S E L I G M A N
- ---------------------- [GRAPHIC]
CAPITAL
FUND, INC.
ANNUAL REPORT
DECEMBER 31, 1998
-----------------
SEEKING CAPITAL
APPRECIATION BY
INVESTING IN
MID-CAPITALIZATION
GROWTH STOCKS
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
<PAGE>
SELIGMAN -- TIMES CHANGE...VALUES ENDURE
J. & W. SELIGMAN & CO. INCORPORATED IS A FIRM WITH A LONG TRADITION OF
INVESTMENT EXPERTISE, OFFERING A BROAD ARRAY OF INVESTMENT CHOICES TO HELP
TODAY'S INVESTORS SEEK THEIR LONG-TERM FINANCIAL GOALS.
[GRAPHIC]
JAMES, JESSE, AND JOSEPH SELIGMAN, 1870
TIMES CHANGE...
Established in 1864, Seligman's history of providing financial services has been
marked not by fanfare, but rather by a quiet and firm adherence to financial
prudence. While the world has changed dramatically in the 134 years since
Seligman first opened its doors, the firm has continued to offer its clients
high-quality investment solutions through changing times.
In the late 19th century, as the country grew, Seligman helped finance the
westward expansion of the railroads, the construction of the Panama Canal, and
the launching of urban transit systems. In the first part of the 20th century,
as America became an industrial power, the firm helped fund the growing capital
needs of the nascent automobile and steel industries.
With the formation of Tri-Continental Corporation in 1929 -- today, the nation's
largest diversified publicly-traded closed-end investment company -- Seligman
began shifting its emphasis from investment banking to investment management.
Despite the stock market crash and ensuing depression, Seligman was convinced of
the importance that investment companies could have in building wealth for
individual investors and began managing its first mutual fund in 1930.
In the decades that followed, Seligman has continued to offer forward-looking
investment solutions, including funds that focus on technology stocks, municipal
bonds, and international securities.
...VALUES ENDURE
Seligman is proud of its distinctive past and of the traditional values that
continue to shape the firm's business decisions and investment judgment. While
much has changed over the years, the firm's commitment to providing prudent
investment management that seeks to build wealth for clients over time is an
enduring value that will guide Seligman into the new millennium.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
To the Shareholders .................... 1 Notes to Financial Statements .................. 14
Interview With Your Portfolio Manager .. 2 Financial Highlights ........................... 17
Performance Overview ................... 4 Report of Independent Auditors ................. 19
Portfolio Overview ..................... 6 Federal Tax Status of 1998 Gain Distribution
Portfolio of Investments ............... 8 for Taxable Accounts ......................... 20
Statement of Assets and Liabilities .... 11 Board of Directors ............................. 21
Statement of Operations ................ 12 Executive Officers AND For More Information .... 22
Statements of Changes in Net Assets .... 13 Glossary of Financial Terms .................... 23
</TABLE>
<PAGE>
TO THE SHAREHOLDERS
Seligman Capital Fund had strong performance for 1998, posting a total return of
19.12% based on the net asset value of Class A shares. This return outpaced the
11.37% total return of the Fund's peers, as measured by the Lipper Mid Cap Funds
Average, and the 17.86% total return of the Russell Midcap Growth Index, which
measures the performance of medium-sized growth stocks. A discussion with your
Portfolio Manager regarding the Fund's results begins on page 2.
The past year was one of continued growth for the US economy, with real domestic
growth of 3.9%, marking the eighth year of economic expansion. A widely watched
market measure, the Standard & Poor's 500 Composite Stock Price Index (S&P 500),
rose 28.58% in 1998, the first time in history that the S&P 500 registered more
than 20% gains four years in a row. But, despite the strong year-end numbers,
1998 was the most volatile year for the markets since 1987.
In 1998, exceptional performance from an extremely narrow list of stocks masked
the true investment results in the broad market. In fact, 197 stocks within the
S&P 500, representing 39% of the Index, actually lost market value during the
last 12 months. Investment results between asset classes were also more widely
dispersed than usual. The disparity was almost unprecedented. For example, while
the large-cap S&P 500 rose 28.58%, the Russell 2000 Index, which measures
small-cap stocks, declined 2.55%. Mid-cap stocks had a mixed year, far outpacing
the returns of small-cap stocks, but lagging the extraordinary results of large
caps.
The markets' volatility can be attributed to a number of factors -- some
domestic, many international. The international economic background in 1998 was
one of steadily deteriorating conditions as a financial crisis, originally
limited to a few Asian countries, spread throughout other regions. Currency
instability and rising global recession/deflation fears exacerbated market
volatility. Anxiety increased following the Russian debt default and the
near-collapse of Long-Term Capital Management LP, a large hedge fund plagued by
a series of bad currency investments. By late August, a stock market correction
threatened to turn into a more significant decline as the Dow Jones Industrial
Average fell more than 850 points in two days, wiping out all of the year's
gains.
During the second half of the year, the Federal Reserve Board cut the
federal-funds rate three times. These actions confirmed the Fed's resolve to
protect the US economy from the global financial crisis, and markets responded
favorably throughout November and December.
Subdued inflation, low interest rates, improving prospects in Asia, and a
Federal Reserve leading the fight against global recession are all positive for
the US markets in 1999. We expect a challenging environment confronted with
economic uncertainties and continued high volatility. Pressure on corporate
profits is likely to continue as the US enters a period of slower growth.
Valuations on some of the largest stocks seem excessive, and any broadening of
the market in 1999 may negatively affect their share prices. In addition, low
commodity prices are impacting much of the world, making it harder for US
multinationals to export. Nonetheless, we see moderately positive returns for
the year in line with our lower growth projections.
Seligman continues to work to ensure that all of its operations are prepared for
the challenges posed by the Year 2000 (Y2K) computer problem. We are confident
that there will be no disruption in the investment and shareholder services
provided by your Fund as a result of Y2K. In addition, your portfolio management
team considers the potential ramifications of Y2K when making decisions on which
securities should be held by the Fund.
Thank you for your continued support of Seligman Capital Fund in 1998. We look
forward to serving your investment needs in 1999.
By order of the Board of Directors,
/s/ William C. Morris
- ---------------------
William C. Morris
Chairman
/s/ Brian T. Zino
-----------------
Brian T. Zino
President
January 29, 1999
1
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGER,
MARION S. SCHULTHEIS
Q. HOW DID SELIGMAN CAPITAL FUND PERFORM IN THE LAST 12 MONTHS?
A. Seligman Capital Fund posted a total return of 19.12% based on the net asset
value of Class A shares for the 12 months ended December 31, 1998. This
return far outpaced the 11.37% total return of its peers, as measured by the
Lipper Mid Cap Funds Average. It also outpaced the 17.86% total return of
the Russell Midcap Growth Index, which measures the performance of
mid-capitalization growth stocks.
Q. WHICH ECONOMIC AND MARKET FACTORS INFLUENCED THE FUND'S RESULTS IN 1998?
A. In 1998, the US economy expanded for the eighth consecutive year as we
experienced a continuation of subdued inflation, low interest rates, and
strong consumer demand. Against this backdrop, mid-capitalization growth
stocks (stocks with market capitalizations between $1 billion and $10
billion) performed well, but not as well as larger-capitalization stocks, as
measured by the Standard & Poor's 500 Composite Stock Price Index (S&P 500),
which was up 28.58%.
As investors worried about everything from deflationary pressures in the US
to devalued currencies in the emerging markets, the largest, most liquid
companies in the US were rewarded in a "flight to quality." This trend,
while positive for the biggest stocks in the market, came at the expense of
small- and mid-cap stocks, which underperformed their large-cap counterparts
despite having attractive fundamentals. The narrowing of the market was so
severe in 1998 that within the S&P 500, 50 stocks accounted for about 94% of
the performance of the index.
Will this narrowness continue in 1999? We do not know, but we did see signs
of a broadening of the market in the fourth quarter of 1998. Seligman
Capital Fund, as a mid-cap growth fund, benefited from this trend in late
1998, and is positioned to do likewise in 1999 if the trend continues.
Q. WHAT WAS YOUR INVESTMENT STRATEGY?
A. What we like most about mid-cap stocks as an asset class is that while they
tend to have growth rates similar to small-cap stocks, they also tend to
have track records that smaller startups lack. Many mid caps also have
breadth of management and multiple products. The companies we look to invest
in are companies that we believe have the potential to outgrow the mid-cap
universe in a few years, if not sooner, and become large-company growth
stocks. At that point, we would generally sell the stock to maintain our
investment discipline, and reinvest those assets in the next promising
mid-cap company.
Specifically, our strategy is to invest in mid-cap stocks with growth rates
at least twice that of the market. Based on our three-year corporate profit
growth projection of 8% to 10%, we are currently looking at companies that
we believe have the ability to grow their earnings by at least 15% per year.
We look to have a fairly concentrated portfolio, with about 60 stocks. This
allows us to really know the companies we own. At year-end, our top 10
holdings accounted for 26% of the Fund's portfolio.
When choosing a stock, we perform both quantitative and fundamental
analysis, so we can screen for both top- and bottom-line growth. If we do
not see a strong
[GRAPHIC] A TEAM APPROACH
GROWTH TEAM: (FROM LEFT) MICHELLE BORRE, Seligman Capital Fund is
DAVE LEVY, SHEILA GRAYSON managed by the Seligman Growth
(ADMINISTRATIVE ASSISTANT), (SEATED) Team, headed by Marion S.
MARION S. SCHULTHEIS (PORTFOLIO Schultheis. Ms. Schultheis is
MANAGER); (NOT PICTURED) CRAIG CHODASH assisted by a team of 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.
2
<PAGE>
catalyst for growth going forward, we will not invest in a company.
Evaluating the strength of a company's management is also a major factor in
our investment strategy. We look for managements with vision and consistent
messages, who can deliver on their promises.
The final thing we look at is valuations within an industry group. We
analyze companies based on historical performance, balance sheets, debt
levels, and earnings growth potential. We then decide what we are willing to
pay for the highest-quality companies in any given industry group.
Q. WHAT INDUSTRIES AFFECTED THE FUND'S PERFORMANCE LAST YEAR?
A. While strong earnings in technology, telecommunications, and consumer
cyclicals translated into solid returns for Seligman Capital Fund, overall
performance in 1998 was affected more by moves in individual stocks than by
broad industry trends.
In technology, it is always important to be invested in the right niches. In
1998, anything Internet-related did extremely well. While we do not own
companies whose only business is the Internet -- due to their lofty
valuations and lack of earnings -- we have nonetheless benefited from the
internet boom. Many of the technology companies we hold are actually
involved in building and maintaining the infrastructure of the Internet.
These are real companies, growing real earnings, with real prospects looking
out 18 months.
Telecommunications was another area of strength for the Fund. As with the
technology sector, much of the excitement in telecommunications was
Internet-driven.
Finally, the Fund benefitted from several of its consumer-cyclical holdings.
The Fund's performance was hurt by our exposure to industrial stocks. While
none of our holdings had direct exposure to Asia, many of their customers
did. This, coupled with deflation in commodity prices, made 1998 a tough
year for many of these companies.
Q. WHAT IS YOUR OUTLOOK?
A. Since mid-cap growth stocks did not participate in the market runup in 1998
to the same extent as large caps, valuations of many quality mid-cap stocks
going into 1999 are attractive. And if we see a continued broadening of the
market away from the largest-capitalization stocks, Seligman Capital Fund's
holdings will likely benefit.
Much like last year, 1999 will be a stock-pickers' market. Companies that
can either hit or surpass their earnings estimates will be rewarded, while
companies that fall short will be punished severely. That is positive for
Seligman Capital Fund, where our strategy focuses on looking for companies
with the potential for positive earnings surprises. Some of the areas we are
excited about in 1999 include broadcasting and advertising,
telecommunications, and specialty retailers.
The biggest potential risks to the US market in 1999 come from outside the
country. A continuation of the economic problems in Latin America,
particularly Brazil, could have negative repercussions on some of the
higher-priced growth stocks in the US. And while there are signs of eventual
improvements in Asia in 1999, any slowing of growth in China will also hurt
US stocks.
Fortunately, the mid-cap companies in Seligman Capital Fund are domestic in
nature, relying little on international markets for earnings growth. As long
as the US economy continues to grow modestly, and US consumer demand remains
strong, Seligman Capital Fund should have a positive year.
3
<PAGE>
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, and assumes that all distributions within the period are invested in
additional shares, for the 10-year period ended December 31, 1998, to a $10,000
investment made in the Lipper Mid Cap Funds Average (Lipper Mid Cap Average) and
the Russell Midcap Growth Index 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 Mid Cap Average and the Russell Midcap Growth Index exclude the effect of
fees and/or sales charges.
---------------------------------------------------------------------
[The following table represents a chart in the printed piece.]
W/O Load With load Lipper Russell
12/31/88 10000 9524 10000 10000
3/31/89 10807 10292 10766 10631
6/30/89 11614 11061 11699 11675
9/30/89 13525 12882 12997 13072
12/31/89 13244 12614 12780 13148
3/31/90 12816 12206 12654 12685
6/30/90 14805 14101 13670 13771
9/30/90 11547 10912 11033 10984
12/31/90 13427 12788 12149 12473
3/31/91 16263 15489 14774 15352
6/30/91 16392 15612 14650 15114
9/30/91 18333 17461 15977 16354
12/31/91 20767 19779 17645 18341
3/31/92 20493 19518 17705 17781
6/30/92 19558 18628 16671 16954
9/30/92 20780 19791 17247 17862
12/31/92 23169 22066 19593 19937
3/31/93 23386 22273 19948 20117
6/30/93 23141 22040 20441 20119
9/30/93 24623 23452 21955 21475
12/31/93 24281 23126 22484 22168
3/31/94 23535 22416 21789 21481
6/30/94 20810 19820 20695 20536
9/30/94 22622 21546 22369 21994
12/31/94 22567 21493 22213 21688
3/31/95 23835 22701 23770 24033
6/30/95 25994 24757 25853 25962
9/30/95 28222 26879 28614 28520
12/31/95 30989 29514 29094 29056
3/31/96 33116 31540 30869 30930
6/30/96 35759 34058 32510 32087
9/30/96 36713 34967 33530 33178
12/31/96 36176 34454 34367 34137
3/31/97 34672 33022 32336 32891
6/30/97 39603 37718 37384 37732
9/30/97 44755 42626 42695 43011
12/31/97 44235 42130 41394 41829
3/31/98 49271 46926 46420 46823
6/30/98 50435 48035 45780 46795
9/30/98 40236 38322 37507 38985
12/31/98 52694 50187 46099 49304
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.
4
<PAGE>
PERFORMANCE OVERVIEW
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED DECEMBER 31, 1998
<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 (0.47)% 13.48% 15.62% 17.51% n/a n/a
Without Sales Charge 4.48 19.12 16.76 18.08 n/a n/a
CLASS B**
With CDSC+ (0.92) 13.24 n/a n/a 15.68% n/a
Without CDSC 4.08 18.24 n/a n/a 16.54 n/a
CLASS D**
With 1% CDSC 3.07 17.23 n/a n/a n/a n/a
Without CDSC 4.07 18.23 15.57 n/a n/a 15.20%
LIPPER MID CAP FUNDS AVERAGE*** 0.70 11.37 15.44 16.51 13.93++ 16.60+++
RUSSELL MIDCAP GROWTH INDEX*** 5.36 17.86 17.33 17.30 17.02++ 18.01+++
</TABLE>
NET ASSET VALUE
DECEMBER 31, 1998 JUNE 30, 1998 DECEMBER 31, 1997
------------------- ------------- -----------------
CLASS A $20.06 $19.93 $17.48
CLASS B 18.44 18.45 16.24
CLASS D 18.45 18.46 16.25
CAPITAL GAIN INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1998
PAID $0.676
UNDISTRIBUTED REALIZED 0.3880
UNREALIZED 6.67200
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
charge ("CDSC"), 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% CDSC,
charged on redemptions made within one year of the date of purchase.
*** The Lipper Mid Cap Funds Average and the Russell Midcap Growth Index are
unmanaged benchmarks that assume investment of dividends. The Lipper Mid
Cap Funds Average and the Russell Midcap Growth Index exclude the effect of
fees and/or sales charges. Investors cannot invest directly in an average
or an index. The monthly performances are used in the Performance Overview
for the Lipper Mid Cap Funds Average.
+ The CDSC is 5% for periods of one year or less, and 3% since inception.
++ From April 30, 1996.
+++ From April 30, 1993.
0 Represents net gain realized November and December 1998, payable in 1999.
00 Represents the per share amount of net unrealized appreciation of portfolio
securities as of December 31, 1998.
5
<PAGE>
PORTFOLIO OVERVIEW
DIVERSIFICATION OF NET ASSETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PERCENT OF NET ASSETS
DECEMBER 31,
---------------------
ISSUES COST VALUE 1998 1997
-------- ------------ ------------ ------- -------
<S> <C> <C> <C> <C> <C>
COMMON STOCKS:
Basic Materials .................................... 2 $ 7,502,078 $ 8,681,863 2.5 3.6
Capital Goods ...................................... 7 31,612,864 38,202,950 11.2 3.2
Communications Services ............................ 2 9,445,646 20,686,188 6.1 4.2
Consumer Cyclicals ................................. 16 55,051,019 82,744,675 24.3 12.3
Consumer Staples ................................... 10 33,417,337 55,346,430 16.2 17.2
Energy ............................................. 2 4,922,430 4,752,163 1.4 4.9
Financial Services ................................. 7 18,910,683 35,255,988 10.4 21.5
Health Care ........................................ 5 15,344,142 23,140,138 6.8 10.4
Printing and Publishing ............................ -- -- -- -- 1.1
Savings and Loan Companies ......................... -- -- -- -- 6.7
Technology ......................................... 11 35,145,143 54,674,828 16.1 14.5
Transportation ..................................... 1 4,604,058 5,912,336 1.7 --
Utilities .......................................... 1 1,962,745 3,027,262 0.9 --
Other .............................................. 1 -- 23,328 -- --
----- ------------ ------------ ----- -----
65 217,918,145 332,448,149 97.6 99.6
SHORT-TERM HOLDINGS AND
OTHER ASSETS LESS LIABILITIES ..................... 1 8,128,214 8,128,214 2.4 0.4
----- ------------ ------------ ----- -----
NET ASSETS ........................................... 66 $226,046,359 $340,576,363 100.0 100.0
===== ============ ============ ===== =====
</TABLE>
LARGEST INDUSTRIES
DECEMBER 31, 1998
[The following table represents a chart in the printed piece.]
CONSUMER CYCLICALS 24.3% $82,744,675
CONSUMER STAPLES 16.2% 55,346,430
TECHNOLOGY 16.1% 54,674,828
CAPITAL GOODS 11.2% 38,202,950
FINANCIAL SERVICES 10.4% 35,255,988
6
<PAGE>
PORTFOLIO OVERVIEW
LARGEST PORTFOLIO CHANGES
DURING PAST SIX MONTHS
SHARES
------------------------
HOLDINGS
ADDITIONS INCREASE 12/31/98
- ------------- ----------- -----------
Applied Power (Class A) .......... 241,300 241,300
Deluxe ........................... 195,400 195,400
Electronic Arts .................. 149,800 149,800
General Dynamics ................. 98,000 98,000
Infinity Broadcasting (Class A) .. 325,200 325,200
Leggett & Platt .................. 253,400 253,400
Office Depot ..................... 262,400 262,400
Service Corp. International ...... 158,900 158,900
ServiceMaster .................... 218,900 218,900
VERITAS Software ................. 130,800 130,800
SHARES
--------------------------
HOLDINGS
REDUCTIONS DECREASE 12/31/98
- --------------- ------------- -----------
AutoZone ......................... 250,800 --
BMC Software ..................... 120,000 --
Budget Group (Class A) ........... 218,200 --
Gartner Group (Class A) .......... 203,500 --
Jones Apparel Group .............. 230,000 --
Life Re .......................... 55,000 --
Omnicare ......................... 150,000 --
Proffitt's ....................... 157,000 --
Schwab (Charles) ................. 126,800 105,700(1)
Synopsys ......................... 130,000 --
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 57,500 shares received as a result of 3-for-2 stock split.
LARGEST PORTFOLIO HOLDINGS
DECEMBER 31, 1998
SECURITY VALUE
- -------- -----------
Century Telephone Enterprises .......... $12,406,500
Office Depot ........................... 9,692,400
Interpublic Group of Companies ......... 9,147,325
Applied Power (Class A) ................ 9,109,075
Infinity Broadcasting (Class A) ........ 8,902,350
Electronic Arts ........................ 8,398,163
Molex .................................. 8,289,200
Tele-Communications (Series A)
TCI Ventures Group ................... 8,279,688
VERITAS Software ....................... 7,831,650
Deluxe ................................. 7,144,312
7
<PAGE>
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
SHARES VALUE
-------- -------
COMMON STOCKS 97.6%
BASIC MATERIALS 2.5%
CROMPTON & KNOWLES
Retailer of specialty chemicals
for the textile and paper
industries 173,300 $ 3,585,144
MINERALS TECHNOLOGIES
Marketer of specialty minerals
and products 124,500 5,096,719
------------
8,681,863
------------
CAPITAL GOODS 11.2%
APPLIED POWER (CLASS A)
Provider of tools and equipment
for the computer and tele-
communication industries 241,300 9,109,075
GENERAL DYNAMICS
Manufacturer of defense
products 98,000 5,745,250
MOLEX
Worldwide manufacturer of
electrical products and systems 217,600 8,289,200
NUCOR
Manufacturer of steel joints,
angles, and rounds 25,000 1,081,250
PALL
Designer and manufacturer of
disposable filters 183,500 4,644,844
RAYOVAC*
Manufacturer of general and
hearing aid batteries 171,700 4,582,244
WASTE MANAGEMENT
Provider of waste management
services 101,900 4,751,087
------------
38,202,950
------------
COMMUNICATIONS SERVICES 6.1%
CENTURY TELEPHONE ENTERPRISES
Provider of regional
telephone services 183,800 12,406,500
TELE-COMMUNICATIONS (SERIES A)
TCI VENTURES GROUP*
Holding company which
has stakes in international
cable, Internet, and telephone
ventures 350,000 8,279,688
------------
20,686,188
------------
CONSUMER CYCLICALS 24.3%
CIRCUIT CITY STORES--CIRCUIT CITY GROUP
Retailer of consumer electronics
and major appliances 98,600 4,923,838
FASTENAL
Industrial and construction
supplies retailer 79,200 3,482,325
CONSUMER CYCLICALS (CONTINUED)
GENERAL NUTRITION*
Vitamin, mineral, and sports
nutrition supplement supplier 161,200 $ 2,614,463
HA-LO INDUSTRIES*
Distributor of specialty
advertising products 114,500 4,308,062
HARLEY-DAVIDSON
Manufacturer of motorcycles 115,000 5,448,125
INTERPUBLIC GROUP OF COMPANIES
Worldwide advertising agency 114,700 9,147,325
ITT EDUCATIONAL SERVICES
Provider of technology-oriented
schooling 175,500 5,967,000
LANCASTER COLONY
Manufacturer of automobile
products, specialty foods,
glassware, and candles 109,600 3,514,050
LEGGETT & PLATT
Manufacturer of home
furnishings 253,400 5,574,800
LOWE'S COMPANIES
Retailer of building materials
and supplies 85,900 4,397,006
OFFICE DEPOT*
Office products retailer 262,400 9,692,400
SERVICE CORP. INTERNATIONAL
Provider of funeral services 158,900 6,048,131
SERVICEMASTER
Provider of lawn care, termite
and pest control, cleaning,
and home inspection services 218,900 4,829,481
SNYDER COMMUNICATIONS*
Provider of marketing services 107,900 3,641,625
TJX COMPANIES
Retailer of discount clothing
and home fashions 176,300 5,112,700
WILLIAMS-SONOMA*
Retailer of cooking equipment,
home furnishings, and garden
accessories 100,300 4,043,344
------------
82,744,675
------------
CONSUMER STAPLES 16.2%
APOLLO GROUP*
Provider of higher education
programs 93,300 3,154,706
CBS
Radio and television
broadcasting 195,000 6,386,250
CARDINAL HEALTH
Distributor of pharmaceutical
products 67,500 5,121,562
CHANCELLOR MEDIA*
Radio broadcasting 97,800 4,679,119
- -------------------------
See footnotes on page 10.
8
<PAGE>
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
SHARES VALUE
-------- -------
CONSUMER STAPLES (CONTINUED)
CLOROX
Manufacturer and marketer of
household consumer products 32,900 $ 3,843,131
DELUXE
Provider of information
solutions services to the
financial and retail industries 195,400 7,144,312
DIAL
Manufacturer and marketer of
personal care, household, and
laundry products 220,000 6,352,500
INFINITY BROADCASTING (CLASS A)*
Operator of radio stations;
provider of outdoor advertising 325,200 8,902,350
KROGER*
Operator of supermarkets and
convenience stores 100,000 6,050,000
NEWELL
Manufacturer and marketer
of home furnishings 90,000 3,712,500
------------
55,346,430
------------
ENERGY 1.4%
ANADARKO PETROLEUM
Explorer and producer of oil
and gas 105,700 3,263,488
ENRON OIL & GAS
Explorer and producer of oil
and gas 86,300 1,488,675
------------
4,752,163
------------
FINANCIAL SERVICES 10.4%
AFLAC
Provider of supplemental
insurance at the work site 130,000 5,720,000
NATIONWIDE FINANCIAL SERVICES
(CLASS A)
Insurance provider 115,000 5,944,063
OLD REPUBLIC INTERNATIONAL
Holding company; subsidiaries
provide risk management and
reinsurance services 198,300 4,461,750
PROGRESSIVE (OHIO)
High-risk auto insurance 25,600 4,336,000
PROVIDENT COMPANIES
Provider of health and
life insurance 120,000 4,980,000
SCHWAB (CHARLES)
Financial services firm 105,700 5,939,019
SOUTHTRUST
Operator of SouthTrust
Bank N.A. 105,000 3,875,156
------------
35,255,988
------------
HEALTH CARE 6.8%
ALZA*
Developer of pharmaceutical
products 77,100 $ 4,028,475
BIOGEN*
Developer of genetically
engineered drugs 65,000 5,390,937
COVANCE*
Provider of medical laboratory
and testing services 217,900 6,346,338
UNIVERSAL HEALTH SERVICES (CLASS B)*
Owner and operator of
health care institutions 100,900 5,234,188
WELLPOINT HEALTH NETWORKS*
Provider of health care services 24,600 2,140,200
------------
23,140,138
------------
TECHNOLOGY 16.1%
APPLIED MATERIALS*
Developer, manufacturer, and
marketer of semiconductor
wafer fabrication equipment 70,500 3,011,672
ASCEND COMMUNICATIONS*
Provider of telecommunication
networking products 45,900 3,019,359
CADENCE DESIGN SYSTEMS*
Manufacturer of electronic
design automation software 117,000 3,480,750
COMPUWARE*
Provider of mainframe software
and consulting services 58,200 4,545,056
ELECTRONIC ARTS*
Developer, marketer, and
distributor of entertainment
software 149,800 8,398,163
FISERV*
Provider of data
processing services 96,900 4,981,266
GENERAL INSTRUMENT*
Developer of analog and
digital systems 171,100 5,806,706
MAXIM INTEGRATED PRODUCTS*
Manufacturer of linear and
mixed-signal integrated circuits 73,600 3,213,100
NETWORK ASSOCIATES*
Supplier of network security
and anti-virus utilities 67,800 4,498,106
PARAMETRIC TECHNOLOGY*
Developer of mechanical
design software 362,400 5,889,000
VERITAS SOFTWARE*
Developer and marketer of
storage devices for computer
systems 130,800 7,831,650
------------
54,674,828
------------
- -------------------------
See footnotes on page 10.
9
<PAGE>
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
SHARES VALUE
-------- -------
TRANSPORTATION 1.7%
CNF TRANSPORTATION
Provider of transportation
services 157,400 $ 5,912,336
------------
UTILITIES 0.9%
AES*
Electrical supplier 63,900 3,027,262
------------
OTHER 23,328
------------
TOTAL COMMON STOCKS
(Cost $217,918,145) 332,448,149
------------
VALUE
-------
SHORT-TERM HOLDINGS 4.2%
(Cost $14,365,000) $ 14,365,000
------------
TOTAL INVESTMENTS 101.8%
(Cost $232,283,145) 346,813,149
OTHER ASSETS
LESS LIABILITIES (1.8)% (6,236,786)
------------
NET ASSETS 100.0% $340,576,363
============
- -------------------------
* Non-income producing security.
Descriptions of companies have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
10
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments, at value:
Common stocks (cost $217,918,145) $332,448,149
Short-term holdings (cost $14,365,000) 14,365,000 $346,813,149
------------
Cash 415,338
Receivable for securities sold 9,664,448
Receivable for Capital Stock sold 1,029,706
Receivable for interest and dividends 81,346
Investment in, and expenses prepaid to, shareholder service agent 68,837
Other 13,639
------------
TOTAL ASSETS 358,086,463
------------
LIABILITIES:
Payable for securities purchased 15,836,176
Payable for Capital Stock repurchased 1,103,124
Accrued expenses, taxes, and other 570,800
------------
TOTAL LIABILITIES 17,510,100
------------
NET ASSETS $340,576,363
============
Composition of Net Assets:
Capital Stock, at par ($1 par value; 500,000,000 shares authorized;
17,166,192 shares outstanding):
Class A $ 14,874,799
Class B 804,107
Class D 1,487,286
Additional paid-in capital 202,324,325
Accumulated net investment loss (101,130)
Undistributed net realized gain 6,656,972
Net unrealized appreciation of investments 114,530,004
------------
NET ASSETS $340,576,363
============
NET ASSET VALUE PER SHARE:
CLASS A ($298,319,227 / 14,874,799 shares) $20.06
======
CLASS B ($14,824,045 / 804,107 shares) $18.44
======
CLASS D ($27,433,091 / 1,487,286 shares) $18.45
======
</TABLE>
- -------------------------
See Notes to Financial Statements.
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 1,409,055
Interest 949,990
------------
TOTAL INVESTMENT INCOME $ 2,359,045
Expenses:
Management fee 1,504,151
Distribution and service fees 1,030,672
Shareholder account services 503,426
Registration 92,420
Custody and related services 76,294
Shareholder reports and communications 74,602
Auditing and legal fees 69,504
Directors' fees and expenses 12,510
Miscellaneous 14,413
------------
TOTAL EXPENSES 3,377,992
------------
NET INVESTMENT LOSS (1,018,947)
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 33,498,209
Net change in unrealized appreciation of investments 26,383,287
------------
NET GAIN ON INVESTMENTS 59,881,496
------------
INCREASE IN NET ASSETS FROM OPERATIONS $ 58,862,549
============
</TABLE>
- -------------------------
See Notes to Financial Statements.
12
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment loss ............................................................ $ (1,018,947) $ (1,121,481)
Net realized gain on investments ............................................... 33,498,209 46,191,130
Net change in unrealized appreciation of investments ........................... 26,383,287 15,868,425
------------- -------------
INCREASE IN NET ASSETS FROM OPERATIONS ......................................... 58,862,549 60,938,074
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain on investments:
Class A ..................................................................... (10,025,257) (35,225,045)
Class B ..................................................................... (488,970) (1,063,047)
Class D ..................................................................... (936,470) (3,268,410)
------------- -------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS ...................................... (11,450,697) (39,556,502)
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
----------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------
1998 1997
----------------- --------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares:
Class A 509,217 722,658 9,432,693 12,694,774
Class B 253,196 203,299 4,232,400 3,394,305
Class D 198,721 282,020 3,380,399 4,666,806
Exchanged from associated Funds:
Class A 17,652,456 7,393,028 318,464,290 134,946,924
Class B 830,239 71,826 13,846,907 1,180,425
Class D 321,693 451,710 5,485,391 7,177,305
Shares issued in payment of gain
distributions:
Class A 513,222 1,869,785 9,125,187 31,392,717
Class B 26,925 62,796 440,484 981,506
Class D 53,532 201,933 876,280 3,156,217
----------- ----------- ------------- -------------
Total 20,359,201 11,259,055 365,284,031 199,590,979
----------- ----------- ------------- -------------
Cost of shares repurchased:
Class A (2,097,094) (2,300,687) (38,074,268) (41,032,182)
Class B (66,337) (24,413) (1,101,885) (414,612)
Class D (303,184) (278,783) (5,083,314) (4,611,613)
Exchanged into associated Funds:
Class A (17,964,860) (7,289,681) (327,416,067) (133,177,110)
Class B (759,346) (74,496) (12,687,007) (1,227,418)
Class D (389,223) (342,474) (6,496,041) (5,595,585)
----------- ----------- ------------- -------------
Total (21,580,044) (10,310,534) (390,858,582) (186,058,520)
----------- ----------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL SHARE TRANSACTIONS (1,220,843) 948,521 (25,574,551) 13,532,459
=========== =========== ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE IN NET ASSETS ......................................................... 21,837,301 34,914,031
NET ASSETS:
Beginning of year .............................................................. 318,739,062 283,825,031
------------- -------------
END OF YEAR (including accumulated net investment loss of $101,130
and $106,527, respectively) ................................................. $ 340,576,363 $ 318,739,062
============= =============
</TABLE>
- -------------------------
See Notes to Financial Statements.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. MULTIPLE CLASSES OF SHARES -- Seligman Capital Fund, Inc. (the "Fund") offers
three classes of shares. 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 charge
("CDSC") 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 CDSC, 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 CDSC, 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, 1998, 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. For the year ended December 31, 1998, the Fund
For the year ended December 31, 1998, the Fund redeemed 21,580,044 of its
shares from shareholders aggregating $390,858,582, of which approximately
$26,900,000 represents capital gain distributions. This information is
provided for federal income tax purposes only.
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, 1998, amounted to $396,272,079 and $441,210,415,
respectively.
At December 31, 1998, 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 $114,822,744 and $292,740, respectively.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
4. MANAGEMENT FEE, DISTRIBUTION 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.
Seligman Advisors, Inc. (the "Distributor") (formerly Seligman Financial
Services, Inc.), agent for the distribution of the Fund's shares and an
affiliate of the Manager, received concessions of $17,323 from sales of Class A
shares, after commissions of $132,668 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,
1998, fees incurred under the Plan aggregated $680,364 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 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, 1998, 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 $104,635 and $245,673, respectively.
The Distributor is entitled to retain any CDSC 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, 1998, such charges amounted to $4,474.
The Distributor has sold its rights to collect any CDSC imposed on
redemptions of Class B shares to the Purchaser. In connection with the sale of
its rights to collect any CDSC 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
retained by the Distributor for the year ended December 31, 1998, amounted to
$5,772.
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, 1998, Seligman Services, Inc. received commissions of $4,797 from the sale
of shares of the Fund. Seligman Services, Inc. also received distribution and
service fees of $84,642, pursuant to the Plan.
Seligman Data Corp., which is owned by the Fund and certain associated
investment companies, charged the Fund at cost $482,858 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. Directors may elect to have their
deferred fees accrue interest or earn a return based on the performance of the
Fund or other funds in the Seligman Group of Investment Companies. The cost of
such fees and earnings accrued thereon is included in directors' fees and
expenses, and the
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
accumulated balance thereof at December 31, 1998, of $101,130 is included in
other liabilities. Deferred fees and related accrued earnings are not deductible
for federal income tax purposes until such amounts are paid.
5. COMMITTED LINE OF CREDIT -- Effective July 1, 1998, the Fund entered into a
joint $800 million committed line of credit that is shared by substantially all
funds in the Seligman Group of Investment Companies. The Fund's borrowings are
limited to 10% of its net assets. Borrowings pursuant to the credit facility are
subject to interest at a rate equal to the overnight federal funds rate plus
0.50%. The Fund incurs a commitment fee of 0.08% per annum on its share of the
unused portion of the credit facility. The credit facility may be drawn upon
only for temporary purposes and is subject to certain other customary
restrictions. The credit facility commitment expires one year from the date of
the agreement but is renewable with the consent of the participating banks. To
date, the Fund has not borrowed from the credit facility.
16
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below are intended to help you understand each Class's financial
performance for the past five years or from its inception if less than five
years. Certain information reflects financial results for a single share of a
Class that was held throughout the periods shown. Per share amounts are
calculated using average shares outstanding. "Total return" shows the rate that
you would have earned (or lost) on an investment in each Class, assuming you
reinvested all your capital gain distributions. Total returns do not reflect any
sales charges, and are not annualized for periods of less than one year.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1998 1997 1996 1995 1994
------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR ............... $17.48 $16.36 $15.59 $13.17 $15.95
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) ..................... (0.04) (0.06) (0.04) (0.02) (0.06)
Net realized and unrealized gain (loss)
on investments ................................. 3.30 3.61 2.68 4.74 (1.12)
------ ------ ------- ------ ------
TOTAL FROM INVESTMENT OPERATIONS ................. 3.26 3.55 2.64 4.72 (1.18)
------ ------ ------- ------ ------
LESS DISTRIBUTIONS:
Distributions from net realized capital gain ..... (0.68) (2.43) (1.87) (2.30) (1.60)
------ ------ ------- ------ ------
TOTAL DISTRIBUTIONS .............................. (0.68) (2.43) (1.87) (2.30) (1.60)
------ ------ ------- ------ ------
NET ASSET VALUE, END OF YEAR ..................... $20.06 $17.48 $16.36 $15.59 $13.17
====== ====== ====== ====== ======
TOTAL RETURN: .................................... 19.12% 22.28% 16.74% 37.32% (7.06)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000s omitted) ........... $298,319 $284,214 $259,514 $215,688 $162,556
Ratio of expenses to average net assets .......... 0.99% 1.05% 1.07% 1.09% 1.13%
Ratio of net income (loss) to average net assets . (0.24)% (0.29)% (0.25)% (0.11)% (0.39)%
Portfolio turnover rate .......................... 132.18% 104.33% 94.97% 103.60% 70.72%
</TABLE>
- -------------------------
See footnotes on page 18.
17
<PAGE>
FINANCIAL HIGHLIGHTS
CLASS B
----------------------------
YEAR ENDED
DECEMBER 31, 4/22/96*
-------------- TO
1998 1997 12/31/96
------ ------ --------
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD ............ $16.24 $15.47 $16.43
------ ------- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .................... (0.17) (0.18) (0.10)
Net realized and unrealized gain
on investments. ............................... 3.05 3.38 1.01
------ ------- ------
TOTAL FROM INVESTMENT OPERATIONS ................ 2.88 3.20 0.91
------ ------- ------
LESS DISTRIBUTIONS:
Distributions from net realized capital gain .... (0.68) (2.43) (1.87)
------ ------- ------
TOTAL DISTRIBUTIONS ............................. (0.68) (2.43) (1.87)
------ ------- ------
NET ASSET VALUE, END OF PERIOD .................. $18.44 $16.24 $15.47
====== ======= ======
TOTAL RETURN: ................................... 18.24% 21.26% 5.33%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) ........ $14,824 $8,437 $4,337
Ratio of expenses to average net assets ......... 1.75% 1.81% 1.89%+
Ratio of net income (loss) to average net assets (1.00)% (1.05)% (0.99)%+
Portfolio turnover rate ......................... 132.18% 104.33% 94.97%++
<TABLE>
<CAPTION>
CLASS D
---------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR ................. $16.25 $15.47 $14.94 $12.82 $15.86
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) ....................... (0.17) (0.18) (0.16) (0.14) (0.33)
Net realized and unrealized gain (loss)
on investment .................................... 3.05 3.39 2.56 4.56 (1.11)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ................... 2.88 3.21 2.40 4.42 (1.44)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Distributions from net realized capital gain ....... (0.68) (2.43) (1.87) (2.30) (1.60)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ................................ (0.68) (2.43) (1.87) (2.30) (1.60)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR ....................... $18.45 $16.25 $15.47 $14.94 $12.82
====== ====== ====== ====== ======
TOTAL RETURN: ...................................... 18.23% 21.34% 15.84% 35.98% (8.75)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000s omitted) ............. $27,433 $26,088 $19,974 $9,137 $3,179
Ratio of expenses to average net assets ............ 1.75% 1.81% 1.83% 2.02% 2.66%
Ratio of net income (loss) to average net assets ... (1.00)% (1.05)% (1.00)% (1.06)% (2.28)%
Portfolio turnover rate ............................ 132.18% 104.33% 94.97% 103.60% 70.72%
</TABLE>
- -------------------------
* Commencement of offering of shares.
+ Annualized.
++ For the year ended December 31, 1996.
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,
1998, 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, 1998, 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, 1998, 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.
/s/Deloitte & Touche LLP
- ------------------------
DELOITTE & TOUCHE LLP
New York, New York
January 29, 1999
19
<PAGE>
FEDERAL TAX STATUS OF 1998 GAIN DISTRIBUTION FOR TAXABLE ACCOUNTS
A net long-term gain distribution of $0.676 per share, realized on investments
from November 1997 to October 1998, was paid on November 23, 1998, to Class A,
B, and D shareholders. In 1997, Congress revised the capital gains provisions so
that depending on how long a security was owned when it was sold, investors may
have been faced with a 28% capital gains rate, a 20% rate, or both. In October
1998, Congress simplified the capital gains provisions so that, generally, all
gains on securities held more than one year are to be taxed at a maximum 20%
rate. 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 1998
as a long-term gain from the sale of capital assets, no matter how long 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, any loss on the sale would be treated as long-term to the extent it
offsets the long-term gain distribution.
If the distribution was paid in shares, the per share cost basis for federal
income tax purposes is $17.78 for Class A shares, $16.36 for Class B shares, and
$16.37 for Class D shares.
A 1998 year-end statement of account activity and a 1998 tax package, which may
include a Form 1099-DIV, a Form 1099-B, and/or a Cost Basis Statement, have been
mailed to each shareholder. Form 1099-DIVshows the distributions paid to the
shareholder during the year. Form 1099-B shows the proceeds of any redemptions
paid to the shareholder during the year. Cost Basis Statements report all sales
or exchanges from a shareholder's account which may have resulted in a capital
gain or loss in 1998. The information shown on Forms 1099-DIV and 1099-B is
reported to the Internal Revenue Service as required by federal regulations.
20
<PAGE>
BOARD OF DIRECTORS
John R. Galvin 2, 4
Dean, Fletcher School of Law and Diplomacy
at Tufts University
Director, Raytheon Company
Alice S. Ilchman 3, 4
Trustee, Committee for Economic Development
Chairman, The Rockefeller Foundation
Frank A. McPherson 2, 4
Director, Kimberly-Clark Corporation
Director, Baptist Medical Center
John E. Merow 2, 4
Retired Chairmen and Senior Partner,
Sullivan & Cromwell, Law Firm
Director, Commonwealth Industries, Inc.
Director, New York Presbyterian Hospital
Betsy S. Michel 2, 4
Trustee, The Geraldine R. Dodge Foundation
Chairmen of the Board of Trustees, St. George's School
William C. Morris 1
Chairman
Chairman of the Board,
J. & W. Seligman & Co. Incorporated
Chairmen, Carbo Ceramics Inc.
Director, Kerr-McGee Corporation
James C. Pitney 3, 4
Retired Partner, Pitney, Hardin, Kipp & Szuch, Law Firm
James Q. Riordan 3, 4
Director, KeySpan Energy Corporation
Trustee, Committee for Economic Development
Director, Public Broadcasting Service
Richard R. Schmaltz 1
Managing Director, Director of Investments,
J. & W. Seligman & Co. Incorporated
Trustee Emeritus, Colby College
Robert L. Shafer 3, 4
Retired Vice President, Pfizer Inc.
James N. Whitson 2, 4
Director and Consultant, 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, ICI Mutual Insurance Company
Director Emeritus
Fred E. Brown
Director and Consultant,
J. & W. Seligman & Co. Incorporated
- -------------------------
Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
4 Board Operations Committee
21
<PAGE>
EXECUTIVE OFFICERS
William C. Morris
Chairman
Brian T. Zino
President
Marion S. Schultheis
Vice President
Lawrence P. Vogel
Vice President
Thomas G. Rose
Treasurer
Frank J. Nasta
Secretary
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 Advisors, 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 United States
(800) 622-4597 24-Hour Automated Telephone Access Service
22
<PAGE>
GLOSSARY OF FINANCIAL TERMS
CAPITAL GAIN DISTRIBUTION -- A payment to mutual fund shareholders of profits
realized on the sale of securities in a fund's portfolio.
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 CHARGE (CDSC) -- Depending on the class of shares
owned, a fee charged by a mutual fund when shares are sold back to the fund (the
CDSC 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, how shares are bought and sold, fund fees and other
charges, and the fund's financial highlights.
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 -- A document that contains updated or more
detailed information about an investment company and that 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.
- -------------------------
Adapted from the Investment Company Institute's 1998 MUTUAL FUND FACT BOOK.
23
<PAGE>
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.
SELIGMAN ADVISORS, INC.
an affiliate of
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park AVenue, New York, NY 10017
EQCA2 12/98 [LOGO] Printed on Recycled Paper
