------------------------------------
S E L I G M A N
[PHOTO OMITTED]
SELIGMAN
CAPITAL
FUND, INC.
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Seeking Capital Appreciation by Investing in the Common Stocks
of Companies with Significant Potential for Growth
DECEMBER 31, 1997 o ANNUAL REPORT
<PAGE>
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Over the Long Term -- J. & W. Seligman & Co. Incorporated
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TIME IS THE TEST
In an industry that has changed dramatically in recent years, it's
comforting to know that stability, tradition, and consistent professional
service can still be found in an investment management firm.
J. & W. Seligman & Co. Incorporated has been providing financial services
for more than 130 years. From its beginning, Seligman has followed a long-term
approach to making money for its clients, by managing investment products and
services of the highest quality. Today, Seligman manages the Seligman Group of
Funds, which offers investors more than 50 investment options.
A PLACE IN HISTORY
Established in 1864, Seligman played a major role in the geographical
expansion and industrial development of the United States. The firm helped
finance the westward path of the railroads and the building of the Panama Canal.
In the late 1800s and early 1900s, the firm was instrumental in financing the
fledgling automobile and steel industries. Seligman also participated in the
original underwritings for some of the nation's most prominent companies,
including General Motors, Victor Talking Machine, United Artists Theater
Circuit, and Maytag. In 1929, Seligman introduced Tri-Continental Corporation --
which today is the nation's largest diversified closed-end investment company.
In 1930, Seligman began managing its first mutual fund, Broad Street Investing
Co., now known as Seligman Common Stock Fund.
[PHOTO OMITTED]
James, Jesse, and Joseph Seligman
SELIGMAN CAPITAL FUND
Seligman Capital Fund, established October 9, 1969, is a mutual fund that
seeks capital appreciation by investing primarily in mid-capitalization common
stocks. Since its inception more than a quarter of a century ago, Seligman
Capital Fund has helped investors seek their financial goals by providing growth
of capital in a well-diversified portfolio of common stocks.
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TABLE OF CONTENTS
To the Shareholders ...................................................... 1
Interview With the Seligman Growth Team .................................. 2
Performance Overview ..................................................... 4
Portfolio Overview ....................................................... 6
Portfolio of Investments ................................................. 8
Statement of Assets and Liabilities ...................................... 12
Statement of Operations .................................................. 13
Statements of Changes in Net Assets ...................................... 14
Notes to Financial Statements ............................................ 15
Financial Highlights ..................................................... 17
Report of Independent Auditors ........................................... 19
Tax Status of 1997 Distribution .......................................... 20
Board of Directors ....................................................... 21
Executive Officers and For More Information .............................. 22
Glossary of Financial Terms .............................................. 23
"As always...investment results are achieved by the individual common stocks
owned. Emphasis continues on fundamental equity research and stock selectivity
to identify companies with strong business and financial characteristics, and
good earnings visibility."
-- Fred E. Brown,
Fund Chairman
1969-1988
"We remain confident that the Fund will benefit from the strong long-term
capital appreciation potential of its investments. We believe that market
participants will increasingly focus on earnings growth and that Seligman
Capital Fund's portfolio, which has a superior overall projected earnings growth
rate compared to the S&P 500, should therefore benefit."
-- William C. Morris,
Fund Chairman
1989-Present
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To the Shareholders
In 1997, Seligman Capital Fund posted a total return of 22.28% based on
the net asset value of Class A shares, outperforming the 20.18% total return of
its peers, as measured by the Lipper Mid Cap Funds Average. The Fund performed
in line with the 22.54% total return of the Russell Midcap Growth Index, which
measures the performance of mid-capitalization growth stocks.
In this seventh year of economic expansion, the US experienced real
domestic growth of 3.8%. Meanwhile, consumer price inflation slowed to under 2%,
interest rates moved steadily lower, productivity rose, and unemployment levels
reached 27-year lows. Concurrently, the federal budget deficit virtually
disappeared and corporate profits posted a third consecutive year of strong
gains. Despite year-end problems in Asia, the domestic business environment was
positive.
While domestic equity markets continued to prosper in 1997, the majority
of the advances occurred in the first seven months of the year, as Asian
troubles increased uncertainty in the last quarter. Mid-cap stocks performed
well for the year overall, although the group's results may seem lackluster
compared to the 33.36% total return of the Standard & Poor's 500 Composite Stock
Price Index (S&P 500). Mid-cap stocks have historically offered investors
superior returns over time, and we believe we are entering a period which will
support the performance of mid-cap stocks.
For 1998, the outlook for US corporate profits is somewhat precarious due
to expectations of more modest economic growth and the unforeseeable effect of
the Asian crisis on corporate profitability and the economy. There is also a
risk of temporary price deflation linked to the Asian crisis, as those economies
seek to export their way out of trouble. Barring problems caused by the
tightness of the labor market, we expect a continuation of the current
low-inflation and low-interest-rate environment.
We expect that market participants will increasingly focus on corporate
earnings growth in 1998. The record-setting three-year stretch has produced
heightened expectations among investors, and the equity markets have become less
forgiving of earnings disappointments. We believe that in such an environment,
active management and cautious stock selection based on superior fundamentals
should grow in importance. We also believe that Seligman Capital Fund, which has
a portfolio with reasonable valuations and superior projected earnings growth
compared to the S&P 500, should perform well as investors re-examine valuations
relative to earnings growth.
We would like to stress the importance of setting long-term investment
goals in the current environment of rising uncertainty. While short-term
investors are at the mercy of daily market changes, long-term investors can
focus on their investment goals rather than the markets' gyrations.
We made a change in the management of Seligman Capital Fund in January
1998. Richard R. Schmaltz, who joined J. & W. Seligman & Co. Incorporated -- the
Fund's investment manager -- as Managing Director, Director of Investments in
September 1996, is now primarily responsible for the day-to-day management of
the Fund as a member of the Seligman Growth Team. Mr. Schmaltz was previously a
Director of Investment Research at Neuberger & Berman and Principal and
Co-Director of Research at Morgan Stanley & Company. He is also a Director of
the Fund.
Thank you for your continued support of Seligman Capital Fund. We look
forward to serving your investment needs in the many years to come. A discussion
with the Seligman Growth Team, the Fund's portfolio of investments, and
financial statements, follow this letter. Additional information on the Fund's
investment results appears starting on page 4.
By order of the Board of Directors,
/s/ William C. Morris
William C. Morris
Chairman
/s/ Brian T. Zino
Brian T. Zino
President
January 30, 1998
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1
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Interview With the Seligman Growth Team
Q. How did Seligman Capital Fund perform in 1997?
A. Seligman Capital Fund posted a total return of 22.28% based on the net
asset value of Class A shares for the 12 months ended December 31, 1997.
This return outpaced the 20.18% total return of its competitor universe,
as measured by the Lipper Mid Cap Funds Average. The Russell Midcap Growth
Index, which measures the performance of mid-capitalization growth stocks,
had a total return of 22.54% for the same period.
Q. Which economic and market factors affected the Fund's performance this
year?
A. The economic expansion continued in 1997, supporting strong corporate
earnings and low interest rates. While the financial markets responded,
reaching new highs, large-capitalization stocks were the primary
beneficiaries of the ideal economic background. Despite high valuations,
investors moved more assets into large-caps due to the liquidity found
there. This trend was only reinforced by the Asian financial crisis. While
mid-cap stocks did not experience the same run-up in valuations as was
found among their large-cap counterparts, they still performed well for
the year.
Q. What was the investment strategy?
A. While we continued to identify and invest in growth stocks selling at
attractive valuations, a significant restructuring of the portfolio took
place in 1997. Large-cap holdings that had been long-term positions in the
portfolio, such as Intel and Microsoft, were sold. The portfolio is now
more firmly placed in the mid-cap asset class. The median market
capitalization of the portfolio holdings now stands at $3 billion, well in
line with the Russell Midcap Growth Index, which will now be the Fund's
primary benchmark.
The mid-cap sector is a broad and widely diversified universe that
offers significant opportunities for our stock-picking discipline. We were
able to select exceptional companies with leading market shares and strong
earnings prospects, which enhanced investment performance. Overall, our
flexibility and attention to stock selection improved returns.
Q. Which portfolio sectors improved the Fund's performance?
A. The Fund's substantial investments in the financial area were a
significant reason for the Fund's strong results relative to its peer
group. Healthy economic growth, low inflation, and consolidation during
the year improved the performance of the Fund's financial services and
savings and loan companies.
Another area that improved the Fund's results was energy. Here, the
Fund's weighting was increased during the year to participate in the
accelerating earnings growth found in the sector. We reduced the Fund's
weighting toward the end of the year, as the sector fell out of favor due
to warmer-than-expected winter weather and concerns regarding the
potential increase in the oil supply.
Q. Which portfolio sectors impaired the Fund's performance?
A. Technology stocks play a large role in the mid-cap arena. Unfortunately,
the Asian debacle resulted in decreased orders for many mid-cap technology
companies in the fourth quarter, particularly in the components area. We
therefore repositioned the portfolio, focusing on software and service
companies that should have more stable earnings and should be better
shielded against shocks emanating from Asia.
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A TEAM APPROACH
Seligman Capital Fund is managed by the Seligman Growth Team. Richard R.
Schmaltz, who is responsible for the day-to-day management of the Fund, is
assisted by seasoned research professionals who are responsible for
identifying those companies in specific industries that offer the greatest
potential for growth, consistent with the Fund's objective.
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2
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Interview With the Seligman Growth Team
Mid-cap health care services companies also had a poor year, due to
deteriorating fundamentals. HMOs, in particular, saw rising costs and a
slowdown in earnings growth. While both technology and the health care
sectors experienced weakness in 1997, they each offer lower valuations and
good recovery potential.
Q. What is the outlook?
A. Going forward, the valuations and growth opportunities found in mid-cap
stocks still offer significant value relative to large-cap stocks. As
mid-cap companies tend to have a greater portion of operations linked to
the domestic markets, they are less exposed to the eventual repercussions
of the Asian financial crisis than large multinational companies. We
believe that this difference in international exposure, combined with more
attractive valuations and greater future earnings growth potential, should
attract investor attention to mid-cap stocks in 1998.
----
3
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Performance Overview
This chart compares a $10,000 hypothetical investment made in Seligman
Capital Fund Class A shares, with and without the initial 4.75% maximum sales
charge, for the 10-year period ended December 31, 1997, to a $10,000 investment
made in the Lipper Capital Appreciation Funds Average (Lipper Capital Average),
the Lipper Mid Cap Funds Average (Lipper Mid Cap Average), the Russell Midcap
Growth Index, and the Standard &Poor's 500 Composite Stock Price Index (S&P 500)
for the same period. The performances of Seligman Capital Fund Class B and Class
D shares are not shown in this chart but are included in the table on page 5. It
is important to keep in mind that the Lipper Capital Average and the Lipper Mid
Cap Average exclude the effect of sales charges and the S&P 500 and the Russell
Midcap Growth Index exclude the effect of fees and sales charges.
Seligman Capital Fund will no longer be compared to the Lipper Capital
Average, which reflects the performance of funds that invest in stocks of all
capitalization sizes, after December 31, 1997. Instead, the Fund will be
compared to the Lipper Mid Cap Average, which reflects the performance of funds
that invest primarily in mid-capitalization stocks, as the Manager believes it
is a more appropriate benchmark because the Fund invests primarily in mid-cap
securities. After December 31, 1997, Seligman Capital Fund will also no longer
be compared to the S&P 500, which measures the performance of 500 widely held
large-cap stocks. Instead, the Fund will be compared to the Russell Midcap
Growth Index, as the Manager believes it is a more appropriate benchmark because
it measures the performance of mid-cap growth stocks, which are the stocks in
which the Fund invests. Therefore, your Fund will continue to be compared to the
Lipper Mid Cap Average and the Russell Midcap Growth Index.
[THE FOLLOWING TABLE WAS DEPICTED AS A LINE GRAPH IN THE PRINTED MATERIAL]
Seligman Capital Fund Class A
Russell
Without With Lipper Lipper Midcap
Sales Sales Capital Mid Cap Growth
Charge Charge Average Average Index S&P 500
------ ------ ------- ------- ------- -------
12/31/87 10,000 9,525 10,000 10,000 10,000 10,000
3/31/88 10,127 9,646 10,834 11,023 10,979 10,569
6/30/88 10,726 10,216 11,421 11,813 11,665 11,273
9/30/88 10,254 9,767 11,283 11,506 11,223 11,311
12/31/88 10,247 9,760 11,369 11,589 11,292 11,661
3/31/89 11,074 10,548 12,257 12,507 12,004 12,487
6/30/89 11,901 11,336 13,283 13,603 13,183 13,590
9/30/89 13,860 13,201 14,650 15,148 14,761 15,046
12/31/89 13,571 12,926 14,395 14,840 14,846 15,356
3/31/90 13,133 12,509 13,988 14,769 14,324 14,893
6/30/90 15,172 14,451 14,805 15,954 15,550 15,830
9/30/90 11,741 11,183 12,332 12,837 12,403 13,655
12/31/90 13,759 13,105 13,138 14,175 14,084 14,879
3/31/91 16,665 15,873 15,528 17,340 17,335 17,040
6/30/91 16,798 15,999 15,348 17,146 17,066 17,001
9/30/91 18,787 17,894 16,674 18,779 18,466 17,911
12/31/91 21,281 20,270 18,206 20,815 20,709 19,412
3/31/92 21,000 20,002 18,280 20,864 20,078 18,921
6/30/92 20,042 19,089 17,635 19,587 19,144 19,280
9/30/92 21,294 20,282 18,050 20,291 20,168 19,887
12/31/92 23,742 22,613 19,878 23,129 22,512 20,888
3/31/93 23,965 22,826 20,701 23,524 22,715 21,801
6/30/93 23,714 22,587 21,340 24,170 22,717 21,907
9/30/93 25,233 24,033 22,881 25,995 24,248 22,473
12/31/93 24,882 23,699 23,521 26,611 25,031 22,994
3/31/94 24,118 22,971 22,740 25,791 24,255 22,123
6/30/94 21,325 20,312 21,779 24,469 23,188 22,215
9/30/94 23,182 22,080 23,258 26,505 24,834 23,302
12/31/94 23,126 22,026 22,896 26,288 24,489 23,297
3/31/95 24,425 23,264 24,421 28,128 27,136 25,566
6/30/95 26,637 25,371 26,688 30,611 29,316 28,008
9/30/95 28,920 27,545 29,298 33,912 32,203 30,234
12/31/95 31,756 30,246 30,119 34,420 32,809 32,055
3/31/96 33,935 32,322 31,913 36,505 34,925 33,776
6/30/96 36,644 34,902 33,495 38,429 36,231 35,292
9/30/96 37,622 35,834 34,242 39,692 37,463 36,383
12/31/96 37,071 35,309 35,231 40,554 38,545 39,417
3/31/97 35,530 33,841 34,071 38,101 37,138 40,474
6/30/97 40,583 38,654 38,867 44,075 42,605 47,540
9/30/97 45,863 43,683 44,000 50,472 48,566 51,101
12/31/97 45,329 43,175 42,324 48,736 47,231 52,569
The performances of Class B and D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
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4
<PAGE>
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Performance Overview
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
For Periods Ended December 31, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL
--------------------------------------------------------------
CLASS B CLASS D
SINCE SINCE
SIX ONE FIVE 10 INCEPTION INCEPTION
MONTHS* YEAR YEARS YEARS 4/22/96 5/3/93
------ ---- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge 6.41% 16.44% 12.71% 15.75% n/a n/a
Without Sales Charge 11.70 22.28 13.81 16.32 n/a n/a
CLASS B**
With CDSL+ 6.39 16.26 n/a n/a 13.43% n/a
Without CDSL 11.20 21.26 n/a n/a 15.56 n/a
CLASS D**
With 1% CDSL 10.31 20.34 n/a n/a n/a n/a
Without CDSL 11.27 21.34 n/a n/a n/a 14.56%
LIPPER CAPITAL AVERAGE*** 8.89 20.13 16.32 15.52 15.28++ 17.09+++
LIPPER MID CAP AVERAGE*** 10.57 20.18 16.08 17.16 15.15++ 17.70+++
RUSSELL MIDCAP GROWTH INDEX*** 10.86 22.54 15.98 16.80 16.51++ 18.04+++
S&P 500*** 10.58 33.36 20.27 18.05 29.25++ 21.39+++
</TABLE>
NET ASSET VALUE
DECEMBER 31, 1997 JUNE 30, 1997 DECEMBER 31, 1996
----------------- ------------- -----------------
CLASS A $17.48 $17.91 $16.36
CLASS B 16.24 16.87 15.47
CLASS D 16.25 16.87 15.47
CAPITAL GAIN INFORMATION
For the Year Ended December 31, 1997
PAID $2.425
REALIZED 2.512
UNREALIZED 4.794(o)
Performance data quoted represent changes in prices and assume that all
distributions within the periods are invested in additional shares. The rates of
return will vary and the principal value of an investment will fluctuate.
Shares, if redeemed, may be worth more or less than their original cost. Past
performance is not indicative of future investment results.
- ----------
* Returns for periods of less than one year are not annualized.
** Return figures reflect any change in price per share and assume the
investment of capital gain distributions. Returns for Class A shares are
calculated with and without the effect of the initial 4.75% maximum sales
charge. Returns for Class A shares reflect the effect of the service fee
of up to 0.25% under the 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 on redemptions made within one year
of the date of purchase, declining to 1% in the sixth year and 0%
thereafter. Returns for Class D shares are calculated with and without the
effect of the 1% CDSL, charged on redemptions made within one year of the
date of purchase.
*** The Lipper Capital Average, the Lipper Mid Cap Average, the Russell Midcap
Growth Index, and the S&P 500 are unmanaged benchmarks that assume
investment of dividends. The Lipper Capital Average and the Lipper Mid Cap
Average exclude the effect of sales charges and the Russell Midcap Growth
Index and the S&P 500 exclude the effect of fees and sales charges.
Investors cannot invest directly in an average or an index. The monthly
performances are used in the Performance Overview for the Lipper Averages.
+ The CDSL is 5% for periods of one year or less, and 4% since inception.
++ From April 30, 1996.
+++ From April 30, 1993.
(o) Represents the per share amount of net unrealized appreciation of
portfolio securities as of December 31, 1997.
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5
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Portfolio Overview
DIVERSIFICATION OF NET ASSETS
December 31, 1997
<TABLE>
<CAPTION>
PERCENT OF NET ASSETS
DECEMBER 31,
---------------------
ISSUES COST VALUE 1997 1996
------ ------------ ------------ ----- -----
<S> <C> <C> <C> <C> <C>
Short-Term Holdings and Other Assets
Less Liabilities .................... 2 $ 1,234,073 $ 1,234,073 0.4 9.7
-- ------------ ------------ ----- -----
Common Stocks:
Basic Materials .................. 3 9,709,439 11,477,188 3.6 4.5
Capital Goods .................... 3 9,587,577 10,126,250 3.2 --
Consumer Cyclicals ............... 9 30,252,842 39,338,750 12.3 17.5
Consumer Staples ................. 11 35,039,720 47,020,626 14.8 6.5
Drugs and Health Care ............ 7 32,922,278 33,198,437 10.4 10.9
Energy ........................... 6 13,365,210 15,734,063 4.9 --
Financial Services ............... 12 35,214,072 64,220,875 20.2 14.4
Industrial Goods and Services..... -- -- -- -- 2.9
Media and Broadcasting ........... 1 3,235,762 7,550,719 2.4 --
Printing and Publishing .......... 2 2,621,200 3,505,000 1.1 0.9
Savings and Loan Companies ....... 5 16,434,463 25,651,562 8.0 --
Technology ....................... 12 32,900,111 46,322,086 14.5 24.8
Telecommunications ............... 3 8,075,598 13,313,281 4.2 7.9
Other ............................ 1 -- 46,152 -- --
-- ------------ ------------ ----- -----
75 229,358,272 317,504,989 99.6 90.3
-- ------------ ------------ ----- -----
Net Assets .......................... 77 $230,592,345 $318,739,062 100.0 100.0
== ============ ============ ===== =====
</TABLE>
[THE FOLLOWING TABLE WAS DEPICTED AS A BAR GRAPH IN THE PRINTED MATERIAL]
LARGEST INDUSTRIES
At December 31, 1997
Percent of
Net Assets
----------
Financial Services 20.2% $64,220,875
Consumer Staples 14.8% $47,020,626
Technology 14.5% $46,322,086
Consumer Cyclicals 12.3% $39,338,750
Drugs and Health Care 10.4% $33,198,437
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6
<PAGE>
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Portfolio Overview
LARGEST PORTFOLIO CHANGES
During Past Six Months
SHARES
--------------------
HOLDINGS
ADDITIONS INCREASE 12/31/97
- --------- -------- --------
American Skiing............... 210,000 210,000
CapStar Hotel................. 100,000 100,000
Dial.......................... 220,000 220,000
Fresh Del Monte Produce....... 335,000 335,000
Gulfstream Aerospace.......... 170,000 170,000
Jones Apparel Group........... 150,000 150,000
Kroger........................ 100,000 100,000
Ocwen Financial............... 160,000(1) 160,000
Schwab (Charles).............. 85,000 235,000(2)
Synopsys...................... 130,000 130,000
SHARES
--------------------
HOLDINGS
REDUCTIONS DECREASE 12/31/97
- ---------- -------- --------
Columbia/HCAHealthcare........ 150,000 --
DST Systems.................... 100,000 --
ENSCO International........... 150,000(3) --
Harley-Davidson............... 125,000 115,000(4)
Lowe's........................ 120,000 --
Newbridge Networks............ 100,000 --
Quantum....................... 200,000 --
Santa Fe International........ 100,000 --
Sterling Commerce............. 170,000 --
Sun International Hotels...... 100,000 --
Largest portfolio changes from the previous period to the current period are
based on cost of purchases and proceeds from sales of securities.
(1) Includes 80,000 shares received as a result of a 2-for-1 stock split.
(2) Includes 50,000 shares received as a result of a 3-for-2 stock split.
(3) Includes 75,000 shares received as a result of a 2-for-1 stock split.
(4) Includes 120,000 shares received as a result of a 2-for-1 stock split.
LARGEST PORTFOLIO HOLDINGS
At December 31, 1997
SECURITY VALUE
- -------- ----------
Coca-Cola Enterprises................. $9,957,500
Schwab (Charles)...................... 9,855,312
Travelers............................. 9,697,500
Universal Health Services (Class B)... 8,815,625
CBS................................... 7,550,719
Interpublic Group of Companies........ 7,471,875
MBNA.................................. 7,374,375
GreenPoint Financial.................. 7,256,250
Covance............................... 6,558,750
Jones Apparel Group................... 6,450,000
----
7
<PAGE>
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Portfolio of Investments
December 31, 1997
SHARES VALUE
------ -----
COMMON STOCKS 99.6%
BASIC MATERIALS 3.6%
Minerals Technologies
Marketer of specialty minerals
and products 75,000 $ 3,407,813
Nucor
Manufacturer of steel joints,
angles, and rounds 70,000 3,381,875
Olin
Manufacturer of chemicals,
metals, and defense products 100,000 4,687,500
-----------
11,477,188
-----------
CAPITAL GOODS 3.2%
Gulfstream Aerospace*
Designer, developer,
manufacturer, and marketer of
business jet aircraft 170,000 4,972,500
Rayovac*
Manufacturer of general and
hearing aid batteries 145,000 2,791,250
Vishay Intertechnology*
Developer and manufacturer of
electronic resistive systems 100,000 2,362,500
-----------
10,126,250
-----------
CONSUMER CYCLICALS 12.3%
AccuStaff*
Provider of temporary
personnel services 115,000 2,645,000
American Skiing*
Owner and operator of
alpine resorts 210,000 3,123,750
Barnes & Noble*
Owner and operator of retail
book stores and superstores 150,000 5,006,250
CapStar Hotel*
Owner and manager of
upscale hotels 100,000 3,431,250
Harley-Davidson
Manufacturer of motorcycles 115,000 3,148,125
Interpublic Group of Companies
Worldwide advertising agency 150,000 7,471,875
Jones Apparel Group*
Designer and marketer of
women's clothing 150,000 6,450,000
Mirage Resorts*
Manager of casinos
in Las Vegas 210,000 4,777,500
Snyder Communications*
Provider of marketing services 90,000 3,285,000
-----------
39,338,750
-----------
CONSUMER STAPLES 14.8%
Bergen Brunswig (Class A)
Diversified drug and health
care distributor 50,000 2,106,250
Beringer Wine Estates (Class B)*
Producer of California
table wines 50,000 1,900,000
Cardinal Health
Health care service provider
involved in pharmaceutical
distribution 45,000 3,380,625
Clorox
Manufacturer and marketer of
household consumer products 50,000 3,953,125
Coca-Cola Enterprises
Manufacturer and marketer
of soft drinks and
consumer products 280,000 9,957,500
Dial
Manufacturer and marketer of
personal care, household, and
laundry products 220,000 4,578,750
Estee Lauder (Class A)
Manufacturer and marketer
of cosmetics and toiletries 75,000 3,857,813
Fresh Del Monte Produce*
Producer, distributor, and
marketer of fresh produce 335,000 4,899,375
Kroger*
Operator of supermarkets and
convenience stores 100,000 3,693,750
McKesson
Provider of health care
products and services 45,000 4,868,438
Newell
Manufacturer and marketer
of home furnishings 90,000 3,825,000
-----------
47,020,626
-----------
- ----------
See footnotes on page 11.
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8
<PAGE>
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Portfolio of Investments
December 31, 1997
SHARES VALUE
------ -----
DRUGS AND HEALTH CARE 10.4%
Biogen*
Developer of genetically
engineered drugs 65,000 $ 2,368,437
Covance*
Provider of medical laboratory
and testing services 330,000 6,558,750
Humana*
Provider of managed
health care plans 200,000 4,150,000
KOS Pharmaceuticals*
Developer of pharmaceutical
products for cardiovascular and
respiratory diseases 120,000 1,848,750
Pfizer
Manufacturer of health care
consumer products and
specialty chemicals 60,000 4,473,750
US Surgical
Developer, manufacturer, and
marketer of stapling devices for
surgical procedures 170,000 4,983,125
Universal Health Services (Class B)*
Owner and operator of
acute-care hospitals 175,000 8,815,625
-----------
33,198,437
-----------
ENERGY 4.9%
Barrett Resources*
Explorer, developer, and
producer of oil and gas 125,000 3,781,250
Bayard Drilling Technologies*
Provider of contract
land drilling services 84,700 1,376,375
EVI*
Manufacturer of engineered
oil field products 25,000 1,293,750
Gulf Indonesia Resources* (Indonesia)
Developer and producer of
oil and natural gas 50,000 1,100,000
Petroleum Geo-Services (ADRs)*
(Norway)
Four-dimensional deep-sea
mapping company for the
oil-drilling industry 78,000 5,050,500
Transocean Offshore
Provider of contract
drilling services 65,000 3,132,188
-----------
15,734,063
-----------
FINANCIAL SERVICES 20.2%
AFLAC
Provider of supplemental
insurance at the work site 65,000 3,323,125
Amerin*
Mortgage insurance provider 47,000 1,327,750
Donaldson, Lufkin & Jenrette Securities
Leading investment and
merchant bank 65,000 5,167,500
MBNA
Issuer of bank credit cards 270,000 7,374,375
Nationwide Financial Services
(Class A)
Insurance provider 155,000 5,599,375
Old Republic International
Holding company, subsidiaries
provide risk management and
reinsurance services 90,000 3,346,875
Peoples Heritage Financial Group
Operator of three savings bank
subsidiaries in Maine, New
Hampshire, and Massachusetts 75,000 3,464,063
Progressive (Ohio)
High-risk auto insurance 50,000 5,993,750
Provident Companies
Provider of health and
life insurance 120,000 4,635,000
Schwab (Charles)
Financial services firm 235,000 9,855,312
SouthTrust
Operator of SouthTrust
Bank N.A. 70,000 4,436,250
Travelers
Provider of diversified
financial services 180,000 9,697,500
-----------
64,220,875
-----------
- ----------
See footnotes on page 11.
----
9
<PAGE>
================================================================================
Portfolio of Investments
December 31, 1997
SHARES VALUE
------ -----
MEDIA AND BROADCASTING 2.4%
CBS
Operator of broadcasting,
industrial, and technology
businesses 256,500 $ 7,550,719
-----------
PRINTING AND PUBLISHING 1.1%
Petersen Companies*
Publisher of special-interest
magazines 60,000 1,380,000
World Color Press*
Commercial printer and
distributor 80,000 2,125,000
-----------
3,505,000
-----------
SAVINGS AND LOAN
COMPANIES 8.0%
GreenPoint Financial
Bank holding company 100,000 7,256,250
Ocwen Financial*
Financial services holding
company specializing in the
acquisition and resolution
of non-performing or
underperforming loans 160,000 4,070,000
St. Paul Bancorp
Holding company for a
savings bank 135,000 3,535,312
TCF Financial
National bank holding company 130,000 4,411,875
Washington Mutual
Financial services company 100,000 6,378,125
-----------
25,651,562
-----------
TECHNOLOGY 14.5%
Activision*
Developer and publisher of
interactive entertainment
software 80,000 1,435,000
Adaptec*
Manufacturer of computer
input-output systems 90,000 3,346,875
Arrow Electronics*
Distributor of semiconductors
and other electrical components 120,000 3,892,500
BMC Software*
Developer of computer
software solutions 60,000 3,933,750
Ceridian*
Provider of computer services 100,000 4,581,250
Fiserv*
Provider of data
processing services 130,000 6,402,500
Gartner Group (Class A)*
Provider of information
technology consulting and
training products and services 95,000 3,544,687
Linear Technology
Designer and manufacturer of
analog integrated circuits 55,000 3,165,938
Maxim Integrated Products*
Designer and manufacturer of
linear and mixed-signal
integrated circuits 160,000 5,530,000
Symantec*
Developer, marketer, and
supporter of application
development tools and
systems software products 95,000 2,098,906
Synopsys*
Supplier of integrated circuit
design software 130,000 4,715,680
Xilinx*
Designer and manufacturer of
field programmable gate arrays 105,000 3,675,000
-----------
46,322,086
-----------
TELECOMMUNICATIONS 4.2%
Century Telephone Enterprises
Provider of regional
telephone services 100,000 4,981,250
QUALCOMM*
Developer, manufacturer, and
marketer of communications
systems and products 75,000 3,789,844
WorldCom*
Long-distance carrier 150,000 4,542,187
-----------
13,313,281
-----------
OTHER 46,152
-----------
TOTAL COMMON STOCKS
(Cost $229,358,272) 317,504,989
-----------
- ----------
See footnotes on page 11.
- ----
10
<PAGE>
================================================================================
Portfolio of Investments
December 31, 1997
PRIN. AMT. VALUE
---------- -----
SHORT-TERM HOLDINGS 7.0%
Bank of Montreal,
Grand Cayman
Fixed Time Deposit,
6 3/8%, 1/2/1998 $11,100,000 $ 11,100,000
First National Bank of Chicago,
Grand Cayman
Fixed Time Deposit,
6 5/8%, 1/2/1998 11,100,000 11,100,000
------------
TOTAL SHORT-TERM HOLDINGS
(Cost $22,200,000) 22,200,000
------------
TOTAL INVESTMENTS 106.6%
(Cost $251,558,272) 339,704,989
OTHER ASSETS
LESS LIABILITIES (6.6)% (20,965,927)
------------
NET ASSETS 100.0% $318,739,062
============
- ----------
* Non-income producing security.
Descriptions of companies have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
----
11
<PAGE>
================================================================================
Statement of Assets and Liabilities
December 31, 1997
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C>
Investments, at value:
Common stocks (cost $229,358,272)........................ $317,504,989
Short-term holdings (cost $22,200,000)................... 22,200,000 $339,704,989
------------
Cash........................................................................ 143,861
Receivable for securities sold.............................................. 2,132,779
Receivable for Capital Stock sold........................................... 1,486,178
Receivable for interest and dividends....................................... 90,976
Expenses prepaid to shareholder service agent............................... 66,276
Other....................................................................... 38,941
------------
Total Assets................................................................ 343,664,000
------------
LIABILITIES:
Payable for securities purchased............................................ 21,450,008
Payable for Capital Stock repurchased....................................... 2,913,034
Accrued expenses, taxes, and other.......................................... 561,896
------------
Total Liabilities........................................................... 24,924,938
------------
Net Assets.................................................................. $318,739,062
============
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($1 par value; 500,000,000
shares authorized; 18,387,035 shares outstanding):
Class A................................................................... $ 16,261,858
Class B................................................................... 519,430
Class D................................................................... 1,605,747
Additional paid-in capital.................................................. 200,817,561
Accumulated net investment loss............................................. (106,527)
Undistributed net realized gain............................................. 11,494,276
Net unrealized appreciation of investments.................................. 88,146,717
------------
Net Assets.................................................................. $318,739,062
============
NET ASSET VALUE PER SHARE:
Class A ($284,213,616 / 16,261,858 shares).................................. $17.48
======
Class B ($8,437,348 / 519,430 shares)....................................... $16.24
======
Class D ($26,088,098 / 1,605,747 shares).................................... $16.25
======
</TABLE>
- ----------
See Notes to Financial Statements.
- ----
12
<PAGE>
================================================================================
Statement of Operations
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Dividends (net of foreign taxes withheld of $7,884)........ $ 1,478,136
Interest................................................... 682,835
Other...................................................... 144,380
-----------
Total Investment Income..................................................... $ 2,305,351
EXPENSES:
Management fee............................................. 1,470,669
Distribution and service fees.............................. 961,403
Shareholder account services............................... 586,635
Shareholder reports and communications..................... 123,973
Registration............................................... 102,731
Custody and related services............................... 67,000
Auditing and legal fees.................................... 65,477
Directors' fees and expenses............................... 20,548
Miscellaneous.............................................. 28,396
-----------
Total Expenses.............................................................. 3,426,832
-----------
Net Investment Loss......................................................... (1,121,481)
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments........................... 46,191,130
Net change in unrealized appreciation of investments....... 15,868,425
-----------
Net Gain on Investments..................................................... 62,059,555
-----------
Increase in Net Assets from Operations ..................................... $60,938,074
===========
</TABLE>
- ----------
See Notes to Financial Statements.
----
13
<PAGE>
================================================================================
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996
------------ ------------
OPERATIONS:
<S> <C> <C>
Net investment loss .......................................... $ (1,121,481) $ (762,243)
Net realized gain on investments ............................. 46,191,130 28,165,196
Net change in unrealized appreciation of investments.......... 15,868,425 8,893,154
------------ ------------
Increase in Net Assets from Operations ....................... 60,938,074 36,296,107
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain on investments:
Class A ................................................... (35,225,045) (26,567,200)
Class B ................................................... (1,063,047) (409,321)
Class D ................................................... (3,268,410) (2,122,695)
------------ ------------
Decrease in Net Assets from Distributions .................... (39,556,502) (29,099,216)
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
--------------------------
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996
----------- ----------
CAPITAL SHARE TRANSACTIONS:*
Net proceeds from sale of shares:
<S> <C> <C> <C> <C>
Class A ...................... 722,658 1,942,799 12,694,774 33,837,665
Class B ...................... 203,299 254,282 3,394,305 4,295,072
Class D ...................... 282,020 557,039 4,666,806 9,125,387
Exchanged from associated Funds:
Class A ...................... 7,393,028 3,292,043 134,946,924 56,774,849
Class B ...................... 71,826 18,524 1,180,425 311,768
Class D ...................... 451,710 523,994 7,177,305 8,588,724
Shares issued in payment of
gain distributions:
Class A ...................... 1,869,785 1,456,987 31,392,717 24,258,766
Class B ...................... 62,796 24,565 981,506 387,386
Class D ...................... 201,933 126,975 3,156,217 2,002,437
----------- ---------- ------------ ------------
Total ........................... 11,259,055 8,197,208 199,590,979 139,582,054
----------- ---------- ------------ ------------
Cost of shares repurchased:
Class A ...................... (2,300,687) (1,456,803) (41,032,182) (25,036,508)
Class B ...................... (24,413) (3,999) (414,612) (64,181)
Class D ...................... (278,783) (186,463) (4,611,613) (2,985,744)
Exchanged into associated Funds:
Class A ...................... (7,289,681) (3,206,843) (133,177,110) (53,969,312)
Class B ...................... (74,496) (12,954) (1,227,418) (213,574)
Class D ...................... (342,474) (341,956) (5,595,585) (5,510,258)
----------- ---------- ------------ ------------
Total ........................... (10,310,534) (5,209,018) (186,058,520) (87,779,577)
----------- ---------- ------------ ------------
Increase in Net Assets from
Capital Share Transactions ...... 948,521 2,988,190 13,532,459 51,802,477
=========== ========== ------------ ------------
Increase in Net Assets ....................................... 34,914,031 58,999,368
NET ASSETS:
Beginning of year............................................. 283,825,031 224,825,663
------------ ------------
End of Year (including accumulated net investment loss of
$106,527 and $99,738, respectively) .......................... $318,739,062 $283,825,031
============ ============
</TABLE>
- ----------
* The Fund began offering Class B shares on April 22, 1996.
See Notes to Financial Statements.
- ----
14
<PAGE>
================================================================================
Notes to Financial Statements
1. Multiple Classes of Shares -- Seligman Capital Fund, Inc. (the "Fund") offers
three classes of shares. All shares existing prior to May 3, 1993, the
commencement of Class D shares, were classified as Class A shares. The Fund
began offering Class B shares on April 22, 1996. Class A shares are sold with an
initial sales charge of up to 4.75% and a continuing service fee of up to 0.25%
on an annual basis. Class A shares purchased in an amount of $1,000,000 or more
are sold without an initial sales charge but are subject to a contingent
deferred sales load ("CDSL") of 1% on redemptions within 18 months of purchase.
Class B shares are sold without an initial sales charge but are subject to a
distribution fee of 0.75%, a service fee of up to 0.25% on an annual basis, and
a CDSL, if applicable, of 5% on redemptions in the first year of purchase,
declining to 1% in the sixth year and 0% thereafter. Class B shares will
automatically convert to Class A shares on the last day of the month that
precedes the eighth anniversary of their date of purchase. Class D shares are
sold without an initial sales charge but are subject to a distribution fee of up
to 0.75%, a service fee of up to 0.25% on an annual basis, and a CDSL, if
applicable, of 1% imposed on redemptions made within one year of purchase. The
three classes of shares represent interests in the same portfolio of
investments, have the same rights and are generally identical in all respects
except that each class bears its separate distribution and certain other class
expenses, and has exclusive voting rights with respect to any matter on which a
separate vote of any class is required.
2. Significant Accounting Policies -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Fund:
a. Security Valuation -- Investments in stocks are valued at current market
values or, in their absence, at fair values determined in accordance with
procedures approved by the Board of Directors. Securities traded on
national exchanges are valued at last sales prices or, in their absence
and in the case of over-the-counter securities, at the mean of bid and
asked prices. Short-term holdings maturing in 60 days or less are valued
at amortized cost.
b. Federal Taxes -- There is no provision for federal income tax. The Fund
has elected to be taxed as a regulated investment company and intends to
distribute substantially all taxable net income and net gain realized.
c. Security Transactions and Related Investment Income -- Investment
transactions are recorded on trade dates. Identified cost of investments
sold is used for both financial statement and federal income tax purposes.
Dividends receivable and payable are recorded on ex-dividend dates.
Interest income is recorded on an accrual basis.
d. Multiple Class Allocations -- All income, expenses (other than
class-specific expenses), and realized and unrealized gains or losses are
allocated daily to each class of shares based upon the relative value of
shares of each class. Class-specific expenses, which include distribution
and service fees and any other items that are specifically attributable to
a particular class, are charged directly to such class. For the year ended
December 31, 1997, distribution and service fees were the only
class-specific expenses.
e. Distributions to Shareholders -- The treatment for financial statement
purposes of distributions made to shareholders during the year from net
investment income or net realized gains may differ from their ultimate
treatment for federal income tax purposes. These differences are caused
primarily by differences in the timing of the recognition of certain
components of income, expense, or realized capital gain for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net assets based on their ultimate
characterization for federal income tax purposes. Any such
reclassification will have no effect on net assets, results of operations,
or net asset value per share of the Fund.
3. Purchases and Sales of Securities -- Purchases and sales of portfolio
securities, excluding US Government obligations and short-term investments, for
the year ended December 31, 1997, amounted to $304,915,507 and $305,843,943,
respectively.
At December 31, 1997, the cost of investments for federal income tax
purposes was substantially the same as the cost for financial reporting
purposes, and the tax basis gross unrealized appreciation and depreciation of
portfolio securities amounted to $96,597,313 and $8,450,596, respectively.
4. Management Fee, Administrative Services, and Other Transactions -- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the Fund and
provides the necessary personnel and facilities. Compensation of all officers of
the Fund, all directors of the Fund who are employees or consultants of the
Manager, and all personnel of the Fund and the Manager is paid by the Manager.
The Manager receives a fee, calculated daily and payable monthly, equal to a per
annum percentage of the Fund's daily net assets. The management fee rate is
calculated on a sliding scale of 0.55% to 0.45%, based on average daily net
assets of all the investment companies managed by the Manager. The management
fee reflected in the Statement of Operations represents 0.48% per annum of the
Fund's average daily net assets.
----
15
<PAGE>
================================================================================
Notes to Financial Statements
Seligman Financial Services, Inc. (the "Distributor"), agent for the
distribution of the Fund's shares and an affiliate of the Manager, received
concessions of $22,246 from sales of Class A shares, after commissions of
$172,103 were paid to dealers.
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distribution of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive a continuing fee of up to 0.25% on an annual basis,
payable quarterly, of the average daily net assets of the Class A shares
attributable to the particular service organizations for providing personal
services and/or the maintenance of shareholder accounts. The Distributor charges
such fees to the Fund pursuant to the Plan. For the year ended December 31,
1997, fees incurred aggregated $659,640 or 0.24% per annum of the average daily
net assets of Class A shares.
Under the Plan, with respect to Class B and Class D shares, service
organizations can enter into agreements with the Distributor and receive a
continuing fee for providing personal services and/or the maintenance of
shareholder accounts of up to 0.25% on an annual basis of the average daily net
assets of the Class B and Class D shares for which the organizations are
responsible; and, for Class D shares only, fees for providing other distribution
assistance of up to 0.75% on an annual basis of such average daily net assets.
Such fees are paid monthly by the Fund to the Distributor pursuant to the Plan.
With respect to Class B shares, a distribution fee of 0.75% on an annual
basis of average daily net assets is payable monthly by the Fund to the
Distributor; however, the Distributor has sold its rights to substantially all
of this fee to a third party (the "Purchaser"), which provides funding to the
Distributor to enable it to pay commissions to dealers at the time of the sale
of the related Class B shares.
For the year ended December 31, 1997, fees incurred under the Plan,
equivalent to 1% per annum of the average daily net assets of Class B and Class
D shares, amounted to $66,618 and $235,145, respectively.
The Distributor is entitled to retain any CDSL imposed on redemptions of
Class D shares occurring within one year of purchase and on certain redemptions
of Class A shares occurring within 18 months of purchase. For the year ended
December 31, 1997, such charges amounted to $18,613.
The Distributor has sold its rights to collect any CDSL imposed on
redemptions of Class B shares to the Purchaser. In connection with the sale of
its rights to collect any CDSL and the distribution fees with respect to Class B
shares described above, the Distributor receives payments from the Purchaser
based on the value of Class B shares sold. The aggregate amount of such payments
and the Class B shares distribution fees retained by the Distributor for the
year ended December 31, 1997, amounted to $10,089.
Seligman Services, Inc., an affiliate of the Manager, is eligible to
receive commissions from certain sales of shares of the Fund, as well as
distribution and service fees pursuant to the Plan. For the year ended December
31, 1997, Seligman Services, Inc. received commissions of $7,630 from the sales
of shares of the Fund. Seligman Services, Inc. also received distribution and
service fees of $90,061, pursuant to the Plan.
Seligman Data Corp., which is owned by the Fund and certain associated
investment companies, charged the Fund at cost $551,394 for shareholder account
services. The Fund's investment in Seligman Data Corp. is recorded at a cost of
$2,199.
Certain officers and directors of the Fund are officers or directors of
the Manager, the Distributor, Seligman Services, Inc., and/or Seligman Data
Corp.
The Fund has a compensation arrangement under which directors who receive
fees may elect to defer receiving such fees. Interest is accrued on the deferred
balances. The annual cost of such fees and interest is included in directors'
fees and expenses and the accumulated balance thereof at December 31, 1997, of
$106,527 is included in other liabilities. Deferred fees and the related accrued
interest are not deductible for federal income tax purposes until such amounts
are paid.
- ----
16
<PAGE>
================================================================================
Financial Highlights
The Fund's financial highlights are presented below. "Per share operating
performance" data is designed to allow investors to trace the operating
performance of each Class, on a per share basis, from the beginning net asset
value to the ending net asset value, so that investors can understand what
effect the individual items have on their investment, assuming it was held
throughout the period. Generally, per share amounts are derived by converting
the actual dollar amounts incurred for each item, as disclosed in the financial
statements, to their equivalent per share amounts.
"Total return based on net asset value" measures each Class's performance
assuming that investors purchased Fund shares at net asset value as of the
beginning of the period, invested dividends and capital gains paid at net asset
value, and then sold their shares at the net asset value on the last day of the
period. The total return computations do not reflect any sales charges investors
may incur in purchasing or selling shares of the Fund. Total returns for periods
of less than one year are not annualized.
"Average commission rate paid" represents the average commission paid by
the Fund to purchase or sell portfolio securities. It is determined by dividing
the total commission dollars paid by the number of shares purchased and sold
during the period for which commissions were paid. This rate is provided for
periods beginning January 1, 1996.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1997(o) 1996(o) 1995(o) 1994(o) 1993
--------- --------- --------- --------- ---------
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ............... $ 16.36 $ 15.59 $ 13.17 $ 15.95 $ 17.04
--------- --------- --------- --------- ---------
Net investment loss .............................. (.06) (.04) (.02) (.06) (.03)
Net realized and unrealized investment
gain (loss)....................................... 3.61 2.68 4.74 (1.12) .84
--------- --------- --------- --------- ---------
Increase (Decrease) from Investment
Operations ....................................... 3.55 2.64 4.72 (1.18) .81
Distributions from net gain realized ............. (2.43) (1.87) (2.30) (1.60) (1.90)
--------- --------- --------- --------- ---------
Net Increase (Decrease) in Net Asset Value ....... 1.12 .77 2.42 (2.78) (1.09)
--------- --------- --------- --------- ---------
Net Asset Value, End of Year ..................... $ 17.48 $ 16.36 $ 15.59 $ 13.17 $ 15.95
========= ========= ========= ========= =========
TOTAL RETURN BASED ON NET ASSET VALUE: 22.28% 16.74% 37.32% (7.06)% 4.80%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................... 1.05% 1.07% 1.09% 1.13% 1.13%
Net investment loss to average net assets ........ (.29)% (.25)% (.11)% (.39)% (.17)%
Portfolio turnover ............................... 104.33% 94.97% 103.60% 70.72% 46.84%
Average commission rate paid ..................... $ .0561 $ .0537
Net Assets, End of Year (000s Omitted) ........... $ 284,214 $ 259,514 $ 215,688 $ 162,556 $ 196,212
</TABLE>
- ----------
See footnotes on page 18.
----
17
<PAGE>
================================================================================
Financial Highlights
<TABLE>
<CAPTION>
CLASS B CLASS D
----------------------- ------------------------------------------------------
YEAR 4/22/96* YEAR ENDED DECEMBER 31, 5/3/93*
ENDED TO ------------------------------------------- TO
12/31/97(o) 12/31/96(o) 1997(o) 1996(o) 1995(o) 1994(o) 12/31/93
----------- ----------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Year ........... $ 15.47 $ 16.43 $ 15.47 $ 14.94 $ 12.82 $ 15.86 $ 16.43
------- ------- ------- ------- ------- ------- -------
Net investment loss .......................... (.18) (.10) (.18) (.16) (.14) (.33) (.08)
Net realized and unrealized
investment gain (loss) ....................... 3.38 1.01 3.39 2.56 4.56 (1.11) 1.41
------- ------- ------- ------- ------- ------- -------
Increase (Decrease) from Investment
Operations ................................... 3.20 .91 3.21 2.40 4.42 (1.44) 1.33
Distributions from net gain realized ......... (2.43) (1.87) (2.43) (1.87) (2.30) (1.60) (1.90)
------- ------- ------- ------- ------- ------- -------
Net Increase (Decrease) in Net Asset Value ... .77 (.96) .78 .53 2.12 (3.04) (.57)
------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Year ................. $ 16.24 $ 15.47 $ 16.25 $ 15.47 $ 14.94 $ 12.82 $ 15.86
======= ======= ======= ======= ======= ======= =======
TOTAL RETURN BASED ON NET ASSET VALUE: ....... 21.26% 5.33% 21.34% 15.84% 35.98% (8.75)% 8.12%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ............... 1.81% 1.89%+ 1.81% 1.83% 2.02% 2.66% 2.26%+
Net investment loss to average net assets .... (1.05)% (.99)%+ (1.05)% (1.00)% (1.06)% (2.28)% (1.32)%+
Portfolio turnover ........................... 104.33% 94.97%++ 104.33% 94.97% 103.60% 70.72% 46.84%+++
Average commission rate paid ................. $ .0561 $ .0537++ $ .0561 $ .0537
Net Assets, End of Year (000s omitted) ....... $ 8,437 $ 4,337 $26,088 $19,974 $ 9,137 $ 3,179 $ 2,749
</TABLE>
- ----------
* Commencement of offering of shares.
(o) Per share amounts for the years ended December 31, 1997, 1996, 1995, and
1994, are calculated based on average shares outstanding.
+ Annualized.
++ For the year ended December 31, 1996.
+++ For the year ended December 31, 1993.
See Notes to Financial Statements.
- ----
18
<PAGE>
================================================================================
Report of Independent Auditors
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders,
Seligman Capital Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman Capital Fund, Inc. as of December 31,
1997, the related statements of operations for the year then ended and of
changes in net assets for each of the years in the two-year period then ended
and the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the Fund's custodian and brokers;
where replies were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Seligman Capital
Fund, Inc. as of December 31, 1997, the results of its operations, the changes
in its net assets, and the financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
January 30, 1998
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Federal Tax Status of 1997 Gain Distribution for Taxable Accounts
A distribution of $2.425 per share, consisting of $2.418 from net
long-term and $.007 from net short-term gain realized on investments from
November 1996 to October 1997, was paid on November 21, 1997, to Class A, B, and
D shareholders. The federal Taxpayer Relief Act of 1997 modified the
classification of long-term capital gains to include a "28% Rate Gain" category.
Please note that 28% of the November 1997 long-term capital gain distribution is
categorized as "28% Rate Gain." The distribution from net long-term gain is
designated as a "capital gain dividend" for federal income tax purposes and is
taxable to shareholders in 1997 as a long-term gain from the sale of capital
assets, no matter how long your shares have been owned or whether the
distribution was paid in additional shares or cash. However, if shares on which
a long-term capital gain distribution was received are subsequently sold, and
such shares were held for six months or less from the date of purchase, any loss
on the sale would be treated as long-term to the extent it offsets the long-term
gain distribution. Net short-term gain is taxable as ordinary income whether
paid to you in cash or shares.
If the distribution was paid in shares, the per share cost basis for
federal income tax purposes is $16.79 for Class A shares, and $15.63 for Class B
and D shares.
A year-end statement of account showing activity for 1997, a Form
1099-DIV, and if applicable, a Form 1099-B have been mailed to each shareholder.
The Form 1099-B shows the proceeds of any redemptions paid to the shareholder
during the year and reported to the Internal Revenue Service as required by
federal regulations. Form 1099-DIV shows the amount of the distribution from
gain on investments paid to the shareholder during the year.
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Board of Directors
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John R. Galvin(2)
Dean, Fletcher School of Law and Diplomacy
at Tufts University
Director, Raytheon Company
Director, USLIFE Corporation
Alice S. Ilchman(3)
President, Sarah Lawrence College
Trustee, Committee for Economic Development
Chairman, The Rockefeller Foundation
Frank A. McPherson(2)
Director, Kimberly-Clark Corporation
Director, Baptist Medical Center
John E. Merow
Retired Chairman and Senior Partner,
Sullivan & Cromwell, Law Firm
Director, Commonwealth Industries, Inc.
Betsy S. Michel(2)
Trustee, Geraldine R. Dodge Foundation
Chairman of the Board of Trustees, St. George's School
William C. Morris(1)
Chairman
Chairman of the Board, J. & W. Seligman & Co.
Incorporated
Chairman, Carbo Ceramics Inc.
Director, Kerr-McGee Corporation
James C. Pitney(3)
Retired Partner, Pitney, Hardin, Kipp & Szuch, Law Firm
James Q. Riordan(3)
Director, The Brooklyn Union Gas Company
Trustee, Committee for Economic Development
Director, Dow Jones & Co., Inc.
Director, Public Broadcasting Service
Richard R. Schmaltz(1)
Managing Director, J. & W. Seligman & Co. Incorporated
Trustee Emeritus, Colby College
Robert L. Shafer(3)
Retired Vice President, Pfizer Inc.
Director, USLIFE Corporation
James N. Whitson(2)
Executive Vice President and Director,
Sammons Enterprises, Inc.
Director, C-SPAN
Director, CommScope, Inc.
Brian T. Zino(1)
President
President, J. & W. Seligman & Co. Incorporated
Chairman, Seligman Data Corp.
Director Emeritus
Fred E. Brown
Director and Consultant, J. & W. Seligman & Co.
Incorporated
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Member: (1) Executive Committee
(2) Audit Committee
(3) Director Nominating Committee
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Executive Officers
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William C. Morris Lawrence P. Vogel Frank J. Nasta
Chairman Vice President Secretary
Brian T. Zino Thomas G. Rose
President Treasurer
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FOR MORE INFORMATION
Manager
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
General Counsel
Sullivan & Cromwell
Independent Auditors
Deloitte & Touche LLP
General Distributor
Seligman Financial Services, Inc.
100 Park Avenue
New York, NY 10017
Shareholder Service Agent
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
Important Telephone Numbers
(800) 221-2450 Shareholder
Services
(800) 445-1777 Retirement Plan
Services
(212) 682-7600 Outside the
Continental
United States
(800) 622-4597 24-Hour Automated
Telephone Access
Service
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Glossary of Financial Terms
CAPITAL GAIN DISTRIBUTION -- A payment to mutual fund shareholders of profits
realized on the sale of securities in the fund's portfolio. For tax purposes,
these profits may be taxed at different rates, primarily depending upon the
length of time the securities were owned by the fund.
CAPITAL APPRECIATION/DEPRECIATION -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.
COMPOUNDING -- The change in the value of an investment as shareholders receive
earnings on their investment's earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will not be based on the
original $1,000, but on the $1,070, which includes the first year's earnings.
CONTINGENT DEFERRED SALES LOAD (CDSL) -- Depending on the class of shares owned,
a fee charged by a mutual fund when shares are sold back to the fund (the CDSL
expires after a fixed time period).
DIVIDEND -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
DIVIDEND YIELD -- A measurement of a fund's dividend as a percentage of the
maximum offering price.
EXPENSE RATIO -- The cost of doing business for a mutual fund, expressed as a
percent of the fund's net assets.
INVESTMENT OBJECTIVE -- The shared investment goal of a fund and its
shareholders.
MANAGEMENT FEE -- The amount paid by a mutual fund to its investment advisor(s).
MULTIPLE CLASSES OF SHARES -- Although an individual mutual fund invests in only
one portfolio of securities, it may offer investors several purchase options
which are "classes" of shares. Multiple classes permit shareholders to choose
the fee structure that best meets their needs and goals. Generally, each class
will differ in terms of how and when sales charges and certain fees are
assessed.
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (NASD) -- A self-regulatory
body with authority over firms that distribute mutual funds.
NET ASSET VALUE (NAV) PER SHARE -- The market worth of one fund share, obtained
by adding a mutual fund's total assets (securities, cash, and any accrued
earnings), subtracting liabilities, and dividing the resulting net assets by the
number of shares outstanding.
OFFERING PRICE (OP) -- The price at which a mutual fund's share can be
purchased. The offering price per share is the current net asset value plus any
sales charge.
PORTFOLIO TURNOVER -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
PROSPECTUS -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission (SEC), such as a fund's investment objective and policies, services,
investment restrictions, officers and directors, how shares are bought and
redeemed, fund fees and other charges, and the fund's financial statements.
SEC YIELD -- SEC Yield refers to the net income earned by a fund during a recent
30-day period. This income is annualized and then divided by the maximum
offering price per share on the last day of the 30-day period. The SEC Yield
formula reflects semiannual compounding.
SECURITIES AND EXCHANGE COMMISSION -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
STATEMENT OF ADDITIONAL INFORMATION -- Document that contains updated or more
detailed information about a mutual fund and supplements the prospectus. It is
available at no charge upon request.
TOTAL RETURN -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The Average Annual Total
Return represents the average annual compounded rate of return for the periods
presented.
YIELD ON SECURITIES -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.
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Adapted from the Investment Company Institute's 1997 Mutual Fund Fact Book.
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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.
[RECYCLE LOGO]
EQCA2 12/97 Printed on Recycled Paper
