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SELIGMAN
[PHOTO]
SELIGMAN
INCOME
FUND, INC.
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SEEKING HIGH CURRENT INCOME AND FUTURE
GROWTH OF CAPITAL
JUNE 30, 1997 o MID-YEAR REPORT
<PAGE>
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OVER THE LONG TERM -- J. & W. SELIGMAN & CO. INCORPORATED
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TIME IS THE TEST
In an industry that has changed dramatically in recent years, it's
comforting to know that stability, tradition, and consistent professional
service can still be found in an investment management firm.
J. & W. Seligman & Co. Incorporated has been providing financial services
for more than 130 years. From its beginning, Seligman has followed a long-term
approach to making money for its clients, by managing investment products and
services of the highest quality. Today, Seligman manages the Seligman Group of
Funds, which offers investors more than 50 investment options.
A PLACE IN HISTORY
Established in 1864, Seligman played a major role in the geographical
expansion and industrial development of the United States. The firm helped
finance the westward path of the railroads and the building of the Panama Canal.
In the late 1800s and early 1900s, the firm was instrumental in financing the
fledgling automobile and steel industries. Seligman also participated in the
original underwritings for some of the nation's most prominent companies,
including General Motors, Victor Talking Machine, United Artists Theater
Circuit, and Maytag. In 1929, Seligman introduced Tri-Continental Corporation --
which today is the nation's largest diversified closed-end investment company.
In 1930, Seligman began managing its first mutual fund, Broad Street Investing
Co., now known as Seligman Common Stock Fund.
SELIGMAN INCOME FUND
Seligman began managing the Whitehall Fund, now known as Seligman Income
Fund, in 1947. For 50 years the Fund has helped investors achieve their
financial goals through all market conditions, by staying true to its objective
of providing high current income consistent with prudent risk of capital, with
the possibility of improvement of capital value over the long term.
[PHOTO]
JAMES, JESSE, AND JOSEPH SELIGMAN
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TABLE OF CONTENTS
To the Shareholders ....................................................... 1
Interview with Your Portfolio Managers .................................... 2
Performance Overview ...................................................... 4
Portfolio Overview ........................................................ 6
Portfolio of Investments .................................................. 8
Statement of Assets and Liabilities ....................................... 12
Statement of Operations ................................................... 13
Statements of Changes in Net Assets ....................................... 14
Notes to Financial Statements ............................................. 15
Financial Highlights ...................................................... 17
Report of Independent Auditors ............................................ 19
Board of Directors/Executive Officers ..................................... 20
Glossary of Financial Terms ............................................... 21
"The Fund began operations on March 31, 1947, with the objective of providing,
in one security, a rounded investment program embracing bonds, preferred stocks,
and common stocks."
-- FRANCIS F. RANDOLPH,
FUND CHAIRMAN
1947-1967
"Your Fund manager continues the strategy of keeping the Fund well diversified
among common stocks, convertible securities, and high-grade corporate and US
Government securities."
-- WILLIAM C. MORRIS,
FUND CHAIRMAN
1989-PRESENT
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TO THE SHAREHOLDERS
Seligman Income Fund had a successful first half of the year. The Fund
posted a total return of 6.67% based on the net asset value of Class A shares,
outperforming the 3.09% total return of the Lehman Brothers Aggregate Bond
Index. The Fund's position in common stocks, which offsets the effects of
inflation by providing the potential for capital appreciation, enhanced returns
relative to those of a pure bond index such as the Lehman Brothers Aggregate
Bond Index. Additional information on the Fund's results appears on page 4.
Thus far, 1997 has shown great promise for both the domestic economy and the
financial markets. Instead of increasing inflation, the growing economy actually
generated lower producer prices for six consecutive months. The Federal Reserve
Board's decision to leave the federal funds rate unchanged in May also helped
tame inflation fears and gave further support to the already strong financial
markets. Low unemployment and high consumer confidence levels continued, while
consumer spending was relatively restrained.
In the fixed-income markets, the enduring absence of inflationary pressures
and the lack of Fed intervention after the March increase prompted a moderate
rally, with bond prices rising and yields falling. After the uncertainties of
the first quarter, when the inflationary outlook was unclear, market
participants became optimistic in the second quarter as the low interest rate
environment persisted. Consequently, the yield on the benchmark 30-year US
Treasury bond fell to 6.78% on June 30, from a high of 7.17% on April 14. The
low interest rates that predominated in the second quarter improved the prices
of the Fund's fixed-income holdings, as well as the Fund's banking, insurance,
and financial holdings.
The outlook for the US economy and the financial markets remains positive.
We expect the bond market rally to continue unless there is a significant change
in the economic forecast, due either to increased inflationary pressures or a
surge in economic growth. Either event may prompt the Fed to increase short-term
interest rates.
We are pleased to introduce your redesigned Shareholder Report. This change
is part of a corporate effort to enhance the overall clarity and quality of all
communications to our Shareholders. We hope you find the additional information
contained herein helpful.
We thank you for your continued support of Seligman Income Fund, and look
forward to serving your investment needs in the many years to come.
A discussion with your Portfolio Managers and the Fund's portfolio of
investments follow this letter.
By order of the Board of Directors,
/s/ William C. Morris
- ---------------------
William C. Morris
Chairman
/s/ Brian T. Zino
------------------
Brian T. Zino
President
August 1, 1997
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1
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INTERVIEW WITH YOUR PORTFOLIO MANAGERS, CHARLES C. SMITH, JR. AND RODNEY COLLINS
Q. HOW DID SELIGMAN INCOME FUND PERFORM IN THE LAST SIX MONTHS?
A. Seligman Income Fund's balanced portfolio of equity and fixed-income
securities posted a total return of 6.67% based on the net asset value of
Class A shares, outper-forming the 3.09% total return of the Lehman
Brothers Aggregate Bond Index. Additionally, the Fund's dividend yield
remained more than twice that of the Standard & Poor's 500 Composite Stock
Price Index (S&P 500), and its results were strong compared to funds with
similar investment strategies. Its total return remained well ahead of
inflation, fixed-income securities, and high-yielding equities such as
electric and gas utilities.
Q. WHICH ECONOMIC AND MARKET FACTORS AFFECTED THE FUND'S PERFORMANCE DURING
THE FIRST HALF OF 1997?
A. The Federal Reserve Board acted once in the six month period, increasing
the federal funds rate by 25 basis points in March, but leaving it
unchanged in May. The March action was due to the first-quarter surge in
economic growth, which led to fears of inflation and noticeable volatility
in the financial markets. The second quarter, however, brought moderate
economic growth and a continuation of the low inflation levels that had
persisted throughout the year. As a result, there was a decline in interest
rates that helped strengthen equity prices and the Fund's equity
investments. The low inflation outlook was also favorable to the
fixed-income portion of the portfolio, particularly toward the end of the
second quarter.
Q. WHAT CHANGES WERE MADE TO THE FUND'S PORTFOLIO?
A. Due to the rich valuations found in convertible securities, the Fund's
portfolio was restructured over the last six months. Because high real
rates of return were available in the bond market, the weighting in
fixed-income securities was increased, while the Fund's holdings in
convertible securities were significantly reduced. The restructuring was
due in part to conditions in the convertible securities market, where new
offerings coming to the market had unusually high premiums and low yields,
reflecting the dramatic rise in valuations in the equity markets and the
declining interest rate environment. The Fund's remaining convertible
holdings are in companies with strong earnings growth that should provide
good long-term rates of return.
The Fund's equity holdings were also increased and significantly
diversified with companies that offered attractive yields and reasonable
valuations relative to earnings. Generally, additions to the Fund came from
the mid-capitalization range of the large-capitalization universe. We
believe the portfolio's increased equity component should provide higher
dividend growth. Overall, the changes to the portfolio's composition were
made without meaningfully increasing the overall volatility or risk level
of the Fund. The Fund's yield advantage over the S&P 500 was also
preserved.
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A TEAM APPROACH
Seligman Income Fund is managed by the Seligman Growth and Income Team, headed
by Charles C. Smith, Jr. Mr. Smith is assisted in the management of the Fund by
seasoned research professionals who are responsible for identifying the most
attractive convertible, corporate, and government securities, and
dividend-paying stocks, consistent with the Fund's objective.
[PHOTO]
SELIGMAN GROWTH AND INCOME TEAM: (FROM LEFT)RODNEY COLLINS (CO-PORTFOLIO
MANAGER), MARGARET DOYLE, JONATHAN ROTH, ODETTE GALLI, (SEATED) MELANIE RAVENELL
(ADMINISTRATIVE ASSISTANT), CHARLES C. SMITH, JR. (CO-PORTFOLIO MANAGER), AMY
FUJII
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2
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INTERVIEW WITH YOUR PORTFOLIO MANAGERS, CHARLES C. SMITH, JR. AND RODNEY COLLINS
Q. WHICH SECTORS IN THE PORTFOLIO AFFECTED THE FUND'S PERFORMANCE?
A. Generally, energy, finance, paper, and transportation were the strongest
industries in the Fund's equity portfolio. Citicorp, GATX, and General
Signal were the leaders among the portfolio's common stocks. In convertible
preferred stocks, Browning-Ferris Industries and St. Paul Capital also
posted strong increases. Further, the results of the Fund's international
holdings continued to strengthen even though some of the mature
international markets generally lagged the results of the S&P 500.
The Fund's objective of maintaining a high current yield limited the
Fund's exposure to industries with low dividend distributions, as in health
care, technology, and consumer staple stocks. This underweighting affected
the performance of the Fund's equity investments relative to the S&P 500.
Q. WHAT IS THE OUTLOOK?
A. The positive economic and low-inflation background
suggests that the Fed will maintain the current fed funds rate, and that
the outlook for the financial markets remains positive. We believe our
strategy of identifying reasonably valued equity securities in the
mid-capitalization range of the large-capitalization universe should
benefit the Fund's performance in the long term. We also believe the Fund's
emphasis in intermediate fixed-income securities should help it maintain an
attractive yield with low volatility, as intermediate bonds are less
vulnerable to changes in interest rates than long-term bonds. Overall, we
remain positive on the long-term outlook for the Fund, and we expect that
its total returns should remain well above that of alternative
income-generating investments, such as the bond market and portfolios
composed primarily of utility stocks.
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3
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PERFORMANCE OVERVIEW
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS*
FOR PERIODS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL
--------------------------------------------------------------------------------
CLASS B CLASS D
SINCE SINCE
SIX ONE FIVE 10 INCEPTION INCEPTION
MONTHS YEAR YEARS YEARS 4/22/96 5/3/93
---------- ---------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
With Sales Charge 1.58% 7.88% 9.38% 9.49% n/a n/a
Without Sales Charge 6.67 13.25 10.44 10.03 n/a n/a
CLASS B
With CDSL+ 1.20 7.39 n/a n/a 8.55% n/a
Without CDSL 6.20 12.39 n/a n/a 11.85 n/a
CLASS D
With 1% CDSL 5.20 11.39 n/a n/a n/a n/a
Without CDSL 6.20 12.39 n/a n/a n/a 8.11%
S&P 500** 20.61 34.70 19.78 14.64 32.37++ 21.28+++
LEHMAN BROTHERS
AGGREGATE BOND INDEX** 3.09 8.15 7.12 8.82 7.99++ 6.23+++
LIPPER INCOME FUNDS AVERAGE** 7.92 15.44 12.30 10.17 14.64++ 11.55+++
</TABLE>
NET ASSET VALUE
JUNE 30, 1997 DECEMBER 31, 1996 JUNE 30, 1996
-------------- -------------------- --------------
CLASS A $15.33 $14.97 $14.46
CLASS B 15.30 14.95 14.43
CLASS D 15.30 14.95 14.43
DIVIDEND AND CAPITAL GAIN INFORMATION
FOR SIX MONTHS ENDED JUNE 30, 1997
DIVIDENDS
PAID CAPITAL GAIN
------------- ---------------
CLASS A $0.38 PAID $0.250
CLASS B $0.32 REALIZED 0.909
CLASS D $0.32 UNREALIZED 1.059#
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* Return figures reflect any change in price per share and assume the
investment of 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 shares returns reflect the effect of the service fee
of up to 0.25% under the Administration, Shareholder Services and
Distribution Plan after January 1, 1993, only. Returns for Class B shares
are calculated with and without the effect of the maximum 5% contingent
deferred sales load ("CDSL"), charged 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. Performance data quoted represent changes
in price and assume that all distributions within the periods are invested
in additional shares. The rates of return will vary and the principal value
of an investment will fluctuate. Shares, if redeemed, may be worth more or
less than their original cost. Past performance is not indicative of future
investment results.
** The S&P 500, the Lehman Brothers Aggregate Bond Index (Lehman Index), and
the Lipper Income Funds Average (Lipper Income Average) are unmanaged
benchmarks that assume investment of dividends. The S&P 500 and the Lehman
Index do not reflect fees and sales charges, and the Lipper Income Average
does not reflect sales charges. The monthly performance of the Lipper
Income Average is used in the Performance Overview. Investors cannot invest
directly in an index or an average.
+ The CDSL is 5% for periods of one year or less, and 4% since inception.
++ From April 30, 1996.
+++ From April 30, 1993.
# Represents the per share amount of net unrealized appreciation of portfolio
securities as of June 30, 1997.
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4
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PERFORMANCE OVERVIEW
GROWTH OF AN ASSUMED $10,000
INVESTMENT IN CLASS A SHARES
JUNE 30, 1987, TO JUNE 30, 1997
[THE FOLLOWING TABLE REPRESENTS A GRAPH IN THE PRINTED PIECE]
6/30/87 .............. 9524*
9/30/87 .............. 9348
12/31/87 ............. 9089
3/31/88 .............. 9603
6/30/88 .............. 9909
9/30/88 .............. 9989
12/31/88 ............. 10046
3/31/89 .............. 10390
6/30/89 .............. 11089
9/30/89 .............. 11306
12/31/89 ............. 11564
3/31/90 .............. 11471
6/30/90 .............. 11537
9/30/90 .............. 10295
12/31/90 ............. 10604
3/31/91 .............. 11768
6/30/91 .............. 12132
9/30/91 .............. 13198
12/31/91 ............. 13798
3/31/92 .............. 14507
6/30/92 .............. 15072
9/30/92 .............. 15762
12/31/92 ............. 16218
3/31/93 .............. 17273
6/30/93 .............. 17707
9/30/93 .............. 18328
12/31/93 ............. 18809
3/31/94 .............. 18056
6/30/94 .............. 17766
9/30/94 .............. 18124
12/31/94 ............. 17788
3/31/95 .............. 18744
6/30/95 .............. 20114
9/30/95 .............. 20928
12/31/95 ............. 21452
3/31/96 .............. 21555
6/30/96 .............. 21866
9/30/96 .............. 22171
12/31/96 ............. 23215
3/31/97 .............. 23385
6/30/97 .............. 24763
GROWTH OF AN ASSUMED $10,000
INVESTMENT IN CLASS B SHARES
APRIL 22, 1996+, TO JUNE 30, 1997
[THE FOLLOWING TABLE REPRESENTS A GRAPH IN THE PRINTED PIECE]
4/22/96 .............. 10000
6/30/96 .............. 10166
9/30/96 .............. 10286
12/31/96 ............. 10758
3/31/97 .............. 10808
6/30/97 .............. 11425**
GROWTH OF AN ASSUMED $10,000
INVESTMENT IN CLASS D SHARES
MAY 3, 1993+, TO JUNE 30, 1997
[THE FOLLOWING TABLE REPRESENTS A GRAPH IN THE PRINTED PIECE]
5/3/93 ............... 10000
6/30/93 .............. 10209
9/30/93 .............. 10546
12/31/93 ............. 10802
3/31/94 .............. 10347
6/30/94 .............. 10165
9/30/94 .............. 10347
12/31/94 ............. 10132
3/31/95 .............. 10655
6/30/95 .............. 11412
9/30/95 .............. 11847
12/31/95 ............. 12124
3/31/96 .............. 12158
6/30/96 .............. 12309
9/30/96 .............. 12455
12/31/96 ............. 13026
3/31/97 .............. 13086
6/30/97 .............. 13833
These charts reflect the growth of a $10,000 investment for a 10-year period for
Class A shares and since inception for Class B and Class D shares. Since the
measured periods vary, the charts are plotted using different scales and are not
comparable.
- ----------------
* Net of the 4.75% maximum initial sales charge.
** Excludes the effect of the 4% CDSL.
+ Inception date.
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5
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PORTFOLIO OVERVIEW
DIVERSIFICATION OF ASSETS
PERCENT OF TOTAL
-------------------------
JUNE 30, DEC. 31,
1997 1996
--------- ---------
Aerospace and Defense ............................ 0.6 --
Automotive and Related ........................... 0.5 0.4
Banking and Finance .............................. 17.2 20.6
Chemicals ........................................ 1.4 0.6
Consumer Goods and Services ...................... 7.1 2.4
Diversified ...................................... 1.6 0.6
Drugs and Health Care ............................ 3.3 1.7
Electric Utilities ............................... 3.9 7.6
Electronics ...................................... 1.5 0.6
Energy ........................................... 11.3 8.8
Environmental Services ........................... 0.9 1.8
Funeral Services ................................. 1.4 --
Industrial Equipment ............................. 0.8 --
Insurance ........................................ 5.1 8.1
Machinery ........................................ 0.2 2.3
Media ............................................ 3.4 4.7
Medical Products
and Technology ................................ 0.6 --
Metals ........................................... 0.6 --
Office Equipment ................................. 0.6 0.6
Paper and Packaging .............................. 1.6 2.3
Retailing ........................................ 4.6 5.8
Shipbuilding ..................................... -- 0.4
Steel ............................................ 0.5 0.8
Technology ....................................... 2.2 5.2
Tobacco .......................................... 0.6 --
Transportation ................................... 3.8 3.6
Utilities/
Telecommunications ............................ 6.0 5.0
Wire and Cable Products .......................... 1.4 --
Miscellaneous .................................... 0.2 3.2
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Total Corporate Fixed-Income
Securities and Common Stocks ..................... 82.9 87.1
US Government and Government
Agency Securities ................................ 14.4 12.0
Short-Term Holdings and
Other Assets Less Liabilities .................... 2.7 0.9
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Total ............................................ 100.0 100.0
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LARGEST PORTFOLIO HOLDINGS
AT JUNE 30, 1997
SECURITY VALUE
- ---------- -----------
Government National Mortgage
Association 7 1/2%, 4/15/2027 ......................... $22,268,482
US Treasury Notes 6 1/4%, 7/31/1998 ..................... 12,056,256
Government National Mortgage
Association 7 1/2%, 2/15/2027 ......................... 8,901,677
Time Warner 9 1/8%, 1/15/2013 ........................... 5,557,220
Comcast Cable Communications
8 7/8%, 5/1/2017 ...................................... 5,408,515
Midland Bank 7.65%, 5/1/2025 ............................ 5,231,045
St. Paul Capital 6% ..................................... 5,193,750
Capital One Bank 8 1/8%, 3/1/2000 ....................... 5,167,240
Oryx Energy 8 1/8%, 10/15/2005 .......................... 5,155,895
Empresa Electrica Guacolda
7.95%, 4/30/2003 ..................................... 5,122,850
COMPOSITION OF NET ASSETS
PERCENT OF TOTAL
----------------------------
JUNE 30, DEC. 31,
1997 1996
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Corporate Bonds ................................ 32.7 28.7
Convertible Preferred Stocks ................... 9.1 16.1
Convertible Bonds .............................. 6.0 19.3
Asset-Backed Securities ........................ 1.1 3.7
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Total Corporate
Fixed-Income Securities ........................ 48.9 67.8
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Common Stocks .................................. 34.0 19.3
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US Government and
Government Agency
Securities ..................................... 14.4 12.0
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Short-Term Holdings and Other
Assets Less Liabilities ........................ 2.7 0.9
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Total .......................................... 100.0 100.0
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6
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PORTFOLIO OVERVIEW
LARGEST PORTFOLIO CHANGES
DURING PAST SIX MONTHS
PRINCIPAL AMOUNT
-----------------------------
HOLDINGS
ADDITIONS INCREASE 6/30/97
- ------------ ------------ -----------
US GOVERNMENT AND
GOVERNMENT AGENCY SECURITIES:
US Treasury Notes
6 1/4%, 7/31/1998 ........................ $12,000,000 $12,000,000
Government National Mortgage
Association Obligations:
7 1/2%, with various maturities
from 1/15/2023 to 4/15/2027 .............. 31,627,873 39,922,402
CORPORATE BONDS:
Comcast Cable Communications
8 7/8%, 5/1/2017 ......................... 5,000,000 5,000,000
Corp. Andina de Fomento
7 1/4%, 3/1/2007 ......................... 5,000,000 5,000,000
Empresa Electrica Guacolda
7.95%, 4/30/2003 ......................... 5,000,000 5,000,000
Harman International Industries
7.32%, 7/1/2007 .......................... 5,000,000 5,000,000
Loewen Group International
7 1/2%, 4/15/2001 ........................ 5,000,000 5,000,000
Oryx Energy 8 1/8%, 10/15/2005 ............... 5,000,000 5,000,000
Petroleum Geo-Services
7 1.2%, 3/1/2007 ......................... 5,000,000 5,000,000
Time Warner 9 1/8%, 1/15/2013 ................ 5,000,000 5,000,000
PRINCIPAL AMOUNT
-----------------------------
HOLDINGS
REDUCTIONS INCREASE 6/30/97
- ---------- ------------ ----------
US GOVERNMENT AND
GOVERNMENT AGENCY SECURITIES:
US Treasury Bonds
7 7/8%, 2/15/2021 ......................... $ 5,000,000 --
US Treasury Notes
6 1/4%, 10/31/2001 ........................ 10,000,000 --
Federal National Mortgage
Association 7 1/2%, 11/1/2026 ............. 21,672,342 --
CORPORATE BONDS:
AEGON N.V. 8%, 8/15/2006 ...................... 5,000,000 --
CAF 7 3/8%, 7/21/2000 ......................... 5,000,000 --
Empresa Electrica Guacolda
7.60%, 4/30/2001 .......................... 5,000,000 --
Federated Department Stores
8 1/2%, 6/15/2003 ......................... 5,000,000 --
Oryx Energy 8 3/8%, 7/15/2004 ................. 5,000,000 --
CONVERTIBLE BONDS:
Carlton Communications
7 1/2%, 8/14/2007 ......................... 2,600,000 --
COMMON STOCKS:
Shell Transport and Trading
(ADRs) (UK) ............................... 50,000 shs. --
Largest portfolio changes from the previous period to the current period are
based on cost of purchases and proceeds from sales of securities.
LARGEST INDUSTRIES+
AT JUNE 30, 1997
[The following table represents a bar graph in the printed piece.]
Per Cent of
Net Assets Value
---------- ---------
Energy ...................................... 11.3% $40,975,426
Consumer Goods and Services ................. 7.1 25,697,433
Banking and Finance ......................... 17.2 62,487,364
Utilities/Telecommunications ................ 6.0 21,568,179
Insurance ................................... 5.1 18,470,096
- ----------------
+ Does not include US Government and Government Agency Securities.
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7
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PORTFOLIO OF INVESTMENTS
June 30, 1997
PRINCIPAL
AMOUNT VALUE
---------- --------
US GOVERNMENT AND
GOVERNMENT AGENCY
SECURITIES 14.4%
US Treasury Notes
6 1/4%, 7/31/1998 $12,000,000 $12,056,256
MORTGAGE-BACKED
SECURITIES:++
Government National
Mortgage Association
Obligations: 7 1/2%, with
various maturities from
1/15/2023 to 4/15/2027 39,922,402 40,113,691
-----------
TOTAL US GOVERNMENT
AND GOVERNMENT
AGENCY SECURITIES
(Cost $51,170,468) 52,169,947
-----------
CORPORATE BONDS 32.7%
BANKING AND FINANCE 9.2%
Capital One Bank
8 1/8%, 3/1/2000 5,000,000 5,167,240
Corp. Andina de Fomento
7 1/4%, 3/1/2007 5,000,000 5,013,045
First USA Bank
5.85%, 2/22/2001 5,000,000 4,860,315
Franchise Finance
7%, 11/30/2000 5,000,000 5,016,055
Midland Bank
7.65%, 5/1/2025 5,000,000 5,231,045
The Money Store
8 3/8%, 4/15/2004 3,000,000 3,076,350
United Companies Financial:
9.35%, 11/1/1999 2,000,000 2,083,358
8 3/8%, 7/1/2005 3,000,000 2,971,713
-----------
33,419,121
-----------
CHEMICALS 0.5%
Geon 6 7/8%, 12/15/2005 1,800,000 1,746,124
-----------
CONSUMER GOODS
AND SERVICES 2.0%
Cott 8 1/2%, 5/1/2007 2,300,000 2,300,000
Harman International Industries
7.32%, 7/1/2007 5,000,000 4,985,950
-----------
7,285,950
-----------
ELECTRIC UTILITIES 1.4%
Empresa Electrica Guacolda
(Chile) 7.95%, 4/30/2003+ 5,000,000 5,122,850
-----------
ENERGY 4.9%
Barrett Resources
7.55%, 2/1/2007 3,300,000 3,288,163
CITGO Petroleum
7 7/8%, 5/15/2006 4,000,000 4,092,412
Oryx Energy
8 1/8%, 10/15/2005 5,000,000 5,155,895
Petroleum Geo-Services
7 1/2%, 3/1/2007 5,000,000 5,068,020
-----------
17,604,490
-----------
FUNERAL SERVICES 1.4%
Loewen Group International
7 1/2%, 4/15/2001 5,000,000 5,062,900
-----------
INSURANCE 0.8%
Florida Residential Property &
Casualty 7.45%, 7/1/2004+ 3,000,000 3,025,950
-----------
MEDIA 2.9%
News America Holdings
7.43%, 10/1/2026 5,000,000 5,055,695
Time Warner
9 1/8%, 1/15/2013 5,000,000 5,557,220
-----------
10,612,915
-----------
PAPER AND PACKAGING 1.0%
Owens-Illinois
7.85%, 5/15/2004 3,500,000 3,569,955
-----------
RETAILING 2.2%
Great Atlantic & Pacific Tea
7 3/4%, 4/15/2007+ 3,000,000 3,071,700
Woolworth 7%, 6/1/2000 5,000,000 5,021,145
-----------
8,092,845
-----------
TECHNOLOGY 1.1%
Solectron 7 3/8%, 3/1/2006 4,000,000 3,962,120
-----------
TRANSPORTATION 1.0%
Norfolk Southern
6.95%, 5/1/2002 3,500,000 3,538,227
-----------
UTILITIES/
TELECOMMUNICATIONS 2.9%
Comcast Cable Communications
8 7/8%, 5/1/2017+ 5,000,000 5,408,515
Tele Communications
6.275%, 9/15/2003 5,000,000 5,013,390
-----------
10,421,905
-----------
- -------------------
See footnotes on page 11.
- ----
8
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
June 30, 1997
PRINCIPAL
AMOUNT VALUE
---------- --------
WIRE AND CABLE
PRODUCTS 1.4%
Anixter 8%, 9/15/2003 $ 5,000,000 $ 5,086,655
------------
TOTAL CORPORATE BONDS
(Cost $117,565,947) 118,552,007
------------
CONVERTIBLE BONDS 6.0%
DIVERSIFIED 0.6%
MascoTech 4 1/2%, 12/15/2003 2,500,000 2,284,375
------------
DRUGS AND
HEALTH CARE 0.6%
Ciba-Geigy 6 1/4%, 3/15/2016 2,000,000 2,012,500
------------
ELECTRONICS 0.5%
Park Electrochemical
5 1/2%, 3/1/2006 2,000,000 1,795,000
------------
ENERGY 1.8%
Apache 6%, 1/15/2002+ 3,000,000 3,558,750
Santa Fe Pipelines
11.162%, 8/15/2010 2,500,000 3,087,500
------------
6,646,250
------------
INSURANCE 0.3%
LibLife International (UK)
6 1/2%, 9/30/2004 750,000 933,750
------------
MACHINERY 0.2%
Teco Electric & Machinery
(Taiwan) 2 3/4%, 4/15/2004 1,000,000 900,000
------------
TECHNOLOGY 1.1%
Evans & Sutherland Computer
6%, 3/1/2012 2,000,000 1,850,000
Xilinx 5 1/4%, 11/1/2002+ 2,000,000 2,307,500
------------
4,157,500
------------
TRANSPORTATION 0.9%
Airborne Freight
6 3/4%, 8/15/2001 1,750,000 2,047,500
Nippon Yusen (Japan)
2%, 9/29/2000 115,000,000* 1,049,563
------------
3,097,063
------------
TOTAL CONVERTIBLE BONDS
(Cost $19,196,069) 21,826,438
------------
CONVERTIBLE
PREFERRED STOCKS 9.1%
BANKING AND FINANCE 1.3%
Salomon 7 5/8% 137,500 4,829,688
----------
DRUGS AND HEALTH CARE 0.8%
McKesson 5%+ 46,000 2,794,500
----------
ENERGY 1.9%
Snyder Oil (Class A) 6% 150,000 3,787,500
Unocal 6 1/4% 55,800 3,222,450
----------
7,009,950
----------
ENVIRONMENTAL
SERVICES 0.9%
Browning-Ferris
Industries 7 1/4% 100,000 3,325,000
----------
INDUSTRIAL EQUIPMENT 0.6%
Greenfield Capital Trust 6% 43,000 1,994,125
----------
INSURANCE 1.4%
St. Paul Capital 6% 75,000 5,193,750
----------
OFFICE EQUIPMENT 0.6%
IKON Office Solutions $5.04 32,500 2,092,187
----------
RETAILING 1.1%
Kmart Financing 7 3/4% 75,000 4,115,625
----------
STEEL 0.5%
AK Steel Holdings 7% 46,300 1,782,550
----------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(Cost $30,207,913) 33,137,375
----------
COMMON STOCKS 34.0%
AEROSPACE AND DEFENSE 0.6%
General Dynamics 26,900 2,017,500
----------
AUTOMOTIVE AND RELATED 0.5%
Echlin 47,400 1,706,400
----------
BANKING AND FINANCE 5.6%
American General 30,000 1,432,500
Banco Bilbao Vizcaya (Spain) 15,400 1,251,531
Bank of Ireland (UK) 190,000 2,090,770
Bank of New York 30,600 1,331,100
- -------------------
See footnotes on page 11.
----
9
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997
SHARES VALUE
---------- --------
BANKING AND FINANCE
(continued)
BankAmerica 21,600 $ 1,394,550
Citicorp 11,600 1,398,525
Grupo Financiera Banamex
Accival (Class B) (Mexico) 166,600 437,149
HSBC Holdings (UK) 70,000 2,105,331
ING Groep (Netherlands) 82,666 3,813,279
National Australia Bank (ADRs)
(Australia) 60,000 4,278,750
Societe Generale (France) 6,360 710,070
-----------
20,243,555
-----------
CHEMICALS 0.9%
Bayer (Germany) 57,000 2,197,401
DuPont 17,600 1,106,600
-----------
3,304,001
-----------
CONSUMER GOODS
AND SERVICES 5.1%
Allied Domecq (UK) 140,000 1,004,920
B.A.T. Industries (UK) 200,000 1,788,263
Christian Dior (France) 7,570 1,249,706
Eastman Kodak 20,400 1,565,700
General Mills 34,400 2,240,300
PepsiCo 80,300 3,016,269
RJR Nabisco Holdings 64,000 2,112,000
Sara Lee 59,200 2,464,200
The Stanley Works 28,900 1,156,000
Xerox 23,000 1,814,125
-----------
18,411,483
-----------
DIVERSIFIED 1.0%
Minnesota Mining &
Manufacturing 21,100 2,152,200
Tenneco 36,000 1,626,750
-----------
3,778,950
-----------
DRUGS AND HEALTH CARE 1.9%
American Home Products 28,800 2,203,200
Bristol-Myers Squibb 29,200 2,365,200
Schering-Plough 46,500 2,226,187
-----------
6,794,587
-----------
ELECTRIC UTILITIES 2.5%
Companhia Energetica de
Minas Gerais (ADRs) (Brazil) 22,700 1,142,854
Duke Energy 36,000 1,725,750
Electricidade de Portugal
(ADRs) (Portugal) 28,200 1,015,200
Empresa Nacionale de
Electricidad (ADRs) (Spain) 25,000 2,126,563
FPL Group 34,500 1,589,156
VEBA (Germany) 30,000 1,695,207
----------
9,294,730
----------
ELECTRONICS 1.0%
AMP 40,400 1,686,700
Thomas & Betts 38,400 2,018,400
----------
3,705,100
----------
ENERGY 2.7%
Amoco 18,200 1,582,263
Atlantic Richfield 19,900 1,402,950
Exxon 26,300 1,617,450
Royal Dutch Petroleum
(Netherlands) 32,000 1,740,000
Total (Class B) (France) 15,396 1,556,448
Williams Companies 41,500 1,815,625
----------
9,714,736
----------
INDUSTRIAL EQUIPMENT 0.2%
General Signal 17,600 767,800
----------
INSURANCE 2.6%
AXA-UAP (France) 9,736 605,631
CIGNA 5,500 976,250
Irish Life (UK) 430,000 2,188,833
Lincoln National 20,700 1,332,563
Marsh & McLennan 20,200 1,441,775
Safeco 30,600 1,429,594
St. Paul Companies 17,600 1,342,000
----------
9,316,646
----------
LEISURE AND HOTELS
Mandarin Oriental* (Hong Kong) 100,000 130,000
----------
MEDIA 0.5%
Tribune 35,300 1,696,606
----------
MEDICAL PRODUCTS
AND TECHNOLOGY 0.6%
Baxter International 42,200 2,204,950
----------
- -------------------
See footnotes on page 11.
- ----
10
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 SHARES OR
PRIN. AMT. VALUE
-------- -----------
METALS 0.6%
Allegheny Teledyne 41,500 shs. $ 1,120,500
Reynolds Metals 14,700 1,047,375
------------
2,167,875
------------
PAPER AND PACKAGING 0.6%
Mead 12,500 778,125
Union Camp 15,300 765,000
Weyerhaeuser 15,300 795,600
------------
2,338,725
------------
RETAILING 1.3%
May Department Stores 25,900 1,223,775
Penney (J.C.) 31,300 1,633,469
Tesco (UK) 287,400 1,766,542
------------
4,623,786
------------
TOBACCO 0.6%
Philip Morris 50,300 2,232,062
------------
TRANSPORTATION 1.9%
Alexander & Baldwin 29,600 774,225
British Airways (UK) 299,145 3,406,262
GATX 32,700 1,888,425
Norfolk Southern 8,400 846,300
------------
6,915,212
------------
UTILITIES/
TELECOMMUNICATIONS 3.1%
Alcatel Alsthom Compagnie
Generale d'Electricite (France) 15,000 1,878,925
Bell Atlantic 21,500 1,631,313
British Telecommunications
(ADRs) (UK) 30,000 2,227,500
GTE 35,300 1,548,788
SBC Communications 27,200 1,683,000
Tele Danmark (ADSs) (Denmark) 50,000 1,306,250
UTILITIES/
TELECOMMUNICATIONS
(continued)
Telecom Italia (Italy) 439,000 870,498
------------
11,146,274
------------
MISCELLANEOUS 0.2%
Pacific Dunlop (Australia) 275,000 813,621
------------
TOTAL COMMON STOCKS
(Cost $105,812,119) 123,324,599
------------
ASSET-BACKED SECURITIES++ 1.1%
(Cost $4,000,000)
BANKING AND FINANCE 1.1%
The Money Store Home Equity
Trust 1997-B 6.93%,
10/15/2003 $4,000,000 3,995,000
------------
SHORT-TERM HOLDINGS 1.5%
(Cost $5,308,000) 5,308,000
------------
TOTAL INVESTMENTS 98.8%
(Cost $333,260,516) 358,313,366
OTHER ASSETS LESS LIABILITIES 1.2% 4,246,038
------------
NET ASSETS 100.0% $362,559,404
============
- ------------------
* 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.
See Notes to Financial Statements.
----
11
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments, at value:
Bonds and stocks (cost $276,782,048) ............. $ 300,835,419
US Government and Government Agency Securities
(cost $51,170,468) ............................. 52,169,947
Short-term holdings (cost $5,308,000) ............ 5,308,000 $ 358,313,366
------------- -------------
Cash ............................................................... 5,027,438
Receivable for securities sold ..................................... 6,309,189
Receivable for interest and dividends .............................. 3,133,420
Receivable for Capital Stock sold .................................. 282,274
Expenses prepaid to shareholder service agent ...................... 75,308
Other .............................................................. 29,676
-------------
TOTAL ASSETS ....................................................... 373,170,671
-------------
LIABILITIES:
Payable for securities purchased ................................... 9,022,330
Payable for Capital Stock repurchased .............................. 963,136
Accrued expenses, taxes, and other ................................. 625,801
-------------
TOTAL LIABILITIES .................................................. 10,611,267
-------------
NET ASSETS ......................................................... $ 362,559,404
=============
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($1 par value; 500,000,000
shares authorized; 23,661,700
shares outstanding):
Class A .......................................................... $ 18,319,015
Class B .......................................................... 370,268
Class D .......................................................... 4,972,417
Additional paid-in capital ......................................... 290,621,324
Undistributed net investment income ................................ 939,626
Undistributed net realized gain .................................... 22,285,871
Net unrealized appreciation of investments ......................... 25,949,779
Net unrealized depreciation on translation of assets
and liabilities denominated in foreign currencies .................. (898,896)
-------------
NET ASSETS ......................................................... $ 362,559,404
=============
NET ASSET VALUE PER SHARE:
CLASS A ($280,813,077 / 18,319,015 SHARES) ......................... $15.33
======
CLASS B ($5,665,482 / 370,268 SHARES) .............................. $15.30
======
CLASS D ($76,080,845 / 4,972,417 SHARES) ........................... $15.30
======
</TABLE>
- -------------------
See Notes to Financial Statements.
- ----
12
<PAGE>
================================================================================
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest ..................................................... $ 7,723,221
Dividends .................................................... 3,527,945
------------
TOTAL INVESTMENT INCOME (net of foreign taxes
withheld of $60,703) ....................................................... $ 11,251,166
EXPENSES:
Management fee ............................................... 1,102,971
Distribution and service fees ................................ 762,545
Shareholder account services ................................. 323,514
Custody and related services ................................. 69,000
Registration ................................................. 47,000
Shareholder reports and communications ....................... 46,869
Auditing and legal fees ...................................... 33,878
Directors' fees and expenses ................................. 13,068
Miscellaneous ................................................ 17,266
------------
TOTAL EXPENSES ............................................................... 2,416,1111
------------
NET INVESTMENT INCOME ........................................................ 8,835,055
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments ............................. 21,273,279
Net realized gain from foreign currency transactions ......... 177,904
Net change in unrealized appreciation of investments ......... (4,848,385)
Net change in unrealized depreciation on translation of
assets and liabilities denominated in foreign currencies ..... (2,018,327)
------------
NET GAIN ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS .................... 14,584,471
------------
INCREASE IN NET ASSETS FROM OPERATIONS ....................................... $ 23,419,526
============
</TABLE>
- --------------
See Notes to Financial Statements.
----
13
<PAGE>
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income ......................................................... $ 8,835,055 $ 19,322,087
Net realized gain on investments .............................................. 21,273,279 5,841,486
Net realized gain from foreign currency transactions .......................... 177,904 7,433
Net change in unrealized appreciation of investments .......................... (4,848,385) 3,571,125
Net change in unrealized appreciation/depreciation on translation of
assets and liabilities denominated in foreign currencies ...................... (2,018,327) 987,448
----------- ------------
INCREASE IN NET ASSETS FROM OPERATIONS ........................................ 23,419,526 29,729,579
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ................................................................... (7,023,273) (14,995,963)
Class B ................................................................... (98,147) (55,035)
Class D ................................................................... (1,608,760) (3,480,362)
Net realized gain on investments:
Class A ................................................................... (4,508,108) (1,799,539)
Class B ................................................................... (88,961) (3,653)
Class D ................................................................... (1,219,427) (494,274)
----------- ------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS ..................................... (14,546,676) (20,828,826)
----------- ------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------ -----------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:*
Net proceeds from sale of shares:
Class A ........................................ 317,332 1,396,344 4,823,920 20,428,865
Class B ........................................ 170,405 207,814 2,584,533 3,024,908
Class D ........................................ 202,257 894,700 3,061,731 13,071,905
Investment of dividends:
Class A ........................................ 315,263 702,268 4,783,104 10,180,313
Class B ........................................ 4,615 2,581 70,127 37,557
Class D ........................................ 86,225 193,834 1,305,261 2,804,770
Exchanged from associated Funds:
Class A ........................................ 173,278 4,447,183 2,627,431 64,919,755
Class B ........................................ 25,798 11,499 395,099 170,381
Class D ........................................ 247,858 590,551 3,724,538 8,537,551
Shares issued in payment of gain distributions:
Class A ........................................ 240,410 102,587 3,704,740 1,470,077
Class B ........................................ 4,650 222 71,517 3,179
Class D ........................................ 70,843 30,841 1,089,491 441,057
---------- ---------- ------------- ------------
Total .............................................. 1,858,934 8,580,424 28,241,492 125,090,318
---------- ---------- ------------- ------------
Cost of shares repurchased:
Class A ........................................ (2,109,976) (3,856,199) (32,107,612) (56,302,959)
Class B ........................................ (26,892) (6,522) (407,448) (96,604)
Class D ........................................ (603,806) (1,261,567) (9,147,432) (18,398,148)
Exchanged into associated Funds:
Class A ........................................ (404,193) (4,758,652) (6,132,932) (69,546,031)
Class B ........................................ (6,435) (17,467) (96,474) (258,956)
Class D ........................................ (514,420) (903,445) (7,872,622) (13,186,394)
---------- ---------- ------------- ------------
Total (3,665,722) (10,803,852) (55,764,520) (157,789,092)
---------- ---------- ------------- ------------
DECREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS ................................. (1,806,788) (2,223,428) (27,523,028) (32,698,774)
========== ========== ------------- ------------
DECREASE IN NET ASSETS ................................................................. (18,650,178) (23,798,021)
NET ASSETS:
Beginning of Period .................................................................... 381,209,582 405,007,603
------------ ------------
END OF PERIOD (including undistributed net
investment income of $939,626 and $888,857,
respectively) .......................................................................... $362,559,404 $381,209,582
============ ============
</TABLE>
- --------------------
* The Fund began offering Class B shares on April 22, 1996.
See Notes to Financial Statements.
- ----
14
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
1. MULTIPLE CLASSES OF SHARES -- Seligman Income Fund, Inc. (the "Fund") offers
three classes of shares. All shares existing prior to May 3, 1993, the
commencement of Class D shares, were classified as Class A shares. The Fund
began offering Class B shares on April 22, 1996. Class A shares are sold with an
initial sales charge of up to 4.75% and a continuing service fee of up to 0.25%
on an annual basis. Class A shares purchased in an amount of $1,000,000 or more
are sold without an initial sales charge but are subject to a contingent
deferred sales load ("CDSL") of 1% on redemptions within 18 months after
purchase. Class B shares are sold without an initial sales charge but are
subject to a distribution fee of 0.75%, a service fee of up to 0.25% on an
annual basis, and a CDSL, if applicable, of 5% on redemptions in the first year
after purchase, declining to 1% in the sixth year and 0% thereafter. Class B
shares will automatically convert to Class A shares on the last day of the month
that precedes the eighth anniversary of their date of purchase. Class D shares
are sold without an initial sales charge but are subject to a distribution fee
of up to 0.75% and a service fee of up to 0.25% on an annual basis, and a CDSL
of 1% imposed on certain redemptions made within one year after purchase. The
three classes of shares represent interests in the same portfolio of
investments, have the same rights and are generally identical in all respects
except that each class bears its separate distribution and certain other class
expenses, and has exclusive voting rights with respect to any matter on which a
separate vote of any class is required.
2. SIGNIFICANT ACCOUNTING POLICIES -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Fund:
a. SECURITY VALUATION -- Investments in US Government and Government agency
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, at the mean of bid and asked prices.
Short-term holdings maturing in 60 days or less are valued at amortized
cost.
b. FOREIGN CURRENCY TRANSACTIONS -- The books and records of the Fund are
maintained in US dollars. The market value of investment securities and
other assets and liabilities denominated in foreign currencies are
translated into US dollars at the closing daily rate of exchange as
reported by a pricing service. Purchases and sales of investment
securities, income, and expenses are translated into US dollars at the rate
of exchange prevailing on the respective dates of such transactions.
The Fund separates that portion of the results of operations resulting from
changes in the foreign exchange rates from the fluctuations arising from
changes in the market prices of securities held in the portfolio.
Similarly, the Fund separates the effect of changes in foreign exchange
rates from the fluctuations arising from changes in the market prices of
portfolio securities sold during the period.
c. FEDERAL TAXES -- There is no provision for federal income tax. The Fund has
elected to be taxed as a regulated investment company and intends to
distribute substantially all taxable net income and net gain realized.
d. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Investment
transactions are recorded on trade dates. Identified cost of investments
sold is used for both financial statement and federal income tax purposes.
Dividends receivable and payable are recorded on ex-dividend dates, except
that certain dividends from foreign securities where the ex-dividend dates
may have passed are recorded as soon as the Fund is informed of the
dividend. Interest income is recorded on an accrual basis.
e. MULTIPLE CLASS ALLOCATIONS -- All income, expenses (other than
class-specific expenses), and realized and unrealized gains or losses are
allocated daily to each class of shares based upon the relative value of
shares of each class. Class-specific expenses, which include distribution
and service fees and any other items that are specifically attributable to
a particular class, are charged directly to such class. For the six months
ended June 30, 1997, distribution and service fees were the only
class-specific expenses.
f. DISTRIBUTIONS TO SHAREHOLDERS -- The treatment for financial statement
purposes of distributions made to shareholders during the year from net
investment income or net realized gains may differ from their ultimate
treatment for federal income tax purposes. These differences are caused
primarily by differences in the timing of the recognition of certain
components of income, expense, or realized capital gain for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net assets based on their ultimate
characterization for federal income tax purposes. Any such reclassification
will have no effect on net assets, results of operations, or net asset
value per share of the Fund.
3. PURCHASES AND SALES OF SECURITIES -- Purchases and sales of portfolio
securities, excluding US Government obligations and short-term investments, for
the six months ended June 30, 1997, amounted to $243,412,839 and $290,204,838,
respectively; purchases and sales of US Government obligations were $61,644,887
and $54,201,482, respectively.
----
15
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
At June 30, 1997, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes, and the
tax basis gross unrealized appreciation and depreciation of portfolio
securities, including the effects of foreign currency translations, amounted to
$29,553,223 and $4,500,373, respectively.
4. SHORT-TERM INVESTMENTS -- At June 30, 1997, the Fund owned short-term
investments which matured in less than seven days.
5. MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS -- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the Fund and
provides or arranges for the necessary personnel and facilities. Seligman
Henderson Co. (the "Subadviser"), an entity owned 50% each by the Manager and
Henderson plc, supervises and directs all or a portion of the Fund's foreign
investments. For this service, the Subadviser receives a fee from the Manager,
payable monthly. Compensation of all officers of the Fund, all directors of the
Fund who are employees or consultants of the Manager, and all personnel of the
Fund and the Manager is paid by the Manager or by Henderson plc. The Manager
receives a fee, calculated daily and payable monthly, equal to 0.60% per annum
of the first $1 billion of the Fund's average daily net assets, 0.55% per annum
of the next $1 billion of the Fund's average daily net assets and 0.50% per
annum of the Fund's average daily net assets in excess of $2 billion. The
management fee reflected in the Statement of Operations represents 0.60% per
annum of the Fund's average daily net assets.
Seligman Financial Services, Inc. (the "Distributor"), agent for the
distribution of the Fund's shares and an affiliate of the Manager, received
concessions of $16,879 from sales of Class A shares, after commissions of
$129,268 paid to dealers.
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distribution of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive a continuing fee of up to 0.25% on an annual basis,
payable quarterly, of the average daily net assets of the Class A shares
attributable to the particular service organizations for providing personal
services and/or the maintenance of shareholder accounts. The Distributor charges
such fees to the Fund pursuant to the Plan. For the six months ended June 30,
1997, fees incurred aggregated $349,236, or 0.24% per annum of the average daily
net assets of Class A shares.
Under the Plan, with respect to Class B and Class D shares, service
organizations can enter into agreements with the Distributor and receive a
continuing fee for providing personal services and/or the maintenance of
shareholder accounts of up to 0.25% on an annual basis of the average daily net
assets of the Class B and Class D shares for which the organizations are
responsible; and, for Class D shares only, fees for providing other distribution
assistance of up to 0.75% on an annual basis of such average daily net assets.
Such fees are paid monthly by the Fund to the Distributor pursuant to the Plan.
With respect to Class B shares, a distribution fee of 0.75% on an annual
basis of average daily net assets is payable monthly by the Fund to the
Distributor; however, the Distributor has sold its rights to substantially all
of this fee to a third party (the "Purchaser"), which provides funding to the
Distributor to enable it to pay commissions to dealers at the time of the sale
of the related Class B shares.
For the six months ended June 30, 1997, fees incurred under the Plan,
equivalent to 1% per annum of the average daily net assets of Class B and Class
D shares, amounted to $20,244 and $393,065, respectively.
The Distributor is entitled to retain any CDSL imposed on certain
redemptions of Class D shares occurring within one year of purchase. For the six
months ended June 30, 1997, such charges amounted to $4,876.
The Distributor has sold its rights to collect any CDSL imposed on
redemptions of Class B shares to the Purchaser. In connection with the sale of
its rights to collect any CDSL and the distribution fees with respect to Class B
shares described above, the Distributor receives payments from the Purchaser
based on the value of Class Bshares sold. The aggregate amount of such payments
and the Class B shares distribution fees retained by the Distributor, for the
six months ended June 30, 1997, was $7,004.
Seligman Services, Inc., an affiliate of the Manager, is eligible to
receive commissions from certain sales of Fund shares as well as distribution
and service fees pursuant to the Plan. For the six months ended June 30, 1997,
Seligman Services, Inc. received commissions of $3,916 from the sales of Fund
shares. Seligman Services, Inc. also received distribution and service fees of
$25,864, pursuant to the Plan.
Seligman Data Corp., which is owned by the Fund and certain associated
investment companies, charged the Fund at cost $323,514 for shareholder account
services. The Fund's investment in Seligman Data Corp. is recorded at 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.
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 cost of such fees and interest is included in directors' fees and
expenses and the accumulated balance thereof at June 30, 1997, of $106,104 is
included in other liabilities. Deferred fees and the related accrued interest
are not deductible for federal income tax purposes until such amounts are paid.
- ----
16
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
The Fund's financial highlights are presented below. "Per share operating
performance" data is designed to allow investors to trace the operating
performance of each Class, on a per share basis, from the beginning net asset
value to the ending net asset value, so that investors can understand what
effect the individual items have on their investment, assuming it was held
throughout the period. Generally, per share amounts are derived by converting
the actual dollar amounts incurred for each item, as disclosed in the financial
statements, to their equivalent per share amounts.
"Total return based on net asset value" measures each Class's performance
assuming that investors purchased Fund shares at net asset value as of the
beginning of the period, invested dividends and capital gains paid at net asset
value, and then sold their shares at the net asset value on the last day of the
period. The total return computations do not reflect any sales charges investors
may incur in purchasing or selling shares of the Fund. Total returns for periods
of less than one year are not annualized.
"Average commission rate paid" represents the average commission paid by the
Fund to purchase or sell portfolio securities. It is determined by dividing the
total commission dollars paid by the number of shares purchased and sold during
the period for which commissions were paid. This rate is provided for periods
beginning January 1, 1996.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------
SIX
MONTHS YEAR ENDED DECEMBER 31,
ENDED ---------------------------------------------------------------
6/30/97@ 1996@ 1995@ 1994@ 1993 1992
-------- ----- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD .............. $14.97 $14.63 $13.05 $14.58 $13.69 $12.45
------ ------ ------ ------ ------ ------
Net investment income ............................. .37 .74 .76 .76 .75 .92
Net realized and unrealized investment gain (loss) .70 .38 1.89 (1.57) 1.40 1.21
Net realized and unrealized gain (loss)
on foreign currency transactions .................. (.08) .04 (.01) .03 -- --
------ ------ ------ ------ ------ ------
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ........................................ .99 1.16 2.64 (.78) 2.15 2.13
Dividends paid .................................... (.38) (.73) (.78) (.75) (.75) (.89)
Distributions from net gain realized .............. (.25) (.09) (.28) -- (.51) --
------ ------ ------ ------ ------ ------
NET INCREASE (DECREASE) IN NET ASSET VALUE ........ .36 .34 1.58 (1.53) .89 1.24
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD .................... $15.33 $14.97 $14.63 $13.05 $14.58 $13.69
====== ====== ====== ====== ====== ======
TOTAL RETURN BASED ON NET ASSET VALUE: ............ 6.67% 8.22% 20.60% (5.43)% 15.98% 17.54%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets .................... 1.14%+ 1.14% 1.00% 1.02% 1.03% .84%
Net investment income to average net assets ....... 4.98%+ 5.11% 5.38% 5.51% 5.29% 6.88%
Portfolio turnover ................................ 84.78% 125.92% 111.78% 66.62% 60.62% 70.43%
Average commission rate paid ...................... $.0497 $.0361
NET ASSETS, END OF PERIOD
(000S omitted) .................................... $280,813 $296,291 $318,307 $286,355 $321,040 $213,007
</TABLE>
- ---------------------
See footnotes on page 18.
----
17
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B CLASS D
----------------------- ----------------------------------------------------
SIX SIX
MONTHS 4/22/96* MONTHS YEAR ENDED DECEMBER 31, 5/3/93*
ENDED TO ENDED ---------------------------- TO
6/30/97@ 12/31/96@ 6/30/97@ 1996@ 1995@ 1994@ 2/31/93
------- -------- -------- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ....... $14.95 $14.43 $14.95 $14.60 $13.01 $14.55 $14.42
------ ------ ------ ------ ------ ------ ------
Net investment income ...................... .32 .43 .32 .63 .65 .65 .45
Net realized and unrealized investment
gain (loss) .............................. .68 .59 .68 .38 1.88 (1.57) .69
Net realized and unrealized gain (loss)
ON FOREIGN CURRENCY TRANSACTIONS ........... (.08) .05 (.08) .04 (.01) .03 --
------ ------ ------ ------ ------ ------ ------
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ................................. .92 1.07 .92 1.05 2.52 (.89) 1.14
Dividends Paid ............................. (.32) (.46) (.32) (.61) (.65) (.65) (.50)
Distributions from net gain realized ....... (.25) (.09) (.25) (.09) (.28) -- (.51)
------ ------ ------ ------ ------ ------ ------
NET INCREASE (DECREASE) IN NET ASSET VALUE.. .35 .52 .35 .35 1.59 (1.54) .13
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ............. $15.30 $14.95 $15.30 $14.95 $14.60 $13.01 $14.55
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN BASED ON NET ASSET VALUE: ..... 6.20% 7.58% 6.20% 7.43% 19.66% (6.20)% 8.02%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ............. 1.90%+ 1.89%+ 1.90%+ 1.90% 1.79% 1.82% 1.84%+
Net investment income to average net assets 4.22%+ 4.36%+ 4.22%+ 4.37% 4.58% 4.74% 4.42%+
Portfolio turnover ......................... 84.78% 125.92%++ 84.78% 125.92% 111.78% 66.62% 60.62%+++
Average commission rate paid ............... $.0497 $.0361++ $.0497 $.0361
NET ASSETS, END OF PERIOD
(000s omitted) ............................. $5,665 $2,961 $76,081 $81,957 $86,701 $67,946 $49,941
</TABLE>
- -------------------------
* Commencement of offering of shares.
@ Per share amounts for the periods ended June 30, 1997, and December 31,
1996, 1995, and 1994, are calculated based on average shares outstanding.
+ Annualized.
++ For the year ended December 31, 1996.
+++ For the year ended December 31, 1993.
See Notes to Financial Statements.
- ----
18
<PAGE>
================================================================================
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS,
SELIGMAN INCOME FUND, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman Income Fund, Inc. as of June 30, 1997,
the related statements of operations for the six months then ended and of
changes in net assets for the six months then ended and for the year ended
December 31, 1996, 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 June
30, 1997, by correspondence with the Fund's custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Seligman Income
Fund, Inc. as of June 30, 1997, the results of its operations, the changes in
its net assets, and the financial highlights for the respective stated periods
in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
- -------------------------
DELOITTE & TOUCHE LLP
New York, New York
August 1, 1997
- --------------------------------------------------------------------------------
---
19
<PAGE>
================================================================================
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
FRED E. BROWN
DIRECTOR EMERITUS
DIRECTOR AND CONSULTANT, J. & W. Seligman & Co. Incorporated
JOHN R. GALVIN 2
DEAN, Fletcher School of Law and Diplomacy
at Tufts University
DIRECTOR, USLIFE Corporation
ALICE S. ILCHMAN 3
PRESIDENT, Sarah Lawrence College
TRUSTEE, Committee for Economic Development
CHAIRMAN, The Rockefeller Foundation
FRANK A. MCPHERSON 2
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
JOHN E. MEROW
RETIRED CHAIRMAN AND SENIOR PARTNER,
Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Aluminum Corporation
BETSY S. MICHEL 2
DIRECTOR OR TRUSTEE, Various Organizations
WILLIAM C. MORRIS 1
CHAIRMAN
CHAIRMAN OF THE BOARD, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Carbo Ceramics Inc.
DIRECTOR, Kerr-McGee Corporation
JAMES C. PITNEY 3
RETIRED PARTNER, Pitney, Hardin, Kipp & Szuch, Law Firm
JAMES Q. RIORDAN 3
DIRECTOR, The Brooklyn Union Gas Company
TRUSTEE, Committee for Economic Development
DIRECTOR, Dow Jones & Co., Inc.
DIRECTOR, Public Broadcasting Service
RICHARD R. SCHMALTZ 1
MANAGING DIRECTOR, J. & W. Seligman & Co. Incorporated
TRUSTEE EMERITUS, Colby College
ROBERT L. SHAFER 3
DIRECTOR OR TRUSTEE, Various Organizations
JAMES N. WHITSON 2
EXECUTIVE VICE PRESIDENT AND DIRECTOR,
Sammons Enterprises, Inc.
DIRECTOR, C-SPAN
DIRECTOR, Red Man Pipe and Supply Company
BRIAN T. ZINO 1
PRESIDENT
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.
- ----------------
Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
- ----
20
<PAGE>
================================================================================
GLOSSARY OF FINANCIAL TERMS
CAPITAL GAIN DISTRIBUTION -- A payment to mutual fund shareholders of profits
realized on the sale of securities in the fund's portfolio. The fund generates
short-term capital gains when portfolio securities held for less than one year
are sold at a profit. The fund generates long-term capital gains when portfolio
securities held for one year or more are sold at a profit. Short-term capital
gains are taxed as ordinary income. Long-term capital gains are taxed at the
federal capital gains rate appropriate to the shareholder's tax bracket.
CAPITAL APPRECIATION/DEPRECIATION -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.
COMPOUNDING -- The increase in the value of an investment as shareholders
receive earnings on their investment's earnings. For example, if $1,000 is
invested at a fixed rate of 7% a year, the initial investment is worth $1,070
after one year. Assuming the same rate of return, second year earnings will not
be based on the original $1,000, but on the $1,070, which includes the first
year's earnings.
CONTINGENT DEFERRED SALES LOAD (CDSL) -- Depending on the class of shares owned,
a fee charged by a mutual fund when shares are sold back to the fund (the CDSL
expires after a fixed time period).
DIVIDEND -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
DIVIDEND YIELD -- A measurement of a fund's dividend as a percentage of the
maximum offering price.
EXPENSE RATIO -- The cost of doing business for a mutual fund, expressed as a
percent of the fund's net assets.
INVESTMENT OBJECTIVE -- The shared investment goal of the fund and its
shareholders.
MANAGEMENT FEE -- The amount paid by a mutual fund to its investment advisor(s).
MULTIPLE CLASSES OF SHARES -- Although an individual mutual fund invests in only
one portfolio of securities, it may offer investors several purchase options
which are "classes" of shares. Multiple classes permit shareholders to choose
the fee structure that best meets their needs and goals. Generally, each class
will differ in terms of how and when sales charges and certain fees are
assessed.
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (NASD) -- A self-regulatory
body with authority over firms that distribute mutual funds.
NET ASSET VALUE (NAV) PER SHARE -- The market worth of one fund share, obtained
by adding a mutual fund's total assets (securities, cash, and any accrued
earnings), subtracting liabilities, and dividing the resulting net assets by the
number of shares outstanding.
OFFERING PRICE (OP) -- The price at which a mutual fund's shares can be
purchased. The offering price is the current net asset value per share plus any
sales charge.
PORTFOLIO TURNOVER -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
PROSPECTUS -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission, such as the fund's investment objective and policies, services,
investment restrictions, officers and directors, how shares are bought and
redeemed, fund fees and other charges, and the fund's financial statements.
SECURITIES AND EXCHANGE COMMISSION (SEC) -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
STATEMENT OF ADDITIONAL INFORMATION -- Document that contains updated or more
detailed information about a mutual fund and supplements the prospectus. It is
available at no charge upon request.
TOTAL RETURN -- A measure of fund performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The AVERAGE ANNUAL TOTAL
RETURN represents the average annual compounded rate of return for the periods
presented.
YIELD -- For bonds, the current yield is the coupon rate of interest, divided by
the purchase price. For stocks, the yield is measured by dividing dividends paid
by the maximum offering price of the stock.
- -----------------
Adapted from the Investment Company Institute's 1996 MUTUAL FUND
FACT BOOK.
----
21
<PAGE>
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
MANAGER
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
GENERAL COUNSEL
Sullivan & Cromwell
INDEPENDENT AUDITORS
Deloitte & Touche LLP
GENERAL DISTRIBUTOR
Seligman Financial Services, Inc.
100 Park Avenue
New York, NY 10017
SHAREHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
IMPORTANT TELEPHONE NUMBERS
(800) 221-2450 Shareholder Services
(800) 445-1777 Retirement Plan
Services
(800) 622-4597 24-Hour Automated
Telephone Access
Service
- --------------------------------------------------------------------------------
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.
[LOGO]
EQIN3 6/97 Printed on Recycled Paper
