Investment Basics

BASICS OF FINANCE

* For the period 1950 - 2006, small-company stocks as represented by the Russell 2000 (1979 - 2006) and Ibbotson Small Stock Index (1950 - 1978). Past performance is no indication or guarantee of future results. There are specific risks associated with global investing, such as currency fluctuations, foreign taxation, differences in financial reporting practices, and rapid changes in political and economic conditions. The stocks of smaller companies may be subject to above-average market price fluctuations.

Stock prices fluctuate, and you could lose money. The stocks of smaller companies may be subject to above-average market-price fluctuations. A portfolio with fewer holdings may be subject to greater volatility than a portfolio with a greater number of holdings. The products of technology companies may be subject to severe competition and rapid obsolescence, and technology stocks may be subject to greater price fluctuation, government regulation, and limited liquidity as compared to other investments. There are specific risks associated with global investing, such as currency fluctuations, foreign taxation, differences in financial reporting practices, and rapid changes in political and economic conditions. Because of the special risks associated with investing in securities of emerging market companies, an investment in Seligman Emerging Markets Fund or Seligman Global Smaller Companies Fund should be considered speculative and not appropriate for individuals who require safety of principal or stable income from their investments. Investments in real estate securities may be subject to specific risks, such as risks to general and local economic conditions, and risks related to individual properties. Fixed income securities are subject to interest rate risk, credit risk, prepayment risk, and market risk. High-yield securities are subject to a greater risk of loss of principal and interest than higher-rated, investment grade fixed income securities.

To the extent that a Fund concentrates its investments in municipal securities issued by a single state and its municipalities, specific events or factors affecting a particular state may have an impact on the municipal securities of that state without affecting the municipal market in general.

Investment Basics

Before choosing which investment options are right for you, it is important to review some of the basics, such as what are stocks, bonds, and money market instruments. Each of these types of assets carries its own risks and potential rewards, and past performance is no guarantee of future results.

What is a Stock?
A stock is a share of ownership in a company and may entitle shareholders to a share of any profits in the form of dividends. The price of a share of stock may go up or down, depending on many factors, including the performance of the company. Stocks have the potential for capital appreciation —that is, the value of the stock may increase over time. In the short term, stocks are generally more volatile than bonds or money market instruments, but over longer periods, stocks have historically provided higher returns.

Within this asset class, there are different risks and rewards associated with specific kinds of stocks. For example, the stocks of small companies are generally more volatile than large-company stocks over short periods of time, but have historically provided higher returns over the long-term.* International stocks may provide downside protection for an investment portfolio during periods in which US markets underperform.

What is a Bond?
A bond is a loan to a company or government entity (called the issuer). The issuer pays the bondholder a fixed rate of interest on the loan, and repays the initial investment at the bond’s specified maturity date. The purpose of bonds in an investment portfolio is to provide regular income. Issuers of bonds are assigned a credit rating; those with lower credit ratings may offer higher rates of interest to bondholders in order to compensate for the increased risk that the issuer may default on the loan. The current market value of a bond may go up or down, depending on several factors. For example, when interest rates rise, bond prices fall; when interest rates fall, bond prices rise. Generally, bonds are subject to less price fluctuation than stocks; however, long-term returns have been lower.

What are Money Market Instruments?
Money market instruments, or cash equivalents, include various kinds of short-term debt obligations or loans to companies or government entities. Their purpose is to provide a low-risk investment for short periods of time. Over longer periods, the low returns money market instruments provide may not be able to keep pace with the rate of inflation.

Asset Allocation
Your asset allocation - the way you decide to diversify among stocks, bonds, and money market instruments - is a critical factor in determining your overall investment return. A portfolio that contains a mix of asset types may provide more consistent returns, because different kinds of assets frequently experience different cycles of ups and downs.

This information is authorized for use only in the case of concurrent or prior delivery of the offering prospectus of the Fund. You should consider the investment objectives, risks, charges, and expenses of a Fund carefully before investing. A prospectus containing information about a Fund (including its investment objectives, risks, charges, expenses, and other information about the Fund) may be obtained here. The prospectus should be read carefully before investing in a Fund.

The Seligman Funds are managed by J. & W. Seligman & Co. Incorporated (Seligman). The Seligman Mutual Funds are distributed by Seligman Advisors, Inc. Seligman Services, Inc. provides client services to Fund shareholders. Seligman Advisors, Inc. and Seligman Services, Inc. are wholly-owned subsidiaries of Seligman.

Distributed by Seligman Advisors, Inc.