<PAGE>
File No. 333-20621
811-08031
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [_]
Post-Effective Amendment No. 7 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 9 [X]
- --------------------------------------------------------------------------------
SELIGMAN VALUE FUND SERIES, INC.
(Exact name of registrant as specified in charter)
- --------------------------------------------------------------------------------
100 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices)
- --------------------------------------------------------------------------------
Registrant's Telephone Number: 212-850-1864 or
Toll Free: 800-221-2450
- --------------------------------------------------------------------------------
THOMAS G. ROSE, Treasurer,
100 Park Avenue
New York, New York 10017
(Name and address of agent for service)
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective (check appropriate box):
[_] immediately upon filing pursuant to [_] on (date) pursuant to paragraph
paragraph (b) (a)(1)
[X] on May 28, 1999 pursuant to [_] 75 days after filing pursuant to
paragraph (b) paragraph (a)(2)
[_] 60 days after filing pursuant to [_] on (date) pursuant to paragraph
paragraph (a)(1) (a)(2) of rule 485.
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
SELIGMAN
- ------------------
Value Fund
Series, Inc.
Large-Cap
Value Fund
Small-Cap
Value Fund
The Securities and Exchange Commission has neither approved nor disapproved
these Funds, and it has not determined the prospectus to be accurate or
adequate. Any representation to the contrary is a criminal offense.
An investment in these Funds or any other fund cannot provide a complete
investment program. The suitability of an investment in a Fund should be
considered based on the investment objective, strategies and risks described
herein, considered in light of all of the other investments in your portfolio,
as well as your risk tolerance, financial goals and time horizons. We recommend
that you consult your financial advisor to determine if one or more of these
Funds is suitable for you.
[GRAPHIC]
Prospectus
JUNE 1, 1999
--------
A Value Approach to
Seeking Long-Term
Capital Appreciation
managed by
[LOGO]JWS
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
EQVA1 6/99
<PAGE>
Table of Contents
The Funds
Seligman Large-Cap Value Fund
Investment Objective/Principal Strategies 1
Principal Risks 2
Past Performance 3
Fees and Expenses 4
Seligman Small-Cap Value Fund
Investment Objective/Principal Strategies 5
Principal Risks 6
Past Performance 7
Fees and Expenses 8
Management of the Funds 9
The Portfolio Managers'
Historical Performance 10
Year 2000 12
Shareholder Information
Deciding Which Class of Shares to Buy 13
Pricing of Fund Shares 15
Opening Your Account 15
How to Buy Additional Shares 16
How to Exchange Shares Among
the Seligman Mutual Funds 17
How to Sell Shares 17
Important Policies That May Affect
Your Account 18
Dividends and Capital Gain Distributions 19
Taxes 19
The Seligman Mutual Funds 20
Financial Highlights 21
How to Contact Us 25
For More Information back cover
TIMES CHANGE ... VALUES ENDURE
<PAGE>
Large-Cap Value Fund
investment objective/principal strategies
The Fund's objective is long-term capital appreciation.
The Fund uses the following principal strategies to pursue its objective:
The Fund generally invests at least 65% of its total
Value assets in the common stocks of "value" companies with
Companies: large market capitalization ($2 billion or more) at the
Those companies time of purchase by the Fund.
believed by the
investment The Fund uses a bottom-up stock selection approach.
manager to be This means that the investment manager concentrates on
undervalued, individual company fundamentals, rather than on a
either particular industry. In selecting investments, the
historically, investment manager seeks to identify value companies
by the market, that it believes display one or more of the following:
or by their
peers. .A low price-to-earnings and/or low price-to-book
ratio
.Positive change in senior management
.Positive corporate restructuring
.Temporary setback in price due to factors that no
longer exist
The Fund generally holds a small number of securities because the investment
manager believes doing so allows it to adhere to its disciplined value
investment approach. The investment manager maintains close contact with the
management of each company in which the Fund invests and continually monitors
Fund holdings, remaining sensitive to overvaluation and deteriorating
fundamentals.
The Fund generally sells a stock if the investment manager believes it has
become fully valued, its fundamentals have deteriorated, or ongoing evaluation
reveals that there are more attractive investment opportunities available.
The Fund invests primarily in equity-related securities of domestic issuers.
These securities may include common stock, preferred stock, stock convertible
into or exchangeable for such securities, and common stock purchase rights and
warrants. The Fund may also invest in American Depositary Receipts (ADRs).
ADRs are publicly traded instruments generally issued by domestic banks or
trust companies that represent a security of a foreign issuer. ADRs are quoted
and settled in US dollars. The Fund uses the same criteria in evaluating these
securities as it does for common stocks.
The Fund may invest up to 15% of its net assets in illiquid securities (i.e.,
securities that cannot be readily sold) and may invest up to 10% of its total
assets directly in foreign securities. The limit on foreign securities does
not include ADRs, or commercial paper and certificates of deposit issued by
foreign banks. The Fund may also purchase put options in an attempt to hedge
against a decline in the price of securities it holds in its portfolio. A put
option gives the Fund the right to sell an underlying security at a particular
price during a fixed period. The Fund generally does not invest a significant
amount of its assets, if any, in illiquid securities, foreign securities, or
put options.
The Fund may, from time to time, take temporary defensive positions that are
inconsistent with its principal strategies in seeking to minimize extreme
volatility caused by adverse market, economic, or other conditions. This could
prevent the Fund from achieving its objective.
The Fund may change its principal strategies if the Fund's Board of Directors
believes doing so is consistent with the Fund's objective. The Fund's
objective may be changed only with shareholder approval.
The Fund's Board of Directors may change the parameters by which large market
capitalization is defined if they conclude such a change is appropriate.
As with any mutual fund, there is no guarantee the Fund will achieve its
objective.
1
<PAGE>
Large-Cap Value Fund
Principal Risks
Stock prices fluctuate. Therefore, as with any fund that invests in stocks, the
Fund's net asset value will fluctuate, especially in the short term. You may
experience a decline in the value of your investment and you could lose money
if you sell your shares at a price lower than you paid for them.
The Fund holds a small number of securities. Consequently, if one or more of
the securities held in its portfolio declines in value or underperforms
relative to the market, it may have a greater impact on the Fund's performance
than if the Fund held a larger number of securities. The Fund may experience
more volatility, especially over the short term, than a fund with a greater
number of holdings.
The Fund may not invest more than 25% of its total assets in securities of
companies in any one industry. However, the Fund may invest more heavily in
certain industries believed to offer good investment opportunities. To the
extent that an industry in which the Fund is invested falls out of favor, the
Fund's performance may be negatively affected. This effect may be heightened
because the Fund holds a smaller number of securities.
The Fund's performance may be affected by the broad investment environment in
the US or international securities markets, which is influenced by, among other
things, interest rates, inflation, politics, fiscal policy, and current events.
Foreign securities, illiquid securities, or options in the Fund's investments
involve higher risk and may subject the Fund to higher price volatility.
Investing in securities of foreign issuers involves risks not associated with
US investments, including settlement risks, currency fluctuations, foreign
taxation, differences in financial reporting practices, and changes in
political conditions.
An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE>
Large-Cap Value Fund
past performance
The Large-Cap Value Fund offers four Classes of shares. The information below
provides some indication of the risks of investing in the Fund by showing how
the performance of each Class (except Class C) compares to three widely-used
measures of large company stock performance. Class C is a new Class of shares,
effective June 1, 1999, as no performance information is available.
The following performance information is designed to assist you in comparing
the returns of the Fund with the returns of other mutual funds. How the Fund
has performed in the past, however, is not necessarily an indication of how the
Fund will perform in the future. Total returns will vary between each Class of
shares due to the different fees and expenses of each Class.
The Class A annual total return presented in the bar chart does not reflect the
effect of any sales charges. If these charges were included, the return would
be less. The average annual total returns presented in the table below the
chart do reflect the effect of the applicable sales charges. Both the bar chart
and table assume that all dividends and capital gain distributions were
reinvested.
[BAR GRAPH]
Class A Annual Total Return
1998
----
11.57%
Best quarter return: 19.32% - quarter ended 12/31/98
Worst quarter return: -17.80% - quarter ended 9/30/98
Average Annual Total Returns - Periods Ended 12/31/98
<TABLE>
<CAPTION>
ONE SINCE INCEPTION
YEAR 4/25/97
----- ---------------
<S> <C> <C>
Class A 6.31% 20.71%
Class B 5.85 21.27
Class D 9.85 23.33
Russell 1000 Index 27.02 31.41(/1/)
Russell 1000 Value Index 15.63 25.62(/1/)
S&P 500 28.58 31.37(/1/)
</TABLE>
The Russell 1000 Index, the Russell 1000 Value Index and
the Standard & Poor's Composite Stock Price Index (S&P
500) are unmanaged benchmarks that assume the
reinvestment of dividends and exclude the effect of fees
and sales charges. The Russell 1000 Index measures the
performance of large-cap stocks. The Russell 1000 Value
Index measures the performance of large-cap value
stocks. The S&P 500 measures the performance of 500 of
the largest US companies based on market capitalization.
(/1/From)April 30, 1997.
3
<PAGE>
Large-Cap Value Fund
fees and expenses
The table below summarizes the fees and expenses that you may pay as a
shareholder of the Fund. Each Class of shares has its own sales charge schedule
and is subject to different ongoing 12b-1 fees. Shareholder fees are charged
directly to you. Annual fund operating expenses are deducted from Fund assets
and are therefore paid indirectly by you and other shareholders of the Fund.
<TABLE>
<CAPTION>
Shareholder Fees Class A Class B Class C Class D
- ---------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) on Purchases
(as a % of offering price)................ 4.75%(/1/) none 1% none
Maximum Contingent Deferred Sales Charge
(Load) (CDSC) on Redemptions
(as a % of original purchase price or
current net asset value,
whichever is less)........................ none(/1/) 5% 1% 1%
Annual Fund Operating Expenses for 1998
- ---------------------------------------
(as a percentage of average net assets)
Management Fees............................ .80% .80% .80% .80%
Distribution and/or Service (12b-1) Fees... .25% 1.00% 1.00% 1.00%
Other Expenses............................. .45% .45% .45% .45%
----- ----- ----- -----
Total Annual Fund Operating Expenses....... 1.50% 2.25% 2.25% 2.25%
===== ===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
- -------
This example is intended to help you compare the expenses of investing in the
Fund with the expenses of investing in other mutual funds. It assumes (1) you
invest $10,000 in the Fund for each period and then sell all of your shares at
the end of that period, (2) your investment has a 5% return each year, and (3)
the Fund's operating expenses remain the same. Although your actual expenses
may be higher or lower, based on these assumptions your expenses would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $620 $ 927 $1,255 $2,180
Class B 728 1,003 1,405 2,396+
Class C 426 796 1,293 2,659
Class D 328 703 1,205 2,585
</TABLE>
If you did not sell your shares at the end of
each period, your expenses would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $620 $927 $1,255 $2,180
Class B 228 703 1,205 2,396+
Class C 326 796 1,293 2,659
Class D 228 703 1,205 2,585
</TABLE>
+ Class B shares will automatically convert to Class A shares after eight
years.
Management Fees:
Fees paid out of Fund
assets to the
investment manager to
compensate it for
managing the Fund.
12b-1 Fees:
Fees paid by each
Class, pursuant to a
plan adopted by the
Fund under Rule 12b-1
of the Investment
Company Act of 1940.
The plan allows each
Class to pay
distribution and/or
service fees for the
sale and distribution
of its shares and for
providing services to
shareholders.
Other Expenses:
Miscellaneous expenses
of running the Fund,
including such things
as transfer agency,
registration, custody,
and auditing and legal
fees.
4
<PAGE>
Small-Cap Value Fund
investment objective/principal strategies
The Fund's objective is long-term capital appreciation.
The Fund uses the following principal strategies to pursue its objective:
The Fund generally invests at least 65% of its total assets in the common
stocks of "value" companies with small market capitalization (up to $1
billion) at the time of purchase by the Fund.
The Fund uses a bottom-up stock selection approach.
Value This means that the investment manager concentrates on
Companies: individual company fundamentals, rather than on a
Those companies particular industry. In selecting investments, the
believed by the investment manager seeks to identify value companies
investment that it believes display one or more of the following:
manager to be
undervalued, . A low price-to-earnings and/or low price-to-book
either ratio
historically, . Positive change in senior management
by the market, . Positive corporate restructuring
or by their . Temporary setback in price due to factors that no
peers. longer exist
The Fund generally holds a small number of securities because the investment
manager believes doing so allows it to adhere to its disciplined value
investment approach. The investment manager maintains close contact with the
management of each company in which the Fund invests and continually monitors
Fund holdings, remaining sensitive to overvaluation and deteriorating
fundamentals.
The Fund generally sells a stock if the investment manager believes it has
become fully valued, its fundamentals have deteriorated, or ongoing evaluation
reveals that there are more attractive investment opportunities available.
The Fund invests primarily in equity-related securities of domestic issuers.
These securities may include common stock, preferred stock, stock convertible
into or exchangeable for such securities, and common stock purchase rights and
warrants. The Fund may also invest in American Depositary Receipts (ADRs).
ADRs are publicly traded instruments generally issued by domestic banks or
trust companies that represent a security of a foreign issuer. ADRs are quoted
and settled in US dollars. The Fund uses the same criteria in evaluating these
securities as it does for common stocks.
The Fund may invest up to 15% of its net assets in illiquid securities (i.e.,
securities that cannot be readily sold) and may invest up to 10% of its total
assets directly in foreign securities. The limit on foreign securities does
not include ADRs, or commercial paper and certificates of deposit issued by
foreign banks. The Fund may also purchase put options in an attempt to hedge
against a decline in the price of securities it holds in its portfolio. A put
option gives the Fund the right to sell an underlying security at a particular
price during a fixed period. The Fund generally does not invest a significant
amount of its assets, if any, in illiquid securities, foreign securities, or
put options.
The Fund may, from time to time, take temporary defensive positions that are
inconsistent with its principal strategies in seeking to minimize extreme
volatility caused by adverse market, economic, or other conditions. This could
prevent the Fund from achieving its objective.
The Fund may change its principal strategies if the Fund's Board of Directors
believes doing so is consistent with the Fund's objective. The Fund's
objective may be changed only with shareholder approval.
The Fund's Board of Directors may change the parameters by which small market
capitalization is defined if they conclude such a change is appropriate.
As with any mutual fund, there is no guarantee the Fund will achieve its
objective.
5
<PAGE>
Small-Cap Value Fund
Principal Risks
Stock prices fluctuate. Therefore, as with any fund that invests in stocks, the
Fund's net asset value will fluctuate, especially in the short term. You may
experience a decline in the value of your investment and you could lose money
if you sell your shares at a price lower than you paid for them.
Small company stocks, as a whole, may experience larger price fluctuations than
large company stocks or other types of investments. Small companies tend to
have shorter operating histories and may have less experienced management.
During times of investor uncertainty, investor sentiment may favor larger well-
known companies over smaller lesser-known companies.
The Fund holds a small number of securities. Consequently, if one or more of
the securities held in its portfolio declines in value or underperforms
relative to the market, it may have a greater impact on the Fund's performance
than if the Fund held a larger number of securities. The Fund may experience
more volatility, especially over the short term, than a fund with a greater
number of holdings.
The Fund may not invest more than 25% of its total assets in securities of
companies in any one industry. However, the Fund may invest more heavily in
certain industries believed to offer good investment opportunities. If an
industry in which the Fund is invested falls out of favor, the Fund's
performance may be negatively affected. This effect may be heightened because
the Fund holds a smaller number of securities.
The Fund's performance may be affected by the broad investment environment in
the US or international securities markets, which is influenced by, among other
things, interest rates, inflation, politics, fiscal policy, and current events.
Foreign securities, illiquid securities, or options in the Fund's portfolio
involve higher risk and may subject the Fund to higher price volatility.
Investing in securities of foreign issuers involves risks not associated with
US investments, including settlement risks, currency fluctuations, foreign
taxation, differences in financial reporting practices, and changes in
political conditions.
An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
6
<PAGE>
Small-Cap Value Fund
past performance
The Small-Cap Value Fund offers four Classes of shares. The information below
provides some indication of the risks of investing in the Fund by showing how
the performance of each Class (except Class C) compares to two widely-used
measures of small company stock performance and one measure of the performance
of mutual funds with investment objectives similar to the Fund. Class C is a
new Class of shares, effective June 1, 1999, so no performance information is
available.
The following performance information is designed to assist you in comparing
the returns of the Fund with the returns of other mutual funds. How the Fund
has performed in the past, however, is not necessarily an indication of how the
Fund will perform in the future. Total returns will vary between each Class of
shares due to the different fees and expenses of each Class.
The Class A annual total return presented in the bar chart does not reflect the
effect of any sales charges. If these charges were included, the return would
be less. The average annual total returns presented in the table below the
chart do reflect the effect of the applicable sales charges. Both the bar chart
and table assume that all dividends and capital gain distributions were
reinvested.
[BAR GRAPH]
Class A Annual Total Return
1998
------
-18.81%
Best quarter return: 13.99% - quarter ended 12/31/98
Worst quarter return: -24.76% - quarter ended 9/30/98
Average Annual Total Returns - Periods Ended 12/31/98
<TABLE>
<CAPTION>
ONE SINCE INCEPTION
YEAR 4/25/97
------ ---------------
<S> <C> <C>
Class A -22.71% 3.17%
Class B -23.42 3.20
Class D -20.21 5.51
Russell 2000 Index -2.55 14.54(/1/)
Russell 2000 Value Index -6.45 12.56(/1/)
Lipper Small Cap Funds Average -0.40 17.04(/1/)
</TABLE>
The Russell 2000 Index, the Russell 2000 Value Index,
and the Lipper Small Cap Funds Average (Lipper Average)
are unmanaged benchmarks that assume the reinvestment of
dividends. The Lipper Average excludes the effect of
sales charges and the Russell 2000 Index and the Russell
2000 Value Index exclude the effect of fees and sales
charges. The Russell 2000 Index measures the performance
of small-cap stocks. The Russell 2000 Value Index
measures the performance of small-cap value stocks. The
Lipper Average measures the performance of mutual funds
with investment objectives similar to the Fund.
(/1/)From April 30, 1997.
7
<PAGE>
Small Cap-Value Fund
fees and expenses
The table below summarizes the fees and expenses that you may pay as a
shareholder of the Fund. Each Class of shares has its own sales charge schedule
and is subject to different ongoing 12b-1 fees. Shareholder fees are charged
directly to you. Annual fund operating expenses are deducted from Fund assets
and are therefore paid indirectly by you and other shareholders of the Fund.
<TABLE>
<CAPTION>
Shareholder Fees Class A Class B Class C Class D
- ---------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) on Purchases
(as a % of offering price)............... 4.75%(/1/) none 1% none
Maximum Contingent Deferred Sales Charge
(Load) (CDSC) on Redemptions (as a % of
original purchase price or current net
asset value, whichever is less).......... none(/1/) 5% 1% 1%
Annual Fund Operating Expenses for 1998
- ---------------------------------------
(as a percentage of average net assets)
Management Fees........................... 1.00% 1.00% 1.00% 1.00%
Distribution and/or Service (12b-1) Fees.. .25% 1.00% 1.00% 1.00%
Other Expenses............................ .44% .44% .44% .44%
----- ----- ----- -----
Total Annual Fund Operating Expenses...... 1.69% 2.44% 2.44% 2.44%
===== ===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example is intended to help you compare the expenses of investing in the
Fund with the expenses of investing in other mutual funds. It assumes (1) you
invest $10,000 in the Fund for each period and then sell all of your shares at
the end of that period, (2) your investment has a 5% return each year, and (3)
the Fund's operating expenses remain the same. Although your actual expenses
may be higher or lower, based on these assumptions your expenses would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $639 $ 982 $1,349 $2,378
Class B 747 1,061 1,501 2,591+
Class C 445 853 1,388 2,848
Class D 347 761 1,301 2,776
</TABLE>
If you did not sell your shares at the end of each period, your expenses would
be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $639 $982 $1,349 $2,378
Class B 247 761 1,301 2,591+
Class C 345 853 1,388 2,848
Class D 247 761 1,301 2,776
</TABLE>
+ Class B shares will automatically convert to Class A shares after eight
years.
Management Fees:
Fees paid out of Fund
assets to the
investment manager to
compensate it for
managing the Fund.
12b-1 Fees:
Fees paid by each
Class, pursuant to a
plan adopted by the
Fund under Rule 12b-1
of the Investment
Company Act of 1940.
The plan allows each
Class to pay
distribution and/or
service fees for the
sale and distribution
of its shares and for
providing services to
shareholders.
Other Expenses:
Miscellaneous expenses
of running the Fund,
including such things
as transfer agency,
registration, custody,
and auditing and legal
fees.
8
<PAGE>
Management of the Funds
The Board of Directors provides broad supervision over the affairs of each
Fund.
J. & W. Seligman & Co. Incorporated (Seligman), 100 Park Avenue, New York, New
York 10017, is the manager of each Fund. Seligman manages the investment of
each Fund's assets, including making purchases and sales of portfolio
securities consistent with each Fund's investment objective and strategies, and
administers each Fund's business and other affairs.
Established in 1864, Seligman currently serves as manager to 18 US registered
investment companies, which offer more than 50 investment portfolios with
approximately $21.5 billion in assets as of April 30, 1999. Seligman also
provides investment management or advice to institutional or other accounts
having an aggregate value at April 30, 1999, of approximately $10.2 billion.
Each Fund pays Seligman a fee for its management services. The fee is based on
a percentage of each Fund's average daily net assets. For the year ended
December 31, 1998, the management fee paid by the Large-Cap Value Fund to
Seligman was equal to an annual rate of .80% of the Fund's average daily net
assets. For the same period, the management fee paid by the Small-Cap Value
Fund to Seligman was equal to an annual rate of 1.00% of the Fund's average
daily net assets.
Affiliates of Seligman:
Seligman Advisors, Inc.:
The Fund's general
distributor; responsible
for accepting orders for
purchases and sales of Fund
shares.
Seligman Services, Inc.:
A limited purpose
broker/dealer; acts as the
broker/dealer of record for
shareholder accounts that
do not have a designated
broker or financial
advisor.
Seligman Data Corp. (SDC):
The Fund's shareholder
service agent; provides
shareholder account
services to the Fund at
cost.
Portfolio Management
The Funds are managed by the Seligman Value Team, headed by Mr. Neil T. Eigen.
Mr. Eigen is Vice President of the Fund and has been Portfolio Manager of each
Fund since its inception. Mr. Eigen joined Seligman on January 3, 1997 as a
Managing Director. Prior to joining Seligman, Mr. Eigen served as Senior
Managing Director, Chief Investment Officer and Director of Equity Investing at
Bear Stearns Asset Management from January 1990 to January 1997.
Mr. Richard S. Rosen is Co-Portfolio Manager of each Fund. Mr. Rosen joined
Seligman on January 3, 1997 as a Senior Vice President, Investment Officer.
Prior to joining Seligman, Mr. Rosen served as a Managing Director and
Portfolio Manager at Bear Stearns Asset Management.
9
<PAGE>
The Portfolio Managers' Historical Performance
Performance Of The Large-Cap Value Fund
The Large-Cap Value Fund commenced investment operations on April 25, 1997.
The data presented below illustrates comparative performance between the Large-
Cap Value Fund, the Russell 1000 Index, the Russell 1000 Value Index, and the
S&P 500.
TOTAL RETURNS
<TABLE>
<CAPTION>
Class A Class B Class C Class D
------------------------------------------- --------------- -------
with without with 4% without with 1% Without without Russell Russell 1000 S&P
sales charge sales charge CDSC CDSC CDSC CDSC CDSC 1000 Index Value Index 500
------------ ------------ ------- ------- ------- ------- ------- ---------- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
18.08% 21.13% 18.44% 20.20% -- -- 20.20% 29.51% 22.85% 30.04%
</TABLE>
The total return figures for the Large-Cap Value Fund are for the period
April 25, 1997 through March 31, 1999. They reflect all changes in price per
share and assume the investment of dividend and capital gain distributions.
Class A returns are calculated with and without the effect of the initial 4.75%
maximum sales charge. Class B returns are calculated with and without the
effect of the maximum 5% CDSC, charged on sales of Fund shares made within one
year of the date of purchase, declining to 1% in the sixth year and 0%
thereafter. Class C is a new class, so total return information is not
available. Class D return is calculated without the effect of the maximum CDSC.
The rates of return will vary and the principal value of an investment will
fluctuate. Shares, if sold, may be worth more or less than their original cost.
Past performance is not indicative of future investment results.
The Russell 1000 Index, the Russell 1000 Value Index, and the S&P 500 are
unmanaged benchmarks that assume investment of dividends, and do not reflect
fees and sales charges. The Russell 1000 Index measures the performance of the
1,000 largest US companies based on total market capitalization. The Russell
1000 Value Index measures the performance of the value companies within the
Russell 1000 Index. The S&P 500 measures the performance of 500 of the largest
US companies based on market capitalization. Investors cannot invest directly
in an index. The average annual total return figures provided for these indices
are for the period April 30, 1997 through March 31, 1999.
The Portfolio Manager's Performance For Other Large-Cap Value Accounts
The performance results presented below are for a composite representing large-
cap value institutional private accounts managed by Neil T. Eigen, Portfolio
Manager, and Richard S. Rosen, Co-Portfolio Manager, of the Large-Cap Value
Fund, including accounts that they managed while employed at their previous
employer (the Composite). The Composite does not include all private accounts
managed by Messrs. Eigen and Rosen while at their previous employer; however,
Seligman believes that the exclusion of such accounts does not materially
affect the performance shown or otherwise cause the performance to be
misleading. All accounts included in the Composite were managed with investment
objectives, policies, and strategies substantially similar to those of the
Large-Cap Value Fund. Messrs. Eigen and Rosen were employed at their previous
employer through December 31, 1996 and performance figures presented for
periods prior thereto represent results achieved while at that employer.
Additionally, calculations of certain "average annual total returns" and the
"annual rate of return" for the year ended March 31, 1997 combine the
performance achieved by Messrs. Eigen and Rosen while at their previous
employer with their performance while at Seligman.
ANNUAL RATES OF RETURN
<TABLE>
<CAPTION>
Year
Ended S&P
March 31, Composite 500
--------- --------- -----
<S> <C> <C>
1993.................. 14.44% 15.23%
1994.................. 3.46 1.47
1995.................. 18.97 15.57
1996.................. 31.59 32.10
1997.................. 21.91 19.82
1998.................. 49.84 48.00
1999.................. 1.51 18.46
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
Annualized through March 31, 1999
[BAR GRAPH]
Composite S&P 500
- ---------------------------------------
1 Year 1.51% 18.46%
3 Years 22.86% 28.07%
5 Years 23.76% 26.25%
7 Years 19.29% 20.78%
10
<PAGE>
The performance of the Composite does not represent historical performance of
the Large-Cap Value Fund (which does not yet have a long-term performance
record) and should not be interpreted as a substitute for the Large-Cap Value
Fund's performance, or as an indication of the Large-Cap Value Fund's
performance, or as an indication of the Large-Cap Value Fund's future
performance.
Private accounts, which comprise the Composite, are not subject to certain
investment limitations, diversification requirements, and other restrictions
imposed by the Investment Company Act of 1940 and the Internal Revenue Code of
1986, which, if applicable, might have adversely affected the performance
results presented above.
The performance presented for the Composite is net of actual expenses (except
for custody fees) and net of the highest management fee rate that could have
been assessed on the accounts that comprise the Composite and assumes the
investment of dividends and capital gains, if any. The performance of the
Composite does not reflect the operating expenses of the Large-Cap Value Fund
or any applicable sales charges. If such expenses and sales charges were
reflected, performance would have been lower. The Large-Cap Value Fund's fees
and expenses are greater than those charged on the Composite. The method for
calculating the performance of the Composite differs from the method mandated
by the Securities and Exchange Commission for calculating the Large-Cap Value
Fund's performance. If the same method had been used, the Composite's
performance results would have been different.
11
<PAGE>
Year 2000
As the millennium approaches, mutual funds, financial and business
organizations, and individuals could be adversely affected if their computer
systems do not properly process and calculate date-related information and data
on and after January 1, 2000. Like other mutual funds, the Funds rely upon
service providers and their computer systems for their day-to-day operations.
Many of the Funds' service providers in turn depend upon computer systems of
their vendors. Seligman and SDC have established a year 2000 project team. The
team's purpose is to assess the state of readiness of Seligman and SDC and the
Funds' other service providers and vendors. The team is comprised of several
information technology and business professionals as well as outside
consultants. The Project Manager of the team reports directly to the
Administrative Committee of Seligman. The Project Manager and other members of
the team also report to the Funds' Board of Directors and its Audit Committee.
The team has identified the service providers and vendors who furnish critical
services or software systems to the Funds, including securities firms that
execute portfolio transactions for the Funds and firms responsible for
shareholder account recordkeeping. The team is working with these critical
service providers and vendors to evaluate the impact year 2000 issues may have
on their ability to provide uninterrupted services to the Funds. The team will
assess the feasibility of their year 2000 plans. The team has made progress on
its year 2000 contingency plans - recovery efforts the team will employ in the
event that year 2000 issues adversely affect the Funds. The team anticipates
finalizing these plans in the near future.
The Funds anticipate the team will implement all significant components of the
team's year 2000 plans by mid-1999, including appropriate testing of critical
systems and receipt of satisfactory assurances from critical service providers
and vendors regarding their year 2000 compliance. The Funds believe that the
critical systems on which they rely will function properly on and after the
year 2000, but this is not guaranteed. If these systems do not function
properly, or the Funds' critical service providers are not successful in
implementing their year 2000 plans, the Funds' operations may be adversely
affected, including pricing, securities trading and settlement, and the
provision of shareholder services.
In addition, the Funds may hold securities of issuers whose underlying business
leaves them susceptible to year 2000 issues. The Funds may also hold securities
issued by governmental or quasi-governmental issuers, which, like other
organizations, are also susceptible to year 2000 concerns. Year 2000 issues may
affect an issuer's operations, creditworthiness, and ability to make timely
payment on any indebtedness and could have an adverse impact on the value of
its securities. If a Fund holds these securities, its performance could be
negatively affected. Seligman seeks to identify an "issuer's" state of year
2000 readiness as part of the research it employs. However, the perception of
an issuer's year 2000 preparedness is only one of the many factors considered
in determining whether to buy, sell, or continue to hold a security.
Information provided by issuers concerning their state of readiness may or may
not be accurate or readily available. Further, the Funds may be adversely
affected if the domestic or foreign exchanges, markets, depositories, clearing
agencies, or governments or third parties responsible for infrastructure needs
do not address their year 2000 issues in a satisfactory manner.
SDC has informed the Funds that it does not expect the cost of its services to
increase materially as a result of the modifications to its computer systems
necessary to prepare for the year 2000. The Funds will not pay to remediate the
systems of Seligman or bear directly the costs to remediate the systems of any
other service providers or vendors, other than SDC.
12
<PAGE>
Shareholder Information
Deciding Which Class of Shares to Buy
Each of the Fund's Classes represents an interest in the same portfolio of
investments. However, each Class has its own sales charge schedule, and its
ongoing 12b-1 fees may differ from other Classes. When deciding which Class of
shares to buy, you should consider, among other things:
. The amount you plan to invest.
. How long you intend to remain invested in each Fund, or another Seligman
mutual fund.
. If you would prefer to pay an initial sales charge and lower ongoing 12b-1
fees, or be subject to a CDSC and pay higher ongoing 12b-1 fees.
. Whether you may be eligible for reduced or no sales charges when you buy
or sell shares.
Your financial advisor will be able to help you decide which Class of shares
best meets your needs.
Class A
.Initial sales charge on Fund purchases, as set forth below:
<TABLE>
<CAPTION>
Sales Charge Regular Dealer
Sales Charge as a % Discount
as a % of Net as a % of
Amount of your Investment of Offering Price(/1/) Amount Invested Offering Price
------------------------- ---------------------- --------------- --------------
<S> <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 and
over(/2/) 0.00 0.00 0.00
</TABLE>
(/1/)"Offering Price" is the amount that you actually pay for Fund shares;
it includes the initial sales charge.
(/2/)You will not pay a sales charge on purchases of $1 million or more, but
you will be subject to a 1% CDSC if you sell your shares within 18
months.
.Annual 12b-1 fee (for shareholder services) of up to 0.25%.
.No sales charge on reinvested dividends or capital gain distributions.
.Certain employer-sponsored defined contribution-type plans can purchase
shares with no initial sales charge.
Class B
.No initial sales charge on purchases.
.A declining CDSC on shares sold within 6 years of purchase:
<TABLE>
<CAPTION>
Years Since Purchase CDSC
-------------------- ----
<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>
Your purchase of Class B
shares must be for less than
$250,000, because if you
invest $250,000 or more, you
will pay less in fees and
charges if you buy another
Class of shares.
.Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
.Automatic conversion to Class A shares after eight years, resulting in
lower ongoing 12b-1 fees.
.No CDSC when you sell shares purchased with reinvested dividends or capital
gain distributions.
13
<PAGE>
Class C
. Initial sales charge on Fund purchases, as set forth below:
<TABLE>
<CAPTION>
Regular Dealer
Sales Charge Sales Charge Discount
Amount of your as a % as a % of Net as a % of
Investment of Offering Price(/1/) Amount Invested Offering Price
-------------- ---------------------- --------------- --------------
<S> <C> <C> <C>
Less than $100,000 1.00% 1.01% 1.00%
$100,000--$249,999 0.50 0.50 0.50
$250,000--
$1,000,000(/2/) 0.00 0.00 0.00
</TABLE>
(/1/)"Offering Price" is the amount that you actually pay for Fund shares; it
includes the initial sales charge.
(/2/)Your purchase of Class C shares must be for less than $1,000,000 because
if you invest $1,000,000 or more you will pay less in fees and charges if
you buy Class A shares.
. A 1% CDSC on shares sold within eighteen months of purchase.
. Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
. No automatic conversion to Class A shares, so you will be subject to
higher ongoing 12b-1 fees indefinitely.
. No CDSC when you sell shares purchased with reinvested dividends or
capital gain distributions.
Class D*
. No initial sales charge on purchases.
. A 1% CDSC on shares sold within one year of purchase.
. Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
. No automatic conversion to Class A shares, so you will be subject to
higher ongoing 12b-1 fees indefinitely.
. No CDSC when you sell shares purchased with reinvested dividends or
capital gain distributions.
* Class D shares are not available to all investors. Beginning June 1,
1999, you may purchase Class D share only if (1) you already own Class D
shares of the Fund or another Seligman mutual fund. (2) if your
financial advisor of record maintains an omnibus account at SDC, or (3)
pursuant to a 401(k) or other retirement plan program for which Class D
shares are already available or for which the sponsor requests Class D
shares because the sales charge structure of Class D shares is
comparable to the sales charge structure of the other funds offered
under the program.
Because the Fund's 12b-1 fees are paid out of each Class's assets on an
ongoing basis, over time these fees will increase your investment expenses
and may cost you more than other types of sales charges.
The Fund's Board of Directors believes that no conflict of interest currently
exists between the Fund's Class A, Class B, Class C, and Class D shares. On
an ongoing basis, the Directors, in the exercise of their fiduciary duties
under the Investment Company Act of 1940 and Maryland law, will seek to
ensure that no such conflict arises.
How CDSCs Are Calculated
To minimize the amount of the CDSC you may pay when you sell your shares, the
Fund assumes that shares acquired through reinvested dividends and capital
gain distributions (which are not subject to a CDSC) are sold first. Shares
that have been in your account long enough so they are not subject to a CDSC
are sold next. After these shares are exhausted, shares will be sold in the
order they were purchased (oldest to youngest). The amount of any CDSC that
you pay will be based on the shares' original purchase price or current net
asset value, whichever is less.
You will not pay a CDSC when you exchange shares of the Fund to buy the same
class of shares of any other Seligman mutual fund. For the purpose of
calculating the CDSC when you sell shares that you acquired by exchanging
shares of the Fund, it will be assumed that you held the shares since the
date you purchased the shares of the Fund.
14
<PAGE>
Pricing of Fund Shares
When you buy or sell shares of a Fund, you do so at the applicable Class's net
asset value (NAV) next calculated after Seligman Advisors accepts your request.
Any applicable sales charge will be added to the purchase price for Class A
shares and Class C shares. Purchase or sale orders received by an authorized
dealer or financial advisor by the close of regular trading on the New York
Stock Exchange (NYSE) (normally 4:00 p.m. Eastern time) and accepted by
Seligman Advisors before the close of business (5:00 p.m. Eastern time) on the
same day will be executed at the Class's NAV calculated as of the close of
regular trading on the NYSE on that day. Your broker/dealer or financial
advisor is responsible for forwarding your order to the Seligman Advisors
before the close of business.
If your buy or sell order is received by your
NAV: broker/dealer or financial advisor after the close of
Computed regular trading on the NYSE, or is accepted by Seligman
separately for Advisors after the close of business, the order will be
each Class by executed at the Class's NAV calculated as of the close
dividing that of regular trading on the next NYSE trading day. When
Class's share of you sell shares, you receive the Class's per share NAV,
the net assets of less any applicable CDSC.
the Fund (i.e.,
its assets less The NAV of each Fund's shares is determined each day,
liabilities) by Monday through Friday, on days that the NYSE is open for
the total number trading. Because of their higher 12b-1 fees, the NAV of
of outstanding Class B, Class C, and Class D shares will generally be
shares of the lower than the NAV of Class A shares of the Fund.
Class.
Securities owned by the Funds are valued at current
market prices. If reliable market prices are
unavailable, securities are valued in accordance with
procedures approved by the Funds' Board of Directors.
Opening Your Account
Each Fund's shares are sold through authorized broker/dealers or financial
advisors who have sales agreements with Seligman Advisors. There are several
programs under which you may be eligible for reduced sales charges or lower
minimum investments. Ask your financial advisor if any of these programs apply
to you. Class D shares are not available to all investors. For more
information, see "Deciding Which Class of Shares to Buy -- Class D."
To make your initial investment in a Fund, contact your financial advisor or
complete an account application and send it with your check directly to SDC at
the address provided on the account application. If you do not choose a Class,
your investment will automatically be made in Class A shares.
You may buy shares of each
Fund for all types of tax-
deferred retirement plans.
Contact Retirement Plan
Services at the address or
phone number listed on the
inside back cover of this
prospectus for information
and to receive the proper
forms.
The required minimum initial investments are:
. Regular (non-retirement) accounts:$1,000
. For accounts opened concurrently with Invest-A-Check(R):
$100 to open if you will be making monthly investments
$250 to open if you will be making quarterly investments
If you buy shares by check and
subsequently sell the shares, SDC will
not send your proceeds until your check
clears, which could take up to 15
calendar days from the date of your
purchase.
You will be sent a statement confirming your purchase, and any subsequent
transactions in your account. You will also be sent quarterly and annual
statements detailing your transactions in the Fund and the other Seligman funds
you own under the same account number. Duplicate account statements will be
sent to you free of charge for the current year and most recent prior year.
Copies of year-end statements for prior years are available for a fee of $10
per year, per account, with a maximum charge of $150 per account. Send your
request and a check for the fee to SDC.
If you want to be able to buy, sell, or exchange shares by telephone,
you should complete an application when you open your account. This
will prevent you from having to complete a supplemental election form
(which may require a signature guarantee) at a later date.
15
<PAGE>
How to Buy Additional Shares
After you have made your initial investment, there are many options available
to make additional purchases of Fund shares. Subsequent investments must be for
$100 or more.
Shares may be purchased through your authorized financial advisor, or you may
send a check directly to SDC. Please provide either an investment slip or a
note that provides your name(s), Fund name, and account number. Unless you
indicate otherwise, your investment will be made in the Class you already own.
Send investment checks to:
Seligman Data Corp.
P.O. Box 9766
Providence, RI 02940-9766
Your check must be in US dollars and be drawn on a US bank. You may not use
third party or credit card convenience checks for investment.
You may also use the following account services to make additional investments:
Invest-A-Check(R). You may buy Fund shares electronically from a savings or
checking account of an Automated Clearing House (ACH) member bank. If your bank
is not a member of ACH, the Fund will debit your checking account by
preauthorized checks. You may buy each Fund's shares at regular monthly
intervals in fixed amounts of $100 or more, or regular quarterly intervals in
fixed amounts of $250 or more. If you use Invest-A-Check(R), you must continue
to make automatic investments until the Fund's minimum initial investment of
$1,000 is met or your account may be closed.
Automatic Dollar-Cost-Averaging. If you have at least $5,000 in Seligman Cash
Management Fund, you may exchange uncertificated shares of that fund to buy
shares of the same class of another Seligman mutual fund at regular monthly
intervals in fixed amounts of $100 or more or regular quarterly intervals in
fixed amounts of $250 or more. If you exchange Class A shares or Class C
shares, you may pay an initial sales charge to buy each Fund's shares.
Automatic CD Transfer. You may instruct your bank to invest the proceeds of a
maturing bank certificate of deposit (CD) in shares of either Fund. If you wish
to use this service, contact SDC or your financial advisor to obtain the
necessary forms. Because your bank may charge you a penalty, it is not normally
advisable to withdraw CD assets before maturity.
Dividends From Other Investments. You may have your dividends from other
companies paid to either Fund. (Dividend checks must include your name, account
number, Fund name, and Class of shares.)
Direct Deposit. You may buy Fund shares electronically with funds from your
employer, the IRS, or any other institution that provides direct deposit. Call
SDC for more information.
Seligman Time Horizon MatrixSM. (Requires an initial total investment of
$10,000.) This is a needs-based investment process, designed to help you and
your financial advisor plan to seek your long-term financial goals. It
considers your financial needs, and helps frame a personalized asset allocation
strategy around the cost of your future commitments and the time you have to
meet them. Contact your financial advisor for more information.
Seligman Harvester. If you are a retiree or nearing retirement, this program is
designed to help you establish an investment strategy that seeks to meet your
needs throughout your retirement. The strategy is customized to your personal
financial situation by allocating your assets to seek to address your income
requirements, prioritizing your expenses, and establishing a prudent withdrawal
schedule. Contact your financial advisor for more information.
16
<PAGE>
How to Exchange Shares Among the Seligman Mutual Funds
You may sell Fund shares to buy shares of the same Class of another Seligman
mutual fund, or you may sell shares of another Seligman mutual fund to buy Fund
shares. Exchanges will be made at each fund's respective NAV. You will not pay
an initial sales charge when you exchange, unless you exchange Class A shares
or Class C shares of Seligman Cash Management Fund to buy the same Class shares
of either Fund or another Seligman mutual fund.
Only your dividend and capital gain distribution options and telephone services
will be automatically carried over to any new fund account. If you wish to
carry over any other account options (for example, Invest-A-Check(R) or
Systematic Withdrawals) to the new fund, you must specifically request so at
the time of your exchange.
If you exchange into a new fund, you must exchange enough to meet the new
fund's minimum initial investment.
See "The Seligman Mutual Funds" for a list of the funds available for exchange.
Before making an exchange, contact your financial advisor or SDC to obtain the
applicable fund prospectus(es). You should read and understand a fund's
prospectus before investing. Some funds may not offer all Classes of shares.
How to Sell Shares
The easiest way to sell Fund shares is by phone. If you have telephone
services, you may be able use this service to sell Fund shares. Restrictions
apply to certain types of accounts. Please see "Important Policies That May
Affect Your Account."
When you sell Fund shares by phone, a check for the proceeds is sent to your
address of record. If you have current ACH bank information on file, you may
have the proceeds of the sale of your Fund shares directly deposited into your
bank account (typically, 3-4 business days after your shares are sold).
You may sell shares to the Fund through a broker/dealer or your financial
advisor. The Fund does not charge any fees or expenses, other than any
applicable CDSC for this transaction; however, the dealer or financial advisor
may charge a service fee. Contact your financial advisor for more information.
You may always send a written request to sell Fund shares,; however, it may
take longer to get your money.
As an additional measure to protect you and the Fund, SDC may confirm written
redemption requests that are (1) for $25,000 or more, or (2) directed to be
paid to an alternate payee or sent to an address other than the address of
record, with you or your financial advisor by telephone before sending you your
money. This will not affect the date on which your redemption request is
actually processed.
If your Fund shares are represented by certificates, you will need to surrender
the certificates to SDC before you sell your shares.
You will need to guarantee your signature(s) if the proceeds are:
(1)$50,000 or more;
(2)to be paid to someone other than all account owners; or
(3)mailed to other than your address of record.
Signature Guarantee:
Protects you and each
Fund from fraud.
It guarantees that a
signature is genuine. A
guarantee must be
obtained from an eligible
financial institution.
Notarization by a notary
public is not an
acceptable guarantee.
You may need to provide additional documents to sell Fund shares if you are:
.a corporation;
.an executor or administrator;
.a trustee or custodian; or
.in a retirement plan.
Contact your financial advisor or SDC's Shareholder Services Department for
information on selling your shares under any of the above circumstances.
You may also use the following account service to sell Fund shares:
Systematic Withdrawal Plan. If you have at least $5,000 in either Fund, you may
withdraw (sell) a fixed dollar amount (minimum of $50) of uncertificated shares
at regular intervals. A check will be sent to you at your address of record or,
if you have current ACH bank information on file, you may have your payments
directly deposited to your predesignated bank account in 3-4 business days
after your shares are sold. If you bought $1,000,000 or more of Class A shares
without an initial sales charge, your withdrawals may be subject to a 1% CDSC
if they occur within 18 months of purchase. If you own Class B, Class C, or
Class D shares and reinvest your dividends and capital gain distributions, you
may withdraw 12%, 10%, or 10%, respectively, of the value of your Fund account
(at the time of election) annually without a CDSC.
17
<PAGE>
Important Policies That May Affect Your Account
To protect you and other shareholders, each Fund reserves the right to:
. Refuse an exchange request if:
1. you have exchanged twice from the same fund in any three-month period;
2. the amount you wish to exchange equals the lesser of $1,000,000 or 1%
of the Fund's net assets; or
3. you or your financial advisor have been advised that previous patterns
of purchases and sales or exchanges have been considered excessive.
. Refuse any request to buy Fund shares;
. Reject any request received by telephone;
. Suspend or terminate telephone services;
. Reject a signature guarantee that SDC believes may be fraudulent;
. Close your fund account if its value falls below $500;
. Close your account if it does not have a certified taxpayer identification
number.
Telephone Services
You and your broker/dealer or financial advisor will be able to place the
following requests by telephone, unless you indicate on your account
application that you do not want telephone services:
. Sell uncertificated shares (up to $50,000 per day, payable to account
owner(s) and mailed to address of record);
. Exchange shares between funds;
. Change dividend and/or capital gain distribution options;
. Change your address;
. Establish systematic withdrawals to address of record.
If you do not complete an account application when you open your account,
telephone services must be elected on a supplemental election form (which may
require a signature guarantee).
Restrictions apply to certain types of accounts:
. Trust accounts on which the current trustee is not listed may not sell Fund
shares by phone;
. Corporations may not sell Fund shares by phone;
. IRAs may only exchange Fund shares or request address changes by phone;
. Group retirement plans may not sell Fund shares by phone; plans that allow
participants to exchange by phone must provide a letter of authorization
signed by the plan custodian or trustee and provide a supplemental election
form signed by all plan participants.
Unless you have current ACH bank information on file, you will not be able to
sell Fund shares by phone within thirty days following an address change.
Your request must be communicated to an SDC representative. You may not request
any phone transactions via the automated access line.
You may cancel telephone services at any time by sending a written request to
SDC. Each account owner, by accepting or adding telephone services, authorizes
each of the other owners to make requests by phone. Your broker/dealer or
financial advisor representative may not establish telephone services without
your written authorization. SDC will send written confirmation to the address
of record when telephone services are added or terminated.
During times of heavy call volume, you may not be able to get through to SDC by
phone to request a sale or exchange of Fund shares. In this case, you may need
to write, and it may take longer for your request to be processed. The Fund's
NAV may fluctuate during this time.
The Funds and SDC will not be liable for processing requests received by phone
as long as it was reasonable to believe that the request was genuine.
Reinstatement Privilege
If you sell either Fund's shares, you may, within 120 calendar days, use part
or all of the proceeds to buy shares of that Fund or any other Seligman mutual
fund (reinstate your investment) without paying an initial sales charge or, if
you paid a CDSC when you sold your shares, receiving a credit for the
applicable CDSC paid. This privilege is available only once each calendar year.
Contact your financial advisor for more information. You should consult your
tax advisor concerning possible tax consequences of exercising this privilege.
18
<PAGE>
Dividends and Capital Gain Distributions
Each Fund generally pays any dividends from its net investment income and
distributes net capital gains realized on investments annually. It is expected
that each Fund's distributions will be primarily capital gains.
You may elect to:
(1) reinvest both dividends and capital gain
Dividend: distributions;
(2) receive dividends in cash and reinvest capital
A payment by a gain distributions; or
mutual fund,
usually derived (3) receive both dividends and capital gain
from the fund's distributions in cash.
net investment
income Your dividends and capital gain distributions will be
(dividends and reinvested if you do not instruct otherwise or if you
interest earned own either Fund's shares in a Seligman tax-deferred
on portfolio retirement plan.
securities less
expenses). If you want to change your election, you may write SDC
at the address listed on the back cover of this
Capital Gain prospectus or, if you have telephone services, you or
Distribution: your financial advisor may call SDC. Your request must
A payment to be received by SDC before the record date to be
mutual fund effective for that dividend or capital gain
shareholders distribution.
which
represents Cash dividends or capital gain distributions will be
profits sent by check to your address of record or, if you
realized on the have current ACH bank information on file, directly
sale of deposited into your predesignated bank account within
securities in a 3-4 business days from the payable date.
fund's
portfolio. Dividends and capital gain distributions are
reinvested to buy additional Fund shares on the
Ex-dividend Date: payable date using the NAV of the ex-dividend date.
The day on
which any Dividends on Class B, Class C and Class D shares will
declared be lower than the dividends on Class A shares as a
distributions result of their higher 12b-1 fees. Capital gain
(dividends or distributions will be paid in the same amount for each
capital gains) Class.
are deducted
from a fund's
assets before
it calculates
its NAV.
Taxes
The tax treatment of dividends and capital gain distributions is the same
whether you take them in cash or reinvest them to buy additional Fund shares.
Tax-deferred retirement plans are not taxed currently on dividends or capital
gain distributions or on exchanges.
Dividends paid by a Fund are taxable to you as ordinary income. You may be
taxed at different rates on capital gains distributed by a Fund depending on
the length of time that Fund holds its assets.
When you sell Fund shares, any gain or loss you realize will generally be
treated as a long-term capital gain or loss if you held your shares for more
than one year, or as a short-term capital gain or loss if you held your shares
for one year or less. However, if you sell Fund shares on which a long-term
capital gain distribution has been received and you held the shares for six
months or less, any loss you realize will be treated as a long-term capital
loss to the extent that it offsets the long-term capital gain distribution.
An exchange of Fund shares is a sale and may result in a gain or loss for
federal income tax purposes.
Each January, you will be sent information on the tax status of any
distributions made during the previous calendar year. Because each
shareholder's situation is unique, you should always consult your tax advisor
concerning the effect income taxes may have on your individual investment.
19
<PAGE>
The Seligman Mutual Funds
Equity
Specialty
- --------------------------------------------------------------------------------
Seligman Communications and
Information Fund
Seeks capital appreciation by investing in companies operating in all aspects
of the communications, information, and related industries.
Seligman Henderson Global Technology Fund
Seeks long-term capital appreciation by investing primarily in global
securities (US and non-US) of companies in the technology and technology-
related industries.
Seligman Henderson Emerging Markets Growth Fund
Seeks long-term capital appreciation by investing primarily in equity
securities of companies in emerging markets.
Small Company
- --------------------------------------------------------------------------------
Seligman Frontier Fund
Seeks growth of capital by investing primarily in small company growth stocks.
Seligman Small-Cap Value Fund
Seeks long-term capital appreciation by investing in equities of small
companies, deemed to be "value" companies by the investment manager.
Seligman Henderson Global Smaller Companies Fund
Seeks long-term capital appreciation by investing in securities of smaller
companies around the world, including the US.
Medium Company
- --------------------------------------------------------------------------------
Seligman Capital Fund
Seeks capital appreciation by investing in the common stocks of companies with
significant potential for growth.
Large Company
- --------------------------------------------------------------------------------
Seligman Growth Fund
Seeks long-term growth of capital value and an increase in future income.
Seligman Henderson Global Growth Opportunities Fund
Seeks capital appreciation by investing primarily in equity securities of
companies that have the potential to benefit from global economic or social
trends.
Seligman Large-Cap Value Fund
Seeks long-term capital appreciation by investing in equities of large
companies, deemed to be "value" companies by the investment manager.
Seligman Common Stock Fund
Seeks favorable, but not the highest, current income and long-term growth of
both income and capital, without exposing capital to undue risk.
Seligman Henderson International Fund
Seeks long-term capital appreciation by investing in securities of medium- to
large-sized companies, primarily in the developed markets outside the US.
Balanced
- --------------------------------------------------------------------------------
Seligman Income Fund
Seeks high current income and improvement in capital value over the long term,
consistent with prudent risk of capital.
Fixed-Income
Income
- --------------------------------------------------------------------------------
Seligman High-Yield Bond Fund
Seeks to maximize current income by investing in a diversified portfolio of
high-yielding, high-risk corporate bonds, commonly referred to as "junk bonds."
Seligman U.S. Government Securities Fund
Seeks high current income primarily by investing in a diversified portfolio of
securities guaranteed by the US government, its agencies, or instrumentalities,
which have maturities greater than one year.
Municipal
- --------------------------------------------------------------------------------
Seligman Municipal Funds:
National Fund
Seeks maximum income, exempt from regular federal income taxes.
State-specific funds:*
Seek to maximize income exempt from regular federal income taxes and from
regular income taxes in the designated state.
<TABLE>
<S> <C> <C>
California Louisiana New Jersey
.High-Yield Maryland New York
.Quality Massachusetts North Carolina
Colorado Michigan Ohio
Florida Minnesota Oregon
Georgia Missouri Pennsylvania
South Carolina
</TABLE>
* A small portion of income may be subject to state taxes.
Money Market
- --------------------------------------------------------------------------------
Seligman Cash Management Fund
Seeks to preserve capital and to maximize liquidity and current income, by
investing only in high-quality money market securities having a maturity of 90
days or less. The fund seeks to maintain a constant net asset value of $1.00
per share.
20
<PAGE>
Financial Highlights
Large-Cap Value Fund
The tables below are intended to help you understand the financial performance
of the Fund's Classes for the period of the Class's operations. Class C is a
new Class, effective June 1, 1999, so financial highlights are not available.
Certain information reflects financial results for a single share of a Class
that was held throughout the periods shown. "Total return" shows the rate that
you would have earned (or lost) on an investment in the Fund, assuming you
reinvested all your dividends and capital gain distributions. Total returns do
not reflect any sales charges. Deloitte & Touche LLP, independent auditors,
have audited this information. Their report, along with the Fund's financial
statements, is included in the Fund's annual report, which is available upon
request.
CLASS A
<TABLE>
<CAPTION>
April 25, 1997**
Year ended to
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Per Share Data:*
Net asset value, beginning of period....... $9.09 $7.14
----- -----
Income from investment operations:
Net investment income..................... 0.06 0.03
Net gains or losses on securities (both
realized and unrealized)................. 0.99 2.06
----- -----
Total from investment operations........... 1.05 2.09
----- -----
Less distributions:
Dividends (from net investment income).... (0.04) (0.01)
Distributions (from capital gains)........ (0.06) (0.13)
----- -----
Total distributions........................ (0.10) (0.14)
----- -----
Net asset value, end of period............. $10.04 $9.09
===== =====
Total Return: 11.57% 29.28%
Ratios/Supplemental Data:
Net assets, end of period (in thousands)... $49,297 $23,699
Ratio of expenses to average net assets.... 1.50% 1.47%+
Ratio of net income to average net assets.. 0.61% 0.58%+
Portfolio turnover rate.................... 10.44% 38.74%
Without management fee waiver:***
Ratios:
Expenses to average net assets............ 2.07%+
Net income to average net assets.......... (0.02)%+
</TABLE>
- --------------
* Per share amounts are calculated based on average shares outstanding.
** Commencement of operations.
*** Seligman at its discretion, waived a portion of its fees for the period
presented.
+ Annualized.
21
<PAGE>
Large-Cap Value Fund
<TABLE>
<CAPTION>
April 25, 1997**
Year ended to
December 31, 1998 December 31, 1997
CLASS B ----------------- -----------------
<S> <C> <C>
Per Share Data:*
Net asset value, beginning of period....... $9.04 $7.14
----- -----
Income from investment operations:
Net investment income..................... (0.02) (0.01)
Net gains or losses on securities (both
realized and unrealized)................. 1.00 2.04
----- -----
Total from investment operations........... 0.98 2.03
----- -----
Less distributions:
Distributions (from capital gains)........ (0.06) (0.13)
----- -----
Total distributions........................ (0.06) (0.13)
----- -----
Net asset value, end of period............. $9.96 $9.04
===== =====
Total Return: 10.85 % 28.46%
Ratios/Supplemental Data:
Net assets, end of period (in thousands)... $56,342 $16,930
Ratio of expenses to average net assets.... 2.25 % 2.25%+
Ratio of net income to average net assets.. (0.14)% (0.20)%+
Portfolio turnover rate.................... 10.44 % 38.74%
Without management fee waiver:***
Ratios:
Expenses to average net assets............ 2.85%+
Net income to average net assets.......... (0.80)%+
<CAPTION>
April 25, 1997**
Year ended to
December 31, 1998 December 31, 1997
CLASS D ----------------- -----------------
<S> <C> <C>
Per Share Data:*
Net asset value, beginning of period....... $9.04 $7.14
----- -----
Income from investment operations:
Net investment income..................... (0.02) (0.01)
Net gains or losses on securities (both
realized and unrealized)................. 1.00 2.04
----- -----
Total from investment operations........... 0.98 2.03
----- -----
Less distributions:
Distributions (from capital gains)........ (0.06) (0.13)
----- -----
Total distributions........................ (0.06) (0.13)
----- -----
Net asset value, end of period............. $9.96 $9.04
===== =====
Total Return: 10.85 % 28.46%
Ratios/Supplemental Data:
Net assets, end of period (in thousands)... $42,886 $10,358
Ratio of expenses to average net assets.... 2.25 % 2.25%+
Ratio of net income to average net assets.. (0.14)% (0.20)%+
Portfolio turnover rate.................... 10.44 % 38.74%
Without management fee waiver:***
Ratios:
Expenses to average net assets............ 2.85%+
Net income to average net assets.......... (0.80)%+
</TABLE>
- --------
* Per share amounts are calculated based on average shares outstanding.
** Commencement of operations.
*** Seligman at its discretion, waived a portion of its fees for the period
presented.
+ Annualized.
22
<PAGE>
Small-Cap Value Fund
The tables below are intended to help you understand the financial performance
of the Fund's Classes for the period of the Class's operations. Class C is a
new Class, effective June 1, 1999, so financial highlights are not available.
Certain information reflects financial results for a single share of a Class
that was held throughout the periods shown. "Total return" shows the rate that
you would have earned (or lost) on an investment in the Fund, assuming you
reinvested all your dividends and capital gain distributions. Total returns do
not reflect any sales charges. Deloitte & Touche llp, independent auditors,
have audited this information. Their report, along with the Fund's financial
statements, is included in the Fund's annual report, which is available upon
request.
CLASS A
<TABLE>
<CAPTION>
April 25, 1997**
Year ended to
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Per Share Data:*
Net asset value, beginning of period....... $9.73 $7.14
----- -----
Income from investment operations:
Net investment income .................... (0.09) (0.07)
Net gains or losses on securities (both
realized and unrealized)................. (1.74) 2.67
----- -----
Total from investment operations........... (1.83) 2.60
----- -----
Less distributions:
Distributions (from capital gains)........ (0.03) (0.01)
----- -----
Total distributions........................ (0.03) (0.01)
----- -----
Net asset value, end of period............. $7.87 $9.73
===== =====
Total Return: (18.81)% 36.38%
Ratios/Supplemental Data:
Net assets, end of period (in thousands)... $60,383 $87,510
Ratio of expenses to average net assets.... 1.69 % 1.87%+
Ratio of net income to average net assets.. (0.98)% (1.12)%+
Portfolio turnover rate.................... 30.06 % 15.91%
</TABLE>
- --------------
* Per share amounts are calculated based on average shares outstanding.
** Commencement of operations.
+ Annualized.
23
<PAGE>
Small-Cap Value Fund
<TABLE>
<CAPTION>
CLASS B
April 25, 1997**
Year ended to
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Per Share Data:*
Net asset value, beginning of period....... $9.69 $7.14
----- -----
Income from investment operations:
Net investment income..................... (0.15) (0.11)
Net gains or losses on securities (both
realized and unrealized)................. (1.73) 2.67
----- -----
Total from investment operations........... (1.88) 2.56
----- -----
Less distributions:
Distributions (from capital gains)........ (0.03) (0.01)
----- -----
Total distributions........................ (0.03) (0.01)
----- -----
Net asset value, end of period............. $7.78 $9.69
===== =====
Total Return: (19.41)% 35.82%
Ratios/Supplemental Data:
Net assets, end of period (in thousands)... $71,875 $88,330
Ratio of expenses to average net assets.... 2.44 % 2.63%+
Ratio of net income to average net assets.. (1.73)% (1.88)%+
Portfolio turnover rate.................... 30.06 % 15.91%
<CAPTION>
April 25, 1997**
Year ended to
December 31, 1998 December 31, 1997
CLASS D ----------------- -----------------
<S> <C> <C>
Per Share Data:*
Net asset value, beginning of period....... $9.69 $7.14
----- -----
Income from investment operations:
Net investment income..................... (0.15) (0.11)
Net gains or losses on securities (both
realized and unrealized)................. (1.73) 2.67
----- -----
Total from investment operations........... (1.88) 2.56
----- -----
Less distributions:
Distributions (from capital gains)........ (0.03) (0.01)
----- -----
Total distributions........................ (0.03) (0.01)
----- -----
Net asset value, end of period............. $7.78 $9.69
===== =====
Total Return: (19.41)% 35.82%
Ratios/Supplemental Data:
Net assets, end of period (in thousands)... $45,384 $63,360
Ratio of expenses to average net assets.... 2.44 % 2.63%+
Ratio of net income to average net assets.. (1.73)% (1.88)%+
Portfolio turnover rate.................... 30.06 % 15.91%
</TABLE>
- --------------
* Per share amounts are calculated based on average shares outstanding.
** Commencement of operations.
+ Annualized.
24
<PAGE>
How to Contact Us
<TABLE>
<S> <C> <C>
The Funds Write: Corporate Communications/
Investor Relations Department
J. & W. Seligman & Co. Incorporated
100 Park Avenue, New York, NY 10017
Phone: Toll-Free (800) 221-7844 in the US or
(212) 850-1864 outside the US
Website: http://www.seligman.com
Your Regular
(Non-Retirement)
Account Write: Shareholder Services Department
Seligman Data Corp.
100 Park Avenue, New York, NY 10017
Phone: Toll-Free (800) 221-2450 in the US or
(212) 682-7600 outside the US
Website: http://www.seligman.com
Your Retirement
Account Write: Retirement Plan Services
Seligman Data Corp.
100 Park Avenue, New York, NY 10017
Phone: Toll-Free (800) 445-1777
</TABLE>
24-hour telephone access is available by
dialing (800) 622-4597 on a touchtone
telephone. You will have instant access to
price, yield, account balance, most recent
transaction, and other information.
25
<PAGE>
For More Information
The following information is available without charge upon request: Call toll-
free (800) 221-2450 in the US or (212) 682-7600 outside the US.
Statement of Additional Information (SAI) contains additional information about
the Funds. It is on file with the Securities and Exchange Commission (SEC) and
is incorporated by reference into (is legally part of) this prospectus.
Annual/Semi-Annual Reports contain additional information about each Fund's
investments. In the Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.
SELIGMAN ADVISORS, INC.
an affiliate of
[LOGO] JWS
J. & W. Seligman & Co.
INCORPORATED
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
Information about the Funds, including the SAI, can be viewed and copied at the
SEC's Public Reference Room in Washington, DC.
For information about the operation of the Public Reference Room, call
(800)SEC-0330. The SAI, Annual/Semi-Annual reports and other information about
the Funds are also available on the SEC's Internet site: http://www.sec.gov.
Copies of this information may be obtained, upon payment of a duplicating fee,
by writing: Public Reference Section of the SEC, Washington, DC 20549-6009.
SEC FILE NUMBER: 811 - 08031
<PAGE>
SELIGMAN VALUE FUND SERIES, INC.
Seligman Large-Cap Value Fund
Seligman Small-Cap Value Fund
Statement of Additional Information
June 1, 1999
100 Park Avenue
New York, New York 10017
(212) 850-1864
Toll Free Telephone: (800) 221-2450
For Retirement Plan Information - Toll-Free Telephone: (800) 445-1777
This Statement of Additional Information (SAI) expands upon and supplements the
information contained in the current Prospectus, dated June 1, 1999, which
covers the Seligman Large-Cap Value Fund and the Seligman Small-Cap Value Fund
(individually, a "Fund"), each a separate fund of Seligman Value Fund Series,
Inc., (the "Series"). This SAI, although not in itself a prospectus, is
incorporated by reference into the Prospectus in its entirety. It should be
read in conjunction with the Prospectus, which you may obtain by writing or
calling the Series at the above address or telephone numbers.
The financial statements and notes included in each Fund's Annual Report, and
the Independent Auditors' Reports thereon, are incorporated herein by reference.
The Annual Report will be furnished to you without charge if you request a copy
of this SAI.
Table of Contents
Series History........................................... 2
Description of the Series and its Investments and Risks.. 2
Management of the Series................................. 6
Control Persons and Principal Holders of Securities...... 11
Investment Advisory and Other Services................... 11
Brokerage Allocation and Other Practices................. 17
Capital Stock and Other Securities....................... 18
Purchase, Redemption, and Pricing of Shares.............. 19
Taxation of the Series................................... 25
Underwriters............................................. 26
Calculation of Performance Data.......................... 27
Financial Statements..................................... 30
General Information...................................... 30
Appendix A............................................... 31
Appendix B............................................... 34
EQVA1
<PAGE>
Series History
Seligman Value Fund Series, Inc. was incorporated under the laws of the state of
Maryland on January 27, 1997.
Description of the Series and its Investments and Risks
Classification
Seligman Value Fund Series, Inc. is a diversified open-end management investment
company, or mutual fund. It consists of two separate and distinct funds: the
Seligman Large-Cap Value Fund and the Seligman Small-Cap Value Fund.
Investment Strategies and Risks
The following information regarding each Fund's investments and risks
supplements the information contained in the Prospectus.
Derivatives. Each Fund may invest in financial instruments commonly known as
"derivatives" only for hedging or investment purposes. Each Fund will not
invest in derivatives for speculative purposes, which means where the derivative
investment exposes the Fund 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. Each Fund will
not invest in a specific type of derivative without prior approval from the
Series' Board of Directors, after consideration of, among other things, how the
derivative instrument serves the Fund's investment objective, and the risks
associated with the investment. The only types of derivatives in which each
Fund is currently permitted to invest are stock purchase rights and warrants and
put options, as more fully described below.
Put Options. Each Fund may purchase put options to protect its portfolio
holdings in an underlying security against a decline in market value. Each Fund
will not purchase options for speculative purposes. Purchasing a put option
gives a Fund the right to sell, and obligates the writer to buy, the underlying
security at the exercise price at any time during the option period.
When a Fund 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 Fund, 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.
A put option provides hedge protection during its existence since a Fund, 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 Fund 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 Fund 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. Each Fund's maximum financial exposure will be limited to
these costs.
2
<PAGE>
Each Fund 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.
Put options on securities may not be available to a Fund on reasonable terms in
many situations and a Fund may frequently choose not to purchase options even
when they are available. Each Fund's ability to engage in option transactions
may be limited by tax considerations.
Rights and Warrants. Each Fund may invest in common stock rights and warrants
believed by the investment manager to provide capital appreciation
opportunities. Each Fund may not invest in rights and warrants if, at the time
of acquisition by the Fund, the investment in rights and warrants would exceed
5% of such Fund's net assets, valued at the lower of cost or market.
Fixed-Income Securities. Each Fund may invest in fixed-income securities that
are not required to be rated by a recognized rating agency. As a matter of
policy, each Fund will invest only in "investment grade" debt securities or, in
the case of unrated securities, debt securities that are, in the opinion of the
investment 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.
Foreign Securities. Each Fund may invest in commercial paper and certificates
of deposit issued by foreign banks and may invest either directly or through
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs), or
Global Depositary Receipts (GDRs) (collectively, Depositary Receipts) in other
securities of foreign issuers. Foreign investments may be affected favorably or
unfavorably by changes in currency rates and exchange control regulations.
There may be less information available about a foreign company than about a US
company and foreign companies may not be subject to reporting standards and
requirements comparable to those applicable to US companies. Foreign securities
may not be as liquid as US securities and there may be delays and risks
attendant in local settlement procedures. Securities of foreign companies may
involve greater market risk than securities of US 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, the possible nationalization
of issuers and the risk of expropriation or restrictions on the repatriation of
proceeds of sale. In addition, foreign investments may be subject to
withholding and other taxes.
Depositary Receipts are instruments generally issued by domestic banks or trust
companies that represent the deposits of a security of a foreign issuer. ADRs,
which are traded in dollars on US Exchanges or over-the-counter, are issued by
domestic banks and evidence ownership of securities issued by foreign
corporations. EDRs are typically traded in Europe. GDRs are typically traded
in both Europe and the United States. Depositary Receipts may be issued under
sponsored or unsponsored programs. In sponsored programs, the issuer has made
arrangements 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 Fund 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.
Illiquid Securities. Each Fund 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
3
<PAGE>
1933 (the 1933 Act)) and other securities that are not readily marketable. Each
Fund does not currently expect to invest more than 5% of its assets in such
securities. Each Fund may purchase restricted securities that may be offered and
sold only to "qualified institutional buyers" under Rule 144A of the 1933 Act,
and the investment manager, acting pursuant to procedures approved by the
Series' 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 investment 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 a Fund, if and to the extent that,
qualified institutional buyers become for a time uninterested in purchasing Rule
144A securities.
Repurchase Agreements. Each Fund 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 Fund acquires a money market
instrument, generally a US Government obligation qualified for purchase by a
Fund, 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 Fund and is unrelated to the interest rate on the
instrument. Each Fund's repurchase agreements will at all times be fully
collateralized, and the Fund 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 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, each Fund 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.
Borrowing. Each Fund from time to time may borrow money only from banks and
only for temporary, extraordinary or emergency purposes in an amount up to 15%
of its total assets at prevailing interest rates and invest the funds in
additional securities. Each Fund may pledge its assets only to the extent
necessary to effect permitted borrowings on a secured basis. Each Fund's
borrowings are limited so that immediately after such borrowing the value of the
Fund's assets (including borrowings) less its liabilities (not including
borrowings) is at least three times the amount of the borrowings. Should a
Fund, for any reason, have borrowings that do not meet the above test, then
within three business days, such Fund must reduce such borrowings so as to meet
the foregoing test. Under these circumstances, a Fund 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
Fund's 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 Fund could decrease faster than if there had been no
borrowings.
Except as otherwise specifically noted above, the Funds' investment strategies
are not fundamental and the Board of Directors of the Series may change such
policies without the vote of a Fund's shareholders.
Fund Policies
Each Fund is subject to fundamental policies that place restrictions on certain
types of investments. Each Fund's policies cannot be changed except by vote of
a majority of its outstanding voting securities. Under these policies, each
Fund may not:
- - 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
Fund will not purchase any securities while outstanding borrowings are
greater than 5% of the value of its total assets;
4
<PAGE>
- - Mortgage or pledge any of its assets, except to the extent necessary to
effect permitted borrowings on a secured basis;
- - Make "short sales" of securities, or purchase securities on "margin," or
write or purchase put or call options, except a Fund may purchase put options
for hedging purposes as approved by the Series' Board of Directors and as
described in the Prospectus and herein;
- - 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 US
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;
- - Invest more than 25% of its total assets at market value in the securities of
issuers of any one industry, except securities issued or guaranteed by the US
Government, its agencies or instrumentalities;
- - Purchase securities of open-end or closed-end investment companies, except as
permitted by the Investment Company Act of 1940, as amended (1940 Act), and
other applicable law or for the purpose of hedging the Series' obligations
under the Deferred Compensation Plan for Directors;
- - Purchase or hold any real estate, except each Fund may invest in securities
secured by real estate or interests therein or issued by persons (including
real estate investments trusts) which deal in real estate or interests
therein;
- - Purchase or hold the securities of any issuer (other than shares of the
Fund), if to the Series' knowledge, those directors or officers of the Series
individually own beneficially more than 0.5% of the outstanding securities of
such issuer, together own beneficially more than 5% of such outstanding
securities;
- - Purchase or sell commodities and commodity futures contracts;
- - Underwrite securities of other issuers, except insofar as a Fund may be
deemed an underwriter when purchasing or selling portfolio securities; or
- - 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.
Each Fund may not change its investment objective without shareholder approval.
Under the Investment Company Act of 1940 (1940 Act), a "vote of a majority of
the outstanding voting securities" of a Fund means the affirmative vote of the
lesser of (l) more than 50% of the outstanding shares of the Fund; or (2) 67% or
more of the shares present at a shareholders' meeting if more than 50% of the
outstanding shares of the Fund are represented at the meeting in person or by
proxy.
Temporary Defensive Position
In an attempt to respond to adverse market, economic, political, or other
conditions, each Fund may invest up to 100% of its assets in cash or cash
equivalents, including, but not limited to, prime commercial paper, bank
certificates of deposit, bankers' acceptances, or repurchase agreements for such
securities, and securities of the US Government and its agencies and
instrumentalities, as well as cash and cash equivalents denominated in foreign
currencies. Each Fund's investments in foreign cash equivalents will be limited
to those that, in the opinion of the investment manager, equate generally to the
standards established for US cash equivalents. Investments in bank obligations
will be limited at the time of investment to the obligations of the 100 largest
domestic banks in terms of assets which are subject to
5
<PAGE>
regulatory supervision by the US Government or state governments, and the
obligations of the 100 largest foreign banks in terms of assets with branches or
agencies in the United States.
Portfolio Turnover
Each Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the year by the monthly average
of the value of the portfolio securities owned during the year. Securities
whose maturity or expiration date at the time of acquisition were one year or
less are excluded from the calculation. The portfolio turnover rate for the
Large-Cap Value Fund for the year ended December 31, 1998 and for the period
April 25, 1997 (inception) through December 31, 1997 was 10.44% and 38.74%,
respectively. The portfolio turnover rate for the Small-Cap Value Fund for the
year ended December 31, 1998 and for the period April 25, 1997 (inception)
through December 31, 1997 was 30.06% and 15.91%, respectively.
Management of the Series
Board of Directors
The Board of Directors provides broad supervision over the affairs of the
Series.
Management Information
Directors and officers of the Series, together with information as to their
principal business occupations during the past five years are shown below. Each
Director who is an "interested person", as defined in the 1940 Act, is indicated
by an asterisk. Unless otherwise indicated, their addresses are 100 Park
Avenue, New York, NY 10017.
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address with Fund Past 5 Years
-------- --------- ------------
<S> <C> <C>
William C. Morris* Director, Chairman of the Chairman, J. & W. Seligman & Co. Incorporated,
(61) Board, Chief Executive Officer Chairman and Chief Executive Officer, the Seligman
and Chairman of the Executive Group of investment companies; Chairman, Seligman
Committee Advisors, Inc., Seligman Services, Inc., and Carbo
Ceramics Inc., ceramic proppants for oil and gas
industry; and Director, Seligman Data Corp.,
Kerr-McGee Corporation, diversified energy company.
Formerly, Director, Daniel Industries Inc.,
manufacturer of oil and gas metering equipment.
Brian T. Zino* Director, President and Member Director and President, J. & W. Seligman & Co.
(46) of the Executive Committee Incorporated; 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;
Chairman, Seligman Data Corp.; Member of the Board
of Governors of the Investment Company Institute;
and Director, ICI Mutual Insurance Company, Seligman
Advisors, Inc., and Seligman Services, Inc.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address with Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
Richard R. Schmaltz* Director and Member of the Director and Managing Director, Director of
(58) Executive Committee Investments, J. & W. Seligman & Co. Incorporated;
Director or Trustee, the Seligman Group of
investment companies (except Seligman Cash
Management Fund, Inc.); Director, Seligman Henderson
Co., and Trustee Emeritus of Colby College.
Formerly, Director, Investment Research at Neuberger
& Berman from May 1993 to September 1996.
John R. Galvin Director Dean, Fletcher School of Law and Diplomacy at Tufts
(69) University; Director or Trustee, the Seligman Group
Tufts University of investment companies; Chairman Emeritus, American
Packard Avenue, Council on Germany; Governor of the Center for
Medford, MA 02155 Creative Leadership; Director; Raytheon Co.,
electronics; National Defense University; and the
Institute for Defense Analyses. Formerly, Director,
USLIFE Corporation, life insurance; 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.
Alice S. Ilchman Director Retired President, Sarah Lawrence College; Director
(64) or Trustee, the Seligman Group of investment
18 Highland Circle, companies; Trustee, the Committee for Economic
Bronxville, NY 10708 Development; and Chairman, The Rockefeller
Foundation, charitable foundation. Formerly,
Trustee, The Markle Foundation, philanthropic
organization; and Director, New York Telephone
Company; and International Research and Exchange
Board, intellectual exchanges.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address With Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
Frank A. McPherson Director Retired Chairman and Chief Executive Officer of
(66) Kerr-McGee Corporation; Director or Trustee, the
2601 Northwest Expressway, Seligman Group of investment companies; Director,
Suite 805E Kimberly-Clark Corporation, consumer products; Bank
Oklahoma City, OK 73112 of Oklahoma Holding Company; Baptist Medical Center;
Oklahoma Chapter of the Nature Conservancy; Oklahoma
Medical Research Foundation; and National Boys and
Girls Clubs of America; and Member of the Business
Roundtable and National Petroleum Council.
Formerly, Chairman, Oklahoma City Public Schools
Foundation; and Director, Federal Reserve System's
Kansas City Reserve Bank and the Oklahoma City
Chamber of Commerce.
John E. Merow Director Retired Chairman and Senior Partner, Sullivan &
(69) Cromwell, law firm; Director or Trustee, the
125 Broad Street, Seligman Group of investment companies; Director,
New York, NY 10004 Commonwealth Industries, Inc., manufacturers of
aluminum sheet products; the Foreign Policy
Association; Municipal Art Society of New York; the
U.S. Council for International Business; and New
York Presbyterian Hospital; Chairman, American
Australian Association; and New York Presbyterian
Healthcare Network, Inc.; Vice-Chairman, the
U.S.-New Zealand Council; and Member of the American
Law Institute and Council on Foreign Relations.
Betsy S. Michel Director Attorney; Director or Trustee, the Seligman Group of
(56) investment companies; Trustee, The Geraldine R.
P.O. Box 449, Dodge Foundation, charitable foundation; and
Gladstone, NJ 07934 Chairman of the Board of Trustees of St. George's
School (Newport, RI). Formerly, Director, the
National Association of Independent Schools
(Washington, DC).
James C. Pitney Director Retired Partner, Pitney, Hardin, Kipp & Szuch, law
(72) firm; Director or Trustee, the Seligman Group of
Park Avenue at Morris investment companies. Formerly, Director, Public
County, P.O. Box 1945, Service Enterprise Group, public utility.
Morristown, NJ 07962
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address With Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
James Q. Riordan Director Director or Trustee, the Seligman Group of
(71) investment companies; Director, The Houston
675 Third Avenue, Exploration Company; The Brooklyn Museum, KeySpan
Suite 3004 Energy Corporation; and Public Broadcasting Service;
New York, NY 10017 and Trustee, the Committee for Economic Development.
Formerly, Co-Chairman of the Policy Council of the
Tax Foundation; Director, Tesoro Petroleum
Companies, Inc. and Dow Jones & Company, Inc.;
Director and President, Bekaert Corporation; and
Co-Chairman, Mobil Corporation.
Robert L. Shafer Director Retired Vice President, Pfizer Inc.; Director or
(66) Trustee, the Seligman Group of investment companies.
96 Evergreen Avenue, Formerly, Director, USLIFE Corporation.
Rye, NY 10580
James N. Whitson Director Director and Consultant, Sammons Enterprises, Inc.;
(64) Director or Trustee, the Seligman Group of
6606 Forestshire Drive, investment companies; Director, C-SPAN and
Dallas, TX 75230 CommScope, Inc., manufacturer of coaxial cables.
Formerly, Executive Vice President, Chief Operating
Officer, Sammons Enterprises, Inc.; and Director,
Red Man Pipe and Supply Company, piping and other
materials.
Neil T. Eigen Vice President and Portfolio Managing Director, J. & W. Seligman & Co.
(56) Manager Incorporated. Formerly, Senior Managing Director,
Chief Investment Officer and Director of Equity
Investing, Bear Stearns Asset Management.
Lawrence P. Vogel Vice President Senior Vice President, Finance, J. & W. Seligman &
(42) Co. Incorporated, Seligman Advisors, Inc., and
Seligman Data Corp.; Vice President, the Seligman
Group of investment companies, and Seligman
Services, Inc.; Vice President and Treasurer,
Seligman International, Inc.; and Treasurer,
Seligman Henderson Co.
Frank J. Nasta Secretary General Counsel, Senior Vice President, Law and
(34) Regulation and Corporate Secretary, J. & W. Seligman
& Co. Incorporated; Secretary, the Seligman Group of
investment companies, Seligman Advisors, Inc.,
Seligman Henderson Co., Seligman Services, Inc.,
Seligman International, Inc. and Seligman Data Corp.
Thomas G. Rose Treasurer Treasurer, the Seligman Group of investment
(41) companies and Seligman Data Corp.
</TABLE>
9
<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 Series for
which no market valuation is available, and to elect or appoint officers of the
Series to serve until the next meeting of the Board.
Directors and officers of the Series are also directors and officers of some or
all of the other investment companies in the Seligman Group.
<TABLE>
<CAPTION>
Compensation
Pension or Total Compensation
Aggregate Retirement Benefits from Series and
Name and Compensation Accrued as Part of Series Complex
Position with Fund from Series (1) Series Expenses to Directors (1)(2)
------------------ --------------- --------------- -------------------
<S> <C> <C> <C>
William C. Morris, Director and Chairman N/A N/A N/A
Brian T. Zino, Director and President N/A N/A N/A
Richard R. Schmaltz, Director N/A N/A N/A
John R. Galvin, Director $1,489.91 N/A $79,000
Alice S. Ilchman, Director 1,367.45 N/A 73,000
Frank A. McPherson, Director 1,489.91 N/A 79,000
John E. Merow, Director 1,449.09 N/A 77,000
Betsy S. Michel, Director 1,489.91 N/A 79,000
James C. Pitney, Director 1,408.27 N/A 75,000
James Q. Riordan, Director 1,408.27 N/A 75,000
Robert L. Shafer, Director 1,408.27 N/A 75,000
James N. Whitson, Director 1,489.91(d) N/A 79,000(d)
</TABLE>
__________________________
(1) For the year ended December 31, 1998. Effective January 16, 1998, the per
meeting fee for Directors was increased by $1,000, which is allocated among
all Funds in the Fund Complex.
(2) The Seligman Group of investment companies consists of eighteen investment
companies.
(d) Deferred.
The Series has a compensation arrangement under which outside directors may
elect to defer receiving their fees. The Series has adopted a Deferred
Compensation Plan under which a director who has elected deferral of his or her
fees may choose a rate of return equal to either (1) the interest rate on short-
term Treasury Bills, or (2) the rate of return on the shares of any of the
investment companies advised by J. & W. Seligman & Co. Incorporated, as
designated by the director. The cost of such fees and earnings is included in
directors' fees and expenses, and the accumulated balance thereof is included in
other liabilities in each Fund's financial statements. The total amount of
deferred compensation (including earnings) payable in respect of the Series to
Mr. Whitson as of December 31, 1998 was $2,484.
The Series may, but is not obligated to, purchase shares of the Seligman Group
of investment companies to hedge its obligations in connection with the Deferred
Compensation Plan.
Sales Charges
Class A shares of each Fund may be issued without a sales charge to present and
retired directors, trustees, officers, employees (and their family members) of
the Series, the other investment companies in the Seligman Group, and J. & W.
Seligman & Co. Incorporated and its affiliates. 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 may also be made to employee benefit plans and thrift plans for such
persons and to any investment advisory, custodial, trust or other fiduciary
account managed or advised by J. & W. Seligman & Co. Incorporated or any
affiliate. The sales may be made for investment purposes only, and shares may
be resold only to the Series.
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.
10
<PAGE>
Control Persons and Principal Holders of Securities
Control Persons
As of May 14, 1999, there was no person or persons who controlled either the
Large-Cap Value Fund or the Small-Cap Value Fund, either through a significant
ownership of shares or any other means of control.
Principal Holders
As of May 14, 1999, 14.41% of the Large-Cap Value Fund's Class A capital stock
then outstanding, 40.17% of the Large-Cap Value Fund's Class B capital stock
then outstanding and 21.12% of the
Large-Cap Value Fund's Class D capital stock then outstanding, were registered
in the name of MLPF&S, Attn Fund Administrator, 4800 Deer Lake Drive East,
Jacksonville, FL 32246.
As of May 14, 1999, 15.36% of the Small-Cap Value Fund's Class A capital stock
then outstanding, 35.61% of the Small-Cap Value Fund's Class B capital stock
then outstanding and 35.68% of the Small-Cap Value Fund's Class D capital stock
then outstanding, were registered in the name of MLPF&S, Attn Fund
Administrator, 4800 Deer Lake Drive East, Jacksonville, FL 32246.
Management Ownership
As of May 14, 1999, Directors and officers of the Series as a group owned
directly or indirectly 118,520 Class A shares, or 2.36% of the outstanding
shares of the Class A capital stock of the Large-Cap Value Fund and 127,723
Class A shares, or 2.09% of the outstanding shares of the Class A capital stock
of the Small-Cap Value Fund. As of the same date, no Directors or officers of
the Series owned shares of Class B or Class D shares of either Fund.
Investment Advisory and Other Services
Investment Manager
J. & W. Seligman & Co. Incorporated (Seligman) manages each Fund of the Series.
Seligman 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 Seligman was purchased by Mr. William C. Morris
and a simultaneous recapitalization of Seligman occurred. See Appendix B for
further history of Seligman.
All of the officers of the Series listed above are officers or employees of
Seligman. Their affiliations with the Series and with Seligman are provided
under their principal business occupations.
Each Fund pays Seligman a management fee for its services, calculated daily and
payable monthly. The management fee is 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. Seligman, at its discretion, waived a portion of its fees for
the Large-Cap Value Fund for the period ended December 31, 1997. The management
fees paid by the Large-Cap Value Fund for the year ended December 31, 1998 and
for the period April 25, 1997 (inception) through December 31, 1997 were
$862,479 and $36,266 or .80% and .20% per annum, respectively, of its average
daily net assets. The management fees paid by the Small-Cap Value Fund for the
year ended December 31, 1998 and for the period April 25, 1997 (inception)
through December 31, 1997 were $2,255,973 and $819,194 or 1% and 1% per annum,
respectively, of its average daily net assets.
Each Fund pays all of its expenses other than those assumed by Seligman,
including brokerage commissions, administration, shareholder services and
distribution fees, fees and expenses of independent
11
<PAGE>
attorneys and auditors, taxes and governmental fees, including fees and expenses
of qualifying their respective 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 record keeping and shareholder
account services, fees and disbursements of transfer agents and custodians,
expenses of disbursing dividends and distributions, fees and expenses of
directors of the Series not employed by or serving as a director of Seligman or
its affiliates, insurance premiums and extraordinary expenses such as litigation
expenses. Certain expenses are allocated between each Fund in a manner
determined by the Board of Directors to be fair and equitable.
The Management Agreement also provides that Seligman will not be liable to the
Series for any error of judgment or mistake of law, or for any loss arising out
of any investment, or for any act or omission in performing its duties under the
Management Agreement, except for willful misfeasance, bad faith, gross
negligence, or reckless disregard of its obligations and duties under the
Management Agreement.
The Management Agreement was initially approved by the Board of Directors on
March 20, 1997 and by the sole shareholder of each Fund 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 Fund and by a vote of
a majority of the Directors who are not parties to the Management Agreement or
interested persons of any such party) and (2) Seligman shall not have notified
the Series 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 either
Fund, without penalty, on 60 days written notice to Seligman and will terminate
automatically in the event of its assignment. Each Fund has agreed to change
its name upon termination of the Management Agreement if continued use of the
name would cause confusion in the context of Seligman's business.
Officers, directors and employees of Seligman are permitted to engage in
personal securities transactions, subject to Seligman's Code of Ethics. The
Code of Ethics 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 Seligman's Compliance Officer,
and sets forth a procedure of identifying, for disciplinary action, those
individuals who violate the Code of Ethics. The Code of Ethics prohibits each
of the officers, directors and employees (including all portfolio managers) of
Seligman from purchasing or selling any security that the officer, director, or
employee knows or believes (1) was recommended by Seligman for purchase or sale
by any client, including the Series, within the preceding two weeks, (2) has
been reviewed by Seligman for a possible purchase or sale within the preceding
two weeks, (3) is being purchased or sold by any client, (4) is being considered
by a research analyst, (5) is being acquired in a private placement, unless
prior approval has been obtained from Seligman's Compliance Officer, or (6) is
being acquired during an initial or secondary public offering. The Code of
Ethics 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 Code of Ethics also prohibits (1) 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 (2) 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 Seligman'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.
12
<PAGE>
Principal Underwriter
Seligman Advisors, Inc. (Seligman Advisors), an affiliate of Seligman, 100 Park
Avenue, New York, New York 10017, acts as general distributor of the shares of
each Fund of the Series and of the other mutual funds in the Seligman Group.
Seligman Advisors is an "affiliated person" (as defined in the 1940 Act) of
Seligman, which is itself an affiliated person of the Series. Those individuals
identified above under "Management Information" as directors or officers of the
Series and Seligman Advisors are affiliated persons of both entities.
Services Provided by the Investment Manager
Under the Management Agreement dated March 20, 1997, subject to the control of
the Board of Directors, Seligman manages the investment of the assets of each
Fund, including making purchases and sales of portfolio securities consistent
with each Fund's investment objectives and policies, and administers its
business and other affairs. Seligman provides the Series with such office
space, administrative and other services and executive and other personnel as
are necessary for Series operations. Seligman pays all of the compensation of
directors of the Series who are employees or consultants of Seligman and of the
officers and employees of the Series. Seligman also provides senior management
for Seligman Data Corp., the Series' shareholder service agent.
Service Agreements
There are no other management-related service contracts under which services are
provided to the Series.
Other Investment Advice
No person or persons, other than directors, officers, or employees of Seligman,
regularly advise the Series with respect to its investments.
Dealer Reallowances
Dealers and financial advisors receive a percentage of the initial sales charge
on sales of Class A shares and Class C shares of each Fund, as set forth below:
Class A shares:
- ---------------
<TABLE>
<CAPTION>
Regular Dealer
Sales Charge Sales Charge Reallowance
As a % of As a % of Net As a % of
Amount of Purchase Offering Price(1) Amount Invested Offering Price
- ------------------ ----------------- --------------- --------------
<S> <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 and over(2) 0 0 0
(1) "Offering Price" is the amount that you actually pay for each Fund's
shares; it includes the initial sales charge.
(2) You will not pay a sales charge on purchases of $1 million or more, but you
will be subject to a 1% CDSC if you sell your
shares within eighteen months.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Class C shares:
- ---------------
Regular Dealer
Sales Charge Sales Charge Reallowance
As a % of as a % of Net As a % of
Amount of Purchase Offering Price(1) Amount Invested Offering Price
- ------------------ ----------------- --------------- --------------
<S> <C> <C> <C>
Less than $100,000 1.00% 1.01% 1.00%
$100,000 - $249,999 0.50 0.50 0.50
$250,000 - $1,000,000(2) 0 0 0
(1) "Offering Price" is the amount that you actually pay for Fund shares; it
includes the initial sales charge.
(2) Your purchase of Class C shares must be for less than $1,000,000 because if
you invest $1,000,000 or more, you will pay less in fees and charges if you
buy Class A shares.
</TABLE>
Seligman Services, Inc. (Seligman Services) an affiliate of Seligman, is a
limited purpose broker/dealer. Seligman Services is eligible to receive
commissions from certain sales of Fund shares. For the year ended December 31,
1998 and for the period April 25, 1997 (inception) through December 31, 1997,
Seligman Services received commissions from certain sales of shares of the
Large-Cap Value Fund in the amount of $3,184 and $725, respectively. For the
year ended December 31, 1998 and for the period April 25, 1997 (inception)
through December 31, 1997, Seligman Services received commissions from certain
sales of shares of the Small-Cap Value Fund in the amount of $2,646 and $4,687,
respectively.
Rule 12b-1 Plan
Each Fund has adopted an Administration, Shareholder Services and Distribution
Plan (12b-1 Plan) in accordance with Section 12(b) of the 1940 Act and Rule 12b-
1 thereunder.
Under the 12b-1 Plan, each Fund may pay to Seligman Advisors an administration,
shareholder services and distribution fee in respect of such Fund's Class A,
Class B, Class C and Class D shares, respectively. Payments by each Fund under
its 12b-1 Plan may include, but are not limited to: (1) compensation to
securities dealers and other organizations (Service Organizations) for providing
distribution assistance with respect to assets invested in the Fund; (2)
compensation to Service Organizations for providing administration, accounting
and other shareholder services with respect to the Fund's shareholders; and (3)
otherwise promoting the sale of shares of the Fund, 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 Seligman Advisors' costs incurred in connection with its
marketing efforts with respect to shares of the Fund. Seligman, in its sole
discretion, may also make similar payments to Seligman Advisors from its own
resources, which may include the management fee that Seligman receives from each
Fund, respectively. Payments made by each Fund under its 12b-1 Plan are
intended to be used to encourage sales of each Fund, as well as to discourage
redemptions.
Fees paid by each Fund under its 12b-1 Plan with respect to any class of shares
of the Fund may not be used to pay expenses incurred solely in respect of any
other class of the Fund, or any other Seligman fund. Expenses attributable to
more than one class of a Fund are allocated between the classes of the Fund in
accordance with a methodology approved by the Series' Board of Directors.
Expenses of distribution activities that benefit both a Fund and other Seligman
funds will be allocated among the applicable funds based on relative gross sales
during the quarter in which such expenses are incurred, in accordance with a
methodology approved by the Board.
14
<PAGE>
Class A
- -------
Under the 12b-1 Plan, each Fund, with respect to its Class A shares, pays
quarterly to Seligman Advisors a service fee at an annual rate of up to .25% of
the average daily net asset value of such Fund's Class A shares. These fees are
used by Seligman Advisors exclusively to make payments to Service Organizations
which have entered into agreements with Seligman Advisors. Such Service
Organizations receive from Seligman Advisors 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 maintenance of shareholder accounts. The fee payable to
Service Organizations from time to time shall, within such limits, be determined
by the Board of Directors. Each Fund is not obligated to pay Seligman Advisors
for any such costs it incurs in excess of the fee described above. No expense
incurred in one year by Seligman Advisors with respect to Class A shares of a
Fund may be paid from Class A 12b-1 fees received from the Fund in any other
year. If a Fund's 12b-1 Plan is terminated in respect of its Class A shares, no
amounts (other than amounts accrued but not yet paid) would be owed by the Fund
to Seligman Advisors with respect to its Class A shares. The total amount paid
to Seligman Advisors in respect of Class A shares of the Large-Cap Value Fund
and the Small-Cap Value Fund for the year ended December 31, 1998 was $102,126
and $189,512, equivalent to .25% and .25% per annum, respectively, of the
average daily net assets of each Fund's Class A shares.
Class B
- -------
Under the 12b-1 Plan, each Fund, with respect to its Class B shares, pays
monthly a 12b-1 fee at an annual rate of up to 1% of the average daily net asset
value of such Fund's Class B shares. The fee is comprised of (1) a distribution
fee equal to .75% per annum, which is paid directly to a third party, FEP
Capital, L.P., to compensate it for having funded, at the time of sale Class B
shares of each Fund(i) a 4% sales commission to Service Organizations and (ii) a
payment of up to .25% of sales to Seligman Advisors to help defray its costs of
distributing Class B shares; and (2) a service fee of up to .25% per annum which
is paid to Seligman Advisors. The service fee is used by Seligman Advisors
exclusively to make payments to Service Organizations which have entered into
agreements with Seligman Advisors. Such Service Organizations receive from
Seligman Advisors a continuing service fee of up to .25% on an annual basis,
payable quarterly, of the average daily net assets of Class B shares
attributable to the particular Service Organization for providing personal
service and/or maintenance of shareholder accounts. The amounts expended by
Seligman Advisors or FEP Capital, L.P. in any one year upon the initial purchase
of Class B shares of each Fund may exceed the 12b-1 fees paid by the Fund in
that year. Each Fund's 12b-1 Plan permits expenses incurred in respect of Class
B shares in one year to be paid from Class B 12b-1 fees received from the Fund
in any other year; however, in any year each Fund is not obligated to pay any
12b-1 fees in excess of the fees described above. Seligman Advisors and FEP
Capital, L.P. are not reimbursed for expenses which exceed such fees. If a
Fund's 12b-1 Plan is terminated in respect of its Class B shares, no amounts
(other than amounts accrued but not yet paid) would be owed by the Fund to
Seligman Advisors or FEP Capital, L.P. with respect to its Class B shares. The
total amount paid in respect of Class B shares of the Large-Cap Value Fund and
the Small-Cap Value Fund for the year ended December 31, 1998 was $392,609 and
$850,237, equivalent to 1% and 1% per annum, respectively, of the average daily
net assets of each Fund's Class B shares.
Class C
- -------
Under the 12b-1 Plan, the Fund, with respect to Class C shares, pays monthly to
Seligman Advisors a 12b-1 fee at an annual rate of up to 1% of the average daily
net asset value of the Class C shares. The fee is used by Seligman Advisors as
follows: During the first year following the sale of Class C shares, a
distribution fee of .75% of the average daily net assets attributable to Class C
shares is used, along with any CDSC proceeds during the first eighteen months,
to (1) reimburse Seligman Advisors for its payment at the time of sale of Class
C shares of a 1.25% sales commission to Service Organizations, and (2) pay for
other distribution expenses, including paying for the preparation of advertising
and sales literature and the printing and distribution of such promotional
materials and prospectuses to prospective investors
15
<PAGE>
and other marketing costs of Seligman Advisors. In addition, during the first
year following the sale of Class C shares, a service fee of up to .25% of the
average daily net assets attributable to such Class C shares is used to
reimburse Seligman Advisors for its prepayment to Service Organizations at the
time of sale of Class C shares of a service fee of .25% of the net asset value
of the Class C share sold (for shareholder services to be provided to Class C
shareholders over the course of the one year immediately following the sale).
The payment of service fees to Seligman Advisors is limited to amounts Seligman
Advisors actually paid to Service Organizations at the time of sale as service
fees. After the initial one-year period following a sale of Class C shares, the
entire 12b-1 fee attributable to such Class C shares is paid to Service
Organizations for providing continuing shareholder services and distribution
assistance in respect of the Fund. The Fund did not pay any 12b-1 fees in
respect of Class C shares for the fiscal year ended September 30, 1998 because
no Class C shares were issued or outstanding during such period.
Class D
- -------
Under the 12b-1 Plan, each Fund, with respect to its Class D shares, pays
monthly to Seligman Advisors a 12b-1 fee at an annual rate of up to 1% of the
average daily net asset value of such Fund's Class D shares. The fee is used by
Seligman Advisors as follows: During the first year following the sale of Class
D shares, a distribution fee of .75% of the average daily net assets
attributable to such Class D shares is used, along with any CDSC proceeds, to
(1) reimburse Seligman Advisors for its payment at the time of sale of Class D
shares of a .75% sales commission to Service Organizations, and (2) pay for
other distribution expenses, 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 other marketing costs of
Seligman Advisors. In addition, during the first year following the sale of
Class D shares, a service fee of up to .25% of the average daily net assets
attributable to such Class D shares is used to reimburse Seligman Advisors for
its prepayment to Service Organizations at the time of sale of Class D shares of
a service fee of .25% of the net asset value of the Class D shares sold (for
shareholder services to be provided to Class D shareholders of the Fund over the
course of the one year immediately following the sale). The payment of service
fees to Seligman Advisors is limited to amounts Seligman Advisors actually paid
to Service Organizations at the time of sale as service fees. After the initial
one-year period following a sale of Class D shares, the entire 12b-1 fee
attributable to such Class D shares is paid to Service Organizations for
providing continuing shareholder services and distribution assistance in respect
of a Fund. The total amount paid in respect of Class D shares of the Large-Cap
Value Fund and the Small-Cap Value Fund for the year ended December 31, 1998 was
$268,437 and $634,151, equivalent to 1% and 1% per annum, respectively, of the
average daily net assets of each Fund's Class D shares.
The amounts expended by Seligman Advisors in any one year with respect to Class
D shares of each Fund may exceed the 12b-1 fees paid by the Fund in that year.
Each Fund's 12b-1 Plan permits expenses incurred by Seligman Advisors in respect
of Class D shares in one year to be paid from Class D 12b-1 fees in any other
year; however, in any year each Fund is not obligated to pay any 12b-1 fees in
excess of the fees described above.
As of December 31, 1998, Seligman Advisors has incurred $157,218 and $142,404 of
unreimbursed expenses, equal to .37% and .31% of net assets in respect of Class
D shares of the Large-Cap Value Fund and the Small-Cap Value Fund, respectively.
If the 12b-1 Plan is terminated in respect of Class D shares of a Fund, no
amounts (other than amounts accrued but not yet paid) would be owed by the Fund
to Seligman Advisors with respect to its Class D shares.
Payments made by the Large-Cap Value Fund and the Small-Cap Value Fund under
each Fund's 12b-1 Plan for the year ended December 31, 1998, were spent on the
following activities in the following amounts (no Class C shares of either Fund
were outstanding during such fiscal year):
16
<PAGE>
<TABLE>
<CAPTION>
Compensation to Compensation to Other
Fund/Class Underwriters Broker/Dealers Compensation*
- ---------- ------------ -------------- -------------
<S> <C> <C> <C>
Large-Cap Value Fund/A --- $102,126 ---
Large-Cap Value Fund/B --- 98,261 $294,348
Large-Cap Value Fund/D $155,541 112,896 ---
Small-Cap Value Fund/A --- $189,512 ---
Small-Cap Value Fund/B --- 213,158 $637,079
Small-Cap Value Fund/D $415,562 218,589 ---
</TABLE>
* Payment is made to FEP Capital, L.P. to compensate it for having funded at the
time of sale, payments to broker/dealers and underwriters.
The 12b-1 Plans were approved on March 20, 1997 by the Board of Directors of the
Series, including a majority of the Directors who are not "interested persons"
(as defined in the 1940 Act) of the Series and who have no direct or indirect
financial interest in the operation of the 12b-1 Plans or in any agreement
related to the 12b-1 Plans (the "Qualified Directors") and by the sole
shareholder of each Fund on April 7, 1997. The 12b-1 Plan was approved in
respect of the Class C shares on May 20, 1999 by the Directors, including a
majority of the Qualified Directors, and became effective in respect of the
Class C shares on June 1, 1999. The 12b-1 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 Series,
cast in person at a meeting called for the purpose of voting on such approval.
The 12b-1 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 12b-1 Plans is proposed to be increased
materially, the Fund will either (1) permit holders of Class B shares to vote as
a separate class on the proposed increase or (2) establish a new class of shares
subject to the same payment under the 12b-1 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 12b-1 Plans may be made
except by a majority of both the Directors and Qualified Directors.
The 12b-1 Plans require that the Treasurer of the Series shall provide to the
Directors, and the Directors shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the 12b-1 Plans. Rule
12b-1 also requires that the selection and nomination of Directors who are not
"interested persons" of the Series be made by such disinterested Directors.
Seligman Services acts as the broker/dealer of record for shareholder accounts
of the Series that do not have a designated financial advisor and receives
compensation from each Fund pursuant to its 12b-1 Plan for providing personal
services and account maintenance to such accounts and other distribution
services. For the year ended December 31, 1998 and for the period April 25,
1997 (inception) through December 31, 1997, Seligman Services received
distribution and service fees from the Large-Cap Value Fund in the amounts of
$10,268 and $2,587, respectively. For the year ended December 31, 1998 and for
the period April 25, 1997 (inception) through December 31, 1997, Seligman
Services received distribution and service fees from the Small-Cap Value Fund in
the amounts of $10,913 and $3,777, respectively.
Brokerage Allocation and Other Practices
Brokerage Transactions
Seligman will seek the most favorable price and execution in the purchase and
sale of portfolio securities for each Fund of the Series. When two or more of
the investment companies in the Seligman Group or other investment advisory
clients of Seligman desire to buy or sell the same security at the same time,
the
17
<PAGE>
securities purchased or sold are allocated by Seligman 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.
In over-the-counter markets, the Series deals with responsible primary market
makers unless a more favorable execution or price is believed to be obtainable.
Each Fund may buy securities from or sell securities to dealers acting as
principal, except dealers with which the Series' directors and/or officers are
affiliated.
For the year ended December 31, 1998 and for the period April 25, 1997
(inception) through December 31, 1997, the Large-Cap Value Fund paid total
brokerage commissions to others for execution, research and statistical services
in the amounts of $134,613 and $80,073, respectively. For the year ended
December 31, 1998 and for the period April 25, 1997 (inception) through December
31, 1997, the Small-Cap Value Fund paid total brokerage commissions to others
for execution, research and statistical services in the amounts of $235,785 and
$333,924, respectively. The amount of brokerage commissions paid by the Large-
Cap Value Fund has increased materially from 1997 due to the Fund's increase in
new assets under management and the Fund's completion of a full year of
portfolio transactions for 1998, in comparison to 1997 where the Fund was only
in operation for the period April 25, 1997 (inception) through December 31,
1997.
Commissions
For the year ended December 31, 1998 and for the period April 25, 1997
(inception) through December 31, 1997, the Series did not execute any portfolio
transactions with, and therefore did not pay any commissions to, any broker
affiliated with either the Series, Seligman, or Seligman Advisors.
Brokerage Selection
Consistent with seeking the most favorable price and execution when buying or
selling portfolio securities, Seligman may give consideration to the research,
statistical, and other services furnished by brokers or dealers to Seligman for
its use, as well as the general attitude toward and support of investment
companies demonstrated by such brokers or dealers. Such services include
supplemental investment research, analysis, and reports concerning issuers,
industries, and securities deemed by Seligman to be beneficial to a Fund. In
addition, Seligman 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 charge to the
Series than 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 Seligman in connection with its services to clients other than the
Series.
Directed Brokerage
During the year ended December 31, 1998, neither the Series nor Seligman
directed any of its brokerage transactions to a broker because of research
services provided.
Regular Broker-Dealers
During the year ended December 31, 1998, neither Fund of the Series acquired
securities of its regular brokers or dealers (as defined in Rule 10b-1 under the
1940 Act) or of their parents.
Capital Stock and Other Securities
Capital Stock
The Directors of the Series are authorized to issue, create and classify shares
of capital stock in separate funds without further action by shareholders.
Shares of capital stock of each Fund have a par value of
18
<PAGE>
$.001 and are divided into four classes, designated as Class A common stock,
Class B common stock, Class C common stock and Class D common stock. Each share
of a Fund's Class A , Class B , Class C, 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 Series has adopted a
Plan (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-assessable, and freely transferable. There are no
liquidation, conversion or prescriptive rights.
Other Securities
The Series has no authorized securities other than the above-mentioned common
stock.
Purchase, Redemption, and Pricing of Shares
Purchase of Shares
Class A
- -------
Class A shares of each Fund of the Series may be purchased at a price equal to
the next determined net asset value per share, plus an initial sales charge.
Purchases of Class A shares by a "single person" (as defined below under
"Persons Entitled to Reductions") may be eligible for the following reductions
in initial sales charges:
Volume Discounts are provided if the total amount being invested in Class A
shares of a Fund alone, or in any combination of shares of the other mutual
funds in the Seligman Group which are sold with an initial sales charge, reaches
levels indicated in the sales charge 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 Fund and shares of the other Seligman mutual
funds sold with an initial sales charge with the total net asset value of shares
of those mutual funds already owned that were sold with an initial sales charge
and the total net asset value of shares of Seligman Cash Management Fund which
were acquired through an exchange of shares of another Seligman mutual fund on
which there was an initial sales charge at the time of purchase to determine
reduced sales charges 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 Seligman mutual
fund on which there was an initial sales charge at the time of purchase will be
taken into account in orders placed through a dealer, however, only if Seligman
Advisors 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 charges in accordance with the schedule in the
Prospectus, based on the total amount of Class A shares of a Fund that the
letter states the investor intends to purchase plus the total net asset value of
shares that were sold with an initial sales charge of the other Seligman mutual
funds 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
Seligman mutual fund on which there was an initial sales charge at the time of
purchase. Reduced sales charges 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.
19
<PAGE>
Persons Entitled To Reductions. Reductions in initial sales charges 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
director 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, organizations tax exempt under Section 501(c)(3) or (13) of the
Internal Revenue 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 Series, to
receive in bulk and to distribute to each participant on a timely basis the
Series 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 Series 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 charges in the Prospectus
applies to sales to "eligible employee benefit plans," except that the Series
may sell shares at net asset value to "eligible employee benefit plans" which
have at least (1) $500,000 invested in the Seligman Group of mutual funds or (2)
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 Series' shareholder service
agent. "Eligible employee benefit plan" means any plan or arrangement, whether
or not tax qualified, which provides for the purchase of Series' 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.
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 financial advisors or Seligman
Advisors.
Further Types of Reductions. Class A shares may also be issued without an
initial sales charge in the following instances:
(1) to any registered unit investment trust which is the issuer of periodic
payment plan certificates, the net proceeds of which are invested in
Series' shares;
(2) to separate accounts established and maintained by an insurance company
which are exempt from registration under Section 3(c)(11) of the 1940 Act;
(3) to registered representatives and employees (and their spouses and minor
children) of any dealer that has a sales agreement with Seligman Advisors;
(4) to financial institution trust departments;
(5) to registered investment advisers exercising discretionary investment
authority with respect to the purchase of Series' shares;
20
<PAGE>
(6) to accounts of financial institutions or broker/dealers that charge account
management fees, provided Seligman or one of its affiliates has entered
into an agreement with respect to such accounts;
(7) 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
Series;
(8) to other investment companies in the Seligman Group in connection with a
deferred fee arrangement for outside directors;
(9) to certain "eligible employee benefit plans" as discussed above;
(10) to those partners and employees of outside counsel to the Fund or its
directors or trustees who regularly provide advice and services to the
Fund, to other funds managed by Seligman, or to their directors or
trustees; and
(11) in connection with sales pursuant to a 401(k) alliance program which has an
agreement with Seligman Advisors.
CDSC Applicable to Class A Shares. Class A shares purchased without an initial
sales charge due to a purchase of $1,000,000 or more either alone or through a
Volume Discount, Right of Accumulation, or Letter of Intent are subject to a
CDSC of 1% on redemptions of such shares within eighteen months of purchase.
Employee benefit plans eligible for net asset value sales may be subject to a
CDSC of 1% for terminations at the plan level only, on redemptions of shares
purchased within eighteen months prior to plan termination. The 1% CDSC will be
waived on shares that were purchased through Morgan Stanley Dean Witter & Co. by
certain Chilean institutional investors (i.e., pension plans, insurance
companies, and mutual funds). Upon redemption of such shares within an
eighteen-month period, Morgan Stanley Dean Witter will reimburse Seligman
Advisors a pro rata portion of the fee it received from Seligman Advisors at the
time of sale of such shares.
See "CDSC Waivers" below for other waivers which may be applicable to Class A
shares.
Class B
- -------
Class B shares of each Fund of the Series may be purchased at a price equal to
the next determined net asset value, without an initial sales charge. However,
Class B shares are subject to a CDSC 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.
Years Since Purchase CDSC
- -------------------- ----
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%
Approximately eight years after purchase, Class B shares will convert
automatically to Class A shares. 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 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
21
<PAGE>
period of the shares exchanged will be tacked onto the holding period of the
shares acquired. Class B shareholders of each Fund exercising the exchange
privilege will continue to be subject to such Fund's CDSC schedule if such
schedule is higher or longer than the CDSC schedule relating to the new Class B
shares. In addition, Class B shares of each Fund acquired by exchange will be
subject to such Fund's CDSC schedule if such schedule is higher or longer than
the CDSC schedule relating to the Class B shares of the Seligman mutual fund
from which the exchange has been made.
Class C
- -------
Class C shares may be purchased at a price equal to the next determined net
asset value, plus an initial sales charge. Purchases of Class C shares by a
"single person" may be eligible for the reductions in initial sales charges
described above for Class A shares. Class C shares are subject to a CDSC of 1%
if the shares are redeemed within eighteen months of purchase, charged as a
percentage of the current net asset value or the original purchase price,
whichever is less.
Class D
- -------
Class D shares of each Fund of the Series may be purchased at a price equal to
the next determined net asset value, without an initial sales charge. However,
Class D shares are subject to a CDSC of 1% if the shares are redeemed within one
year of purchase, charged as a percentage of the current net asset value or the
original purchase price, whichever is less. Unlike Class B shares, Class D
shares do not automatically convert to Class A shares after eight years.
Systematic Withdrawals. Class B, Class C and Class D shareholders of each Fund
who reinvest both their dividends and capital gain distributions to purchase
additional shares of each Fund, respectively, may use the Fund's Systematic
Withdrawal Plan to withdraw up to 12% and 10%, respectively, of the value of
their accounts per year without the imposition of a CDSC. Account value is
determined as of the date the systematic withdrawals begin.
CDSC Waivers. The CDSC on Class B, Class B and Class D shares of each Fund of
the Series (and certain Class A shares, as discussed above) will be waived or
reduced in the following instances:
(1) on redemptions following the death or disability (as defined in Section
72(m)(7) of the Internal Revenue Code) of a shareholder or beneficial
owner;
(2) in connection with (1) distributions from retirement plans qualified under
Section 401(a) of the Internal Revenue 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), (2) distributions from a custodial account under
Section 403(b)(7) of the Internal Revenue Code or an IRA due to death,
disability, minimum distribution requirements after attainment of age 70
1/2 or, for accounts established prior to January 1, 1998, attainment of
age 59 1/2, and (3) a tax-free return of an excess contribution to an IRA;
(3) in whole or in part, in connection with shares sold to current and retired
Directors of the Series;
(4) 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 any registered investment
management company;
(5) in whole or in part, in connection with systematic withdrawals;
(6) in connection with participation in the Merrill Lynch Small Market 401(k)
Program.
22
<PAGE>
If, with respect to a redemption of any Class A, Class B, Class C or Class D
shares sold by a dealer, the CDSC is waived because the redemption qualifies for
a waiver as set forth above, the dealer shall remit to Seligman Advisors
promptly upon notice, an amount equal to the payment or a portion of the payment
made by Seligman Advisors at the time of sale of such shares.
Payment in Securities. In addition to cash, the Series may accept securities in
payment for Series' shares sold at the applicable public offering price (net
asset value and, if applicable, any sales charge), although the Series does not
presently intend to accept securities in payment for its shares. Generally, the
Series will only consider accepting securities (l) to increase its holdings in a
portfolio security, or (2) if Seligman determines that the offered securities
are a suitable investment for the Series and in a sufficient amount for
efficient management. Although no minimum has been established, it is expected
that the Series would not accept securities with a value of less than $100,000
per issue in payment for shares. The Series may reject in whole or in part
offers to pay for Series' shares with securities, may require partial payment in
cash for applicable sales charges, and may discontinue accepting securities as
payment for Series' shares at any time without notice. The Series will not
accept restricted securities in payment for shares. The Series will value
accepted securities in the manner provided for valuing portfolio securities of
the Series. Any securities accepted by the Series in payment for Series' shares
will have an active and substantial market and have a value which is readily
ascertainable.
Fund Reorganizations
Class A shares and Class C shares of each Fund of the Series may be issued
without an initial sales charge in connection with the acquisition of cash and
securities owned by other investment companies. Any CDSC will be waived in
connection with the redemption of a Fund's shares if the Fund is combined with
another Seligman mutual fund, or in connection with a similar reorganization
transaction.
Offering Price
When you buy or sell shares of each Fund, you do so at the Class's net asset
value (NAV) next calculated after Seligman Advisors accepts your request. Any
applicable sales charge will be added to the purchase price for Class A shares
and Class C shares.
NAV per share of each class of a Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time), on
each day that the NYSE is open for business. The NYSE is currently closed on
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
The Series will also determine NAV for each class of a Fund on each day in which
there is a sufficient degree of trading in a Fund's portfolio securities that
the NAV of Fund shares might be materially affected. NAV per share for a class
of a Fund is computed by dividing such class's share of the value of the net
assets of the Fund (i.e., the value of its assets less liabilities) by the total
number of outstanding shares of such class. All expenses of a Fund, including
the management fee, are accrued daily and taken into account for the purpose of
determining NAV. The NAV of Class B, Class C and Class D shares will generally
be lower than the NAV of Class A shares as a result of the higher 12b-1 fees
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 60 days remaining to maturity are generally valued at
amortized cost. Short-term obligations with more than 60 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
23
<PAGE>
amortized cost value does not represent fair market value. Expenses and fees,
including the management fee, are accrued daily and taken into account for the
purpose of determining the net asset value of each Fund's 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 each Fund will be subtracted
from its net asset value.
Generally, trading in foreign securities, as well as US Government securities,
money market instruments and repurchase agreements, is substantially completed
each day at various times prior to the close of regular trading on the NYSE.
The values of such securities used in computing the net asset value of the
shares of each Fund are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of regular trading on the
NYSE. Occasionally, events affecting the value of such securities and such
exchange rates may occur between the times at which they are determined and the
close of regular trading on 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 Board of Directors.
For purposes of determining the net asset value per share of each Fund, all
assets and liabilities initially expressed in foreign currencies will be
converted into US dollars at the mean between the bid and offer prices of such
currencies against US 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.
Specimen Price Make-Up
Under the current distribution arrangements between the Series and Seligman
Advisors, Class A shares and Class C shares are sold with a maximum initial
sales charge of 4.75% and 1.00%(1), respectively, and Class B and Class D shares
are sold at NAV(2). Using each Class's NAV at December 31, 1998, (except Class C
shares which commences operations effective June 1, 1999), the maximum offering
price of each Fund's shares is as follows:
<TABLE>
<CAPTION>
Large-Cap Small-Cap
Value Fund Value Fund
Class A
- -------
<S> <C> <C>
Net asset value per share....................... $10.04 $7.87
------ -----
Maximum sales charge (4.75% of offering price).. .50 .39
------ -----
Offering price to public........................ $10.54 $8.26
====== =====
Class B
- -------
Net asset value and offering price per share(2). $9.96 $7.78
===== =====
Class D
- -------
Net asset value and offering price per share(2). $9.96 $7.78
===== =====
______________
(1) In addition to the front-end sales charge of 1.00%, Class C shares are
subject to a 1% CDSC if you redeem your shares with in eighteen months of
purchase.
(2) Class B shares are subject to a CDSC declining from 5% in the first year
after purchase to 0% after six years. Class D shares are also subject to a
1% CDSC if you redeem your shares within one year of purchase.
</TABLE>
24
<PAGE>
Redemption in Kind
The procedures for selling 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.
Taxation of the Series
Each Fund is qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code. For each
year so qualified, each Fund 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 shareholders, whether received
in cash or reinvested in additional shares. To the extent designated as derived
from a Fund's dividend income that would be eligible for the dividends received
deduction if the Fund 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 gains (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 the shares have been held by a shareholder. Such distributions are not
eligible for the dividends received deduction allowed to corporate shareholders.
Shareholders receiving distributions in the form of additional shares issued by
the Series will be treated for federal income tax purposes as having received a
distribution in an amount equal to the fair market value on the date of
distribution of the shares received. Individual shareholders generally will be
subject to federal tax on distributions of net capital gains at a maximum rate
of 20% if designated as derived from the Series' capital gains from property
held for more than one year.
Any gain or loss realized upon a sale or redemption of shares in each Fund 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. Individual
shareholders will be subject to federal income tax on net capital gains at a
maximum rate of 20% in respect of shares held for more than one year. Net
capital gain of a corporate shareholder is taxed at the same rate as ordinary
income. 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
each Fund 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 (including
shares acquired through dividend reinvestment) securities that are substantially
identical to the shares of such Fund.
In determining gain or loss on shares of each Fund 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 charge
incurred in acquiring such shares to the extent of any subsequent reduction of
the sales charge by reason of the Exchange or Reinstatement Privilege offered by
the Series. Any sales charge not taken into account in determining the tax
basis of shares sold or exchanged within 90 days after acquisition will be added
to the shareholder's tax basis in the shares acquired pursuant to the Exchange
or Reinstatement Privilege.
25
<PAGE>
Each Fund 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 Fund 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 (social
security number for individuals) on the account application and certifies that
the shareholder is not subject to backup withholding, the Series is required to
withhold and remit to the US Treasury a portion of distributions and other
reportable payments to the shareholder. The rate of backup withholding is 31%.
Shareholders should be aware that, under regulations promulgated by the Internal
Revenue Service, the Series 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 Series may charge a service fee of up to $50 that
may be deducted from the shareholder's account and offset against any of its
undistributed dividends and capital gain distributions. The Series also
reserves the right to close any account which does not have a certified taxpayer
identification number.
Underwriters
Distribution of Securities
The Series and Seligman Advisors are parties to a Distributing Agreement dated
March 20, 1997 under which Seligman Advisors acts as the exclusive agent for
distribution of shares of the Series. Seligman Advisors accepts orders for the
purchase of the Series' shares, which are offered continuously. As general
distributor of the Series' shares, Seligman Advisors allows reallowances to all
dealers on sales of Class A shares, as set forth above under "Dealer
Reallowances." Seligman Advisors retains the balance of sales charges and any
CDSCs paid by investors.
Total initial sales charges paid by shareholders of Class A shares of the Large-
Cap Value Fund for the year ended December 31, 1998 and for the period April 25,
1997 (inception) through December 31, 1997 amounted to $505,337 and $442,967,
respectively, of which $57,852 and $29,676, respectively, was retained by
Seligman Advisors. Total initial sales charges paid by shareholders of Class A
shares of the Small-Cap Value Fund for the year ended December 31, 1998 and for
the period April 25, 1997 (inception) through December 31, 1997 amounted to
$556,351 and $2,115,552, respectively, of which $61,808 and $194,285,
respectively, was retained by Seligman Advisors. No Class C shares of the Fund
were issued or outstanding during such fiscal years.
Compensation
Seligman Advisors, which is an affiliated person of Seligman, which is an
affiliated person of the Series, received the following commissions and other
compensation from each Fund during its year ended December 31, 1998:
26
<PAGE>
<TABLE>
<CAPTION>
Net Underwriting Compensation on
Discounts and Redemptions and
Commissions Repurchases
(Class A Sales (CDSC on Class A and Brokerage Other
Fund Charge Retained) Class D Retained) Commissions Compensation(1)
- ---- --------------- ----------------- ----------- ---------------
<S> <C> <C> <C> <C>
Large-Cap Value $57,852 $12,233 $0 $49,268
Small-Cap Value $61,808 $71,797 $0 $39,142
</TABLE>
(1) Seligman Advisors has sold its rights to collect the distribution fees paid
by each Fund in respect of Class B shares and any CDSC imposed on
redemptions of Class B shares to FEP Capital, L.P., in connection with an
arrangement with FEP Capital, L.P. as discussed above under "12b-1 Plan."
In connection with this arrangement, Seligman Advisors receives payments
from FEP Capital, L.P. based on the value of Class B shares sold. Such
payments received for the year ended December 31, 1998 are reflected in the
table.
Other Payments
Seligman Advisors shall pay broker/dealers, from its own resources, a fee on
purchases of Class A shares of $1,000,000 or more (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 from $5
million and above. The calculation of the fee will be based on assets held 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 purchases made on behalf of any other fiduciary or
individual account.
Seligman Advisors 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" that are attributable to
the particular broker/dealer. The shares eligible for the fee are those on
which an initial sales charge was not paid because either the participating
eligible employee benefit plan has at least (1) $500,000 invested in the
Seligman mutual funds or (2) 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 for each Plan 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.
Seligman Advisors 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. Seligman Advisors may from
time to time pay a bonus or other incentive to dealers that sell shares of the
Seligman mutual funds. 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 Seligman
Advisors of such promotional activities and payments shall be consistent with
the rules of the National Association of Securities Dealers, Inc., as then in
effect.
Calculation of Performance Data
The total returns for Class A shares of the Large-Cap Value Fund for the year
ended December 31, 1998 and for the period April 25, 1997 (inception) through
December 31, 1998 were 6.31% and 20.71%, respectively. The total returns for
Class A shares of the Small-Cap Value Fund for the year ended December 31, 1998
and for the period April 25, 1997 (inception) through December 31, 1998 were
(22.71)% and 3.17%, respectively. These returns were computed by subtracting
the maximum sales
27
<PAGE>
charge of 4.75% of the public offering price and assuming that all of the
dividends and capital gain distributions paid by each Fund's Class A shares over
the relevant time period were reinvested. It was then assumed that at the end of
the period, the entire amount was redeemed. The total return was then determined
by calculating the rate required for the initial investment to grow to the
amount which would have been received upon redemption (income and capital). The
total returns for Class B shares of the Large-Cap Value Fund for the year ended
December 31, 1998 and for the period April 25, 1997 (inception) through December
31, 1998 were 5.85% and 21.27%, respectively. These returns were computed
assuming that all of the dividends and capital gain distributions paid by each
Fund's Class B shares, if any, were reinvested over the relevant time period.
The total returns for Class B shares of the Small-Cap Value Fund for the year
ended December 31, 1998 and for the period April 25, 1997 (inception) through
December 31, 1998 were (23.42)% and 3.20%, respectively. It was then assumed
that at the end of the period the entire amount was redeemed, subtracting the
applicable CDSC. The total returns for Class D shares of the Large-Cap Value
Fund for the year ended December 31, 1998 and for the period April 25, 1997
(inception) through December 31, 1998 were 9.85% and 23.33%, respectively. The
total returns for Class D shares of the Small-Cap Value Fund for the year ended
December 31, 1998 and for the period April 25, 1997 (inception) through December
31, 1998 were (20.21)% and 5.51%, respectively. These returns were computed
assuming that all of the dividends and capital gain distributions paid by each
Fund's Class D shares, if any, were reinvested over the relevant time period. It
was then assumed that at the end of the period, the entire amount was redeemed,
subtracting the 1% CDSC, if applicable.
Class C shares is a new class, effective June 1, 1999, so no performance data is
presented.
Table A below illustrates the total return (income and capital) on Class A
shares of each Fund with dividends invested and capital gain distributions taken
in shares. It shows that a $1,000 investment in Class A shares of the Large-Cap
Value Fund, assuming payment of the 4.75% sales charge, made on April 25, 1997
(commencement of offering) had a value of $1,373 on December 31, 1998, resulting
in an aggregate total return of 37.32%; and a $1,000 investment in Class A
shares of the Small-Cap Value Fund, assuming payment of the 4.75% sales charge,
made on April 25, 1997 (commencement of offering) had a value of $1,054 on
December 31, 1998, resulting in an aggregate total return of 5.40%. Table B
illustrates the total return (income and capital) on Class B shares of each Fund
with dividends invested and capital gain distributions, if any, taken in shares.
It shows that a $1,000 investment in Class B shares of the Large-Cap Value Fund
made on April 25, 1997 (commencement of offering) had a value of $1,384 on
December 31, 1998, after subtracting the 4% CDSC, resulting in an aggregate
total return of 38.39%; and a $1,000 investment in Class B shares of the Small-
Cap Value Fund made on April 25, 1997 (commencement of offering) had a value of
$1,055 on December 31, 1998, after subtracting the 4% CDSC, resulting in an
aggregate total return of 5.46%. Table C illustrates the total return (income
and capital) on Class D shares of each Fund with dividends invested and capital
gain distributions, if any, taken in shares. It shows that a $1,000 investment
in Class D shares of the Large-Cap Value Fund made on April 25, 1997
(commencement of offering) had a value of $1,424 on December 31, 1998, resulting
in an aggregate total return of 42.39%; and a $1,000 investment in Class D
shares of the Small-Cap Value Fund made on April 25, 1997 (commencement of
offering) had a value of $1,095 on December 31, 1998, resulting in an aggregate
total return of 9.46%. The results shown should not be considered a
representation of the dividend income or gain in capital value which may be
realized from an investment made in a class of shares of the Series today.
28
<PAGE>
<TABLE>
<CAPTION>
TABLE A - CLASS A SHARES
Value of Value of Capital
Initial Gain Value of Total Value of Total
Period Ended1 Investment/2/ Distributions Dividends Investment Return/1,3/
------------- ------------- ------------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Large-Cap
Value Fund
12/31/97 $1,212 $18 $1 $1,231
12/31/98 1,339 27 7 1,373 37.32%
Small-Cap Value
Fund
12/31/97 $1,297 $ 1 $--- $1,298
12/31/98 1,049 5 --- 1,054 5.40%
</TABLE>
<TABLE>
TABLE B - CLASS B SHARES
Value of Value of Capital
Initial Gain Value of Total Value of Total
Period Ended1 Investment/2/ Distributions Dividends Investment/2/ Return/1,3/
------------- ------------- ------------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Large-Cap
Value Fund
12/31/97 $1,267 $18 $--- $1,285
12/31/98 1,355 29 --- 1,384 38.39%
Small-Cap Value
Fund
12/31/97 $1,357 $ 1 $--- $1,358
12/31/98 1,050 5 --- 1,055 5.46%
</TABLE>
<TABLE>
TABLE C - CLASS D SHARES
Value of Capital
Value of Initial Gain Value of Total Value of Total
Period Ended1 Investment/2/ Distributions Dividends Investment/2/ Return/1,3/
------------- ------------- ------------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Large-Cap
Value Fund
12/31/97 $1,267 $18 $--- $1,285
12/31/98 1,395 29 --- 1,424 42.39%
Small-Cap Value
Fund
12/31/97 $1,357 $ 1 $--- $1,358
12/31/98 1,090 5 --- 1,095 9.46%
</TABLE>
_______________________
1 For the year ended December 31, 1997 the performance of the Class A, Class B
and Class D shares represents the performance for the period April 25, 1997
(commencement of offering) through December 31, 1997.
2 The "Value of Initial Investment" as of the date indicated reflects the
effect of the maximum sales charge or CDSC, if applicable, assumes that all
dividends and capital gain distributions were taken in cash and reflects
changes in the net asset value of the shares purchased with the hypothetical
initial investment. "Total Value of Investment" reflects the effect of the
CDSC, if applicable, and assumes investment of all dividends and capital gain
distributions.
29
<PAGE>
3 "Total Return" for each class of shares of each Fund is calculated by
assuming a hypothetical initial investment of $1,000 at the beginning of the
period specified; subtracting the maximum sales charge for Class A shares;
determining total value of all dividends and capital gain distributions that
would have been paid during the period on such shares assuming that each
dividend or capital gain distribution was invested in additional shares at
net asset value; calculating the total value of the investment at the end of
the period; subtracting the CDSC on Class B and Class D shares, if
applicable; and finally, by dividing the difference between the amount of the
hypothetical initial investment at the beginning of the period and its total
value at the end of the period by the amount of the hypothetical initial
investment.
Each Fund may, from time to time, make reference in advertising or promotional
material to performance information, including mutual fund rankings, prepared by
Lipper Analytical Services, Inc., an independent reporting service which
monitors the performance of mutual funds. In calculating the total return of
each Fund's Class A, Class B, Class C and Class D shares, respectively, the
Lipper analysis assumes investment of all dividends and distributions paid but
does not take into account applicable sales charges. Each Fund may also refer
in advertisements in other promotional material to articles, comments, listings
and columns in the financial press pertaining to such Fund's performance.
Examples of such financial and other press publications include BARRON'S,
BUSINESS WEEK, CDA/WIESENBERGER 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., PENSION AND
INVESTMENTS, SMART MONEY, THE NEW YORK TIMES, THE WALL STREET JOURNAL, USA
TODAY, U.S. NEWS AND WORLD REPORT, WORTH MAGAZINE, WASHINGTON POST AND YOUR
MONEY.
Each Fund's advertising or promotional material may make reference to such
Fund's "Beta," "Standard Deviation," or "Alpha." Beta measures the volatility
of a Fund, as compared to that of the overall market. Standard deviation
measures how widely a Fund's performance has varied from its average
performance, and is an indicator of a Fund's potential for volatility. Alpha
measures the difference between the returns of a Fund and the returns of the
market, adjusted for volatility.
Financial Statements
Each Fund's Annual Report to shareholders for the year ended December 31, 1998
contains a schedule of investments as of December 31, 1998 as well as certain
other financial information as of that date. The financial statements and notes
included in the Annual Reports, and the Independent Auditors' Reports thereon,
are incorporated herein by reference. These Reports will be furnished without
charge to investors who request copies of this SAI.
General Information
Custodian. Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City,
Missouri 64105, serves as custodian of the Series. It also maintains, under the
general supervision of the Manager, the accounting records and determines the
net asset value for each Fund of the Series.
Auditors. Deloitte & Touche, LLP, independent auditors, have been selected as
auditors of the Series. Their address is Two World Financial Center, New York,
New York 10281.
30
<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 the 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.
31
<PAGE>
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" indicates 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 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
capacity to pay interest and repay principal although it is somewhat more
susceptible 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 an adequate 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.
32
<PAGE>
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.
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.
33
<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 underwritings.
. 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 successful 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.
34
<PAGE>
...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 50
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, Inc. and Seligman Quality
Municipal Fund, Inc. two closed-end funds that invest in high quality
municipal bonds.
. In 1991 establishes a joint venture with Henderson 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 Smaller Companies Fund, Seligman Henderson Global Technology Fund,
Seligman Henderson Global Growth Opportunities Fund and Seligman Henderson
Emerging Markets Growth Fund.
. Launches Seligman Value Fund Series, Inc., which currently offers two
separate series: Seligman Large-Cap Value Fund and Seligman Small-Cap Value
Fund.
Saivfb699
35
<PAGE>
SELIGMAN
-----------------
LARGE-CAP
VALUE FUND
[GRAPHIC]
ANNUAL REPORT
DECEMBER 31, 1998
----------
A Value Approach
to Seeking the
Capital Appreciation
Potential of
Larger Companies
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
<PAGE>
SELIGMAN -- TIMES CHANGE...VALUES ENDURE
J. & W. Seligman & Co. Incorporated is a firm with a long tradition of
investment expertise, offering a broad array of investment choices to help
today's investors seek their long-term financial goals.
[PHOTOGRAPH]
Picture of James, Jesse, and Joseph Seligman, 1870
TIMES CHANGE...
Established in 1864, Seligman's history of providing financial services has been
marked not by fanfare, but rather by a quiet and firm adherence to financial
prudence. While the world has changed dramatically in the 134 years since
Seligman first opened its doors, the firm has continued to offer its clients
high-quality investment solutions through changing times.
In the late 19th century, as the country grew, Seligman helped finance the
westward expansion of the railroads, the construction of the Panama Canal, and
the launching of urban transit systems. In the first part of the 20th century,
as America became an industrial power, the firm helped fund the growing capital
needs of the nascent automobile and steel industries.
With the formation of Tri-Continental Corporation in 1929 -- today, the nation's
largest diversified publicly-traded closed-end investment company -- Seligman
began shifting its emphasis from investment banking to investment management.
Despite the stock market crash and ensuing depression, Seligman was convinced of
the importance that investment companies could have in building wealth for
individual investors and began managing its first mutual fund in 1930.
In the decades that followed, Seligman has continued to offer forward-looking
investment solutions, including funds that focus on technology stocks, municipal
bonds, and international securities.
...VALUES ENDURE
Seligman is proud of its distinctive past and of the traditional values that
continue to shape the firm's business decisions and investment judgment. While
much has changed over the years, the firm's commitment to providing prudent
investment management that seeks to build wealth for clients over time is an
enduring value that will guide Seligman into the new millennium.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
To the Shareholders ....................................................... 1
Interview With Your Portfolio Managers .................................... 2
Performance Overview ...................................................... 4
Portfolio Overview ........................................................ 6
Portfolio of Investments .................................................. 8
Statement of Assets and Liabilities ....................................... 10
Statement of Operations ................................................... 11
Statements of Changes in Net Assets ....................................... 12
Notes to Financial Statements ............................................. 13
Financial Highlights ...................................................... 16
Report of Independent Auditors ............................................ 17
Federal Tax Status of 1998 Dividend and Gain
Distributions for Taxable Accounts ...................................... 18
Board of Directors ........................................................ 19
Executive Officers and For More Information ............................... 20
Glossary of Financial Terms ............................................... 21
- --------------------------------------------------------------------------------
<PAGE>
TO THE SHAREHOLDERS
In 1998, Seligman Large-Cap Value Fund posted a total return of 11.57% based on
the net asset value of Class A shares. This return lagged the 15.63% total
return of the Russell 1000 Value Index and the 28.58% return of the Standard &
Poor's 500 Composite Stock Price Index (S&P 500). A discussion with your
Portfolio Managers regarding the Fund's results begins on page 2.
The past year marked the eighth year of economic expansion in the US, with real
domestic growth of 3.9%. For the stock market, it was the first time in history
that the S&P 500 registered more than 20% gains four years in a row.
Unfortunately for your Fund, the majority of 1998's gains came from
large-capitalization growth stocks. The large-cap value stocks that your Fund
invests in did not fare as well.
The international economic background in 1998 was one of steadily deteriorating
conditions as the financial crisis, originally limited to a few Asian countries,
spread throughout other regions. In the ensuing "flight to quality," investors
from around the world poured money into the largest US growth stocks. In the
rush to own only the very best American growth companies, investors bypassed
value stocks, which by their nature are undervalued and underappreciated by the
market.
Some value stocks are cheap for a reason -- the company has a history of missed
earnings estimates, a poor management team, etc. Other value stocks are cheap
due to a temporary condition -- the company is restructuring, changing
management, etc. A value manager tries to invest in the second type of stock in
anticipation of the market recognizing the company's true value. In 1998
however, cheap stocks stayed cheap as the market rewarded growth over value.
Currency instability and rising global recession/deflation fears exacerbated
already high market volatility throughout the year. The Russian debt default, as
well as the possible collapse of Long-Term Capital Management LP, a large hedge
fund plagued by a series of bad currency investments, left investors nervous. By
late August, a stock market correction threatened to turn into a more
significant decline, as the Dow Jones Industrial Average fell more than 850
points in two days, wiping out all of the year's gains. Value stocks were
punished along with growth stocks, and did not rebound as sharply when the
Federal Reserve cut short-term interest rates.
Subdued inflation, low interest rates, improving prospects in Asia, and a
Federal Reserve leading the fight against global recession are all positive for
the US markets in 1999. However, pressure on corporate profits is likely to
continue, as the US enters a period of slower growth. Valuations on some of the
largest growth stocks seem excessive, and any broadening of the market in 1999
may negatively affect their share prices and reward more reasonably-priced value
stocks. In addition, low commodity prices are impacting much of the world,
making it harder for US multinationals to export. We expect a challenging
environment confronted with economic uncertainties and continued high
volatility.
Seligman continues to work to ensure that all of its operations are prepared for
the challenges posed by the Year 2000 (Y2K) computer problem. We are confident
that there will be no disruption in the investment and shareholder services
provided by your Fund as a result of Y2K. In addition, your portfolio management
team considers the potential ramifications of Y2K when making decisions on which
securities should be held by the Fund.
Thank you for your continued support of Seligman Large-Cap Value Fund in 1998.
We look forward to serving your investment needs in 1999.
By order of the Board of Directors,
/s/William C. Morris
- --------------------
William C. Morris
Chairman
/s/Brian T. Zino
-----------------
Brian T. Zino
President
January 29, 1999
1
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGERS,
NEIL T. EIGEN AND RICHARD S. ROSEN
Q. How did Seligman Large-Cap Value Fund perform in 1998?
A. For the 12 months ended December 31, 1998, Seligman Large-Cap Value Fund
posted a total return of 11.57% based on the net asset value of Class A
shares. This compares to the 28.58% return of the Standard &Poor's 500
Composite Stock Price Index (S&P 500) and the 15.63% total return of the
Russell 1000 Value Index. The Fund underperformed relative to the S&P 500
because value stocks in general did not fare as well as growth stocks. The
Fund's underperformance relative to the Russell 1000 Value Index was due to
the Fund's heavy weighting in financial stocks, which were particularly
hard hit during the third quarter. However, many of these stocks began to
recover in the fourth quarter.
Q. Which economic and market factors influenced the Fund's results in 1998?
A. The past year proved difficult for value funds in general, and ours was no
exception. The biggest problem for us in 1998 was the weak economies of
Asia and their dampening effect on global trade. A number of the companies
the Fund owns suffered earnings disappointments because of the shortfall in
business from Asia. This erosion in earnings led to lower stock prices.
In 1998, the S&P 500 returned more than 28%. This impressive return masks
several difficulties experienced by investors in 1998. The first is the
issue of growth versus value. As investors worried about everything from
deflationary pressures in the US to devalued currencies in the emerging
markets, the largest, most liquid growth companies in the US -- companies
with proven track records of growing earnings in the past -- were rewarded
in a "flight to quality." Meanwhile, large-cap value stocks didn't fare as
well. The growth subsector of the S&P 500 was up 40%, while the value
subsector was up only 12%. This was one of the widest growth-to-value
performance disparities in history.
The other issue masked by the large gains in the S&P 500 was the narrowness
of the market. Fifty of the stocks in the S&P 500 were responsible for 94%
of its gain, leaving the other 450 with a rise of about 1.5%. While this
trend was troublesome for active managers in general, it adversely affected
value managers even more, since eight of the top 10 performers within the
S&P 500 were growth-oriented technology companies.
Q. Which factors measurably influenced the Fund's results?
A. The third quarter was particularly difficult period for the Fund as the
world experienced a substantial financial crisis. The Asian crisis spread
throughout emerging markets, culminating in the Russian debt debacle.
- --------------------------------------------------------------------------------
A TEAM APPROACH
Seligman Large-Cap Value Fund is managed by the Seligman Value Team, headed by
Neil T. Eigen, who has 30 years of experience as a value investor. Mr. Eigen and
Richard S. Rosen are assisted in the management of the Fund by seasoned research
professionals who are responsible for identifying reasonably valued
large-capitalization companies with the potential for high returns on equity.
- --------------------------------------------------------------------------------
[PHOTOGRAPH]
Value Team: (from left) Nevis George (Administrative Assistant), Milton Rubin
(Client Services), Richard S. Rosen (Co-Portfolio Manager), (seated) Neil T.
Eigen (Portfolio Manager)
2
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGERS,
NEIL T. EIGEN AND RICHARD S. ROSEN
This crisis, in addition to the subsequent bailout of Long-Term Capital
Management LP, a large US hedge fund, raised concerns that the world
financial system was at risk and resulted in a substantial sell-off of
financial stocks. This sector was the most heavily weighted sector of the
Fund, and performance suffered from August through October. However, the
Fund made up most of the lost ground in the fourth quarter.
Another major factor hurting performance this past year was the strength in
technology stocks in general and Internet stocks in particular, where a
virtual mania developed. This resulted in a speculative trading market that
became extremely divergent. By their nature, value stocks will not do well
in this type of environment. Value stocks are cheap. Some are cheap for a
reason, while others are cheap due to some temporary situation that does
not affect the long-term viability of a company. Seligman Large-Cap Value
Fund invests in value stocks that we believe have strong underlying
fundamentals. Unfortunately, in last year's environment, many stocks that
were cheap, regardless of the reason, got cheaper, as market inflows
focused on a narrow band of already expensive stocks. This divergence is
not healthy, as investors concentrate on a few industry groups at the
expense of the broader market.
Q. What was the Fund's strategy?
A. In 1998, we continued to pursue a strategy of looking for undervalued
companies with below-market price/ earnings ratios, where we see potential
catalysts to accelerating earnings growth rates.
During the course of the year we added to our positions in the paper and
forest products sector, which had been hurt by earnings downgrades due to
the ongoing Asian crisis. We have confidence that when the economies of
Japan, Korea, and China show signs of stabilizing, these stocks will
rebound. We also increased the Fund's exposure to financial stocks during
the third quarter sell-off and, by year-end, this industry had a dramatic
rebound.
Q. What is your outlook?
A. For 1999, we expect a modest slowdown in the growth rate of gross domestic
product (GDP) to about 2.5%. Trade should continue to be under pressure and
there could be a meaningful decline in capital spending. This would result
in a period of slowing job creation and income gains. Unemployment may rise
a bit. However, we anticipate that inflation will remain muted.
We think that one of the major investment themes for 1999 will be
restructuring and consolidating, as managements continue to adjust to a
slow growth environment. In commodity price sensitive businesses, this will
slowly bring supply into better balance.
We think corporate profits will be hard to grow in a slow growth economic
environment. Profit margins for US non-financial companies peaked in the
third quarter of 1997 and have been declining since then. This has resulted
in moderating cash flows and, ultimately, in reduced levels of capital
spending. Thus, stock selection will be important. Nonetheless, we expect
moderately positive overall returns for the year.
3
<PAGE>
PERFORMANCE OVERVIEW
This chart compares a $10,000 hypothetical investment made in Seligman
Large-Cap Value Fund since the commencement of operations on April 25, 1997,
through December 31, 1998, to a $10,000 investment made in the Russell 1000
Index, the Russell 1000 Value Index, and Standard &Poor's 500 Composite Stock
Price Index (S&P500) from April 30, 1997, to December 31, 1998. The results for
Seligman Large-Cap Value Fund were determined with and without the initial 4.75%
maximum sales charge for Class A shares, with the 4% contingent deferred sales
charge ("CDSC") for Class B shares, and without the 1% CDSC for Class D shares,
and assume that all distributions within the period are invested in additional
shares. It is important to keep in mind that the Russell 1000 Index, the Russell
1000 Value Index, and the S&P500 exclude the effect of fees and sales charges.
Seligman Large-Cap Value Fund will no longer be compared to the Russell
1000 Index after December 31, 1998, as it measures the performance of 1,000
widely held large-capitalization stocks. Instead, the Fund will be compared to
the Russell 1000 Value Index, which the Manager believes is a more appropriate
benchmark because it measures the value performance of large-cap stocks, and the
Fund invests primarily in those types of stocks. Therefore, your Fund will
continue to be compared to the Russell 1000 Value Index and the S&P 500.
[THE FOLLOWING TABLE WAS PRESENTED AS A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Class A Class A Russell
with without Class D 1000
Sales Sales Class B without Russell Value
Charge Charge with CDSC CDSC 1000 Index* Index* S&P 500*
------- ------- --------- ------- ----------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
4/25/97 9,520 10,000 10,000 10,000
4/30/97 9,613 10,098 10,098 10,098 10,000 10,000 10,000
5/31/97 10,173 10,686 10,672 10,672 10,640 10,559 10,609
6/30/97 10,813 11,359 11,331 11,331 11,080 11,012 11,084
7/31/97 11,813 12,409 12,381 12,381 11,987 11,840 11,966
8/31/97 11,333 11,905 11,863 11,863 11,421 11,419 11,296
9/30/97 11,813 12,409 12,367 12,367 12,047 12,108 11,914
10/31/97 11,360 11,933 11,891 11,891 11,657 11,770 11,516
11/30/97 12,120 12,731 12,661 12,661 12,163 12,291 12,050
12/31/97 12,308 12,928 12,846 12,846 12,410 12,649 12,256
1/31/98 12,335 12,957 12,874 12,874 12,503 12,471 12,392
2/28/98 13,432 14,109 14,011 14,011 13,394 13,310 13,286
3/31/98 13,906 14,607 14,494 14,494 14,069 14,125 13,966
4/30/98 13,973 14,678 14,551 14,551 14,214 14,220 14,107
5/31/98 14,095 14,806 14,664 14,664 13,907 14,009 13,864
6/30/98 14,000 14,706 14,565 14,565 14,422 14,189 14,427
7/31/98 13,621 14,308 14,167 14,167 14,249 13,939 14,274
8/31/98 11,319 11,890 11,766 11,766 12,118 11,865 12,210
9/30/98 11,509 12,089 11,950 11,950 12,935 12,546 12,992
10/31/98 12,768 13,412 13,258 13,258 13,957 13,518 14,049
11/30/98 13,662 14,351 14,167 14,167 14,821 14,148 14,901
12/31/98 13,732 14,424 13,839 14,239 15,765 14,629 15,759
</TABLE>
* From April 30, 1997
A portfolio with fewer holdings may be subject to greater volatility than a
portfolio with a greater number of holdings.
4
<PAGE>
PERFORMANCE OVERVIEW
Investment Results Per Share
TOTAL RETURNS
For Periods Ended December 31, 1998
AVERAGE ANNUAL
-----------------------
SINCE
SIX ONE INCEPTION
MONTHS* YEAR 4/25/97
---------- ------- ------------
Class A**
With Sales Charge (6.61)% 6.31% 20.71%
Without Sales Charge (1.92) 11.57 24.29
Class B**
With CDSC+ (7.24) 5.85 21.27
Without CDSC (2.24) 10.85 23.33
Class D**
With 1% CDSC (3.24) 9.85 n/a
Without CDSC (2.24) 10.85 23.33
Russell 1000 Index*** 9.31 27.02 31.41++
Russell 1000 Value Index*** 3.10 15.63 25.62++
S&P 500*** 9.22 28.58 31.37++
NET ASSET VALUE
DECEMBER 31, 1998 JUNE 30, 1998 DECEMBER 31, 1997
------------------- ------------- -------------------
Class A $10.04 $10.34 $9.09
Class B 9.96 10.25 9.04
Class D 9.96 10.25 9.04
DIVIDEND AND CAPITAL GAIN (LOSS) INFORMATION
For the Year Ended December 31, 1998
DIVIDEND PAID CAPITAL GAIN (LOSS)
--------------- ---------------------
Class A $0.040 Paid $0.059
Class B -- Realized (0.040)
Class D -- Unrealized 0.671+++
Performance data quoted represent changes in price and assume that all
distributions within the periods are invested in additional shares. The rates of
return will vary and the principal value of an investment will fluctuate.
Shares, if redeemed, may be worth more or less than their original cost. Past
performance is not indicative of future investment results.
- ----------
* Returns for periods of less than one year are not annualized.
** Return figures reflect any change in price per share and assume the
investment of dividend and capital gain distributions. Return figures for
Class A shares are calculated with and without the effect of the initial
4.75% maximum sales charge. Returns for Class B shares are calculated with
and without the effect of the maximum 5% contingent deferred sales charge
("CDSC"), charged on redemptions made within one year of the date of
purchase, declining to 1% in the sixth year and 0% thereafter. Returns for
Class D shares are calculated with and without the effect of the 1% CDSC,
charged on redemptions made within one year of the date of purchase.
*** The Russell 1000 Index, the Russell 1000 Value Index, and the S&P 500 are
unmanaged benchmarks that assume investment of dividends and exclude the
effect of fees and sales charges. Investors cannot invest directly in an
index.
+ The CDSC is 5% for periods of one year or less, and 4% since inception.
++ From April 30, 1997.
+++ Represents the per share amount of net unrealized appreciation of portfolio
securities as of December 31, 1998.
5
<PAGE>
PORTFOLIO OVERVIEW
Diversification of Net Assets
December 31, 1998
<TABLE>
<CAPTION>
PERCENT OF NET ASSETS
DECEMBER 31,
-------------------
ISSUES COST VALUE 1998 1997
----- ------------- ------------- ----- -----
<S> <C> <C> <C> <C> <C>
COMMON STOCKS:
Aerospace ................................ 2 $ 9,294,919 $ 9,416,250 6.3 6.6
Automotive and Related ................... 2 6,892,149 8,887,094 6.0 5.9
Banking .................................. 3 14,715,916 16,051,623 10.8 11.2
Drugs and Health Care .................... 2 7,267,724 8,971,681 6.1 6.1
Electric Utilities ....................... 1 3,938,034 4,721,750 3.2 3.2
Energy ................................... 1 4,233,637 3,902,175 2.6 3.4
Finance and Insurance .................... 5 21,165,714 22,341,942 15.0 15.2
Food ..................................... 1 4,343,015 3,045,000 2.1 2.7
Household Products and Furnishings ....... 3 13,822,945 15,183,288 10.2 9.6
Industrial Equipment ..................... 1 3,339,294 4,592,813 3.1 3.0
Medical Products and Technology .......... 2 7,537,736 10,130,269 6.8 6.8
Office Equipment ......................... 1 3,661,955 5,097,600 3.4 3.3
Packaging ................................ 1 4,811,300 3,389,375 2.3 3.4
Paper and Forest Products ................ 2 10,013,303 9,716,637 6.6 --
Retail Trade ............................. 3 13,146,216 11,917,875 8.0 10.9
Specialty Materials ...................... 1 4,644,501 4,039,062 2.7 3.3
Tobacco .................................. 1 4,656,917 6,056,200 4.1 3.4
----- ------------- ------------- ----- -----
32 137,485,275 147,460,634 99.3 98.0
SHORT-TERM HOLDINGS AND
OTHER ASSETS LESS LIABILITIES 1 1,064,107 1,064,107 0.7 2.0
----- ------------- ------------- ----- -----
NET ASSETS 33 $138,549,382 $148,524,741 100.0 100.0
===== ============= ============= ===== =====
</TABLE>
Largest Industries
December 31, 1998
[THE FOLLOWING TABLE WAS PRESENTED AS A BAR GRAPH IN THE PRINTED MATERIALS.]
Percent of Total Dollar
Net Assets Amount
---------- ------------
FINANCE AND INSURANCE 14.90% $22,341,942
BANKING 10.80% $16,051,623
HOUSEHOLD PRODUCTS AND FURNISHINGS 10.20% $15,183,288
RETAIL TRADE 8.00% $11,917,875
MEDICAL PRODUCTS AND TECHNOLOGY 6.80% $10,130,269
6
<PAGE>
PORTFOLIO OVERVIEW
Largest Portfolio Changes
During Past Six Months
SHARES
----------------------
HOLDINGS
ADDITIONS INCREASE 12/31/98
- ------------- ---------- ---------
Armstrong World Industries .......... 29,000 79,000
Champion International .............. 70,700 119,900
Crown Cork &Seal .................... 30,000 110,000
The Equitable Companies ............. 25,000 80,000
Goodrich (B.F.) ..................... 45,000 120,000
Penney (J.C.) ....................... 29,000 75,000
St. Paul Companies .................. 31,000 119,846
Sears, Roebuck ...................... 38,100 101,100
United Healthcare ................... 103,000 103,000
Washington Mutual ................... 30,000 120,500
Largest portfolio changes from the previous period to the current period are
based on cost of purchases of securities.
- --------------------------------------------------------------------------------
Largest Portfolio Holdings
December 31, 1998
SECURITY VALUE
- -------- ----------
Summit Bancorp .......................... $6,553,125
Philip Morris ........................... 6,056,200
Bank of New York ........................ 5,796,000
Kimberly-Clark .......................... 5,221,100
Dial .................................... 5,197,500
SECURITY VALUE
- -------- ----------
Medtronic ............................... $5,197,500
United Technologies ..................... 5,111,250
Xerox ................................... 5,097,600
Baxter International .................... 4,932,769
Georgia-Pacific Group ................... 4,860,687
- --------------------------------------------------------------------------------
7
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1998
SHARES VALUE
------------ ------------
COMMON STOCKS 99.3%
AEROSPACE 6.3% Goodrich (B.F.)
Manufacturer and supplier of
systems and component parts
for the aerospace industry 120,000 $ 4,305,000
United Technologies
Manufacturer of elevators, jet
engines, flight systems, and
automotive parts 47,000 5,111,250
------------
9,416,250
------------
AUTOMOTIVE AND RELATED 6.0%
Ford Motor
Manufacturer and distributor of
automobiles, trucks, and
related parts 74,000 4,342,875
General Motors
Manufacturer and distributor of
automobiles, trucks, and
related parts 63,500 4,544,219
------------
8,887,094
------------
BANKING 10.8%
Bank of New York
Commercial bank 144,000 5,796,000
BankAmerica
Commercial bank 61,580 3,702,498
Summit Bancorp
Operator of commercial banks 150,000 6,553,125
------------
16,051,623
------------
DRUGS AND HEALTH CARE 6.1%
Bristol-Myers Squibb
Developer and manufacturer
of health and personal care
products 33,900 4,536,244
United Healthcare
Health maintenance
organization 103,000 4,435,437
------------
8,971,681
------------
ELECTRIC UTILITIES 3.2%
Dominion Resources
Provider of electric services in
the mid-Atlantic region 101,000 4,721,750
------------
ENERGY 2.6%
Texaco
Explorer, producer, transporter,
refiner, and marketer of natural
gas, oil, and petroleum products 73,800 3,902,175
------------
FINANCE AND INSURANCE 15.0%
Citigroup
Provider of investment services
and life insurance 83,400 4,128,300
The Equitable Companies
Provider of insurance and
investment management 80,000 4,630,000
Fannie Mae
Provider of mortgage financing 65,100 4,817,400
St. Paul Companies
Property and casualty insurer 119,846 4,164,648
Washington Mutual
Regional finance company for
small- and mid-sized businesses 120,500 4,601,594
------------
22,341,942
------------
FOOD 2.1%
Dole Food
Producer and marketer of
fresh and packaged fruits
and vegetables 101,500 3,045,000
------------
HOUSEHOLD PRODUCTS
AND FURNISHINGS 10.2%
Armstrong World Industries
Manufacturer and marketer of
interior furnishings 79,000 4,764,688
Dial
Manufacturer and marketer of
personal care, household, and
laundry products 180,000 5,197,500
Kimberly-Clark
Manufacturer of consumer paper
products; newsprint 95,800 5,221,100
------------
15,183,288
------------
INDUSTRIAL EQUIPMENT 3.1%
General Electric
Supplier of diversified
electronics 45,000 4,592,813
------------
MEDICAL PRODUCTS
AND TECHNOLOGY 6.8%
Baxter International
Manufacturer and distributor of
hospital and laboratory products 76,700 4,932,769
Medtronic
Manufacturer of pacemakers and
related cardiovascular products 70,000 5,197,500
------------
10,130,269
------------
- ----------
See footnotes on page 9.
8
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1998
SHARES VALUE
------------ ------------
OFFICE EQUIPMENT 3.4%
Xerox
Developer, manufacturer,
and marketer of office
automation products 43,200 $ 5,097,600
------------
PACKAGING 2.3%
Crown Cork & Seal
Manufacturer of packaging
products 110,000 3,389,375
------------
PAPER AND
FOREST PRODUCTS 6.6%
Champion International
Manufacturer of paper
products 119,900 4,855,950
Georgia-Pacific Group
Manufacturer of building
products and paper 83,000 4,860,687
------------
9,716,637
------------
RETAIL TRADE 8.0%
May Department Stores
Department store operator 68,000 4,105,500
Penney (J.C.)
Operator of retail department
stores and drugstores 75,000 3,515,625
Sears, Roebuck
Large retail store operator 101,100 4,296,750
------------
11,917,875
------------
SPECIALTY MATERIALS 2.7%
Raychem
Diversified product manufacturer
for the aerospace, automotive,
cable television, and
communications industries 125,000 $ 4,039,062
------------
TOBACCO 4.1%
Philip Morris
Manufacturer of tobacco
products, food, and beverages 113,200 6,056,200
------------
TOTAL COMMON STOCKS
(Cost $137,485,275) 147,460,634
SHORT-TERM HOLDINGS 0.6%
(Cost $900,000) 900,000
------------
TOTAL INVESTMENTS 99.9%
(Cost $138,385,275) 148,360,634
OTHER ASSETS
LESS LIABILITIES 0.1% 164,107
------------
NET ASSETS 100.0% $148,524,741
============
- ----------
Descriptions of companies have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
9
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value:
Common stocks (cost $137,485,275) ................................................. $147,460,634
Short-term holdings (cost $900,000) ............................................... 900,000 $ 148,360,634
-------------
Cash .................................................................................................... 62,585
Receivable for Capital Stock sold ....................................................................... 377,511
Receivable for dividends and interest ................................................................... 231,586
Expenses prepaid to shareholder service agent ........................................................... 33,715
Deferred organization expenses .......................................................................... 8,589
Other ................................................................................................... 27,747
-------------
Total Assets ............................................................................................ 149,102,367
-------------
LIABILITIES:
Payable for Capital Stock repurchased ................................................................... 277,064
Accrued expenses, taxes, and other ...................................................................... 300,562
-------------
Total Liabilities ....................................................................................... 577,626
-------------
Net Assets .............................................................................................. $ 148,524,741
=============
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($0.001 par value; 1,000,000,000 shares authorized;
14,876,547 shares outstanding):
Class A ............................................................................................... $ 4,910
Class B ............................................................................................... 5,659
Class D ............................................................................................... 4,308
Additional paid-in capital .............................................................................. 139,135,961
Distribution in excess of net investment income ......................................................... (1,108)
Accumulated net realized loss ........................................................................... (600,348)
Net unrealized appreciation of investments .............................................................. 9,975,359
-------------
Net Assets .............................................................................................. $ 148,524,741
=============
NET ASSET VALUE PER SHARE:
Class A ($49,297,119 / 4,909,406 shares) ................................................................ $10.04
======
Class B ($56,341,709 / 5,659,395 shares) ................................................................ $9.96
======
Class D ($42,885,913 / 4,307,746 shares) ................................................................ $9.96
======
</TABLE>
- ----------
See Notes to Financial Statements.
10
<PAGE>
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends ........................................................................... $ 2,188,321
Interest ............................................................................ 89,744
-----------
Total Investment Income ............................................................................... $ 2,278,065
EXPENSES:
Management fee ...................................................................... 862,479
Distribution and service fees ....................................................... 763,172
Shareholder account services ........................................................ 265,935
Registration ........................................................................ 89,193
Shareholder reports and communications .............................................. 65,067
Auditing and legal fees ............................................................. 26,768
Custody and related services ........................................................ 24,683
Directors' fees and expenses ........................................................ 5,468
Amortization of deferred organization expenses ...................................... 2,576
Miscellaneous ....................................................................... 5,903
-----------
Total Expenses ........................................................................................ 2,111,244
-----------
Net Investment Income ................................................................................. 166,821
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments .................................................... (600,348)
Net change in unrealized appreciation of investments ................................ 6,792,088
-----------
Net Gain on Investments ............................................................................... 6,191,740
-----------
Increase in Net Assets from Operations ................................................................ $ 6,358,561
===========
</TABLE>
- ----------
See Notes to Financial Statements.
11
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
APRIL 25, 1997*
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income ......................................................................... $ 166,821 $ 34,008
Net realized gain (loss) on investments ....................................................... (600,348) 1,395,588
Net change in unrealized appreciation of investments .......................................... 6,792,088 3,183,271
------------ ------------
Increase in Net Assets from Operations ........................................................ 6,358,561 4,612,867
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A .................................................................................... (192,895) (22,102)
Net realized gain on investments:
Class A .................................................................................... (282,285) (268,929)
Class B .................................................................................... (326,267) (188,489)
Class D .................................................................................... (219,836) (114,588)
------------ ------------
Decrease in Net Assets from Distributions ..................................................... (1,021,283) (594,108)
------------ ------------
<CAPTION>
SHARES
--------------------------------------
YEAR ENDED APRIL 25, 1997* TO
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ------------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares:
Class A ................................................. 2,732,752 2,081,806 26,848,150 17,203,013
Class B ................................................. 3,343,264 1,758,227 33,045,799 14,700,536
Class D ................................................. 1,904,014 769,857 18,793,866 6,526,662
Investment of dividends:
Class A ................................................. 17,633 2,282 171,043 20,514
Exchanged from associated Funds:
Class A ................................................. 2,456,260 673,049 24,149,943 5,675,733
Class B ................................................. 1,184,929 216,546 11,389,752 1,850,949
Class D ................................................. 2,084,910 538,684 20,284,370 4,563,959
Shares issued in payment of gain distributions:
Class A ................................................. 26,432 28,791 260,093 248,471
Class B ................................................. 29,903 19,544 290,656 167,688
Class D ................................................. 21,341 12,598 207,435 108,094
------------ ------------ ------------ ------------
Total ...................................................... 13,801,438 6,101,384 135,441,107 51,065,619
------------ ------------ ------------ ------------
Cost of shares repurchased:
Class A ................................................. (1,351,175) (117,118) (12,554,489) (997,479)
Class B ................................................. (357,377) (52,380) (3,440,426) (455,672)
Class D ................................................. (318,189) (30,230) (3,037,090) (264,838)
Exchanged into associated Funds:
Class A ................................................. (1,580,952) (67,357) (15,313,160) (583,297)
Class B ................................................. (413,592) (69,669) (3,869,171) (594,926)
Class D ................................................. (530,094) (145,145) (5,026,493) (1,250,982)
------------ ------------ ------------ ------------
Total ...................................................... (4,551,379) (481,899) (43,240,829) (4,147,194)
------------ ------------ ------------ ------------
Increase in Net Assets from Capital
Share Transactions ...................................... 9,250,059 5,619,485 92,200,278 46,918,425
============ ============ ------------ ------------
Increase in Net Assets ........................................................................ 97,537,556 50,937,184
NET ASSETS:
Beginning of period ........................................................................... 50,987,185 50,001
------------ ------------
End of Period (including distribution in excess of net investment
income and undistributed net investment income of $(1,108) and
$11,906, respectively) ...................................................................... $148,524,741 $ 50,987,185
============ ============
</TABLE>
- ----------
* Commencement of operations.
See Notes to Financial Statements.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Organization -- Seligman Large-Cap Value Fund (the "Fund") is a series of
Seligman Value Fund Series, Inc., which was incorporated in the State of
Maryland on January 27, 1997, and subsequently was registered under the
Investment Company Act of 1940 as an open-end, diversified management investment
company. The Fund had no operations prior to April 25, 1997 (commencement of
operations),other than those related to organizational matters, and the sale and
issuance to Seligman Advisors, Inc. (the "Distributor")(formerly Seligman
Financial Services, Inc.) of 7,003 Class A shares of Capital Stock for $50,001
on April 4, 1997.
2. Multiple Classes of Shares -- The Fund offers three classes of shares. Class
A shares are sold with an initial sales charge of up to 4.75% and a continuing
service fee of up to 0.25% on an annual basis. Class A shares purchased in an
amount of $1,000,000 or more are sold without an initial sales charge but are
subject to a contingent deferred sales charge ("CDSC") of 1% on redemptions
within 18 months of purchase. Class B shares are sold without an initial sales
charge but are subject to a distribution fee of 0.75%, a service fee of up to
0.25% on an annual basis, and a CDSC, if applicable, of 5% on redemptions in the
first year of purchase, declining to 1% in the sixth year and 0% thereafter.
Class B shares will automatically convert to Class A shares on the last day of
the month that precedes the eighth anniversary of their date of purchase. Class
D shares are sold without an initial sales charge but are subject to a
distribution fee of up to 0.75% and a service fee of up to 0.25% on an annual
basis, and a CDSC, if applicable, of 1% imposed on redemptions made within one
year of purchase. The three classes of shares 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 certain
other class expenses, and has exclusive voting rights with respect to any matter
on which a separate vote of any class is required.
3. Significant Accounting Policies -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Fund:
a. Security Valuation -- Investments in common stocks are valued at current
market values or, in their absence, at fair values determined in accordance
with procedures approved by the Board of Directors. Securities traded on
national exchanges are valued at last sales prices or, in their absence and
in the case of over-the-counter securities, at the mean of bid and asked
prices. Short-term holdings maturing in 60 days or less are valued at
amortized cost.
b. Federal Taxes -- There is no provision for federal income tax. The Fund has
elected to be taxed as a regulated investment company and intends to
distribute substantially all taxable net income and net gain realized.
c. Security Transactions and Related Investment Income -- Investment
transactions are recorded on trade dates. Identified cost of investments
sold is used for both financial statement and federal income tax purposes.
Dividends receivable and payable are recorded on ex-dividend dates.
Interest income is recorded on an accrual basis.
d. Multiple Class Allocations -- All income, expenses (other than
class-specific expenses), and realized and unrealized gains or losses are
allocated daily to each class of shares based upon the relative value of
shares of each class. Class-specific expenses, which include distribution
and service fees and any other items that are specifically attributable to
a particular class, are charged directly to such class. For the year ended
December 31, 1998, distribution and service fees were the only
class-specific expenses.
e. Distributions to Shareholders -- The treatment for financial statement
purposes of distributions made to shareholders during the year from net
investment income or net realized gains may differ from their ultimate
treatment for federal income tax purposes. These differences are caused
primarily by differences in the timing of the recognition of certain
components of income, expense, or realized capital gain for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net assets based on their ultimate
characterization for federal income tax purposes. Any such reclassification
will have no effect on net assets, results of operations, or net asset
value per share of the Fund.
f. Organization Expenses -- Deferred organization expenses are being amortized
on a straight-line basis over
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
a period of 60 months beginning with the commencement of operations of the
Fund.
4. Short-Term Investments -- At December 31, 1998, the Fund owned short-term
investments which matured in less than seven days.
5. Purchases and Sales of Securities -- Purchases and sales of portfolio
securities, excluding US Government obligations and short-term investments, for
the year ended December 31, 1998, amounted to $102,313,346 and $11,016,359,
respectively.
At December 31, 1998, the cost of investments for federal income tax
purposes was substantially the same as the cost for financial reporting
purposes, and the tax basis gross unrealized appreciation and depreciation of
portfolio securities amounted to $18,785,511 and $8,810,152, respectively.
6. Management Fee, Distribution Services, and Other Transactions -- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the Fund and
provides the necessary personnel and facilities. Compensation of all officers of
the Fund, all directors of the Fund who are employees or consultants of the
Manager, and all personnel of the Fund and the Manager is paid by the Manager.
The Manager receives a fee, calculated daily and payable monthly, equal to 0.80%
per annum of the Fund's average daily net assets.
The Distributor, agent for the distribution of the Fund's shares and an
affiliate of the Manager, received concessions of $57,852 from sales of Class A
shares, after commissions of $447,485 were paid to dealers.
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distribution of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive a continuing fee of up to 0.25% on an annual basis,
payable quarterly, of the average daily net assets of the Class A shares
attributable to the particular service organizations for providing personal
services and/or the maintenance of shareholder accounts. The Distributor charges
such fees to the Fund pursuant to the Plan. For the year ended December 31,
1998, fees incurred under the Plan aggregated $102,126, or 0.25% per annum of
the average daily net assets of Class A shares.
Under the Plan, with respect to Class B and Class D shares, service
organizations can enter into agreements with the Distributor and receive a
continuing fee for providing personal services and/or the maintenance of
shareholder accounts of up to 0.25% on an annual basis of the average daily net
assets of the Class B and Class D shares for which the organizations are
responsible; and, for Class D shares only, fees for providing other distribution
assistance of up to 0.75% on an annual basis of such average daily net assets.
Such fees are paid monthly by the Fund to the Distributor pursuant to the Plan.
With respect to Class B shares, a distribution fee of 0.75% on an annual
basis of average daily net assets is payable monthly by the Fund to the
Distributor; however, the Distributor has sold its rights to this fee to a third
party (the "Purchaser"), which provides funding to the Distributor to enable it
to pay commissions to dealers at the time of the sale of the related Class B
shares.
For the year ended December 31, 1998, fees incurred under the Plan,
equivalent to 1% per annum of the average daily net assets of Class B and Class
D shares, amounted to $392,609 and $268,437, respectively.
The Distributor is entitled to retain any CDSC imposed on redemptions of
Class D shares occurring within one year of purchase and on certain redemptions
of Class A shares occurring within 18 months of purchase. For the year ended
December 31, 1998, such charges amounted to $12,233.
The Distributor has sold its rights to collect any CDSC imposed on
redemptions of Class B shares to the Purchaser. In connection with the sale of
its rights to collect any CDSC and the distribution fees with respect to Class B
shares described above, the Distributor receives payments from the Purchaser
based on the value of Class Bshares sold. The aggregate amount of such payments
retained by the Distributor for the year ended December 31, 1998, amounted to
$49,268.
Seligman Services, Inc., an affiliate of the Manager, is eligible to
receive commissions from certain sales of shares of the Fund as well as
distribution and service fees pursuant
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
to the Plan. For the year ended December 31, 1998, Seligman Services, Inc.
received commissions of $3,184 from the sale of shares of the Fund. Seligman
Services, Inc. also received distribution and service fees of $10,268, pursuant
to the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged the Fund at cost $265,935 for shareholder account services.
Certain officers and directors of the Fund are officers or directors of the
Manager, the Distributor, Seligman Services, Inc., and/or Seligman Data Corp.
The Fund has a compensation arrangement under which directors who receive
fees may elect to defer receiving such fees. Directors may elect to have their
deferred fees accrue interest or earn a return based on the performance of the
Fund or other funds in the Seligman Group of Investment Companies. The annual
cost of such fees and earnings accrued thereon is included in directors' fees
and expenses, and the accumulated balance thereof at December 31, 1998, of
$1,108 is included in other liabilities. Deferred fees and related accrued
earnings are not deductible for federal income tax purposes until such amounts
are paid.
7. Loss Carryforward -- At December 31, 1998, the Fund had a net capital loss
carryforward for federal income tax purposes of $600,348, which is available for
offset against future taxable net gains and will expire in 2006. Accordingly, no
capital gain distributions are expected to be paid to shareholders until net
capital gains have been realized in excess of the available capital loss
carryforward.
8. Committed Line of Credit -- Effective July 1, 1998, the Fund entered into a
joint $800 million committed line of credit that is shared by substantially all
funds in the Seligman Group of Investment Companies. The Fund's borrowings are
limited to 10% of its net assets. Borrowings pursuant to the credit facility are
subject to interest at a rate equal to the overnight federal funds rate plus
0.50%. The Fund incurs a commitment fee of 0.08% per annum on its share of the
unused portion of the credit facility. The credit facility may be drawn upon
only for temporary purposes and is subject to certain other customary
restrictions. The credit facility commitment expires one year from the date of
the agreement but is renewable with the consent of the participating banks. To
date, the Fund has not borrowed from the credit facility.
15
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below are intended to help you understand each Class's financial
performance from the inception of the Fund. Certain information reflects
financial results for a single share of a Class that was held throughout the
periods shown. Per share amounts are calculated using average shares
outstanding. "Total return" shows the rate that you would have earned (or lost)
on an investment in each Class, assuming you reinvested all your dividends and
capital gain distributions. Total returns do not reflect any sales charges, and
are not annualized for periods of less than one year.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
------------------- -------------------- --------------------
YEAR 4/25/97* YEAR 4/25/97* YEAR 4/25/97*
ENDED TO ENDED TO ENDED TO
12/31/98 12/31/97 12/31/98 12/31/97 12/31/98 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net Asset Value, Beginning of Period .................. $ 9.09 $ 7.14 $ 9.04 $ 7.14 $ 9.04 $ 7.14
------- ------ ------ ------ ------ ------
Income from Investment Operations:
Net investment income (loss) .......................... 0.06 0.03 (0.02) (0.01) (0.02) (0.01)
Net realized and unrealized gain (loss)
on investments ...................................... 0.99 2.06 1.00 2.04 1.00 2.04
------- ------ ------ ------ ------ ------
Total from Investment Operations ...................... 1.05 2.09 0.98 2.03 0.98 2.03
------- ------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income .................. (0.04) (0.01) -- -- -- --
Distributions from net realized capital gains ......... (0.06) (0.13) (0.06) (0.13) (0.06) (0.13)
------- ------ ------ ------ ------ ------
Total Distributions ................................... (0.10) (0.14) (0.06) (0.13) (0.06) (0.13)
------- ------ ------ ------ ------ ------
Net Asset Value, End of Period ........................ $10.04 $ 9.09 $ 9.96 $ 9.04 $ 9.96 $ 9.04
======= ====== ====== ====== ====== ======
TOTAL RETURN: 11.57% 29.28% 10.85% 28.46% 10.85% 28.46%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) .............. $49,297 $23,699 $56,342 $16,930 $42,886 $10,358
Ratio of expenses to average net assets ............... 1.50% 1.47%+ 2.25% 2.25%+ 2.25% 2.25%+
Ratio of net income (loss) to average net assets ...... 0.61% 0.58%+ (0.14)% (0.20)%+ (0.14)% (0.20)%+
Portfolio turnover rate ............................... 10.44% 38.74% 10.44% 38.74% 10.44% 38.74%
Without management fee waiver:**
Ratio of expenses to average net assets ............... 2.07%+ 2.85%+ 2.85%+
Ratio of net income (loss) to average net assets ...... (0.02)%+ (0.80)%+ (0.80)%+
</TABLE>
- ----------
* Commencement of operations.
** The Manager, at its discretion, waived a portion of its fees for certain of
the periods presented.
+ Annualized.
See Notes to Financial Statements.
16
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders,
Seligman Large-Cap Value Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman Large-Cap Value Fund as of December
31, 1998, the related statements of operations for the year then ended and of
changes in net assets and the financial highlights for the year then ended and
for the period from April 25, 1997 (commencement of operations)to December 31,
1997. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with the Fund's custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Seligman Large-Cap
Value Fund as of December 31, 1998, the results of its operations, the changes
in its net assets, and the financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
January 29, 1999
- --------------------------------------------------------------------------------
17
<PAGE>
FEDERAL TAX STATUS OF 1998 DIVIDEND AND
GAIN DISTRIBUTIONS FOR TAXABLE ACCOUNTS
- --------------------------------------------------------------------------------
The dividend paid to Class A shareholders in 1998 is taxable as ordinary income
for federal income tax purposes, regardless of whether it was received in cash
or in shares. Under the Internal Revenue Code, 96.06% of the dividend paid to
Class A shareholders has been designated as qualifying for the dividends
received deduction available to corporate shareholders. In order to claim the
dividends received deduction for this distribution, corporate shareholders must
have held the Fund's shares for 46 days or more during the 90-day period
beginning 45 days before each ex-dividend date.
The distribution of $0.059 per share from net short-term gain realized on
investments was paid on November 23, 1998, to Class A, B, and D shareholders.
Net short-term gain is taxable as ordinary income whether paid to you in cash or
shares.
If the gain distribution was paid in shares, the per share cost basis for
federal income tax purposes is $9.84 for Class A shares and $9.72 for Class B
and D shares.
A 1998 year-end statement of account activity and a 1998 Tax Package, which may
include a Form 1099-DIV, a Form 1099-B, and/or a Cost Basis Statement, have been
mailed to each shareholder. Form 1099-DIVshows the distributions paid to the
shareholder during the year. Form 1099-B shows the proceeds of any redemptions
paid to the shareholder during the year. Cost Basis Statements report all sales
or exchanges from a shareholder's account which may have resulted in a capital
gain or loss in 1998. The information shown on Forms 1099-DIV and 1099-B is
reported to the Internal Revenue Service as required by federal regulations.
- --------------------------------------------------------------------------------
18
<PAGE>
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
John R. Galvin 2, 4
Dean, Fletcher School of Law and Diplomacy
at Tufts University
Director, Raytheon Company
Alice S. Ilchman 3, 4
Trustee, Committee for Economic Development
Chairman, The Rockefeller Foundation
Frank A. McPherson 2, 4
Director, Kimberly-Clark Corporation
Director, Baptist Medical Center
John E. Merow 2, 4
Retired Chairman and Senior Partner,
Sullivan & Cromwell, Law Firm
Director, Commonwealth Industries, Inc.
Director, New York Presbyterian Hospital
Betsy S. Michel 2, 4
Trustee, The Geraldine R. Dodge Foundation
Chairman of the Board of Trustees, St. George's School
William C. Morris 1
Chairman
Chairman of the Board,
J. & W. Seligman & Co. Incorporated
Chairman, Carbo Ceramics Inc.
Director, Kerr-McGee Corporation
James C. Pitney 3, 4
Retired Partner, Pitney, Hardin, Kipp & Szuch, Law Firm
James Q. Riordan 3, 4
Director, KeySpan Energy Corporation
Trustee, Committee for Economic Development
Director, Public Broadcasting Service
Richard R. Schmaltz 1
Managing Director, Director of Investments,
J. & W. Seligman & Co. Incorporated
Trustee Emeritus, Colby College
Robert L. Shafer 3, 4
Retired Vice President, Pfizer Inc.
James N. Whitson 2, 4
Director and Consultant, Sammons Enterprises, Inc.
Director, C-SPAN
Director, CommScope, Inc.
Brian T. Zino 1
President
President, J. & W. Seligman & Co. Incorporated
Chairman, Seligman Data Corp.
Director, ICI Mutual Insurance Company
Director Emeritus
Fred E. Brown
Director and Consultant,
J. & W. Seligman & Co. Incorporated
- ----------
Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
4 Board Operations Committee
- --------------------------------------------------------------------------------
19
<PAGE>
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
William C. Morris
Chairman
Brian T. Zino
President
Neil T. Eigen
Vice President
Lawrence P. Vogel
Vice President
Thomas G. Rose
Treasurer
Frank J. Nasta
Secretary
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
Manager
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
General Counsel
Sullivan & Cromwell
Independent Auditors
Deloitte & Touche LLP
General Distributor
Seligman Advisors, Inc.
100 Park Avenue
New York, NY 10017
Shareholder Service Agent
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
Important Telephone Numbers
(800) 221-2450 Shareholder Services
(800) 445-1777 Retirement Plan Services
(212) 682-7600 Outside the United States
(800) 622-4597 24-Hour Automated Telephone Access Service
- --------------------------------------------------------------------------------
20
<PAGE>
GLOSSARY OF FINANCIAL TERMS
Capital Gain Distribution -- A payment to mutual fund shareholders of profits
realized on the sale of securities in a fund's portfolio.
Capital Appreciation/Depreciation -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.
Compounding -- The change in the value of an investment as shareholders receive
earnings on their investment's earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will not be based on the
original $1,000, but on the $1,070, which includes the first year's earnings.
Contingent Deferred Sales Charge (CDSC) -- Depending on the class of shares
owned, a fee charged by a mutual fund when shares are sold back to the fund (the
CDSC expires after a fixed time period).
Dividend -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
Dividend Yield -- A measurement of a fund's dividend as a percentage of the
maximum offering price.
Expense Ratio -- The cost of doing business for a mutual fund, expressed as a
percent of the fund's net assets.
Investment Objective -- The shared investment goal of a fund and its
shareholders.
Management Fee -- The amount paid by a mutual fund to its investment advisor(s).
Multiple Classes of Shares -- Although an individual mutual fund invests in only
one portfolio of securities, it may offer investors several purchase options
which are "classes" of shares. Multiple classes permit shareholders to choose
the fee structure that best meets their needs and goals. Generally, each class
will differ in terms of how and when sales charges and certain fees are
assessed.
National Association of Securities Dealers, Inc. (NASD) -- A self-regulatory
body with authority over firms that distribute mutual funds.
Net Asset Value (NAV) Per Share -- The market worth of one fund share, obtained
by adding a mutual fund's total assets (securities, cash, and any accrued
earnings), subtracting liabilities, and dividing the resulting net assets by the
number of shares outstanding.
Offering Price (OP) -- The price at which a mutual fund's share can be
purchased. The offering price per share is the current net asset value plus any
sales charge.
Portfolio Turnover -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
Prospectus -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission (SEC), such as a fund's investment objective and policies, services,
investment restrictions, how shares are bought and sold, fund fees and other
charges, and the fund's financial highlights.
SEC Yield -- SEC Yield refers to the net income earned by a fund during a recent
30-day period. This income is annualized and then divided by the maximum
offering price per share on the last day of the 30-day period. The SEC Yield
formula reflects semiannual compounding.
Securities and Exchange Commission -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
Statement of Additional Information -- A document that contains updated or more
detailed information about an investment company and that supplements the
prospectus. It is available at no charge upon request.
Total Return -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The Average Annual Total
Return represents the average annual compounded rate of return for the periods
presented.
Yield on Securities -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.
- ----------
Adapted from the Investment Company Institute's 1998 Mutual Fund Fact Book.
21
<PAGE>
This report is intended only for the information of shareholders or those
who have received the offering prospectus covering shares of Capital Stock
of Seligman Large-Cap Value Fund, which contains information about the
sales charges, management fee, and other costs. Please read the prospectus
carefully before investing or sending money.
SELIGMAN ADVISORS, INC.
an affiliate of
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
EQVL2 12/98 [LOGO]Printed on Recycled Paper
SELIGMAN
-------------------
SMALL-CAP
VALUE FUND
[PHOTOGRAPH]
ANNUAL REPORT
DECEMBER 31, 1998
----------
A Value Approach
to Seeking the
Capital Appreciation
Potential of
Smaller Companies
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
<PAGE>
SELIGMAN -- TIMES CHANGE...VALUES ENDURE
J. & W. Seligman & Co. Incorporated is a firm with a long tradition of
investment expertise, offering a broad array of investment choices to help
today's investors seek their long-term financial goals.
[PHOTOGRAPH]
James, Jesse, and Joseph Seligman, 1870
TIMES CHANGE...
Established in 1864, Seligman's history of providing financial services has been
marked not by fanfare, but rather by a quiet and firm adherence to financial
prudence. While the world has changed dramatically in the 134 years since
Seligman first opened its doors, the firm has continued to offer its clients
high-quality investment solutions through changing times.
In the late 19th century, as the country grew, Seligman helped finance the
westward expansion of the railroads, the construction of the Panama Canal, and
the launching of urban transit systems. In the first part of the 20th century,
as America became an industrial power, the firm helped fund the growing capital
needs of the nascent automobile and steel industries.
With the formation of Tri-Continental Corporation in 1929 -- today, the nation's
largest diversified publicly-traded closed-end investment company -- Seligman
began shifting its emphasis from investment banking to investment management.
Despite the stock market crash and ensuing depression, Seligman was convinced of
the importance that investment companies could have in building wealth for
individual investors and began managing its first mutual fund in 1930.
In the decades that followed, Seligman has continued to offer forward-looking
investment solutions, including funds that focus on technology stocks, municipal
bonds, and international securities.
...VALUES ENDURE
Seligman is proud of its distinctive past and of the traditional values that
continue to shape the firm's business decisions and investment judgment. While
much has changed over the years, the firm's commitment to providing prudent
investment management that seeks to build wealth for clients over time is an
enduring value that will guide Seligman into the new millennium.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
To the Shareholders ....................................................... 1
Interview With Your Portfolio Managers .................................... 2
Performance Overview ...................................................... 4
Portfolio Overview ........................................................ 6
Portfolio of Investments .................................................. 8
Statement of Assets and Liabilities ....................................... 10
Statement of Operations ................................................... 11
Statements of Changes in Net Assets ....................................... 12
Notes to Financial Statements ............................................. 13
Financial Highlights ...................................................... 16
Report of Independent Auditors ............................................ 17
Federal Tax Status of 1998 Gain Distribution
for Taxable Accounts .................................................... 18
Board of Directors ........................................................ 19
Executive Officers and For More Information ............................... 20
Glossary of Financial Terms ............................................... 21
- --------------------------------------------------------------------------------
<PAGE>
TO THE SHAREHOLDERS
In 1998, Seligman Small-Cap Value Fund posted a total return of -18.81% based on
the net asset value of Class A shares. This return lagged the -6.45% total
return of the Russell 2000 Value Index and the -0.40% return of the Lipper Small
Cap Funds Average. A discussion with your Portfolio Managers regarding the
Fund's results begins on page 2.
There were three primary reasons for the Fund's disappointing results in 1998.
First, the stocks of smaller companies were out of favor with investors in 1998.
Second, small-cap value stocks performed worse than small-cap growth stocks. And
finally, a number of small-cap value stocks in Seligman Small-Cap Value Fund
were hit with earnings downgrades that caused them to underperform other stocks
in their asset class.
While the past year was one of continued growth for the US stock market,
exceptional performance from an extremely narrow list of stocks masked the true
investment results in the broad markets. Investment results between asset
classes were also more widely dispersed than usual. In fact, the disparity was
almost unprecedented. For example, while the large-capitalization dominated S&P
500 rose 28.58%, the Russell 2000 Index, which measures smaller-capitalization
stocks, actually declined 2.55% for the year.
A number of factors led to the markets' narrowness and divergence in 1998 --
some domestic, many international. The international economic background in 1998
was one of steadily deteriorating conditions as the financial crisis, originally
limited to a few Asian countries, spread throughout other regions. The global
turmoil continued as Russia defaulted on its debt and devalued its currency, and
problems in Brazil escalated. In the ensuing "flight to quality," investors from
around the world poured money into large, well-known US stocks, with
consistently strong records of earnings growth. Investors put aside concerns
over high valuations in a rush to own only the largest and best American growth
companies. In last year's market environment, small-cap stocks, especially
small-cap value stocks, were ignored.
There were few standouts among small-cap stocks in 1998. Those stocks that did
best were in typical growth areas such as technology, telecommunications, and
health care. Internet stocks, in particular, benefited from a near frenzy, as
investors continually pushed valuations higher. Stocks in typical value sectors,
such as financial services and consumer cyclicals, tended to underperform.
Subdued inflation, low interest rates, improving prospects in Asia, and a
Federal Reserve leading the fight against global recession are all positive for
the US markets in 1999. We expect a challenging environment confronted with
economic uncertainties and continued high volatility. Pressure on corporate
profits is likely to continue, as the US enters a period of slower growth. At
this time, valuations on some of the largest growth stocks seem excessive and
any broadening of the market in 1999 may reward more reasonably priced small-cap
stocks.
Seligman continues to work to ensure that all of its operations are prepared for
the challenges posed by the Year 2000 (Y2K) computer problem. We are confident
that there will be no disruption in the investment and shareholder services
provided by your Fund as a result of Y2K. In addition, your portfolio management
team considers the potential ramifications of Y2K when making decisions on which
securities should be held by the Fund.
Thank you for your continued support of Seligman Small-Cap Value Fund in 1998.
We look forward to serving your investment needs in 1999.
By order of the Board of Directors,
/s/ William Morris
- ------------------
William C. Morris
Chairman
/s/ Brian T. Zino
-----------------
Brian T. Zino
President
January 29, 1999
1
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGERS,
NEIL T. EIGEN AND RICHARD S. ROSEN
Q. How did Seligman Small-Cap Value Fund perform in 1998?
A. We were disappointed with Seligman Small-Cap Value Fund's results in 1998.
The Fund posted a total return of -18.81% based on the net asset value of
Class A shares for the year ended December 31, 1998. This compares to the
-0.40% return of the Lipper Small Cap Funds Average, and the -6.45% return
of the Russell 2000 Value Index.
Q. Which economic and market factors influenced the Fund's results in 1998,
and how did you respond?
A. The greatest influence on both the Fund and the small-cap market was an
ongoing reduction in expectations for corporate earnings throughout 1998.
When conditions are positive, investors are generally willing to pay big
premiums to own the faster rate of earnings growth that small-cap stocks
typically enjoy. The problem, however, is that during periods of earnings
uncertainty (as in 1998), investors do not want to own smaller companies,
almost regardless of valuations. This past year was characterized by
negative earnings estimate revisions in every quarter. The worst might have
been over early in the year, if there had been one big estimate reduction,
but that was not the case. A number of the Fund's holdings received
earnings downgrades during the year, which contributed to the Fund's
underperformance relative to its benchmarks. We anticipate profit pressures
lasting through early 1999.
In 1998, small-cap stocks were at a disadvantage on both the supply and
demand sides of the equation relative to larger-cap stocks. From a supply
standpoint, the stock market experienced a strong year in initial public
offering (IPO) activity. New equity supply tends to hurt small-cap
investors, in that most new issues are for smaller companies. When an IPO
successfully comes to market, fund managers, in general, are forced to
become net sellers of other small-cap holdings to pay for the purchase. In
terms of demand, cash flows into mutual funds also restrained small-cap
performance. In 1998, most mutual fund cash flows poured into two areas --
large-cap stocks and technology. Even the tremendous inflows of money from
foreign investors generally ignored small caps. Share buybacks were also
principally kept within the domain of the largest companies.
We responded to this environment by staying focused on our investment
discipline. We bought what we considered to be quality companies, where
there was an opportunity to make a handsome return over a longer period of
time. In retrospect, a winning strategy for small-cap investors in 1998
would have been to emphasize those "concept" companies that have no
earnings, or high-tech companies, where valuations
[PHOTOGRAPH]
Value Team:(from left) Nevis George (Administrative Assistant), Milton Rubin
(Client Services), Richard S. Rosen (Co-Portfolio Manager), (seated) Neil T.
Eigen (Portfolio Manager)
- --------------------------------------------------------------------------------
A TEAM APPROACH
Seligman Small-Cap Value Fund is managed by the Seligman Value Team, headed by
Neil T. Eigen, who has 30 years of experience as a value investor. Mr. Eigen and
Richard S. Rosen are assisted in the management of the Fund by seasoned research
professionals who are responsible for identifying reasonably valued
small-capitalization companies with the potential for high returns on equity.
- --------------------------------------------------------------------------------
2
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGERS,
NEIL T. EIGEN AND RICHARD S. ROSEN
are well above what a traditional value investor is willing to pay. Given
that we would not compromise our investment disciplines, we remained
committed to our long-term value approach to investing, firmly believing
that at some point our discipline will be rewarded. To change one's
investment style in order to fit with what is working in the market today
is referred to as style rotation, and it is something we will not do.
Q. What was your investment strategy in 1998?
A. Our value style is driven by one overriding theme. We look for companies
for which the market has low expectations but where we see a catalyst that
will make them better companies going forward than they have been in the
past. We then own these stocks for a long period of time.
Though we are value managers, earnings acceleration is generally an
important consideration. In our mind, investing is a long-term proposition.
Investment ideas do not always work right away, and of course, some never
work at all. But sometimes ideas that are working are not immediately
rewarded by the market. That is what we saw in 1998. We are disappointed
about this past year, but not discouraged.
Q. How was Seligman Small-Cap Value Fund's portfolio constructed in 1998, and
how did that affect performance?
A. We constructed the portfolio so that it was well diversified; however, we
also endeavored to limit the number of holdings to stocks in which we have
a strong conviction and which we can know well.
On the positive side, the Fund benefited from having owned five companies
that merged or were bought out in 1998. We do not buy stocks simply because
we think they will be taken over, although takeovers are a logical
development in a portfolio focused on finding those companies that we
believe sell at a discount to their underlying value. Nonetheless, it was a
source of encouragement to see value realized.
As to disappointments, we generally avoid investing in companies where the
movement in the price of a commodity (gold, oil, interest rates, etc.) far
outweighs any impact management can make. We did, however, add two
energy-related investments earlier this year, based on a discount to net
asset value, already significant price declines, unseasonably mild weather
for the prior year, and potential demand recovery in Asia. Unfortunately,
these investments have not yet fulfilled our expectations, although we
believe that at some point energy prices will come back, and with them
these stock prices.
The current economic environment has also created a great deal of earnings
uncertainty, and in some cases stock price anxiety. Some of our holdings
represent good franchises with great futures, but their valuations have
been discounted by near-term uncertainty. History has shown that investors
who sell quality companies based on near-term concerns regret their
actions.
Q. What is your outlook?
A. Small-cap valuations are compelling, but investors will need to remain
patient. Historically, when the asset class has rebounded from a period of
underperformance, it has done so in a rewarding manner, and generally in a
very short period of time.
Avoiding small-cap value stocks simply because the asset class
underperformed other indices in 1998 is short-sighted. Valuations suggest
that a period of significant catch-up for small-cap stocks, in general, and
small-cap value stocks, in particular, is coming. Will it be in 1999? We do
not know. As we have always told our shareholders, we are not market
timers. But for investors seeking long-term capital appreciation, who can
withstand greater volatility, small-cap value is an attractive investment
area.
3
<PAGE>
PERFORMANCE OVERVIEW
This chart compares a $10,000 hypothetical investment made in Seligman
Small-Cap Value Fund since the commencement of operations on April 25, 1997,
through December 31, 1998, to a $10,000 investment made in the Lipper Small Cap
Funds Average, the Russell 2000 Index, and the Russell 2000 Value Index, from
April 30, 1997, to December 31, 1998. The results for Seligman Small-Cap Value
Fund were determined with and without the initial 4.75% maximum sales charge for
Class A shares, with the 4% contingent deferred sales charge ("CDSC") for Class
B shares, and without the 1% CDSC for Class D shares, and assume that all
distributions within the period are invested in additional shares. It is
important to keep in mind that the Lipper Small Cap Funds Average, the Russell
2000 Index, and the Russell 2000 Value Index exclude the effect of fees and/or
sales charges.
Seligman Small-Cap Value Fund will no longer be compared to the Russell
2000 Index after December 31, 1998, as it measures the performance of 2,000
widely held small-capitalization stocks. Instead, the Fund will be compared to
the Russell 2000 Value Index, which the Manager believes is a more appropriate
benchmark because it measures the value performance of small-cap stocks, and the
Fund invests primarily in those types of stocks. Therefore, your Fund will
continue to be compared to the Lipper Small Cap Funds Average and the Russell
2000 Value Index.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Seligman Small Cap Value Fund
Lipper Small
Class A Class A Class B Class D Cap Funds Russell 2000 Russell 2000
with Sales without Sales with CDSC without CDSC Average* Index* Value Index*
---------- ------------- --------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
4/25/97 $9,520 $10,000 $10,000 $10,000
4/30/97 $9,600 $10,084 $10,084 $10,084 $10,000 $10,000 $10,000
5/31/97 $10,547 $11,078 $11,064 $11,064 $11,198 $11,112 $10,796
6/30/97 $11,467 $12,045 $12,031 $12,031 $11,794 $11,589 $11,342
7/31/97 $12,027 $12,633 $12,619 $12,619 $12,536 $12,128 $11,819
8/31/97 $12,240 $12,857 $12,829 $12,829 $12,769 $12,405 $12,007
9/30/97 $13,160 $13,824 $13,782 $13,782 $13,729 $13,313 $12,805
10/31/97 $12,627 $13,263 $13,221 $13,221 $13,137 $12,729 $12,457
11/30/97 $12,623 $13,259 $13,203 $13,203 $12,949 $12,646 $12,594
12/31/97 $12,983 $13,638 $13,582 $13,582 $13,061 $12,867 $13,021
1/31/98 $12,209 $12,825 $12,755 $12,755 $12,847 $12,664 $12,785
2/28/98 $13,050 $13,708 $13,624 $13,624 $13,845 $13,600 $13,558
3/31/98 $13,650 $14,338 $14,240 $14,254 $14,498 $14,160 $14,109
4/30/98 $13,370 $14,044 $13,932 $13,946 $14,617 $14,238 $14,178
5/31/98 $12,890 $13,539 $13,441 $13,441 $13,794 $13,471 $13,676
6/30/98 $12,289 $12,909 $12,811 $12,811 $13,903 $13,499 $13,600
7/31/98 $11,502 $12,082 $11,970 $11,970 $12,906 $12,406 $12,535
8/31/98 $9,314 $9,783 $9,685 $9,685 $10,324 $9,996 $10,572
9/30/98 $9,247 $9,713 $9,615 $9,615 $10,930 $10,779 $11,169
10/31/98 $9,727 $10,218 $10,106 $10,106 $11,377 $11,219 $11,501
11/30/98 $10,165 $10,678 $10,566 $10,566 $12,118 $11,807 $11,813
12/31/98 $10,540 $11,072 $10,546 $10,946 $13,008 $12,538 $12,183
</TABLE>
* From April 30, 1997
A portfolio with fewer holdings may be subject to greater volatility than a
portfolio with a greater number of holdings. The stocks of smaller companies may
be subject to above-average market fluctuations.
4
<PAGE>
PERFORMANCE OVERVIEW
Investment Results Per Share
TOTAL RETURNS
For Periods Ended December 31, 1998
AVERAGE ANNUAL
------------------------
SINCE
SIX ONE INCEPTION
MONTHS* YEAR 4/25/97
--------- -------- -----------
Class A**
With Sales Charge (18.31)% (22.71)% 3.17%
Without Sales Charge (14.23) (18.81) 6.23
Class B**
With CDSC+ (19.56) (23.42) 3.20
Without CDSC (14.56) (19.41) 5.51
Class D**
With 1% CDSC (15.56) (20.21) n/a
Without CDSC (14.56) (19.41) 5.51
Lipper Small Cap Funds Average*** (6.44) (0.40) 17.04++
Russell 2000 Index*** (7.12) (2.55) 14.54++
Russell 2000 Value Index*** (10.43) (6.45) 12.56++
NET ASSET VALUE
DECEMBER 31, 1998 JUNE 30, 1998 DECEMBER 31, 1997
----------------- ------------- -----------------
Class A $7.87 $9.21 $9.73
Class B 7.78 9.14 9.69
Class D 7.78 9.14 9.69
CAPITAL GAIN (LOSS) INFORMATION
For the Year Ended December 31, 1998
Paid $0.028
Undistributed Realized --
Unrealized (1.477)+++
Performance data quoted represent changes in price and assume that all
distributions within the periods are invested in additional shares. The rates of
return will vary and the principal value of an investment will fluctuate.
Shares, if redeemed, may be worth more or less than their original cost. Past
performance is not indicative of future investment results.
- ----------
* Return for periods of less than one year are not annualized.
** Return figures reflect any change in price per share and assume the
investment of dividend and capital gain distributions. Return figures for
Class A shares are calculated with and without the effect of the initial
4.75% maximum sales charge. Returns for Class B shares are calculated with
and without the effect of the maximum 5% contingent deferred sales charge
("CDSC"), charged on redemptions made within one year of the date of
purchase, declining to 1% in the sixth year and 0% thereafter. Returns for
Class D shares are calculated with and without the effect of the 1% CDSC,
charged on redemptions made within one year of the date of purchase.
*** The Lipper Small Cap Funds Average (Lipper Average), the Russell 2000
Index, and the Russell 2000 Value Index are unmanaged benchmarks that
assume investment of dividends. The Lipper Average, the Russell 2000 Index,
and the Russell 2000 Value Index exclude the effect of fees and/or sales
charges. The monthly performance of the Lipper Average is used in the
Performance Overview. Investors cannot invest directly in an average or an
index.
+ The CDSC is 5% for periods of one year or less, and 4% since inception.
++ From April 30, 1997.
+++ Represents the per share amount of net unrealized depreciation of portfolio
securities as of December 31, 1998.
5
<PAGE>
PORTFOLIO OVERVIEW
Diversification of Net Assets
December 31, 1998
<TABLE>
<CAPTION>
PERCENT OF NET ASSETS
DECEMBER 31,
---------------------
ISSUES COST VALUE 1998 1997
------ ---- ----- ---- ----
<S> <C> <C> <C> <C> <C>
COMMON STOCKS:
Advertising ................... 1 $ 4,975,455 $ 5,375,000 3.0 --
Apparel and Textiles .......... 1 3,360,714 6,551,563 3.7 2.2
Appliances .................... 1 3,586,319 1,356,250 0.8 2.2
Automotive and Trucking ....... 1 4,889,950 3,757,813 2.1 2.1
Banking ....................... 2 9,165,654 8,208,281 4.6 8.6
Building and Construction ..... 1 6,219,749 5,398,113 3.0 1.7
Capital Goods ................. 2 7,234,499 5,555,625 3.1 --
Computer Software ............. 1 3,111,025 1,867,344 1.0 2.4
Consumer Goods and Services ... -- -- -- -- 0.8
Distributors .................. 2 6,454,248 7,323,388 4.1 3.5
Energy ........................ -- -- -- -- 2.0
Finance and Insurance ......... 3 11,433,801 8,445,563 4.8 7.1
Food .......................... 1 4,122,919 3,527,500 2.0 2.6
Garden Products ............... 1 5,520,628 2,936,188 1.7 1.2
Industrial Goods and Services . 1 4,455,210 4,265,625 2.4 1.4
Machinery ..................... 1 8,810,892 3,477,734 2.0 2.5
Manufacturing ................. 3 10,730,865 12,682,525 7.1 8.3
Medical Products and Technology 2 10,423,537 10,810,938 6.1 4.1
Oil and Gas ................... 3 13,655,516 8,797,450 5.0 2.6
Packaging/Containers .......... 2 7,454,854 6,089,906 3.4 2.5
Plastics ...................... 1 3,399,581 2,260,125 1.3 0.5
Printing and Publishing ....... 2 11,158,301 10,551,875 5.9 4.9
Restaurants ................... 2 10,866,761 9,965,887 5.6 4.1
Retail Trade .................. 4 16,790,134 16,082,187 9.1 6.6
Shipbuilding .................. 1 3,944,765 4,862,734 2.7 2.3
Specialty Chemicals ........... 2 8,213,531 7,768,562 4.4 4.8
Specialty Metals/Steel ........ 2 11,208,267 4,528,134 2.5 4.2
Tobacco ....................... 1 5,073,850 4,687,187 2.6 4.4
Transportation ................ 2 12,555,923 8,452,969 4.8 6.7
Miscellaneous ................. 1 3,306,789 2,943,125 1.7 2.5
----- ------------- ------------- ----- -----
47 212,123,737 178,529,591 100.5 98.8
OTHER ASSETS LESS LIABILITIES .... -- (887,239) (887,239) (0.5) 1.2
----- ------------- ------------- ----- -----
NET ASSETS ....................... 47 $ 211,236,498 $ 177,642,352 100.0 100.0
===== ============= ============= ===== =====
</TABLE>
6
<PAGE>
PORTFOLIO OVERVIEW
Largest Portfolio Changes
During Past Six Months
SHARES
------------------------
HOLDINGS
ADDITIONS INCREASE 12/31/98
- --------- -------- --------
Acorn Products ................................. 1,000 431,000
BWAY ........................................... 20,000 208,500
Pittson BAX Group .............................. 180,000 390,000
Stage Stores ................................... 350,000 350,000
SHARES
------------------------
HOLDINGS
REDUCTIONS DECREASE 12/31/98
- ---------- -------- --------
Abercrombie & Fitch (Class A) .................. 65,000 90,000
Consolidated Cigar Holding ..................... 165,000 265,000
Cutter & Buck .................................. 105,000 175,000
Dexter ......................................... 60,000 89,000
Elsag Bailey Process Auto
(ADRs) ....................................... 228,300 111,700
Foodmaker ...................................... 96,700 325,000
Furniture Brands International ................. 70,600 179,400
The Wet Seal (Class A) ......................... 50,000 170,000
Windmere-Durable Holdings ...................... 50,000 175,000
Zeigler Coal Holding ........................... 290,000 --
Largest portfolio changes from the previous period to the current period are
based on cost of purchases and proceeds from sales of securities.
- --------------------------------------------------------------------------------
Largest Portfolio Holdings
December 31, 1998
SECURITY VALUE
- -------- ----------
Foodmaker ................................................ $7,170,312
ChiRex ................................................... 7,012,500
Cutter & Buck ............................................ 6,551,563
Abercrombie & Fitch (Class A) ............................ 6,367,500
Dal-Tile International ................................... 5,398,113
True North Communications ................................ $5,375,000
Cadmus Communications .................................... 5,337,500
Merrill .................................................. 5,214,375
The Wet Seal (Class A) ................................... 5,131,875
Schulman (A.) ............................................ 4,970,625
- --------------------------------------------------------------------------------
Largest Industries
December 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Percent of Total
Net Assets Dollar Amount
---------- -------------
RETAIL TRADE 9.10% $16,082,187
MANUFACTURING 7.10% $12,682,525
MEDICAL PRODUCTS AND TECHNOLOGY 6.10% $10,810,938
PRINTING AND PUBLISHING 5.90% $10,551,875
RESTAURANTS 5.60% $ 9,965,887
7
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1998
SHARES VALUE
------ ------------
COMMON STOCKS 100.5%
ADVERTISING 3.0%
True North Communications
Advertising Agency 200,000 $ 5,375,000
------------
APPAREL AND TEXTILES 3.7%
Cutter & Buck*+
Designer and marketer of
men's sportswear and
outerwear 175,000 6,551,563
------------
APPLIANCES 0.8%
Windmere-Durable Holdings
Manufacturer and distributor of
electrical appliances for
home use 175,000 1,356,250
------------
AUTOMOTIVE AND
TRUCKING 2.1%
Wabash National
Designer, manufacturer,
and marketer of truck trailers 185,000 3,757,813
------------
BANKING 4.6%
Bank United (Class A)
Financial service provider 105,000 4,111,406
Bay View Capital
Bank operator 190,000 4,096,875
------------
8,208,281
------------
BUILDING AND
CONSTRUCTION 3.0%
Dal-Tile International*
Manufacturer of ceramic tile 520,300 5,398,113
------------
CAPITAL GOODS 3.1%
Apogee Enterprises
Distributor and installer of
windows and glass products 425,000 4,781,250
BMC Industries
Manufacturer of
electronic components 123,900 774,375
------------
5,555,625
------------
COMPUTER SOFTWARE 1.0%
Dialogic*
Manufacturer of communication
software 95,000 1,867,344
------------
DISTRIBUTORS 4.1%
Cubic
Developer, manufacturer, and
distributor of defense and
industrial electronic products 157,500 2,953,125
Elsag Bailey Process
Auto (ADRs)* (Netherlands)
Manufacturer and distributor
of control systems 111,700 4,370,263
------------
7,323,388
------------
FINANCE AND INSURANCE 4.8%
Provider of financial services 100,000 878,125
Berkley (W.R.)
Insurance provider 90,200 3,044,250
RenaissanceRe Holdings
Global provider of reinsurance
and insurance 123,500 4,523,188
------------
8,445,563
------------
FOOD 2.0%
Richfood Holdings
Wholesale food distributor 170,000 3,527,500
------------
GARDEN PRODUCTS 1.7%
Acorn Products*+
Manufacturer and marketer of
lawn and garden tools 431,000 2,936,188
------------
INDUSTRIAL GOODS AND
SERVICES 2.4%
Furon
Manufacturer of component
products 250,000 4,265,625
------------
MACHINERY 2.0%
Stewart & Stevenson Services
Designer, assembler, and
marketer of machinery 362,500 3,477,734
------------
MANUFACTURING 7.1%
Furniture Brands International*
Manufacturer of furniture and
home furnishings 179,400 4,888,650
Giant Cement Holding*
Manufacturer and producer of
cement 199,000 4,950,125
Mueller Industries*
Manufacturer and distributor of
brass, bronze, copper, and
aluminum products 140,000 2,843,750
------------
12,682,525
------------
MEDICAL PRODUCTS AND
TECHNOLOGY 6.1%
Cephalon*
Developer of biopharmaceutical
products to treat neurological
disorders 425,000 3,798,438
ChiRex*
Pharmaceutical contractor 330,000 7,012,500
------------
10,810,938
------------
- ----------
See footnotes on page 9.
8
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1998
SHARES VALUE
------ ------------
OIL AND GAS 5.0%
Equitable Resources
Energy supplier 165,000 $ 4,805,625
Friede Goldman International*
Provider of offshore drilling
services for international
oil and gas companies 80,600 916,825
Marine Drilling*
Provider of offshore drilling
services for international
oil and gas companies 400,000 3,075,000
------------
8,797,450
------------
PACKAGING/
CONTAINERS 3.4%
Applied Extrusion Technologies*
Developer, producer, and
seller of packaging supplies 363,000 2,949,375
BWAY*
Manufacturer and marketer of
steel containers 208,500 3,140,531
------------
6,089,906
------------
PLASTICS 1.3%
Lamson & Sessions*
Manufacturer and distributor of
thermoplastics and electronics 441,000 2,260,125
------------
PRINTING AND
PUBLISHING 5.9%
Cadmus Communications
Commercial printer 280,000 5,337,500
Merrill
Document management
company 270,000 5,214,375
------------
10,551,875
------------
RESTAURANTS 5.6%
Avado Brands
Restaurant operator 333,800 2,795,575
Foodmaker*
Owner and operator of fast
food restaurants 325,000 7,170,312
------------
9,965,887
------------
RETAIL TRADE 9.1%
Abercrombie & Fitch (Class A)*
Retailer of casual apparel 90,000 6,367,500
Loehmann's*+
Specialty retailer 700,000 1,301,562
Stage Stores*
Clothing retailer 350,000 3,281,250
The Wet Seal (Class A)*
Retailer of young women's
apparel 170,000 5,131,875
------------
16,082,187
------------
SHIPBUILDING 2.7%
Avondale Industries*
Constructor and repairer of
ships for military and
commercial use 167,500 4,862,734
------------
SPECIALTY CHEMICALS 4.4%
Dexter
Manufacturer of specialty
materials 89,000 2,797,937
Schulman (A.)
Manufacturer of specialty
chemicals and plastics 220,000 4,970,625
------------
7,768,562
------------
SPECIALTY METALS/
STEEL 2.5%
Olympic Steel*
Processor and distributor of
steel products 397,000 1,991,203
Universal Stainless &
Alloy Products*+
Manufacturer and marketer of
specialty steel 341,100 2,536,931
------------
4,528,134
------------
TOBACCO 2.6%
Consolidated Cigar Holding*
Manufacturer and marketer
of cigars 265,000 4,687,187
------------
TRANSPORTATION 4.8%
ABC Rail Products*
Manufacturer and marketer of
railroad equipment 335,000 4,114,219
Pittston BAX Group
Provider of global freight
transportation 390,000 4,338,750
------------
8,452,969
------------
MISCELLANEOUS 1.7%
VWR Scientific Products*
Distributor of
laboratory supplies 170,000 2,943,125
------------
TOTAL INVESTMENTS 100.5%
(Cost $212,123,737) 178,529,591
OTHER ASSETS
LESS LIABILITIES (0.5)% (887,239)
------------
NET ASSETS 100.0% $177,642,352
============
- ----------
* Non-income producing security.
+ Affiliated issuers (Fund's holdings representing 5% or more of the
outstanding voting securities).
Descriptions of companies have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
9
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at value:
Common stocks* (cost $212,123,737) ................................................ $ 178,529,591
Cash ................................................................................ 149,748
Receivable for securities sold ...................................................... 711,976
Receivable for Capital Stock sold ................................................... 648,471
Receivable for dividends and interest ............................................... 65,822
Expenses prepaid to shareholder service agent ....................................... 60,291
Deferred organization expenses ...................................................... 8,589
Other ............................................................................... 36,498
-------------
Total Assets ........................................................................ 180,210,986
-------------
LIABILITIES:
Payable for Capital Stock repurchased ............................................... 2,199,523
Accrued expenses, taxes, and other .................................................. 369,111
-------------
Total Liabilities ................................................................... 2,568,634
-------------
Net Assets .......................................................................... $ 177,642,352
=============
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($0.001 par value; 1,000,000,000 shares authorized;
22,745,839 shares outstanding):
Class A ........................................................................... $ 7,672
Class B ........................................................................... 9,240
Class D ........................................................................... 5,834
Additional paid-in capital .......................................................... 211,392,600
Accumulated net investment loss ..................................................... (1,376)
Distribution in excess of net realized gain ......................................... (177,472)
Net unrealized depreciation of investments .......................................... (33,594,146)
-------------
Net Assets .......................................................................... $ 177,642,352
=============
NET ASSET VALUE PER SHARE:
Class A ($60,383,260 / 7,672,244 shares) ............................................ $7.87
=====
Class B ($71,875,285 / 9,240,164 shares) ............................................ $7.78
=====
Class D ($45,383,807 / 5,833,431 shares) ............................................ $7.78
=====
</TABLE>
- ----------
* Includes affiliated issuers (issuers in which the Fund's holdings represent
5% or more of the outstanding voting securities) with a cost of $19,465,700
and a value of $13,326,244.
See Notes to Financial Statements.
10
<PAGE>
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends ...................................................................... $ 1,540,636
Interest ....................................................................... 57,121
------------
Total Investment Income ................................................................................. $ 1,597,757
EXPENSES:
Management fee ................................................................. 2,255,973
Distribution and service fees .................................................. 1,673,900
Shareholder account services ................................................... 596,762
Registration ................................................................... 142,688
Shareholder reports and communications ......................................... 95,580
Auditing and legal fees ........................................................ 68,328
Custody and related services ................................................... 66,194
Directors' fees and expenses ................................................... 8,559
Amortization of deferred organization expenses ................................. 2,576
Miscellaneous .................................................................. 8,458
------------
Total Expenses .......................................................................................... 4,919,018
------------
Net Investment Income (Loss) ............................................................................ (3,321,261)
NET REALIZED AND UNREALIZED GAIN (LOSS)ON INVESTMENTS:
Net realized gain on investments* .............................................. 1,143,557
Net change in unrealized appreciation of investments ........................... (49,090,217)
------------
Net Loss on Investments ........................................................ (47,946,660)
------------
Decrease in Net Assets from Operations .................................................................. $(51,267,921)
============
</TABLE>
- ----------
* Includes net realized gain from affiliated issuers of $1,852,012.
See Notes to Financial Statements.
11
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
APRIL 25, 1997*
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1998 1997
------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment loss .............................................................................. $ (3,321,261) $ (1,298,700)
Net realized gain on investments ................................................................. 1,143,557 2,092,282
Net change in unrealized appreciation of investments ............................................. (49,090,217) 15,496,071
------------- -------------
Increase (Decrease) in Net Assets from Operations ................................................ (51,267,921) 16,289,653
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain on investments:
Class A ....................................................................................... (222,320) (57,925)
Class B ....................................................................................... (269,568) (57,494)
Class D ....................................................................................... (179,287) (41,437)
------------- -------------
Decrease in Net Assets from Distributions ........................................................ (671,175) (156,856)
------------- -------------
<CAPTION>
SHARES
-------------------------------
APRIL 25, 1997*
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1998 1997
----------- ---------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares:
Class A ...................................................... 2,864,792 7,738,571 25,758,797 69,603,297
Class B ...................................................... 2,907,461 8,892,774 26,305,568 80,894,889
Class D ...................................................... 2,371,845 5,320,090 21,525,345 48,461,463
Exchanged from associated Funds:
Class A ...................................................... 1,272,935 1,921,426 10,646,139 17,411,273
Class B ...................................................... 408,213 545,670 3,503,911 5,021,131
Class D ...................................................... 1,376,302 1,772,296 12,493,032 16,230,693
Shares issued in payment of gain distributions:
Class A ...................................................... 27,525 5,767 206,712 54,554
Class B ...................................................... 33,089 5,544 245,853 52,231
Class D ...................................................... 22,062 4,071 163,918 38,394
----------- ---------- ------------- -------------
Total ........................................................... 11,284,224 26,206,209 100,849,275 237,767,925
----------- ---------- ------------- -------------
Cost of shares repurchased:
Class A ...................................................... (3,480,497) (412,080) (29,705,640) (3,898,861)
Class B ...................................................... (1,578,419) (136,373) (13,327,385) (1,292,238)
Class D ...................................................... (2,125,511) (171,335) (16,902,737) (1,617,237)
Exchanged into associated Funds:
Class A ...................................................... (2,004,039) (269,159) (16,748,650) (2,525,759)
Class B ...................................................... (1,647,820) (189,975) (13,470,487) (1,762,418)
Class D ...................................................... (2,350,039) (386,350) (20,312,582) (3,654,556)
----------- ---------- ------------- -------------
Total ........................................................... (13,186,325) (1,565,272) (110,467,481) (14,751,069)
----------- ---------- ------------- -------------
Increase (Decrease)in Net Assets from
Capital Share Transactions .................................... (1,902,101) 24,640,937 (9,618,206) 223,016,856
----------- ---------- ------------- -------------
Increase (Decrease)in Net Assets ................................................................ (61,557,302) 239,149,653
NET ASSETS:
Beginning of period ............................................................................. 239,199,654 50,001
------------- -------------
End of Period (including accumulated net investment loss of
$1,376 and $369, respectively) ................................................................ $ 177,642,352 $ 239,199,654
============= =============
</TABLE>
- ----------
* Commencement of operations.
See Notes to Financial Statements.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Organization -- Seligman Small-Cap Value Fund (the "Fund") is a series of
Seligman Value Fund Series, Inc., which was incorporated in the State of
Maryland on January 27, 1997, and subsequently was registered under the
Investment Company Act of 1940 as an open-end, diversified management investment
company. The Fund had no operations prior to April 25, 1997 (commencement of
operations), other than those related to organizational matters, and the sale
and issuance to Seligman Advisors, Inc. (the "Distributor") (formerly Seligman
Financial Services, Inc.) of 7,003 Class A shares of Capital Stock for $50,001
on April 4, 1997.
2. Multiple Classes of Shares -- The Fund offers three classes of shares. Class
A shares are sold with an initial sales charge of up to 4.75% and a continuing
service fee of up to 0.25% on an annual basis. Class A shares purchased in an
amount of $1,000,000 or more are sold without an initial sales charge but are
subject to a contingent deferred sales charge ("CDSC") of 1% on redemptions
within 18 months of purchase. Class B shares are sold without an initial sales
charge but are subject to a distribution fee of 0.75%, a service fee of up to
0.25% on an annual basis, and a CDSC, if applicable, of 5% on redemptions in the
first year of purchase, declining to 1% in the sixth year and 0% thereafter.
Class B shares will automatically convert to Class A shares on the last day of
the month that precedes the eighth anniversary of their date of purchase. Class
D shares are sold without an initial sales charge but are subject to a
distribution fee of up to 0.75% and a service fee of up to 0.25% on an annual
basis, and a CDSC, if applicable, of 1% imposed on redemptions made within one
year of purchase. The three classes of shares 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 certain
other class expenses, and has exclusive voting rights with respect to any matter
on which a separate vote of any class is required.
3. Significant Accounting Policies -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Fund:
a. Security Valuation -- Investments in stocks are valued at current market
values or, in their absence, at fair values determined in accordance with
procedures approved by the Board of Directors. Securities traded on
national exchanges are valued at last sales prices or, in their absence and
in the case of over-the-counter securities, at the mean of bid and asked
prices. Short-term holdings maturing in 60 days or less are valued at
amortized cost.
b. Federal Taxes -- There is no provision for federal income tax. The Fund has
elected to be taxed as a regulated investment company and intends to
distribute substantially all taxable net income and net gain realized.
c. Security Transactions and Related Investment Income -- Investment
transactions are recorded on trade dates. Identified cost of investments
sold is used for both financial statement and federal income tax purposes.
Dividends receivable and payable are recorded on ex-dividend dates.
Interest income is recorded on an accrual basis.
d. Multiple Class Allocations -- All income, expenses (other than
class-specific expenses), and realized and unrealized gains or losses are
allocated daily to each class of shares based upon the relative value of
shares of each class. Class-specific expenses, which include distribution
and service fees and any other items that are specifically attributable to
a particular class, are charged directly to such class. For the year ended
December 31, 1998, distribution and service fees were the only
class-specific expenses.
e. Distributions to Shareholders -- The treatment for financial statement
purposes of distributions made to shareholders during the year from net
investment income or net realized gains may differ from their ultimate
treatment for federal income tax purposes. These differences are caused
primarily by differences in the timing of the recognition of certain
components of income, expense, or realized capital gain for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net assets based on their ultimate
characterization for federal income tax purposes. Any such reclassification
will have no effect on net assets, results of operations, or net asset
value per share of the Fund.
For the year ended December 31, 1998, the Fund redeemed 13,186,325 of
its shares from shareholders aggregating $110,467,481, of which
approximately $1,300,000 represents capital gain distributions. This
information is provided for federal income tax purposes only.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
f. Organization Expenses -- Deferred organization expenses are being amortized
on a straight-line basis over a period of 60 months beginning with the
commencement of operations of the Fund.
4. Purchases and Sales of Securities -- Purchases and sales of portfolio
securities, excluding US Government obligations and short-term investments, for
the year ended December 31, 1998, amounted to $67,427,233 and $77,168,760,
respectively.
At December 31, 1998, the cost of investments for federal income tax
purposes was substantially the same as the cost for financial reporting
purposes, and the tax basis gross unrealized appreciation and depreciation of
portfolio securities amounted to $16,528,433 and $50,122,579, respectively.
5. Management Fee, Distribution Services, and Other Transactions -- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the Fund and
provides the necessary personnel and facilities. Compensation of all officers of
the Fund, all directors of the Fund who are employees or consultants of the
Manager, and all personnel of the Fund and the Manager is paid by the Manager.
The Manager receives a fee, calculated daily and payable monthly, equal to 1.00%
per annum of the Fund's average daily net assets.
The Distributor, agent for the distribution of the Fund's shares and an
affiliate of the Manager, received concessions of $61,808 from sales of Class A
shares, after commissions of $494,543 were paid to dealers.
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distribution of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive a continuing fee of up to 0.25% on an annual basis,
payable quarterly, of the average daily net assets of the Class A shares
attributable to the particular service organizations for providing personal
services and/or the maintenance of shareholder accounts. The Distributor charges
such fees to the Fund pursuant to the Plan. For the year ended December 31,
1998, fees incurred under the Plan aggregated $189,512, or 0.25% per annum of
the average daily net assets of Class A shares.
Under the Plan, with respect to Class B and Class D shares, service
organizations can enter into agreements with the Distributor and receive a
continuing fee for providing personal services and/or the maintenance of
shareholder accounts of up to 0.25% on an annual basis of the average daily net
assets of the Class B and Class D shares for which the organizations are
responsible; and, for Class D shares only, fees for providing other distribution
assistance of up to 0.75% on an annual basis of such average daily net assets.
Such fees are paid monthly by the Fund to the Distributor pursuant to the Plan.
With respect to Class B shares, a distribution fee of 0.75% on an annual
basis of average daily net assets is payable monthly by the Fund to the
Distributor; however, the Distributor has sold its rights to this fee to a third
party (the "Purchaser"), which provides funding to the Distributor to enable it
to pay commissions to dealers at the time of the sale of the related Class B
shares.
For the year ended December 31, 1998, fees incurred under the Plan,
equivalent to 1% per annum of the average daily net assets of Class B and Class
D shares, amounted to $850,237 and $634,151, respectively.
The Distributor is entitled to retain any CDSC imposed on redemptions of
Class D shares occurring within one year of purchase and on certain redemptions
of Class A shares occurring within 18 months of purchase. For the year ended
December 31, 1998, such charges amounted to $71,797.
The Distributor has sold its rights to collect any CDSC imposed on
redemptions of Class B shares to the Purchaser. In connection with the sale of
its rights to collect any CDSC and the distribution fees with respect to Class B
shares described above, the Distributor receives payments from the Purchaser
based on the value of Class Bshares sold. The aggregate amount of such payments
retained by the Distributor for the year ended December 31, 1998, amounted to
$39,142.
Seligman Services, Inc., an affiliate of the Manager, is eligible to
receive commissions from certain sales of shares of the Fund, as well as
distribution and service fees pursuant to the Plan. For the year ended December
31, 1998, Seligman Services, Inc. received commissions of $2,646 from the sale
of shares of the Fund and distribution and service fees of $10,913, pursuant to
the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged the Fund at cost $596,762 for shareholder account services.
Certain officers and directors of the Fund are officers or directors of the
Manager, the Distributor, Seligman Services, Inc., and/or Seligman Data Corp.
The Fund has a compensation arrangement under which directors who receive
fees may elect to defer receiving such fees. Directors may elect to have their
deferred fees accrue
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
interest or earn a return based on the performance of the Fund or other funds in
the Seligman Group of Investment Companies. The annual cost of such fees and
earnings accrued thereon is included in directors' fees and expenses, and the
accumulated balance thereof at December 31, 1998, of $1,376 is included in other
liabilities. Deferred fees and related accrued earnings are not deductible for
federal income tax purposes until such amounts are paid.
6. Committed Line of Credit -- Effective July 1, 1998, the Fund entered into a
joint $800 million committed line of credit that is shared by substantially all
funds in the Seligman Group of Investment Companies. The Fund's borrowings are
limited to 10% of its net assets. Borrowings pursuant to the credit facility are
subject to interest at a rate equal to the overnight federal funds rate plus
0.50%. The Fund incurs a commitment fee of 0.08% per annum on its share of the
unused portion of the credit facility. The credit facility may be drawn upon
only for temporary purposes and is subject to certain other customary
restrictions. The credit facility commitment expires one year from the date of
the agreement but is renewable with the consent of the participating banks. To
date, the Fund has not borrowed from the credit facility.
7. Affiliated Issuers -- As defined under the Investment Company Act of 1940, as
amended, affiliated issuers are those issuers in which the Fund's holdings
represent 5% or more of the outstanding voting securities of the issuer. A
summary of the Fund's transactions in the securities of these issuers during the
year ended December 31, 1998, is as follows:
<TABLE>
<CAPTION>
GROSS GROSS
BEGINNING PURCHASES SALES AND ENDING REALIZED DIVIDEND ENDING
AFFILIATE SHARES AND ADDITIONS REDUCTIONS SHARES GAIN INCOME VALUE
- --------- --------- ------------- ---------- ------ --------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Acorn Products ............... 290,000 141,000 -- 431,000 -- -- $ 2,936,188
Cutter & Buck ................ 280,000 10,000 115,000 175,000 $1,852,012 -- 6,551,563
Loehmann's ................... 700,000 -- -- 700,000 -- -- 1,301,562
Universal Stainless
& Alloy Products ........... 336,100 5,000 -- 341,100 -- -- 2,536,931
---------- -----------
TOTAL ........................ $1,852,012 $13,326,244
========== ===========
</TABLE>
15
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below are intended to help you understand each Class's financial
performance from the inception of the Fund. Certain information reflects
financial results for a single share of a Class that was held throughout the
periods shown. Per share amounts are calculated using average shares
outstanding. "Total return" shows the rate that you would have earned (or lost)
on an investment in each Class, assuming you reinvested all your capital gain
distributions. Total returns do not reflect any sales charges, and are not
annualized for periods of less than one year.
<TABLE>
<CAPTION>
Class A Class B Class D
--------------------- -------------------- ---------------------
YEAR 4/25/97* YEAR 4/25/97* YEAR 4/25/97*
ENDED TO ENDED TO ENDED TO
12/31/98 12/31/97 12/31/98 12/31/97 12/31/98 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net Asset Value, Beginning of Period ........... $9.73 $7.14 $9.69 $7.14 $9.69 $7.14
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income (loss) ................... (0.09) (0.07) (0.15) (0.11) (0.15) (0.11)
Net realized and unrealized gain (loss)
on investments ............................... (1.74) 2.67 (1.73) 2.67 (1.73) 2.67
------- ------- ------- ------- ------- -------
Total from Investment Operations ............... (1.83) 2.60 (1.88) 2.56 (1.88) 2.56
------- ------- ------- ------- ------- -------
Less Distributions:
Distributions from net realized capital gains .. (0.03) (0.01) (0.03) (0.01) (0.03) (0.01)
------- ------- ------- ------- ------- -------
Total Distributions ............................ (0.03) (0.01) (0.03) (0.01) (0.03) (0.01)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ................. $7.87 $9.73 $7.78 $9.69 $7.78 $9.69
======= ======= ======= ======= ======= =======
TOTAL RETURN: (18.81)% 36.38% (19.41)% 35.82% (19.41)% 35.82%
Ratios/Supplemental Data:
Net assets, end of period (000s omitted) ....... $60,383 $87,510 $71,875 $88,330 $45,384 $63,360
Ratio of expenses to average net assets ........ 1.69% 1.87%+ 2.44% 2.63%+ 2.44% 2.63%+
Ratio of net income (loss) to average net assets (0.98)% (1.12)%+ (1.73)% (1.88)%+ (1.73)% (1.88)%+
Portfolio turnover rate ........................ 30.06% 15.91% 30.06% 15.91% 30.06% 15.91%
</TABLE>
- ----------
* Commencement of operations.
+ Annualized.
See Notes to Financial Statements.
16
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders,
Seligman Small-Cap Value Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman Small-Cap Value Fund as of December
31, 1998, the related statements of operations for the year then ended and of
changes in net assets and the financial highlights for the year then ended and
for the period from April 25, 1997 (commencement of operations) to December 31,
1997. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with the Fund's custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Seligman Small-Cap
Value Fund as of December 31, 1998, the results of its operations, the changes
in its net assets, and the financial highlights for the respective periods
stated, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
January 29, 1999
- --------------------------------------------------------------------------------
17
<PAGE>
FEDERAL TAX STATUS OF 1998 GAIN
DISTRIBUTION FOR TAXABLE ACCOUNTS
- --------------------------------------------------------------------------------
A distribution of $0.028 per share from net short-term gain realized on
investments was paid on November 23, 1998, to Class A, B, and D shareholders.
Net short-term gain is taxable as ordinary income, regardless of whether it was
paid in cash or shares.
If the distribution was paid in shares, the per share cost basis for federal
income tax purposes is $7.51 for Class A shares and $7.43 for Class B and D
shares.
A 1998 year-end statement of account activity and a 1998 Tax Package, which may
include a Form 1099-DIV, a Form 1099-B, and/or a Cost Basis Statement, have been
mailed to each shareholder. Form 1099-DIV shows the distributions paid to the
shareholder during the year. Form 1099-B shows the proceeds of any redemptions
paid to the shareholder during the year. Cost Basis Statements report all sales
or exchanges from a shareholder's account which may have resulted in a capital
gain or loss in 1998. The information shown on Forms 1099-DIV and 1099-B is
reported to the Internal Revenue Service as required by federal regulations.
- --------------------------------------------------------------------------------
18
<PAGE>
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
John R. Galvin 2, 4
Dean, Fletcher School of Law and Diplomacy
at Tufts University
Director, Raytheon Company
Alice S. Ilchman 3, 4
Trustee, Committee for Economic Development
Chairman, The Rockefeller Foundation
Frank A. McPherson 2, 4
Director, Kimberly-Clark Corporation
Director, Baptist Medical Center
John E. Merow 2, 4
Retired Chairman and Senior Partner,
Sullivan & Cromwell, Law Firm
Director, Commonwealth Industries, Inc.
Director, New York Presbyterian Hospital
Betsy S. Michel 2, 4
Trustee, The Geraldine R. Dodge Foundation
Chairman of the Board of Trustees, St. George's School
William C. Morris 1
Chairman
Chairman of the Board,
J. & W. Seligman & Co. Incorporated
Chairman, Carbo Ceramics Inc.
Director, Kerr-McGee Corporation
James C. Pitney 3, 4
Retired Partner, Pitney, Hardin, Kipp & Szuch, Law Firm
James Q. Riordan 3, 4
Director, KeySpan Energy Corporation
Trustee, Committee for Economic Development
Director, Public Broadcasting Service
Richard R. Schmaltz 1
Managing Director, Director of Investments,
J. & W. Seligman & Co. Incorporated
Trustee Emeritus, Colby College
Robert L. Shafer 3, 4
Retired Vice President, Pfizer Inc.
James N. Whitson 2, 4
Director and Consultant, Sammons Enterprises, Inc.
Director, C-SPAN
Director, CommScope, Inc.
Brian T. Zino 1
President
President, J. & W. Seligman & Co. Incorporated
Chairman, Seligman Data Corp.
Director, ICI Mutual Insurance Company
Director Emeritus
Fred E. Brown
Director and Consultant,
J. &W. Seligman &Co. Incorporated
- ----------
Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
4 Board Operations Committee
- --------------------------------------------------------------------------------
19
<PAGE>
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
William C. Morris
Chairman
Brian T. Zino
President
Neil T. Eigen
Vice President
Lawrence P. Vogel
Vice President
Thomas G. Rose
Treasurer
Frank J. Nasta
Secretary
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
Manager
J. & W. Seligman & Co.
Incorporated
100 Park Avenue
New York, NY 10017
General Counsel
Sullivan & Cromwell
Independent Auditors
Deloitte & Touche LLP
General Distributor
Seligman Advisors, Inc.
100 Park Avenue
New York, NY 10017
Shareholder Service Agent
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
Important Telephone Numbers
(800) 221-2450 Shareholder Services
(800) 445-1777 Retirement Plan Services
(212) 682-7600 Outside the United States
(800) 622-4597 24-Hour Automated Telephone Access Service
- --------------------------------------------------------------------------------
20
<PAGE>
GLOSSARY OF FINANCIAL TERMS
Capital Gain Distribution -- A payment to mutual fund shareholders of profits
realized on the sale of securities in a fund's portfolio.
Capital Appreciation/Depreciation -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.
Compounding -- The change in the value of an investment as shareholders receive
earnings on their investment's earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will not be based on the
original $1,000, but on the $1,070, which includes the first year's earnings.
Contingent Deferred Sales Charge (CDSC) -- Depending on the class of shares
owned, a fee charged by a mutual fund when shares are sold back to the fund (the
CDSC expires after a fixed time period).
Dividend -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
Dividend Yield -- A measurement of a fund's dividend as a percentage of the
maximum offering price.
Expense Ratio -- The cost of doing business for a mutual fund, expressed as a
percent of the fund's net assets.
Investment Objective -- The shared investment goal of a fund and its
shareholders.
Management Fee -- The amount paid by a mutual fund to its investment advisor(s).
Multiple Classes of Shares -- Although an individual mutual fund invests in only
one portfolio of securities, it may offer investors several purchase options
which are "classes" of shares. Multiple classes permit shareholders to choose
the fee structure that best meets their needs and goals. Generally, each class
will differ in terms of how and when sales charges and certain fees are
assessed.
National Association of Securities Dealers, Inc. (NASD) -- A self-regulatory
body with authority over firms that distribute mutual funds.
Net Asset Value (NAV) Per Share -- The market worth of one fund share, obtained
by adding a mutual fund's total assets (securities, cash, and any accrued
earnings), subtracting liabilities, and dividing the resulting net assets by the
number of shares outstanding.
Offering Price (OP) -- The price at which a mutual fund's share can be
purchased. The offering price per share is the current net asset value plus any
sales charge.
Portfolio Turnover -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
Prospectus -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission (SEC), such as a fund's investment objective and policies, services,
investment restrictions, how shares are bought and sold, fund fees and other
charges, and the fund's financial highlights.
SEC Yield -- SEC Yield refers to the net income earned by a fund during a recent
30-day period. This income is annualized and then divided by the maximum
offering price per share on the last day of the 30-day period. The SEC Yield
formula reflects semiannual compounding.
Securities and Exchange Commission -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
Statement of Additional Information -- A document that contains updated or more
detailed information about an investment company and that supplements the
prospectus. It is available at no charge upon request.
Total Return -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The Average Annual Total
Return represents the average annual compounded rate of return for the periods
presented.
Yield on Securities -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.
- ----------
Adapted from the Investment Company Institute's 1998 Mutual Fund Fact Book.
21
<PAGE>
This report is intended only for the information of shareholders or those
who have received the offering prospectus covering shares of Capital Stock
of Seligman Small-Cap Value Fund, which contains information about the
sales charges, management fee, and other costs. Please read the prospectus
carefully before investing or sending money.
SELIGMAN ADVISORS, INC.
an affiliate of
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
EQVS2 12/98 [LOGO]Printed on Recycled Paper
<PAGE>
File No. 333-20621
811-08031
PART C. OTHER INFORMATION
- ------ -----------------
Item 23. Exhibits.
- ------- ---------
All Exhibits listed below have been previously filed, except Exhibits
marked with an asterisk (*) which are filed herewith.
(a) *Articles Supplementary dated May 24, 1999.
(a)(1) Articles of Incorporation of Registrant. (Incorporated by reference to
Registrant's Initial Registration Statement filed on January 29, 1997.)
(b) By-laws of Registrant. (Incorporated by reference to Registrant's Pre-
Effective Amendment No. 2 filed on April 17, 1997.)
(c) Specimen Stock Certificate.
(d) Management Agreement between Registrant and J. & W. Seligman & Co.
Incorporated. (Incorporated by reference to Registrant's Pre-Effective
Amendment No. 2 filed on April 17, 1997.)
(e) *Addendum to Sales/Bank Agreement. (Incorporated by reference to Post-
Effective Amendment No. 57 to the Registration Statement of Seligman
Capital Fund, Inc. (File #811-1886) filed on May 28, 1999.)
(e)(1) *Form of Bank Agreement between Seligman Advisors, Inc. and Banks.
(Incorporated by reference to Post-Effective Amendment No. 57 to the
Registration Statement of Seligman Capital Fund, Inc. (File #811-1886)
filed on May 28, 1999.)
(e)(2) Distributing Agreement between Registrant and Seligman Advisors, Inc.
(Incorporated by reference to Registrant's Pre-Effective Amendment No. 2
filed on April 17, 1997.)
(e)(3) Sales Agreement between Seligman Advisors, Inc. and Dealers.
(Incorporated by reference to Registrant's Pre-Effective Amendment No. 2
filed on April 17, 1997.)
(f) Matched Accumulation Plan of J. & W. Seligman & Co. Incorporated.
(Incorporated by reference to Registrant's Pre-Effective Amendment No. 2
filed on April 17, 1997.)
(f)(1) Deferred Compensation Plan for Directors of Seligman Value Fund Series,
Inc. (Incorporated by reference to Registrant's Post-Effective Amendment
No. 4 filed on April 30, 1998.)
(g) Form of Custody and Investment Accounting Agreement between Registrant
and Investors Fiduciary Trust Company. (Incorporated by reference to
Registrant's Pre-Effective Amendment No. 2 filed on April 17, 1997.)
(h) Not applicable.
(i) *Opinion and Consent of Counsel in respect of Class C shares.
(i)(1) Opinion and Consent of Counsel. (Incorporated by reference to
Registrant's Pre-Effective Amendment No. 2 filed on April 17, 1997.)
(j) *Consent of Independent Auditors.
(k) Not applicable.
<PAGE>
File No. 333-20621
811-08031
(l) *Form of Purchase Agreement (Investment Letter) in respect of Class C
shares between Registrant and J. & W. Seligman & Co. Incorporated.
C-2
<PAGE>
File No. 333-20621
811-08031
PART C. OTHER INFORMATION
- ------ -----------------
(l)(1) Purchase Agreement (Investment Letter) between Registrant. (Incorporated
by reference to Registrant's Pre-Effective Amendment No. 2 filed on
April 17, 1997.)
(m) *Amended Administration, Shareholder Services and Distribution Plan of
each of the Seligman Large-Cap Value and Small-Cap Value Funds.
(m)(1) *Amended Administration, Shareholder Services and Distribution Agreement
between Seligman Advisors, Inc. and Dealers. (Incorporated by reference
to Post-Effective Amendment No. 57 to the Registration Statement of
Seligman Capital Fund, Inc. (File #811-1886) filed on May 28, 1999.)
(n) Financial Data Schedules. (Incorporated by reference to Post-effective
Amendment No. 6 filed on April 30, 1999.)
(o) *Plan of Multiple Classes of Shares (four Classes) pursuant to Rule 18f-
3 under the Investment Company Act of 1940. (Incorporated by reference
to Post-Effective Amendment No. 57 to the Registration Statement to the
Seligman Capital Fund, Inc. (File #811-1886) filed on May 28, 1999
Other Exhibits: Powers of Attorney. (Incorporated by reference to Registrant's
- --------------
Pre-Effective Amendment No. 2 filed on April 17, 1997.)
Item 24. Persons Controlled by or Under Common Control with Registrant. None.
- -------- --------------------------------------------------------------
Item 25. Indemnification. Reference is made to the provisions of Article
- -------- ----------------
Twelfth of Registrant's Articles of Incorporation filed as Exhibit
24(b)(1) of the Registrant's Registration Statement, filed on Form
N-1A on January 31, 1997 and Article VII of Registrant's By-laws filed
as Exhibit 24(b)(2) to Registrant's Pre-Effective Amendment No. 2 to
the Registration Statement.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised by the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act as is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
Item 26. Business and Other Connections of Investment Adviser. J. & W.
- -------- -----------------------------------------------------
Seligman & Co. Incorporated, a Delaware corporation ("Manager"), is
the Registrant's investment adviser. The Manager also serves as
investment adviser to several associated investment companies. They
are: Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc.,
Seligman Common Stock Fund, Inc., Seligman Communications and
Information Fund, Inc., Seligman Frontier Fund, Inc., Seligman Growth
Fund, Inc., Seligman Henderson Global Fund Series, Inc., Seligman High
Income Fund Series, Seligman Income Fund, Inc., Seligman Municipal
Fund Series, Inc., Seligman Municipal Series Trust, Seligman New
Jersey Municipal Fund, Inc., Seligman Pennsylvania Municipal Fund
Series, Seligman Portfolios, Inc., Seligman Quality Municipal Fund,
Inc. Seligman Select Municipal Fund, Inc., and Tri-Continental
Corporation.
The Manager has an investment advisory service division which provides
investment management or advice to private clients. The list required
by this Item 28 of officers and directors of the Manager, together
with information as to any other business, profession, vocation or
employment of a
C-3
<PAGE>
File No. 333-20621
811-08031
substantial nature engaged in by such officers and directors during
the past two years, is incorporated by reference to Schedules A and D
of Forms ADV, filed by the Manager pursuant to the Investment Advisers
Act of 1940 (SEC File Nos. 801-15798), which was filed on March 31,
1999.
PART C. OTHER INFORMATION (continued)
- ------- -----------------
Item 27. Principal Underwriters.
- ------- -----------------------
(a) The names of each investment company (other than the Registrant) for
which Registrant's principal underwriter is currently distributing
securities of the Registrant and also acts as a principal underwriter,
depositor or investment adviser are as follows:
Seligman Capital Fund, Inc.
Seligman Cash Management Fund, Inc.
Seligman Common Stock Fund, Inc.
Seligman Communications and Information Fund, Inc.
Seligman Frontier Fund, Inc.
Seligman Growth Fund, Inc.
Seligman Henderson Global Fund Series, Inc.
Seligman High Income Fund Series
Seligman Income Fund, Inc.
Seligman Municipal Fund Series, Inc.
Seligman Municipal Series Trust
Seligman New Jersey Municipal Fund, Inc.
Seligman Pennsylvania Municipal Fund Series
Seligman Portfolios, Inc.
C-4
<PAGE>
File No. 333-20621
811-08031
PART C. OTHER INFORMATION (continued)
- ------- -----------------
(b) Name of each director, officer or partner of Registrant's principal
underwriter named in response to Item 20:
<TABLE>
<CAPTION>
Seligman Advisors, Inc.
-----------------------
As of April 30, 1999
--------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
William C. Morris* Director Chairman of the Board and Chief Executive Officer
Brian T. Zino* Director President and Director
Ronald T. Schroeder* Director None
Fred E. Brown* Director Director Emeritus
William H. Hazen* Director None
Thomas G. Moles* Director None
David F. Stein* Director None
Stephen J. Hodgdon* President and Director None
Charles W. Kadlec* Chief Investment Strategist None
Lawrence P. Vogel* Senior Vice President, Finance Vice President
Edward F. Lynch* Senior Vice President, National None
Sales Director
James R. Besher Senior Vice President, Division None
14000 Margaux Lane Sales Director
Town & Country, MO 63017
Gerald I. Cetrulo, III Senior Vice President, Sales None
140 West Parkway
Pompton Plains, NJ 07444
Matthew A. Digan* Senior Vice President, None
Domestic Funds
Jonathan G. Evans Senior Vice President, Sales None
222 Fairmont Way
Ft. Lauderdale, FL 33326
Robert T. Hausler* Senior Vice President, International None
Funds
T. Wayne Knowles Senior Vice President, None
104 Morninghills Court Division Sales Director
Cary, NC 27511
Joseph Lam Senior Vice President, Regional None
Seligman International Inc. Director, Asia
Suite 1133, Central Building
One Pedder Street
Central Hong Kong
Bradley W. Larson Senior Vice President, Sales None
367 Bryan Drive
Alamo, CA 94526
Michelle L. McCann-Rappa* Senior Vice President, None
Retirement Plans
Scott H. Novak* Senior Vice President, Insurance None
Richard M. Potocki Senior Vice President, Regional None
Seligman International UK Limited Director, Europe and the Middle East
Berkeley Square House 2nd Floor
Berkeley Square
London, United Kingdom W1X 6EA
</TABLE>
C-5
<PAGE>
File No. 333-20621
811-08031
PART C. OTHER INFORMATION (continued)
- ------- -----------------------------
<TABLE>
<CAPTION>
Seligman Advisors, Inc.
-----------------------
As of April 30, 1999
--------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Bruce M. Tuckey Senior Vice President, Sales None
41644 Chathman Drive
Novi, MI 48375
Andrew S. Veasey Senior Vice President, Sales None
14 Woodside Drive
Rumson, NJ 07760
Charles L. von Breitenbach, II* Senior Vice President, None
Managed Money
J. Brereton Young* Senior Vice President, Director None
of Sales Development
Jeffrey S. Dean* Vice President, Business Analysis None
Mason S. Flinn Vice President, Regional Retirement None
159 Varennes Plans Manager
San Francisco, CA 94133
Marsha E. Jacoby* Vice President, Offshore Business None
Manager
William W. Johnson* Vice President, Order Desk None
Joan M. O'Connell Vice President, Regional Retirement None
3707 Fifth Avenue #136 Plans Manager
San Diego, CA 92103
Ronald W. Pond* Vice President, Portfolio Advisor None
Jeffery C. Pleet* Vice President, Regional Retirement None
Plans Manager
Tracy A. Salomon* Vice President, Retirement Marketing None
Helen Simon* Vice President, Sales Administration None
Gary A. Terpening* Vice President, Director of Business None
Development
Charles E. Wenzel Vice President, Regional Retirement None
703 Greenwood Road Plans Manager
Wilmington, DE 19807
Jeff Botwinick Regional Vice President None
11508 Foster Road
Overland Park, KS 66210
Kevin Casey Regional Vice President None
19 Bayview Avenue
Babylon, NY 11702
Richard B. Callaghan Regional Vice President None
7821 Dakota Lane
Orland Park, IL 60462
Bradford C. Davis Regional Vice President None
241 110th Avenue SE
Bellevue, WA 98004
Christopher J. Derry Regional Vice President None
2380 Mt. Lebanon Church Road
Alvaton, KY 42122
</TABLE>
C-6
<PAGE>
File No. 333-20621
811-08031
PART C. OTHER INFORMATION (continued)
- ------- -----------------------------
<TABLE>
<CAPTION>
Seligman Advisors, Inc.
-----------------------
As of April 30, 1999
--------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Kenneth Dougherty Regional Vice President None
8640 Finlarig Drive
Dublin, OH 43017
Kelli A. Wirth Dumser Regional Vice President None
7121 Jardiniere Court
Charlotte, NC 28226
Edward S. Finocchiaro Regional Vice President None
120 Screenhouse Lane
Duxbury, MA 02332
Michael C. Forgea Regional Vice President None
32 W. Anapamu Street # 186
Santa Barbara, CA 93101
Carla A. Goehring Regional Vice President None
11426 Long Pine
Houston, TX 77077
Cathy Des Jardins Regional Vice President None
PMB 152
1705 14th Street
Boulder, CO 80302
Michael K. Lewallen Regional Vice President None
908 Tulip Poplar Lane
Birmingham, AL 35244
Judith L. Lyon Regional Vice President None
7105 Harbour Landing
Alpharetta, GA 30005
Tim O'Connell Regional Vice President None
11908 Acacia Glen Court
San Diego, CA 92128
George M. Palmer, Jr. Regional Vice President None
1805 Richardson Place
Tampa, FL 33606
Thomas Parnell Regional Vice President None
1575 Edgecomb Road
St. Paul, MN 55116
Craig Prichard Regional Vice President None
300 Spyglass Drive
Fairlawn, OH 44333
Nicholas Roberts Regional Vice President None
200 Broad Street, Apt. 2225
Stamford, CT 06901
Diane H. Snowden Regional Vice President None
11 Thackery Lane
Cherry Hill, NJ 08003
Eugene P. Sullivan Regional Vice President None
4858 Battery Lane Bethesda, MD 21814
</TABLE>
C-7
<PAGE>
File No. 333-20621
811-08031
PART C. OTHER INFORMATION (continued)
- ------- -----------------------------
<TABLE>
<CAPTION>
Seligman Advisors, Inc.
-----------------------
As of April 30, 1999
--------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
James Taylor Regional Vice President None
1145 Kenilworth Circle
Naperville, IL 60540
Steve Wilson Regional Vice President None
83 Kaydeross Park Road
Saratoga Springs, NY 12866
Frank J. Nasta* Secretary Secretary
Aurelia Lacsamana* Treasurer None
Gail S. Cushing* Assistant Vice President, National None
Accounts Manager
Sandra G. Floris* Assistant Vice President, Order Desk None
Keith Landry* Assistant Vice President, Order Desk None
Albert A. Pisano* Assistant Vice President and None
Compliance Officer
Joyce Peress* Assistant Secretary Assistant Secretary
</TABLE>
* The principal business address of each of these directors and/or officers is
100 Park Avenue, New York, NY 10017.
(c) Not applicable.
Item 28. Location of Accounts and Records. The accounts, books and documents
- -------- ---------------------------------
required to be maintained by Section 31(a) of the Investment Company
Act of 1940 and the Rules promulgated thereunder are kept in the
possession of J.& W. Seligman & Co. Incorporated at its offices at 100
Park Avenue, New York, NY 10017 or at the following locations:
(1) Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City,
Missouri 64105 is custodian of the Registrant's cash and securities.
It also is agent to perform certain accounting and record-keeping
functions relating to portfolio transactions and to calculate the net
asset value of the Registrant.
(2) Seligman Data Corp., 100 Park Avenue, New York, NY 10017, as
shareholder servicing agent, maintains shareholder records for the
Registrant.
Item 29. Management Services. Not Available.
- -------- --------------------
Item 30. Undertakings. The Registrant undertakes: (1) to furnish a copy of
- -------- ------------
the Registrant's latest annual report, upon request and without
charge, to every person to whom a prospectus is delivered; and, (2) if
requested to do so by the holders of at least 10% of its outstanding
shares, to call a meeting of shareholders for the purpose of voting
upon the removal of a director or directors and to assist in
communications with other shareholders as required by Section 16(c) of
the Investment Company Act of 1940, as amended.
C-8
<PAGE>
File No. 333-20621
811-08031
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement under Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 7 to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 27th day of May, 1999.
SELIGMAN VALUE FUND SERIES, INC.
By: /s/William C. Morris
-------------------------------
William C. Morris, Chairman
Pursuant to the requirements of the Securities Act of 1933, and the Investment
Company Act of 1940 this Post-Effective Amendment No. 7 to the Registration
Statement has been signed below by the following persons in the capacities
indicated on May 27, 1999.
Signature Title
--------- -----
/s/ Brian T. Zino Chairman of the Board
- -------------------------------- (Principal executive officer)
William C. Morris* and Director
/s/ Brian T. Zino Director and President
- --------------------------------
Brian T. Zino
/s/Thomas G. Rose Treasurer
- --------------------------------
Thomas G. Rose
John R. Galvin, Director )
Alice S. Ilchman, Director )
Frank A. McPherson, Director )
John E. Merow, Director )
Betsy S. Michel, Director ) /s/ Brian T. Zino
--------------------------------
James C. Pitney, Director ) *Brian T. Zino, Attorney-in-fact
James Q. Riordan, Director )
Richard R. Schmaltz, Director )
Robert L. Shafer, Director )
James N. Whitson, Director )
<PAGE>
File No. 333-20621
811-08031
SELIGMAN VALUE FUND SERIES, INC.
Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A
EXHIBIT INDEX
Form N-1A Item No. Description
- ------------------ -----------
Item 23(a) Articles Supplementary
Item 23(i) Opinion and Consent of Counsel
Item 23 (j) Consent of Independent Auditors
Item 23(l) Form of Purchase Agreement for Initial Capital
Item 23(m) Amended Administration, Shareholder Services
And Distribution Plan for each series
<PAGE>
EXHIBIT 99.23(A)
SELIGMAN VALUE FUND SERIES, INC.
-------------------------------
ARTICLES SUPPLEMENTARY
Seligman Value Fund Series, Inc., a Maryland corporation having its principal
office in Baltimore City, Maryland (hereinafter called the "Corporation") and
registered as an open-end investment company under the Investment Company Act of
1940, as amended (the "Investment Company Act"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: (a) The total number of shares of capital stock of all sub-classes of
the Seligman Large-Cap Value Fund Class of the Corporation (the "Large-Cap Value
Series") which the Corporation has authority to issue is 1,000,000,000 shares,
which were previously classified by the Board of Directors of the Corporation
into three classes designated as Class A Common Stock, Class B Common Stock and
Class D Common Stock of the Large-Cap Value Series. The number of authorized
shares of Class A Common Stock, Class B Common Stock and Class D Common Stock of
the Large-Cap Value Series each consisted of the sum of x and y, where x equaled
the issued and outstanding shares of such sub-class and y equaled one-third of
the authorized but unissued shares of Common Stock of all sub-classes; provided
that at all times the aggregate authorized, issued and outstanding shares of
Class A, Class B and Class D Common Stock of the Large-Cap Value Series shall
not exceed the authorized number of shares of Common Stock of the Large-Cap
Value Series; and, in the event application of the formula above would have
resulted, at any time, in fractional shares, the applicable number of authorized
shares of each class was to have been rounded down to the nearest whole number
of shares of such sub-class.
(b): Pursuant to the authority of the Board of Directors to classify and
reclassify unissued shares of capital stock of the Corporation, the Board of
Directors has reclassified the unissued shares of Class A Common Stock, Class B
Common Stock and Class D Common Stock of the Large-Cap Value Series into the
following subclasses, has provided for the issuance of shares of such subclasses
and has set the following terms of such subclasses:
(1) The total number of shares of all classes of stock which the Large-
Cap Value Series has authority to issue is 1,000,000,000 shares of common
stock ("Shares") of the par value of $.001 each having an aggregate par
value of $1,000,000. The Common Stock of the Large-Cap Value Series shall
have four subclasses of shares, which shall be designated Class A Common
Stock, Class B Common Stock, Class C Common Stock and Class D Common Stock.
The number of authorized shares of Class A Common Stock, of Class B Common
Stock, of Class C Common Stock and of Class D Common Stock of the Large-Cap
Value Series shall each consist of the sum of x and y, where x equals the
issued and outstanding shares of such subclass and y equals one-fourth of
the authorized but unissued shares of Common Stock of all subclasses;
provided that at all times the aggregate authorized, issued and outstanding
shares of Class A, Class B, Class C and Class D Common Stock of the Large-
Cap Value Series shall not exceed the
1
<PAGE>
authorized number of shares of Common Stock of the Large-Cap Value Series
(i.e., 1,000,000,000 shares of Common Stock until changed by further action
of the Board of Directors in accordance with Section 2-208.1 of the
Maryland General Corporation Law, or any successor provision); and, in the
event application of the formula above would result, at any time, in
fractional shares, the applicable number of authorized shares of each class
shall be rounded down to the nearest whole number of shares of such class.
Any subclass of Common Stock of the Large-Cap Value Series shall be
referred to herein individually as a "Large-Cap Value Class" and
collectively, together with any further subclass or sub classes from time
to time established, as the "Large-Cap Value Classes".
(2) All Large-Cap Value Classes shall represent the same interest in the
Corporation and have identical voting, dividend, liquidation, and other
rights; provided, however, that notwithstanding anything in the charter of
the Corporation to the contrary:
(A) Class A shares may be subject to such front-end sales loads
as may be established by the Board of Directors from time to time in
accordance with the Investment Company Act and applicable rules and
regulations of the National Association of Securities Dealers, Inc.
(the "NASD").
(B) Class B shares may be subject to such contingent deferred
sales charges as may be established from time to time by the Board of
Directors in accordance with the Investment Company Act and applicable
rules and regulations of the NASD. Subject to subsection (F) below,
each Large-Cap Value Class B share shall convert automatically into
Large-Cap Value Class A shares on the last business day of the month
that precedes the eighth anniversary of the date of issuance of such
Large-Cap Value Class B share; such conversion shall be effected on
the basis of the relative net asset values of Large-Cap Value Class B
shares and Large-Cap Value Class A shares as determined by the
Corporation on the date of conversion.
(C) Class C shares may be subject to such front-end sales loads
and such contingent deferred sales charges as may be established from
time to time by the Board of Directors in accordance with the
Investment Company Act and applicable rules and regulations of the
NASD.
(D) Class D shares may be subject to such contingent deferred
sales charges as may be established from time to time by the Board of
Directors in accordance with the Investment Company Act and applicable
rules and regulations of the NASD.
(E) Expenses related solely to a particular Large-Cap Value
Class (including, without limitation, distribution expenses under a
Rule 12b-1 plan and administrative expenses under an administration or
service agreement, plan or other arrangement, however designated,
which may
2
<PAGE>
differ between the Large-Cap Value Classes) shall be borne by that
Large-Cap Value Class and shall be appropriately reflected (in the
manner determined by the Board of Directors) in the net asset value,
dividends, distribution and liquidation rights of the shares of that
Large-Cap Value Class.
(F) At such time as shall be permitted under the Investment
Company Act, any applicable rules and regulations thereunder and the
provisions of any exemptive order applicable to the Corporation, and
as may be determined by the Board of Directors and disclosed in the
then current prospectus of the Large-Cap Value Series, shares of a
particular Large-Cap Value Class may be automatically converted into
shares of another Large-Cap Value Class; provided, however, that such
conversion shall be subject to the continuing availability of an
opinion of counsel to the effect that such conversion does not
constitute a taxable event under Federal income tax law. The Board of
Directors, in its sole discretion, may suspend any conversion rights
if such opinion is no longer available.
(G) As to any matter with respect to which a separate vote of
any Large-Cap Value Class is required by the Investment Company Act or
by the Maryland General Corporation Law (including, without
limitation, approval of any plan, agreement or other arrangement
referred to in subsection (E) above), such requirement as to a
separate vote by the Large-Cap Value Class shall apply in lieu of
single Large-Cap Value Class voting, and, if permitted by the
Investment Company Act or any rules, regulations or orders thereunder
and the Maryland General Corporation Law, the Large-Cap Value Classes
shall vote together as a single Large-Cap Value Class on any such
matter that shall have the same effect on each such Large-Cap Value
Class. As to any matter that does not affect the interest of a
particular Large-Cap Value Class, only the holders of shares of the
Large-Cap Value Class shall be entitled to vote.
SECOND: (a) The total number of shares of capital stock of all sub-
classes of the Seligman Small-Cap Value Fund Class of the Corporation (the
"Small-Cap Value Series") which the Corporation has authority to issue is
1,000,000,000 shares, which were previously classified by the Board of Directors
of the Corporation into three classes designated as Class A Common Stock, Class
B Common Stock and Class D Common Stock of the Small-Cap Value Series. The
number of authorized shares of Class A Common Stock, Class B Common Stock and
Class D Common Stock of the Small-Cap Value Series each consisted of the sum of
x and y, where x equaled the issued and outstanding shares of such sub-class and
y equaled one-third of the authorized but unissued shares of Common Stock of all
sub-classes; provided that at all times the aggregate authorized, issued and
outstanding shares of Class A, Class B and Class D Common Stock of the Small-Cap
Value Series shall not exceed the authorized number of shares of Common Stock of
the Small-Cap Value Series; and, in the event application of the formula above
would have resulted, at any time, in fractional shares, the applicable number of
3
<PAGE>
authorized shares of each class was to have been rounded down to the nearest
whole number of shares of such sub-class.
(b): Pursuant to the authority of the Board of Directors to classify
and reclassify unissued shares of capital stock of the Corporation, the Board of
Directors has reclassified the unissued shares of Class A Common Stock, Class B
Common Stock and Class D Common Stock the Small-Cap Value Series into the
following subclasses, has provided for the issuance of shares of such subclasses
and has set the following terms of such subclasses:
(1) The total number of shares of all classes of stock which the
Small-Cap Value Series has authority to issue is 1,000,000,000 shares of
common stock ("Shares") of the par value of $.001 each having an aggregate
par value of $1,000,000. The Common Stock of the Small-Cap Value Series
shall have four subclasses of shares, which shall be designated Class A
Common Stock, Class B Common Stock, Class C Common Stock and Class D Common
Stock. The number of authorized shares of Class A Common Stock, of Class B
Common Stock, of Class C Common Stock and of Class D Common Stock of the
Small-Cap Value Series shall each consist of the sum of x and y, where x
equals the issued and outstanding shares of such subclass and y equals one-
fourth of the authorized but unissued shares of Common Stock of all
subclasses; provided that at all times the aggregate authorized, issued and
outstanding shares of Class A, Class B, Class C and Class D Common Stock of
the Small-Cap Value Series shall not exceed the authorized number of shares
of Common Stock of the Small-Cap Value Series (i.e., 1,000,000,000 shares
of Common Stock until changed by further action of the Board of Directors
in accordance with Section 2-208.1 of the Maryland General Corporation Law,
or any successor provision); and, in the event application of the formula
above would result, at any time, in fractional shares, the applicable
number of authorized shares of each class shall be rounded down to the
nearest whole number of shares of such class. Any subclass of Common Stock
of the Small-Cap Value Series shall be referred to herein individually as a
"Small-Cap Value Class" and collectively, together with any further
subclass or sub classes from time to time established, as the "Small-Cap
Value Classes".
(2) All Small-Cap Value Classes shall represent the same interest in
the Corporation and have identical voting, dividend, liquidation, and other
rights; provided, however, that notwithstanding anything in the charter of
the Corporation to the contrary:
(A) Class A shares may be subject to such front-end sales loads
as may be established by the Board of Directors from time to time in
accordance with the Investment Company Act and applicable rules and
regulations of the National Association of Securities Dealers, Inc.
(the "NASD").
(B) Class B shares may be subject to such contingent deferred
sales charges as may be established from time to time by the Board of
Directors
4
<PAGE>
in accordance with the Investment Company Act and applicable
rules and regulations of the NASD. Subject to subsection (F) below,
each Small-Cap Value Class B share shall convert automatically into
Small-Cap Value Class A shares on the last business day of the month
that precedes the eighth anniversary of the date of issuance of such
Small-Cap Value Class B share; such conversion shall be effected on
the basis of the relative net asset values of Small-Cap Value Class B
shares and Small-Cap Value Class A shares as determined by the
Corporation on the date of conversion.
(C) Class C shares may be subject to such front-end sales loads
and such contingent deferred sales charges as may be established from
time to time by the Board of Directors in accordance with the
Investment Company Act and applicable rules and regulations of the
NASD.
(D) Class D shares may be subject to such contingent deferred
sales charges as may be established from time to time by the Board of
Directors in accordance with the Investment Company Act and applicable
rules and regulations of the NASD.
(E) Expenses related solely to a particular Small-Cap Value
Class (including, without limitation, distribution expenses under a
Rule 12b-1 plan and administrative expenses under an administration or
service agreement, plan or other arrangement, however designated,
which may differ between the Small-Cap Value Classes) shall be borne
by that Small-Cap Value Class and shall be appropriately reflected (in
the manner determined by the Board of Directors) in the net asset
value, dividends, distribution and liquidation rights of the shares of
that Small-Cap Value Class.
(F) At such time as shall be permitted under the Investment
Company Act, any applicable rules and regulations thereunder and the
provisions of any exemptive order applicable to the Corporation, and
as may be determined by the Board of Directors and disclosed in the
then current prospectus of the Small-Cap Value Series, shares of a
particular Small-Cap Value Class may be automatically converted into
shares of another Small-Cap Value Class; provided, however, that such
conversion shall be subject to the continuing availability of an
opinion of counsel to the effect that such conversion does not
constitute a taxable event under Federal income tax law. The Board of
Directors, in its sole discretion, may suspend any conversion rights
if such opinion is no longer available.
(G) As to any matter with respect to which a separate vote of
any Small-Cap Value Class is required by the Investment Company Act or
by the Maryland General Corporation Law (including, without
limitation, approval of any plan, agreement or other arrangement
referred to in subsection (E) above), such requirement as to a
separate vote by the Small-Cap Value Class shall apply in lieu of
single Small-Cap Value Class voting,
5
<PAGE>
and, if permitted by the Investment Company Act or any rules,
regulations or orders thereunder and the Maryland General Corporation
Law, the Small-Cap Value Classes shall vote together as a single
Small-Cap Value Class on any such matter that shall have the same
effect on each such Small-Cap Value Class. As to any matter that does
not affect the interest of a particular Small-Cap Value Class, only
the holders of shares of the Small-Cap Value Class shall be entitled
to vote.
THIRD: These Articles Supplementary do not change the total number of
authorized shares of the Corporation.
IN WITNESS WHEREOF, SELIGMAN VALUE FUND SERIES, INC. has caused these
Articles Supplementary to be signed in its name and on its behalf by its
President and witnessed by its Secretary, and each of said officers of the
Corporation has also acknowledged these Articles Supplementary to be the
corporate act of the Corporation and has stated under penalties of perjury that
to the best of his knowledge, information and belief that the matters and facts
set forth with respect to approval are true in all material respects, all on May
24, 1999.
SELIGMAN VALUE FUND SERIES, INC.
By: /s/ Brian T. Zino
--------------------------------
Brian T. Zino, President
Witness:
/s/ Frank J. Nasta
- -------------------------------
Frank J. Nasta, Secretary
6
<PAGE>
SULLIVAN & CROMWELL
May 27, 1999
Seligman Value Fund Series, Inc.,
100 Park Avenue,
New York, N.Y. 10017.
Dear Sirs:
In connection with Post-Effective Amendment No.7 to the Registration
Statement on Form N-1A (File No. 333-20621) of Seligman Value Fund Series, Inc.,
a Maryland corporation (the "Fund"), which you expect to file under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to an
indefinite number of shares of capital stock, par value $0.001 per share, of the
class designated as Class C shares (the "Shares") of the series of the Fund
designated Seligman Large-Cap Value Fund and Seligman Small-Cap Value Fund
(collectively, the "Series"), we, as your counsel, have examined such corporate
records, certificates and other documents, and such questions of law, as we have
considered necessary or appropriate for the purposes of this opinion.
The number of shares of each class of capital stock that each Series
is authorized to issue at any time is determined by adding to the number of
shares of such class then outstanding additional authorized shares in an amount
determined according to a formula set forth in the Fund's charter. The formula
allocates to each class an equal portion of the number of shares representing
the difference between the number of shares that the Series is authorized to
issue and the total number of shares of all classes of such Series outstanding
at such time.
Upon the basis of such examination, we advise you that, in our
opinion, the Fund is authorized to issue the number of Shares of each Series
determined in accordance with the charter of the Fund as described above and,
when the Post-Effective Amendment referred to above has become effective under
the Securities Act and the Shares have been issued (a) for at least the par
value thereof in accordance with the Registration Statement referred to above,
(b) so as not to exceed the then authorized number of Shares of such Series and
(c) in accordance with the authorization of the Board of Directors, the Shares
will be duly and validly issued, fully paid and non-assessable.
The foregoing opinion is limited to the Federal laws of the United
States and the General Corporation Law of the State of Maryland, and we are
expressing no opinion as to the effect of the laws of any other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the
Post-Effective Amendment referred to above. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act.
Very truly yours,
SULLIVAN & CROMWELL
<PAGE>
EXHIBIT 99.23 (j)
CONSENT OF INDEPENDENT AUDITORS
Seligman Value Fund Series, Inc.:
We consent to the use in Post-Effective Amendment No. 7 to Registration
Statement No. 333-20621 of our reports dated January 29, 1999, appearing in the
Annual Reports to Shareholders for the year ended December 31, 1998, which are
incorporated by reference in the Statement of Additional Information, which is
included in such Registration Statement, and to the references to us under the
captions "Financial Highlights" in the Prospectus and "General Information" in
the Statement of Additional Information, which are also included in such
Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
May 26, 1999
<PAGE>
EXHIBIT 99.23(L)
INVESTMENT LETTER
SELIGMAN VALUE FUND SERIES, INC.
Seligman Value Fund Series, Inc. (the "Fund"), an open-end diversified
management investment company, and the undersigned ("Purchaser"), intending to
be legally bound, hereby agree as follows:
1. The Fund hereby sells to Purchaser and Purchaser purchases 1 Class C share
of Capital Stock (par value $.001) of the Seligman Large-Cap Value Series
of the Fund (the "Large-Cap Value Series") at a price equivalent to the net
asset value of one Class D share of the Large-Cap Value Series as of the
close of business on May 27, 1999 and 1 Class C share of Capital Stock (par
value $.001) of the Seligman Small-Cap Value Series of the Fund (the
"Small-Cap Value Series") at a price equivalent to the net asset value of
one Class D share of the Small-Cap Value Series as of the close of business
on May 27, 1999 (collectively, the "Shares"). The Fund hereby acknowledges
receipt from the Purchaser of funds in such amount in full payment for the
Shares.
2. Purchaser represents and warrants to the Fund that the Shares are being
acquired for investment and not with a view to distribution thereof, and
that Purchaser has no present intention to redeem or dispose of the Shares.
IN WITNESS WHEREOF, the parties have executed this agreement as of the 28th day
of May, 1999 ("Purchase Date").
SELIGMAN VALUE FUND SERIES, INC.
By:
-------------------------------
Name: Lawrence P. Vogel
Title: Vice President
J. & W. SELIGMAN & CO. INCORPORATED.
By:
-------------------------------
Name: Brian T. Zino
Title: President
<PAGE>
EXHIBIT 99.23(M)
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
----------------------------------------------------------
As amended and restated through June 1, 1999
Section 1. Seligman Large-Cap Value Fund (the "Series"), a series of Seligman
Value Fund Series, Inc. (the "Fund") will pay fees to Seligman Advisors, Inc.,
the principal underwriter of its shares (the "Distributor"), for administration,
shareholder services and distribution assistance for the Class A, Class B, Class
C and Class D shares of the Series. As a result, the Series is adopting this
Administration, Shareholder Services and Distribution Plan (the "Plan") pursuant
to Section 12(b) of the Investment Company Act of 1940, as amended (the "Act")
and Rule 12b-1 thereunder.
Section 2. Pursuant to this Plan, the Series may pay to the Distributor a
shareholder servicing fee of up to .25% on an annual basis, of the average daily
net assets of the Series (payable quarterly with respect to Class A and monthly
with respect to Class B, Class C and Class D) and a distribution fee of .75% on
an annual basis, payable monthly, of the average daily net assets of the Series
attributable to the Class B Shares and a distribution fee of up to .75% on an
annual basis, payable monthly, of the average daily net assets of the Series
attributable toClass C and Class D shares. Such fees will be used in their
entirety by the Distributor to make payments for administration, shareholder
services and distribution assistance, including, but not limited to (i)
compensation to securities dealers and other organizations (each, a "Service
Organization" and collectively, the "Service Organizations"), for providing
distribution assistance with respect to assets invested in the Series, (ii)
compensation to Service Organizations for providing administration, accounting
and other shareholder services with respect to Series shareholders, and (iii)
otherwise promoting the sale of shares of the Series, including paying for the
preparation of advertising and sales literature and the printing and
distribution of such promotional materials and prospectuses to prospective
investors and defraying the Distributor's costs incurred in connection with its
marketing efforts with respect to shares of the Series. To the extent a Service
Organization provides administration, accounting and other shareholder services,
payment for which is not required to be made pursuant to a plan meeting the
requirements of Rule 12b-1, a portion of the fee paid by the Series shall be
deemed to include compensation for such services. The fees received from the
Series hereunder in respect of the Class A shares may not be used to pay any
interest expense, carrying charges or other financing costs, and fees received
hereunder may not be used to pay any allocation of overhead of the Distributor.
The fees of any particular class of the Series may not be used to subsidize the
sale of shares of any other class. The fees payable to Service Organizations
from time to time shall, within such limits, be determined by the Directors of
the Fund.
Section 3. J. & W. Seligman & Co. Incorporated, the Fund's investment manager
(the "Manager"), in its sole discretion, may make payments to the Distributor
for similar purposes. These payments will be made by the Manager from its own
resources, which may include the management fee that the Manager receives from
the Fund.
1
<PAGE>
Section 4. This Plan shall continue in effect through December 31 of each
year so long as such continuance is specifically approved at least annually by
vote of a majority of both (a) the Directors of the Fund and (b) the Qualified
Directors, cast in person at a meeting called for the purpose of voting on such
approval.
Section 5. The Distributor shall provide to the Fund's Directors, and the
Directors shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
Section 6. This Plan may be terminated by the Series with respect to any
class at any time by vote of a majority of the Qualified Directors of the Fund,
or by vote of a majority of the outstanding voting securities of such class. If
this Plan is terminated in respect of a class, no amounts (other than amounts
accrued but not yet paid) would be owed by the Series to the Distributor with
respect to such class.
Section 7. All agreements related to this Plan shall be in writing, and shall
be approved by vote of a majority of both (a) the Directors of the Fund and (b)
the Qualified Directors, cast in person at a meeting called for the purpose of
voting on such approval, provided, however, that the identity of a particular
Service Organization executing any such agreement may be ratified by such a vote
within 90 days of such execution. Any agreement related to this Plan shall
provide:
A. That such agreement may be terminated in respect of any class of the
Series at any time, without payment of any penalty, by vote of a
majority of the Qualified Directors or by vote of a majority of the
outstanding voting securities of the class, on not more than 60 days'
written notice to any other party to the agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
Section 8. This Plan may not be amended to increase materially the amount of
fees permitted pursuant to Section 2 hereof without the approval of a majority
of the outstanding voting securities of the relevant class and no material
amendment to this Plan shall be approved other than by vote of a majority of
both (a) the Directors of the Fund and (b) the Qualified Directors, cast in
person at a meeting called for the purpose of voting on such approval. This
Plan shall not be amended to reduce the distribution fee payable to the
Distributor pursuant to Section 2 hereof in respect of Class B shares, unless
the shareholder servicing fee payable pursuant to Section 2 hereof for
compensation to Service Organizations for providing administration, accounting
and other shareholder services has been eliminated, provided, however that the
distribution fee in respect of Class B shares may be reduced without change to
the shareholder servicing fee, if and to the extent required in order to comply
with any applicable laws or regulations, including applicable rules of the
National Association of Securities Dealers, Inc. regulating maximum sales
charges.
2
<PAGE>
Section 9. The Series is not obligated to pay any administration, shareholder
services or distribution expense in excess of the fee described in Section 2
hereof, and, in the case of Class A shares, any expenses of administration,
shareholder services and distribution of Class A shares of the Series accrued in
one fiscal year of the Series may not be paid from administration, shareholder
services and distribution fees received from the Series in respect of Class A
shares in any other fiscal year.
Section 10. As used in this Plan, (a) the terms "assignment", "interested
person" and "vote of a majority of the outstanding voting securities" shall have
the respective meanings specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission and (b) the term "Qualified Directors" shall mean the
Directors of the Fund who are not "interested persons" of the Fund and have no
direct or indirect financial interest in the operation of this Plan or in any
agreement related to this Plan.
3
