SELIGMAN FINANCIAL SERVICES, INC.
AN AFFILIATE OF
JWS
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.
EQIN3c 9/96
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THIRD QUARTER REPORT
- --------------------------------------------------------------------------------
SELIGMAN
INCOME
FUND, INC.
- --------------------------------------------------------------------------------
September 30, 1996
JWS
- --------------------------------------------------------------------------------
AN INCOME FUND
ESTABLISHED IN 1947
<PAGE>
================================================================================
TO THE SHAREHOLDERS
- --------------------------------------------------------------------------------
Seligman Income Fund had a modest third quarter as it slightly lagged the Lehman
Brothers Aggregate Bond Index (Lehman Index) for the three months ended
September 30, 1996. Year-to-date, however, the Fund significantly outpaced the
Lehman Index. Specific performance information and a discussion with your
Portfolio Manager about the past three months begins on page 2.
In the third quarter of 1996, the economy continued to grow at a healthy
pace with virtually no inflationary repercussions and no action from the Federal
Reserve Board to alter interest rates. Reports issued in September reflected the
economy's health, showing improvement in production, new home sales, wages, and
spending.
With the lowest unemployment rate since June 1990, strong personal incomes,
interest rates far below their 1980s levels, and few signs of inflationary
pressure, consumer confidence as measured by The Conference Board rose 25% above
its January 1996 level.
Despite the Fed's unchanging position on interest rates in the third
quarter, the apprehension surrounding each Fed meeting continued to have a
significant influence on the financial markets. Continuing the year's trend, the
bond markets rose or fell with the release of each new economic report. On
September 24, the Fed stated that it had not seen sufficient evidence of an
acceleration in inflation to warrant an increase in the fed funds rate. The
Fed's decision helped to stabilize the bond markets and prompted a modest
decline in yields. On September 30, the 30-year Treasury bond stood at 6.92%
after trading between 7.03% and 6.89% for most of the quarter. In the equity
markets, July was marked by a correction, August by a recovery, and September by
a series of record-breaking highs.
Going forward, we foresee continued, albeit moderate, economic growth and a
benign level of inflation. This environment of modest growth, combined with
relatively stable interest rates, should be beneficial for financial markets in
the months ahead. As always, there could be short-term volatility, but we remain
confident in the long-term outlook.
As we near the end of the year, we encourage you to review your overall
investment portfolio. When doing so, you may wish to consult your financial
advisor to discuss financial issues such as tax planning, and to ensure that you
are following the best investment strategy to help you seek your financial
goals.
We welcome Mr. Rodney Collins as Co-Portfolio Manager of Seligman Income
Fund, Inc. Mr. Collins has been with J. & W. Seligman & Co. Incorporated since
1992, has been a member of the Seligman Growth and Income Team since early 1995,
and has five years of investment experience.
We thank you for your continued interest in Seligman Income Fund, and look
forward to serving your investment needs in the many years to come.
By order of the Board of Directors,
/s/ William C. Morris
- ---------------------
William C. Morris
Chairman
/s/ Brian T. Zino
-----------------
Brian T. Zino
President
October 30, 1996
1
<PAGE>
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INTERVIEW WITH YOUR PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
----------
[PHOTO]
----------
CHARLES C. SMITH, JR.
HOW DID SELIGMAN INCOME FUND PERFORM IN THE PAST THREE MONTHS?
Seligman Income Fund's performance lagged that of its competitors in the third
quarter of 1996 due in part to its higher weighting in fixed-income issues and
to the ongoing volatility of interest rates. Due to its blend of equity and
fixed-income holdings, the Fund lagged the Standard & Poor's 500 Composite Price
Index (S&P 500), but maintained a dividend yield that is almost twice that of
the S&P 500. Additionally, the Fund outpaced the Lehman Brothers Aggregate Bond
Index for the nine months ended September 30.
WHAT ECONOMIC FACTORS AFFECTED THE FUND IN THE QUARTER?
In the last three months, the economy's growth continued, as exhibited in strong
housing and employment reports, which ignited fears of inflation and potential
interest rate increases by the Federal Reserve Board. Nonetheless, the buoyancy
of the economy improved corporate profits, which in turn strengthened the equity
markets. In the fixed-income markets, however, the uncertainty over the future
direction of the economy provoked ongoing interest rate volatility in the
quarter.
WHAT MARKET EVENTS INFLUENCED THE FUND IN THE PAST THREE MONTHS?
Once again, the Fund's exposure to the equity markets proved positive as it
helped offset the losses of the Fund's bond holdings. Continued strength in
corporate profits led to significant increases in the equity markets, which
reached new highs by September 30 despite a July correction. The Fund,
therefore, had a positive quarter due to the performance of its convertible
bonds, common stocks, and foreign equity securities. Conversely, the
fixed-income markets endured a volatile interest rate environment caused by
continued strength in the economy, and lagged the equity markets again this
quarter.
WHAT WAS YOUR INVESTMENT STRATEGY?
We continued to pursue a diversified investment approach, which includes owning
convertible stocks and bonds in addition to utilities and traditional
fixed-income tools. This proved beneficial in the third quarter as both
utilities and bonds performed poorly. Specifically, we increased our exposure to
technology by purchasing select convertible bonds, such as Xilinx. Even so, the
portfolio is modestly underweighted in convertibles at this time, because these
securities have failed to meet our quality requirements. We will continue,
however, to look for value in the convertible marketplace.
WHAT IS YOUR OUTLOOK?
If the economy slows, the Fed may reduce interest rates, which could improve the
outlook for interest rate-sensitive securities. Since Seligman Income Fund is
interest rate-sensitive, a reduction in interest rates would benefit its
fixed-income holdings. If the economy continues to grow and inflation is
ignited, however, the Fed could be pushed to increase interest rates, thereby
delaying improvements in the fixed-income markets and possibly weakening prices.
Regardless of future rate changes, our long-term diversification strategy should
allow the Fund's equity holdings to improve overall performance.
2
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SELIGMAN INCOME FUND, INC.
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<TABLE>
<CAPTION>
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS*
For Periods Ended September 30, 1996
AVERAGE ANNUAL
-----------------------------------------------
CLASS B CLASS D
SINCE SINCE
INCEPTION THREE NINE ONE FIVE 10 INCEPTION
4/22/96 MONTHS MONTHS YEAR YEARS YEARS 5/3/93
---------- --------- ---------- ------ ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
With Sales Charge n/a (3.41)% (1.56)% 0.88% 9.85% 8.72% n/a
Without Sales Charge n/a 1.39 3.35 5.94 10.93 9.25 n/a
CLASS B
With 5% CDSL (2.14)% (3.81) n/a n/a n/a n/a n/a
Without CDSL 2.86 1.19 n/a n/a n/a n/a n/a
CLASS D
With 1% CDSL n/a 0.19 1.73 4.15 n/a n/a n/a
Without CDSL n/a 1.19 2.72 5.13 n/a n/a 6.64%
S&P 500** 6.15+ 3.09 13.50 20.33 15.23 14.95 16.99++
LEHMAN BROTHERS
AGGREGATE BOND INDEX** 3.01+ 1.85 0.61 4.90 7.46 8.50 5.77++
NET ASSET VALUE
<CAPTION>
SEPTEMBER 30, 1996 JUNE 30, 1996 MARCH 31, 1996 DECEMBER 31, 1995
----------------------- ---------------- -------------------- --------------------
<S> <C> <C> <C> <C>
CLASS A $14.48 $14.46 $14.52 $14.63
CLASS B 14.45 14.43 14.43+++ n/a
CLASS D 14.45 14.43 14.49 14.60
<CAPTION>
DIVIDEND AND CAPITAL GAIN INFORMATION
For the Nine Months Ended September 30, 1996
CAPITAL GAIN (LOSS)
------------------------------------
DIVIDEND PAID CAPITAL GAIN PAID REALIZED UNREALIZED(0)
------------------ ---------------------- ------------ ---------------
<S> <C> <C> <C> <C>
CLASS A $0.54 $0.087 $(0.124) $1.067
CLASS B 0.30*** 0.087 (0.124) 1.067
CLASS D 0.45 0.087 (0.124) 1.067
</TABLE>
- ----------
* Return figures reflect any change in price per share and assume the
reinvestment of dividends and capital gain distributions. Return figures
for Class A shares are calculated with and without the effect of the
initial 4.75% maximum sales charge. Class A share returns reflect the
effect of the 0.25% Administration, Shareholder Services and Distribution
Plan after January 1, 1993, only. Returns for Class B shares are calculated
with and without the effect of the maximum 5% contingent deferred sales
load ("CDSL"), charged only on certain redemptions made within one year of
the date of purchase, declining to 1% in the sixth year and 0% thereafter.
Returns for Class D shares are calculated with and without the effect of
the 1% CDSL, charged only on redemptions made within one year of the date
of purchase.
The rates of return will vary and the principal value of an investment will
fluctuate. Shares, if redeemed, may be worth more or less than their
original cost. Past performance is not indicative of future investment
results.
** The S&P 500 and Lehman Brothers Aggregate Bond Index are unmanaged indices
that assume reinvestment of estimated dividends, and do not reflect fees
and expenses. Investors may not invest directly in an index.
*** For the period April 22, 1996, to September 30, 1996.
+ From April 30, 1996.
++ From April 30, 1993.
+++ As of April 22, 1996.
0 Represents the per share amount of net unrealized
appreciation of portfolio securities as of September 30, 1996.
3
<PAGE>
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SELIGMAN INCOME FUND, INC.
- --------------------------------------------------------------------------------
LARGEST PORTFOLIO CHANGES
During the Past Three Months
PRINCIPAL AMOUNT
------------------------
HOLDINGS
ADDITIONS INCREASE 9/30/96
- ----------- ----------- -----------
U.S. GOVERNMENT
AGENCY SECURITIES
Federal National Mortgage
Association 71/2%, 10/1/2026 $22,000,000 $22,000,000
CORPORATE BONDS
Anixter 8%, 9/15/2003....... 5,000,000 5,000,000
Empresa Electrica Guacolda
7.60%, 4/30/2001.......... 5,000,000 5,000,000
Equitable Companies
9%, 12/15/2004............ 5,000,000 5,000,000
Federated Department Stores
8 1/2%, 6/15/2003.......... 5,000,000 5,000,000
Key Bank Oregon
7 3/8%,, 9/15/2008......... 5,000,000 5,000,000
News America Holdings
7.43%, 10/1/2026.......... 5,000,000 5,000,000
Oryx Energy 8%, 10/15/2003.. 5,000,000 5,000,000
Tele Communications
6.275%, 9/15/2003......... 5,000,000 5,000,000
Viacom 7 3/4%, 6/1/2005...... 5,000,000 5,000,000
PRINCIPAL AMOUNT
------------------------
HOLDINGS
REDUCTIONS DECREASE 9/30/96
- ----------- ----------- -----------
U.S. GOVERNMENT AND
GOVERNMENT AGENCY SECURITIES
Federal National Mortgage
Association 7%, 5/1/2026.. $14,060,959 --
Federal National Mortgage
Association 7%, 4/1/2026.. 8,113,056 --
U.S. Treasury Notes 53/4%,
10/31/2000................ 4,000,000 $6,000,000
CORPORATE BONDS
Coastal 9 3/4%, 8/1/2003..... 5,000,000 --
Conseco 10 1/2%, 12/15/2004.. 5,000,000 --
Empresa Electrica Pehuenche
7.30%, 5/1/2003........... 5,000,000 --
Oryx Energy 10%, 4/1/2001... 5,000,000 --
Tosco 7 5/8%, 5/15/2006...... 5,000,000 --
Viacom 6 3/4%, 1/15/2003..... 5,000,000 --
Asset-Backed Securities
Money Store Home Equity Trust
1996-B 7.55%, 7/15/2002... 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.
MAJOR PORTFOLIO HOLDINGS
At September 30, 1996
SECURITY VALUE
- ---------- -------
Federal National Mortgage Association
7 1/2%, 10/1/2026...................... $21,759,386
Carlton Communications 7 1/2%, 8/14/2007. 7,020,364
U.S. Treasury Notes 5 3/4%, 10/31/2000... 5,855,622
General Signal 5 3/4%, 6/1/2002.......... 5,568,750
Equitable Companies 9%, 12/15/2004...... 5,510,150
Time Warner 9 1/8%, 1/15/2013............ 5,304,070
United Companies Financial
9.35%, 11/1/1999 ..................... 5,252,305
AEGON N.V. 8%, 8/15/2006................ 5,231,175
Continental Cablevision 8.30%, 5/15/2006 5,185,250
Capital One Bank 8 1/8%, 3/1/2000........ 5,161,865
PORTFOLIO COMPOSITION
At September 30, 1996
[The following table represents a pie chart in the printed piece.]
Corporate Bonds ................................... 28.4%
Common Stocks ..................................... 20.7%
Convertible Bonds ................................. 20.4%
Convertible Preferred Stocks ...................... 16.0%
U.S. Government and Government Agency Securities .. 11.7%
Asset-Backed Securities ........................... 2.3%
Short-Term Holdings and Other ..................... 0.5%
4
<PAGE>
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PORTFOLIO OF INVESTMENTS (unaudited) September 30, 1996
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT VALUE
------ -----
U.S. GOVERNMENT AND GOVERNMENT
AGENCY SECURITIES 11.7%
U.S. Treasury Notes
5 3/4%, 10/31/2000......... $ 6,000,000 $ 5,855,622
MORTGAGE-BACKED SECURITIES:++
Federal National Mortgage
Association 7 1/2%, 10/1/2026 22,000,000 21,759,386
Government National Mortgage
Association Obligations:
7 1/2%, with various maturities
from 1/15/2023 to 12/15/2024 8,546,603 8,453,129
10%, with various maturities
from 1/15/2018 to 8/15/2021 7,617,512 8,322,132
--------------
TOTAL U.S. GOVERNMENT
AND GOVERNMENT
AGENCY SECURITIES
(Cost $43,685,952) ........ 44,390,269
--------------
CORPORATE BONDS 28.4%
BANKING AND FINANCE 11.8%
Alco Capital 5.435%, 2/22/1999 5,000,000 4,865,300
American Savings Bank
6 5/8%, 2/15/2006+......... 5,000,000 4,689,400
CAF 7 3/8%, 7/21/2000......... 5,000,000 5,011,460
Capital One Bank 8 1/8%, 3/1/2000 5,000,000 5,161,865
First USA Bank 5.85%, 2/22/2001 5,000,000 4,759,900
Franchise Finance 7%, 11/30/2000 5,000,000 4,925,675
Key Bank Oregon 7 3/8%, 9/15/2008 5,000,000 4,966,500
Midland Bank 7.65%, 5/1/2025. 5,000,000 5,134,395
United Companies Financial
9.35%, 11/1/1999.......... 5,000,000 5,252,305
--------------
44,766,800
--------------
CABLE SYSTEMS 1.4%
Continental Cablevision
8.30%, 5/15/2006.......... 5,000,000 5,185,250
--------------
ELECTRIC UTILITIES 1.3%
Empresa Electrica Guacolda
7.60%, 4/30/2001+......... 5,000,000 5,010,950
--------------
ENERGY 1.3%
Oryx Energy 8%, 10/15/2003... 5,000,000 4,957,755
--------------
INSURANCE 2.8%
AEGON N.V. 8%, 8/15/2006..... 5,000,000 5,231,175
Equitable Companies
9%, 12/15/2004............ 5,000,000 5,510,150
--------------
10,741,325
--------------
MACHINERY 1.3%
Anixter 8%, 9/15/2003........ 5,000,000 5,018,100
--------------
MEDIA 4.0%
News America Holdings
7.43%, 10/1/2026.......... 5,000,000 4,986,050
Time Warner 9 1/8%, 1/15/2013. 5,000,000 5,304,070
Viacom 7 3/4%, 6/1/2005....... 5,000,000 4,809,390
--------------
15,099,510
--------------
RETAILING 1.4%
Federated Department Stores
8 1/2%, 6/15/2003.......... 5,000,000 5,100,425
--------------
TECHNOLOGY 1.0%
Solectron 7 3/8%, 3/1/2006+... 4,000,000 3,859,320
--------------
TELECOMMUNICATIONS 2.1%
Compania de Telecomunicaciones
de Chile 7 5/8%, 7/15/2006. 3,000,000 3,031,380
Tele Communications 6.275%,
9/15/2003................. 5,000,000 5,000,000
--------------
8,031,380
--------------
TOTAL CORPORATE BONDS
(Cost $107,950,663) ....... 107,770,815
--------------
CONVERTIBLE BONDS 20.4%
CONSUMER GOODS
AND SERVICES 0.5%
Bell Sports 4 1/4%, 11/15/2000 2,500,000 1,909,375
--------------
DIVERSIFIED 0.6%
MascoTech 4 1/2%, 12/15/2003.. 2,750,000 2,110,625
--------------
DRUGS AND HEALTH
CARE 1.0%
Ciba-Geigy 6 1/4%, 3/15/2016. 2,000,000 2,035,000
Greenery Rehabilitation Group
8 3/4%, 4/1/2015.......... 2,000,000 1,715,000
--------------
3,750,000
--------------
ELECTRONICS 0.4%
Park Electrochemical
5 1/2%, 3/1/2006.......... 2,000,000 1,647,500
--------------
ENERGY 1.7%
Apache 6%, 1/15/2002+........ 3,000,000 3,390,000
Santa Fe Pipelines
11.162%, 8/15/2010........ 2,500,000 3,062,500
--------------
6,452,500
--------------
ENVIRONMENTAL SERVICES 1.5%
Molten Metals 5 1/2%, 5/1/2006+ 3,000,000 3,045,000
OHM 8%, 10/1/2006............ 3,000,000 2,703,750
--------------
5,748,750
--------------
- ----------
See footnotes on page 7.
5
<PAGE>
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PORTFOLIO OF INVESTMENTS (unaudited) (continued)
- --------------------------------------------------------------------------------
PRIN. AMT.
OR SHARES VALUE
---------- -----
INSURANCE 1.9%
Leucadia National 5 1/4%, 2/1/2003 $ 3,000,000 $ 3,033,750
LibLife International
6 1/2%, 9/30/2004.......... 750,000 980,625
Trenwick Group 6%, 12/15/1999 3,000,000 3,345,000
--------------
7,359,375
--------------
MACHINERY 1.0%
Cooper Industries 7.05%, 1/1/2015 2,724,000 2,969,160
Teco Electric and Machinery
2 3/4%, 4/15/2004.......... 1,000,000 780,000
--------------
3,749,160
--------------
MEDIA 1.9%
Carlton Communications
7 1/2%, 8/14/2007.......... 2,600,000 7,020,364
--------------
RETAILING 1.7%
CML Group 5 1/2%, 1/15/2003+.. 2,000,000 1,380,000
Price Co. 6 3/4%, 3/1/2001.... 3,000,000 3,165,000
Proffitts 4 3/4%, 11/1/2003... 2,000,000 2,065,000
--------------
6,610,000
--------------
TECHNOLOGY 3.8%
Bay Networks 5 1/4%, 5/15/2003+ 2,000,000 1,910,000
BroadBand Technologies
5%, 5/15/2001+............ 4,000,000 3,280,000
Conner Peripherals
6 1/2%, 3/1/2002........... 3,000,000 3,427,500
Cray Research 6 1/8%, 2/1/2011 1,500,000 1,160,625
Data General 7 3/4%, 6/1/2001. 2,000,000 1,990,000
Evans & Sutherland
Computer 6%, 3/1/2012..... 2,000,000 1,745,000
Xilinx 5 1/4%, 11/1/2002+..... 1,000,000 970,000
--------------
14,483,125
--------------
TELECOMMUNICATIONS 0.3%
Network Equipment
7 1/4%, 5/15/2014.......... 1,470,000 1,242,150
--------------
TRANSPORTATION 2.1%
Airborne Freight 6 3/4%, 8/15/2001 1,750,000 1,715,000
British Airways 9 3/4%, 6/15/2005 700,000(0) 2,368,417
Builders Transport 8%, 8/15/2005 $ 3,000,000 2,520,000
Nippon Yusen 2%, 9/29/2000... 115,000,000** 1,181,447
--------------
7,784,864
--------------
MISCELLANEOUS 2.0%
General Signal 5 3/4%, 6/1/2002 $ 5,000,000 5,568,750
TriMas 5%, 8/1/2003.......... 2,000,000 2,210,000
--------------
7,778,750
--------------
TOTAL CONVERTIBLE BONDS
(Cost $70,383,723) ........ 77,646,538
--------------
CONVERTIBLE PREFERRED STOCKS 16.0%
COMPUTER AND
BUSINESS SERVICES 1.2%
Ceridian 5 1/2%............... 40,000shs. 4,370,000
--------------
SHARES VALUE
------- -----
CONSUMER GOODS
AND SERVICES 0.7%
RJR Nabisco Holdings $0.6012. 500,000 $ 2,687,500
--------------
ENERGY 2.7%
Snyder Oil (Class A) 6%...... 150,000 3,000,000
Unocal $3.50+................ 55,800 2,992,275
Williams Cos. $3.50.......... 50,000 4,143,750
WRT Energy 9%*............... 40,000 80,000
--------------
10,216,025
--------------
ENVIRONMENTAL
SERVICES 0.8%
Browning-Ferris Industries 7 1/4% 100,000 2,850,000
--------------
INSURANCE 4.4%
Ahmanson (H.F.) (Series D) 6% 50,000 3,075,000
Alexander & Alexander
(Series A) $3.625+........ 65,000 3,014,375
American General (Series A) $3.00 50,000 2,643,750
FSA 7 5/8%.................... 137,500 3,901,563
St. Paul Capital 6%.......... 75,000 4,031,250
--------------
16,665,938
--------------
PAPER 1.0%
International Paper 5 1/4%+... 80,000 3,840,000
--------------
RETAILING 1.2%
Kmart Financing 7 3/4%........ 75,000 3,665,625
Venture Stores $3.25......... 40,000 960,000
--------------
4,625,625
--------------
STEEL 0.7%
U.S. Steel $3.25............. 60,000 2,587,500
--------------
TRANSPORTATION 2.1%
GATX $3.875.................. 50,000 2,850,000
Interpool 5 3/4%.............. 20,000 1,997,500
Sea Containers $4.00......... 70,000 3,307,500
--------------
8,155,000
--------------
UTILITIES/
TELECOMMUNICATIONS 0.3%
Mobile Telecommunication
Technologies $2.25+...... 50,000 1,193,750
--------------
MISCELLANEOUS 0.9%
Corning (Delaware) 6%........ 60,000 3,390,000
--------------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(Cost $57,934,577)......... 60,581,338
--------------
- ----------
See footnotes on page 7.
6
<PAGE>
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September 30, 1996
- --------------------------------------------------------------------------------
SHARES VALUE
------- -----
COMMON STOCKS 20.7%
BANKING AND FINANCE 5.1%
Banco de Santander........... 52,732 $ 2,741,883
Citicorp..................... 44,999 4,078,034
Grupo Financiera Banamex
Accival (Class B)......... 443,000 960,949
HSBC Holdings................ 70,000 1,298,978
ING Groep.................... 81,433 2,542,549
National Australia Bank (ADRs) 60,000 3,172,500
National City................ 95,352 4,016,661
Societe Generale............. 6,360 703,273
--------------
19,514,827
--------------
CHEMICALS 0.5%
Bayer........................ 57,000 2,082,717
--------------
CONSUMER GOODS AND
SERVICES 1.8%
Allied-Domecq................ 140,000 984,230
B.A.T. Industries............ 200,000 1,332,453
Christian Dior-ABSA.......... 7,570 885,449
Wendy's International........ 162,601 3,495,922
--------------
6,698,054
--------------
ELECTRIC UTILITIES 4.7%
Central & South West......... 60,100 1,562,600
Central Costanera (ADRs)+.... 14,000 448,000
CINergy...................... 102,300 3,158,513
Empresa Nacionale de
Electricidad (ADRs)....... 25,000 1,484,375
Entergy...................... 100,000 2,700,000
FPL Group.................... 100,000 4,325,000
Hong Kong Electric........... 800,000 2,586,319
VEBA......................... 30,000 1,572,248
--------------
17,837,055
--------------
ENERGY 2.6%
Atlantic Richfield........... 20,000 2,550,000
BP Prudhoe Bay Royalty Trust. 80,000 1,370,000
Shell Transport and Trading (ADRs) 50,000 4,637,500
Total SA (Class B)........... 15,396 1,211,990
--------------
9,769,490
--------------
INSURANCE 1.0%
AXA.......................... 9,736 583,353
GCR Holdings................. 57,000 1,382,250
Irish Life................... 430,000 1,726,944
--------------
3,692,547
--------------
RETAILING 0.9%
Tesco........................ 287,400 1,365,740
TJX Companies................ 57,831 2,074,687
--------------
3,440,427
--------------
STEEL 0.1%
Pohang Iron & Steel (ADRs)... 15,000 320,625
--------------
PRIN. AMT.
OR SHARES VALUE
---------- -----
UTILITIES/
TELECOMMUNICATIONS 3.9%
Alcatel Alsthom.............. 15,000 $ 1,265,057
British Telecommunications (ADRs) 30,000 1,676,250
GTE.......................... 100,000 3,850,000
NYNEX........................ 50,000 2,175,000
Tele Danmark (ADSs).......... 50,000 1,181,250
Telecom Italia-Di Risp....... 439,000 808,456
U.S. West.................... 50,000 1,487,500
WorldCom*.................... 105,069 2,258,984
------------
14,702,497
------------
MISCELLANEOUS 0.1%
Pacific Dunlop............... 275,000 570,096
------------
OTHER ....................... 148,000
------------
TOTAL COMMON STOCKS
(Cost $61,263,592) ........ 78,776,335
------------
ASSET-BACKED SECURITIES++ 2.3%
FINANCE 2.3%
Advanta Mortgage Loan
Trust 1996-2 7.44%, 8/25/2018 $5,000,000 5,017,850
Money Store Home
Equity Trust 1996-C
7.40%, 6/15/2021.......... 3,763,000 3,781,815
------------
TOTAL ASSET-BACKED
SECURITIES
(Cost $8,760,455) ......... 8,799,665
------------
SHORT-TERM HOLDINGS 1.0%
(Cost $3,700,000) ........... 3,700,000
------------
TOTAL INVESTMENTS 100.5%
(Cost $353,678,962) ....... 381,664,960
OTHER ASSETS LESS
LIABILITIES (0.5)% ............. (1,891,884)
------------
NET ASSETS 100.0% ........... $379,773,076
============
- ----------
* Non-income producing security.
** Principal amount reported in Japanese yen.
+ Rule 144A security.
++ Investments in mortgage-backed and asset-backed securities are subject to
principal paydowns. As a result of prepayments from refinancing or
satisfaction of the underlying instruments, the average life may be less
than the original maturity. This in turn may impact the ultimate yield
realized from these instruments.
(0)Principal amount reported in British pounds.
Note: Investments in U.S. Government securities, bonds, and stocks are valued at
current market values or, in their absence, at fair values determined in
accordance with procedures approved by the Board of Directors. Securities traded
on national exchanges are valued at last sales prices or, in their absence and
in the case of over-the-counter securities, a mean of bid and asked prices.
Short-term holdings maturing in 60 days or less are valued at amortized cost.
7
