SELIGMAN FINANCIAL SERVICES, INC.
an affiliate of
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
This report is intended only for the information of shareholders or those who
have received the offering prospectus covering shares of Capital Stock of
Seligman Capital Fund, Inc., which contains information
about the sales charges, management fee, and other costs. Please read the
prospectus carefully before investing or sending money.
EQCA3c 9/96
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THIRD QUARTER REPORT
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SELIGMAN
CAPITAL
FUND, INC.
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September 30, 1996
[LOGO]
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A Capital Appreciation Fund
Established in 1983
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TO THE SHAREHOLDERS
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Seligman Capital Fund slightly lagged the Standard & Poor's 500 Composite Stock
Price Index (S&P 500) for the three months ended September 30, 1996.
Year-to-date, however, the Fund has outpaced the S&P 500. Specific performance
information and a discussion with your Portfolio Manager about the past three
months begin on page 2.
In the third quarter of 1996, the economy continued to grow at a healthy
pace with virtually no inflationary repercussions and no action from the Federal
Reserve Board to alter interest rates. Reports issued in September reflected the
economy's health, showing improvement in production, new home sales, wages, and
spending.
With the lowest unemployment rate since June 1990, strong personal incomes,
interest rates far below their 1980s levels, and few signs of inflationary
pressure, consumer confidence as measured by The Conference Board rose 25% above
its January 1996 level.
Despite the Fed's unchanging position on interest rates in the third
quarter, the apprehension surrounding each Fed meeting continued to have a
significant influence on the financial markets. In the equity markets, July was
marked by a correction, August by a recovery, and September by a series of
record-breaking highs. Continuing the year's trend, the bond markets rose or
fell with the release of each new economic report. Following the Fed's September
24 decision to maintain the current fed funds rate, the yield on the 30-year
Treasury bond declined modestly. For the remainder of the month, the yield
ranged from 6.89% to 6.98%, ending the quarter at 6.92%.
Going forward, we foresee continued, albeit moderate, economic growth and a
benign level of inflation. This environment of modest growth, combined with
relatively stable interest rates, should be beneficial for financial markets in
the months ahead. As always, there could be short-term volatility, but we remain
confident in the long-term outlook.
As we near the end of the year, we encourage you to review your overall
investment portfolio. When doing so, you may wish to consult your financial
advisor to discuss financial issues such as tax planning, and to ensure that you
are following the best investment strategy to help you seek your financial
goals.
We thank you for your continued interest in Seligman Capital Fund, and look
forward to serving your investment needs in the many years to come.
By order of the Board of Directors,
/s/ William C. Morris
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William C. Morris
Chairman
/s/ Brian T. Zino
-----------------
Brian T. Zino
President
October 30, 1996
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IMPORTANT TELEPHONE NUMBERS
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SHAREHOLDER
SERVICES
(800) 221-2450
RETIREMENT PLAN
SERVICES
(800) 445-1777
24-HOUR AUTOMATED
TELEPHONE ACCESS SERVICE
(800) 622-4597
1
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INTERVIEW WITH YOUR PORTFOLIO MANAGER
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[PHOTO]
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LORIS D. MUZZATTI
HOW DID SELIGMAN CAPITAL FUND PERFORM IN THE PAST THREE MONTHS?
Seligman Capital Fund modestly lagged the Standard & Poor's 500 Composite Stock
Price Index (S&P 500) in the third quarter of 1996. However, the Fund outpaced
the S&P 500 for the nine months ended September 30, 1996.
WHAT ECONOMIC FACTORS INFLUENCED SELIGMAN CAPITAL FUND'S PERFORMANCE IN THE PAST
THREE MONTHS?
In the third quarter of 1996, continued economic growth brought fears of
inflationary pressure and a possible increase in interest rates. Strong
employment data sent the equity markets lower in July, and interest rates spiked
briefly but stabilized in August and September as economic news started to
indicate an economic slowdown. As fears of an imminent Federal Reserve Board
tightening subsided, the equity markets regained strength to set new highs by
the end of the third quarter, improving the valuations of your Fund's holdings.
WHAT INDUSTRIES AFFECTED THE FUND'S PERFORMANCE IN THE PAST THREE MONTHS?
Overall, Seligman Capital Fund benefited significantly from the strength of
mid-capitalization stocks. More specifically, the fact that the Fed did not
increase interest rates improved the outlook for interest rate-sensitive stocks,
such as banks. Strong individual company performance also drove these stocks
higher. The portfolio's positions in financial services, therefore, had a strong
quarter and led the Fund's performance. We modestly increased our positions in
financial services with the purchase of Old Republic International, a specialty
insurance company, and St. Paul Bancorp, a regional bank.
In health care, rising medical costs squeezed the margins of smaller health
care services companies such as Mid Atlantic Medical Services and Humana. We
reduced our exposure to smaller HMOs and redeployed the assets to more
attractively valued health care stocks with stronger long-term growth prospects.
We purchased Pharmacia & Upjohn, whose established business is better positioned
to sustain earnings in the current environment, and smaller companies such as
Arterial Vascular Engineering which manufactures leading-edge cardiovascular
products and has outstanding growth prospects.
Technology stocks also had a strong third quarter, due in part to the
buying opportunity provided by the July sell-off. We increased our exposure to
the technology sector, adding attractively valued companies such as Arrow
Electronics, Sterling Commerce, and Xilinx. All have strong underlying
fundamentals and good long-term growth prospects.
2
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Continuing mergers and acquisitions in the telecommunications industry
somewhat dampened the Fund's performance. The purchase of MFS Communications by
WorldCom sparked a sell-off of WorldCom. However, another of the Fund's
telecommunications holdings, McLeod, which has operations similar to MFS, saw
its valuation improve as a result of its potential for future acquisition.
Further, sluggish sales caused specialty apparel retailers and department stores
to have a difficult quarter. We, therefore, reduced our position in Nordstrom,
but purchased Saks Holdings due to its rapid expansion potential and superior
merchandising strategies.
WHAT IS YOUR OUTLOOK?
In the third quarter of 1996, we took advantage of July's reduced valuations to
shift the portfolio into growth companies with stronger fundamentals and solid
long-term growth potential. The Fund shows continued improvement in performance,
on both a relative and absolute basis, and is well positioned in its objective
and portfolio characteristics to provide strong long-term results. The outlook
remains positive for the Fund's portfolio of rapid growth stocks, which are
selling at attractive valuations and have good prospects for future
appreciation.
3
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SELIGMAN CAPITAL FUND, INC.
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<TABLE>
<CAPTION>
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS*
For Periods Ended September 30, 1996
AVERAGE ANNUAL
-------------------------------------------
CLASS B CLASS D
SINCE SINCE
INCEPTION THREE NINE ONE FIVE 10 INCEPTION
4/22/96 MONTHS MONTHS YEAR YEARS YEARS 5/3/93
------- ------ ------ ---- ----- ----- ------
CLASS A
<S> <C> <C> <C> <C> <C> <C> <C>
With Sales Charge n/a (2.22)% 12.83% 23.92% 13.78% 13.53% n/a
Without Sales Charge n/a 2.67 18.47 30.09 14.90 14.08 n/a
CLASS B
With 5% CDSL 2.12% (2.56) n/a n/a n/a n/a n/a
Without CDSL 7.12 2.44 n/a n/a n/a n/a n/a
CLASS D
With 1% CDSL n/a 1.44 16.80 28.08 n/a n/a n/a
Without CDSL n/a 2.44 17.80 29.08 n/a n/a 14.35%
S&P 500** 6.15+ 3.09 13.50 20.33 15.23 14.95 16.99++
<CAPTION>
NET ASSET VALUE
SEPTEMBER 30, 1996 JUNE 30, 1996 MARCH 31, 1996 DECEMBER 31, 1995
-------------------- -------------- ---------------- --------------------
<S> <C> <C> <C> <C>
CLASS A $18.47 $17.99 $16.66 $15.59
CLASS B 17.60 17.18 16.43+++ n/a
CLASS D 17.60 17.18 15.94 14.94
</TABLE>
CAPITAL GAIN INFORMATION
For the Nine Months Ended September 30, 1996
CAPITAL GAIN
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REALIZED UNREALIZED(0)
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CLASS A $1.691 $5.297
CLASS B 1.691 5.297
CLASS D 1.691 5.297
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* Return figures reflect any change in price per share and assume the
reinvestment of dividends and capital gain distributions. Return figures for
Class A shares are calculated with and without the effect of the initial
4.75% maximum sales charge. Class A share returns reflect the effect of the
0.25% Administration, Shareholder Services and Distribution Plan after
January 1, 1993, only. Returns for Class B shares are calculated with and
without the effect of the maximum 5% contingent deferred sales load
("CDSL"), charged only on certain redemptions made within one year of the
date of purchase, declining to 1% in the sixth year and 0% thereafter.
Returns for Class D shares are calculated with and without the effect of the
1% CDSL, charged only on redemptions made within one year of the date of
purchase.
The rates of return will vary and the principal value of an
investment will fluctuate. Shares, if redeemed, may be worth more or less
than their original cost. Past performance is not indicative of future
investment results.
** The S&P 500 is an unmanaged index that assumes reinvestment of estimated
dividends, and does not reflect fees and expenses. Investors may not invest
directly in an index.
+ From April 30, 1996.
++ From April 30, 1993.
+++ As of April 22, 1996.
(0) Represents the per share amount of net unrealized appreciation of portfolio
securities as of September 30, 1996.
4
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SELIGMAN CAPITAL FUND, INC.
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LARGEST PORTFOLIO CHANGES
During Past Three Months
SHARES
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HOLDINGS
ADDITIONS INCREASE 9/30/96
- --------- ------- -------
Arrow Electronics ................... 60,000 60,000
Arterial Vascular Engineering ....... 140,000 165,000
Landry's Seafood Restaurants ........ 55,000 55,000
MGM Grand ........................... 60,000 60,000
Old Republic International .......... 60,000 60,000
Pharmacia & Upjohn .................. 70,000 70,000
St. Paul Bancorp .................... 50,000 50,000
Sterling Commerce ................... 100,000 100,000
TCSI ................................ 96,500 186,500
Xilinx .............................. 50,000 50,000
SHARES
------------------
HOLDINGS
REDUCTIONS DECREASE 9/30/96
- ---------- ------- -------
AmeriSource Health (Class A) ........ 75,000 --
Biogen .............................. 35,000 --
Comshare ............................ 150,000 --
Cooper Tire & Rubber ................ 75,000 --
Guidant ............................. 35,000 50,000
Informix ............................ 95,000 --
Oxford Health Plans ................. 40,000 40,000
Sterling Software ................... 50,000 --
Sybase .............................. 100,000 --
Viacom (Class B) .................... 105,000 --
Largest portfolio changes from the previous quarter to the current quarter are
based on cost of purchases and proceeds from sales of securities.
MAJOR PORTFOLIO HOLDINGS
At September 30, 1996
SECURITY VALUE
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Travelers................................ $7,368,750
Fiserv................................... 6,715,625
PepsiCo.................................. 6,215,000
Home Depot............................... 5,687,500
Microsoft................................ 5,272,500
Harley-Davidson.......................... 5,160,000
UCAR International....................... 5,062,500
Amgen.................................... 5,055,000
Ceridian................................. 5,000,000
Intel.................................... 4,771,875
MAJOR SECTORS
At September 30, 1996
[The following table represents a pie chart in the printed piece.]
Drugs and Health Care ............. 15.8%
Financial Services ................ 11.2%
Telecommunications ................ 10.6%
Short-Term Holdings ............... 10.5%
Computer Goods and
Services ........................ 8.8%
Consumer Goods and
Services ........................ 8.4%
Leisure and Related ............... 7.8%
Software .......................... 6.6%
Retail Trade ...................... 6.4%
Basic Materials ................... 3.9%
Other ............................. 10.0%
5
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PORTFOLIO OF INVESTMENTS (unaudited)
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SHARES VALUE
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COMMON STOCKS 91.5%
AUTOMOTIVE AND RELATED 1.9%
Harley-Davidson............... 120,000 $ 5,160,000
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BASIC MATERIALS 3.9%
Minerals Technologies......... 75,000 2,803,125
Nucor......................... 70,000 3,552,500
Olin.......................... 25,000 2,100,000
Schulman, A................... 93,750 2,156,250
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10,611,875
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BUSINESS SERVICES AND
SUPPLIES 3.7%
HFS* ......................... 55,000 3,678,125
Interpublic Group of Companies 100,000 4,725,000
Leap Group.................... 84,000 861,000
Snyder Communications......... 51,700 982,300
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10,246,425
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COMPUTER GOODS AND
SERVICES 8.8%
Arrow Electronics............. 60,000 2,670,000
Ceridian* .................... 100,000 5,000,000
Compaq Computer* ............. 40,000 2,565,000
Fiserv* ...................... 175,000 6,715,625
Intel ..................... 50,000 4,771,875
National Processing* ......... 45,000 877,500
Xilinx* ...................... 50,000 1,696,875
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24,296,875
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CONSUMER GOODS AND
SERVICES 8.4%
Block (H. & R.)............... 50,000 1,487,500
Consolidated Cigar Holdings
(Class A)* ................. 50,000 1,531,250
Estee Lauder* ................ 65,000 2,916,875
Gargoyles* ................... 40,000 840,000
Gucci Group................... 29,250 2,120,625
Newell........................ 150,000 4,500,000
Oakley* ...................... 100,000 4,250,000
Tag Heuer (ADRs)* ............ 60,000 1,185,000
Tommy Hilfiger* .............. 70,000 4,147,500
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22,978,750
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DRUGS AND HEALTH
CARE 15.8%
Amgen* ....................... 80,000 5,055,000
Arterial Vascular Engineering* 165,000 4,455,000
Columbia/HCA Healthcare....... 75,000 4,265,625
Express Scripts (Class A)* ... 45,000 1,670,625
Guidant....................... 50,000 2,762,500
Humana* ...................... 100,000 2,025,000
InControl* ................... 100,000 925,000
Mid Atlantic Medical Services* 125,000 1,593,750
Nitinol Medical Technologies* 100,000 1,112,500
Optical Sensors* ............. 75,000 628,125
Oxford Health Plans* ......... 40,000 1,992,500
Pharmacia & Upjohn............ 70,000 2,887,500
Pfizer........................ 50,000 3,956,250
Physio-Control International* 145,000 3,670,312
St. Jude Medical* ............ 80,000 3,235,000
United Healthcare............. 75,000 3,121,875
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43,356,562
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FINANCIAL SERVICES 11.2%
Allmerica Financial........... 62,500 2,031,250
Amerin* ...................... 165,000 3,671,250
Donaldson Lufkin & Jenrette
Securities.................. 125,000 4,390,625
Greenpoint Financial.......... 83,500 3,183,437
MBNA.......................... 127,500 4,430,625
Old Republic International.... 60,000 1,485,000
Progressive (Ohio)............ 50,000 2,862,500
St. Paul Bancorp.............. 50,000 1,306,250
Travelers..................... 150,000 7,368,750
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30,729,687
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FOOD AND FOOD
SERVICES 2.8%
Landry's Seafood Restaurants* 55,000 1,361,250
PepsiCo....................... 220,000 6,215,000
-----------
7,576,250
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INDUSTRIAL GOODS AND
SERVICES 2.2%
Ionics* ...................... 20,000 942,500
UCAR International* .......... 125,000 5,062,500
-----------
6,005,000
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LEISURE AND RELATED 7.8%
British Sky Broadcasting (ADRs) 60,000 3,300,000
Circus Circus Enterprises* ... 100,000 3,537,500
Infinity Broadcasting (Class A)* 150,000 4,725,000
MGM Grand..................... 60,000 2,535,000
Mirage Resorts* .............. 140,000 3,587,500
Sun International Hotels* .... 75,000 3,843,750
-----------
21,528,750
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PACKAGING 0.4%
Ball.......................... 50,000 1,225,000
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6
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September 30, 1996
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SHARES VALUE
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RETAIL TRADE 6.4%
Cross-Continent Auto Retailers* 48,500 $ 1,115,500
Home Depot.................... 100,000 5,687,500
Nordstrom..................... 55,000 2,093,438
Office Depot* ................ 125,000 2,953,125
OfficeMax* ................... 150,000 2,100,000
Saks Holdings* ............... 105,000 3,675,000
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17,624,563
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SOFTWARE 6.6%
Activision* .................. 80,000 1,135,000
DST Systems* ................. 80,000 2,560,000
Infoseek* .................... 91,200 815,100
International Game Technology. 175,000 3,587,500
Microsoft* ................... 40,000 5,272,500
Parametric Technology* ....... 34,700 1,715,481
Sterling Commerce* ........... 100,000 2,950,000
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18,035,581
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TELECOMMUNICATIONS 10.6%
Advanced Fibre Communications* 20,500 512,500
American Portable
Telecommunications* ....... 150,000 1,490,625
Ascend Communications* ....... 20,000 1,321,250
Century Telephone Enterprises. 100,000 3,437,500
EXCEL Communications* ........ 125,000 3,953,125
Harmonics Lightwaves* ........ 30,000 585,000
LCC International* ........... 65,000 1,194,375
McLeod (Class A)* ............ 100,000 3,300,000
MRV Communications* .......... 145,000 3,751,875
Orckit Communications* ....... 30,000 553,125
TCSI* ........................ 186,500 2,494,438
360(degree)Communications* ... 100,000 2,350,000
WorldCom* .................... 210,000 4,515,000
------------
29,458,813
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MISCELLANEOUS 1.0%
World Color Press*............ 126,500 2,814,625
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OTHER ....................... 58,973
------------
TOTAL COMMON STOCKS
(Cost $172,497,293) ....... 251,707,729
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SHORT-TERM HOLDINGS 10.5% PRINICIPAL
ABN-AMRO Bank, Grand Cayman, AMOUNT
----------
Fixed Time Deposit,
5 3/8%, 10/1/1996............ $ 4,960,000 $ 4,960,000
Canadian Imperial Bank of
Commerce, Grand Cayman,
Fixed Time Deposit,
5 1/2%, 10/1/1996............ 12,000,000 12,000,000
First National Bank of Chicago,
Grand Cayman,
Fixed Time Deposit,
5 3/4%, 10/1/1996............ 12,000,000 12,000,000
-------------
TOTAL SHORT-TERM HOLDINGS
(Cost $28,960,000).................. 28,960,000
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TOTAL INVESTMENTS 102.0%
(Cost $201,457,293)................. 280,667,729
OTHER ASSETS LESS
LIABILITIES (2.0)% ................ (5,490,000)
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NET ASSETS 100.0% ................... $275,177,729
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* Non-income producing security.
Note: Investments in stocks are valued at current market values or, in their
absence, at fair values determined in accordance with procedures approved by the
Board of Directors. Securities traded on national exchanges are valued at last
sales prices or, in their absence and in the case of over-the-counter
securities, a mean of bid and asked prices. Short-term holdings maturing in 60
days or less are valued at amortized cost.
7
