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S E L I G M A N
[PHOTO]
SELIGMAN
GROWTH
FUND, INC.
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SEEKING LONGER-TERM GROWTH OF CAPITAL VALUE AND
AN INCREASE IN FUTURE INCOME
DECEMBER 31, 1997 o ANNUAL REPORT
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OVER THE LONG TERM -- J. & W. SELIGMAN & CO. INCORPORATED
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TIME IS THE TEST
In an industry that has changed dramatically in recent years, it's comforting
to know that stability, tradition, and consistent professional service can still
be found in an investment management firm.
J. & W. Seligman & Co. Incorporated has been providing financial services for
more than 130 years. From its beginning, Seligman has followed a long-term
approach to making money for its clients, by managing investment products and
services of the highest quality. Today, Seligman manages the Seligman Group of
Funds, which offers investors more than 50 investment options.
A PLACE IN HISTORY
Established in 1864, Seligman played a major role in the geographical
expansion and industrial development of the United States. The firm helped
finance the westward path of the railroads and the building of the Panama Canal.
In the late 1800s and early 1900s, the firm was instrumental in financing the
fledgling automobile and steel industries. Seligman also participated in the
original underwritings for some of the nation's most prominent companies,
including General Motors, Victor Talking Machine, United Artists Theater
Circuit, and Maytag. In 1929, Seligman introduced Tri-Continental Corporation --
which today is the nation's largest diversified closed-end investment company.
In 1930, Seligman began managing its first mutual fund, Broad Street Investing
Co., now known as Seligman Common Stock Fund.
SELIGMAN GROWTH FUND
Seligman Growth Fund, established April 1, 1937, is one of the first growth
stock mutual funds created in the United States. Seligman Growth Fund has helped
investors seek their financial goals through all market conditions by staying
true to its objective of long-term growth of capital value and an increase in
future income. Current income is not an objective.
[PHOTO]
JAMES, JESSE, AND JOSEPH
SELIGMAN
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TABLE OF CONTENTS
To the Shareholders ............................... 1
Interview With the Seligman Growth Team ........... 2
Performance Overview .............................. 4
Portfolio Overview ................................ 6
Portfolio of Investments .......................... 8
Statement of Assets and Liabilities ............... 12
Statement of Operations ........................... 13
Statements of Changes in Net Assets ............... 14
Notes to Financial Statements ..................... 15
Financial Highlights .............................. 17
Report of Independent Auditors .................... 19
Tax Status of 1997 Distribution ................... 20
Board of Directors ................................ 21
Executive Officers and For More Information ....... 22
Glossary of Financial Terms ....................... 23
"Your Fund has long followed a policy of investing its funds primarily in the
stocks of 'growth' companies. These are companies believed able, over a period
of years, to increase their sales and earnings at a greater rate than American
business as a whole. They may be relatively small, little-known companies or
they may be large and leaders in their industries."
-- FRANCIS F. RANDOLPH,
FUND CHAIRMAN
1942-1967
"We continue to use a thorough and rigorous investment process in our stock
selection. We continue to invest in growth companies in expanding business areas
with attractive price-to-earnings ratios and good opportunities for
appreciation."
-- WILLIAM C. MORRIS,
FUND CHAIRMAN
1989-PRESENT
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TO THE SHAREHOLDERS
Seligman Growth Fund's investment results were disappointing in 1997, as the
Fund posted a total return of 18.11% based on the net asset value of Class A
shares. This return lagged the 25.01% total return of the Fund's peers as
measured by the Lipper Growth Funds Average, and underperformed the 30.49% total
return of the Russell 1000 Growth Index, which measures the performance of
large-capitalization growth stocks. This divergence in investment results was
due to the Fund's underweighting in the largest-capitalization stocks, which
experienced a significant share of the gains.
The Fund's need to improve investment results prompted your Manager -- J. &
W. Seligman & Co. Incorporated -- to make a change in the management of Seligman
Growth Fund in January 1998. Richard R. Schmaltz, who joined your Manager as
Managing Director, Director of Investments in September 1996, is now responsible
for the day-to-day management of the Fund as a member of the Seligman Growth
Team. Your Manager, Mr. Schmaltz, and the other members of the Seligman Growth
Team are committed to improving the investment results of your Fund.
This was the seventh year of economic expansion in the US, with real domestic
growth of 3.8%. Consumer price inflation slowed to under 2%, interest rates
moved steadily lower, productivity rose, and unemployment levels reached 27-year
lows. Meanwhile, the federal budget deficit virtually disappeared and corporate
profits posted a third consecutive year of strong gains. Despite year-end
problems in Asia, the domestic business environment was positive.
While domestic equity markets continued to prosper in 1997, the majority of
the advances occurred in the first seven months of the year, as Asian troubles
increased uncertainty in the equity markets in the last quarter. Investors also
had to contend with repeated cracks in share prices and unusual volatility
throughout the year, as nearly a third of the trading days brought changes of
one percent or more in the Dow Jones Industrial Average.
The broadening of the market, as reflected in the outperformance of stocks
other than the 50-largest in the Standard & Poor's 500 Composite Stock Price
Index, was interrupted in October by the Southeast Asian crisis. Thereafter,
investor bias toward the largest, or "mega-cap," stocks resumed, even though
these multinational companies' exports and corporate earnings were the most
vulnerable to the effects of the Asian crisis. Seligman Growth Fund, which had a
reduced exposure to multinational companies based on valuations, saw its
performance negatively affected when the market resumed its earlier emphasis on
mega-cap stocks.
The outlook for US corporate profits in 1998 is somewhat uncertain due to
expectations of more modest economic growth and the unforeseeable effect of the
Asian crisis on corporate profitability and the economy. There is also a risk of
temporary price deflation linked to the Asian crisis, as those economies seek to
export their way out of trouble. Barring problems caused by the tightness of the
labor market, we expect a continuation of the current low-inflation and
low-interest-rate environment.
As investors who focus on fundamentals and stock selection, we believe the
Fund is well positioned for 1998. The US economy should experience more moderate
economic growth. The record-setting three-year stretch has produced heightened
expectations among investors, and the equity markets have become less forgiving
of earnings disappointments. We believe that, in such an environment, active
management and cautious stock selection based on superior fundamentals should
grow in importance.
Thank you for your continued support of Seligman Growth Fund. We look forward
to serving your investment needs in the many years to come. A discussion with
the Seligman Growth Team, the Fund's portfolio of investments, and financial
statements, follow this letter. Additional information on the Fund's investment
results appears starting on page 4.
By order of the Board of Directors,
/s/ William C. Morris
-----------------
William C. Morris
Chairman
/s/ Brian T. Zino
-------------
Brian T. Zino
President
January 30, 1998
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1
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INTERVIEW WITH THE SELIGMAN GROWTH TEAM
Q. HOW DID SELIGMAN GROWTH FUND PERFORM IN 1997?
A. Seligman Growth Fund posted a total return of 18.11% based on the net asset
value of Class A shares, lagging the 25.01% total return of its competitor
universe as measured by the Lipper Growth Funds Average. The Russell 1000
Growth Index, which measures the performance of large-capitalization growth
stocks, had a total return of 30.49% for the period.
The Fund's disappointing results relate to the importance of the largest
stocks in the performance of the growth universe. Seligman Growth Fund,
which followed its strategy of identifying growth stocks at reasonable
valuation levels, did not carry a significant exposure to large
multinational stocks, whose valuations were reaching 10-year highs. The
underweighting of this area contributed significantly to the performance
shortfall for the year. The Fund's exposure to larger-cap multinational
companies was increased over the year when attractive valuations were
available, and particularly in the fourth quarter in light of the Southeast
Asian crisis. The portfolio's median market capitalization rose from $37
billion at the beginning of the year to $58 billion in the fourth quarter,
and the Fund's performance relative to the market improved progressively.
Q. WHAT MARKET AND ECONOMIC FACTORS INFLUENCED THE FUND'S PERFORMANCE?
A. The continued strength of the economy and the low- interest-rate environment
supported corporate profitability in 1997. Gains in productivity and
reductions in the cost of raw materials also improved corporate earnings.
This beneficial economic background contributed to the markets' strong
performance year and improved the performance of the Fund's financial
stocks.
While the US equity markets appreciated in 1997, several international
markets experienced sharp corrections due to the Asian financial crisis.
Compounding the difference in performance was the strength of the US dollar,
which further reduced any gains overseas. The international holdings in the
portfolio negatively affected the Fund's results.
Q. WHAT PORTFOLIO SECTORS INFLUENCED THE FUND'S PERFORMANCE?
A. The strongest areas in the portfolio were the financial and health care
stocks. The low-inflation environment led to declines in interest rates,
which benefited the financial sector. Continued consolidation in the
industry, the growing popularity of the equity markets, and the need for
baby boomers to save for retirement also contributed to the strong
performance of the financial stocks in the Fund's portfolio. In health care,
pharmaceutical companies performed extremely well, as increased drug
utilization rates translated into growing earnings and profitability,
improving already strong underlying fundamentals. Further, the lackluster
performance of health service organizations made pharmaceutical stocks even
more attractive by comparison. Health care is a large portion of the Russell
1000 Growth universe, and the Fund will likely continue to carry a
substantial weighting in this area.
Weaker performance was seen from the Fund's technology investments in
1997. These were vulnerable to disappointing earnings announcements. There
were broad selloffs in technology, first from February to May, and again in
the last quarter. The fourth quarter selloff was due to the onset of the
Asian financial crisis and investors' assumption that technology stocks were
most vulnerable to this region's problems. While valuations have reached
attractive levels, continued negative earnings surprises have cast a shadow
on the group for 1998. The portfolio's investments in technology were cut
back and reoriented toward those stocks that should have the strongest
future earnings prospects. The Fund's underweighting in consumer staple and
consumer cyclical stocks for most of 1997 further restrained overall
investment results.
Q. WHAT IS THE INVESTMENT STRATEGY?
A. Our strategy going forward aims to reduce the portfolio's overall volatility
and improve performance. We will continue to employ a rigorous,
fundamentals-driven investment approach. Strict attention will be paid to
weighting and sector exposure decisions in order to mitigate the risks
associated with not owning the Russell 1000 Growth Index's largest
positions. Our fundamental research and valuation strategy will now be
rounded out with a weighting decision relative to the Russell 1000 Growth
Index.
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A TEAM APPROACH Seligman Growth Fund is managed by the Seligman Growth
Team. Richard R. Schmaltz, who is responsible for the day-to-day
management of the Fund, is assisted by seasoned research professionals
who are responsible for identifying those companies in specific
industries that offer the greatest potential for growth, consistent
with the Fund's objective.
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2
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INTERVIEW WITH THE SELIGMAN GROWTH TEAM
As previously discussed, "mega-cap" stocks are extremely important within
the Russell 1000 Growth Index and we have therefore increased the Fund's
weighting in this area. However, as these multinational US companies have
greater exposure to the Asian markets, we plan to carefully monitor their
results in 1998.
Finally, the Fund's exposure to foreign stocks will be reduced to lessen
the impact of any volatility in the international equity markets and to
eliminate the effects of foreign currency fluctuations on the Fund's
results.
Q. WHAT OTHER STEPS HAVE BEEN TAKEN TO IMPROVE THE FUND'S FUTURE RESULTS?
A. As mentioned in the Chairman and President's letter, the management of
Seligman Growth Fund has been changed. Richard R. Schmaltz assumed
responsibility for the day-to-day management of the Fund as a member of the
Seligman Growth Team in January 1998. Mr. Schmaltz, who joined Seligman in
September 1996, was previously a Director of Investment Research at
Neuberger & Berman and Principal and Co-Director of Research at Morgan
Stanley & Company. He is also a Director of the Fund. Mr. Schmaltz and the
rest of the Seligman Growth Team are dedicated to improving the Fund's
investment results going forward.
Q. WHAT IS THE OUTLOOK?
A. We anticipate a challenging backdrop for equity investors in 1998. While the
low-interest-rate and low-inflation environment should endure, the Asian
financial crisis will certainly impact global trade. Corporate earnings for
US companies will, therefore, come under pressure and any gains in the
equity markets will likely be more modest than in recent years. We believe
that in this environment, domestic consumer confidence will be the key to
continued performance. Wages and consumer spending have been on the rise,
and we are now increasing our exposure to consumer staples and select
consumer cyclical stocks to participate in these trends. We believe that the
factors that resulted in the Fund's disappointing performance have been
remedied and that the outlook going forward is significantly brighter.
-----
3
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PERFORMANCE OVERVIEW
This chart compares a $10,000 hypothetical investment made in Seligman Growth
Fund Class A shares, with and without the initial 4.75% maximum sales charge,
for the 10-year period ended December 31, 1997, to a $10,000 investment made in
the Lipper Growth Funds Average, the Russell 1000 Growth Index, and the Standard
& Poor's 500 Composite Stock Price Index (S&P 500) for the same period. The
performances of Seligman Growth Fund Class B and Class D shares are not shown in
this chart but are included in the table on page 5. It is important to keep in
mind that the Lipper Growth Funds Average excludes the effect of sales charges
and the Russell 1000 Growth Index and the S&P 500 exclude the effect of fees and
sales charges.
Seligman Growth Fund will no longer be compared to the S&P500 after December
31, 1997, as it measures the performance of 500 widely held large-capitalization
stocks. Instead, the Fund will be compared to the Russell 1000 Growth Index,
which the Manager believes is a more appropriate benchmark because it measures
the performance of large-cap stocks with greater-than-average growth
orientations and the Fund invests primarily in those types of stocks. Therefore,
your Fund will continue to be compared to the Lipper Growth Funds Average and
the Russell 1000 Growth Index.
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[The following table represents a line chart in the printed report.]
Seligman Growth Fund
Class A
Russell
1,000 Lipper
Growth Growth Growth Growth S&P
With load W/O load Index Average 500
--------- -------- ------ ------- -------
12/31/87 ..... $ 9,527 $10,000 $10,000 $10,000 $10,000
3/31/88 ...... 9,640 10,118 10,310 10,759 10,569
6/30/88 ...... 10,361 10,875 10,864 11,375 11,273
9/30/88 ...... 10,111 10,613 10,817 11,305 11,311
12/31/88 ..... 10,227 10,734 11,126 11,472 11,661
3/31/89 ...... 10,834 11,372 11,900 12,327 12,487
6/30/89 ...... 12,001 12,597 13,099 13,347 13,590
9/30/89 ...... 13,789 14,474 14,729 14,730 15,046
12/31/89 ..... 13,678 14,357 15,125 14,624 15,356
3/31/90 ...... 12,953 13,597 14,565 14,308 14,893
6/30/90 ...... 14,321 15,032 16,041 15,363 15,830
9/30/90 ...... 11,695 12,276 13,596 12,917 13,655
12/31/90 ..... 12,972 13,615 15,085 14,010 14,879
3/31/91 ...... 15,327 16,088 17,791 16,516 17,040
6/30/91 ...... 15,214 15,969 17,620 16,344 17,001
9/30/91 ...... 16,439 17,255 18,852 17,570 17,911
12/31/91 ..... 17,959 18,851 21,295 19,186 19,412
3/31/92 ...... 17,597 18,471 20,243 18,964 18,921
6/30/92 ...... 16,722 17,552 20,022 18,502 19,280
9/30/92 ...... 17,750 18,632 20,903 19,075 19,887
12/31/92 ..... 19,988 20,980 22,360 20,775 20,888
3/31/93 ...... 19,889 20,876 22,173 21,329 21,801
6/30/93 ...... 19,260 20,217 21,829 21,486 21,907
9/30/93 ...... 20,984 22,026 22,152 22,523 22,473
12/31/93 ..... 21,226 22,280 23,009 23,060 22,994
3/31/94 ...... 20,460 21,475 21,995 22,332 22,123
6/30/94 ...... 19,370 20,332 21,770 21,772 22,215
9/30/94 ...... 20,581 21,602 23,444 22,969 23,302
12/31/94 ..... 20,411 21,425 23,620 22,679 23,297
3/31/95 ...... 21,355 22,416 25,869 24,362 25,566
6/30/95 ...... 22,929 24,067 28,412 26,732 28,008
9/30/95 ...... 25,222 26,474 30,991 29,033 30,234
12/31/95 ..... 26,223 27,525 32,402 29,716 32,055
3/31/96 ...... 28,031 29,423 34,142 31,339 33,776
6/30/96 ...... 29,388 30,847 36,313 32,767 35,292
9/30/96 ...... 30,543 32,060 37,620 33,747 36,383
12/31/96 ..... 31,766 33,343 39,892 35,578 39,417
3/31/97 ...... 31,331 32,887 40,108 35,199 40,474
6/30/97 ...... 35,784 37,561 47,692 40,752 47,540
9/30/97 ...... 37,359 39,214 51,279 45,036 51,101
12/31/97 ..... 37,518 39,380 52,057 44,475 52,569
The performances of Class B and D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
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4
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PERFORMANCE OVERVIEW
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-----------------------------------------------------------
CLASS B CLASS D
SINCE SINCE
SIX ONE FIVE 10 INCEPTION INCEPTION
MONTHS* YEAR YEARS YEARS 4/22/96 5/3/93
------- ---- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge (0.15)% 12.53% 12.33% 14.14% n/a n/a
Without Sales Charge 4.85 18.11 13.42 14.69 n/a n/a
CLASS B**
With CDSL+ (0.02) 12.10 n/a n/a 14.89% n/a
Without CDSL 4.53 17.10 n/a n/a 17.03 n/a
CLASS D**
With 1% CDSL 3.62 16.10 n/a n/a n/a n/a
Without CDSL 4.53 17.10 n/a n/a n/a 14.46%
LIPPER GROWTH FUNDS AVERAGE*** 9.14 25.01 16.44 16.09 20.99++ 17.82+++
RUSSELL 1000 GROWTH INDEX*** 9.15 30.49 18.41 17.94 26.81++ 21.12+++
S&P 500*** 10.58 33.36 20.27 18.05 29.25++ 21.39+++
</TABLE>
NET ASSET VALUE
DECEMBER 31, 1997 JUNE 30, 1997 DECEMBER 31, 1996
----------------- ------------- -----------------
CLASS A $6.08 $6.59 $5.85
CLASS B 5.60 6.15 5.49
CLASS D 5.60 6.15 5.49
CAPITAL GAIN INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1997
PAID $0.802
REALIZED 0.902
UNREALIZED 1.862o
Performance data quoted represent changes in prices and assume that all
distributions within the periods are invested in additional shares. The rates of
return will vary and the principal value of an investment will fluctuate.
Shares, if redeemed, may be worth more or less than their original cost. Past
performance is not indicative of future investment results.
- ----------------
* Returns for periods of less than one year are not annualized.
** Return figures reflect any change in price per share and assume the
investment of dividend and capital gain distributions. Returns for Class A
shares are calculated with and without the effect of the initial 4.75%
maximum sales charge. Returns for Class A shares reflect the effect of the
service fee of up to 0.25% under the Administration, Shareholder Services
and Distribution Plan after January 1, 1993, only. Returns for Class B
shares are calculated with and without the effect of the maximum 5%
contingent deferred sales load ("CDSL"), charged on redemptions made within
one year of the date of purchase, declining to 1% in the sixth year and 0%
thereafter. Returns for Class D shares are calculated with and without the
effect of the 1% CDSL, charged on redemptions made within one year of the
date of purchase.
*** The Lipper Growth Funds Average excludes the effect of sales charges that
may be incurred in connection with purchases or sales. The monthly
performance is used in the Performance Overview. The Russell 1000 Growth
Index and the S&P 500 are unmanaged benchmarks that assume investment of
dividends and exclude the effect of fees and sales charges. Investors
cannot invest directly in an average or an index.
+ The CDSL is 5% for periods of one year or less, and 4% since inception.
++ From April 30, 1996.
+++ From April 30, 1993.
o Represents the per share amount of net unrealized appreciation of portfolio
securities as of December 31, 1997.
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5
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<TABLE>
<CAPTION>
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PORTFOLIO OVERVIEW
DIVERSIFICATION OF NET ASSETS
DECEMBER 31, 1997
PERCENT OF NET ASSETS
DECEMBER 31,
--------------------------------
ISSUES COST VALUE 1997 1996
------ ------------ ------------ ----- -----
<S> <C> <C> <C> <C> <C>
Short-Term Holdings and
Other Assets Less Liabilities .................... 1 $ 14,278,664 $ 14,278,664 1.9 0.8
--- ------------ ------------ ----- -----
Common Stocks:
Basic Materials ............................... 1 9,816,040 8,454,687 1.1 0.7
Chemicals ..................................... -- -- -- -- 2.5
Capital Goods ................................. 5 45,003,021 67,530,625 9.0 6.3
Communication Services ........................ 4 9,681,475 14,465,687 1.9 5.4
Consumer Cyclicals ............................ 13 65,707,024 96,970,381 12.9 24.0
Consumer Staples .............................. 10 76,319,246 112,309,315 14.9 11.3
Drugs and Health Care ......................... 12 108,721,457 142,788,122 19.0 12.6
Electronics ................................... -- -- -- -- 0.1
Energy ........................................ 2 7,815,949 8,397,150 1.1 0.3
Financial Services ............................ 11 75,363,236 137,385,067 18.3 16.7
Industrial Equipment .......................... 2 4,867,326 6,062,329 0.8 1.2
Printing and Publishing ....................... 1 594,895 971,132 0.1 0.4
Technology .................................... 14 101,352,441 142,129,635 18.9 15.4
Miscellaneous ................................. 1 2,077,543 995,622 0.1 2.3
--- ------------ ------------ ----- -----
76 507,319,653 738,459,752 98.1 99.2
--- ------------ ------------ ----- -----
Net Assets ....................................... 77 $521,598,317 $752,738,416 100.0 100.0
=== ============ ============ ===== =====
</TABLE>
LARGEST INDUSTRIES
AT DECEMBER 31, 1997
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[The following table represents a bar graph in the printed report.]
Percent of
Net Assets
----------
Drugs and Health Care 19.0% $142,788,122
Technology 18.9% $137,531,975
Financial Services 18.3% $137,385,067
Consumer Staples 14.9% $109,214,029
Consumer Cyclicals 12.9% $ 89,964,687
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6
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PORTFOLIO OVERVIEW
LARGEST PORTFOLIO CHANGES
DURING PAST SIX MONTHS
SHARES
--------------------
HOLDINGS
ADDITIONS INCREASE 12/31/97
- --------- -------- --------
Applied Materials ............ 225,000 225,000
Cisco Systems ................ 277,500(1) 277,500
Compaq Computer .............. 165,000 165,000
Dayton Hudson ................ 245,000 245,000
Eaton ........................ 125,000 125,000
Jones Apparel Group .......... 205,000 205,000
MBNA ......................... 312,500 650,000(2)
Texas Instruments ............ 120,000 120,000
Wal-Mart Stores .............. 205,000 205,000
Warner-Lambert ............... 50,000 50,000
SHARES
--------------------
HOLDINGS
REDUCTIONS DECREASE 12/31/97
- ---------- -------- --------
Air Products & Chemicals ..... 150,000 --
Coca-Cola .................... 200,000 --
Columbia/HCA Healthcare ...... 340,000 --
First Data ................... 450,000 --
General Re ................... 75,000 --
HFS .......................... 240,000 --
MGIC Investment .............. 300,000 --
Microsoft .................... 70,200 149,800
Nike (Class B) ............... 205,000 --
SunGard Data Systems ......... 475,000(3) --
Largest portfolio changes from the previous period to the current period are
based on cost of purchases and proceeds from sales of securities.
(1) Includes 92,500 shares received as a result of a 3-for-2 stock split.
(2) Includes 112,500 shares received as a result of a 3-for-2 stock split.
(3) Includes 225,000 shares received as a result of a 2-for-1 stock split.
LARGEST PORTFOLIO HOLDINGS
AT DECEMBER 31, 1997
SECURITY VALUE
- -------- -----------
Merck ................................. $28,687,500
Pfizer ................................ 27,960,938
General Electric ...................... 25,314,375
Intel ................................. 21,065,625
Travelers ............................. 20,607,187
Microsoft ............................. 19,356,969
Norwest ............................... 19,312,500
Interpublic Group of Companies ........ 18,679,688
MBNA .................................. 17,753,125
Gillette .............................. 17,576,563
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7
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PORTFOLIO OF INVESTMENTS
December 31, 1997
SHARES VALUE
------ -----
COMMON STOCKS 98.1%
AUTOMOTIVE AND
RELATED 0.3%
VALEO (FRANCE)
Manufacturer of commercial
automotive components 37,194 $ 2,523,492
-------------
BASIC MATERIALS 1.1%
NUCOR
Mini-mill steel production 175,000 8,454,687
-------------
CAPITAL GOODS 9.0%
BOEING
Aircraft manufacturer 200,000 9,787,500
EATON
Diversified manufacturer,
including truck transmissions
and axles 125,000 11,156,250
GENERAL ELECTRIC
Supplier of electrical
equipment and other
industrial and consumer
products 345,000 25,314,375
HONEYWELL
Manufacturer of automation
and control systems 135,000 9,247,500
ILLINOIS TOOL WORKS
Manufacturer of fasteners,
tools, and plastic items 200,000 12,025,000
-------------
67,530,625
-------------
COMMUNICATION
SERVICES 1.2%
WORLDCOM*
Long distance carrier 300,000 9,084,375
-------------
14,465,687
-------------
CONSUMER CYCLICALS 11.4%
DAYTON HUDSON
General merchandise retailer 245,000 16,537,500
HARLEY-DAVIDSON
Manufacturer of motorcycles 300,000 8,212,500
HILTON HOTELS
Owner, operator, and
manager of hotels 260,000 7,735,000
INTERPUBLIC GROUP OF COMPANIES
Worldwide advertising
agency 375,000 18,679,688
JONES APPAREL GROUP*
Designer and marketer of
women's clothing 205,000 8,815,000
LIZ CLAIBORNE
Designer and distributor of
women's apparel 70,000 2,926,875
MATTEL
Manufacturer of dolls,
games, and action and
activity toys 218,750 8,148,437
MIRAGE RESORTS*
Manager of casinos in
Las Vegas 300,000 6,825,000
WAL-MART STORES
Discount retailer 205,000 8,084,688
-------------
85,964,688
-------------
CONSUMER STAPLES 14.5%
ADIDAS (GERMANY)
Manufacturer of
sporting equipment
and footwear 25,000 3,308,404
CARDINAL HEALTH
Health care service provider
involved in pharmaceutical
distribution 105,000 7,888,125
COLGATE-PALMOLIVE
Manufacturer of household
and personal care products 180,000 13,230,000
CPC INTERNATIONAL
International food processor 90,000 9,697,500
DISNEY, WALT
Theme parks; hotels; films 115,000 11,392,187
GILLETTE
Manufacturer of personal
care products 175,000 17,576,563
PEPSICO
Soft drinks; consumer products 380,000 13,846,250
PHILIP MORRIS
Manufacturer of
tobacco products 360,000 16,312,500
PROCTER & GAMBLE
Manufacturer and distributor
of household and personal
care products 200,000 15,962,500
-------------
109,214,029
-------------
- -------------
See footnotes on page 11.
- -----
8
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
December 31, 1997
SHARES VALUE
------ -----
DRUGS AND
HEALTH CARE 19.0%
AMERICAN HOME PRODUCTS
Manufacturer of
pharmaceuticals, food,
and housewares 145,000 $ 11,092,500
AMGEN*
Biotechnology company 80,000 4,330,000
BOSTON SCIENTIFIC
Developer, producer, and
marketer of medical devices 78,700 3,610,363
BRISTOL-MYERS SQUIBB
Developer and manufacturer
of health and personal
care products 165,000 15,613,125
ELAN (ADRS)* (IRELAND)
Developer, manufacturer,
and marketer of drug
delivery systems 55,000 2,815,312
ELI LILLY
Developer and manufacturer
of pharmaceuticals 170,000 11,836,250
JOHNSON & JOHNSON
Developer and manufacturer
of health care products 250,000 16,468,750
MERCK
Developer and manufacturer
of pharmaceuticals 270,000 28,687,500
NOVARTIS (SWITZERLAND)
Manufacturer of health
care products 2,000 3,242,134
PFIZER
Manufacturer of health
care consumer products
and specialty chemicals 375,000 27,960,938
UNITED HEALTHCARE
Health maintenance
organization 220,000 10,931,250
WARNER-LAMBERT
Developer, manufacturer,
and marketer of
pharmaceutical and
health care products 50,000 6,200,000
-------------
142,788,122
-------------
ENERGY 1.1%
HUANENG POWER INTERNATIONAL
(ADRS)* (CHINA)
Diversified energy company 100,500 2,330,344
TRANSOCEAN OFFSHORE
Provider of contract
drilling services 125,900 6,066,806
-------------
8,397,150
-------------
FINANCIAL SERVICES 18.3%
AMERICAN INTERNATIONAL GROUP
International insurance provider 145,000 15,768,750
C.I.T. GROUP (CLASS A)*
Diversified finance organization 250,000 8,062,500
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
Provider of mortgage financing 300,000 17,118,750
GREENPOINT FINANCIAL
Bank holding company 110,000 7,981,875
ING GROEP (NETHERLANDS)
Banking and insurance
services group 70,000 2,949,914
MBNA
Issuer of bank credit cards 650,000 17,753,125
MORGAN STANLEY,
DEAN WITTER, DISCOVER
Provider of credit and
investment products 200,000 11,825,000
NORWEST
Commercial bank 500,000 19,312,500
SUNAMERICA
Diversified financial services,
specializing in pre-
retirement savings 216,100 9,238,275
TRAVELERS
Provider of diversified
financial services 382,500 20,607,187
WASHINGTON MUTUAL
Regional finance company for
small- and mid-sized businesses 106,100 6,767,191
-------------
137,385,067
-------------
- ------------
See footnotes on page 11.
-----
9
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
December 31, 1997
SHARES VALUE
------ -----
INDUSTRIAL EQUIPMENT 0.8%
FKI BABCOCK (UK)
Electrical engineering
company 885,000 $ 2,806,569
KEYENCE (JAPAN)
Producer of detection
devices for the
manufacturing process 22,000 3,255,760
-------------
6,062,329
-------------
LEISURE AND
ENTERTAINMENT 1.6%
GRANADA GROUP (UK)
Radio and television
broadcasting and publishing 200,000 3,095,286
LADBROKE GROUP (UK)
Hotel and property
investor and developer 690,000 3,008,737
SOL MELIA (SPAIN)
Hotel manager and franchise
company 70,000 2,802,665
WPP GROUP (UK)
Provider of worldwide
marketing services 600,000 2,670,799
-------------
11,577,487
-------------
PRINTING AND PUBLISHING 0.1%
ELSEVIER (NETHERLANDS)
Global printer and publisher
of professional trade journals
and magazines 60,000 971,132
-------------
TECHNOLOGY 18.3%
APPLIED MATERIALS*
Developer, manufacturer, and
marketer of semiconductor
wafer fabrication equipment 225,000 6,771,094
CISCO SYSTEMS*
Manufacturer of computer
network routers and switches 277,500 15,487,969
COMPAQ COMPUTER
Global PC manufacturer 165,000 9,312,187
HEWLETT-PACKARD
Manufacturer of computers
and peripherals 235,000 14,687,500
INTEL
Semiconductor manufacturer 300,000 $ 21,065,625
LUCENT TECHNOLOGIES
Designer and developer of
public and private networks 185,000 14,776,875
MICROSOFT*
Developer of personal
computer software 149,800 19,356,969
MOTOROLA
Producer of wireless
telecommunications
equipment 220,000 12,553,750
SECOM (JAPAN)
Manufacturer of
electronic instrumentation 35,000 2,238,239
SGS-THOMSON
MICROELECTRONICS* (FRANCE)
Manufacturer of semiconductor
integrated circuits 30,000 1,857,392
TEXAS INSTRUMENTS
Global semiconductor company
and designer of electronic
components 120,000 5,400,000
XEROX
Developer and marketer of
document processing
products and services 190,000 14,024,375
-------------
137,531,975
-------------
TELECOMMUNICATIONS 1.3%
L.M. ERICSSON TELEFON
(SERIES B) (SWEDEN)
Global telecommunications
equipment and systems,
both wired and mobile 75,000 2,821,681
GRUPO IUSACELL (MEXICO)
Controller and operator of
wireless cellular services 135,000 2,927,812
MAGYAR TAVKOZLESI
(ADRS)* "MATAV" (HUNGARY)
Provider of
telecommunications services 41,000 1,066,000
- -----------
See footnotes on page 11.
- -----
10
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
December 31, 1997
SHARES VALUE
------ -----
TELECOMMUNICATIONS (CONTINUED)
NOKIA (ADRS) (FINLAND)
Developer and manufacturer
of telecommunications systems 25,000 $ 1,775,979
VIDESH SANCHAR NIGAM
(GDRS) (INDIA)
Provider of international
telecommunications services 100,000 1,387,500
-------------
9,978,972
-------------
MISCELLANEOUS 0.1%
HIS (JAPAN)
Discount tour operator 57,200 995,622
-------------
VALUE
-----
TOTAL COMMON STOCKS
(Cost $507,319,653) $ 738,459,752
-------------
SHORT-TERM HOLDINGS 4.2%
(Cost $31,800,000) 31,800,000
-------------
TOTAL INVESTMENTS 102.3%
(Cost $539,119,653) 770,259,752
OTHER ASSETS
LESS LIABILITIES (2.3)% (17,521,336)
-------------
NET ASSETS 100.0% $ 752,738,416
=============
- --------------------
* Non-income producing security.
Descriptions of companies have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
-----
11
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<S> <C> <C>
ASSETS:
Investments, at value:
Common stocks (cost $507,319,653) ..................... $738,459,752
Short-term holdings (cost $31,800,000) ................ 31,800,000 $770,259,752
------------
Cash ............................................................................ 1,179,640
Receivable for Capital Stock sold ............................................... 1,000,539
Receivable for interest and dividends ........................................... 794,908
Expenses prepaid to shareholder service agent ................................... 173,710
Other ........................................................................... 83,349
------------
TOTAL ASSETS .................................................................... 773,491,898
------------
LIABILITIES:
Payable for securities purchased ................................................ 14,095,519
Payable for Capital Stock repurchased ........................................... 5,381,449
Accrued expenses, taxes, and other .............................................. 1,276,514
------------
TOTAL LIABILITIES ............................................................... 20,753,482
------------
NET ASSETS ...................................................................... $752,738,416
============
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($1 par value; 500,000,000 shares authorized;
124,137,761 shares outstanding):
Class A ....................................................................... $120,566,689
Class B ....................................................................... 753,572
Class D ....................................................................... 2,817,500
Additional paid-in capital ...................................................... 367,879,386
Accumulated net investment loss ................................................. (247,853)
Undistributed net realized gain ................................................. 29,829,139
Net unrealized appreciation of investments ...................................... 234,213,764
Net unrealized depreciation on translation of assets and liabilities
denominated in foreign currencies ............................................... (3,073,781)
------------
NET ASSETS ...................................................................... $752,738,416
============
NET ASSET VALUE PER SHARE:
CLASS A ($732,754,132 / 120,566,689 shares) ..................................... $ 6.08
============
CLASS B ($4,219,004 / 753,572 shares) ........................................... $ 5.60
============
CLASS D ($15,765,280 / 2,817,500 shares) ........................................ $ 5.60
============
</TABLE>
- ----------------
See Notes to Financial Statements.
- -----
12
<PAGE>
================================================================================
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Dividends (net of foreign taxes withheld of $73,269) ...................... $ 7,146,665
Interest .................................................................. 1,222,646
Other ..................................................................... 136,223
-----------
TOTAL INVESTMENT INCOME ........................................................................... $ 8,505,534
EXPENSES:
Management fee ............................................................ 5,213,047
Distribution and service fees ............................................. 1,878,409
Shareholder account services .............................................. 1,072,674
Custody and related services .............................................. 215,000
Shareholder reports and communications .................................... 154,246
Registration .............................................................. 100,902
Auditing and legal fees ................................................... 82,913
Directors' fees and expenses .............................................. 38,513
Miscellaneous ............................................................. 31,261
-----------
TOTAL EXPENSES .................................................................................... 8,786,965
------------
NET INVESTMENT LOSS ............................................................................... (281,431)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments .......................................... 112,859,384
Net realized loss from foreign currency transactions ...................... (896,184)
Net change in unrealized appreciation of investments ...................... 13,601,198
Net change in unrealized depreciation on translations of assets
and liabilities denominated in foreign currencies ......................... (2,776,834)
-----------
NET GAIN ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS ........................................ 122,787,564
------------
INCREASE IN NET ASSETS FROM OPERATIONS ........................................................... $122,506,133
============
</TABLE>
- -------------------
See Notes to Financial Statements.
-----
13
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment loss ............................................................ $ (281,431) $ (820,251)
Net realized gain on investments ............................................... 112,859,384 45,998,438
Net realized loss from foreign currency transactions ........................... (896,184) (192,526)
Net change in unrealized appreciation of investments ........................... 13,601,198 80,581,682
Net change in unrealized appreciation/depreciation of assets and liabilities
denominated in foreign currencies .............................................. (2,776,834) (1,186,005)
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS ......................................... 122,506,133 124,381,338
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain on investments:
Class A ..................................................................... (88,125,334) (51,655,332)
Class B ..................................................................... (436,521) (48,869)
Class D ..................................................................... (1,908,912) (833,364)
------------ ------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS (90,470,767) (52,537,565)
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
------------------------------
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996
---------- ----------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:*
Net proceeds from sale of shares:
Class A ................................. 1,803,217 1,555,646 11,441,313 8,910,750
Class B ................................. 445,150 146,621 2,599,277 807,268
Class D ................................. 574,002 648,614 3,413,694 3,516,242
Exchanged from associated Funds:
Class A ................................. 31,958,901 13,065,985 206,157,045 74,567,188
Class B ................................. 276,718 24,435 1,652,977 136,451
Class D ................................. 7,361,738 830,652 43,996,593 4,521,180
Shares issued in payment of
gain distributions:
Class A ................................. 11,845,991 6,962,221 69,654,414 40,868,393
Class B ................................. 75,334 8,453 408,312 46,662
Class D ................................. 325,908 147,558 1,766,426 814,469
---------- ---------- ------------ ------------
Total ...................................... 54,666,959 23,390,185 341,090,051 134,188,603
---------- ---------- ------------ ------------
Cost of shares repurchased:
Class A ................................. (8,524,026) (7,581,746) (54,800,294) (43,251,632)
Class B ................................. (127,571) (7,314) (798,290) (40,259)
Class D ................................. (545,926) (323,816) (3,268,572) (1,774,413)
Exchanged into associated Funds:
Class A ................................. (31,908,540) (13,094,458) (206,538,604) (74,677,608)
Class B ................................. (76,212) (12,042) (447,915) (65,695)
Class D ................................. (6,990,014) (503,789) (41,992,651) (2,685,707)
---------- ---------- ------------ ------------
Total ...................................... (48,172,289) (21,523,165) (307,846,326) (122,495,314)
---------- ---------- ------------ ------------
INCREASE IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS ................. 6,494,670 1,867,020 33,243,725 11,693,289
========== ========== ------------ ------------
INCREASE IN NET ASSETS ......................................................... 65,279,091 83,537,062
NET ASSETS:
Beginning of year .............................................................. 687,459,325 603,922,263
------------ ------------
END OF YEAR (including accumulated net investment
loss of $247,853 and $233,414, respectively) ................................... $752,738,416 $687,459,325
============ ============
</TABLE>
- ---------------
* The Fund began offering Class B shares on April 22, 1996.
See Notes to Financial Statements.
- -----
14
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
1. MULTIPLE CLASSES OF SHARES -- Seligman Growth Fund, Inc. (the "Fund") offers
three classes of shares. All shares existing prior to May 3, 1993, the
commencement of Class D shares, were classified as Class A shares. The Fund
began offering Class B shares on April 22, 1996. Class A shares are sold with an
initial sales charge of up to 4.75% and a continuing service fee of up to 0.25%
on an annual basis. Class A shares purchased in an amount of $1,000,000 or more
are sold without an initial sales charge but are subject to a contingent
deferred sales load ("CDSL") of 1% on redemptions within 18 months of purchase.
Class B shares are sold without an initial sales charge but are subject to a
distribution fee of 0.75%, a service fee of up to 0.25% on an annual basis, and
a CDSL, if applicable, of 5% on redemptions in the first year of purchase,
declining to 1% in the sixth year and 0% thereafter. Class B shares will
automatically convert to Class A shares on the last day of the month that
precedes the eighth anniversary of their date of purchase. Class D shares are
sold without an initial sales charge but are subject to a distribution fee of up
to 0.75% and a service fee of up to 0.25% on an annual basis, and a CDSL, if
applicable, of 1% imposed on redemptions made within one year of purchase. The
three classes of shares represent interests in the same portfolio of
investments, have the same rights and are generally identical in all respects
except that each class bears its separate distribution and certain other class
expenses, and has exclusive voting rights with respect to any matter on which a
separate vote of any class is required.
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 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, at the mean
of bid and asked prices. Short-term holdings maturing in 60 days or less are
valued at amortized cost.
b. FOREIGN CURRENCY TRANSACTIONS -- The books and records of the Fund are
maintained in US dollars. The market value of investment securities, other
assets and liabilities denominated in foreign currencies are translated into
US dollars at the 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. 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.
d. 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, except
that certain dividends from foreign securities where the ex-dividend dates
may have passed are recorded as soon as the Fund is informed of the dividend.
Interest income is recorded on an accrual basis.
e. MULTIPLE CLASS ALLOCATIONS -- All income, expenses (other than class-specific
expenses), and realized and unrealized gains or losses are allocated daily to
each class of shares based upon the relative value of shares of each class.
Class-specific expenses, which include distribution and service fees and any
other items that are specifically attributable to a particular class, are
charged directly to such class. For the year ended December 31, 1997,
distribution and service fees were the only class-specific expenses.
f. DISTRIBUTIONS TO SHAREHOLDERS -- The treatment for financial statement
purposes of distributions made to shareholders during the year from net
investment income or net realized gains may differ from their ultimate
treatment for federal income tax purposes. These differences are caused
primarily by differences in the timing of the recognition of certain
components of income, expense, or realized capital gain for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net assets based on their ultimate
characterization for federal income tax purposes. Any such reclassification
will have no effect on net assets, results of operations, or net asset value
per share of the Fund.
3. PURCHASES AND SALES OF SECURITIES -- Purchases and sales of portfolio
securities, excluding US Government obligations and short-term investments, for
the year ended December 31, 1997, amounted to $388,619,598 and $454,034,047,
respectively.
At December 31, 1997, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes, and the
tax basis gross unrealized appreciation and depreciation of portfolio
securities, including the effects of foreign currency translations, amounted to
$241,986,098 and $10,845,999, respectively.
-----
15
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
4. SHORT-TERM INVESTMENTS -- At December 31, 1997, the Fund owned short-term
investments which matured in less than seven days.
5. MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS -- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the Fund and
provides or arranges for the necessary personnel and facilities. Seligman
Henderson Co. (the "Subadviser"), an entity owned 50% each by the Manager and
Henderson plc, supervises and directs all or a portion of the Fund's foreign
investments. For this service, the Subadviser receives a fee from the Manager,
payable monthly. 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 or by Henderson plc. The Manager
receives a fee, calculated daily and payable monthly, equal to 0.70% per annum
of the first $1 billion of the Fund's average daily net assets, 0.65% per annum
of the next $1 billion of the Fund's average daily net assets and 0.60% per
annum of the Fund's average daily net assets in excess of $2 billion. The
management fee reflected in the Statement of Operations represents .70% per
annum of the Fund's average daily net assets.
Seligman Financial Services, Inc. (the "Distributor"), agent for the
distribution of the Fund's shares and an affiliate of the Manager, received
concessions of $21,774 from sales of Class A shares, after commissions of
$168,023 were paid to dealers.
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distribution of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive a continuing fee of up to 0.25% on an annual basis,
payable quarterly, of the average daily net assets of the Class A shares
attributable to the particular service organizations for providing personal
services and/or the maintenance of shareholder accounts. The Distributor charges
such fees to the Fund pursuant to the Plan. For the year ended December 31,
1997, fees incurred aggregated $1,705,923, or 0.23% per annum of the average
daily net assets of Class A shares.
Under the Plan, with respect to Class B and Class D shares, service
organizations can enter into agreements with the Distributor and receive a
continuing fee for providing personal services and/or the maintenance of
shareholder accounts of up to 0.25% on an annual basis of the average daily net
assets of the Class B and Class D shares for which the organizations are
responsible; and, for Class D shares only, fees for providing other distribution
assistance of up to 0.75% on an annual basis of such average daily net assets.
Such fees are paid monthly by the Fund to the Distributor pursuant to the Plan.
With respect to Class B shares, a distribution fee of 0.75% on an annual
basis of average daily net assets is payable monthly by the Fund to the
Distributor; however, the Distributor has sold its rights to substantially all
of this fee to a third party (the "Purchaser"), which provides funding to the
Distributor to enable it to pay commissions to dealers at the time of the sale
of the related Class B shares.
For the year ended December 31, 1997, fees incurred under the Plan,
equivalent to 1% per annum of the average daily net assets of Class B and Class
D shares, amounted to $26,106 and $146,380, respectively.
The Distributor is entitled to retain any CDSL imposed on redemptions of
Class D shares occurring within one year of purchase and on certain redemptions
of Class A shares occurring within 18 months of purchase. For the year ended
December 31, 1997, such charges amounted to $18,737.
The Distributor has sold its rights to collect any CDSL imposed on
redemptions of Class B shares to the Purchaser. In connection with the sale of
its rights to collect any CDSL and the distribution fees with respect to Class B
shares described above, the Distributor receives payments from the Purchaser
based on the value of Class B Shares sold. The aggregate amount of such payments
and the Class B shares distribution fees retained by the Distributor for the
year ended December 31, 1997, amounted to $7,140.
Seligman Services, Inc., an affiliate of the Manager, is eligible to receive
commissions from certain sales of shares of the Fund, as well as distribution
and service fees pursuant to the Plan. For the year ended December 31, 1997,
Seligman Services, Inc. received commissions of $23,434 from the sale of shares
of the Fund. Seligman Services, Inc. also received distribution and service fees
of $612,030, pursuant to the Plan.
Seligman Data Corp., which is owned by the Fund and certain associated
investment companies, charged the Fund at cost $1,053,726 for shareholder
account services. The Fund's investment in Seligman Data Corp. is recorded at a
cost of $43,170.
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.
The Fund has a compensation arrangement under which directors who receive
fees may elect to defer receiving such fees. Interest is accrued on the deferred
balances. The annual cost of such fees and interest is included in directors'
fees and expenses and the accumulated balance thereof at December 31, 1997, of
$247,853 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.
- -----
16
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
The Fund's financial highlights are presented below. "Per share operating
performance" data is designed to allow investors to trace the operating
performance of each Class, on a per share basis, from the beginning net asset
value to the ending net asset value, so that investors can understand what
effect the individual items have on their investment, assuming it was held
throughout the period. Generally, per share amounts are derived by converting
the actual dollar amounts incurred for each item, as disclosed in the financial
statements, to their equivalent per share amounts.
"Total return based on net asset value" measures each Class's performance
assuming that investors purchased Fund shares at net asset value as of the
beginning of the period, invested dividends and capital gains paid at net asset
value, and then sold their shares at the net asset value on the last day of the
period. The total return computations do not reflect any sales charges investors
may incur in purchasing or selling shares of the Fund. Total returns for periods
of less than one year are not annualized.
"Average commission rate paid" represents the average commission paid by the
Fund to purchase or sell portfolio securities. It is determined by dividing the
total commission dollars paid by the number of shares purchased and sold during
the period for which commissions were paid. This rate is provided for periods
beginning January 1, 1996.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1997o 1996o 1995o 1994o 1993
-------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ..................... $ 5.85 $ 5.22 $ 4.54 $ 5.26 $ 6.04
-------- -------- -------- -------- --------
Net investment income (loss) ........................... -- (.01) .01 .01 .01
Net realized and unrealized investment gain (loss) ..... 1.06 1.13 1.27 (.22) .35
Net realized and unrealized investment gain (loss)
from foreign currency transactions ..................... (.03) (.01) .01 -- --
-------- -------- -------- -------- --------
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ............................................. 1.03 1.11 1.29 (.21) .36
Dividends paid ......................................... -- -- (.01) (.01) (.01)
Distributions from net gain realized ................... (.80) (.48) (.60) (.50) (1.13)
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSET VALUE ............. .23 .63 .68 (.72) (.78)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR ........................... $ 6.08 $ 5.85 $ 5.22 $ 4.54 $ 5.26
======== ======== ======== ======== ========
TOTAL RETURN BASED ON NET ASSET VALUE: 18.11% 21.14% 28.47% (3.84)% 6.20%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ......................... 1.16% 1.20% .94% .90% .89%
Net investment income (loss) to average net assets ..... (.02)% (.12)% .17% .14% .18%
Portfolio turnover ..................................... 54.15% 26.05% 102.30% 93.59% 105.64%
Average commission rate paid ........................... $ .0573 $ .0437
NET ASSETS, END OF YEAR (000S OMITTED) ................. $732,754 $675,086 $597,510 $513,328 $591,491
</TABLE>
- -----------------
See footnotes on page 18.
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17
<PAGE>
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FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B CLASS D
---------------------- -----------------------------------------------
YEAR 4/22/96* YEAR ENDED DECEMBER 31, 5/3/93*
ENDED TO ------------------------------------- TO
12/31/97o 12/31/96o 1997o 1996o 1995o 1994o 12/31/93
--------- --------- -------- ------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR .................. $ 5.49 $ 5.35 $ 5.49 $ 4.96 $ 4.38 $ 5.23 $ 5.67
------ ------ -------- ------- ------ ------ -------
Net investment loss ................................. (.05) (.03) (.05) (.05) (.04) (.12) (.03)
Net realized and unrealized investment gain (loss) .. .99 .65 .99 1.07 1.21 (.23) .72
Net realized and unrealized gain (loss)
from foreign currency transactions .................. (.03) -- (.03) (.01) .01 -- --
------ ------ -------- ------- ------ ------ -------
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS .......................................... .91 .62 .91 1.01 1.18 (.35) .69
Distributions from net gain realized ................ (.80) (.48) (.80) (.48) (.60) (.50) (1.13)
------ ------ -------- ------- ------ ------ -------
NET INCREASE (DECREASE) IN NET ASSET VALUE .......... .11 .14 .11 .53 .58 (.85) (.44)
------ ------ -------- ------- ------ ------ -------
NET ASSET VALUE, END OF YEAR ........................ $ 5.60 $ 5.49 $ 5.60 $ 5.49 $ 4.96 $ 4.38 $ 5.23
====== ====== ======== ======= ====== ====== =======
TOTAL RETURN BASED ON NET ASSET VALUE: .............. 17.10% 11.45% 17.10% 20.21% 27.01% (6.56)% 12.40%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ...................... 1.93% 1.99%+ 1.93% 1.97% 1.91% 2.93% 2.17%+
Net investment loss to average net assets ........... (.79)% (.83)%+ (.79)% (.88)% (.83)% (2.34)% (1.03)%+
Portfolio turnover .................................. 54.15% 26.05%++ 54.15% 26.05% 102.30% 93.59% 105.64%+++
Average commission rate paid ........................ $ .0573 $ .0437++ $ .0573 $ .0437
NET ASSETS, END OF YEAR (000S OMITTED) .............. $ 4,219 $ 880 $15,765 $ 11,493 $ 6,412 $1,742 $1,197
</TABLE>
- -------------------
* Commencement of offering of shares.
o Per share amounts for the years ended December 31, 1997, 1996, 1995, and
1994, are calculated based on average shares outstanding.
+ Annualized.
++ For the year ended December 31, 1996.
+++ For the year ended December 31, 1993.
See Notes to Financial Statements.
- -----
18
<PAGE>
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REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS,
SELIGMAN GROWTH FUND, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman Growth Fund, Inc. as of December 31,
1997, the related statements of operations for the year then ended and of
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the Fund's custodian and brokers;
where replies were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Seligman Growth
Fund, Inc. as of December 31, 1997, the results of its operations, the changes
in its net assets, and the financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
January 30, 1998
- --------------------------------------------------------------------------------
-----
19
<PAGE>
================================================================================
FEDERAL TAX STATUS OF 1997 GAIN DISTRIBUTION FOR TAXABLE ACCOUNTS
A net long-term distribution of $0.802 per share, realized on investments
from November 1996 to October 1997, was paid on November 21, 1997, to Class A,
B, and D shareholders. The federal Taxpayer Relief Act of 1997 modified the
classification of long-term capital gains to include a "28% Rate Gain" category.
Please note that 36% of the November 1997 long-term capital gain distribution is
categorized as "28% Rate Gain." The distribution from net long-term gain is
designated as a "capital gain dividend" for federal income tax purposes and is
taxable to shareholders in 1997 as a long-term gain from the sale of capital
assets, no matter how long your shares have been owned or whether the
distribution was paid in additional shares or cash. However, if shares on which
a long-term capital gain distribution was received are subsequently sold, and
such shares were held for six months or less from date of purchase, any loss on
the sale would be treated as long-term to the extent it offsets the long-term
gain distribution.
If the distribution was paid in shares, the per share cost basis for federal
income tax purposes was $5.88 for Class A shares and $5.42 for both Class B and
D shares.
A year-end statement of account showing activity for 1997, a Form 1099-DIV,
and if applicable, a Form 1099-B have been mailed to each shareholder. The Form
1099-B shows the proceeds of any redemptions paid to the shareholder during the
year and reported to the Internal Revenue Service as required by federal
regulations. Form 1099-DIV shows the amounts of the distribution on investments
paid to the shareholder during the year.
- -----
20
<PAGE>
================================================================================
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. GALVIN 2
DEAN, Fletcher School of Law and Diplomacy
at Tufts University
DIRECTOR, Raytheon Company
DIRECTOR, USLIFE Corporation
ALICE S. ILCHMAN 3
PRESIDENT, Sarah Lawrence College
TRUSTEE, Committee for Economic Development
CHAIRMAN, The Rockefeller Foundation
FRANK A. MCPHERSON 2
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
JOHN E. MEROW
RETIRED CHAIRMAN AND SENIOR PARTNER,
Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Industries, Inc.
BETSY S. MICHEL 2
TRUSTEE, Geraldine R. Dodge Foundation
CHAIRMAN OF THE BOARD OF TRUSTEES, St. George's School
WILLIAM C. MORRIS 1
CHAIRMAN
CHAIRMAN OF THE BOARD, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Carbo Ceramics Inc.
DIRECTOR, Kerr-McGee Corporation
JAMES C. PITNEY 3
RETIRED PARTNER, Pitney, Hardin, Kipp & Szuch, Law Firm
JAMES Q. RIORDAN 3
DIRECTOR, The Brooklyn Union Gas Company
TRUSTEE, Committee for Economic Development
DIRECTOR, Dow Jones & Co., Inc.
DIRECTOR, Public Broadcasting Service
RICHARD R. SCHMALTZ 1
MANAGING DIRECTOR, J. & W. Seligman & Co. Incorporated
TRUSTEE EMERITUS, Colby College
ROBERT L. SHAFER 3
RETIRED VICE PRESIDENT, Pfizer Inc.
DIRECTOR, USLIFE Corporation
JAMES N. WHITSON 2
EXECUTIVE VICE PRESIDENT AND DIRECTOR,
Sammons Enterprises, Inc.
DIRECTOR, C-SPAN
DIRECTOR, CommScope, Inc.
BRIAN T. ZINO 1
PRESIDENT
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.
DIRECTOR EMERITUS
FRED E. BROWN
DIRECTOR AND CONSULTANT, J. & W. Seligman & Co. Incorporated
- ----------------
Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
- --------------------------------------------------------------------------------
-----
21
<PAGE>
================================================================================
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
WILLIAM C. MORRIS
CHAIRMAN
BRIAN T. ZINO
PRESIDENT
LAWRENCE P. VOGEL
VICE PRESIDENT
THOMAS G. ROSE
TREASURER
FRANK J. NASTA
SECRETARY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
MANAGER
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
GENERAL COUNSEL
Sullivan & Cromwell
INDEPENDENT AUDITORS
Deloitte & Touche LLP
GENERAL DISTRIBUTOR
Seligman Financial Services, Inc.
100 Park Avenue
New York, NY 10017
SHAREHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
IMPORTANT TELEPHONE NUMBERS
(800) 221-2450 Shareholder Services
(800) 445-1777 Retirement Plan
Services
(212) 682-7600 Outside the Continental United States
(800) 622-4597 24-Hour Automated
Telephone Access
Service
- --------------------------------------------------------------------------------
- -----
22
<PAGE>
================================================================================
GLOSSARY OF FINANCIAL TERMS
CAPITAL GAIN DISTRIBUTION -- A payment to mutual fund shareholders of profits
realized on the sale of securities in the fund's portfolio. For tax purposes,
these profits may be taxed at different rates, primarily depending upon the
length of time the securities were owned by the fund.
CAPITAL APPRECIATION/DEPRECIATION -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.
COMPOUNDING -- The change in the value of an investment as shareholders receive
earnings on their investment's earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will not be based on the
original $1,000, but on the $1,070, which includes the first year's earnings.
CONTINGENT DEFERRED SALES LOAD (CDSL) -- Depending on the class of shares owned,
a fee charged by a mutual fund when shares are sold back to the fund (the CDSL
expires after a fixed time period).
DIVIDEND -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
DIVIDEND YIELD -- A measurement of a fund's dividend as a percentage of the
maximum offering price.
EXPENSE RATIO -- The cost of doing business for a mutual fund, expressed as a
percent of the fund's net assets.
INVESTMENT OBJECTIVE -- The shared investment goal of a fund and its
shareholders.
MANAGEMENT FEE -- The amount paid by a mutual fund to its investment advisor(s).
MULTIPLE CLASSES OF SHARES -- Although an individual mutual fund invests in only
one portfolio of securities, it may offer investors several purchase options
which are "classes" of shares. Multiple classes permit shareholders to choose
the fee structure that best meets their needs and goals. Generally, each class
will differ in terms of how and when sales charges and certain fees are
assessed.
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (NASD) -- A self-regulatory
body with authority over firms that distribute mutual funds.
NET ASSET VALUE (NAV) PER SHARE -- The market worth of one fund share, obtained
by adding a mutual fund's total assets (securities, cash, and any accrued
earnings), subtracting liabilities, and dividing the resulting net assets by the
number of shares outstanding.
OFFERING PRICE (OP) -- The price at which a mutual fund's share can be
purchased. The offering price per share is the current net asset value plus any
sales charge.
PORTFOLIO TURNOVER -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
PROSPECTUS -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission (SEC), such as a fund's investment objective and policies, services,
investment restrictions, officers and directors, how shares are bought and
redeemed, fund fees and other charges, and the fund's financial statements.
SEC YIELD -- SEC Yield refers to the net income earned by a fund during a recent
30-day period. This income is annualized and then divided by the maximum
offering price per share on the last day of the 30-day period. The SEC Yield
formula reflects semiannual compounding.
SECURITIES AND EXCHANGE COMMISSION -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
STATEMENT OF ADDITIONAL INFORMATION -- Document that contains updated or more
detailed information about a mutual fund and supplements the prospectus. It is
available at no charge upon request.
TOTAL RETURN -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The AVERAGE ANNUAL TOTAL
RETURN represents the average annual compounded rate of return for the periods
presented.
YIELD ON SECURITIES -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.
- ---------------
Adapted from the Investment Company Institute's 1997 MUTUAL FUND FACT BOOK.
-----
23
<PAGE>
SELIGMAN FINANCIAL SERVICES, INC.
AN AFFILIATE OF
[LOGO]
J. & W. SELGIMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK 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 GROWTH FUND, INC., WHICH CONTAINS INFORMATION
ABOUT THE SALES CHARGES, MANAGEMENT FEE, AND OTHER
COSTS. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE
INVESTING OR SENDING MONEY.
EQGR2 12/97 Printed on Recycled Paper
