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 25, 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'
investment 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 re-
quested 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 deferred sales
load ("CDSL") of 1% on redemptions within eighteen months of purchase. 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 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. 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
information about the Fund, including a Statement of Additional Information, has
been filed with the Securities and Exchange Commission. The Statement of
Additional 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 various
costs and expenses which shareholders of the Fund bear directly or indirectly.
"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 certain
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 purchase, 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, Shareholder 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)
a 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
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN AND THE 5%
ANNUAL 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
Securities Dealers, Inc., the aggregate deferred sales loads and annual
distribution 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
period, 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
investors 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
investors 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
particular 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 being
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
initial 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 reduced
by the initial sales load on Class A shares deducted at the time of purchase.
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 initial 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 because 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 after a period of approximately eight
years, and thereafter investors will be subject to 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.
Alternatively, some investors might choose to have all of their funds invested
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 reduced 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 investment 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 payable on
a purchase of the same amount of Class A or Class D shares, particularly if the
Class B shares are redeemed shortly after purchase or if the investor 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 distribution 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,
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
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
exists 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 arises.
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 reasonably
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 ongoing 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 advantageous 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 another 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
Series seeks to achieve this objective by investing at least 65% of its total
assets 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
Series and identified by the Manager as value companies. There can be no
assurance 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
Series seeks to achieve this objective by investing at least 65% of its total
assets 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 Series
and identified by the Manager as value companies. There can be no assurance 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
invested primarily in equity securities of domestic issuers, including common
stock, preferred stock and stock convertible into or exchangeable for such
securities. Each Series expects that no more than 15% of its assets will be
invested in cash or fixed-income securities except for temporary defensive
purposes.
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 securities
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 invest
in derivatives for speculative purposes, i.e., where the derivative investment
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
Series 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
securities 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
purposes. 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 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, 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
certificates 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 information
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
Receipts are instruments generally issued by domestic banks or trust companies
that represent the deposits of a security of a foreign issuer. ADRs may be
publicly 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
requirements with respect to sponsored and unsponsored Depositary Receipt
programs are generally similar, the issuers of securities represented by
unsponsored Depositary Receipts are not obligated to disclose material
information 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 Receipts which are traded in the United States or to commercial paper
and certificates 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
securities or, in the case of unrated securities, debt securities that are, in
the opinion of the Manager, of equivalent quality to "investment grade"
securities. "Investment grade" debt securities are rated within the four highest
rating 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
securities ratings appears in Appendix A to the Statement of Additional
Information.
BORROWING. Each Series may borrow money only from banks and only for temporary
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.
Government 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 delivery or
evidence of book entry transfer to the account of its custodian. Repurchase
agreements could involve certain risks in the event of bankruptcy or other
default of the seller, including possible delays and expenses in liquidating the
underlying security, decline in the value of the underlying security and loss of
interest.
TEMPORARY INVESTMENTS. When the Manager believes that market conditions
warrant a temporary defensive position, a Series may invest up to 100% of its
assets 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. Investments
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
subject 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
parameters by which "large" and "small" market capitalizations are defined,
without 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
affairs of the Fund. Pursuant to a Management Agreement between the Fund, on
behalf 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
address 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 Corporation. The
aggregate assets of the Seligman Group were approximately $14.2 billion at March
31, 1997. The Manager also provides investment management or advice 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,
calculated 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
supervision, determines which securities will be purchased or sold, makes
purchases 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
liabilities 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
investment companies. The Subadviser currently serves as subadviser to Seligman
Capital 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
Income 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
appropriate 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
Manager and the Subadviser 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 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 commission
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
investors 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
distribution fee and a CDSL on redemptions within one year of purchase. See
"Alternative Distribution System" above.
Shares of the Series may be purchased through any authorized investment
dealer. 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 RETURN
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. Orders
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
payments, dealer orders must first be placed through SFSI's order desk and
assigned 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 specific
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
shareholder. 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
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 are valued at fair value determined in accordance with
procedures approved 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 maturity, 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
substantially 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 asset
value of Class A shares. See "Administration, Shareholder Services and
Distribution 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 redeemed
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 participating
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
account or single trust. Purchases made by a trustee or other fiduciary for a
fiduciary 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 Mutual
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
invested 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
investor 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
behalf 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
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.
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
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.
Section 403(b) plans sponsored by public educational institutions are not
eligible 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
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. 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
exercising the exchange privilege will continue to be subject to such Series'
CDSL schedule if such schedule is higher or longer than the CDSL schedule
relating to 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 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
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. 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
purchased 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 pursuant
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
pursuant 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
redemption 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
defined 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
qualified 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)
distributions 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
registered investment management company; (e) pursuant to an automatic cash
withdrawal 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
another 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
incentive 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
representatives 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
Application (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
Application, 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
completing a supplemental election application available from the broker/dealer
of record.
For accounts registered as IRAs. Telephone services will include only
exchanges or address changes.
For accounts registered as trusts (unless the trustee and sole beneficiary are
the same person), corporations or group retirement plans: Telephone redemptions
are not permitted. Group retirement plans that may allow plan participants 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 distribution
option.
All Seligman Mutual Fund accounts with the same account number (i.e.,
registered 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, neither they nor
any of their affiliates will be liable for any loss to the shareholder 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 neither they nor
any of their affiliates will be liable
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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
unauthorized or fraudulent instructions. Telephone transactions must be effected
through a representative of Seligman Data Corp., i.e., requests may not be
communicated 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
SHAREHOLDER. 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 accompanied
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 instruction
or endorsed stock power should specify the Series name, account number, 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., requests 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 someone
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
companies, credit unions, securities brokers and dealers, savings and loan
associations and participants in the Securities Transfer Association Medallion
Program (STAMP), the Stock Exchanges Medallion Program (SEMP) or the New York
Stock Exchange 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 SERVICES
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
shareholder 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 redeemed 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 purchase, 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 described under "Purchase of Shares--Class B
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<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
repurchase 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
received 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
determined as of the close of the NYSE on the next trading day, less any
applicable 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. Redemption
requests by telephone will not be accepted within 30 days following an address
change. Qualified Plans, IRAs or other retirement plans are not eligible for
telephone redemptions. The Fund reserves the right to suspend or terminate 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
registered 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 redemptions 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
investment 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
investment 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
decides 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 shareholder 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 reinvested
in shares of the same Series, some or all of the loss will not be allowed 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
services 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
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 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 Series.
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
respect of Class A shares will be used primarily to compensate Service
Organizations 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
average 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 continuing
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 primarily 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 attributable 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
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<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
shareholder accounts that do not have a designated broker/dealer of record and
receives 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 exchanged
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
continue 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 companies
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.
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. 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 Series
and the North Carolina Municipal Series, each of which invests in municipal
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
respective 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
telephone and may be exchanged only upon receipt of a written exchange request
together 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
investment 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 telephone
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-
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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
exchange (1) from any shareholder account from which there have been two
exchanges 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 account
if the shareholder or the shareholder's broker/dealer has been advised that
previous patterns of purchases and redemptions or exchanges have been considered
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 reserves 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
portfolio securities and the costs of operations. Each Series distributes
substantially all of any taxable net long-term and short-term gain realized on
investments to shareholders at least annually. Dividends and distributions will
generally 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 distributions
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 elections 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 distribution.
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 Mutual
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.
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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
received in cash or reinvested in additional shares, and, to the extent
designated as derived from a Series' dividend income that would be eligible for
the dividends received deduction if the Series were not a regulated investment
company, 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
eligible 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 period
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 Series.
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
Reinstatement 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
shareholders in the calendar year in which it was earned. Furthermore, dividends
declared 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
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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
IDENTIFICATION 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
Communications/ 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 accounts 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
purchases 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 established 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 minimum 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 intervals 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
invest 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
documentation. 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 maturity.
. 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. 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
forwarded, 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
application form. The Fund may register an IRA investment for which an account
application 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
authorized dealer.
25
<PAGE>
ADVERTISING A SERIES' PERFORMANCE
From time to time a Series may advertise its "total return" and "average
annual 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
periods 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
material 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
account 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,
Investment 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 series
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 specifically
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
prescriptive 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 distributions 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 effective 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
application 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) Service 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
Seligman Mutual Fund 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 shareholder uses the
Invest-A-Check(R) Service to make an IRA investment, the purchase 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 contribution.
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. Under this Service, a Class B
shareholder who requests both dividends and distributions in additional shares
may withdraw up to 12% of the value of the shareholder's fund account (at the
time of election) per annum, without the imposition of 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 suspension. This 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 considered terminated in the event a withdrawal of shares, other than
to make scheduled 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 purchases of shares of this or any other investment company, will be
disadvantageous because of the payment of duplica- tive 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
account or delivered to the shareholder. A shareholder may include toward
completion 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 requested
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 already 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 an initial
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 determining
reduced sales loads on additional purchases of the other Seligman Mutual Funds.
4/97
27
<PAGE>
Seligman Value
Fund Series, Inc.
- -------------------------------------------------
Seligman Large-Cap Value Fund
Seligman Small-Cap Value Fund
- -------------------------------------------------
100 Park Avenue
New York, New York 10017
Table of Contents
Page
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 Series................. 22
Dividends and Distributions................ 22
Federal Income Taxes....................... 23
Shareholder Information.................... 24
Advertising a Series' Performance.......... 26
Organization and Capitalization............ 26
======================================================
Prospectus
Seligman
Value
Fund
Series, Inc.
Seligman Large-Cap Value Fund
Seligman Small-Cap Value Fund
April 25, 1997
======================================================
A Capital Appreciation Fund
EQVA 4/97
<PAGE>
--
STATEMENT OF ADDITIONAL INFORMATION
April 25, 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 25, 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
EQFR1A
Page
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
<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 warrants 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.
<PAGE>
Borrowing. A Series may from time to time borrow money for temporary,
extraordinary or emergency purposes in an amount up to 15% 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
<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 Executive
(58) 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 Executive
(44) 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
<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
<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.
<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 Total
Compensation Benefits Compensation
Position With Fund from Fund (1) Accrued as from Fund and
part of Fund Complex
Fund (1)(2)
Expenses
<S> <C> <C> <C>
William C. Morris, Director N/A N/A N/A
and Chairman
Brian T. Zino, Director N/A N/A N/A
and President
Richard R. Schmaltz, N/A N/A N/A
Director
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 are 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.
<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 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
<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.
<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; 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.
<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 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.
<PAGE>
FINANCIAL STATEMENTS
The Fund's statements of assets and liabilities presented below have been
audited by Deloitte & Touche LLP, independent auditors.
<TABLE>
<CAPTION>
SELIGMAN VALUE FUND SERIES, INC.
STATEMENTS OF ASSETS AND LIABILITIES
April 9, 1997
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 73,300
--- ------
payable .............................. 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.
<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
<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 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.
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.
<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
Helps finance America's fledgling railroads through underwriting.
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.
Becomes a prominent underwriter of corporate securities, including New York
Mutual Gas Light Company, later part of Consolidated Edison.
Provides financial assistance to Mary Todd Lincoln and urges the Senate to
award her a pension.
Is appointed U.S. Navy fiscal agent by President Grant.
Becomes a leader in raising capital for America's industrial and
urban development.
...1900-1910
Helps Congress finance the building of the Panama Canal.
...1910s
Participates in raising billions for Great Britain, France and Italy,
helping to finance World War I.
...1920s
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.
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
Assumes management of Broad Street Investing Co. Inc., its first mutual
fund, today known as Seligman Common Stock Fund, Inc.
Establishes Investment Advisory Service.
...1940s
Helps shape the Investment Company Act of 1940.
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.
Assumes management of National Investors Corporation, today Seligman
Growth Fund, Inc.
Establishes Whitehall Fund, Inc., today Seligman Income Fund, Inc.
...1950-1989
Develops new open-end investment companies. Today, manages more than 40
mutual fund portfolios.
Helps pioneer state-specific, municipal bond funds, today managing a
national and 18 state-specific municipal funds.
Establishes J. & W. Seligman Trust Company, and J. & W. Seligman
Valuations Corporation.
Establishes Seligman Portfolios, Inc., an investment vehicle offered through
variable annuity products.
...1990s
Introduces Seligman Select Municipal Fund and Seligman Quality
Municipal Fund, two closed-end funds that invest in high-quality
municipal bonds.
In 1991 establishes a joint venture with Henderson Administration Group plc,
of London, known as Seligman Henderson Co., to offer global investment
products.
Introduces to the public Seligman Frontier Fund, Inc., a small
capitalization mutual fund.
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.
