SELIGMAN NEW TECHNOLOGIES VENTURE FUND II - ADDENDUM

Date17-Jul-2001
SELIGMAN NEW TECHNOLOGIES VENTURE FUND II

 

Addendum to Private Placing Memorandum dated February 21, 2000

 

THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION BY ANY PERSON

IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL, OR IN

WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO

SO, OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.

 

AVAILABLE ONLY TO INVESTORS WHO ARE NOT US PERSONS

 

Dated July 16, 2001

 

This Addendum includes and should be read together with the Private Placing

Memorandum dated February 21, 2000 (the "Memorandum") prepared for the

purpose of offering Class A shares in the Seligman New Technologies Venture

Fund II (the "Fund"), a sub-fund of Seligman Investment Opportunities Fund

(the "Company"). Capitalized terms not defined in this Addendum shall have

the same meaning set forth in the Memorandum. This Addendum is authorized

for distribution only when accompanied or preceded by the Memorandum.

Unless inconsistent with the terms of this Addendum, the provisions set

forth in the Memorandum continue to apply.

 

Additional Information for Shareholders

 

Effective as of the date hereof, the Fund is accepting additional

subscriptions for Class A Shares from existing Shareholders on each Dealing

Day (as defined herein). A complete list of the Master Fund NTV II

Portfolio, a sub-fund of Seligman Investment Opportunities (Master) Fund

(the "Master Fund"), as of the most recent practicable date is available

upon request.

 

The definition of Dealing Day in the Memorandum is hereby amended, with the

effect being that a Dealing Day is now the third Wednesday of each calendar

month or such other day as the Directors may determine, provided that if

any such day is not a Business Day, the next following Business Day shall

be designated as the Dealing Day. Each reference in the Memorandum to the

Dealing Day shall hereafter be consistent with the above amendment.

 

In the past year, the broad investment environment, particularly the US

technology market, has adversely impacted the Fund's performance and

holdings. The value of the Fund's public investments and investments in

companies whose securities are not publicly traded ("Venture Capital

Investments") has declined significantly. As of June 30, 2001, the Master

Fund NTV II Portfolio, through which the Fund invests, had approximately

58% of its net assets invested in Venture Capital Investments. As a

result, the Fund will not make further Venture Capital Investments through

the Master Fund NTV II Portfolio until the percentage of the Master Fund

NTV II Portfolio's assets invested in Venture Capital Investments falls

below 50%, except that the Master Fund NTV II Portfolio may make further

investments in companies in which it has previously invested ("Follow-on

Investments"), irrespective of any limitation on Venture Capital

Investments, if the Investment Manager believes that the Master Fund NTV II

Portfolio, and consequently the Fund, could be adversely affected by not

participating in such Follow-on Investments. There can be no guarantee

that Venture Capital Investments will fall below 50% of the Master Fund NTV

II Portfolio's assets or that the Fund, through the Master Fund NTV II

Portfolio, will be able or willing to invest further in Venture Capital

Investments. In addition, despite receiving additional subscriptions, the

Fund could be forced to suspend redemptions and commence liquidation if

market conditions continue to adversely affect the investments owned by the

Fund or Shareholders continue to request redemptions at the maximum monthly

amount.

 

Please be advised that, under current market conditions, the Investment

Manager does not currently intend to exercise its discretion to satisfy

redemption requests on a given Redemption Day in excess of the 2% limit

provided in the Memorandum even if the Fund has accepted a comparable

number of subscriptions on the corresponding Dealing Day.

 

After December 31, 2001, the Fund may accept new subscriptions from

investors who are not current Shareholders.

 

Risks Associated with Investments in Venture Capital Companies

Investors are reminded that there are substantial risks associated with

investing in venture capital companies, including those set forth below.

 

The Fund may invest a substantial portion of its assets in securities of

unseasoned venture capital companies, which present all the risks of

investment in small companies described in the Memorandum plus certain

additional risks. Venture capital companies represent highly speculative

investments by the Fund. The Fund's ability to realize value from an

investment in a venture capital company is to a large degree dependent upon

successful completion of the company's initial public offering or the sale

of the venture capital company to another company, which may not occur for

a period of several years after the date of the Fund's investment, if ever.

There can be no assurance that any of the venture capital companies in

which the Fund invests will complete public offerings or be sold, or, if

such events occur, as to the timing and values of such offerings or sales.

The Fund may also lose all or part of its entire investment if these

companies fail or their product lines fail to achieve an adequate level of

market recognition or acceptance. Some companies may depend upon managerial

assistance or financing provided by their investors. The Fund does not

intend to provide any such managerial assistance and may be unable or

unwilling to make further investments in a company. Therefore, the value of

its investments may depend upon the quality of managerial assistance

provided by other investors and their ability and willingness to provide

financial support. To the extent that the Fund is unwilling or unable to

make Follow-on Investments, the Fund may be adversely affected, including

by having all or a portion of its prior investment converted to common

stock from preferred stock and forfeiting certain potentially valuable

rights such as preferential payments upon a sale or liquidation of the

venture capital company. In addition, there can be no assurance that the

Fund will be able to identify a sufficient number of desirable venture

capital investments.

 

Depending on the specific facts and circumstances of a venture capital

investment, there may not be a reasonable basis to revalue it for a

substantial period of time after the Fund's investment. If a venture

capital company does not complete an initial public offering within the

anticipated time frame of up to three years from the date of the Fund's

investment, or enter into a transaction whereby its shares are exchanged

for shares of a public company, there may never be a public market

benchmark for valuing the investment. The Fund's Net Asset Value per share

may change substantially in a short time as a result of developments at the

companies in which the Fund invests. Changes in the Fund's Net Asset Value

may be more pronounced and more rapid than with other funds because of the

Fund's emphasis on venture capital companies that are not publicly traded.

The Fund's Net Asset Value per share may change materially from day to day,

including during the time between Redemption Days.

 

Use of Derivatives

 

The Fund, through investment in the Master Fund NTV II Portfolio, may buy

or sell put or call options on securities or on a basket or index of

securities to hedge against adverse movements in the prices of securities

held in the portfolio. The options strategies may include the purchase of

puts and the simultaneous writing of calls having different strike prices

to place a "collar" on a portion of a fund's asset value. (This strategy,

which involves the sale of call options to help reduce the price of the put

options, is viewed as a hedge even though the writing of a call without the

purchase of a put would not be considered hedging.) The Fund and the

Master Fund NTV II Portfolio are authorized to use this strategy regardless

of whether the options are actively traded or not. However, these

transactions will only be entered into with broker-dealers that are

reputable financial institutions which (i) specialize in these types of

transactions, (ii) make markets in these options, or (iii) are participants

in over-the-counter markets. A put option gives the purchaser of the

option the right to sell, and obligates the writer of the put option to

buy, the underlying security at a stated exercise price at any time prior

to the expiration of the option. A call option gives the purchaser of the

option the right to buy, and obligates the writer of the call option to

sell, the underlying security at a stated exercise price at any time prior

to the expiration of the option.

 

Management and Administration of the Company

 

Effective October 12, 2000, Mr. Richard M. Potocki, Senior Vice President

and Director, Global Financial Services, Seligman International, Inc., was

appointed as a Director of the Company and the Master Fund.

 

Mr. Richard R. Schmaltz resigned from the Board of Directors of the Company

and the Master Fund on July 13, 2001. Subsequently, on July 16, 2001, Mr.

Paul C. Guidone, Managing Director and Chief Investment Officer of the

Investment Manager, was appointed as a Director of the Company and the

Master Fund.

 

The Investment Manager manages approximately US$31.2 billion as of June 30,

2001, consisting of more than 60 portfolios of US and non-US investment

companies with aggregate assets of approximately US$21.5 billion and

separately managed accounts with aggregate assets of approximately US$9.7

billion.

 

Incentive Fee Payable to the Investment Manager

 

The Memorandum sets out the basis on which an Incentive Fee is payable to

the Investment Manager. For the avoidance of doubt, the Directors wish to

clarify the principals determining the calculation of the Incentive Fee

having regard to adjustments on account of redemptions occurring during a

Performance Period and to ensure that the Incentive Fee is calculated by

reference to actual performance during a Performance Period.

 

When redemptions are made during any Performance Period, such reduction in

the number of Class A Shares outstanding will be taken into account in

reducing the Loss Carryforward Amount from any prior Performance Periods in

accordance with the formula in the Memorandum and such formula shall also

be applied to reduce the relevant amount of loss incurred in the current

Performance Period. The effect of this approach is to ensure that only the

losses applicable to the remaining Class A Shares of the Fund outstanding,

after giving effect to the redemption, are made up before the Incentive Fee

becomes payable.

 

For the avoidance of doubt, no adjustment for subscriptions will be made

during any Performance Period, because such additional Class A Shares have

not participated in any loss accruing during the Performance Period.

 

The intent of the Incentive Fee mechanics is to compensate the Investment

Manager for that portion of the net increase in the Fund's net assets from

investment operations, subject to adjustment as described herein and in the

Memorandum when Shares are redeemed.