S E L I G M A N
- ----------------------
S M A L L - C A P [GRAPHIC OMITTED]
V A L U E F U N D
ANNUAL REPORT
DECEMBER 31, 1999
***********
A VALUE APPROACH
TO SEEKING THE
CAPITAL APPRECIATION
POTENTIAL OF
SMALLER COMPANIES
[J. & W. SELIGMAN & CO. LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
<PAGE>
SELIGMAN -- TIMES CHANGE ... VALUES ENDURE
J. & W. SELIGMAN & CO. INCORPORATED IS A FIRM WITH A LONG TRADITION OF
INVESTMENT EXPERTISE, OFFERING A BROAD ARRAY OF INVESTMENT CHOICES TO HELP
TODAY'S INVESTORS SEEK THEIR LONG-TERM FINANCIAL GOALS.
[PHOTOGRAPH OMITTED]
JAMES, JESSE, AND JOSEPH SELIGMAN, 1870
TIMES CHANGE...
Established in 1864, Seligman has a history of providing financial services
marked not by fanfare, but rather by a quiet and firm adherence to financial
prudence. While the world has changed dramatically in the 136 years since
Seligman first opened its doors, the firm has continued to offer its clients
high-quality investment solutions through changing times.
In the late 19th century, as the country grew, Seligman helped finance the
westward expansion of the railroads, the construction of the Panama Canal, and
the launching of urban transit systems. In the first part of the 20th century,
as America became an industrial power, the firm helped fund the growing capital
needs of the nascent automobile and steel industries.
With the formation of Tri-Continental Corporation in 1929 -- today, the nation's
largest diversified publicly-traded closed-end investment company -- Seligman
began shifting its emphasis from investment banking to investment management.
Despite the stock market crash and ensuing depression, Seligman was convinced of
the importance that investment companies could have in building wealth for
individual investors and began managing its first mutual fund in 1930.
In the decades that followed, Seligman has continued to offer forward-looking
investment solutions, including equity funds that specialize in small companies,
technology, or international securities, and bond funds that focus on high-yield
issuers, US government bonds, or municipal securities.
...VALUES ENDURE
Seligman is proud of its distinctive past and of the traditional values that
continue to shape the firm's business decisions and investment judgment. While
much has changed over the years, the firm's commitment to providing prudent
investment management that seeks to build wealth for clients over time is an
enduring value that will guide Seligman in the new millennium.
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 ....................................... 10
Statement of Operations ................................................... 11
Statements of Changes in Net Assets ....................................... 12
Notes to Financial Statements ............................................. 13
Financial Highlights ...................................................... 16
Report of Independent Auditors ............................................ 18
Federal Tax Status of 1999 Gain Distribution
for Taxable Accounts and For More
Information ............................................................. 19
Board of Directors and Executive Officers ................................. 20
Glossary of Financial Terms ............................................... 21
<PAGE>
TO THE SHAREHOLDERS
Nineteen ninety-nine was a challenging year for Seligman Small-Cap Value Fund.
The Fund posted a total return of 1.00% based on the net asset value of Class A
shares while the Russell 2000 Value Index posted a total return of -1.49% and
the Lipper Small Cap Funds Average posted a total return of 30.04%. The Fund's
underperformance relative to its Lipper peer group was primarily the result of
the wide performance disparity between value stocks and growth stocks during the
period. The Lipper Small Cap Funds Average contains many funds that pursue a
growth-oriented style of investing, while the Fund consistently pursues value
stocks. In 1999, value stocks underperformed growth stocks by a wide margin.
In 1999, the markets were extraordinarily narrow. Despite stellar performances
delivered by the popular US equity indices in 1999, just over half the stocks in
the S&P 500 had positive returns. The outsized returns of a few stocks also
skewed the indices. Just seven stocks were responsible for half of the S&P 500's
return; five of these were technology companies, with four of those delivering
astounding triple-digit returns.
Large-capitalization growth and technology companies continued to dominate the
market, while value stocks underperformed considerably. In such an environment,
the Fund, which pursues companies based upon their valuations and fundamentals,
lagged behind. The market was driven to an unprecedented degree by momentum, and
in such a market, valuations and fundamentals are largely ignored.
Throughout 1999, the US economy showed few signs of slowing, triggering concerns
regarding inflation. In response, the Federal Reserve Board increased the
federal funds rate three times, completely reversing its 1998 rate cuts. The
Fed's skillful watch over the economy, both in its response to the worldwide
crisis of 1998 and its vigilance regarding inflation in 1999, has been a key
contributor to the long-term health of this remarkable economy.
We think the economy will slow moderately in 2000, which would be positive for
the long-term health of the stock market. As we look into the 21st century, we
are optimistic, and believe that there are several long-term factors that may
support equity prices for many years. First are global demographic trends. The
fastest-growing segment of the population in the US and other developed
countries is 45-to 64-year-olds, which is likely to increase its savings rate as
its members mature. We believe that this will produce a groundswell of savings,
which will be a significant support for equity prices in the coming years.
Second, despite the uptick in rates during 1999, we believe that the long-term
trend is one of continued benign inflation and low interest rates -- a positive
environment for the stock market. Third, the global economy has rebounded
strongly since the 1998 financial crisis. We believe that this will continue,
allowing investors to benefit from attractive overseas investment opportunities.
Finally, new technology has allowed the economy to become vastly more
productive. This sector now accounts for approximately 25% of gross domestic
product growth and approximately 40% of capital spending. Technology has been,
and will continue to be, responsible for substantial changes in business
activity, both business-to-business, and business-to-consumer. However, while we
are highly enthusiastic about the long-term benefits that technology will have
for the economy, we are concerned that investment behavior in this area has
become increasingly speculative. Nonetheless, technology is a positive factor in
the continued expansion prospects for the global economy.
We believe that the market will broaden in 2000 to include a wider range of
stocks. In 1999, as technology stocks and growth stocks soared, the market
prices of many value stocks became increasingly attractive. We believe that
investors will once again seek out companies with strong fundamentals and more
reasonable valuations.
Thank you for your continued support of Seligman Small-Cap Value Fund. A
discussion with your Fund's Portfolio Managers, as well as a performance
overview and financial statements, including a portfolio of investments, follows
this letter. We look forward to serving your investment needs for many years to
come.
By order of the Board of Directors,
/s/ William C. Morris /s/ Brian T. Zino
- --------------------- -----------------
William C. Morris Brian T. Zino
Chairman President
February 11, 2000
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGERS,
NEIL T. EIGEN AND RICHARD S. ROSEN
Q: HOW DID SELIGMAN SMALL-CAP VALUE FUND PERFORM FOR THE 12 MONTHS ENDED
DECEMBER 31, 1999?
A: Seligman Small-Cap Value Fund posted a total return of 1.00% for the fiscal
year ended December 31, 1999. This was slightly better than the -1.49%
total return posted by the overall small-cap value market, as measured by
the Russell 2000 Value Index, but considerably behind the 30.04% total
return posted by the Fund's peer group, as measured by the Lipper Small Cap
Funds Average.
Q: WHY DID THE FUND'S PERFORMANCE LAG ITS LIPPER PEER AVERAGE?
A: Many of the funds within the Lipper Small Cap Funds Average pursue a
growth-oriented style of investing, and growth stocks outperformed value
stocks by a wide margin in 1999. Last year's market was driven, to a great
extent, by momentum. Stocks that were going up continued to go up,
regardless of fundamentals. Such an environment is detrimental to value
investors, such as your Fund's managers, who evaluate factors such as
price-to-earnings ratios, cash flow, and strong company management when
constructing a portfolio of stocks.
Q: WHAT MARKET FACTORS AFFECTED FUND PERFORMANCE?
A: The market in 1999 largely ignored fundamentals and was one of the
narrowest on record. A small number of stocks, particularly in the
technology sector, continued to experience price gains, while much of the
market lagged behind. In fact, technology alone was responsible for nearly
70% of the return of the S&P 500. Seligman Small-Cap Value Fund had, and
continues to have, very low exposure to this sector because we believe that
the vast majority of these stocks do not qualify as value stocks. Stock
prices for these companies continued to rise over the course of the year,
despite often poor fundamentals, including a consistent lack of earnings
for many of these companies, and a continued rise in interest rates.
The narrowness of the market was evidenced by the fact that nearly half the
stocks in the S&P 500 posted negative returns for the year, with
value-style stocks trailing growth-style stocks to an unprecedented degree.
Just a few stocks, mostly large-cap growth and technology stocks, within
the S&P 500 carried the performance of the entire index for the year.
Value managers believe that strong fundamentals and attractive valuations
will ultimately be recognized by the market. However, during 1999, the
market did not recognize or reward value. While many companies within the
Fund's portfolio posted strong operating results, this was not reflected in
higher stock prices. For example, during the Fund's second fiscal quarter,
six companies, representing about 15% of the portfo-
[PHOTOGRAPH OMITTED]
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), (not shown) MICHELLE BORRE
A TEAM APPROACH
Seligman Small-Cap Value Fund is managed by the Seligman Value Team, headed by
Neil T. Eigen, who has over 30 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.
2
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGERS,
NEIL T. EIGEN AND RICHARD S. ROSEN
lio,beat earnings estimates to such an extent that estimates for future earnings
were revised higher. Despite this positive news, each of these stocks declined
by between 13% and 30% in the third quarter.
Q: WHAT SECTORS CONTRIBUTED POSITIVELY TO PORTFOLIO PERFORMANCE?
A: The Energy sector as a whole outperformed during the period. The Fund's
overweighting in the sector, as well as the strong performances of
individual energy stocks in the portfolio, helped both absolute and
relative performance.
Q: WHAT SECTORS DETRACTED FROM PORTFOLIO PERFORMANCE?
A: During the past fiscal year, financial stocks came under considerable
pressure as a result of rising interest rates. These companies are among
the most sensitive to interest rate changes; they tend to perform poorly
when interest rates go up, and perform well when interest rates decline.
While the portfolio did have significant exposure to financial stocks, the
Fund was, fortunately, considerably underweighted in this sector versus its
benchmark, the Russell 2000 Value Index.
One of the Fund's long-term holdings in Specialty Retail delivered poor
stock-price performance during the period despite posting
better-than-expected operating performance. This is a specific example of
the market's often irrational behavior during this time. We continued to
hold the stock because we believe that if a company continues to deliver
strong results, the market will ultimately recognize the stock.
Q: WHAT WAS YOUR INVESTING STRATEGY DURING THE 12-MONTH PERIOD UNDER REVIEW?
A: Through short-term trends in investor sentiment and market behavior, we
remain focused on pursuing a consistent strategy. We continue to search for
companies that we believe will have earnings growth exceeding the overall
market, while having below-average valuations. We believe that such a
strategy makes sense for long-term investors.
As value managers, we are currently avoiding biotech and technology stocks,
since many of these stocks are expensive with poor underlying fundamentals.
However, during the fiscal year, we did find one biotech company and one
technology company that we felt comfortable adding to the portfolio. Both
of these companies have earnings, and these earnings are relatively
predictable. However, investment in areas such as biotech and technology
will generally be minimal because these stocks are usually not consistent
with our value philosophy.
Q: WHAT IS YOUR OUTLOOK?
A: We are optimistic regarding the prospects for value stocks during the
coming fiscal year. We do not believe that the type of market that
prevailed in 1999 -- one in which economic and company-specific
fundamentals were largely ignored -- can continue. Despite the market's
apparent runup in 1999, many good companies were left behind and are now
trading at what we believe are exceptionally attractive prices. We are
convinced that it is only a matter of time before investors begin to pursue
these relative bargains in the midst of a broader market that in some areas
has become remarkably expensive. The Russell 2000 Value Index now has a
dividend yield higher than that of the S&P 500. This is unprecedented.
Small companies typically have higher earnings growth rates but lower
dividend yields. Currently, small companies are offering higher current
yields in addition to potentially higher growth rates.
In addition to our conviction that value stocks are long overdue for market
recognition, we believe that the economic environment bodes well for value
stocks. We forecast a slowing US economy, but a strengthening international
economy. Value companies tend to be economically sensitive and thus perform
well within a growing global economy. In addition, a more sedate US economy
should allow interest rates to stabilize, which would further benefit value
stocks.
3
<PAGE>
PERFORMANCE OVERVIEW
This chart compares a $10,000 hypothetical investment made in Seligman Small-Cap
Value Fund since the commencement of operations on April 25, 1997, through
December 31, 1999, to a $10,000 investment made in the Lipper Small Cap Funds
Average and the Russell 2000 Value Index, from April 30, 1997, to December 31,
1999. The results for Seligman Small-Cap Value Fund were determined with and
without the initial 4.75% maximum sales charge for Class A shares, with the 3%
contingent deferred sales charge ("CDSC") for Class B shares, and without the 1%
CDSC for Class D shares, and assume that all distributions within the period are
invested in additional shares. The performance of Class C shares is not shown in
this chart but is included in the table on page 5. It is important to keep in
mind that the Lipper Small Cap Funds Average and the Russell 2000 Value Index
exclude the effect of fees and/or sales charges.
[LINE GRAPH OMITTED]
[FIGURES BELOW REPRESENTS LINE GRAPH IN ITS PRINTED FORM.]
<TABLE>
<CAPTION>
Small Cap A Small Cap Small Cap B Small Cap D Russell 2000 Lipper S Cap
With Load A W/O Load with CDSL Without CDSL Value Index Fds Avg
<S> <C> <C> <C> <C> <C> <C>
9520 10000 10000 10000
4/30/97 9600 10084 10084 10084 10000 10000
10546.7 11078.4 11064.4 11064.4 10796 11173
6/30/97 11466.7 12044.8 12030.8 12030.8 11342.3 11776.3
12026.7 12633 12619 12619 11818.6 12514.7
12240 12857.1 12829.1 12829.1 12006.6 12746.2
9/30/97 13160 13823.5 13781.5 13781.5 12805 13702.2
12626.7 13263.3 13221.3 13221.3 12456.7 13128.1
12622.7 13259.1 13203.1 13203.1 12593.7 12956.1
12/31/97 12982.9 13637.5 13582 13582 13020.7 13079.2
12209 12825 12755 12755 12785 12869.9
13050 13708 13624 13624 13558.5 13858.3
3/31/98 13650 14338 14240 14254 14109 14512.5
13370 14044 13932 13946 14178.1 14637.3
12890 13539 13441 13441 13676.2 13827.8
6/30/98 12289 12909 12811 12811 13599.6 13924.6
11502 12082 11970 11970 12534.8 12938.8
9314 9783 9685 9685 10571.8 10375.6
9/30/98 9247 9713 9615 9615 11169.1 10985.7
9727 10218 10106 10106 11500.8 11449.3
10165 10678 10566 10566 11812.5 12193.5
12/31/98 10540 11072 10946 10946 12183.4 13081.1
10232 10748 10622 10622 11906.9 13111.2
9643 10123 10003 10003 11093.6 12053.2
3/31/99 9777 10270 10130 10130 11002.6 12265.3
11130 11691 11522 11536 12007.2 13065
11183 11747 11579 11579 12375.8 13327.6
6/30/99 12094 12704 12507 12507 12823.8 14223.2
11826 12422 12240 12240 12519.9 14122.2
10835 11381 11199 11199 12062.9 13742.3
9/30/99 10513 11044 10861 10861 11821.7 13791.8
10031 10537 10355 10355 11585.2 14067.6
10457 10985 10788 10788 11645.5 15184.6
12/31/99 10646 11182 10672 10972 12003 17011.3
</TABLE>
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.
4
<PAGE>
PERFORMANCE OVERVIEW
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
CLASS C -------------------------
SINCE SINCE
SIX INCEPTION ONE INCEPTION
MONTHS* 5/27/99* YEAR 4/25/97
------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
CLASS A**
With Sales Charge (16.15)% n/a (3.77)% 2.36%
Without Sales Charge (11.97) n/a 1.00 4.25
CLASS B**
With CDSC+ (16.66) n/a (4.75) 2.45
Without CDSC (12.28) n/a 0.24 3.51
CLASS C**
With Sales Charge and CDSC (14.02) (5.61)% n/a n/a
Without Sales Charge and CDSC (12.28) (3.72) n/a n/a
CLASS D**
With 1% CDSC (13.15) n/a (0.76) n/a
Without CDSC (12.28) n/a 0.24 3.51
LIPPER SMALL CAP FUNDS AVERAGE*** 19.60 27.64+++ 30.04 22.01++
RUSSELL 2000 VALUE INDEX*** (6.41) (3.02)+++ (1.49) 7.07++
<CAPTION>
NET ASSET VALUE
DECEMBER 31, 1999 JUNE 30, 1999 DECEMBER 31, 1998
----------------- ------------- -----------------
CLASS A $7.91 $9.03 $7.87
CLASS B 7.76 8.89 7.78
CLASS C 7.76 8.89 N/A
CLASS D 7.76 8.89 7.78
</TABLE>
CAPITAL GAIN (LOSS) INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1999
PAID $0.039
REALIZED 0.270
UNREALIZED (2.580)0
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.
- --------------
* 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 charge
("CDSC"), charged on redemptions made within one year of the date of
purchase, declining to 1% in the sixth year and 0% thereafter. Returns for
Class C shares are calculated with and without the effect of the initial 1%
maximum sales charge and the 1% CDSC that is charged on redemptions made
within 18 months of the date of purchase. Returns for Class D shares are
calculated with and without the effect of the 1% CDSC, charged on
redemptions made within one year of the date of purchase.
*** The Lipper Small Cap Funds Average (Lipper Average) and the Russell 2000
Value Index are unmanaged benchmarks that assume investment of dividends.
The Lipper Average and the Russell 2000 Value Index exclude the effect of
fees and/or 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.
+ The CDSC is 5% for periods of one year or less, and 3% since inception.
++ From April 30, 1997.
+++ From May 31, 1999.
0 Represents the per share amount of net unrealized depreciation of portfolio
securities as of December 31, 1999.
5
<PAGE>
PORTFOLIO OVERVIEW
DIVERSIFICATION OF NET ASSETS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
PERCENT OF NET ASSETS
DECEMBER 31,
---------------------
ISSUES COST VALUE 1999 1998
------ ------------- ------------- ------ ------
<S> <C> <C> <C> <C> <C>
COMMON STOCKS:
Advertising ................... 1 $ 1,654,682 $ 2,904,688 2.6 3.0
Apparel and Textiles .......... 1 2,483,585 2,961,562 2.6 3.7
Appliances .................... 1 3,787,395 3,315,000 2.9 0.8
Automotive and Trucking ....... -- -- -- -- 2.1
Banking ....................... 3 10,211,275 6,350,625 5.6 4.6
Building and Construction ..... 1 3,315,639 3,192,413 2.8 3.0
Business Services ............. 1 2,181,006 3,011,250 2.7 --
Capital Goods ................. 1 3,582,293 1,509,375 1.3 3.1
Computer Software ............. -- -- -- -- 1.0
Consumer Goods and Services ... 2 6,686,924 4,509,688 4.0 --
Distributors .................. 1 3,400,276 2,515,625 2.2 4.1
Drugs and Health Care ......... 2 4,986,060 6,049,375 5.4 --
Finance and Insurance ......... 3 9,347,979 7,457,950 6.6 4.8
Food .......................... -- -- -- -- 2.0
Garden Products ............... 1 4,814,638 607,219 0.5 1.7
Industrial Goods and Services . -- -- -- -- 2.4
Leisure and Related ........... 1 2,500,780 3,367,500 3.0 --
Machinery ..................... 1 6,391,848 3,197,813 2.8 2.0
Manufacturing ................. 2 4,594,737 6,342,500 5.6 7.1
Medical Products and Technology 1 1,505,881 3,389,062 3.0 6.1
Oil and Gas ................... 4 10,481,511 11,785,625 10.4 5.0
Packaging/Containers .......... 3 11,425,980 6,736,625 6.0 3.4
Plastics ...................... 1 3,399,581 2,149,875 1.9 1.3
Printing and Publishing ....... 1 5,794,776 2,911,250 2.6 5.9
Restaurants ................... 1 2,252,120 2,896,250 2.6 5.6
Retail Trade .................. 7 24,033,206 14,051,312 12.5 9.1
Shipbuilding .................. -- -- -- -- 2.7
Specialty Chemicals ........... -- -- -- -- 4.4
Specialty Metals/Steel ........ 3 14,607,440 7,620,090 6.8 2.5
Tobacco ....................... -- -- -- -- 2.6
Transportation ................ 2 8,126,320 5,438,981 4.8 4.8
Miscellaneous ................. -- -- -- -- 1.7
--- ------------- ------------- ------ -----
45 151,565,932 114,271,653 101.2 100.5
OTHER ASSETS LESS LIABILITIES . -- (1,374,051) (1,374,051) (1.2) (0.5)
--- ------------- ------------- ------ -----
NET ASSETS .................... 45 $ 150,191,881 $ 112,897,602 100.0 100.0
=== ============= ============= ====== =====
</TABLE>
6
<PAGE>
PORTFOLIO OVERVIEW
LARGEST PORTFOLIO CHANGES
DURING PAST SIX MONTHS
SHARES
-----------------------------
HOLDINGS
ADDITIONS INCREASE 12/31/99
- ------------- ------------ ------------
Abercrombie &
Fitch (Class A) ......... 10,000 80,000
AK Steel Holding .......... 170,000 170,000
American National
Can Group................ 210,000 210,000
Apria Healthcare Group .... 170,000 170,000
Cadmus Communications ..... 60,000 340,000
Complete Business
Solutions................ 120,000 120,000
Midcoast Energy Resources.. 145,000 145,000
Rent-Way .................. 30,000 145,000
Trans World Entertainment.. 30,000 230,000
Valero Energy ............. 170,000 170,000
SHARES
-----------------------------
HOLDINGS
REDUCTIONS DECREASE 12/31/99
- ------------- ------------ ------------
ABC-NACO ................ 61,100 238,900
ChiRex .................. 150,000 --
Dexter .................. 89,000 --
Equitable Resources ..... 45,000 85,000
Furon ................... 245,000 --
Giant Cement Holdings ... 189,100 --
Marine Drilling ......... 150,000 140,000
Merrill ................. 250,000 --
Mueller Industries ...... 40,000 90,000
True North
Communications......... 65,000 65,000
Largest portfolio changes from the previous period to the current period are
based on cost of purchases and proceeds from sales of securities.
LARGEST PORTFOLIO HOLDINGS
DECEMBER 31, 1999
SECURITY VALUE
- ---------- --------------
Urban Outfitters .................. $3,502,500
Pittston BAX Group ................ 3,453,125
Pharmacopeia ...................... 3,389,062
Valero Energy ..................... 3,378,750
Harman International Industries.... 3,367,500
Windmere-Durable Holdings ......... 3,315,000
RenaissanceRe Holdings ............ 3,270,000
Mueller Industries ................ 3,262,500
AK Steel Holding .................. 3,208,750
Stewart & Stevenson Services ...... 3,197,813
LARGEST INDUSTRIES
DECEMBER 31, 1999
[BAR CHART OMITTED]
[TABLE BELOW REPRESENTS BAR GRAPH IN ITS PRINTED FORM.]
Percent of Net Assets
- ---------------------
RETAIL TRADE........................... $14,051,312
OIL AND GAS ........................... $11,785,625
SPECIALTY METALS/STEEL................. $ 7,620,090
FINANCE AND INSURANCE.................. $ 7,457,950
PACKAGING/CONTAINERS .................. $ 6,736,625
7
<PAGE>
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
SHARES VALUE
------ -----
COMMON STOCKS - 101.2%
ADVERTISING 2.6%
TRUE NORTH COMMUNICATIONS
Advertising agency 65,000 $2,904,688
----------
APPAREL AND TEXTILES 2.6%
CUTTER & BUCK*
Designer and marketer of
men's sportswear and
outerwear 195,000 2,961,562
----------
APPLIANCES 2.9%
WINDMERE-DURABLE HOLDINGS
Manufacturer and distributor of
electrical appliances for
home use 195,000 3,315,000
----------
BANKING 5.6%
BANK UNITED (CLASS A)
Financial services provider 80,000 2,157,500
BAY VIEW CAPITAL
Bank operator 170,000 2,411,875
COMMERCIAL FEDERAL
Provider of financial services 100,000 1,781,250
----------
6,350,625
----------
BUILDING AND
CONSTRUCTION 2.8%
DAL-TILE INTERNATIONAL*
Manufacturer of ceramic tile 315,300 3,192,413
----------
BUSINESS SERVICES 2.7%
COMPLETE BUSINESS SOLUTIONS*
Provider of information
technology services 120,000 3,011,250
----------
CAPITAL GOODS 1.3%
APOGEE ENTERPRISES
Distributor and installer of
windows and glass products 300,000 1,509,375
----------
CONSUMER GOODS AND
SERVICES 4.0%
FRESH DEL MONTE PRODUCE*
Producer, distributor, and
marketer of fresh produce 200,000 1,800,000
RENT-WAY*
Provider of home entertainment
equipment and furniture
rentals 145,000 2,709,688
----------
4,509,688
----------
DISTRIBUTORS 2.2%
CUBIC
Developer, manufacturer, and
distributor of defense and
industrial electronic products 115,000 2,515,625
----------
DRUGS AND HEALTH CARE 5.4%
APRIA HEALTHCARE GROUP*
Provider of home health care
services 170,000 $3,049,375
OMNICARE
Provider of pharmaceutical
services to long-term
care institutions 250,000 3,000,000
----------
6,049,375
----------
FINANCE AND INSURANCE 6.6%
Berkley (W.R.)
Insurance provider 90,200 1,894,200
Liberty Financial
Provider of asset management
services 100,000 2,293,750
RenaissanceRe Holdings
Global provider of reinsurance
and insurance 80,000 3,270,000
----------
7,457,950
----------
GARDEN PRODUCTS 0.5%
Acorn Products*+
Manufacturer and marketer of
lawn and garden tools 381,000 607,219
----------
LEISURE AND RELATED 3.0%
Harman International Industries
Provider of audio and video
products for the consumer and
professional markets 60,000 3,367,500
----------
MACHINERY 2.8%
Stewart & Stevenson Services
Designer, assembler, and
marketer of machinery 270,000 3,197,813
----------
MANUFACTURING 5.6%
Furniture Brands International*
Manufacturer of furniture and
home furnishings 140,000 3,080,000
Mueller Industries*
Manufacturer and distributor of
brass, bronze, copper, and
aluminum products 90,000 3,262,500
----------
6,342,500
----------
MEDICAL PRODUCTS AND
TECHNOLOGY 3.0%
Pharmacopeia*
Provider of technology services
used to accelerate drug discovery
and chemical development 150,000 3,389,062
----------
- ---------------
See footnotes on page 9.
8
<PAGE>
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
SHARES VALUE
------ -----
OIL AND GAS 10.4%
EQUITABLE RESOURCES
Energy supplier 85,000 $ 2,836,875
MARINE DRILLING*
Provider of offshore drilling
services for international
oil and gas companies 140,000 3,141,250
MIDCOAST ENERGY RESOURCES
Transporter and marketer of
natural gas and other
petroleum products 145,000 2,428,750
VALERO ENERGY
Owner and operator of
oil refineries 170,000 3,378,750
-------------
11,785,625
-------------
PACKAGING/CONTAINERS 6.0%
AMERICAN NATIONAL CAN GROUP
Manufacturer of beverage cans 210,000 2,730,000
APPLIED EXTRUSION TECHNOLOGIES*
Developer, producer, and
seller of packaging supplies 413,000 2,607,062
BWAY*
Manufacturer and marketer of
steel containers 228,500 1,399,563
-------------
6,736,625
-------------
PLASTICS 1.9%
LAMSON & SESSIONS*
Manufacturer and distributor
of thermoplastics and
electronics 441,000 2,149,875
-------------
PRINTING AND
PUBLISHING 2.6%
CADMUS COMMUNICATIONS
Commercial printer 340,000 2,911,250
-------------
RESTAURANTS 2.6%
JACK IN THE BOX*
Operator of fast-food
restaurants 140,000 2,896,250
-------------
RETAIL TRADE 12.5%
ABERCROMBIE & FITCH (Class A)*
Retailer of casual apparel 80,000 2,135,000
FRED'S
Discount retailer 200,000 3,181,250
LOEHMANN'S*+
Specialty retailer 700,000 38,500
STAGE STORES*
Clothing retailer 730,000 1,688,125
THE WET SEAL (Class A)*
Retailer of young women's
apparel 90,000 1,105,312
TRANS WORLD ENTERTAINMENT*
Retailer of music and
video products 230,000 2,400,625
URBAN OUTFITTERS*
Clothing retailer 120,000 3,502,500
-------------
14,051,312
-------------
SPECIALTY METALS/STEEL 6.8%
AK STEEL HOLDING
Producer of carbon steel 170,000 $ 3,208,750
OLYMPIC STEEL*
Processor and distributor of
steel products 447,000 2,130,234
UNIVERSAL STAINLESS & ALLOY
PRODUCTS*+
Manufacturer and marketer of
specialty steel 341,100 2,281,106
-------------
7,620,090
-------------
TRANSPORTATION 4.8%
ABC-NACO*
Manufacturer and marketer
of railroad equipment 238,900 1,985,856
PITTSTON BAX GROUP
Provider of global freight
transportation 325,000 3,453,125
-------------
5,438,981
-------------
TOTAL INVESTMENTS 101.2%
(Cost $151,565,932) 114,271,653
OTHER ASSETS
LESS LIABILITIES (1.2)% (1,374,051)
-------------
NET ASSETS 100.0% $ 112,897,602
=============
- -------------
* 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.
9
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value:
Common stocks* (cost $151,565,932) ........................................... $ 114,271,653
Receivable for securities sold ................................................. 747,044
Receivable for dividends ....................................................... 28,476
Receivable for Capital Stock sold .............................................. 83,099
Expenses prepaid to shareholder service agent .................................. 43,413
Deferred organization expenses ................................................. 6,012
Other .......................................................................... 3,840
-------------
TOTAL ASSETS ................................................................... 115,183,537
-------------
LIABILITIES:
Payable for Capital Stock repurchased .......................................... 1,091,767
Bank Overdraft ................................................................. 914,939
Accrued expenses and other ..................................................... 279,229
-------------
TOTAL LIABILITIES .............................................................. 2,285,935
-------------
NET ASSETS ..................................................................... $ 112,897,602
=============
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($0.001 par value; 1,000,000,000 shares authorized;
14,454,313 shares outstanding):
Class A ...................................................................... $ 5,144
Class B ...................................................................... 5,934
Class C ...................................................................... 162
Class D ...................................................................... 3,214
Additional paid-in capital ..................................................... 150,209,233
Accumulated net investment loss ................................................ (2,272)
Accumulated net realized loss .................................................. (29,534)
Net unrealized depreciation of investments ..................................... (37,294,279)
-------------
NET ASSETS ..................................................................... $ 112,897,602
=============
NET ASSET VALUE PER SHARE:
CLASS A ($40,677,732 / 5,144,490 shares) ....................................... $ 7.91
=============
CLASS B ($46,029,928 / 5,933,906 shares) ....................................... $ 7.76
=============
CLASS C ($1,253,580 / 161,590 shares) .......................................... $ 7.76
=============
CLASS D ($24,936,362 / 3,214,327 shares) ....................................... $ 7.76
=============
</TABLE>
- --------------
* Includes affiliated issuers (issuers in which the Fund's holdings represent
5% or more of the outstanding voting securities) with a cost of
$15,398,985, and a value of $2,926,825.
See Notes to Financial Statements.
10
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................. $ 1,313,484
Interest .............................................. 25,481
-----------
TOTAL INVESTMENT INCOME ................................................... $ 1,338,965
EXPENSES:
Management fee ........................................ 1,413,866
Distribution and service fees ......................... 1,040,758
Shareholder account services .......................... 496,346
Registration .......................................... 112,068
Shareholder reports and communications ................ 94,935
Custody and related services .......................... 85,354
Auditing and legal fees ............................... 50,341
Directors' fees and expenses .......................... 14,525
Amortization of deferred organization expenses ........ 2,577
Miscellaneous ......................................... 8,486
-----------
TOTAL EXPENSES ............................................................ 3,319,256
-----------
NET INVESTMENT LOSS ....................................................... (1,980,291)
NET REALIZED AND UNREALIZED GAIN (loss) ON INVESTMENTS:
Net realized gain on investments* ..................... 3,899,601
Net change in unrealized depreciation of investments .. (3,700,133)
-----------
NET GAIN ON INVESTMENTS ................................................... 199,468
-----------
DECREASE IN NET ASSETS FROM OPERATIONS .................................... $(1,780,823)
===========
</TABLE>
- ---------------
* Includes net realized loss from affiliated issuers of $446,634.
See Notes to Financial Statements.
11
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1999 1998
-----------------------------------
<S> <C> <C>
OPERATIONS:
Net investment loss ............................................ $ (1,980,291) $ (3,321,261)
Net realized gain on investments ............................... 3,899,601 1,143,557
Net change in unrealized appreciation/depreciation
of investments ............................................... (3,700,133) (49,090,217)
------------- -------------
DECREASE IN NET ASSETS FROM OPERATIONS ......................... (1,780,823) (51,267,921)
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain on investments:
Class A ..................................................... (217,190) (222,320)
Class B ..................................................... (252,504) (269,568)
Class C ..................................................... (5,054) --
Class D ..................................................... (139,563) (179,287)
------------- -------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS ...................... (614,311) (671,175)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares .............................. 18,654,762 73,589,710
Exchanged from associated Funds ................................ 30,506,558 26,643,082
Value of shares issued in payment of gain distributions ........ 417,927 616,483
------------- -------------
Total .......................................................... 49,579,247 100,849,275
------------- -------------
Cost of shares repurchased ..................................... (55,673,925) (59,935,762)
Exchanged into associated Funds ................................ (56,254,938) (50,531,719)
------------- -------------
Total .......................................................... (111,928,863) (110,467,481)
------------- -------------
DECREASEIN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS .......... (62,349,616) (9,618,206)
------------- -------------
DECREASEIN NET ASSETS .......................................... (64,744,750) (61,557,302)
NET ASSETS:
Beginning of year .............................................. 177,642,352 239,199,654
------------- -------------
END OF YEAR (including accumulated net investment loss of $2,272
and $1,376, respectively) .................................... $ 112,897,602 $ 177,642,352
============= =============
</TABLE>
- --------------
See Notes to Financial Statements.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. MULTIPLE CLASSES OF SHARES -- Seligman Small-Cap Value Fund (the "Fund"), a
series of Seligman Value Fund Series, Inc., offers four classes of shares. Class
A shares are sold with an initial sales charge of up to 4.75% and a continuing
service fee of up to 0.25% on an annual basis. Class A shares purchased in an
amount of $1,000,000 or more are sold without an initial sales charge but are
subject to a contingent deferred sales charge ("CDSC") of 1% on redemptions
within 18 months of purchase. Class B shares are sold without an initial sales
charge but are subject to a distribution fee of 0.75% and a service fee of up to
0.25% on an annual basis, and a CDSC, if applicable, of 5% on redemptions in the
first year of purchase, declining to 1% in the sixth year and 0% thereafter.
Class B shares will automatically convert to Class A shares on the last day of
the month that precedes the eighth anniversary of their date of purchase. The
Fund began offering Class C shares on May 27, 1999. Class C shares are sold with
an initial sales charge of up to 1% and 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 CDSC, if
applicable, of 1% imposed on redemptions made within 18 months 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 CDSC, if applicable, of 1% imposed on redemptions made within one
year of purchase. The four 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-specific expenses, and has exclusive voting rights with respect to
any matter on which a separate vote of any class is required.
2. SIGNIFICANT ACCOUNTING POLICIES -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Fund:
a. SECURITY VALUATION -- Investments in stocks are valued at current market
values or, in their absence, at fair values determined in accordance with
procedures approved by the Board of Directors. Securities traded on national
exchanges are valued at last sales prices or, in their absence and in the
case of over-the-counter securities, at the mean of bid and asked prices.
Short-term holdings maturing in 60 days or less are valued at amortized cost.
b. FEDERAL TAXES -- There is no provision for federal income tax. The Fund has
elected to be taxed as a regulated investment company and intends to
distribute substantially all taxable net income and net gain realized.
c. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Investment
transactions are recorded on trade dates. Identified cost of investments sold
is used for both financial statement and federal income tax purposes.
Dividends receivable and payable are recorded on ex-dividend dates. Interest
income is recorded on an accrual basis.
d. MULTIPLE CLASS ALLOCATIONS -- All income, expenses (other than class-specific
expenses), and realized and unrealized gains or losses are allocated daily to
each class of shares based upon the relative value of shares of each class.
Class-specific expenses, which include distribution and service fees and any
other items that are specifically attributable to a particular class, are
charged directly to such class. For the year ended December 31, 1999,
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.
3. PURCHASES AND SALES OF SECURITIES -- Purchases and sales of portfolio
securities, excluding US Government obligations and short-term investments, for
the year ended December 31, 1999, amounted to $59,102,340 and $123,559,746,
respectively.
At December 31, 1999, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes, and the
tax basis gross unrealized appreciation and depreciation of portfolio securities
amounted to $12,810,193 and $50,134,006, respectively.
4. CAPITAL SHARE TRANSACTIONS -- The Fund has authorized 1,000,000,000 shares of
$0.001 par value Capital Stock.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Transactions in shares of Capital Stock were as follows:
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1999 1998
--------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
---------- -------------- ---------- ------------
Net proceeds from
sales of shares 1,060,132 $ 8,580,796 2,864,792 $25,758,797
Exchanged from
associated Funds 2,717,628 22,128,020 1,272,935 10,646,139
Shares issued in
payment of gain
distributions 21,837 173,809 27,525 206,712
---------- ------------- ---------- ------------
Total 3,799,597 30,882,625 4,165,252 36,611,648
---------- ------------- ---------- ------------
Cost of shares
repurchased (2,847,811) (22,161,118) (3,480,497) (29,705,640)
Exchanged into
associated
Funds (3,479,540) (28,047,117) (2,004,039) (16,748,650)
---------- ------------- ---------- ------------
Total (6,327,351) (50,208,235) (5,484,536) (46,454,290)
---------- ------------- ---------- ------------
Decrease (2,527,754) $ (19,325,610) (1,319,284) $ (9,842,642)
========== ============= ========== ============
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1999 1998
--------------------------- -------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
---------- -------------- ---------- ------------
Net proceeds
from sales
of shares 676,372 $ 5,356,321 2,907,461 $26,305,568
Exchanged from
associated Funds 279,379 2,253,268 408,213 3,503,911
Shares issued in
payment of gain
distributions 19,608 153,140 33,089 245,853
---------- ------------- ---------- ------------
Total 975,359 7,762,729 3,348,763 30,055,332
---------- ------------- ---------- ------------
Cost of shares
repurchased (2,096,029) (16,144,317) (1,578,419) (13,327,385)
Exchanged into
associated
Funds (2,185,588) (16,538,393) (1,647,820) (13,470,487)
---------- ------------- ---------- ------------
Total (4,281,617) (32,682,710) (3,226,239) (26,797,872)
---------- ------------- ---------- ------------
Increase
(Decrease) (3,306,258) $ (24,919,981) 122,524 $ 3,257,460
========== ============= ========== ============
MAY 27, 1999* TO
DECEMBER 31, 1999
--------------------------------
CLASS C SHARES AMOUNT
--------- ----------
Net proceeds
from sales
of shares ............................ 175,923 $1,430,671
Exchanged from
associated funds...................... 3,201 27,297
Shares issued in
payment of gain
distributions ........................ 623 4,869
------- ----------
Total .................................. 179,747 1,462,837
------- ----------
Cost of shares
repurchased .......................... (5,578) (42,114)
Exchanged into
associated funds (12,579) (93,161)
------- ----------
Total .................................. (18,157) (135,275)
------- ----------
Increase ............................... 161,590 $1,327,562
======= ==========
* Commencement of offering of shares.
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1999 1998
--------------------------- -------------------------
CLASS D SHARES AMOUNT SHARES AMOUNT
---------- -------------- ---------- ------------
Net proceeds
from sales
of shares 417,018 $ 3,286,974 2,371,845 $ 21,525,345
Exchanged from
associated Funds 740,549 6,097,973 1,376,302 12,493,032
Shares issued in
payment of gain
distributions 11,025 86,109 22,062 163,918
---------- ------------- ---------- ------------
Total 1,168,592 9,471,056 3,770,209 34,182,295
---------- ------------- ---------- ------------
Cost of shares
repurchased (2,264,750) (17,326,376) (2,125,511) (16,902,737)
Exchanged into
associated
Funds (1,522,945) (11,576,267) (2,350,039) (20,312,582)
---------- ------------- ---------- ------------
Total (3,787,695) (28,902,643) (4,475,550) (37,215,319)
---------- ------------- ---------- ------------
Decrease (2,619,103) $ (19,431,587) (705,341) $ (3,033,024)
========== ============= ========== ============
5. MANAGEMENT FEE, DISTRIBUTION SERVICES, AND OTHER TRANSACTIONS -- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the Fund and
provides the necessary personnel and facilities. Compensation of all officers of
the Fund, all directors of the Fund who are employees or consultants of the
Manager, and all personnel of the Fund and the Manager is paid by the Manager.
The Manager receives a fee, calculated daily and payable monthly, equal to 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 $11,928 from sales of Class A
shares. Commissions of $92,523 and $13,377 were paid to dealers for sales of
Class A and Class C shares, respectively.
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distribution of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive a continuing fee of up to 0.25% on an annual basis,
payable quarterly, of the average daily net assets of the Class A shares
attributable to the particular service organizations for providing personal
services and/or the maintenance of shareholder accounts. The Distributor charges
such fees to the Fund pursuant to the Plan. For the year ended December 31,
1999, fees incurred under the Plan aggregated $123,760 or 0.25% per annum of the
average daily net assets of Class A shares.
Under the Plan, with respect to Class B shares, Class C shares, 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
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
basis of the average daily net assets of the Class B, Class C, and Class D
shares for which the organizations are responsible; and, for Class C and Class D
shares, fees for providing other distribution assistance of up to 0.75% on an
annual basis of such average daily net assets. Such fees are paid monthly by the
Fund to the Distributor pursuant to the Plan.
With respect to Class B shares, a distribution fee of 0.75% on an annual
basis of average daily net assets is payable monthly by the Fund to the
Distributor; however, the Distributor has sold its rights to this fee to a third
party (the "Purchaser"), which provides funding to the Distributor to enable it
to pay commissions to dealers at the time of the sale of the related Class B
shares.
For the year ended December 31, 1999, fees incurred under the Plan,
equivalent to 1% per annum of the average daily net assets of Class B, Class C,
and Class D shares, amounted to $580,076, $4,122, and $332,800, respectively.
The Distributor is entitled to retain any CDSC imposed on certain redemptions
of Class A and Class C shares occurring within 18 months of purchase and on
redemptions of Class D shares occurring within one year of purchase. For the
year ended December 31, 1999, such charges amounted to $36,980.
The Distributor has sold its rights to collect any CDSC imposed on
redemptions of Class B shares to the Purchaser. In connection with the sale of
its rights to collect any CDSC and the distribution fees with respect to Class B
shares described above, the Distributor receives payments from the Purchaser
based on the value of Class Bshares sold. The aggregate of such payments
retained by the Distributor, for the year ended December 31, 1999, amounted to
$7,678.
Seligman Services, Inc., an affiliate of the Manager, is eligible to receive
commissions from certain sales of shares of the Fund, as well as distribution
and service fees pursuant to the Plan. For the year ended December 31, 1999,
Seligman Services, Inc. received commissions of $883 from the sales of shares of
the Fund and distribution and service fees of $10,364, pursuant to the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged the Fund at cost $496,346 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. Directors may elect to have their
deferred fees accrue interest or earn a return based on the performance of the
Fund or other funds in the Seligman Group of Investment Companies. The cost of
such fees and earnings accrued thereon is included in directors' fees and
expenses, and the accumulated balance thereof at December 31, 1999, of $2,272 is
included in other liabilities. Deferred fees and related accrued earnings are
not deductible for federal income tax purposes until such amounts are paid.
6. COMMITTED LINE OF CREDIT -- The Fund is a participant in a joint $750 million
committed line of credit that is shared by substantially all funds in the
Seligman Group of Investment Companies. The Fund's borrowings are limited to 10%
of its net assets. Borrowings pursuant to the credit facility are subject to
interest at a rate equal to the overnight federal funds rate plus 0.50%. The
Fund incurs a commitment fee of 0.08% per annum on its share of the unused
portion of the credit facility. The credit facility may be drawn upon only for
temporary purposes and is subject to certain other customary restrictions. The
credit facility commitment expires in June 2000, but is renewable annually with
the consent of the participating banks. For the year ended December 31, 1999,
the Fund did not borrow from the credit facility.
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 of the issuer. A
summary of the Fund's transactions in the securities of these issuers during the
year ended December 31, 1999, is as follows:
<TABLE>
<CAPTION>
GROSS GROSS
BEGINNING PURCHASES SALES AND ENDING REALIZED DIVIDEND ENDING
AFFILIATE SHARES AND ADDITIONS REDUCTIONS SHARES LOSS INCOME VALUE
- ------------ --------------------------------------------- --------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Acorn Products ........... 431,000 -- 50,000 381,000 $446,634 -- $ 607,219
Loehmann's ............... 700,000 -- -- 700,000 -- -- 38,500
Universal Stainless
&Alloy Products ........ 341,100 -- -- 341,100 -- -- 2,281,106
--------- -----------
TOTAL $446,634 $2,926,825
========= ===========
</TABLE>
15
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below are intended to help you understand each Class's financial
performance from its inception. Certain information reflects financial results
for a single share of a Class that was held throughout the periods shown. Per
share amounts are calculated using average shares outstanding. "Total return"
shows the rate that you would have earned (or lost) on an investment in each
Class, assuming you reinvested all your capital gain distributions. Total
returns do not reflect any sales charges and are not annualized for periods of
less than one year.
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 4/25/97* YEAR ENDED DECEMBER 31, 4/25/97*
---------------------------- TO ------------------------ TO
1999 1998 12/31/97 1999 1998 12/31/97
------- ------- ----------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD ................ $7.87 $9.73 $7.14 $7.78 $9.69 $7.14
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) ........................ (0.07) (0.09) (0.07) (0.14) (0.15) (0.11)
Net realized and unrealized gain (loss)
on investments .................................... 0.15 (1.74) 2.67 0.16 (1.73) 2.67
------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS .................... 0.08 (1.83) 2.60 0.02 (1.88) 2.56
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Distributions from net realized capital gains ....... (0.04) (0.03) (0.01) (0.04) (0.03) (0.01)
------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ................................. (0.04) (0.03) (0.01) (0.04) (0.03) (0.01)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ...................... $7.91 $7.87 $9.73 $7.76 $7.78 $9.69
======= ======= ======= ======= ======= =======
TOTAL RETURN: ....................................... 1.00% (18.81)% 36.38% 0.24% (19.41)% 35.82%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) ............ $40,678 $60,383 $87,510 $46,030 $71,875 $88,330
Ratio of expenses to average net assets ............. 1.86% 1.69% 1.87%+ 2.61% 2.44% 2.63%+
Ratio of net income (loss) to average net assets .... (0.92)% (0.98)% (1.12)%+ (1.67)% (1.73)% (1.88)%+
Portfolio turnover rate ............................. 41.48% 30.06% 15.91% 41.48% 30.06% 15.91%
</TABLE>
- -----------
See footnotes on page 17.
16
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C CLASS D
-------------------------------------------------
5/27/99** YEAR ENDED DECEMBER 31, 4/25/97*
TO --------------------------- TO
12/31/99 1999 1998 12/31/97
---------- --------------------------- ---------
<S> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $8.10 $7.78 $9.69 $7.14
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.07) (0.13) (0.15) (0.11)
Net realized and unrealized gain (loss)
on investments (0.23) 0.15 (1.73) 2.67
------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS (0.30) 0.02 (1.88) 2.56
------- ------- ------- -------
LESS DISTRIBUTIONS:
Distributions from net realized capital gains (0.04) (0.04) (0.03) (0.01)
------- ------- ------- -------
TOTAL DISTRIBUTIONS (0.04) (0.04) (0.03) (0.01)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $7.76 $7.76 $7.78 $9.69
======= ======= ======= =======
TOTAL RETURN: (3.72)% 0.24% (19.41)% 35.82%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $1,254 $24,936 $45,384 $63,360
Ratio of expenses to average net assets 2.69%+ 2.61% 2.44% 2.63%+
Ratio of net income (loss) to average net assets (1.65)%+ (1.67)% (1.73)% (1.88)%+
Portfolio turnover rate 41.48%++ 41.48% 30.06% 15.91%
</TABLE>
- -----------------
* Commencement of operations.
** Commencement of offering of shares.
+ Annualized.
++ For the year ended December 31, 1999.
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, 1999, the related statements of operations for the year then ended and of
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. We conducted our audits
in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1999, by correspondence with
the Fund's custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Seligman Small-Cap Value Fund as of December 31, 1999, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New York, New York
February 11, 2000
18
<PAGE>
FEDERAL TAX STATUS OF 1999
GAIN DISTRIBUTION FOR TAXABLE ACCOUNTS
A long-term capital gain distribution of $0.039 per share representing net
capital gains realized through 1999 was paid on November 23, 1999 to Class A, B,
C, and D shareholders.
The long-term capital gain distribution is designated a "capital gain dividend"
for federal income tax purposes and is taxable to shareholders in 1999 as a
long-term gain from the sale of capital assets, no matter how long shares have
been owned, or whether the distribution was received in shares or in cash.
However, if shares on which a capital gain distribution was received are
subsequently sold, and such shares have been held for six months or less, any
loss on the sale would be treated as long-term to the extent that it offsets the
long-term gain distribution.
If the distribution was received in shares, the per share cost basis for federal
income tax purposes is $7.96 for Class A shares, and $7.81 for Class B, Class C,
and Class D shares.
A 1999 year-end statement of account activity and a 1999 tax package, which may
include a Form 1099-DIV, Form 1099-B, and/or a Cost Basis Statement, have been
mailed to each shareholder. Form 1099-DIV shows the distributions paid to the
shareholder during the year. Form 1099-B shows the proceeds of any redemptions
paid to the shareholder during the year. Cost Basis Statements report all sales
or exchanges from a shareholder's account which may have resulted in a capital
gain or loss in 1999. The information shown on Forms 1099-DIV and 1099-B is
reported to the Internal Revenue Service as required by federal regulations.
FOR MORE INFORMATION
MANAGER
J. & W. Seligman & Co.
Incorporated
100 Park Avenue
New York, NY 10017
GENERAL COUNSEL
Sullivan & Cromwell
INDEPENDENT AUDITORS
Deloitte & Touche LLP
GENERAL DISTRIBUTOR
Seligman Advisors, Inc.
100 Park Avenue
New York, NY 10017
SHAREHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
IMPORTANT TELEPHONE NUMBERS
(800) 221-2450 Shareholder Services
(800) 445-1777 Retirement Plan Services
(212) 682-7600 Outside the United States
(800) 622-4597 24-Hour Automated Telephone Access Service
19
<PAGE>
BOARD OF DIRECTORS
JOHN R. GALVIN 2, 4
DEAN, Fletcher School of Law and Diplomacy
at Tufts University
DIRECTOR, Raytheon Company
ALICE S. ILCHMAN 3, 4
TRUSTEE, Committee for Economic Development
CHAIRMAN, The Rockefeller Foundation
FRANK A. MCPHERSON 2, 4
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
DIRECTOR, Conoco Inc.
JOHN E. MEROW 2, 4
RETIRED CHAIRMAN AND SENIOR PARTNER,
Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Industries, Inc.
DIRECTOR, New York Presbyterian Hospital
BETSY S. MICHEL 2, 4
TRUSTEE, The Geraldine R. Dodge Foundation
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, 4
RETIRED PARTNER, Pitney, Hardin, Kipp & Szuch, Law Firm
JAMES Q. RIORDAN 3, 4
DIRECTOR, KeySpan Energy Corporation
TRUSTEE, Committee for Economic Development
DIRECTOR, Public Broadcasting Service
RICHARD R. SCHMALTZ 1
MANAGING DIRECTOR, DIRECTOR OF INVESTMENTS,
J. & W. Seligman & Co. Incorporated
TRUSTEE EMERITUS, Colby College
ROBERT L. SHAFER 3, 4
RETIRED VICE PRESIDENT, Pfizer Inc.
JAMES N. WHITSON 2, 4
DIRECTOR AND CONSULTANT, Sammons Enterprises, Inc.
DIRECTOR, C-SPAN
DIRECTOR, CommScope, Inc.
BRIAN T. ZINO 1
PRESIDENT
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.
DIRECTOR, ICI Mutual Insurance Company
MEMBER OF THE BOARD OF GOVERNORS,
Investment Company Institute
DIRECTOR EMERITUS
FRED E. BROWN
DIRECTOR AND CONSULTANT,
J. &W. Seligman &Co. Incorporated
- ----------------
Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
4 Board Operations Committee
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
20
<PAGE>
GLOSSARY OF FINANCIAL TERMS
CAPITAL GAIN DISTRIBUTION -- A payment to mutual fund shareholders of profits
realized on the sale of securities in a fund's portfolio.
CAPITAL APPRECIATION/DEPRECIATION -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.
COMPOUNDING -- The change in the value of an investment as shareholders receive
earnings on their investment's earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will not be based on the
original $1,000, but on the $1,070, which includes the first year's earnings.
CONTINGENT DEFERRED SALES CHARGE (CDSC) -- Depending on the class of shares
owned, a fee charged by a mutual fund when shares are sold back to the fund. The
CDSC expires after a fixed time period.
DIVIDEND -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
DIVIDEND YIELD -- A measurement of a fund's dividend as a percentage of the
maximum offering price or net asset value.
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 -- The price at which a mutual fund's share can be purchased. The
offering price per share is the current net asset value plus any sales charge.
PORTFOLIO TURNOVER -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
PROSPECTUS -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission (SEC), such as a fund's investment objective and policies, services,
investment restrictions, how shares are bought and sold, fund fees and other
charges, and the fund's financial highlights.
SEC YIELD -- SEC Yield refers to the net income earned by a fund during a recent
30-day period. This income is annualized and then divided by the maximum
offering price per share on the last day of the 30-day period. The SEC Yield
formula reflects semiannual compounding.
SECURITIES AND EXCHANGE COMMISSION -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
STATEMENT OF ADDITIONAL INFORMATION -- A document that contains more detailed
information about an investment company and that supplements the prospectus. It
is available at no charge upon request.
TOTAL RETURN -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The AVERAGE ANNUAL TOTAL
RETURN represents the average annual compounded rate of return for the periods
presented.
YIELD ON SECURITIES -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.
- ----------------
Adapted from the Investment Company Institute's 1999 MUTUAL FUND FACT BOOK.
21
<PAGE>
THIS REPORT IS INTENDED ONLY FOR THE INFORMATION OF SHAREHOLDERS OR THOSE
WHO HAVE RECEIVED THE OFFERING PROSPECTUS COVERING SHARES OF CAPITAL STOCK
OF SELIGMAN 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.
SELIGMAN ADVISORS, INC.
an affiliate of
[LOGO OMITTED]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
EQVSC2 12/99 [SYMBOL]Printed on Recycled Paper
