49TH ANNUAL REPORT
SELIGMAN
INCOME
FUND, INC.
DECEMBER 31, 1995
[logo]
AN INCOME FUND
ESTABLISHED IN 1947
SELIGMAN FINANCIAL SERVICES, INC.
AN AFFILIATE OF
[logo]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
THIS REPORT IS INTENDED ONLY FOR THE INFORMATION OF SHAREHOLDERS OR THOSE WHO
HAVE RECEIVED THE OFFERING PROSPECTUS COVERING SHARES OF CAPITAL STOCK OF
SELIGMAN INCOME FUND, INC., WHICH CONTAINS INFORMATION ABOUT THE SALES CHARGES,
MANAGEMENT FEE, AND OTHER COSTS. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE
INVESTING OR SENDING MONEY.
EQIN2 12/95
<PAGE>
================================================================================
SELIGMAN INCOME FUND
- --------------------------------------------------------------------------------
A mutual fund that seeks to provide shareholders with high current income
consistent with prudent risk of capital, and with the possibility of improvement
in income and capital value over the longer term.
HIGHLIGHTS OF 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------- -----------------------
CLASS A CLASS D CLASS A CLASS D
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets (in thousands)............................ $318,307 $86,701 $286,355 $67,946
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value per Share............................ $14.63 $14.60 $13.05 $13.01
- ----------------------------------------------------------------------------------------------------------------------
Dividends Paid per Share............................. $ 0.78 $ 0.65 $ 0.75 $ 0.65
Distribution of Realized Gain per Share.............. 0.276 0.276 -- --
- ----------------------------------------------------------------------------------------------------------------------
Total Expenses per Dollar of
Average Net Assets................................. $0.0100 $0.0179 $0.0102 $0.0182
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
================================================================================
TO THE SHAREHOLDERS
- --------------------------------------------------------------------------------
Your Fund performed favorably during the past year. Long-term performance
results and an interview with your Portfolio Manager begin on page 3.
On December 27, your Fund paid a $0.20 per share dividend to Class A
shareholders of record December 21, and a $0.165 dividend to Class D
shareholders. For both Class A and D shares, net realized gain per share from
investment transactions for the 12 months totaled $0.37. Net unrealized gain per
share totaled $0.99 at December 31. A realized gain distribution of $0.276 was
paid on December 27 to shareholders of record December 21.
Turning towards the US financial markets, it can be unanimously concluded
that 1995 was a banner year. After a pessimistic start, many factors including
low inflation, falling interest rates, and strong corporate earnings paved the
way for a memorable year.
Both equity and bond market indices tell the best story. The Standard &
Poor's 500 Composite Stock Price Index and the Ibbotson Long-Term Government
Bond Index were up 30% or more for the year. It is interesting to note that
these leading market indices have only once, since the end of World War II,
risen more than 1995's powerful advance.
The financial markets, however, did teeter towards the end of the year due
to the Federal budget stalemate between the White House and Congress, which
brought on fears of higher inflation and interest rates. Nevertheless, the
deadlock in Washington did not deter the Federal Reserve Board from lowering
short-term interest rates on December 19--a move that quickly rejuvenated the
financial markets.
Looking forward, the slowing economy, the budget negotiations, and the 1996
Presidential election are a few of the factors that may create somewhat more
volatile markets in the year ahead. We remain optimistic about your Fund's
performance and will continue to search for, and invest in, those companies that
can sustain earnings growth in a challenging and competitive global business
environment--a strategy we believe is key to investment performance.
A Special Meeting of Shareholders was held on December 12, at which several
proposals were voted on. The results of the Special Meeting appear on page 21.
We thank you for your continued investment in Seligman Income Fund, and
look forward to serving your investment needs in 1996 and the years ahead.
By order of the Board of Directors,
/s/ William C. Morris
William C. Morris
Chairman
/s/ Brian T. Zino
Brian T. Zino
President
February 2, 1996
2
<PAGE>
================================================================================
ANNUAL PERFORMANCE OVERVIEW
- --------------------------------------------------------------------------------
The following are biographies of your Portfolio Managers, a discussion with them
regarding Seligman Income Fund, and a comparison chart and table of your Fund's
performance against the Standard & Poor's 500 Composite Stock Price Index, the
Lehman Brothers Aggregate Bond Index, and the Lipper Income Fund Average.
YOUR PORTFOLIO MANAGERS
CHARLES C. SMITH, JR. is a Managing Director of J. & W.
Seligman & Co. Incorporated and has been Portfolio Manager of
Seligman Income Fund since December 1991. Mr. Smith is also
Portfolio Manager of Seligman Common Stock Fund and
Tri-Continental Corporation. In addition, Mr. Smith is Vice
President of Seligman Portfolios, Inc. and Portfolio Manager
of its Common Stock and Income portfolios. Mr. Smith joined
Seligman in 1985 as Vice President, Investment Officer. He was
[Photo] promoted to Senior Vice President, Senior Investment Officer
in August 1992, and to Managing Director in January 1994.
Stacey G. Navin, Vice President of J. & W. Seligman & Co.
Incorporated, has been Co-Portfolio Manager of Seligman Income
Fund and Seligman Common Stock Fund since December 1991. Ms.
Navin joined Seligman in 1986 as a research analyst and
assumed portfolio management responsibilities in 1988. Mr.
Smith and Ms. Navin are supported by a group of investment
professionals dedicated to the income and growth investment
discipline, and to the objectives of Seligman Income Fund.
IAIN C. CLARK, Chief Investment Officer of Seligman Henderson Co., is
responsible for the investment activities of Seligman Income Fund's Subadviser,
Seligman Henderson Co. Mr. Clark is also head of International Investments for,
and a Director of, Henderson Administration Group plc, an investment manager in
London, England. He has been with Henderson since 1985.
YOUR MANAGERS' INVESTMENT STRATEGY
"LATE IN 1994, WE EXTENDED MATURITIES IN THE FIXED-INCOME PORTION OF YOUR FUND,
BASED ON OUR EXPECTATION FOR DECLINING INTEREST RATES IN 1995. AT THE SAME TIME,
WE FOCUSED ON INCREASING OUR COMMITMENTS TO CONVERTIBLE SECURITIES WITH LOWER
PREMIUMS THAT HAVE A STRONGER CORRELATION TO THEIR UNDERLYING COMMON STOCK.
LASTLY, WE MODESTLY INCREASED OUR EXPOSURE TO UTILITY ISSUES, WHICH HAVE
HISTORICALLY DONE WELL IN DECLINING INTEREST RATE ENVIRONMENTS.
"AS PART OF YOUR FUND'S INVESTMENT POLICY, IT MAY INVEST UP TO 10% OF ASSETS IN
INTERNATIONAL EQUITIES. BY INVESTING INTERNATIONALLY, SELIGMAN INCOME FUND HAS
THE ABILITY TO PARTICIPATE IN NON-U.S. MARKETS, THUS SEEKING TO ACHIEVE GREATER
PORTFOLIO DIVERSIFICATION WITH LESS OVERALL RISK. HOWEVER, IN PERIODS WHEN
INTERNATIONAL MARKETS LAG THE U.S. MARKETS, SUCH AS 1995, INTERNATIONAL EXPOSURE
CAN DAMPEN OVERALL INVESTMENT RESULTS."
ECONOMIC FACTORS AFFECTING SELIGMAN INCOME FUND
"THE DRAMATIC DECLINE IN INTEREST RATES IN 1995 HAD A VERY POSITIVE IMPACT ON
YOUR FUND. INVESTORS' EXPECTATIONS FOR STABLE ECONOMIC GROWTH COUPLED WITH
MODEST INFLATION GREATLY BENEFITED INCOME-SENSITIVE INVESTMENTS SUCH AS BONDS,
CONVERTIBLE SECURITIES, AND HIGHER YIELDING EQUITIES - TRADITIONAL INVESTMENTS
FOR YOUR FUND."
3
<PAGE>
================================================================================
ANNUAL PERFORMANCE OVERVIEW (continued)
- --------------------------------------------------------------------------------
INDIVIDUAL SECTOR PERFORMANCE
"MANY CONVERTIBLE SECURITIES ARE ISSUED BY COMPANIES WITH SMALLER
CAPITALIZATIONS, WHICH ENJOYED GOOD PERFORMANCE IN 1995. THE FINANCIAL,
TECHNOLOGY, AND UTILITY INDUSTRIES--THREE OF THE LARGER SECTORS IN THE
CONVERTIBLE AND EQUITY PORTIONS OF YOUR PORTFOLIO--DID PARTICULARLY WELL.
SPECIFICALLY, THE CONVERTIBLE SECURITIES OF CITICORP, H.F. AHMANSON, AND
CERIDIAN, AS WELL AS THE COMMON STOCKS OF NYNEX AND GTE, CONTRIBUTED TO YOUR
FUND'S PERFORMANCE IN 1995. ADDITIONALLY, THE BONDS HELD IN YOUR PORTFOLIO NOT
ONL CONTRIBUTED HIGH CURRENT INCOME, BUT SOLID CAPITAL APPRECIATION."
OUTLOOK FOR THE YEAR AHEAD
"ISSUE SELECTION WILL BE EXTREMELY IMPORTANT FOR YOUR FUND'S PERFORMANCE IN
1996. WE WILL PAY PARTICULAR ATTENTION TO IDENTIFYING VALUE, IN BOTH THE STOCK
AND BOND MARKETS. FURTHER, INTERNATIONAL INVESTMENTS SHOULD BE A POSITIVE FACTOR
AS THE YEAR PROGRESSES IF FOREIGN MONETARY AUTHORITIES LOWER INTEREST RATES
ABROAD."
4
<PAGE>
================================================================================
PERFORMANCE COMPARISON CHART AND TABLE December 31, 1995
- --------------------------------------------------------------------------------
This chart compares a $10,000 hypothetical investment made in Seligman Income
Fund Class A shares, with and without the maximum initial sales charge of 4.75%,
for the 10-year period ended December 31, 1995, to a $10,000 hypothetical
investment made in the Standard & Poor's 500 Composite Stock Price Index (S&P
500), the Lehman Brothers Aggregate Bond Index (Lehman Index), and the Lipper
Income Funds Average (Lipper Income) for the same period. The performance of
Seligman Income Fund Class D shares is not shown in this chart, but is included
in the table below. It is important to keep in mind that the indices exclude the
effects of any fees or sales charges, and the Lipper Income excludes the effects
of any sales charges.
[TABLE BELOW LISTS PLOT POINTS FOR LINE GRAPH INCLUDED WITH PRINTED REPORT]
<TABLE>
<CAPTION>
Income Fund Income Fund S&P Stock Lehman Brothers
Date with sales charge w/o sales charge Index Aggregate Index Lipper Income
- ---- ----------------- ---------------- --------------- --------------- -------------
<C> <C> <C> <C> <C> <C> <C>
12/31/85 9524.16 10000 10000 10000 10000
3/31/86 10485.38 11009.25 11410.50 10777 11005
6/30/86 10781.48 11320.15 12083.03 10905.25 11309.84
9/30/86 10783.58 11322.36 11240.12 11163.7 11266.86
12/31/86 11153.21 11710.46 11866.53 11526.52 11675.85
3/31/87 11524.28 12100.07 14400.28 11716.71 12503.67
6/30/87 11219.29 11779.83 15123.17 11506.98 12426.14
9/30/87 11012.17 11562.35 16120.85 11192.84 12470.88
12/31/87 10707.33 11242.28 12489.63 11843.14 11680.22
3/31/88 11312.48 11877.67 13200.78 12288.44 12273.58
6/30/88 11672.53 12255.72 14079.96 12433.45 12579.19
9/30/88 11767.51 12355.45 14127.69 12680.87 12780.46
12/31/88 11834.81 12426.11 14563.81 12777.25 12921.04
3/31/89 12239.65 12851.17 15596.38 12922.91 13352.61
6/30/89 13063.49 13716.18 16973.08 13952.87 14066.97
9/30/89 13318.17 13983.58 18790.72 14110.53 14619.8
12/31/89 13622.6 14303.23 19178.56 14635.44 14812.78
3/31/90 13513.09 14188.25 18601.67 14518.36 14583.19
6/30/90 13591.39 14270.46 19771.90 15048.28 14991.51
9/30/90 12128.22 12734.19 17054.65 15177.7 14228.45
12/31/90 12491.48 13115.61 18583.43 15945.69 14830.31
3/31/91 13863.37 14556.05 21282.86 16390.57 16092.37
6/30/91 14292.12 15006.22 21234.12 16659.38 16393.3
9/30/91 15547.31 16324.12 22369.72 17605.63 17498.2
12/31/91 16254.31 17066.44 24245.20 18498.24 18465.86
3/31/92 17089.18 17943.02 23632.77 18261.46 18650.51
6/30/92 17755.49 18642.62 23082.26 18999.22 19230.55
9/30/92 18567.74 19495.46 24841.58 19816.19 19911.31
12/31/92 19105.23 20059.81 26092.60 19869.69 20279.67
3/31/93 20347.86 21364.52 27232.06 20690.31 21328.12
6/30/93 20858.94 21901.14 27364.68 21238.6 21808.01
9/30/93 21591.36 22670.16 28072.06 21792.93 22521.13
12/31/93 22157.63 23264.74 28722.49 21806.01 22737.33
3/31/94 21270.96 22333.76 27633.33 21180.17 22062.03
6/30/94 20928.89 21974.6 27749.67 20962.02 21953.93
9/30/94 21350.06 22416.82 29106.35 21089.89 22377.64
12/31/94 20954.4 22001.39 29101.69 21170.03 22071.07
3/31/95 22081.35 22962.37 31935.32 22237 23287.18
6/30/95 23612.06 24878.47 34983.87 23591.23 24656.47
9/30/95 24653.15 25884.96 37764.04 24053.62 25788.2
12/31/95 25271.34 26534.02 40037.43 25078.3 26946.09
</TABLE>
The table below shows the average annual total returns for the one-, five-, and
10-year periods through December 31, 1995, for the Seligman Income Fund Class A
shares, with and without the maximum initial sales charge of 4.75%, the S&P 500,
the Lehman Index, and the Lipper Income. Also included in the table are the
average annual total returns for the one-year and since-inception periods
through December 31, 1995, for the Seligman Income Fund Class D shares, with and
without the effect of the 1% contingent deferred sales load ("CDSL") imposed on
shares redeemed within one year of purchase, the S&P 500, the Lehman Index, and
the Lipper Income.
AVERAGE ANNUAL TOTAL RETURNS
ONE FIVE 10
YEAR YEARS YEARS
------ ------ ------
Seligman Income Fund
Class A with sales charge 14.88% 14.01% 9.71%
Class A without sales charge 20.60 15.13 10.25
S&P 500 37.58 16.59 14.86
Lehman Index 18.46 9.48 9.63
Lipper Income 22.10 12.69 10.42
SINCE
ONE INCEPTION
YEAR 5/3/93
--------- ---------
Seligman Income Fund
Class D with CDSL 18.66% n/a
Class D without CDSL 19.66 7.50%
S&P 500 37.58 16.62*
Lehman Index 18.46 7.19*
Lipper Income 21.66 9.04*
* From 4/30/93.
No adjustment was made to performance for periods prior to January 1, 1993, the
commencement date for the annual Administration, Shareholder Services and
Distribution Plan fee of up to 0.25% of average daily net assets of Class A
shares. THE PERFORMANCE OF CLASS 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. Performance data quoted represent changes in
prices and assume that all distributions within the periods are invested in
additional shares. The investment return and principal value of an investment
will fluctuate so that shares, if redeemed, may be worth more or less than their
original cost. Past performance is not indicative of future investment results.
5
<PAGE>
================================================================================
SELIGMAN INCOME FUND
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION FOR 1995 DIVIDEND AND GAIN DISTRIBUTIONS FOR TAXABLE
ACCOUNTS
The quarterly dividends paid to both Class A and Class D shareholders in 1995
are taxable as ordinary income for federal tax purposes. It makes no difference
whether you received them in cash or in shares. Under the Internal Revenue Code,
17% of the dividend paid to both Class A and Class D shareholders has been
designated as qualifying for the dividend received deduction available to
corporate shareholders. In order to claim the dividend received deduction for
this distribution, corporate shareholders must have held the Fund's shares for
at least 46 days.
A distribution of $0.276 per share, consisting of $0.067 from net long-term
and $0.209 from net short-term gain realized on investments in 1995, was paid on
December 27, 1995, to both Class A and D shareholders. 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 1995 as a long-term gain from the
sale of capital assets, no matter how long your shares may have been owned or
whether the distribution was paid in additional shares or cash. However, if
shares on which a capital gain distribution was received are subsequently sold,
and such shares were held for six months or less from the date of purchase, any
loss would be treated as long-term to the extent it offsets the long-term gain
distribution. Net short-term gain is taxable as ordinary income whether paid to
you in cash or shares.
If the gain distribution was paid in shares, the per share cost basis for
federal income tax purposes was $14.52 for Class A and $14.49 for Class D.
A year-end statement of account showing activity for 1995 and a combined
Form 1099-DIV/B have been mailed to each shareholder. The Form 1099-B shows the
proceeds of any redemptions paid to shareholders during the year and reported to
the Internal Revenue Service as required by federal regulations. Form 1099-DIV
shows the amount of the dividends and the distribution from gain on investments
paid during the year.
6
<PAGE>
================================================================================
SELIGMAN INCOME FUND
- --------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
PERCENT OF TOTAL
DECEMBER 31
----------------
1995 1994
- ---------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT
AGENCY SECURITIES .................. 10.6 12.6
- ---------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES ........ -- 0.6
- ---------------------------------------------------------
Corporate Bonds........................ 35.5 23.6
Convertible Bonds...................... 19.5 27.4
Convertible Preferred Stocks........... 14.4 16.8
Asset-backed Securities................ -- 1.4
- ---------------------------------------------------------
Total Corporate Fixed Income ......... 69.4 69.2
- ---------------------------------------------------------
Common Stocks ........................ 15.4 16.0
- ---------------------------------------------------------
Net Cash and Short-Term
Holdings ........................... 4.6 1.6
- ---------------------------------------------------------
Total ................................ 100.0 100.0
- ---------------------------------------------------------
DIVERSIFICATION OF NET ASSETS BY INDUSTRY
PERCENT OF TOTAL
DECEMBER 31
---------------
1995 1994
- --------------------------------------------------------
Automotive............................. 2.3 2.7
Banking and Finance.................... 18.4 10.5
Broadcasting........................... 1.2 --
Building and Construction.............. -- 1.2
Chemicals.............................. 3.9 1.1
Commercial Services.................... 1.0 --
Computer and Business Services......... 0.9 1.7
Consumer Goods and Services............ 3.2 2.8
Diversified............................ 0.8 0.8
Drugs and Health Care.................. 0.9 1.7
Electric Utilities..................... 5.4 4.0
Energy ................................ 10.1 8.6
Environmental Services................. 0.6 1.6
Finance and Insurance.................. -- 9.6
Food................................... 1.6 0.7
Insurance.............................. 8.2 --
Leasing................................ -- 0.8
Machinery.............................. 0.9 0.7
Manufacturing.......................... -- 0.2
Minerals............................... -- 0.7
Office Equipment and Services.......... -- 0.6
Packaging and Paper.................... 0.9 0.7
Publishing............................. 1.4 1.0
Retailing.............................. 3.4 5.1
Spirits, Wines, and Ciders............. -- 0.3
Steel.................................. 0.8 1.8
Technology............................. 4.0 5.8
Transportation......................... 3.9 8.3
Utilities/Telecommunications........... 6.2 8.6
Miscellaneous.......................... 4.8 3.6
- --------------------------------------------------------
TOTAL CORPORATE FIXED INCOME AND
COMMON STOCKS........................ 84.8 85.2
- --------------------------------------------------------
U.S. GOVERNMENT AND GOVERNMENT
AGENCY SECURITIES.................... 10.6 12.6
- --------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES.......... -- 0.6
- --------------------------------------------------------
NET CASH AND SHORT-TERM
HOLDINGS............................. 4.6 1.6
- --------------------------------------------------------
TOTAL.................................. 100.0 100.0
- --------------------------------------------------------
7
<PAGE>
================================================================================
SELIGMAN INCOME FUND
- --------------------------------------------------------------------------------
MAJOR PORTFOLIO HOLDINGS
AT DECEMBER 31, 1995
SECURITY VALUE
- ----------- ---------
U.S. Treasury Bonds
121/2%, 8/15/2014....................... $16,171,870
U.S. Treasury Notes
91/4%, 2/15/2016........................ 6,878,125
Carlton Communications
71/2%, 8/14/2007........................ 5,729,620
AEGON N.V. 8%,
8/15/2006............................... 5,643,200
Midland Bank 7.65%,
5/1/2025................................ 5,540,010
News America Holdings
81/4%, 8/10/2018........................ 5,468,895
Capital One Bank 81/8%,
3/1/2000................................ 5,384,495
Whitman 75/8%, 6/15/2015.................. 5,315,985
First Union 6.55%, 10/15/2035............. 5,174,480
St. Paul Companies 6.74%,
7/18/2005............................... 5,174,275
LARGEST PORTFOLIO CHANGES*
DURING PAST THREE MONTHS
PRINCIPAL AMOUNT
------------------------
HOLDINGS
ADDITIONS INCREASE 12/31/95
- ----------- ----------- -----------
U.S. GOVERNMENT AND GOVERN-
MENT AGENCY SECURITIES
U.S. Treasury Bonds 121/2%,
8/15/2014 .............................. $10,000,000 $10,000,000
CORPORATE BONDS
Alco Capital 5.97%, 12/1/1998 ............ 5,000,000 5,000,000
Chase Manhattan Grantor Trust,
5.90%, 11/15/2001 ...................... 4,834,517 4,834,517
Finova Capital 6.54%,
11/15/2002 ............................. 5,000,000 5,000,000
Ford Credit Grantor Trust 5.90%,
10/15/2000 ............................. 4,863,483 4,863,483
Geon 67/8%, 12/15/2005 ................... 5,000,000 5,000,000
Tosco 7%, 7/15/2000 ...................... 5,000,000 5,000,000
USAA Capital 5.73%,
11/17/1997 ............................. 5,000,000 5,000,000
Viacom 63/4%, 1/15/2003 .................. 5,000,000 5,000,000
Woolworth 7%, 10/15/2002 ................. 5,000,000 5,000,000
HOLDINGS
REDUCTIONS DECREASE 12/31/95
- ---------- ----------- ----------
U.S. GOVERNMENT AND GOVERN-
MENT AGENCY SECURITIES
U.S. Treasury Bonds 12%,
8/15/2013 .............................. $10,000,000 --
U.S. Treasury Notes 73/8%,
5/15/1996 .............................. 3,000,000 --
CORPORATE BONDS
Alco Capital 61/4%, 6/24/1998 ............ 5,000,000 --
Beneficial 6.59%, 7/18/2002 ............. 5,000,000 --
Cemex 61/4%, 10/25/1995 .................. 3,000,000 --
Dresdner Bank 71/4%, 9/15/2015 ........... 5,000,000 --
James River 6.70%, 11/15/2003 ............ 4,000,000 --
McDonnell Douglas 6.39%,
5/15/1997 .............................. 5,000,000 --
ASSET-BACKED SECURITIES
Ford Credit Auto Lease Trust
6.35%, 10/15/1998 ...................... 5,000,000 --
Toyota Auto Receivable Grantor
Trust 5.85%, 1/15/1999 ................. 5,000,000 --
* Largest portfolio changes from the previous quarter to the current quarter are
based on cost of purchases and proceeds from sales of securities.
8
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS December 31, 1995
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
------ -----
U.S. GOVERNMENT AND GOVERNMENT
AGENCY SECURITIES 10.6%
U.S. Treasury Bonds
12 1/2%, 8/15/2014 .............................. $10,000,000 $ 16,171,870
U.S. Treasury Notes
9 1/4%, 2/15/2016 ............................... 5,000,000 6,878,125
MORTGAGE-BACKED SECURITIES:++
Government National Mortgage
Association Obligations:
7 1/2%, with various maturities from
1/15/2023 to 12/15/2024 ......................... 9,293,226 9,566,215
10%, with various maturities from
1/15/2018 to 8/15/2021 .......................... 9,353,255 10,282,735
------------
TOTAL U.S. GOVERNMENT AND
GOVERNMENT AGENCY SECURITIES
(Cost $40,423,180) ............................. 42,898,945
------------
CORPORATE BONDS 35.5%
AUTOMOTIVE 2.3%
Ford Credit Grantor Trust,
5.90%, 10/15/2000 ............................... 4,863,483 4,883,229
General Motors
9 1/8%, 7/15/2001 ............................... 4,000,000 4,574,528
------------
9,457,757
------------
BANKING AND FINANCE 14.7%
Alco Capital 5.97%, 12/1/1998 ..................... 5,000,000 5,040,950
CAF 7 3/8%, 7/21/2000 ............................. 5,000,000 5,126,250
Capital One Bank 8 1/8%, 3/1/2000 ................. 5,000,000 5,384,495
Chase Manhattan Grantor Trust
5.90%, 11/15/2001 ............................... 4,834,517 4,854,146
Finova Capital 6.54%, 11/15/2002 .................. 5,000,000 5,101,765
First Union 6.55%, 10/15/2035 ..................... 5,000,000 5,174,480
First USA Bank 5 3/4%, 1/15/1999 .................. 4,000,000 3,982,596
Golden West Financial
6.70%, 7/1/2002 ................................. 4,000,000 4,118,764
Midland Bank 7.65%, 5/1/2025 ...................... 5,000,000 5,540,010
Travelers Group
6 1/4%, 12/1/2005 ............................... 3,000,000 2,995,410
United Companies Financial
7%, 7/15/1998 ................................... 2,000,000 2,038,438
United Companies Financial
9.35%, 11/1/1999 ................................ 3,000,000 3,228,342
USAA Capital+
5.73%, 11/17/1997 ............................... 5,000,000 5,029,700
USF&G 7%, 5/15/1998 ............................... 2,000,000 2,047,110
------------
59,662,456
------------
BROADCASTING 1.2%
Viacom 6 3/4%, 1/15/2003 .......................... $5,000,000 $ 5,044,250
------------
CHEMICALS 3.4%
Geon 6 7/8%, 12/15/2005 .......................... 5,000,000 5,017,900
Lyondell Petrochemical
9 1/8%, 3/15/2002 ............................... 4,000,000 4,559,672
Praxair 6.85%, 6/15/2005 .......................... 4,000,000 4,157,576
------------
13,735,148
------------
COMMERCIAL SERVICES 1.0%
Service Corp. 6 3/8%, 10/1/2000 ................... 4,000,000 4,075,700
------------
ELECTRIC UTILITIES 1.0%
New Jersey Central Power & Light
6 1/8%, 8/1/1996 ............................... 1,000,000 999,896
Texas Utilities 5P. %, 4/1/1998 ................... 3,000,000 3,009,912
------------
4,009,808
------------
ENERGY 3.2%
Enron 7 1/8%, 5/15/2007 ........................... 3,000,000 3,187,989
Oryx Energy 10%, 4/1/2001 ......................... 4,000,000 4,508,420
Tosco 7%, 7/15/2000 ............................... 5,000,000 5,092,570
------------
12,788,979
------------
INSURANCE 2.7%
AEGON N.V. 8%, 8/15/2006 .......................... 5,000,000 5,643,200
St. Paul Companies
6.74%, 7/18/2005 ............................... 5,000,000 5,174,275
------------
10,817,475
------------
PUBLISHING 1.4%
News America Holdings
8 1/4%, 8/10/2018 ............................... 5,000,000 5,468,895
------------
RETAILING 1.3%
Woolworth 7%, 10/15/2002 ......................... 5,000,000 5,119,670
------------
TECHNOLOGY 0.5%
Tektronix 7 5/8%, 8/15/2002 ....................... 2,000,000 2,115,366
------------
MISCELLANEOUS 2.8%
CSR America 6 7/8%, 7/21/2005 ..................... 3,000,000 3,121,827
Trinova 7.95%, 5/1/1997 .......................... 3,000,000 3,087,039
Whitman 7 5/8%, 6/15/2015 ........................ 5,000,000 5,315,985
------------
11,524,851
------------
TOTAL CORPORATE BONDS
(Cost $138,768,312) ............................. 143,820,355
------------
9
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
------ -----
CONVERTIBLE BONDS 19.5%
CONSUMER GOODS AND SERVICES 2.3%
Bell Sports 4 1/4%, 11/15/2000 .................... $2,500,000 $ 1,750,000
Unifi 6%, 3/15/2002 ................................ 4,000,000 4,030,000
Wendy's International
7%, 4/1/2006 ..................................... 2,000,000 3,437,500
------------
9,217,500
------------
DIVERSIFIED 0.8%
Land and General Berhad
4 1/2%, 7/26/2004 ................................ 1,000,000 1,132,500
MascoTech 4 1/2%, 12/15/2003 ....................... 2,750,000 2,151,875
------------
3,284,375
------------
DRUGS AND HEALTH CARE 0.9%
Ciba-Geigy 6 1/4%, 3/15/2016+ ...................... 2,000,000 2,030,000
Greenery Rehabilitation Group
8 3/4%, 4/1/2015 ................................. 2,000,000 1,790,000
------------
3,820,000
------------
ENERGY 2.2%
Apache 6%, 1/15/2002+ .............................. 3,000,000 3,412,500
E. E. Finance 8 1/2%, 6/27/2006 .................... 1,000,000 1,543,120
Kelley Oil & Gas
8 1/2%, 4/1/2000 ................................. 1,250,000 698,438
Santa Fe Pipelines
11.162%, 8/15/2010 ............................... 2,500,000 3,168,750
------------
8,822,808
------------
ENVIRONMENTAL SERVICES 0.6%
OHM 8%, 10/1/2006 .................................. 3,000,000 2,625,000
------------
INSURANCE 2.0%
AXA 6%, 1/1/2001 ................................... 2,184,500++ 584,915
Leucadia National
5 1/4%, 2/1/2003 ................................. 3,000,000 3,097,500
Liberty Life International
6 1/2%, 9/30/2004 ................................ 750,000 986,250
Trenwick Group
6%, 12/15/1999 ................................... 3,000,000 3,540,000
------------
8,208,665
------------
MACHINERY 0.9%
Cooper Industries
7.05%, 1/1/2015 .................................. $2,724,000 $ 2,819,340
Teco Electric and Machinery ........................ 1,000,000 783,750
------------
3,603,090
------------
RETAILING 1.5%
CML Group 5 1/2%, 1/15/2003 ........................ 2,000,000 1,450,000
Price Co. 6 3/4%, 3/1/200 1 ........................ 3,000,000 3,048,750
Proffitts 4 3/4%, 11/1/2003 ........................ 2,000,000 1,727,500
------------
6,226,250
------------
TECHNOLOGY 2.9%
Bay Networks
5 1/4%, 5/15/2003+ ............................... 2,000,000 2,147,500
Conner Peripherals
6 1/2%, 3/1/2002 ................................. 3,000,000 3,075,000
Cray Research 6 1/8%, 2/1/2011 ..................... 1,500,000 1,205,625
Data General 7 3/4%, 6/1/2001 ...................... 2,000,000 1,980,000
EMC 4 1/4%, 1/1/2001 ............................... 1,500,000 1,492,500
Evans & Sutherland Computer
6%, 3/1/2012 ..................................... 2,000,000 1,730,000
------------
11,630,625
------------
TELECOMMUNICATIONS 2.3%
Carlton Communications
7 1/2%, 8/14/2007 ................................ 2,600,000 5,729,620
LDDS Communications
5%, 8/15/2003 .................................... 2,000,000 2,110,000
Network Equipment
7 1/4%, 5/15/2014 ............................... 1,470,000 1,534,313
------------
9,373,933
------------
TRANSPORTATION 2.0%
Airborne Freight
6 3/4%, 8/15/2001 ............................... 1,750,000 1,758,750
British Airways
9 3/4%, 6/15/2005 ............................... 700,000o 2,110,869
Builders Transport
8%, 8/15/2005 ................................... 3,000,000 2,726,250
Nippon Yusen 2%, 9/29/2000 ........................ 115,000,000** 1,311,111
------------
7,906,980
------------
10
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
------ -----
MISCELLANEOUS 1.1%
General Signal 5 3/4%, 6/1/2002 .................. $2,300,000 $ 2,415,000
TriMas 5%, 8/1/2003 ............................... 2,000,000 1,960,000
------------
4,375,000
------------
TOTAL CONVERTIBLE BONDS
(Cost $72,435,924) .............................. 79,094,226
------------
CONVERTIBLE PREFERRED
STOCKS 14.4%
BANKING AND FINANCE 1.5%
Citicorp $5.375 ................................... 15,000 shs. 2,746,875
National City $4.00 ............................... 40,000 3,150,000
------------
5,896,875
------------
COMPUTER AND BUSINESS SERVICES 0.9%
Ceridian 5 1/2% .................................... 40,000 3,700,000
------------
ENERGY 2.4%
Snyder Oil (Class A) 6% ............................ 150,000 2,962,500
Unocal $3.50+ ...................................... 50,000 2,681,250
Williams Cos. $3.50+ ............................... 50,000 3,800,000
WRT Energy 9% ...................................... 40,000 182,500
------------
9,626,250
------------
FOOD 0.8%
RJR Nabisco Holdings ............................... 500,000 3,187,500
------------
INSURANCE 3.2%
Ahmanson (HF) (Series D) 6% ........................ 50,000 2,956,250
Alexander & Alexander
(Series A) $3.625+ ............................... 65,000 3,241,875
American General (Series A) $3.00 .................. 50,000 2,618,750
St. Paul Capital 6% ................................ 75,000 4,218,750
------------
13,035,625
------------
PAPER 0.9%
International Paper 5(TM)%+ ........................ 80,000 3,630,000
------------
RETAILING 0.4%
TJX Companies $3.125 ............................... 30,000 1,342,500
Venture Stores $3.25 ............................... 40,000 400,000
------------
1,742,500
------------
STEEL 0.7%
U.S. Steel $3.25 ................................... 60,000 2,857,500
------------
TECHNOLOGY 0.6%
General Motors (Series E) 6 1/2% ................... 30,000 $ 2,197,500
------------
TRANSPORTATION 1.9%
GATX $3.875 ........................................ 50,000 2,875,000
Interpool 5 3/4% ................................... 20,000 1,870,000
Sea Containers $4.00 ............................... 70,000 3,062,500
------------
7,807,500
------------
UTILITIES/TELECOMMUNICATIONS 0.4%
Mobile Telecommunication
Technologies $2.25+ ............................. 50,000 1,587,500
------------
MISCELLANEOUS 0.7%
Corning (Delaware) 6% .............................. 60,000 3,022,500
------------
TOTAL CONVERTIBLE PREFERRED
STOCKS (Cost $53,682,725) ....................... 58,291,250
------------
COMMON STOCKS 15.4%
BANKING AND FINANCE 2.2%
Banco de Santander ................................. 52,732 2,638,658
Grupo Financiera Banamex
Accival (Class B ................................ 443,000 738,238
Internationale Nederlanden Bank .................... 31,518 2,101,200
National Australia Bank (ADRs) ..................... 60,000 2,715,000
Societe Generale ................................... 6,164 760,057
------------
8,953,153
------------
CHEMICALS 0.5%
Bayer AG ........................................... 5,700 1,511,006
European Vinyls .................................... 24,700 640,541
------------
2,151,547
------------
CONSUMER GOODS AND SERVICES 0.9%
Allied Domecq ...................................... 140,000 1,140,610
B.A.T. Industries .................................. 200,000 1,761,350
Christian Dior--ABSA ............................... 7,570 814,625
------------
3,716,585
------------
ELECTRIC UTILITIES 4.4%
Central Costanera (ADRs)+ .......................... 14,000 427,000
CINergy ............................................ 102,300 3,132,938
Empresa Nacionale de
Electricidad (ADRs) ............................. 25,000 1,431,250
Entergy ............................................ 100,000 2,925,000
FPL Group .......................................... 100,000 4,637,500
11
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
------ -----
ELECTRIC UTILITIES (continued)
Hong Kong Electric ................................. 800,000 $ 2,622,696
Huaneng Power International (ADRs)* ................ 35,000 503,125
SCE ................................................ 120,000 2,130,000
------------
17,809,509
------------
ENERGY 2.3%
Atlantic Richfield ................................. 20,000 2,215,000
BP Prudhoe Bay Royalty Trust ....................... 80,000 1,160,000
British Gas Petroleum (ADRs) ....................... 25,000 975,000
Shell Transport and Trading (ADRs) ................. 50,000 4,068,750
Total SA (Class B) ................................ 15,000 1,010,394
------------
9,429,144
------------
FOOD 0.8%
ConAgra ............................................ 76,329 3,148,571
------------
INSURANCE 0.3%
GCR Holdings ....................................... 57,000 1,275,375
------------
RETAILING 0.2%
Kmart .............................................. 100,000 725,000
------------
STEEL 0.1%
Pohang Iron & Steel (ADRs) ......................... 15,000 328,125
------------
UTILITIES/TELECOMMUNICATIONS 3.5%
Alcatel Alsthom .................................... 15,000 1,290,737
British Telecommunications (ADRs) .................. 30,000 1,638,750
GTE ................................................ 100,000 4,400,000
NYNEX .............................................. 50,000 2,700,000
Tele Danmark (ADSs) ................................ 50,000 1,381,250
Telecom Italia-Di Risp ............................. 439,000 536,864
Telecom Italia Mobile .............................. 439,000 461,669
U.S. West .......................................... 50,000 1,787,500
------------
14,196,770
------------
MISCELLANEOUS 0.2%
Pacific Dunlop ..................................... 275,000 $ 643,407
------------
OTHER .............................................. 121,585
------------
TOTAL COMMON STOCKS
(Cost $53,933,794) ............................... 62,498,771
------------
SHORT-TERM HOLDINGS 2.9%
(Cost $11,700,000) ............................... 11,700,000
------------
TOTAL INVESTMENTS 98.3%
(Cost $370,943,935) .............................. 398,303,547
OTHER ASSETS LESS
LIABILITIES 1.7% .............................. 6,704,056
------------
NET ASSETS 100.0% ................................ $405,007,603
============
- ---------------------
+Rule 144A security.
++Investments in mortgage-backed securities are subject to principal paydowns.
As a result of prepayments from refinancing or satisfaction of the underlying
mortgage instruments, the average life may be less than the original
maturity. This in turn may impact the ultimate yield realized from these
instruments.
oPrincipal amount reported in British pounds.
#Principal amount reported in French francs.
**Principal amount reported in Japanese yen.
*Non-income producing security.
See notes to financial statements.
12
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C>
Investments, at value:
Bonds and stocks (cost $318,820,755) ........................... $343,704,602
U.S. Government and Government Agency
securities (cost $40,423,180) ............................... 42,898,945
Short-term holdings (cost $11,700,000) ......................... 11,700,000 $398,303,547
------------
Cash ............................................................. 3,011,193
Receivable for interest and dividends ............................ 4,910,863
Receivable for Capital Stock sold ................................ 603,945
Investment in, and expenses prepaid to, shareholder service agent 36,708
Other ............................................................ 75,601
------------
Total Assets ..................................................... 406,941,857
------------
LIABILITIES:
Payable for Capital Stock repurchased ............................ 1,230,236
Accrued expenses, taxes, and other ............................... 704,018
------------
Total Liabilities ................................................ 1,934,254
------------
NET ASSETS ....................................................... $405,007,603
============
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($1 par value; 100,000,000 shares authorized;
27,691,916 shares outstanding):
Class A .......................................................... $ 21,753,370
Class D .......................................................... 5,938,546
Additional paid-in capital ......................................... 346,812,910
Undistributed net investment income ................................ 131,568
Undistributed net realized gain .................................... 3,012,187
Net unrealized appreciation of investments ......................... 27,227,039
Net unrealized appreciation on translation of assets and liabilities
denominated in foreign currencies ............................... 131,983
------------
Net Assets ......................................................... $405,007,603
============
NET ASSET VALUE PER SHARE:
Class A ($318,306,477 / 21,753,370 shares) ......................... $14.63
======
Class D ($86,701,126 / 5,938,546 shares) ........................... $14.60
======
</TABLE>
- -----------------
See notes to financial statements.
13
<PAGE>
================================================================================
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Interest .......................................................... $17,870,239
Dividends ......................................................... 6,536,929
-----------
Total investment income (net of foreign taxes withheld of $101,989) $24,407,168
EXPENSES:
Management fee .................................................... 1,836,072
Distribution and service fees ..................................... 1,478,906
Shareholder account services ...................................... 650,436
Custody and related services ...................................... 120,000
Shareholder reports and communications ............................ 98,766
Auditing and legal fees ........................................... 79,816
Registration ...................................................... 78,105
Directors' fees and expenses ...................................... 39,219
Shareholders' meeting ............................................. 18,013
Miscellaneous ..................................................... 42,254
-----------
Total expenses .................................................... 4,441,587
-----------
Net investment income ............................................. 19,965,581
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments .................................. 10,209,134
Net realized gain from foreign currency transactions .............. 124,087
Net change in unrealized depreciation of investments .............. 40,389,728
Net change in unrealized appreciation on translation of assets
and liabilities denominated in foreign currencies .............. (316,625)
------------
NET GAIN ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS ......... 50,406,324
------------
INCREASE IN NET ASSETS FROM OPERATIONS ............................ $ 70,371,905
============
</TABLE>
- -----------------
See notes to financial statements.
14
<PAGE>
================================================================================
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1995 1994
------------ ------------
OPERATIONS:
<S> <C> <C>
Net investment income ........................................................ $ 19,965,581 $ 20,225,018
Net realized gain (loss) on investments ...................................... 10,209,134 (617,238)
Net realized gain from foreign currency transactions ......................... 124,087 463,795
Net change in unrealized appreciation (depreciation) of investments .......... 40,389,728 (42,180,630)
Net change in unrealized appreciation on translation of assets and liabilities
denominated in foreign currencies ......................................... (316,625) 442,628
------------ ------------
Increase (decrease) in net assets from operations ............................ 70,371,905 (21,666,427)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A .................................................................... (16,607,821) (16,840,179)
Class D .................................................................... (3,554,476) (3,211,726)
Net realized gain on investments:
Class A .................................................................... (5,854,791) --
Class D .................................................................... (1,589,987) --
------------ ------------
Decrease in net assets from distributions .................................... (27,607,075) (20,051,905)
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-----------------------------
YEAR ENDED DECEMBER 31
-----------------------------
CAPITAL SHARE TRANSACTIONS: 1995 1994
------------ --------------
<S> <C> <C> <C> <C>
Net proceeds from sale of shares:
Class A ..................................... 2,037,105 2,841,412 29,059,201 39,717,860
Class D ..................................... 1,319,539 2,558,453 18,613,132 35,792,197
Investment of dividends:
Class A ..................................... 769,996 839,174 10,950,044 11,361,860
Class D ..................................... 193,425 187,366 2,746,592 2,524,974
Exchanged from associated Funds:
Class A ..................................... 2,629,077 448,817 38,414,916 6,195,966
Class D ..................................... 785,959 55,945 11,323,047 745,079
Shares issued in payment of gain distributions:
Class A ..................................... 340,918 -- 4,950,128 --
Class D ..................................... 104,206 -- 1,509,952 --
---------- ---------- ------------- -----------
Total ......................................... 8,180,225 6,931,167 117,567,012 96,337,936
---------- ---------- ------------- -----------
Cost of shares repurchased:
Class A ..................................... (3,019,135) (2,914,276) (42,874,377) (39,968,347)
Class D ..................................... (921,962) (722,706) (13,046,572) (9,798,891)
Exchanged into associated Funds:
Class A ..................................... (2,948,092) (1,290,311) (42,763,690) (17,596,183)
Class D ..................................... (765,462) (288,794) (10,940,934) (3,935,880)
---------- ---------- ------------- -----------
Total ......................................... (7,654,651) (5,216,087) (109,625,573) (71,299,301)
---------- ---------- ------------- -----------
Increase in net assets from capital
share transactions ......................... 525,574 1,715,080 7,941,439 25,038,635
========== ========== ------------- -----------
Increase (decrease) in net assets ............. 50,706,269 (16,679,697)
</TABLE>
<TABLE>
<CAPTION>
NET ASSETS:
<S> <C> <C>
Beginning of year ............................................................ 354,301,334 370,981,031
------------ ------------
End of year (including undistributed net investment income of $131,568 and
$253,655, respectively) ................................................... $405,007,603 $354,301,334
============ ============
</TABLE>
- -----------------
See notes to financial statements.
15
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Seligman Income Fund, Inc. (the "Fund") offers two classes of shares. All
shares existing prior to May 3, 1993, were classified as Class A 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 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 contingent deferred sales
load ("CDSL") of 1% imposed on certain redemptions made within one year of
purchase. The two 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 class
expenses and has exclusive voting rights with respect to any matter to which a
separate vote of any class is required.
2. Significant accounting policies followed, all in conformity with generally
accepted accounting principles, are given below:
a. Investments in U.S. Government securities, bonds and stocks are
valued at current market values or, in their absence, at fair value
determined in accordance with procedures approved by the Board of
Directors. Securities traded on national exchanges are valued at last sales
prices or, in their absence and in the case of over-the-counter securities,
a mean of bid and asked prices. Short-term holdings maturing in 60 days or
less are valued at amortized cost.
b. The books and records of the Fund are maintained in U.S. dollars.
The market value of investment securities and other assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at the
closing daily rate of exchange as reported by a pricing service. Purchases
and sales of investment securities, income, and expenses are translated
into U.S. dollars at the rate of exchange prevailing on the respective
dates of such transactions.
The Fund separates that portion of the results of operations resulting
from changes in the foreign exchange rates from the fluctuations arising
from changes in the market prices of securities held in the portfolio.
Similarly, the Fund separates the effect of changes in foreign exchange
rates from the fluctuations arising from changes in the market prices of
portfolio securities sold during the period.
c. There is no provision for federal income or excise tax. The Fund
has elected to be taxed as a regulated investment company and intends to
distribute substantially all taxable net income and net gain realized.
d. Investment transactions are recorded on trade dates. Identified
cost of investments sold is used for both financial statement and federal
income tax purposes. Dividends receivable and payable are recorded on
ex-dividend dates. Interest income is recorded on an accrual basis.
e. All income, expenses (other than class-specific expenses), and
realized and unrealized gains or losses are allocated daily to each class
of shares based upon the relative value of the shares of each class.
Class-specific expenses, which include distribution and service fees and
any other items that are specifically attributed to a particular class, are
charged directly to such class.
f. The treatment for financial statement purposes of distributions
made during the year from net investment income or net realized gain may
differ from their ultimate treatment for federal income tax purposes. These
differences are caused primarily by: differences in the timing of the
recognition of certain components of income, expense, or capital gain and
the recharacterization of foreign exchange gains or losses to either
ordinary income 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 reclassifications will have no effect
on net assets, results of operations, or net asset value per share of the
Fund.
16
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
3. Purchases and sales of portfolio securities, excluding short-term
investments, for the year ended December 31, 1995, amounted to $411,914,153 and
$424,421,417, respectively.
At December 31, 1995, the cost of investments for federal income tax
purposes was $370,222,289, and the tax basis gross unrealized appreciation and
depreciation of portfolio securities, including the effects of foreign currency
translations, amounted to $38,235,115 and $10,153,857, respectively.
4. At December 31, 1995, the Fund owned short-term investments which matured in
less than 7 days.
5. J. & W. Seligman & Co. Incorporated (the "Manager") manages the affairs of
the Fund and provides the necessary personnel and facilities. Compensation of
all officers of the Fund, all directors of the Fund who are employees or
consultants of the Manager, and all personnel of the Fund and the Manager is
paid by the Manager. The Manager receives a fee, calculated daily and payable
monthly, equal to a per annum percentage of the Fund's daily net assets. The
management fee is calculated on a sliding scale of 0.50% to 0.44%, based on
average daily net assets of all the investment companies managed by the Manager.
The management fee for the year ended December 31, 1995, was equivalent to an
annual rate of 0.48% of the average daily net assets of the Fund. Seligman
Henderson Co. (the "Subadviser"), a 50% owned affiliate of the Manager, is
entitled to a portion of the Manager's fee for acting as Subadviser for certain
of the international investments of the Fund.
Effective January 1, 1996, the management fee rate is 0.60% of the first $1
billion of the Fund's average daily net assets, 0.55% of the next $1 billion of
average daily net assets and 0.50% of average daily net assets, thereafter.
Seligman Financial Services, Inc. (the "Distributor"), agent for the
distribution of Fund shares and an affiliate of the Manager, received
concessions of $105,433 from sales of Class A shares, after commissions of
$804,096 paid to dealers.
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to Class A shares under which 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, 1995, fees paid aggregated $704,025,
or 0.23% per annum of the average daily net assets of Class A shares.
The Fund has a Plan with respect to Class D shares under which 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 D shares for which the organizations are responsible, and
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. For the year ended December 31, 1995,
fees paid amounted to $774,881, or 1% per annum of the average daily net assets
of Class D shares.
The Distributor is entitled to retain any CDSL imposed on certain
redemptions occurring within one year of purchase. For the year ended December
31, 1995, such charges amounted to $18,340.
Effective April 1, 1995, Seligman Services, Inc., an affiliate of the
Manager, became eligible to receive commissions from certain sales of shares of
the Fund, as well as distribution and service fees pursuant to the Plan. For the
period ended December 31, 1995, Seligman Services, Inc. received commissions of
$7,101 from sales of shares of the Fund. Seligman Services, Inc. also received
distribution and service fees of $39,985, pursuant to the Plan.
17
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
Seligman Data Corp., owned by the Fund and certain associated investment
companies, charged the Fund at cost $650,436 for shareholder account services.
The Fund's investment in Seligman Data Corp. is recorded at a cost of $3,553.
Certain officers and directors of the Fund are officers or directors of the
Manager, the Subadviser, the Distributor, Seligman Services, Inc., and/or
Seligman Data Corp.
Fees of $24,000 were incurred by the Fund for legal services of Sullivan &
Cromwell, a member of which firm is a director of the Fund.
The Fund has a compensation arrangement under which directors who receive
fees may elect to defer receiving such fees. Interest is accrued on the deferred
balances. The annual cost of such fees and interest is included in directors'
fees and expenses, and the accumulated balance thereof at December 31, 1995 of
$91,952 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. 6. Class-specific expenses charged to Class A and Class D during the
year ended December 31, 1995, which are included in the corresponding captions
of the Statement of Operations, were as follows:
CLASS A CLASS D
------- -------
Distribution and service fees.... $704,025 $774,881
Registration..................... 16,342 20,040
Shareholder reports and
communications................ 11,021 495
18
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The Fund's financial highlights are presented below. The per share operating
performance data is designed to allow investors to trace the operating
performance, on a per share basis, from the Fund's beginning net asset value to
the ending net asset value so that they can understand what effect the
individual items have on their investment, assuming it was held throughout the
period. Generally, the per share amounts are derived by converting the actual
dollar amounts incurred for each item, as disclosed in the financial statements,
to their equivalent per share amounts.
The total return based on net asset value measures the Fund's performance
assuming investors purchased Fund shares at net asset value as of the beginning
of the period, reinvested dividends and capital gains paid at net asset value,
and then sold their shares at the net asset value per share on the last day of
the period. The total return computations do not reflect any sales charges
investors may incur in purchasing or selling shares of the Fund. The total
returns for periods of less than one year are not annualized.
<TABLE>
<CAPTION>
CLASS A CLASS D
------------------------------------------------ -------------------------
YEAR ENDED
YEAR ENDED DECEMBER 31 DECEMBER 31 5/3/93*
------------------------------------------------ --------------- TO
1995o 1994o 1993 1992 1991 1995o 1994o 12/31/93
-------- -------- -------- -------- -------- -------- -------- --------
PER SHARE OPERATING
PERFORMANCE:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.................... $ 13.05 $ 14.58 $ 13.69 $ 12.45 $ 10.38 $ 13.01 $ 14.55 $ 14.42
-------- -------- -------- -------- -------- -------- -------- --------
Net investment income....... .76 .76 .75 .92 .96 .65 .65 .45
Net realized and unrealized
investment gain (loss)... 1.89 (1.57) 1.40 1.21 2.08 1.88 (1.57) .69
Net realized and unrealized
gain (loss) on foreign currency
transactions............. (.01) .03 -- -- -- (.01) .03 --
-------- -------- -------- -------- -------- -------- -------- --------
Increase (decrease) from
investment operations.... 2.64 (.78) 2.15 2.13 3.04 2.52 (.89) 1.14
Dividends paid.............. (.78) (.75) (.75) (.89) (.97) (.65) (.65) (.50)
Distributions from net gain
realized................. (.28) -- (.51) -- -- (.28) -- (.51)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease) in
net asset value.......... 1.58 (1.53) .89 1.24 2.07 1.59 (1.54) .13
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 14.63 $ 13.05 $ 14.58 $ 13.69 $ 12.45 $ 14.60 $ 13.01 $ 14.55
======== ======== ======== ======== ======== ======== ======== ========
TOTAL RETURN BASED
ON NET ASSET VALUE 20.60% (5.43)% 15.98% 17.54% 30.12% 19.66% (6.20)% 8.02%
Ratios/Supplemental Data:
Expenses to average net assets 1.00% 1.02% 1.03% .84% .85% 1.79% 1.82% 1.84%+
Net investment income to
average net assets....... 5.38% 5.51% 5.29% 6.88% 8.24% 4.58% 4.74% 4.42%+
Portfolio turnover.......... 111.78% 66.62% 60.62% 70.43% 66.77% 111.78% 66.62% 60.62%++
Net assets, end of period
(000's omitted)...... $318,307 $286,355 $321,040 $213,007 $153,511 $86,701 $67,946 $49,941
</TABLE>
- -------------------
*Commencement of offering of Class D shares.
oPer share amounts for the years ended December 31, 1995 and 1994, are
calculated based on average shares outstanding.
+Annualized.
++For the year ended December 31, 1993.
See notes to financial statements.
19
<PAGE>
================================================================================
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS,
SELIGMAN INCOME FUND, INC.:
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of Seligman Income Fund, Inc. as of December 31,
1995, 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, 1995 by correspondence with
the Fund's custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion. In our opinion, such financial statements and
financial highlights present fairly, in all material respects, the financial
position of Seligman Income Fund, Inc. as of December 31, 1995, the results of
its operations, the changes in its net assets and the financial highlights for
the respective stated periods, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New York, New York
February 2, 1996
20
<PAGE>
================================================================================
PROXY RESULTS
- --------------------------------------------------------------------------------
Seligman Income Fund Shareholders voted on the following proposals at the
Special Meeting of Shareholders held on December 12, 1995, in New York, New
York. Each Director was elected, and all other proposals were approved. The
description of each proposal and number of shares voted are as follows:
FOR AGAINST NON-VOTE
--- ------- --------
Election of Directors:
Fred E. Brown 15,946,062 426,117 10,890,954
John R. Galvin 15,930,574 438,971 10,890,963
Alice S. Ilchman 15,960,658 416,494 10,890,949
Frank A. McPherson 15,954,192 420,203 10,890,961
John E. Merow 15,940,479 437,335 10,890,959
Betsy S. Michel 15,966,339 415,836 10,890,947
William C. Morris 15,975,444 408,871 10,890,948
James C. Pitney 15,971,929 407,638 10,890,948
James Q. Riordan 15,950,875 417,741 10,890,960
Ronald T. Schroeder 15,976,763 406,380 10,890,947
Robert L. Shafer 15,973,044 406,696 10,890,948
James N. Whitson 15,974,281 406,702 10,890,948
Brian T. Zino 15,972,907 409,516 10,890,947
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTE
--- ------- ------- --------
<S> <C> <C> <C> <C>
Ratification of Deloitte & Touche LLP as
independent auditors: 15,599,126 189,322 597,178 10,890,945
Approval of amendment to the Management
Agreement to increase management fee
payable by the Fund: 11,639,399 3,530,814 1,215,413 10,890,945
Approval of amendment to the Subadvisory
Agreement to increase the subadvisory fee payable
by J. & W. Seligman & Co. Incorporated: 11,689,152 3,385,959 1,310,512 10,890,948
Approval of amendment of Fund's fundamental
investment policy to increase the amount that may
be borrowed to 15% of the market value of the
Fund's total assets: 13,451,956 1,891,397 1,042,218 10,890,999
Approval of amendment of Fund's fundamental
investment policy to permit mortgaging or
pledging of its assets: 12,995,409 2,163,549 1,226,660 10,890,953
Approval of amendment of Fund's fundamental
investment policy with respect to investments in
real estate investment trusts: 13,820,605 1,496,126 1,068,895 10,890,945
</TABLE>
21
<PAGE>
================================================================================
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
FRED E. BROWN
DIRECTOR AND CONSULTANT,
J. & W. Seligman & Co. Incorporated
JOHN R. GALVIN 2, 4
DEAN, Fletcher School of Law and Diplomacy at Tufts University
DIRECTOR, USLIFE Corporation
ALICE S. ILCHMAN 3, 4
PRESIDENT, Sarah Lawrence College
TRUSTEE, Committee for Economic Development
DIRECTOR, NYNEX
CHAIRMAN, The Rockefeller Foundation
FRANK A. MCPHERSON 2, 4
CHAIRMAN AND CEO, Kerr-McGee Corporation
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
JOHN E. MEROW
PARTNER, Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Aluminum Corporation
BETSY S. MICHEL 2, 4
DIRECTOR OR TRUSTEE,
Various Organizations
WILLIAM C. MORRIS 1
CHAIRMAN
CHAIRMAN OF THE BOARD AND PRESIDENT,
J. & W. Seligman & Co. Incorporated
CHAIRMAN, Carbo Ceramics Inc.
DIRECTOR, Kerr-McGee Corporation
JAMES C. PITNEY 3, 4
PARTNER, Pitney, Hardin, Kipp & Szuch, Law Firm
DIRECTOR, Public Service Enterprise Group
JAMES Q. RIORDAN 3, 4
DIRECTOR, The Brooklyn Union Gas Company
TRUSTEE, Committee for Economic Development
DIRECTOR, Dow Jones & Co., Inc.
DIRECTOR, Public Broadcasting Service
RONALD T. SCHROEDER 1
MANAGING DIRECTOR, J. & W. Seligman & Co. Incorporated
ROBERT L. SHAFER 3, 4
VICE PRESIDENT, Pfizer Inc.
DIRECTOR, USLIFE Corporation
JAMES N. WHITSON 2, 4
EXECUTIVE VICE PRESIDENT AND DIRECTOR,
Sammons Enterprises, Inc.
DIRECTOR, C-SPAN
DIRECTOR, Red Man Pipe and Supply Company
BRIAN T. ZINO 1
PRESIDENT
MANAGING DIRECTOR, J. & W. Seligman & Co. Incorporated
- ------------------
Member:
1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
4 Board Operations Committee
22
<PAGE>
================================================================================
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
WILLIAM C. MORRIS
CHAIRMAN
BRIAN T. ZINO
PRESIDENT
CHARLES C. SMITH, JR.
VICE PRESIDENT
LAWRENCE P. VOGEL
VICE PRESIDENT
THOMAS G. ROSE
TREASURER
FRANK J. NASTA
SECRETARY
MANAGER
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
GENERAL COUNSEL
Sullivan & Cromwell
INDEPENDENT AUDITORS
Deloitte & Touche LLP
GENERAL DISTRIBUTOR
Seligman Financial Services, Inc.
100 Park Avenue
New York, NY 10017
SHAREHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
IMPORTANT TELEPHONE NUMBERS
(800) 221-2450 SHAREHOLDER SERVICES
(800) 445-1777 RETIREMENT PLAN
SERVICES
(800) 622-4597 24-HOUR AUTOMATED
TELEPHONE ACCESS
SERVICE
23
