay to
the Trust Fund the full amount of his prior distribution from his Account
provided that (a) he has not incurred five one-year Breaks in Service and (b)
the repayment is made prior to five years after his resumption of employment. In
the event of such repayment, the amount of his prior distribution plus any
amounts forfeited shall be restored to his Account and upon his subsequent
termination of Service, his vested interest shall include amounts previously
forfeited. In the event such a Participant does not repay the amount of his
prior distribution, his vested interest shall be based only on contributions
made subsequent to his date of reemployment.
<PAGE>
40
(d) If a Participant who has withdrawn all or a portion of his
Accounts attributable to Matching Contributions pursuant to Section 7.2, his
vested interest in his Accounts attributable to Matching Contributions shall be
equal to:
P (AB + D)- D
where P equals the vesting percentage determined under the schedule in
subparagraph (a) at the relevant time, AB equals his account balance
attributable to Matching Contributions at the relevant time and D equals the
amount of the distribution.
ARTICLE VII
WITHDRAWALS DURING SERVICE
7.1 IN-SERVICE WITHDRAWALS (OTHER THAN FOR HARDSHIP). Upon Notice to
the Committee a Participant, while he is still an Employee, shall be entitled to
withdraw in cash as of such Valuation Date, in the following order:
(a) up to the amount of his Voluntary Contributions made prior to
January 1, 1987, under the Plan (not including earnings thereon) not
previously withdrawn;
(b) up to the amount attributable to his unmatched Voluntary
Contributions (including earnings thereon) made subsequent to December 31,
1986, under the Plan not previously withdrawn;
(c) an amount, as designated by the Participant, up to the value of
the earnings on the amount referred to in (a) above;
(d) up to the amount attributable to matched Voluntary Contributions
(including earnings thereon)
<PAGE>
41
made on or subsequent to May 1, 1993; provided, however, that in the event
of a withdrawal of such amount, the Participant shall not be eligible to
receive a Matching Contribution until the expiration of the three-month
period immediately following the receipt of the withdrawal (although he
will be eligible to share in Profit Sharing Contributions, have Salary
Reduction Contributions contributed on his behalf and contribute Voluntary
Contributions);
(e) in the case of a Participant who has attained age 59-1/2, amounts
attributable to that portion of the Profit Sharing Contributions made on
his behalf at least two years prior to the date of withdrawal (except that
such two-year limitation shall not apply if he has been a Participant in
the Plan--including participation in a Predecessor Plan--for a continuous
period of at least five years); and
(f) up to the amount attributable to his Rollover Contributions
(including earnings thereon) under the Plan not previously withdrawn.
The minimum amount of any withdrawal by a Participant under this Section 7.1
shall be equal to the lesser of (i) 10% of the Participant's interest in the
Funds, or (ii) $1,000.
<PAGE>
42
7.2 HARDSHIP WITHDRAWALS. If a Participant has withdrawn the maximum
amount permitted under Section 7.1, the Committee, under uniform rules
prescribed by it, shall permit a withdrawal of the remaining amount allocated to
his Accounts other than (i) Profit Sharing Contributions not subject to a Cash
Distribution election, (ii) any earnings attributable to Profit Sharing
Contributions that were credited to his Accounts after December 31, 1988, or
(iii) earnings attributable to Salary Reduction Contributions. A withdrawal for
hardship shall be made from the Participant's Accounts in the following order:
(a) up to the amount attributable to unmatched Salary Reduction
Contributions and Optional Deferrals (including earnings thereon credited
to his Accounts on or prior to December 31, 1988);
(b) up to the amount of matched Salary Reduction Contributions; and
(c) up to the amount attributable to vested Matching Contributions
(including earnings thereon).
For these purposes, a withdrawal for financial hardship may be made
only if it is on account of an immediate and heavy financial need of the
Participant and is necessary to satisfy such financial need. An immediate and
heavy financial need shall be considered to exist only if it arises from one or
more of the following circumstances:
(1) medical expenses, as described in Section 213(d) of the Code,
incurred or to be incurred by his spouse, child or other dependent (as
defined in Code Section 152);
(2) costs directly related to the purchase of a principal residence,
excluding mortgage payments, for the Participant or former Participant;
<PAGE>
43
(3) tuition payments and educational fees for the next 12 months of
post-secondary education for the Participant, his spouse, children or other
dependents;
(4) the need to prevent eviction from, or foreclosure on the mortgage
of, the Participants principal residence; and
(5) any other financial need as may be deemed by the Internal Revenue
Service to constitute an immediate and heavy financial need.
The following conditions must be satisfied for a hardship withdrawal:
(A) the withdrawal may not exceed the amount needed to satisfy the Participant's
immediate financial need created by the hardship (including any taxes or
penalties reasonably anticipated to result from the hardship withdrawal); (B)
the Participant must have obtained all distributions (other than hardship
distributions under other plans) and all nontaxable loans under all plans
maintained by the Corporation or an Affiliate; (C) the Participant will be
suspended from having Optional Deferrals and Salary Reduction Contributions made
on his behalf and from making Voluntary Contributions under the Plan and from
making before-tax contributions or after-tax contributions under any other plan
(other than a welfare plan) maintained by the Corporation or an Affiliate until
the expiration of the 12-month period immediately following the receipt of the
withdrawal; and (D) the maximum dollar amount applicable to Optional Deferrals
and Salary Reduction Contributions for the Year immediately following the Year
in which the hardship withdrawal occurs shall be reduced by the aggregate of the
Participant's Optional Deferrals and Salary Reduction Contributions for the Year
in which the hardship withdrawal occurs.
7.3 COMPLETE WITHDRAWAL. In the event of a complete withdrawal, there
shall be paid in cash to the Participant an amount equal to his payroll
deductions made
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44
subsequent to the applicable Valuation Date for such withdrawal.
7.4 PAYMENTS. All withdrawals pursuant to Sections 7.1 and 7.2 shall
be made by Notice to the Committee. The Participant shall designate the Fund or
Funds from which the withdrawal is to be made. The withdrawal shall be made
promptly but in no event later than 30 days following Notice to the Committee.
Payments of such withdrawals shall be made as provided in Article X.
7.5 ROLLOVER CONTRIBUTIONS. Rollover Contributions shall be treated as
Profit Sharing Contributions, except that solely for the purposes of this
Article VII, amounts transferred under the terms of the Plan in existence
immediately prior to January 1, 1985, shall be treated as Voluntary
Contributions to the extent that they represent the Participant's own
contributions from an employees' trust described in Section 401(a) of the Code.
<PAGE>
45
ARTICLE VIII
LOANS
8.1 AMOUNT OF LOANS. On the request of a Participant, the Committee
may, in its sole discretion and on such terms and conditions as it shall
prescribe under uniform rules, direct the Trustee to make a loan to the
Participant from the Trust Fund. Any such loan shall be secured by 50% of the
value of the Participant's Accounts in the Plan and shall be for a minimum
amount of $500. The maximum aggregate amount of any loan outstanding with
respect to a Participant at any time shall not exceed the lesser of (i) $50,000,
reduced with respect to loans made, modified or extended after December 31,
1986, by the excess of the highest outstanding loan balance during the one-year
period preceding the date of such loan, over the outstanding loan balance on the
date of such loan or (ii) for loans granted or renewed after October 18, 1989,
50% of the value of such Participant's Accounts.
8.2 PAYMENT OF LOAN. Upon the granting of a loan to a Participant,
that portion of the Participant's interest in his Account shall be redeemed in
the manner described in Section 10.1 and transferred to the Participant. The
Participant shall designate the Fund or Funds from which the loan is to be made.
Upon repayment of principal amounts of the loan and interest, such amounts shall
be reinvested in the same Fund or Funds as current contributions of the same
character as are used to secure the loan are invested or as the Participant
directs, if the Participant is not making current contributions.
8.3 TERMS OF LOAN. Each loan shall be for a period of not more than
five years; PROVIDED, HOWEVER, that such five-year maximum period shall not
apply to a loan used to acquire a dwelling unit used as a principal residence of
the Participant. In no event will the term of any loan exceed 10 years. Each
loan shall bear interest on the unpaid balance thereof at a rate for each
successive <PAGE>
46
calendar year or part thereof, beginning with the year in which the loan is
made, equal to a rate determined by the Committee; provided, however, that
effective January 1, 1990, such rate shall be equal to one percentage point
above the prime interest rate charged by J. P. Morgan & Co. Incorporated on the
date the application for the loan is received by the Committee (or its
delegatee).
8.4 REPAYMENT OF LOAN. Each loan shall be repaid by whichever of the
following methods shall be requested by the Participant and agreed to by the
Committee:
(a) equal installment payments of principal and interest (although the
amount of principal and interest in each installment may vary), to be
deducted from the Participant's Compensation in each of his pay periods; or
(b) with respect to loans other than loans made, modified or extended
after December 31, 1986, payment of principal at the conclusion of the term
of the loan and annual payments of interest.
Any loan may be prepaid in full at any time by payment by the Participant of the
unpaid principal and accrued interest of such loan.
8.5 DEFAULT. If a Participant defaults on any installment payment of
principal or interest on a loan, the entire unpaid principal amount of such
loan, together with any unpaid accrued interest thereon, shall immediately
become due and payable and shall be satisfied from his interest in his Accounts
determined as of the Valuation Date next preceding the date of default;
PROVIDED, HOWEVER, that no amount in the individual's Accounts will be debited
prior to his termination of employment to the extent such amounts cannot be
withdrawn pursuant to Article VII.
8.6 TERMINATION OF SERVICE OR PLAN. In the absence of a default and in
the event that (a) a Participant
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47
who has a loan outstanding shall terminate Service for any reason or (b) the
Plan is terminated, the entire unpaid principal amount of such loan, together
with any unpaid interest thereon, shall become immediately due and payable and
shall be paid by payment of such amounts in cash by or on behalf of the
Participant. If such cash payment is not made, the loan shall be satisfied as if
a default had occurred.
8.7 MAXIMUM NUMBER OF LOANS. Anything in the Plan to the contrary
notwithstanding, a Participant shall not have more than one loan made pursuant
to this Article VIII outstanding at any time.
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48
ARTICLE IX
DISTRIBUTIONS UPON TERMINATION OF SERVICE
9.1 TERMINATION OF SERVICE. A Participant whose Service terminates for
any reason shall receive his interest in the Funds. Such interest shall be
distributed as soon as practicable following his termination of employment;
PROVIDED, HOWEVER, that if the value of the Participant's Accounts exceeds
$3,500 such distribution shall not be made prior to the Valuation Date
coinciding with or next following his 65th birthday without his consent. Subject
to Section 9.2, in the event the Participant does not consent to an immediate
distribution of his Accounts, he may elect to receive his distribution as of any
Valuation Date up to the Valuation Date coinciding with or next following his
65th birthday. Such distribution shall be made in a lump sum unless prior to his
distribution date he has elected by Notice to the Committee to receive his
interest in the Funds in annual, quarterly, or monthly installments; PROVIDED,
HOWEVER, that the period over which such installments shall be paid may not
exceed the life expectancy of the Participant or the joint life expectancy of
the Participant and his Beneficiary, determined as of the date of the
Participant's benefit commencement date. The minimum amount of such installments
required to be distributed in any Year shall be determined in accordance with
Code Section 401(a)(9) and the regulations issued thereunder. To the extent any
provision of the Plan is inconsistent with such Code section or such
regulations, the Plan provisions shall be disregarded.
9.2 DEFERRED DISTRIBUTION. Notwithstanding anything to the contrary
contained in Section 9.1, if the value of a Participant's Accounts exceeds
$3,500, and his Service terminates (a) because of Disability or (b) for any
reason other than Disability after attainment of his early retirement date as
defined in the J. & W. Seligman & Co. Incorporated Retirement Income Plan, he
may elect by Notice to the Committee to defer his distribution until any
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49
specified date no later than April 1 of the Year following the Year in which he
attains age 70-1/2. The period of deferral may later be reduced upon his
request.
9.3 COMMENCEMENT OF BENEFITS. Notwithstanding anything herein
contained to the contrary, the distribution of a Participant's interest in the
Funds shall commence no later than the April 1 of the Year following the Year in
which such Participant attains age 70-1/2, even though he continues to be a
Participant after such date. Unless a Participant (or former Participant) elects
otherwise by Notice to the Committee, distributions to a former Participant
shall be made or installment payments shall commence not later than the 60th day
after the end of the Plan Year in which occurs the later of (i) his attainment
of age 65 or (ii) the date on which his employment with an Employer terminates.
ARTICLE X
PAYMENTS OF DISTRIBUTIONS AND WITHDRAWALS
10.1 DISTRIBUTIONS. Subject to Section 10.6, all distributions and
withdrawals shall be equal to the value of the number of shares and fractions
thereof which are withdrawn, valued as of the close of business on the Valuation
Date as of which payment is made. Payment of distributions shall be made as soon
as is reasonably practicable after the date of the event giving rise to the
distribution.
10.2 PAYMENTS. Distributions and withdrawals shall be paid in cash.
10.3 DESIGNATION OF BENEFICIARY. A Participant may by Notice to the
Committee designate one or more Beneficiaries to receive his interest on his
death. Such a designation may be changed or revoked from time to time by Notice
to the Committee and the last designation received by
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50
the Committee shall be controlling. However, a change or revocation shall not be
effective prior to its receipt by the Committee prior to the Participant's
death. The Beneficiary of a married Participant shall be his surviving spouse,
unless such spouse consents to the designation of someone else as Beneficiary in
a document filed with the Committee that acknowledges the effect of such
election and is witnessed by a notary public or a Plan representative. Such
consent shall not be required if it is established to the satisfaction of the
Committee that the consent cannot be obtained because there is no surviving
spouse, the spouse cannot be located or because of such other circumstances as
may be prescribed in regulations issued by the Secretary of the Treasury. In the
event that a Participant dies without a surviving spouse and without having in
effect at the time of his death a designation of a Beneficiary made as
aforesaid, the Beneficiary shall be, in the following order of priority, his (a)
child or children, PER STIRPES, (b) parents in equal shares or (c) estate.
10.4 DEATH BENEFITS. Upon the death of a Participant, his Account
shall be paid to his Beneficiary in a lump sum. If there is doubt as to the
right of any Beneficiary to receive any amount, the Trustee may either retain
such amount until the rights thereto are determined or pay such amount into any
court of appropriate jurisdiction with no further liability to anyone.
10.5 PAYMENTS TO MINORS OR OTHER PERSONS UNDER A DISABILITY. If any
person to whom benefits are otherwise payable is under the age of 18 or is, in
the opinion of the Committee, not able to care for his affairs because of
physical or mental disability, the Committee may, in its sole discretion, direct
the benefits otherwise payable to such person to be made to a third person who,
in the opinion of the Committee, may be expected to apply the payments for the
benefit of the minor or disabled person, without any responsibility on the part
of the Committee or the Trustee in respect of the application of such payments.
Payments so made shall operate as a complete discharge of any and all
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51
obligations of the Committee, the Trustee and the Trust Fund.
10.6 DIVIDENDS OR CAPITAL GAIN DISTRIBUTIONS. Anything in the Plan to
the contrary notwithstanding, in the event of the intended distribution or
withdrawal of the total interest of a Participant in any Fund during the period
between (a) the record date for payment of any dividend or capital gains
distribution declared in respect of shares of such Fund and (b) the date
additional shares shall have been credited to such Participant on account of
such dividend or capital gains distribution, then one share of such Participant
shall remain in such Fund, unless such retention in such Fund would prevent the
Participant from receiving a "lump-sum distribution" within the meaning of
Section 402 of the Code.
10.7 PREDECESSOR PLAN. Amounts transferred to the Trust Fund by a
participant or former participant in a Predecessor Plan and not otherwise
payable under this Plan shall be distributed in accordance with the applicable
provisions of such Predecessor Plan.
10.8 DIRECT ROLLOVERS. Effective for distributions equal to or more
than $200 made on or after January 1, 1993, notwithstanding anything contained
in the Plan to the contrary, a distributee, as defined below, may elect, in
accordance with procedures established by the Committee, to have all or any
portion of an eligible rollover distribution (as defined in Code Section
402(c)(4)) paid directly into an individual retirement account, individual
retirement annuity or a qualified trust in a direct rollover, provided that in
the case of a qualified trust, the terms of the related plan permit the
acceptance of such distributions and the eligible distributee is not the
Participant's surviving spouse.
A distributee includes a Participant, former Participant, the
surviving spouse of a Participant or former Participant or an alternate payee
under a qualified domestic
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52
relations order who is the spouse or former spouse of the Participant or former
Participant.
ARTICLE XI
THE TRUST FUND
11.1 TRUST FUND. The Trust Fund shall be held, invested, reinvested,
used and disbursed by the Trustee in accordance with the directions of the
Participants which shall be in accordance with the provisions of the Plan and
the Trust Agreement. Subject to the provisions of the Act, no person shall have
any interest in, or right to, the Trust Fund or any part thereof, except as
expressly provided in the Plan or the Trust Agreement.
11.2 TRUSTEE. The Board may remove the Trustee at any time upon the
notice required by the provisions of the Trust Agreement, and if the Trustee
resigns or is so removed, the Board shall designate a successor trustee.
11.3 PROHIBITION AGAINST DIVERSION. Except as provided in this Section
11.3, no part of the assets of the Trust Fund shall, by reason of any
modification, amendment, termination or otherwise, be used for or diverted to
purposes other than for the exclusive benefit of Participants and their
Beneficiaries. Any contribution made by an Employer under a mistake of fact may
be returned to the Employer within one year after the payment of the
contribution. All contributions are conditioned on their deductibility and to
the extent any deduction is disallowed, the contribution may be returned to the
Employer within one year after the disallowance of the deduction. Both such
returned contributions shall be reduced by Trust Fund losses attributable
thereto but shall not be increased by Trust Fund gains attributable thereto.
11.4 RECORDKEEPING. Interests in the Funds may, pursuant to directions
of the Trustee, be maintained by the
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53
Agent in book credit form. Interest in the Funds may be registered in the name
of the Trustee or its nominee or held in such other form as will pass by
delivery.
11.5 EXPENSES. Brokerage commissions and transfer taxes incurred in
connection with the purchase or sale of securities shall be added to the cost
thereof or deducted from the proceedst thereof, as the case may be. All other
costs and expenses, including administrative expenses, of the Plan shall be paid
by the Employers in proportion to the value of the assets held by the Trustee
attributable to Participants employed by each Employer if not paid out of the
Trust Fund.
11.6 VOTING. Each Participant shall be entitled to instruct the
Trustee as to the manner in which the securities in the Funds represented by
shares credited to his Account in the Funds are to be voted. The Trustee, either
itself or by such proxy as it may select, shall vote the securities in
accordance with such instructions, if any, or in the absence of such
instructions, in accordance with the instructions of the Committee. If no such
instructions are received from the Committee, the shares shall not be voted.
ARTICLE XII
VALUATION OF INTERESTS AND STATEMENTS OF ACCOUNTS
12.1 VALUATION. The value of a Participant's interest in each Fund as
of any Valuation Date shall be determined by multiplying the number of shares or
units (carried to three decimal places) to his credit in such Fund on such Date
by the value of a share or unit in such Fund at the close of business on such
Date.
12.2 CHANGES IN VALUATION. In the event a Participant's interest in a
Fund is increased by a contribution or reduced by a distribution or withdrawal
on a
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54
Valuation Date, the number of shares or units to his credit in such Fund shall
be increased or reduced, as the case may be, on the basis of the value of a
share or unit in such Fund on the close of business on such Date. All
calculations for a Valuation Date shall be made as soon as practicable after
such Date.
12.3 STATEMENT OF ACCOUNT. As soon as practicable after the end of
each Year, the Committee shall deliver to each Participant a statement setting
forth his interest in the Funds as of the last day of such Year. At the time of
any distribution or withdrawal of a Participant's interest in the Funds, the
Committee shall deliver to the person receiving the payment a statement showing
how the amount of the payment was computed. To the extent permitted by law, any
statement given by the Committee pursuant to this Section 12.3 shall be deemed
correct unless Notice to the Committee is given to the contrary within 90 days
after delivery of the statement.
ARTICLE XIII
ADMINISTRATION
13.1 APPOINTMENT OF COMMITTEE. The Plan shall be administered by a
Committee consisting of three or more Employees who shall be appointed or
removed from time to time with the approval of the boards of directors of each
of the Employers. A Participant may be a member of the Committee. No member of
the Committee shall receive compensation for his services as such. The Committee
shall report to the Employers annually and at such other times as they may
request.
13.2 POWERS OF THE COMMITTEE. The Committee shall have all powers
necessary to administer the Plan except to the extent that any such powers are
vested in any other person by the Plan or the Committee. The Committee may from
time to time establish rules for the administration
<PAGE>
55
of the Plan, and it shall have the exclusive right to interpret the Plan and to
decide any matters arising in connection with the administration and operation
of the Plan. All its rules, interpretations and decisions shall be applied in a
uniform manner to all persons similarly situated, and shall be conclusive and
binding on the Employers and on Participants and their Beneficiaries to the
extent permitted by law.
13.3 PROCEDURES OF THE COMMITTEE. A majority of the members of the
Committee at the time in office shall constitute a quorum for the transaction of
business. All resolutions or other action taken by the Committee shall be by
vote of a majority of its members present at any meeting or, without a meeting,
by an instrument in writing signed by all its members.
13.4 DELEGATION OF DUTIES. The members of the Committee shall elect
one of their number as chairman, and shall elect a secretary who may, but need
not, be one of their number. The Committee may allocate any of its powers or
duties among its members or designate others to carry out any of its powers or
duties. It may authorize one or more of its members to execute or deliver any
instrument or to make any payment on its behalf. It may employ such counsel and
agents and require such clerical, medical, accounting and actuarial services as
it may require to carry out the provisions of the Plan, and to the extent
permitted by law it shall be entitled to rely upon all tables, valuations,
certificates, opinions or other reports furnished by such persons.
13.5 PAYMENT OF EXPENSES. All expenses that arise in connection with
the administration of the Plan and the Trust Agreement shall be paid by the
Employers if not paid out of the Trust Fund in accordance with Section 11.5.
13.6 DUTIES AND RESPONSIBILITIES OF THE COMMITTEE. (a) Every person
who has any responsibilities with respect to the Plan shall discharge such
<PAGE>
56
responsibilities solely in the interest of the Participants and their
Beneficiaries, for the exclusive purpose of providing benefits to such persons
and defraying reasonable expenses of administering the Plan, and with the care,
skill, prudence and diligence under the circumstances then prevailing that a
prudent man acting in a like capacity and familiar with such matters would use
in the conduct of an enterprise of like character and with like aims.
(b) The members of the Board, the members of the Committee and any
person the Committee may designate to carry out any of its duties under the Plan
may employ persons to render advice with regard to any responsibility they may
have under the Plan.
(c) No person shall be liable for any of his own acts or omissions
with respect to the Plan, or for the acts or omissions of any other person with
respect to the Plan, except to the extent required by the Act.
(d) Any person or group of persons may serve in more than one
fiduciary capacity under the Plan.
13.7 INDEMNIFICATION. The Employers shall indemnify each member of the
Committee against all liabilities and expenses, including attorneys' fees,
reasonably incurred by him in connection with any actual or threatened legal
action to which he is or might be a party by reason of his membership on the
Committee, except with respect to any matters as to which he shall be adjudged
to be liable for gross negligence or willful misconduct in the performance of
his duty as such a member.
<PAGE>
57
ARTICLE XIV
CLAIMS PROCEDURE
<PAGE>
58
All claims for benefits under the Plan by a Participant or Beneficiary
shall be made in writing to a person designated by the Committee for such
purpose. If the designated person receiving a claim for benefits believes that
the claim should be denied, he shall notify the claimant in writing of the
denial of the claim within 90 days (180 days, if the claimant is notified within
the initial 90 day period that an extension is necessary) after his receipt
thereof. Such notice shall (a) set forth the specific reason or reasons for the
denial, making reference to the pertinent provisions of the Plan or the Plan
documents on which the denial is based, (b) describe any additional material or
information that should be received before the claim request may be acted upon
favorably, and explain why such material or information, if any, is needed and
(c) inform the person making the claim of his right pursuant to this Article XIV
to request review of the decision by the Committee. Any such person who believes
that he has submitted all available and relevant information may appeal the
denial of a claim to the Committee by submitting a written request for review to
the Committee within 60 days after the date on which such denial is received.
Such period may be extended by the Committee for good cause shown. The person
making the request for review may examine pertinent Plan documents. The request
for review may discuss any issues relevant to the claim. The Committee shall
decide whether or not to grant the claim within 60 days after receipt of the
request for review, but this period may be extended by the Committee for up to
an additional 60 days in special circumstances. If such an extension of time for
review is required because of special circumstances, written notice of the
extension shall be furnished to the claimant prior to the commencement of the
extension. The Committee's decision shall be in writing, shall include specific
reasons for the decision and shall refer to pertinent provisions of the Plan or
of Plan documents on which the decision is based.
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59
ARTICLE XV
AMENDMENT OR TERMINATION OF THE PLAN OR
DISCONTINUANCE OF EMPLOYER CONTRIBUTIONS
15.1 AMENDMENT. The Corporation (for itself and the other Employers)
may at any time amend the Plan by action of the Board, but no such amendment
shall have the effect of revesting in any Employer any part of the Trust Fund or
of diverting the Trust Fund to purposes other than for the exclusive benefit of
Participants and their Beneficiaries or of reducing the interest in the Trust
Fund of Participants and their Beneficiaries at the date of such amendment.
15.2 TERMINATION. The Employers expect to continue the Plan
indefinitely, but the continuance of the Plan and the payment of Employer
Contributions for any Year are not contractual obligations. The Corporation
reserves the right, by action of the Board, to terminate the Plan or to
discontinue contributions thereunder. On the complete discontinuance of Employer
Contributions or on the total or partial termination of the Plan, the interest
of each affected Participant shall become immediately fully vested and
nonforfeitable and shall become payable as of the Valuation Date coinciding with
or next following the date of such discontinuance or termination.
15.3 MERGER, CONSOLIDATION OR TRANSFER OF ASSETS OR LIABILITIES. In
the event of any merger or consolidation of the Plan with, or transfer of assets
or liabilities of the Plan to, any other plan, each Participant shall (if such
other plan then terminates) be entitled to receive a benefit immediately after
such merger, consolidation or transfer which is equal to or greater than the
benefit he would have been entitled to receive immediately before such merger,
consolidation or transfer (if the Plan had then terminated).
15.4 WITHDRAWAL OF EMPLOYER. Anything in the Plan to the contrary
notwithstanding, if at any time a
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60
corporation which is an Employer hereunder shall cease to be an Employer, the
Trustee shall determine that portion of the Trust Fund which is applicable to
any employees of such corporation who were Participants and shall pay such
portion to, or for the benefit of, such employees or apply such portion by
payment thereof to the trustee of any profit sharing or similar plan of such
corporation (or any successor thereto) or otherwise, all as such corporation
shall direct.
ARTICLE XVI
GENERAL PROVISIONS
16.1 PLAN IS NOT A CONTRACT OF EMPLOYMENT. The Plan shall not be
deemed to constitute a contract between any Employer and any Employee or to be a
consideration for, or an inducement for, the employment of any Employee by an
Employer. Nothing contained in the Plan shall be deemed to give any Employee the
right to be retained in the employ of an Employer or to interfere with the right
of an Employer to discharge or to terminate the employment of any Employee at
any time without regard to the effect that such discharge or termination may
have on any rights under the Plan.
16.2 PLAN IS FOR THE EXCLUSIVE BENEFIT OF BENEFICIARIES. Anything in
the Plan to the contrary notwithstanding, no part of the property of the Trust
Fund shall, by reason of any modification, amendment or termination, or
otherwise, be used for or diverted to purposes other than for the exclusive
benefit of Participants and their Beneficiaries.
16.3 NONALIENATION OF BENEFITS. Except as may be required to comply
with a qualified domestic relations order under Section 414(p) of the Code, any
benefit payable under the Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, lien
or charge, and any attempt to cause any such benefit to
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61
be so subjected shall not be recognized except to such extent as may be required
by law.
16.4 APPLICABLE LAW. The Plan shall be construed and its provisions
enforced and administered in accordance with the laws of the State of New York
except as any of such laws may be superseded by the Act. Anything in the Plan or
any amendment thereof to the contrary notwithstanding, no provision of the Plan
shall be so construed as to violate the requirements of the Act or the
requirements of the Code necessary for qualification of the Plan under Section
401(a) thereof.
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62
EXHIBIT A
TOP-HEAVY PROVISIONS
Effective January 1, 1984, the following special provisions shall
apply to determine if the Plan is a Top Heavy Plan in accordance with Section
416 of the Code and any special rules that will apply based on such status. In
the event that the provisions contained in this Exhibit A are inconsistent with
the terms contained in the remainder of the Plan, the provisions contained in
this Exhibit A shall take precedence.
ARTICLE I
DEFINITIONS
Aggregation Group: All plans maintained by the Corporation or an
Affiliate that are qualified under the Code,
provided that each such plan satisfies at
least one of the following requirements:
(a) one or more Key Employees are
participants;
(b) the plan enables any plan in which a
Key Employee is a participant to comply with
the coverage and nondiscrimination
requirements of Sections 401(a)(4) and 410 of
the Code; or
(c) such plan has been designated as part
of the Aggregation Group, provided
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63
that the resulting Aggregation Group meets the
coverage and nondiscrimination requirements of
Sections 401(a)(4) and 410 of the Code.
Determination Date: With respect to any Year, the last day of the
preceding Year.
Key Employee: With respect to any Year, an employee or
former employee of the Corporation or an
Affiliate (or beneficiary of such individual)
who is a key employee determined in accordance
with Section 416 of the Code and any
regulations issued thereunder. The
determination as to whether an individual is a
Key Employee shall be based, where applicable,
on a Participant's annual total pay as
described in Code Section 414(q)(7).
Non-Key Employee: With respect to any Year, a Participant who is
not a Key Employee.
Top-Heavy Plan: With respect to any Year, the Plan, if it is
included in the Aggregation Group, and as of
the Determination Date for such Year, the sum
of:
(a) the aggregate Accounts for all Key
Employees under the Plan; and
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64
(b) the aggregate account values and the
aggregate present values of accrued benefits
(excluding amounts attributable to rollover
contributions) for all Key Employees under all
other plans in the Aggregation Group, exceeds
60% of all such aggregate values for all
individuals under all plans in the Aggregation
Group. In determining the value of any
individual's account or the present value of
his accrued benefits:
(1) the value of such account or the
present value of such accrued benefits shall
be increased by the sum of the distributions
made with respect to such individual from such
plan during the five-year period ending on the
Determination Date; and
(2) the present value of his accrued
benefits under a defined benefit plan shall be
determined by using a five percent interest
rate assumption and the mortality table used
to determine a benefit that is the actuarial
equivalent of another benefit under such plan.
Effective January 1, 1985, the value of an
individual's account or the present value of
his accrued
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65
benefits shall not be considered in
determining if the Plan is a Top-Heavy Plan if
the individual has not performed any services
for an Employer at any time within the
five-year period ending on the Determination
Date.
Effective January 1, 1987, the accrued benefit
of a Non-Key Employee shall be determined
under the method that is used for accrual
purposes under all plans in the Aggregation
Group, or if there is no such method, as if
such benefit accrued not more rapidly than the
slowest accrual rate determined under Section
411(b)(1)(C) of the Code.
Top-Heavy Year: A year in which the Plan is a Top-Heavy Plan.
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66
ARTICLE II
MINIMUM ALLOCATION
Each Participant who on the last day of any Top-Heavy Year (a) is a
Non-Key Employee and (b) does not participate in a defined benefit plan
maintained by the Corporation or an Affiliate that provides that the minimum
benefit requirements applicable to top-heavy plans will be satisfied in such
other plan shall receive a minimum allocation of aggregate Employer
Contributions (excluding Optional Deferrals and Salary Reduction Contributions)
for such Year equal to a percentage of his total pay (as described in Treasury
Regulation Section 1.415-2(d)) up to $150,000 (as adjusted by the Secretary of
the Treasury to reflect increases in the cost of living) received in such Year.
Such percentage shall be equal to the lesser of three percent or the highest
percentage at which Employer Contributions (including Optional Deferrals and
Salary Reduction Contributions) are allocated to the Accounts of any Key
Employee for such Year (when expressed as a percentage of such Key Employee's
total pay up to $150,000, as adjusted). To the extent necessary to provide this
minimum allocation, the allocations to the Accounts of Key Employees shall be
reduced proportionately.
ARTICLE III
DUAL PLAN LIMIT
For any Top-Heavy Year, the denominator of the "defined contribution
plan fraction" and the "defined benefit plan fraction" (as determined under
Section 415(e) of the Code and the regulations promulgated thereunder) shall be
calculated by using a factor of 1.0 rather than 1.25.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
OF EACH OF:
Seligman Capital Fund, Inc. Seligman Income Fund,Inc.
Seligman Cash Management Fund, Inc. Seligman Municipal Fund
Seligman Common Stock Fund, Inc. Series, Inc.
Seligman Communications & Seligman Muncipal Series Trust
Information Fund, Inc. Seligman New Jersey Municipal
Seligman Frontier Fund, Inc. Fund, Inc.
Seligman Growth Fund, Inc. Seligman Pennsylvania Municipal
Seligman Henderson Global Fund Series, Inc. Fund Series
Seligman High Income Fund Series Seligman Portfolios, Inc.
Seligman Quality Municipal
Fund, Inc.
Seligman Select Municipal
Fund, Inc.
Seligman Value Fund Series, Inc.
Tri-Continental Corporation
1. Election to Defer Payments. Any member of the Board of Directors/Trustees
of the Fund/Series may elect to have payment of the director's/trustees'
annual retainer or meeting fees or both for Board service deferred as
provided in this Plan. The election shall be made in writing prior to, and
to take effect from, the beginning of a calendar year, or for any
director/trustee in the year in which this Plan is adopted or for a person
elected a director/trustee in other than the last calendar quarter of a
year, prior to, and to take effect from, the beginning of the calendar
quarter next ensuing after that event. Elections shall continue in effect
until terminated in writing, any such termination to take effect on the
first day of the calendar year beginning after receipt of the notice of
termination. An election shall be irrevocable as to payments deferred in
conformity with that election.
2. Deferred Payment Account. Each deferred retainer or fee shall be credited
at the time when it otherwise would have been payable to an account to be
established in the name of the director/trustee on the books of the
Fund/Series. All amounts in such account, including interest credited
thereto, shall bear interest at a rate equivalent to the rate of return
earned on 90-day Treasury Bills in each calendar quarter. Such interest
shall be credited to the account quarterly at the end of each calendar
quarter. Amounts in the account shall not be evidenced by any note or other
security, funded or secured in any way.
3. Payment of Deferred Amounts. All amounts credited to an account pursuant to
any election by the director/trustee made as provided in (1) above shall be
paid to the director/trustee.
(a) in, or beginning in, the calendar year following the calendar year in
which the director/trustee ceases to be a director/trustee of the
Fund/Series, or
<PAGE>
(b) in, or beginning in, the calendar year following the earlier of the
calendar year in which the director/trustee ceases to be a
director/trustee of the Fund/Series or attains age 70, and shall be
paid
(c) in a lump sum payable on the first day of the calendar year in which
payment is to be made, or
(d) in 10 or fewer installments, payable on the first day of each year
commencing with the calendar year in which payment is to begin,
all as the director/trustee shall specify in making the election. If the
payment is to be made in installments, the amount of each installment shall
be equal to a fraction of the total of the amounts in the account at the
date of the payment, the numerator of which shall be one and the
denominator of which shall be the then remaining number of unpaid
installments (including the installment then to be paid). If the
director/trustee dies at any time before all amounts in the account have
been paid, such amounts shall be paid at that time in a lump sum to the
estate of the director/trustee.
4. Assignment. No deferred amount or unpaid portion thereof may be assigned or
transferred by the director/trustee except by will or the laws of descent
and distribution.
5. Withholding Taxes. The Fund/Series shall deduct from all payments any
federal, state or local taxes and other charges required by law to be
withheld with respect to such payments.
6. Amendments and Acceleration. The Board of Directors/Trustees of the
Fund/Series may at any time at its sole discretion accelerate the payment
of any unpaid amount for any or all directors/trustees or terminate this
Plan, provided that no such amendment or termination shall adversely affect
the right of directors/trustees to receive deferred amounts credited to
their account.
Revised: March 19, 1992
March 20, 1997
CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
THIS AGREEMENT made the _____ day of _______________, 1997, by and between
INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of
the state of Missouri, having its trust office located at l27 West 10th Street,
Kansas City, Missouri 64105 ("Custodian"), and SELIGMAN VALUE FUND SERIES, INC.,
a Maryland corporation, having its principal office and place of business at 100
Park Avenue, New York, New York 10017 ("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint Investors Fiduciary Trust Company as
custodian of the securities and monies of Fund's investment portfolio and as its
agent to perform certain investment accounting and recordkeeping functions; and
WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment;
NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:
1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and appoints Custodian
as:
A. Custodian of the securities and monies at any time owned by the Fund;
and
B. Agent to perform certain accounting and recordkeeping functions
relating to portfolio transactions required of a duly registered
investment company under Rule 31a of the Investment Company Act of
1940 (the "1940 Act") and to calculate the net asset value of the
Fund.
2. REPRESENTATIONS AND WARRANTIES.
A. Fund hereby represents, warrants and acknowledges to Custodian:
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1. That it is a corporation or trust (as specified above) duly
organized and existing and in good standing under the laws of its
state of organization, and that it is registered under the 1940
Act; and
2. That it has the requisite power and authority under applicable
law, its articles of incorporation and its bylaws to enter into
this Agreement; that it has taken all requisite action necessary
to appoint Custodian as custodian and investment accounting and
recordkeeping agent for the Fund; that this Agreement has been
duly executed and delivered by Fund; and that this Agreement
constitutes a legal, valid and binding obligation of Fund,
enforceable in accordance with its terms.
B. Custodian hereby represents, warrants and acknowledges to Fund:
1. That it is a trust company duly organized and existing and in
good standing under the laws of the State of Missouri; and
2. That it has the requisite power and authority under applicable
law, its charter and its bylaws to enter into and perform this
Agreement; that this Agreement has been duly executed and
delivered by Custodian; and that this Agreement constitutes a
legal, valid and binding obligation of Custodian, enforceable in
accordance with its terms.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery of Assets
Except as permitted by the 1940 Act, Fund will deliver or cause to be
delivered to Custodian on the effective date of this Agreement, or as
soon thereafter as practicable, and from time to time thereafter, all
portfolio securities acquired by it and monies then owned by it or
from time to time coming into its possession during the time this
Agreement shall continue in effect. Custodian shall have no
responsibility or liability whatsoever for or on account of securities
or monies not so delivered.
B. Delivery of Accounts and Records
Fund shall turn over or cause to be turned over to Custodian all of
the Fund's relevant accounts and records previously maintained.
Custodian shall be
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entitled to rely conclusively on the completeness and correctness of
the accounts and records turned over to it, and Fund shall indemnify
and hold Custodian harmless of and from any and all expenses, damages
and losses whatsoever arising out of or in connection with any error,
omission, inaccuracy or other deficiency of such accounts and records
or in the failure of Fund to provide, or to provide in a timely
manner, any accounts, records or information needed by the Custodian
to perform its functions hereunder.
C. Delivery of Assets to Third Parties
Custodian will receive delivery of and keep safely the assets of Fund
delivered to it from time to time segregated in a separate account,
and if Fund is comprised of more than one portfolio of investment
securities (each a "Portfolio") Custodian shall keep the assets of
each Portfolio segregated in a separate account. Custodian will not
deliver, assign, pledge or hypothecate any such assets to any person
except as permitted by the provisions of this Agreement or any
agreement executed by it according to the terms of Section 3.S. of
this Agreement. Upon delivery of any such assets to a subcustodian
pursuant to Section 3.S. of this Agreement, Custodian will create and
maintain records identifying those assets which have been delivered to
the subcustodian as belonging to the Fund, by Portfolio if applicable.
The Custodian is responsible for the safekeeping of the securities and
monies of Fund only until they have been transmitted to and received
by other persons as permitted under the terms of this Agreement,
except for securities and monies transmitted to subcustodians
appointed under Section 3.S. of this Agreement, for which Custodian
remains responsible to the extent provided in Section 3.S. hereof.
Custodian may participate directly or indirectly through a
subcustodian in the Depository Trust Company (DTC), Treasury/Federal
Reserve Book Entry System (Fed System), Participant Trust Company
(PTC) or other depository approved by the Fund (as such entities are
defined at 17 CFR Section 270.17f-4(b)) (each a "Depository" and
collectively, the "Depositories").
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D. Registration of Securities
The Custodian shall at all times hold registered securities of the
Fund in the name of the Custodian, the Fund, or a nominee of either of
them, unless specifically directed by instructions to hold such
registered securities in so-called "street name," provided that, in
any event, all such securities and other assets shall be held in an
account of the Custodian containing only assets of the Fund, or only
assets held by the Custodian as a fiduciary or custodian for
customers, and provided further, that the records of the Custodian at
all times shall indicate the Fund or other customer for which such
securities and other assets are held in such account and the
respective interests therein. If, however, the Fund directs the
Custodian to maintain securities in "street name", notwithstanding
anything contained herein to the contrary, the Custodian shall be
obligated only to utilize its best efforts to timely collect income
due the Fund on such securities and to notify the Fund of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers. All securities, and the
ownership thereof by Fund, which are held by Custodian hereunder,
however, shall at all times be identifiable on the records of the
Custodian. The Fund agrees to hold Custodian and its nominee harmless
for any liability as a shareholder of record of securities held in
custody.
E. Exchange of Securities
Upon receipt of instructions as defined herein in Section 4.A,
Custodian will exchange, or cause to be exchanged, portfolio
securities held by it for the account of Fund for other securities or
cash issued or paid in connection with any reorganization,
recapitalization, merger, consolidation, split-up of shares, change of
par value, conversion or otherwise, and will deposit any such
securities in accordance with the terms of any reorganization or
protective plan. Without instructions, Custodian is authorized to
exchange securities held by it in temporary form for securities in
definitive form, to effect an exchange of shares when the par value of
the stock is changed, and, upon receiving payment
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therefor, to surrender bonds or other securities held by it at
maturity or when advised of earlier call for redemption, except that
Custodian shall receive instructions prior to surrendering any
convertible security.
F. Purchases of Investments of the Fund - Other Than Options and Futures
Fund will, on each business day on which a purchase of securities
(other than options and futures) shall be made by it, deliver to
Custodian instructions which shall specify with respect to each such
purchase:
1. If applicable, the name of the Portfolio making such purchase;
2. The name of the issuer and description of the security;
3. The number of shares and the principal amount purchased, and
accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission, taxes
and other expenses payable in connection with the purchase;
7. The total amount payable upon such purchase;
8. The name of the person from whom or the broker or dealer through
whom the purchase was made; and
9. Whether the security is to be received in certificated form or
via a specified Depository.
In accordance with such instructions, Custodian will pay for out of
monies held for the account of Fund, but only insofar as such monies
are available for such purpose, and receive the portfolio securities
so purchased by or for the account of Fund, except that Custodian may
in its sole discretion advance funds to the Fund which may result in
an overdraft because the monies held by the Custodian on behalf of the
Fund are insufficient to pay the total amount payable upon such
purchase. Except as otherwise instructed by Fund, such payment shall
be made by the Custodian only upon receipt of securities: (a) by the
Custodian; (b) by a clearing corporation of a national exchange of
which the
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Custodian is a member; or (c) by a Depository. Notwithstanding the
foregoing, (i) in the case of a repurchase agreement, the Custodian
may release funds to a Depository prior to the receipt of advice from
the Depository that the securities underlying such repurchase
agreement have been transferred by book-entry into the account
maintained with such Depository by the Custodian, on behalf of its
customers, provided that the Custodian's instructions to the
Depository require that the Depository make payment of such funds only
upon transfer by book-entry of the securities underlying the
repurchase agreement in such account; (ii) in the case of time
deposits, call account deposits, currency deposits and other deposits,
foreign exchange transactions, futures contracts or options, the
Custodian may make payment therefor before receipt of an advice or
confirmation evidencing said deposit or entry into such transaction;
and (iii) in the case of the purchase of securities, the settlement of
which occurs outside of the United States of America, the Custodian
may make, or cause a subcustodian appointed pursuant to Section 3.S.2.
of this Agreement to make, payment therefor in accordance with
generally accepted local custom and market practice.
G. Sales and Deliveries of Investments of the Fund - Other Than Options
and Futures
Fund will, on each business day on which a sale of investment
securities (other than options and futures) of Fund has been made,
deliver to Custodian instructions specifying with respect to each such
sale:
1. If applicable, the name of the Portfolio making such sale;
2. The name of the issuer and description of the securities;
3. The number of shares and principal amount sold, and accrued
interest, if any;
4. The date on which the securities sold were purchased or other
information identifying the securities sold and to be delivered;
5. The trade date;
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6. The settlement date;
7. The sale price per unit and the brokerage commission, taxes or
other expenses payable in connection with such sale;
8. The total amount to be received by Fund upon such sale; and
9. The name and address of the broker or dealer through whom or
person to whom the sale was made.
In accordance with such instructions, Custodian will deliver or cause
to be delivered the securities thus designated as sold for the account
of Fund to the broker or other person specified in the instructions
relating to such sale. Except as otherwise instructed by Fund, such
delivery shall be made upon receipt of: (a) payment therefor in such
form as is satisfactory to the Custodian; (b) credit to the account of
the Custodian with a clearing corporation of a national securities
exchange of which the Custodian is a member; or (c) credit to the
account of the Custodian, on behalf of its customers, with a
Depository. Notwithstanding the foregoing: (i) in the case of
securities held in physical form, such securities shall be delivered
in accordance with "street delivery custom" to a broker or its
clearing agent; or (ii) in the case of the sale of securities, the
settlement of which occurs outside of the United States of America,
the Custodian may make, or cause a subcustodian appointed pursuant to
Section 3.S.2. of this Agreement to make, such delivery upon payment
therefor in accordance with generally accepted local custom and market
practice.
H. Purchases or Sales of Options and Futures
Fund will, on each business day on which a purchase or sale of the
following options and/or futures shall be made by it, deliver to
Custodian instructions which shall specify with respect to each such
purchase or sale:
1. If applicable, the name of the Portfolio making such purchase or
sale;
2. Security Options
a. The underlying security;
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b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising, expiring
or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or dealer through whom the
sale or purchase was made.
3. Options on Indices
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising, expiring
or closing transaction;
h. Whether the transaction involves a put or call;
i. Whether the option is written or purchased; and
j. The name and address of the broker or dealer through whom
the sale or purchase was made, or other applicable
settlement instructions.
4. Security Index Futures Contracts
a. The last trading date specified in the contract and, when
available, the closing level, thereof;
b. The index level on the date the contract is entered into;
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c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in addition to
instructions, and if not already in the possession of
Custodian, Fund shall deliver a substantially complete and
executed custodial safekeeping account and procedural
agreement which shall be incorporated by reference into this
Custody Agreement); and
f. The name and address of the futures commission merchant
through whom the sale or purchase was made, or other
applicable settlement instructions.
5. Options on Index Future Contracts
a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased; and
i. The market on which the option is traded.
I. Securities Pledged or Loaned
If specifically allowed for in the prospectus of Fund, and subject to
such additional terms and conditions as Custodian may require:
1. Upon receipt of instructions, Custodian will release or cause to
be released securities held in custody to the pledgee designated
in such instructions by way of pledge or hypothecation to secure
any loan incurred by Fund; provided, however, that the securities
shall be released only upon payment to Custodian of the monies
borrowed,
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except that in cases where additional collateral is required to
secure a borrowing already made, further securities may be
released or caused to be released for that purpose upon receipt
of instructions. Upon receipt of instructions, Custodian will
pay, but only from funds available for such purpose, any such
loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or notes
evidencing such loan.
2. Upon receipt of instructions, Custodian will release securities
held in custody to the borrower designated in such instructions;
provided, however, that the securities will be released only upon
deposit with Custodian of full cash collateral as specified in
such instructions, and that Fund will retain the right to any
dividends, interest or distribution on such loaned securities.
Upon receipt of instructions and the loaned securities, Custodian
will release the cash collateral to the borrower.
J. Routine Matters
Custodian will, in general, attend to all routine and mechanical
matters in connection with the sale, exchange, substitution, purchase,
transfer, or other dealings with securities or other property of Fund
except as may be otherwise provided in this Agreement or directed from
time to time by the Fund in writing.
K. Deposit Accounts
Custodian will open and maintain one or more special purpose deposit
accounts in the name of Custodian ("Accounts"), subject only to draft
or order by Custodian upon receipt of instructions. All monies
received by Custodian from or for the account of Fund shall be
deposited in said Accounts. Barring events not in the control of the
Custodian such as strikes, lockouts or labor disputes, riots, war or
equipment or transmission failure or damage, fire, flood, earthquake
or other natural disaster, action or inaction of governmental
authority or other causes beyond its control, at 9:00 a.m., Kansas
City time, on
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the second business day after deposit of any check into an Account,
Custodian agrees to make Fed Funds available to the Fund in the amount
of the check. Deposits made by Federal Reserve wire will be available
to the Fund immediately and ACH wires will be available to the Fund on
the next business day. Income earned on the portfolio securities will
be credited to the Fund based on the schedule attached as Exhibit A.
The Custodian will be entitled to reverse any credited amounts where
credits have been made and monies are not finally collected. If monies
are collected after such reversal, the Custodian will credit the Fund
in that amount. Custodian may open and maintain Accounts in such banks
or trust companies as may be designated by it or by Fund in writing,
all such Accounts, however, to be in the name of Custodian and subject
only to its draft or order. Funds received and held for the account of
different Portfolios shall be maintained in separate Accounts
established for each Portfolio.
L. Income and Other Payments to Fund
Custodian will:
1. Collect, claim and receive and deposit for the account of Fund
all income and other payments which become due and payable on or
after the effective date of this Agreement with respect to the
securities deposited under this Agreement, and credit the account
of Fund in accordance with the schedule attached hereto as
Exhibit A. If, for any reason, the Fund is credited with income
that is not subsequently collected, Custodian may reverse that
credited amount.
2. Execute ownership and other certificates and affidavits for all
federal, state and local tax purposes in connection with the
collection of bond and note coupons; and
3. Take such other action as may be necessary or proper in
connection with:
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a. the collection, receipt and deposit of such income and other
payments, including but not limited to the presentation for
payment of:
1. all coupons and other income items requiring
presentation; and
2. all other securities which may mature or be called,
redeemed, retired or otherwise become payable and
regarding which the Custodian has actual knowledge, or
should reasonably be expected to have knowledge; and
b. the endorsement for collection, in the name of Fund, of all
checks, drafts or other negotiable instruments.
Custodian, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon receipt
of instructions and upon being indemnified to its satisfaction against
the costs and expenses of such suit or other actions. Custodian will
receive, claim and collect all stock dividends, rights and other
similar items and will deal with the same pursuant to instructions.
M. Payment of Dividends and Other Distributions
On the declaration of any dividend or other distribution on the shares
of capital stock of Fund ("Fund Shares") by the Board of Directors of
Fund, Fund shall deliver to Custodian instructions with respect
thereto. On the date specified in such instructions for the payment of
such dividend or other distribution, Custodian will pay out of the
monies held for the account of Fund, insofar as the same shall be
available for such purposes, and credit to the account of the Dividend
Disbursing Agent for Fund, such amount as may be specified in such
instructions.
N. Shares of Fund Purchased by Fund
Whenever any Fund Shares are repurchased or redeemed by Fund, Fund or
its agent shall advise Custodian of the aggregate dollar amount to be
paid for such
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shares and shall confirm such advice in writing. Upon receipt of such
advice, Custodian shall charge such aggregate dollar amount to the
account of Fund and either deposit the same in the account maintained
for the purpose of paying for the repurchase or redemption of Fund
Shares or deliver the same in accordance with such advice. Custodian
shall not have any duty or responsibility to determine that Fund
Shares have been removed from the proper shareholder account or
accounts or that the proper number of Fund Shares have been cancelled
and removed from the shareholder records.
O. Shares of Fund Purchased from Fund
Whenever Fund Shares are purchased from Fund, Fund will deposit or
cause to be deposited with Custodian the amount received for such
shares. Custodian shall not have any duty or responsibility to
determine that Fund Shares purchased from Fund have been added to the
proper shareholder account or accounts or that the proper number of
such shares have been added to the shareholder records.
P. Proxies and Notices
Custodian will promptly deliver or mail or have delivered or mailed to
Fund all proxies properly signed, all notices of meetings, all proxy
statements and other notices, requests or announcements affecting or
relating to securities held by Custodian for Fund and will, upon
receipt of instructions, execute and deliver or cause its nominee to
execute and deliver or mail or have delivered or mailed such proxies
or other authorizations as may be required. Except as provided by this
Agreement or pursuant to instructions hereafter received by Custodian,
neither it nor its nominee will exercise any power inherent in any
such securities, including any power to vote the same, or execute any
proxy, power of attorney, or other similar instrument voting any of
such securities, or give any consent, approval or waiver with respect
thereto, or take any other similar action.
Q. Disbursements
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Custodian will pay or cause to be paid, insofar as funds are available
for the purpose, bills, statements and other obligations of Fund
(including but not limited to obligations in connection with the
conversion, exchange or surrender of securities owned by Fund,
interest charges, dividend disbursements, taxes, management fees,
custodian fees, legal fees, auditors' fees, transfer agents' fees,
brokerage commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting forth the
name of the person to whom payment is to be made, the amount of the
payment, and the purpose of the payment.
R. Daily Statement of Accounts
Custodian will, within a reasonable time, render to Fund a detailed
statement of the amounts received or paid and of securities received
or delivered for the account of Fund during each business day.
Custodian will, from time to time, upon request by Fund, render a
detailed statement of the securities and monies held for Fund under
this Agreement, and Custodian will maintain such books and records as
are necessary to enable it to do so. Custodian will permit such
persons as are authorized by Fund, including Fund's independent public
accountants, reasonable access to such records or will provide
reasonable confirmation of the contents of such records, and if
demanded, Custodian will permit federal and state regulatory agencies
to examine the securities, books and records. Upon the written
instructions of Fund or as demanded by federal or state regulatory
agencies, Custodian will instruct any subcustodian to permit such
persons as are authorized by Fund, including Fund's independent public
accountants, reasonable access to such records or to provide
reasonable confirmation of the contents of such records, and to permit
such agencies to examine the books, records and securities held by
such subcustodian which relate to Fund.
S. Appointment of Subcustodians
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1. Notwithstanding any other provisions of this Agreement, all or
any of the monies or securities of Fund may be held in
Custodian's own custody or in the custody of one or more other
banks or trust companies acting as subcustodians as may be
selected by Custodian. Any such subcustodian selected by the
Custodian must have the qualifications required for a custodian
under the 1940 Act, as amended. Custodian shall be responsible to
the Fund for any loss, damage or expense suffered or incurred by
the Fund resulting from the actions or omissions of any
subcustodians selected and appointed by Custodian (except
subcustodians appointed at the request of Fund and as provided in
Subsection 2 below) to the same extent Custodian would be
responsible to the Fund under Section 5. of this Agreement if it
committed the act or omission itself. Upon request of the Fund,
Custodian shall be willing to contract with other subcustodians
reasonably acceptable to the Custodian for purposes of (i)
effecting third-party repurchase transactions with banks,
brokers, dealers, or other entities through the use of a common
custodian or subcustodian, or (ii) providing depository and
clearing agency services with respect to certain variable rate
demand note securities, or (iii) for other reasonable purposes
specified by Fund; provided, however, that the Custodian shall be
responsible to the Fund for any loss, damage or expense suffered
or incurred by the Fund resulting from the actions or omissions
of any such subcustodian only to the same extent such
subcustodian is responsible to the Custodian. The Fund shall be
entitled to review the Custodian's contracts with any such
subcustodians appointed at the request of Fund. Custodian shall
be responsible to the Fund for any loss, damage or expense
suffered or incurred by the Fund resulting from the actions or
omissions of any Depository only to the same extent such
Depository is responsible to Custodian.
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2. Notwithstanding any other provisions of this Agreement, Fund's
foreign securities (as defined in Rule 17f-5(c)(1) under the 1940
Act) and Fund's cash or cash equivalents, in amounts deemed by
the Fund to be reasonably necessary to effect Fund's foreign
securities transactions, may be held in the custody of one or
more banks or trust companies acting as subcustodians, and
thereafter, pursuant to a written contract or contracts as
approved by Fund's Board of Directors, may be transferred to
accounts maintained by any such subcustodian with eligible
foreign custodians, as defined in Rule 17f-5(c)(2). Custodian
shall be responsible to the Fund for any loss, damage or expense
suffered or incurred by the Fund resulting from the actions or
omissions of any foreign subcustodian only to the same extent the
foreign subcustodian is liable to the domestic subcustodian with
which the Custodian contracts for foreign subcustody purposes.
T. Accounts and Records
Custodian will prepare and maintain, with the direction and as
interpreted by the Fund, Fund's accountants and/or other advisors, in
complete, accurate and current form all accounts and records (i)
required to be maintained by Fund with respect to portfolio
transactions under Rule 31a of the 1940 Act, (ii) required to be
maintained as a basis for calculation of the Fund's net asset value,
and (iii) as otherwise agreed upon between the parties. Custodian will
preserve said records in the manner and for the periods prescribed in
the 1940 Act or for such longer period as is agreed upon by the
parties. Custodian relies upon Fund to furnish, in writing or its
electronic or digital equivalent, accurate and timely information
needed by Custodian to complete Fund's records and perform daily
calculation of the Fund's net asset value. Custodian shall incur no
liability and Fund shall indemnify and hold harmless Custodian from
and against any liability arising from any failure of Fund to furnish
such information in a timely and accurate manner, even if Fund
subsequently provides accurate
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but untimely information. It shall be the responsibility of Fund to
furnish Custodian with the declaration, record and payment dates and
amounts of any dividends or income and any other special actions
required concerning each of its securities when such information is
not readily available from generally accepted securities industry
services or publications.
U. Accounts and Records Property of Fund
Custodian acknowledges that all of the accounts and records maintained
by Custodian pursuant to this Agreement are the property of Fund, and
will be made available to Fund for inspection or reproduction within a
reasonable period of time, upon demand. Custodian will assist Fund's
independent auditors, or upon approval of Fund, or upon demand, any
regulatory body, in any requested review of Fund's accounts and
records but shall be reimbursed by Fund for all expenses and employee
time invested in any such review outside of routine and normal
periodic reviews. Upon receipt from Fund of the necessary information
or instructions, Custodian will supply information from the books and
records it maintains for Fund that Fund needs for tax returns,
questionnaires, periodic reports to shareholders and such other
reports and information requests as Fund and Custodian shall agree
upon from time to time.
V. Adoption of Procedures
Custodian and Fund may from time to time adopt procedures as they
agree upon, and Custodian may conclusively assume that no procedure
approved or directed by Fund or its accountants or other advisors
conflicts with or violates any requirements of its prospectus,
articles of incorporation, bylaws, any applicable law, rule or
regulation, or any order, decree or agreement by which Fund may be
bound. Fund will be responsible to notify Custodian of any changes in
statutes, regulations, rules, requirements or policies which might
necessitate changes in Custodian's responsibilities or procedures.
W. Calculation of Net Asset Value
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Custodian will calculate Fund's net asset value, in accordance with
Fund's prospectus. Custodian will price the securities and foreign
currency holdings of Fund for which market quotations are available by
the use of outside services designated by Fund which are normally used
and contracted with for this purpose; all other securities and foreign
currency holdings will be priced in accordance with Fund's
instructions. Custodian will have no responsibility for the accuracy
of the prices quoted by these outside services or for the information
supplied by Fund or for acting upon such instructions.
X. Advances
In the event Custodian or any subcustodian shall, in its sole
discretion, advance cash or securities for any purpose (including but
not limited to securities settlements, purchase or sale of foreign
exchange or foreign exchange contracts and assumed settlement) for the
benefit of any Portfolio, the advance shall be payable by the Fund on
demand. Any such cash advance shall be subject to an overdraft charge
at the rate set forth in the then-current fee schedule from the date
advanced until the date repaid. As security for each such advance,
Fund hereby grants Custodian and such subcustodian a lien on and
security interest in all property at any time held for the account of
the applicable Portfolio, including without limitation all assets
acquired with the amount advanced. Should the Fund fail to promptly
repay the advance, the Custodian and such subcustodian shall be
entitled to utilize available cash and to dispose of such Portfolio's
assets pursuant to applicable law to the extent necessary to obtain
reimbursement of the amount advanced and any related overdraft
charges.
Y. Exercise of Rights; Tender Offers
Upon receipt of instructions, the Custodian shall: (a) deliver
warrants, puts, calls, rights or similar securities to the issuer or
trustee thereof, or to the agent of such issuer or trustee, for the
purpose of exercise or sale, provided that the new securities, cash or
other assets, if any, are to be delivered to the Custodian; and (b)
deposit securities upon invitations for tenders thereof, provided that
the
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consideration for such securities is to be paid or delivered to the
Custodian or the tendered securities are to be returned to the
Custodian.
4. INSTRUCTIONS.
A. The term "instructions", as used herein, means written (including
telecopied or telexed) or oral instructions which Custodian reasonably
believes were given by a designated representative of Fund. Fund shall
deliver to Custodian, prior to delivery of any assets to Custodian and
thereafter from time to time as changes therein are necessary, written
instructions naming one or more designated representatives to give
instructions in the name and on behalf of Fund, which instructions may
be received and accepted by Custodian as conclusive evidence of the
authority of any designated representative to act for Fund and may be
considered to be in full force and effect (and Custodian will be fully
protected in acting in reliance thereon) until receipt by Custodian of
notice to the contrary. Unless such written instructions delegating
authority to any person to give instructions specifically limit such
authority to specific matters or require that the approval of anyone
else will first have been obtained, Custodian will be under no
obligation to inquire into the right of such person, acting alone, to
give any instructions whatsoever which Custodian may receive from such
person. If Fund fails to provide Custodian any such instructions
naming designated representatives, any instructions received by
Custodian from a person reasonably believed to be an appropriate
representative of Fund shall constitute valid and proper instructions
hereunder. "Designated representatives" of Fund may include its
employees and agents, including investment managers and their
employees.
B. No later than the next business day immediately following each oral
instruction, Fund will send Custodian written confirmation of such
oral instruction. At Custodian's sole discretion, Custodian may record
on tape, or otherwise, any oral instruction whether given in person or
via telephone, each such recording
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<PAGE>
identifying the date and the time of the beginning and ending of such
oral instruction.
C. If Custodian shall provide Fund direct access to any computerized
recordkeeping and reporting system used hereunder or if Custodian and
Fund shall agree to utilize any electronic system of communication,
Fund shall be fully responsible for any and all consequences of the
use or misuse of the terminal device, passwords, access instructions
and other means of access to such system(s) which are utilized by,
assigned to or otherwise made available to the Fund. Fund agrees to
implement and enforce appropriate security policies and procedures to
prevent unauthorized or improper access to or use of such system(s).
Custodian shall be fully protected in acting hereunder upon any
instructions, communications, data or other information received by
Custodian by such means as fully and to the same effect as if
delivered to Custodian by written instrument signed by the requisite
authorized representative(s) of Fund. Fund shall indemnify and hold
Custodian harmless from and against any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liability which
may be suffered or incurred by Custodian as a result of the use or
misuse, whether authorized or unauthorized, of any such system(s) by
Fund or by any person who acquires access to such system(s) through
the terminal device, passwords, access instructions or other means of
access to such system(s) which are utilized by, assigned to or
otherwise made available to the Fund, except to the extent
attributable to any negligence or willful misconduct by Custodian.
5. LIMITATION OF LIABILITY OF CUSTODIAN.
A. Custodian shall at all times use reasonable care and due diligence and
act in good faith in performing its duties under this Agreement.
Custodian shall not be responsible for, and the Fund shall indemnify
and hold Custodian harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and
liability which may be asserted against Custodian,
20
<PAGE>
incurred by Custodian or for which Custodian may be held to be liable,
arising out of or attributable to:
1. All actions taken by Custodian pursuant to this Agreement or any
instructions provided to it hereunder, provided that Custodian
has acted in good faith and with due diligence and reasonable
care; and
2. The Fund's refusal or failure to comply with the terms of this
Agreement (including without limitation the Fund's failure to pay
or reimburse Custodian under this indemnification provision), the
Fund's negligence or willful misconduct, or the failure of any
representation or warranty of the Fund hereunder to be and remain
true and correct in all respects at all times.
B. Custodian may request and obtain at the expense of Fund the advice and
opinion of counsel for Fund or of its own counsel with respect to
questions or matters of law, and it shall be without liability to Fund
for any action taken or omitted by it in good faith, in conformity
with such advice or opinion. If Custodian reasonably believes that it
could not prudently act according to the instructions of the Fund or
the Fund's accountants or counsel, it may in its discretion, with
notice to the Fund, not act according to such instructions.
C. Custodian may rely upon the advice and statements of Fund, Fund's
accountants and officers or other authorized individuals, and other
persons believed by it in good faith to be expert in matters upon
which they are consulted, and Custodian shall not be liable for any
actions taken, in good faith, upon such advice and statements.
D. If Fund requests Custodian in any capacity to take any action which
involves the payment of money by Custodian, or which might make it or
its nominee liable for payment of monies or in any other way,
Custodian shall be indemnified and held harmless by Fund against any
liability on account of such action; provided, however, that nothing
herein shall obligate Custodian to take any such action except in its
sole discretion.
21
<PAGE>
E. Custodian shall be protected in acting as custodian hereunder upon any
instructions, advice, notice, request, consent, certificate or other
instrument or paper appearing to it to be genuine and to have been
properly executed. Custodian shall be entitled to receive upon request
as conclusive proof of any fact or matter required to be ascertained
from Fund hereunder a certificate signed by an officer or designated
representative of Fund. Fund shall also provide Custodian instructions
with respect to any matter concerning this Agreement requested by
Custodian.
F. Custodian shall be under no duty or obligation to inquire into, and
shall not be liable for:
1. The validity of the issue of any securities purchased by or for
Fund, the legality of the purchase of any securities or foreign
currency positions or evidence of ownership required by Fund to
be received by Custodian, or the propriety of the decision to
purchase or amount paid therefor;
2. The legality of the sale of any securities or foreign currency
positions by or for Fund, or the propriety of the amount for
which the same are sold;
3. The legality of the issue or sale of any Fund Shares, or the
sufficiency of the amount to be received therefor;
4. The legality of the repurchase or redemption of any Fund Shares,
or the propriety of the amount to be paid therefor; or
5. The legality of the declaration of any dividend by Fund, or the
legality of the issue of any Fund Shares in payment of any stock
dividend.
G. Custodian shall not be liable for, or considered to be Custodian of,
any money represented by any check, draft, wire transfer,
clearinghouse funds, uncollected funds, or instrument for the payment
of money to be received by it on behalf of Fund until Custodian
actually receives such money; provided, however, that it shall advise
Fund promptly if it fails to receive any such money in the ordinary
course of business and shall cooperate with Fund toward the end that
such money shall be received.
22
<PAGE>
H. Except as provided in Section 3.S., Custodian shall not be responsible
for loss occasioned by the acts, neglects, defaults or insolvency of
any broker, bank, trust company, or any other person with whom
Custodian may deal.
I. Custodian shall not be responsible or liable for the failure or delay
in performance of its obligations under this Agreement, or those of
any entity for which it is responsible hereunder, arising out of or
caused, directly or indirectly, by circumstances beyond the affected
entity's reasonable control, including, without limitation: any
interruption, loss or malfunction of any utility, transportation,
computer (hardware or software) or communication service; inability to
obtain labor, material, equipment or transportation, or a delay in
mails; governmental or exchange action, statute, ordinance, rulings,
regulations or direction; war, strike, riot, emergency, civil
disturbance, terrorism, vandalism, explosions, labor disputes,
freezes, floods, fires, tornados, acts of God or public enemy,
revolutions, or insurrection.
J. EXCEPT FOR VIOLATIONS OF SECTION 9, IN NO EVENT AND UNDER NO
CIRCUMSTANCES SHALL EITHER PARTY TO THIS AGREEMENT BE LIABLE TO
ANYONE, INCLUDING, WITHOUT LIMITATION TO THE OTHER PARTY, FOR
CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES FOR ANY ACT OR FAILURE TO
ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF ADVISED OF THIS
POSSIBILITY THEREOF.
6. COMPENSATION. In consideration for its services hereunder as Custodian and
investment accounting and recordkeeping agent, Fund will pay to Custodian
such compensation as shall be set forth in a separate fee schedule to be
agreed to by Fund and Custodian from time to time. A copy of the initial
fee schedule is attached hereto and incorporated herein by reference.
Custodian shall also be entitled to receive, and Fund agrees to pay to
Custodian, on demand, reimbursement for Custodian's cash disbursements and
reasonable out-of-pocket costs and expenses, including attorney's fees,
incurred by Custodian in connection with the performance of services
hereunder.
23
<PAGE>
Custodian may charge such compensation against monies held by it for the
account of Fund. Custodian will also be entitled to charge against any
monies held by it for the account of Fund the amount of any loss, damage,
liability, advance, overdraft or expense for which it shall be entitled to
reimbursement from Fund, including but not limited to fees and expenses due
to Custodian for other services provided to the Fund by Custodian.
Custodian will be entitled to reimbursement by the Fund for the losses,
damages, liabilities, advances, overdrafts and expenses of subcustodians
only to the extent that (i) Custodian would have been entitled to
reimbursement hereunder if it had incurred the same itself directly, and
(ii) Custodian is obligated to reimburse the subcustodian therefor.
7. TERM AND TERMINATION. The initial term of this Agreement shall be for a
period of one (1) year. Thereafter, either party to this Agreement may
terminate the same by notice in writing, delivered or mailed, postage
prepaid, to the other party hereto and received not less than ninety (90)
days prior to the date upon which such termination will take effect. Upon
termination of this Agreement, Fund will pay Custodian its fees and
compensation due hereunder and its reimbursable disbursements, costs and
expenses paid or incurred to such date and Fund shall designate a successor
custodian by notice in writing to Custodian by the termination date. In the
event no written order designating a successor custodian has been delivered
to Custodian on or before the date when such termination becomes effective,
then Custodian may, at its option, deliver the securities, funds and
properties of Fund to a bank or trust company at the selection of
Custodian, and meeting the qualifications for custodian set forth in the
1940 Act and having not less that Two Million Dollars ($2,000,000)
aggregate capital, surplus and undivided profits, as shown by its last
published report, or apply to a court of competent jurisdiction for the
appointment of a successor custodian or other proper relief, or take any
other lawful action under the circumstances; provided, however, that Fund
shall reimburse Custodian for its costs and expenses, including reasonable
attorney's fees, incurred in connection therewith. Custodian will, upon
termination of this Agreement and payment of all sums due to Custodian from
Fund
24
<PAGE>
hereunder or otherwise, deliver to the successor custodian so specified or
appointed, or as specified by the court, at Custodian's office, all
securities then held by Custodian hereunder, duly endorsed and in form for
transfer, and all funds and other properties of Fund deposited with or held
by Custodian hereunder, and Custodian will co-operate in effecting changes
in book-entries at all Depositories. Upon delivery to a successor custodian
or as specified by the court, Custodian will have no further obligations or
liabilities under this Agreement. Thereafter such successor will be the
successor custodian under this Agreement and will be entitled to reasonable
compensation for its services. In the event that securities, funds and
other properties remain in the possession of the Custodian after the date
of termination hereof owing to failure of the Fund to appoint a successor
custodian, the Custodian shall be entitled to compensation as provided in
the then-current fee schedule hereunder for its services during such period
as the Custodian retains possession of such securities, funds and other
properties, and the provisions of this Agreement relating to the duties and
obligations of the Custodian shall remain in full force and effect.
8. NOTICES. Notices, requests, instructions and other writings addressed to
Fund at 100 Park Avenue, New York, New York 10017, or at such other address
as Fund may have designated to Custodian in writing, will be deemed to have
been properly given to Fund hereunder; and notices, requests, instructions
and other writings addressed to Custodian at its offices at 127 West 10th
Street, Kansas City, Missouri 64105, Attention: Custody Department, or to
such other address as it may have designated to Fund in writing, will be
deemed to have been properly given to Custodian hereunder.
9. CONFIDENTIALITY.
A. Fund shall preserve the confidentiality of the computerized investment
portfolio recordkeeping and accounting system used by Custodian (the
"Portfolio Accounting System") and the tapes, books, reference
manuals, instructions, records, programs, documentation and
information of, and other materials relevant to, the Portfolio
Accounting System and the business of Custodian ("Confidential
Information"). Fund agrees that it will not voluntarily disclose
25
<PAGE>
any such Confidential Information to any other person other than its
own employees who reasonably have a need to know such information
pursuant to this Agreement. Fund shall return all such Confidential
Information to Custodian upon termination or expiration of this
Agreement.
B. Fund has been informed that the Portfolio Accounting System is
licensed for use by Custodian from DST Systems, Inc. ("Licensor"), and
Fund acknowledges that Custodian and Licensor have proprietary rights
in and to the Portfolio Accounting System and all other Custodian or
Licensor programs, code, techniques, know-how, data bases, supporting
documentation, data formats, and procedures, including without
limitation any changes or modifications made at the request or expense
or both of Fund (collectively, the "Protected Information"). Fund
acknowledges that the Protected Information constitutes confidential
material and trade secrets of Custodian and Licensor. Fund shall
preserve the confidentiality of the Protected Information, and Fund
hereby acknowledges that any unauthorized use, misuse, disclosure or
taking of Protected Information, residing or existing internal or
external to a computer, computer system, or computer network, or the
knowing and unauthorized accessing or causing to be accessed of any
computer, computer system, or computer network, may be subject to
civil liabilities and criminal penalties under applicable law. Fund
shall so inform employees and agents who have access to the Protected
Information or to any computer equipment capable of accessing the
same. Licensor is intended to be and shall be a third party
beneficiary of the Fund's obligations and undertakings contained in
this paragraph.
10. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio:
A. Each Portfolio shall be regarded for all purposes hereunder as a
separate party apart from each other Portfolio. Unless the context
otherwise requires, with respect to every transaction covered by this
Agreement, every reference herein to the Fund shall be deemed to
relate solely to the particular Portfolio to which
26
<PAGE>
such transaction relates. Under no circumstances shall the rights,
obligations or remedies with respect to a particular Portfolio
constitute a right, obligation or remedy applicable to any other
Portfolio. The use of this single document to memorialize the separate
agreement of each Portfolio is understood to be for clerical
convenience only and shall not constitute any basis for joining the
Portfolios for any reason.
B. Additional Portfolios may be added to this Agreement, provided that
Custodian consents to such addition. Rates or charges for each
additional Portfolio shall be as agreed upon by Custodian and Fund in
writing.
11. MISCELLANEOUS.
A. This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of
the State of Missouri, without reference to the choice of laws
principles thereof.
B. All terms and provisions of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.
C. The representations and warranties, the indemnifications extended
hereunder, and the provisions of Section 9. hereof are intended to and
shall continue after and survive the expiration, termination or
cancellation of this Agreement.
D. No provisions of the Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by each party hereto.
E. The failure of either party to insist upon the performance of any
terms or conditions of this Agreement or to enforce any rights
resulting from any breach of any of the terms or conditions of this
Agreement, including the payment of damages, shall not be construed as
a continuing or permanent waiver of any such terms, conditions, rights
or privileges, but the same shall continue and remain in full force
and effect as if no such forbearance or waiver had occurred. No
waiver, release or discharge of any party's rights hereunder shall be
27
<PAGE>
effective unless contained in a written instrument signed by the party
sought to be charged.
F. The captions in the Agreement are included for convenience of
reference only, and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.
G. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same instrument.
H. If any provision of this Agreement shall be determined to be invalid
or unenforceable, the remaining provisions of this Agreement shall not
be affected thereby, and every provision of this Agreement shall
remain in full force and effect and shall remain enforceable to the
fullest extent permitted by applicable law.
I. This Agreement may not be assigned by either party hereto without the
prior written consent of the other party.
J. Neither the execution nor performance of this Agreement shall be
deemed to create a partnership or joint venture by and between
Custodian and Fund.
K. Except as specifically provided herein, this Agreement does not in any
way affect any other agreements entered into among the parties hereto
and any actions taken or omitted by either party hereunder shall not
affect any rights or obligations of the other party hereunder.
28
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST COMPANY
By: ____________________________________
Title: _________________________________
SELIGMAN VALUE FUND SERIES, INC.
By: ____________________________________
Title: _________________________________
29
SULLIVAN & CROMWELL
125 Broad Street, New York, NY 10004-2498
April 14, 1997
Seligman Value Fund Series, Inc.,
100 Park Avenue,
New York, New York 10017.
Dear Sirs:
In connection with the Pre-Effective Amendment No. 2 to the Registration
Statement on Form N-1A (File No. 333-20621) of Seligman Value Fund Series, Inc.,
a Maryland corporation (the "Company"), which you expect to file under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to
shares of Capital Stock, par value $.001 per share, of the series designated as
the Company's Seligman Large-Cap Value Fund (the "Large-Cap Value Shares") and
Seligman Small-Cap Value Fund (the "Small-Cap Value Shares" and, together with
the Large-Cap Value Shares, the "Shares"), we, as your counsel, have examined
such corporate records, certificates and other documents, and such questions of
law, as we have considered necessary or appropriate for the purposes of this
opinion.
<PAGE>
Seligman Value Fund Series, Inc. -2-
Upon the basis of such examination, we advise you that, in our opinion, the
Large-Cap Value Shares have been duly authorized to the extent of 1,000,000,000
Shares and the Small-Cap Value Shares have been duly authorized to the extent of
1,000,000,000 Shares and, when the Registration Statement referred to above has
become effective under the Securities Act and the Shares have been issued and
sold (a) for at least the par value thereof, (b) so as not to exceed the then
authorized number of Shares of the respective series and (c) in accordance with
the Company's Articles of Incorporation, as amended, and as authorized by the
Board of Directors of the Company, the Shares will be validly issued, fully paid
and nonassessable.
The foregoing opinion is limited to the Federal laws of the United States
and the General Corporation Law of the State of Maryland, and we are expressing
no opinion as to the effect of the laws of any other jurisdiction.
Also, we have relied as to certain matters on information obtained from
public officials, officers of the Company and other sources believed by us to be
responsible.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement referred to above.
<PAGE>
Seligman Value Fund Series, Inc. -3-
In giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act.
Very truly yours,
/s/ Sullivan & Cromwell
Consent of Independent Auditors
Seligman Value Fund Series, Inc.
We consent to the use in this Pre-Effective Amendment No. 2 to Registration
Statement No. 333-20621 of our report dated April 9, 1997, appearing in the
Statement of Additional Information, which is part of such Registration
Statement, and to the reference to us under the heading "General Information" in
such Prospectus.
DELOITTE & TOUCHE LLP
New York, New York
April 15, 1997
INVESTMENT LETTER
SELIGMAN VALUE FUND SERIES, INC.
Seligman Value Fund Series, Inc. (the "Fund"), an open-end diversified
management investment company, and the undersigned ("Purchaser"), intending to
be legally bound, hereby agree as follows:
1. In order to provide the Fund with its initial capital, the Fund hereby
sells to Purchaser and Purchaser purchases 7,003 shares of Class A Capital
Stock (par value $.001) of Seligman Large-Cap Value Fund and 7,003 shares
of Class A Capital Stock (par value $.001) of Seligman Small-Cap Value
Fund, in each case at a price of $7.14 per share (the "Shares") as of the
close of business on April 4, 1997. The Fund hereby acknowledges receipt
from Purchaser of funds in the amount of $100,002.84 in full payment for
the Shares.
2. Purchaser represents and warrants to the Fund that the Shares are being
acquired for investment and not with a view to distribution thereof, and
that Purchaser has no present intention to redeem or dispose of the Shares.
IN WITNESS WHEREOF, the parties have executed this agreement as of the 4th day
of April, 1997 ("Purchase Date").
SELIGMAN VALUE FUND SERIES, INC.
By: /s/ Lawrence P. Vogel
------------------------------
Name: Lawrence P. Vogel
Title: Vice President
SELIGMAN FINANCIAL SERVICES, INC.
By: /s/ Stephen J. Hodgdon
------------------------------
Name: Stephen J. Hodgdon
Title: President
THE SELIGMAN IRA
Plan Agreement
Form 5305-A Under Section 408(a) of the Internal Revenue Code
FORM(REV. OCT. 1992)
The Depositor whose name appears on the attached Application is establishing an
Individual Retirement Account under Section 408(a) to provide for his or her
retirement and for the support of his or her beneficiaries after death.
The Custodian named on the Application has given the Depositor the disclosure
statement required under Regulations Section 1.408-6.
The Depositor has assigned the Custodial account the sum indicated on the
Application
The Depositor and the Custodian make the following Agreement:
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in Section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3) or an employer contribution to a Simplified
Employee Pension Plan as described in Section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in Section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a Simplified Employee Pension Plan described in Section 408(k).
ARTICLE II
The Depositor's interest in the balance in the Custodial account is
nonforfeitable.
ARTICLE III
1. No part of the Custodial funds may be invested in life insurance contracts,
nor may the assets of the Custodial account be commingled with other
property except in a common trust fund or common investment fund (within
the meaning of Section 408(a)(5)).
2. No part of the Custodial funds may be invested in collectibles (within the
meaning of Section 408(m)) except as otherwise permitted by Section
408(m)(3) which provides an exception for certain gold and silver coins and
coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this Agreement to the contrary, the
distribution of the Depositor's interest in the Custodial account shall be
made in accordance with the following requirements and shall otherwise
comply with Section 408(a)(6) and Proposed Regulations Section 1.408-8,
including the incidental death benefit provisions of Proposed Regulations
Section 1.401(a)(9)-2, the provisions of which are herein incorporated by
reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Depositor and the surviving spouse and shall apply to all subsequent years.
The life expectancy of a non-spouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the Custodial account must be, or begin
to be, distributed by the Depositor's required beginning date (April 1
following the calendar year end in which the Depositor reaches age 70 1/2).
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the Custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor
expectancy of the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has
begun, entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the
fifth anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the
year of the Depositor's death. If, however, the beneficiary is
the Depositor's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the
Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on
the Depositor's required beginning date, even though payments may
actually have been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual
payment for each year, divide the Depositor's entire interest in the
Custodial account as of the close of business on December 31 of the
preceding year by the life expectancy of the Depositor (or the joint life
and last survivor expectancy of the Depositor and the Depositor's
designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under
paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and
designated beneficiary as of their birthdays in the year the Depositor
reaches age 70 1/2. In the case of a distribution in accordance with
paragraph 4(b)(ii), determine life expectancy using the attained age of the
designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits
an individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for
another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary for
the Custodian to prepare any reports required under Section 408(i) and
Regulations Sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with Section 408(a) and related
regulations will be invalid.
ARTICLE VII
This Agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear on the prior Agreement.
ARTICLE VIII
8.01 Definitions: In this part of this Agreement (Article VIII), the words "you"
and "your" mean the Depositor, the words "we," "us" and "our" mean the Custodian
and "Code" means the Internal Revenue Code. "Group Shares" shall mean shares
issued by any regulated investment company within the meaning of Section 851(a)
of the Code, which are managed by J. & W. Seligman and Co. Incorporated.
8.02 Notices and Change of Address: Any required notice regarding this IRA will
be considered effective when we mail it to the last address of the intended
recipient which we have in our records. Any notice to be given to us will be
considered effective when we actually receive it. You must notify us of any
change of address.
8.03 Scope of the Depository's and the Custodian's Duties: Neither the Custodian
nor the Depository (Seligman Retirement Services, c/o Seligman Data Corp.) shall
be responsible for determining a Depositor's eligibility for contributions or
rollovers into the Custodial account; nor for determining the necessity of
distributing benefits upon the Depositor's death, if it has not been notified of
such death. Other than as prescribed by law, neither the Depository nor the
Custodian shall be responsible for determining the amount of, nor for making
Minimum Required Distributions to a Depositor who has attained age 70 1/2, nor
to a beneficiary upon the Depositor's death. The Custodian and/or Depository
shall be able to rely upon the certification of the Depositor and/or the
distributing plan that a transaction represents a valid "direct rollover" as
described in ss.401(a)(31) of the Code, and the applicable regulations. The
Custodian shall only be liable under this Agreement for its own bad faith, gross
negligence, or willful misconduct. The Depositor and the successors of the
Depositor including any executor or adminis-
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trator of the Depositor shall, to the extent permitted by law, indemnify the
Custodian and its successors and assign against any and all claims, actions or
liabilities of the Custodian to the Depositor or the successors or beneficiaries
of the Depositor whatsoever (including without limitation all reasonable
expenses incurred in defending against or settlement of such claims, actions or
liabilities) which may arise in connection with this Agreement or the Custodial
account, except those due to the Custodian's own bad faith, gross negligence or
willful misconduct.
8.04 Expenses and Compensation: The Custodian may charge against and deduct from
the Custodial account all reasonable expenses incurred by the Custodian in the
administration of the Custodial account, including, but not limited to, any
income or other taxes that may be levied upon or with respect to the Custodial
account, counsel fees and reasonable compensation for its services as Custodian
hereunder or with respect to any controversies concerning the Custodial
accounts. The Custodian shall, without the prior consent of the Depositor, also
have the right to initiate, increase or decrease, a fee for its services under
this Agreement and such fee may be charged against and deducted from the
Custodial account. The annual fee in effect on the date of this Agreement is set
forth in the Application.
8.05 Investment of Amounts in the IRA:
a. Each cash contribution to the Custodial account shall be applied by the
Custodian to the purchase of Seligman Group Shares (including fractional
Shares carried to the third decimal place) in the proportions specified in
written instructions of the Depositor accompanying the contribution. The
Custodian shall not be liable for interest on any cash balance in the
Custodial account.
b. Dividends, gain distributions, and any other cash payments attributable to
Seligman Group Shares held in the Custodial account will be invested in the
same Shares to which such payments are attributable. Where gain
distributions are payable in Seligman Group Shares or in cash, at the
option of the holder, the Custodian shall elect payment in full and
fractional Shares.
c. The Depositor may direct the Custodian at any time and from time to time to
exchange the Seligman Group Shares held in the Custodial account for other
Seligman Group Shares in accordance with the then current prospectuses
relating to such shares.
d. No part of the Custodial account assets shall be invested in life insurance
contracts or collectibles (as defined in Section 408(m) of the Code), nor
may the assets of the Custodial account be commingled with other property
except in a common trust fund or a common investment fund (within the
meaning of Section 408(a)(5) of the Code).
e. All transactions shall be subject to any and all applicable Federal and
State laws and regulations and the rules, regulations, customs and usages
of any exchange, market or clearing house where the transaction is executed
and to our policies and practices.
f. After death, your beneficiary(ies) shall have the right to direct the
investment of your IRA assets, subject to the same conditions that applied
to you during your lifetime under this Agreement (including, without
limitation, Section 8.03).
g. We shall have no discretion to direct any investment in your IRA. We assume
no responsibility for rendering investment advice with respect to your IRA,
nor will we offer any opinion or judgement to you concerning the value or
suitability of any investment or proposed investment for your IRA. We shall
not have any power or authority to vote any shares with respect to Group
Shares in your IRA, except in accordance with the directions you provide
us.
h. We may, but are not required to, permit you to delegate your investment
responsibility for your IRA to another party acceptable to us by giving
written notice of your delegation in a format we prescribe. We shall follow
the direction of any such party who is properly appointed and we shall be
under no duty to review or question, nor shall we be responsible for, any
of that party's directions, actions or failures to act.
8.06 Judicial Settlement of Accounts: In the event of any dispute or uncertainty
as to the person to whom the payment of any funds shall be made hereunder, the
Custodian may withhold such payment until such dispute or uncertainty shall have
been determined or resolved by a court of competent jurisdiction, or settled by
the parties concerned. The Custodian shall have the right to apply, at any time,
to a court of competent jurisdiction for the judicial settlement of its
accounts. In any such judicial action or proceeding, only the Custodian and the
Depositor (or in the case of the Depositor's death, his representative) shall be
necessary parties, and no other person having an interest in the Custodial
account shall be entitled to any notice or service of process. Any judgment
entered in such proceeding or action shall be conclusive upon all persons
claiming under this Agreement. In the event that the Custodian applies for a
judicial settlement of its accounts or any individual account, all fees and
disbursements it incurs, including but not limited to legal and accounting fees,
shall be paid from the Custodial account and shall constitute a lien against the
account until paid.
8.07 Designation of Beneficiary:
a. The Depositor may designate and redesignate his Beneficiary or
Beneficiaries in writing on a form provided by the Custodian for such
purpose. The Custodian may in its discretion limit the designation of
beneficiary to those contemplated in the form provided, or may permit
Depositor to provide his or her own form, subject to the Custodian's review
and written acceptance. Upon the Depositor's death, such Beneficiary(ies)
shall be entitled to the balance in the Custodial account of the Depositor.
Such designation may be changed or revoked only by written instrument filed
with the Custodian. The Custodian may rely upon the last written
designation received by it, which shall supersede all prior designations.
If the Beneficiary(ies) shall predecease the Depositor, the designation
shall be ineffective. Subject to the provisions of the law, if another
designation is not made, or if no designation is in effect at the time of
the Depositor's death, a married Depositor's Beneficiary shall be his
surviving spouse, and an unmarried Depositor's Beneficiary shall be the
Depositor's estate.
b. Notwithstanding anything to the contrary in paragraph 8.07(a) above, upon
the Depositor's death, a surviving spouse Beneficiary may designate and
redesignate his or her Beneficiary or Beneficiaries in writing on a form
provided (or accepted) by the Custodian for such purpose. In a manner
similar to that provided for the Depositor in paragraph 8.07(a) above, such
Beneficiary(ies) shall be entitled to the balance in the Custodial account
upon the death of the surviving spouse.
c. Where there is more than one Beneficiary designated, distributions from the
Custodial account shall be made in the manner specified in the Designation
of Beneficiary Form, or in the absence of any such specification,
distributions shall be made pro rata among those Beneficiaries who are
alive at the time of the distribution.
8.08 Resignation or Removal of Custodian: The Custodian may resign at any time
upon sixty (60) days notice in writing to Seligman Retirement Services, c/o
Seligman Data Corp. Upon such resignation, Seligman Retirement Services, shall
notify the Depositor, and shall appoint a successor custodian under this
Agreement. The Depositor or Seligman Retirement Services, at any time, may
remove the Custodian upon sixty days written notice as filed with the
Custodian. Such notice must include designation of a successor custodian. The
successor custodian shall satisfy the requirements of section 408(h) of the
Code. Upon receipt by the Custodian of written acceptance of such appointment
by the successor custodian, the Custodian shall transfer and pay over to such
successor the assets of and records relating to the Custodial account. (The
Custodian is authorized, however, to reserve such sum of money as it may deem
advisable for payment of all fees, compensation, costs and expenses, or for
payment of any other liability constituting a charge on or against the assets
of the Custodial account or on or against the Custodian, and where necessary
may liquidate shares in the Custodial account for such payments.) Any balance
of such reserve remaining after the payment of all such items shall be paid
over to the successor Custodian. The Custodian shall not be liable for the acts
or omissions of any predecessor or successor custodian or trustee.
8.09 Amendments: The Depositor and the Custodian delegate to Seligman Retirement
Services, the right to amend this Agreement (including retroactive amendments)
by written notice to the Custodian and the Depositor. The Depositor shall be
deemed to have consented to any such amendment, provided that (a) no amendment
shall cause or permit any of the assets of the Custodial account to be diverted
to purposes other than for the exclusive benefit of the Depositor or his or her
beneficiaries; (b) any amendment which affects the rights, duties, or
responsibilities of the Custodian may only be made with the Custodian's consent;
and (c) no amendment shall be made except in accordance with any applicable laws
and regulations affecting this Agreement and Custodial account.
8.10 Withdrawals: All requests for withdrawal shall be in writing on a form
provided by or acceptable to us. The method of distribution must be specified in
writing. The tax identification number of the recipient must be provided to us
before we make a distribution. Any withdrawals shall be subject to all
applicable tax and other laws and regulations including possible early
withdrawal penalties and withholding requirements.
8.11 Required Minimum Distributions: We reserve the right to elect whether or
not life expectancies will be recalculated in connection with required minimum
distributions from your IRA, provided, however, that we give you notice of our
election. Alternatively, we may allow you to make such an election. As described
in Article IV, Section 3, of this Agreement, you may make an election to begin
receiving payments from your IRA in a manner that satisfies the required minimum
distribution rules no later than April 1 of the year following the year you
reach age 70 1/2. (This is called the "required beginning date.") If you fail
to make such an election by your required beginning date, we can do any one of
the following:
o make no payment until you give us a proper payment request;
o pay your entire IRA to you in a single sum payment; or
o calculate your required minimum distribution from your IRA each year
based on your single life expectancy (not recalculated) and pay those
distributions to you until you direct otherwise.
We will not be liable for any penalties or taxes related to your failure to take
a distribution. Consistent with Section 8.10 the Custodian is not obligated to
make any distributions absent a specific written direction, in a form acceptable
to and filed with the Custodian, from the Depositor or designated beneficiary to
do so. Except in the case of the Depositor's death or disability (as defined in
ss. 72(m)(7) of the Code), or the attainment of age of 59 1/2, before
distributing an amount from the account, the Custodian may require from the
Depositor a declaration of the Depositor's intention as to the disposition of
the amount distributed. The Custodian may at its option require each (monthly,
quarterly, semiannually, etc.) distrib-
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<PAGE>
ution in an installment series to meet certain minimum amounts, which may
necessitate the distribution of amounts greater than otherwise required under
Article IV.
8.12 Transfers From Other Plans: We can receive amounts transferred to this IRA
from the custodian or trustee of another IRA. In addition, we can accept direct
rollovers of eligible rollover distributions from employer plans as permitted by
the Code. We reserve the right not to accept any transfer or direct rollover.
8.13 Liquidation of Assets: We have the right to liquidate assets in your IRA if
necessary to make distributions or to pay fees, expenses or taxes properly
chargeable against your IRA. If you fail to direct us as to which assets to
liquidate, we will determine and you agree not to hold us liable for any adverse
consequences that result from our decision.
8.14 Restrictions On The Fund: Neither you nor any Beneficiary may sell,
transfer or pledge any interest in your IRA in any manner whatsoever, except as
provided by law or this Agreement. The assets in your IRA shall not be
responsible for the debts, contracts, or torts of any person entitled to
distributions under this Agreement.
8.15 Timing of Contributions: A contribution is deemed to have been made on the
last day of the preceding taxable year if the contribution is made by the
deadline for filing the Depositor's income tax return (not including extensions)
and if the Depositor designates the contribution as a contribution for the
preceding taxable year in a manner acceptable to the Custodian. The Custodian
will not be liable or responsible for any consequences of postal delays or
delays resulting from an incomplete Application or a designation made in an
unacceptable form. Applications received by the Custodian postmarked after the
deadline will be treated as a contribution for the Depositor's current tax year.
Improperly completed applications will be returned to the sender.
8.16 When Effective: This Agreement shall not become effective until acceptance
of the Application by the Custodian, as evidenced by a written confirmation to
the Depositor.
8.17 Simplified Employee Pension Plan: Under a Simplified Employee Pension (SEP)
Plan that meets the requirements of Section 408(h) of the Code, your employer
may make contributions to your IRA. Your employer is required to provide you
with information which describes the terms of your employer's plan.
8.18 What Law Applies: This Agreement and the IRA shall be construed,
administered and enforced according to laws of the State of Missouri.
If any part of this Agreement is held to be illegal or invalid, the remaining
parts shall not be affected. Neither your nor our failure to enforce at any time
or for any period of time any of the provisions of this Agreement shall be
construed as a waiver of such provisions, or your right or our right thereafter
to enforce each and every such provision.
INSTRUCTIONS
(Section references are to the Internal Revenue Code unless otherwise noted.)
PURPOSE OF FORM
Form 5305-A is a model Custodial account Agreement that meets the requirements
of Section 408(a) and has been automatically approved by the IRS. An individual
retirement account (IRA) is established after the form is fully executed by both
the individual (Depositor) and the Custodian and must be completed no later than
the due date of the individual's income tax return for the tax year (without
regard to extensions). This account must be created in the United States for the
exclusive benefit of the Depositor or his or her Beneficiaries.
Individuals may rely on regulations of the Tax Reform Act of 1986 to the extent
specified in those regulations.
Do not file Form 5305-A with the IRS. Instead, keep it for your records.
For more information on IRAs, including the required disclosure, you can get
from your Custodian, get IRS Publication 590, Individual Retirement Arrangements
(IRAs).
DEFINITIONS
Custodian: The Custodian must be a bank or savings and loan association, as
defined in Section 408(n), or other person who has the approval of the IRS to
act as Custodian.
Depositor: The Depositor is the person who establishes the Custodial account.
IDENTIFYING NUMBER
The Depositor's social security number will serve as the identification number
of his or her IRA. An employer identification number is required only for an IRA
for which a return is filed to report unrelated business taxable income. An
employer identification number is required for a common fund created for IRAs.
IRA FOR NON-WORKING SPOUSE
Form 5305-A may be used to establish the IRA Custodial account for a non-working
spouse.
Contributions to an IRA Custodial account for a non-working spouse must be made
to a separate IRA Custodial account established by the non-working spouse.
SPECIFIC INSTRUCTIONS
Article IV: Distributions made under this Article may be made in a single sum,
periodic payment, or a combination of both. The distribution option should be
reviewed in the year the Depositor reaches age 70 1/2 to ensure that the
requirements of Section 408(a)(6) have been met.
Article VIII: Article VIII and any that follow it may incorporate additional
provisions that are agreed upon by the Depositor and Custodian to complete the
Agreement. They may include, for example, definitions, investment powers, voting
rights, exculpatory provisions, amendment and termination, removal of Custodian,
Custodian's fees, State law requirements, beginning date of distributions,
accepting only cash, treatment of excess contributions, prohibited transactions
with the Depositor, etc. Use additional pages if necessary and attach them to
this form. NOTE: Form 5305-A may be reproduced and reduced in size for adoption
to passbook purposes.
(C)1997 Universal Pensions, Inc., Brainerd, MN 56401
THE SELIGMAN IRA
Disclosure Statement
RIGHT TO REVOKE YOUR IRA
If you receive this Disclosure Statement at the time you establish your IRA, you
have the right to revoke your IRA within seven (7) days of its establishment. If
revoked, you are entitled to a full return of the contribution you made to your
IRA. The amount returned to you would not include an adjustment for such items
as sales commissions, administrative expenses, or fluctuation in market value.
You may make this revocation only by mailing or delivering a written notice to
Seligman Retirement Services, c/o Seligman Data Corp., at the address listed on
the Application. If you send your notice by first-class mail, your revocation
shall be deemed mailed as of the date of the postmark. If you have any questions
about the procedure for revoking your IRA, please call Seligman Retirement
Services, c/o Seligman Data Corp., at the telephone number listed on the
Application.
REQUIREMENTS OF AN IRA
A. Cash Contributions - Your contribution must be in cash, unless it is a
rollover contribution.
B. Maximum Contribution - The total amount you may contribute to an IRA for
any taxable year cannot exceed the lesser of $2,000 or 100 percent of your
compensation.
C. Nonforfeitability - Your interest in your IRA is nonforfeitable.
D. Eligible Custodians- The Custodian of your IRA must be a bank, savings and
loan association, credit union, or a person approved by the Secretary of
the Treasury.
E. Commingling Assets - The assets of your IRA cannot be commingled with other
property except in a common trust fund or common investment fund.
F. Life Insurance - No portion of your IRA may be invested in life insurance
contracts.
G. Collectibles - You may not invest the assets of your IRA in collectibles
(within the meaning of Internal Revenue Code (IRC) Section 408(m)). A
collectible is defined as any work of art, rug or antique, metal or gem,
stamp or coin, alcoholic beverage, or any other tangible personal property
specified by the Internal Revenue Service. Specially minted United States
gold and silver bullion coins and certain state-issued coins are
permissible IRA investments.
H. Required Minimum Distributions - You are required to take minimum
distributions from your IRA at certain times in accordance with Proposed
Treasury Regulations Section 1.408-8. Below is a summary of the IRA
distribution rules.
1. You are required to take a minimum distribution from your IRA for the
year in which you reach age 70 1/2 and for each year thereafter. You
must take your first payout by your required beginning date, April 1
of the year following the year you attain age 70 1/2. The minimum
distribution for any taxable year is equal to the amount obtained by
dividing the account balance at the end of the prior year (less any
required distribution taken between January 1 and April 1 of the year
following the year you attain age 70 1/2) by the joint life expectancy
of you and your designated beneficiary. If you have not designated a
beneficiary for your IRA by your required beginning date, your single
life expectancy will be used.
2. Your single or joint life expectancy is determined by using the IRS
unisex life expectancy tables. You can find these tables in Treasury
Regulations Section 1.72-9. We may establish a policy dictating
whether or not life expectancies may be recalculated in determining
required minimum distributions from your IRA. Alternatively, we may
allow you to elect whether or not to recalculate your life
expectancies. You may choose (within the limits set forth in the
distribution rules and our life expectancy recalculation policy) how
you want your required minimum distributions structured. You must make
your payment elections no later than April 1 following your 70 1/2
year. If you do not make an election by that date, we may do any one
of the following:
(a) make no payment until you give us a proper payout request,
(b) pay your entire IRA to you in a single sum payment, or
(c) determine your required minimum distribution each year based on
your single life expectancy (not recalculated) and pay those
distributions to you until you direct otherwise.
3. If you name someone other than your spouse as your beneficiary, and
your beneficiary is more than 10 years younger than you, your required
minimum distributions must satisfy the Minimum Distribution Incidental
Benefit (MDIB) rule. The MDIB rule generally requires that your
required minimum distributions be calculated as if your beneficiary
were exactly 10 years younger than you.
4. If you die,
(a) on or after your required beginning date, distributions must be
made to your beneficiary or beneficiaries at least as rapidly as
under the method being used to determine minimum distributions as
of the date of your death.
(b) before your required beginning date, the entire amount remaining
in your account will, at the election of your beneficiary or
beneficiaries, either
(i) be distributed by December 31 of the year containing the
fifth anniversary of your death, or
(ii) be distributed in equal or substantially equal payments over
the life or life expectancy of your designated beneficiary
or beneficiaries.
Your beneficiary or beneficiaries must elect either option (i) or (ii) by
December 31 of the year following the year of your death. If no election is
made, distribution will be made in accordance with (ii) if the beneficiary is
your surviving spouse, and in accordance with (i) if your beneficiary is not
your surviving spouse. In the case of distributions under (ii), distributions
must commence by December 31 of the year following the year of your death. If
your spouse is the beneficiary, distributions need not commence until December
31 of the year you would have attained age 70 1/2, if later.
INCOME TAX CONSEQUENCES OF ESTABLISHING AN IRA
A. IRA Deductibility - If you are under age 70 1/2 and have earned income from
services rendered, you may make an IRA contribution of the lesser of 100
percent of compensation or $2,000. However, the amount of the contribution
for which you may take a tax deduction will depend upon whether you (or
your spouse) are an active participant in an employer-maintained retirement
plan. If you (and your spouse) are not an active participant, your IRA
contribution will be totally deductible. If you (or your spouse) are an
active participant, the deductibility of your contribution will depend on
your adjusted gross income (AGI) for the tax year for which the
contribution was made. AGI is determined on your tax return (disregarding
any deductible IRA contribution).
Definition of Active Participant - Generally, you will be an active
participant if you are covered by one or more of the following
employer-maintained retirement plans:
1. a qualified pension, profit sharing, 401(k), or stock bonus plan;
2. a qualified annuity plan of an employer;
3. a simplified employee pension (SEP) plan;
4. a retirement plan established by the Federal government, a State, or a
political subdivision (except certain unfunded deferred compensation plans
under IRC Section 457);
5. a tax-sheltered annuity for employees of certain tax-exempt organizations
or public schools;
6. a qualified plan for self-employed individuals (H.R. 10 or Keogh Plan); and
7. a SIMPLE IRA plan or a SIMPLE 401(k) Plan.
If you do not know whether your employer maintains one of these plans or whether
you are an active participant in it, check with your employer and your tax
advisor. Also, the Form W-2 (Wage and Tax Statement) that you receive at the end
of the year from your employer will indicate whether you are an active
participant.
If you are single, your threshold AGI level is $25,000. The threshold level if
you are married and file a joint tax return is $40,000, and if you are married
but file a separate tax return, the threshold level is $0. If your AGI is less
than $10,000 above your threshold level, you will still be able to make a
deductible contribution but it may be limited in amount (but never less than
$200).
The deductible amount of your contribution is determined by taking your
threshold AGI level plus $10,000 (e.g., $50,000 if you are married and filing
jointly, $35,000 if you are single) and subtracting from it your AGI (determined
prior to taking your itemized deductions). Multiply the resulting number by .2
to give you your personal deduction limit. You must round up the resulting
number to the next highest $10 if the number is not a multiple of 10.
B. Tax-Deferred Earnings - The investment earnings of your IRA are not subject
to federal income tax until distributions are made (or, in certain
instances, when distributions are deemed to be made).
C. Nondeductible Contributions - You may make nondeductible contributions to
your IRA to the extent that deductible contributions are not allowed. The
sum of your deductible and nondeductible IRA contributions cannot exceed
your contribution limit (the lesser of $2,000 or 100 percent of
compensation). You may elect to treat deductible IRA contributions as
nondeductible contributions. If you make nondeductible contributions for a
particular tax year, you must report the amount of the nondeductible
contribution on your federal income tax return (using IRS Form 8606). If
you overstate the amount of designated nondeductible contributions for any
taxable year, you are subject to a $100 penalty unless reasonable cause for
the overstatement can be shown. Failure to file any form required by the
IRS to report nondeductible contributions (e.g., IRS Form 8606) will result
in a $50 per failure penalty.
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D. Taxation of Distributions - The taxation of IRA distributions depends on
whether or not you have ever made nondeductible IRA contributions. If you
have only made deductible contributions, any IRA distribution will be fully
included in income.
If you have ever made nondeductible contributions to any IRA, the following
formula must be used to determine the amount of any IRA distribution
excluded from income:
(Aggregate Nondeductible Contributions)
x (Amount Withdrawn)
------------------------------------- = Amount Excluded From Income
AGGREGATE IRA BALANCE
NOTE: Aggregate nondeductible contributions include all nondeductible
contributions made by you through the end of the year of the distribution
(which have not previously been withdrawn and excluded from income). Also
note that aggregate IRA balance includes the total balance of all of your
IRAs as of the end of the year of distribution and any distributions
occurring during the year.
E. Rollovers - Your IRA may be rolled over to an IRA of yours, or may receive
rollover contributions, provided that all of the applicable rollover rules
are followed. Rollover is a term used to describe a tax-free movement of
cash or other property to your IRA from any of your IRAs, or from your
employer's Qualified Retirement Plan or Tax-Sheltered Annuity. SIMPLE IRA
funds may not be rolled over to your IRA during the first two years you
participate in your employer's SIMPLE IRA plan. The rollover rules are
generally summarized below. These transactions are often complex. If you
have any questions regarding a rollover, please see a competent financial
or tax advisor.
1. IRA to IRA Rollovers - Funds distributed from your IRA may be rolled
over to an IRA of yours if the requirements of IRC Section 408(d)(3)
are met. A proper IRA to IRA rollover is completed if all or part of
the distribution is rolled over not later than 60 days after the
distribution is received. You may not have completed another IRA to
IRA rollover from the distributing IRA during the 12 months preceding
the date you receive the distribution. Further, you may roll the same
dollars or assets only once every 12 months.
2. Qualified Plan (or Tax-Sheltered Annuity) to IRA Rollovers - Effective
for qualified plan distributions received after January 1, 1993, you
may roll over, directly or indirectly, any eligible rollover
distribution. An eligible rollover distribution is defined generally
as any distribution from a qualified plan (other than distributions to
non-spouse beneficiaries) unless it is part of a certain series of
substantially equal periodic payments, after-tax dollars or a required
minimum distribution. If you elect to receive your rollover
distribution prior to placing it in an IRA, thereby conducting an
indirect rollover, your plan administrator will generally be required
to withhold 20 percent of your distribution as a prepayment of income
taxes. When completing the rollover, you may make up the amount
withheld, out of pocket, and roll over the full amount distributed
from your qualified plan balance, if you so choose. To qualify as a
rollover, your eligible rollover distribution must be rolled over to
your IRA not later than 60 days after you receive it. Alternatively,
you may claim the withheld amount as income and pay the applicable
income tax and, if you are under age 59 1/2, the 10 percent early
distribution penalty (unless an exception to the penalty applies). As
an alternative to the indirect rollover, your employer generally must
give you the option of directly rolling your qualified plan balance
over to an IRA. If you elect the direct rollover option, your eligible
rollover distribution will be paid directly to the IRA (or other
qualified plan) that you designate. The 20 percent withholding
requirements do not apply to direct rollovers. If you place your
rollover contribution in a separate (i.e., conduit) IRA plan which
holds just those dollars, you preserve the right to later roll over
the money originating from the qualified plan into another qualified
plan.
3. Written Election - At the time you make a proper rollover to an IRA,
you must designate to the Custodian, in writing, your election to
treat that contribution as a rollover. Once made, the rollover
election is irrevocable.
F. Carryback Contributions - A contribution is deemed to have been made on the
last day of the preceding taxable year if you make a contribution by the
deadline for filing your income tax return (not including extensions), and
you designate that contribution as a contribution for the preceding taxable
year. For example, if you are a calendar year taxpayer and you make your
IRA contribution on or before April 15, your contribution is considered to
have been made for the previous tax year if you designated it as such.
LIMITATIONS AND RESTRICTIONS
A. SEP Plans - Under a Simplified Employee Pension (SEP) Plan that meets the
requirements of IRC Section 408(k), your employer may make contributions to
your IRA. Your employer is required to provide you with information which
describes the terms of your employer's SEP Plan.
B. Spousal IRA - If you are married, you may make payments to an IRA
established for the benefit of your spouse. Your spouse must not have
attained age 70 1/2 in that year, or any prior year, even if you are age
70 1/2 or older. You must file a joint tax return for the year for which
the contribution is made. The amount you may contribute to your IRA and
your spouse's IRA is the lesser of $4,000 or 100 percent of your combined
compensation. However, you may not contribute more than $2,000 to any one
IRA.
C. Deduction of Rollovers and Transfers - A deduction is not allowed for
rollover or transfer contributions.
D. Estate Tax Exclusion - The $100,000 Federal estate tax exclusion previously
available has been repealed for individuals dying after 12/31/84. No
exclusion will be allowed for individuals dying after that date. Transfers
of your IRA assets to a named beneficiary made during your life and at your
request or because of your failure to instruct otherwise, may be subject to
Federal gift tax under IRC Section 2501 if made after October 22, 1986.
E. Special Tax Treatment - Capital gains treatment and the favorable five or
ten year forward averaging tax authorized by IRC Section 402 do not apply
to IRA distributions.
F. Income Tax Treatment- Any withdrawal from your IRA, except a direct
transfer, is subject to Federal income tax withholding. You may, however,
elect not to have withholding apply to your IRA withdrawal. If withholding
is applied to your withdrawal, not less than 10 percent of the amount
withdrawn must be withheld.
G. Prohibited Transactions - If you or your beneficiary engage in a prohibited
transaction with your IRA, as described in IRC Section 4975, your IRA will
lose its tax-exempt status and you must include the value of your account
in your gross income for that taxable year.
H. Pledging - If you pledge any portion of your IRA as collateral for a loan,
the amount so pledged will be treated as a distribution and will be
included in your gross income for that year.
FEDERAL TAX PENALTIES
A. Early Distribution Penalty - If you are under age 59 1/2 and receive an IRA
distribution, an additional tax of 10 percent will apply, unless made on
account of death, disability, a qualifying rollover, a direct transfer, the
timely withdrawal of an excess contribution; or if the distribution is part
of a series of substantially equal periodic payments (at least annual
payments) made over your life expectancy or the joint life expectancy of
you and your beneficiary. Beginning January 1, 1997, payments made to pay
medical expenses which exceed 7.5 percent of your adjusted gross income and
distributions to pay for insurance by an individual who has separated from
employment and who has received unemployment compensation under a federal
or state program for at least 12 weeks are also exempt from the 10 percent
tax. This additional tax will apply only to the portion of a distribution
which is includible in your income.
B. Excess Contribution Penalty - An excise tax of 6 percent is imposed upon
any excess contribution you make to your IRA. This tax will apply each year
in which an excess remains in your IRA. An excess contribution is any
contribution amount which exceeds your contribution limit, excluding
rollover and direct transfer amounts. Your contribution limit is the lesser
of $2,000 or 100 percent of your compensation for the taxable year.
C. Excess Accumulation Penalty - One of the requirements listed above is that
you must take a minimum distribution for the year you attain age 70 1/2 and
for each year thereafter and that your designated beneficiary(ies) is
required to take certain minimum distributions after your death. An
additional tax of 50 percent is imposed on the amount of the required
minimum distribution which should have been taken but was not. This tax is
referred to as an excess accumulation penalty tax.
D. Excess Distribution Penalty - You will be taxed an additional 15 percent on
any amount received and included in income during a calendar year from
qualified retirement plans, tax-sheltered annuities and IRAs which exceeds
$112,500 (indexed each year for the cost of living). Certain exceptions may
apply. If you receive an excess distribution as described above, you should
see your tax advisor to determine if these exceptions apply to you. This
tax is referred to as an excess distribution penalty. However, this penalty
is suspended for payments received during 1997, 1998, and 1999 as a result
of the Small Business Job Protection Act of 1996.
E. Excess Retirement Accumulation Penalty - Your estate will have to pay
additional Federal estate tax if you die with an excess retirement
accumulation. The increased estate tax will be equal to 15 percent of the
excess retirement accumulation. An excess retirement accumulation exists
if, at the time of your death, the value of all of your interests in
qualified plans, tax-sheltered annuities and IRAs exceeds the present value
of an annuity with annual payments of $112,500 (indexed each year for the
cost of living), payable over your life expectancy immediately before your
death. This tax is referred to as an excess retirement accumulation tax
penalty.
F. Penalty Reporting - You must file Form 5329 with the Internal Revenue
Service to report and remit any penalties or excise taxes.
OTHER
A. IRS Plan Approval - The Agreement used to establish this IRA has been
approved by the Internal Revenue Service. The Internal Revenue Service
approval is a determination only as to form. It is not an endorsement of
the plan in operation or of the investments offered.
B. Additional Information - You may obtain further information on IRAs from
your District Office of the Internal Revenue Service. In particular, you
may wish to obtain IRS Publication 590, Individual Retirement Arrangements.
(C)1997 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
________
SELIGMAN
________
SELIGMAN
________
SELIGMAN
This material is authorized for use only in the case of a concurrent or prior
delivery of the offering prospectus of any of the Seligman Mutual Funds eligible
for The Seligman SIMPLE IRA Plan. For complete information on any of the other
Seligman Mutual Funds eligible for The Seligman SIMPLE IRA Plan, including a
prospectus that contains information about investment policies, sales charges,
and other expenses, please contact your financial advisor or call Seligman
Retirement Services at (800)445-1777. Please read the prospectus carefully
before you invest or send money.
(C)1997 Universal Pensions, Inc., Brainerd, MN 56401
SELIGMAN
================================================================================
THE SELIGMAN
SIMPLE IRA
PLAN SET-UP
KIT FOR EMPLOYERS
-----------------
o Adoption Agreement
o Employer Profile
o Employer Contribution
Worksheet
o Participation Notice &
Summary Description
o Basic Plan Document
[LOGO]
<PAGE>
SELIGMAN SIMPLE IRA PLAN
Establishing a Plan is Easy
1. Read through this booklet before signing any forms. You may want to consult
your tax and/or legal advisor prior to establishing your plan.
2. Complete and sign the Seligman SIMPLE IRA Plan Adoption Agreement on page
3. You will need to set your plan parameters for employee participation.
3. Complete and sign the Employer Profile on page 4. You will need to
determine how you will make Employer Contributions. We have provided a
useful worksheet on page 5 to help you.
4. Send a copy of the SIMPLE IRA Plan Adoption Agreement and the Employer
Profile, in the pre-paid envelope provided, to: Retirement Services c/o
Seligman Data Corp. 100 Park Avenue New York, NY 10017
5. Distribute a photocopy of the completed Participation Notice & Summary
Description (pages 7 and 8) to each employee. New plans may be established
any time during a year up to October 1. You must distribute this notice up
to 60 days before the effective date, but no later than your plan's
effective date.
Subsequent enrollment periods will begin November 2 and end December 31 of
each year. Your employees must receive a new Participation Notice & Summary
Description at a reasonable time before each annual enrollment period.
Seligman will assist you with these legal notice requirements.
---------------
Seligman Offers
a SIMPLE IRA
Program at No
Cost for Both
You and Your
Employees
---------------
Upon receipt of your plan information, Seligman will provide you with the
procedures for depositing contributions. Your Financial Advisor will provide you
with enrollment material and forms to allow employees to make investments in the
Seligman Group of Funds.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Key Benefits and Provisions 1
Adoption Agreement Instructions 2
Adoption Agreement 3
Employer Profile 4
Employer Contribution Worksheet 5
Comparing Employer Contribution Options 6
Participation Notice & Summary Description 7
Basic Plan Document 9
- --------------------------------------------------------------------------------
Questions? Call Seligman Retirement Services at (800) 445-1777
<PAGE>
SELIGMAN SIMPLE IRA PLAN
Key Benefits and Provisions
WHAT IS A SIMPLE IRA PLAN?
A Savings Incentive Match Plan for Employees (SIMPLE) allows you to provide an
important retirement benefit to yourself and your employees. Employee salary
reduction contributions and employer contributions under a SIMPLE IRA Plan are
deposited into your employees' individual SIMPLE IRAs, which are similar to
regular IRAs.
WHAT ARE THE BENEFITS OF A SIMPLE IRA PLAN?
o Tax Advantages: SIMPLE IRA contributions made to your own and your
employees' SIMPLE IRAs are tax deductible to your business. Because all
contributions are deposited into SIMPLE IRAs, all earnings are
tax-sheltered, meaning they are not taxed until withdrawn.
o Employee Retention: Similar to other employer-sponsored retirement plans, a
SIMPLE IRA Plan serves as part of your employee benefits package to help
attract and retain quality employees.
o Flexible Eligibility Requirements: You must cover all employees who have
earned at least $5,000 during any two preceding years and are expected to
earn that amount during the current year. However, you may exclude
non-resident aliens and certain union members.
o Flexible Contributions: Each employee, including yourself, specifies the
percentage of pay to withhold and contribute to his or her account each
year. Contributing Participants may defer up to $6,000 annually (assuming
they earn at least $6,000). In addition, an employer must make either
matching contributions, generally dollar-for-dollar up to 3% of each
contributing participant's compensation, or nonelective contributions,
equal to 2% of each eligible participant's compensation.* The match may be
reduced under certain conditions. Mandatory employer contributions,
including those you make to yourself, safeguard you from the complex, and
sometimes costly, testing generally required of qualified plans. You have
until the due date for filing your business tax return (plus extensions) to
make employer contributions.
o Employee-Directed Accounts: Employees are responsible for all investment
decisions within their SIMPLE IRAs, thereby helping to limit employer
fiduciary liability.
o Distributions: When taking a distribution from a SIMPLE IRA, normal IRA
rules generally apply. Distributions must begin by April 1 of the year
following the year the SIMPLE IRA holder reaches age 70 1/2. Distributions
prior to age 59 1/2 are generally subject to early distribution penalties.
Please consult your tax advisor for specifics.
o Low Maintenance: Unlike qualified plans and Keoghs, there is minimal
reporting, no discrimination testing, and no third-party recordkeeping
required in a SIMPLE IRA Plan.
- --------------------------------------------------------------------------------
IS YOUR COMPANY ELIGIBLE FOR A SIMPLE IRA PLAN?
Please consider the following to determine if your business is eligible to
establish a SIMPLE IRA Plan. You may wish to consult your tax and/or legal
advisor in selecting the plan features that best suit your business needs.
o You must own or control a business in order to establish a SIMPLE IRA
Plan.
o A SIMPLE IRA Plan is for businesses with 100 or fewer employees who
received at least $5,000 in compensation in the previous calendar
year.
o Your business may not have maintained another qualified plan at any
time during the current year, where contributions were made or
benefits accrued.
o If your business is a member of a controlled group, affiliated service
group, or uses the services of leased employees, please contact your
tax advisor. You may have to include leased employees and/or employees
of your other businesses in the SIMPLE IRA Plan.
- --------------------------------------------------------------------------------
* For purposes of the 2% nonelective contribution, compensation is capped at
$160,000 for tax year 1997.
1
<PAGE>
SELIGMAN SIMPLE IRA PLAN
Adoption Agreement Instructions
Seligman Retirement Services is available to help you fill out the Adoption
Agreement. These instructions are designed to serve as a general guide and are
not intended to substitute for qualified legal or tax advice.
- --------------------------------------------------------------------------------
SECTION I. EMPLOYER INFORMATION
- --------------------------------------------------------------------------------
Fill in the requested information.
- --------------------------------------------------------------------------------
SECTION 2. EFFECTIVE DATE
- --------------------------------------------------------------------------------
Your SIMPLE IRA Plan is either a new plan (an initial adoption) or an amendment
and restatement of an existing SIMPLE Plan.
If this is a new Plan, check Option A and fill in your effective date. The
effective date is usually the first day of the Plan Year in which this Adoption
Agreement is signed. For example, if this Adoption Agreement is signed on
September 24, 1997, the effective date would be January 1, 1997.
If you are adopting this Plan to amend and replace an existing SIMPLE IRA Plan,
check Option B. The existing plan to be replaced is called a "prior plan." You
will need to know the effective date of the prior plan. The best way to
determine its effective date is to refer to the prior plan Adoption Agreement.
The effective date of this amendment and restatement must be the first day of
the Plan Year in which the Adoption Agreement is signed.
- --------------------------------------------------------------------------------
SECTION 3. ELIGIBILITY REQUIREMENTS (Complete even if you do not have
employees)
- --------------------------------------------------------------------------------
Within limits, you as the Employer can specify the compensation your employees
must earn from you over a period of years before they are eligible to
participate in this Plan. Note that the eligibility requirements that you set up
for the Plan also apply to you.
Part A. Service/Compensation Requirement
Fill in the participation requirements, including the minimum annual
compensation required for participation. In addition, provide the number of
preceding years needed to satisfy the minimum compensation requirement.
Part B. Exclusion of Certain Classes of Employees
All employees will be eligible to become participants unless indicated otherwise
in the Adoption Agreement. To exclude employees, select the class(es) of
employees you wish to exclude from participating in this Plan. The following
describes the employees that may be excluded:
1. Employees covered by the terms of a collective bargaining agreement
(e.g., a union agreement) where retirement benefits were bargained
for.
2. Employees who are non-resident aliens without any US income.
- --------------------------------------------------------------------------------
SECTION 4. ELECTIVE DEFERRALS (Salary Reductions)
- --------------------------------------------------------------------------------
Contributing Participants may specify a percentage of compensation they wish to
contribute to this Plan. There are no blanks to be completed in Section 4.
Seligman will provide a Salary Reduction Agreement (elective deferral agreement)
to all eligible employees during the enrollment period.
- --------------------------------------------------------------------------------
SECTION 5. EMPLOYER CONTRIBUTIONS
- --------------------------------------------------------------------------------
Each year, you are required to make Matching or Nonelective Contributions to the
SIMPLE IRAs of Participants, in accordance with the Basic Plan Document. Fill in
the amount of annual compensation required for Participants to be eligible to
receive Nonelective Contributions, should they be made (even if you will be
making a matching contribution this year). This amount will be effective should
you choose the Nonelective Contribution option in future years.
- --------------------------------------------------------------------------------
SECTION 6. EMPLOYER SIGNATURE
- --------------------------------------------------------------------------------
An authorized representative of the Employer must sign and date this Adoption
Agreement.
2 (C)1997 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
SELIGMAN SIMPLE IRA PLAN
Adoption Agreement
Return a copy of this completed form to Retirement Services c/o Seligman Data
Corp. and file the original.
- --------------------------------------------------------------------------------
SECTION I. EMPLOYER INFORMATION
- --------------------------------------------------------------------------------
Name of Employer _______________________________________________________________
Address ________________________________________________________________________
City ______________________________ State _____________________ Zip ___________
Telephone ______________________ Income Tax Year End ___________________________
Employer's Federal Tax ID Number _______________________________________________
- --------------------------------------------------------------------------------
SECTION 2. EFFECTIVE DATE
- --------------------------------------------------------------------------------
Check and complete Option A or B.
Option A [ ] This is the initial adoption of a SIMPLE IRA plan by the
Employer. The effective date of this Plan is ____________________
Note: The effective date is usually the first day of the year in
which this Adoption Agreement is signed.
Option B [ ] This is an amendment and restatement of an existing SIMPLE IRA
Plan (a Prior Plan). The Prior Plan was initially
effective on ____________________________________________________
The effective date of this amendment and restatement is
January 1,________
- --------------------------------------------------------------------------------
SECTION 3. ELIGIBILITY REQUIREMENTS (Complete even if you do not have
employees)
- --------------------------------------------------------------------------------
Complete Parts A and B.
Part A. Service Requirement: For any year, an Employee will be eligible to
become a Participant in the Plan provided the Employee has received at
least $_______________ (enter a dollar amount no greater than $5,000)
in Compensation from the Employer during any _______________(enter 0,
1 or 2) preceding Years and is reasonably expected to receive at least
such amount in Compensation during the Year.
Part B. Exclusion of Certain Classes of Employees: All Employees will be
eligible to become Participants in the Plan except (check any that
apply):
[ ] Collective bargaining unit Employees as described in Section
3.02(A) of the Plan.
[ ] Non-resident aliens as described in Section 3.02(B) of the Plan.
- --------------------------------------------------------------------------------
SECTION 4. ELECTIVE DEFERRALS (Salary Reductions)
- --------------------------------------------------------------------------------
A Contributing Participant may elect, under an elective deferral agreement, to
have his or her compensation reduced by a percentage. The amount of such
reduction shall be contributed by the Employer under the Plan to a SIMPLE IRA on
behalf of the Contributing Participant. For any Year, a Contributing
Participant's Elective Deferrals shall not exceed $6,000 (indexed for
cost-of-living increases in accordance with Section 408(p)(2)(E) of the Code).
- --------------------------------------------------------------------------------
SECTION 5. EMPLOYER CONTRIBUTIONS
- --------------------------------------------------------------------------------
Each Year, the Employer shall make the Matching Contributions or Nonelective
Contributions to the SIMPLE IRAs of Participants in accordance with the rules
described in Section 4.02 of the Plan.
For any year the Employer makes Nonelective Contributions, such contributions
will be made on behalf of each Participant who has at least $______________
(enter a dollar amount no less than the amount entered in Section 3, Part A
above and no greater than $5,000) of Compensation for such year.
- --------------------------------------------------------------------------------
SECTION 6. EMPLOYER SIGNATURE
- --------------------------------------------------------------------------------
Signature of Employer _________________________________ Date Signed ___________
Print Name ____________________________________________
Note to Employer: Before signing this Adoption Agreement you should obtain the
advice of a qualified attorney and/or tax advisor regarding the legal and tax
implications of adopting this Plan.
Name of Prototype Sponsor Seligman Common Stock Fund, Inc.
Address 100 Park Avenue, New York, NY 10017
Phone (800) 445-1777
(C)1997 Universal Pensions, Inc., Brainerd, MN 56401 3
<PAGE>
SELIGMAN SIMPLE IRA PLAN
Employer Profile
Return a copy of this completed form to Retirement Services c/o Seligman Data
Corp. and file the original.
- --------------------------------------------------------------------------------
EMPLOYER INFORMATION
- --------------------------------------------------------------------------------
Company Name ________________________ Type of Business:[ ] Sole Proprietorship
Contact Person _____________________ [ ] Partnership [ ] Corp. [ ] S Corp.
Name of Your Financial Advisor _______________ Broker/Dealer Firm ______________
(required)
- --------------------------------------------------------------------------------
EMPLOYEE INFORMATION
- --------------------------------------------------------------------------------
o Number of employees in your company, including yourself __________________
o Based on your selected eligibility requirements, number of employees
eligible to participate __________________________________________________
o Number of eligible employees that you estimate will actually make salary
deferrals (reductions) into the Plan ______________________________________
- --------------------------------------------------------------------------------
CONTRIBUTIONS
- --------------------------------------------------------------------------------
o Please indicate how you will be making employer contributions for the
current plan year. You may use the worksheet on the facing page to
calculate the costs of each type of employer contribution. Choose only one
of the following:
[ ] The Employer will match dollar-for-dollar up to 3% of each
Contributing Participant's compensation, not to exceed $6,000.
[ ] The Employer will match dollar-for-dollar up to ______ (insert a
percentage between 1% and 3%) of each Contributing Participant's
compensation, not to exceed $6,000. (This option may be chosen for no
more than two years in a five-year period).
[ ] The Employer will make a nonelective contribution of 2% of
compensation for each Eligible Participant, as defined in Section 5 of
the Adoption Agreement, even if the Eligible Participant chooses not
to make Salary Reductions to the Plan. Compensation is capped at
$160,000 for 1997 and will be indexed for inflation in future years.
o Payroll frequency: [ ] Weekly [ ] Bi-Weekly [ ] Semi-Monthly [ ] Monthly
o Employee Salary Reductions must be deposited as soon as possible but no
later than the 30th day following the last day of the month in which
deferrals are withheld from employees' compensation. Employer contributions
must be made by your company's tax filing deadline, including extensions,
for the taxable year for which the contributions are made.
o How often will you send Employee Salary Reductions to Seligman?
[ ] Bi-Weekly [ ] Semi-Monthly [ ] Monthly
o How often will you send employer contributions to Seligman?
[ ] Bi-Weekly [ ] Semi-Monthly [ ] Monthly [ ] Annually [ ] Other_______
- --------------------------------------------------------------------------------
EMPLOYEE NOTICE REQUIREMENT
- --------------------------------------------------------------------------------
o Date you provided or will provide initial Participation Notice & Summary
Description __________________________________
o Note: Each year before the 60-day election period (November 2 - December
31), you must provide a written notice to your employees containing the
following SIMPLE Plan information:
o Your name and address;
o The requirements for eligibility for participation;
o The benefits provided with respect to the arrangement;
o The time and method of making elections with respect to the
arrangement and;
o The effects of withdrawal.
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE
- --------------------------------------------------------------------------------
I certify that the above information is correct. I understand that my choice for
employer contributions will carry forth for the Plan Year, as indicated on the
Adoption Agreement. I understand that I may modify my employer contribution
choice next year with proper notification to employees. I further certify that I
will provide employees the annual Participation Notice & Summary Description,
containing the information listed above, on a timely basis.
- --------------------------------------------------------------------------------
Signature of Employer Print Name Date
4
<PAGE>
SELIGMAN SIMPLE IRA PLAN
Employer Contribution Worksheet
SIMPLE IRA plans require an employer to make either dollar-for-dollar matching
contributions or nonelective contributions to employees. You are permitted to
change your employer contribution option annually, provided all eligible
employees are notified of the change in a reasonable time before the start of
each annual enrollment period (November 2 - December 31).
The following worksheet will help you estimate and compare the costs of employer
contributions under the three available scenarios. You will have to select one
option to get started and indicate your choice on the Employer Profile.
This worksheet is intended to assist you in understanding the impact of the
alternative employer contribution options available under the SIMPLE. Actual
required contributions will vary depending on participation rates, employee
salary reduction percentages, and the addition or termination of employees. This
worksheet is not intended as a substitute for advice from your tax advisor.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
EXAMPLE YOUR COMPANY
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
A. Number of eligible employees, including yourself 15 A. __________
B. Number of eligible employees you expect will contribute to the Plan 12 B. __________
C. Average annual salary of eligible employees, including yourself* $32,000 C.$__________
D. Average annual salary of eligible employees you expect will contribute to the Plan $34,000 D.$__________
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
SCENARIO ONE: 3% Matching Contribution for contributing employees
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
E. Average employer matching contribution per employee (multiply Line D by 3%)** $1,020 E.$__________
F. Estimated cost to employer for 3% match (multiply Line E by Line B) $12,240 F.$__________
(assumes each employee defers the maximum of 3%)
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
SCENARIO TWO: 1% Reduced Match (available for only two years in any five-year period) for contributing employees
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
G. Average employer matching contribution per employee (multiply Line D by 1%) $ 340 G.$__________
H. Estimated cost to employer for reduced match (multiply Line G by Line B) $4,080 H.$__________
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
SCENARIO THREE: 2% Nonelective Contribution for all eligible employees
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
I. Average nonelective contribution per eligible employee (multiply Line C by 2%) $ 640 I.$__________
J. Estimated cost to employer for 2% nonelective contribution (multiply Line I by Line A) $9,600 J.$__________
</TABLE>
* For the purposes of determining the 2% nonelective contribution for
eligible employees, the compensation cap is $160,000 for 1997. No
compensation cap is imposed for matching contributions.
** Employer matching contributions may not exceed $6,000.
5
<PAGE>
SELIGMAN SIMPLE IRA PLAN
Comparing Employer Contribution Options
To help you understand which employer contribution is best for your company, you
should review your objectives and consider your employee demographics which will
have an effect on your contribution choice.
Are you concerned with:
o maximizing your own contributions?
Between your salary reductions and a matching contribution, you may be
able to contribute up to $12,000 per year toward retirement. A match
would allow you to put away more than the 2% nonelective contribution,
which is capped at $160,000 of compensation.
o maximizing participation rates?
The 3% match offers employees the greatest incentive to join the Plan.
o maximizing the benefits you provide to all employees?
The 2% nonelective contribution covers all employees, even those who
choose not to participate.
o high turnover?
The 3% match rewards only those who participate in the Plan, and can
be lowered to as little as 1% in any two of five years. Those who
participate in the Plan perceive it as a benefit and may be less
likely to leave your company.
o costs?
If you have high participation rates, either the 2% nonelective or the
3% match (reduced in two of five years to 1%) will work.
If you have low participation rates, the 3% match is your best option
since you only contribute to those employees who participate.
If you have a large number of very highly compensated employees,
consider selecting the 2% nonelective option, because the contribution
to the employee is limited to $3,200 due to the $160,000 compensation
cap in 1997. The matching contribution could be as high as $6,000.
The following table illustrates some differences between each employer
contribution option. It is intended to provide examples of cost estimates under
different scenarios.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Option 1 Option 2
3% Match 2% nonelective contribution
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
A. Employee contributes 6% of Employer matches 3% of $35,000, or $1,050. Employer contributes 2% of $35,000, or $700.
his $35,000 salary to the Plan. If match is reduced to 1% in any two of five
years, employer matches $350.
- ------------------------------------------------------------------------------------------------------------------------------------
B. Employee contributes 2% of Employer matches only 2% of $35,000, or $700. Employer contributes 2% of $35,000, or $700.
his $35,000 salary to the Plan. If match is reduced to 1% in any two of five
years, employer matches $350.
- ------------------------------------------------------------------------------------------------------------------------------------
C. Employee contributes $6,000 Employer matches only 3% of $15,000, or $450. Employer contributes 2% of $15,000, or $300.
of his $15,000 salary to the Plan. If match is reduced to 1% in any two of five
years, employer matches $150.
- ------------------------------------------------------------------------------------------------------------------------------------
D. Employee contributes $6,000 Employer matches 3% of $225,000 with a Employer contributes 2% of compensation
of his $225,000 salary to the Plan. match cap of $6,000. Employer matches capped at $160,000 for 1997, or $3,200.
$6,000. If match is reduced to 1% in
any two of five years, employer matches
$2,250.
- ------------------------------------------------------------------------------------------------------------------------------------
E. Employee contributes $0 of his Employer matches nothing. Employer contributes 2% of $35,000, or $700.
$35,000 salary to the Plan.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
SELIGMAN SIMPLE IRA PLAN
Participation Notice & Summary Description
- --------------------------------------------------------------------------------
SECTION A. GENERAL INFORMATION
- --------------------------------------------------------------------------------
IMPORTANT: Carefully read and consider the information on both sides of this
notice before you decide whether to start, continue or change your Salary
Reduction Agreement.
Employer and Plan Information __________________________________________________
Employer Name __________________________________________________________________
Address ________________________________________________________________________
City _______________________________ State _____________________ Zip ___________
- --------------------------------------------------------------------------------
SECTION B. ELIGIBILITY REQUIREMENTS
- --------------------------------------------------------------------------------
Opportunity to Participate
This form is intended, in part, to notify you of your right during the
Enrollment Period, to choose to make Elective Deferrals (Salary Reductions)
under the Savings Incentive Match Plan for Employees (SIMPLE IRA Plan)
established by your Employer. The Enrollment Period is generally the 60-day
period before the beginning of each year and the 60-day period before the first
day you become eligible to participate. This notice includes a Summary
Description of your Employer's SIMPLE IRA Plan.
Compensation and Service
You are required to earn at least $_______________ (may not exceed $5,000)
during any _____________ (may not exceed 2) preceding years to be eligible to
participate in the Plan, and you must reasonably be expected to earn such amount
during the current year unless otherwise specified below.
Eligible Employees
You will be eligible to participate in this Plan unless you are:
o covered by a collective bargaining agreement.
o a non-resident alien with no earned income from your Employer.
- --------------------------------------------------------------------------------
SECTION C. PLAN CONTRIBUTIONS
- --------------------------------------------------------------------------------
Elective Deferrals (Salary Reductions)
By completing a Salary Reduction Agreement, you agree to make Elective Deferrals
to this Plan. Your compensation will be reduced each pay period by an amount
equal to the percentage of your compensation you specify on the Salary Reduction
Agreement. In no event, however, may your Elective Deferrals exceed $6,000
during any calendar year.
You may change the amount of your Elective Deferrals by completing and signing a
revised Salary Reduction Agreement during the Enrollment Period or any other
period specified below.
You may discontinue making Elective Deferrals at any time during the year by
completing and signing a revised Salary Reduction Agreement. You are allowed to
begin making Elective Deferrals the first day of the year following the year you
cease deferring unless specified otherwise below.
- --------------------------------------------------------------------------------
Financial Institution
The Seligman Group of Funds will provide you with necessary applications for you
to establish a Seligman SIMPLE IRA. Should you have any questions, please call
Seligman Retirement Services at (800) 445-1777. Your Employer will not be making
contributions to a Designated Financial Institution. You must select the
financial organization that will serve as trustee, custodian or issuer of your
SIMPLEIRA, and notify your Employer by providing a completed Salary Reduction
Agreement.
(C)1997 Universal Pensions, Inc., Brainerd, MN 56401 7
<PAGE>
Participation Notice & Summary Description (continued)
Employer Contributions
For calendar year ______________, your Employer will make the following
contribution:
[ ] OPTION 1: Matching contributions equal to 100% of your Elective Deferrals
(Salary Reductions) which do not exceed 3% of your compensation.
[ ] OPTION 2: Matching contributions in an amount equal to your Elective
Deferrals which do not exceed ______% (must not be less than 1%).
[ ] OPTION 3: Nonelective contributions equal to 2% of compensation on behalf
of each Participant who earns at least $5,000 during the year
unless a different dollar amount is specified below.
You are required to earn at least $___________ (may not exceed
$5,000) during the year to be eligible to receive nonelective
contributions.
- --------------------------------------------------------------------------------
SECTION D. DISTRIBUTIONS
- --------------------------------------------------------------------------------
The following is a summary of the rules applicable to distributions from SIMPLE
IRAs. You are advised to refer to your SIMPLE IRA documents and/or seek the
assistance of a qualified tax advisor if you have additional questions.
Procedures
SIMPLE IRA assets are fully vested and may be withdrawn at any time subject to
taxes and penalties as explained below. The custodian of your SIMPLE IRA, and
not your Employer, is responsible for making distributions to you upon your
request.
Federal Income Tax
Distributions from SIMPLE IRAs are taxed as ordinary income in the Year in which
you receive them. In addition, federal income tax withholding will be applied to
your distribution at a rate of 10% unless you specify a higher rate or waive
your right to withholding.
Penalties
Early Distribution Penalty -- A 25% early withdrawal penalty applies to SIMPLE
IRA distributions taken within two years of your initial participation in the
Plan, unless you are age 59 1/2 or older, or can claim an exemption from the
early distribution penalty described in Internal Revenue Code (IRC) Sec.
72(t)(6). If you are under age 59 1/2, have satisfied the two-year requirement,
and receive a distribution, you will be subject to a 10% early distribution
penalty.
Excess Distribution Penalty -- You will be taxed an additional 15% on any amount
received and included in income during a calendar year from IRAs, SIMPLE IRAs,
and other retirement plans which exceed $160,000 (indexed for the cost of
living). The excess distribution penalty, however, does not apply for tax years
1997, 1998 or 1999. Certain other exceptions may apply.
Rollovers
SIMPLE IRA distributions may be rolled over to other SIMPLE IRAs. Rollovers from
regular IRAs are not permitted. If a SIMPLE IRA distribution is properly rolled
over, your rollover amount will be excluded when determining the amount of your
federal income tax, early distribution penalty, or excess distribution. You may
roll over SIMPLE IRA distributions to regular IRAs. However, you must generally
wait two years from the date you become a participant before doing so.
Required Minimum Distributions
You are generally required to begin taking minimum distributions from your
SIMPLE IRA upon attainment of age 70 1/2 in accordance with IRS regulations.
8 (C)1997 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
SELIGMAN SIMPLE IRA PLAN
(SAVINGS INCENTIVE MATCH PLAN FOR EMPLOYEES)
Basic Plan Document
- --------------------------------------------------------------------------------
SECTION 1 ESTABLISHMENT AND PURPOSE OF PLAN
- --------------------------------------------------------------------------------
1.01 PURPOSE The purpose of this Plan is to provide, in accordance with its
provisions, a SIMPLE IRA plan providing benefits upon retirement for the
individuals who are eligible to participate hereunder.
1.02 INTENT TO QUALIFY It is the intent of the Employer that this Plan shall be
for the exclusive benefit of its Employees and shall qualify for approval under
Section 408(p) of the Internal Revenue Code, as amended from time to time (or
corresponding provisions of any subsequent Federal law at that time in effect)
as a SIMPLE IRA plan. This document is intended to conform with the applicable
rules and procedures of the Internal Revenue Service that apply to prototype
SIMPLE IRA plans. It is further intended that it comply, to the extent
applicable, with the provisions of the Employee Retirement Income Security Act
of 1974 (ERISA) as amended from time to time. In case of any ambiguity, it shall
be interpreted to accomplish the foregoing intentions.
1.03 EXCLUSIVE PLAN REQUIREMENT An Employer cannot maintain this Plan for any
Year if the Employer (or a predecessor employer) maintained a qualified plan
with respect to which contributions were made, or benefits were accrued, for
service in any Year in the period beginning with the Year this Plan became
effective and ending with the Year for which the determination is being made.
For purposes of this Section 1.03, the term "qualified plan" means a plan,
contract, pension or trust described in subparagraph (A) or (B) of Section
219(g)(5) of the Code.
1.04 USE WITH SIMPLE IRA This prototype SIMPLE IRA Plan must be used with a
SIMPLE IRA.
1.05 FOR MORE INFORMATION To obtain more information concerning the rules
governing this Plan, contact the Prototype Sponsor listed in Section 6 of the
Adoption Agreement.
- --------------------------------------------------------------------------------
SECTION 2 DEFINITIONS
- --------------------------------------------------------------------------------
2.01 ADOPTION AGREEMENT Means the document executed by the Employer through
which it adopts the Plan and thereby agrees to be bound by all terms and
conditions of the Plan.
2.02 CODE Means the Internal Revenue Code of 1986 as amended.
2.03 COMPENSATION Shall mean all of a Participant's wages and certain elective
deferrals as described in paragraphs (3) and (8) of Section 6051(a) of the Code.
For any Self Employed Individual covered under the Plan, Compensation will
mean Earned Income.
Compensation shall include only that Compensation which is actually paid to the
Participant during the Year.
For purposes of the 2% Nonelective Contribution described in Section 4.02(C),
the annual Compensation of each Employee taken into account under the Plan shall
not exceed $160,000, as adjusted by the Internal Revenue Service for increases
in the cost of living in accordance with Section 401(a)(17)(B) of the Code. The
cost of living adjustment in effect for a calendar year applies to any period,
not exceeding 12 months, over which Compensation is determined (determination
period) beginning in such calendar year.
2.04 CONTRIBUTING PARTICIPANT Means a person who has met the participation
requirements and who has enrolled as a Contributing Participant pursuant to
Section 3.04 and on whose behalf the Employer is contributing Elective
Deferrals.
2.05 EARNED INCOME Means the net earnings from self- employment in the trade or
business with respect to which the Plan is established, determined under Section
1402(a) of the Code prior to subtracting any contributions made pursuant to this
Plan on behalf of the individual.
2.06 EFFECTIVE DATE Means the date the Plan becomes effective as indicated in
the Adoption Agreement.
2.07 ELECTION PERIOD Means the period during which a Participant may enroll as a
Contributing Participant. The Election Period shall be the 60-day period
immediately before the beginning of any Year. However for the year in which a
Participant becomes eligible to participate, the period in which a Participant
may enroll as a Contributing Participant is a 60-day period that includes either
the date the Participant becomes eligible to participate or the day before that
date or any other period as may be allowed under rules or procedures promulgated
by the Internal Revenue Service.
2.08 ELECTIVE DEFERRAL AGREEMENT Means an agreement, on a form provided by the
Employer, pursuant to which a Contributing Participant may elect to have his or
her Compensation reduced and paid as an Elective Deferral to his or her SIMPLE
IRA by the Employer. No Elective Deferral Agreement may apply to Compensation
that a Contributing Participant received, or had a right to immediately receive,
before execution of the Elective Deferral Agreement.
2.09 ELECTIVE DEFERRALS Mean contributions made by the Employer to the Plan on
behalf of a Contributing Participant pursuant to Section 4.01.
2.10 EMPLOYEE Means any person who is employed by the Employer as a common law
employee and if the Employer is a sole proprietorship or partnership, any Self
Employed Individual who performs services with respect to the trade or business
of the Employer. Further, any employee of any other employer required to be
aggregated under Section 414(b), (c), (m), or (o) of the Code and any leased
employee required to be treated as an employee of the Employer under Section
414(n) of the Code shall also be considered an Employee.
2.11 EMPLOYER Means any corporation, partnership or sole proprietorship named in
the Adoption Agreement and any successor
(C)1997 Universal Pensions, Inc., Brainerd, MN 56401 9
<PAGE>
who by merger, consolidation, purchase or otherwise assumes the obligations of
the Plan, provided such entity meets the eligibility requirement described in
this Section 2.11. A partnership is considered to be the Employer of each of the
partners and a sole proprietorship is considered to be the Employer of the sole
proprietor.
An Employer meets the eligibility requirement and therefore will be eligible to
maintain this Plan with respect to any Year only if the Employer had no more
than 100 Employees who received at least $5,000 of Compensation from the
Employer for the preceding Year.
An eligible Employer who establishes and maintains a SIMPLE IRA plan for one or
more Years and who fails to be an eligible Employer for any subsequent Year
shall be treated as an eligible Employer for the two Years following the last
Year the Employer was an eligible Employer. If such failure is due to any
acquisition, disposition, or similar transaction involving an eligible Employer,
the preceding sentence shall apply only in accordance with rules similar to the
rules of Section 410(b)(6)(C)(i) of the Code.
2.12 EMPLOYER CONTRIBUTION Means the amount contributed by the Employer to this
Plan.
2.13 MATCHING CONTRIBUTION Means an Employer Contribution made pursuant to this
Plan on behalf of a Contributing Participant on account of an Elective Deferral
made by such Contributing Participant, as described in Section 4.02(B).
2.14 NONELECTIVE CONTRIBUTION Means an Employer Contribution made pursuant to
this Plan as described in Section 4.02(C).
2.15 PARTICIPANT Means any Employee who has met the eligibility requirements of
Section 3.01 and who may enroll as a Contributing Participant and who is or may
become eligible to receive an Employer Contribution.
2.16 PLAN Means this plan document plus the corresponding Adoption Agreement as
completed and signed by the Employer.
2.17 PRIOR PLAN Means a SIMPLE IRA plan which was amended or replaced by
adoption of this plan document, as indicated in the Adoption Agreement.
2.18 PROTOTYPE SPONSOR Means the entity specified in the Adoption Agreement
which sponsors this prototype Plan.
2.19 SELF EMPLOYED INDIVIDUAL Means an individual who has Earned Income for a
Plan Year from the trade or business for which the Plan is established; also, an
individual who would have had Earned Income but for the fact that the trade or
business had no net profits for the Plan Year.
2.20 SIMPLE IRA Means the Individual Retirement Account or Individual Retirement
Annuity, which satisfies the requirements of Section 408(a) or 408(b) of the
Code, and, with respect to which, the only contributions allowed are
contributions under a SIMPLE IRA plan.
2.21 YEAR Means the calendar year.
- --------------------------------------------------------------------------------
SECTION 3 ELIGIBILITY AND PARTICIPATION
- --------------------------------------------------------------------------------
3.01 ELIGIBILITY REQUIREMENTS Except for those Employees excluded pursuant to
Section 3.02, each Employee of the Employer who fulfills the eligibility
requirements specified in the Adoption Agreement shall become a Participant.
Each Participant must establish a SIMPLE IRA to which Employer Contributions
under this Plan will be made.
3.02 EXCLUSION OF CERTAIN EMPLOYEES
A. Collective Bargaining Unit Employees
If the Employer has so indicated in the Adoption Agreement the following
Employees will not be eligible to become Participants in the Plan:
Those employees included in a unit of Employees covered by a collective
bargaining agreement between the Employer and Employee representatives, if
retirement benefits were the subject of good faith bargaining and if two
percent or less of the Employees who are covered pursuant to that agreement
are professionals as defined in Section 1.410(b)-9 of the Treasury
Regulations. For this purpose, the term "employee representatives" does not
include any organization more than half of whose members are Employees who
are owners, officers, or executives of the Employer.
B. Non-Resident Aliens
If the Employer has so indicated in the Adoption Agreement the following
Employees will not be eligible to become Participants in the Plan:
Those Employees who are non-resident aliens (within the meaning of Section
7701(b)(1)(B) of the Code) and who received no earned income (within the
meaning of Section 911(d)(2) of the Code) from the Employer which
constitutes income from sources within the United States (within the
meaning of Section 861(a)(3) of the Code).
3.03 ADMITTANCE AS A PARTICIPANT
A. Notification of Eligibility - The Employer shall notify each Employee
who becomes a Participant of his or her status as a Participant in the Plan
and of his or her duty to establish a SIMPLE IRA to which Employer
Contributions may be made. The Employer must permit each eligible Employee
to select the financial institution that will serve as trustee, custodian
or issuer of the SIMPLEIRA to which the Employer will make all
contributions on behalf of that Employee.
B. Establishment of a SIMPLE IRA - If a Participant fails to establish a
SIMPLE IRA for whatever reason, the Employer may execute any necessary
documents to establish a SIMPLE IRA on behalf of the Participant.
3.04 CONTRIBUTING PARTICIPANT
A. Requirements to Enroll as a Contributing Participant
Each Employee who becomes a Participant may enroll as a Contributing
Participant. A Participant who desires to enroll as a Contributing
Participant must complete, sign and deliver to the Employer an Elective
Deferral Agreement during the Election Period. In addition, the Employer in
a uniform and nondiscriminatory manner may provide additional opportunities
for Participants to enroll as Contributing Participants in accordance with
procedures established by the Employer.
B. Modification of Elective Deferrals
A Contributing Participant may modify his or her Elective Deferral
Agreement to increase or decrease the amount of his or her Compensation
deferred into his or her SIMPLE IRA under the Plan. A Contributing
Participant who desires to make such a modification shall complete, sign
and file a new Elective Deferral Agreement with
10 (C)1997 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
the Employer during the Election Period. In addition, if the Employer in a
uniform and nondiscriminatory manner permits, a Contributing Participant
may modify his or her Elective Deferral Agreement more frequently in
accordance with procedures established by the Employer.
C. Withdrawal as a Contributing Participant
A Participant may withdraw as a Contributing Participant at any time during
the Year by revoking his or her authorization to the Employer to make
Elective Deferrals on his or her behalf. A Participant who desires to
withdraw as a Contributing Participant shall give written notice of
withdrawal to the Employer. A Participant shall cease to be a Contributing
Participant upon his or her termination of employment, or on account of
termination of the Plan.
D. Return as Contributing Participant after Withdrawal
A Participant who has withdrawn as a Contributing Participant may not again
become a Contributing Participant until the first day of the first Year
following the effective date of his or her withdrawal as Contributing
Participant, unless the Employer, in a uniform and nondiscriminatory
manner, permits withdrawing Participants to resume their status as
Contributing Participants sooner.
3.05 DETERMINATIONS UNDER THIS SECTION The Employer shall determine the
eligibility of each Employee to be a Participant. This determination shall be
conclusive and binding upon all persons except as otherwise provided herein or
by law.
3.06 LIMITATION RESPECTING EMPLOYMENT Neither the fact of the establishment of
the Plan nor the fact that a commonlaw employee has become a Participant shall
give to that commonlaw employee any right to continued employment; nor shall
either fact limit the right of the Employer to discharge or to deal otherwise
with a commonlaw employee without regard to the effect such treatment may have
upon the Employee's rights under the Plan.
- --------------------------------------------------------------------------------
SECTION 4 CONTRIBUTIONS AND ALLOCATIONS
- --------------------------------------------------------------------------------
4.01 ELECTIVE DEFERRALS At the election of a Contributing Participant, the
Employer shall contribute Elective Deferrals to the SIMPLE IRA of such
Contributing Participant. Elective Deferrals for a Contributing Participant must
be deposited to the SIMPLE IRA of such Contributing Participant by the Employer
as of the earliest date on which such Elective Deferrals can reasonably be
segregated from the Employer's general assets, but in no event later than the
close of the 30-day period following the last day of the month with respect to
which the contributions are to be made. Thus, for example, amounts that a
Contributing Participant elects to defer with respect to the month of March of a
Year must be contributed by the Employer to the Contributing Participant's
SIMPLE IRA not later than the following April 30th.
4.02 REQUIRED EMPLOYER CONTRIBUTIONS
A. Employer Must Make Certain Contributions
Each Year, the Employer shall make either the Matching Contribution
described in Section 4.02(B) or the Nonelective Contribution described in
Section 4.02(C) to the SIMPLE IRAs of Participants. Such contributions for
any Year shall be made not later than the due date for filing the
Employer's tax return for such Year (including extensions).
B. Matching Contribution
The Employer may satisfy the requirement set forth in Section 4.02(A) by
making a Matching Contribution to the SIMPLE IRA of each Contributing
Participant for any Year in an amount equal to so much of the amount of the
Contributing Participant's Elective Deferral as does not exceed 3% of the
Contributing Participant's Compensation for the Year (the "Matching
Contribution percentage"). Instead of the 3% Matching Contribution
percentage referred to in the previous sentence, the Employer may elect to
apply a lower Matching Contribution percentage (not less than 1%) for any
Year for all Contributing Participants if the Employer notifies the
Employees eligible to participate in the Plan of such lower Matching
Contribution percentage within a reasonable period of time before the
Election Period for such Year. The Employer may not elect a lower Matching
Contribution percentage for any Year if that election would result in the
Matching Contribution percentage being lower than 3% in more than 2 of the
Years in the 5-Year period ending with such Year. If any Year in the 5-Year
period described in the preceding sentence is a Year prior to the first
Year for which this SIMPLE IRA plan (or a Prior Plan) is in effect with
respect to the Employer (or any predecessor employer), the Employer shall
be treated as if the Matching Contribution percentage was equal to 3% of
Compensation for such prior Year.
C. Nonelective Contribution
The Employer may satisfy the requirement set forth in Section 4.02(A) by
making a Nonelective Contribution of 2% of Compensation to the SIMPLE IRA
of each Participant who has at least $5,000 of Compensation (or such lesser
amount of Compensation as may be specified in the Adoption Agreement) from
the Employer for the Year provided the Employer notifies the Employees
eligible to participate in the Plan that the Employer will be making a
Nonelective Contribution within a reasonable period of time before the
Election Period for such Year.
4.03 NO OTHER CONTRIBUTIONS The Employer shall make no contributions to the
SIMPLE IRAs of Participants other than Elective Deferrals made pursuant to
Section 4.01 and those contributions required under Section 4.02. Nothing herein
shall prevent an Employee from rolling over or transferring funds from another
SIMPLE IRA to a SIMPLE IRA maintained under this Plan.
4.04 VESTING AND WITHDRAWAL RIGHTS All Employer Contributions made under the
Plan on behalf of Employees shall be fully vested and nonforfeitable at all
times. Each Employee shall have an unrestricted right to withdraw at any time
all or a portion of the Employer Contributions made on his or her behalf.
However, withdrawals taken are subject to the taxation and penalty provisions of
the Code which are applicable to distributions from SIMPLE IRAs.
4.05 SIMPLIFIED EMPLOYER REPORTS The Employer shall furnish reports, relating to
account activity under the Plan, in the time and manner and containing the
information prescribed by the Secretary of the Treasury. The Employer shall
furnish information to the trustee, custodian or issuer of SIMPLE IRAs of
Participants as such trustee, custodian or issuer may reasonably request to
enable it to fulfill its reporting and other responsibilities in connection with
this SIMPLE IRA plan or the SIMPLE IRAs of Participants.
(C)1997 Universal Pensions, Inc., Brainerd, MN 56401 11
<PAGE>
- --------------------------------------------------------------------------------
SECTION 5 AMENDMENT OR TERMINATION OF PLAN
- --------------------------------------------------------------------------------
5.01 AMENDMENT BY EMPLOYER The Employer reserves the right to amend the
elections made or not made on the Adoption Agreement by executing a new Adoption
Agreement and delivering a copy of the same to the Prototype Sponsor. The
Employer shall not have the right to amend any nonelective provision of the
Adoption Agreement nor the right to amend provisions of this plan document. If
the Employer adopts an amendment to the Adoption Agreement or plan document in
violation of the preceding sentence, the Plan will be deemed to be an
individually designed plan and may no longer participate in this prototype Plan.
5.02 AMENDMENT BY PROTOTYPE SPONSOR By adopting this Plan, the Employer
delegates to the Prototype Sponsor the power to amend or replace the Adoption
Agreement of the Plan to conform them to the provisions of any law, regulations
or administrative rulings pertaining to SIMPLE IRA plans and to make such other
changes to the Plan, which, in the judgment of the Prototype Sponsor, are
necessary or appropriate. The Employer shall be deemed to have consented to all
such amendments; provided however, that no changes may be made without the
consent of the Employer if the effect would be to substantially change the costs
or benefits under the Plan. The Prototype Sponsor shall not have the obligation
to exercise or not to exercise the power delegated to it nor shall the Prototype
Sponsor incur liability of any nature for any act done or failed to be done by
the Prototype Sponsor in good faith in the exercise or nonexercise of the power
delegated hereunder. The Prototype Sponsor shall notify the Employer should it
discontinue sponsorship of the Plan. For purposes of Prototype Sponsor
amendments, the mass submitter shall be recognized as the agent of the Prototype
Sponsor. The Prototype Sponsor's duties are limited to those expressly assigned
to it under the terms of this Plan together with any requirements of prototype
sponsors of SIMPLE IRA plans that may be set forth from time to time by the
Internal Revenue Service under its rules and procedures. The Prototype Sponsor
shall not be responsible for any duties assigned to the Employer.
5.03 LIMITATIONS ON POWER TO AMEND No amendment by either the Employer or the
Prototype Sponsor shall reduce or otherwise adversely affect any benefits of a
Participant acquired prior to such amendment unless it is required to maintain
compliance with any law, regulation or administrative ruling pertaining to
SIMPLE IRA plans.
5.04 TERMINATION While the Employer expects to continue the Plan indefinitely,
the Employer shall not be under any obligation or liability to continue
contributions or to maintain the Plan for any given length of time. The Employer
may terminate this Plan at any time by appropriate action of its managing body.
This Plan shall terminate on the occurrence of any of the following events:
A. Delivery to the Prototype Sponsor of a notice of termination executed by
the Employer specifying the effective date of the Plan's termination.
B. Adjudication of the Employer as bankrupt or the liquidation or
dissolution of the Employer.
5.05 NOTICE OF AMENDMENT OR TERMINATION Any amendment or termination shall be
communicated by the Employer to all appropriate parties as required by law.
Amendments made by the Prototype Sponsor shall be furnished to the Employer and
communicated by the Employer to all appropriate parties as required by law. Any
filings required by the Internal Revenue Service or any other regulatory body
relating to the amendment or termination of the Plan shall be made by the
Employer.
5.06 CONTINUANCE OF PLAN BY SUCCESSOR EMPLOYER A successor of the Employer may
continue the Plan and be substituted in the place of the present Employer. The
successor and present Employer (or if deceased, the executor of the estate of a
deceased Self-Employed Individual who was the Employer) must execute a written
instrument authorizing such substitution and the successor must complete and
sign a new Adoption Agreement.
5.07 SENDING OF NOTICES BY U.S. MAIL Any notice required under this Plan may be
provided by U.S. mail. If mailed, a notice will be considered effective at the
time it is mailed to the last known address of the intended recipient which is
on file with the provider of the notice.
5.08 LIMITATION OFLIABILITY The Prototype Sponsor, trustee, custodian or issuer
of a SIMPLE IRA shall not be liable for any losses incurred by the SIMPLE IRA by
any direction to invest communicated by the Employer, or any Participant or
beneficiary. It is specifically understood that the Prototype Sponsor, trustee,
custodian or issuer shall have no duty or responsibility with respect to the
determination of the adequacy of contributions to the Plan and enforcing the
payment of such contributions. In addition, it is specifically understood that
the Prototype Sponsor, trustee, custodian or issuer shall have no duty or
responsibility with respect to the determination of matters pertaining to the
eligibility of any Employee to become a Participant or remain a Participant
hereunder, the amount of benefit to which the Participant or beneficiary shall
be entitled to receive hereunder or whether a distribution to Participant or
beneficiary is appropriate under the terms of the Plan; it being understood that
all such responsibilities under the Plan are vested in the Employer.
12 (C)1997 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
---------------------------------------------------------------
FOR MORE INFORMATION
If you have questions regarding the set up of your Seligman
SIMPLE IRA Plan, or need additional information, please contact
Seligman Retirement Services at (800) 445-1777.
---------------------------------------------------------------
THE SELIGMAN SIMPLE IRA
Plan Agreement
Form 5305-SA Under Section 408(a) of the Internal Revenue Code
FORM (REV. DEC. 1996)
The Participant whose name appears on the attached Application is establishing a
savings incentive match plan for employees of small employers individual
retirement account (SIMPLE IRA) under Sections 408(a) and 408(p) of the Internal
Revenue Code to provide for his or her retirement and for the support of his or
her beneficiaries after death.
The Custodian named on the Application has given the Participant the disclosure
statement required under Regulations Section 1.408-6.
The Participant and the Custodian make the following Agreement:
ARTICLE I
The Custodian will accept cash contributions made on behalf of the Participant
by the Participant's employer under the terms of a SIMPLE plan described in
Section 408(p). In addition, the Custodian will accept transfers or rollovers
from other SIMPLE IRAs of the Participant. No other contributions will be
accepted by the Custodian.
ARTICLE II
The Participant's interest in the balance in the Custodial account is
nonforfeitable.
ARTICLE III
1. No part of the Custodial funds may be invested in life insurance contracts,
nor may the assets of the Custodial account be commingled with other
property except in a common trust fund or common investment fund (within
the meaning of Section 408(a)(5)).
2. No part of the Custodial funds may be invested in collectibles (within the
meaning of Section 408(m)) except as otherwise permitted by Section
408(m)(3), which provides an exception for certain gold and silver coins
and coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this Agreement to the contrary, the
distribution of the Participant's interest in the Custodial account shall
be made in accordance with the following requirements and shall otherwise
comply with Section 408(a)(6) and Proposed Regulations Section 1.408-8,
including the incidental death benefit provisions of Proposed Regulations
Section 1.401(a)(9)-2, the provisions of which are incorporated by
reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Participant under paragraph 3, or to the surviving spouse under
paragraph 4, other than in the case of a life annuity, life expectancies
shall be recalculated annually. Such election shall be irrevocable as to
the Participant and the surviving spouse and shall apply to all subsequent
years. The life expectancy of a non-spouse beneficiary may not be
recalculated.
3. The Participant's entire interest in the Custodial account must be, or
begin to be, distributed by the Participant's required beginning date
(April 1 following the calendar year end in which the Participant reaches
age 70 1/2). By that date, the Participant may elect, in a manner
acceptable to the Custodian, to have the balance in the Custodial account
distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the
Participant.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last
survivor lives of the Participant and his or her designated
beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Participant's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor
expectancy of the Participant and his or her designated beneficiary.
4. If the Participant dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Participant dies on or after distribution of his or her
interest has begun, distribution must continue to be made in
accordance with paragraph 3.
(b) If the Participant dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Participant or, if the Participant has not so elected, at the election
of the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the
fifth anniversary of the Participant's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the
year of the Participant's death. If, however, the beneficiary is
the Participant's surviving spouse, then this distribution is not
required to begin before December 31 of the year in which the
Participant would have reached age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on
the Participant's required beginning date, even though payments may
actually have been made before that date.
(d) If the Participant dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse,
no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual
payment for each year, divide the Participant's entire interest in the
Custodial account as of the close of business on December 31 of the
preceding year by the life expectancy of the Participant (or the joint life
and last survivor expectancy of the Participant and the Participant's
designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under
paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Participant and
designated beneficiary as of their birthdays in the year the Participant
reaches age 70 1/2. In the case of a distribution in accordance with
paragraph 4(b)(ii), determine life expectancy using the attained age of the
designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits
an individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for
another.
ARTICLE V
1. The Participant agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under Section 408(i),
408(l)(2) and Regulations Sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Participant as prescribed by the Internal Revenue Service.
3. The Custodian also agrees to provide the Participant's employer the summary
description described in Section 408(l)(2) unless this SIMPLE IRA is a
transfer SIMPLE IRA.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with Section 408(a) and 408(p) and
related regulations will be invalid.
ARTICLE VII
This Agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear on the Application.
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ARTICLE VIII
8.01 Definitions: In this part of this Agreement (Article VIII), the words "you"
and "your" mean the Participant, the words "we," "us" and "our" mean the
Custodian and "Code" means the Internal Revenue Code. "Group Shares" shall mean
shares issued by any regulated investment company within the meaning of Section
851(a) of the Code, which are managed by J. & W. Seligman and Co. Incorporated.
8.02 Notices and Change of Address: Any required notice regarding this SIMPLE
IRA will be considered effective when we mail it to the last address of the
intended recipient which we have in our records. Any notice to be given to us
will be considered effective when we actually receive it. You must notify us of
any change of address.
8.03 Scope of the Depository's and the Custodian's Duties: Neither the Custodian
nor the Depository (Seligman Retirement Services, c/o Seligman Data Corp.) shall
be responsible for determining a Participant's eligibility for contributions or
rollovers into the Custodial account; nor for determining the necessity of
distributing benefits upon the Participant's death, if it has not been notified
of such death. Other than as prescribed by law, neither the Depository, nor the
Custodian, shall be responsible for determining the amount of, nor for making
Minimum Required Distributions to a Participant who has attained age 70 1/2, nor
to a beneficiary upon the Participant's death. The Custodian shall only be
liable under this Agreement for its own bad faith, gross negligence, or willful
misconduct. The Participant and the successors of the Participant including any
executor or administrator of the Participant shall, to the extent permitted by
law, indemnify the Custodian and its successors and assign against any and all
claims, actions or liabilities of the Custodian to the Participant or the
successors or beneficiaries of the Participant whatsoever (including without
limitation all reasonable expenses incurred in defending against or settlement
of such claims, actions or liabilities) which may arise in connection with this
Agreement or the Custodial account, except those due to the Custodian's own bad
faith, gross negligence or willful misconduct.
8.04 Expenses and Compensation: The Custodian may charge against and deduct from
the Custodial account all reasonable expenses incurred by the Custodian in the
administration of the Custodial account, including, but not limited to, any
income or other taxes that may be levied upon or with respect to the Custodial
account, counsel fees and reasonable compensation for its services as Custodian
hereunder or with respect to any controversies concerning the Custodial account.
The Custodian shall, without the prior consent of the Participant, also have the
right to initiate, increase or decrease a fee for its services under this
Agreement and such fee may be charged against and deducted from the Custodial
account. The annual fee in effect on the date of this Agreement is set forth in
the Application.
8.05 Investment of Amounts in the SIMPLE IRA:
(a) You must make an affirmative election among the investment options
beginning with the initial investment of any contribution to this SIMPLE
IRA. Each cash contribution to the Custodial account shall be applied by
the Custodian to the purchase of Seligman Group Shares (including
fractional Shares carried to the third decimal place) in the proportions
specified in written instructions of the Participant accompanying the
contribution. The Custodian shall not be liable for interest on any cash
balance in the Custodial account.
(b) Dividends, gain distributions, and any other cash payments attributable to
Seligman Group Shares held in the Custodial account will be invested in the
same Shares to which such payments are attributable. Where gain
distributions are payable in Seligman Group Shares or in cash, at the
option of the holder, the Custodian shall elect payment in full and
fractional Shares.
(c) The Participant may direct the Custodian at any time and from time to time
to exchange the Seligman Group Shares held in the Custodial account for
other Seligman Group Shares in accordance with the then current
prospectuses relating to such Shares.
(d) No part of the Custodial account assets shall be invested in life insurance
contracts or collectibles (as defined in Section 408(m) of the Code), nor
may the assets of the Custodial account be commingled with other property
except in a common trust fund or a common investment fund (within the
meaning of Section 408(a)(5) of the Code).
(e) All transactions shall be subject to any and all applicable Federal and
State laws and regulations and the rules, regulations, customs and usages
of any exchange, market or clearing house where the transaction is
executed, and to our policies and practices.
(f) After death, your beneficiary(ies) shall have the right to direct the
investment of your simple IRA assets, subject to the same conditions that
applied to you during your lifetime under this Agreement (including,
without limitation, Section 8.03).
(g) We shall have no discretion to direct any investment in your SIMPLE IRA. We
assume no responsibility for rendering investment advice with respect to
your SIMPLE IRA, nor will we offer any opinion or judgment to you
concerning the value or suitability of any investment or proposed
investment for your SIMPLE IRA. We shall not have any power or authority to
vote any shares with respect to Group Shares in your SIMPLE IRA, except in
accordance with the directions you provide us.
(h) We may, but are not required to, permit you to delegate your investment
responsibility for your SIMPLE IRA to another party acceptable to us by
giving written notice of your delegation in a format we prescribe. We shall
follow the direction of any such party who is properly appointed and we
shall be under no duty to review or question, nor shall we be responsible
for, any of that party's directions, actions or failures to act.
8.06 Judicial Settlement of Accounts: In the event of any dispute or uncertainty
as to the person to whom the payment of any funds shall be made hereunder, the
Custodian may withhold such payment until such dispute or uncertainty shall have
been determined or resolved by a court of competent jurisdiction, or settled by
the parties concerned.
The Custodian shall have the right to apply, at any time, to a court of
competent jurisdiction for the judicial settlement of its accounts. In any such
judicial action or proceeding, only the Custodian and the Participant (or in the
case of the Participant's death, his representative) shall be necessary parties,
and no other person having an interest in the Custodial account shall be
entitled to any notice or service of process. Any judgment entered in such
proceeding or action shall be conclusive upon all persons claiming under this
Agreement. In the event that the Custodian applies for a judicial settlement of
its accounts or any individual account, all fees and disbursements it incurs,
including but not limited to legal and accounting fees, shall be paid from the
Custodial account and shall constitute a lien against the account until paid.
8.07 Designation of Beneficiary:
(a) The Participant may designate and redesignate his beneficiary or
beneficiaries in writing on a form provided by the Custodian for such
purpose. The Custodian may in its discretion limit the designation of
beneficiary to those contemplated in the form provided, or may permit the
Participant to provide his or her own form, subject to the Custodian's
review and written acceptance. Upon the Participant's death, such
beneficiary(ies) should be entitled to the balance in the Custodial account
of the Participant. Such designation may be changed or revoked only by
written instrument filed with the Custodian. The Custodian may rely upon
the last written designation received by it, which shall supersede all
prior designations. If the beneficiary(ies) should predecease the
Participant, the designation shall be ineffective. Subject to the
provisions of the law, if another designation is not made, or if no
designation is in effect at the time of the Participant's death, a married
Participant's beneficiary shall be his or her surviving spouse, and an
unmarried Participant's beneficiary shall be the Participant's estate.
(b) Notwithstanding anything to the contrary in paragraph 8.07(a) above, upon
the Participant's death, a surviving spouse beneficiary may designate and
redesignate his or her beneficiary or beneficiaries in writing on a form
provided (or accepted) by the Custodian for such purpose. In a manner
similar to that provided for the Participant in paragraph 8.07(a) above,
such beneficiary(ies) shall be entitled to the balance in the Custodial
account upon the death of the surviving spouse.
(c) Where there is more than one beneficiary designated, distributions from the
Custodial account shall be made in the manner specified in the Designation
of Beneficiary section of the Application or, in the absence of any such
specification, distributions shall be made pro rata among those
beneficiaries who are alive at the time of the distribution.
8.08 Resignation or Removal of Custodian: The Custodian may resign at any time
upon sixty (60) days notice in writing to Seligman Retirement Services, c/o
Seligman Data Corp. Upon such resignation, Seligman Retirement Services, shall
notify the Participant, and shall appoint a successor custodian under this
Agreement. The Participant or Seligman Retirement Services, at any time, may
remove the Custodian upon 60 days written notice as filed with the Custodian.
Such notice must include designation of a successor custodian. The successor
custodian shall satisfy the requirements of section 408(h) of the Code. Upon
receipt by the Custodian of written acceptance of such appointment by the
successor custodian, the Custodian shall transfer and pay over to such successor
the assets of and records relating to the Custodial account. (The Custodian is
authorized, however, to reserve such sum of money as it may deem advisable for
payment of all fees, compensation, costs and expenses, or for payment of any
other liability constituting a charge on or against the assets of the Custodial
account or on or against the Custodian, and where necessary may liquidate shares
in the Custodial account for such payments.) Any balance of such reserve
remaining after the payment of all such items shall be paid over to the
successor custodian. The Custodian shall not be liable for the acts or omissions
of any predecessor or successor custodian or trustee.
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8.09 Amendments: The Participant and the Custodian delegate to Seligman
Retirement Services, the right to amend this Agreement (including retroactive
amendments) by written notice to the Custodian and the Participant. The
Participant shall be deemed to have consented to any such amendment, provided
that
(a) no amendment shall cause or permit any of the assets of the Custodial
account to be diverted to purposes other than for the exclusive benefit of
the Participant or his or her beneficiaries;
(b) any amendment which affects the rights, duties, or responsibilities of the
Custodian may only be made with the Custodian's consent; and
(c) no amendment shall be made except in accordance with any applicable laws
and regulations affecting this Agreement and Custodial account.
8.10 Withdrawals: All requests for withdrawal shall be in writing on a form
provided by or acceptable to us. The method of distribution must be specified in
writing. The tax identification number of the recipient must be provided to us
before we make a distribution.
Any withdrawals shall be subject to all applicable tax and other laws and
regulations including possible early withdrawal penalties and withholding
requirements.
8.11 Required Minimum Distributions: We reserve the right to elect whether or
not life expectancies will be recalculated in connection with required minimum
distributions from your SIMPLE IRA, provided, however, that we give you notice
of our election. Alternatively, we may allow you to make such an election.
As described in Article IV, Section 3, of this Agreement, you may make an
election to begin receiving payments from your SIMPLE IRA in a manner that
satisfies the required minimum distribution rules no later than April 1 of the
year following the year you reach age 70 1/2 . (This is called the "required
beginning date.") If you fail to make such an election by your required
beginning date, we can do any one of the following:
o make no payment until you give us a proper payment request;
o pay your entire SIMPLE IRA to you in a single sum payment; or
o calculate your required minimum distribution from your SIMPLE IRA each
year based on your single life expectancy (not recalculated) and pay
those distributions to you until you direct otherwise.
We will not be liable for any penalties or taxes related to your failure to take
a distribution. Consistent with Section 8.10, the Custodian is not obligated to
make any distributions absent a specific written direction, in a form acceptable
to and filed with the Custodian, from the Participant or designated beneficiary
to do so.
Except in the case of the Participant's death or disability (as defined in
Section 72(m)(7) of the Code), or the attainment of age of 59 1/2, before
distributing an amount from the account, the Custodian may require from the
Participant a declaration of the Participant's intention as to the disposition
of the amount distributed. The Custodian may at its option require each
(monthly, quarterly, semiannually, etc.) distribution in an installment series
to meet certain minimum amounts, which may necessitate the distribution of
amounts greater than otherwise required under Article IV.
8.12 Transfers From Other Plans: We can receive amounts transferred to this
SIMPLE IRA from the custodian or trustee of another SIMPLE IRA, including
rollovers and other contributions as tax law and related regulations may permit.
We reserve the right not to accept any transfer or rollover.
8.13 Transfers from Custodial Account: At the direction of the Participant, the
Custodian will transfer the amount in the Participant's Custodial account to
another individual retirement account designated by the Participant, the
custodian or trustee of which agrees to accept such transfer, or to an
individual retirement annuity contract, the issuer of which agrees to accept
such transfer. If such transfer is made within two years after the date of the
first contribution by the employer to the Participant's SIMPLE IRA account under
the employer's SIMPLE IRA plan, the Custodian will have the right to a
representation from the successor custodian or trustee that the successor IRA is
a SIMPLE IRA if required under applicable law.
The Custodian will have no responsibility for insuring compliance with the
requirements of Code section 408(p) and any other applicable requirements
(including whether such transferee individual retirement account or annuity
meets the requirement to be a SIMPLE IRA or whether the transferee financial
institution properly carries out the Participant's investment directions) in
connection with such transfer have been satisfied, or for any penalty taxes that
may be payable in connection therewith, which matters shall be the sole
responsibility of the Participant.
8.14 Liquidation of Assets: We have the right to liquidate assets in your SIMPLE
IRA if necessary to make distributions or to pay fees, expenses or taxes
properly chargeable against your SIMPLE IRA. If you fail to direct us as to
which assets to liquidate, we will determine and you agree not to hold us liable
for any adverse consequences that result from our decision.
8.15 Restrictions On The Fund: Neither you nor any beneficiary may sell,
transfer or pledge any interest in your SIMPLE IRA in any manner whatsoever,
except as provided by law or this Agreement.
The assets in your SIMPLE IRA shall not be responsible for the debts, contracts,
or torts of any person entitled to distributions under this Agreement.
8.16 When Effective: This Agreement shall not become effective until acceptance
of the Application by the Custodian, as evidenced by a written confirmation to
the Participant.
8.17 What Law Applies: This Agreement and the SIMPLE IRA shall be construed,
administered and enforced according to laws of the State of Missouri.
If any part of this Agreement is held to be illegal or invalid, the remaining
parts shall not be affected. Neither your nor our failure to enforce at any time
or for any period of time any of the provisions of this Agreement shall be
construed as a waiver of such provisions, or your right or our right thereafter
to enforce each and every such provision.
8.18 Summary Description Requirements: Notwithstanding Article V above, we will
be deemed to have satisfied our summary description reporting requirements under
Section 408(1)(2) of the Code if either:
(a) we provide a summary description directly to you, or
(b) we provide our name, address and withdrawal procedures to you and your
employer provides you with all other required information.
INSTRUCTIONS
(Section references are to the Internal Revenue Code unless otherwise noted.)
PURPOSE OF FORM
Form 5305-SA is a model Custodial account Agreement that meets the requirements
of Sections 408(a) and 408(p) and has been automatically approved by the IRS. An
individual retirement account (IRA) is established after the form is fully
executed by both the individual (Participant) and the Custodian. This account
must be created in the United States for the exclusive benefit of the
Participant or his or her beneficiaries.
Individuals may rely on regulations for Tax Reform Act of 1986 to the extent
specified in those regulations.
Do not file Form 5305-SA with the IRS. Instead, keep it for your records.
For more information on IRAs, including the required disclosures the Custodian
must give the Participant, get Pub. 590, Individual Retirement Arrangements
(IRAs).
DEFINITIONS
Participant: The Participant is the person who establishes the Custodial
account.
Custodian: The Custodian must be a bank or savings and loan association, as
defined in Section 408(n), or other person who has the approval of the IRS to
act as Custodian.
TRANSFER SIMPLE IRA
This SIMPLE IRA is a "transfer SIMPLE IRA" if it is not the original recipient
of contributions under any SIMPLE plan. The summary description requirements of
section 408(l)(2) do not apply to transfer SIMPLE IRAs.
SPECIFIC INSTRUCTIONS
Article IV: Distributions made under this Article may be made in a single sum,
periodic payment, or a combination of both. The distribution option should be
reviewed in the year the Participant reaches age 70 1/2 to ensure that the
requirements of Section 408(a)(6) have been met.
Article VIII: Article VIII and any that follow it may incorporate additional
provisions that are agreed to by the Participant and Custodian to complete the
Agreement. They may include, for example, definitions, investment powers, voting
rights, exculpatory provisions, amendment and termination, removal of Custodian,
Custodian's fees, State law requirements, beginning date of distributions,
accepting only cash, treatment of excess contributions, prohibited transactions
with the Participant, etc. Use additional pages if necessary and attach them to
this form.
NOTE: Form 5305-SA may be reproduced and reduced in size for adoption to
passbook purposes.
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THE SELIGMAN SIMPLE IRA
Disclosure Statement
RIGHT TO REVOKE YOUR SIMPLE IRA
If you receive this Disclosure Statement at the time you establish your SIMPLE
IRA, you have the right to revoke your SIMPLE IRA within seven (7) days of its
establishment. If revoked, you are entitled to a full return of the contribution
you made to your SIMPLE IRA. The amount returned to you would not include an
adjustment for such items as sales commissions, administrative expenses, or
fluctuation in market value. You may make this revocation only by mailing or
delivering a written notice to Seligman Retirement Services, c/o Seligman Data
Corp., at the address listed on the Application.
If you send your notice by first-class mail, your revocation will be deemed
mailed as of the date of the postmark.
If you have any questions about the procedure for revoking your SIMPLE IRA,
please call Seligman Retirement Services, c/o Seligman Data Corp., at the
telephone number listed on the Application.
REQUIREMENTS OF A SIMPLE IRA
A. Cash Contributions - Your contributions must be in cash. The assets in your
SIMPLE IRA will be invested by the Custodian in Seligman Group Shares in
accordance with your instructions and Article VIII of the Custodial
Agreement.
B. Maximum Contribution - The only contributions which may be made to your
SIMPLE IRA are employee elective deferrals and employer contributions under
a qualified salary reduction arrangement which is a SIMPLE IRA plan
maintained by your employer and other contributions allowed by law or
regulations. Employee elective deferrals shall not exceed the lesser of
$6,000 (indexed) or 100% of your compensation for the calendar year. Your
employer may make additional contributions to your SIMPLE IRA within the
limits prescribed in Section 408(p). Your employer is required to provide
you with information which describes the terms of your employer's SIMPLE
IRA plan.
C. Nonforfeitability - Your interest in your SIMPLE IRA is nonforfeitable.
D. Eligible Custodians - The Custodian of your SIMPLE IRA must be a bank,
savings and loan association, credit union, or a person approved by the
Secretary of the Treasury.
E. Commingling Assets - The assets of your SIMPLE IRA cannot be commingled
with other property except in a common trust fund or common investment
fund.
F. Life Insurance - No portion of your SIMPLE IRA may be invested in life
insurance contracts.
G. Collectibles - You may not invest the assets of your SIMPLE IRA in
collectibles (within the meaning of Internal Revenue Code (IRC) Section
408(m)). A collectible is defined as any work of art, rug or antique, metal
or gem, stamp or coin, alcoholic beverage, or any other tangible personal
property specified by the Internal Revenue Service. Specially minted United
States gold and silver bullion coins and certain state issued coins are
permissible SIMPLE IRA investments.
H. Required Minimum Distributions - You are required to take minimum
distributions from your SIMPLE IRA at certain times in accordance with
Proposed Treasury Regulations Section 1.408-8. Below is a summary of the
SIMPLE IRA distribution rules.
1. You are required to take a minimum distribution from your SIMPLE IRA
for the year in which you reach age 70 1/2 and for each year
thereafter. You must take your first payout by your required beginning
date, April 1 of the year following the year you attain age 70 1/2.
The minimum distribution for any taxable year is equal to the amount
obtained by dividing the account balance at the end of the prior year
(less any required distribution taken between January 1 and April 1 of
the year following the year you attain age 70 1/2) by the joint life
expectancy of you and your designated beneficiary. If you have not
designated a beneficiary for your SIMPLE IRA by your required
beginning date, your single life expectancy will be used.
2. Your single or joint life expectancy is determined by using the IRS
unisex life expectancy tables. You can find these tables in Treasury
Regulations Section 1.72-9.
We may establish a policy dictating whether or not life expectancies
may be recalculated in determining required minimum distributions from
your SIMPLE IRA. Alternatively, we may allow you to elect whether or
not to recalculate your life expectancies.
You may choose (within the limits set forth in the distribution rules
and our life expectancy recalculation policy) how you want your
required minimum distributions structured. You must make your payment
elections no later than April 1 following your 70 1/2 year. If you do
not make an election by that date, we may do any one of the following:
(a) make no payment until you give us a proper payout request,
(b) pay your entire SIMPLE IRA to you in a single sum payment, or
(c) determine your required minimum distribution each year based on
your single life expectancy (not recalculated) and pay those
distributions to you until you direct otherwise.
3. If you name someone other than your spouse as your beneficiary, and your
beneficiary is more than 10 years younger than you, your required minimum
distributions must satisfy the Minimum Distribution Incidental Benefit
(MDIB) rule. The MDIB rule generally requires that your required minimum
distributions be calculated as if your beneficiary were exactly 10 years
younger than you.
4. If you die,
(a) on or after your required beginning date, distributions must be made
to your beneficiary or beneficiaries at least as rapidly as under the
method being used to determine minimum distributions as of the date of
your death.
(b) before your required beginning date, the entire amount remaining in
your account will, at the election of your beneficiary or
beneficiaries, either
(i) be distributed by December 31 of the year containing the fifth
anniversary of your death, or
(ii) be distributed in equal or substantially equal payments over the
life or life expectancy of your designated beneficiary or
beneficiaries.
Your beneficiary or beneficiaries must elect either option (i) or (ii) by
December 31 of the year following the year of your death. If no election is
made, distribution will be made in accordance with (ii) if the beneficiary
is your surviving spouse, and in accordance with (i) if your beneficiary is
not your surviving spouse. In the case of distributions under (ii),
distributions must commence by December 31 of the year following the year
of your death. If your spouse is the beneficiary, distributions need not
commence until December 31 of the year you would have attained age 70 1/2,
if later.
INCOME TAX CONSEQUENCES OF ESTABLISHING A SIMPLE IRA
A. Deductibility for SIMPLE IRA Contributions - You may not take a deduction
for the amounts contributed to your SIMPLE IRA as either employee elective
deferrals or employer contributions. However, elective deferrals to a
SIMPLE IRA will reduce your taxable income. Further, employer SIMPLE IRA
contributions, including earnings, will not be taxable to you until you
take a payout from your SIMPLE IRA.
Participation in your employer's SIMPLE IRA plan renders you an active
participant for purposes of determining whether or not you can deduct
contributions to a regular IRA.
B. Tax-Deferred Earnings - The investment earnings of your SIMPLE IRA are not
subject to federal income tax until distributions are made (or, in certain
instances, when distributions are deemed to be made).
C. Rollovers - Rollover is a term used to describe a tax-free movement of cash
or other property from your SIMPLE IRA to either a regular IRA or another
SIMPLE IRA. Your SIMPLE IRA may be rolled over to another SIMPLE IRA of
yours, or may receive rollover contributions, provided that all of the
applicable rollover rules are followed. The rollover rules are generally
summarized below. These transactions are often complex. If you have any
questions regarding a rollover, please see a competent financial or tax
advisor.
1. SIMPLE IRA to SIMPLE IRA Rollovers - Funds distributed from your
SIMPLE IRA may be rolled over to a SIMPLE IRA of yours if the
requirements of IRC Section 408(d)(3) are met. A proper SIMPLE IRA to
SIMPLE IRA rollover is completed if all or part of the distribution is
rolled over not later than 60 days after the distribution is received.
You may not have completed another SIMPLE IRA to SIMPLE IRA rollover
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from the distributing SIMPLE IRA during the 12 months preceding the
date you receive the distribution. Further, you may roll the same
dollars or assets only once every 12 months.
2. SIMPLE IRA to REGULAR IRA Rollovers - Funds may be distributed from
your SIMPLE IRA and rolled to your regular IRA without IRS penalty
provided two years have passed since you first participated in a
SIMPLE IRA plan sponsored by your employer. As with SIMPLE IRA to
SIMPLE IRA rollovers, the requirements of Section 408(d)(3) must be
met. A proper SIMPLE IRA to regular IRA rollover is completed if all
or part of the distribution is rolled over not later than 60 days
after the distribution is received. You may not have completed another
SIMPLE IRA to regular IRA or SIMPLE IRA to SIMPLE IRA rollover from
the distributing SIMPLE IRA during the 12 months preceding the date
you receive the distribution. Further, you may roll the same dollars
or assets only once every 12 months.
3. Written Election - At the time you make a proper rollover to a SIMPLE
IRA, you must designate to the Custodian, in writing, your election to
treat that contribution as a rollover. Once made, the rollover
election is irrevocable.
LIMITATIONS AND RESTRICTIONS
A. Deduction of Rollovers and Transfers - A deduction is not allowed for
rollover or transfer contributions.
B. Special Tax Treatment - Capital gains treatment and the favorable five or
10 year forward averaging tax authorized by IRC Section 402 do not apply to
SIMPLE IRA distributions.
C. Prohibited Transactions - If you or your beneficiary engage in a prohibited
transaction with your SIMPLE IRA, as described in IRC Section 4975, your
SIMPLE IRA will lose its tax-exempt status and you must include the value
of your account in your gross income for that taxable year.
D. Pledging - If you pledge any portion of your SIMPLE IRA as collateral for a
loan, the amount so pledged will be treated as a distribution and will be
included in your gross income for that year.
E. Estate Tax Exclusion - The $100,000 Federal estate tax exclusion previously
available has been repealed for individuals dying after 12/31/84. No
exclusion will be allowed for individuals dying after that date. Transfers
of your SIMPLE IRA assets to a named beneficiary made during your life and
at your request or because of your failure to instruct otherwise may be
subject to Federal gift tax under IRC Section 2501 if made after October
22, 1986.
FEDERAL TAX PENALTIES
A. Early Distribution Penalty - If you are under age 59 1/2 and receive a
SIMPLE IRA distribution, an additional tax of 10 percent will generally
apply, unless made on account of death, disability, a qualifying rollover,
a direct transfer, or the timely withdrawal of an excess contribution; or
if the distribution is part of a series of substantially equal periodic
payments (at least annual payments) made over your life expectancy or the
joint life expectancy of you and your beneficiary. Beginning January 1,
1997, payments made to pay medical expenses which exceed 7.5 percent of
income and distributions to pay for insurance by an individual who has
separated from employment and who has received unemployment compensation
under a federal or state program for at least 12 weeks are also exempt from
the 10 percent tax. This additional tax will apply only to the portion of a
distribution which is includible in your income. If less than two years
have passed since you first participated in a SIMPLE IRA plan sponsored by
your employer, the early distributions penalty shall be increased from 10%
to 25%.
B. Excess Accumulation Penalty - One of the requirements listed above is that
you must take a minimum distribution for the year you attain age 70 1/2 and
by the end of each year thereafter and that your designated
beneficiary(ies) is required to take certain minimum distributions after
your death. An additional tax of 50 percent is imposed on the amount of the
required minimum distribution which should have been taken but was not.
This tax is referred to as an excess accumulation penalty tax.
C. Excess Distribution Penalty - You will be taxed an additional 15 percent on
any amount received and included in income during a calendar year from
qualified retirement plans, tax-sheltered annuities and SIMPLE IRAs which
exceeds $112,500 (indexed each year for the cost of living). Certain
exceptions may apply. If you receive an excess distribution as described
above, you should see your tax advisor to determine if these exceptions
apply to you. This tax is referred to as an excess distribution penalty.
However, this penalty is suspended for payments received during 1997, 1998
and 1999 as a result of the Small Business Job Protection Act of 1996.
D. Excess Retirement Accumulation Penalty - Your estate will have to pay an
additional Federal estate tax if you die with an excess retirement
accumulation. The increased estate tax will be equal to 15 percent of the
excess retirement accumulation. An excess retirement accumulation exists
if, at the time of your death, the value of all of your interests in
qualified plans, tax-sheltered annuities and IRAs exceeds the present value
of an annuity with annual payments of $112,500 (indexed each year for the
cost of living), payable over your life expectancy immediately before your
death. This tax is referred to as an excess retirement accumulation
penalty.
E. Excess Contribution Penalty - An excise tax may be assessed against you by
the IRS for contributions which exceed the permissible limits under Section
408(a) and 408(p).
F. Penalty Reporting - You must generally file Form 5329 with the Internal
Revenue Service to report and remit any penalties or excise taxes.
OTHER
A. IRS Plan Approval - The Agreement used to establish this SIMPLE IRA has
been approved by the Internal Revenue Service. The Internal Revenue Service
approval is determination only as to form. It is not an endorsement of the
plan in operation or of the investments offered.
B. Additional Information - You may obtain further information on SIMPLE IRAs
from your District Office of the Internal Revenue Service. In particular,
you may wish to obtain IRS Publication 590, Individual Retirement
Arrangements.
C. Financial Disclosure - Because you control the selection of investments and
because mutual fund shares fluctuate in value, growth in value of your
Custodial account cannot be guaranteed or projected. See the prospectus for
information on income, fees and expenses.
NOTE: The information in this Disclosure Statement reflects the best
information available at the time of preparation. However, SIMPLE IRAs
are governed by new provisions of the Internal Revenue Code and the IRS
has not issued regulations on SIMPLE IRA plans or answered many of the
questions about SIMPLE IRAs. Consult your professional tax advisor or
the IRS on any questions you have about a SIMPLE IRA or about the most
recent IRS developments.
19
(C)1997 Universal Pensions, Inc., Brainerd, MN 56401
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
Section 1. Seligman Large-Cap Value Fund (the "Series"), a series of
Seligman Value Fund Series, Inc. (the "Fund") will pay fees to Seligman
Financial Services, Inc., the principal underwriter of its shares (the
"Distributor"), for administration, shareholder services and distribution
assistance for the Class A, Class B, and Class D shares of the Series. As a
result, the Series is adopting this Administration, Shareholder Services and
Distribution Plan (the "Plan") pursuant to Section 12(b) of the Investment
Company Act of 1940, as amended (the "Act") and Rule 12b-1 thereunder.
Section 2. Pursuant to this Plan, the Series may pay to the Distributor a
shareholder servicing fee of up to .25% on an annual basis, of the average daily
net assets of the Series (payable quarterly with respect to Class A and monthly
with respect to Class B and Class D) and a distribution fee of .75% on an annual
basis, payable monthly, of the average daily net assets of the Series
attributable to the Class B Shares and a distribution fee of up to .75% on an
annual basis, payable monthly, of the average daily net assets of the Series
attributable to Class D shares. Such fees will be used in their entirety by the
Distributor to make payments for administration, shareholder services and
distribution assistance, including, but not limited to (i) compensation to
securities dealers and other organizations (each, a "Service Organization" and
collectively, the "Service Organizations"), for providing distribution
assistance with respect to assets invested in the Series, (ii) compensation to
Service Organizations for providing administration, accounting and other
shareholder services with respect to Series shareholders, and (iii) otherwise
promoting the sale of shares of the Series, including paying for the preparation
of advertising and sales literature and the printing and distribution of such
promotional materials and prospectuses to prospective investors and defraying
the Distributor's costs incurred in connection with its marketing efforts with
respect to shares of the Series. To the extent a Service Organization provides
administration, accounting and other shareholder services, payment for which is
not required to be made pursuant to a plan meeting the requirements of Rule
12b-1, a portion of the fee paid by the Series shall be deemed to include
compensation for such services. The fees received from the Series hereunder in
respect of the Class A shares may not be used to pay any interest expense,
carrying charges or other financing costs, and fees received hereunder may not
be used to pay any allocation of overhead of the Distributor. The fees of any
particular class of the Series may not be used to subsidize the sale of shares
of any other class. The fees payable to Service Organizations from time to time
shall, within such limits, be determined by the Directors of the Fund.
Section 3. J. & W. Seligman & Co. Incorporated, the Fund's investment
manager (the "Manager"), in its sole discretion, may make payments to the
Distributor for similar purposes. These payments will be made by the Manager
from its own resources, which may include the management fee that the Manager
receives from the Fund.
Section 4. This Plan shall continue in effect through December 31 of each
year so long as such continuance is specifically approved at least annually by
vote of a majority of
1
<PAGE>
both (a) the Directors of the Fund and (b) the Qualified Directors, cast in
person at a meeting called for the purpose of voting on such approval.
Section 5. The Distributor shall provide to the Fund's Directors, and the
Directors shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
Section 6. This Plan may be terminated by the Series with respect to any
class at any time by vote of a majority of the Qualified Directors of the Fund,
or by vote of a majority of the outstanding voting securities of such class. If
this Plan is terminated in respect of a class, no amounts (other than amounts
accrued but not yet paid) would be owed by the Series to the Distributor with
respect to such class.
Section 7. All agreements related to this Plan shall be in writing, and
shall be approved by vote of a majority of both (a) the Directors of the Fund
and (b) the Qualified Directors, cast in person at a meeting called for the
purpose of voting on such approval, provided, however, that the identity of a
particular Service Organization executing any such agreement may be ratified by
such a vote within 90 days of such execution. Any agreement related to this Plan
shall provide:
A. That such agreement may be terminated in respect of any class of the
Series at any time, without payment of any penalty, by vote of a
majority of the Qualified Directors or by vote of a majority of the
outstanding voting securities of the class, on not more than 60 days'
written notice to any other party to the agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
Section 8. This Plan may not be amended to increase materially the amount
of fees permitted pursuant to Section 2 hereof without the approval of a
majority of the outstanding voting securities of the relevant class and no
material amendment to this Plan shall be approved other than by vote of a
majority of both (a) the Directors of the Fund and (b) the Qualified Directors,
cast in person at a meeting called for the purpose of voting on such approval.
This Plan shall not be amended to reduce the distribution fee payable to the
Distributor pursuant to Section 2 hereof in respect of Class B shares, unless
the shareholder servicing fee payable pursuant to Section 2 hereof for
compensation to Service Organizations for providing administration, accounting
and other shareholder services has been eliminated, provided, however that the
distribution fee in respect of Class B shares may be reduced without change to
the shareholder servicing fee, if and to the extent required in order to comply
with any applicable laws or regulations, including applicable rules of the
National Association of Securities Dealers, Inc. regulating maximum sales
charges.
2
<PAGE>
Section 9. The Series is not obligated to pay any administration,
shareholder services or distribution expense in excess of the fee described in
Section 2 hereof, and, in the case of Class A shares, any expenses of
administration, shareholder services and distribution of Class A shares of the
Series accrued in one fiscal year of the Series may not be paid from
administration, shareholder services and distribution fees received from the
Series in respect of Class A shares in any other fiscal year.
Section 10. As used in this Plan, (a) the terms "assignment", "interested
person" and "vote of a majority of the outstanding voting securities" shall have
the respective meanings specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission and (b) the term "Qualified Directors" shall mean the
Directors of the Fund who are not "interested persons" of the Fund and have no
direct or indirect financial interest in the operation of this Plan or in any
agreement related to this Plan.
3
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
Section 1. Seligman Small-Cap Value Fund (the "Series"), a series of
Seligman Value Fund Series, Inc. (the "Fund") will pay fees to Seligman
Financial Services, Inc., the principal underwriter of its shares (the
"Distributor"), for administration, shareholder services and distribution
assistance for the Class A, Class B, and Class D shares of the Series. As a
result, the Series is adopting this Administration, Shareholder Services and
Distribution Plan (the "Plan") pursuant to Section 12(b) of the Investment
Company Act of 1940, as amended (the "Act") and Rule 12b-1 thereunder.
Section 2. Pursuant to this Plan, the Series may pay to the Distributor a
shareholder servicing fee of up to .25% on an annual basis, of the average daily
net assets of the Series (payable quarterly with respect to Class A and monthly
with respect to Class B and Class D) and a distribution fee of .75% on an annual
basis, payable monthly, of the average daily net assets of the Series
attributable to the Class B Shares and a distribution fee of up to .75% on an
annual basis, payable monthly, of the average daily net assets of the Series
attributable to Class D shares. Such fees will be used in their entirety by the
Distributor to make payments for administration, shareholder services and
distribution assistance, including, but not limited to (i) compensation to
securities dealers and other organizations (each, a "Service Organization" and
collectively, the "Service Organizations"), for providing distribution
assistance with respect to assets invested in the Series, (ii) compensation to
Service Organizations for providing administration, accounting and other
shareholder services with respect to Series shareholders, and (iii) otherwise
promoting the sale of shares of the Series, including paying for the preparation
of advertising and sales literature and the printing and distribution of such
promotional materials and prospectuses to prospective investors and defraying
the Distributor's costs incurred in connection with its marketing efforts with
respect to shares of the Series. To the extent a Service Organization provides
administration, accounting and other shareholder services, payment for which is
not required to be made pursuant to a plan meeting the requirements of Rule
12b-1, a portion of the fee paid by the Series shall be deemed to include
compensation for such services. The fees received from the Series hereunder in
respect of the Class A shares may not be used to pay any interest expense,
carrying charges or other financing costs, and fees received hereunder may not
be used to pay any allocation of overhead of the Distributor. The fees of any
particular class of the Series may not be used to subsidize the sale of shares
of any other class. The fees payable to Service Organizations from time to time
shall, within such limits, be determined by the Directors of the Fund.
Section 3. J. & W. Seligman & Co. Incorporated, the Fund's investment
manager (the "Manager"), in its sole discretion, may make payments to the
Distributor for similar purposes. These payments will be made by the Manager
from its own resources, which may include the management fee that the Manager
receives from the Fund.
Section 4. This Plan shall continue in effect through December 31 of each
year so long as such continuance is specifically approved at least annually by
vote of a majority of
1
<PAGE>
both (a) the Directors of the Fund and (b) the Qualified Directors, cast in
person at a meeting called for the purpose of voting on such approval.
Section 5. The Distributor shall provide to the Fund's Directors, and the
Directors shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
Section 6. This Plan may be terminated by the Series with respect to any
class at any time by vote of a majority of the Qualified Directors of the Fund,
or by vote of a majority of the outstanding voting securities of such class. If
this Plan is terminated in respect of a class, no amounts (other than amounts
accrued but not yet paid) would be owed by the Series to the Distributor with
respect to such class.
Section 7. All agreements related to this Plan shall be in writing, and
shall be approved by vote of a majority of both (a) the Directors of the Fund
and (b) the Qualified Directors, cast in person at a meeting called for the
purpose of voting on such approval, provided, however, that the identity of a
particular Service Organization executing any such agreement may be ratified by
such a vote within 90 days of such execution. Any agreement related to this Plan
shall provide:
A. That such agreement may be terminated in respect of any class of the
Series at any time, without payment of any penalty, by vote of a
majority of the Qualified Directors or by vote of a majority of the
outstanding voting securities of the class, on not more than 60 days'
written notice to any other party to the agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
Section 8. This Plan may not be amended to increase materially the amount
of fees permitted pursuant to Section 2 hereof without the approval of a
majority of the outstanding voting securities of the relevant class and no
material amendment to this Plan shall be approved other than by vote of a
majority of both (a) the Directors of the Fund and (b) the Qualified Directors,
cast in person at a meeting called for the purpose of voting on such approval.
This Plan shall not be amended to reduce the distribution fee payable to the
Distributor pursuant to Section 2 hereof in respect of Class B shares, unless
the shareholder servicing fee payable pursuant to Section 2 hereof for
compensation to Service Organizations for providing administration, accounting
and other shareholder services has been eliminated, provided, however that the
distribution fee in respect of Class B shares may be reduced without change to
the shareholder servicing fee, if and to the extent required in order to comply
with any applicable laws or regulations, including applicable rules of the
National Association of Securities Dealers, Inc. regulating maximum sales
charges.
2
<PAGE>
Section 9. The Series is not obligated to pay any administration,
shareholder services or distribution expense in excess of the fee described in
Section 2 hereof, and, in the case of Class A shares, any expenses of
administration, shareholder services and distribution of Class A shares of the
Series accrued in one fiscal year of the Series may not be paid from
administration, shareholder services and distribution fees received from the
Series in respect of Class A shares in any other fiscal year.
Section 10. As used in this Plan, (a) the terms "assignment", "interested
person" and "vote of a majority of the outstanding voting securities" shall have
the respective meanings specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission and (b) the term "Qualified Directors" shall mean the
Directors of the Fund who are not "interested persons" of the Fund and have no
direct or indirect financial interest in the operation of this Plan or in any
agreement related to this Plan.
3
ADMINISTRATION, SHAREHOLDER SERVICES AND
DISTRIBUTION AGREEMENT
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION AGREEMENT, dated as
of ___________________, 19__ between Seligman Financial Services, Inc.
("Seligman Financial Services") and _________________________________ (the
"Service Organization").
The Parties hereto enter into an Administration, Shareholder Services and
Distribution Agreement ("Service Agreement") with respect to the shares of
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 New Jersey Tax-Exempt Fund, Inc., Seligman Pennsylvania
Tax-Exempt Fund Series, Seligman Tax-Exempt Fund Series, Inc., Seligman
Tax-Exempt Series Trust (the "Funds"), and any other future mutual funds that
may become members of the Seligman Group of Investment Companies which adopt an
Administration, Shareholder Services and Distribution Plan, pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended (the "Act"), and in
consideration of the mutual agreements herein made, agree as follows:
The Service Organization shall make such use of or provide such information
and services as may be necessary or appropriate (i) to provide shareholder
services to shareholders of the Funds and (ii) to assist Seligman Financial
Services in any distribution of shares of the Funds, including, without
limitation, making use of the Service Organization's name, client lists, and
publications, for the solicitation of sales of shares of the Funds to Service
Organization clients, and such other assistance as Seligman Financial Services
reasonably requests, to the extent permitted by applicable statute, rule or
regulation.
1. Except with respect to the Class D shares of a Fund for the first year
following the sale thereof, Seligman Financial Services shall pay to the
Service Organization a service fee (as defined in the National Association
of Securities Dealers, Inc. Rules of Fair Practice) not to exceed .25 of 1%
per annum of the average daily net assets of each class of shares of each
Fund attributable to the clients of the Service Organization.
2. With respect to the first year following the sale of Class D shares of a
Fund, Seligman Financial Services shall pay to the Service Organization at
or promptly after the time of sale a service fee (as defined in the
National Association of Securities Dealers, Inc. Rules of Fair Practice)
not to exceed .25 of 1% of the net asset value of the Class D shares sold
by the Service Organization. Such service fee shall be paid to the Service
Organization solely for personal services and/or the maintenance of
shareholder accounts to be provided by the Service Organization to the
purchaser of such Class D Shares over the course of the first year
following the sale.
3. Any service fee paid hereunder shall be paid solely for personal services
and/or the maintenance of shareholder accounts. For greater certainty, no
part of a service fee shall be paid for subtransfer agency services,
subaccounting services, or administrative services.
<PAGE>
4. In addition to payment of the service fee, from time to time Seligman
Financial Services may make payments to the Service Organization in
addition to those contemplated above for providing distribution assistance
with respect to assets invested in each Fund by its clients.
5. Neither the Service Organization nor any of its employees or agents are
authorized to make any representation concerning the Funds or the Funds'
shares except those contained in the then current Prospectus, copies of
which will be supplied by Seligman Financial Services. The Service
Organization shall have no authority to act as agent for Seligman Financial
Services or the Funds.
6. In consideration of the services provided pursuant to paragraphs 1, 2
and/or 4 above, the Service Organization shall be entitled to receive fees
as are set forth in Exhibit A hereto as may be amended from time to time by
Seligman Financial Services. Seligman Financial Services has no obligation
to make any such payments and the Service Organization agrees to waive
payment of its fee until Seligman Financial Services is in receipt of the
fee from the Fund(s). The payment of fees has been authorized pursuant to
an Administration, Shareholder Services and Distribution Plans (the
"Plans") approved by the Directors/Trustees and the shareholders of the
Funds pursuant to the requirements of the Act and such authorizations may
be withdrawn at any time.
7. It is understood that the Funds reserve the right, at their discretion and
without notice, to suspend or withdraw the sale of shares of the Funds.
This Agreement shall not be construed to authorize the Service Organization
to perform any act that Seligman Financial Services would not be permitted
to perform under the respective Distributing Agreements between each of the
Funds and Seligman Financial Services.
8. Subject to the proviso in Section 6 of the Plans, this Agreement shall
continue until December 31 of the year in which any Plan has first been
approved by shareholders and through December 31 of each year thereafter
provided such continuance is specifically approved at least annually by a
vote of a majority of (i) the Fund's Directors/Trustees and (ii) the
Qualified Directors/Trustees cast in person at a meeting called for the
purpose of voting on such approval and provided further that the Service
Organization shall not have notified Seligman Financial Services in writing
at least 60 days prior to the anniversary date of the previous continuance
that it does not desire such continuance. This Agreement may be terminated
at any time without payment of any penalty with respect to any of the Funds
by vote of a majority of the Qualified Directors/Trustees, or by vote of a
majority of the outstanding voting securities of the particular Fund or
class or series of a Fund, on 60 days' written notice to the Service
Organization and Seligman Financial Services. Notwithstanding anything
contained herein, in the event that any of the Plans shall be terminated or
any of the Plans or any part thereof shall be found invalid or ordered
terminated by any regulatory or judicial authority, or the Service
Organization shall fail to perform the services contemplated by this
Agreement, such determination to be made in good faith by Seligman
Financial Services, this Agreement may be terminated with respect to such
Plan effective upon receipt of written notice thereof by the Service
Organization. This Agreement will also terminate automatically in the event
of its assignment.
<PAGE>
9. All communications to Seligman Financial Services shall be sent to it at
its offices, 100 Park Avenue, New York, New York 10017.
Any notice to the Service Organization shall be duly given if mailed or
telegraphed to it at the address shown below.
10. As used in this Agreement, the terms "assignment", "interested person" and
"vote of a majority of the outstanding voting securities" shall have the
respective meanings specified in the Act and in the rules and regulations
thereunder and the term "Qualified Directors/Trustees" shall mean the
Directors/Trustees of a Fund who are not interested persons of the Fund and
have no direct or indirect financial interest in its Plan or in any
agreements related to the Plan.
11. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. Anything herein to the contrary
notwithstanding, this Agreement shall not be construed to require, or to
impose any duty upon, any of the parties to do anything in violation of any
applicable laws or regulations.
IN WITNESS WHEREOF, Seligman Financial Services and the Service Organization
have caused this Agreement to be executed by their duly authorized offices as of
the date first above written.
SELIGMAN FINANCIAL SERVICES, INC.
By
----------------------------------
Stephen J. Hodgdon, President
SERVICE ORGANIZATION
-----------------------------------
By
-----------------------------------
Address
--------------------------
-----------------------------------
1/95
<PAGE>
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION AGREEMENT
EXHIBIT A
The payment schedule for Service Organizations is set forth immediately
below:
<TABLE>
<CAPTION>
Average Daily Fees as a Percentage
Net Assets of Each Fund's/Series'
Attributable to Net Assets Attributable
Fund Name Service Organizations to Service Organizations*
- --------- --------------------- -------------------------
Class A Shares Class A Shares Class D
-------------- ---------------
Class B Shares+ Shares**
--------------- --------
<S> <C> <C> <C>
Seligman Capital Fund, Inc. $100,000 or more .25% 1.00%
Seligman Cash Management Fund, Inc. $100,000 or more -0-/.25% 1.00%
Seligman Common Stock Fund, Inc. $100,000 or more .25% 1.00%
Seligman Communications and Information Fund, Inc. $100,000 or more .25% 1.00%
Seligman Frontier Fund, Inc. $100,000 or more .25% 1.00%
Seligman Growth Fund, Inc. $100,000 or more .25% 1.00%
Seligman Henderson Global Fund Series, Inc:
Seligman Henderson Emerging Markets Growth Fund $100,000 or more .25% 1.00%
Seligman Henderson Global Smaller Companies Fund $100,000 or more .25% 1.00%
Seligman Henderson Global Growth Opportunities Fund $100,000 or more .25% 1.00%
Seligman Henderson Global Technology Fund $100,000 or more .25% 1.00%
Seligman Henderson International Fund $100,000 or more .25% 1.00%
Seligman High Income Fund Series:
U.S. Government Securities Series $100,000 or more .25% 1.00%
High-Yield Bond Series $100,000 or more .25% 1.00%
Seligman Income Fund, Inc. $100,000 or more .25% 1.00%
Seligman New Jersey Municipal Fund, Inc. $100,000 or more .25% 1.00%
Seligman Pennsylvania Municipal Fund Series $100,000 or more .25% 1.00%
Seligman Municipal Fund Series, Inc:
National Series $100,000 or more .10% 1.00%
Colorado Series $100,000 or more .10% 1.00%
Georgia Series $100,000 or more .10% 1.00%
Louisiana Series $100,000 or more .10% 1.00%
Maryland Series $100,000 or more .10% 1.00%
Massachusetts Series $100,000 or more .10% 1.00%
Michigan Series $100,000 or more .10% 1.00%
Minnesota Series $100,000 or more .10% 1.00%
Missouri Series $100,000 or more .10% 1.00%
New York Series $100,000 or more .10% 1.00%
Ohio Series $100,000 or more .10% 1.00%
Oregon Series $100,000 or more .10% 1.00%
South Carolina Series $100,000 or more .10% 1.00%
Seligman Municipal Series Trust:
California Municipal Quality Series $100,000 or more .10% 1.00%
California Municipal High-Yield Series $100,000 or more .10% 1.00%
Florida Municipal Series $100,000 or more .25% 1.00%
North Carolina Municipal Series $100,000 or more .25% 1.00%
Seligman Value Fund Series, Inc. $100,000 or more .25% 1.00%
</TABLE>
March 20, 1997
* Included in each of the percentages above is the service fee (as defined in
the National Association of Securities Dealers, Inc. Rules of Fair Practice)
with respect to each class of shares referred to in paragraph 1 of this
Agreement. Except as provided in Footnote ** below, Seligman Financial Services
shall pay the fees provided for above to the Service Organization quarterly.
**At or promptly after the time of sale of any Class D Shares, a Service
Organization shall be paid 1.00% of the net asset value of the Class D Shares
sold by it. The difference between .75% and the amount paid is comprised of the
service fee referred to in paragraph 1 of this Agreement for services to be
provided to Class D shareholders over the course of the one year period
immediately following the sale.
+ Class B Shares are not available for theSeligman New Jersey Municipal Fund,
Inc., Seligman Pennsylvania Municipal Fund Series or any Series of Seligman
Municipal Fund Series, Inc. or Seligman Municipal Series Trust.
SELIGMAN GROUP OF MUTUAL FUNDS
Plan for Multiple Classes of Shares (three classes)
THIS PLAN, as it may be amended from time to time, sets forth the separate
arrangement and expense allocation of each class of shares (a "Class") of each
registered open-end management investment company, or series thereof, in the
Seligman Group of Mutual Funds that offers multiple classes of shares (each, a
"Fund"). The Plan has been adopted pursuant to Rule 18f-3(d) under the
Investment Company Act of 1940, as amended (the "Act"), by a majority of the
Board of Directors or Trustees, as applicable ("Directors"), of each Fund listed
on Schedule I hereto, including a majority of the Directors who are not
interested persons of such Fund within the meaning of Section 2(a)(19) of the
Act ("Disinterested Directors"). Any material amendment to this Plan is subject
to the prior approval of the Board of Directors of each Fund to which it
relates, including a majority of the Disinterested Directors.
1. General
A. Any Fund may issue more than one Class of voting stock, provided that
each Class:
i. Shall have a different arrangement for shareholder services or
the distribution of securities or both, and shall pay all of the
expenses of that arrangement;
ii. May pay a different share of other expenses, not including
advisory or custodial fees or other expenses related to the
management of the Fund's assets, if these expenses are actually
incurred in a different amount by that Class, or if the Class
receives services of a different kind or to a different degree
than other Classes of the same Fund ("Class Level Expenses");
iii. May pay a different advisory fee to the extent that any
difference in amount paid is the result of the application of the
same performance fee provisions in the advisory contract of the
Fund to the different investment performance of each Class;
iv. Shall have exclusive voting rights on any matter submitted to
shareholders that relates solely to its arrangement;
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<PAGE>
v. Shall have separate voting rights on any matter submitted to
shareholders in which the interests of one Class differ from the
interests of any other Class; and
vi. Shall have in all other respects the same rights and obligations
as each other Class of the Fund.
B. i. Except as expressly contemplated by this paragraph B., no types
or categories of expenses shall be designated Class Level
Expenses.
ii. The Directors recognize that certain expenses arising in certain
sorts of unusual situations are properly attributable solely to
one Class and therefore should be borne by that Class. These
expenses ("Special Expenses") may include, for example: (i) the
costs of preparing a proxy statement for, and holding, a special
meeting of shareholders to vote on a matter affecting only one
Class; (ii) the costs of holding a special meeting of Directors
to consider such a matter; (iii) the costs of preparing a special
report relating exclusively to shareholders of one Class; and
(iv) the costs of litigation affecting one Class exclusively. J.
& W. Seligman & Co. Incorporated (the "Manager") shall be
responsible for identifying expenses that are potential Special
Expenses.
iii. Subject to clause iv. below, any Special Expense identified by
the Manager shall be treated as a Class Level Expense.
iv. Any Special Expense identified by the Manager that is material to
the Class in respect of which it is incurred shall be submitted
by the Manager to the Directors of the relevant Fund on a case by
case basis with a recommendation by the Manager as to whether it
should be treated as a Class Level Expense. If approved by the
Directors, such Special Expense shall be treated as a Class Level
Expense of the affected class.
C. i. Realized and unrealized capital gains and losses of a Fund shall
be allocated to each class of that Fund on the basis of the
aggregate net asset value of all outstanding shares ("Record
Shares") of the Class in relation to the aggregate net asset
value of Record Shares of the Fund.
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<PAGE>
ii. Income and expenses of a Fund not charged directly to a
particular Class shall be allocated to each Class of that Fund on
the following basis:
a. For periodic dividend funds, on the basis of the aggregate
net asset value of Record Shares of each Class in relation
to the aggregate net asset value of Record Shares of the
Fund.
b. For daily dividend funds, on the basis of the aggregate net
asset value of Settled Shares of each Class in relation to
the aggregate net asset value of Settled Shares of the Fund.
"Settled Shares" means Record Shares minus the number of
shares of that Class or Fund that have been issued but for
which payment has not cleared and plus the number of shares
of that Class or Fund which have been redeemed but for which
payment has not yet been issued.
D. On an ongoing basis, the Directors, pursuant to their fiduciary
responsibilities under the Act and otherwise, will monitor each Fund
for the existence of any material conflicts among the interests of its
several Classes. The Directors, including a majority of the
Disinterested Directors, shall take such action as is reasonably
necessary to eliminate any such conflicts that may develop. The
Manager and Seligman Financial Services, Inc. (the "Distributor") will
be responsible for reporting any potential or existing conflicts to
the Directors. If a conflict arises, the Manager and the Distributor
will be responsible at their own expense for remedying such conflict
by appropriate steps up to and including separating the classes in
conflict by establishing a new registered management company to
operate one of the classes.
E. The plan of each Fund adopted pursuant to Rule 12b-1 under the Act
(the "Rule 12b-1 Plan") provides that the Directors will receive
quarterly and annual statements complying with paragraph (b)(3)(ii) of
Rule 12b-1, as it may be amended from time to time. To the extent that
the Rule 12b-1 Plan in respect of a specific Class is a reimbursement
plan, then only distribution expenditures properly attributable to the
sale of shares of that Class will be used in the statements to support
the Rule 12b-1 fee charged to shareholders of such Class. In such
cases expenditures not related to the sale of a specific Class will
not be presented to the Directors to support Rule 12b-1 fees charged
to shareholders of such Class. The statements, including the
allocations upon which they are based, will be subject to the review
of the Disinterested Directors.
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<PAGE>
F. Dividends paid by a Fund with respect to each Class, to the extent any
dividends are paid, will be calculated in the same manner, at the same
time and on the same day and will be in the same amount, except that
fee payments made under the Rule 12b-1 Plan relating to the Classes
will be borne exclusively by each Class and except that any Class
Level Expenses shall be borne by the applicable Class.
G. The Directors of each Fund hereby instruct such Fund's independent
auditors to review expense allocations each year as part of their
regular audit process, to inform the Directors and the Manager of any
irregularities detected and, if specifically requested by the
Directors, to prepare a written report thereon. In addition, if any
Special Expense is incurred by a Fund and is classified as a Class
Level Expense in the manner contemplated by paragraph B. above, the
independent auditors for such Fund, in addition to reviewing such
allocation, are hereby instructed to report thereon to the Audit
Committee of the relevant Fund and to the Manager. The Manager will be
responsible for taking such steps as are necessary to remedy any
irregularities so detected, and will do so at its own expense to the
extent such irregularities should reasonably have been detected and
prevented by the Manager in the performance of its services to the
Fund.
2. Specific Arrangements for Each Class
The following arrangements regarding shareholder services, expense
allocation and other indicated matters shall be in effect with respect to the
Class A shares, Class B shares and Class D shares of each Fund. The following
descriptions are qualified by reference to the more detailed description of such
arrangements set forth in the prospectus relating to each Fund, as the same may
from time to time be amended or supplemented (for each Fund, the "Relevant
Prospectus"), provided that no Relevant Prospectus may modify the provisions of
this Plan applicable to Rule 12b-1 fees or Class Level Expenses.
(a) Class A Shares
i. Class A shares are subject to an initial sales load which varies with
the size of the purchase, to a maximum of 4.75% of the public offering
price. Reduced sales loads shall apply in certain circumstances. Class
A shares of Seligman Cash Management Fund, Inc. shall not be subject
to an initial sales load.
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<PAGE>
ii. Class A shares shall be subject to a Rule 12b-1 service fee of up to
0.25% of average daily net assets.
iii. Special Expenses attributable to the Class A shares, except those
determined by the Directors not to be Class Level Expenses of the
Class A shares in accordance with paragraph 1.B.iv., shall be Class
Level Expenses and attributed solely to the Class A shares. No other
expenses shall be treated as Class Level Expenses of the Class A
shares.
iv. The Class A shares shall be entitled to the shareholder services,
including exchange privileges, described in the Relevant Prospectus.
(b) Class B Shares
i. Class B shares are sold without an initial sales load but are subject
to a contingent deferred sales load ("CDSL") in certain cases. The
CDSL in respect of any Class B share, if applicable, will be in the
following amount (as a percentage of the current net asset value or
the original purchase price, whichever is less) if the redemption
occurs within the indicated number of years of issuance of such share:
Years since issuance CDSL
-------------------- ----
less than one 5%
one but less than two 4%
two but less than four 3%
four but less than five 2%
five but less than six 1%
six or more 0%
ii. Class B shares shall be subject to a Rule 12b-1 fee of up to 1.00% of
average daily net assets, consisting of an asset-based distribution
fee of up to 0.75% and a service fee of up to 0.25%.
iii. Each Class B share shall automatically convert to a Class A share on
the last day of the month which precedes the eighth anniversary of its
date of issue occurs.
iv. Special Expenses attributable to the Class B shares, except those
determined by the Directors not to be Class Level Expenses of the
Class B shares in accordance with paragraph 1.B.iv., shall be
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<PAGE>
Class Level Expenses and attributed solely to the Class B shares. No
other expenses shall be treated as Class Level Expenses of the Class B
shares.
v. The Class B shares shall be entitled to the shareholder services,
including exchange privileges, described in the Relevant Prospectus.
(c) Class D Shares
i. Class D shares are sold without an initial sales load but are
subject to a CDSL of 1% of the lesser of the current net asset
value or the original purchase price in certain cases if the
shares are redeemed within one year.
ii. Class D shares shall be subject to a Rule 12b-1 fee of up to
1.00% of average daily net assets, consisting of an asset-based
distribution fee of up to 0.75% and a service fee of up to 0.25%.
iii. Special Expenses attributable to the Class D shares, except those
determined by the Directors not to be Class Level Expenses of the
Class D shares in accordance with paragraph 1.B.iv., shall be
Class Level Expenses and attributed solely to the Class D shares.
No other expenses shall be treated as Class Level Expenses of the
Class D shares.
iv. The Class D shares shall be entitled to the shareholder services,
including exchange privileges, described in the Relevant
Prospectus.
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<PAGE>
Schedule I
Seligman Cash Management Fund, Inc.
Seligman Capital Fund, Inc.
Seligman Common Stock, Inc.
Seligman Communications and Information Fund, Inc.
Seligman Frontier Fund, Inc.
Seligman Growth Fund, Inc.
Seligman Income Fund, Inc.
Seligman Henderson Emerging Markets Growth Fund
Seligman Henderson Global Growth Opportunities Fund
Seligman Henderson Global Smaller Companies Fund
Seligman Henderson Global Technology Fund
Seligman Henderson International Fund
Seligman High-Yield Bond Fund
Seligman U.S. Government Securities Fund
Seligman Value Fund Series, Inc.
-7-
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN VALUE
FUND SERIES, INC. a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 20th day of March, 1997.
/s/ John R. Galvin (L.S.)
------------------------
John R. Galvin
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN VALUE
FUND SERIES, INC. a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
her attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in her name and stead, in her capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 20th day of March, 1997.
/s/ Alice S. Ilchman (L.S.)
------------------------
Alice S. Ilchman
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN VALUE
FUND SERIES, INC. a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 20th day of March, 1997.
/s/ Frank A. McPherson (L.S.)
------------------------
Frank A. McPherson
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN VALUE
FUND SERIES, INC. a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 20th day of March, 1997.
/s/ John E. Merow (L.S.)
------------------------
John E. Merow
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN VALUE
FUND SERIES, INC. a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
her attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in her name and stead, in her capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 20th day of March, 1997.
/s/ Betsy S. Michel (L.S.)
------------------------
Betsy S. Michel
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN VALUE
FUND SERIES, INC. a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 10th day of April, 1997.
/s/ William C. Morris (L.S.)
------------------------
William C. Morris
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN VALUE
FUND SERIES, INC. a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 31st day of March, 1997.
/s/ James C. Pitney (L.S.)
------------------------
James C. Pitney
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN VALUE
FUND SERIES, INC. a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 20th day of March, 1997.
/s/ James Q. Riordan (L.S.)
------------------------
James Q. Riordan
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN VALUE
FUND SERIES, INC. a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 4th day of April, 1997.
/s/ Richard R. Schmaltz (L.S.)
------------------------
Richard R. Schmalt
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN VALUE
FUND SERIES, INC. a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 20th day of March, 1997.
/s/ Robert L. Shafer (L.S.)
------------------------
Robert L. Shafer
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN VALUE
FUND SERIES, INC. a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 20th day of March, 1997.
/s/ James N. Whitson (L.S.)
------------------------
James N. Whitson
