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SELIGMAN
[GRAPHIC]
SELIGMAN
LARGE-CAP
VALUE FUND
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A VALUE APPROACH TO SEEKING THE CAPITAL
APPRECIATION POTENTIAL OF LARGER COMPANIES
DECEMBER 31, 1997 o ANNUAL REPORT
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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]
JAMES, JESSE, AND JOSEPH SELIGMAN
SELIGMAN LARGE-CAP VALUE FUND
Seligman Large-Cap Value Fund, which commenced operations on April 25, 1997,
is designed for long-term investors seeking capital appreciation. What makes the
Fund different from many other large-company mutual funds is its adherence to a
value discipline. The Value Team will only invest in as many stocks as they can
closely follow. Because of this attention, buy decisions tend to be made with
the long term in mind.
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TABLE OF CONTENTS
To the Shareholders ....................................................... 1
Interview With Your Portfolio Managers .................................... 2
Performance Overview ...................................................... 4
Portfolio Overview ........................................................ 6
Portfolio of Investments .................................................. 7
Statement of Assets and Liabilities ....................................... 9
Statement of Operations ................................................... 10
Statement of Changes in Net Assets ........................................ 11
Notes to Financial Statements ............................................. 12
Financial Highlights ...................................................... 14
Report of Independent Auditors and
Tax Status of1997 Distributions ........................................... 15
Board of Directors and Executive Officers ................................. 16
Glossary of Financial Terms ............................................... 17
"As value managers, the Value Team looks to buy a stock at a lower price than it
believes the stock is worth.As such, the team examines companies that are
overlooked or undiscovered by the investment community, as reflected in the
stock price. The team employs fundamental research to analyze company
characteristics, such as price-to-book ratio, price-to-earnings ratio, growth,
and return on equity."
-- WILLIAM C. MORRIS
FUND CHAIRMAN
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TO THE SHAREHOLDERS
Since its inception on April 25, 1997, Seligman Large-Cap Value Fund has had
outstanding performance. The Fund's 29.28% total return based on the net asset
value of Class A shares from April 25 to December 31, 1997, significantly
outpaced the 22.56% total return of the Standard & Poor's 500 Composite Stock
Price Index (S&P 500) for the same period. The Fund's results also outperformed
the 24.11% total return of the Russell 1000, another broad-based
large-capitalization stock index.
This was the seventh year of economic expansion in the US, with real domestic
growth of 3.8%. Consumer price inflation slowed to under 2%, interest rates
moved steadily lower, productivity rose, and unemployment levels reached 27-year
lows. Meanwhile, 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.
The domestic equity markets, as measured by the Dow Jones Industrial Average
(DJIA), brought equity investors returns in excess of 20% for a third
consecutive year -- a feat unmatched in the DJIA's 101-year history. However,
the majority of the advances occurred in the first seven months of 1997, as
Asian troubles increased uncertainty in the equity markets in the last quarter.
Investors also had to contend with repeated cracks in share prices and unusual
volatility throughout the year, as nearly a third of the trading days brought
changes of one percent or more in the DJIA.
The broadening of the market that began in the second quarter abruptly ended
in the beginning of the fourth quarter. Investors, faced with growing concerns
about the impact of the Asian financial crisis on future corporate earnings
growth, fled into the largest, or "mega-cap," companies in the S&P 500. Low
interest rate levels, supporting continued corporate growth, helped justify the
higher valuations of large-cap stocks. For the year, the large-cap stocks in the
S&P 500 enjoyed a disproportionate share of the index's appreciation.
Despite the market's focus on the largest stocks in the S&P 500 and the high
valuations of the large-cap group as a whole, quality stocks that fit the Fund's
large-cap value investment strategy were found. Special emphasis was placed on
identifying companies that could deliver substantial earnings acceleration going
forward and that had solid pricing power in the low inflation environment. This
investment strategy proved rewarding in the volatile market environment, with
the Fund posting strong results.
We expect that 1998 will bring continued uncertainty and that larger
companies should find it difficult to sustain the earnings growth seen in the
last three years. In this more volatile environment, value investing should
become particularly important because, historically, the performance of value
stocks tends to be less volatile than that of the overall market. We also
believe that in such an environment, active management and cautious stock
selection based on superior fundamentals will grow in importance.
Looking ahead, the positive economic environment should continue, although
growth is likely to be more moderate. We expect to see growing corporate
profitability, albeit at a lower rate. The Federal Reserve Board may even need
to ease interest rates to counter the effects of the Asian financial crisis on
the US 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.
However, barring problems caused by the tightness of the labor market, we expect
a continuation of the current low-inflation and low-interest-rate environment.
Thank you for your continued support of Seligman Large-Cap Value Fund. We
look forward to serving your investment needs in the many years to come. A
discussion with your Portfolio Managers, 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
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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 YOUR PORTFOLIO MANAGERS, NEIL T. EIGEN AND RICHARD S. ROSEN
Q. HOW HAS SELIGMAN LARGE-CAP VALUE FUND PERFORMED SINCE ITS INCEPTION ON APRIL
25, 1997?
A. Since its inception on April 25, 1997, Seligman Large-Cap Value Fund has had
outstanding results. The Fund posted a total return of 29.28% from April 25
to December 31, 1997, significantly outpacing the 22.56% total return of the
Standard & Poor's 500 Composite Stock Price Index (S&P 500) for the same
period. The Fund's results also outperformed the 24.11% total return of the
Russell 1000, another broad large-cap stock index.
We are very pleased with the results of the Fund since its inception in
late April. We hope that we have demonstrated that a well-managed value
portfolio can produce strong performance within the context of an overall
strong equity market.
Q. WHICH ECONOMIC AND MARKET FACTORS INFLUENCED THE FUND'S RESULTS IN THE LAST
EIGHT MONTHS?
A. In 1997, the economic environment was one of low inflation and moderate
economic growth. The healthy economy and the growing demand for stocks from
baby boomers racing to save for retirement were the primary forces driving
the continued strength in the stock markets. The Fund was able to benefit
from the positive equity market environment, which was also supported by
strong corporate earnings growth.
Q. WHICH SECTORS AFFECTED THE FUND'S PERFORMANCE IN 1997?
A. The portfolio was appropriately positioned for the low- interest-rate
environment, with a concentrated investment position in banking and life
insurance/retirement companies. Due to its substantial investments in these
stocks, the Fund participated in the strong performance of the financial
sector.
The factor having the most negative direct impact on the portfolio was the
weakness in Asian currencies and, in the fourth quarter, the market's
reaction to the anticipated impact of the Asian crisis on the earnings of
domestic companies. Some portfolio holdings were negatively impacted due to
concerns regarding future corporate profitability. However, it is our
opinion that investors selling on this news are ignoring the fact that there
are companies that possess great franchises and have tremendous operating
momentum. Despite the fourth quarter setback in the market, the portfolio as
a whole still did very well.
Q. WHAT IS YOUR INVESTMENT STRATEGY?
A. Our investment strategy is unchanging: find high-quality, value-oriented
companies possessing an agent for change that, as a result, have the
potential for positive revaluation by the investing public. We do not buy
stocks just because they are "cheap," nor do we buy them for a short-term
trade. We purchase stocks because we think the underlying
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[PHOTO]
SELIGMAN VALUE TEAM: (FROM LEFT) NEVIS GEORGE (ADMINISTRATIVE ASSISTANT), MILTON
RUBIN (CLIENT SERVICES), RICHARD S. ROSEN (CO-PORTFOLIO MANAGER), (SEATED) NEIL
T. EIGEN (PORTFOLIO MANAGER)
A TEAM APPROACH
Seligman Large-Cap Value Fund is managed by the Seligman Value Team, headed by
Neil T. Eigen, who has 29 years of experience as a value investor. Mr. Eigen and
Richard S. Rosen are assisted in the management of the Fund by seasoned research
professionals who are responsible for identifying reasonably valued
large-capitalization companies with the potential for high returns on equity.
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2
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INTERVIEW WITH YOUR PORTFOLIO MANAGERS, NEIL T. EIGEN AND RICHARD S. ROSEN
companies' prospects are improving significantly, and we want to own these
stocks for a long period of time.
Rather than identifying specific economic sectors that are attractive and
working backwards to find investments (the top-down approach), every
investment is contemplated based on its own merits (the bottom-up approach).
We are not "market timers." We believe history has shown that investors who
invest in a fund managed by good stock pickers, rather than market timers,
will come out ahead in the long run. As Portfolio Managers, we attempt to
maximize the value of an investment over long periods of time.
Q. WHAT IS THE OUTLOOK?
A. We are of the opinion that, in terms of corporate profits, productivity, and
inflation, the current US business cycle is the best it has been in 35
years. In 1998, we expect to witness the eighth year of economic growth.
One risk in the near term is that international assets could flow out of
the safe haven of US Treasuries, if there is a meaningful bailout of South
Korea and Japan. This could temporarily raise domestic interest rates. We
are evaluating the potential impact of this scenario on the
interest-sensitive stocks in the portfolio. In our view, the danger for the
latter part of 1998 is that earnings and economic growth expectations are
too optimistic and are therefore vulnerable to disappointments.
Despite the anticipated slowing in the rate of economic growth, we believe
there will be continued opportunities for value investors. Because investing
in common stocks is a long-term endeavor and we are confident in our own
abilities as managers to add value, we believe that the long-term outlook
for Seligman Large-Cap Value Fund is bright.
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3
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PERFORMANCE OVERVIEW
This chart compares a $10,000 hypothetical investment made in Seligman
Large-Cap Value Fund, with and without the initial 4.75% maximum sales charge
for Class A shares, with the 5% contingent deferred sales load ("CDSL") for
Class B shares, and with the 1% CDSL for Class D shares, since the commencement
of operations on April 25, 1997, through December 31, 1997, to a $10,000
investment made in the Russell 1000 Index and Standard &Poor's 500 Composite
Stock Price Index (S&P500) from April 30, 1997, to December 31, 1997. It is
important to keep in mind that the Russell 1000 Index and the S&P500 exclude the
effect of fees and sales charges.
[The following table represents a line graph in the printed report.]
A portfolio with fewer holdings may be subject to greater volatility than a
portfolio with a greater number of holdings.
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
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PERFORMANCE OVERVIEW
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR THE PERIODS ENDED DECEMBER 31, 1997
SINCE
SIX INCEPTION
MONTHS* 4/25/97*
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Class A**
With Sales Charge 8.47% 23.08%
Without Sales Charge 13.82 29.28
Class B**
With 5% CDSL 8.37 23.46
Without CDSL 13.37 28.46
Class D**
With 1% CDSL 12.37 27.46
Without CDSL 13.37 28.46
RUSSELL 1000 INDEX*** 12.00 24.11+
S&P 500*** 10.58 22.56+
NET ASSET VALUE
DECEMBER 31, 1997 JUNE 30, 1997 APRIL 25, 1997
----------------- ------------- --------------
CLASS A $9.09 $8.11 $7.14
CLASS B 9.04 8.09 7.14
CLASS D 9.04 8.09 7.14
DIVIDEND AND CAPITAL GAIN INFORMATION
FOR THE PERIOD ENDED DECEMBER 31, 1997
DIVIDEND PAID
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CLASS A $0.009
CLASS B -
CLASS D -
CAPITAL GAIN
------------
PAID $0.125
REALIZED 0.248
UNREALIZED 0.566++
Performance data quoted represent changes in price 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.
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* 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 dividend and capital gain distributions. Return figures for
Class A shares are calculated with and without the effect of the initial
4.75% maximum sales charge. 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 Russell 1000 Index and the S&P 500 are unmanaged benchmarks that assume
investment of dividends and exclude the effect of fees and sales charges.
Investors cannot invest directly in an index.
+ From April 30, 1997.
++ 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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PERFORMANCE OVERVIEW
<TABLE>
<CAPTION>
DIVERSIFICATION OF NET ASSETS
DECEMBER 31, 1997
PERCENT OF
ISSUES COST VALUE NET ASSETS
------ ---- ----- ----------
<S> <C> <C> <C> <C>
Short-Term Holdings and
Other Assets Less Liabilities ........................... 1 $ 1,015,278 $ 1,015,278 2.0
-- ----------- ----------- -----
Common Stocks:
Aerospace ............................................. 2 3,629,938 3,342,250 6.6
Automotive and Related ................................ 2 2,900,452 3,007,510 5.9
Banking ............................................... 3 4,523,384 5,717,200 11.2
Drugs and Health Care ................................. 2 3,034,152 3,117,637 6.1
Electric Utilities .................................... 1 1,397,071 1,638,656 3.2
Energy ................................................ 1 1,797,642 1,729,125 3.4
Finance and Insurance ................................. 5 6,721,497 7,739,703 15.2
Food .................................................. 1 1,319,818 1,395,375 2.7
Household Products and Furnishings .................... 3 4,486,013 4,901,438 9.6
Industrial Equipment .................................. 1 1,403,448 1,540,875 3.0
Medical Products and Technology ....................... 2 3,219,355 3,453,732 6.8
Office Equipment ...................................... 1 1,653,050 1,660,781 3.3
Packaging ............................................. 1 1,592,885 1,754,375 3.4
Retail Trade .......................................... 4 5,743,539 5,549,281 10.9
Specialty Materials ................................... 1 1,721,470 1,679,438 3.3
Tobacco ............................................... 1 1,644,922 1,744,531 3.4
-- ----------- ----------- -----
31 46,788,636 49,971,907 98.0
-- ----------- ----------- -----
NET ASSETS .............................................. 32 $47,803,914 $50,987,185 100.0
== =========== =========== =====
</TABLE>
LARGEST INDUSTRIES
AT DECEMBER 31, 1997
[The following table represents a bar graph in the printed report.]
Finance and Insurance ................................. $7,739,703
Banking ............................................... $5,717,200
Retail Trade .......................................... $5,549,281
Household Products and Furnishings .................... $4,901,438
Medical Products and Technology ....................... $3,453,732
LARGEST PORTFOLIO HOLDINGS
AT DECEMBER 31, 1997
SECURITY VALUE
- ---------- --------------
Summit Bancorp ...................... $2,361,637
Medtronic ........................... 1,935,563
Dial ................................ 1,852,313
USF&G ............................... 1,848,837
Crown Cork &Seal .................... 1,754,375
Philip Morris ....................... 1,744,531
Goodrich (B.F.) ..................... 1,740,375
Texaco .............................. 1,729,125
Humana .............................. 1,707,725
Ford Motor .......................... 1,704,062
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6
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PORTFOLIO OF INVESTMENTS
December 31, 1997
SHARES VALUE
------ -----
COMMON STOCKS 98.0%
AEROSPACE 6.6%
GOODRICH (B.F.)
Manufacturer and supplier of
systems and component parts
for the aerospace industry 42,000 $1,740,375
UNITED TECHNOLOGIES
Manufacturer of elevators, jet
engines, flight systems, and
automotive parts 22,000 1,601,875
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3,342,250
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AUTOMOTIVE AND
RELATED 5.9%
FORD MOTOR
Manufacturer and distributor of
automobiles, trucks, and
related parts 35,000 1,704,062
GENERAL MOTORS
Manufacturer and distributor of
automobiles, trucks, and
related parts 21,500 1,303,448
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3,007,510
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BANKING 11.2%
BANK OF NEW YORK
Commercial bank 29,000 1,676,563
BANKAMERICA
Commercial bank 23,000 1,679,000
SUMMIT BANCORP
Operator of commercial banks 44,350 2,361,637
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5,717,200
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DRUGS AND
HEALTH CARE 6.1%
BRISTOL-MYERS SQUIBB
Developer and manufacturer of
health and personal care products 14,900 1,409,912
HUMANA*
Provider of managed health
care plans 82,300 1,707,725
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3,117,637
----------
ELECTRIC UTILITIES 3.2%
DOMINION RESOURCES
Provider of electric services in
the mid-Atlantic region 38,500 1,638,656
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ENERGY 3.4%
TEXACO
Explorer, producer, transporter,
refiner, and marketer of natural
gas, oil, and petroleum products 31,800 1,729,125
----------
FINANCE AND
INSURANCE 15.2%
THE EQUITABLE COMPANIES
Insurance and investment
management organization 34,000 1,691,500
FEDERAL NATIONAL
MORTGAGE ASSOCIATION
Provider of mortgage financing 23,100 1,318,144
TRAVELERS
Provider of broad-based
financial services 28,500 1,535,438
USF&G
Provider of property, casualty,
and life insurance 83,800 1,848,837
WASHINGTON MUTUAL
Regional finance company for
small- and mid-sized businesses 21,100 1,345,784
----------
7,739,703
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FOOD 2.7%
DOLE FOOD
Producer and marketer of fresh and
packaged fruits and vegetables 30,500 1,395,375
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HOUSEHOLD PRODUCTS
AND FURNISHINGS 9.6%
ARMSTRONG WORLD INDUSTRIES
Manufacturer and marketer of
interior furnishings 21,000 1,569,750
DIAL
Manufacturer and marketer of
personal care, household, and
laundry products 89,000 1,852,313
KIMBERLY-CLARK
Manufacturer of consumer paper
products; newsprint 30,000 1,479,375
----------
4,901,438
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7
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PORTFOLIO OF INVESTMENTS
December 31, 1997
SHARES VALUE
------ -----
INDUSTRIAL EQUIPMENT 3.0%
GENERAL ELECTRIC
Supplier of electrical equipment
and other industrial and
consumer products 21,000 $1,540,875
----------
MEDICAL PRODUCTS
AND TECHNOLOGY 6.8%
BAXTER INTERNATIONAL
Manufacturer and distributor of
hospital and laboratory products 30,100 1,518,169
MEDTRONIC
Manufacturer of pacemakers and
related cardiovascular products 37,000 1,935,563
------------
3,453,732
------------
OFFICE EQUIPMENT 3.3%
XEROX
Developer and marketer of
document processing products
and services 22,500 1,660,781
------------
PACKAGING 3.4%
CROWN CORK & SEAL
Manufacturer of packaging
products 35,000 1,754,375
------------
RETAIL TRADE 10.9%
GAP
Specialty apparel retailer 37,500 1,328,906
MAY DEPARTMENT STORES
Department store operator 24,000 1,264,500
PENNEY (J.C.)
Operator of retail department
stores and drugstores 22,000 1,326,875
SEARS, ROEBUCK
Large retail store operator 36,000 1,629,000
------------
5,549,281
------------
SPECIALTY MATERIALS 3.3%
RAYCHEM
Diversified product manufacturer
for the aerospace, automotive,
cable television, and
communications industries 39,000 1,679,438
------------
TOBACCO 3.4%
PHILIP MORRIS
Manufacturer of tobacco
products, food, and beverages 38,500 1,744,531
------------
TOTAL COMMON STOCKS
(Cost $46,788,636) 49,971,907
SHORT-TERM HOLDINGS 1.4%
(Cost $700,000) 700,000
-----------
TOTAL INVESTMENTS 99.4%
(Cost $47,488,636) 50,671,907
OTHER ASSETS
LESS LIABILITIES 0.6% 315,278
------------
NET ASSETS 100.0% $50,987,185
============
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* Non-income producing security.
Descriptions of companies have not been audited by Deloitte &Touche LLP.
See Notes to Financial Statements.
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8
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STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
ASSETS:
Investments, at value:
Common stocks (cost $46,788,636) ........... $49,971,907
Short-term holdings (cost $700,000) ........ 700,000 $50,671,907
-----------
Cash.......................................................... 52,614
Receivable for Capital Stock sold ............................ 672,146
Receivable for dividends and interest ........................ 73,554
Receivable for securites sold ................................ 51,883
Receivable from associated companies ......................... 13,364
Deferred organization expenses ............................... 11,165
Expenses prepaid to shareholder service agent ................ 10,225
Other ........................................................ 33,375
-----------
TOTAL ASSETS ................................................. 51,590,233
-----------
LIABILITIES:
Payable for securities purchased ............................. 360,225
Payable for Capital Stock repurchased ........................ 129,512
Accrued expenses, taxes, and other ........................... 113,311
-----------
TOTAL LIABILITIES ............................................ 603,048
-----------
NET ASSETS ................................................... $50,987,185
===========
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($.001 par value; 1,000,000,000 shares
authorized; 5,626,488 shares outstanding):
CLASS A .................................................... $ 2,608
CLASS B .................................................... 1,872
CLASS D .................................................... 1,146
Additional paid-in capital 46,962,800
Undistributed net investment income .......................... 11,906
Undistributed net realized gain .............................. 823,582
Net unrealized appreciation of investments ................... 3,183,271
-----------
NET ASSETS ................................................... $50,987,185
===========
NET ASSET VALUE PER SHARE:
CLASS A ($23,698,831 / 2,608,456 shares) ..................... $9.09
=====
CLASS B ($16,929,893 / 1,872,268 shares) ..................... $9.04
=====
CLASS D ($10,358,461 / 1,145,764 shares) ..................... $9.04
=====
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See Notes to Financial Statements.
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9
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STATEMENT OF OPERATIONS
For the Period April 25, 1997,* to December 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ 355,269
Interest .............................................. 23,989
---------
TOTAL INVESTMENT INCOME ........................................... $ 379,258
EXPENSES:
Management fee ........................................ 147,648
Distribution and service fees ......................... 114,545
Shareholder account services .......................... 59,042
Registration .......................................... 55,590
Shareholder reports and communications ................ 42,093
Auditing and legal fees ............................... 21,635
Custody and related services .......................... 7,000
Directors' fees and expenses .......................... 4,504
Amortization of deferred organization expenses ........ 2,011
Miscellaneous ......................................... 2,564
---------
Total Expenses Before Management Fee Waiver ........... 456,632
Management Fee Waiver ................................. (111,382)
---------
TOTAL EXPENSES AFTER MANAGEMENT FEE WAIVER ........................ 345,250
---------
NET INVESTMENT INCOME ............................................. 34,008
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ...................... 1,395,588
Net change in unrealized appreciation of investments .. 3,183,271
---------
NET GAIN ON INVESTMENTS ........................................... 4,578,859
----------
INCREASE IN NET ASSETS FROM OPERATIONS ............................ $4,612,867
==========
</TABLE>
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* Commencement of operations.
See Notes to Financial Statements.
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10
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STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
APRIL 25, 1997*
TO
DECEMBER 31, 1997
--------------
<S> <C> <C>
OPERATIONS:
Net investment income .............................................................. $ 34,008
Net realized gain on investments ................................................... 1,395,588
Net change in unrealized appreciation of investments ............................... 3,183,271
-----------
INCREASE IN NET ASSETS FROM OPERATIONS ............................................. 4,612,867
-----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A .......................................................................... (22,102)
Net realized gain on investments:
Class A .......................................................................... (268,929)
Class B .......................................................................... (188,489)
Class D .......................................................................... (114,588)
-----------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS ........................................... (594,108)
-----------
<CAPTION>
SHARES
-----------------
APRIL 25, 1997*
TO
DECEMBER 31, 1997
-----------------
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares:
Class A ....................................................... 2,081,806 17,203,013
Class B ....................................................... 1,758,227 14,700,536
Class D ....................................................... 769,857 6,526,662
Investment of dividends:
Class A ....................................................... 2,282 20,514
Exchanged from associated Funds:
Class A ....................................................... 673,049 5,675,733
Class B ....................................................... 216,546 1,850,949
Class D ....................................................... 538,684 4,563,959
Shares issued in payment of gain distributions:
Class A ....................................................... 28,791 248,471
Class B ....................................................... 19,544 167,688
Class D ....................................................... 12,598 108,094
--------- -----------
Total ............................................................ 6,101,384 51,065,619
--------- -----------
Cost of shares repurchased:
Class A ....................................................... (117,118) (997,479)
Class B ....................................................... (52,380) (455,672)
Class D ....................................................... (30,230) (264,838)
Exchanged into associated Funds:
Class A ....................................................... (67,357) (583,297)
Class B ....................................................... (69,669) (594,926)
Class D ....................................................... (145,145) (1,250,982)
--------- -----------
Total ............................................................ (481,899) (4,147,194)
--------- -----------
INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ........... 5,619,485 46,918,425
========= -----------
INCREASE IN NET ASSETS .......................................................... 50,937,184
NET ASSETS:
Beginning of period ............................................................. 50,001
-----------
END OF PERIOD (including undistributed net investment income of $11,906) ........ $50,987,185
===========
</TABLE>
- -----------------
* Commencement of operations.
See Notes to Financial Statements.
----
11
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION -- Seligman Large-Cap Value Fund (the "Fund") is a series of
Seligman Value Fund Series, Inc., which was incorporated in the State of
Maryland on January 27, 1997, and subsequently was registered under the
Investment Company Act of 1940 as an open-end, diversified management investment
company. The Fund had no operations prior to April 25, 1997 (commencement of
operations),other than those related to organizational matters, and the sale and
issuance to Seligman Financial Services, Inc. (the "Distributor")of 7,003 Class
A shares of Capital Stock for $50,001 on April 4, 1997.
2. MULTIPLE CLASSES OF SHARES -- 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 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% and 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.
3. 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 common 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
will elect 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 period
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.
f. ORGANIZATION EXPENSES -- Deferred organization expenses are being
amortized on a straight-line basis over a period of 60 months beginning
with the commencement of operations of the Fund.
4. SHORT-TERM INVESTMENTS -- At December 31, 1997, the Fund owned short-term
investments which matured in less than seven days.
5. PURCHASES AND SALES OF SECURITIES -- Purchases and sales of portfolio
securities, excluding US Government obligations and short-term investments, for
the period ended December 31, 1997, amounted to $55,651,080 and $10,258,032,
respectively.
At December 31, 1997, the cost of investments for federal income tax
purposes was substantially the same as the cost for
- ----
12
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
financial reporting purposes, and the tax basis gross unrealized appreciation
and depreciation of portfolio securities amounted to $4,078,507 and $895,236,
respectively.
6. 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 0.80%
per annum of the Fund's average daily net assets. For the period ended December
31, 1997, the Manager, at its discretion, waived a portion of its fees equal to
$111,382. The management fees reflected in the Statement of Operations represent
0.20% per annum of the Fund's average daily net assets.
The Distributor, agent for the distribution of the Fund's shares and an
affiliate of the Manager, received concessions of $29,676 from sales of Class A
shares, after commissions of $413,291 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 period ended December 31,
1997, fees incurred aggregated $19,751, or 0.22% 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 period 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 $60,150 and $34,644, 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
period ended December 31, 1997, such charges amounted to $536.
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 Bshares sold. The aggregate amount of such payments
and the Class B shares distribution fees retained by the Distributor for the
period ended December 31, 1997, amounted to $38,244.
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 period ended
December 31, 1997, Seligman Services, Inc. received commissions of $725 from the
sales of shares of the Fund. Seligman Services, Inc. also received distribution
and service fees of $2,587, pursuant to the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged the Fund at cost $56,617 for shareholder account services.
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 cost of such fees and interest is included in directors'
fees and expenses and the accumulated balance thereof at December 31, 1997, of
$407 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.
----
13
<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, using average shares
outstanding.
"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.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
---------- --------- ---------
4/25/97* 4/25/97* 4/25/97*
TO TO TO
12/31/97 12/31/97 12/31/97
------- ------- --------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ................... $7.14 $7.14 $7.14
------ ------ ------
Net investment income (loss)** ......................... .03 (.01) (.01)
Net realized and unrealized investment gain ............ 2.06 2.04 2.04
------ ------ ------
INCREASE FROM INVESTMENT OPERATIONS .................... 2.09 2.03 2.03
Dividend paid .......................................... (.01) -- --
Distributions from net gain realized ................... (.13) (.13) (.13)
----- ------ ------
NET INCREASE IN NET ASSET VALUE ........................ 1.95 1.90 1.90
----- ------ ------
NET ASSET VALUE, END OF PERIOD ......................... $9.09 $9.04 $9.04
====== ====== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ................. 29.28% 28.46% 28.46%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ......................... 1.47%+ 2.25%+ 2.25%+
Net investment income (loss) to average net assets ..... .58%+ (.20)%+ (.20)%+
Portfolio turnover ..................................... 38.74% 38.74% 38.74%
Average commission rate paid ........................... $.0590 $.0590 $.0590
NET ASSETS, END OF PERIOD (000s omitted) ............... $23,699 $16,930 $10,358
Without management fee waiver:**
Net investment loss per share ........................ $ -- $ (.05) $ (.05)
Ratios:
Expenses to average net assets ....................... 2.07%+ 2.85%+ 2.85%+
Net investment loss to average net assets ............ (.02)%+ (.80)%+ (.80)%+
</TABLE>
- -------------------
* Commencement of operations.
** The Manager, at its discretion, waived a portion of its fees for the
period presented.
+ Annualized.
See Notes to Financial Statements.
- ----
14
<PAGE>
================================================================================
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS,
SELIGMAN LARGE-CAP VALUE FUND:
We have audited the accompanying statement of assets
and liabilities, including the portfolio of investments, of Seligman Large-Cap
Value Fund as of December 31, 1997, the related statements of operations and of
changes in net assets, and the financial highlights for the period from April
25, 1997 (commencement of operations)to December 31, 1997. 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 audit.
We conducted our audit 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 audit provides 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 Large-Cap
Value Fund as of December 31, 1997, the results of its operations, the changes
in its net assets, and the financial highlights for the period from April 25,
1997 to December 31, 1997, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New York, New York
January 30, 1998
- --------------------------------------------------------------------------------
FEDERAL TAX STATUS OF 1997 DIVIDEND AND GAIN
DISTRIBUTIONS FOR TAXABLE ACCOUNTS
- --------------------------------------------------------------------------------
The dividend paid to Class A shareholders in 1997 is taxable as ordinary income
for federal income tax purposes. It makes no difference whether you received it
in cash or in shares. Under the Internal Revenue Code, 94% of the dividend paid
to Class A shareholders has been designated as qualifying for the dividend
received deduction available to corporate shareholders. In order to claim the
dividend received deduction for this distribution, corporate shareholders must
have held the Fund's shares for 46 days or more during the 90-day period
beginning 45 days before each ex-dividend date.
A distribution of $0.125 per share from net short-term gain realized on
investments during the period April 25, 1997, to October 31, 1997, was paid on
November 21, 1997, to Class A, B, and D shareholders. Net short-term gain is
taxable as ordinary income whether paid to you in cash or shares.
If the gain distribution was paid in shares, the per share cost basis for
federal income tax purposes is $8.63 for Class A shares and $8.58 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-DIVshows the amount of the dividend and the distribution
on investments paid to the shareholder during the year.
- --------------------------------------------------------------------------------
----
15
<PAGE>
================================================================================
BOARD OF DIRECTORS
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, USLIFECorporation
JAMES N. WHITSON 2
EXECUTIVE VICE PRESIDENT AND DIRECTOR,
Sammons Enterprises, Inc.
DIRECTOR, CommScope, Inc.
DIRECTOR, C-SPAN
BRIAN T. ZINO 1
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.
DIRECTOR EMERITUS
FRED E. BROWN
DIRECTOR AND CONSULTANT,
J. & W. Seligman & Co. Incorporated
- -----------------
Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
- --------------------------------------------------------------------------------
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
WILLIAM C. MORRIS NEIL T. EIGEN THOMAS G. ROSE
CHAIRMAN VICE PRESIDENT TREASURER
BRIAN T. ZINO LAWRENCE P. VOGEL FRANK J. NASTA
PRESIDENT VICE PRESIDENT SECRETARY
- --------------------------------------------------------------------------------
- ----
16
<PAGE>
================================================================================
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.
- --------------
Adapted from the Investment Company Institute's 1997 MUTUAL FUND FACT BOOK.
----
17
<PAGE>
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
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 LARGE-CAP VALUE FUND, WHICH CONTAINS
INFORMATION ABOUT THE SALES CHARGES, MANAGEMENT FEE, AND OTHER COSTS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING OR SENDING MONEY.
[Recycled Logo]
EQVL2 12/97 Printed on Recycled Paper
===============================
SELIGMAN
[GRAPHIC]
SMALL-CAP
VALUE FUND
===============================
A VALUE APPROACH TO SEEKING THE CAPITAL
APPRECIATION POTENTIAL OF SMALLER COMPANIES
DECEMBER 31, 1997 o ANNUAL REPORT
<PAGE>
OVER THE LONG TERM -- J. & W. SELIGMAN & CO. INCORPORATED
- --------------------------------------------------------------------------------
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.
[PHOTOGRAPH]
JAMES, JESSE, AND JOSEPH SELIGMAN
SELIGMAN SMALL-CAP VALUEFUND
Seligman Small-Cap Value Fund, which commenced operations on April 25, 1997,
is designed for long-term investors seeking capital appreciation. What makes the
Fund different from many other small-company mutual funds is its adherence to a
value discipline. The Value Team will only invest in as many stocks as they can
closely follow. Because of this attention, buy decisions tend to be made with
the long term in mind.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
To the Shareholders .................................... 1
Interview With Your Portfolio Managers ................. 2
Performance Overview ................................... 4
Portfolio Overview ..................................... 6
Portfolio of Investments ............................... 8
Statement of Assets and Liabilities .................... 11
Statement of Operations ................................ 12
Statement of Changes in Net Assets ..................... 13
Notes to Financial Statements .......................... 14
Financial Highlights ................................... 17
Report of Independent Auditors and Tax Status
of 1997 Distribution ................................... 18
Board of Directors ..................................... 19
Executive Officers and For More Information ............ 20
Glossary of Financial Terms ............................ 21
"As value managers, the Value Team looks to buy a stock at a lower price than it
believes the stock is worth. As such, the team examines companies that are
overlooked or undiscovered by the investment community, as reflected in the
stock price. The team employs fundamental research to analyze company
characteristics, such as price-to-book ratio, price-to-earnings ratio, growth,
and return on equity."
-- WILLIAM C. MORRIS,
FUND CHAIRMAN
<PAGE>
TO THE SHAREHOLDERS
Since its inception on April 25, 1997, Seligman Small-Cap Value Fund has had
superior investment results. The Fund posted a total return of 36.38% from April
25 to December 31, 1997, based on the net asset value of Class A shares, widely
outpacing the 30.41% total return of its peers, as measured by the Lipper Small
Cap Funds Average. The Fund also significantly outperformed the small-cap stock
sector, as measured by the Russell 2000 Index, which had a total return of
28.68% for the eight-month period.
This seventh year of economic expansion in the US was accompanied by real
domestic growth of 3.8%. Consumer price inflation slowed to under 2%, interest
rates moved steadily lower, productivity rose, and unemployment levels reached
27-year lows. Meanwhile, 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 remained positive.
The domestic equity markets, as measured by the Dow Jones Industrial Average
(DJIA), brought equity investors returns in excess of 20% for a third
consecutive year -- a feat unmatched in the DJIA's 101 year-history. While the
performance of small-cap stocks trailed that of large-cap stocks until May,
small caps saw significantly improved performance in the third quarter. Value
investing, specifically, was rich in rewards.
As the valuations of small-cap stocks continued to trail those of large-cap
stocks, it was easier to find companies that would meet the Fund's value
criteria. Special emphasis was placed on identifying companies that could
deliver substantial earnings acceleration going forward, and a number of such
stocks were identified in the financial sector in particular. The Fund's results
testify to the success of this strategy.
This was a great year for value investors, with clear outperformance from
this group in the small-cap arena. We anticipate that 1998 will bring more
uncertainty and that US companies could find it difficult to sustain the
earnings growth seen in the last three years. In this expected volatile
environment, value should become a particularly important investment area
because, historically, it has been less volatile than the market as a whole. In
such an environment, active management and cautious stock selection based on
superior fundamentals should grow in importance.
Looking ahead, the positive economic environment should continue, although
growth is likely to be more moderate. We expect to see growing corporate
profitability, albeit at a lower rate. There is also the increased possibility
that the Federal Reserve Board will need to ease interest rates to counter the
effects of the Asian financial crisis on the US economy. Additionally, there is
a risk of temporary price deflation linked to the Asian crisis, as those
economies seek to export their way out of trouble. However, barring problems
caused by the tightness of the labor market, we expect a continuation of the
current low-inflation and low-interest-rate environment.
Thank you for your continued support of Seligman Small-Cap Value Fund. We
look forward to serving your investment needs in the many years to come. A
discussion with your Portfolio Managers, 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
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGERS, NEIL T. EIGEN AND RICHARD S. ROSEN
- --------------------------------------------------------------------------------
A TEAM APPROACH
Seligman Small-Cap Value Fund is managed by the Seligman Value Team, headed by
Neil T. Eigen, who has 29 years of experience as a value investor.
Mr. Eigen and Richard S. Rosen are assisted in the management of the Fund by
seasoned research professionals who are responsible for identifying reasonably
valued small-capitalization companies with the potential for high returns on
equity.
[PHOTOGRAPH]
SELIGMAN VALUE TEAM:(FROM LEFT) NEVIS GEORGE (ADMINISTRATIVE ASSISTANT), MILTON
RUBIN (CLIENT SERVICES), RICHARD S. ROSEN (CO-PORTFOLIO MANAGER), (SEATED) NEIL
T. EIGEN (PORTFOLIO MANAGER)
- --------------------------------------------------------------------------------
Q. HOW HAS SELIGMAN SMALL-CAP VALUE FUND PERFORMED SINCE ITS INCEPTION
ON APRIL 25, 1997?
A. Seligman Small-Cap Value Fund has had very strong investment results.
Through December 31, 1997, the Fund posted a total return of 36.38% based on
the net asset value of Class A shares, significantly outperforming the
30.41% total return of its peers, as measured by the Lipper Small Cap Funds
Average. The Fund's results were also superior to the 28.68% total return of
the small-cap stock sector as a whole, as measured by the Russell 2000
Index.
We are very pleased with the results of the Fund since its inception in
late April. We hope that we have demonstrated that a well-managed value
portfolio can produce strong performance within the context of an overall
strong equity market.
Q. WHICH ECONOMIC AND MARKET FACTORS INFLUENCED THE FUND'S PERFORMANCE RESULTS
IN THE LAST EIGHT MONTHS?
A. Two primary forces drove the US bull market in 1997: First, the low
inflation and moderate economic growth environment supported positive
corporate earnings; and second, the growing demand from baby boomers for
stocks as they race to save for retirement.
While the broad market performed well, the small-cap sector had uneven
performance. In the third quarter, small-cap stocks benefited from the
broadening of the market, but these stocks were negatively affected by the
tremendous number of initial public offerings that came to the market in the
fourth quarter. The flood of new issues reduced demand for small-cap stocks.
Q. WHICH SECTORS AFFECTED THE FUND'S RESULTS IN 1997?
A. The Fund's portfolio was appropriately positioned to take advantage of the
favorable economic background, with concentrated investment positions in
banking and life insurance/retirement companies. The Fund generally
benefited from the strength of the financial sector, as low interest rates,
deregulation, and consolidation drove strong performance. The takeover of
two of our holdings and the performance of two thrifts improved the Fund's
overall investment results.
Q. WHAT IS YOUR INVESTMENT STRATEGY?
A. We have an unchanging, long-term investment strategy that seeks superior
capital appreciation by identifying high-quality, value-oriented companies
possessing an agent for change. The hope is that a company's improved
prospects will attract the investing public's attention and create positive
sentiment toward the stock.
Rather than identifying specific economic sectors that are attractive and
working backwards to find investments (the top-down approach), every
investment is contemplated based on its own merits (the bottom-up approach).
We are not "market timers," nor do we buy stocks solely because they are
"cheap," and we do not make purchases seeking short-term profit. We buy
stocks because we think the underlying companies' prospects are improving
signifi-
- ----
2
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGERS, NEIL T. EIGEN AND RICHARD S. ROSEN
cantly and we want to own these stocks for a long period of time.
History has shown that investors who invest in a fund managed by good stock
pickers, rather than market timers, will come out ahead in the long run.
Q. WHAT IS THE OUTLOOK?
A. We believe that, in terms of corporate profits, productivity, and inflation,
the current US business cycle is the best it has been in 35 years. We also
believe we could witness an eighth year of economic growth in 1998. However,
one risk in the near term is that if there is a meaningful bailout of South
Korea and Japan, international assets could flow out of the safe haven of US
treasuries. This would temporarily raise domestic interest rates. We are
evaluating the potential impact of this scenario on the interest-sensitive
stocks in the portfolio. In our view, the danger for the latter part of 1998
is that earnings and economic growth expectations are too optimistic and are
therefore vulnerable to disappointments.
Nonetheless, our outlook for the Fund is highly positive. Because
investing in common stocks is a long-term endeavor and we are confident in
our own abilities as managers to add value, we think that the long-term
outlook for the Fund is bright. The anticipated slowing in the economy in
1998 should still provide plenty of opportunities to find companies that
meet our investment criteria.
----
3
<PAGE>
PERFORMANCE OVERVIEW
This chart compares a $10,000 hypothetical investment made in Seligman
Small-Cap Value Fund, with and without the initial 4.75% maximum sales charge
for Class A shares, with the 5% contingent deferred sales load ("CDSL") for
Class B shares, and with the 1% CDSL for Class D shares, since the commencement
of operations on April 25, 1997, through December 31, 1997, to a $10,000
investment made in the Lipper Small Cap Funds Average and the Russell 2000 Index
from April 30, 1997, to December 31, 1997. It is important to keep in mind that
the Lipper Small Cap Funds Average excludes the effect of sales charges and the
Russell 2000 Index excludes the effect of fees and sales charges.
[The following table represents a line graph in the printed report.]
A portfolio with fewer holdings may be subject to greater volatility than a
portfolio with a greater number of holdings. The stocks of smaller companies may
be subject to above-average market fluctuations.
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 THE PERIODS ENDED DECEMBER 31, 1997
SINCE
SIX INCEPTION
MONTHS* 4/25/97*
---------- ------------
CLASS A**
With Sales Charge 7.83% 29.83%
Without Sales Charge 13.22 36.38
CLASS B**
With 5% CDSL 7.89 30.82
Without CDSL 12.89 35.82
CLASS D**
With 1% CDSL 11.89 34.82
WITHOUT CDSL 12.89 35.82
LIPPER SMALL CAP FUNDS AVERAGE*** 10.59 30.41+
RUSSELL 2000 INDEX*** 11.03 28.68+
Performance data quoted represent changes in price 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.
NET ASSET VALUE
DECEMBER 31, 1997 JUNE 30, 1997 APRIL 25, 1997
-------------------- -------------- ---------------
CLASS A $9.73 $8.60 $7.14
CLASS B 9.69 8.59 7.14
CLASS D 9.69 8.59 7.14
CAPITAL GAIN INFORMATION
FOR THE PERIOD ENDED DECEMBER 31, 1997
PAID $0.007
REALIZED 0.085
UNREALIZED 0.629++
- ------------
* Return for periods of less than one year are not annualized.
** Return figures reflect any change in price per share and assume the
investment of dividend and capital gain distributions. Return figures for
Class A shares are calculated with and without the effect of the initial
4.75% maximum sales charge. 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 Small Cap Funds Average (Lipper Average) and the Russell 2000
Index are unmanaged benchmarks that assume investment of dividends. The
Lipper Average excludes the effect of sales charges and the Russell 2000
Index excludes the effect of fees and sales charges. The monthly performance
of the Lipper Average is used in the Performance Overview. Investors cannot
invest directly in an average or an index.
+ From April 30, 1997.
++ Represents the per share amount of net unrealized appreciation of portfolio
securities as of December 31, 1997.
----
5
<PAGE>
PORTFOLIO OVERVIEW
<TABLE>
<CAPTION>
DIVERSIFICATION OF NET ASSETS
DECEMBER 31, 1997
PERCENT OF
ISSUES COST VALUE NET ASSETS
------ --------- --------- -------------
<S> <C> <C> <C> <C>
Short-Term Holdings and
Other Assets Less Liabilities 1 $ 2,981,876 $ 2,981,876 1.2
-- ----------- ----------- ----
Common Stocks:
Apparel and Textiles .............................. 1 4,683,120 5,215,000 2.2
Appliances ........................................ 1 4,366,482 5,358,594 2.2
Automotive and Trucking ........................... 1 4,606,850 4,976,563 2.1
Banking ........................................... 3 15,500,698 20,470,038 8.6
Building and Construction ......................... 1 4,480,525 3,984,925 1.7
Computer Software ................................. 1 4,659,213 5,663,125 2.4
Consumer Goods and Services ....................... 1 1,407,000 1,934,625 0.8
Distributors ...................................... 2 8,282,010 8,346,875 3.5
Energy ............................................ 1 6,723,269 4,730,625 2.0
Finance and Insurance ............................. 3 15,858,582 16,977,562 7.1
Food .............................................. 1 5,425,919 6,215,000 2.6
Garden Products ................................... 1 4,174,208 2,972,500 1.2
Industrial Goods and Services ..................... 1 2,698,922 3,440,200 1.4
Machinery ......................................... 1 5,760,948 5,957,812 2.5
Manufacturing ..................................... 4 17,178,455 19,911,944 8.3
Medical Products and Technology ................... 2 9,944,347 9,888,766 4.1
Oil and Gas ....................................... 1 5,286,412 6,190,625 2.6
Packaging/Containers .............................. 2 6,122,550 5,914,187 2.5
Plastics .......................................... 1 1,553,705 1,110,188 0.5
Printing and Publishing ........................... 2 10,700,798 11,745,000 4.9
Restaurants ....................................... 2 11,344,206 9,715,294 4.1
Retail Trade ...................................... 3 15,487,753 15,801,250 6.6
Shipbuilding ...................................... 1 4,202,180 5,429,375 2.3
Specialty Chemicals ............................... 2 10,092,644 11,558,062 4.8
Specialty Metals/Steel ............................ 2 10,336,708 10,164,212 4.2
Tobacco ........................................... 2 10,932,921 10,480,312 4.4
Transportation .................................... 3 14,978,475 16,053,869 6.7
Miscellaneous ..................................... 1 3,932,807 6,011,250 2.5
-- ------------ ------------ -----
47 220,721,707 236,217,778 98.8
-- ------------ ------------ -----
NET ASSETS ............................................ 48 $223,703,583 $239,199,654 100.0
== ============ ============ =====
</TABLE>
- ----
6
<PAGE>
PORTFOLIO OVERVIEW
LARGEST INDUSTRIES
AT DECEMBER 31, 1997
[The following table represents a bar graph in the printed report.]
Banking ......................... $20,470,038
Manufacturing ................... $19,911,944
Finance and Insurance ........... $16,977,562
Transportation .................. $16,053,869
Retail Trade .................... $15,801,250
LARGEST PORTFOLIO HOLDINGS
AT DECEMBER 31, 1997
SECURITY VALUE
- -------- ----------
Bay View Capital ...................... $8,016,250
Coast Savings Financial ............... 6,856,250
Cadmus Communications ................. 6,225,000
Richfood Holdings ..................... 6,215,000
Equitable Resources ................... 6,190,625
RenaissanceRe Holdings ................ 6,111,312
Abercrombie & Fitch (Class A) ......... 6,093,750
VWR Scientific Products ............... 6,011,250
Dexter ................................ 6,003,062
Stewart & Stevenson Services .......... 5,957,812
----
7
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1997
SHARES VALUE
------ -----
COMMON STOCKS 98.8%
APPAREL AND TEXTILES 2.2%
CUTTER & BUCK*+
Designer and marketer of
men's sportswear and
outerwear 280,000 $ 5,215,000
------------
APPLIANCES 2.2%
WINDMERE-DURABLE HOLDINGS
Manufacturer and distributor of
electrical appliances for
home use 237,500 5,358,594
------------
AUTOMOTIVE AND
TRUCKING 2.1%
WABASH NATIONAL
Designer, manufacturer,
and marketer of truck trailers 175,000 4,976,563
------------
BANKING 8.6%
BANK UNITED (CLASS A)
Financial service provider 113,800 5,597,538
BAY VIEW CAPITAL
Bank operator 220,000 8,016,250
COAST SAVINGS FINANCIAL*
Retail bank; residential
real estate lender 100,000 6,856,250
------------
20,470,038
------------
BUILDING AND
CONSTRUCTION 1.7%
DAL-TILE INTERNATIONAL*
Manufacturer of ceramic tile 325,300 3,984,925
------------
COMPUTER SOFTWARE 2.4%
DIALOGIC*
Manufacturer of communications
software 130,000 5,663,125
------------
CONSUMER GOODS AND
SERVICES 0.8%
RAYOVAC*
Manufacturer of general
and hearing aid batteries 100,500 1,934,625
------------
DISTRIBUTORS 3.5%
CUBIC
Developer, manufacturer, and
distributor of defense and
industrial electronic products 107,500 3,520,625
ELSAG BAILEY PROCESS AUTO (ADRS)*
(NETHERLANDS)
Manufacturer and distributor
of control systems 292,500 4,826,250
------------
8,346,875
------------
ENERGY 2.0%
ZIEGLER COAL HOLDING
Energy company 290,000 4,730,625
------------
FINANCE AND
INSURANCE 7.1%
AMRESCO*
Provider of financial services 170,000 5,089,375
BERKLEY (W.R.)
Insurance provider 130,000 5,776,875
RENAISSANCERE HOLDINGS
Global provider of reinsurance
and insurance 138,500 6,111,312
------------
16,977,562
------------
FOOD 2.6%
RICHFOOD HOLDINGS
Wholesale food distributor 220,000 6,215,000
------------
GARDEN PRODUCTS 1.2%
ACORN PRODUCTS*
Manufacturer and marketer of
lawn and garden tools 290,000 2,972,500
------------
INDUSTRIAL GOODS AND
SERVICES 1.4%
FURON
Manufacturer of component
products 164,800 3,440,200
------------
MACHINERY 2.5%
STEWART & STEVENSON SERVICES
Designer, assembler, and
marketer of machinery 232,500 5,957,812
------------
- ----
8
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1997
SHARES VALUE
------ -----
MANUFACTURING 8.3%
FURNITURE BRANDS INTERNATIONAL*
Manufacturer of furniture and
home furnishings 281,700 $ 5,774,850
GIANT CEMENT HOLDING*
Manufacturer and producer of
cement 194,000 4,510,500
MUELLER INDUSTRIES*
Manufacturer and distributor of
brass, bronze, copper, and
aluminum products 95,000 5,605,000
TRIANGLE PACIFIC*
Manufacturer of home
furnishings 118,500 4,021,594
------------
19,911,944
------------
MEDICAL PRODUCTS
AND TECHNOLOGY 4.1%
CEPHALON*
Developer of biopharmaceutical
products to treat neurological
disorders 465,500 5,309,610
CHIREX*
Pharmaceutical contractor 264,500 4,579,156
------------
9,888,766
------------
OIL AND GAS 2.6%
EQUITABLE RESOURCES
Energy supplier 175,000 6,190,625
------------
PACKAGING/CONTAINERS 2.5%
APPLIED EXTRUSION TECHNOLOGIES*
Developer, producer, and
seller of packaging supplies 308,000 2,059,750
BWAY*
Manufacturer and marketer of
steel containers 168,500 3,854,437
------------
5,914,187
------------
PLASTICS 0.5%
LAMSON & SESSIONS*
Manufacturer and distributor of
thermoplastics and electronics 191,000 1,110,188
------------
PRINTING AND
PUBLISHING 4.9%
CADMUS COMMUNICATIONS
Commercial printer 300,000 $ 6,225,000
MERRILL
Document management
company 240,000 5,520,000
------------
11,745,000
------------
RESTAURANTS 4.1%
APPLE SOUTH
Restaurant operator 290,000 3,815,313
FOODMAKER*
Owner and operator of fast
food restaurants 391,700 5,899,981
------------
9,715,294
------------
RETAIL TRADE 6.6%
ABERCROMBIE & FITCH (CLASS A)*
Retailer of casual apparel 195,000 6,093,750
LOEHMANN'S*+
SPECIALTY RETAILER 700,000 4,090,625
THE WET SEAL (CLASS A)*
Retailer of young women's
apparel 190,000 5,616,875
------------
15,801,250
------------
SHIPBUILDING 2.3%
AVONDALE INDUSTRIES*
Constructor and repairer of ships
for military and commercial use 182,500 5,429,375
------------
SPECIALTY CHEMICALS 4.8%
DEXTER
Manufacturer of specialty
materials 139,000 6,003,062
SCHULMAN (A.)
Manufacturer of specialty
chemicals and plastics 220,000 5,555,000
------------
11,558,062
------------
----
9
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1997
SHARES VALUE
------ -----
SPECIALTY METALS/STEEL 4.2%
OLYMPIC STEEL*
Processor and distributor of
steel products 340,000 $ 5,248,750
UNIVERSAL STAINLESS &
ALLOY PRODUCTS*+
Manufacturer and marketer of
specialty steel 336,100 4,915,462
------------
10,164,212
------------
TOBACCO 4.4%
CONSOLIDATED CIGAR HOLDING*
Manufacturer and marketer
of cigars 175,000 4,823,437
DIMON
Distributor of tobacco and
fresh cut flowers 215,500 5,656,875
------------
10,480,312
------------
TRANSPORTATION 6.7%
ABC RAIL PRODUCTS*
Manufacturer and marketer of
railroad equipment 285,000 5,735,625
PITTSTON BURLINGTON GROUP
Provider of global freight
transportation 180,000 4,725,000
C.H. ROBINSON WORLDWIDE
Provider of transportation
services 247,900 5,593,244
------------
16,053,869
------------
MISCELLANEOUS 2.5%
VWR SCIENTIFIC PRODUCTS*
Distributor of laboratory
supplies 210,000 6,011,250
-------------
TOTAL COMMON STOCKS
(Cost $220,721,707) 236,217,778
SHORT-TERM HOLDINGS 1.8%
(Cost $4,400,000) 4,400,000
-------------
TOTAL INVESTMENTS 100.6%
(Cost $225,121,707) 240,617,778
OTHER ASSETS
LESS LIABILITIES (0.6)% (1,418,124)
-------------
NET ASSETS 100.0% $239,199,654
=============
- --------------
* Non-income producing security.
+ Affiliated issuers (Fund's holdings representing 5% or more of the outstanding
voting securities).
Descriptions of companies have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
- ----
10
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<S> <C> <C>
ASSETS:
Investments, at value:
Common stocks* (cost $220,721,707) ................................... $236,217,778
Short-term holdings (cost $4,400,000) ................................ 4,400,000 $240,617,778
------------
Receivable for Capital Stock sold ................................................................. 1,516,830
Receivable for dividends and interest ............................................................. 97,020
Expenses prepaid to shareholder service agent ..................................................... 34,765
Deferred organization expenses .................................................................... 11,165
Other ............................................................................................. 39,530
------------
TOTAL ASSETS ...................................................................................... 242,317,088
------------
LIABILITIES:
Payable for securities purchased .................................................................. 1,782,763
Payable to custodian .............................................................................. 462,723
Payable for Capital Stock repurchased ............................................................. 281,555
Accrued expenses, taxes, and other ................................................................ 590,393
------------
TOTAL LIABILITIES ................................................................................. 3,117,434
------------
NET ASSETS ........................................................................................ $239,199,654
============
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($.001 par value; 1,000,000,000 shares authorized;
24,647,940 shares outstanding):
Class A ......................................................................................... $ 8,991
Class B ......................................................................................... 9,118
Class D ......................................................................................... 6,539
Additional paid-in capital ........................................................................ 223,042,209
Accumulated net investment loss ................................................................... (369)
Undistributed net realized gain ................................................................... 637,095
Net unrealized appreciation of investments ........................................................ 15,496,071
------------
NET ASSETS ........................................................................................ $239,199,654
============
NET ASSET VALUE PER SHARE:
CLASS A ($87,509,919 / 8,991,528 shares) .......................................................... $9.73
=====
CLASS B ($88,330,339 / 9,117,640 shares) .......................................................... $9.69
=====
CLASS D ($63,359,396 / 6,538,772 shares) .......................................................... $9.69
=====
</TABLE>
- --------------------------------------------------------------------------------
* Includes affiliated issuers (issuers in which the Fund's holdings represent 5%
or more of the outstanding voting securities) with a cost of $15,201,502 and a
value of $14,221,087.
See Notes to Financial Statements.
----
11
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Period April 25, 1997&, to December 31, 1997
<S> <C> <C>
INVESTMENT INCOME:
Dividends .................................................... $ 503,092
Interest ..................................................... 112,546
----------
TOTAL INVESTMENT INCOME .......................................................................... $ 615,638
EXPENSES:
Management fee ............................................... 819,194
Distribution and service fees ................................ 580,118
Shareholder account services ................................. 268,748
Registration ................................................. 91,801
Auditing and legal fees ...................................... 67,852
Shareholder reports and communications ....................... 54,248
Custody and related services ................................. 23,000
Directors' fees and expenses ................................. 4,162
Amortization of deferred organization expenses ............... 2,011
Miscellaneous ................................................ 3,204
----------
TOTAL EXPENSES ..................................................................................... 1,914,338
-----------
NET INVESTMENT LOSS ................................................................................ (1,298,700)
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 2,092,282
Net change in unrealized appreciation of investments ......... 15,496,071
----------
NET GAIN ON INVESTMENTS ............................................................................ 17,588,353
-----------
INCREASE IN NET ASSETS FROM OPERATIONS ............................................................. $16,289,653
===========
</TABLE>
- --------------
* Commencement of operations.
See Notes to Financial Statements.
- ----
12
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
APRIL 25, 1997*
TO
DECEMBER 31, 1997
-----------------
<S> <C> <C>
OPERATIONS:
Net investment loss ................................................................................. $ (1,298,700)
Net realized gain on investments .................................................................... 2,092,282
Net change in unrealized appreciation of investments ................................................ 15,496,071
------------
INCREASE IN NET ASSETS FROM OPERATIONS .............................................................. 16,289,653
------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain on investments:
Class A .......................................................................................... (57,925)
Class B .......................................................................................... (57,494)
Class D .......................................................................................... (41,437)
------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS ........................................................... (156,856)
------------
SHARES
---------------
APRIL 25, 1997*
TO
DECEMBER 31, 1997
-----------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares:
Class A .................................................................. 7,738,571 69,603,297
Class B .................................................................. 8,892,774 80,894,889
Class D .................................................................. 5,320,090 48,461,463
Exchanged from associated Funds:
Class A .................................................................. 1,921,426 17,411,273
Class B .................................................................. 545,670 5,021,131
Class D .................................................................. 1,772,296 16,230,693
Shares issued in payment of gain distributions:
Class A .................................................................. 5,767 54,554
Class B .................................................................. 5,544 52,231
Class D .................................................................. 4,071 38,394
---------- ------------
Total ....................................................................... 26,206,209 237,767,925
---------- ------------
Cost of shares repurchased:
Class A .................................................................. (412,080) (3,898,861)
Class B .................................................................. (136,373) (1,292,238)
Class D .................................................................. (171,335) (1,617,237)
Exchanged into associated Funds:
Class A .................................................................. (269,159) (2,525,759)
Class B .................................................................. (189,975) (1,762,418)
Class D .................................................................. (386,350) (3,654,556)
---------- ------------
Total ....................................................................... (1,565,272) (14,751,069)
---------- ------------
INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ...................... 24,640,937 223,016,856
========== ============
INCREASE IN NET ASSETS .............................................................................. 239,149,653
NET ASSETS:
Beginning of period ................................................................................. 50,001
------------
END OF PERIOD (including accumulated net investment loss of $369) ................................... $239,199,654
============
</TABLE>
- ---------------
* Commencement of operations.
See Notes to Financial Statements.
----
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION -- Seligman Small-Cap Value Fund (the "Fund") is a series of
Seligman Value Fund Series, Inc., which was incorporated in the State of
Maryland on January 27, 1997, and subsequently was registered under the
Investment Company Act of 1940 as an open-end, diversified management investment
company. The Fund had no operations prior to April 25, 1997 (commencement of
operations), other than those related to organizational matters, and the sale
and issuance to Seligman Financial Services, Inc. (the "Distributor") of 7,003
Class A shares of Capital Stock for $50,001 on April 4, 1997.
2. MULTIPLE CLASSES OF SHARES -- 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 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% and 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.
3. 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 common 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 will
elect 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 period 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.
f. ORGANIZATION EXPENSES -- Deferred organization expenses are being amortized
on a straight-line basis over a period of 60 months beginning with the
commencement of operations of the Fund.
4. SHORT-TERM INVESTMENTS -- At December 31, 1997, the Fund owned short-term
investments which matured in less than seven days.
5. PURCHASES AND SALES OF SECURITIES -- Purchases and sales of portfolio
securities, excluding US Government obligations and short-term investments, for
the period ended December 31, 1997, amounted to $237,656,162 and $19,026,737,
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
- ----
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
appreciation and depreciation of portfolio securities amounted to $25,824,188
and $10,328,117, respectively.
6. 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 1.00%
per annum of the Fund's average daily net assets.
The Distributor, agent for the distribution of the Fund's shares and an
affiliate of the Manager, received concessions of $194,285 from sales of Class A
shares, after commissions of $1,921,267 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 period ended December 31,
1997, fees incurred aggregated $75,499, 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 period 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 $293,782 and $210,837, 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 period ended
December 31, 1997, such charges amounted to $11,454.
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 Bshares sold. The aggregate amount of such payments
and the Class B shares distribution fees retained by the Distributor for the
period ended December 31, 1997, amounted to $209,547.
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 period ended December 31, 1997,
Seligman Services, Inc. received commissions of $4,687 from the sales of shares
of the Fund and distribution and service fees of $3,777, pursuant to the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged the Fund at cost $260,043 for shareholder account services.
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 cost of such fees and interest is included in directors' fees and
expenses and the accumulated balance thereof at December 31, 1997, of $369 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.
----
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
7. AFFILIATED ISSUERS -- As defined under the Investment Company Act of 1940,
as amended, affiliated issuers are those issuers in which the Fund's holdings
represent 5% or more of the outstanding voting securities. A summary of the
Fund's transactions in the securities of these issuers during the period ended
December 31, 1997, is as follows:
<TABLE>
<CAPTION>
GROSS
PURCHASES GROSS
BEGINNING AND SALES AND ENDING REALIZED DIVIDEND ENDING
AFFILIATE SHARES ADDITIONS REDUCTIONS SHARES GAIN INCOME VALUE
- ----------- ------------- ------------- --------------- --------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cutter &Buck -- 280,000 -- 280,000 -- -- $ 5,215,000
Loehmann's -- 700,000 -- 700,000 -- -- 4,090,625
Universal Stainless
& Alloy Products -- 336,100 -- 336,100 -- -- 4,915,462
----------
TOTAL $14,221,087
==========
</TABLE>
- ----
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, using average shares
outstanding.
"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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CLASS A CLASS B CLASS D
--------- --------- ---------
4/25/97* 4/25/97* 4/25/97*
TO TO TO
12/31/97 12/31/97 12/31/97
-------- -------- --------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ........................ $7.14 $7.14 $7.14
---- ---- ----
Net investment loss ......................................... (.07) (.11) (.11)
Net realized and unrealized investment gain ................. 2.67 2.67 2.67
---- ---- ----
INCREASE FROM INVESTMENT OPERATIONS ......................... 2.60 2.56 2.56
Distributions from net gain realized ........................ (.01) (.01) (.01)
---- ---- ----
NET INCREASE IN NET ASSET VALUE ............................. 2.59 2.55 2.55
---- ---- ----
NET ASSET VALUE, END OF PERIOD .............................. $9.73 $9.69 $9.69
==== ==== ====
TOTAL RETURN BASED ON NET ASSET VALUE: ...................... 36.38% 35.82% 35.82%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets .............................. 1.87%+ 2.63%+ 2.63%+
Net investment loss to average net assets ................... (1.12)%+ (1.88)%+ (1.88)%+
Portfolio turnover .......................................... 15.91% 15.91% 15.91%
Average commission rate paid ................................ $.0571 $.0571 $.0571
NET ASSETS, END OF PERIOD (000S OMITTED) .................... $87,510 $88,330 $63,360
</TABLE>
- --------------
* Commencement of operations.
+ Annualized.
See Notes to Financial Statements.
----
17
<PAGE>
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS,
SELIGMAN SMALL-CAP VALUE FUND
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman Small-Cap Value Fund as of December
31, 1997, the related statements of operations and of changes in net assets, and
the financial highlights for the period from April 25, 1997 (commencement of
operations) to December 31, 1997. 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 audit.
We conducted our audit 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 audit provides 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 Small-Cap
Value Fund as of December 31, 1997, the results of its operations, the changes
in its net assets, and the financial highlights for the period from April 25,
1997 to December 31, 1997, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New York, New York
January 30, 1998
- --------------------------------------------------------------------------------
FEDERAL TAX STATUS OF 1997 GAIN DISTRIBUTION
FOR TAXABLE ACCOUNTS
- --------------------------------------------------------------------------------
A distribution of $0.007 per share from net short-term gain realized on
investments during the period April 25, 1997, to October 31, 1997, was paid on
November 21, 1997, to Class A, B, and D shareholders. 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 $9.46 for Class A shares, $9.42 for Class B shares and
$9.43 for Class 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.
- --------------------------------------------------------------------------------
- ----
18
<PAGE>
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
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
RUSTEE, 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, USLIFECorporation
James N. Whitson 2
EXECUTIVE VICE PRESIDENT AND DIRECTOR,
Sammons Enterprises, Inc.
DIRECTOR, CommScope, Inc.
DIRECTOR, C-SPAN
Brian T. Zino 1
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.
DIRECTOR EMERITUS
Fred E. Brown
DIRECTOR AND CONSULTANT,
J. & W. Seligman & Co. Incorporated
- -----------------
Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
- --------------------------------------------------------------------------------
----
19
<PAGE>
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
William C. Morris
CHAIRMAN
Brian T. Zino
PRESIDENT
Neil T. Eigen
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 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
- --------------------------------------------------------------------------------
- ----
20
<PAGE>
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.
- -------------
Adapted from the Investment Company Institute's 1997 MUTUAL FUND FACT BOOK.
----
21
<PAGE>
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
SMALL-CAP VALUE FUND, WHICH CONTAINS INFORMATION ABOUT
THE SALES CHARGES, MANAGEMENT FEE, AND OTHER COSTS.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING OR SENDING MONEY.
[Logo]
EQVS2 12/97 Printed on Recycled Paper
