<PAGE>
SELIGMAN
INCOME
FUND, INC.
MID-YEAR REPORT
JUNE 30, 1998
SEEKING HIGH
CURRENT INCOME
AND FUTURE
GROWTH OF CAPITAL
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
<PAGE>
SELIGMAN -- TIMES CHANGE...VALUES ENDURE
J. & W. Seligman & Co. Incorporated is a firm with a long tradition of
investment expertise, offering a broad array of investment choices to help
today's investors seek their long-term financial goals.
[PICTURE]
TIMES CHANGE...
Established in 1864, Seligman's history of providing financial services has been
marked not by fanfare, but rather by a quiet and firm adherence to financial
prudence. While the world has changed dramatically in the 134 years since
Seligman first opened its doors, the firm has continued to offer its clients
high-quality investment solutions for these changing times.
In the late 19th century, as the country grew, Seligman helped finance the
westward expansion of the railroads, the construction of the Panama Canal, and
the launching of urban transit systems. In the first part of the 20th century,
as America became an industrial power, the firm helped fund the growing capital
needs of the nascent automobile and steel industries.
With the formation of Tri-Continental Corporation in 1929 -- today, the nation's
largest, diversified, publicly-traded closed-end investment company -- Seligman
began shifting its emphasis from investment banking to investment management.
Despite the stock market crash and ensuing depression, Seligman was convinced of
the importance investment companies could have in building wealth for individual
investors and began managing its first mutual fund in 1930.
In the decades that followed, Seligman has continued to offer forward-looking
investment solutions, including funds that focus on technology stocks, municipal
bonds, and international securities.
...VALUES ENDURE
Seligman is proud of its distinctive past and of the traditional values that
continue to shape the firm's business decisions and investment judgment. While
much has changed over the years, the firm's commitment to providing prudent
investment management that seeks to build wealth for clients over time is an
enduring value that will guide Seligman into the new millennium.
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 .................. 11
Statement of Operations .............................. 12
Statements of Changes in Net Assets .................. 13
Notes to Financial Statements ........................ 14
Financial Highlights ................................. 17
Report of Independent Auditors AND Additional
Information ........................................ 19
Board of Directors AND Executive Officers ............ 20
Glossary of Financial Terms .......................... 21
<PAGE>
TO THE SHAREHOLDERS
For the first six months of 1998, Seligman Income Fund posted a total return of
6.04% based on the net asset value of Class A shares. This return outpaced the
5.85% total return of its peers, as measured by the Lipper Income Funds Average.
The Fund also outpaced the 3.93% total return of the Lehman Brothers Aggregate
Bond Index, which measures the performance of the bond markets. Meanwhile, the
Fund maintained a favorable dividend yield compared to that of the Standard &
Poor's 500 Composite Stock Price Index (S&P 500).
The US economy continued to grow throughout the first half of the year, bringing
the expansion into an unprecedented eighth year. Inflation was low, wages were
high, and consumer spending was strong. According to the Conference Board,
consumer confidence rose to a 29-year high in June, reflecting these positive
fundamentals. Further, the supply of consumer goods kept pace with demand, which
helped the economic expansion remain balanced.
However, some economic indicators toward the end of the first half suggested the
start of a deceleration in the pace of economic growth. The expectation of
slower growth, combined with fears about the effects of the Asian financial
crisis, heightened investor demand for "safe haven" US fixed-income investments.
Both foreign and domestic investors continued to favor the safety and quality of
US Treasury securities. Many overseas investors, in particular, pulled assets
out of foreign stock and bond markets in favor of US Treasuries. In fact,
foreign investors doubled purchases of US bonds over the past three years,
according to the Federal Reserve Board.
Within the equity market, the scenario was similar. Domestic and overseas
investors retreated into well-known, liquid, large-cap growth stocks, which have
a history of providing stable earnings and dividends. This "flight to quality"
was beneficial to the equity portion of the portfolio. Domestic consumer
confidence and the healthy economy also boosted overall demand for equity
investments, and increased consumer spending provided an opportunity for many US
companies to reinvest earnings, improve credit lines, and strengthen their core
businesses.
Looking ahead, we have a positive outlook for the fixed-income markets. The
Asian crisis has tempered inflationary forces, and this should continue to
prevent the Fed from raising short-term interest rates. Moreover, as the federal
budget surplus grows, the US Treasury will probably issue fewer bonds in the
coming months. This would further reduce supply, and could increase the value of
the Fund's fixed-income holdings.
Within the US equity market, the Asian crisis has just begun to impact the US
economy. While the crisis led investors to favor the safety of large-cap growth
stocks, it may begin to pressure the earnings of these companies, and by
extension their stock prices, in the months to come. Expectations for a
continued appreciation in the prices of equities may be too optimistic. However,
we believe that ongoing strong domestic consumer confidence and healthy economic
conditions should boost corporate performance, despite the Asian crisis and the
slowdown in growth. US companies should again benefit from a benign economic
environment.
As you may know, companies are modifying their computer systems to recognize
dates of January 1, 2000, and beyond. This is often referred to as the "Y2K"
problem. Unless systems are updated, many applications may interpret the last
two digits of the year to mean 1900 instead of 2000. J. & W. Seligman & Co.
Incorporated, the Seligman Investment Companies, and Seligman Data Corp., your
shareholder service agent, have jointly established a team to ensure that your
investment and shareholder services are not disrupted. This team is supported by
consulting firms specializing in Y2K solutions. Substantial work has been
performed to date, and we are confident that there will be no disruption in the
services provided by your Fund.
Thank you for your continued interest in Seligman Income Fund. We look forward
to serving your investment needs in the many years to come. A discussion with
your Portfolio Managers, the Fund's portfolio of investments, and financial
statements 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
July 31, 1998
1
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGERS,
CHARLES C. SMITH, JR. AND RODNEY COLLINS
Q. HOW DID SELIGMAN INCOME FUND PERFORM IN THE FIRST HALF OF 1998?
A. Seligman Income Fund posted a total return of 6.04% based on the net asset
value of Class A shares. This return outpaced the Lipper Income Funds
Average's total return of 5.85% and the 3.93% total return of the Lehman
Brothers Aggregate Bond Index, which measures the performance of the bond
markets. The Fund continued to maintain a favorable dividend yield compared
to the Standard & Poor's 500 Composite Stock Price Index (S&P 500).
Q. WHICH ECONOMIC AND MARKET FACTORS INFLUENCED SELIGMAN INCOME FUND'S RESULTS
IN THE FIRST HALF OF 1998?
A. Overall, the economic environment was positive for both the fixed-income and
equity portions of the Fund's portfolio. The US economy continued to grow in
the first half, even though some economic indicators suggested the start of
a deceleration in the pace of economic growth. The economy provided a solid
environment for profit growth among many domestic companies, while the
expectation of slower growth heightened investor interest in these stocks.
Ironically, the Asian financial crisis actually had positive effects on the
portfolio's holdings, as it strengthened demand for fixed-income investments
and increased returns in the equity portion of the Fund's portfolio. The
stability of US securities attracted many overseas investors, in particular.
In fact, foreign investors now own about $1.5 trillion of US Treasuries, or
about one-third of all those outstanding. These factors reduced yields and
increased prices, which benefited the fixed-income market.
Meanwhile, as the federal budget continued to run at a surplus, the US
Treasury issued fewer bonds, tightening supplies and enhancing returns in
the fixed-income market.
In the US equity market, demand for large-capitalization growth stocks was
strong. Domestic and overseas investors favored well-known, liquid,
large-capitalization growth stocks with stable earnings and dividends, such
as those held by your Fund.
SELIGMAN GROWTH AND INCOME TEAM
Rodney Collins (Co-Portfolio Manager), Amy Fujii, Melanie Ravenell
(Administrative Assistant), Jonathan Roth, Charles C. Smith, Jr. (Portfolio
Manager)
A TEAM APPROACH
Seligman Income Fund is managed by the Seligman Growth and Income Team, headed
by Charles C. Smith, Jr. Mr. Smith and Mr. Collins are assisted in the
management of the Fund by seasoned research professionals who are responsible
for identifying the most attractive corporate and government securities and
dividend-paying common stocks, consistent with the Fund's objective.
2
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGERS,
CHARLES C. SMITH, JR. AND RODNEY COLLINS
While the Asian crisis increased investor interest in US fixed-income and
equity investments in the first half, it began to pressure corporate profits
in some industries. Global demand fell for consumer products, infrastructure
equipment, and commodities. Companies that previously sold into these
markets instead infused the US with inexpensive imports.
Q. WHAT WAS YOUR INVESTMENT STRATEGY?
A. The restructuring of Seligman Income Fund's portfolio in 1997, which
eliminated its exposure to convertible securities, improved the Fund's
returns without increasing overall risk. Further, the Fund maintained an
attractive current yield compared to its competitors.
In the fixed-income portion of the portfolio, we continued to hold bonds
with intermediate maturities, as they are less volatile relative to bonds
with longer maturities, but still benefit from declining interest rates.
Generally, the Fund's equity investments performed well in the first half.
The portfolio's holdings in capital goods, consumer cyclicals, finance,
health care, and technology stocks all posted strong results. The consumer
cyclicals sector performed especially well, due to strength in consumer
spending.
The equity portion of the portfolio was overweighted in energy stocks
because they had attractive yields and reasonable valuations, and we believe
the companies have good long-term prospects. This sector outperformed
expectations, despite recent declines in energy prices. We will remain
overweighted in energy stocks, as we believe the drop in energy prices will
soon end.
On the other hand, the portfolio was underweighted in the technology sector
to avoid the negative impact of lower Asian demand for high-tech consumer
products such as disk drives, personal computers, and infrastructure
equipment. Nevertheless, the Fund still benefited overall from its holdings
in this sector because they were concentrated in companies that have little
Asian exposure. The portfolio will remain underweighted in technology stocks
until the long-term impact of the Asian crisis on the industry becomes
clearer.
Q. WHAT IS THE OUTLOOK?
A. Overall, we remain cautiously optimistic due to our expectations for stable
but slowing economic growth. While the Asian financial crisis only modestly
affected the US economy in the first half of 1998, and, in fact, may have
helped to buoy demand for bonds and stocks, we believe it could compromise
corporate profits in some industries in the months to come.
In general, the economic fundamentals remain positive, yet we believe
investor expectations may be too optimistic. While we expect the economy to
remain healthy, we are aware that it may not grow at the same pace seen over
the past few years.
Seligman Income Fund's conservative investment strategy and substantial
dividend yield should benefit investors. The fixed-income portion of the
portfolio should be helped by low interest rates and high demand. The Asian
crisis could also be a stabilizing factor in the bond markets, as it should
yet again prevent the Fed from raising short-term interest rates. Within
this supportive environment, we believe Seligman Income Fund could
outperform less-diversified income-oriented portfolios.
3
<PAGE>
PERFORMANCE OVERVIEW
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------------------------------------------
CLASS B CLASS D
SINCE SINCE
SIX ONE FIVE 10 INCEPTION INCEPTION
MONTHS* YEAR YEARS YEARS 4/22/96 5/3/93
---------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge 1.00% 8.03% 8.59% 10.44% n/a n/a
Without Sales Charge 6.04 13.39 9.66 10.98 n/a n/a
CLASS B**
With CDSL+ 0.57 7.61 n/a n/a 10.98% n/a
Without CDSL 5.57 12.58 n/a n/a 12.18 n/a
CLASS D**
With 1% CDSL 4.57 11.51 n/a n/a n/a n/a
Without CDSL 5.57 12.51 8.80 n/a n/a 8.95%
LIPPER INCOME FUNDS AVERAGE*** 5.85 13.95 12.09 12.24 14.84++ 12.33+++
LEHMAN BROS. AGGREGATE BOND INDEX*** 3.93 10.54 6.88 9.07 9.16++ 7.05+++
S&P 500*** 17.71 30.16 23.08 18.56 31.34++ 22.95+++
</TABLE>
NET ASSET VALUE
JUNE 30, 1998 DECEMBER 31, 1997 JUNE 30, 1997
-------------- -------------------- --------------
CLASS A $15.23 $14.81 $15.33
CLASS B 15.19 14.79 15.30
CLASS D 15.18 14.78 15.30
DIVIDEND AND CAPITAL GAIN INFORMATION For the Six Months Ended June 30, 1998
DIVIDENDS
PAID CAPITAL GAIN
------------- ---------------
CLASS A $0.340 PAID $0.132o
CLASS B 0.290 REALIZED 1.105
CLASS D 0.290 UNREALIZED 0.921oo
Performance data quoted represent changes in prices and assume that all
distributions within the periods are invested in additional shares. The rates of
return will vary and the principal value of an investment will fluctuate.
Shares, if redeemed, may be worth more or less than their original cost. Past
performance is not indicative of future investment results.
- -------------
* Returns for periods of less than one year are not annualized.
** Return figures reflect any change in price per share and assume the
investment of dividend and capital gain distributions. Returns for Class A
shares are calculated with and without the effect of the initial 4.75%
maximum sales charge. Returns for Class A shares reflect the effect of the
service fee of up to 0.25% under the Administration, Shareholder Services
and Distribution Plan after January 1, 1993, only. Returns for Class B
shares are calculated with and without the effect of the maximum 5%
contingent deferred sales load ("CDSL"), charged on 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 on redemptions made within one
year of the date of purchase.
*** The Lipper Income Funds Average, the Lehman Bros. Aggregate Bond Index, and
the S&P 500 are unmanaged benchmarks that assume investment of dividends.
The Lipper Income Funds Average excludes the effect of sales charges. The
monthly performance of the Lipper Income Funds Average is used in the
Performance Overview. The S&P 500 and the Lehman Bros. Aggregate Bond Index
exclude the effect of fees and sales charges. Investors cannot invest
directly in an index or an average.
+ The CDSL is 5% for periods of one year or less, and 3% since inception.
++ From April 30, 1996.
+++ From April 30, 1993.
o Represents undistributed realized capital gains from 1997, which were paid
on June 24, 1998.
oo Represents the per share amount of net unrealized appreciation of portfolio
securities as of June 30, 1998.
4
<PAGE>
PERFORMANCE OVERVIEW
GROWTH OF AN
ASSUMED $10,000 INVESTMENT IN
CLASS A SHARES
JUNE 30, 1988, to
JUNE 30, 1998
GROWTH OF AN ASSUMED $10,000
INVESTMENT IN
CLASS B SHARES
APRIL 22, 1996, to
JUNE 30, 1998
GROWTH OF AN ASSUMED $10,000
INVESTMENT IN
CLASS D SHARES
MAY 3, 1993, to
JUNE 30, 1998
[THE FOLLOWING FIGURES REPRESENT A MOUNTAIN CHART IN THE PRINTED REPORT]
Class A With load
6/30/88 $9,523* Initial Amount Invested
9/30/88 9,601
12/31/88 9,656
3/31/89 9,986
6/30/89 10,658
9/30/89 10,866
12/31/89 11,114
3/31/90 11,025
6/30/90 11,089
9/30/90 9,895
12/31/90 10,192
3/31/91 11,311
6/30/91 11,661
9/30/91 12,685
12/31/91 13,262
3/31/92 13,943
6/30/92 14,486
9/30/92 15,149
12/31/92 15,588
3/31/93 16,602
6/30/93 17,019
9/30/93 17,616
12/31/93 18,078
3/31/94 17,355
6/30/94 17,076
9/30/94 17,419
12/31/94 17,096
3/31/95 18,016
6/30/95 19,332
9/30/95 20,114
12/31/95 20,619
3/31/96 20,718
6/30/96 21,016
9/30/96 21,309
12/31/96 22,313
3/31/97 22,476
6/30/97 23,801
9/30/97 24,904
12/31/97 25,450
3/31/98 26,875
6/30/98 $26,987 Total Value at June 30, 1998
[THE FOLLOWING FIGURES REPRESENT A MOUNTAIN CHART IN THE PRINTED REPORT]
Class B With CDSL
4/22/96 $10,000 Initial Amount Invested
5/31/96 10,097
6/30/96 10,166
7/31/96 9,976
8/31/96 10,067
9/30/96 10,286
10/31/96 10,479
11/30/96 10,785
12/31/96 10,758
1/31/97 10,881
2/28/97 10,931
3/31/97 10,808
4/30/97 10,932
5/31/97 11,237
6/30/97 11,425
7/31/97 11,843
8/31/97 11,552
9/30/97 11,934
10/31/97 11,851
11/30/97 11,976
12/31/97 12,183
1/31/98 12,290
2/28/98 12,587
3/31/98 12,833
4/30/98 12,767
5/31/98 12,780
6/30/98 12,862** Total Value at June 30, 1998
<PAGE>
[THE FOLLOWING FIGURES REPRESENT A MOUNTAIN CHART IN THE PRINTED PIECE]
Class D W/O CDSL
5/3/93 10,000 Initial Amount Invested
6/30/93 10,209
9/30/93 10,546
12/31/93 10,802
3/31/94 10,347
6/30/94 10,165
9/30/94 10,347
12/31/94 10,132
3/31/95 10,655
6/30/95 11,412
9/30/95 11,847
12/31/95 12,124
3/31/96 12,158
6/30/96 12,308
9/30/96 12,454
12/31/96 13,025
3/31/97 13,086
6/30/97 13,832
9/30/97 14,449
12/31/97 14,740
3/31/98 15,527
6/30/98 15,562 Total Value at June 30, 1998
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, assuming that
all distributions within the periods are invested in additional 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 3% CDSL.
+ Inception date.
5
<PAGE>
PORTFOLIO OVERVIEW
DIVERSIFICATION OF NET ASSETS
PERCENT OF TOTAL
------------------
JUNE 30, DEC. 31,
1998 1997
------------------
Aerospace and Defense ......... 1.0 0.6
Automotive and Related ........ 1.7 1.9
Banking and Finance ........... 15.0 19.4
Business Services ............. 0.9 1.3
Chemicals ..................... 2.7 3.2
Computer Goods
and Services ............... 2.7 --
Consumer Goods
and Services ............... 10.0 5.5
Diversified ................... 0.3 1.2
Drugs and Health Care ......... 2.9 4.1
Electric and Gas Utilities .... 4.4 5.7
Electronics ................... -- 1.4
Energy ........................ 7.5 9.1
Environmental Services ........ -- 1.0
Food .......................... 1.1 0.5
Funeral Services .............. 1.4 1.4
Hotels/Motels ................. -- 0.6
Insurance ..................... 4.8 4.4
Leisure ....................... 1.4 --
Machinery ..................... 1.2 2.1
Media ......................... 4.6 3.2
Metals ........................ 0.8 0.3
Office Equipment .............. -- 0.6
Paper and Packaging ........... 0.7 2.2
Retailing ..................... 5.8 4.5
Technology .................... 2.5 1.8
Tobacco ....................... 2.4 0.8
Transportation ................ 0.7 0.2
Utilities/Telecommunications .. 6.5 4.3
Miscellaneous ................. -- 0.2
------ ------
Total Corporate
Fixed-Income Securities
and Common Stocks .......... 83.0 81.5
US Government and
Government Agency
Securities ................. 15.3 17.9
SHORT-TERM HOLDINGS
AND OTHER ASSETS
LESS LIABILITIES ........... 1.7 0.6
------ ------
TOTAL ......................... 100.0 100.0
====== ======
LARGEST INDUSTRIES+
JUNE 30, 1998
[THE FOLLOWING FIGURES REPRESENT A CHART IN THE PRINTED REPORT]
Percent of
Net Assets
----------
BANKING AND FINANCE ............. 15.0%
CONSUMER GOODS AND SERVICES ..... 10.0%
ENERGY .......................... 7.5%
UTILITIES/TELECOMMUNICATIONS .... 6.5%
RETAILING ....................... 5.7%
- -----------
+ Excludes US Government and Government Agency securities.
COMPOSITION OF NET ASSETS
PERCENT OF TOTAL
----------------------
JUNE 30, DEC. 31,
1998 1997
-------- --------
Corporate Bonds .................... 39.3 31.3
Convertible Preferred Stocks ....... 3.2 7.5
Convertible Bonds .................. -- 3.8
Asset-Backed Securities ............ 1.4 2.8
- -----------------------------------------------------------
Total Corporate
Fixed-Income Securities ............ 43.9 45.4
- -----------------------------------------------------------
Common Stocks ...................... 39.1 36.1
- -----------------------------------------------------------
US Government and
Government Agency
Securities ......................... 15.3 17.9
Short-Term Holdings and
Other Assets Less Liabilities ...... 1.7 0.6
- -----------------------------------------------------------
TOTAL .............................. 100.0 100.0
- -----------------------------------------------------------
6
<PAGE>
PORTFOLIO OVERVIEW
LARGEST PORTFOLIO CHANGES
During Past Six Months
PRINCIPAL AMOUNT
------------------------------
HOLDINGS
ADDITIONS INCREASE 6/30/98
- --------- ----------- -----------
US GOVERNMENT AND
GOVERNMENT AGENCY
SECURITIES:
US Treasury Notes
6 1/4%, 8/31/2002 ..................... $10,000,000 $10,000,000
US Treasury Notes
6 3/8%, 8/15/2027 ..................... 5,000,000 5,000,000
Government National
Mortgage Association
6 1/2%, 8/15/2027 ..................... 36,037,703 36,037,703
CORPORATE BONDS:
Chase Manhattan
6 3/8%, 4/1/2008 ...................... 5,000,000 5,000,000
Philip Morris
7 1/8%, 8/15/2002 ..................... 5,000,000 5,000,000
Praxair 6 5/8%, 10/15/2007 ............... 5,000,000 5,000,000
Royal Caribbean Cruises
6 3/4%, 3/15/2008 ..................... 5,000,000 5,000,000
Viacom 7 3/4%, 6/1/2005 .................. 5,000,000 5,000,000
Whitman 7 1/2%, 2/1/2003 ................. 5,000,000 5,000,000
WorldCom 7 3/4%, 4/1/2007 ................ 5,000,000 5,000,000
PRINCIPAL AMOUNT
OR SHARES
------------------------------
HOLDINGS
REDUCTIONS INCREASE 6/30/98
- ---------- ----------- -----------
US GOVERNMENT AND
GOVERNMENT AGENCY
SECURITIES:
US Treasury Notes
6 5/8%, 5/15/2007 ..................... $13,000,000 $ 4,000,000
US Treasury Notes
6 5/8%, 2/15/2027 ..................... 5,000,000 --
Government National
Mortgage Association
7 1/2%, 4/15/2027 ..................... 21,979,014 --
CORPORATE BONDS:
Anixter 8%, 9/15/2003 .................... 5,000,000 --
Corp.Andina de Fomento
7 1/4%, 3/1/2007 ...................... 5,000,000 --
Homeside Lending
6.86%, 7/2/2001 ....................... 5,000,000 --
Oryx Energy
8 1/8%, 10/15/2005 .................... 5,000,000 --
CONVERTIBLE
PREFERRED STOCKS:
Federal Mogul 7% ......................... 96,000 shs. --
ASSET-BACKED SECURITIES:
United Companies Financial
1997-C 6.88%, 9/15/2022 ............... $ 5,000,000 --
Largest portfolio changes from the previous period are based on cost of
purchases and proceeds from sales of securities.
LARGEST PORTFOLIO HOLDINGS
JUNE 30, 1998
SECURITY VALUE
- -------- -----------
Government National Mortgage
Association 6 1/2%, 8/15/2027 ......................... $36,008,513
US Treasury Notes
6 1/4%, 8/31/2002 ..................................... 10,262,510
Salomon Smith Barney
Holdings 7 5/8% ....................................... 6,548,438
Tele-Communications
9.80%, 2/1/2012 ....................................... 6,438,465
Time Warner 9 1/8%, 1/15/2013 ............................ 6,167,060
US Treasury Notes
6 3/8%, 8/15/2027 ..................................... 5,493,755
Petroleum Geo-Services
7 1/2%, 3/31/2007 ..................................... 5,439,615
News America Holdings
7.43%, 10/1/2026 ...................................... 5,434,980
WorldCom 7 3/4%, 4/1/2007 ................................ 5,409,925
St. Paul Capital 6% ...................................... 5,400,000
7
<PAGE>
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
PRINCIPAL
AMOUNT VALUE
------------ -----------
US GOVERNMENT AND
GOVERNMENT AGENCY
SECURITIES 15.3%
US Treasury Notes
6 1/4%, 8/31/2002 $10,000,000 $10,262,510
US Treasury Notes
6 5/8%, 5/15/2007 4,000,000 4,300,004
US Treasury Notes
6 3/8%, 8/15/2027 5,000,000 5,493,755
Government National
Mortgage Association,
Mortgage-backed
Pass-through Certificates:
6 1/2%, 8/15/2027++ 36,037,703 36,008,513
-----------
TOTAL US GOVERNMENT
AND GOVERNMENT
AGENCY SECURITIES
(Cost $55,844,196) 56,064,782
-----------
CORPORATE BONDS 39.3%
BANKING AND FINANCE 8.0%
American General Finance
6.20%, 3/15/2003 4,000,000 4,028,420
AT&T Capital
6 1/4%, 5/15/2001 5,000,000 5,004,915
Capital One Bank
8 1/8%, 3/1/2000 5,000,000 5,153,775
Chase Manhattan
6 3/8%, 4/1/2008 5,000,000 5,024,525
Franchise Finance
7%, 11/30/2000 5,000,000 5,056,910
United Companies Financial
9.35%, 11/1/1999 2,000,000 2,041,008
United Companies Financial
8 3/8%, 7/1/2005 3,000,000 2,994,468
-----------
29,304,021
-----------
CHEMICALS 1.7%
Geon 6 7/8%, 12/15/2005 1,000,000 1,022,856
Praxair 6 5/8%, 10/15/2007 5,000,000 5,100,435
-----------
6,123,291
-----------
COMPUTER GOODS
AND SERVICES 2.7%
Dell Computer
6.55%, 4/15/2008 5,000,000 5,077,995
Lexmark International
6 3/4%, 5/15/2008 5,000,000 5,017,280
-----------
10,095,275
-----------
CONSUMER GOODS
AND SERVICES 3.6%
Equifax 6.30%, 7/1/2005 3,000,000 2,979,666
Service Corp. International
6 1/2%, 3/15/2008 5,000,000 5,038,255
Whitman 7 1/2%, 2/1/2003 5,000,000 5,256,755
-----------
13,274,676
-----------
ELECTRIC AND GAS UTILITIES 1.4%
Consumers Energy
6 3/8%, 2/1/2008+ 5,000,000 4,984,815
-----------
ENERGY 2.4%
Barrett Resources
7.55%, 2/1/2007 3,300,000 3,458,647
Petroleum Geo-Services
7 1/2%, 3/31/2007 5,000,000 5,439,615
-----------
8,898,262
-----------
FUNERAL SERVICES 1.4%
Loewen Group International
7 1/2%, 4/15/2001 5,000,000 5,092,700
-----------
LEISURE 1.4%
Royal Caribbean Cruises
6 3/4%, 3/15/2008 5,000,000 5,063,130
-----------
MEDIA 4.6%
News America Holdings
7.43%, 10/1/2026 5,000,000 5,434,980
Time Warner 9 1/8%, 1/15/2013 5,000,000 6,167,060
Viacom 7 3/4%, 6/1/2005 5,000,000 5,356,190
-----------
16,958,230
-----------
RETAILING 4.2%
Sears, Roebuck 6%, 3/20/2003 5,000,000 4,995,090
Staples 7 1/8%, 8/15/2007 5,000,000 5,194,300
Woolworth 7%, 6/1/2000 5,000,000 5,070,820
-----------
15,260,210
-----------
TECHNOLOGY 2.5%
Raytheon 6.55%, 3/15/2010 5,000,000 5,055,290
Solectron 7 3/8%, 3/1/2006 4,000,000 4,220,132
-----------
9,275,422
-----------
8
- ----------------------
See footnotes on page 10
<PAGE>
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
PRINCIPAL
AMOUNT
OR SHARES VALUE
----------- -----------
TOBACCO 1.4%
Philip Morris 7 1/8%, 8/15/2002 $ 5,000,000 $ 5,147,045
-----------
UTILITIES/
TELECOMMUNICATIONS 4.0%
Mid America Energy
6 3/8%, 6/15/2006 3,000,000 2,986,350
Tele-Communications
9.80%, 2/1/2012 5,000,000 6,438,465
WorldCom 7 3/4%, 4/1/2007 5,000,000 5,409,925
-----------
14,834,740
-----------
TOTAL CORPORATE BONDS
(Cost $141,377,782) 144,311,817
-----------
CONVERTIBLE
PREFERRED STOCKS 3.2%
BANKING AND FINANCE 1.8%
Salomon Smith Barney
Holdings 7 5/8% 137,500 shs. 6,548,438
INSURANCE 1.4%
St. Paul Capital 6% 75,000 5,400,000
-----------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(Cost $7,513,938) 11,948,438
-----------
COMMON STOCKS 39.1%
AEROSPACE AND DEFENSE 1.0%
General Dynamics 80,400 3,738,600
-----------
AUTOMOTIVE AND RELATED 1.7%
Chrysler 75,000 4,228,125
Eaton 27,700 2,153,675
-----------
6,381,800
-----------
BANKING AND FINANCE 3.8%
Ahmanson (H.F.) 51,100 3,628,100
BankAmerica 18,900 1,633,669
Bank of New York 45,500 2,761,281
Citicorp 17,400 2,596,950
Hartford Financial Services Group 30,200 3,454,125
-----------
14,074,125
-----------
BUSINESS SERVICES 0.9%
Xerox 33,500 3,404,438
-----------
CHEMICALS 1.0%
duPont (E.I.) de Nemours 26,400 1,970,100
Goodrich (B.F.) 34,200 1,697,175
-----------
3,667,275
-----------
SHARES VALUE
----------- -----------
CONSUMER GOODS
AND SERVICES 6.4%
Anheuser-Busch 83,100 3,921,281
Avon Products 42,900 3,324,750
General Mills 51,400 3,514,475
Kimberly-Clark 51,400 2,357,975
RJR Nabisco Holdings 33,300 790,875
Russell 100,000 3,018,750
Sara Lee 88,500 4,950,469
Stanley Works 42,900 1,783,031
-----------
23,661,606
-----------
DIVERSIFIED 0.3%
Alexander & Baldwin 43,800 1,272,938
-----------
DRUGS AND HEALTH CARE 2.9%
Abbott Laboratories 80,000 3,270,000
American Home Products 75,000 3,881,250
Bristol-Myers Squibb 30,200 3,471,112
-----------
10,622,362
-----------
ELECTRIC AND
GAS UTILITIES 3.0%
Edison International 111,200 3,287,350
Unicom 96,300 3,376,519
The Williams Companies 123,800 4,178,250
-----------
10,842,119
-----------
ENERGY 5.1%
Chevron 27,900 2,317,444
Exxon 49,000 3,494,312
Mobil 43,200 3,310,200
Royal Dutch Petroleum
(Netherlands) 47,700 2,614,556
Texaco 54,000 3,223,125
Unocal 106,100 3,793,075
-----------
18,752,712
-----------
FOOD 1.1%
ConAgra 123,000 3,897,563
-----------
INSURANCE 3.4%
American General 55,900 3,979,381
Lincoln National 38,800 3,545,350
Marsh & McLennan 45,150 2,728,753
St. Paul Companies 52,800 2,220,900
-----------
12,474,384
-----------
- ----------------------
See footnotes on page 10
9
<PAGE>
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
SHARES VALUE
----------- -----------
MACHINERY 1.2%
GATX 97,600 $ 4,282,200
-----------
METALS 0.8%
Allegheny Teledyne 126,800 2,900,550
-----------
PAPER AND PACKAGING 0.7%
Mead 28,800 914,400
Union Camp 17,800 883,325
Weyerhaeuser 19,900 919,131
-----------
2,716,856
-----------
RETAILING 1.6%
May Department Stores 38,600 2,528,300
Penney (J.C.) 46,700 3,376,994
-----------
5,905,294
-----------
TOBACCO 1.0%
Philip Morris 90,200 3,551,625
-----------
TRANSPORTATION 0.7%
Norfolk Southern 84,900 2,531,081
-----------
UTILITIES/
TELECOMMUNICATIONS 2.5%
GTE 93,500 5,200,938
SBC Communications 97,200 3,888,000
-----------
9,088,938
-----------
TOTAL COMMON STOCKS
(Cost $129,132,352) 143,766,466
-----------
PRINCIPAL
AMOUNT VALUE
----------- ------------
ASSET-BACKED
SECURITIES++ 1.4%
(Cost $5,000,000)
BANKING AND FINANCE 1.4%
The Money Store Home Equity
Trust 6.47%, 12/15/2025 $ 5,000,000 $ 5,023,440
------------
SHORT-TERM HOLDINGS 0.8%
(Cost $3,100,000) 3,100,000
------------
TOTAL INVESTMENTS 99.1%
(Cost $341,968,268) 364,214,943
OTHER ASSETS
LESS LIABILITIES 0.9% 3,204,637
------------
NET ASSETS 100.0% $367,419,580
============
- ----------------------
+ 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.
10
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
ASSETS:
Investments, at value:
<S> <C> <C>
Bonds and stocks (cost $283,024,072) ....................................... $ 305,050,161
US Government and Government agency securities
(cost $55,844,196) ......................................................... 56,064,782
Short-term holdings (cost $3,100,000) ...................................... 3,100,000 $ 364,214,943
-------------
Cash .......................................................................................... 311,247
Receivable for interest and dividends ......................................................... 3,616,908
Receivable for Capital Stock sold ............................................................. 311,893
Receivable for securities sold ................................................................ 233,562
Investment in, and expenses prepaid to, shareholder service agent ............................. 67,032
Other ......................................................................................... 44,878
-------------
TOTAL ASSETS .................................................................................. 368,800,463
-------------
LIABILITIES:
Payable for Capital Stock repurchased ......................................................... 735,218
Accrued expenses, taxes, and other ............................................................ 645,665
-------------
TOTAL LIABILITIES ............................................................................. 1,380,883
-------------
NET ASSETS .................................................................................... $ 367,419,580
=============
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($1 par value; 500,000,000 shares authorized; 24,147,448
shares outstanding):
Class A ..................................................................................... $ 17,929,608
Class B ..................................................................................... 920,831
Class D ..................................................................................... 5,297,009
Additional paid-in capital .................................................................... 296,021,739
Distributions in excess of net investment income .............................................. (682,947)
Undistributed net realized gain ............................................................... 25,687,597
Net unrealized appreciation of investments .................................................... 22,246,675
Net unrealized depreciation on translation of assets
and liabilities denominated in foreign currencies ........................................... (932)
-------------
NET ASSETS .................................................................................... $ 367,419,580
=============
NET ASSET VALUE PER SHARE:
CLASS A ($273,019,030 / 17,929,608 shares) .................................................... $15.23
======
CLASS B ($13,983,795 / 920,831 shares) ........................................................ $15.19
======
CLASS D ($80,416,755 / 5,297,009 shares) ...................................................... $15.18
======
</TABLE>
- --------------
See Notes to Financial Statements.
11
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1998
<S> <C> <C>
INVESTMENT INCOME:
Interest ......................................................... $ 6,954,526
Dividends ........................................................ 2,007,504
-----------
TOTAL INVESTMENT INCOME ........................................................... $ 8,962,030
EXPENSES:
Management fee ................................................... 1,085,851
Distribution and service fees .................................... 774,228
Shareholder account services ..................................... 246,912
Shareholder reports and communications ........................... 55,000
Registration ..................................................... 43,734
Auditing and legal fees .......................................... 37,907
Custody and related services ..................................... 35,000
Directors' fees and expenses ..................................... 5,357
Miscellaneous .................................................... 12,985
-----------
TOTAL EXPENSES .................................................................... 2,296,974
-----------
NET INVESTMENT INCOME ............................................................. 6,665,056
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments ................................. 27,736,588
Net realized loss from foreign currency transactions ............. (1,060,330)
Net change in unrealized appreciation of investments ............. (13,503,010)
Net change in unrealized depreciation on translation of
assets and liabilities denominated in foreign currencies ....... 903,953
-----------
NET GAIN ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS ......................... 14,077,201
-----------
INCREASE IN NET ASSETS FROM OPERATIONS ............................................ $20,742,257
===========
- ----------
See Notes to Financial Statements.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
---------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................................................. $ 6,665,056 $ 16,391,245
Net realized gain on investments ....................................................... 27,736,588 28,464,970
Net realized loss from foreign currency transactions ................................... (1,060,330) (330,664)
Net change in unrealized appreciation of investments ................................... (13,503,010) 4,951,521
Net change in unrealized appreciation/depreciation on translation of
assets and liabilities denominated in foreign currencies .............................. 903,953 (2,024,316)
------------ ------------
INCREASE IN NET ASSETS FROM OPERATIONS ................................................. 20,742,257 47,452,756
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ............................................................................. (6,047,555) (13,456,408)
Class B ............................................................................. (231,462) (246,429)
Class D ............................................................................. (1,477,726) (3,132,293)
Net realized gain on investments:
Class A ............................................................................. (2,339,283) (25,021,509)
Class B ............................................................................. (118,196) (633,473)
Class D ............................................................................. (673,601) (6,970,215)
------------ ------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS .............................................. (10,887,823) (49,460,327)
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-----------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
--------------- -----------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS: Net proceeds from sale of shares:
Class A ................................................ 632,654 650,380 9,584,795 9,972,700
Class B ................................................ 333,974 343,682 5,090,539 5,230,021
Class D ................................................ 338,919 404,112 5,173,878 6,155,758
Investment of dividends:
Class A ................................................ 275,087 606,682 4,211,925 9,216,525
Class B ................................................ 10,742 11,758 163,915 178,238
Class D ................................................ 78,440 167,968 1,198,550 2,546,388
Exchanged from associated Funds:
Class A ................................................ 508,719 330,769 7,860,783 5,064,541
Class B ................................................ 52,220 79,482 792,724 1,207,365
Class D ................................................ 349,305 418,908 5,322,420 6,386,380
Shares issued in payment of
gain distributions:
Class A ................................................ 128,042 1,378,265 1,932,157 20,340,211
Class B ................................................ 6,043 34,906 90,942 512,347
Class D ................................................ 40,522 423,625 609,669 6,229,511
---------- ---------- ----------- -----------
Total ..................................................... 2,754,667 4,850,537 42,032,297 73,039,985
---------- ---------- ----------- -----------
Cost of shares repurchased:
Class A ................................................ (1,371,536) (3,510,451) (21,006,677) (53,806,277)
Class B ................................................ (27,778) (46,830) (426,464) (709,661)
Class D ................................................ (386,561) (1,022,412) (5,890,323) (15,638,553)
Exchanged into associated Funds:
Class A ................................................ (514,747) (971,157) (7,800,378) (14,983,726)
Class B ................................................ (36,489) (39,006) (546,715) (600,589)
Class D ................................................ (279,018) (720,259) (4,285,468) (11,014,316)
---------- ---------- ----------- -----------
Total ..................................................... (2,616,129) (6,310,115) (39,956,025) (96,753,122)
---------- ---------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS ............................. 138,538 (1,459,578) 2,076,272 (23,713,137)
========== ========== ----------- -----------
INCREASE (DECREASE) IN NET ASSETS .......................................................... 11,930,706 (25,720,708)
NET ASSETS:
Beginning of period ........................................................................ 355,488,874 381,209,582
----------- -----------
END OF PERIOD (including distributions in excess
of net investment income and undistributed net
investment income of $682,947 and
$406,565, respectively) ................................................................. $367,419,580 $355,488,874
============ ============
</TABLE>
- ------------
See Notes to Financial Statements.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. MULTIPLE CLASSES OF SHARES -- Seligman Income Fund, Inc. (the "Fund") offers
three classes of shares. Class A shares are sold with an initial sales charge of
up to 4.75% and a continuing service fee of up to 0.25% on an annual basis.
Class A shares purchased in an amount of $1,000,000 or more are sold without an
initial sales charge but are subject to a contingent deferred sales load
("CDSL") of 1% on redemptions within 18 months of purchase. Class B shares are
sold without an initial sales charge but are subject to a distribution fee of
0.75%, a service fee of up to 0.25% on an annual basis, and a CDSL, if
applicable, of 5% on redemptions in the first year of purchase, declining to 1%
in the sixth year and 0% thereafter. Class B shares will automatically convert
to Class A shares on the last day of the month that precedes the eighth
anniversary of their date of purchase. Class D shares are sold without an
initial sales charge but are subject to a distribution fee of up to 0.75% and a
service fee of up to 0.25% on an annual basis, and a CDSL, if applicable, of 1%
imposed on redemptions made within one year of purchase. The three classes of
shares represent interests in the same portfolio of investments, have the same
rights and are generally identical in all respects except that each class bears
its separate distribution and certain other class expenses, and has exclusive
voting rights with respect to any matter on which a separate vote of any class
is required.
2. SIGNIFICANT ACCOUNTING POLICIES -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Fund:
a. SECURITY VALUATION -- Investments in 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 an exchange are
valued at last sales prices or, in their absence and in the case of
over-the-counter securities, at the mean of bid and asked prices. Short-term
holdings maturing in 60 days or less are valued at amortized cost.
b. FOREIGN CURRENCY TRANSACTIONS -- The books and records of the Fund are
maintained in US dollars. The market value of investment securities, other
assets and liabilities denominated in foreign currencies are translated into
US dollars at the daily rate of exchange as reported by a pricing service.
Purchases and sales of investment securities, income, and expenses are
translated into US dollars at the rate of exchange prevailing on the
respective dates of such transactions.
The Fund separates that portion of the results of operations resulting from
changes in the foreign exchange rates from the fluctuations arising from
changes in the market prices of securities held in the portfolio. Similarly,
the Fund separates the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of portfolio
securities sold during the period.
c. FEDERAL TAXES -- There is no provision for federal income tax. The Fund has
elected to be taxed as a regulated investment company and intends to
distribute substantially all taxable net income and net gain realized.
d. SECURITY TRANSACTIONS AND RELATED INVESTMENT
INCOME -- Investment transactions are recorded on trade dates. Identified
cost of investments sold is used for both financial statement and federal
income tax purposes. Dividends receivable and payable are recorded on
ex-dividend dates, except that certain dividends from foreign securities
where the ex-dividend dates may have passed are recorded as soon as the Fund
is informed of the dividend. Interest income is recorded on an accrual basis.
e. MULTIPLE CLASS ALLOCATIONS -- All income, expenses (other than class-specific
expenses), and realized and unrealized gains or losses are allocated daily to
each class of shares based upon the relative value of shares of each class.
Class-specific expenses, which include distribution and service fees and any
other items that are specifically attributable to a particular class, are
charged directly to such class. For the six months ended June 30, 1998,
distribution and service fees were the only class-specific expenses.
f. DISTRIBUTIONS TO SHAREHOLDERS -- The treatment for financial statement
purposes of distributions made to shareholders during the year from net
investment income or net realized gains may differ from their ultimate
treatment for federal income tax purposes. These differences are caused
primarily by differences in the
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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, 1998, amounted to $179,609,634 and $176,448,853,
respectively; purchases and sales of USGovernment obligations were $52,147,138
and $61,539,132, respectively.
At June 30, 1998, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes, and the tax
basis gross unrealized appreciation and depreciation of portfolio securities
amounted to $25,774,592 and $3,527,917, respectively.
4. SHORT-TERM INVESTMENTS -- At June 30, 1998, the Fund owned short-term
investments which matured in less than seven days.
5. MANAGEMENT FEE, DISTRIBUTION SERVICES, AND OTHER TRANSACTIONS -- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the Fund and
provides the necessary personnel and facilities. Compensation of all officers of
the Fund, all directors of the Fund who are employees or consultants of the
Manager, and all personnel of the Fund and the Manager is paid by the Manager.
The Manager receives a fee, calculated daily and payable monthly, equal to 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.
Prior to March 31, 1998, Seligman Henderson Co., an entity owned 50% each by
the Manager and Henderson International, Inc., a subsidiary of Henderson plc,
supervised and directed all or a portion of the Fund's foreign investments. For
this service, the Manager paid Seligman Henderson Co. a monthly fee.
Seligman Financial Services, Inc. (the "Distributor"), agent for the
distribution of the Fund's shares and an affiliate of the Manager, received
concessions of $19,777 from sales of Class A shares, after commissions of
$153,024 were paid to dealers.
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distribution of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive a continuing fee of up to 0.25% on an annual basis,
payable quarterly, of the average daily net assets of the Class A shares
attributable to the particular service organizations for providing personal
services and/or the maintenance of shareholder accounts. The Distributor charges
such fees to the Fund pursuant to the Plan. For the six months ended June 30,
1998, fees incurred under the Plan aggregated $329,545, or 0.24% per annum of
the average daily net assets of Class A shares.
Under the Plan, with respect to Class B and Class D shares, service
organizations can enter into agreements with the Distributor and receive a
continuing fee for providing personal services and/or the maintenance of
shareholder accounts of up to 0.25% on an annual basis of the average daily net
assets of the Class B and Class D shares for which the organizations are
responsible; and, for Class D shares only, fees for providing other distribution
assistance of up to 0.75% on an annual basis of such average daily net assets.
Such fees are paid monthly by the Fund to the Distributor pursuant to the Plan.
With respect to Class B shares, a distribution fee of 0.75% on an annual
basis of average daily net assets is payable monthly by the Fund to the
Distributor; however, the Distributor has sold its rights to this fee to a third
party (the "Purchaser"), which provides funding to the Distributor to enable it
to pay commissions to dealers at the time of the sale of the related Class B
shares.
For the six months ended June 30, 1998, fees incurred under the Plan,
equivalent to 1% per annum of the average daily net assets of Class B and Class
D shares, amounted to $55,543 and $389,140, respectively.
The Distributor is entitled to retain any CDSL imposed on redemptions of
Class D shares occurring within one year of purchase and on certain redemptions
of Class A shares occurring within 18 months of purchase. For the six months
ended June 30, 1998, such charges amounted to $17,516.
15
<PAGE>
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
retained by the Distributor for the six months ended June 30, 1998, amounted to
$7,630.
Seligman Services, Inc., an affiliate of the Manager, is eligible to receive
commissions from certain sales of shares of the Fund, as well as distribution
and service fees pursuant to the Plan. For the six months ended June 30, 1998,
Seligman Services, Inc. received commissions of $2,574 from the sale of shares
of the Fund. Seligman Services, Inc. also received distribution and service fees
of $25,880, pursuant to the Plan.
Seligman Data Corp., which is owned by the Fund and certain associated
investment companies, charged the Fund at cost $246,912 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 Distributor, Seligman Services, Inc., and/or Seligman Data Corp.
The Fund has a compensation arrangement under which directors who receive
fees may elect to defer receiving such fees. Directors may elect to have their
deferred fees accrue interest or earn a return based on the performance of the
Fund or other funds in the Seligman Group of Investment Companies. The cost of
such fees and earnings accrued thereon is included in directors' fees and
expenses, and the accumulated balance thereof at June 30, 1998, of $101,538 is
included in other liabilities. Deferred fees and related accrued earnings are
not deductible for federal income tax purposes until such amounts are paid.
6. COMMITTED LINE OF CREDIT -- Effective July 1, 1998, the Fund entered into a
joint $800 million committed line of credit that is shared by substantially all
funds in the Seligman Group of Investment Companies. The Fund's borrowings are
limited to 10% of its net assets. Borrowings pursuant to the credit facility are
subject to interest at a rate equal to the overnight federal funds rate plus
0.50% on an overnight basis. The Fund incurs a commitment fee of 0.08% per annum
on its share of the unused portion of the credit facility. The credit facility
may be drawn upon only for temporary purposes and is subject to certain other
customary restrictions. The credit facility commitment expires one year from the
date of the agreement but is renewable with the consent of the participating
banks. To date, the Fund has not borrowed from the credit facility.
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.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED ----------------------------------------------------------
6/30/98o 1997o 1996o 1995o 1994o 1993
--------- -------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ............... $14.81 $14.97 $14.63 $13.05 $14.58 $13.69
------ ------ ------ ------ -------- --------
Net investment income .............................. 0.29 0.71 0.74 0.76 0.76 0.75
Net realized and unrealized investment gain (loss) . 0.61 1.41 0.38 1.89 (1.57) 1.40
Net realized and unrealized gain (loss)
from foreign currency transactions ............... (0.01) (0.10) 0.04 (0.01) 0.03 --
------ ------ ------ ------ ------ ------
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ....................................... 0.89 2.02 1.16 2.64 (0.78) 2.15
Dividends paid ..................................... (0.34) (0.74) (0.73) (0.78) (0.75) (0.75)
Distributions from net gain realized ............... (0.13) (1.44) (0.09) (0.28) -- (0.51)
------ ------ ------ ------ ------ ------
NET INCREASE (DECREASE) IN NET ASSET VALUE ......... 0.42 (0.16) 0.34 1.58 (1.53) 0.89
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ..................... $15.23 $14.81 $14.97 $14.63 $13.05 $14.58
====== ====== ====== ====== ====== ======
TOTAL RETURN BASED ON NET ASSET VALUE: ............. 6.04% 14.06% 8.22% 20.60% (5.43)% 15.98%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ..................... 1.08% 1.14% 1.14% 1.00% 1.02% 1.03%
Net investment income to average net assets ........ 3.87%+ 4.66% 5.11% 5.38% 5.51% 5.29%
Portfolio turnover ................................. 65.48% 138.90% 125.92% 111.78% 66.62% 60.62%
NET ASSETS, END OF PERIOD (000s omitted) ........... $273,019 $270,688 $296,291 $318,307 $286,355 $321,040
</TABLE>
- --------
See footnotes on page 18.
17
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B
-------------------------------------
SIX MONTHS YEAR 4/22/96*
ENDED ENDED TO
6/30/98o 12/31/97o 12/31/96o
----------- --------- ---------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ............. $14.79 $14.95 $14.43
------ ------ ------
Net investment income ............................ 0.23 0.59 0.43
Net realized and unrealized investment gain ...... 0.60 1.41 0.59
Net realized and unrealized gain (loss)
from foreign currency transactions ............. (0.01) (0.10) 0.05
------ ------ ------
INCREASE FROM INVESTMENT OPERATIONS .............. 0.82 1.90 1.07
Dividends paid ................................... (0.29) (0.62) (0.46)
Distributions from net gain realized ............. (0.13) (1.44) (0.09)
------ ------ ------
NET INCREASE (DECREASE) IN NET ASSET VALUE ....... 0.40 (0.16) 0.52
------ ------ ------
NET ASSET VALUE, END OF PERIOD ................... $15.19 $14.79 $14.95
====== ====== ======
TOTAL RETURN BASED ON NET ASSET VALUE: ........... 5.57% 13.24% 7.58%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................... 1.84% 1.90% 1.89%
Net investment income to average net assets ...... 3.11%+ 3.90% 4.36%+
Portfolio turnover ............................... 65.48% 138.90% 125.92%++
NET ASSETS, END OF PERIOD (000s omitted) ......... $13,984 $8,607 $2,961
</TABLE>
<TABLE>
<CAPTION>
CLASS D
-------------------------------------------------------------------------
SIX MONTHS YEAR ENDED DECEMBER 31, 5/3/93*
ENDED ----------------------------------------------- TO
6/30/98o 1997o 1996o 1995o 1994o 12/31/93
--------- ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $14.78 $14.95 $14.60 $13.01 $14.55 $14.42
------ ------ ------ ------ ------ ------
Net investment income 0.23 0.59 0.63 0.65 0.65 0.45
Net realized and unrealized investment gain (loss) 0.60 1.40 0.38 1.88 (1.57) 0.69
Net realized and unrealized gain (loss)
from foreign currency transactions (0.01) (0.10) 0.04 (0.01) 0.03 --
------ ------ ------ ------ ------ ------
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS 0.82 1.89 1.05 2.52 (0.89) 1.14
Dividends paid (0.29) (0.62) (0.61) (0.65) (0.65) (0.50)
Distributions from net gain realized (0.13) (1.44) (0.09) (0.28) -- (0.51)
------ ------ ------ ------ ------ ------
NET INCREASE (DECREASE) IN NET ASSET VALUE 0.40 (0.17) 0.35 1.59 (1.54) 0.13
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $15.18 $14.78 $14.95 $14.60 $13.01 $14.55
====== ====== ====== ====== ====== ======
TOTAL RETURN BASED ON NET ASSET VALUE: 5.57% 13.17% 7.43% 19.66% (6.20)% 8.02%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets 1.84% 1.90% 1.90% 1.79% 1.82% 1.84%
Net investment income to average net assets 3.11%+ 3.90% 4.37% 4.58% 4.74% 4.42%+
Portfolio turnover 65.48% 138.90% 125.92% 111.78% 66.62% 60.62%+++
NET ASSETS, END OF PERIOD (000s omitted) $80,417 $76,194 $81,957 $86,701 $67,946 $49,941
</TABLE>
- -----------------------
* Commencement of offering of shares.
o Per share amounts for the six months ended June 30, 1998, and the years
ended December 31, 1997, 1996, 1995, and 1994, are calculated based on
average shares outstanding.
+ Annualized.
++ For the year ended December 31, 1996.
+++ For the year ended December 31, 1993.
See Notes to Financial Statements.
18
<PAGE>
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, 1998,
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, 1997, 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, 1998, by correspondence with the Fund's custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Seligman Income
Fund, Inc. as of June 30, 1998, the results of its operations, the changes in
its net assets, and the financial highlights for the respective stated periods
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
July 31, 1998
ADDITIONAL INFORMATION
MANAGER
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
GENERAL COUNSEL
Sullivan & Cromwell
INDEPENDENT AUDITORS
Deloitte & Touche LLP
GENERAL DISTRIBUTOR
Seligman Financial Services, Inc.
100 Park Avenue
New York, NY 10017
SHAREHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
IMPORTANT TELEPHONE NUMBERS
(800) 221-2450 Shareholder Services
(800) 445-1777 Retirement Plan Services
(212) 682-7600 Outside the United States
(800) 622-4597 24-Hour Automated Telephone Access Service
19
<PAGE>
JOHN R. GALVIN 2, 4
DEAN, Fletcher School of Law and Diplomacy
at Tufts University
DIRECTOR, Raytheon Company
ALICE S. ILCHMAN 3, 4
TRUSTEE, Committee for Economic Development
CHAIRMAN, The Rockefeller Foundation
FRANK A. MCPHERSON 2, 4
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
John E. Merow 2, 4
RETIRED CHAIRMAN AND SENIOR PARTNER,
Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Industries, Inc.
TRUSTEE, The New York and Presbyterian Hospital
BETSY S. MICHEL 2, 4
TRUSTEE, The Geraldine R. Dodge Foundation
CHAIRMAN OF THE BOARD OF TRUSTEES, St. George's School
WILLIAM C. MORRIS 1
CHAIRMAN
CHAIRMAN OF THE BOARD, J. & W. Seligman & Co.
Incorporated
CHAIRMAN, Carbo Ceramics Inc.
DIRECTOR, Kerr-McGee Corporation
JAMES C. PITNEY 3, 4
RETIRED PARTNER, Pitney, Hardin, Kipp & Szuch, Law Firm
JAMES Q. RIORDAN 3, 4
DIRECTOR, The Brooklyn Union Gas Company
TRUSTEE, Committee for Economic Development
DIRECTOR, Public Broadcasting Service
RICHARD R. SCHMALTZ 1
MANAGING DIRECTOR, DIRECTOR OF INVESTMENTS,
J. & W. Seligman & Co. Incorporated
TRUSTEE EMERITUS, Colby College
ROBERT L. SHAFER 3, 4
RETIRED VICE PRESIDENT, Pfizer Inc.
JAMES N. WHITSON 2, 4
DIRECTOR AND CONSULTANT, Sammons Enterprises, Inc.
DIRECTOR, CommScope, Inc.
DIRECTOR, C-SPAN
BRIAN T. ZINO 1
PRESIDENT
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.
DIRECTOR EMERITUS
FRED E. BROWN
DIRECTOR AND CONSULTANT, J. &W. Seligman &Co.
Incorporated
- ----------------
MEMBER: 1 EXECUTIVE COMMITTEE
2 AUDIT COMMITTEE
3 DIRECTOR NOMINATING COMMITTEE
4 BOARD OPERATIONS COMMITTEE
EXECUTIVE OFFICERS
WILLIAM C. MORRIS
CHAIRMAN
BRIAN T. ZINO
PRESIDENT
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 a fund's portfolio. For tax purposes,
these profits may be taxed at different rates, primarily depending upon the
length of time the securities were owned by the fund.
CAPITAL APPRECIATION/DEPRECIATION -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.
COMPOUNDING -- The change in the value of an investment as shareholders receive
earnings on their investment's earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will not be based on the
original $1,000, but on the $1,070, which includes the first year's earnings.
CONTINGENT DEFERRED SALES LOAD (CDSL) -- Depending on the class of shares owned,
a fee charged by a mutual fund when shares are sold back to the fund (the CDSL
expires after a fixed time period).
DIVIDEND -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
DIVIDEND YIELD -- A measurement of a fund's dividend as a percentage of the
maximum offering price.
EXPENSE RATIO -- The cost of doing business for a mutual fund, expressed as a
percent of the fund's net assets.
INVESTMENT OBJECTIVE -- The shared investment goal of a fund and its
shareholders.
MANAGEMENT FEE -- The amount paid by a mutual fund to its investment advisor(s).
MULTIPLE CLASSES OF SHARES -- Although an individual mutual fund invests in only
one portfolio of securities, it may offer investors several purchase options
which are "classes" of shares. Multiple classes permit shareholders to choose
the fee structure that best meets their needs and goals. Generally, each class
will differ in terms of how and when sales charges and certain fees are
assessed.
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (NASD) -- A self-regulatory
body with authority over firms that distribute mutual funds.
NET ASSET VALUE (NAV) PER SHARE -- The market worth of one fund share, obtained
by adding a mutual fund's total assets (securities, cash, and any accrued
earnings), subtracting liabilities, and dividing the resulting net assets by the
number of shares outstanding.
OFFERING PRICE (OP) -- The price at which a mutual fund's share can be
purchased. The offering price per share is the current net asset value plus any
sales charge.
PORTFOLIO TURNOVER -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
PROSPECTUS -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission (SEC), such as a fund's investment objective and policies, services,
investment restrictions, officers and directors, how shares are bought and
redeemed, fund fees and other charges, and the fund's financial statements.
SEC YIELD -- SEC Yield refers to the net income earned by a fund during a recent
30-day period. This income is annualized and then divided by the maximum
offering price per share on the last day of the 30-day period. The SEC Yield
formula reflects semiannual compounding.
SECURITIES AND EXCHANGE COMMISSION -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
STATEMENT OF ADDITIONAL INFORMATION -- A document that contains updated or more
detailed information about a mutual fund and that supplements the prospectus. It
is available at no charge upon request.
TOTAL RETURN -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The AVERAGE ANNUAL TOTAL
RETURN represents the average annual compounded rate of return for the periods
presented.
YIELD ON SECURITIES -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.
- -------------------
Adapted from the Investment Company Institute's 1997 MUTUAL FUND FACT BOOK.
21
<PAGE>
THIS REPORT IS INTENDED ONLY FOR THE INFORMATION OF SHAREHOLDERS OR THOSE
WHO HAVE RECEIVED THE OFFERING PROSPECTUS COVERING SHARES OF CAPITAL STOCK
OF SELIGMAN 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.
SELIGMAN FINANCIAL SERVICES, INC.
AN AFFILIATE OF
[LOGO]
J.& W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
EQIN3 6/98 Printed on Recycled Paper
