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67TH ANNUAL REPORT
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SELIGMAN
COMMON STOCK
FUND, INC.
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December 31, 1996
[LOGO]
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A Growth and Income Fund
Established in 1930
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 Common Stock Fund, Inc., which contains information about the sales
charges, management fee, and other costs. Please read the prospectus carefully
before investing or sending money.
EQCS2 12/96
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SELIGMAN COMMON STOCK FUND, INC.
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A mutual fund that seeks to
produce favorable current
income and long-term growth
of both income and capital value without
exposing capital to undue risk.
HIGHLIGHTS OF 1996
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<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------------------- -------------------
CLASS A CLASS B* CLASS D CLASS A CLASS D
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Assets (in thousands) ............................ $656,260 $6,451 $63,938 $614,400 $46,564
- ---------------------------------------------------------------------------------------------------------------------------
Net Asset Value per Share ............................ $14.89 $14.87 $14.87 $14.19 $14.16
With 1996 Gain Distributions
Taken in Shares ................................. 16.02 15.99 15.99 -- --
Increase in Net Asset Value with Gain
Distributions Taken in Shares(1) ................ 12.90% 8.04% 12.92% -- --
- ---------------------------------------------------------------------------------------------------------------------------
Dividends Paid per Share ............................. $0.340 $0.156 $0.213 $0.360 $0.218
With December 1995 and June 1996
Gain Distributions Taken in Shares .............. 0.369 0.158 0.229 -- --
Distributions of Realized Gain per Share ............. 1.115 1.115 1.115 0.944 0.944
- ---------------------------------------------------------------------------------------------------------------------------
Total Expenses per Dollar of
Average Net Assets ................................ $0.0115 $0.0192(2) $0.0191 $0.0093 $0.0172
- ---------------------------------------------------------------------------------------------------------------------------
*From April 22, 1996 (commencement of operations).
(1)Excluding the effect of dividends paid.
(2)Annualized.
</TABLE>
1
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TO THE SHAREHOLDERS
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Seligman Common Stock Fund increased its dividend for the 53rd year in a row for
those investors who reinvest their capital gains. The Fund posted moderate gains
in 1996, though the total return based on the net asset value of Class A shares
lagged that of the Standard & Poor's 500 Composite Stock Price Index (S&P 500)
and the Lipper Growth and Income Funds Average. The Fund's investment results
begin on page 6.
Driven by the outstanding performance of a small number of the largest
stocks, the US equity markets continued to advance in 1996, setting successive
new highs by rebounding from occasional sharp, short-term, setbacks. The S&P
500's total return for the year was 22.96%, and the Dow Jones Industrial Average
(DJIA) posted an exceptional total return of 28.91%. The bond markets, in
contrast, had a less positive year, due to persistent concerns that the
economy's unexpected vigor would produce higher levels of inflation and, in
turn, increases in interest rates.
A constructive economic environment supported strong corporate earnings in
most industries during 1996. In spite of continued corporate downsizing and
restructuring, the unemployment rate fell as low as 5.2% in August and ended the
year at 5.3%, as compared to 5.6% in December 1995. The increased competitive-
ness of US industry and the low inflation environment provided strong funda-
mental support to higher equity prices.
Currently, there are no clear indications that there will be either runaway
economic expansion or recession in 1997. Looking ahead, the environment for the
US financial markets and investors remains generally positive, given continued
modest economic growth, low inflation, and bipartisan efforts to balance the
federal budget without raising taxes. While we always recognize that there could
be further short-term volatility, we remain positive about the long-term outlook
for the financial markets and your Fund.
On a final note, the activity witnessed in the equity markets in 1996,
where large one-day increases followed abrupt corrections, is not unusual in the
challenging world of investing. We believe the best strategy for growth of
capital is long-term investing. A professional financial advisor can help you
formulate a long-term investment plan to help you seek your financial goals, and
can provide the insight and support needed to weather the day-to-day uncertainty
that accompanies investing. It is time, not timing, that counts when it comes to
investing.
A discussion with your Portfolio Managers and the Fund's portfolio of
investments follow this letter.
We thank you for your continued interest in Seligman Common Stock Fund, and
look forward to serving your investment needs in the many years to come.
By order of the Board of Directors,
/s/ William Morris
- ------------------
William C. Morris
Chairman
/s/ Brian T. Zino
-----------------
Brian T. Zino
President
January 31, 1997
2
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ANNUAL PERFORMANCE OVERVIEW
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The following is a discussion with your Portfolio Managers regarding Seligman
Common Stock Fund, and a chart and table comparing your Fund's performance
against the performance of the Standard & Poor's 500 Composite Stock Price Index
(S&P 500) and the Lipper Growth and Income Funds Average.
YOUR PORTFOLIO MANAGERS
CHARLES C. SMITH, JR. is a Managing Director
of J. & W. Seligman & Co. Incorporated and
has been Vice President and Portfolio Manager
of Seligman Common Stock Fund since December
1991. Mr. Smith is also Vice President and
Portfolio Manager of Seligman Income Fund and
Tri-Continental Corporation. Additionally, he
is Vice President of Seligman Portfolios,
Inc. and Portfolio Manager of its Common
[PHOTO] Stock and Income Portfolios. Mr. Smith joined
Seligman in 1985 as Vice President,
Investment Officer. He was promoted to Senior
Vice President, Senior Investment Officer in
August 1992, and to Managing Director in
January 1994. Odette Galli, Vice President of
J. & W. Seligman & Co. Incorporated, was
named Co-Portfolio Manager of Seligman Common
Stock Fund and Tri-Continental Corporation
this year. Ms. Galli joined Seligman in 1993
as a member of the Seligman Growth and Income
Team. Mr. Smith and Ms. Galli are supported
by a group of investment professionals
dedicated to the growth and income investment
discipline, and to the objectives of Seligman
Common Stock Fund.
Seligman Growth and Income Team:
(from left) Rodney Collins, Margaret
Doyle, Jonathan Roth, Odette Galli
(Co-Portfolio Manager), (seated)
Melanie Ravenell (Administrative
Assistant), Charles C. Smith, Jr.
(Co-Portfolio Manager), Amy Fujii
IAIN C. CLARK is Chief Investment Officer of Seligman Henderson Co., Seligman
Common Stock Fund's Subadviser, and is responsible for the international
investment activities of the Fund. Mr. Clark is also head of International
Investments for, and a Director of, Henderson plc, an investment manager in
London, England. He has been with Henderson since 1985.
How did Seligman Common Stock Fund perform in the last 12 months?
"Seligman Common Stock Fund had solid results in 1996, posting a total return of
15.44% based on the net asset value of Class A shares. The Fund's total return
lagged the 22.96% total return of the S&P 500 and the 20.73% total return of the
Lipper Growth and Income Funds Average. However, the Fund's yield exceeded that
of the S&P 500 and was significantly above the average dividend yield of the
Lipper Growth and Income Funds Average. Further, the Fund's risk level, as
measured by the weighted average beta of the Fund's holdings, was less than the
S&P 500. Beta measures the volatility of an investment, as compared to that of
the overall market (represented by the S&P 500)."
Which economic factors affected the Fund's performance in 1996?
"In 1996, the economy grew at a moderate pace and low levels of inflation
prevailed. This environment produced stronger-than-expected corporate profits in
many industries and Seligman Common Stock Fund's equity holdings broadly
benefited in this environment. Further, the declining interest rates in the
second half of the year improved the performance of the interest rate-sensitive
issues in the portfolio."
Which market factors influenced the Fund's performance in the last 12 months?
"Throughout the year, the appreciation of a small number of the largest
companies pushed the markets to record highs. These strong advances were also
due to the steady economy, continued corporate profitability, and increased
mutual fund inflows.
"Abroad, most mature international markets continued to lag the S&P 500's
impressive rise in 1996. Further, the strength of the US Dollar throughout the
year did not improve international results. The Fund maintains a 10%
3
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ANNUAL PERFORMANCE OVERVIEW (continued)
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weighting outside the US to take advantage of quality investment opportunities
and to realize a higher potential rate of return over the long term. Though the
international portion of the portfolio did not match the gains of the domestic
investments in 1996, we anticipate improving relative performance for the
international equity markets in the future."
What was your investment strategy?
"The Fund continued to be a true growth and income fund. Over the year,
investment strategy focused on increasing dividends and identifying undervalued
stocks with strong potential for long-term growth. In a year that was driven by
momentum investing, with large-company stocks clearly leading the markets, we
identified large-company growth stocks selling at attractive relative historic
valuations. While most large-company stocks traded at the high end of their
historic ranges, we kept our value orientation and maintained the portfolio's
low level of risk and reasonable valuation.
"Over the last 12 months, opportunistic buying led us to several
restructuring companies, which proved quite profitable. We sought companies
whose managements were working to improve the corporate balance sheet, increase
efficiency, and therefore enhance profitability. As each fit the restructuring
model, General Signal, an industrial equipment company, Olin, a chemical
manufacturer, and Woolworth, a retailer, were purchased. AMP, an electronics
manufacturer, and Raytheon, a defense company, were also purchased, as we
believe their managements' restructuring efforts should improve performance in
1997. Finally, Ford Motor was recently added, as it should benefit from
management's efforts to improve productivity and profitability through
cost-cutting."
Which sectors in the portfolio improved the Fund's performance in 1996?
"Consumer cyclical stocks, which are economically sensitive, benefited from the
year's positive economic environment. Consequently, the portfolio's overweight
position in the sector in early 1996 improved the Fund's performance. The
strongest consumer cyclical stocks included Knight-Ridder Newspapers and Tribune
in publishing, and Woolworth and Liz Claiborne, in retail. As several holdings
reached full valuation at the end of the year, the portfolio's overall weighting
in consumer cyclicals was reduced and profits were taken. The Fund was also
overweight in consumer staples, with consumer goods and food holdings such as
Colgate-Palmolive, Sara Lee, and Campbell Soup, which performed well.
"Finance and energy were two other strong sectors in the portfolio. The
improving interest rate environment strengthened the financial sector, and
stocks such as Bank of New York, Citicorp, and Household International posted
strong results. In the energy sector, reduced supply improved the pricing
ability of energy companies and, their stocks appreciated. Therefore, the
portfolio's positions in stocks such as Royal Dutch Petroleum, Texaco, and
PanEnergy improved results."
Which sectors impaired the Fund's performance in 1996?
"The basic materials sector, which includes the portfolio's mineral, steel, and
paper issues, suffered throughout the year due to ongoing restructuring problems
and reduced earnings. However, we expect that leading basic materials stocks
should rebound from their currently low historic valuations. Utilities were also
generally weak in 1996, due to continued problems associated with the
deregulation of the industry. Nonetheless, the Fund's utility holdings
outperformed the average of their peers in the markets. Finally, the convertible
markets did not keep pace with the advance of the large-company equity markets.
Convertible issues are often purchased to help meet the Fund's objective of
favorable current income."
What is the outlook?
"The Fund is well positioned for the coming year. The portfolio is reasonably
valued, with a lower average price-to-earnings ratio than the S&P 500. The Fund
will invest in cyclical stocks in 1997, as they appear undervalued, and we will
continue to search for good value in the marketplace. We believe stock selection
will be extremely important in 1997, as market participants should focus
increasingly on fundamentals. We remain committed to maintaining a broadly
diversified portfolio, holding companies with reasonable current income and
solid long-term prospects for earnings and dividend growth."
4
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SELIGMAN COMMON STOCK FUND, INC.
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DIVERSIFICATION OF ASSETS
December 31, 1996
<TABLE>
<CAPTION>
PERCENT OF NET ASSETS
DECEMBER 31,
--------------------------
ISSUES COST VALUE 1996 1995
------ ------------ ------------ ----- -----
NET CASH AND SHORT-TERM HOLDINGS 4 $93,765,814 $ 93,765,814 12.9 5.2
--- ------------ ------------ ----- -----
<S> <C> <C> <C> <C> <C>
COMMON STOCKS:
Advertising ................................ 1 4,272,125 9,150,000 1.2 1.1
Aerospace/Defense .......................... 4 17,020,847 21,562,500 3.0 1.8
Apparel and Textiles ....................... 1 2,634,496 5,793,750 0.8 1.2
Automotive and Related ..................... 7 17,823,627 18,849,283 2.6 1.6
Chemicals .................................. 4 11,699,121 18,254,448 2.5 3.2
Computer Goods and Services ................ 2 8,721,980 8,612,500 1.2 --
Construction ............................... 1 3,606,295 5,600,000 0.8 0.6
Consumer Goods and Services ................ 9 28,692,118 49,639,274 6.8 9.1
Drugs and Health Care ...................... 6 12,493,808 21,752,676 3.0 5.7
Electric and Gas Utilities ................. 8 35,937,882 42,914,533 5.9 6.3
Electronics ................................ 4 15,263,438 19,779,497 2.7 0.9
Energy ..................................... 8 27,544,742 54,916,227 7.6 7.5
Environmental Services ..................... 1 2,981,630 2,625,000 0.3 --
Finance and Insurance ...................... 19 47,978,934 94,153,334 13.0 11.6
Food ....................................... 6 25,032,928 42,150,000 5.8 5.0
Industrial Equipment ....................... 7 24,969,427 35,667,590 4.9 3.3
Leisure and Entertainment .................. 2 1,450,152 1,621,526 0.2 0.1
Machinery .................................. 2 5,170,798 5,163,298 0.7 --
Metals and Mining .......................... 1 5,564,047 5,637,500 0.8 --
Office Equipment ........................... 1 3,099,900 8,175,000 1.1 1.1
Paper and Packaging ........................ 4 16,177,151 18,727,876 2.6 2.4
Printing and Publishing .................... 3 6,603,522 9,965,128 1.4 2.8
Restaurants ................................ 1 3,726,200 3,620,000 0.5 0.6
Retail Trade ............................... 4 11,636,303 13,651,922 1.9 5.3
Steel ...................................... 3 9,588,251 8,598,750 1.2 0.6
Technology ................................. -- -- -- -- 0.6
Telecommunications ......................... 4 4,650,665 4,465,691 0.6 3.2
Telephone Utilities ........................ 3 13,692,860 16,250,000 2.2 1.2
Tobacco .................................... 2 7,132,352 8,134,413 1.1 2.1
Transportation ............................. 3 5,642,997 6,389,891 0.9 1.7
Miscellaneous/Diversified .................. 3 10,163,225 19,034,375 2.6 3.7
--- ------------ ------------ ----- -----
124 390,971,821 580,855,982 79.9 84.3
--- ------------ ------------ ----- -----
Convertible Bonds .......................... 13 31,257,130 33,611,080 4.6 7.5
--- ------------ ------------ ----- -----
Convertible Preferred Stocks ............... 6 18,115,852 18,416,250 2.6 3.0
--- ------------ ------------ ----- -----
Net Assets ................................. 147 $534,110,617 $726,649,126 100.0 100.0
=== ============ ============ ===== =====
</TABLE>
5
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PERFORMANCE COMPARISON CHART December 31, 1996
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This chart compares a $10,000 hypothetical investment made in Seligman Common
Stock Fund Class A shares, with and without the maximum initial sales charge of
4.75%, for the 10-year period ended December 31, 1996, to a $10,000 hypothetical
investment made in the Standard & Poor's 500 Composite Stock Price Index (S&P
500) and the Lipper Growth & Income Funds Average (Lipper Growth & Income
Average) for the same period. The performances of Seligman Common Stock Fund
Class B and D shares are not shown in this chart, but are included in the table
on page 7. It is important to keep in mind that the S&P 500 excludes the effect
of any fees or sales charges, and the Lipper Growth & Income Average excludes
the effect of sales charges.
[The following table represents a chart in the printed piece]
SELIGMAN COMMON STOCK FUND -- CLASS A
With Without Lipper Growth %
Sales Charge Sales Charge S&P 500 Index Income Average
------------ ------------ ------------- ---------------
12/31/86 9,524.85 10,000.00 10,000.00 10,000.00
11,299.52 11,863.20 12,135.00 11,681.96
11,460.68 12,032.41 12,744.18 12,034.89
11,921.65 12,516.38 13,585.29 12,638.00
12/31/87 9,544.97 10,021.12 10,524.53 10,220.44
10,024.39 10,524.46 11,123.37 10,958.59
10,546.35 11,072.46 11,864.19 11,574.78
10,441.89 10,962.79 11,904.53 11,613.72
12/31/88 10,506.98 11,031.13 12,272.38 11,857.87
11,112.72 11,667.08 13,142.49 12,621.40
11,758.16 12,344.72 14,302.97 13,525.41
12,912.91 13,557.07 15,834.82 14,683.51
12/31/89 13,319.95 13,984.42 16,161.01 14,680.58
13,190.36 13,848.37 15,674.57 14,323.63
14,013.39 14,712.45 16,660.50 15,067.83
11,569.06 12,146.20 14,371.35 13,073.50
12/31/90 12,801.99 13,440.63 15,659.02 14,049.64
14,903.45 15,646.92 17,934.27 16,067.88
14,598.63 15,326.90 17,893.03 16,014.81
15,726.62 16,511.14 18,850.30 16,907.39
12/31/91 16,633.81 17,463.58 20,429.96 18,117.50
16,911.90 17,755.54 19,913.08 18,119.32
17,020.05 17,869.08 20,291.43 18,160.18
17,491.43 18,363.98 20,930.61 18,629.22
12/31/92 18,440.47 19,360.36 21,983.42 19,737.67
19,335.24 20,299.78 22,944.09 20,657.87
19,800.57 20,788.32 23,056.52 20,852.18
20,298.12 21,310.68 23,651.38 21,589.44
12/31/93 21,179.64 22,236.15 24,200.09 22,089.03
20,185.13 21,192.05 23,282.91 21,437.35
20,291.95 21,304.20 23,380.69 21,389.12
21,089.57 22,141.60 24,524.01 22,308.41
12/31/94 20,779.52 21,816.08 24,519.11 21,960.39
22,547.68 23,672.45 26,907.27 23,733.66
24,187.02 25,393.57 29,476.91 25,637.64
25,715.74 26,998.54 31,820.32 27,490.43
12/31/95 26,633.18 27,961.75 33,735.91 28,771.79
27,983.94 29,379.89 35,547.53 30396.68
28,974.29 30,419.64 37,140.06 31,421.53
29,207.84 30,664.83 38,287.68 32,340.50
12/31/96 30,745.01 32,278.66 41,480.88 34,735.20
Performance data quoted represent changes in prices and assume that all
distributions within the period 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.
6
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SELIGMAN COMMON STOCK FUND, INC.
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INVESTMENT RESULTS PER SHARE
TOTAL RETURNS*
For Periods Ended December 31, 1996
<TABLE>
<CAPTION>
AVERAGE ANNUAL
--------------------------------------------------
CLASS B CLASS D
SINCE SINCE
INCEPTION THREE ONE FIVE 10 INCEPTION
4/22/96 MONTHS YEAR YEARS YEARS 5/3/93
--------- ------ ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
CLASS A
With Sales Charge n/a 0.25% 9.94% 11.97% 11.89% n/a
Without Sales Charge n/a 5.26 15.44 13.07 12.43 n/a
CLASS B
With 5% CDSL 4.21% 0.10 n/a n/a n/a n/a
Without CDSL 9.21 5.07 n/a n/a n/a n/a
CLASS D
With 1% CDSL n/a 4.07 13.58 n/a n/a n/a
Without CDSL n/a 5.07 14.58 n/a n/a 12.46%
S&P 500** 15.00+ 8.34 22.96 15.22 15.27 18.29++
LIPPER GROWTH &
INCOME AVERAGE** 12.27+ 7.40 20.73 13.89 13.25 15.75++
NET ASSET VALUE
DECEMBER 31, 1996 SEPTEMBER 30, 1996 JUNE 30, 1996 MARCH 31, 1996 DECEMBER 31, 1995
-------------------- --------------------- -------------- ---------------- --------------------
CLASS A $14.89 $15.00 $14.97 $14.83 $14.19
CLASS B 14.87 14.97 14.93 14.80+++ n/a
CLASS D 14.87 14.97 14.93 14.80 14.16
DIVIDEND AND CAPITAL GAIN INFORMATION
For the Year Ended December 31, 1996
CAPITAL GAIN
------------------------------------
DIVIDENDS PAID CAPITAL GAINS PAID REALIZED UNREALIZED o
------------------ ----------------------- ------------ ---------------
CLASS A $0.340 $1.115 $1.287 $3.945
CLASS B 0.156*** 1.115 1.287 3.945
CLASS D 0.213 1.115 1.287 3.945
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.
</TABLE>
- ----------------
* Return figures reflect any change in price per share and assume the
investment of dividends and capital gain distributions. Return figures for
Class A shares are calculated with and without the effect of the initial
4.75% maximum sales charge. Class A share returns reflect the effect of the
0.25% Administration, Shareholder Services and Distribution Plan after
January 1, 1993, only. Returns for Class B shares are calculated with and
without the effect of the maximum 5% contingent deferred sales load
("CDSL"), charged only on certain redemptions made within one year of the
date of purchase, declining to 1% in the sixth year and 0% thereafter.
Returns for Class D shares are calculated with and without the effect of the
1% CDSL, charged only on redemptions made within one year of the date of
purchase. The rates of return will vary and the principal value of an
investment will fluctuate. Shares, if redeemed, may be worth more or less
than their original cost. Past performance is not indicative of future
investment results.
** The S&P 500 and the Lipper Growth & Income Average are unmanaged benchmarks
that assume investment of dividends. The S&P 500 does not reflect fees and
sales charges and the Lipper Growth & Income Average does not reflect sales
charges. The monthly performance of the Lipper Growth & Income Average is
used in the Performance Comparison Chart and the Investment Results per
Share. Investors may not invest directly in an index or an average.
*** For the period April 22, 1996, to December 31, 1996.
+ From April 30, 1996.
++ From April 30, 1993.
+++ As of April 22, 1996.
o Represents the per share amount of net unrealized appreciation of portfolio
securities as of December 31, 1996.
7
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SELIGMAN COMMON STOCK FUND, INC.
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LARGEST PORTFOLIO CHANGES
During Past Three Months
SHARES
------------------------
HOLDINGS
ADDITIONS INCREASE 12/31/96
- ----------- ----------- -----------
Automatic Data Processing .... 100,000 100,000
Burlington Northern Santa Fe . 40,000 40,000
Cooper Industries ............ 75,000 150,000
Electronic Data Systems ...... 100,000 100,000
Ford Motor ................... 100,000 100,000
Hercules ..................... 100,000 100,000
Mead ......................... 100,000 100,000
Parker-Hannifin .............. 75,000 75,000
Raytheon ..................... 150,000 150,000
Vishay Intertechnology ....... 200,000 200,000
SHARES
------------------------
HOLDINGS
REDUCTIONS DECREASE 12/31/96
- ------------- ----------- -----------
Bard (C.R.) .................. 150,000 --
Coca-Cola .................... 150,000 --
Conrail ...................... 50,000 --
Fleet Financial Group ........ 150,000 --
General Electric ............. 50,000 100,000
Philip Morris ................ 75,000 --
Schering-Plough .............. 140,000 75,000
Sears, Roebuck ............... 100,000 --
Unicom ....................... 250,000 --
U.S. West .................... 200,000 --
Largest portfolio changes from previous quarter to current quarter are based on
cost of purchases and proceeds from sales of securities.
LARGEST PORTFOLIO HOLDINGS
At December 31, 1996
SECURITY VALUE
- --------- ------------
Royal Dutch Petroleum .................. $11,098,750
American International Group ........... 10,825,000
Bank of New York ....................... 10,125,000
General Electric ....................... 9,887,500
Sara Lee ............................... 9,312,500
Corning (Delaware) ..................... 9,250,000
Colgate-Palmolive ...................... 9,225,000
Omnicom Group .......................... 9,150,000
PanEnergy .............................. 9,000,000
Bankers Trust .......................... 8,625,000
8
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SELIGMAN COMMON STOCK FUND, INC.
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FEDERAL TAX STATUS OF 1996
DIVIDEND AND GAIN DISTRIBUTIONS
FOR TAXABLE ACCOUNTS
The quarterly dividends paid to Class A, B, and D shareholders in 1996 are
taxable as ordinary income for federal tax purposes. It makes no difference
whether you received them in cash or in shares. Under the Internal Revenue Code,
70% of the dividends paid to Class A, B, and D 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 at
least 46 days.
A distribution of $0.292 per share from 1995 undistributed net realized
gain, consisting of $0.265 from net long-term and $0.027 from net short-term
gain realized on investments, was paid June 26, 1996, to Class A, B, and D
shareholders. On November 22, 1996, a distribution of $0.823 per share,
consisting of $0.813 from net long-term and $0.010 from net short-term gain
realized on investments in 1996, was paid to Class A, B, and D shareholders. The
distributions from net long-term gain are designated as "capital gain dividends"
for federal income tax purposes and are taxable to shareholders in 1996 as a
long-term gain from the sale of capital assets, no matter how long your shares
have been owned or whether the distribution was paid in additional shares or
cash. However, if shares on which a long-term capital gain distribution was
received are subsequently sold, and such shares were held for six months or less
from date of purchase, any loss on the sale would be treated as long-term to the
extent it offsets the long-term gain distribution. Net short-term gain is
taxable as ordinary income whether paid to you in cash or shares.
If the distributions were paid in shares, the per share cost basis for
federal income tax purposes is $14.86 for Class A shares, and $14.82 for Class B
and D shares for the June 26 distribution, and $15.05 for Class A shares, and
$15.00 for Class B and Class D shares for the November 22 distribution.
A year-end statement of account showing activity for 1996, 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 redemp-tions paid to the shareholder during the
year and reported to the Internal Revenue Service as required by federal
regulations. Form 1099-DIV shows the amounts of the distributions on investments
paid to the shareholder during the year.
9
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================================================================================
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
COMMON STOCKS 79.9%
ADVERTISING 1.2%
Omnicom Group
Worldwide advertising
agencies............................ 200,000 $ 9,150,000
AEROSPACE/DEFENSE 3.0%
General Dynamics
Diversified defense contractor ..... 50,000 3,525,000
General Motors (Class H)
Diversified aerospace
manufacturer--missiles,
satellites, and communication
systems............................. 75,000 4,218,750
Raytheon
Producer of defense and
commercial electronics.............. 150,000 7,218,750
United Technologies
Manufacturer of elevators,
jet engines, flight systems,
and automotive parts................ 100,000 6,600,000
------------
21,562,500
------------
APPAREL AND TEXTILES 0.8%
Liz Claiborne
Designer and distributor of
women's apparel..................... 150,000 5,793,750
------------
AUTOMOTIVE AND
RELATED 2.6%
Autoliv (ADRs)+
Swedish supplier of safety
restraint systems................... 20,000 870,000
Borg-Warner Automotive
Manufacturer of automotive
powertrain components............... 6,200 238,700
Echlin
Manufacturer of brakes and
auto replacement parts.............. 200,000 6,325,000
Federal-Mogul
Manufacturer of transmission
products............................ 100,000 2,200,000
Ford Motor
Manufacturer of automobiles,
trucks, and related parts........... 100,000 3,187,500
Genuine Parts
Supplier of retail and
wholesale automotive parts.......... 100,000 4,450,000
Volkswagen (ADRs)
German manufacturer of
automobiles......................... 19,000 1,578,083
------------
18,849,283
------------
CHEMICALS 2.5%
Bayer
German producer of specialty
chemicals, pharmaceuticals,
and plastics........................ 76,000 3,081,948
Dow Chemical
Diversified chemicals............... 100,000 7,837,500
Hercules
Manufacturer of specialty
chemicals........................... 100,000 4,325,000
Olin
Chemicals; defense products
and ammunition; metals.............. 80,000 3,010,000
------------
18,254,448
------------
COMPUTER GOODS
AND SERVICES 1.2%
Automatic Data Processing
Provider of data processing
services............................ 100,000 4,287,500
Electronic Data Systems
Provider of computer
systems and services................ 100,000 4,325,000
------------
8,612,500
------------
CONSTRUCTION 0.8%
Sherwin-Williams
Paints and allied products.......... 100,000 5,600,000
------------
CONSUMER GOODS
AND SERVICES 6.8%
Adidas
German manufacturer
of sporting equipment
and footwear........................ 13,646 1,178,518
Allied Domecq
International food, drink, and
hospitality group in the UK......... 230,000 1,798,039
Christian Dior
French holding company for
LVMH Moet Hennessy.................. 10,000 1,612,717
Colgate-Palmolive
Household and personal care
products............................ 100,000 9,225,000
Eastman Kodak
Film and chemicals.................. 100,000 8,025,000
- -----------------------
See footnotes on page 15.
10
<PAGE>
================================================================================
December 31, 1996
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
CONSUMER GOODS
AND SERVICES (continued)
First Brands
Manufacturer of consumer
products for homes and
automobiles......................... 200,000 $ 5,675,000
International Flavors &
Fragrances
Developer and manufacturer
of flavor and fragrance
products............................ 150,000 6,750,000
PepsiCo
Soft drinks, consumer
products............................ 250,000 7,312,500
Procter & Gamble
Household and personal care
products............................ 75,000 8,062,500
------------
49,639,274
------------
DRUGS AND
HEALTH CARE 3.0%
Abbott Laboratories
Diversified health care
products............................ 75,000 3,806,250
American Home Products
Pharmaceuticals, food, and
housewares.......................... 60,000 3,517,500
Baxter International, Inc.
Manufacturer and distributor
of hospital and laboratory
products............................ 80,000 3,280,000
Bristol-Myers Squibb
Health and personal care
products............................ 40,000 4,350,000
Novartis*
Swiss manufacturer of
pharmaceuticals..................... 1,700 1,942,676
Schering-Plough
Pharmaceuticals, health and
personal care products............... 75,000 4,856,250
------------
21,752,676
------------
ELECTRIC AND
GAS UTILITIES 5.9%
Central & South West
Electric utility..................... 250,000 6,406,250
CINergy
Holding company for a
producer, transmitter, and
distributor of electricity........... 250,000 8,343,750
Empresa Nacional de
Electricidad (ADRs)
Spanish electric utility............. 50,000 3,500,000
Entergy
Electric utility..................... 250,000 6,937,500
Hong Kong Electric
Regional natural gas producer
and distributor in Hong Kong......... 1,800,000 5,980,994
PECO Energy
Provider of gas and electricity
to southeast Pennsylvania............ 140,000 3,535,000
VEBA
Provider of electric energy
in Germany........................... 45,000 2,586,039
Williams Cos.
Oil and gas production and
pipeline............................. 150,000 5,625,000
------------
42,914,533
------------
ELECTRONICS 2.7%
AMP
Manufacturer of electronic
connectors and systems............... 166,700 6,397,113
Kemet*
Manufacturer and supplier
of capacitors........................ 124,000 2,759,124
Motorola
Producer of semiconductors
and communications
equipment............................ 100,000 6,137,500
Vishay Intertechnology*
Electronic resistive systems......... 200,000 4,485,760
------------
19,779,497
------------
ENERGY 7.6%
Atlantic Richfield
Oil producer and
West Coast marketer.................. 50,000 6,625,000
Enron
Pipeline exploration
and production....................... 150,000 6,468,750
Mobil
International oil enterprise......... 50,000 6,112,500
PanEnergy
Producer of oil and gas.............. 200,000 9,000,000
- -----------------------
See footnotes on page 15. 11
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
ENERGY (continued)
Royal Dutch Petroleum
International oil services
in the Netherlands................... 65,000 $ 11,098,750
Schlumberger
Worldwide energy enterprise.......... 75,000 7,490,625
Texaco
International oil company............ 70,000 6,868,750
Total (Class B)
International oil enterprise
in France............................ 15,396 1,251,852
------------
54,916,227
------------
ENVIRONMENTAL
SERVICES 0.3%
Browning-Ferris Industries
Solid and liquid waste
management services.................. 100,000 2,625,000
------------
FINANCE AND
INSURANCE 13.0%
Ahmanson (H.F.)
Owner of savings institution
in the US............................ 150,000 4,875,000
American International
Group
International insurance holding
company.............................. 100,000 10,825,000
Aon
Accident, health, and life
insurance............................ 100,000 6,212,500
AXA-UAP
French provider of financial
services and insurance............... 20,045 1,274,538
Banco de Santander (ADSs)....
Retail banking, financial,
and financial investment
services in Spain.................... 50,000 3,198,860
Bank of New York
Commercial bank...................... 300,000 10,125,000
Bankers Trust
Commercial bank...................... 100,000 8,625,000
Citicorp
Global commercial bank............... 50,000 5,150,000
Federal National Mortgage
Association
Mortgage financing................... 200,000 7,450,000
General Re
Property casualty reinsurer.......... 50,000 7,887,500
Great Western Financial
Savings and loan in California
and Florida.......................... 200,000 5,800,000
Grupo Financiero Banamex
Accival (Class B)
Financial company involved
in banking and stockbroking
in Mexico............................ 551,000 1,150,217
Household International
Consumer loans, credit cards,
equity loans, and life
insurance............................ 40,000 3,690,000
HSBC Holdings
UK provider of banking and
financial services................... 50,000 1,069,882
ING Groep
Banking and insurance
services group in the
Netherlands.......................... 100,636 3,621,801
Irish Life
Provider of insurance and
related products in the UK........... 380,000 1,766,786
Mellon Bank
Commercial banking................... 70,000 4,970,000
National Australia Bank
(ADRs)
Commercial bank
in Australia......................... 50,000 2,943,750
St. Paul Companies
Property and casualty
insurance............................ 60,000 3,517,500
------------
94,153,334
------------
FOOD 5.8%
Campbell Soup
Canned soup and other food
products............................ 100,000 8,025,000
ConAgra
Prepared foods and
agricultural products............... 150,000 7,462,500
CPC International
International food processor........ 100,000 7,750,000
General Mills
Consumer foods...................... 100,000 6,337,500
Sara Lee
Processed foods, consumer
products............................ 250,000 9,312,500
Sysco
Food distributor.................... 100,000 3,262,500
------------
42,150,000
------------
- -----------------------
See footnotes on page 15.
12
<PAGE>
================================================================================
December 31, 1996
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
INDUSTRIAL EQUIPMENT 4.9%
BTR
Global UK company that
manufactures a broad range
of industrial goods................. 320,000 $ 1,556,320
Cooper Industries
Manufacturer of electrical,
industrial, and automotive
products............................ 150,000 6,318,750
Emerson Electric
Electric motors, hand-held tools,
and miscellaneous electric
equipment........................... 50,000 4,837,500
General Electric
Electrical equipment................ 100,000 9,887,500
General Signal
Electrical equipment................ 200,000 8,550,000
Mannesmann
Plant and machinery
construction; trading;
automotive technology
in Germany.......................... 4,000 1,720,000
Pacific Dunlop
Australian diversified
manufacturing company............... 1,100,000 2,797,520
------------
35,667,590
------------
LEISURE AND
ENTERTAINMENT 0.2%
Mandarin Oriental
Owner and operator of major
hotels throughout Asia
in Hong Kong........................ 300,000 423,000
Television Broadcast
Television producer and
broadcaster in the UK............... 300,000 1,198,526
------------
1,621,526
------------
MACHINERY 0.7%
Ingersoll-Rand
Manufacturer of machinery,
equipment, bearings,
and tools........................... 50,000 2,245,175
Parker-Hannifin
Manufacturer of
motion-control products............. 75,000 2,918,123
------------
5,163,298
------------
METALS AND MINING 0.8%
Reynolds Metals
Manufacturer of finished
aluminum products................... 100,000 $ 5,637,500
------------
OFFICE EQUIPMENT 1.1%
Pitney Bowes
Postage meters, office
equipment........................... 150,000 8,175,000
------------
PAPER AND
PACKAGING 2.6%
International Paper
Paper and paper products,
specialty products, wood
and timber.......................... 175,000 7,065,625
Kimberly-Clark
Consumer paper products,
newsprint........................... 50,000 4,762,500
Mead
Manufacturer of paper, lumber
and wood products................... 100,000 5,812,500
Stora Kopparbergs (Class B)
Manufacturer of forestry
products in Sweden.................. 80,000 1,087,251
------------
18,727,876
------------
PRINTING AND
PUBLISHING 1.4%
Elsevier
Global printer and publisher of
professional trade journals and
magazines in the Netherlands........ 130,000 2,196,378
Knight-Ridder Newspapers
Newspapers, business
information services................ 100,000 3,825,000
Tribune
Book publishing,
newsprint operations................ 50,000 3,943,750
------------
9,965,128
------------
RESTAURANTS 0.5%
McDonald's
Fast-food restaurants............... 80,000 3,620,000
------------
RETAIL TRADE 1.9%
May Department Stores
Department store chain.............. 100,000 4,675,000
Tesco
Supermarket chain in the UK......... 184,600 1,120,672
- -----------------------
See footnotes on page 15. 13
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
SHARES VALUE
------ -----
RETAIL TRADE (continued)
Wal-Mart
Discount retail chain............... 200,000 $ 4,575,000
Woolworth
Discount and variety retailer....... 150,000 3,281,250
------------
13,651,922
------------
STEEL 1.2%
Nucor
Mini-mill steel
production.......................... 60,000 3,060,000
Pohang Iron & Steel (ADRs)
Korean steel manufacturer........... 40,000 810,000
Worthington Industries
Manufacturer of metal
and plastic products................ 260,000 4,728,750
------------
8,598,750
------------
TELECOMMUNICATIONS 0.6%
Alcatel Alsthom
Communications systems;
energy; transportation in
France.............................. 17,000 1,365,240
Indosat (ADRs)
International
telecommunications in
Indonesia........................... 13,100 358,613
Tele Danmark (ADSs)
Domestic and international
phone services in Denmark........... 70,000 1,907,500
Telecom Italia-Di Risp
Telecommunications
services in Italy................... 585,000 834,338
------------
4,465,691
------------
TELEPHONE UTILITIES 2.2%
ALLTEL
Telecommunications/data
processing services................. 250,000 7,843,750
Frontier
Telephone utility................... 200,000 4,525,000
SBC Communications
Provider of telephone services,
primarily in the Midwest............ 75,000 3,881,250
------------
16,250,000
------------
TOBACCO 1.1%
B.A.T. Industries
UK financial services and
tobacco company..................... 200,000 1,659,413
SHARES OR
PRIN. AMOUNT
------------
UST Inc.
Tobacco and beverages............... 200,000 shs. 6,475,000
------------
8,134,413
------------
TRANSPORTATION 0.9%
British Airways (ADRs)
International airline in
the UK.............................. 21,000 2,142,000
Burlington Northern Santa Fe
Freight railroad system............. 40,000 3,492,264
Jurong Shipyard
Ship repair company in
Singapore........................... 150,000 755,627
------------
6,389,891
------------
MISCELLANEOUS/
DIVERSIFIED 2.6%
Corning (Delaware)
Specialty glass products............ 200,000 9,250,000
Minnesota Mining &
Manufacturing
Consumer and industrial goods
and services........................ 50,000 4,143,750
Tenneco
Natural gas pipelines; ship-
building; auto parts; chemicals;
plastic packaging................... 125,000 5,640,625
------------
19,034,375
------------
TOTAL COMMON STOCKS
(Cost $390,971,821) ................ 580,855,982
------------
CONVERTIBLE BONDS 4.6%
INSURANCE 0.1%
Liblife International
6 1/2%, 9/30/2004................... $1,000,000 1,144,375
------------
LEISURE AND RELATED 0.3%
Bell Sports
4 1/4%, 11/15/2000.................. 2,500,000 1,937,500
------------
RETAIL TRADE 0.7%
The Pep Boys
4%, 9/1/1999........................ 5,000,000 5,012,500
------------
TECHNOLOGY 1.7%
Bay Networks
5 1/4%, 5/15/2003+ ................. 3,500,000 3,158,750
BroadBand Technologies
5%, 5/15/2001+ ..................... 4,250,000 3,251,250
- -----------------------
See footnotes on page 15.
14
<PAGE>
================================================================================
December 31, 1996
- --------------------------------------------------------------------------------
PRIN. AMT.
OR SHARES VALUE
------------ -----
TECHNOLOGY (continued)
Data General
7 3/4%, 6/1/2001..................... $ 3,000,000 $ 3,090,000
Xilinx
5 1/4%, 11/1/2002+ ................. 3,000,000 2,985,000
------------
12,485,000
------------
TRANSPORTATION 0.2%
Nippon Yusen (Japan)
2%, 9/29/2000....................... 140,000,000** 1,313,405
------------
MISCELLANEOUS/
DIVERSIFIED 1.6%
Cirrus Logic*
6%, 12/15/2003...................... $ 580,000 531,425
MascoTech
4 1/2%, 12/15/2003.................. 3,000,000 2,437,500
Teco Electric & Machinery
2 3/4%, 4/15/2004.................... 1,500,000 1,119,375
Thermo Electron
5%, 4/15/2001+ ..................... 3,000,000 5,430,000
TriMas
5%, 8/1/2003........................ 2,000,000 2,200,000
------------
11,718,300
------------
TOTAL CONVERTIBLE BONDS
(Cost $31,257,130) ................. 33,611,080
------------
CONVERTIBLE
PREFERRED STOCKS 2.6%
INSURANCE 0.7%
Alexander & Alexander
(Series A) $3.625+ ................ 100,000 shs. 5,200,000
------------
PAPER 0.3%
International Paper $4.00+ ........... 40,000 1,830,000
------------
RETAIL TRADE 0.5%
Kmart Financing 73/4%................. 75,000 3,656,250
------------
TELECOMMUNICATIONS 0.2%
Mobile Telecommunication
Technologies $2.25+ .................. 75,000 1,368,750
------------
TRANSPORTATION 0.9%
GATX $3.875........................... 70,000 4,086,250
Sea Containers $4.00.................. 50,000 2,275,000
------------
6,361,250
------------
PRINCIPAL
AMOUNT
------------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(Cost $18,115,852) ................ 18,416,250
-------------
SHORT-TERM HOLDINGS 15.8%
Canadian Imperial Bank of
Commerce (Canada), Grand
Cayman Fixed Time Deposit,
6 1/2%, 1/2/1997....................$29,000,000 29,000,000
First National Bank of
Chicago, Grand Cayman Fixed
Time Deposit,
6 1/4%, 1/2/1997.................... 29,000,000 29,000,000
National Westminster Bank,
Nassau Fixed Time Deposit,
6 1/2%, 1/2/1997.................... 29,000,000 29,000,000
Republic National Bank of
New York, Grand Cayman
Fixed Time Deposit,
6 3/4%, 1/2/1997.................... 28,095,000 28,095,000
------------
TOTAL SHORT-TERM
HOLDINGS
(Cost $115,095,000)................. 115,095,000
------------
TOTAL INVESTMENTS 102.9%
(Cost $555,439,803) ................ 747,978,312
OTHER ASSETS LESS
LIABILITIES (2.9)% ................ (21,329,186)
------------
NET ASSETS 100.0% ................. $726,649,126
============
- ----------------------
*Non-income producing security.
**Principal amount reported in Japanese yen.
+Rule 144A security.
Descriptions of companies have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
15
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments, at value:
Common stocks and convertible securities (cost $440,344,803) ...... $632,883,312
Short-term holdings (cost $115,095,000) ........................... 115,095,000 $ 747,978,312
------------
Cash................................................................... 2,448,838
Receivable for dividends and interest ................................. 1,470,327
Receivable for Capital Stock sold ..................................... 769,854
Investment in, and expenses prepaid to, shareholder service agent ..... 162,748
Other.................................................................. 39,793
-------------
TOTAL ASSETS .......................................................... 752,869,872
-------------
LIABILITIES:
Payable for securities purchased....................................... 24,450,051
Payable for Capital Stock repurchased.................................. 606,208
Accrued expenses, taxes, and other..................................... 1,164,487
-------------
TOTAL LIABILITIES ..................................................... 26,220,746
-------------
NET ASSETS ........................................................... $726,649,126
=============
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($0.50 par value; 500,000,000 shares authorized;
48,806,308 shares outstanding):
Class A............................................................. $ 22,035,976
Class B............................................................. 216,927
Class D............................................................. 2,150,251
Additional paid-in capital............................................. 484,194,169
Undistributed net investment income.................................... 1,123,357
Undistributed net realized gain........................................ 24,386,959
Net unrealized appreciation of investments............................. 191,659,367
Net unrealized appreciation on translation of assets and liabilities
denominated in foreign currencies.................................... 882,120
-------------
NET ASSETS ............................................................ $726,649,126
=============
NET ASSET VALUE PER SHARE:
CLASS A ($656,260,287 / 44,071,952 SHARES).......................... $14.89
======
CLASS B ($6,450,530 / 433,854 SHARES).............................. $14.87
======
CLASS D ($63,938,309 / 4,300,502 SHARES)............................ $14.87
======
</TABLE>
- ----------------------------
See Notes to Financial Statements.
16
<PAGE>
================================================================================
STATEMENT OF OPERATIONS December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends...................................................... $19,102,268
Interest....................................................... 4,921,331
Other.......................................................... 404,872
-----------
TOTAL INVESTMENT INCOME (net of foreign taxes
withheld of $208,484) ...................................... $24,428,471
EXPENSES:
Management fee................................................. 4,516,946
Distribution and service fees.................................. 2,092,766
Shareholder account services................................... 1,131,395
Custody and related services................................... 230,000
Registration................................................... 139,916
Shareholder reports and communications......................... 129,360
Auditing and legal fees........................................ 80,682
Directors' fees and expenses................................... 38,252
Shareholders' meeting.......................................... 27,193
Miscellaneous.................................................. 49,424
-----------
TOTAL EXPENSES ................................................ 8,435,934
-----------
Net Investment Income....................................... 15,992,537
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments............................... 62,861,837
Net realized loss from foreign currency transactions........... (9,298)
Net change in unrealized appreciation of investments........... 20,969,267
Net change in unrealized appreciation on translation of
assets and liabilities denominated
in foreign currencies...................................... (158,076)
-----------
Net Gain on Investments and Foreign Currency Transactions...... 83,663,730
-----------
Increase in Net Assets from Operations......................... $99,656,267
===========
</TABLE>
- ---------------------------
See Notes to Financial Statements.
17
<PAGE>
================================================================================
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995
-------------- --------------
OPERATIONS:
Net investment income....................... $ 15,992,537 $ 15,264,706
Net realized gain on investments............ 62,861,837 55,017,101
Net realized gain (loss) from foreign
currency transactions..................... (9,298) 225,127
Net change in unrealized appreciation
of investments............................ 20,969,267 76,349,692
Net change in unrealized appreciation on
translation of assets and liabilities
denominated in foreign currencies......... (158,076) 351,103
------------ ------------
Increase in net assets from operations...... 99,656,267 147,207,729
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:......................
Class A.................................... (14,590,224) (14,964,866)
Class B.................................... (34,814) --
Class D.................................... (813,879) (491,306)
Net realized gain on investments:
Class A.................................... (47,224,171) (38,904,062)
Class B.................................... (297,882) --
Class D.................................... (4,385,491) (2,848,693)
------------ ------------
Decrease in net assets from distributions... (67,346,461) (57,208,927)
------------ ------------
(Continued on page 19)
18
<PAGE>
================================================================================
STATEMENT OF CHANGES IN NET ASSETS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
----------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
---------------------------------- -------------------------------------
CAPITAL SHARE TRANSACTIONS:* 1996 1995 1996 1995
-------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net proceeds from sale of shares:
Class A................................. 2,178,472 2,595,379 $ 32,299,564 $ 35,934,717
Class B................................. 430,908 -- 6,449,796 --
Class D................................. 1,319,042 1,887,144 19,486,806 26,182,816
Investment of dividends:
Class A................................. 527,914 540,438 7,838,581 7,493,573
Class B................................. 2,114 -- 31,288 --
Class D................................. 50,273 29,748 745,246 415,449
Exchanged from associated Funds:
Class A................................. 5,995,029 2,312,459 89,181,764 33,357,990
Class B................................. 9,871 -- 146,507 --
Class D................................. 481,390 629,898 7,120,548 9,013,077
Shares issued in payment of
gain distributions:
Class A................................. 2,201,193 1,917,613 33,016,448 26,922,726
Class B................................. 17,548 -- 262,950 --
Class D................................. 273,306 192,465 4,087,158 2,696,370
----------- ------------ -------------- -------------
Total.................................... 13,487,060 10,105,144 200,666,656 142,016,718
----------- ------------ -------------- -------------
Cost of shares repurchased:
Class A................................. (4,436,075) (3,546,666) (65,928,248) (49,307,504)
Class B................................. (5,175) -- (77,652) --
Class D................................. (502,645) (213,657) (7,458,967) (2,986,437)
Exchanged into associated Funds:
Class A................................. (5,701,122) (2,672,563) (84,564,193) (37,994,566)
Class B................................. (21,412) -- (324,343) --
Class D................................. (610,189) (430,578) (8,937,833) (6,135,330)
----------- ------------ -------------- -------------
Total.................................... (11,276,618) (6,863,464) (167,291,236) (96,423,837)
----------- ------------ -------------- -------------
Increase in net assets from
capital share transactions ........... 2,210,442 3,241,680 33,375,420 45,592,881
=========== ============ -------------- -------------
Increase in Net Assets.................................................... 65,685,226 135,591,683
NET ASSETS:
Beginning of year......................................................... 660,963,900 525,372,217
-------------- -------------
End of year (including undistributed net investment income of
$1,123,357 and $537,697, respectively)................................. $726,649,126 $660,963,900
============== =============
- -----------------------
*The Fund began offering Class B shares on April 22, 1996.
See Notes to Financial Statements.
</TABLE>
19
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Seligman Common Stock Fund, Inc. (the "Fund") offers three classes of shares.
All shares existing prior to May 3, 1993, the commencement of Class D shares,
were classified as Class A shares. The Fund began offering Class B shares on
April 22, 1996. Class A shares are sold with an initial sales charge of up to
4.75% and a continuing service fee of up to 0.25% on an annual basis. Class A
shares purchased in an amount of $1,000,000 or more are sold without an initial
sales charge but are subject to a contingent deferred sales load ("CDSL") of 1%
on redemptions within eighteen months of purchase. Class B 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 5% on redemptions in the first year after 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 of 1% imposed on
certain redemptions made within one year of purchase. The three classes of
shares represent interests in the same portfolio of investments, have the same
rights and are generally identical in all respects except that each class bears
its separate distribution and certain other class expenses, and has exclusive
voting rights with respect to any matter on which a separate vote of any class
is required.
2. Significant accounting policies followed, all in conformity with generally
accepted accounting principles, are given below:
a. Investments in common stocks and convertible securities are valued at current
market values or, in their absence, at fair values determined in accordance
with procedures approved by the Board of Directors. Securities traded on
national exchanges are valued at last sales prices or, in their absence and
in the case of over-the-counter securities, a mean of bid and asked prices.
Short-term holdings maturing in 60 days or less are valued at amortized cost.
b. The books and records of the Fund are maintained in US dollars. The market
value of investment securities and other assets and liabilities denominated
in foreign currencies are translated into US dollars at the closing daily
rate of exchange as reported by a pricing service. Purchases and sales of
investment securities, income, and expenses are translated into US dollars at
the rate of exchange prevailing on the respective dates of such transactions.
The Fund separates that portion of the results of operations resulting
from changes in the foreign exchange rates from the fluctuations arising from
changes in the market prices of securities held in the portfolio. Similarly,
the Fund separates the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of portfolio
securities sold during the period.
c. There is no provision for federal income or excise 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.
d. 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.
e. 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 attributed to a particular class, are charged directly to such
class. For the year ended December 31, 1996, distribution and service fees
were the only class-specific expenses.
20
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- --------------------------------------------------------------------------------
f. The treatment for financial statement purposes of distributions made during
the year from net investment income or net realized gain 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; and the
recharacterization of foreign exchange gains or losses to either ordinary
income or realized capital gains for federal income tax purposes. Where such
differences are permanent in nature, they are reclassified in the components
of net assets based on their ultimate characterization for federal income tax
purposes. Any such reclassification will have no effect on net assets,
results of operations, or net asset value per share of the Fund.
3. Purchases and sales of portfolio securities, excluding US Government
obligations and short-term investments, for the year ended December 31, 1996,
amounted to $361,296,187 and $438,807,053, respectively.
At December 31, 1996, 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, including the effects of foreign currency translations, amounted to
$203,126,166 and $10,587,657, respectively.
4. 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 0.65% per annum of the first $1 billion of the Fund's average
daily net assets, 0.60% per annum of the next $1 billion of the Fund's average
daily net assets, and 0.55% per annum of the Fund's average daily net assets in
excess of $2 billion. Prior to January 1, 1996, the management fee rate was
calculated on a sliding scale of 0.50% to 0.44%, based on average daily net
assets of all the investment companies managed by the Manager. The management
fee reflected in the Statement of Operations represents 0.65% per annum of the
Fund's average daily net assets. Seligman Henderson Co. (the "Subadviser"), an
entity owned 50% each by the Manager and Henderson plc, is entitled to a portion
of the Manager's fee for acting as Subadviser for certain of the international
investments of the Fund.
Seligman Financial Services, Inc. (the "Distributor"), agent for the
distribution of the Fund's shares and an affiliate of the Manager, received
concessions of $102,883 from sales of Class A shares, after commissions of
$797,266 paid to dealers.
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distribution of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive a continuing fee of up to 0.25% on an annual basis,
payable quarterly, of the average daily net assets of the Class A shares
attributable to the particular service organizations for providing personal
services and/or the maintenance of shareholder accounts. The Distributor charges
such fees to the Fund pursuant to the Plan. For the year ended December 31,
1996, fees incurred aggregated $1,516,877, 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.
21
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
With respect to Class B shares, a distribution fee of up to 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 provided 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, 1996, fees in-curred under the Plan,
equivalent to 1% per annum of the average daily net assets of Class B and Class
D shares, amounted to $20,276 and $555,613, respectively.
The Distributor is entitled to retain any CDSL imposed on certain redemptions
of Class D shares occurring within one year of purchase. For the year ended
December 31, 1996, such charges amounted to $15,668.
The Distributor has sold its rights to collect any CDSL imposed on
redemptions of Class B shares to the Purchaser. In connection with the sale of
its rights to collect any CDSL and the distribution fees with respect to Class B
shares described above, the Distributor receives payments from the Purchaser
based on the value of Class B shares sold. The aggregate amount of such payments
and the Class B share distribution fees retained by the Distributor for the year
ended December 31, 1996, was $16,591.
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, 1996,
Seligman Services, Inc. received commissions of $21,997 from sales of Fund
shares. Seligman Services, Inc. also received distribution and service fees of
$448,975 pursuant to the Plan.
Seligman Data Corp., owned by the Fund and certain associated investment
companies, charged the Fund at cost $1,131,236 for shareholder account services.
The Fund's investment in Seligman Data Corp. is recorded at a cost of $22,506.
Certain officers and directors of the Fund are officers or directors of the
Manager, the Subadviser, the Distributor, Seligman Services, Inc., and/or
Seligman Data Corp.
Fees of $23,000 were incurred by the Fund for legal services of Sullivan &
Cromwell, a member of which firm is a director of the Fund.
The Fund has a compensation arrangement under which directors who receive
fees may elect to defer receiving such fees. Interest is accrued on the deferred
balances. The annual cost of such fees and interest is included in directors'
fees and expenses, and the accumulated balance thereof at December 31, 1996, of
$176,853 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.
22
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FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The Fund's financial highlights are presented below. The per share operating
performance data is designed to allow investors to trace the operating
performance, on a per share basis, from each Class's beginning net asset value
to the ending net asset value so that they can understand what effect the
individual items have on their investment, assuming it was held throughout the
period. Generally, the 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.
The total return based on net asset value measures each Class's performance
assuming investors purchased Fund shares at net asset value as of the beginning
of the period, reinvested dividends and capital gains paid at net asset value,
and then sold their shares at the net asset value per share 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. The total
returns for periods of less than one year are not annualized.
Average commission rate paid represents the average commission paid by the
Fund to purchase or sell portfolio securities. It is determined by dividing the
total commission dollars paid by the number of shares purchased and sold during
the period for which commissions were paid. This rate is provided for periods
beginning January 1, 1996.
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------
1996o 1995o 1994o 1993 1992
----- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of year ............ $14.19 $12.12 $13.47 $12.79 $12.54
------ ------ ------ ------ ------
Net investment
income ........................................ .35 .36 .38 39 .39
Net realized and unrealized
investment gain (loss) ...................... 1.81 3.00 (.64) 1.49 .95
Net realized and unrealized gain on
foreign currency transactions ............... -- .01 -- -- --
------ ------ ------ ------ ------
Increase (decrease) from investment
operations .................................. 2.16 3.37 (.26) 1.88 1.34
Dividends paid ................................ (.34) (.36) (.37) (.38) (.39)
Distributions from net gain realized........... (1.12) (.94) (.72) (.82) (.70)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value .... .70 2.07 (1.35) .68 .25
------ ------ ------ ------ ------
Net asset value, end of year .................. $14.89 $14.19 $12.12 $13.47 $12.79
====== ====== ====== ====== ======
TOTAL RETURN BASED
ON NET ASSET VALUE:.......................... 15.44% 28.17% (1.89)% 14.86% 10.86%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................ 1.15% .93% .85% 87% .75%
Net investment income to average net assets ... 2.36% 2.56% 2.93% 2.86% 3.00%
Portfolio turnover ............................ 56.10% 46.08% 57.17% 54.37% 46.78%
Average commission rate paid .................. $.0554
Net assets, end of year (000s omitted) ........ $656,260 $614,400 $510,956 $553,222 $514,069
</TABLE>
- ------------------
See footnotes on page 24.
23
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FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B CLASS D
--------- -------------------------------------------------------
4/22/96* YEAR ENDED DECEMBER 31, 5/3/93*
TO ------------------------------------------ TO
12/31/96o 1996o 1995o 1994o 12/31/93
---------- ------- ------- ------ -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period........... $14.80 $14.16 $12.07 $13.46 $13.29
------ ------ ------ ------ ------
Net investment income.......................... .15 .24 .24 .22 .18
Net realized and unrealized
investment gain (loss)...................... 1.20 1.80 3.00 (.66) 1.02
Net realized and unrealized gain on
foreign currency transactions............... -- -- 0.01 -- --
------ ------ ------ ------ ------
Increase (decrease) from investment
operations.................................. 1.35 2.04 3.25 (.44) 1.20
Dividends paid................................. (.16) (.21) (.22) (.23) (.21)
Distributions from net gain realized........... (1.12) (1.12) (.94) (.72) (.82)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value..... .07 .71 2.09 (1.39) .17
------ ------ ------ ------ ------
Net asset value, end of period................. $14.87 $14.87 $14.16 $12.07 $13.46
====== ====== ====== ====== ======
TOTAL RETURN BASED
ON NET ASSET VALUE: 9.21% 14.58% 27.17% (3.24)% 9.09%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets................. 1.92%+ 1.91% 1.72% 1.96% 2.02%+
Net investment income to average net assets.... 1.55%+ 1.61% 1.80% 1.68% 1.83%+
Portfolio turnover............................. 56.10%++ 56.10% 46.08% 57.17% 54.37%+++
Average commission rate paid................... $.0554++ $.0554
Net assets, end of period (000s omitted)....... $6,451 $63,938 $46,564 $14,416 $5,667
- ------------------
* Commencement of offering of shares.
o Per share amounts for the years/period ended December 31, 1996, 1995, and
1994, are calculated based on average shares outstanding.
+ Annualized.
++ For the year ended December 31, 1996.
+++ For the year ended December 31, 1993.
See Notes to Financial Statements.
</TABLE>
24
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REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders,
Seligman Common Stock Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman Common Stock Fund, Inc. as of
December 31, 1996, 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, 1996 by correspondence with the Fund's custodians and brokers;
where replies were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Seligman Common
Stock Fund, Inc. as of December 31, 1996, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
January 31, 1997
25
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BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
FRED E. BROWN
Director and Consultant,
J. & W. Seligman & Co. Incorporated
JOHN R. GALVIN 2, 4
Dean, Fletcher School of Law and
Diplomacy at Tufts University
Director, USLIFE Corporation
ALICE S. ILCHMAN 3, 4
President, Sarah Lawrence College
Trustee, Committee for Economic Development
Director, NYNEX
Chairman, The Rockefeller Foundation
FRANK A. MCPHERSON 2, 4
Chairman and CEO, Kerr-McGee Corporation
Director, Kimberly-Clark Corporation
Director, Baptist Medical Center
JOHN E. MEROW
Senior Partner, Sullivan & Cromwell, Law Firm
Director, Commonwealth Aluminum Corporation
BETSY S. MICHEL 2, 4
Director or Trustee,
Various Organizations
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
Partner, Pitney, Hardin, Kipp & Szuch, Law Firm
Director, Public Service Enterprise Group
JAMES Q. RIORDAN 3, 4
Director, The Brooklyn Union Gas Company
Trustee, Committee for Economic Development
Director, Dow Jones & Co., Inc.
Director, Public Broadcasting Service
RONALD T. SCHROEDER 1
Managing Director, J. & W. Seligman & Co.
Incorporated
ROBERT L. SHAFER 3, 4
Director or Trustee,
Various Organizations
JAMES N. WHITSON 2, 4
Executive Vice President and Director,
Sammons Enterprises, Inc.
Director, C-SPAN
Director, Red Man Pipe and Supply Company
BRIAN T. ZINO 1
President
President and Managing Director,
J. & W. Seligman & Co. Incorporated
Chairman and President, Seligman Data Corp.
- ---------------------
Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
4 Board Operations Committee
26
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EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
WILLIAM C. MORRIS
Chairman
BRIAN T. ZINO
President
CHARLES C. SMITH, JR.
Vice President
LAWRENCE P. VOGEL
Vice President
THOMAS G. ROSE
Treasurer
FRANK J. NASTA
Secretary
- --------------------------------------------------------------------------------
MANAGER
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
SUBADVISER
Seligman Henderson Co.
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
(800) 622-4597 24-Hour Automated
Telephone Access
Service
27