File No. 33-15253
811-5221
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. 24 |X|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 26 |X|
SELIGMAN PORTFOLIOS, 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 paragraph (b)
|_| on (date) pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(1)
|_| on (date) pursuant to paragraph (a)(1)
|X| 75 days after filing pursuant to paragraph (a)(2)
|_| on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
SELIGMAN
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PORTFOLIOS, INC.
o Seligman Bond Portfolio
o Seligman Capital Portfolio
o Seligman Cash Management Portfolio
o Seligman Common Stock Portfolio
o Seligman Communications and Information Portfolio
o Seligman Frontier Portfolio
o Seligman Henderson Global Growth Opportunities Portfolio
o Seligman Henderson Global Smaller Companies Portfolio
o Seligman Henderson Global Technology Portfolio
o Seligman Henderson International Portfolio
o Seligman High-Yield Bond Portfolio
o Seligman Income Portfolio
o Seligman Large-Cap Growth Portfolio
o Seligman Large-Cap Value Portfolio
o Seligman Small-Cap Value Portfolio
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 this Fund or any other fund cannot provide a complete
investment program. The suitability of an investment in this 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 this Fund is suitable
for you.
PROSPECTUS
MAY 1, 1999
managed by
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
EQVA1 5/99
<PAGE>
Table of Contents
The Fund
Discussions of the investment objectives,
strategies, risks, and performance of the
Portfolios of the Fund
Overview of the Fund P-1
Seligman Bond Portfolio P-2
Seligman Capital Portfolio P-5
Seligman Cash Management Portfolio P-7
Seligman Common Stock Portfolio P-10
Seligman Communications and
Information Portfolio P-13
Seligman Frontier Portfolio P-16
Seligman Henderson Global
Growth Opportunities Portfolio P-19
Seligman Henderson Global
Smaller Companies Portfolio P-22
Seligman Henderson Global
Technology Portfolio P-25
Seligman Henderson International
Portfolio P-28
Seligman High-Yield Bond Portfolio P-31
Seligman Income Portfolio P-34
Seligman Large-Cap
Growth Portfolio P-37
Seligman Large-Cap Value Portfolio P-39
Seligman Small-Cap Value Portfolio P-41
Management of the Fund P-43
Year 2000 P-44
Euro Conversion P-44
Shareholder Information
Pricing of Fund Shares P-45
How to Purchase and Sell Shares P-45
Dividends and Capital Gain
Distributions P-45
Taxes P-45
Financial Highlights P-46
For More Information back cover
TIMES CHANGE ... VALUES ENDURE
<PAGE>
The Fund
OVERVIEW OF THE FUND
This Prospectus contains information about Seligman Portfolios, Inc. The Fund
consists of the following 15 separate and distinct portfolios:
Seligman Bond Portfolio
Seligman Capital Portfolio
Seligman Cash Management Portfolio
Seligman Common Stock Portfolio
Seligman Communications and Information Portfolio
Seligman Frontier Portfolio
Seligman Henderson Global Growth Opportunities Portfolio
Seligman Henderson Global Smaller Companies Portfolio
Seligman Henderson Global Technology Portfolio
Seligman Henderson International Portfolio
Seligman High-Yield Bond Portfolio
Seligman Income Portfolio
Seligman Large-Cap Growth Portfolio
Seligman Large-Cap Value Portfolio
Seligman Small-Cap Value Portfolio
Shares of the Fund's Portfolios are not offered or sold directly to investors.
They are offered and sold only to insurance company separate accounts.
The shares are currently provided as the investment medium for certain variable
annuity accounts offered by Canada Life Insurance Company of America and Canada
Life Insurance Company of New York.
Shares of some Portfolios of the Fund may not be offered to all Canada Life
Accounts. Shares of the Fund will be purchased and sold by Canada Life Accounts
at net asset value, without charge. However, the Canada Life Accounts are
subject to certain fees and charges. These fees and charges for the Canada Life
Accounts are described in the prospectuses or disclosure documents for Canada
Life Accounts and should be read together with this Prospectus, as applicable.
Shares of some of the Portfolios of the Fund are also provided as the investment
medium for Seligman Mutual Benefit Plan, a separate account of MBL Life
Assurance Corporation. However, MBL Life no longer accepts applications for new
contracts nor will it accept additional purchase payments under existing
contracts.
Each Portfolio has its own objectives, strategies and risks. A discussion of
each Portfolio begins on the next page. You should read this information before
making an investment decision about that Portfolio.
P-1
<PAGE>
Seligman Bond Portfolio
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The Portfolio's objective is favorable current income.
The Portfolio uses the following principal strategies to seek its objective:
Generally, the Portfolio invests in fixed-income securities, diversified among a
number of market sectors. The Portfolio has a fundamental policy that at least
80% of the Portfolio's assets will be invested in securities that are rated
investment grade when purchased by the Portfolio. The Portfolio may invest in
securities of any duration. Capital appreciation will be a secondary
consideration in selecting securities for purchase by the Portfolio.
The types of securities in which the Portfolio may invest include corporate debt
securities (including bonds and debentures convertible into common stock or with
rights and warrants), securities issued or guaranteed by the US Treasury, its
agencies or instrumentalities, mortgage-backed securities, and high-grade money
market instruments. The Portfolio may also hold or sell any securities obtained
through the exercise of conversion rights or warrants, or as a result of a
reorganization, recapitalization, or liquidation proceeding of any issuer of
securities owned by the Portfolio.
The Portfolio uses an investment approach that combines macro analysis of the
fixed-income market with fundamental research into individual securities,
customized by market sector. This means that the investment manager considers
the trends in the fixed-income market and evaluates the long-term trends in
interest rates, and then selects individual securities for the Portfolio based
on its evaluation of each security's particular characteristics (for example,
duration, yield, quality, relative value). The average maturity of the Portfolio
will vary in response to what the investment manager believes to be the
long-term trend in interest rates. Additionally, the Portfolio's concentration
in any particular market sector and the Portfolio's individual security holdings
will vary depending on what the investment manager believes to be the relative
value offered by certain sectors, as well as specific securities within those
sectors.
In selecting individual securities for purchase by the Portfolio, the investment
manager will seek to identify securities of various market sectors that it
believes offer better total return opportunities.
The Portfolio generally sells securities when the investment manager believes
that the direction of long-term interest rates is changing, better opportunities
exist in the market, or yield spreads (i.e., the yields offered on different
securities) have become exceedingly narrow so the Portfolio is not being amply
rewarded for buying long-term securities (which generally offer higher yields
but are subject to more price volatility than short-term securities), or when
the Portfolio must meet cash requirements.
The Portfolio 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 Portfolio from achieving its objective.
The Portfolio may invest up to 15% of its net assets in illiquid securities and
may invest up to 10% of its total assets directly in foreign securities. The
Portfolio may purchase securities on a when-issued basis (i.e., delivery of
securities and payment of the purchase price takes place after the commitment to
purchase the securities). The Fund generally does not invest a significant
amount, if any, in illiquid or foreign securities.
Except for its fundamental policy stated above, the Portfolio may change its
principal strategies if the Fund's Board of Directors believes doing so is
consistent with the Portfolio's investment objective of favorable current
income.
The Portfolio's objective, as well as its fundamental policy, may be changed
only with the approval of shareholders. As with any mutual fund, there is no
guarantee the Portfolio will achieve its objective.
P-2
<PAGE>
Seligman Bond Portfolio
PRINCIPAL RISKS
The value of your investment in the Portfolio will fluctuate with fluctuations
in the value of the securities held by the Portfolio. The principal factors that
may affect the value of the Portfolio's securities holdings are changes in
interest rates and the credit worthiness of the issuers of securities held by
the Portfolio.
Interest rate risk. Changes in market interest rates will affect the value of
securities held by the Portfolio. The Portfolio invests mostly in fixed-income
securities. In general, the market value of fixed-income securities moves in the
opposite direction of interest rates: the market value decreases when interest
rates rise and increases when interest rates fall. The Portfolio's net asset
value per share generally moves in the same direction as the market value of the
securities it holds. Therefore, if interest rates rise, you should expect the
Portfolio's net asset value per share to fall, and if interest rates fall, the
Portfolio's net asset value should rise.
Long-term securities are generally more sensitive to changes in interest rates,
and therefore subject to a greater degree of market price volatility. To the
extent the Portfolio holds long-term securities, its net asset value will be
subject to a greater degree of fluctuation than if it held securities of shorter
duration.
Credit risk. A fixed-income security could deteriorate in quality to such an
extent that its rating is downgraded or its market value declines relative to
comparable securities. Credit risk also includes the risk that an issuer of a
debt security would be unable to make interest and principal payments. To the
extent the Portfolio holds securities that have been downgraded, or that default
on payment, its performance could be negatively affected.
While the Portfolio is required to invest a majority of its assets in securities
rated investment grade on the date of purchase, there is no guarantee that these
securities are free from credit risk. Moody's and S&P ratings are generally
accepted measures of credit risk. However, these ratings are subject to certain
limitations. The rating of an issuer is based heavily on past developments and
does not necessarily reflect probable future conditions. Ratings also are not
updated continuously.
Fixed-income securities, like those in which the Portfolio invests, are traded
principally by dealers in the over-the counter market. The Portfolio's ability
to sell securities it holds is dependent on the willingness and ability of
market participants to provide bids that reflect current market levels. Adverse
market conditions could result in reducing the number of ready buyers.
An investment in the Portfolio is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
P-3
<PAGE>
Seligman Bond Portfolio
PAST PERFORMANCE
The information below provides some indication of the risks of investing in the
Bond Portfolio by showing how the performance of a single share of the Portfolio
has varied year to year, as well as how its performance compares to two
widely-used measures of performance. How the Portfolio has performed in the
past, however, is not necessarily an indication of how it will perform in the
future.
The returns presented in the bar chart and table do not reflect the effect of
any administration fees or sales charges associated with variable annuity
contracts. If these expenses were included, the returns would be less. Both the
bar chart and table assume that all dividends and capital gain distributions
were reinvested.
Annual Total Returns
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1989 8.70%
1990 6.14%
1991 14.58%
1992 5.60%
1993 7.98%
1994 -3.39%
1995 19.18%
1996 0.09%
1997 8.98%
1998 8.20%
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
================================================================================
================================================================================
Portfolio Management
The Bond Portfolio is managed by the Seligman Taxable Fixed Income Group, headed
by Gary S. Zeltzer. Mr. Zeltzer joined Seligman in March 1998 as Senior Vice
President, Manager Taxable Fixed Income. He is a Vice President of the Fund and
has been a Portfolio Manager of the Bond Portfolio since March 1998. Prior to
joining Seligman, Mr. Zeltzer was a Group Vice President and Portfolio Manager
at Schroder Capital Management from July 1979 to March 1998. Mr. Zeltzer also
manages the Cash Management Portfolio of the Fund; and he manages Seligman Cash
Management Fund, Inc. and Seligman U.S. Government Securities Series, a series
of Seligman High Income Fund Series.
P-4
<PAGE>
Seligman Capital Portfolio
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The Portfolio's objective is capital appreciation.
The Portfolio uses the following principal strategies to seek its objective:
Generally, the Portfolio invests primarily in the common stock of medium-sized
US companies. Common stocks are chosen for the Portfolio using both quantitative
and fundamental analysis. This means the investment manager first screens
companies for past growth in sales and earnings, as well as a strong balance
sheet (e.g., low ratio of debt to total capital). In selecting individual
securities for investment, the investment manager then looks to identify
medium-sized companies that it believes display one or more of the following:
o Proven track record
o Strong management
o Multiple product lines
o Potential for improvement in overall operations (i.e., catalyst
for growth in revenues and/or earnings)
o Positive supply and demand outlook for its industry
The investment manager also looks at the forecasted earnings of a company
considered for investment to determine if the company has the potential for
above-average growth.
The Portfolio will generally sell a stock when the investment manager believes
that the company or industry fundamentals have deteriorated or the company's
catalyst for growth is already reflected in the stock's price (i.e., the stock
is fully valued).
Although the Portfolio generally concentrates its investments in common stocks,
it may invest in preferred stocks, securities convertible into common stocks,
common stock rights or warrants, and debt securities if the investment manager
believes they offer capital appreciation opportunities.
The Portfolio 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 Portfolio from achieving its objective.
The Portfolio 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 Portfolio may borrow money from
time to time to purchase securities. The Portfolio generally does not invest a
significant amount, if any, in illiquid or foreign securities.
The Portfolio may change its principal strategies if the Fund's Board of
Directors believes doing so is consistent with the Portfolio's investment
objective of capital appreciation.
The Portfolio's objective is a fundamental policy and may be changed only with
the approval of shareholders. As with any mutual fund, there is no guarantee the
Portfolio will meet its objective.
P-5
<PAGE>
Seligman Capital Portfolio
PRINCIPAL RISKS
Stock prices fluctuate. Therefore, as with any fund that invests in stocks, the
Portfolio'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.
The Portfolio'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.
Concentration of investments in any one industry is avoided, except under
unusual circumstances. The Portfolio may, however, invest more heavily in
certain industries which the investment manager believes offer good investment
opportunities. To the extent that an industry in which the Portfolio is invested
falls out of favor, the Portfolio's performance may be negatively affected.
To the extent that the Portfolio invests some of its assets in higher-risk
securities, such as foreign securities or illiquid securities, it may be subject
to higher price volatility. Investing in securities of foreign issuers involves
risks not associated with US investments, including currency fluctuations,
foreign taxation, differences in financial reporting practices, and changes in
political conditions.
The Portfolio may actively and frequently trade securities in its portfolio to
carry out its principal strategies, or for other reasons. A high portfolio
turnover rate results in correspondingly greater transaction costs for the
Portfolio and a possible increase in short-term capital gains and losses.
An investment in the Portfolio is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
P-6
<PAGE>
Seligman Capital Portfolio
PAST PERFORMANCE
The information below provides some indication of the risks of investing in the
Capital Portfolio by showing how the performance of a single share of the
Portfolio has varied year to year, as well as how its performance compares to
two widely-used measures of performance. How the Portfolio has performed in the
past, however, is not necessarily an indication of how it will perform in the
future.
The returns presented in the bar chart and table do not reflect the effect of
any administration fees or sales charges associated with variable annuity
contracts. If these expenses were included, the returns would be less. Both the
bar chart and table assume that all dividends and capital gain distributions
were reinvested.
Annual Total Returns
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1989 16.47%
1990 -3.18%
1991 59.05%
1992 6.80%
1993 11.65%
1994 -4.59%
1995 27.17%
1996 14.51%
1997 21.31%
1998 22.19%
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
================================================================================
================================================================================
Portfolio Management
The Capital Portfolio is managed by the Seligman Growth Team, headed by Marion
Schultheis. Marion Schultheis joined Seligman in May 1998 as a Managing
Director. She is a Vice President of the Fund and has been Portfolio Manager of
the Capital Portfolio since May 1998. Prior to joining Seligman, Ms. Schultheis
was a Managing Director at Chancellor LGT from October 1997 to May 1998 and
Senior Portfolio Manager at IDS Advisory Group Inc. from August 1987 to October
1997. Ms. Schultheis also manages the Large-Cap Growth Portfolio and co-manages
the Global Growth Opportunities Portfolio of the Fund; and she manages Seligman
Capital Fund, Inc. and Seligman Growth Fund, Inc. and co-manages Seligman
Henderson Global Growth Opportunities Fund, a series of Seligman Henderson
Global Fund Series, Inc.
P-7
<PAGE>
Seligman Cash Management Portfolio
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The Portfolio's objectives are to preserve capital and to maximize liquidity and
current income.
The Portfolio uses the following principal strategies to seek its objectives:
The Portfolio invests in US-denominated high-quality money market instruments.
Such instruments include obligations of the US Treasury, its agencies or
instrumentalities, obligations of domestic and foreign banks (such as
certificates of deposit and fixed time deposits), commercial paper and
short-term corporate debt securities, and repurchase agreements with respect to
these types of instruments.
The Portfolio will invest only in US dollar-denominated securities having a
remaining maturity of 13 months (397) days or less and will maintain a US
dollar-weighted average portfolio maturity of 90 days or less.
In seeking to maintain a constant net asset value of $1.00, the Portfolio will
limit its investments to securities that, in accordance with guidelines approved
by the Fund's Board of Directors, present minimal credit risk. Accordingly, the
Portfolio will only purchase US Government securities, or securities rated in
one of the two highest rating categories assigned to short-term debt securities
by at least two nationally recognized statistical rating organizations (such as
Moody's Investors Service, Inc. (Moody's) or Standard and Poor's Rating Service
(S&P), or if not so rated, determined to be of comparable quality.
Determination of quality is made at the time of investment, and is made in
accordance with procedures approved by the Fund's Board of Directors. If the
quality of an investment later declines, the Portfolio may, in certain limited
circumstances, continue to hold the investment.
Presently, the Portfolio only invests in either US Government securities or
securities that are rated in the top category by Moody's and S&P. However, the
Portfolio is permitted to invest up to 5% of its assets in securities rated in
the second rating category by two nationally recognized statistical rating
organizations, provided that not more than the greater of 1% of its total assets
or $1,000,000 are invested in any one security.
The Portfolio may change its principal strategies if the Fund's Board of
Directors believes doing so is consistent with the Portfolio's investment
objectives.
The Portfolio's objectives are a fundamental policy and may be changed only with
the approval of shareholders. As with any mutual fund, the Portfolio may not
achieve its investment objectives.
PRINCIPAL RISKS
An investment in the Portfolio is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Portfolio seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the Portfolio.
Yield and total return of the Portfolio will fluctuate with fluctuations in the
yields of the securities held by the Portfolio. In periods of declining interest
rates, the yields of the securities held by the Portfolio will tend to be
somewhat higher than prevailing market rates, and in periods of rising interest
rates, the yields of securities held by the Portfolio will tend to be lower than
market rates. Additionally, when interest rates are falling, the inflow of new
money to the Portfolio from the continuous sale of its shares will likely be
invested in securities producing lower yields than the balance of the
Portfolio's assets, thereby reducing the current yield of the Portfolio. In
periods of rising interest rates, the opposite may be true.
Repurchase agreements in which the Portfolio invests could involve certain risks
in the event of the default by the seller, including possible delays and
expenses in liquidating the securities underlying the agreement, decline in the
value of the underlying securities and loss of interest.
Investments in foreign banks and foreign branches of US banks involve certain
risks not generally associated with investments in US banks. While US banks are
required to maintain certain reserves and are subject to other regulations,
these requirements and regulations may not apply to foreign banks or foreign
branches of US banks. Investments in foreign banks or foreign branches may also
be subject to other risks, including political or economic developments, the
seizure or nationalization of foreign deposits and the establishments of
exchange controls or other restrictions.
P-8
<PAGE>
Seligman Cash Management Portfolio
PAST PERFORMANCE
The information below provides some indication of the risks of investing in the
Cash Management Portfolio by showing how the performance of a single share of
the Portfolio has varied year to year. How the Portfolio has performed in the
past, however, is not necessarily an indication of how it will perform in the
future.
The returns presented in the bar chart do not reflect the effect of any
administration fees or sales charges associated with variable annuity contracts.
If these expenses were included, the returns would be less. The returns
presented assume that all dividends and capital gain distributions were
reinvested.
Annual Total Returns
1989 7.81%
1990 7.79%
1991 5.70%
1992 3.53%
1993 3.00%
1994 4.03%
1995 5.60%
1996 5.43%
1997 5.52%
1998 5.42%
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
The Seligman Cash Management Portfolio's 7-day yield as of December 31,
1999 was __%.
P-9
<PAGE>
Seligman Common Stock Portfolio
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The Portfolio's objectives are to produce favorable, but not the highest,
current income and long-term growth of both income and capital value, without
exposing capital to undue risk.
The Portfolio uses the following principal strategies to seek its objectives:
Generally, the Portfolio invests a majority of its assets in common stocks,
broadly diversified among a number of industries. The Portfolio usually invests
in the common stock of larger US companies; however, it may invest in companies
of any size. While common stocks have for many years been the predominant type
of security owned by the Portfolio, substantial portions of the Portfolio's
assets have been held, and may be held, in cash and fixed-income securities.
The Portfolio uses a bottom-up stock selection approach. This means the
investment manager concentrates on individual company fundamentals, rather than
on a particular industry. The Portfolio seeks to purchase strong, well-managed
companies that have the potential for solid earnings growth and dividend
increases.
The investment manager identifies companies that have attractive dividend yields
relative to the market and that typically display relatively low valuations
based on one or more of the following measures: price-to-earnings, price-to-cash
flow, price-to-sales, and price-to-book value. The investment manager then uses
in-depth research into each company that meets its preliminary criteria to
identify those companies that it believes possess a catalyst for earnings
acceleration.
The Portfolio generally sells a stock if the investment manager believes one or
more of the following:
o the stock is over valued or fully valued
o its dividend yield is not competitive compared to the yields
offered by other securities in its industry
o its earnings are disappointing or the catalyst for earnings
acceleration no longer exists
o the company's underlying fundamentals have deteriorated
o there are more attractive investment opportunities
The Portfolio may purchase American Depositary Receipts (ADRs), which are
publicly traded instruments generally issued by domestic banks or trust
companies that represent a security of a foreign issuer. The Portfolio 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 (which does not include ADRs). The Portfolio generally does
not invest a significant amount, if any, in illiquid or foreign securities.
The Portfolio 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 Portfolio from achieving its objective.
The Portfolio may change its principal strategies if the Fund's Board of
Directors believes doing so is consistent with the Portfolio's investment
objectives.
The Portfolio's objectives are a fundamental policy and may be changed only with
the approval of shareholders. As with any mutual fund, there is no guarantee the
Portfolio will achieve its objectives.
P-10
<PAGE>
Seligman Common Stock Portfolio
PRINCIPAL RISKS
Stock prices fluctuate. Therefore, as with any fund that invests in stocks, the
Portfolio'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.
While the Portfolio maintains exposure to varied industry sectors over the
longer term, it may invest more heavily in certain industries believed to offer
good investment opportunities. To the extent that an industry in which the
Portfolio is invested falls out of favor, the Portfolio's performance may be
negatively affected.
The Portfolio'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.
Stocks of large US companies, like those in which the Portfolio generally
invests, are experiencing an extended period of strong performance. However, if
investor sentiment changes, the value of large company stocks may decline. This
could have an adverse effect on the Portfolio's performance.
To the extent that the Portfolio invests some of its assets in higher-risk
securities, such as foreign or illiquid securities, it may be subject to higher
price volatility. Investing in securities of foreign issuers involves risks not
associated with US investments, including currency fluctuations, foreign
taxation, differences in financial reporting practices, and changes in political
conditions.
The Portfolio may actively and frequently trade securities in its portfolio to
carry out its principal strategies. A high portfolio turnover rate results in
correspondingly greater transaction costs for the Portfolio and a possible
increase in short-term capital gains and losses.
An investment in the Portfolio is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
P-11
<PAGE>
Seligman Common Stock Portfolio
PAST PERFORMANCE
The information below provides some indication of the risks of investing in the
Common Stock Portfolio by showing how the performance of a single share of the
Portfolio has varied year to year, as well as how its performance compares to
two widely-used measures of performance. How the Portfolio has performed in the
past, however, is not necessarily an indication of how it will perform in the
future.
The returns presented in the bar chart and table do not reflect the effect of
any administration fees or sales charges associated with variable annuity
accounts. If these expenses were included, the returns would be less. Both the
bar chart and table assume that all dividends and capital gain distributions
were reinvested.
Annual Total Returns
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1989 24.11%
1990 -3.15%
1991 33.16%
1992 12.14%
1993 11.94%
1994 0.04%
1995 27.28%
1996 20.08%
1997 21.31%
1998 24.16%
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
================================================================================
Average Annual Total Returns - Periods Ended 12/31/98
ONE FIVE TEN
YEAR YEARS YEARS
------- ------- -------
Seligman Common Stock Portfolio 24.16% 18.16% 16.55%
S & P 500 Index 28.58 24.07 19.21
Lipper Growth and Income Funds Average 15.32 18.32 15.76
The Lipper Growth and Income Funds Average excludes the effect of sales charges
that may be incurred in connection with purchases or sales. The S&P 500 Index is
an unmanaged benchmark that assumes investment of dividends and excludes the
effect of fees and sales charges.
================================================================================
Portfolio Management
The Common Stock Portfolio is managed by the Seligman Growth and Income Team,
headed by Charles C. Smith, Jr. Mr. Smith, a Managing Director of Seligman, is a
Vice President of the Fund and has been Portfolio Manager of the Common Stock
Portfolio since December 1991. Mr. Smith joined Seligman in 1985 as Vice
President, Investment Officer. He became Senior Vice President, Senior
Investment Officer in 1992, and Managing Director in January 1994. Mr. Smith
also manages the Income Portfolio of the Fund; and he manages Seligman Common
Stock Fund, Inc. and Seligman Income Fund, Inc.
Rodney D. Collins, Senior Vice President, Investment Officer of Seligman since
January 1999, co-manages the Common Stock Portfolio. Mr. Collins joined Seligman
in 1992 as a Vice President, Investment Officer. Mr. Collins also co-manages the
Income Portfolio of the Fund; and he co-manages Seligman Common Stock Fund, Inc.
and Seligman Income Fund, Inc.
P-12
<PAGE>
Seligman Communications and Information Portfolio
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The Portfolio's objective is capital gain.
The Portfolio uses the following principal strategies to seek its objective:
The Portfolio generally invests at least 80% of its net assets, exclusive of
government securities, short-term notes, and cash and cash equivalents, in
securities of companies operating in the communications, information and related
industries. The Portfolio may invest in companies of any size.
The Portfolio may invest in securities of large companies that now are well
established in the world communications and information market and can be
expected to grow with the market. The Portfolio may also invest in
small-to-medium size companies that the investment manager believes provide
opportunities to benefit from the rapidly changing technologies and the
expansion of the communications, information and related industries.
The Portfolio uses a bottom-up stock selection approach. This means that the
investment manager uses extensive in-depth research into specific companies in
the communications, information and related industries to find those companies
that it believes offer the greatest prospects for future growth. In selecting
individual securities, the investment manager looks for companies that it
believes display or are expected to display:
o Robust growth prospects
o High profit margins or return on capital
o Attractive valuation relative to expected earnings or cash flow
o Quality management
o Unique competitive advantages
The Portfolio generally sells a stock if the investment manager believes its
target price is reached, its earnings are disappointing, its revenue growth has
slowed, or its underlying fundamentals have deteriorated.
The Portfolio anticipates that it will be invested primarily in common stocks.
However, the Portfolio may also invest in securities convertible into or
exchangeable for common stocks, in rights and warrants to purchase common
stocks, and in debt securities or preferred stocks believed to provide
opportunities for capital gain.
The Portfolio may purchase American Depositary Receipts (ADRs), which are
publicly traded instruments generally issued by domestic banks or trust
companies that represent a security of a foreign issuer. The Portfolio 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 (which does not include ADRs, or commercial paper and
certificates of deposit issued by foreign banks). The Portfolio may also
purchase put options (which gives the Portfolio the right to sell an underlying
security at a particular price during a fixed period) in an attempt to hedge
against a decline in the price of securities it holds.
The Portfolio 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 Portfolio from achieving its objective.
The Portfolio may change its principal strategies if the Fund's Board of
Directors believes doing so is consistent with the Portfolio's objective.
The Portfolio's objective is a fundamental policy and may be changed only with
shareholder approval. As with any mutual fund, there is no guarantee the
Portfolio will achieve its objective.
P-13
<PAGE>
Seligman Communications and Information Portfolio
PRINCIPAL RISKS
Stock prices fluctuate. Therefore, as with any fund that invests in stocks, the
Portfolio's net asset value will fluctuate. You may experience a decline in the
value of your investment and you could lose money.
The Portfolio concentrates its investments in companies in the communications,
information and related industries. Therefore, the Portfolio may be susceptible
to factors affecting these industries and the Portfolio's net asset value may
fluctuate more than a fund that invests in a wider range of industries. In
addition, given the rapid pace of change within many of these industries,
companies in these industries in general tend to operate in a more volatile
environment than companies in other industries.
The Portfolio may be negatively affected by the broad investment environment in
the international or US securities markets, which may be influenced by interest
rates, inflation, politics, fiscal policy, and current events.
To the extent the Portfolio invests some of its assets in higher-risk
securities, such as illiquid securities, foreign securities, or options, it may
be subject to higher price volatility. Investing in securities of foreign
issuers involves risks not associated with US investments, including settlement
risk, currency fluctuations, foreign taxation, differences in financial
reporting practices, and changes in political conditions.
The Portfolio may actively and frequently trade stocks in its portfolio to carry
out its principal strategies. A high portfolio turnover rate results in
correspondingly greater transaction costs for the Portfolio and a possible
increase in short-term capital gains and losses
An investment in the Portfolio is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
P-14
<PAGE>
Seligman Communications and Information Portfolio
PAST PERFORMANCE
The information below provides some indication of the risks of investing in the
Communications and Information Portfolio by showing how the performance of a
single share of the Portfolio has varied year to year, as well as how its
performance compares to two widely-used measures of performance. How the
Portfolio has performed in the past, however, is not necessarily an indication
of how it will perform in the future.
The returns presented in the bar chart and table do not reflect the effect of
any administration fees or sales charges associated with variable annuity
accounts. If these expenses were included, the returns would be less. Both the
bar chart and table assume that all dividends and capital gain distributions
were reinvested.
Annual Total Returns
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1994* 10.44%
1995 13.50%
1996 14.69%
1997 13.09%
1998 36.49%
*For the period 10/11/94 to 12/31/94.
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
================================================================================
Average Annual Total Returns - Periods Ended 12/31/98
CLASS A
ONE SINCE INCEPTION
YEAR 10/11/94
------- ---------------
Seligman Communications and Information Portfolio 36.49% 25.67%
S & P 500 Index 30.32 28.44(1)
Lipper Science & Technology Funds Average 52.55 28.58(1)
The Lipper Science & Technology Funds Average is an average of 57 science and
technology funds and excludes the effect of the sales charges that may be
incurred in connection with purchases or sales. The S&P 500 Index is an
unmanaged index that assumes investment of dividends and excludes the effect of
fees and sales charges.
(1) From September 30, 1994.
================================================================================
Portfolio Management
The Communications and Information Portfolio is managed by the Seligman
Technology Team, headed by Paul H. Wick. Mr. Wick, a Managing Director of
Seligman, is a Vice President of the Fund and has been Portfolio Manager of the
Communications and Information Portfolio since its inception. Mr. Wick joined
Seligman in August 1987 as an Associate, Investment Research and became Vice
President, Investment Officer in August 1991; he was named Managing Director in
January 1995 and was elected a Director of Seligman in November 1997. Mr. Wick
also co-manages the Seligman Henderson Global Technology Portfolio of the Fund;
and he manages Seligman Communications and Information Fund, Inc. and co-manages
Seligman Henderson Global Technology Fund, a series of Seligman Henderson Global
Fund Series, Inc.
P-15
<PAGE>
Seligman Frontier Portfolio
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
- ------------------------------
Small Companies:
Copmanies with market
capitalizations, at the time
of purchase by the Fund, of
$1.25 billion or less
- ------------------------------
The Portfolio's objective is growth of capital. Income may be considered but is
incidental to the Portfolio's investment objective.
The Portfolio uses the following strategies to pursue its objective of growth of
capital:
The Portfolio generally invests at least 65% of its total assets in the common
stock of small US companies. Companies are selected for their growth prospects.
The Portfolio uses a bottom-up stock selection approach. This means that the
investment manager concentrates on individual company fundamentals, rather than
on a particular market sector. The Portfolio maintains a disciplined investment
process that focuses on downside risks as well as upside potential. In selecting
investments, the investment manager looks to identify companies that typically
display one or more of the following:
o Positive operating cash flows
o Management ownership
o A unique competitive advantage
o Historically high returns on capital
The Portfolio generally sells a stock if its target price is reached, its
earnings are disappointing, its revenue growth slows, or its underlying
fundamentals deteriorate.
Although the Portfolio generally concentrates its investments in common stocks,
it may invest up to 35% of its assets in preferred stocks, securities
convertible into common stocks, and stock purchase warrants if the manager
believes they offer capital growth opportunities. The Portfolio may also invest
in American Depositary Receipts (ADRs), which 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 Portfolio
uses the same criteria in evaluating these securities as it does for common
stocks.
The Portfolio 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 Portfolio from achieving its objective.
The Portfolio may invest up to 15% of its net assets in illiquid securities and
may invest up to 10% of its total assets directly in foreign securities (which
does not include ADRs). The Portfolio may also purchase put options in an
attempt to hedge against a decline in the price of securities it holds in its
portfolio and may lend portfolio securities. The Portfolio generally does not
invest a significant amount of its assets, if any, in illiquid securities,
foreign securities, or put options.
The Portfolio may change its principal strategies if the Portfolio's Board of
Directors believes doing so is consistent with the Portfolio's objective.
The Portfolio's objective is a fundamental policy and may be changed only with
the approval of shareholders. As with any mutual fund, there is no guarantee the
Portfolio will achieve its objective.
P-16
<PAGE>
Seligman Frontier Portfolio
PRINCIPAL RISKS
Stock prices fluctuate. Therefore, as with any fund that invests in stocks, the
Portfolio'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.
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
periods of investor uncertainty, investor sentiment may favor larger, well-known
companies over small, lesser-known companies.
The Portfolio avoids concentration in any one industry. The Portfolio may,
however, invest more heavily in certain industries believed to offer good
investment opportunities. To the extent that an industry in which the Portfolio
is invested falls out of favor, the Portfolio's performance may be negatively
affected.
The Portfolio may also be negatively 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.
To the extent that the Portfolio invests some of its assets in higher-risk
securities, such as illiquid securities, foreign securities, or options, it may
be subject to higher price volatility. Investing in securities of foreign
issuers involves risks not associated with U.S. investments, including currency
fluctuations, foreign taxation, differences in financial reporting practices,
and changes in political conditions.
The Portfolio may actively and frequently trade stocks in its portfolio to carry
out its principal strategies. A high portfolio turnover rate results in
correspondingly greater transaction costs for the Portfolio and a possible
increase in short-term capital gains and losses.
An investment in the Portfolio is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
P-17
<PAGE>
Seligman Frontier Portfolio
PAST PERFORMANCE
The information below provides some indication of the risks of investing in the
Frontier Portfolio by showing how the performance of a single share of the
Portfolio has varied year to year, as well as how its performance compares to
three widely-used measures of performance. How the Portfolio has performed in
the past, however, is not necessarily an indication of how the Portfolio will
perform in the future.
The returns presented in the bar chart and table do not reflect the effect of
any administration fees or sales charges associated with variable annuity
accounts. If these expenses were included, the returns would be less. Both the
bar chart and table assume that all dividends and capital gain distributions
were reinvested.
Annual Total Returns
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1994* 10.58%
1995 13.56%
1996 14.98%
1997 15.78%
1998 -1.46%
*For the period 10/11/94 to 12/31/94.
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
================================================================================
Average Annual Total Returns - Periods Ended 12/31/98
ONE SINCE INCEPTION
YEAR 10/11/94
------ ---------------
Seligman Frontier Portfolio (1.46)% 17.88%
Russell 2000 Index (2.55) 14.07(1)
Russell 2000 Growth Index 1.23 12.56(1)
Lipper Small Cap Funds Average (.40) 16.31(1)
The Lipper Small Cap Funds Average, the Russell 2000 Growth Index, and the
Russell 2000 Index are unmanaged benchmarks that assume investment of all
dividends. The Lipper Small Cap Funds Average does not reflect sales charges,
and the Russell 2000 Growth Index and the Russell 2000 Index do not reflect fees
and sales charges.
(1) From September 30, 1994.
================================================================================
Portfolio Management
The Frontier Portfolio is managed by the Seligman Small Company Team, headed by
Arsen Mrakovcic. Mr. Mrakovcic, a Managing Director of Seligman, is a Vice
President of the Fund and has been Portfolio Manager of the Frontier Portfolio
since October 1995. Mr. Mrakovcic joined Seligman in 1992 as a Portfolio
Assistant, became Assistant Vice President, Credit Officer in April 1993, Vice
President, Investment Officer in January 1995, and a Managing Director in
January 1996. Mr. Mrakovcic also co-manages the Seligman Henderson Global
Smaller Companies Portfolio of the Fund; and he manages Seligman Frontier Fund,
Inc. and co-manages Seligman Henderson Global Smaller Companies Fund, a series
of Seligman Henderson Global Fund Series, Inc.
P-18
<PAGE>
Seligman Henderson Global Growth Opportunities Portfolio
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The Portfolio's objective is long-term capital appreciation.
The Portfolio uses the following principal strategies to seek its objective:
The Portfolio invests primarily in equity securities of non-US and US growth
companies that have the potential to benefit from global economic or social
trends.
The Portfolio may invest in companies of any size, domiciled in any country.
Typically, the Portfolio will invest in several countries in different
geographic regions.
The Portfolio uses an investment style that combines macro analysis of global
trends with in-depth research of individual companies. This means that the
investment managers analyze the rapidly changing world to identify investment
themes that they believe will have the greatest impact on global markets, and
use in-depth research to identify attractive companies around the world. The
Portfolio focuses on the following macro trends:
o economic liberalization and the flow of capital through global
trade and investment
o globalization of the world's economy
o the expansion of technology as an increasingly important
influence on society
o increased awareness of the importance of protecting the
environment
o the increase in life expectancy leading to changes in consumer
demographics and a greater need for healthcare, personal
security, and leisure
In selecting individual securities, the investment managers look to identify
companies that they believe display one or more of the following:
o Attractive pricing relative to earnings forecasts or other
valuation criteria (e.g., return on equity)
o Quality management and equity ownership by executives
o A unique competitive advantage (e.g., market share, proprietary
products)
o Market liquidity
o Potential for improvement in overall operations
The Portfolio generally sells a stock if its target price is reached, its
earnings are disappointing, its revenue growth slows, or its underlying
fundamentals deteriorate. The Portfolio may also sell a stock if the investment
manager believes that a shifting in global trends may negatively affect a
company's outlook.
The Portfolio may invest in all types of securities, many of which will be
denominated in currencies other than the US dollar. Although the Portfolio
normally invests in equity securities, the Portfolio may invest up to 25% of its
assets in preferred stock and investment grade or comparable quality debt
securities. The Portfolio may also invest in depositary receipts, which are
publicly traded instruments generally issued by US or foreign banks or trust
companies that represent securities of foreign issuers.
The Portfolio 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 Portfolio from achieving its objective.
The Portfolio may invest up to 15% of its assets in illiquid securities, and may
from time to time enter into forward foreign currency exchange contracts in an
attempt to manage the risk of adverse changes in currencies. The Portfolio may
also purchase put options in an attempt to hedge against a decline in the price
of securities it holds in its portfolio.
The Portfolio may change its principal strategies if the Fund's Board of
Directors believes doing so is consistent with the Portfolio's objective.
The Portfolio's objective is a fundamental policy and may be changed only with
the approval of shareholders. As with any mutual fund, there is no guarantee the
Portfolio will meet its objective.
P-19
<PAGE>
Seligman Henderson Global Growth Opportunities Portfolio
PRINCIPAL RISKS
Stock prices fluctuate. Therefore, as with any fund that invests in stocks, the
Portfolio's net asset value will fluctuate. You may experience a decline in the
value of your investment and you could lose money.
Investing in securities of foreign issuers involves risks not associated with US
investments, including currency fluctuations, foreign taxation, differences in
financial reporting practices, and changes in political conditions. There can be
no assurance that the Portfolio's foreign investments will present less risk
than a portfolio of solely US securities.
The Portfolio seeks to limit the risk of investing in foreign securities by
diversifying its investments among different countries, as well as among
different themes. Diversification reduces the effect events in any one country
will have on the Portfolio's entire investment portfolio. However, a decline in
the value of the Portfolio's investments in one country may offset potential
gains from investments in another country.
If global trends do not develop as the manager expects, the Portfolio's
performance could be negatively affected.
The Portfolio may be negatively affected by the broad investment environment in
the international or US securities markets, which may be influenced by interest
rates, inflation, politics, fiscal policy, and current events.
To the extent the Portfolio invests some of its assets in higher-risk
securities, such as illiquid securities or options, it may be subject to higher
price volatility.
The Portfolio may actively and frequently trade stocks in its portfolio to carry
out its principal strategies. A high portfolio turnover rate results in
correspondingly greater transaction costs for the Portfolio and a possible
increase in short-term capital gains and losses.
An investment in the Portfolio is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
P-20
<PAGE>
Seligman Henderson Global Growth Opportunities Portfolio
PAST PERFORMANCE
The information below provides some indication of the risks of investing in the
Global Growth Opportunities Portfolio by showing how the performance of a single
share of the Portfolio has varied year to year, as well as how its performance
compares to two widely-used measures of performance. How the Portfolio has
performed in the past, however, is not necessarily an indication of how it will
perform in the future.
The returns presented in the bar chart and table do not reflect the effect of
any administration fees or sales charge associated with variable annuity
accounts. If these expenses were included, the returns would be less. Both the
bar chart and table assume that all dividends and capital gain distributions
were reinvested.
Annual Total Returns
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1996* 9.91%
1997 11.03%
1998 21.60%
*For the period 5/1/96 to 12/31/96.
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
================================================================================
Average Annual Total Returns - Periods Ended 12/31/98
ONE SINCE INCEPTION
YEAR 5/1/96
------- ---------------
Seligman Henderson Global Growth
Opportunities Portfolio 21.60% 12.16%
MSCI World Index 24.79 17.83(1)
Lipper Global Funds Average 14.06 12.98(1)
The Lipper Global Funds Average and the Morgan Stanley Capital International
World Index (MSCI World Index) are unmanaged benchmarks that assume reinvestment
of dividends. The Lipper Global Funds Average excludes the effect of sales
charges and the MSCI World Index excludes the effect of fees and sales charges.
(1) From April 30, 1996.
================================================================================
Portfolio Management
The Global Growth Opportunities Portfolio is co-managed by the Seligman Growth
Team and Henderson Investment Management Limited, subadviser to the Fund.
The Seligman Growth Team is headed by Marion Schultheis. Marion Schultheis
joined Seligman in May 1998 as a Managing Director. She is a Vice President of
the Fund and has been Co-Portfolio Manager of the Global Growth Opportunities
Portfolio since May 1998. Prior to joining Seligman, Ms. Schultheis was a
Managing Director at Chancellor LGT from October 1997 to May 1998 and Senior
Portfolio Manager at IDS Advisory Group Inc. from August 1987 to October 1997.
Ms. Schultheis also manages the Capital Portfolio and the Large-Cap Growth
Portfolio and co-manages the Global Growth Opportunities Portfolio of the Fund;
and she manages Seligman Capital Fund, Inc. and Seligman Growth Fund, Inc. and
co-manages Seligman Henderson Global Growth Opportunities Fund, a series of
Seligman Henderson Global Fund Series, Inc.
Nitin Mehta, a Vice President of the Fund, has been Co-Portfolio Manager of the
Global Growth Opportunities Portfolio since its inception. Mr. Mehta has been a
Portfolio Manager with Henderson plc since September 1994. Prior to joining
Henderson, Mr. Mehta was Head of Currency Management and Derivatives at Quroum
Capital Management from May 1993 to September 1994. Mr. Mehta also co-manages
Seligman Henderson Global Growth Opportunities Fund, a series of Seligman
Henderson Global Growth Opportunities Fund.
Ms. Schultheis and Mr. Mehta have responsibility for directing the domestic and
international investments, respectively, of the Global Growth Opportunities
Portfolio.
P-21
<PAGE>
Seligman Henderson Global Smaller Companies Portfolio
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
- ---------------------------
Smaller Companies:
Companies with market
capitalization (at the time
of purchase by the
Portfolio) equivalent to US
$1 billion or less.
- ---------------------------
The Portfolio's objective is long-term capital appreciation.
The Portfolio uses the following principal strategies to seek its objective:
The Portfolio generally invests at least 65% of its assets in equity securities
of smaller US and non-US companies.
The Portfolio may invest in companies domiciled in any country, although it
typically invests in developed countries. The Portfolio will generally invest in
several countries in different geographic regions.
The Portfolio uses an investment style that combines macro analysis with
research into individual company attractiveness. This means that the investment
managers identify countries that they believe offer good investment
opportunities, and use extensive in-depth research to identify attractive
smaller companies around the world. The investment managers look at the
following factors when making country allocation decisions:
o Relative economic growth potential of the various economies and
securities markets
o Political, financial, and social conditions influencing
investment opportunities
o Investor sentiment
o Prevailing interest rates and expected levels of inflation
o Market prices relative to historic averages
In selecting individual securities, the investment managers look for companies
that they believe display one or more of the following:
o Attractive pricing relative to earnings forecasts or other
valuation criteria (e.g., return on equity)
o Quality management and equity ownership by executives
o A unique competitive advantage (e.g., market share, proprietary
products)
o Market liquidity
o Potential for improvement in overall operations
The Portfolio generally sells a stock if its target price is reached, its
earnings are disappointing, its revenue growth slows, or its underlying
fundamentals deteriorate. The Portfolio anticipates that it will continue to
hold securities of companies that grow or expand so long as those investments
continue to offer prospects of long-term growth.
The Portfolio may invest in all types of securities, many of which will be
denominated in currencies other than the US dollar. Although the Portfolio
normally invests in equity securities, the Portfolio may invest up to 25% of its
assets in preferred stock and investment grade or comparable quality debt
securities. The Portfolio may also invest in depositary receipts, which are
publicly traded instruments generally issued by US or foreign banks or trust
companies that represent securities of foreign issuers. Additionally, the
Portfolio may invest up to 35% of it assets in companies with market
capitalization of over $1billion.
The Portfolio 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 Portfolio from achieving its objective.
The Portfolio may invest up to 15% of its assets in illiquid securities, and may
from time to time enter into forward foreign currency exchange contracts in an
attempt to manage the risk of adverse changes in currencies. The Portfolio may
also purchase put options in an attempt to hedge against a decline in the price
of securities it holds.
The Portfolio may change its principal strategies, if the Board of Directors
believes doing so is consistent with the Portfolio's objective . The Directors
may change the definition of "small company" if they conclude that such a change
is appropriate.
The Portfolio's objective is a fundamental policy and may be changed only with
the approval of shareholders. As with any mutual fund, there can be no guarantee
the Portfolio will achieve its objective.
P-22
<PAGE>
Seligman Henderson Global Smaller Companies Portfolio
PRINCIPAL RISKS
Stock prices fluctuate. Therefore, as with any portfolio that invests in stocks,
the Portfolio's net asset value will fluctuate. You may experience a decline in
the value of your investment and you could lose money.
Investing in securities of foreign issuers involves risks not associated with US
investments, including currency fluctuations, foreign taxation, differences in
financial reporting practices, and changes in political conditions.
Investments in smaller companies typically involve greater risks than
investments in larger companies. Small company stocks, as a whole, may
experience larger price fluctuations than large-company stocks or other types of
investments. Some small companies may have shorter operating histories, less
experienced management and limited product lines, markets, and financial or
managerial resources.
The Portfolio may be negatively affected by the broad investment environment in
the international or US securities markets, which may be influenced by interest
rates, inflation, politics, fiscal policy, and current events.
To the extent the Portfolio invests some of its assets in higher-risk
securities, such as illiquid securities or options, it may be subject to higher
price volatility.
The Portfolio may actively and frequently trade stocks in its portfolio to carry
out its principal strategies. A high portfolio turnover rate results in
correspondingly greater transaction costs for the Portfolio and a possible
increase in short-term capital gains and losses.
An investment in the Portfolio is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
P-23
<PAGE>
Seligman Henderson Global Smaller Companies Portfolio
PAST PERFORMANCE
The information below provides some indication of the risks of investing in the
Global Smaller Companies Portfolio by showing how the performance of a single
share of the Portfolio has varied year to year, as well as how its performance
compares to two widely-used measures of performance. How the Portfolio has
performed in the past, however, is not necessarily an indication of how it will
perform in the future.
The returns presented in the bar chart and table do not reflect the effect of
any administration fees or sales charges associated with variable annuity
accounts. If these expenses were included, the returns would be less. Both the
bar chart and table assume that all dividends and capital gain distributions
were reinvested.
Annual Total Returns
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1994* 10.31%
1995 11.67%
1996 12.87%
1997 12.98%
1998 6.58%
*For the period 10/11/94 to 12/31/94.
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
================================================================================
Average Annual Total Returns - Periods Ended 12/31/98
ONE SINCE INCEPTION
YEAR 10/11/94
------- ---------------
Seligman Henderson Global
Smaller Companies Portfolio 6.58% 11.60%
Salomon Smith Barney EM Index World 5.93 9.42(1)
Lipper Global Small Cap Funds Average .75 7.91(1)
The Lipper Global Small Cap Funds Average and the Salomon Smith Barney Extended
Market Index World (Salomon Smith Barney EM Index World) are unmanaged
benchmarks that assume reinvestment of dividends. The Lipper Global Small Cap
Funds Average excludes the effect of sales charges, and the Salomon Smith Barney
EM Index World excludes the effect of fees and sales charges.
(1) From September 30, 1994.
================================================================================
Portfolio Management
The Global Smaller Companies Portfolio is co-managed by the Seligman Small
Company Team and Henderson Investment Management Limited, subadviser to the
Fund.
The Seligman Small Company Team is headed by Arsen Mrakovcic. Mr. Mrakovcic, a
Managing Director of Seligman, is a Vice President of the Fund and has been
Portfolio Manager of the Global Smaller Companies since October 1995. Mr.
Mrakovcic joined Seligman in 1992 as a Portfolio Assistant, became Assistant
Vice President, Credit Officer in April 1993, Vice President, Investment Officer
in January 1995, and a Managing Director in January 1996. Mr. Mrakovcic also
manages the Frontier Portfolio of the Fund; and he manages Seligman Frontier
Fund, Inc. and co-manages Seligman Henderson Global Smaller Companies Fund, a
series of Seligman Henderson Global Fund Series, Inc.
Mr. Iain C. Clark, Chief Investment officer of Henderson Investment Management
Limited, is a Vice President of the Fund and has been Co-Portfolio Manager of
the Global Smaller Companies Portfolio since its inception. Mr. Clark has been a
Director and Senior Portfolio Manager of Henderson plc and Director of Henderson
International, Ltd. since 1985. He has been Secretary, Treasurer and Vice
President of Henderson International, Inc. since 1991. Mr. Clark also manages
the Seligman Henderson International Portfolio of the Fund; and he manages
Seligman Henderson International Fund and co-manages Seligman Henderson Global
Smaller Companies Fund, two series of Seligman Henderson Global Fund Series,
Inc.
Mr. Mrakovcic and Mr. Clark have responsibility for directing the domestic and
international investments, respectively, of the Global Smaller Companies
Portfolio.
P-24
<PAGE>
Seligman Henderson Global Technology Portfolio
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
- ------------------------------------
Technology:
The use of science to create new
products and services. The industry
comprises information technology and
communications, as well as medical,
environmental and biotechnology.
- ------------------------------------
The Portfolio's objective is long-term capital appreciation.
The Portfolio uses the following principal strategies to seek its objective:
The Portfolio generally invests at least 65% of its assets in equity securities
of US and non-US companies with business operations in technology and
technology-related industries.
The Portfolio may invest in companies domiciled in any country. The Portfolio
generally invests in several countries in different geographic regions.
The Portfolio may invest in companies of any size. Securities of large companies
that are well established in the world technology market can be expected to grow
with the market and will frequently be held by the Portfolio. However, rapidly
changing technologies and expansion of technology and technology-related
industries often provide a favorable environment for companies of
small-to-medium size, and the Portfolio may invest in these companies as well.
The investment managers seek to identify those technology companies that they
believe have the greatest prospects for future growth, no matter what their
country of origin. The Portfolio combines in-depth research into individual
companies with macro analysis. The investment managers look for attractive
technology companies around the world, while seeking to identify particularly
strong technology sectors and/or factors within regions or specific countries
that may affect investment opportunities. In selecting individual securities,
the investment managers look for companies that they believe display one or more
of the following:
o Robust growth prospects
o High profit margins
o Attractive valuation relative to earnings forecasts or other
valuation criteria (e.g., return on equity)
o Quality management and equity ownership by executives
o Unique competitive advantages (e.g., market share, proprietary
products)
o Potential for improvement in overall operations
The Portfolio generally sells a stock if its target price is reached, its
earnings are disappointing, its revenue growth slows, or its underlying
fundamentals deteriorate.
The Portfolio may invest in all types of securities, many of which will be
denominated in currencies other than the US dollar. Although the Portfolio
normally invests in equity securities, the Portfolio may invest up to 25% of its
assets in preferred stock and investment grade or comparable quality debt
securities. The Portfolio may also invest in depositary receipts, which are
publicly traded instruments generally issued by US or foreign banks or trust
companies that represent securities of foreign issuers.
The Portfolio 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 Portfolio from achieving its objective.
The Portfolio may invest up to 15% of its assets in illiquid securities, and may
from time to time enter into forward foreign currency exchange contracts in an
attempt to manage the risk of adverse changes in currencies. The Portfolio may
also purchase put options in an attempt to hedge against a decline in the price
of securities it holds.
The Portfolio may change its principal strategies if the Fund's Board of
Directors believes doing so is consistent with the Portfolio's objective.
The Portfolio's objective is a fundamental policy and may be changed only with
the approval of shareholders. As with any mutual fund, there is no guarantee the
Portfolio will achieve its objective.
P-25
<PAGE>
Seligman Henderson Global Technology Portfolio
PRINCIPAL RISKS
Stock prices fluctuate. Therefore, as with any portfolio that invests in stocks,
the Portfolio's net asset value will fluctuate. You may experience a decline in
the value of your investment and you could lose money.
Investing in securities of foreign issuers involves risks not associated with US
investments, including currency fluctuations, foreign taxation, differences in
financial reporting practices, and changes in political conditions.
The Portfolio may be susceptible to factors affecting technology and
technology-related industries and the Portfolio's net asset value may fluctuate
more than a portfolio that invests in a wider range of portfolio securities.
Technology companies are often smaller and less experienced companies and may be
subject to greater risks than larger companies, such as limited product lines,
markets, and financial or managerial resources. These risks may be heightened
for technology companies in foreign markets.
The Portfolio seeks to limit risk by diversifying its investments among
different sectors within the technology industry, as well as among different
countries. Diversification reduces the effect the performance of any one sector
or events in any one country will have on the Portfolio's entire investment
portfolio. However, a decline in the value of one of the Portfolio's investments
may offset potential gains from other investments.
The Portfolio may be negatively affected by the broad investment environment in
the international or US securities markets, which may be influenced by interest
rates, inflation, politics, fiscal policy, and current events.
To the extent the Portfolio invests some of its assets in higher-risk
securities, such as illiquid securities or options, it may be subject to higher
price volatility.
The Portfolio may actively and frequently trade stocks in its portfolio to carry
out its principal strategies. A high portfolio turnover rate results in
correspondingly greater transaction costs for the Portfolio and a possible
increase in short-term capital gains and losses.
An investment in the Portfolio is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
P-26
<PAGE>
Seligman Henderson Global Technology Portfolio
PAST PERFORMANCE
The information below provides some indication of the risks of investing in the
Global Technology Portfolio by showing how the performance of a single share of
the Portfolio has varied year to year, as well as how its performance compares
to three widely-used measures of performance. How the Portfolio has performed in
the past, however, is not necessarily an indication of how it will perform in
the future.
The returns presented in the bar chart and table do not reflect the effect of
any administration fees or sales charges associated with variable annuity
contracts. If these expenses were included, the returns would be less. Both the
bar chart and table assume that all dividends and capital gain distributions
were reinvested.
Annual Total Returns
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1996* 10.32%
1997 10.59%
1998 36.80%
*For the period 5/1/96 to 12/31/96.
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
================================================================================
Average Annual Total Returns - Periods Ended 12/31/98
ONE SINCE INCEPTION
YEAR 5/1/96
------- ---------------
Seligman Henderson Global Technology Portfolio 36.80% 22.02%
MSCI World Index 24.79 17.83(1)
Lipper Global Funds Average 14.06 12.98(1)
Lipper Science & Technology Fund Average 52.55 25.95(1)
The Lipper Global Funds Average, Lipper Science & Technology Fund Average, and
the Morgan Stanley Capital International World Index (MSCI World Index) are
unmanaged benchmarks that assume reinvestment of dividends. The Lipper Global
Fund Average and the Lipper Science & Technology Fund Average exclude the effect
of sales charges and the MSCI World Index excludes the effect of fees and sales
charges.
(1) From April 30, 1996.
================================================================================
Portfolio Management
The Global Technology Portfolio is co-managed by the Seligman Technology Team
and Henderson Investment Management Limited, subadviser to the Fund.
The Seligman Technology Team is headed by Paul H. Wick. Mr. Wick, a Managing
Director of Seligman, is Vice President of the Fund and has been Portfolio
Manager of the Global Technology Portfolio since its inception. Mr. Wick joined
Seligman in August 1987 as an Associate, Investment Research and became Vice
President, Investment Officer in August 1991; he was named Managing Director in
January 1995 and was elected a Director of Seligman in November 1997. Mr. Wick
also manages the Communications and Information Portfolio of the Fund; and he
manages the Seligman Communications and Information Fund, Inc. and co-manages
Seligman Henderson Global Technology Fund, a series of Seligman Henderson Global
Fund Series, Inc.
Brian Ashford-Russell, a Vice President of the Fund, has been Co-Portfolio
Manager of the Global Technology Portfolio since its inception. Mr.
Ashford-Russell has been a Portfolio Manager with Henderson plc since February
1993. Mr. Ashford-Russell also co-manages Seligman Henderson Global Technology
Fund, as series of Seligman Henderson Global Technology Fund.
Mr. Wick and Mr. Ashford-Russell have responsibility for directing the domestic
and international investments, respectively, of the Global Technology Portfolio.
P-27
<PAGE>
Seligman Henderson International Portfolio
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The Portfolio's objective is long-term capital appreciation.
The Portfolio uses the following principal strategies to seek its objective:
The Portfolio invests primarily in equity securities of non-US companies. The
Portfolio may invest in companies domiciled in any country; however, it
typically will not invest in the US or Canada. It generally invests in several
countries in different geographic regions.
While the Portfolio may invest in companies of any size, it generally invests in
medium to large-sized companies in the principal international markets. It may
also invest in companies with lower market capitalization or in smaller regional
or emerging markets.
The Portfolio uses a top-down investment style when choosing securities to
purchase. This means the investment manager concentrates first on regional and
country allocations, then on industry sectors, followed by fundamental analysis
of individual companies. The Portfolio's investments are allocated among
geographic regions or countries based on such factors as:
o Relative economic growth potential of the various economies and
securities markets
o Political, financial, and social conditions influencing
investment opportunities
o Investor sentiment
o Prevailing interest rates and expected levels of inflation
o Market prices relative to historic averages
In selecting individual securities, the investment manager looks to identify
companies that it believes display one or more of the following:
o Attractive pricing relative to earnings forecasts or other
valuation criteria (e.g., return on equity)
o Quality management and equity ownership by executives
o A unique competitive advantage (e.g., market share, proprietary
products)
o Market liquidity
o Potential for improvement in overall operations
The Portfolio generally sells a stock if its target price is reached, its
earnings are disappointing, its revenue growth slows, or its underlying
fundamentals deteriorate. The Portfolio may also sell a stock if the investment
manager believes that negative country or regional factors may affect a
company's outlook.
The Portfolio may invest in all types of securities, many of which will be
denominated in currencies other than the US dollar. The securities may be listed
on a US or foreign stock exchange or traded in US or foreign over-the-counter
markets. Although the Portfolio normally invests in equity securities, the
Portfolio may invest up to 25% of its assets in preferred stock and investment
grade or comparable quality debt securities. The Portfolio may also invest in
depositary receipts, which are publicly traded instruments generally issued by
US or foreign banks or trust companies that represent securities of foreign
issuers.
The Portfolio 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 Portfolio from achieving its objective.
The Portfolio may invest up to 15% of its assets in illiquid securities, and may
from time to time enter into forward foreign currency exchange contracts in an
attempt to manage the risk of adverse changes in currencies. The Portfolio may
also purchase put options in an attempt to hedge against a decline in the price
of securities it holds in its portfolio.
The Portfolio may change its principal strategies if the Fund's Board of
Directors believes doing so is consistent with the Portfolio's objective.
The Portfolio's objective is a fundamental policy and may be changed only with
the approval of shareholders. As with any mutual fund, there is no guarantee the
Portfolio will achieve its objective.
P-28
<PAGE>
Seligman Henderson International Portfolio
PRINCIPAL RISKS
Stock prices fluctuate. Therefore, as with any portfolio that invests in stocks,
the Portfolio's net asset value will fluctuate. You may experience a decline in
the value of your investment and you could lose money.
Investing in securities of foreign issuers involves risks not associated with US
investments, including currency fluctuations, foreign taxation, differences in
financial reporting practices, and changes in political conditions. There can be
no assurance that the Portfolio's foreign investments will present less risk
than a portfolio of solely US securities.
The Portfolio seeks to limit the risk of investing in foreign securities by
diversifying its investments among different regions and countries.
Diversification reduces the effect events in any one country will have on the
Portfolio's entire investment portfolio. However, a decline in the value of the
Portfolio's investments in one country may offset potential gains from
investments in another country.
The Portfolio may be negatively affected by the broad investment environment in
the international or US securities markets, which may be influenced by interest
rates, inflation, politics, fiscal policy, and current events.
To the extent the Portfolio invests some of its assets in higher-risk
securities, such as illiquid securities or options, it may be subject to higher
price volatility.
The Portfolio may actively and frequently trade stocks in its portfolio to carry
out its principal strategies. A high portfolio turnover rate results in
correspondingly greater transaction costs for the Portfolio and a possible
increase in short-term capital gains and losses.
An investment in the Portfolio is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
P-29
<PAGE>
Seligman Henderson International Portfolio
PAST PERFORMANCE
The information below provides some indication of the risks of investing in the
International Portfolio by showing how the performance of a single share of the
Portfolio has varied year to year, as well as how its performance compares to
two widely-used measures of performance. How the Portfolio has performed in the
past, however, is not necessarily an indication of how it will perform in the
future.
The returns presented in the bar chart and table do not reflect the effect of
any administration fees or sales charges associated with variable annuity
accounts. If these expenses were included, the returns would be less. Both the
bar chart and table assume that all dividends and capital gain distributions
were reinvested.
Annual Total Returns
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1993* 11.37%
1994 11.34%
1995 12.39%
1996 12.96%
1997 13.54%
1998 15.81%
*For the period 5/3/93 to 12/31/93.
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
================================================================================
Average Annual Total Returns - Periods Ended 12/31/98
ONE FIVE SINCE INCEPTION
YEAR YEARS 5/3/93
------- ------- ---------------
Seligman Henderson International Portfolio 15.81% 8.67% 10.20%
MSCI EAFE Index 12.80 7.78 10.16(1)
Lipper International Funds Average 20.34 9.51 9.87(1)
The Morgan Stanley Capital International EAFE(Europe, Australasia, Far East)
Index (MSCIEAFE Index) and the Lipper International Funds Average are unmanaged
benchmarks that assume reinvestment of dividends. The Lipper International Funds
Average excludes the effect of sales charges and the MSCIEAFE Index excludes the
effect of fees and sales charges.
(1) From April 30, 1993.
================================================================================
Portfolio Management
Mr. Iain C. Clark, Chief Investment officer of Henderson Investment Management
Limited, is a Vice President of the Fund and has been Portfolio Manager of the
International Portfolio since its inception. Mr. Clark has been a Director and
Senior Portfolio Manager of Henderson plc and Director of Henderson
International, Ltd. since 1985. He has been Secretary, Treasurer and Vice
President of Henderson International, Inc. since 1991. Mr. Clark also co-manages
the Seligman Henderson Global Smaller Companies Portfolio of the Fund; and he
manages Seligman Henderson International Fund and co-manages Seligman Henderson
Global Smaller Companies Fund, two series of Seligman Henderson Global Fund
Series, Inc.
P-30
<PAGE>
Seligman High-Yield Bond Portfolio
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The Portfolio's objective is to produce maximum current income.
The Portfolio uses the following principal strategies to seek its objective:
The Portfolio has a fundamental policy that requires that, except for temporary
defensive purposes, it invest at least 80% of the value of its total assets in
high-yielding, income-producing corporate bonds.
The Portfolio invests in a diversified range of high-yield, high-risk, medium
and lower quality corporate bonds and notes. Generally, bonds and notes
providing the highest yield are unrated or carry lower ratings (Baa or lower by
Moody's Investors Service, Inc. (Moody's) or BBB or lower by Standard and Poor's
Rating Service (S&P)). The Portfolio may purchase restricted securities that may
be offered and sold only to "qualified institutional buyers" under Rule 144A of
the Securities Act of 1933 (Rule 144A Securities).
The Portfolio uses a bottom-up security selection process. This means the
investment manager concentrates first on individual company fundamentals, before
industry considerations. The investment manager then looks at the particular
bond characteristics of the securities considered for purchase. In selecting
individual securities, the investment manager looks to identify companies that
it believes display one or more of the following:
o Strong operating cash flow and margins
o Improving financial ratios (i.e., creditworthiness)
o Marketshare leadership or competitive advantage
o Superior management
o Attractive relative pricing
The Portfolio will generally sell a security if the investment manager believes
that the company displays deteriorating cash flows, an ineffective management
team, or an unattractive relative valuation.
The Portfolio may invest up to 20% of its total assets in a range of high-yield,
medium and lower quality corporate notes; short-term money market instruments,
including certificates of deposit of FDIC member banks having total assets of
more than $1 billion; bankers' acceptances and interest-bearing savings or time
deposits of such banks; prime commercial paper; securities issued, guaranteed,
or insured by the US Government, its agencies or instrumentalities; and other
income-producing cash items, including repurchase agreements.
The Portfolio 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 Portfolio from achieving its objective.
The Portfolio may invest up to 15% of its net assets in illiquid securities
(i.e., securities that cannot be readily sold). Rule 144A Securities deemed to
be liquid by the investment manager are not included in this limitation. The
Portfolio may invest up to 10% of its total assets in debt securities of foreign
issuers. In accordance with its objective of producing maximum current income,
the Portfolio may invest up to 10% of its total assets in preferred stock,
including non-investment grade preferred stock. While the Portfolio favors
cash-paying bonds over deferred pay securities, it may invest in "zero-coupon"
bonds (interest payments accrue until maturity) and "pay-in-kind" bonds
(interest payments are made in additional bonds).
Except for its fundamental policy stated above, the Portfolio may change its
principal strategies if the Fund's Board of Directors believes doing so is
consistent with the Portfolio's objective.
The Portfolio's objective, as well as its fundamental policy, may be changed
only with the approval of shareholders. As with any mutual fund, there is no
guarantee the Portfolio will achieve its objective.
P-31
<PAGE>
Seligman High-Yield Bond Portfolio
PRINCIPAL RISKS
The Portfolio's net asset value, yield and total return will fluctuate with
fluctuations in the yield and market value of the individual securities held by
the Portfolio. The types of securities in which the Portfolio invests are
generally subject to higher volatility in yield and market value than securities
of higher quality. Factors that may affect the performance of the securities
held by the Portfolio are discussed below.
Higher-yielding, higher-risk, medium and lower quality corporate bonds and
notes, like the securities in which the Portfolio invests, are subject to
greater risk of loss of principal and income than higher-rated bonds and notes
and are considered to be predominately speculative with respect to the issuer's
capacity to pay interest and repay principal.
An economic downturn could adversely impact issuers' ability to pay interest and
repay principal and could result in issuers' defaulting on such payments. The
value of the Portfolio's bonds and notes will be affected, like all fixed-income
securities, by market conditions relating to changes in prevailing interest
rates. However, the value of lower rated or unrated corporate bonds and notes is
also affected by investors' perceptions. When economic conditions appear to be
deteriorating, lower-rated or unrated corporate bonds and notes may decline in
market value due to investors' heightened concerns and perceptions over credit
quality.
Lower-rated and unrated corporate bonds and notes are traded principally by
dealers in the over-the-counter market. The market for these securities may be
less active and less liquid than for higher rated securities. Under adverse
market or economic conditions, the secondary market for these bonds and notes
could contract further, causing the Portfolio difficulties in valuing and
selling its securities.
To the extent that the Portfolio invests its assets in higher-risk securities,
such as foreign or illiquid securities, it may be subject to higher price
volatility. Investing in securities of foreign issuers involves risks not
associated with US investments, including currency fluctuations, foreign
taxation, differences in financial reporting practices, and changes in political
conditions.
"Zero-coupon" and "pay-in-kind" securities may be subject to greater
fluctuations in value because they tend to be more speculative than
income-bearing securities. Fluctuations in the market prices of these securities
owned by the Portfolio will result in corresponding fluctuations and volatility
in the net asset value of the shares of the Portfolio. Additionally, because
they do not pay current income, they will detract from the Portfolio's objective
of producing maximum current income.
The Portfolio may actively and frequently trade securities in its portfolio to
carry out its principal strategies, or for other reasons. A high portfolio
turnover rate results in correspondingly greater transaction costs and a
possible increase in short-term capital gains and losses. This may increase the
Portfolio's expenses and have tax consequences for investors in the Portfolio.
An investment in the Portfolio is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
P-32
<PAGE>
Seligman High-Yield Bond Portfolio
PAST PERFORMANCE
The information below provides some indication of the risks of investing in the
High Yield Bond Portfolio by showing how the performance of a single share of
the Portfolio has varied year to year, as well as how its performance compares
to two widely-used measures of performance. How the Portfolio has performed in
the past, however, is not necessarily an indication of how it will perform in
the future.
The returns presented in the bar chart and table do not reflect the effect of
any administration fees or sales charges associated with variable annuity
contracts. If these expenses were included, the returns would be less. Both the
bar chart and table assume that all dividends and capital gain distributions
were reinvested.
Annual Total Returns
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1995* 10.50%
1996 11.19%
1997 11.87%
1998 1.02%
*For the period 5/1/95 to 12/31/95.
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
================================================================================
Average Annual Total Returns - Periods Ended 12/31/98
ONE SINCE INCEPTION
YEAR 5/1/95
------- ---------------
Seligman High-Yield Bond Portfolio 1.02% 10.25%
Merrill Lynch High Yield Master Index 3.67 10.34(1)
Lipper High Current Yield Funds Average (0.30) 9.63(1)
The Lipper High Current Yield and the Merrill Lynch High Yield Master Index are
unmanaged benchmarks that assume investment of dividends and exclude the effect
of fees or sales charges.
(1) From April 30, 1995.
================================================================================
Portfolio Management
The High-Yield Bond Portfolio is managed by the Seligman High-Yield Team, headed
by Daniel J. Charleston. Mr. Charleston, a Managing Director of Seligman, is a
Vice President of the Fund and has been Portfolio Manager of the High-Yield
Portfolio since its inception. Mr. Charleston joined Seligman in 1987 as an
Assistant Portfolio Manager. He became Vice President, Investment Officer in
August 1991, and Managing Director in January 1996. Mr. Charleston also manages
Seligman High-Yield Bond Portfolio, a series of Seligman High Income Fund
Series.
P-33
<PAGE>
Seligman Income Portfolio
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The Portfolio's objectives are high current income consistent with what is
believed to be prudent risk of capital and the possibility of improvement in
income over time.
The Portfolio uses the following principal strategies to seek its objectives:
The Portfolio generally invests at least 80% of its assets in income-producing
securities. The Portfolio has a fundamental policy that, at all times, it must
invest at least 25% of the value of its gross assets in cash, bonds and/or
preferred stocks.
Subject to these requirements, the Portfolio may be invested in many different
types of securities, including, but not limited to: money market instruments,
fixed-income securities (such as notes, bonds, debentures, and preferred stock),
US Government securities, senior securities convertible into common stocks,
common stocks, and American Depositary Receipts (ADRs). ADRs are publicly traded
instruments generally issued by domestic banks or trust companies that represent
securities of foreign issuers. Securities are carefully selected in light of the
Portfolio's investment objectives and are diversified among many different types
of securities and market sectors.
The Portfolio allocates its assets between equity securities and fixed-income
securities. If equity valuations become excessive, then the Portfolio will
invest more of its assets in fixed-income securities.
Equity securities are chosen for purchase by the Portfolio using a bottom-up
stock selection approach. This means the investment manager concentrates on
individual company fundamentals, rather than on a particular industry. The
Portfolio maintains a disciplined investment process that focuses on downside
risk as well as upside potential. The Portfolio seeks to purchase strong,
well-managed companies, generally large US companies, which have the potential
for solid earnings growth and dividend increases. The investment manager looks
to identify companies that it believes offer attractive dividend yields relative
to the market and, typically, that display relatively low valuations.
Fixed-income securities are chosen for purchase by the Portfolio using a method
that combines macro analysis of the fixed-income with fundamental research into
individual securities, customized by market sector. This means that the
investment manager considers the trends in the fixed-income market and evaluates
the long-term trends in interest rates, and then selects individual securities
for the Portfolio based on its evaluation of each security's particular
characteristics (for example, duration, yield, quality, relative value) and
total return opportunities.
The Portfolio 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 Portfolio from achieving its objective.
The Portfolio 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 (which does not include ADRs). The
Portfolio generally does not invest a significant amount, if any, in illiquid or
foreign securities.
Except for its fundamental policy, which can only be changed with the approval
of shareholders, the Portfolio may change its principal strategies if the Fund's
Board of Directors believes doing so is consistent with the Portfolio's
objectives.
The Portfolio's objectives are a fundamental policy and may be changed only with
the approval of shareholders. As with any mutual fund, there is no guarantee the
Portfolio will achieve its objectives.
P-34
<PAGE>
Seligman Income Portfolio
PRINCIPAL RISKS
A significant portion of the Portfolio's assets is generally invested in common
stocks. Stock prices fluctuate. Therefore, as with any fund that invests in
stocks, the Portfolio's net assets value will fluctuate, especially in the short
term. You may experience a decline in the value of your investment and you could
lose money.
While the Portfolio maintains exposure to varied industry sectors over the
longer term, it may invest more heavily in certain industries believed to offer
good investment opportunities. To the extent that an industry in which the
Portfolio is invested falls out of favor, the Portfolio's performance may be
negatively affected.
Stocks of large US companies, like those in which the Portfolio may invest, are
experiencing an extended period of strong performance. However, if investor
sentiment changes, the value of large company stocks may decline. This could
have an adverse effect on the Portfolio's yield, net assets value, and total
return.
The portion of the Portfolio's assets that are invested in fixed-income
securities will be subject to interest rate risk and credit risk, as discussed
below.
Changes in market interest rates will affect the value of the fixed-income
securities held by the Portfolio. In general, the market value of fixed-income
securities, like the securities in which the Portfolio invests, move in the
opposite direction of interest rates: the market value decreases when interest
rates rise and increases when interest rates fall. Long-term securities are
generally more sensitive to changes in interest rates, and therefore subject to
a greater degree of market price volatility. Changes in the value of the
fixed-income securities held by the Portfolio may affect the Portfolio's net
asset value. The extent to which the Portfolio is affected will depend on the
percentage of the Portfolio's assets that is invested in fixed-income securities
and the duration of the securities held.
A fixed-income security could deteriorate in quality to such an extent that its
rating is downgraded or its market value declines relative to comparable
securities. Credit risk also includes the risk that an issuer of a security
would be unable to make interest and principal payments. To the extent the
Portfolio holds securities that have been downgraded, or default on payment, its
performance could be negatively affected.
Fixed-income securities, like those in which the Portfolio invests, are traded
principally by dealers in the over-the counter market. The Portfolio's ability
to sell securities it holds is dependent on the willingness and ability of
market participants to provide bids that reflect current market levels. Adverse
market conditions could result in a lack of liquidity by reducing the number of
ready buyers.
The Portfolio may actively and frequently trade securities in its portfolio to
carry out its principal strategies. A high portfolio turnover rate results in
correspondingly greater transaction costs and a possible increase in short-term
capital gains and losses. This may increase the Portfolio's expenses and have
tax consequences for investors in the Portfolio.
An investment in the Portfolio is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
P-35
<PAGE>
Seligman Income Portfolio
PAST PERFORMANCE
The information below provides some indication of the risks of investing in the
Income Portfolio by showing how the performance of a single share of the
Portfolio has varied year to year, as well as how its performance compares to
three widely-used measures of performance. How the Portfolio has performed in
the past, however, is not necessarily an indication of how it will perform in
the future.
The returns presented in the bar chart and table do not reflect the effect of
any administration fees or sales charges associated with variable annuity
contracts. If these expenses were included, the returns would be less. Both the
bar chart and table assume that all dividends and capital gain distributions
were reinvested.
Annual Total Returns
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1989 10.78%
1990 9.50%
1991 11.25%
1992 11.39%
1993 11.38%
1994 9.97%
1995 10.56%
1996 10.52%
1997 10.80%
1998 7.76%
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
================================================================================
Average Annual Total Returns - Periods Ended 12/31/98
ONE FIVE TEN
YEAR YEARS YEARS
----- ------- -------
Seligman Income Portfolio 7.76% 7.77% 10.29%
S&P 500 Index 28.58 24.07 19.21
Lehman Brothers Aggregate Bond Index 8.70 7.27 9.26
Lipper Income Funds Average 7.85 10.68 11.61
The Lipper Income Funds Average, the Lehman Brothers Aggregate Bond Index, and
the S&P 500 Index are unmanaged benchmarks that assume investment of dividends.
The Lipper Income Funds Average excludes the effect of sales charges. The S&P
500 Index and the Lehman Brothers Aggregate Index exclude the effect of fees and
sales charges.
================================================================================
Portfolio Management
The Income Portfolio is managed by the Seligman Growth and Income Team, headed
by Charles C. Smith, Jr. Mr. Smith, a Managing Director of Seligman, is a Vice
President of the Fund and has been Portfolio Manager of the Income Portfolio
since December 1991. Mr. Smith joined Seligman in 1985 as Vice President,
Investment Officer. He became Senior Vice President, Senior Investment Officer
in 1992, and Managing Director in January 1994. Mr. Smith also manages the
Common Stock Portfolio of the Fund; and he manages Seligman Common Stock Fund,
Inc. and Seligman Income Fund, Inc.
Rodney D. Collins, Senior Vice President, Investment Officer of Seligman since
January 1999, co-manages the Income Portfolio. Mr. Collins joined Seligman in
1992 as a Vice President, Investment Officer. Mr. Collins also co-manages the
Common Stock Portfolio of the Fund; and he co-manages Seligman Common Stock
Fund, Inc. and Seligman Income Fund, Inc.
P-36
<PAGE>
Seligman Large-Cap Growth Portfolio
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The Portfolio's objectives are longer-term growth in capital value.
The Portfolio uses the following principal strategies to seek these objectives:
Generally, the Portfolio invests primarily in the common stock of large US
companies, selected for their growth prospects. Common stocks are chosen for the
Portfolio using both quantitative and fundamental analysis. This means the
investment manager first screens companies for past growth in sales and
earnings, as well as a strong balance sheet (e.g., low ratio of debt to total
capital). In selecting individual securities for investment, the investment
manager then looks to identify large companies that it believes display one or
more of the following:
o Proven track record
o Strong management
o Multiple product lines
o Potential for improvement in overall operations (i.e., catalyst
for growth in revenues and/or earnings)
o Positive supply and demand outlook for its industry
The investment manager also looks at the forecasted earnings of a company
considered for investment to determine if the company has the potential for
above-average growth.
The Portfolio will generally sell a stock when the investment manager believes
that the company or industry fundamentals have deteriorated or the company's
catalyst for growth is already reflected in the stock's price (i.e., the stock
is fully valued).
Although the Portfolio generally concentrates its investment in common stocks,
it may invest in preferred stocks, securities convertible into common stocks,
common stock rights or warrants, and debt securities if the investment manager
believes they offer capital appreciation opportunities.
The Portfolio 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 Portfolio from achieving its objective.
The Portfolio 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 Portfolio generally does not
invest a significant amount, if any, in illiquid or foreign securities.
The Portfolio may change its principal strategies if the Fund's Board of
Directors believes doing so is consistent with the Portfolio's investment
objectives.
The Portfolio's objectives are a fundamental policy and may be changed with only
the approval of shareholders. As with any mutual fund, there is no guarantee the
Portfolio will meet its objectives.
P-37
<PAGE>
Seligman Large-Cap Growth Portfolio
PRINCIPAL RISKS
Stock prices fluctuate. Therefore, as with any fund that invests in stocks, the
Portfolio'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.
The Portfolio'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.
Concentration of investments in any one industry is avoided, except under
unusual circumstances. The Portfolio may, however, invest more heavily in
certain industries believed to offer good investment opportunities. To the
extent that an industry in which the Portfolio is invested falls out of favor,
the Portfolio's performance may be negatively affected.
To the extent that the Portfolio invests some of its assets in higher-risk
securities, such as foreign securities or illiquid securities, it may be subject
to higher price volatility. Investing in securities of foreign issuers involves
risks not associated with US investments, including currency fluctuations,
foreign taxation, differences in financial reporting practices, and changes in
political conditions.
The Portfolio may actively and frequently trade securities in its portfolio to
carry out its principal strategies, or for other reasons. A high portfolio
turnover rate results in correspondingly greater transaction costs for the
Portfolio and a possible increase in short-term capital gains and losses.
An investment in the Portfolio is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PAST PERFORMANCE
The Large-Cap Growth Portfolio commenced operations on May 1, 1999. Therefore,
no performance information is provided for the Portfolio.
PORTFOLIO MANAGEMENT
The Large-Cap Growth Portfolio is managed by the Seligman Growth Team, headed by
Marion Schultheis. Marion Schultheis joined Seligman in May 1998 as a Managing
Director. She is a Vice President of the Fund and has been Portfolio Manager of
the Large-Cap Growth Portfolio since its inception. Prior to joining Seligman,
Ms. Schultheis was a Managing Director at Chancellor LGT from October 1997 to
May 1998 and Senior Portfolio Manager at IDS Advisory Group Inc. from August
1987 to October 1997. Ms. Schultheis also manages the Capital Portfolio and
co-manages the Global Growth Opportunities Portfolio of the Fund; and she
manages Seligman Capital Fund, Inc. and Seligman Growth Fund, Inc. and
co-manages Seligman Henderson Global Growth Opportunities Fund, a series of
Seligman Henderson Global Fund Series, Inc.
P-38
<PAGE>
Seligman Large-Cap Value Portfolio
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
- -----------------------------------------
Value Companies:
Those companies believed by the
investment manager to be
undervalued, either historically, by the
market, of by their peers.
- -----------------------------------------
The Portfolio's objective is long-term capital appreciation.
The Portfolio uses the following principal strategies to pursue its objective:
The Portfolio generally invests at least 65% of its total assets in the common
stocks of "value" companies with large market capitalization ($2 billion or
more) at the time of purchase by the Portfolio.
The Portfolio uses a bottom-up stock selection approach. This means that the
investment manager concentrates on individual company fundamentals, rather than
on a particular industry. In selecting investments, the investment manager seeks
to identify value companies that it believes display one or more of the
following:
o A low price-to-earning and/or low price-to-book ratio
o Positive change in senior management
o Positive corporate restructuring
o Temporary setback in price due to factors that no longer exist
The Portfolio generally holds a small number of securities because the
investment manager believe 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 Portfolio invests and continually
monitors portfolio holdings, remaining sensitive to overvaluation and
deteriorating fundamentals.
The Portfolio 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 Portfolio anticipates that it will be invested in equity securities of
domestic issuers, including common stock, preferred stock and stock convertible
into or exchangeable for such securities. The Portfolio expects that no more
than 15% of its assets will be invested in cash or fixed-income securities,
except as a temporary defensive measure. The Portfolio may also invest in
American Depository 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 Portfolio
uses the same criteria in evaluating these securities as it does for common
stocks.
The Portfolio 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 Portfolio from achieving its objective.
The Portfolio may invest up to 15% of its net assets in illiquid securities
(i.e., securities that cannot be readily sold). The Portfolio may also invest up
to 10% of its total assets directly in foreign securities (which does not
include ADRs, or commercial paper and certificates of deposit issued by foreign
banks). The Portfolio may also purchase put options (which gives the Portfolio
the right to sell an underlying security at a particular price during a fixed
period) in an attempt to hedge against a decline in the price of securities it
holds in its portfolio. The Portfolio generally does not invest a significant
amount of its assets, if any, in illiquid securities, foreign securities, or put
options.
The Portfolio may change its principal strategies if the Fund's Board of
Directors believes doing so is consistent with the Portfolio's objective. The
Directors may also change the parameters by which "large" market capitalization
is defined if they conclude such a change is appropriate.
The Portfolio's objective is a fundamental policy and may be changed only with
the approval of shareholders. As with any mutual fund, there is no guarantee the
Portfolio will achieve its objective.
P-39
<PAGE>
Seligman Large-Cap Value Portfolio
PRINCIPAL RISKS
Stock prices fluctuate. Therefore, as with any fund that invests in stocks, the
Portfolio'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.
The Portfolio 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 Portfolio's
performance than if the Portfolio held a larger number of securities. The
Portfolio may experience more volatility, especially over the short term, than a
fund with a greater number of holdings.
The Portfolio generally avoids concentration in any one industry. However, the
Portfolio may invest more heavily in certain industries believed to offer good
investment opportunities. To the extent that an industry in which the Portfolio
is invested falls out of favor, the Portfolio's performance may be negatively
affected. This effect may be heightened because the Portfolio holds a smaller
number of securities.
The Portfolio'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.
To the extent that the Portfolio invests some of its assets in higher-risk
securities, such as foreign securities, illiquid securities, or options, it may
be subject to higher price volatility. Investing in securities of foreign
issuers involves risks not associated with US investments, including settlement
risk, currency fluctuations, foreign taxation, differences in financial
reporting practices, and changes in political conditions.
An investment in the Portfolio is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PAST PERFORMANCE
The Large-Cap Value Portfolio has not completed a full calendar year's
performance. Therefore, no performance information is provided for the
Portfolio.
PORTFOLIO MANAGEMENT
The Large-Cap Value Portfolio is managed by the Seligman Value Team, headed by
Neil T. Eigen. Mr. Eigen joined Seligman in January 1998 as a Managing Director.
He is a Vice President of the Fund and has been Portfolio Manager of the
Large-Cap Value Portfolio since its inception. Prior to joining Seligman, Mr.
Eigen was Senior Managing Director, Chief Investment Officer and Director of
Equity Investing at Bear Stearns Asset Management. Mr. Eigen also manages the
Seligman Small-Cap Value Portfolio of the Fund; and he manages the Seligman
Large-Cap Value Fund and the Seligman Small-Cap Value Fund, the two series of
Seligman Value Fund Series, Inc.
Richard S. Rosen co-manages the Large-Cap Value Portfolio. Mr. Rosen joined
Seligman in January 1998 as a Senior Vice President, Investment Officer. Prior
to joining Seligman, Mr. Rosen was a Managing Director and Portfolio Manager at
Bear Stearns Asset Management. Mr. Rosen also co-manages the Seligman Small-Cap
Value Portfolio of the Fund; and he co-manages the Seligman Large-Cap Value Fund
and the Seligman Small-Cap Value Fund, the two series of Seligman Value Fund
Series, Inc.
P-40
<PAGE>
Seligman Small-Cap Value Portfolio
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
- -----------------------------------------
Value Companies:
Those companies believed by the
investment manager to be
undervalued, either historically, by the
market, of by their peers.
- -----------------------------------------
The Portfolio's objective is long-term capital appreciation.
The Portfolio uses the following principal strategies to pursue its objective:
The Portfolio 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 Portfolio.
The Portfolio uses a bottom-up stock selection approach. This means that the
investment manager concentrates on individual company fundamentals, rather than
on a particular industry. In selecting investments, the investment manager seeks
to identify value companies that it believes display one or more of the
following:
o A low price-to-earning and/or low price-to-book ratio
o Positive change in senior management
o Positive corporate restructuring
o Temporary setback in price due to factors that no longer exist
The Portfolio generally holds a small number of securities because the
investment manager believe 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 Portfolio invests and continually
monitors portfolio holdings, remaining sensitive to overvaluation and
deteriorating fundamentals.
The Portfolio 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 Portfolio anticipates that it will be invested in equity securities of
domestic issuers, including common stock, preferred stock and stock convertible
into or exchangeable for such securities. The Portfolio expects that no more
than 15% of its assets will be invested in cash or fixed-income securities,
except as a temporary defensive measure. The Portfolio may also invest in
American Depository 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 Portfolio
uses the same criteria in evaluating these securities as it does for common
stocks.
The Portfolio 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 Portfolio from achieving its objective.
The Portfolio may invest up to 15% of its net assets in illiquid securities
(i.e., securities that cannot be readily sold). The Portfolio may also invest up
to 10% of its total assets directly in foreign securities (which does not
include ADRs, or commercial paper and certificates of deposit issued by foreign
banks). The Portfolio may also purchase put options (which gives the Portfolio
the right to sell an underlying security at a particular price during a fixed
period) in an attempt to hedge against a decline in the price of securities it
holds in its portfolio. The Portfolio generally does not invest a significant
amount of its assets, if any, in illiquid securities, foreign securities, or put
options.
The Portfolio may change its principal strategies if the Fund's Board of
Directors believes doing so is consistent with the Portfolio's objective. The
Directors may also change the parameters by which "small" market capitalization
is defined if they conclude such a change is appropriate.
The Portfolio's objective is a fundamental policy and may be changed only with
the approval of shareholders. As with any mutual fund, there is no guarantee the
Portfolio will achieve its objective.
P-41
<PAGE>
Seligman Small-Cap Value Portfolio
PRINCIPAL RISKS
Stock prices fluctuate. Therefore, as with any fund that invests in stocks, the
Portfolio'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.
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 small lesser-known companies.
The Portfolio 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 Portfolio's
performance than if the Portfolio held a larger number of securities. The
Portfolio may experience more volatility, especially over the short term, than a
fund with a greater number of holdings.
The Portfolio generally avoids concentration in any one industry. However, the
Portfolio may invest more heavily in certain industries believed to offer good
investment opportunities. To the extent that an industry in which the Portfolio
is invested falls out of favor, the Portfolio's performance may be negatively
affected. This effect may be heightened because the Portfolio holds a smaller
number of securities.
The Portfolio'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.
To the extent that the Portfolio invests some of its assets in higher-risk
securities, such as foreign securities, illiquid securities, or options, it may
be subject to higher price volatility. Investing in securities of foreign
issuers involves risks not associated with US investments, including settlement
risk, currency fluctuations, foreign taxation, differences in financial
reporting practices, and changes in political conditions.
An investment in the Portfolio is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
PAST PERFORMANCE
The Small-Cap Value Portfolio has not completed a full calendar year's
performance. Therefore, no performance information is provided for the
Portfolio.
PORTFOLIO MANAGEMENT
The Small-Cap Value Portfolio is managed by the Seligman Value Team, headed by
Neil T. Eigen. Mr. Eigen joined Seligman in January 1998 as a Managing Director.
He is a Vice President of the Fund and has been Portfolio Manager of the
Small-Cap Value Portfolio since its inception. Prior to joining Seligman, Mr.
Eigen was Senior Managing Director, Chief Investment Officer and Director of
Equity Investing at Bear Stearns Asset Management. Mr. Eigen also manages the
Seligman Large-Cap Value Portfolio of the Fund; and he manages the Seligman
Large-Cap Value Fund and the Seligman Small-Cap Value Fund, the two series of
Seligman Value Fund Series, Inc.
Richard S. Rosen co-manages the Small-Cap Value Portfolio. Mr. Rosen joined
Seligman in January 1998 as a Senior Vice President, Investment Officer. Prior
to joining Seligman, Mr. Rosen was a Managing Director and Portfolio Manager at
Bear Stearns Asset Management. Mr. Rosen also co-manages the Seligman Large-Cap
Value Portfolio of the Fund; and he co-manages the Seligman Large-Cap Value Fund
and the Seligman Small-Cap Value Fund, the two series of Seligman Value Fund
Series, Inc.
P-42
<PAGE>
MANAGEMENT OF THE FUND
A Board of Directors provides broad supervision over the affairs of the Fund.
The Fund's manager is J. & W. Seligman & Co. Incorporated (Seligman), 100 Park
Avenue, New York, New York 10017. Seligman provides investment management
services for each of the Fund's Portfolios, including making purchases and sales
of securities for the Portfolios, consistent with each Portfolio's investment
objectives and strategies, and administers each Portfolio'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 $XX.X billion in assets as of March 31, 1999. Seligman also
provides investment management or advice to institutional or other accounts
having an aggregate value at March 31, 1999 of approximately $XX.X billion.
Each Portfolio pays Seligman a fee for its services, equal to a percentage of
the Portfolio's average daily net assets, as follows:
Management Fee Rate
<TABLE>
<CAPTION>
Management Fee Rate
Management Fee Rate Paid for
as a % of Average Fiscal Period ended
Daily Net Assets December 31, 1998
-------------------- ---------------------
<S> <C> <C>
Seligman Bond Portfolio .40% .40%
Seligman Capital Portfolio .40% .40%
Seligman Cash Management Portfolio .40% --*
Seligman Common Stock Portfolio .40% .40%
Seligman Communications and Information Portfolio .75% .75%
Seligman Frontier Portfolio .75% .75%
Seligman Henderson Global Growth Opportunities Portfolio 1.00% 1.00%
Seligman Henderson Global Smaller Companies Portfolio 1.00% 1.00%
Seligman Henderson Global Technology Portfolio 1.00% 1.00%
Seligman Henderson International Portfolio 1.00% 1.00%
Seligman High-Yield Bond Portfolio .50% .50%
Seligman Income Portfolio .40% .40%
Seligman Large-Cap Growth Portfolio .70% on first $1 billion; N/A**
.65% on next $1 billion;
.60% thereafter
Seligman Large-Cap Value Portfolio .80% on first $500 million; .80%
.70% on next $500 million;
.60% thereafter
Seligman Small-Cap Value Portfolio 1.00% on first $500 million; 1.00%
.90% on next $500 million;
.80% thereafter
</TABLE>
* Seligman voluntarily waived its management fee for the Seligman Cash
Management Portfolio. There is no assurance that Seligman will continue
this policy in the future.
** Seligman Large-Cap Growth Portfolio commenced operation on May 1, 1999.
The Fund's Subadviser
The Fund's subadviser is Henderson Investment Management Limited (HIML), 3
Finsbury Avenue, London EC2M 2PA. HIML, established in 1984, is a wholly owned
subsidiary of Henderson plc, a United Kingdom corporation. Henderson plc is a
subsidiary of AMP Limited, an Australian life insurance and financial services
company. HIML provides investment advice, research and assistance with respect
to the non-US investments of each of the Seligman Henderson Portfolios of the
Fund. Seligman pays HIML a fee for its services in respect of each Seligman
Henderson Portfolio based on the assets under HIML's supervision. This fee does
not affect the fees paid by any Portfolio.
Prior to July 1, 1998, Seligman Henderson Co. served as subadviser to the Fund.
Seligman Henderson Co. was founded in 1991 as a general partnership between
Seligman and Henderson International, Inc., a wholly owned subsidiary of
Henderson plc. Each partner owns an equal 50% ownership in the partnership.
Seligman paid Seligman Henderson Co. for its services to the Seligman Henderson
Portfolios.
P-43
<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 Fund relies upon
service providers and their computer systems for its day-to-day operations. Many
of the Fund's 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 Fund's
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 Board of Directors of the Fund and its Audit
Committee.
The team has identified the service providers and vendors who furnish critical
services or software systems to the Fund, including securities firms that
execute portfolio transactions for the Fund 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 Fund. 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 Fund. The team anticipates
finalizing these plans in the near future.
The Fund anticipates 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 Fund believes that the
critical systems on which it relies will function properly on and after the year
2000, but this is not guaranteed. If these systems do not function properly, or
the Fund's critical service providers are not successful in implementing their
year 2000 plans, the Fund's operations may be adversely affected, including
pricing, securities trading and settlement, and the provision of shareholder
services.
In addition, the Fund may hold securities of issuers whose underlying business
leaves them susceptible to year 2000 issues. The Fund 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 the Fund holds these securities, the Fund's 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 Fund may be adversely affected if
the exchanges, markets, depositories, clearing agencies, or government or third
parties responsible for infrastructure needs do not address their year 2000
issues in a satisfactory manner.
SDC has informed the Fund 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 Fund 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.
Euro Conversion
On January 1, 1999, eleven of the fifteen member countries in the European Union
adopted a common legal currency, called the "euro". For European issuers, and
other entities with significant markets or operations in Europe (whether or not
in the participating countries), the euro conversion may create strategic
challenges as these entities adapt to a single transnational currency.
The Fund, Seligman, and HIML are monitoring the changing marketplace in Europe
to seek to identify investment opportunities created by the euro and avoid
investments that may adversely affect the performance of any Portfolio. Despite
these efforts, a Portfolio's performance may be adversely affected if the
issuers of securities that are purchased, held, or sold by the Portfolio do not
adapt to the potential changes in the European marketplace as a result of the
euro. For example, the euro will likely result in greater price transparency
(making it more difficult for businesses to charge different prices for the same
products on a country-by-country basis), thereby creating a more competitive
marketplace in Europe. As a result, European issuers and other issuers with
significant markets or operations in Europe (whether or not in the participating
countries), may be adversely affected if they do not respond to this new
competitive marketplace by cutting costs and streamlining operations. Further,
any participating country may opt out of the euro within the first three years.
A participating country may decide to opt out of the euro for several reasons,
including high unemployment, lack of economic growth, or frustration with the
lack of unity in the participating countries' economies. The risk of one or more
participating countries opting out of the euro is enhanced by the participating
countries' lack of control over their own monetary policies as they have
delegated this function to the European Central Bank. Issuers in a participating
country, as well as other issuers globally, may be adversely impacted in the
event that a participating country terminates its participation in the euro or
the euro itself collapses due to disagreements among the governments of the
participating countries.
P-44
<PAGE>
Shareholder Information
PRICING AND FUND SHARES
When you buy or sell shares, you do so at the applicable Portfolio's net asset
value (NAV) next calculated after your request is received by Canada Life or MBL
Life. If your purchase or sell request is received by Canada Life or MBL Life by
the close of regular trading on the New York Stock Exchange (NYSE) (normally
4:00 p.m. Eastern time), it will be executed at the applicable Portfolio's NAV
calculated as of the close of regular trading on the NYSE on that day.
If your purchase or sell request is received by Canada Life or MBL Life after
the close of regular trading on the NYSE, your request will be executed at the
applicable Portfolio's NAV calculated as of the close of regular trading on the
next NYSE trading day.
The NAV of each Portfolio is computed each day, Monday through Friday, on days
that the NYSE is open for trading. Securities owned by each Portfolio are valued
at current market prices. If reliable market prices are unavailable, securities
are value in accordance with procedures approved by the Fund's Board of
Directors.
HOW TO PURCHASE AND SELL SHARES
Shares of the Fund's Portfolios are offered only to Canada Life Accounts and
Seligman Mutual Benefit Plan. Shares of some Portfolios of the Fund may not be
offered to all Canada Life Accounts. Additionally, MBL Life no longer accepts
applications for new contracts nor will it accept additional purchase payments
under existing contracts.
Shares of the Fund's Portfolios will be purchased and sold by Canada Life
Accounts, and sold by Seligman Mutual Benefit Plan, at net asset value without
charge. However, the Canada Life Accounts and Seligman Mutual Benefit Plan are
subject to certain fees and charges. These fees and charges are described in the
prospectuses or disclosure documents for the Canada Life Accounts and Seligman
Mutual Benefit Plan, which should be read together with this Prospectus.
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Dividends and capital gain distributions from each of the Portfolios, except the
Seligman Cash Management Portfolio, will be declared and paid annually and will
be reinvested in additional shares (at net asset value) of the Portfolio that
declared such dividend or capital gain distribution. Dividends on the Seligman
Cash Management Portfolio will be declared daily and reinvested monthly in
additional shares of such Portfolio; it is not expected that this Portfolio will
realize capital gains.
TAXES
The Fund's Portfolios will be subject to federal income tax only with respect to
undistributed net investment income and net realized capital gain.
Dividends or capital gain distributions are generally not currently taxable to
owners of the Canada Life Accounts or Seligman Mutual Benefit Plan. Each of the
Fund's Portfolios will be treated as a separate entity for income tax purposes.
Further information regarding the tax consequences of an investment in the Fund
is contained in the separate prospectuses or disclosure documents of the Canada
Life Accounts or Seligman Mutual Benefit Plan.
P-45
<PAGE>
Financial Highlights
The tables below are intended to help you understand each Portfolio's financial
performance for the past five years or, if less than five years, the period of
the Portfolio's operations. Certain information reflects financial results for a
single share of a Portfolio that was held throughout the periods shown. "Total
return" shows the rate that you would have earned (or lost) on an investment in
the Portfolio. Total returns do not reflect the effect of any administration
fees or sales charges associated with variable annuity accounts, independent
auditors, have audited this information. Their report, along with each
Portfolio's financial statements, is included in the Fund's annual report, which
is available upon request.
Seligman Bond Portfolio
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period ...... $ 9.89 $10.44 $ 9.27 $10.11
------ ------ ------ ------ ------
Income from investment operations:
Net investment income** ................. .54 .57 .61 .50
Net gains or losses on securities (both
realized and unrealized) ................ .35 (.55) 1.17 (.84)
------ ------ ------ ------ ------
Total from investment operations .......... .89 .01 1.78 (.34)
------ ------ ------ ------ ------
Less distributions:
Dividends (from net
investment income) ...................... (.54) (.56) (.61) (.50)
------ ------ ------ ------ ------
Total distributions ....................... (.54) (.56) (.61) (.50)
------ ------ ------ ------ ------
Net asset value, end of period ............ $10.24 $ 9.89 $10.44 $ 9.27
====== ====== ====== ====== ======
Total return .............................. 8.98% .09% 19.18% (3.40)
Ratios/Supplemental Data:
Net assets, end of period (in thousands) .. $7,232 $5,015 $4,497 $3,606
Ratio of expenses to average net assets** . .60% .60% .60% .60%
Ratio of net income to average
net assets** ............................ 6.22% 5.97% 6.22% 5.12%
Portfolio turnover rate ................... 170.12% 199.74% 114.42% 237.23%
</TABLE>
Seligman Capital Portfolio
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period ...... $16.01 $14.91 $12.70 $14.95
------ ------ ------ ------ ------
Income from investment operations:
Net investment income** ................. .03 .04 .05 .02
Net gains or losses on securities (both
realized and unrealized) ................ 3.35 2.12 3.38 (.70)
------ ------ ------ ------ ------
Total from investment operations .......... 3.38 2.16 3.43 (.68)
------ ------ ------ ------ ------
Less distributions:
Distributions (from capital gains) ...... (1.26) (1.02) (1.18) (1.55)
------ ------ ------ ------ ------
Dividends (from net
investment income) ...................... (.03) (.04) (.05) (.02)
------ ------ ------ ------ ------
Total distributions ....................... (1.29) (1.06) (1.23) (1.57)
------ ------ ------ ------ ------
Net asset value, end of period ............ $18.10 $16.01 $14.91 $12.70
====== ====== ====== ====== ======
Total return .............................. 21.31% 14.51% 27.17% (4.59)
Ratios/Supplemental Data:
Net assets, end of period (in thousands) .. $20,400 $14,313 $9,294 5,942
Ratio of expenses to average net assets** . .60% .59% .60% .60%
Ratio of net income to average
net assets** ............................ .16% .29% .32% .10%
Portfolio turnover rate ................... 93.97% 88.78% 122.20% 67.39%
</TABLE>
- ----------
* Per share amounts are calculated based on average shares outstanding.
P-46
<PAGE>
Seligman Cash Management Portfolio
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period ...... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment income** ................. .05 .05 .06 .04
Net gains or losses on securities (both
realized and unrealized) ................ -- -- -- --
------ ------ ------ ------ ------
Total from investment operations .......... .05 .05 .06 .04
------ ------ ------ ------ ------
Less distributions:
Dividends (from net
investment income) ...................... (.05) (.05) (.06) (.04)
------ ------ ------ ------ ------
Total distributions ....................... (.05) (.05) (.06) (.04)
------ ------ ------ ------ ------
Net asset value, end of period ............ $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total return .............................. 5.52% 5.43% 5.60% 4.03
Ratios/Supplemental Data:
Net assets, end of period (in thousands) .. $8,635 $9,755 $7,800 $3,230
Ratio of expenses to average net assets** . -- -- -- --
Ratio of net income to average
net assets** ............................ 5.39% 5.30% 5.48% 3.98%
</TABLE>
Seligman Common Stock Portfolio
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period ...... $15.92 $15.44 $13.78 $14.98
------ ------ ------ ------ ------
Income from investment operations:
Net investment income** ................. .33 .33 .35 .37
Net gains or losses on securities (both
realized and unrealized) ................ 3.01 2.79 3.40 (.36)
------ ------ ------ ------ ------
Total from investment operations .......... 3.34 3.12 3.75 .01
------ ------ ------ ------ ------
Less distributions:
Distributions (from capital gains) ...... (2.67) (2.31) (1.74) (.82)
Dividends (from net
investment income) ...................... (.32) (.34) (.35) (.39)
------ ------ ------ ------ ------
Total distributions ....................... (2.99) (2.65) (2.09) (1.21)
------ ------ ------ ------ ------
Net asset value, end of period ............ $16.28 $15.92 $15.44 $13.78
====== ====== ====== ====== ======
Total return .............................. 21.31% 20.08% 27.28% 0.04%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) .. $50,737 $37,168 $28,836 $20,168
Ratio of expenses to average net assets** . .53% .53% .54% .60%
Ratio of net income to average
net assets** ............................ 1.92% 1.99% 2.42% 2.45%
Portfolio turnover rate ................... 80.13% 50.33% 55.48% 15.29%
</TABLE>
- ----------
* Per share amounts are calculated based on average shares outstanding.
** Seligman voluntarily waives its management fee and reimburses all expenses
for the Cash Management Portfolio; and reimburses expenses (excluding its
management fee) that exceed .20% per annum of the Common Stock Portfolio's
average daily net assets. These amounts reflect the effect of these waivers
and/or reimbursements. There is no assurance that Seligman will continue
this policy in the future.
P-47
<PAGE>
Seligman Communications & Information Portfolio
<TABLE>
<CAPTION>
Year ended December 31, 10/11/94+
--------------------------------------------------- to
1998 1997 1996 1995 12/31/94
------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period ...... $14.69 $13.50 $10.44 $10.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment income** ................. -- -- -- (.02)
Net gains or losses on securities (both
realized and unrealized) ................ 3.05 1.19 4.02 .46
------ ------ ------ ------ ------
Total from investment operations .......... 3.05 1.19 4.02 .44
------ ------ ------ ------ ------
Less distributions:
Distributions (from capital gains) ...... (4.65) -- (.96) --
------ ------ ------ ------ ------
Total distributions ....................... (4.65) -- (.96) --
------ ------ ------ ------ ------
Net asset value, end of period ............ $13.09 $14.69 $13.50 $10.44
====== ====== ====== ====== ======
Total return 22.22% 8.81% 38.55% 4.40%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) .. $87,633 $60,645 $38,442 $495
Ratio of expenses to average net assets** . .87 .87 .95 .95+
Ratio of net income to average
net assets** ............................ (.49) (.32) (.89) (.95)+
Portfolio turnover rate ................... 277.14% 167.20% 96.62% --
</TABLE>
Seligman Frontier Portfolio
<TABLE>
<CAPTION>
Year ended December 31, 10/11/94+
--------------------------------------------------- to
1998 1997 1996 1995 12/31/94
------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period ...... $14.98 $13.56 $10.58 $10.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment income** ................. -- -- -- (.01)
Net gains or losses on securities (both
realized and unrealized) ................ 2.39 3.22 3.51 .59
------ ------ ------ ------ ------
Total from investment operations .......... 2.39 3.22 3.51 .58
------ ------ ------ ------ ------
Less distributions:
Distributions (from capital gains) ...... (1.59) (1.80) (.53) --
------ ------ ------ ------ ------
Total distributions ....................... (1.59) (1.80) (.53) --
------ ------ ------ ------ ------
Net asset value, end of period ............ $15.78 $14.98 $13.56 $10.58
====== ====== ====== ====== ======
Total return .............................. 16.33% 23.93% 33.28% 5.80%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) .. $42.973 $31,672 $12,476 $169
Ratio of expenses to average net assets** . .89 .92 .95 .95++
Ratio of net income to average
net assets** ............................ (.05) (.37) (.55) (.70)++
Portfolio turnover rate ................... 101.68% 119.74% 106.48% --
</TABLE>
- ----------
* Per share amounts are calculated based on average shares outstanding.
** Seligman voluntarily reimburses expenses (excluding its management fee)
that exceed .20% per annum of the Portfolio's average daily net assets.
These amounts reflect the effect of these waivers. There is no assurance
that Seligman will continue this policy in the future.
+ Commencement of investment operations.
++ Annualized.
P-48
<PAGE>
Seligman Henderson Global Growth Opportunities Portfolio
<TABLE>
<CAPTION>
Year ended
December 31, 5/1/96+
--------------------- to
1998 1997 12/31/96
------ ------ --------
<S> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period ................................... $ 9.91 $10.00
------ ------ ------
Income from investment operations:
Net investment income ................................................ -- --
Net gains or losses on securities (both realized and unrealized) ..... 1.80 .02
Net gains or losses on foreign currency transactions
(both realized and unrealized) ..................................... (.56) (.10)
------ ------ ------
Total from investment operations ....................................... 1.24 (.08)
------ ------ ------
Less distributions:
Distributions (from capital gains) ................................... (.12) --
------ ------ ------
Dividends (from net investment income)
Total distributions .................................................... -- (.01)
------ ------ ------
Net asset value, end of period ......................................... $(.12) $(.01)
====== ====== ======
Total return ........................................................... 11.03% 9.91%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) ............................... $5,449 $1,590
Ratio of expenses to average net assets ................................ 1.40 1.40+++
Ratio of net income to average net assets .............................. .01% .37%
Portfolio turnover rate ................................................ 77.85% 12.99%
</TABLE>
Seligman Henderson Global Smaller Companies Portfolio
<TABLE>
<CAPTION>
Year ended December 31, 10/11/94++
--------------------------------------------------- to
1998 1997 1996 1995 12/31/94
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period ....... $12.87 $11.67 $10.31 $10.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment income .................... .02 .02 .05 .06
Net gains or losses on securities (both
realized and unrealized) ................. 1.17 2.31 2.04 .27
Net gains or losses on
foreign currency transactions
(both realized and unrealized) ........... (.75) (.16) (.30) .03
------ ------ ------ ------ ------
Total from investment operations ........... .44 2.17 1.79 .36
------ ------ ------ ------ ------
Less distributions:
Distributions (from capital gains) ....... (.31) (.95) (.38) --
Dividends (from net investment income) ... (.02) (.02) (.05) (.04)
------ ------ ------ ------ ------
Total distributions ........................ (.33) (.97) (.43) (.04)
------ ------ ------ ------ ------
Net asset value, end of period ............. $12.98 $12.87 $11.67 $10.31
====== ====== ====== ====== ======
Total return ............................... 3.43% 18.66% 17.38% 3.53%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) ... $20,505 $16,876 $4,837 $132
Ratio of expenses to average net assets .... 1.40 1.40 1.39 1.20+++
Ratio of net income to average
net assets ............................... .24 .23 .64 3.14+++
Portfolio turnover rate .................... 64.81% 62.31% 55.65% --
</TABLE>
- ----------
* Per share amounts are calculated based on average shares outstanding.
** Seligman and Seligman Henderson Co. (HIML for periods after 7/1/98)
voluntarily waived a portion of the management fees and/or reimbursed
expenses for the Portfolio. These amounts reflect the effect of these
waivers and/or reimbursements. There is no assurance that Seligman or HIML
will continue this policy in the future.
+ Commencement of operations.
++ Commencement of investment operations.
+++ Annualized.
P-49
<PAGE>
Seligman Henderson Global Technology Portfolio
<TABLE>
<CAPTION>
Year ended
December 31, 5/1/96+
--------------------- to
1998 1997 12/31/96
------ ------ --------
<S> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period .................................. $10.32 $10.00
------ ------ ------
Income from investment operations:
Net investment income** ............................................. .01 --
Net gains or losses on securities (both realized and unrealized) .... 2.15 .31
Net gains or losses on foreign currency transactions
(both realized and unrealized) .................................... (.19) (.09)
------ ------ ------
Total from investment operations ...................................... 1.96 .40
------ ------ ------
Less distributions:
Distributions (from capital gains) .................................. (1.69) (.08)
Dividends (from net investment income) .............................. (.01) --
------ ------ ------
Total distributions ................................................... (1.70) (.08)
------ ------ ------
Net asset value, end of period ........................................ $10.59 $10.32
====== ====== ======
Total return .......................................................... 19.53% 4.01%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $3,686 $1,364
Ratio of expenses to average net assets** ............................. 1.40 1.40++
Ratio of net income to average net assets** ........................... .12 .60++
Portfolio turnover rate ............................................... 167.36% 45.04%
</TABLE>
Seligman Henderson International Portfolio
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period ....... $12.96 $12.39 $11.34 $11.37
------ ------ ------ ------ ------
Income from investment operations:
Net investment income** .................. .03 .07 .15 .13
Net gains or losses on securities (both
realized and unrealized) ................. 2.11 1.12 .90 (.31)
Net gains or losses on
foreign currency transactions
(both realized and unrealized) ........... (1.06) (.32) .24 .33
------ ------ ------ ------ ------
Total from investment operations ........... 1.08 .87 1.29 .15
------ ------ ------ ------ ------
Less distributions:
Distributions (from capital gains) ....... (.47) (.24) (.09) (.12)
Dividends (from net investment income) ... (.03) (.07) (.15) (.06)
------ ------ ------ ------ ------
Total distributions ........................ (.50) (.31) (.24) (.18)
------ ------ ------ ------ ------
Net asset value, end of period ............. $13.54 $12.96 $12.39 $11.34
====== ====== ====== ====== ======
Total return ............................... 8.35% 7.08% 11.34% 1.32%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) ... $9,182 $7,242 $4,183 $1,776
Ratio of expenses to average net assets** .. 1.40 1.40 1.35 1.20
Ratio of net income to average net assets** .43 .70 1.01 1.17
Portfolio turnover rate .................... 89.43% 48.53% 41.40% 47.34%
</TABLE>
- ----------
* Per share amounts are calculated based on average shares outstanding.
** Seligman and Seligman Henderson Co. (HIML for periods after 7/1/98)
voluntarily waived a portion of the management fees and/or reimbursed
expenses for the Portfolio. These amounts reflect the effect of these
waivers and/or reimbursements. There is no assurance that Seligman or HIML
will continue this policy in the future.
+ Commencement of operations.
++ Annualized.
P-50
<PAGE>
Seligman High-Yield Bond Portfolio
<TABLE>
<CAPTION>
Year ended December 31, 5/1/95+
------------------------------------ to
1998 1997 1996 12/31/95
------ ------ ------ --------
<S> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period .................. $11.19 $10.50 $10.00
------ ------ ------ ------
Income from investment operations:
Net investment income** ............................. .91 .77 .22
Net gains or losses on securities (both
realized and unrealized) ............................ .78 .77 .52
------ ------ ------ ------
Total from investment operations ...................... 1.69 1.54 .74
------ ------ ------ ------
Less distributions:
Distributions (from capital gains) .................. (.11) (.08) (.02)
Dividends (from net investment income) .............. (.90) (.77) (.22)
------ ------ ------ ------
Total distributions ................................... (1.01) (.85) (.24)
------ ------ ------ ------
Net asset value, end of period ........................ $11.87 $11.19 $10.50
====== ====== ====== ======
Total return .......................................... 15.09% 14.62% 7.37%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) .............. $23,268 $11,176 $3,009
Ratio of expenses to average net assets** ............. .70 .70 .70++
Ratio of net income to average net assets** ........... 9.61% 9.77% 7.46%++
Portfolio turnover rate ............................... 74.54% 117.01% 67.55%
</TABLE>
Seligman Income Portfolio
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period ...... $10.52 $10.56 $ 9.97 $11.38
------ ------ ------ ------ ------
Income from investment operations:
Net investment income** ................. .56 .58 .60 .69
Net gains or losses on securities (both
realized and unrealized) ................ .91 .13 1.19 (1.37)
------ ------ ------ ------ ------
Total from investment operations .......... 1.47 .71 1.79 (.68)
------ ------ ------ ------ ------
Less distributions:
Distributions (from capital gains) ...... (.64) (.17) (.60) --
Dividends (from net
investment income) ...................... (.54) (.58) (.60) (.73)
------ ------ ------ ------ ------
Total distributions ....................... (1.18) (.75) (1.20) (.73)
------ ------ ------ ------ ------
Net asset value, end of period ............ $10.80 $10.52 $10.56 $9.97
====== ====== ====== ====== ======
Total return .............................. 14.02% 6.66% 17.98% (5.96)
Ratios/Supplemental Data:
Net assets, end of period (in thousands) .. $13,835 $13,717 $12,619 $10,050
Ratio of expenses to average net assets** . .60 .59 .60 .60
Ratio of net income to average
net assets** ............................ 4.71 5.37 5.55 6.34
Portfolio turnover rate ................... 96.99% 19.59% 51.22% 29.76
</TABLE>
- ----------
* Per share amounts are calculated based on average shares outstanding.
** Seligman voluntarily reimburses expenses (excluding its management fee)
that exceed .20% per annum of the Portfolio's average daily net assets.
These amounts reflect the effect of these reimbursements. There is no
assurance that Seligman will continue this countinue this policy in the
futre.
+ Commencement of operations.
++ Annualized.
P-51
<PAGE>
Seligman Large-Cap Value Portfolio
5/1/98+
to
12/31/98
--------
Per Share Data:*
Net asset value, beginning of period ...............................
-----
Income from investment operations:
Net investment income** ..........................................
Net gains or losses on securities (both realized and unrealized) .
-----
Total from investment operations ...................................
-----
Less distributions:
Distributions (from capital gains) ...............................
-----
Total distributions ................................................
-----
Net asset value, end of period .....................................
=====
Total return .......................................................
Ratios/Supplemental Data:
Net assets, end of period (in thousands) ...........................
Ratio of expenses to average net assets** ..........................
Ratio of net income to average net assets** ........................
Portfolio turnover rate ............................................
Seligman Small-Cap Value Portfolio
5/1/98+
to
12/31/98
--------
Per Share Data:*
Net asset value, beginning of period ...............................
-----
Income from investment operations:
Net investment income** ..........................................
Net gains or losses on securities (both realized and unrealized) .
-----
Total from investment operations ...................................
-----
Less distributions:
Distributions (from capital gains) ...............................
-----
Total distributions ................................................
-----
Net asset value, end of period .....................................
=====
Total return .......................................................
Ratios/Supplemental Data:
Net assets, end of period (in thousands) ...........................
Ratio of expenses to average net assets** ..........................
Ratio of net income to average net assets** ........................
Portfolio turnover rate ............................................
- ----------
* Per share amounts are calculated based on average shares outstanding.
** Seligman voluntarily reimburses total expenses (including the management
fee) that exceed .80% and 1.00%, respectively, of the Seligman Large-Cap
Value and Seligman Small-Cap Value Portfolios. These amounts reflect the
effect of these waivers. There is no assurance that Seligman will continue
this policy in the future.
+ Commencement of operations
P-52
<PAGE>
For More Information
================================================================================
The following information is available without charge upon request: Call
toll-free (800) 221-2783 in the US or (212) 850-1864 outside the US.
Statement of Additional Information (SAI) contains additional information about
the Fund. 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 Portfolio's
investments. In the Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected each
Portfolio's performance during its last fiscal year.
================================================================================
SELIGMAN ADVISORS, INC.
an affiliate of
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
Information about the Fund, 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 Fund 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: 811-5221
<PAGE>
SELIGMAN PORTFOLIOS, INC.
Statement of Additional Information
May 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 of Seligman Portfolios, Inc.,
dated May 1, 1999. 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 Fund at the above address or telephone numbers.
The financial statements and notes included in the Fund's Annual Report, and the
Independent Auditors' Report 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
Fund History............................................. 2
Description of the Fund and its Investments and Risks.... 2
Management of the Fund................................... 14
Investment Advisory and Other Services................... 20
Brokerage Allocation and Other Practices................. 23
Capital Stock and Other Securities....................... 24
Purchase, Redemption, and Pricing of Shares.............. 24
Taxation of the Fund..................................... 26
Financial Statements..................................... 26
General Information...................................... 26
Appendix A .............................................. 27
Appendix B .............................................. 30
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Fund History
The Fund was incorporated under the laws of the state of Maryland on June 24,
1987 under the name Seligman Mutual Benefit Portfolios, Inc. The Fund's name was
changed to Seligman Portfolios, Inc. on April 15, 1993.
Description of the Fund and Its Investments and Risks
Classification
The Fund is a diversified open-end management investment company, or mutual
fund. The Fund consists of the following fifteen separate and independent
Portfolios:
<TABLE>
<S> <C>
Seligman Bond Portfolio Seligman Henderson Global Technology Portfolio
Seligman Capital Portfolio Seligman Henderson International Portfolio
Seligman Cash Management Portfolio Seligman High-Yield Bond Portfolio
Seligman Common Stock Portfolio Seligman Income Portfolio
Seligman Communications and Information Portfolio Seligman Large-Cap Growth Portfolio
Seligman Frontier Portfolio Seligman Large-Cap Value Portfolio
Seligman Henderson Global Growth Opportunities Portfolio Seligman Small-Cap Value Portfolio
Seligman Henderson Global Smaller Companies Portfolio
</TABLE>
Shares of the Fund are currently provided as the investment medium for Canada
Life of America Variable Annuity Account 1 ("CLAVA-1"), Canada Life of America
Variable Annuity Account 2 ("CLAVA-2"), Canada Life of America Annuity Account 2
("CLAA-2"), Canada Life of America Annuity Account 3 ("CLAA-3"), Canada Life of
New York Variable Annuity Account 1 ("CLNYVA-1") and Canada Life of New York
Variable Annuity Account 2 ("CLNYVA-2") (collectively, "Canada Life Accounts"),
each of which is a separate account of either Canada Life Insurance Company of
America or Canada Life Insurance Company of New York, (collectively, "Canada
Life"). Shares of certain Portfolios of the Fund may not be offered to all
Canada Life Accounts.
Shares of the Seligman Bond Portfolio, Seligman Capital Portfolio, Seligman Cash
Management Portfolio, Seligman Common Stock Portfolio and Seligman Income
Portfolio are also provided as the investment medium for Mutual Benefit Variable
Contract Account-9 ("VCA-9" or "Seligman Mutual Benefit Plan") established by
MBL Life Assurance Corporation ("MBL Life"). However, MBL Life no longer accepts
application for nor contracts nor will it accept additional purchase payments
under existing contracts.
CLAVA-1, CLAVA-2, CLNYVA-1 and CLNYVA-2 are each registered as a unit investment
trust under the Investment Company Act of 1940 (the "1940 Act") and fund
variable annuity contracts ("VA Contracts") issued by Canada Life and
distributed by Seligman Financial Services, Inc. CLAA-2 and CLAA-3 are not
registered or regulated under the 1940 Act in reliance on the exemption provided
in Section 3(c)(11) of the 1940 Act. CLAA-2 and CLAA-3 fund annuity contracts
("CLAA contracts") issued by Canada Life and distributed by Seligman Advisors,
Inc. which may be purchased only by pension or profit-sharing employee benefit
plans that satisfy the requirements for qualification set forth in Section 401
of the Internal Revenue Code of 1986. VCA-9 is registered as a unit investment
trust under the 1940 Act and funds variable annuity contracts ("VCA-9
Contracts") issued by MBL Life.
Investment Strategies and Risks
The Prospectus discusses the investment objectives of each of the Fund's
Portfolios and the policies each Portfolio employs to achieve its objectives.
The following information regarding the Fund's Portfolios investment policies
supplements the information contained in the Prospectus.
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Convertible Bonds
Certain of the Portfolios may purchase convertible bonds. Convertible bonds are
convertible at a stated exchange rate or price into common stock. Before
conversion, convertible securities are similar to non-convertible debt
securities in that they provide a steady stream of income with generally higher
yields than an issuer's equity securities. The market value of all debt
securities, including convertible securities, tends to decline as interest rates
increase and to increase as interest rates decline. In general, convertible
securities may provide lower interest or dividend yields than non-convertible
debt securities of similar quality, but they may also allow investors to benefit
from increases in the market price of the underlying common stock. When the
market price of the underlying common stock increases, the price of the
convertible security tends to reflect the increase. When the market price of the
underlying common stock declines, the convertible security tends to trade on the
basis of yield, and may not depreciate to the same extent as the underlying
common stock. In an issuer's capital structure, convertible securities are
senior to common stocks. They are therefore of higher quality and involve less
risk than the issuer's common stock, but the extent to which risk is reduced
depends largely on the extent to which the convertible security sells above its
value as a fixed-income security. In selecting convertible securities for a
Portfolio, the investment manager evaluates such factors as economic and
business conditions involving the issuer, future earnings growth potential of
the issuer, potential for price appreciation of the underlying equity, the value
of individual securities relative to other investment alternatives, trends in
the determinants of corporate profits, and capability of management. In
evaluating a convertible security, the investment manager gives emphasis to the
attractiveness of the underlying common stock and the capital appreciation
opportunities that the convertible security presents. Convertible securities can
be callable or redeemable at the issuer's discretion, in which case the
investment manager would be forced to seek alternative investments. The
Portfolio may invest in debt securities convertible into equity securities rated
as low as CC by Standard & Poor's Rating Service ("S&P") or Ca by Moody's
Investors Service, Inc. ("Moody's"). Debt securities rated below investment
grade (frequently referred to as "junk bonds") often have speculative
characteristics and will be subject to greater market fluctuations and risk of
loss of income and principal than higher-rated securities. A description of
credit ratings and risks associated with lower-rated debt securities is set
forth in Appendix "A" to this Prospectus. The investment manager does not rely
on the ratings of these securities in making investment decisions but performs
its own analysis, based on the factors described above, in light of the
Portfolio's investment objectives.
Depositary Receipts
Each Portfolio may invest in securities represented by American Depositary
Receipts ("ADRs"), American Depositary Shares ("ADSs"), European Depositary
Receipts ("EDRs"), Global Depositary Receipts ("GDRs") or Global Depositary
Shares ("GDSs") (collectively, "Depositary Receipts"). ADRs and ADSs are
instruments generally issued by domestic banks or trust companies that represent
the deposit of a security of a foreign issuer. ADRs and ADSs may be publicly
traded on exchanges or over-the-counter in the United States and are quoted and
settled in dollars at a price that generally reflects the dollar equivalent of
the home country share price. EDRs, GDRs and GDSs are typically issued by
foreign banks or trust companies and traded in Europe. Depositary Receipts may
be issued as sponsored or unsponsored programs. In sponsored programs, the
issuer has made arrangements to have its securities trade in the form of
Depositary Receipts. In unsponsored programs, the issuer may not be directly
involved in the creation of the program. Although regulatory requirements with
respect to sponsored and unsponsored programs are generally similar, the issuers
of unsponsored Depositary Receipts are not obligated to disclose material
information in the US, and therefore, the import of such information may not be
reflected in the market value of such instruments. By investing in foreign
securities, the Portfolios will attempt to take advantage of differences among
economic trends and the performance of securities markets in various countries.
To date, the market values of securities of issuers located in different
countries have moved relatively independently of each other. During certain
periods, the return on equity investments in some countries has exceeded the
return on similar investments in the US. The Fund's subadviser believes that, in
comparison with investment companies investing solely in domestic securities, it
may be possible to obtain significant appreciation from a portfolio of foreign
investments and securities from various markets that offer different investment
opportunities and are affected by different economic trends. Global
diversification reduces the effect that events in any one country will have on
the entire investment portfolio. Of course, a decline in the value of a
Portfolio's investments in one country may offset potential gains from
investments in another country.
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Derivatives
Each of the Portfolios may invest in financial instruments commonly known as
"derivatives" only for hedging or investment purposes. A Portfolio will not
invest in derivatives for speculative purposes, i.e., where the derivative
investment exposes the Portfolio to undue risk of loss, such as where the risk
of loss is greater than the cost of the investment.
A derivative is generally defined as an instrument whose value is derived from,
or based upon, some underlying index, reference rate (e.g., interest rates or
currency exchange rates), security, commodity or other asset. A Portfolio will
not invest in a specific type of derivative without prior approval from its
Board of Directors, after consideration of, among other things, how the
derivative instrument serves the Portfolio's investment objective, and the risk
associated with the investment. The only types of derivatives in which the
Portfolios are currently permitted to invest, as described more fully below, are
forward currency exchange contracts, put options, and rights and warrants.
Forward Currency Exchange Contracts
Each of the Seligman Henderson Global Growth Opportunities Portfolio, the
Seligman Henderson Global Smaller Companies Portfolio, the Seligman Henderson
Global Technology Portfolio and the Seligman Henderson International Portfolio
(the "Seligman Henderson Portfolios") will generally enter into forward foreign
currency exchange contracts to fix the US dollar value of a security it has
agreed to buy or sell for the period between the date the trade was entered into
and the date the security is delivered and paid for, or, to hedge the US dollar
value of securities it owns. A forward foreign currency exchange contract is an
agreement to purchase or sell a specific currency at a future date and at a
price set at the time the contract is entered into.
A Portfolio may enter into a forward contract to sell or buy the amount of a
foreign currency it believes may experience a substantial movement against the
US dollar. In this case the contract would approximate the value of some or all
of the Portfolio's securities denominated in such foreign currency. Under normal
circumstances, the investment manager will limit forward currency contracts to
not greater than 75% of a Portfolio's position in any one country as of the date
the contract is entered into. This limitation will be measured at the point the
hedging transaction is entered into by the Portfolio. Under extraordinary
circumstances, the Fund's subadviser may enter into forward currency contracts
in excess of 75% of a Portfolio's position in any one country as of the date the
contract is entered into. The precise matching of the forward contract amounts
and the value of securities involved will not generally be possible since the
future value of such securities in foreign currencies will change as a
consequence of market movement in the value of those securities between the date
the forward contract is entered into and the date it matures. The projection of
short-term currency market movement is extremely difficult, and the successful
execution of a short-term hedging strategy is highly uncertain. Under certain
circumstances, a Portfolio may commit a substantial portion or the entire value
of its assets to the consummation of these contracts. The Fund's subadviser will
consider the effect a substantial commitment of its assets to forward contracts
would have on the investment program of a Portfolio and its ability to purchase
additional securities.
Except as set forth above and immediately below, each Portfolio will not enter
into forward contracts or maintain a net exposure to such contracts where the
consummation of the contracts would oblige the Portfolio to deliver an amount of
foreign currency in excess of the value of the Portfolio's securities or other
assets denominated in that currency. A Portfolio, in order to avoid excess
transactions and transaction costs, may nonetheless maintain a net exposure to
forward contracts in excess of the value of the Portfolio's securities or other
assets denominated in that currency provided the excess amount is "covered" by
cash and/or liquid, high-grade debt securities, denominated in any currency,
having a value at least equal at all times to the amount of such excess. Under
normal circumstances, consideration of the prospect for currency parties will be
incorporated into the longer term investment decisions made with regard to
overall diversification strategies. However, the Fund's subadviser believes that
it is important to have the flexibility to enter into such forward contracts
when it determines that the best interests of the Portfolio will be served.
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<PAGE>
At the maturity of a forward contract, a Portfolio may either sell the security
and make delivery of the foreign currency, or it may retain the security and
terminate its contractual obligation to deliver the foreign currency by
purchasing an "offsetting" contract obligating it to purchase, on the same
maturity date, the same amount of the foreign currency.
As indicated above, it is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of the forward contract.
Accordingly, it may be necessary for a Portfolio to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security is less than the amount of foreign currency the
Portfolio is obligated to deliver and if a decision is made to sell the security
and make delivery of the foreign currency. Conversely, it may be necessary to
sell on the spot market some of the foreign currency received upon the sale of
the portfolio security if its market value exceeds the amount of foreign
currency a Portfolio is obligated to deliver. However, a Portfolio may use
liquid, high-grade debt securities, denominated in any currency, to cover the
amount by which the value of a forward contract exceeds the value of the
securities to which it relates.
If a Portfolio retains the portfolio security and engages in offsetting
transactions, the Portfolio will incur a gain or a loss (as described below) to
the extent that there has been movement in forward contract prices. If the
Portfolio engages in an offsetting transaction, it may subsequently enter into a
new forward contract to sell the foreign currency. Should forward prices decline
during the period between the Portfolio's entering into a forward contract for
the sale of a foreign currency and the date it enters into an offsetting
contract for the purchase of the foreign currency, the Portfolio will realize a
gain to the extent the price of the currency it has agreed to sell exceeds the
price of the currency it has agreed to purchase. Should forward prices increase,
the Portfolio will suffer a loss to the extent the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
Each Portfolio's dealing in forward foreign currency exchange contracts will be
limited to the transactions described above. A Portfolio is not required to
enter into forward contracts with regard to its foreign currency-denominated
securities and will not do so unless deemed appropriate by the Fund's
subadviser. It also should be realized that this method of hedging against a
decline in the value of a currency does not eliminate fluctuations in the
underlying prices of the securities. It simply establishes a rate of exchange at
a future date. Additionally, although such contracts tend to minimize the risk
of loss due to a decline in the value of a hedged currency, at the same time,
they tend to limit any potential gain which might result from an increase in the
value of that currency.
Shareholders should be aware of the costs of currency conversion. Although
foreign exchange dealers do not charge a fee for conversion, they do realize a
profit based on the difference (the "spread") between the prices at which they
are buying and selling various currencies. Thus, a dealer may offer to sell a
foreign currency to a Portfolio at one rate, while offering a lesser rate of
exchange should the Portfolio desire to resell that currency to the dealer.
Put Options
Each Portfolio, other than the Seligman Cash Management Portfolio, the Seligman
Bond Portfolio, and the Seligman High-Yield Bond Portfolio, may purchase put
options in an attempt to provide a hedge against a decrease in the market price
of an underlying security held by a Portfolio. A Portfolio will not purchase
options for speculative purposes. Purchasing a put option gives a Portfolio the
right to sell, and obligates the writer to buy, the underlying security at the
exercise price at any time during the option period. This hedge protection is
provided during the life of the put option since a Portfolio, 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 Portfolio 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.
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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 Portfolio would let the option expire
resulting in a reduced profit on the underlying security equal to the cost of
the put option premium and transaction costs.
When a Portfolio 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 a Portfolio, 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. The cost of the put option is limited to
the premium plus commission paid. A Portfolio's maximum financial exposure will
be limited to these costs.
A Portfolio may purchase both listed and over-the-counter put options. A
Portfolio will be exposed to the risk of counterparty nonperformance in the case
of over-the-counter put options.
A Portfolio's ability to engage in option transactions may be limited by tax
considerations
Rights and Warrants
Each Portfolio may invest in common stock rights and warrants believed by the
investment manager to provide capital appreciation opportunities. Common stock
rights and warrants received as part of a unit or attached to securities
purchased (i.e., not separately purchased) are not included in each Portfolio's
investment restrictions regarding such securities.
Each Portfolio may not invest in rights and warrants if, at the time of
acquisition, the investment in rights and warrants would exceed 5% of the
Portfolio's net assets, valued at the lower of cost or market. In addition, no
more than 2% of net assets may be invested in warrants not listed on the New
York or American Stock Exchanges. For purposes of this restriction, rights and
warrants acquired by each Portfolio in units or attached to securities may be
deemed to have been purchased without cost.
Foreign Securities
Each of the Portfolios may invest up to 10% of its total assets in foreign
securities (except the Seligman Henderson Portfolios, which may invest up to
100% of their total assets in foreign securities), except that this 10% limit
does not apply to foreign securities held through Depositary Receipts, or to
commercial paper and certificates of deposit issued by foreign banks. 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. 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 in the US. Investments in foreign securities may also
be subject to local economic or political risks, political instability and
possible nationalization of issuers
IIliquid Securities
Each Portfolio, other than the Seligman Cash Management Portfolio, may invest up
to 15% of its net assets in illiquid securities, including restricted securities
(i.e., securities not readily marketable without registration under the
Securities Act of 1933 (the "1933 Act")) and other securities that are not
readily marketable. Each Portfolio, other than the Seligman Cash Management
Portfolio, may purchase restricted securities that can be offered and sold to
"qualified institutional buyers" under Rule 144A of the 1933 Act, and Fund's
Board of Directors, may determine, when appropriate, that specific Rule 144A
securities are liquid and not subject to the 15% limitation on illiquid
securities. Should the Board of Directors make this determination, it 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
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evolve. This investment practice could have the effect of increasing the level
of illiquidity in a Portfolio, if and to the extent that qualified institutional
buyers become for a time uninterested in purchasing Rule 144A securities.
Money Market Instruments
Each of the Portfolios, other than the Seligman Cash Management Portfolio, which
intends to invest primarily in the money market instruments described below, may
invest a portion of their assets in the following money market instruments.
US Government Obligations
US Government Obligations are obligations issued or guaranteed as to both
principal and interest by the US Government or backed by the full faith and
credit of the United States, such as US Treasury bills, securities issued or
guaranteed by a US Government agency or instrumentality, and securities
supported by the right of the issuer to borrow from the US Treasury.
Bank Obligations
Bank obligations include US dollar-denominated certificates of deposit, banker's
acceptances, fixed time deposits and commercial paper of domestic banks,
including their branches located outside the United States, and of domestic
branches of foreign banks. 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 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.
Commercial Paper and Short-Term Corporate Debt Securities
Commercial paper and short-term debt securities include short-term unsecured
promissory notes with maturities not exceeding nine months issued in bearer form
by bank holding companies, corporations and finance companies. Investments in
commercial paper issued by bank holding companies will be limited at the time of
investment to the 100 largest US bank holding companies in terms of assets.
Mortgage-Backed Securities
Certain of the Portfolios may invest in mortgage-backed securities.
Mortgage-backed securities include securities that represent interests in pools
of mortgage loans made by lenders such as savings and loan institutions,
mortgage bankers, and commercial banks. Such securities provide a "pass-through"
of monthly payments of interest and principal made by the borrowers on their
residential mortgage loans (net of any fees paid to the issuer or guarantor of
such securities). Although the residential mortgages underlying a pool may have
maturities of up to 30 years, a pool's effective maturity may be reduced by
prepayments of principal on the underlying mortgage obligations. Factors
affecting mortgage prepayments include, among other things, the level of
interest rates, general economic and social conditions and the location and age
of the mortgages. High interest rate mortgages are more likely to be prepaid
than lower-rate mortgages; consequently, the effective maturities of
mortgage-related obligations that pass-through payments of higher-rate mortgages
are likely to be shorter than those of obligations that pass-through payments of
lower-rate mortgages. If such prepayment of mortgage-related securities in which
the Portfolio invests occurs, the Portfolio may have to invest the proceeds in
securities with lower yields.
The Government National Mortgage Association ("GNMA") is a US Government
corporation within the Department of Housing and Urban Development, authorized
to guarantee, with the full faith and credit of the US Government, the timely
payment of principal and interest on securities issued by institutions approved
by GNMA (such as savings and loan institutions, commercial banks and mortgage
bankers) and backed by pools of Federal Housing Administration insured or
Veterans Administration guaranteed residential mortgages. These securities
entitle the holder to receive all interest and principal payments owed on the
mortgages in the pool, net of certain fees, regardless of whether or not the
mortgagors actually make the payments. Other government-related issuers of
mortgage-related securities include the Federal National Mortgage Association
("FNMA"), a government-sponsored corporation subject to general
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regulation by the Secretary of Housing and Urban Development but owned entirely
by private stockholders, and the Federal Home Loan Mortgage Corporation
("FHLMC"), a corporate instrumentality of the US Government created for the
purpose of increasing the availability of mortgage credit for residential
housing that is owned by the twelve Federal Home Loan Banks. FHLMC issues
Participation Certificates ("PCs"), which represent interests in mortgages from
FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and
ultimate collection of principal, but PCs are not backed by the full faith and
credit of the US Government. Pass-through securities issued by FNMA are backed
by residential mortgages purchased from a list of approved seller/servicers and
are guaranteed as to timely payment of principal and interest by FNMA, but are
not backed by the full faith and credit of the US Government.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through securities based on pools of conventional residential mortgage
loans. Securities created by such non-governmental issuers may offer a higher
rate of interest than government-related securities; however, timely payment of
interest and principal may or may not be supported by insurance or guarantee
arrangements, and there can be no assurance that the private issuers can meet
their obligations.
Repurchase Agreements
Each Portfolio may hold cash or cash equivalents and may enter into repurchase
agreements with respect to securities; normally repurchase agreements relate to
money market obligations backed by the full faith and credit of the US
Government. Repurchase agreements are transactions in which an investor (e.g.,
any of the Fund's Portfolios) purchases a security from a bank, recognized
securities dealer, or other financial institution and simultaneously commits to
resell that security to such institution at an agreed upon price, date and
market rate of interest unrelated to the coupon rate or maturity of the
purchased security. A repurchase agreement thus involves the obligation of the
bank or securities dealer to pay the agreed upon price on the date agreed to,
which obligation is in effect secured by the value of the underlying security
held by the Portfolio. 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. Although repurchase
agreements carry certain risks not associated with direct investments in
securities, each Portfolio intends to enter into repurchase agreements only with
financial institutions believed to present minimum credit risks in accordance
with guidelines established by the Fund's Board of Directors. The
creditworthiness of such institutions will be reviewed and monitored under the
general supervision of the Board of Directors. The Portfolios will invest only
in repurchase agreements collateralized in an amount at least equal at all times
to the purchase price plus accrued interest. Repurchase agreements usually are
for short periods, such as one week or less, but may be for longer periods. No
Portfolio will enter into a repurchase agreement with a maturity of more than
seven days if, as a result, more than 15% of the value of its net assets would
then be invested in such repurchase agreements and other illiquid investments.
When-Issued Securities
The Seligman Bond Portfolio and the Seligman High-Yield Bond Portfolio may
purchase securities on a when-issued basis. Settlement of such transactions
(i.e., delivery of securities and payment of purchase price) normally takes
place within 45 days after the date of the commitment to purchase. Although the
Seligman High-Yield Bond Portfolio will purchase a security on a when-issued
basis only with the intention of actually acquiring the securities, the
Portfolio may sell these securities before the purchase settlement date if it is
deemed advisable.
At the time a Portfolio enters into such a commitment both payment and interest
terms will be established prior to settlement; there is a risk that prevailing
interest rates on the settlement date will be greater than the interest rate
terms established at the time the commitment was entered into. When-issued
securities are subject to changes in market value prior to settlement based upon
changes, real or anticipated, in the level of interest rates or creditworthiness
of the issuer. If a Portfolio remains substantially fully invested at the same
time that it has purchased securities on a when-issued basis, the market value
of that Portfolio's assets may fluctuate more than otherwise would be the case.
For this reason, accounts for each Portfolio will be established with the Fund's
custodian consisting of cash and/or liquid high-grade debt securities equal to
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the amount of each Portfolio's when-issued commitment; these accounts will be
valued each day and additional cash and/or liquid high-grade debt securities
will be added to an account in the event that the current value of the
when-issued commitment increases. When the time comes to pay for when-issued
securities, a Portfolio will meet its respective obligations from then available
cash flow, sale of securities held in the separate account, sale of other
securities, or from the sale of the when-issued securities themselves (which may
have a value greater or less than a Portfolio's payment obligations). Sale of
securities to meet when-issued commitments carries with it a greater potential
for the realization of capital gain or loss.
Short Sales
Each of the Seligman Henderson Portfolios may sell securities short
"against-the-box." A short sale "against-the-box" is a short sale in which the
Portfolio owns an equal amount of the securities sold short or securities
convertible into or exchangeable without payment of further consideration for
securities of the same issue as, and equal in amount to, the securities sold
short.
Lending of Portfolio Securities
Other than the Seligman Cash Management Portfolio, each of the Portfolios may
lend portfolio securities to broker/dealers, banks or other institutional
borrowers, provided that securities loaned by each of the Seligman Henderson
Portfolios may not exceed 33 1/3% of the Portfolios' total assets taken at
market value. The Portfolios will not lend portfolio securities to any
institutions affiliated with the Fund. The borrower must maintain with the
Fund's custodian bank cash or equivalent collateral equal to at least 100% of
the market value of the securities loaned. During the time portfolio securities
are on loan, the borrower pays the lending Portfolio an amount equal to any
dividends or interest paid on the securities. The lending Portfolio may invest
the collateral and earn additional income or receive an agreed upon amount of
interest income from the borrower. Loans made by the Portfolios will generally
be short-term. Loans are subject to termination at the option of the lending
Portfolio or the borrower. The lending Portfolio may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the collateral to the borrower or
placing broker. The lending Portfolio does not have the right to vote securities
on loan, but would terminate the loan and regain the right to vote if that were
considered important with respect to the investment. The lending Portfolio may
loose money if a borrower defaults on its obligation to return securities and
the value of the collateral held by the lending Portfolio is insufficient to
replace the loaned securities. In addition, the lending Portfolio is responsible
for any loss that might result from its investment of the borrower's collateral.
Borrowing
Except as noted below, a Portfolio may borrow money only from banks for
temporary purposes (but not for the purpose of purchasing portfolio securities)
in an amount not to exceed 10% of the value of the total assets of that
Portfolio. In addition, the Seligman Frontier Portfolio, the Seligman High-Yield
Bond Portfolio, the Seligman Large-Cap Growth Portfolio, the Seligman Large-Cap
Value Portfolio, and the Seligman Small-Cap Value Portfolio will not purchase
additional portfolio securities if such Portfolios have outstanding borrowings
in excess of 5% of the value of their total assets.
The Seligman Capital Portfolio, the Seligman Common Stock Portfolio, the
Seligman Communications and Information Portfolio, the Seligman Large-Cap Growth
Portfolio, Seligman Large-Cap Value Portfolio, and the Seligman Small-Cap Value
Portfolio may from time to time borrow money in order to purchase securities.
Borrowings may be made only from banks and each of these Portfolios may not
borrow in excess of one-third of the market value of its assets, less
liabilities other than such borrowing, or pledge more than 10% (15% for the
Seligman Large-Cap Growth Portfolio, the Seligman Large-Cap Value Portfolio, and
the Seligman Small-Cap Value Portfolio) of its total assets, taken at cost, to
secure the borrowing. Current asset value coverage of three times any amount
borrowed by the respective Portfolio is required at all times. Borrowed money
creates an opportunity for greater capital appreciation, but at the same time
increases exposure to capital risk. The net cost of any money borrowed would be
an expense that otherwise would not be incurred, and this expense will reduce
the Portfolio's net investment income in any
9
<PAGE>
given period. Any gain in the value of securities purchased with money borrowed
to an amount in excess of amounts borrowed plus interest would cause the net
asset value of the Portfolio's shares to increase more than otherwise would be
the case. Conversely, any decline in the value of securities purchased to an
amount below the amount borrowed plus interest would cause the net asset value
to decrease more than would otherwise be the case.
Each of the Seligman Henderson Portfolios may from time to time borrow money for
temporary, extraordinary or emergency purposes and may invest the funds in
additional securities. Borrowings for the purchase of securities will not exceed
5% of the Portfolio's total assets and will be made at prevailing interest
rates.
Fund Policies
The Fund is subject to fundamental policies that place restrictions on certain
types of investments. Except as otherwise indicated below, restrictions No. 1
through 9 may not be changed without the affirmative vote of the holders of a
majority of a Portfolio's outstanding voting securities; restrictions No. 10
through 16 may be changed by the Fund's Board of Directors without such a vote.
Under these restrictions, none of the Portfolios may:
1. Borrow money, except from banks for temporary purposes (but not for the
purpose of purchasing portfolio securities) in an amount not to exceed 10%
(15% for the Seligman Large-Cap Growth Portfolio, the Seligman Large-Cap
Value Portfolio, and the Seligman Small-Cap Value Portfolio) of the value
of the total assets of the Portfolio; except that the Seligman Capital
Portfolio, Seligman Common Stock Portfolio, Seligman Communications and
Information Portfolio, Seligman Large-Cap Growth Portfolio, Seligman
Large-Cap Value Portfolio, and Seligman Small-Cap Value Portfolio may
borrow to purchase securities provided that such borrowings are made only
from banks, do not exceed one-third of the respective Portfolio's net
assets (taken at market) and are secured by not more than 10% (15% for the
Seligman Large-Cap Growth Portfolio, the Seligman Large-Cap Value
Portfolio, and the Seligman Small-Cap Value Portfolio) of such assets
(taken at cost); except that the Seligman Frontier Portfolio, the Seligman
High-Yield Bond Portfolio, the Seligman Large-Cap Growth Portfolio, the
Seligman Large-Cap Value Portfolio and the Seligman Small-Cap Value
Portfolio will not purchase additional portfolio securities if it has
outstanding borrowings in excess of 5% of the value of its total assets;
and except that each of the Seligman Henderson Portfolios may borrow money
from banks to purchase securities in amounts not in excess of 5% of its
total assets.
2. Mortgage, pledge or hypothecate any of its assets, except to secure
borrowings permitted by paragraph 1 and provided that this limitation does
not prohibit escrow, collateral or margin arrangements in connection with
(a) the purchase or sale of covered options (including stock index
options), (b) the purchase or sale of interest rate or stock index futures
contracts or options on such contracts by any of the Fund's Portfolios
otherwise permitted to engage in transactions involving such instruments or
(c) in connection with the Fund's purchase of fidelity insurance and errors
and omissions insurance, and provided, further, that Seligman High-Yield
Bond Portfolio may mortgage, pledge or hypothecate its assets, but the
value of such encumbered assets may not exceed 10% of that Portfolio's net
asset value. This investment restriction No. 2 may be changed, with respect
to the Seligman High-Yield Bond Portfolio, by the Fund's Board of
Directors.
3. Make "short" sales of securities (except that each of the Seligman
Henderson Portfolios may make short sales "against-the-box"), or purchase
securities on "margin" except for short-term credits necessary for the
purchase or sale of securities, provided that for purposes of this
limitation, initial and variation payments or deposits in connection with
transactions involving interest rate or stock index futures contracts and
options on such contracts by any Portfolio permitted to engage in
transactions involving such instruments will not be deemed to be the
purchase of securities on margin.
10
<PAGE>
4. With respect to 75% of its securities portfolio (or 100% of its securities
portfolio, in the case of the Seligman High-Yield Bond Portfolio), purchase
securities of any issuer if immediately thereafter more than 5% of its
total assets valued at market would be invested in the securities of any
one issuer, other than securities issued or guaranteed by the US
Government, its agencies or instrumentalities; or buy more than 10% of the
voting securities of any one issuer.
5. Invest more than 25% of the market value of its total assets in securities
of issuers in any one industry (except securities issued or guaranteed by
the US Government, its agencies or instrumentalities), provided that for
the purpose of this limitation, mortgage-related securities do not
constitute an industry; provided further that the Seligman Communications
and Information Portfolio will invest at least 65% of the value of its
total assets in securities of companies principally engaged in the
communications, information and related industries, except when investing
for temporary defensive purposes; and provided further that the Seligman
Cash Management Portfolio may invest more than 25% of its gross assets: (i)
in the banking industry; (ii) in the personal credit institution or
business credit institution industries; or (iii) in any combination of (i)
and (ii).
6. Purchase or hold any real estate, except that the Seligman Bond Portfolio,
the Seligman Large-Cap Growth Portfolio, the Seligman Large-Cap Value
Portfolio, the Seligman Small-Cap Value Portfolio, and each of the Seligman
Henderson Portfolios may engage in transactions involving securities
secured by real estate or interests therein, and each of the Seligman
Henderson Portfolios may purchase securities issued by companies or
investment trusts that invest in real estate or interests therein.
7. Purchase or sell commodities and commodity futures contracts; except that
the Board of Directors may authorize any Portfolio other than the Seligman
Cash Management Portfolio and the Seligman High-Yield Bond Portfolio to
engage in transactions involving interest rate and/or stock index futures
and related options solely for the purposes of reducing investment risk and
not for speculative purposes.
8. Underwrite the securities of other issuers, provided that the disposition
of investments otherwise permitted to be made by any Portfolio (such as
investments in securities that are not readily marketable without
registration under the 1933 Act and repurchase agreements with maturities
in excess of seven days) will not be deemed to render a Portfolio engaged
in an underwriting investment if not more than 10% of the value of such
Portfolio's total assets (taken at cost) would be so invested and except
that in connection with the disposition of a security a Portfolio may be
deemed to be an underwriter as defined in the 1933 Act.
9. Make loans, except loans of securities, provided that purchases of notes,
bonds or other evidences of indebtedness, including repurchase agreements,
are not considered loans for purposes of this restriction; provided further
that each of the Seligman Henderson Global Portfolios may not make loans of
money or securities other than (a) through the purchase of securities in
accordance with the Fund's investment objective, (b) through repurchase
agreements and (c) by lending portfolio securities in an amount not to
exceed 33 1/3% of the funds total assets.
10. Purchase illiquid securities for any Portfolio including repurchase
agreements maturing in more than seven days and securities that cannot be
sold without registration or the filing of a notification under Federal or
state securities laws, if, as a result, such investment would exceed 15% of
the value of such Portfolio's net assets.
11. Invest in oil, gas or other mineral exploration or development programs;
provided, however, that this investment restriction shall not prohibit a
Portfolio from purchasing publicly-traded securities of companies engaging
in whole or in part in such activities.
12. Purchase securities of any other investment company, except in connection
with a merger, consolidation, acquisition or reorganization or for the
purpose of hedging the Portfolios' obligations under the Deferred
Compensation Plan for Directors, and except to the extent permitted by
Section 12 of the 1940 Act.
11
<PAGE>
13. Purchase securities of companies which, together with predecessors, have a
record of less than three years' continuous operation, if as a result of
such purchase, more than 5% of such Portfolio's net assets would then be
invested in such securities; except that the Seligman Communications and
Information Portfolio, the Seligman Frontier Portfolio, each of the
Seligman Henderson Portfolios and the Seligman High-Yield Bond Portfolio
may each invest no more than 5% of total assets, at market value, in
securities of companies which, with their predecessors, have been in
operation less than three continuous years, excluding from this limitation
securities guaranteed by a company that, including predecessors, has been
in operation at least three continuous years. This restriction does not
apply to the Seligman Large-Cap Growth Portfolio, the Seligman Large-Cap
Value Portfolio or the Seligman Small-Cap Value Portfolio.
14. Purchase securities of companies for the purpose of exercising control.
15. Purchase securities from or sell securities to any of its officers or
Directors, except with respect to its own shares and as permissible under
applicable statutes, rules and regulations. In addition, the Seligman
High-Yield Bond Portfolio may not purchase or hold the securities of any
issuer if, to its knowledge, directors or officers of the Fund individually
owning beneficially more than 0.5% of the securities of that issuer own in
the aggregate more than 5% of such securities.
16. Invest more than 5% of the value of its net assets, valued at the lower of
cost or market, in warrants, of which no more than 2% of net assets may be
invested in warrants and rights not listed on the New York or American
Stock Exchange. For this purpose, warrants acquired by the Fund in units or
attached to securities may be deemed to have been purchased without cost.
If a percentage restriction is adhered to at the time of an investment, a later
increase or decrease in such percentage resulting from a change in the value of
assets will not constitute a violation of such restriction. In order to permit
the sale of the Fund's shares in certain states, the Fund may make commitments
more restrictive than the investment restrictions described above. Should the
Fund determine that any such commitment is no longer in the best interest of the
Fund it will revoke the commitment by terminating sales in the state involved.
The Fund also intends to comply with the diversification requirements under
Section 817(h) of the Internal Revenue Code of 1986, as amended. For a
description of these requirements see the separate account prospectuses or
disclosure documents of Canada Life or MBL Life, as applicable.
Under the 1940 Act, a "vote of a majority of the outstanding voting securities"
of the Fund or of a particular Portfolio means the affirmative vote of the
lesser of (1) more than 50% of the outstanding shares of the Fund or of such
Portfolio or (2) 67% or more of the shares of the Fund or of such Portfolio
present at a shareholder's meeting if more than 50% of the outstanding shares of
the Fund or of such Portfolio are represented at the meeting in person or by
proxy.
Temporary Defensive Position
Each Portfolio may, from time to time, take a temporary defensive position in
seeking to minimize extreme volatility caused by adverse market, economic, or
other conditions, or in anticipation of significant withdraws.
When the investment manager believes that market conditions warrant a temporary
defensive position, a Portfolio may invest up to 100% of its assets in
short-term instruments, 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. A Portfolio's investments in foreign short-term instruments will be
limited to those that, in the opinion of the investment manager, equate
generally to the standards established for US short-term instruments.
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 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. In addition, the High-Yield Bond
Portfolio may also invest in high-yield, medium and lower quality corporate
notes.
12
<PAGE>
Portfolio Turnover
The portfolio turnover rates for each Portfolio are calculated by dividing the
lesser of purchases or sales of portfolio securities for the fiscal year by the
monthly average of the value of the portfolio securities owned during the fiscal
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
rates for the years ended December 31, 1998 and 1997 for each Portfolio (except
the Seligman Cash Management Portfolio; and the Seligman Large-Cap Growth
Portfolio, which commenced operations on May 1, 1999) were as follows:
1998 1997
---- ----
Seligman Bond Portfolio 170.12%
Seligman Capital Portfolio 93.97
Seligman Common Stock Portfolio 80.13
Seligman Communications and Information Portfolio 277.14
Seligman Frontier Portfolio 101.68
Seligman Henderson Global Growth Opportunities Portfolio 77.85
Seligman Henderson Global Smaller Companies Portfolio 64.81
Seligman Henderson Global Technology Portfolio 167.36
Seligman Henderson International Portfolio 89.43
Seligman High-Yield Bond Portfolio 74.54
Seligman Income Portfolio 96.99
Seligman Large-Cap Value Portfolio --
Seligman Small-Cap Value Portfolio --
13
<PAGE>
Management of the Fund
Board of Directors
The Board of Directors provides broad supervision over the affairs of the Fund.
Management Information
Directors and officers of the Fund, together with information as to their
principal business occupations during the past five years are shown below. Each
Director who is an "interested person" of the Fund, as defined in the 1940 Act,
is indicated by an asterisk. Unless otherwise indicated, their addresses are 100
Park Avenue, New York, NY 10017.
<TABLE>
<CAPTION>
Name, Principal
(Age) and Positions(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,
(60) Board, Chief Executive Chairman and Chief Executive Officer, the Seligman
Officer and Chairman of the Group of investment companies; Chairman, Seligman
Executive Committee Advisors, Inc, Seligman Services, Inc., and Carbo
Ceramics Inc., ceramic proppants for oil and gas
industry; Director, Seligman Data Corp., Kerr-McGee
Corporation, diversified energy company; and Sarah
Lawrence College; and a Member of the Board of
Governors of the Investment Company Institute.
Formerly, Director, Daniel Industries Inc.,
manufacturer of oil and gas metering equipment.
Brian T. Zino* Director, President and Director and President, J. & W. Seligman & Co.
(46) Member of the Executive Incorporated; President (with the exception of
Committee 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.; Director, ICI Mutual Insurance
Company; Seligman Advisors, Inc., and Seligman
Services, Inc.
Richard R. Schmaltz* Director and Member of the Director and Managing Director, Director of Investments, J. & W.
(58) Executive Committee Seligman & Co. Incorporated; Director or Trustee, the Seligman
Group of investment companies; Director, Seligman Henderson Co.,
and Trustee Emeritus of Colby College. Formerly, Director,
Investment Research at Neuberger & Berman from May 1993 to
September 1996.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Positions(s) Held Occupation(s) During
Address With Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
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, American Council
Packard Avenue, on Germany; a Governor of the Center for Creative
Medford, MA 02155 Leadership; Director; Raytheon Co., electronics;
National Defense University; and the Institute for
Defense Analysis. Formerly, Director, USLIFE
Corporation; Ambassador, US 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 or
(63) Trustee, the Seligman Group of investment companies;
18 Highland Circle Director, the Committee for Economic Development; and
Bronxville, NY 10708 Chairman, The Rockefeller Foundation, charitable foundation.
Formerly, Trustee, The Markle Foundation, philanthropic
organization; and Director, NYNEX, telephone company; and
International Research and Exchange Board, intellectual
exchanges.
Frank A. McPherson Director Retired Chairman and Chief Executive Officer of
(65) 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.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Positions(s) Held Occupation(s) During
Address With Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
John E. Merow Director Retired Chairman and Senior Partner, Sullivan & Cromwell,
(69) law firm; Director or Trustee, the Seligman Group of
125 Broad Street, investment companies; Director, Commonwealth Industries,
New York, NY 10004 Inc., manufacturers of aluminum sheet products; the Foreign
Policy Association; Municipal Art Society of New York; the
US Council for International Business; and New York
Presbyterian Hospital; Chairman, American Australian
Association; and New York Presbyterian Healthcare Network,
Inc.; Vice-Chairman, the US-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. Dodge
P.O. Box 449 Foundation, charitable foundation; and Chairman of
Gladstone, NJ 07934 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 County, investment companies. Formerly, Director, Public
P.O. Box 1945, Morristown, NJ Service Enterprise Group, public utility.
07962
James Q. Riordan Director Director or Trustee, the Seligman Group of investment
(71) companies; Director, The Houston Exploration Company;
675 Third Avenue, The Brooklyn Museum, KeySpan Energy Corporation; and
Suite 3004 Public Broadcasting Service; and Trustee, the
New York, NY 10017 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
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Positions(s) Held Occupation(s) During
Address With Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
James N. Whitson Director Director and Consultant, Sammons Enterprises, Inc.; Director
(63) or Trustee, the Seligman Group of investment companies;
6606 Forestshire Drive C-SPAN; and CommScope, Inc. manufacturer of coaxial cables.
Dallas, TX 75230 Formerly, Executive Vice President, Chief Operating Officer,
Sammons Enterprises, Inc.; and Director, Red Man Pipe and
Supply Company, piping and other materials.
Brian Ashford- Russell Vice President and Portfolio Portfolio Manager, Seligman Henderson Co., advisers; and
(40) Manager Henderson plc, investment managers; Vice President and
Portfolio Manager, one other open-end investment company in
the Seligman Group; formerly, Portfolio Manager, Touche
Remnant & Co., investment managers.
Daniel J. Charleston Vice President and Portfolio Managing Director (formerly, Vice President, Investment
(39) Manager Officer), J. & W. Seligman & Co. Incorporated, investment
managers and advisers; Vice President and Portfolio Manager,
one other open-end investment company in the Seligman Group.
Iain C. Clark Vice President and Portfolio Chief Investment Officer, Seligman Henderson Co., Advisers;
(48) Manager Vice President and Portfolio Manager, one other open-end
investment company in the Seligman Group; Director and
Senior Portfolio Manager, Henderson plc, investment
managers; Director, Henderson International, Ltd.,
investment managers; and Secretary, Treasurer and Vice
President, Henderson International, Inc., investment
adviser.
Neil T. Eigen Vice President and Portfolio Managing Director, J. & W. Seligman & Co. Incorporated,
(56) Manager investment managers and advisers; Vice President and
Portfolio Manager, two other open-end investment companies
in the Seligman Group.
Nitin Mehta Vice President and Portfolio Portfolio Manager, Seligman Henderson Co., advisers;and
(38) Manager Henderson plc, investment managers; and Vice President and
Portfolio Manager, one other open-end investment company in
the Seligman Group; formerly, Head of Currency Management
and Derivatives, Quorum Capital Management; Investment
Officer, International Finance Corp.; and Director of
Equities, Shearson Lehman Global Asset Management.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Positions(s) Held Occupation(s) During
Address With Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
Arsen Mrakovcic Vice President and Portfolio Managing Director, J. & W. Seligman & Co.
(33) Manager Incorporated; Vice President and Portfolio Manager,
two other open-end investment companies in the
Seligman Group. Formerly, Vice President, Investment
Officer, J. & W. Seligman & Co. Incorporated from
January 1995 to January 1996 and Portfolio Assistant,
J. & W. Seligman & Co. Incorporated from June 1992 to
January 1995.
Marion S. Schultheis Vice President and Portfolio Managing Director, J. & W. Seligman & Co. Incorporated,
(45) Manager investment managers and advisers; Vice President and
Portfolio Manager, two other open-end investment companies
in the Seligman Group.
Charles C. Smith, Jr. Vice President and Portfolio Managing Director (formerly, Senior Vice President and
(42) Manager Senior Investment Officer), J. & W. Seligman & Co.
Incorporated, investment managers and advisers; Vice
President and Portfolio Manager, two other open-end
investment companies in the Seligman Group and
Tri-Continental Corporation, closed-end investment company.
Paul H. Wick Vice President and Portfolio Managing Director (formerly, Vice President, Investment
(36) Manager Officer), J. & W. Seligman & Co. Incorporated, investment
managers and advisers; and Vice President and Portfolio
Manager, two other open-end investment companies in the
Seligman Group.
Gary S.Zeltzer Vice President and Portfolio Senior Vice President, J. & W. Seligman & Co. Incorporated,
(47) Manager investment managers and advisers; Vice President and
Portfolio Manager, two other open-end investment companies
in the Seligman Group.
Lawrence P. Vogel Vice President Senior Vice President, Finance, J. & W. Seligman & Co.
(42) Incorporated, Seligman Advisors, Inc., and Seligman Data
Corp.; Vice President, the Seligman Group of investment
companies, and Seligman Services, 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., and
Seligman Data Corp.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Positions(s) Held Occupation(s) During
Address With Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
Thomas G. Rose Treasurer Treasurer, the Seligman Group of investment companies
(41) and Seligman Data Corp.
</TABLE>
The Executive Committee of the Board acts on behalf of the Board between
meetings to determine the value of securities and assets owned by the Fund for
which no market valuation is available and to elect or appoint officers of the
Fund to serve until the next meeting of the Board.
Directors and officers of the Fund are also directors and officers of some or
all of the investment companies in the Seligman Group.
Compensation
Compensation Table
<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits from Fund
Name and Compensation Accrued as part of and Fund Complex
Position with Fund From Fund (1) Fund Expenses Paid 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 $ N/A $79,000
Alice S. Ilchman, Director N/A 73,000
Frank A. McPherson, Director N/A 79,000
John E. Merow, Director N/A 77,000
Betsy S. Michel, Director N/A 79,000
James C. Pitney, Director N/A 75,000
James Q. Riordan, Director N/A 75,000
Robert L. Shafer, Director N/A 75,000
James N. Whitson, Director (d) N/A 79,000(d)
</TABLE>
- ----------
(1) Based on remuneration received by the Directors of the Fund 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 Fund has a compensation arrangement under which outside directors may elect
to defer receiving their fees. The Fund 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 the directors' fees
and expenses, and the accumulated balance thereof is included in other
liabilities in the Fund's financial statements. The total amount of deferred
compensation (including earnings) payable in respect of the Fund to Mr. Whitson
as of December 31, 1998 was $_______. Messrs. Merow and Pitney no longer defer
current compensation; however, they have accrued deferred compensation in the
amounts of $_______ and $________, respectively, as of December 31, 1998.
The Fund may, but is not obligated to, purchase shares of Seligman Group
investment companies to hedge its obligations in connection with the Fund's
Deferred Compensation Plan.
19
<PAGE>
Investment Advisory and Other Services
The Investment Manager
J. & W. Seligman & Co. Incorporated (Seligman) manages the Fund. 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
about Seligman.
The Seligman Bond Portfolio, Seligman Capital Portfolio, Seligman Cash
Management Portfolio, Seligman Common Stock Portfolio and Seligman Income
Portfolio each pays Seligman a management fee for its services, calculated daily
and payable monthly, equal to an annual rate of .40% of the average daily net
assets of each such Portfolio. The Seligman High-Yield Bond Portfolio pays
Seligman a management fee for its services, calculated daily and payable
monthly, equal to an annual rate of .50% of the average daily net assets of such
Portfolio. The Seligman Communications and Information Portfolio and Seligman
Frontier Portfolio each pay Seligman a management fee for its services,
calculated daily and payable monthly, equal to an annual rate of .75% of the
average daily net assets of each such Portfolio. The Seligman Large-Cap Value
Portfolio pays Seligman a management fee for its services, calculated daily and
payable monthly, equal to an annual rate of .80% of the Portfolio's average
daily net assets on the first $500 million of net assets, .70% of the
Portfolio's average daily net assets on the next $500 million of net assets and
.60% of the Portfolio' average daily net assets in excess of $1 billion. The
Seligman Small-Cap Value Portfolio pays Seligman a management fee for its
services, calculated daily and payable monthly, equal to an annual rate of 1.00%
of the Portfolio's average daily net assets on the first $500 million of net
assets, .90% of the Portfolio's average daily net assets on the next $500
million of net assets, and .80% of the Portfolio's average daily net assets in
excess of $1 billion. The Seligman Large-Cap Growth Portfolio pays Seligman a
management fee for its services, calculated daily and payable monthly, equal to
an annual rate of .70% of the Portfolio's average daily net assets on the first
$1 billion of net assets, .65% of the Portfolio's average daily net assets on
the next $1 billion of net assets and .60% of the Portfolio's average daily net
assets in excess of $2 billion. Each of the Seligman Henderson Portfolios pays
Seligman a management fee for its services, calculated daily and payable
monthly, equal to an annual rate of 1.00% of the average daily net assets of
each such Portfolio.
The following table indicates the management fees paid (or waived, in the case
of Seligman Cash Management Portfolio) for the years 1998, 1997, and 1996 for
each Portfolio (except the Seligman Large-Cap Growth Portfolio which commenced
operations on May 1, 1999):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Seligman Bond Portfolio $ 23,150 $ 18,034
Seligman Capital Portfolio 70,147 48,339
Seligman Cash Management Portfolio* 38,042 36,532
Seligman Common Stock Portfolio 178,662 134,264
Seligman Communications and Information Portfolio 574,370 373,337
Seligman Frontier Portfolio 282,248 165,050
Seligman Henderson Global Growth Opportunities Portfolio 38,358 4,098**
Seligman Henderson Global Smaller Companies Portfolio 200,415 110,169
Seligman Henderson Global Technology Portfolio 26,504 4,920**
Seligman Henderson International Portfolio 88,212 57,323
Seligman High-Yield Bond Portfolio 84,740 35,858
Seligman Income Portfolio 54,451 49,574
Seligman Large-Cap Value Portfolio ***
Seligman Small-Cap Value Portfolio ***
</TABLE>
- ----------
* The Manager, at its discretion, waived all of its fees.
** Fees paid from May 1, 1996 (commencement of operations) to December 31,
1996.
*** Fees paid from May 1, 1998 (commencement of operations) to December 31,
1998.
Under a Subadvisory Agreement dated July 1, 1998, Henderson Investment
Management Limited (HIML) furnishes investment advice, research and assistance
with respect to each of the Seligman Henderson Portfolio's non-US investments.
20
<PAGE>
HIML, headquartered in the United Kingdom, was incorporated in 1984 and is a
registered investment adviser under the Investment Advisers Act of 1940. HIML is
a wholly owned subsidiary of Henderson plc. Henderson plc is a subsidiary of AMP
Limited, an Australian life insurance and financial services company. Henderson
plc, headquartered in London, is one of the largest money managers in Europe.
HIML receives a fee from Seligman, equal to an annual rate of .50% of each of
the Seligman Henderson Portfolio's average daily net assets under the
supervision of HIML. The Subadvisory Agreement will continue until December 31,
1999 and from year to year thereafter (1) if such continuance is approved in the
manner required by the 1940 Act (by a vote of a majority of the Board of
Directors or of the outstanding voting securities of the Portfolios and by a
vote of a majority of the Directors who are not parties to the Subadvisory
Agreement or interested persons of any such party) and (2) HIML shall not have
notified Seligman in writing at least 60 days prior to such December 31 or prior
to December 31 of any year thereafter that it does not desire such continuance.
The Subadvisory Agreement may be terminated at any time by the Fund, on 60 days
written notice to HIML. The Subadvisory Agreement will terminate automatically
in the event of their assignment or upon the termination of the relevant
Management Agreement.
The Management Agreements (and Subadvisory Agreement, in the case of the
Seligman Henderson Portfolios) provide that Seligman (and HIML, in the case of
the Seligman Henderson Portfolios) will not be liable to the Fund for any error
of judgment or mistake of law, or for any loss arising out of any investment, or
for any act or omission in performing their duties under the Management
Agreements (or Subadvisory Agreement), except for willful misfeasance, bad
faith, gross negligence, or reckless disregard of their obligations and duties
under the Management Agreements (or Subadvisory Agreement).
The Fund pays all its expenses other than those assumed by Seligman or HIML,
including brokerage commissions, fees and expenses of independent attorneys and
auditors, taxes and governmental fees, including fees and expenses of qualifying
the Fund and its shares under Federal securities laws, 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, fees and expenses of
directors of the Fund not employed by or serving as a Director of Seligman or
its affiliates, insurance premiums and extraordinary expenses such as litigation
expenses.
The Management Agreement with respect to the Seligman Bond Portfolio, Seligman
Capital Portfolio, Seligman Cash Management Portfolio, Seligman Common Stock
Portfolio and Seligman Income Portfolio was approved by the Board of Directors
on September 30, 1988 and by shareholders at a Special Meeting held on December
16, 1988. The Management Agreement with respect to the Seligman Henderson
International Portfolio was approved by the Board of Directors on March 18,
1993. The Management Agreements with respect to the Seligman Communications and
Information Portfolio, the Seligman Frontier Portfolio, and the Seligman
Henderson Global Smaller Companies Portfolio were approved by the Board of
Directors on July 21, 1994. The Management Agreement with respect to the
Seligman High-Yield Bond Portfolio was approved by the Board of Directors on
March 16, 1995. The Management Agreement with respect to the Seligman Henderson
Global Growth Opportunities Portfolio and the Seligman Henderson Global
Technology Portfolio was approved by the Board of Directors on March 21, 1996.
The Management Agreement with respect to the Seligman Large-Cap Value Portfolio
and the Seligman Small-Cap Value Portfolio was approved by the Board of
Directors on March 19, 1998 and by the sole shareholder of each Portfolio on
April 30, 1998. The Management Agreement with respect to the Seligman Large-Cap
Growth Portfolio will be voted on by the Board of Directors on March 18, 1999.
The Management Agreements will continue in effect until December 31 of each
year, with respect to each Portfolio (except the Seligman Large-Cap Value
Portfolio and the Seligman Small-Cap Value Portfolio, for which the Management
Agreement is in effect until December 31, 1999, and then each December 31
thereafter) if (1) such continuance is approved in the manner required by the
1940 Act (by a vote of a majority of the Board of Directors or of the
outstanding voting securities of the Portfolios and by a vote of a majority of
the Directors who are not parties to the Management Agreements or interested
persons of any such party) and (2) Seligman shall not have notified the Fund at
least 60 days prior to the anniversary date of the previous continuance that it
does not desire such continuance. The Management Agreements may be terminated at
any time with respect to any or all Portfolios, by the Fund, without penalty, on
60 days' written notice to Seligman. Seligman may terminate the Management
21
<PAGE>
Agreements at any time upon 60 days written notice to the Fund. The Management
Agreements will terminate automatically in the event of their assignment. The
Fund has agreed to change its name upon termination of the Management Agreements
if continued use of the name would cause confusion in the context of Seligman's
business.
The Code of Ethics
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' 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 Fund, within the preceding two weeks, (2) has been
reviewed by Seligman for 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.
Services Provided by the Investment Manager
Pursuant to management agreements between the Fund and Seligman in respect of
the Portfolios and subject to the control of the Board of Directors, Seligman
manages the investment of the assets of the Fund's Portfolios, including making
purchases and sales of portfolio securities consistent with each Portfolio's
investment objectives and policies, and administers the Fund's business and
other affairs. Seligman provides the Fund with such office space, administrative
and other services and executive and other personnel as are necessary for Fund
operations. Seligman pays all of the compensation of directors and/or officers
of the Fund who are employees or consultants of Seligman except as otherwise
provided by HIML.
Service Agreements
There are no other management-related service contracts under which services are
provided to the Fund.
Other Investment Advice
No person or persons, other than directors, officers, or employees of Seligman
or HIML, regularly advise the Fund's Portfolios with respect to their
investments.
22
<PAGE>
Brokerage Allocation and Other Practices
Brokerage Transactions
Seligman and HIML will seek the most favorable price and execution in the
purchase and sale of portfolio securities of each Portfolio. When two or more of
the investment companies in the Seligman Group or other investment advisory
clients of Seligman or HIML desire to buy or sell the same security at the same
time, the securities purchased or sold are allocated by Seligman or HIML 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 Portfolios deal with responsible primary market
makers unless a more favorable execution or price is believed to be obtainable.
Each Portfolio may buy securities from or sell securities to dealers acting as
principal, except dealers with which its directors and/or officers are
affiliated.
Brokerage commissions of each Portfolio (except the Seligman Bond Portfolio,
Seligman Cash Management Portfolio and Seligman High-Yield Bond Portfolio; and
the Seligman Large-Cap Growth Portfolio which commenced operations on May 1,
1999) for the years 1998, and if applicable, 1997 and 1996, are set forth in the
following table:
<TABLE>
<CAPTION>
Total Brokerage
Commissions Paid for
Execution and Statistical Services (1)
--------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Seligman Capital Portfolio $ $ 35,821 $ 19,283
Seligman Common Stock Portfolio 74,489 37,709
Seligman Communications and Information Portfolio 235,341 82,832
Seligman Frontier Portfolio 69,951 43,065
Seligman Henderson Global Growth Opportunities Portfolio 15,812 4,056
Seligman Henderson Global Smaller Companies Portfolio 42,231 39,649
Seligman Henderson Global Technology Portfolio 6,589 2,037
Seligman Henderson International Portfolio 36,291 20,495
Seligman Income Portfolio 11,228 1,483
Seligman Large-Cap Value Portfolio *
Seligman Small-Cap Value Portfolio *
</TABLE>
- ----------
(1) Not including any spreads on principal transactions on a net basis.
* Commissions paid from May 1, 1998 (commencement of operations).
Commissions
For the years ended December 31, 1998, 1997, and 1996, the Fund did not execute
any portfolio transactions with, and therefore did not pay any commissions to,
any broker affiliated with either the Fund, Seligman, HIML, 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 the Fund's
Portfolios. 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 higher brokerage charges
to the Fund's Portfolios than the use of brokers selected
23
<PAGE>
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 Fund's Portfolios.
Directed Brokerage
During the Fund's year ended December 31, 1998, neither the Fund, Seligman, nor
HIML directed any of the Fund's brokerage transactions to a broker because of
research services provided.
Regular Broker-Dealers
During the Fund's year ended December 31, 1998, the Fund did not acquire
securities of any 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 Fund is authorized to issue a total of 1,000,000,000 shares , each with a
par value of $.001. The Fund presently has fifteen separate series of common
stock, each of which maintains a separate investment portfolio, designated as
follows: Seligman Bond Portfolio, Seligman Capital Portfolio, Seligman Cash
Management Portfolio, Seligman Common Stock Portfolio, Seligman Communications
and Information Portfolio, Seligman Frontier Portfolio, Seligman Henderson
Global Growth Opportunities Portfolio, Seligman Henderson Global Smaller
Companies Portfolio, Seligman Henderson Global Technology Portfolio, Seligman
Henderson International Portfolio, Seligman High-Yield Bond Portfolio, Seligman
Income Portfolio, Seligman Large-Cap Growth Portfolio, Seligman Large-Cap Value
Portfolio, and Seligman Small-Cap Value Portfolio. Each share represents an
equal proportionate interest in the respective series and shares entitle their
holders to one vote per share. Shares have noncumulative voting rights, do not
have preemptive or subscription rights, are transferable and are fully paid and
non-assessable. In accordance with current policy of the Securities and Exchange
Commission (the "SEC"), holders of the Canada Life Accounts and VCA-9 have the
right to instruct Canada Life and MBL Life, respectively, as to voting of Fund
shares held by such Canada Life Accounts and VCA-9, respectively, on all matters
to be voted on by Fund shareholders. Such rights may change in accordance with
changes in policies of the SEC. Voting rights of the participants in the Canada
Life Accounts and VCA-9 are more fully set forth in the prospectus or disclosure
document relating to that account, as applicable, which should be read together
with this Prospectus. The Directors of the Fund have authority to create
additional portfolios and to classify and reclassify shares of capital stock
without further action by shareholders and additional series may be created in
the future. Under Maryland corporate law, the Fund is not required to hold
annual meetings and it is the intention of the Fund's Directors not to do so.
However, special meetings of shareholders will be held for action by
shareholders as may be required by the 1940 Act, the Fund's Articles of
Incorporation and By-Laws, or Maryland corporate law.
Other Securities
The Fund has no authorized securities other than commonl stock.
Purchase, Redemption, and Pricing of Shares
Purchase of Shares
Shares of the Portfolios are offered only to Canada Life Accounts. Shares of the
Portfolios are no longer available for purchase by any participants in the
Mutual Benefit Plan. Shares of the Portfolios will be purchased by Canada Life
Accounts at net asset value, without charge. However, the Canada Life Accounts
are sold subject to certain fees and charges. These fees and charges for the
Canada Life Accounts are described in the prospectuses or disclosure documents
for Canada Life Accounts, which should be read together with this Prospectus, as
applicable.
24
<PAGE>
Offering Price
The net asset value per share of each Portfolio is determined as of the close of
regular trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern
time) each day that the New York Stock Exchange is open. Currently, the New York
Stock Exchange is 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.
It is the policy of the Seligman Cash Management Portfolio to use its best
efforts to maintain a constant per share price equal to $1.00. Instruments held
by the Seligman Cash Management Portfolio are valued on the basis of amortized
cost. This involves valuing an instrument at its cost initially and, thereafter,
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. While this method provides certainty in valuation, it may result
in periods during which the value, as determined by amortized cost, is higher or
lower than the price the Portfolio would receive if it sold the instrument.
The foregoing method of valuation is permitted by Rule 2a-7 adopted by the SEC.
Under this rule, the Seligman Cash Management Portfolio must maintain an
average-weighted portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 397 days or less, and invest only in
securities determined by the Fund's Directors to be of high quality with minimal
credit risks. In accordance with the rule, the Directors have established
procedures designed to stabilize, to the extent reasonably practicable, the
price per share as computed for the purpose of sales and redemptions of the
Seligman Cash Management Portfolio at $1.00. Such procedures include review of
the portfolio holdings by the Seligman Cash Management Portfolio and
determination as to whether the net asset value of the Seligman Cash Management
Portfolio, calculated by using available market quotations or market
equivalents, deviates from $1.00 per share based on amortized cost. The rule
also provides that the extent of any deviation between the net asset value based
upon available market quotations or market equivalents, and $1.00 per share net
asset value, based on amortized cost, must be examined by the Directors. In the
event that a deviation of .5 of 1% or more exists between the Portfolio's $1.00
per share net asset value and the net asset value calculated by reference to
market gestations, or if there is any deviation which the Board of Directors
believes would result in a material dilution to shareholders or purchasers, the
Board of Directors will promptly consider what action, if any, should be
initiated. Any such action may include: selling portfolio instruments prior to
maturity to realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends or paying distributions from capital or capital
gains; redeeming shares in kind; or establishing a net asset value per share by
using available market quotations.
With respect to each of the Seligman Henderson Portfolios, portfolio securities,
including open short positions, 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 not
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 determined in accordance with procedures approved by the
Board of Directors. Short-term obligations with less than sixty days remaining
to maturity are generally valued at amortized cost. Short-term obligations with
more than sixty days remaining to maturity will be valued at current market
value until the sixtieth day prior to maturity, and will then be valued on an
amortized cost basis based on the value on such date unless the Board of
Directors determines that this amortized cost value does not represent fair
market 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 New York
Stock Exchange. The values of such securities used in computing the net asset
value of the shares of the Portfolio are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of
regular trading on the New York Stock Exchange.
For purposes of determining the net asset value per share of the Portfolio all
assets and liabilities initially expressed in foreign currencies will be
converted into US dollars at the mean between the bid and offer prices
25
<PAGE>
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.
Purchase requests received by Canada Life by the close of regular trading on the
New York Stock Exchange (normally, 4:00 p.m. Eastern time) are effected at the
applicable Portfolio's net asset value per share calculated on the date such
purchase or redemption requests are received.
Redemption in Kind
The procedures for redemption of Fund shares under ordinary circumstances are
set forth in the Prospectus. In unusual circumstances, payment may be postponed,
if the orderly liquidation of portfolio securities is prevented by the closing
of, or restricted trading on the New York Stock Exchange during periods of
emergency, or such other periods as ordered by the SEC. It is not anticipated
that shares will be redeemed for other than cash or its equivalent. However, the
Fund reserves the right to pay the redemption price to the Canada Life Accounts
and MBL Accounts in whole or in part, by a distribution in kind from the Fund's
investment portfolio, in lieu of cash, taking the securities at their value
employed for determining such redemption price, and selecting the securities in
such manner as the Board of Directors may deem fair and equitable. If shares are
redeemed in this way, brokerage costs will ordinarily be incurred by the Canada
Life Accounts and VCA-9 in converting such securities into cash.
Taxation of the Fund
Each Portfolio of the Fund intends to continue to qualify as a "regulated
investment company" under certain provisions of the Internal Revenue Code of
1986, as amended. Under such provisions, the Fund's Portfolios will be subject
to federal income tax only with respect to undistributed net investment income
and net realized capital gain. Each of the Fund's Portfolios will be treated as
a separate entity. Information regarding the tax consequences of an investment
in the Fund is contained in the separate prospectus or disclosure documents of
the Canada Life Accounts and Mutual Benefit Plan, which should be read together
with this SAI.
Financial Statements
The Annual Report to shareholders for the year ended December 31, 1998 contains
a schedule of the investments of the Fund 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 Report, and the Independent Auditors' Report
thereon, are incorporated herein by reference. The Annual Report will be
furnished without charge to investors who request copies of this SAI.
General Information
Custodians
With the exception of each of the Seligman Henderson Portfolios, Investors
Fiduciary Trust Company, 801 Pennsylvania, Kansas City, Missouri 64105, serves
as custodian for the Fund, and in such capacity holds in a separate account
assets received by it from or for the account of each of the Fund's Portfolios.
Morgan Stanley Trust Company, One Pierrepont Plaza, Brooklyn, New York 11201,
serves as custodian for each of the Seligman Henderson Portfolios, and in such
capacity holds in a separate account assets received by it from or for the
account of each of these Portfolios of the Fund.
Independent Auditors
_________, independent auditors, serve as auditors of the Fund and certify the
annual financial statements of the Fund. Their address is 787 Seventh Avenue,
New York, New York 10019.
26
<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.
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.
27
<PAGE>
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.
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."
28
<PAGE>
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.
29
<PAGE>
APPENDIX B
HISTORY OF J. & W. SELIGMAN & CO. INCORPORATED
Seligman's beginnings date back to 1837, when Joseph Seligman, the oldest
of eight brothers, arrived in the United States from Germany. He earned his
living as a pack peddler in Pennsylvania, and began sending for his brothers.
The Seligmans became successful merchants, establishing businesses in the South
and East.
Backed by nearly thirty years of business success - culminating in the sale
of government securities to help finance the Civil War - Joseph Seligman, with
his brothers, established the international banking and investment firm of J. &
W. Seligman & Co. In the years that followed, the Seligman Complex played a
major role in the geographical expansion and industrial development of the
United States.
The Seligman Complex:
.... Prior to 1900
o Helps finance America's fledgling railroads through underwriting.
o Is admitted to the New York Stock Exchange in 1869. Seligman remained a
member of the NYSE until 1993, when the evolution of its business made it
unnecessary.
o Becomes a prominent underwriter of corporate securities, including New York
Mutual Gas Light Company, later part of Consolidated Edison.
o Provides financial assistance to Mary Todd Lincoln and urges the Senate to
award her a pension.
o Is appointed US Navy fiscal agent by President Grant.
o Becomes a leader in raising capital for America's industrial and urban
development.
...1900-1910
o Helps Congress finance the building of the Panama Canal.
...1910s
o Participates in raising billions for Great Britain, France and Italy,
helping to finance World War I.
...1920s
o Participates in hundreds of 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.
o Forms Tri-Continental Corporation in 1929, today the nation's largest,
diversified closed-end equity investment company, with over $3 billion in
assets, and one of its oldest.
...1930s
o Assumes management of Broad Street Investing Co. Inc., its first mutual
fund, today known as Seligman Common Stock Fund, Inc.
o Establishes Investment Advisory Service.
30
<PAGE>
...1940s
o Helps shape the Investment Company Act of 1940.
o Leads in the purchase and subsequent sale to the public of Newport News
Shipbuilding and Dry Dock Company, a prototype transaction for the
investment banking industry.
o Assumes management of National Investors Corporation, today Seligman Growth
Fund, Inc.
o Establishes Whitehall Fund, Inc., today Seligman Income Fund, Inc.
...1950-1989
o Develops new open-end investment companies. Today, manages more than 40
mutual fund portfolios.
o Helps pioneer state-specific, municipal bond funds, today managing a
national and 18 state-specific municipal funds.
o Establishes J. & W. Seligman Trust Company, and J. & W. Seligman Valuations
Corporation.
o Establishes Seligman Portfolios, Inc., an investment vehicle offered
through variable annuity products.
...1990s
o Introduces Seligman Select Municipal Fund, Inc. and Seligman Quality
Municipal Fund, Inc. two closed-end funds that invest in high quality
municipal bonds.
o In 1991 establishes a joint venture with Henderson plc, of London, known as
Seligman Henderson Co., to offer global and international investment
products.
o Introduces to the public Seligman Frontier Fund, Inc., a small
capitalization mutual fund.
o Launches Seligman Henderson Global Fund Series, Inc., which today offers
five separate series: Seligman Henderson International Fund, Seligman
Henderson Global Smaller Companies Fund, Seligman Henderson Global
Technology Fund, Seligman Henderson Global Growth Opportunities Fund and
Seligman Henderson Emerging Markets Growth Fund.
o Launches Seligman Value Fund Series, Inc., which currently offers two
separate series: Seligman Large-Cap Value Fund and Seligman Small-Cap Value
Fund.
31
<PAGE>
File No. 33-15253
811-5221
PART C. OTHER INFORMATION
Item 23. Exhibits.
All Exhibits have been previously filed, except Exhibits marked with an
asterisk (*) which will be filed by amendment.
(a) Form of Articles of Amendment and Restatement of Articles of Incorporation.
(Incorporated by reference to Registrant's Post-Effective Amendment No. 22
filed on April 28, 1998.)
(b) By-laws of Registrant. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 20 filed on April 17, 1997.)
(c) Not applicable.
(d) Investment Management Agreements.
(1) Form of Management Agreement in respect of Seligman Henderson Global
Growth Opportunities Portfolio and Seligman Henderson Global
Technology Portfolio. (Incorporated by reference to Registrant's
Post-Effective No. 17 filed on February 15, 1996.)
(2) Subadvisory Agreement in respect of Seligman Henderson Global Growth
Opportunities Portfolio and Seligman Henderson Global Technology
Portfolio. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 22 filed on April 28, 1998.)
(3) Form of Management Agreement in respect of Seligman High-Yield Bond
Portfolio. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 14 filed on February 14, 1995.)
(4) Management Agreement in respect of Seligman Communications and
Information and Seligman Frontier Portfolios. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 15 filed on
March 31, 1995.)
(5) Management Agreement in respect of Seligman Henderson Global Smaller
Companies Portfolio (formerly, Seligman Henderson Global Emerging
Companies Portfolio). (Incorporated by reference to Registrant's
Post-Effective Amendment No. 15 filed on March 31, 1995.)
(6) Subadvisory Agreement in respect of Seligman Henderson Global Smaller
Companies Portfolio. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 22 filed on April 28, 1998.)
(7) Management Agreement in respect of Seligman Henderson International
Portfolio. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 15 filed on March 31, 1995.)
(8) Subadvisory Agreement in respect of Seligman Henderson Global Growth
Opportunities Portfolio and Seligman Henderson Global Technology
Portfolio. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 22 filed on April 28, 1998.)
(9) Management Agreement in respect of Seligman Capital, Seligman Cash
Management, Seligman Common Stock, Seligman Bond Securities, and
Seligman Income Portfolios. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 15 filed on March 31, 1995.)
(10) Management Agreement in respect of Seligman Large-Cap Value Portfolio
and Seligman Small-Cap Value Portfolio. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 22 filed on April 28, 1998.)
(e) Not applicable.
<PAGE>
File No. 33-15253
811-5221
PART C. OTHER INFORMATION (cont'd)
(f) Deferred Compensation Plan for Directors of Seligman Portfolios, Inc.
(Incorporated by reference to Registrant's Post-Effective Amendment No. 22
filed on April 28, 1998.)
(g) Custodian Agreements.
(1) Form of Custodian Agreement in respect of Seligman Capital, Seligman
Cash Management, Seligman Common Stock, Seligman Bond Securities, and
Seligman Income Portfolios. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 22 filed on April 28, 1998.)
(2) Form of First Amendment to Custodian Agreement in respect of Seligman
Communications and Information and Seligman Frontier Portfolios.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 22 filed on April 28, 1998.)
(3) Form of Recordkeeping Agreement in respect of Seligman Henderson
International Portfolio. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 22 filed on April 28, 1998.)
(4) Form of First Amendment to Recordkeeping Agreement in respect of
Seligman Henderson Global Smaller Companies Portfolio. (Incorporated
by reference to Registrant's Post-Effective Amendment No. 22 filed on
April 28, 1998.)
(5) Second Amendment to Custodian Agreement in respect of Seligman
High-Yield Bond Portfolio. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 18 filed on May 2, 1996.)
(6) Second Amendment to Recordkeeping Agreement in respect of Seligman
Henderson Global Growth Opportunities Portfolio and Seligman Henderson
Global Technology Portfolio. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 18 filed on May 2, 1996.)
(7) Custodian Agreement between Registrant and Morgan Stanley Trust
Company in respect of the Seligman Henderson Portfolios. (Incorporated
by reference to Registrant's Post-Effective Amendment No. 19 filed on
November 1, 1996.)
(h) Other Material Contracts.
(1) Buy-Sell Agreement and Modification between the Registrant and The
Mutual Benefit Life Insurance Company. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 10 filed on April 26, 1993.)
(2) Form of Buy/Sell Agreement between Registrant and Canada Life
Insurance Company of America. (Incorporated by reference to
Post-Effective Amendment No. 22 filed on April 28, 1998.)
(3) Form of Buy/Sell Agreement between Registrant and Canada Life
Insurance Company of New York. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 22 filed on April 28, 1998.)
(4) Agency Agreement between Investors Fiduciary Trust Company, acting as
Transfer and Dividend Disbursing Agent, and the Fund in respect of
Seligman Capital, Seligman Cash Management, Seligman Common Stock,
Seligman Bond Securities, and Seligman Income Portfolios.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 22 filed on April 28, 1998.)
(5) First Amendment to Agency Agreement between Investors Fiduciary Trust
Company, acting as Transfer and Dividend Disbursing Agent, and the
Fund in respect of Seligman Henderson International Portfolio.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 22 filed on April 28, 1998.)
<PAGE>
File No. 33-15253
811-5221
PART C. OTHER INFORMATION (cont'd)
(6) Second Amendment to Agency Agreement between Investors Fiduciary Trust
Company, acting as Transfer and Dividend Disbursing Agent, and the
Fund in respect of Seligman Communications and Information, Seligman
Frontier, and Seligman Henderson Global Smaller Companies Portfolios.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 22 filed on April 28, 1998.)
(7) Third Amendment to Agency Agreement between Investors Fiduciary Trust
Company, acting as Transfer and Dividend Disbursing Agent, and the
Fund in respect of Seligman High-Yield Bond Portfolio. (Incorporated
by reference to Registrant's Post-Effective Amendment No. 18, filed
May 2, 1996.)
(8) Fourth Amendment to Agency Agreement between Investors Fiduciary Trust
Company, acting as Transfer and Dividend Disbursing Agent, and the
Fund in respect of Seligman Henderson Global Growth Opportunities
Portfolio and Seligman Henderson Global Technology Portfolio.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 18, filed May 2, 1996.)
(9) Form of Promotional Agent Distribution Agreement between Seligman
Advisors, Inc. (formerly, Seligman Financial Services, Inc.), on
behalf of Registrant and Canada Life Insurance Company of America.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 22 filed on April 28, 1998.)
(10) Form of Promotional Agent Distribution Agreement between Seligman
Advisors, Inc. (formerly, Seligman Financial Services, Inc. ), on
behalf of Registrant and Canada Life Insurance Company of New York.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 22 filed on April 28, 1998.)
(11) Form of Selling Agreement between Seligman Advisors, Inc. (formerly,
Seligman Financial Services, Inc.), on behalf of Registrant and Canada
Life Insurance Company of America. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 22 filed on April 28, 1998.)
(12) Form of Selling Agreement between Seligman Advisors, Inc. (formerly,
Seligman Financial Services, Inc.), on behalf of Registrant and Canada
Life Insurance Company of New York. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 22 filed on April 28, 1998.)
(i) Opinion and Consent of Counsel.
*(1) Opinion and Consent of Counsel on behalf of Registrant's Seligman
Large-Cap Growth Portfolio.
*(2) Opinion and Consent of Counsel on behalf of Registrant's Seligman Bond
Portfolio (formerly, Seligman Fixed-Income Portfolio), Seligman
Capital Portfolio, Seligman Cash Management Portfolio, Seligman Common
Stock Portfolio and Seligman Income Portfolio.
(3) Opinion and Consent of Counsel on behalf of Registrant's Seligman
Henderson International Portfolio (formerly, Seligman Henderson Global
Portfolio). (Incorporated by reference to Registrant's Post-Effective
Amendment No. 10 filed on April 29, 1994.)
(4) Opinion and Consent of Counsel on behalf of Registrant's Seligman
Communication and Information Portfolio, Seligman Frontier Portfolio
and Seligman Henderson Global Smaller Companies Portfolio (formerly,
Seligman Henderson Global Emerging Companies Portfolio). (Incorporated
by reference to Registrant's Post-Effective Amendment No. 13 filed on
September 30, 1994.)
(5) Opinion and Consent of Counsel on behalf of Registrant's Seligman
High-Yield Bond Portfolio. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 15 filed on March 31, 1995.)
<PAGE>
File No. 33-15253
811-5221
PART C. OTHER INFORMATION (cont'd)
(6) Opinion and Consent of Counsel on behalf of Registrant's Seligman
Henderson Global Growth Opportunities Portfolio and Seligman Henderson
Global Technology Portfolio. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 18 filed on May 1, 1996.)
(7) Opinion and Consent of Counsel on behalf of Registrant's Seligman
Large-Cap Value Portfolio and Seligman Small-Cap Value Portfolio.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 23 filed on April 28, 1998.)
(j) *Consent of Independent Auditors.
(k) Not applicable.
(l) Initial Capital Agreements.
*(1) Form of Purchase Agreement (Investment Letter) for Registrant's
Seligman Large-Cap Growth Portfolio.
(2) Form of Purchase Agreement (Investment Letter) for Seligman Capital,
Seligman Cash Management, Seligman Common Stock, Seligman Bond, and
Seligman Income Portfolios. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 22 filed on April 28, 1998.)
(3) Purchase Agreement (Investment Letter) for Seligman Henderson
International Portfolio. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 22 filed on April 28, 1998.)
(4) Purchase Agreement (Investment Letter) for Seligman High-Yield Bond
Portfolio. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 15 filed on March 31, 1995.)
(5) Purchase Agreement (Investment Letter) for Seligman Henderson Global
Growth Opportunities Portfolio and Seligman Henderson Global
Technology Portfolio. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 18, filed May 2, 1996.)
(m) Not applicable.
(n) *Financial Data Schedules.
(o) Not applicable.
Other Exhibits: Power of Attorney for Richard R. Schmaltz. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 22
filed on April 28, 1998.)
Powers of Attorney. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 20 filed on April
17, 1997.)
Item 24. Persons Controlled by or Under Common Control with Registrant.
None.
<PAGE>
File No. 33-15253
811-5221
PART C. OTHER INFORMATION (cont'd)
Item 25. Indemnification.
Reference is made to the provisions of Article Eleventh of Registrant's
Amended and Restated Articles of Incorporation filed as Exhibit 24(b)(1) of
Registrant's Post-Effective Amendment No. 22 to the Registration Statement
and Article IV of Registrant's Amended and Restated By-laws filed as
Exhibit 24(b)(2) to Registrant's Post-Effective Amendment No. 20 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 and 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 manager. The Manager also serves as investment
manager to seventeen other 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 Quality Municipal Fund, Inc.,
Seligman Select Municipal Fund, Inc., Seligman Value Fund Series, Inc., and
Tri-Continental Corporation.
Seligman Henderson Co. ("Subadviser") serves as subadviser to the
Registrant and Seligman Henderson Global Fund Series, Inc.
The Manager and Subadviser each have an investment advisory service
division which provides investment management or advice to private clients.
The list required by this Item 28 of officers and directors of the Manager
and the Subadviser, respectively, together with information as to any other
business, profession, vocation or employment of a substantial nature
engaged in by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV, filed by the
Manager and the Subadviser, respectively, pursuant to the Investment
Advisers Act of 1940 (SEC File Nos. 801-15798 and 801-55577, respectively),
which were filed on March 25, 1998 and October 15, 1998, respectively.
Item 27. Not applicable.
Item 28. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules (17 CFR 270.31a-1 to 31a-3)
promulgated thereunder will be maintained by the following:
Custodian for Seligman Bond Portfolio, Seligman Capital Portfolio, Seligman
Cash Management Portfolio, Seligman Common Stock Portfolio, Seligman
Communications and Information Portfolio, Seligman Frontier Portfolio,
Seligman High-Yield Bond Portfolio, and Seligman Income Portfolio and
Recordkeeping Agent for all Portfolios: Investors Fiduciary Trust Company,
801 Pennsylvania, Kansas City, Missouri 64105.
<PAGE>
File No. 33-15253
811-5221
PART C. OTHER INFORMATION (cont'd)
Custodian for Seligman Henderson Global Growth Opportunities Portfolio,
Seligman Henderson Global Smaller Companies Portfolio, Seligman Henderson
Global Technology Portfolio, and Seligman Henderson International
Portfolio: Chase Manhattan Bank, One Pierrepont Plaza, Brooklyn, New York
11201.
Transfer, Redemption and Other Shareholder Account Services for all
Portfolios: Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas
City, Missouri 64105.
Item 29. Management Services.
Not applicable.
Item 30. Undertakings.
(1) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
(2) The Registrant undertakes to call a meeting of shareholders for the
purpose of voting upon the removal of a director or directors and to
assist in communications with other shareholders as required by
Section 16(c) of the Investment Company Act of 1940.
<PAGE>
File No. 33-15253
811-5221
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 24 to the 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 12th day of February, 1999.
SELIGMAN PORTFOLIOS, 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. 24 to the Registration
Statement has been signed below by the following persons, in the capacities
indicated on February 12, 1999.
Signature Title
--------- -----
/s/ BRIAN T. ZINO Chairman of the Board (Principal
---------------------- executive officer) and Director
William C. Morris*
/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 ---------------------------------
James Q. Riordan, Director ) *Brian T. Zino, Attorney-In-Fact
Richard R. Schmaltz, Director )
Robert L. Shafer, Director )
James N. Whitson, Director )
)
