SELIGMAN
-------------
GROWTH
FUND, INC.
[GRAPHIC]
ANNUAL REPORT
DECEMBER 31, 1998
----------
Seeking Longer-Term
Growth of Capital
Value and an Increase
in Future Income
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
<PAGE>
SELIGMAN -- TIMES CHANGE...VALUES ENDURE
J. & W. Seligman & Co. Incorporated is a firm with a long tradition of
investment expertise, offering a broad array of investment choices to help
today's investors seek their long-term financial goals.
[PHOTO]
James, Jesse, and Joseph Seligman, 1870
TIMES CHANGE...
Established in 1864, Seligman's history of providing financial services has been
marked not by fanfare, but rather by a quiet and firm adherence to financial
prudence. While the world has changed dramatically in the 134 years since
Seligman first opened its doors, the firm has continued to offer its clients
high-quality investment solutions through changing times.
In the late 19th century, as the country grew, Seligman helped finance the
westward expansion of the railroads, the construction of the Panama Canal, and
the launching of urban transit systems. In the first part of the 20th century,
as America became an industrial power, the firm helped fund the growing capital
needs of the nascent automobile and steel industries.
With the formation of Tri-Continental Corporation in 1929 -- today, the nation's
largest diversified publicly-traded closed-end investment company -- Seligman
began shifting its emphasis from investment banking to investment management.
Despite the stock market crash and ensuing depression, Seligman was convinced of
the importance that investment companies could have in building wealth for
individual investors and began managing its first mutual fund in 1930.
In the decades that followed, Seligman has continued to offer forward-looking
investment solutions, including funds that focus on technology stocks, municipal
bonds, and international securities.
...VALUES ENDURE
Seligman is proud of its distinctive past and of the traditional values that
continue to shape the firm's business decisions and investment judgment. While
much has changed over the years, the firm's commitment to providing prudent
investment management that seeks to build wealth for clients over time is an
enduring value that will guide Seligman into the new millennium.
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TABLE OF CONTENTS
To the Shareholders ....................................................... 1
Interview With Your Portfolio Manager ..................................... 2
Performance Overview ...................................................... 4
Portfolio Overview ........................................................ 6
Portfolio of Investments .................................................. 8
Statement of Assets and Liabilities ....................................... 10
Statement of Operations ................................................... 11
Statements of Changes in Net Assets ....................................... 12
Notes to Financial Statements ............................................. 13
Financial Highlights ...................................................... 16
Report of Independent Auditors ............................................ 18
Federal Tax Status of 1998 Dividend and
Gain Distributions for Taxable Accounts
and For More Information ................................................ 19
Board of Directors and Executive Officers ................................. 20
Glossary of Financial Terms ............................................... 21
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<PAGE>
TO THE SHAREHOLDERS
Seligman Growth Fund had a solid year in 1998, posting a total return of 35.24%
based on the net asset value of Class A shares. This return outpaced the 22.11%
total return of the Fund's peers, as measured by the Lipper Growth Funds
Average, but lagged the 38.71% total return of the Russell 1000 Growth Index,
which measures the performance of large-capitalization growth stocks. A
discussion with your Portfolio Manager begins on page 2.
The past year was one of continued growth for the US economy, with real domestic
growth of 3.9%, marking the eighth year of economic expansion in the US. A
widely watched market measure, the S&P 500, rose 28.58% in 1998, the first time
in history that the S&P 500 registered more than 20% gains four years in a row.
But, despite the strong year-end numbers, 1998 was the most volatile year for
the markets since 1987.
Once again in 1998, exceptional performance from an extremely narrow list of
stocks masked the true investment results in the broad market. Within the S&P
500, the successes of a few stocks blurred the total picture. In fact, 197
stocks within the S&P 500, representing 39% of the Index, actually lost market
value during the last 12 months. Investment results between asset classes were
also more widely dispersed than usual. The disparity was almost unprecedented.
While the large-cap S&P 500 rose 28.58%, the Russell 2000 Index, which measures
small-cap stocks, declined 2.55%.
The market's volatility can be attributed to a number of factors -- some
domestic, many international. The international economic background in 1998 was
one of steadily deteriorating conditions as the financial crisis, originally
limited to a few Asian countries, spread throughout other regions. Currency
instability and rising global recession/deflation fears exacerbated market
volatility. Anxiety increased following the Russian debt default and the
near-collapse of Long-Term Capital Management LP, a large hedge fund plagued by
a series of bad currency investments. By late August, a stock market correction
threatened to turn into a more significant decline as the Dow Jones Industrial
Average fell more than 850 points in two days, wiping out all of the year's
gains.
During the second half of the year, the Federal Reserve Board cut the
federal-funds rate three times. These actions confirmed the Fed's resolve to
protect the US economy from the global financial crisis and markets responded
favorably throughout November and December.
Subdued inflation, low interest rates, improving prospects in Asia, and a
Federal Reserve leading the fight against global recession are all positive for
the US markets in 1999. We expect a challenging environment confronted with
economic uncertainties and continued high volatility. Pressure on corporate
profits is likely to continue as the US enters a period of slower growth.
Valuations on some of the largest stocks seem excessive, and any broadening of
the market in 1999 may negatively affect their share prices. In addition, low
commodity prices are impacting much of the world, making it harder for US
multinationals to export. Nonetheless, we see moderately positive returns for
the year in line with our lower growth projections.
Seligman continues to work to ensure that all of its operations are prepared for
the challenges posed by the Year 2000 (Y2K) computer problem. We are confident
that there will be no disruption in the investment and shareholder services
provided by your Fund as a result of Y2K. In addition, your portfolio management
team considers the potential ramifications of Y2K when making decisions on which
securities should be held by the Fund.
Thank you for your continued support of Seligman Growth Fund in 1998. We look
forward to serving your investment needs in 1999.
By order of the Board of Directors,
/s/ William Morris
William C. Morris
Chairman
/s/ Brian T. Zino
Brian T. Zino
President
January 29, 1999
1
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGER,
MARION S. SCHULTHEIS
Q. How did Seligman Growth Fund perform in the last 12 months?
A. We were pleased with Seligman Growth Fund's strong results in 1998. The
Fund posted a total return of 35.24% based on the net asset value of Class
A shares. This return far outpaced the 22.11% total return of its peers, as
measured by the Lipper Growth Funds Average, but lagged the 38.71% total
return of the Russell 1000 Growth Index, which measures the performance of
large-capitalization growth stocks.
Q. Which economic and market factors influenced the Fund's results in 1998?
A. In 1998, the US economy expanded for the eighth year in a row as we
experienced a continuation of subdued inflation, low interest rates, and
strong consumer demand. Quality large-capitalization growth stocks were
among the year's biggest beneficiaries.
As investors worried about everything from deflationary pressures in the US
to devalued currencies in the emerging markets, the largest, most liquid
companies in the US -- companies with proven track records of growing
earnings in the past, and prospects for doing more of the same in the
future -- were rewarded in a "flight to quality." This trend, while
positive for the biggest stocks in the growth category, caused a narrowing
of the market that left many stocks behind. In fact, 50 of the stocks in
the S&P 500 accounted for about 94% of the performance of the Index.
Mergers and acquisitions played a major market role in 1998. The total
value of announced deals in the US this past year was $1.613 trillion, up
78% from 1997. This activity reflects the problems facing many companies in
an environment where downward pressure on prices is making it harder for
them to increase revenue. Forging a strategic partnership or buying a
complementary business allows a company to streamline and become more
competitive. This has helped the performance of a number of large-cap
growth stocks.
Q. What is your investment strategy?
A. Our strategy is to invest in large-cap stocks with earnings growth rates of
at least one-and-a-half times that of the market. Based on our three-year
corporate profit growth projection of 8% to 10%, we are currently looking
at companies that we expect can grow earnings by at least 12-15% per year.
We try to maintain a fairly concentrated portfolio of about 50 stocks. This
allows us to really know the companies we own. At year-end, our top 10
holdings accounted for 35% of the Fund's portfolio.
[PHOTO]
Growth Team: (from left) Michelle Borre, David Levy, Sheila Grayson
(Administrative Assistant), (seated) Marion S. Schultheis (Portfolio Manager);
(not pictured) Craig Chodash
- --------------------------------------------------------------------------------
A TEAM APPROACH
Seligman Growth Fund is managed by the Seligman Growth Team, headed by Marion S.
Schultheis. Ms. Schultheis is assisted in the management of the Fund by a group
of seasoned professionals who are responsible for identifying those companies in
specific industries that offer the greatest potential for growth, consistent
with the Fund's objective.
- --------------------------------------------------------------------------------
2
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGER,
MARION S. SCHULTHEIS
When choosing a stock, we perform both quantitative and fundamental
analysis. We screen for both top- and bottom-line growth, strong cash flow,
and a strong balance sheet. Evaluating the strength of a company's
management is also a major factor in our investment strategy. We look for
managements with vision and consistent messages, who can deliver on their
promises.
The final thing we look at is valuations within an industry group. We
analyze companies based on historical performance, balance sheets, debt
levels, and earnings growth potential. We then decide what we are willing
to pay for the highest quality companies in any given industry group.
Q. What industries affected the Fund's performance last year?
A. In 1998, strong earnings in technology, telecommunications, retailing, and
pharmaceuticals translated into solid returns for our Fund.
In technology, it is important to be invested in the right niches. In 1998,
anything Internet-related did extremely well. While we do not own any
direct Internet companies -- due to their lofty valuations and general lack
of earnings -- we have nonetheless benefited from the Internet boom. Many
of the technology companies we hold are actually involved in building and
maintaining the infrastructure of the Internet. These are real companies,
growing real earnings, with real prospects looking ahead 18 months.
Much of the excitement in telecommunications was Internet-driven, as was
the case in the technology sector. In addition, telecommunications stocks
benefited from the continuing move to wireless and digital communications.
We did well with several of the retailers we held in the Fund. Discounters
have continued to take market share away from the big traditional
department stores, and we held sizable positions in this type of company.
We see this trend continuing for some time.
The Fund benefited from its exposure to pharmaceutical stocks. This market
is expanding due to advances in medicine and the overall aging of the
population. The Food and Drug Administration is also approving new products
at a much faster rate than in the past, greatly enhancing revenues at these
companies.
Q. What is your outlook?
A. We believe there are several sectors of the economy that can continue to
show strong earnings growth and selected companies within these industries
should do well. But it is definitely going to be a stock-pickers' market.
We believe companies that can either hit or surpass their earnings
estimates will be rewarded, while companies that fall short will be
punished severely.
We continue to see selective opportunities in the technology and
telecommunications sectors of the market. Consumer cyclical companies that
can take market share from their competition -- such as discount retailers
-- should also do well in 1999.
The biggest potential risks to the US market in 1999 come from outside the
country. A continuation of the economic problems in Latin America,
particularly in Brazil, could have negative repercussions on some of the
higher-priced growth stocks in the US. And while there are signs of
eventual improvements in Asia in 1999, any slowing of growth in China will
also hurt many US large-cap growth stocks.
But in an uncertain investment environment, a mutual fund with a
disciplined investment approach, such as Seligman Growth Fund, should be in
a good position to find opportunities others might miss.
3
<PAGE>
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, and assumes that all distributions within the period are invested in
additional shares, for the 10-year period ended December 31, 1998, to a $10,000
investment made in the Lipper Growth Funds Average and the Russell 1000 Growth
Index 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 and the
Russell 1000 Growth Index exclude the effect of fees and/or sales charges.
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[THE FOLLOWING TABLE WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Seligman Growth Fund Seligman Growth Fund
Class A Without Class A With Lipper Growth Russell 1000
Sales Charge Sales Charge Funds Average Growth Index
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
12/31/88 $10,000 $ 9,522 $10,000 $10,000
3/31/89 $10,594 $10,087 $10,748 $10,695
6/30/89 $11,735 $11,174 $11,631 $11,773
9/30/89 $13,484 $12,839 $12,833 $13,238
12/31/89 $13,374 $12,735 $12,737 $13,594
3/31/90 $12,666 $12,061 $12,471 $13,091
6/30/90 $14,004 $13,334 $13,378 $14,417
9/30/90 $11,436 $10,889 $11,280 $12,220
12/31/90 $12,684 $12,077 $12,234 $13,558
3/31/91 $14,988 $14,270 $14,433 $15,990
6/30/91 $14,877 $14,165 $14,285 $15,837
9/30/91 $16,075 $15,306 $15,361 $16,944
12/31/91 $17,561 $16,721 $16,758 $19,139
3/31/92 $17,207 $16,384 $16,576 $18,194
6/30/92 $16,352 $15,570 $16,200 $17,996
9/30/92 $17,357 $16,527 $16,692 $18,787
12/31/92 $19,545 $18,610 $18,199 $20,097
3/31/93 $19,448 $18,518 $18,684 $19,928
6/30/93 $18,834 $17,933 $18,858 $19,619
9/30/93 $20,519 $19,538 $19,780 $19,910
12/31/93 $20,756 $19,763 $20,252 $20,680
3/31/94 $20,006 $19,049 $19,630 $19,768
6/30/94 $18,941 $18,035 $19,144 $19,566
9/30/94 $20,125 $19,162 $20,198 $21,071
12/31/94 $19,959 $19,004 $19,927 $21,229
3/31/95 $20,882 $19,883 $21,426 $23,250
6/30/95 $22,421 $21,348 $23,521 $25,536
9/30/95 $24,663 $23,483 $25,556 $27,854
12/31/95 $25,642 $24,415 $26,186 $29,122
3/31/96 $27,410 $26,099 $27,618 $30,685
6/30/96 $28,736 $27,362 $28,883 $32,637
9/30/96 $29,866 $28,438 $29,764 $33,812
12/31/96 $31,062 $29,576 $31,412 $35,854
3/31/97 $30,637 $29,172 $31,146 $36,048
6/30/97 $34,991 $33,317 $36,074 $42,864
9/30/97 $36,531 $34,784 $39,842 $46,088
12/31/97 $36,686 $34,932 $39,394 $46,787
3/31/98 $42,660 $40,620 $44,488 $53,876
6/30/98 $44,168 $42,056 $45,290 $56,322
9/30/98 $39,945 $38,034 $39,242 $51,208
12/31/98 $49,614 $47,241 $48,102 $64,901
</TABLE>
The performances of Class B and D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
4
<PAGE>
PERFORMANCE OVERVIEW
Investment Results Per Share
TOTAL RETURNS
For Periods Ended December 31, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------------------------------------------
CLASS B CLASS D
SINCE SINCE
SIX ONE FIVE 10 INCEPTION INCEPTION
MONTHS* YEAR YEARS YEARS 4/22/96 5/3/93
----------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Class A**
With Sales Charge 6.93% 28.88% 17.90% 16.80% n/a n/a
Without Sales Charge 12.33 35.24 19.04 17.37 n/a n/a
Class B**
With CDSC+ 6.77 29.13 n/a n/a 22.32% n/a
Without CDSC 11.77 34.13 n/a n/a 23.11 n/a
Class D**
With 1% CDSC 10.94 33.33 n/a n/a n/a n/a
Without CDSC 11.94 34.33 17.54 n/a n/a 17.74%
Lipper Growth Funds Average*** 6.21 22.11 18.89 17.01 21.64++ 18.78+++
Russell 1000 Growth Index*** 15.22 38.71 25.70 20.56 31.15++ 24.06+++
</TABLE>
NET ASSET VALUE
<TABLE>
<CAPTION>
DECEMBER 31, 1998 JUNE 30, 1998 DECEMBER 31, 1997
----------------- ------------- -----------------
<S> <C> <C> <C>
Class A $7.42 $7.32 $6.08
Class B 6.72 6.72 5.60
Class D 6.73 6.72 5.60
</TABLE>
DIVIDEND AND CAPITAL GAIN INFORMATION
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
DIVIDEND PAID CAPITAL GAIN
------------------ ----------------
<S> <C> <C> <C>
Class A $0.01 Paid $0.730
Class B -- Undistributed Realized 0.130#
Class D -- Unrealized 2.664##
</TABLE>
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 charge ("CDSC"), charged on redemptions made
within one year of the date of purchase, declining to 1% in the sixth year
and 0% thereafter. Returns for Class D shares are calculated with and
without the effect of the 1% CDSC, charged on redemptions made within one
year of the date of purchase.
*** The Lipper 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 is an unmanaged benchmark that assumes investment of dividends and
excludes the effect of fees and sales charges. Investors cannot invest
directly in an average or an index.
+ The CDSC is 5% for periods of one year or less, and 3% since inception.
++ From April 30, 1996.
+++ From April 30, 1993.
# Represents net gain realized from November and December 1998, payable in
1999.
## Represents the per share amount of net unrealized appreciation of portfolio
securities as of December 31, 1998.
5
<PAGE>
PORTFOLIO OVERVIEW
Diversification of Net Assets
December 31, 1998
<TABLE>
<CAPTION>
PERCENT OF NET ASSETS
DECEMBER 31,
----------------------
ISSUES COST VALUE 1998 1997
------- ------------ ------------ ------- --------
<S> <C> <C> <C> <C> <C>
Common Stocks:
Basic Materials ................................ -- -- -- -- 1.1
Capital Goods .................................. 5 $ 84,084,036 $114,291,425 11.4 9.0
Communications Services ........................ 4 55,740,103 82,518,696 8.3 1.9
Consumer Cyclicals ............................. 6 61,863,158 119,534,613 12.0 12.9
Consumer Staples ............................... 10 128,902,072 171,415,463 17.2 14.9
Energy ......................................... 1 4,553,302 3,941,438 0.4 1.1
Financial Services ............................. 5 28,606,474 60,328,137 6.0 18.3
Health Care .................................... 9 102,883,312 166,179,863 16.7 19.0
Industrial Equipment ........................... -- -- -- -- 0.8
Printing and Publishing ........................ -- -- -- -- 0.1
Technology ..................................... 11 119,415,810 224,924,645 22.5 18.9
Utilities ...................................... 1 6,299,689 9,716,612 1.0 --
Miscellaneous .................................. -- -- -- -- 0.1
----- ------------ ------------ ----- -----
52 592,347,956 952,850,892 95.5 98.1
Short-Term Holdings and
Other Assets Less Liabilities .................. 2 44,984,753 44,984,753 4.5 1.9
----- ------------ ------------ ----- -----
Net Assets ......................................... 54 $637,332,709 $997,835,645 100.0 100.0
===== ============ ============ ===== =====
</TABLE>
Largest Industries
December 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED AS A BAR CHART IN THE PRINTED MATERIAL]
Percent of Total Dollar
Net Assets Amount
---------- ------------
TECHNOLOGY 22.50% $224,924,645
CONSUMER STAPLES 17.20% $171,415,463
HEALTH CARE 16.70% $166,179,863
CONSUMER CYCLICALS 12.00% $119,534,613
CAPITAL GOODS 11.40% $114,291,425
6
<PAGE>
PORTFOLIO OVERVIEW
Largest Portfolio Changes
During Past Six Months
SHARES
--------------------------
HOLDINGS
ADDITIONS INCREASE 12/31/98
- ------------- ---------- ----------
AlliedSignal ................... 278,700 278,700
AT&T ........................... 262,700 262,700
CBS ............................ 627,800 627,800
General Dynamics ............... 338,900 338,900
Microsoft ...................... 130,500 380,500
Motorola ....................... 401,300 401,300
Raytheon (Class A) ............. 276,600 276,600
SBC Communications ............. 426,200 426,200
Service Corp. International .... 653,200 653,200
Tyco International ............. 562,000 562,000
SHARES
--------------------------
HOLDINGS
REDUCTIONS DECREASE 12/31/98
- --------------- ------------- -----------
AutoZone ....................... 507,500 --
Colgate-Palmolive .............. 180,000 --
Dayton Hudson .................. 281,700 208,300
Disney, Walt ................... 254,200(1) --
Gillette ....................... 311,600 --
Hewlett-Packard ................ 147,900 --
Lucent Technologies ............ 84,000 161,000
MBNA ........................... 605,000(2) --
PepsiCo ........................ 210,700 --
Schering-Plough ................ 160,000 --
Largest portfolio changes from the previous period to the current period are
based on cost of purchases and proceeds from sales of securities.
- ----------
(1) Includes 157,200 shares received as a result of a 3-for-1 stock split.
(2) Includes 155,000 shares received as a result of a 3-for-2 stock split.
Largest Portfolio Holdings
December 31, 1998
SECURITY VALUE
- ---------- -------------
Microsoft .......................... $52,711,141
Tyco International ................. 42,395,875
Merck .............................. 35,888,063
Bristol-Myers Squibb ............... 33,974,994
General Electric ................... 33,384,644
SECURITY VALUE
- ---------- -------------
Cisco Systems ...................... $31,181,573
Philip Morris ...................... 30,382,650
Interpublic Group of Companies ..... 29,906,250
Wal-Mart Stores .................... 28,910,313
MCI WorldCom ....................... 28,533,046
7
<PAGE>
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
SHARES VALUE
----------- ------------
COMMON STOCKS 95.5%
CAPITAL GOODS 11.4%
AlliedSignal
Producer of aerospace and
automotive materials 278,700 $ 12,349,894
General Dynamics
Manufacturer of defense
products 338,900 19,868,012
General Electric
Supplier of diversified
electronics 327,100 33,384,644
Illinois Tool Works
Manufacturer of fasteners,
tools, and plastic items 108,500 6,293,000
Tyco International
Worldwide provider of
fire protection devices,
electronic security services,
and underwater
telecommunication systems 562,000 42,395,875
------------
114,291,425
------------
COMMUNICATIONS SERVICES 8.3%
AT&T
Provider of communications
services 262,700 19,768,175
Bell Atlantic
Provider of telephone services
in the Atlantic region 200,000 11,362,500
MCI WorldCom
Provider of
telecommunications services 397,500 28,533,046
SBC Communications
Provider of telephone services 426,200 22,854,975
------------
82,518,696
------------
CONSUMER CYCLICALS 12.0%
Dayton Hudson
General merchandise retailer
specializing in large stores 208,300 11,300,275
Harley-Davidson
Manufacturer of motorcycles 248,200 11,758,475
Interpublic Group of Companies
Worldwide advertising agency 375,000 29,906,250
Lowe's Companies
Retailer of building materials
and supplies 250,000 12,796,875
Service Corp. International
Provider of funeral services 653,200 24,862,425
Wal-Mart Stores
Discount retailer 355,000 28,910,313
------------
119,534,613
------------
CONSUMER STAPLES 17.2%
Bestfoods
Manufacturer of brand name
food products 180,000 9,585,000
Cardinal Health
Distributor of pharmaceutical
products 292,500 22,193,438
CBS
Radio and television
broadcasting 627,800 20,560,450
Coca-Cola
Manufacturer and marketer of
soft drinks and consumer
products 125,800 8,412,875
ConAgra
Developer and manufacturer
of prepared foods and
agricultural products 430,000 13,545,000
Kroger*
Operator of supermarkets and
convenience stores 213,000 12,886,500
Newell
Manufacturer and marketer of
home furnishings 195,300 8,056,125
Philip Morris
Manufacturer of tobacco
products, food, and beverages 567,900 30,382,650
Procter & Gamble
Manufacturer and distributor
of household and personal
care products 200,000 18,262,500
Time Warner
Diversified media and
entertainment company 443,600 27,530,925
------------
171,415,463
------------
ENERGY 0.4%
Transocean Offshore
Provider of contract
drilling services 147,000 3,941,438
------------
FINANCIAL SERVICES 6.0%
American International Group
International insurance provider 165,000 15,943,125
Fannie Mae
Provider of mortgage financing 140,000 10,360,000
Freddie Mac
Provider of mortgage financing 160,000 10,310,000
Washington Mutual
Regional finance company for
small and mid-sized businesses 118,600 4,529,037
Wells Fargo
Worldwide provider of
financial services 480,400 19,185,975
------------
60,328,137
------------
- ---------------------------
See footnotes on page 9.
8
<PAGE>
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
SHARES VALUE
----------- -----------
HEALTH CARE 16.7%
American Home Products
Developer and manufacturer
of pharmaceuticals, food,
and housewares 262,500 $ 14,782,031
Baxter International
Manufacturer and distributor of
hospital and laboratory products 74,800 4,810,575
Bristol-Myers Squibb
Developer and manufacturer
of health and personal care
products 253,900 33,974,994
Johnson & Johnson
Developer and manufacturer
of health care products 250,000 20,968,750
Eli Lilly
Developer and manufacturer
of pharmaceuticals 90,900 8,078,738
Medtronic
Manufacturer of pacemakers
and related cardiovascular
products 107,400 7,974,450
Merck
Developer and manufacturer
of pharmaceuticals 243,000 35,888,063
Pfizer
Manufacturer of health
care consumer products
and specialty chemicals 226,600 28,424,137
Warner-Lambert
Developer, manufacturer,
and marketer of
pharmaceutical and
health care products 150,000 11,278,125
------------
166,179,863
------------
TECHNOLOGY 22.5%
Applied Materials*
Developer, manufacturer, and
marketer of semiconductor
wafer fabrication equipment 209,800 8,962,394
Cisco Systems*
Manufacturer of computer
network routers and switches 335,850 31,181,573
Computer Associates
International
Developer of software utilities
and databases 212,400 9,053,550
Compuware
Provider of mainframe software
and consulting services 185,000 14,447,343
EMC*
Manufacturer of enterprise
storage devices 240,000 20,400,000
SHARES OR
PRIN. AMT. VALUE
------------- ---------------
TECHNOLOGY (CONTINUED)
International Business Machines
Manufacturer of micro and
personal computers 50,000shs. $ 9,237,500
Lucent Technologies
Manufacturer of tele-
communication equipment 161,000 17,710,000
Microsoft*
Provider of computer software
products 380,500 52,711,141
Motorola
Producer of wireless
communications and
equipment 401,300 24,504,381
Raytheon (Class A)
Producer of defense and
commercial electronics 276,600 14,296,763
Xerox
Developer, manufacturer, and
marketer of office
automation products 190,000 22,420,000
---------------
224,924,645
---------------
UTILITIES 1.0%
AES*
Electrical supplier 205,100 9,716,612
---------------
Total Common Stocks
(Cost $592,347,956) 952,850,892
---------------
SHORT-TERM HOLDINGS 5.5%
Bank of Nova Scotia, Grand
Cayman Fixed Time Deposit,
43/4%, 1/4/1999 $ 27,446,000 27,446,000
State Street Bank and Trust,
Grand Cayman
Fixed Time Deposit,
41/2%, 1/4/1999 27,447,000 27,447,000
---------------
TOTAL SHORT-TERM HOLDINGS
(Cost $54,893,000) 54,893,000
---------------
TOTAL INVESTMENTS 101.0%
(Cost $647,240,956) 1,007,743,892
OTHER ASSETS
LESS LIABILITIES (1.0)% (9,908,247)
---------------
NET ASSETS 100.0% $ 997,835,645
===============
- ----------
* Non-income producing security.
Descriptions of companies have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
9
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value:
Common stocks (cost $592,347,956) ............................................... $952,850,892
Short-term holdings (cost $54,893,000) .......................................... 54,893,000 $1,007,743,892
--------------
Cash ................................................................................................. 456,489
Receivable for securities sold ....................................................................... 10,568,365
Receivable for Capital Stock sold .................................................................... 2,746,737
Receivable for interest and dividends ................................................................ 857,797
Investment in, and expenses prepaid to, shareholder service agent .................................... 193,501
Other ................................................................................................ 78,823
--------------
Total Assets ......................................................................................... 1,022,645,604
--------------
LIABILITIES:
Payable for securities purchased ..................................................................... 22,526,465
Payable for Capital Stock repurchased ................................................................ 675,245
Accrued expenses, taxes, and other ................................................................... 1,608,249
--------------
Total Liabilities .................................................................................... 24,809,959
--------------
Net Assets ........................................................................................... $ 997,835,645
==============
Composition of Net Assets:
Capital Stock, at par ($1 par value; 500,000,000 shares authorized;
135,309,110 shares outstanding):
Class A ............................................................................................ $ 125,915,551
Class B ............................................................................................ 3,984,905
Class D ............................................................................................ 5,408,654
Additional paid-in capital ........................................................................... 484,642,093
Accumulated net investment loss ...................................................................... (231,942)
Undistributed net realized gain ...................................................................... 17,613,646
Net unrealized appreciation of investments ........................................................... 360,502,738
--------------
Net Assets ........................................................................................... $ 997,835,645
==============
NET ASSET VALUE PER SHARE:
Class A ($934,654,180 / 125,915,551 shares) .......................................................... $7.42
=====
Class B ($26,790,850 / 3,984,905 shares) ............................................................. $6.72
=====
Class D ($36,390,615 / 5,408,654 shares) ............................................................. $6.73
=====
</TABLE>
- ----------
See Notes to Financial Statements.
10
<PAGE>
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends ............................................................................ $ 7,229,828
Interest ............................................................................. 3,464,012
-------------
Total Investment Income (net of foreign taxes withheld of $8,415) ............................................... $ 10,693,840
EXPENSES:
Management fee ....................................................................... 6,000,039
Distribution and service fees ........................................................ 2,277,732
Shareholder account services ......................................................... 1,161,140
Custody and related services ......................................................... 171,570
Registration ......................................................................... 131,270
Shareholder reports and communications ............................................... 110,943
Auditing and legal fees .............................................................. 92,187
Directors' fees and expenses ......................................................... 22,490
Miscellaneous ........................................................................ 32,605
-------------
Total Expenses .................................................................................................. 9,999,976
-------------
Net Investment Income ........................................................................................... 693,864
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments ..................................................... 137,133,994
Net realized loss from foreign currency transactions ................................. (3,183,176)
Net change in unrealized appreciation of investments ................................. 126,289,172
Net change in unrealized depreciation on translations of assets
and liabilities denominated in foreign currencies .................................. 3,073,583
-------------
Net Gain on Investments and Foreign Currency Transactions ............................ .......................... 263,313,573
-------------
Increase in Net Assets from Operations .......................................................................... $264,007,437
=============
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1998 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) ....................................................... $ 693,864 $ (281,431)
Net realized gain on investments ................................................... 137,133,994 112,859,384
Net realized loss from foreign currency transactions ............................... (3,183,176) (896,184)
Net change in unrealized appreciation of investments ............................... 126,289,172 13,601,198
Net change in unrealized depreciation of assets and liabilities
denominated in foreign currencies ................................................ 3,073,583 (2,776,834)
------------- -------------
Increase in Net Assets from Operations ............................................. 264,007,437 122,506,133
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ......................................................................... (1,259,431) --
Net realized gain on investments:
Class A ......................................................................... (85,132,303) (88,125,334)
Class B ......................................................................... (2,101,759) (436,521)
Class D ......................................................................... (3,291,473) (1,908,912)
------------- -------------
Decrease in Net Assets from Distributions .......................................... (91,784,966) (90,470,767)
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
--------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------
1998 1997
------------- -------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares:
Class A ............................................. 6,247,606 1,803,217 43,436,023 11,441,313
Class B ............................................. 1,189,920 445,150 7,641,423 2,599,277
Class D ............................................. 609,777 574,002 3,885,427 3,413,694
Investment of dividends:
Class A ............................................. 135,042 -- 937,188 --
Exchanged from associated Funds:
Class A ............................................. 62,988,477 31,958,901 438,189,220 206,157,045
Class B ............................................. 2,657,809 276,718 16,973,170 1,652,977
Class D ............................................. 22,625,884 7,361,738 144,402,504 43,996,593
Shares issued in payment of
gain distributions:
Class A ............................................. 9,931,558 11,845,991 68,030,814 69,654,414
Class B ............................................. 315,870 75,334 1,958,406 408,312
Class D ............................................. 511,974 325,908 3,174,239 1,766,426
------------- ------------- ------------- -------------
Total .................................................. 107,213,917 54,666,959 728,628,414 341,090,051
------------- ------------- ------------- -------------
Cost of shares repurchased:
Class A ............................................. (12,291,159) (8,524,026) (85,236,803) (54,800,294)
Class B ............................................. (220,048) (127,571) (1,386,808) (798,290)
Class D ............................................. (729,441) (545,926) (4,591,818) (3,268,572)
Exchanged into associated Funds:
Class A ............................................. (61,662,662) (31,908,540) (429,794,412) (206,538,604)
Class B ............................................. (712,218) (76,212) (4,510,173) (447,915)
Class D ............................................. (20,427,040) (6,990,014) (130,233,642) (41,992,651)
------------- ------------- ------------- -------------
Total .................................................. (96,042,568) (48,172,289) (655,753,656) (307,846,326)
------------- ------------- ------------- -------------
Increase in Net Assets from
Capital Share Transactions ........................... 11,171,349 6,494,670 72,874,758 33,243,725
============= ============= ============= =============
Increase in Net Assets ...................................................................... 245,097,229 65,279,091
NET ASSETS:
Beginning of year ........................................................................... 752,738,416 687,459,325
------------- -------------
End of Year (including accumulated net investment
loss of $231,942 and $247,853, respectively) ............................................. $ 997,835,645 $ 752,738,416
============= =============
</TABLE>
- ------------------------------------
See Notes to Financial Statements.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Multiple Classes of Shares -- Seligman Growth Fund, Inc. (the "Fund") offers
three classes of shares. Class A shares are sold with an initial sales charge of
up to 4.75% and a continuing service fee of up to 0.25% on an annual basis.
Class A shares purchased in an amount of $1,000,000 or more are sold without an
initial sales charge but are subject to a contingent deferred sales charge
("CDSC") of 1% on redemptions within 18 months of purchase. Class B shares are
sold without an initial sales charge but are subject to a distribution fee of
0.75%, a service fee of up to 0.25% on an annual basis, and a CDSC, if
applicable, of 5% on redemptions in the first year of purchase, declining to 1%
in the sixth year and 0% thereafter. Class B shares will automatically convert
to Class A shares on the last day of the month that precedes the eighth
anniversary of their date of purchase. Class D shares are sold without an
initial sales charge but are subject to a distribution fee of up to 0.75% and a
service fee of up to 0.25% on an annual basis, and a CDSC, if applicable, of 1%
imposed on redemptions made within one year of purchase. The 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 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 an
exchange 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, 1998, 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
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
of net assets based on their ultimate characterization for federal income
tax purposes. Any such reclassification will have no effect on net assets,
results of operations, or net asset value per share of the Fund.
For the year ended December 31, 1998, the Fund redeemed 96,042,568 of
its shares from shareholders aggregating $655,753,656, of which
approximately $55,700,000 represents capital gain distributions. This
information is provided for federal income tax purposes only.
3. Purchases and Sales of Securities -- Purchases and sales of portfolio
securities, excluding US Government obligations and short-term investments, for
the year ended December 31, 1998, amounted to $617,700,814 and $666,675,535,
respectively.
At December 31, 1998, the cost of investments for federal income tax
purposes was substantially the same as the cost for financial reporting
purposes, and the tax basis gross unrealized appreciation and depreciation of
portfolio securities amounted to $362,683,075 and $2,180,139, respectively.
4. Management Fee, Distribution Services, and Other Transactions -- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the Fund and
provides for 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 0.70% 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 0.70% per annum of the Fund's average daily net assets.
Prior to March 31, 1998, Seligman Henderson Co., an entity owned 50% each
by the Manager and Henderson International, Inc., a subsidiary of Henderson plc,
supervised and directed all or a portion of the Fund's foreign investments. For
this service, the Manager paid Seligman Henderson Co. a monthly fee.
Seligman Advisors, Inc. (the "Distributor") (formerly Seligman Financial
Services, Inc.), agent for the distribution of the Fund's shares and an
affiliate of the Manager, received concessions of $30,576 from sales of Class A
shares, after commissions of $231,641 were paid to dealers.
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distribution of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive a continuing fee of up to 0.25% on an annual basis,
payable quarterly, of the average daily net assets of the Class A shares
attributable to the particular service organizations for providing personal
services and/or the maintenance of shareholder accounts. The Distributor charges
such fees to the Fund pursuant to the Plan. For the year ended December 31,
1998, fees incurred under the Plan aggregated $1,949,527, or 0.24% per annum of
the average daily net assets of Class A shares.
Under the Plan, with respect to Class B and Class D shares, service
organizations can enter into agreements with the Distributor and receive a
continuing fee for providing personal services and/or the maintenance of
shareholder accounts of up to 0.25% on an annual basis of the average daily net
assets of the Class B and Class D shares for which the organizations are
responsible; and, for Class D shares only, fees for providing other distribution
assistance of up to 0.75% on an annual basis of such average daily net assets.
Such fees are paid monthly by the Fund to the Distributor pursuant to the Plan.
With respect to Class B shares, a distribution fee of 0.75% on an annual
basis of average daily net assets is payable monthly by the Fund to the
Distributor; however, the Distributor has sold its rights to this fee to a third
party (the "Purchaser"), which provides funding to the Distributor to enable it
to pay commissions to dealers at the time of the sale of the related Class B
shares.
For the year ended December 31, 1998, fees incurred under the Plan,
equivalent to 1% per annum of the average daily net assets of Class B and Class
D shares, amounted to $102,607 and $225,598, respectively.
The Distributor is entitled to retain any CDSC imposed on redemptions of
Class D shares occurring within one year of purchase and on certain redemptions
of Class A shares occurring within 18 months of purchase. For the year ended
December 31, 1998, such charges amounted to $7,750.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The Distributor has sold its rights to collect any CDSC imposed on
redemptions of Class B shares to the Purchaser. In connection with the sale of
its rights to collect any CDSC and the distribution fees with respect to Class B
shares described above, the Distributor receives payments from the Purchaser
based on the value of Class Bshares sold. The aggregate amount of such payments
retained by the Distributor for the year ended December 31, 1998, amounted to
$11,100.
Seligman Services, Inc., an affiliate of the Manager, is eligible to
receive commissions from certain sales of shares of the Fund, as well as
distribution and service fees pursuant to the Plan. For the year ended December
31, 1998, Seligman Services, Inc. received commissions of $23,421 from the sale
of shares of the Fund. Seligman Services, Inc. also received distribution and
service fees of $674,868, pursuant to the Plan.
Seligman Data Corp., which is owned by the Fund and certain associated
investment companies, charged the Fund at cost $1,149,344 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 Distributor, Seligman Services, Inc., and/or Seligman Data Corp.
The Fund has a compensation arrangement under which directors who receive
fees may elect to defer receiving such fees. Directors may elect to have their
deferred fees accrue interest or earn a return based on the performance of the
Fund or other funds in the Seligman Group of Investment Companies. The cost of
such fees and earnings accrued thereon is included in directors' fees and
expenses, and the accumulated balance thereof at December 31, 1998, of $231,942
is included in other liabilities. Deferred fees and related accrued earnings are
not deductible for federal income tax purposes until such amounts are paid.
5. Committed Line of Credit -- Effective July 1, 1998, the Fund entered into a
joint $800 million committed line of credit that is shared by substantially all
funds in the Seligman Group of Investment Companies. The Fund's borrowings are
limited to 10% of its net assets. Borrowings pursuant to the credit facility are
subject to interest at a rate equal to the overnight federal funds rate plus
0.50%. The Fund incurs a commitment fee of 0.08% per annum on its share of the
unused portion of the credit facility. The credit facility may be drawn upon
only for temporary purposes and is subject to certain other customary
restrictions. The credit facility commitment expires one year from the date of
the agreement but is renewable with the consent of the participating banks. To
date, the Fund has not borrowed from the credit facility.
15
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below are intended to help you understand each Class's financial
performance for the past five years or from its inception, if less than five
years. Certain information reflects financial results for a single share of a
Class that was held throughout the periods shown. Per share amounts are
calculated using average shares outstanding. "Total return" shows the rate that
you would have earned (or lost) on an investment in each Class, assuming you
reinvested all your dividends and capital gain distributions. Total returns do
not reflect any sales charges, and are not annualized for periods of less than
one year.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net Asset Value, Beginning of Year ................... $6.08 $5.85 $5.22 $4.54 $5.26
-------- -------- -------- --------- ---------
Income from Investment Operations:
Net investment income (loss) ......................... 0.01 -- (0.01) 0.01 0.01
Net realized and unrealized gain (loss) on investments 2.07 1.06 1.13 1.27 (0.22)
Net realized and unrealized gain (loss) from
foreign currency transactions ...................... -- (0.03) (0.01) 0.01 --
-------- -------- -------- --------- ---------
Total from Investment Operations ..................... 2.08 1.03 1.11 1.29 (0.21)
-------- -------- -------- --------- ---------
Less Distributions:
Dividends from net investment income ................. (0.01) -- -- (0.01) (0.01)
Distributions from net realized capital gain ......... (0.73) (0.80) (0.48) (0.60) (0.50)
-------- -------- -------- --------- ---------
Total Distributions .................................. (0.74) (0.80) (0.48) (0.61) (0.51)
-------- -------- -------- --------- ---------
Net Asset Value, End of Year ......................... $7.42 $6.08 $5.85 $5.22 $4.54
======== ======== ======== ========= =========
TOTAL RETURN: 35.24% 18.11% 21.14% 28.47% (3.84)%
Ratios/Supplemental Data:
Net assets, end of year (000s omitted) ............... $934,654 $732,754 $675,086 $597,510 $513,328
Ratio of expenses to average net assets .............. 1.14% 1.16% 1.20% 0.94% 0.90%
Ratio of net income (loss) to average net assets ..... 0.11% (0.02)% (0.12)% 0.17% 0.14%
Portfolio turnover rate .............................. 77.85% 54.15% 26.05% 102.30% 93.59%
</TABLE>
- ----------------------------
See footnotes on page 17.
16
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B
------------------------------------
YEAR ENDED
DECEMBER 31, 4/22/96*
--------------------- TO
1998 1997 12/31/96
------- ---------- ----------
<S> <C> <C> <C>
PER SHARE DATA:
Net Asset Value, Beginning of Period ........... $5.60 $5.49 $5.35
------- ------- -------
Income from Investment Operations:
Net investment income (loss) ................... (0.04) (0.05) (0.03)
Net realized and unrealized gain on investments 1.89 0.99 0.65
Net realized and unrealized gain (loss) from
foreign currency transactions ................ -- (0.03) --
------- ------- -------
Total from Investment Operations ............... 1.85 0.91 0.62
------- ------- -------
Less Distributions:
Dividends from net investment income ........... -- -- --
Distributions from net realized capital gain ... (0.73) (0.80) (0.48)
------- ------- -------
Total Distributions ............................ (0.73) (0.80) (0.48)
------- ------- -------
Net Asset Value, End of Period ................. $6.72 $5.60 $5.49
======= ======= =======
TOTAL RETURN: 34.13% 17.10% 11.45%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) ....... $26,791 $4,219 $880
Ratio of expenses to average net assets ........ 1.90% 1.93% 1.99%+
Ratio of net income (loss) to average net assets (0.65)% (0.79)% (0.83)%+
Portfolio turnover rate ........................ 77.85% 54.15% 26.05%++
</TABLE>
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net Asset Value, Beginning of Year ................... $5.60 $5.49 $4.96 $4.38 $5.23
----- ----- ----- ----- -----
Income from Investment Operations:
Net investment income (loss) ......................... (0.04) (0.05) (0.05) (0.04) (0.12)
Net realized and unrealized gain (loss) on investments 1.90 0.99 1.07 1.21 (0.23)
Net realized and unrealized gain (loss) from
foreign currency transactions ...................... -- (0.03) (0.01) 0.01 --
----- ----- ----- ----- -----
Total from Investment Operations ..................... 1.86 0.91 1.01 1.18 (0.35)
----- ----- ----- ----- -----
Less Distributions:
Dividends from net investment income ................. -- -- -- -- --
Distributions from net realized capital gain ......... (0.73) (0.80) (0.48) (0.60) (0.50)
----- ----- ----- ----- -----
Total Distributions .................................. (0.73) (0.80) (0.48) (0.60) (0.50)
----- ----- ----- ----- -----
Net Asset Value, End of Year ......................... $6.73 $5.60 $5.49 $4.96 $4.38
===== ===== ===== ===== =====
TOTAL RETURN: 34.33% 17.10% 20.21% 27.01% (6.56)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000s omitted) ............... $36,391 $15,765 $11,493 $6,412 $1,742
Ratio of expenses to average net assets .............. 1.90% 1.93% 1.97% 1.91% 2.93%
Ratio of net income (loss) to average net assets ..... (0.65)% (0.79)% (0.88)% (0.83)% (2.34)%
Portfolio turnover rate .............................. 77.85% 54.15% 26.05% 102.30% 93.59%
</TABLE>
- ----------
* Commencement of offering of shares.
+ Annualized.
++ For the year ended December 31, 1996.
See Notes to Financial Statements.
17
<PAGE>
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,
1998, the related statements of operations for the year then ended and of
changes in net assets for each of the years in the two-year then ended, and the
financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. We conducted our audits
in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998, by correspondence with
the Fund's custodian and brokers; where replies were not received from brokers,
we performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management
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, 1998, the results of its operations, the changes
in its net assets, and the financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
January 29, 1999
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18
<PAGE>
FEDERAL TAX STATUS OF 1998 DIVIDEND AND GAIN DISTRIBUTIONS FOR TAXABLE ACCOUNTS
The dividend paid to Class A shareholders in 1998 is taxable as ordinary income
for federal tax purposes, regardless of whether it was received in cash or in
shares. Under the Internal Revenue Code, 67.20% of the dividend paid to Class A
shareholders has been designated as qualifying for the dividends received
deduction available to corporate shareholders. In order to claim the dividends
received deduction for this distribution, corporate shareholders must have held
the Fund's shares for 46 days or more during the 90-day period beginning 45 days
before each ex-dividend date.
A long-term capital gain distribution of $0.730 per share from 1998
undistributed net realized gain was paid on November 23, 1998 to Class A, B, and
D shareholders. In 1997, Congress revised the capital gain provisions, so that
depending on how long a security was owned when it was sold, investors may have
been faced with a 28% capital gains rate, a 20% rate, or both. In October 1998,
Congress simplified the capital gains provisions so that, generally, all gains
on securities held more than one year are to be taxed at a maximum 20% rate. The
distributions from net long-term gain are designated as "capital gain dividends"
for federal income tax purposes and are taxable to shareholders in 1998 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, any loss on the sale would be treated as long-term to the extent it
offsets the long-term capital gain distribution.
If the gain distributions were paid in shares, the per share cost basis for
federal income tax purposes is $6.85 for Class A shares and $6.20 for Class B
and D shares for the November 23 distribution.
A 1998 year-end statement of account activity and a 1998 tax package, which may
include a Form 1099-DIV, a Form 1099-B, and/or a Cost Basis Statement, have been
mailed to each shareholder. Form 1099-DIV shows the distributions paid to the
shareholder during the year. Form 1099-B shows the proceeds of any redemptions
paid to the shareholder during the year. Cost Basis Statements report all sales
or exchanges from a shareholder's account which may have resulted in a capital
gain or loss in 1998. The information shown on Forms 1099-DIV and 1099-B is
reported to the Internal Revenue Service as required by federal regulations.
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FOR MORE INFORMATION
Manager
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
General Counsel
Sullivan & Cromwell
Independent Auditors
Deloitte & Touche LLP
General Distributor
Seligman Advisors, Inc.
100 Park Avenue
New York, NY 10017
Shareholder Service Agent
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
Important Telephone Numbers
(800) 221-2450 Shareholder Services
(800) 445-1777 Retirement Plan Services
(212) 682-7600 Outside the
United States
(800) 622-4597 24-Hour Automated
Telephone Access
Service
- --------------------------------------------------------------------------------
19
<PAGE>
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
John R. Galvin 2, 4
Dean, Fletcher School of Law and Diplomacy
at Tufts University
Director, Raytheon Company
Alice S. Ilchman 3, 4
Trustee, Committee for Economic Development
Chairman, The Rockefeller Foundation
Frank A. McPherson 2, 4
Director, Kimberly-Clark Corporation
Director, Baptist Medical Center
John E. Merow 2, 4
Retired Chairman and Senior Partner,
Sullivan & Cromwell, Law Firm
Director, Commonwealth Industries, Inc.
Director, New York Presbyterian Hospital
Betsy S. Michel 2, 4
Trustee, The Geraldine R. Dodge Foundation
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, 4
Retired Partner, Pitney, Hardin, Kipp & Szuch, Law Firm
James Q. Riordan 3, 4
Director, KeySpan Energy Corporation
Trustee, Committee for Economic Development
Director, Public Broadcasting Service
Richard R. Schmaltz 1
Managing Director, Director of Investments,
J. & W. Seligman & Co. Incorporated
Trustee Emeritus, Colby College
Robert L. Shafer 3, 4
Retired Vice President, Pfizer Inc.
James N. Whitson 2, 4
Director and Consultant, Sammons Enterprises, Inc.
Director, CommScope, Inc.
Director, C-SPAN
Brian T. Zino 1
President
President, J. & W. Seligman & Co. Incorporated
Chairman, Seligman Data Corp.
Director, ICIMutual Insurance Company
Director Emeritus
Fred E. Brown
Director and Consultant,
J. &W. Seligman &Co. Incorporated
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Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
4 Board Operations Committee
- --------------------------------------------------------------------------------
Executive Officers
- --------------------------------------------------------------------------------
William C. Morris
Chairman
Brian T. Zino
President
Marion S. Schultheis
Vice President
Lawrence P. Vogel
Vice President
Thomas G. Rose
Treasurer
Frank J. Nasta
Secretary
- --------------------------------------------------------------------------------
20
<PAGE>
GLOSSARY OF FINANCIAL TERMS
Capital Gain Distribution -- A payment to mutual fund shareholders of profits
realized on the sale of securities in a fund's portfolio.
Capital Appreciation/Depreciation -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.
Compounding -- The change in the value of an investment as shareholders receive
earnings on their investment's earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will not be based on the
original $1,000, but on the $1,070, which includes the first year's earnings.
Contingent Deferred Sales Charge (CDSC) -- Depending on the class of shares
owned, a fee charged by a mutual fund when shares are sold back to the fund (the
CDSC expires after a fixed time period).
Dividend -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
Dividend Yield -- A measurement of a fund's dividend as a percentage of the
maximum offering price.
Expense Ratio -- The cost of doing business for a mutual fund, expressed as a
percent of the fund's net assets.
Investment Objective -- The shared investment goal of a fund and its
shareholders.
Management Fee -- The amount paid by a mutual fund to its investment advisor(s).
Multiple Classes of Shares -- Although an individual mutual fund invests in only
one portfolio of securities, it may offer investors several purchase options
which are "classes" of shares. Multiple classes permit shareholders to choose
the fee structure that best meets their needs and goals. Generally, each class
will differ in terms of how and when sales charges and certain fees are
assessed.
National Association of Securities Dealers, Inc. (NASD) -- A self-regulatory
body with authority over firms that distribute mutual funds.
Net Asset Value (NAV) Per Share -- The market worth of one fund share, obtained
by adding a mutual fund's total assets (securities, cash, and any accrued
earnings), subtracting liabilities, and dividing the resulting net assets by the
number of shares outstanding.
Offering Price (OP) -- The price at which a mutual fund's share can be
purchased. The offering price per share is the current net asset value plus any
sales charge.
Portfolio Turnover -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
Prospectus -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission (SEC), such as a fund's investment objective and policies, services,
investment restrictions, how shares are bought and sold, fund fees and other
charges, and the fund's financial highlights.
SEC Yield -- SEC Yield refers to the net income earned by a fund during a recent
30-day period. This income is annualized and then divided by the maximum
offering price per share on the last day of the 30-day period. The SEC Yield
formula reflects semiannual compounding.
Securities and Exchange Commission -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
Statement of Additional Information -- A document that contains updated or more
detailed information about an investment company and that supplements the
prospectus. It is available at no charge upon request.
Total Return -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The Average Annual Total
Return represents the average annual compounded rate of return for the periods
presented.
Yield on Securities -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.
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Adapted from the Investment Company Institute's 1998 Mutual Fund Fact Book.
21
<PAGE>
This report is intended only for the information of shareholders or those who
have received the offering prospectus covering shares of Capital Stock of
Seligman 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.
SELIGMAN ADVISORS, INC.
an affiliate of
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
EQGR2 12/98 [LOGO]Printed on Recycled Paper
