FILE NO. 2-10837
811-525
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
PRE-EFFECTIVE AMENDMENT NO. __ |_|
POST-EFFECTIVE AMENDMENT NO. 78 |X|
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
AMENDMENT NO. 24 |X|
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SELIGMAN INCOME FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
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100 PARK AVENUE, NEW YORK, NEW YORK 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER: 212-850-1864 OR
TOLL FREE: 800-221-2450
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THOMAS G. ROSE, TREASURER
100 PARK AVENUE
NEW YORK, NEW YORK 10017
(NAME AND ADDRESS OF AGENT FOR SERVICE)
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IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX):
|_| IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B)
|X| ON MAY 28, 1999 PURSUANT TO PARAGRAPH (B)
------------
|_| 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1)
|_| ON (DATE) PURSUANT TO PARAGRAPH (A)(1)
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|_| 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2)
|_| ON (DATE) PURSUANT TO PARAGRAPH (A)(2) OF RULE 485.
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IF APPROPRIATE, CHECK THE FOLLOWING BOX:
|_| THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
<PAGE>
S E L I G M A N
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INCOME
FUND, INC.
The Securities and Exchange Commission has neither approved nor disapproved this
Fund, and it has not determined the prospectus to be accurate or adequate. Any
representation to the contrary is a criminal offense.
An investment in this Fund or any other fund cannot provide a complete
investment program. The suitability of an investment in the Fund should be
considered based on the investment objective, strategies and risks described
herein, considered in light of all of the other investments in your portfolio,
as well as your risk tolerance, financial goals and time horizons. We recommend
that you consult your financial advisor to determine if this Fund is suitable
for you.
EQIN1 6/99
[GRAPHIC OMITTED]
PROSPECTUS
JUNE 1, 1999
-------------------
SEEKING HIGH CURRENT
INCOME AND IMPROVEMENT OF
INCOME AND CAPITAL VALUE
OVER THE LONGER TERM
managed by
[GRAPHIC OMITTED]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
<PAGE>
TABLE OF CONTENTS
THE FUND
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES 1
PRINCIPAL RISKS 2
PAST PERFORMANCE 3
FEES AND EXPENSES 4
MANAGEMENT 5
YEAR 2000 6
SHAREHOLDER INFORMATION
DECIDING WHICH CLASS OF SHARES TO BUY 7
PRICING OF FUND SHARES 9
OPENING YOUR ACCOUNT 9
HOW TO BUY ADDITIONAL SHARES 10
HOW TO EXCHANGE SHARES AMONG
THE SELIGMAN MUTUAL FUNDS 10
HOW TO SELL SHARES 11
IMPORTANT POLICIES THAT MAY AFFECT
YOUR ACCOUNT 12
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS 13
TAXES 13
THE SELIGMAN MUTUAL FUNDS 14
FINANCIAL HIGHLIGHTS 15
HOW TO CONTACT US 17
FOR MORE INFORMATION BACK COVER
TIMES CHANGE ... VALUES ENDURE
<PAGE>
THE FUND
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Fund's objectives are high current income consistent with what is believed
to be prudent risk of capital and the possibility of improvement in income and
capital value over the longer term.
The Fund uses the following principal strategies to seek its objectives:
The Fund generally invests at least 80% of its assets in income-producing
securities. In addition, the Fund has a fundamental policy that, at all times,
it must invest at least 25% of the market value of its gross assets in cash,
bonds and/or preferred stocks.
Subject to these requirements, the Fund may invest in many different types of
securities. Income-producing securities in which the Fund may invest include
money market instruments, fixed-income securities (such as notes, bonds,
debentures, and preferred stocks), US Government securities, collateralized
mortgage obligations, senior securities convertible into common stocks, common
stocks, and American Depositary Receipts (ADRs). ADRs are publicly traded
instruments generally issued by domestic banks or trust companies that represent
securities of foreign issuers. Securities are carefully selected in light of the
Fund's investment objectives and are diversified among many different types of
securities and market sectors.
The Fund allocates its assets between equity securities and fixed-income
securities. If equity valuations become excessive, then the Fund will invest
more of its assets in fixed-income securities. The Fund may also invest more of
its assets in fixed-income securities if the investment manager believes that
interest rates are at attractive levels.
Equity securities are chosen for purchase by the Fund using a bottom-up stock
selection approach. This means the investment manager concentrates on individual
company fundamentals, rather than on a particular industry. The Fund seeks to
purchase strong, well-managed companies, generally large US companies, which
have the potential for solid earnings growth and dividend increases. The
investment manager looks to identify companies that it believes offer attractive
dividend yields relative to the market and, typically, that display relatively
low valuations.
Fixed-income securities are chosen for purchase by the Fund using a method that
combines macro analysis of the fixed-income market with fundamental research
into individual securities, customized by market sector. This means that the
investment manager considers the trends in the fixed-income market and evaluates
the long-term trends in interest rates, and then selects individual securities
for the Fund based on its evaluation of each security's particular
characteristics (for example, duration, yield, quality, relative value) and
total return opportunities.
The Fund may invest up to 15% of its net assets in illiquid securities (i.e.,
securities that cannot be readily sold) and may invest up to 10% of its total
assets directly in foreign securities. The limit on foreign securities does not
apply to ADRs or commercial paper and certificates of deposit issued by foreign
banks.
The Fund may, from time to time, take temporary defensive positions that are
inconsistent with its principal strategies in seeking to minimize extreme
volatility caused by adverse market, economic, or other conditions. This could
prevent the Fund from achieving its objective.
Except for its fundamental policy, the Fund may change its principal strategies
if the Fund's Board of Directors believes doing so is consistent with the Fund's
objectives. The Fund's objectives and its fundamental policy may be changed only
with shareholder approval.
As with any mutual fund, there is no guarantee the Fund will achieve its
objectives.
<PAGE>
PRINCIPAL RISKS
A significant portion of the Fund's assets are generally invested in common
stocks. Stock prices fluctuate. Therefore, as with any fund that invests in
stocks, the Fund's net asset value will fluctuate, especially in the short term.
You may experience a decline in the value of your investment and you could lose
money if you sell your shares at a price lower than you paid for them.
While the Fund maintains exposure to varied industry sectors over the longer
term, it may invest more heavily in certain industries believed by the
investment manager to offer good investment opportunities. If an industry in
which the Fund is invested falls out of favor, the Fund's performance may be
negatively affected.
Stocks of large US companies, like those in which the Fund may invest, are
experiencing an extended period of strong performance. However, if investor
sentiment changes, the value of large company stocks may decline. This could
have an adverse effect on the Fund's yield, net asset value, and total return.
The portion of the Fund's assets that are invested in fixed-income securities
will be subject to interest rate risk and credit risk, as discussed below.
Changes in market interest rates will affect the value of the fixed-income
securities held by the Fund. In general, the market value of fixed-income
securities move in the opposite direction of interest rates: the market value
decreases when interest rates rise and increases when interest rates fall.
Long-term securities are generally more sensitive to changes in interest rates,
and therefore subject to a greater degree of market price volatility. Changes in
the value of the fixed-income securities held by the Fund may affect the Fund's
net asset value. The extent to which the Fund is affected will depend on the
percentage of the Fund's assets that is invested in fixed-income securities and
the duration of the securities held.
A fixed-income security could deteriorate in quality to such an extent that its
rating is downgraded or its market value declines relative to comparable
securities. Credit risk also includes the risk that an issuer of a security
would be unable to make interest and principal payments. To the extent the Fund
holds securities that are downgraded, or default on payment, its performance
could be negatively affected.
Fixed-income securities, like those in which the Fund invests, are traded
principally by dealers in the over-the-counter market. The Fund's ability to
sell securities it holds is dependent on the willingness and ability of market
participants to provide bids that reflect current market levels. Adverse market
conditions could result in a lack of liquidity by reducing the number of ready
buyers.
The Fund may actively and frequently trade securities in its portfolio to carry
out its principal strategies. A high portfolio turnover rate increases
transaction costs which may increase the Fund's expenses.There may also be
adverse tax consequences for investors in the Fund due to an increase in
short-term capital gains.
An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE>
PAST PERFORMANCE
The Fund offers four Classes of shares. The information below provides some
indication of the risks of investing in the Fund by showing how the performance
of Class A shares has varied year to year, as well as how the performance of
each Class (except Class C) compares to three widely-used measures of
performance. Class C is a new Class of shares, effective June 1, 1999, so no
performance information is available.
The following performance information is designed to assist you in comparing the
returns of the Fund with the returns of other mutual funds. How the Fund has
performed in the past, however, is not necessarily an indication of how the Fund
will perform in the future. Total returns will vary between each Class of shares
due to the different fees and expenses of each Class.
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table below the chart
do reflect the effect of the applicable sales charges. Both the bar chart and
table assume that all dividends and capital gain distributions were reinvested.
CLASS A ANNUAL TOTAL RETURNS
[This table represents a chart in the printed piece]
15.11% -8.30% 30.12% 17.54% 15.98% -5.43% 20.60% 8.22% 14.06% 7.26%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Best quarter return: 10.98% - quarter ended 3/31/91
Worst quarter return: -10.77% - quarter ended 9/30/90
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS - PERIODS ENDED 12/31/98
CLASS B CLASS D
ONE FIVE TEN SINCE INCEPTION SINCE INCEPTION
YEAR YEARS YEARS 4/22/96 5/3/93
------- ------- ------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Class A 2.16% 7.54% 10.41% -- --
Class B 1.45 n/a n/a 9.12% --
Class D 5.39 7.74 n/a -- 8.26%
Lehman Bros. Aggregate Bond Index 8.69 7.27 9.26 9.20(1) 7.25(2)
S&P 500 Index 28.58 24.06 19.21 29.00(1) 22.63(2)
Lipper Income Funds Average 7.85 10.68 11.61 11.98(1) 10.62(2)
</TABLE>
The S&P 500 Index, the Lehman Bros. Aggregate Bond Index and the Lipper Income
Funds Average are unmanaged benchmarks that assume the reinvestment of
dividends. The Lipper Income Funds Average does not reflect any sales charges
and the S&P 500 Index and Lehman Bros. Aggregate Bond Index do not reflect any
fees or sales charges. The S&P 500 Index measures the performance of large-cap
stocks, the Lehman Bros. Aggregate Bond Index measures the performance of
government and corporate bonds, and the Lipper Income Funds Average measures the
performance of mutual funds with investment objectives similar to the Fund.
(1) From April 30, 1996.
(2) From April 30, 1993.
3
<PAGE>
FEES AND EXPENSES
The table below summarizes the fees and expenses that you may pay as a
shareholder of the Fund. Each Class of shares has its own sales charge schedule
and is subject to different ongoing 12b-1 fees. Shareholder fees are charged
directly to you. Annual fund operating expenses are deducted from Fund assets
and are therefore paid indirectly by you and other shareholders of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES Class A Class B Class C Class D
- ---------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) on Purchases
(as a % of offering price) 4.75%(1) none 1% none
Maximum Contingent Deferred Sales Charge (Load)
(CDSC) on Redemptions
(as a % of original purchase price or current net asset value,
whichever is less) none(1) 5% 1% 1%
ANNUAL FUND OPERATING EXPENSES FOR 1998
- ---------------------------------------
(as a percentage of average net assets)
Management Fees .60% .60% .60% .60%
Distribution and/or Service (12b-1) Fees .24% 1.00% 1.00% 1.00%
Other Expenses .26% .26% .26% .26%
----- ----- ----- -----
Total Annual Fund Operating Expenses 1.10% 1.86% 1.86% 1.86%
===== ===== ===== =====
</TABLE>
(1) If you buy Class A shares for $1,000,000 or more you will not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within 18
months.
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MANAGEMENT FEES:
FEES PAID OUT OF FUND ASSETS TO THE
INVESTMENT MANAGER TO COMPENSATE IT FOR
MANAGING THE FUND.
12B-1 FEES: FEES PAID BY EACH CLASS,
PURSUANT TO A PLAN ADOPTED BY THE FUND
UNDER RULE 12B-1 OF THE INVESTMENT COMPANY
ACT OF 1940. THE PLAN ALLOWS EACH CLASS TO
PAY DISTRIBUTION AND/OR SERVICE FEES FOR
THE SALE AND DISTRIBUTION OF ITS SHARES AND
FOR PROVIDING SERVICES TO SHAREHOLDERS.
OTHER EXPENSES: MISCELLANEOUS EXPENSES
OF RUNNING THE FUND, INCLUDING SUCH
THINGS AS TRANSFER AGENCY, REGISTRATION,
CUSTODY, AND AUDITING AND LEGAL FEES.
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Example
- -------
This example is intended to help you compare the expenses of investing in
the Fund with the expenses of investing in other mutual funds. It assumes (1)
you invest $10,000 in the Fund for each period and then sell all of your shares
at the end of that period, (2) your investment has a 5% return each year, and
(3) the Fund's operating expenses remain the same. Although your actual expenses
may be higher or lower, based on these assumptions your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- -------
Class A $582 $808 $1,052 $1,752
Class B 689 885 1,206 1,981+
Class C 387 679 1,096 2,258
Class D 289 585 1,006 2,180
If you did not sell your shares at the end of each period, your expenses
would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- -------
Class A $582 $808 $1,052 $1,752
Class B 189 585 1,006 1,981+
Class C 287 679 1,096 2,258
Class D 189 585 1,006 2,180
+ Class B shares will automatically convert to Class A shares after eight
years.
4
<PAGE>
MANAGEMENT
The Fund's Board of Directors provides broad supervision over the affairs of the
Fund.
J. & W. Seligman & Co. Incorporated (Seligman), 100 Park Avenue, New York, New
York 10017, is the manager of the Fund. Seligman manages the investment of the
Fund's assets, including making purchases and sales of portfolio securities
consistent with the Fund's investment objective and strategies, and administers
the Fund's business and other affairs.
Established in 1864, Seligman currently serves as manager to 18 USregistered
investment companies, which offer more than 50 investment portfolios with
approximately $21.5 billion in assets as of April 30, 1999. Seligman also
provides investment management or advice to institutional or other accounts
having an aggregate value at April 30, 1999, of approximately $10.2 billion.
The Fund pays Seligman a fee for its management services. The fee rate declines
as the Fund's net assets increase. It is equal to an annual rate of .60% of the
Fund's average daily net assets on the first $1 billion of net assets, .55% of
the Fund's average daily net assets on the next $1 billion of net assets and
.50% of the Fund's average daily net assets in excess of $2 billion. For the
year ended December 31, 1998, the management fee paid by the Fund to Seligman
was equal to an annual rate of .60% of the Fund's average daily net assets.
- ------------------------------------------------------------
AFFILIATES OF SELIGMAN:
SELIGMAN ADVISORS, INC.:
THE FUND'S GENERAL DISTRIBUTOR; RESPONSIBLE FOR
ACCEPTING ORDERS FOR PURCHASES AND SALES OF
FUND SHARES.
SELIGMAN SERVICES, INC.:
A LIMITED PURPOSE BROKER/DEALER; ACTS AS
THE BROKER/DEALER OF RECORD FOR SHAREHOLDER
ACCOUNTS THAT DO NOT HAVE A DESIGNATED
BROKER OR FINANCIAL ADVISOR.
SELIGMAN DATA CORP. (SDC):
THE FUND'S SHAREHOLDER SERVICE AGENT; PROVIDES
SHAREHOLDER ACCOUNT SERVICES TO THE FUND AT
COST.
- ------------------------------------------------------------
PORTFOLIO MANAGEMENT
The Fund is managed by the Seligman Growth and Income Team, headed by Mr.
Charles C. Smith, Jr. Mr. Smith, a Managing Director of Seligman, is a Vice
President of the Fund and has been Portfolio Manager of the Fund since December
1991. Mr. Smith joined Seligman in 1985 as Vice President, Investment Officer.
He became Senior Vice President, Senior Investment Officer in 1992, and Managing
Director in January 1994. Mr. Smith also manages Seligman Common Stock Fund,
Inc.; and he manages the Seligman Common Stock Portfolio and the Seligman Income
Portfolio, two portfolios of Seligman Portfolios, Inc., and Tri-Continental
Corporation.
Mr. Rodney D. Collins, Senior Vice President, Investment Officer of Seligman
since January 1999, co-manages the Fund. Mr. Collins joined Seligman in 1992 as
an Investment Associate, and was named a Vice President, Investment Officer in
January 1995. Mr. Collins also co-manages Seligman Common Stock Fund, Inc.; and
he co-manages the Seligman Common Stock Portfolio and the Seligman Income
Portfolio, two portfolios of Seligman Portfolios, Inc., and Tri-Continental
Corporation.
5
<PAGE>
YEAR 2000
As the millennium approaches, mutual funds, financial and business
organizations, and individuals could be adversely affected if their computer
systems do not properly process and calculate date-related information and data
on and after January 1, 2000. Like other mutual funds, the Fund relies upon
service providers and their computer systems for its day-to-day operations. Many
of the Fund's service providers in turn depend upon computer systems of their
vendors. Seligman and SDC have established a year 2000 project team. The team's
purpose is to assess the state of readiness of Seligman and SDC and the Fund's
other service providers and vendors. The team is comprised of several
information technology and business professionals as well as outside
consultants. The Project Manager of the team reports directly to the
Administrative Committee of Seligman. The Project Manager and other members of
the team also report to the Board of Directors of the Fund and its Audit
Committee.
The team has identified the service providers and vendors who furnish critical
services or software systems to the Fund, including securities firms that
execute portfolio transactions for the Fund and firms responsible for
shareholder account recordkeeping. The team is working with these critical
service providers and vendors to evaluate the impact year 2000 issues may have
on their ability to provide uninterrupted services to the Fund. The team will
assess the feasibility of their year 2000 plans. The team has made progress on
its year 2000 contingency plans - recovery efforts the team will employ in the
event that year 2000 issues adversely affect the Fund. The team anticipates
finalizing these plans in the near future.
The Fund anticipates the team will implement all significant components of the
team's year 2000 plans by mid-1999, including appropriate testing of critical
systems and receipt of satisfactory assurances from critical service providers
and vendors regarding their year 2000 compliance. The Fund believes that the
critical systems on which it relies will function properly on and after the year
2000, but this is not guaranteed. If these systems do not function properly, or
the Fund's critical service providers are not successful in implementing their
year 2000 plans, the Fund's operations may be adversely affected, including
pricing, securities trading and settlement, and the provision of shareholder
services.
In addition, the Fund may hold securities of issuers whose underlying business
leaves them susceptible to year 2000 issues. The Fund may also hold securities
issued by governmental or quasi-governmental issuers, which, like other
organizations, are also susceptible to year 2000 concerns. Year 2000 issues may
affect an issuer's operations, creditworthiness, and ability to make timely
payment on any indebtedness and could have an adverse impact on the value of its
securities. If the Fund holds these securities, the Fund's performance could be
negatively affected. Seligman seeks to identify an issuer's state of year 2000
readiness as part of the research it employs. However, the perception of an
issuer's year 2000 preparedness is only one of the many factors considered in
determining whether to buy, sell, or continue to hold a security. Information
provided by issuers concerning their state of readiness may or may not be
accurate or readily available. Further, the Fund may be adversely affected if
the domestic or foreign exchanges, markets, depositories, clearing agencies, or
governments or third parties responsible for infrastructure needs do not address
their year 2000 issues in a satisfactory manner.
SDC has informed the Fund that it does not expect the cost of its services to
increase materially as a result of the modifications to its computer systems
necessary to prepare for the year 2000. The Fund will not pay to remediate the
systems of Seligman or bear directly the costs to remediate the systems of any
other service providers or vendors, other than SDC.
6
<PAGE>
SHAREHOLDER INFORMATION
DECIDING WHICH CLASS OF SHARES TO BUY
Each of the Fund's Classes represents an interest in the same portfolio of
investments. However, each Class has its own sales charge schedule, and its
ongoing 12b-1 fees may differ from other Classes. When deciding which Class of
shares to buy, you should consider, among other things:
o The amount you plan to invest.
o How long you intend to remain invested in the Fund, or another Seligman
mutual fund.
o If you would prefer to pay an initial sales charge and lower ongoing 12b-1
fees, or be subject to a CDSC and pay higher ongoing 12b-1 fees.
o Whether you may be eligible for reduced or no sales charges when you buy or
sell shares. Your financial advisor will be able to help you decide which Class
of shares best meets your needs.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
CLASS A
o Initial sales charge on Fund purchases, as set forth below:
SALES CHARGE REGULAR DEALER
SALES CHARGE AS A % DISCOUNT
AS A % OF NET AS A % OF
AMOUNT OF YOUR INVESTMENT OF OFFERING PRICE(1) AMOUNT INVESTED OFFERING PRICE
-------------------------- ---------------- ---------------- --------------
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.25%
$50,000 - $ 99,999 4.00 4.17 3.50
$100,000 - $249,999 3.50 3.63 3.00
$250,000 - $499,999 2.50 2.56 2.25
$500,000 - $999,999 2.00 2.04 1.75
$1,000,000 and over(2) 0.00 0.00 0.00
(1)"Offering Price" is the amount that you actually pay for Fund shares; it includes the initial sales charge.
(2)You will not pay a sales charge on purchases of $1 million or more, but you will be subject to a 1% CDSC if you
sell your shares within 18 months.
o Annual 12b-1 fee (for shareholder services) of up to 0.25%.
o No sales charge on reinvested dividends or capital gain distributions.
o Certain employer-sponsored defined contribution-type plans can purchase shares with no initial sales charge
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
CLASS B
o No initial sales charge on purchases.
o A declining CDSC on shares sold within 6 years of purchase:
YEARS SINCE PURCHASE CDSC
-------------------- ------
Less than 1 year 5%
1 year or more but less than 2 years 4
2 years or more but less than 3 years 3
3 years or more but less than 4 years 3
4 years or more but less than 5 years 2
5 years or more but less than 6 years 1
6 years or more 0
o Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
o Automatic conversion to Class A shares after eight years, resulting in
lower ongoing 12b-1 fees.
o No CDSC when you sell shares purchased with reinvested dividends or
capital gain distributions.
- --------------------------------------------------------------------------------
--------------------------------------------------
Your purchase of Class B shares
must be for less than $250,000, because
if you are investing $250,000 or more you
will pay less in fees and charges if you buy
another Class of Shares.
--------------------------------------------------
7
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
CLASS C
o Initial sales charge on Fund purchases, as set forth below:
REGULAR DEALER
SALES CHARGE SALES CHARGE DISCOUNT
AS A % AS A % OF NET AS A % OF
AMOUNT OF YOUR INVESTMENT OF OFFERING PRICE(1) AMOUNT INVESTED OFFERING PRICE
-------------------------- ----------------- ----------------- --------------
<S> <C> <C> <C>
Less than $100,000 1.00% 1.01% 1.00%
$100,000 - $249,999 0.50 0.50 0.50
$250,000 - $1,000,000(2) 0.00 0.00 0.00
(1) "Offering Price" is the amount that you actually pay for Fund shares; it includes the initial sales charge.
(2) Your purchase of Class C shares must be for less than $1,000,000 because if you invest $1,000,000 or more
you will pay less in fees and charges if you buy Class A shares.
o A 1% CDSC on shares sold within eighteen months of purchase.
o Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
o No automatic conversion to Class A shares, so you will be subject to
higher ongoing 12b-1 fees indefinitely.
o No CDSC when you sell shares purchased with reinvested dividends or
capital gain distributions.
- -------------------------------------------------------------------------------------------------------------------------
CLASS D*
o No initial sales charge on purchases.
o A 1% CDSC on shares sold within one year of purchase.
o Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
o No automatic conversion to Class A shares, so you will be subject to higher
ongoing 12b-1 fees indefinitely.
o No CDSC when you sell shares purchased with reinvested dividends or
capital gain distributions.
*Class D shares are not available to all investors. Beginning June 1,
1999, you may purchase Class D shares only if (1) you already own Class D
shares of the Fund or another Seligman mutual fund, (2) if your financial
advisor of record maintains an omnibus account at SDC, or (3) pursuant
to a 401(k) or other retirement plan program for which Class D shares are
already available or for which the sponsor requests Class D shares
because the sales charge structure of Class D shares is comparable to
the sales charge structure of the other funds offered under the program.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Because the Fund's 12b-1 fees are paid out of each Class's assets on an ongoing
basis, over time these fees will increase your investment expenses and may cost
you more than other types of sales charges.
The Fund's Board of Directors believes that no conflict of interest currently
exists between the Fund's Class A, Class B, Class C, and Class D shares. On an
ongoing basis, the Directors, in the exercise of their fiduciary duties under
the Investment Company Act of 1940 and Maryland law, will seek to ensure that no
such conflict arises.
HOW CDSCS ARE CALCULATED
To minimize the amount of the CDSC you may pay when you sell your shares, the
Fund assumes that shares acquired through reinvested dividends and capital gain
distributions (which are not subject to a CDSC) are sold first. Shares that have
been in your account long enough so they are not subject to a CDSC are sold
next. After these shares are exhausted, shares will be sold in the order they
were purchased (oldest to youngest). The amount of any CDSC that you pay will be
based on the shares' original purchase price or current net asset value,
whichever is less.
You will not pay a CDSC when you exchange shares of the Fund to buy the same
class of shares of any other Seligman mutual fund. For the purpose of
calculating the CDSC when you sell shares that you acquired by exchanging shares
of the Fund, it will be assumed that you held the shares since the date you
purchased the shares of the Fund.
8
<PAGE>
PRICING OF FUND SHARES
When you buy or sell shares, you do so at the Class's net asset value (NAV) next
calculated after Seligman Advisors accepts your request. Any applicable sales
charge will be added to the purchase price for Class A shares. Purchase or sale
orders received by an authorized dealer or financial advisor by the close of
regular trading on the New York Stock Exchange (NYSE) (normally 4:00 p.m.
Eastern time) and accepted by Seligman Advisors before the close of business
(5:00 p.m. Eastern time) on the same day will be executed at the Class's NAV
calculated as of the close of regular trading on the NYSE on that day. Your
broker/dealer or financial advisor is responsible for forwarding your order to
Seligman Advisors before the close of business.
- ----------------------------------------
NAV:
COMPUTED SEPARATELY FOR
EACH CLASS BY DIVIDING THAT
CLASS'S SHARE OF THE NET ASSETS
OF THE FUND (I.E., ITS ASSETS LESS
LIABILITIES) BY THE TOTAL NUMBER
OF OUTSTANDING SHARES OF THE
CLASS.
- ----------------------------------------
If your buy or sell order is received by your broker/dealer or financial advisor
after the close of regular trading on the NYSE, or is accepted by Seligman
Advisors after the close of business, the order will be executed at the Class's
NAV calculated as of the close of regular trading on the next NYSE trading day.
When you sell shares, you receive the Class's per share NAV, less any applicable
CDSC.
The NAV of the Fund's shares is determined each day, Monday through Friday, on
days that the NYSE is open for trading. Because of their higher 12b-1 fees, the
NAV of Class B, Class C, and Class D shares will generally be lower than the NAV
of Class A shares of the Fund. Securities owned by the Fund are valued at
current market prices. If reliable market prices are unavailable, securities are
valued in accordance with procedures approved by the Fund's Board of Directors.
OPENING YOUR ACCOUNT
The Fund's shares are sold through authorized broker/dealers or financial
advisors who have sales agreements with Seligman Advisors. There are several
programs under which you may be eligible for reduced sales charges or lower
minimum investments. Ask your financial advisor if any of these programs apply
to you. Class D shares are not available to all investors. For more information,
see "Deciding Which Class of Shares to Buy-Class D."
To make your initial investment in the Fund, contact your financial advisor or
complete an account application and send it with your check directly to SDC at
the address provided on the account application. If you do not choose a Class,
your investment will automatically be made in Class A shares. The required
minimum initial investments are:
o Regular (non-retirement) accounts: $1,000
o For accounts opened concurrently with Invest-A-Check(R):
$100 to open if you will be making monthly investments
$250 to open if you will be making quarterly investments
If you buy shares by check and subsequently sell the shares, SDC will not send
your proceeds until your check clears, which could take up to 15 calendar days
from the date of your purchase.
You will be sent a statement confirming your purchase, and any subsequent
transactions in your account. You will also be sent quarterly and annual
statements detailing your transactions in the Fund and the other Seligman funds
you own under the same account number. Duplicate account statements will be sent
to you free of charge for the current year and most recent prior year. Copies of
year-end statements for prior years are available for a fee of $10 per year, per
account, with a maximum charge of $150 per account. Send your request and a
check for the fee to SDC.
IF YOU WANT TO BE ABLE TO BUY, SELL, OR EXCHANGE SHARES BY TELEPHONE, YOU SHOULD
COMPLETE AN APPLICATION WHEN YOU OPEN YOUR ACCOUNT. THIS WILL PREVENT
YOU FROM HAVING TO COMPLETE A SUPPLEMENTAL ELECTION FORM
(WHICH MAY REQUIRE A SIGNATURE GUARANTEE) AT
A LATER DATE.
- --------------------------------------------------------
YOU MAY BUY SHARES OF THE FUND FOR ALL
TYPES OF TAX-DEFERRED RETIREMENT PLANS.
CONTACT RETIREMENT PLAN SERVICES AT
THE ADDRESS OR PHONE NUMBER LISTED ON
THE INSIDE BACK COVER OF THIS PROSPECTUS
FOR INFORMATION AND TO RECEIVE THE
PROPER FORMS.
- --------------------------------------------------------
9
<PAGE>
HOW TO BUY ADDITIONAL SHARES
After you have made your initial investment, there are many options available to
make additional purchases of Fund shares. Subsequent investments must be for
$100 or more.
Shares may be purchased through your authorized financial advisor, or you may
send a check directly to SDC. Please provide either an investment slip or a note
that provides your name(s), Fund name, and account number. Unless you indicate
otherwise, your investment will be made in the Class you already own. Send
investment checks to:
Seligman Data Corp.
P.O. Box 9766
Providence, RI 02940-9766
Your check must be in US dollars and be drawn on a US bank. You may not use
third party or credit card convenience checks for investment.
You may also use the following account services to make additional investments:
INVEST-A-CHECK(R). You may buy Fund shares electronically from a savings or
checking account of an Automated Clearing House (ACH) member bank. If your bank
is not a member of ACH, the Fund will debit your checking account by
preauthorized checks. You may buy Fund shares at regular monthly intervals in
fixed amounts of $100 or more, or regular quarterly intervals in fixed amounts
of $250 or more. If you use Invest-A-Check(R), you must continue to make
automatic investments until the Fund's minimum initial investment of $1,000 is
met or your account may be closed.
AUTOMATIC DOLLAR-COST-AVERAGING. If you have at least $5,000 in Seligman Cash
Management Fund, you may exchange uncertificated shares of that fund to buy
shares of the same class of another Seligman mutual fund at regular monthly
intervals in fixed amounts of $100 or more or regular quarterly intervals in
fixed amounts of $250 or more. If you exchange Class A shares or Class C shares,
you may pay an initial sales charge to buy Fund shares.
AUTOMATIC CD TRANSFER. You may instruct your bank to invest the proceeds of a
maturing bank certificate of deposit (CD) in shares of the Fund. If you wish to
use this service, contact SDC or your financial advisor to obtain the necessary
forms. Because your bank may charge you a penalty, it is not normally advisable
to withdraw CD assets before maturity.
DIVIDENDS FROM OTHER INVESTMENTS. You may have your dividends from other
companies paid to the Fund. (Dividend checks must include your name, account
number, Fund name, and Class of shares.)
DIRECT DEPOSIT. You may buy Fund shares electronically with funds from your
employer, the IRS, or any other institution that provides direct deposit. Call
SDC for more information.
SELIGMAN TIME HORIZON MATRIXSM. (Requires an initial total investment of
$10,000.) This is a needs-based investment process, designed to help you and
your financial advisor plan to seek your long-term financial goals. It considers
your financial needs, and helps frame a personalized asset allocation strategy
around the cost of your future commitments and the time you have to meet them.
Contact your financial advisor for more information.
SELIGMAN HARVESTER. If you are a retiree or nearing retirement, this program is
designed to help you establish an investment strategy that seeks to meet your
needs throughout your retirement. The strategy is customized to your personal
financial situation by allocating your assets to seek to address your income
requirements, prioritizing your expenses, and establishing a prudent withdrawal
schedule. Contact your financial advisor for more information.
HOW TO EXCHANGE SHARES AMONG THE SELIGMAN MUTUAL FUNDS
You may sell Fund shares to buy shares of the same Class of another Seligman
mutual fund, or you may sell shares of another Seligman mutual fund to buy Fund
shares. Exchanges will be made at each fund's respective NAV. You will not pay
an initial sales charge when you exchange, unless you exchange Class A shares or
Class C shares of Seligman Cash Management Fund to buy shares of the same Class
of the Fund or another Seligman mutual fund. Only your dividend and capital gain
distribution options and telephone services will be automatically carried over
to any new fund account. If you wish to carry over any other account options
(for example, Invest-A-Check(R) or Systematic Withdrawals) to the new fund, you
must specifically request so at the time of your exchange.
If you exchange into a new fund, you must exchange enough to meet the new fund's
minimum initial investment.
10
<PAGE>
See "The Seligman Mutual Funds" for a list of the funds available for exchange.
Before making an exchange, contact your financial advisor or SDC to obtain the
applicable fund prospectus(es). You should read and understand a fund's
prospectus before investing. Some funds may not offer all classes of shares.
HOW TO SELL SHARES
The easiest way to sell Fund shares is by phone. If you have telephone services,
you may be able use this service to sell Fund shares. Restrictions apply to
certain types of accounts. Please see "Important Policies That May Affect Your
Account."
When you sell Fund shares by phone, a check for the proceeds is sent to your
address of record. If you have current ACH bank information on file, you may
have the proceeds of the sale of your Fund shares directly deposited into your
bank account (typically, 3-4 business days after your shares are sold).
You may sell shares to the Fund through a broker/dealer or your financial
advisor. The Fund does not charge any fees or expenses, other than any
applicable CDSC, for this transaction; however, the dealer or financial advisor
may charge a service fee. Contact your financial advisor for more information.
As an additional measure to protect you and the Fund, SDC may confirm written
redemption requests that are (1) for $25,000 or more, or (2) directed to be paid
to an alternate payee or sent to an address other than the address of record,
with you or your financial advisor by telephone before sending you your money.
This will not effect the date on which your redemption request is actually
processed.
You may always send a written request to sell Fund shares; however, it may take
longer to get your money.
You will need to guarantee your signature(s) if the proceeds are:
(1) $50,000 or more;
(2) to be paid to someone other than all account owners; or
(3) mailed to other than your address of record.
- ------------------------------------------------------------
SIGNATURE GUARANTEE:
PROTECTS YOU AND THE FUND FROM FRAUD.
IT GUARANTEES THAT A SIGNATURE IS GENUINE. A
GUARANTEE MUST BE OBTAINED FROM AN ELIGIBLE
FINANCIAL INSTITUTION. NOTARIZATION BY A NOTARY
PUBLIC IS not AN ACCEPTABLE GUARANTEE.
- ------------------------------------------------------------
If your Fund shares are represented by certificates, you will need to surrender
the certificates to SDC before you sell your shares.
You may need to provide additional documents to sell Fund shares if you are:
o a corporation;
o an executor or administrator;
o a trustee or custodian; or
o in a retirement plan.
Contact your financial advisor or SDC's Shareholder Services Department for
information on selling your shares under any of the above circumstances.
You may also use the following account services to sell Fund shares:
SYSTEMATIC WITHDRAWAL PLAN. If you have at least $5,000 in the Fund, you may
withdraw (sell) a fixed dollar amount (minimum of $50) of uncertificated shares
at regular intervals. A check will be sent to you at your address of record or,
if you have current ACH bank information on file, you may have your payments
directly deposited to your predesignated bank account in 3-4 business days after
your shares are sold. If you bought $1,000,000 or more of Class A shares without
an initial sales charge, your withdrawals may be subject to a 1% CDSC if they
occur within 18 months of purchase. If you own Class B, Class C, or Class D
shares and reinvest your dividends and capital gain distributions, you may
withdraw 12%, 10%, or 10%, respectively, of the value of your Fund account (at
the time of election) annually without a CDSC.
CHECK REDEMPTION SERVICE. If you have at least $25,000 in the Fund, you may ask
SDC to provide checks which may be drawn against your account in amounts of $500
or more. You can elect this service on your initial application, or contact SDC
for the appropriate forms to establish this service. If you own Class A shares
that were bought at NAV because of the size of your purchase, or if you own
Class B shares, check redemptions may be subject to CDSC. If you own Class D or
Class C shares, you may use this service only with respect to shares that you
have held for at least one year or eighteen months, respectively.
11
<PAGE>
IMPORTANT POLICIES THAT MAY AFFECT YOUR ACCOUNT
To protect you and other shareholders, the Fund reserves the right to:
o Refuse an exchange request if:
1. you have exchanged twice from the same fund in any three-month period;
2. the amount you wish to exchange equals the lesser of $1,000,000 or 1%
of the Fund's net assets; or
3. you or your financial advisor have been advised that previous patterns
of purchases and sales or exchanges have been considered excessive.
o Refuse any request to buy Fund shares;
o Reject any request received by telephone;
o Suspend or terminate telephone services;
o Reject a signature guarantee that SDC believes may be fraudulent;
o Close your fund account if its value falls below $500;
o Close your account if it does not have a certified taxpayer identification
number.
TELEPHONE SERVICES
You and your broker/dealer or financial advisor will be able to place the
following requests by telephone, unless you indicate on your account application
that you do not want telephone services:
o Sell uncertificated shares (up to $50,000 per day, payable to account
owner(s) and mailed to address of record);
o Exchange shares between funds;
o Change dividend and/or capital gain distribution options;
o Change your address;
o Establish systematic withdrawals to address of record.
If you do not complete an account application when you open your account,
telephone services must be elected on a supplemental election form (which may
require a signature guarantee).
Restrictions apply to certain types of accounts:
o Trust accounts on which the current trustee is not listed may not sell Fund
shares by phone;
o Corporations may not sell Fund shares by phone;
o IRAs may only exchange Fund shares or request address changes by phone;
o Group retirement plans may not sell Fund shares by phone; plans that allow
participants to exchange by phone must provide a letter of authorization
signed by the plan custodian or trustee and provide a supplemental election
form signed by all plan participants.
Unless you have current ACH bank information on file, you will not be able to
sell Fund shares by phone within thirty days following an address change.
Your request must be communicated to an SDC representative. You may not request
any phone transactions via the automated access line.
You may cancel telephone services at any time by sending a written request to
SDC. Each account owner, by accepting or adding telephone services, authorizes
each of the other owners to make requests by phone. Your broker/dealer or
financial advisor representative may not establish telephone services without
your written authorization. SDC will send written confirmation to the address of
record when telephone services are added or terminated.
During times of heavy call volume, you may not be able to get through to SDC by
phone to request a sale or exchange of Fund shares. In this case, you may need
to write, and it may take longer for your request to be processed. The Fund's
NAV may fluctuate during this time. The Fund and SDC will not be liable for
processing requests received by phone as long as it was reasonable to believe
that the request was genuine.
REINSTATEMENT PRIVILEGE
If you sell Fund shares, you may, within 120 calendar days, use part or all of
the proceeds to buy shares of the Fund or any other Seligman mutual fund
(reinstate your investment) without paying an initial sales charge or, if you
paid a CDSC when you sold your shares, receiving a credit for the applicable
CDSC paid. This privilege is available only once each calendar year. Contact
your financial advisor for more information. You should consult your tax advisor
concerning possible tax consequences of exercising this privilege.
12
<PAGE>
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Fund generally pays any dividends from its net investment income quarterly
and distributes any net capital gains realized on investments annually.
- --------------------------------------------
DIVIDEND:
A PAYMENT BY A MUTUAL
FUND, USUALLY DERIVED FROM
THE FUND'S NET INVESTMENT
INCOME (DIVIDENDS AND
INTEREST EARNED ON PORTFOLIO
SECURITIES LESS EXPENSES).
CAPITAL GAIN DISTRIBUTION:
A PAYMENT TO MUTUAL FUND
SHAREHOLDERS WHICH
REPRESENTS PROFITS REALIZED
ON THE SALE OF SECURITIES IN
A FUND'S PORTFOLIO.
EX-DIVIDEND DATE:
THE DAY ON WHICH ANY
DECLARED DISTRIBUTIONS
(DIVIDENDS OR CAPITAL GAINS)
ARE DEDUCTED FROM A FUND'S
ASSETS BEFORE IT CALCULATES
ITS NAV.
- --------------------------------------------
You may elect to:
(1) reinvest both dividends and capital gain distributions;
(2) receive dividends in cash and reinvest capital gain distributions; or
(3) receive both dividends and capital gain distributions in cash.
Your dividends and capital gain distributions will be reinvested if you do not
instruct otherwise or if you own Fund shares in a Seligman tax-deferred
retirement plan.
If you want to change your election, you may write SDC at the address listed on
the back cover of this prospectus or, if you have telephone services, you or
your financial advisor may call SDC. Your request must be received by SDC before
the record date to be effective for that dividend or capital gain distribution.
Cash dividends or capital gain distributions will be sent by check to your
address of record or, if you have current ACH bank information on file, directly
deposited into your predesignated bank account within 3-4 business days from the
payable date.
Dividends and capital gain distributions are reinvested to buy additional Fund
shares on the payable date using the NAV of the ex-dividend date.
Dividends on Class B, Class C, and Class D shares will be lower than the
dividends on Class A shares as a result of their higher 12b-1 fees. Capital gain
distributions will be paid in the same amount for each Class.
TAXES
The tax treatment of dividends and capital gain distributions is the same
whether you take them in cash or reinvest them to buy additional Fund shares.
Tax-deferred retirement plans are not taxed currently on dividends or capital
gain distributions or on exchanges.
Dividends paid by the Fund are taxable to you as ordinary income. You may be
taxed at different rates on capital gains distributed by the Fund depending on
the length of time the Fund holds its assets.
When you sell Fund shares, any gain or loss you realize will generally be
treated as a long-term capital gain or loss if you held your shares for more
than one year, or as a short-term capital gain or loss if you held your shares
for one year or less. However, if you sell Fund shares on which a long-term
capital gain distribution has been received and you held the shares for six
months or less, any loss you realize will be treated as a long-term capital loss
to the extent that it offsets the long-term capital gain distribution.
An exchange of Fund shares is a sale and may result in a gain or loss for
federal income tax purposes.
Each January, you will be sent information on the tax status of any
distributions made during the previous calendar year. Because each shareholder's
situation is unique, you should always consult your tax advisor concerning the
effect income taxes may have on your individual investment.
13
<PAGE>
THE SELIGMAN MUTUAL FUNDS
EQUITY
SPECIALTY
- --------------------------------------------------------------------------------
SELIGMAN COMMUNICATIONS AND
INFORMATION FUND
SEEKS CAPITAL APPRECIATION BY INVESTING IN COMPANIES OPERATING IN ALL ASPECTS
OF THE COMMUNICATIONS, INFORMATION, AND RELATED INDUSTRIES.
SELIGMAN HENDERSON GLOBAL TECHNOLOGY FUND
SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING PRIMARILY IN GLOBAL SECURITIES
(US AND NON-US) OF COMPANIES IN THE TECHNOLOGY AND TECHNOLOGY-RELATED
INDUSTRIES.
SELIGMAN HENDERSON EMERGING MARKETS GROWTH FUND
SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING PRIMARILY IN EQUITY SECURITIES
OF COMPANIES IN EMERGING MARKETS.
SMALL COMPANY
- --------------------------------------------------------------------------------
SELIGMAN FRONTIER FUND
SEEKS GROWTH OF CAPITAL BY INVESTING PRIMARILY IN SMALL COMPANY GROWTH STOCKS.
SELIGMAN SMALL-CAP VALUE FUND
SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING IN EQUITIES OF SMALL
COMPANIES, DEEMED TO BE "VALUE" COMPANIES BY THE INVESTMENT MANAGER.
SELIGMAN HENDERSON GLOBAL SMALLER COMPANIES FUND
SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING IN SECURITIES OF SMALLER
COMPANIES AROUND THE WORLD, INCLUDING THE US.
MEDIUM COMPANY
- --------------------------------------------------------------------------------
SELIGMAN CAPITAL FUND
SEEKS CAPITAL APPRECIATION BY INVESTING IN THE COMMON STOCKS OF COMPANIES WITH
SIGNIFICANT POTENTIAL FOR GROWTH.
LARGE COMPANY
- --------------------------------------------------------------------------------
SELIGMAN GROWTH FUND
SEEKS LONG-TERM GROWTH OF CAPITAL VALUE AND AN INCREASE IN FUTURE INCOME.
SELIGMAN HENDERSON GLOBAL GROWTH OPPORTUNITIES FUND
SEEKS CAPITAL APPRECIATION BY INVESTING PRIMARILY IN EQUITY SECURITIES OF
COMPANIES THAT HAVE THE POTENTIAL TO BENEFIT FROM GLOBAL ECONOMIC OR SOCIAL
TRENDS.
SELIGMAN LARGE-CAP VALUE FUND
SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING IN EQUITIES OF LARGE
COMPANIES, DEEMED TO BE "VALUE" COMPANIES BY THE INVESTMENT MANAGER.
SELIGMAN COMMON STOCK FUND
SEEKS FAVORABLE, BUT NOT THE HIGHEST, CURRENT INCOME AND LONG-TERM GROWTH OF
BOTH INCOME AND CAPITAL, WITHOUT EXPOSING CAPITAL TO UNDUE RISK.
SELIGMAN HENDERSON INTERNATIONAL FUND
SEEKS LONG-TERM CAPITAL APPRECIATION BY INVESTING IN SECURITIES OF MEDIUM- TO
LARGE-SIZED COMPANIES, PRIMARILY IN THE DEVELOPED MARKETS OUTSIDE THE US.
BALANCED
- --------------------------------------------------------------------------------
SELIGMAN INCOME FUND
SEEKS HIGH CURRENT INCOME AND IMPROVEMENT IN CAPITAL VALUE OVER THE LONG TERM,
CONSISTENT WITH PRUDENT RISK OF CAPITAL.
FIXED-INCOME
INCOME
- --------------------------------------------------------------------------------
SELIGMAN HIGH-YIELD BOND FUND
SEEKS TO MAXIMIZE CURRENT INCOME BY INVESTING IN A DIVERSIFIED PORTFOLIO OF
HIGH-YIELDING, HIGH-RISK CORPORATE BONDS, COMMONLY REFERRED TO AS "JUNK BONDS."
SELIGMAN U.S. GOVERNMENT SECURITIES FUND
SEEKS HIGH CURRENT INCOME PRIMARILY BY INVESTING IN A DIVERSIFIED PORTFOLIO OF
SECURITIES GUARANTEED BY THE US GOVERNMENT, ITS AGENCIES, OR INSTRUMENTALITIES,
WHICH HAVE MATURITIES GREATER THAN ONE YEAR.
MUNICIPAL
- --------------------------------------------------------------------------------
SELIGMAN MUNICIPAL FUNDS:
NATIONAL FUND
SEEKS MAXIMUM INCOME, EXEMPT FROM REGULAR FEDERAL INCOME TAXES.
STATE-SPECIFIC FUNDS:*
SEEK TO MAXIMIZE INCOME EXEMPT FROM REGULAR FEDERAL INCOME TAXES AND FROM
REGULAR INCOME TAXES IN THE DESIGNATED STATE.
California Louisiana New Jersey
o High-Yield Maryland New York
o Quality Massachusetts North Carolina
Colorado Michigan Ohio
Florida Minnesota Oregon
Georgia Missouri Pennsylvania
South Carolina
* A small portion of income may be subject to state taxes.
MONEY MARKET
- --------------------------------------------------------------------------------
SELIGMAN CASH MANAGEMENT FUND
SEEKS TO PRESERVE CAPITAL AND TO MAXIMIZE LIQUIDITY AND CURRENT INCOME, BY
INVESTING ONLY IN HIGH-QUALITY MONEY MARKET SECURITIES HAVING A MATURITY OF 90
DAYS OR LESS. THE FUND SEEKS TO MAINTAIN A CONSTANT NET ASSET VALUE OF $1.00 PER
SHARE.
14
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below are intended to help you understand the financial performance
of the Fund's Classes for the past five years or, if less than five years, the
period of the Class's operations. Class C is a new Class, effective June 1,
1999, so financial highlights are not available. Certain information reflects
financial results for a single share of a Class that was held throughout the
periods shown. "Total return" shows the rate that you would have earned (or
lost) on an investment in the Fund, assuming you reinvested all your dividends
and capital gain distributions. Total returns do not reflect any sales charges.
Deloitte & Touche LLP, independent auditors, have audited this information.
Their report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request.
CLASS A
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:*
Net asset value, beginning of period $14.81 $14.97 $14.63 $13.05 $14.58
------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.64 0.71 0.74 0.76 0.76
Net gains or losses on securities
(both realized and unrealized) 0.41 1.41 0.38 1.89 (1.57)
Net gains or losses on foreign currency
transactions (both realized and unrealized) -- (0.10) 0.04 (0.01) 0.03
------ ------ ------ ------ ------
Total from investment operations 1.05 2.02 1.16 2.64 (0.78)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends (from net investment income) (0.65) (0.74) (0.73) (0.78) (0.75)
Distributions (from capital gains) (0.86) (1.44) (0.09) (0.28) --
------ ------ ------ ------ ------
Total distributions (1.51) (2.18) (0.82) (1.06) (0.75)
------ ------ ------ ------ ------
Net asset value, end of period $14.35 $14.81 $14.97 $14.63 $13.05
====== ====== ====== ====== ======
TOTAL RETURN: 7.26% 14.06% 8.22% 20.60% (5.43)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $256,060 $270,688 $296,291 $318,307 $286,355
Ratio of expenses to average net assets 1.10% 1.14% 1.14% 1.00% 1.02%
Ratio of net income to average net assets 4.25% 4.66% 5.11% 5.38% 5.51%
Portfolio turnover rate 124.79% 138.90% 125.92% 111.78% 66.62%
</TABLE>
- -----------------
* Per share amounts are calculated based on average shares outstanding.
15
<PAGE>
CLASS B
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 4/22/96**
---------------------- TO
1998 1997 12/31/96
----- ----- ------
<S> <C> <C> <C>
PER SHARE DATA:*
Net asset value, beginning of period $14.79 $14.95 $14.43
------ ------ ------
Income from investment operations:
Net investment income 0.52 0.59 0.43
Net gains or losses on securities
(both realized and unrealized) 0.39 1.41 0.59
Net gains or losses on foreign currency
transactions (both realized and unrealized) -- (0.10) 0.05
----- ----- -----
Total from investment operations 0.91 1.90 1.07
----- ----- -----
Less distributions:
Dividends (from net investment income) (0.54) (0.62) (0.46)
Distributions (from capital gains) (0.86) (1.44) (0.09)
----- ----- -----
Total distributions (1.40) (2.06) (0.55)
----- ----- -----
Net asset value, end of period $14.30 $14.79 $14.95
===== ===== =====
TOTAL RETURN: 6.28% 13.24% 7.58%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $21,096 $8,607 $2,961
Ratio of expenses to average net assets 1.86% 1.90% 1.89%+
Ratio of net income to average net assets 3.49% 3.90% 4.36%+
Portfolio turnover rate 124.79% 138.90% 125.92%++
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
CLASS D 1998 1997 1996 1995 1994
----- ----- ----- ----- -----
PER SHARE DATA:*
Net asset value, beginning of period $14.78 $14.95 $14.60 $13.01 $14.55
----- ----- ----- ----- -----
Investment operations:
Net investment income 0.52 0.59 0.63 0.65 0.65
Net gains or losses on securities
(both realized and unrealized) 0.40 1.40 0.38 1.88 (1.57)
Net gains or losses on foreign currency
transactions (both realized and unrealized) -- (0.10) 0.04 (0.01) 0.03
----- ----- ----- ----- -----
Total from investment operations 0.92 1.89 1.05 2.52 (0.89)
----- ----- ----- ----- -----
Less distributions:
Dividends (from net investment income) (0.54) (0.62) (0.61) (0.65) (0.65)
Distributions (from capital gains) (0.86) (1.44) (0.09) (0.28) --
----- ----- ----- ----- -----
Total distributions (1.40) (2.06) (0.70) (0.93) (0.65)
----- ----- ----- ----- -----
Net asset value, end of period $14.30 $14.78 $14.95 $14.60 $13.01
===== ===== ===== ===== =====
TOTAL RETURN: 6.36% 13.17% 7.43% 19.66% (6.20)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $78,263 $76,194 $81,957 $86,701 $67,946
Ratio of expenses to average net assets 1.86% 1.90% 1.90% 1.79% 1.82%
Ratio of net income to average net assets 3.49% 3.90% 4.37% 4.58% 4.74%
Portfolio turnover rate 124.79% 138.90% 125.92% 111.78% 66.62%
</TABLE>
- --------------------------
* Per share amounts are calculated based on average shares outstanding.
** Commencement of offering of shares.
+ Annualized.
++ For the year ended December 31, 1996.
16
<PAGE>
- --------------------------------------------------------------------------------
HOW TO CONTACT US
THE FUND Write: Corporate Communications/
Investor Relations Department
J. & W. Seligman & Co. Incorporated
100 Park Avenue, New York, NY 10017
Phone: Toll-Free (800) 221-7844 in the US or
(212) 850-1864 outside the US
Website: http://www.seligman.com
YOUR REGULAR
(NON-RETIREMENT)
ACCOUNT Write: Shareholder Services Department
Seligman Data Corp.
100 Park Avenue, New York, NY 10017
Phone: Toll-Free (800) 221-2450 in the US or
(212) 682-7600 outside the US
Website: http://www.seligman.com
YOUR RETIREMENT
ACCOUNT Write: Retirement Plan Services
Seligman Data Corp.
100 Park Avenue, New York, NY 10017
Phone: Toll-Free (800) 445-1777
-----------------------------------------------------------------
24-hour telephone access is available by dialing (800)
622-4597 on a touchtone telephone. You will have
instant access to price, yield, account balance, most
recent transaction, and other information.
-----------------------------------------------------------------
- --------------------------------------------------------------------------------
17
<PAGE>
FOR MORE INFORMATION
---------------------------------------------------------------------
THE FOLLOWING INFORMATION IS AVAILABLE WITHOUT CHARGE
UPON REQUEST: CALL TOLL-FREE (800) 221-2450 IN THE US OR
(212) 682-7600 OUTSIDE THE US.
STATEMENT OF ADDITIONAL INFORMATION (SAI) CONTAINS
ADDITIONAL INFORMATION ABOUT THE FUND. IT IS ON FILE WITH
THE SECURITIES AND EXCHANGE COMMISSION (SEC) AND IS
INCORPORATED BY REFERENCE INTO (IS LEGALLY PART OF) THIS
PROSPECTUS.
ANNUAL/SEMI-ANNUAL REPORTS CONTAIN ADDITIONAL INFORMATION
ABOUT THE FUND'S INVESTMENTS. IN THE FUND'S ANNUAL
REPORT, YOU WILL FIND A DISCUSSION OF THE MARKET
CONDITIONS AND INVESTMENT STRATEGIES THAT SIGNIFICANTLY
AFFECTED THE FUND'S PERFORMANCE DURING ITS LAST FISCAL
YEAR.
---------------------------------------------------------------------
SELIGMAN ADVISORS, INC.
AN AFFILIATE OF
[GRAPHIC OMITTED]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
Information about the Fund, including the SAI, can be viewed and copied at the
SEC's Public Reference Room in Washington, DC. For information about the
operation of the Public Reference Room, call (800) SEC-0330. The SAI,
Annual/Semi-Annual reports and other information about the Fund are also
available on the SEC's Internet site: http://www.sec.gov.
Copies of this information may be obtained, upon payment of a duplicating fee,
by writing: Public Reference Section of the SEC, Washington, DC 20549-6009.
SEC FILE NUMBER: 811-525
<PAGE>
SELIGMAN INCOME FUND, INC.
Statement of Additional Information
June 1, 1999
100 Park Avenue
New York, New York 10017
(212) 850-1864
Toll Free Telephone: (800) 221-2450
For Retirement Plan Information - Toll-Free Telephone: (800) 445-1777
This Statement of Additional Information (SAI) expands upon and supplements the
information contained in the current Prospectus of Seligman Income Fund, Inc.,
dated June 1, 1999. This SAI, although not in itself a prospectus, is
incorporated by reference into the Prospectus in its entirety. It should be read
in conjunction with the Prospectus, which you may obtain by writing or calling
the Fund at the above address or telephone numbers.
The financial statements and notes included in the Fund's Annual Report, and the
Independent Auditors' Report thereon, are incorporated herein by reference. The
Annual Report will be furnished to you without charge if you request a copy of
this SAI.
Table of Contents
Fund History..................................................... 2
Description of the Fund and its Investments and Risks............ 2
Management of the Fund........................................... 8
Control Persons and Principal Holders of Securities.............. 13
Investment Advisory and Other Services........................... 13
Brokerage Allocation and Other Practices......................... 19
Capital Stock and Other Securities .............................. 20
Purchase, Redemption, and Pricing of Shares...................... 21
Taxation of the Fund............................................. 26
Underwriters..................................................... 27
Calculation of Performance Data.................................. 29
Financial Statements............................................. 31
General Information.............................................. 31
Appendix A....................................................... 32
Appendix B....................................................... 35
<PAGE>
Fund History
The Fund was incorporated under the laws of the state of Maryland in 1947.
Description of the Fund and its Investments and Risks
Classification
The Fund is a diversified open-end management investment company, or mutual
fund.
Investment Strategies and Risks
The following information regarding the Fund's investments and risks supplements
the information contained in the Fund's Prospectus.
The Fund generally invests at least 65% of its total assets in income-producing
securities.
Convertible bonds. Convertible bonds are convertible at a stated exchange rate
or price into common stock. Before conversion, convertible securities are
similar to nonconvertible debt securities in that they provide a steady stream
of income with generally higher yields than an issuer's equity securities. The
market value of all debt securities, including convertible securities, tends to
decline as interest rates increase and to increase as interest rates decline. In
general, convertible securities may provide lower interest or dividend yields
than nonconvertible debt securities of similar quality, but they may also allow
investors to benefit from increases in the market price of the underlying common
stock. When the market price of the underlying common stock increases, the price
of the convertible security tends to reflect the increase. When the market price
of the underlying common stock declines, the convertible security tends to trade
on the basis of yield, and may not depreciate to the same extent as the
underlying common stock. In an issuer's capital structure, convertible
securities are senior to common stocks. They are therefore of higher quality and
involve less risk than the issuer's common stock but the extent to which risk is
reduced depends largely on the extent to which the convertible security sells
above its value as a fixed income security. In selecting convertible securities
for the Fund's portfolio, the investment manager evaluates such factors as
economic and business conditions involving the issuer, future earnings growth
potential of the issuer, potential for price appreciation of the underlying
equity, the value of individual securities relative to other investment
alternatives, trends in the determinants of corporate profits and capability of
management. In evaluating a convertible security, the investment manager gives
emphasis to the attractiveness of the underlying common stock and the capital
appreciation opportunities that the convertible security presents. Convertible
securities can be callable or redeemable at the issuer's discretion, in which
case the investment manager would be forced to seek alternative investments. The
Fund may invest in debt securities convertible into equity securities rated as
low as CC by Standard & Poor's Rating Service (S&P) or Ca by Moody's Investors
Service, Inc. (Moody's). Debt securities rated below investment grade
(frequently referred to as "junk bonds") often have speculative characteristics
and may be subject to greater market fluctuations and risk of loss of income and
principal than higher rated securities. A description of credit ratings and
risks associated with lower rated debt securities, which tend to be more
speculative and riskier than higher rated debt securities, is set forth in
Appendix A to this document. The investment manager does not rely on the ratings
of these securities in making investment decisions but performs its own
analysis, based on the factors described above, in light of the Fund's
investment objectives.
The Fund does not expect to invest more than 5% of its assets in nonconvertible
bonds, notes and debentures rated below investment grade (BB or lower by S&P or
Ba or lower by Moody's). Although bonds rated in the fourth credit rating
category (BBB or Baa) are commonly referred to as investment grade, they may
have speculative characteristics.
Collateralized Mortgage Obligations. The Fund may invest in Collateralized
Mortgage Obligations (CMOs), including certain CMOs that have elected to be
treated as Real Estate Mortgage Investment Conduits (REMICs). CMOs are
fixed-income securities collateralized by pooled mortgages and separated into
short-, medium-, and long-term positions (called tranches). Tranches pay
different rates of
2
<PAGE>
interest depending upon their maturity. CMOs may be collateralized by (a) pass
through securities issued or guaranteed by the Government National Mortgage
Association (GNMA), Federal National Mortgage Association (FNMA) or Federal Home
Loan Mortgage Corporation (FHLMC), (b) unsecuritized mortgage loans insured by
the Federal Housing Administration or guaranteed by the Department of Veteran's
Affairs, (c) unsecuritized conventional Mortgages, (d) other mortgage related
securities or (e) any combination thereof.
Each tranche of a CMO is issued at a specific coupon rate and has a stated
maturity. As the payments on the underlying mortgage loans are collected, the
CMO issuer generally pays the coupon rate of interest to the holders of each
tranche. In a common structure referred to as a "Pay" CMO, all scheduled and
unscheduled principal payments generated by the collateral, as loans are repaid
or prepaid, go initially to investors in the first tranches. Investors in later
tranches do not start receiving principal payments until the prior tranches are
paid in full. Sometimes, CMOs are structured so that the prepayment and/or
market risks are transferred from one tranche to another.
Most CMOs are issued by Federal agencies. However, the only CMOs backed by the
full faith and credit of the US Government are CMOs collateralized by pass
through securities guaranteed by GNMA. All CMOs are subject to reinvestment
risk; that is, as prepayments on the underlying pool of mortgages increase, the
maturity of the tranches in the CMO will decrease. As a result, the Fund may
have to invest the proceeds that were invested in such CMOs in securities with
lower yields. Factors affecting reinvestment risk include the level of interest
rates, general economic and social conditions and the location and age of the
mortgages.
Foreign Securities. The Fund may invest in commercial paper and certificates of
deposit issued by foreign banks and may invest either directly or through
American Depositary Receipts (ADRs), European Depositary Receipts (EDRs), or
Global Depositary Receipts (GDRs) (collectively, Depositary Receipts) in other
securities of foreign issuers. Foreign investments may be affected favorably or
unfavorably by changes in currency rates and exchange control regulations. There
may be less information available about a foreign company than about a US
company and foreign companies may not be subject to reporting standards and
requirements comparable to those applicable to US companies. Foreign securities
may not be as liquid as US securities and there may be delays and risks
attendant in local settlement procedures. Securities of foreign companies may
involve greater market risk than securities of US companies, and foreign
brokerage commissions and custody fees are generally higher than those in the
United States. Investments in foreign securities may also be subject to local
economic or political risks, political instability, the possible nationalization
of issuers and the risk of expropriation or restrictions on the repatriation of
proceeds of sale. In addition, foreign investments may be subject to withholding
and other taxes.
Depositary Receipts are instruments generally issued by domestic banks or trust
companies that represent the deposits of a security of a foreign issuer. ADRs,
which are traded in dollars on US Exchanges or over-the-counter, are issued by
domestic banks and evidence ownership of securities issued by foreign
corporations. EDRs are typically traded in Europe. GDRs are typically traded in
both Europe and the United States. Depositary Receipts may be issued under
sponsored or unsponsored programs. In sponsored programs, the issuer has made
arrangements to have its securities traded in the form of a Depositary Receipt.
In unsponsored programs, the issuers may not be directly involved in the
creation of the program. Although regulatory requirements with respect to
sponsored and unsponsored Depositary Receipt programs are generally similar, the
issuers of securities represented by unsponsored Depositary Receipts are not
obligated to disclose material information in the United States, and therefore,
the import of such information may not be reflected in the market value of such
receipts. The Fund may invest up to 10% of its total assets in foreign
securities that it holds directly, but this 10% limit does not apply to foreign
securities held through Depositary Receipts which are traded in the United
States or to commercial paper and certificates of deposit issued by foreign
banks.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. The United States has
entered into tax treaties with many foreign countries which entitle the Fund to
a reduced rate of such taxes or exemption from taxes on such income.
3
<PAGE>
It is impossible to determine the effective rate of foreign tax in advance since
the amounts of the Fund's assets to be invested within various countries is not
known.
Forward Foreign Currency Exchange Contracts. The investment manager will
consider changes in exchange rates in making investment decisions. As one way of
managing exchange rate risk, the Fund may enter into forward currency exchange
contracts. A forward foreign currency exchange contract is an agreement to
purchase or sell a specific currency at a future date and at a price set at the
time the contract is entered into. The Fund will generally enter into these
contracts to fix the US dollar value of a security that it has agreed to buy or
sell for the period between the date the trade was entered into and the date the
security is delivered and paid for.
The Fund may enter into a forward contract to sell or buy the amount of a
foreign currency it believes may experience a substantial movement against the
US dollar. In this case the contract would approximate the value of some or all
of the Fund's portfolio securities denominated in such foreign currency. Under
normal circumstances, the investment manager will limit forward currency
contracts to not greater than 75% of the Fund's portfolio position in any one
country as of the date the contract is entered into. This limitation will be
measured at the point the hedging transaction is entered into by the Fund. Under
extraordinary circumstances, the investment manager may enter into forward
currency contracts in excess of 75% of the Fund's portfolio position in any one
country as of the date the contract is entered into. The precise matching of the
forward contract amounts and the value of securities involved will not generally
be possible since the future value of such securities in foreign currencies will
change as a consequence of market involvement in the value of those securities
between the date the forward contract is entered into and the date it matures.
The projection of short-term currency market movement is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Under certain circumstances, the Fund may commit up to the entire
value of its assets which are denominated in foreign currencies to the
consummation of these contracts. The investment manager will consider the effect
a substantial commitment of its assets to forward contracts would have on the
investment program of the Fund and its ability to purchase additional
securities.
Except as set forth above and immediately below, the Fund will also not enter
into such forward contracts or maintain a net exposure to such contracts where
the consummation of the contracts would oblige the Fund to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency. The Fund, in order to avoid excess
transactions and transaction costs, may nonetheless maintain a net exposure to
forward contracts in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency provided the excess amount is
"covered" by cash or liquid, high-grade debt securities, denominated in any
currency, having a value at least equal at all times to the amount of such
excess. Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the longer term investment decisions made
with regard to overall diversification strategies. However, the investment
manager believes that it is important to have the flexibility to enter into such
forward contracts when it determines that the best interests of the Fund will be
served.
At the maturity of a forward contract, the Fund may either sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract obligating it to purchase, on
the same maturity date, the same amount of the foreign currency.
As indicated above, it is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of the forward contract.
Accordingly, it may be necessary for the Fund to purchase additional foreign
currency on the spot market (and bear the expense of such purchase) if the
market value of the security is less than the amount of foreign currency the
Fund is obligated to deliver and if a decision is made to sell the security and
make delivery of the foreign currency. Conversely, it may be necessary to sell
on the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver. However, the Fund may use liquid, high-grade
debt securities, denominated in any currency, to cover the amount by which the
value of a forward contract exceeds the value of the securities to which it
relates.
4
<PAGE>
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If the Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward prices decline
during the period between the Fund's entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting contract
for the purchase of the foreign currency, the Fund will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. Should forward prices increase, the Fund
will suffer a loss to the extent the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell.
The Fund's dealing in forward foreign currency exchange contracts will be
limited to the transactions described above. Of course, the Fund is not required
to enter into forward contracts with regard to its foreign currency-denominated
securities and will not do so unless deemed appropriate by the investment
manager.
Although the Fund will seek to benefit by using forward contracts, anticipated
currency movements may not be accurately predicted and the Fund may therefore
incur a gain or loss on a forward contract. A forward contract may help reduce
the Fund's losses on securities denominated in a hedged currency, but it may
also reduce the potential gain on the securities which might result from an
increase in the value of that currency.
Investors should be aware of the costs of currency conversion. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a profit or
"spread" based on the difference between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to the Fund at one rate, while offering a lesser rate of exchange should the
Fund desire to resell that currency to the dealer.
Repurchase Agreements. The Fund may enter into repurchase agreements with
commercial banks and broker/dealers as a short-term cash management tool. A
repurchase agreement is an agreement under which the Fund acquires a security,
generally a US Government obligation, subject to resale at an agreed upon price
and date. The resale price reflects an agreed upon interest rate effective for
the period of time the Fund holds the security and is unrelated to the interest
rate on the security. The Fund's repurchase agreements will at all times be
fully collateralized.
Repurchase agreements could involve certain risks in the event of bankruptcy or
other default by the seller, including possible delays and expenses in
liquidating the securities underlying the agreement, a decline in value of the
underlying securities and a loss of interest. Repurchase agreements are
typically entered into for periods of one week or less. As a matter of
fundamental policy, the Fund will not enter into repurchase agreements of more
than one week's duration if more than 10% of its net assets would be so
invested.
Illiquid Securities. The Fund may invest up to 15% of its net assets in illiquid
securities, including restricted securities (i.e., securities not readily
marketable without registration under the Securities Act of 1933 (1933 Act)) and
other securities that are not readily marketable. The Fund may purchase
restricted securities that can be offered and sold to "qualified institutional
buyers" under Rule 144A of the 1933 Act, and the Fund's Board of Directors may
determine, when appropriate, that specific Rule 144A securities are liquid and
not subject to the 15% limitation on illiquid securities. Should the Board of
Directors make this determination, it will carefully monitor the security
(focusing on such factors, among others, as trading activity and availability of
information) to determine that the Rule 144A security continues to be liquid. It
is not possible to predict with assurance exactly how the market for Rule 144A
securities will further evolve. This investment practice could have the effect
of increasing the level of illiquidity in the Fund, if and to the extent that
qualified institutional buyers become for a time uninterested in purchasing Rule
144A securities.
5
<PAGE>
Borrowing. The Fund may borrow money for temporary or emergency purposes in an
amount not to exceed 15% of the value of its total assets. The Fund may pledge
its assets only to the extent necessary to effect permitted borrowings on a
secured basis.
Rights and Warrants. The Fund may invest in common stock rights and warrants
believed by the investment manager to provide capital appreciation
opportunities. Common stock rights and warrants received as part of a unit or
attached to securities purchased (i.e., not separately purchased) are not
included in the Fund's investment restrictions regarding such securities.
The Fund may not invest in rights and warrants if, at the time of acquisition,
the investment in rights and warrants would exceed 5% of the Fund's net assets,
valued at the lower of cost or market. In addition, no more than 2% of net
assets may be invested in warrants not listed on the New York or American Stock
Exchanges. For purposes of this restriction, rights and warrants acquired by the
Fund in units or attached to securities may be deemed to have been purchased
without cost.
Lending of Portfolio Securities. The Fund may lend portfolio securities to
broker/dealers or other institutions, if the investment manager believes such
loans will be beneficial to the Fund. The borrower must maintain with the Fund
cash or equivalent collateral equal to at least 100% of the market value of the
securities loaned. During the time portfolio securities are on loan, the
borrower pays the Fund any dividends or interest paid on the securities. The
Fund may invest the collateral and earn additional income or receive an agreed
upon amount of interest income from the borrower. Loans made by the Fund will
generally be short-term. Loans are subject to termination at the option of the
Fund or the borrower. The Fund may pay reasonable administrative and custodial
fees in connection with a loan and may pay a negotiated portion of the interest
earned on the collateral to the borrower or placing broker. The Fund does not
have the right to vote securities on loan, but would terminate the loan and
regain the right to vote if that were considered important with respect to the
investment. The Fund may lose money if a borrower defaults on its obligation to
return securities and the value of the collateral held by the Fund is
insufficient to replace the loaned securities. In addition, the Fund is
responsible for any loss that might result from its investment of the borrower's
collateral.
Except as otherwise specifically noted above, the Fund's investment strategies
are not fundamental and the Fund, with the approval of the Board of Directors,
may change such strategies without the vote of shareholders.
Fund Policies
The Fund is subject to fundamental policies that place restrictions on certain
types of investments. These policies cannot be changed except by vote of a
majority of the Fund's outstanding voting securities. Under these policies, the
Fund may not:
- - Borrow money, except for temporary or emergency purposes in an amount not
to exceed 15% of the value of its total assets;
- - Mortgage or pledge any of its assets, except to the extent necessary to
effect permitted borrowings on a secured basis and except to enter into
escrow arrangements in connection with the sales of permitted call options.
The Fund has no present intention of selling call options, and will not do
so without the prior approval of the Fund's Board of Directors;
- - Purchase securities (other than closing call options) except for
investment, buy on "margin," or sell "short";
- - Invest more than 5% of the value of its total assets, at market value, in
securities of any company which, with their predecessors, have been in
operation less than three continuous years, provided, however, that
securities guaranteed by a company that (including predecessors) has been
in operation at least three continuous years shall be excluded from this
calculation;
6
<PAGE>
- - Invest more than 5% of its total assets (taken at market) in securities of
any one issuer, other than the US Government, its agencies or
instrumentalities, buy more than 10% of the outstanding voting securities
or more than 10% of all the securities of any issuer, or invest to control
or manage any company;
- - Invest more than 25% of total assets at market value in any one industry;
- - Invest in securities issued by other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization or
for the purpose of hedging the Fund's obligations under the Deferred
Compensation Plan for Directors;
- - Purchase or hold any real estate, including limited partnership interests
in real property, except the Fund may invest in securities secured by real
estate or interests therein or issued by persons (including real estate
investment trusts) which deal in real estate or interests therein;
- - Purchase or hold the securities of any issuer, if to its knowledge,
directors or officers of the Fund individually owning beneficially more
than 0.5% of the securities of that other company own in the aggregate more
than 5% of such securities;
- - Deal with its directors or officers, or firms they are associated with, in
the purchase or sale of securities of other issuers, except as broker;
- - Purchase or sell commodities and commodity contracts;
- - Underwrite the securities of other issuers, except insofar as the Fund may
be deemed an underwriter under the Securities Act of 1933, as amended, in
disposing of a portfolio security;
- - Make loans, except loans of portfolio securities and except to the extent
the purchase of notes, bonds or other evidences of indebtedness, the entry
into repurchase agreements or deposits with banks may be considered loans;
or
- - Write or purchase put, call, straddle or spread options except that the
Fund may sell covered call options listed on a national securities exchange
or quoted on NASDAQ and purchase closing call options so listed or quoted.
The Fund has no present intention of entering into these types of
transactions, and will not do so without the prior approval of the Fund's
Board of Directors.
The Fund also may not change its investment objective without shareholder
approval.
Under the Investment Company Act of 1940, as amended (1940 Act), a "vote of a
majority of the outstanding voting securities" of the Fund means the affirmative
vote of the lesser of (l) more than 50% of the outstanding shares of the Fund;
or (2) 67% or more of the shares present at a shareholders' meeting if more than
50% of the outstanding shares are represented at the meeting in person or by
proxy.
Temporary Defensive Position
In an attempt to respond to adverse market, economic, political, or other
conditions, the Fund may invest up to 100% of its assets in cash or cash
equivalents, including, but not limited to, prime commercial paper, bank
certificates of deposit, bankers' acceptances, or repurchase agreements for such
securities, and securities of the US Government and its agencies and
instrumentalities, as well as cash and cash equivalents denominated in foreign
currencies. The Fund's investments in foreign cash equivalents will be limited
to those that, in the opinion of the investment manager, equate generally to the
standards established for US cash equivalents. Investments in bank obligations
will be limited at the time of investment to the obligations of the 100 largest
domestic banks in terms of assets which are subject to regulatory supervision by
the US Government or state governments, and the obligations of the 100 largest
foreign banks in terms of assets with branches or agencies in the United States.
7
<PAGE>
Portfolio Turnover
The Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the year by the monthly average
of the value of the portfolio securities owned during the year. Securities whose
maturity or expiration date at the time of acquisition were one year or less are
excluded from the calculation. The Fund's portfolio turnover rates for the years
ended December 31, 1998 and 1997 were 124.79% and 138.90%, respectively.
Management of the Fund
Board of Directors
The Board of Directors provides broad supervision over the affairs of the Fund.
Management Information
Directors and officers of the Fund, together with information as to their
principal business occupations during the past five years are shown below. Each
Director who is an "interested person" of the Fund, as defined in the 1940 Act,
is indicated by an asterisk. Unless otherwise indicated, their addresses are 100
Park Avenue, New York, NY 10017.
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address With Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
William C. Morris* Director, Chairman of the Chairman, J. & W. Seligman & Co. Incorporated,
(61) Board, Chief Executive Chairman and Chief Executive Officer, the Seligman
Officer and Chairman of the Group of investment companies; Chairman, Seligman
Executive Committee Advisors, Inc., Seligman Services, Inc., and Carbo
Ceramics Inc., ceramic proppants for oil and gas
industry; and Director, Seligman Data Corp.,
Kerr-McGee Corporation, diversified energy company.
Formerly, Director, Daniel Industries Inc.,
manufacturer of oil and gas metering equipment.
Brian T. Zino* Director, President and Director and President, J. & W. Seligman & Co.
(46) Member of the Executive Incorporated; President (with the exception of
Committee Seligman Quality Municipal Fund, Inc. and Seligman
Select Municipal Fund, Inc.) and Director or Trustee,
the Seligman Group of investment companies; Chairman,
Seligman Data Corp.; Member of the Board of Governors
of the Investment Company Institute and Director, ICI
Mutual Insurance Company, Seligman Advisors, Inc.,
and Seligman Services, Inc.
Richard R. Schmaltz* Director and Member of the Director and Managing Director, Director of
(58) Executive Committee Investments, J. & W. Seligman & Co. Incorporated;
Director or Trustee, the Seligman Group of investment
companies (except Seligman Cash Management Fund, Inc.);
Director, Seligman Henderson Co., and Trustee Emeritus
of Colby College. Formerly, Director, Investment
Research at Neuberger & Berman from May 1993 to
September 1996.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address With Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
John R. Galvin Director Dean, Fletcher School of Law and Diplomacy at Tufts
(69) University; Director or Trustee, the Seligman Group
Tufts University of investment companies; Chairman Emeritus, American
Packard Avenue, Council on Germany; Governor of the Center for
Medford, MA 02155 Creative Leadership; Director; Raytheon Co.,
electronics; National Defense University; and the
Institute for Defense Analyses. Formerly, Director,
USLIFE Corporation, life insurance; Ambassador, U.S.
State Department for negotiations in Bosnia;
Distinguished Policy Analyst at Ohio State University
and Olin Distinguished Professor of National Security
Studies at the United States Military Academy. From
June 1987 to June 1992, he was the Supreme Allied
Commander, Europe and the Commander-in-Chief, United
States European Command.
Alice S. Ilchman Director Retired President, Sarah Lawrence College; Director
(64) or Trustee, the Seligman Group of investment
18 Highland Circle, companies; Trustee, the Committee for Economic
Bronxville, NY 10708 Development; and Chairman, The Rockefeller
Foundation, charitable foundation. Formerly,
Trustee, The Markle Foundation, philanthropic
organization; and Director, New York Telephone Company;
and International Research and Exchange Board,
intellectual exchanges.
Frank A. McPherson Director Retired Chairman and Chief Executive Officer of
(66) Kerr-McGee Corporation; Director or Trustee, the
2601 Northwest Expressway, Suite Seligman Group of investment companies; Director,
805E Kimberly-Clark Corporation, consumer products; Bank
Oklahoma City, OK 73112 of Oklahoma Holding Company; Baptist Medical Center;
Oklahoma Chapter of the Nature Conservancy; Oklahoma
Medical Research Foundation; and National Boys and
Girls Clubs of America; and Member of the Business
Roundtable and National Petroleum Council. Formerly,
Chairman, Oklahoma City Public Schools Foundation;
and Director, Federal Reserve System's Kansas City
Reserve Bank and the Oklahoma City Chamber of
Commerce.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address With Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
John E. Merow Director Retired Chairman and Senior Partner, Sullivan &
(69) Cromwell, law firm; Director or Trustee, the Seligman
125 Broad Street, Group of investment companies; Director, Commonwealth
New York, NY 10004 Industries, Inc., manufacturers of aluminum sheet
products; the Foreign Policy Association; Municipal Art
Society of New York; the U.S. Council for International
Business; and New York Presbyterian Hospital; Chairman,
American Australian Association; and New York
Presbyterian Healthcare Network, Inc.; Vice-Chairman,
the U.S.-New Zealand Council; and Member of the
American Law Institute and Council on Foreign
Relations.
Betsy S. Michel Director Attorney; Director or Trustee, the Seligman Group of
(56) investment companies; Trustee, The Geraldine R. Dodge
P.O. Box 449, Foundation, charitable foundation; and Chairman of
Gladstone, NJ 07934 the Board of Trustees of St. George's School
(Newport, RI). Formerly, Director, the National
Association of Independent Schools (Washington, DC).
James C. Pitney Director Retired Partner, Pitney, Hardin, Kipp & Szuch, law
(72) firm; Director or Trustee, the Seligman Group of
Park Avenue at Morris County, investment companies. Formerly, Director, Public
P.O. Box 1945, Morristown, NJ Service Enterprise Group, public utility.
07962
James Q. Riordan Director Director or Trustee, the Seligman Group of investment
(71) companies; Director, The Houston Exploration Company;
675 Third Avenue, The Brooklyn Museum, KeySpan Energy Corporation; and
Suite 3004 Public Broadcasting Service; and Trustee, the
New York, NY 10017 Committee for Economic Development. Formerly,
Co-Chairman of the Policy Council of the Tax
Foundation; Director, Tesoro Petroleum Companies,
Inc. and Dow Jones & Company, Inc.; Director and
President, Bekaert Corporation; and Co-Chairman,
Mobil Corporation.
Robert L. Shafer Director Retired Vice President, Pfizer Inc.; Director or
(66) Trustee, the Seligman Group of investment companies.
96 Evergreen Avenue, Formerly, Director, USLIFE Corporation.
Rye, NY 10580
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address With Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
James N. Whitson Director Director and Consultant, Sammons Enterprises, Inc.;
(64) Director or Trustee, the Seligman Group of investment
6606 Forestshire Drive, companies; Director, C-SPAN and CommScope, Inc.,
Dallas, TX 75230 manufacturer of coaxial cables. Formerly, Executive
Vice President, Chief Operating Officer, Sammons
Enterprises, Inc.; and Director, Red Man Pipe and
Supply Company, piping and other materials.
Charles C. Smith, Jr. Vice President and Portfolio Managing Director (formerly, Senior Vice President
(42) Manager and Senior Investment Officer), J. & W. Seligman &
Co. Incorporated; Vice President and Portfolio
Manager, two other open-end investment companies in
the Seligman Group and Tri-Continental Corporation,
closed-end investment company.
Lawrence P. Vogel Vice President Senior Vice President, Finance, J. & W. Seligman &
(42) Co. Incorporated, Seligman Advisors, Inc., and
Seligman Data Corp.; Vice President, the Seligman
Group of investment companies, and Seligman Services,
Inc.; Vice President and Treasurer, Seligman
International, Inc.; and Treasurer, Seligman
Henderson Co.
Frank J. Nasta Secretary General Counsel, Senior Vice President, Law and
(34) Regulation and Corporate Secretary, J. & W. Seligman
& Co. Incorporated; Secretary, the Seligman Group of
investment companies, Seligman Advisors, Inc.,
Seligman Henderson Co., Seligman Services, Inc.,
Seligman International, Inc. and Seligman Data Corp.
Thomas G. Rose Treasurer Treasurer, the Seligman Group of investment companies
(41) and Seligman Data Corp.
</TABLE>
The Executive Committee of the Board acts on behalf of the Board between
meetings to determine the value of securities and assets owned by the Fund for
which no market valuation is available, and to elect or appoint officers of the
Fund to serve until the next meeting of the Board.
Directors and officers of the Fund are also directors and officers of some or
all of the other investment companies in the Seligman Group.
11
<PAGE>
Compensation
<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits from Fund and
Name and Compensation Accrued as Part of Fund Complex Paid
Position with Fund from Fund (1) Fund Expenses to Directors (1)(2)
------------------ ------------- ------------- -------------------
<S> <C> <C> <C>
William C. Morris, Director and Chairman N/A N/A N/A
Brian T. Zino, Director and President N/A N/A N/A
Richard R. Schmaltz, Director N/A N/A N/A
John R. Galvin, Director $1,103 N/A $79,000
Alice S. Ilchman, Director 1,041 N/A 73,000
Frank A. McPherson, Director 1,103 N/A 79,000
John E. Merow, Director 1,082 N/A 77,000
Betsy S. Michel, Director 1,103 N/A 79,000
James C. Pitney, Director 1,062 N/A 75,000
James Q. Riordan, Director 1,062 N/A 75,000
Robert L. Shafer, Director 1,062 N/A 75,000
James N. Whitson, Director 1,103(d) N/A 79,000(d)
</TABLE>
- ----------
(1) For the Fund's year ended December 31, 1998. Effective January 16, 1998,
the per meeting fee for Directors was increased by $1,000, which is
allocated among all Funds in the Fund Complex.
(2) The Seligman Group of investment companies consists of eighteen investment
companies.
(d) Deferred.
The Fund has a compensation arrangement under which outside directors may elect
to defer receiving their fees. The Fund has adopted a Deferred Compensation Plan
under which a director who has elected deferral of his or her fees may choose a
rate of return equal to either (1) the interest rate on short-term Treasury
Bills, or (2) the rate of return on the shares of any of the investment
companies advised by J. & W. Seligman & Co. Incorporated, as designated by the
director. The cost of such fees and earnings is included in directors' fees and
expenses, and the accumulated balance thereof is included in other liabilities
in the Fund's financial statements. The total amount of deferred compensation
(including earnings) payable in respect of the Fund to Mr. Whitson as of
December 31, 1998 was $17,251.
Messrs. Merow and Pitney no longer defer current compensation; however, they
have accrued deferred compensation (including earnings) in the amounts of
$50,456 and $36,523, respectively, as of December 31, 1998.
The Fund may, but is not obligated to, purchase shares of the Seligman Group of
investment companies to hedge its obligations in connection with the Fund's
Deferred Compensation Plan.
Sales Charges
Class A shares of the Fund may be issued without a sales charge to present and
retired directors, trustees, officers, employees (and their family members) of
the Fund, the other investment companies in the Seligman Group, and J. & W.
Seligman & Co. Incorporated and its affiliates. Family members are defined to
include lineal descendants and lineal ancestors, siblings (and their spouses and
children) and any company or organization controlled by any of the foregoing.
Such sales may also be made to employee benefit plans and thrift plans for such
persons and to any investment advisory, custodial, trust or other fiduciary
account managed or advised by J. & W. Seligman & Co. Incorporated or any
affiliate. The sales may be made for investment purposes only, and shares may be
resold only to the Fund.
Class A shares may be sold at net asset value to these persons since such sales
require less sales effort and lower sales related expenses as compared with
sales to the general public.
12
<PAGE>
Control Persons and Principal Holders of Securities
Control Persons
As of May 14, 1999, there was no person or persons who controlled the Fund,
either through a significant ownership of shares or any other means of control.
Principal Holders
As of May 14, 1999, 7.40% of the Fund's Class A common stock then outstanding,
22.31% of the Fund's Class B common stock then outstanding and 23.02% of the
Fund's Class D common stock then outstanding, were owned of record by MLPF&S for
the Sole Benefit of Its Customers, Attn Fund Administrator, 4800 Deer Lake Drive
East, 3rd Floor, Jacksonville, FL 32246.
Management Ownership
Directors and officers of the Fund as a group owned less than 1% of the Fund's
Class A capital stock as of May 14, 1999. As of the same date, no Directors or
officers owned shares of the Fund's Class B or Class D capital stock.
Investment Advisory and Other Services
Investment Manager
J. & W. Seligman & Co. Incorporated (Seligman) manages the Fund. Seligman is a
successor firm to an investment banking business founded in 1864 which has
thereafter provided investment services to individuals, families, institutions,
and corporations. On December 29, 1988, a majority of the outstanding voting
securities of Seligman was purchased by Mr. William C. Morris and a simultaneous
recapitalization of Seligman occurred. See Appendix B for further history of
Seligman.
All of the officers of the Fund listed above are officers or employees of
Seligman. Their affiliations with the Fund and with Seligman are provided under
their principal business occupations.
The Fund pays Seligman a management fee for its services, calculated daily and
payable monthly. The management fee is equal to .60% per annum of the Fund's
average daily net assets on the first $1 billion of net assets, .55% per annum
of the Fund's average daily net assets on the next $1 billion of net assets and
.50% per annum of the Fund's average daily net assets in excess of $2 billion.
For the year ended December 31, 1998, the Fund paid Seligman $2,159,063, equal
to .60% per annum of its average daily net assets. For the year ended December
31, 1997, the Fund paid Seligman $2,192,400, equal to .60% per annum of its
average daily net assets, and for the year ended December 31, 1996, the Fund
paid Seligman $2,342,764, equal to .60% per annum of its average daily net
assets. Seligman paid fees to Seligman Henderson Co., pursuant to a subadvisory
contract, of $271,414 and $248,704 for the years ended December 31, 1997 and
1996, respectively. On March 30, 1998, the subadvisory agreement was terminated.
For the period January 1, 1998 through March 30, 1998, Seligman paid fees to
Seligman Henderson Co. of $48,076.
The Fund pays all of its expenses other than those assumed by Seligman,
including brokerage commissions, administration, shareholder services and
distribution fees, fees and expenses of independent attorneys and auditors,
taxes and governmental fees, including fees and expenses of qualifying the Fund
and its shares under Federal and State securities laws, cost of stock
certificates and expenses of repurchase or redemption of shares, expenses of
printing and distributing reports, notices and proxy materials to shareholders,
expenses of printing and filing reports and other documents with governmental
agencies, expenses of shareholders' meetings, expenses of corporate data
processing and related services, shareholder record keeping and shareholder
account services, fees and disbursements of transfer agents and custodians,
expenses of disbursing dividends and distributions, fees and expenses of
directors of the
13
<PAGE>
Fund not employed by or serving as a Director of Seligman or its affiliates,
insurance premiums and extraordinary expenses such as litigation expenses.
The Management Agreement provides that Seligman will not be liable to the Fund
for any error of judgment or mistake of law, or for any loss arising out of any
investment, or for any act or omission in performing its duties under the
Agreement, except for willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations and duties under the Agreement.
The Management Agreement was initially approved by the Board of Directors at a
Meeting held on September 30, 1988 and by the shareholders at a special meeting
held on December 16, 1988. Amendments to the Management Agreement, effective
April 10, 1991, to increase the fee rate payable to Seligman by the Fund, were
approved by the Board of Directors on January 17, 1991 and by the shareholders
at a special meeting held on April 10, 1991. The amendments to the Management
Agreement, effective January 1, 1996 to increase the fee rate payable to
Seligman by the Fund were approved by the Board of Directors on September 21,
1995 and by the shareholders at a special meeting held on December 12, 1995. The
Management Agreement will continue in effect until December 31 of each year if
(1) such continuance is approved in the manner required by the 1940 Act (i.e.,
by a vote of a majority of the Board of Directors or of the outstanding voting
securities of the Fund and by a vote of a majority of the Directors who are not
parties to the Management Agreement or interested persons of any such party) and
(2) Seligman shall not have notified the Fund at least 60 days prior to December
31 of any year that it does not desire such continuance. The Management
Agreement may be terminated by the Fund, without penalty, on 60 days' written
notice to Seligman and will terminate automatically in the event of its
assignment. The Fund has agreed to change its name upon termination of the
Management Agreement if continued use of the name would cause confusion in the
context of Seligman's business.
Officers, directors and employees of Seligman are permitted to engage in
personal securities transactions, subject to Seligman's Code of Ethics. The Code
of Ethics proscribes certain practices with regard to personal securities
transactions and personal dealings, provides a framework for the reporting and
monitoring of personal securities transactions by Seligman's Compliance Officer,
and sets forth a procedure of identifying, for disciplinary action, those
individuals who violate the Code of Ethics. The Code of Ethics prohibits each of
the officers, directors and employees (including all portfolio managers) of
Seligman from purchasing or selling any security that the officer, director, or
employee knows or believes (1) was recommended by Seligman for purchase or sale
by any client, including the Fund, within the preceding two weeks, (2) has been
reviewed by Seligman for possible purchase or sale within the preceding two
weeks, (3) is being purchased or sold by any client, (4) is being considered by
a research analyst, (5) is being acquired in a private placement, unless prior
approval has been obtained from Seligman's Compliance Officer, or (6) is being
acquired during an initial or secondary public offering. The Code of Ethics also
imposes a strict standard of confidentiality and requires portfolio managers to
disclose any interest they may have in the securities or issuers that they
recommend for purchase by any client.
The Code of Ethics also prohibits (1) each portfolio manager or member of an
investment team from purchasing or selling any security within seven calendar
days of the purchase or sale of the security by a client's account (including
investment company accounts) for which the portfolio manager or investment team
manages; and (2) each employee from engaging in short-term trading (a purchase
and sale or vice-versa within 60 days). Any profit realized pursuant to either
of these prohibitions must be disgorged.
Officers, directors, and employees are required, except under very limited
circumstances, to engage in personal securities transactions through Seligman's
order desk. The order desk maintains a list of securities that may not be
purchased due to a possible conflict with clients. All officers, directors and
employees are also required to disclose all securities beneficially owned by
them on December 31 of each year.
14
<PAGE>
Principal Underwriter
Seligman Advisors, Inc. (Seligman Advisors), an affiliate of Seligman, 100 Park
Avenue, New York, New York 10017, acts as general distributor of the shares of
the Fund and of the other mutual funds in the Seligman Group. Seligman Advisors
is an "affiliated person" (as defined in the 1940 Act) of Seligman, which is
itself an affiliated person of the Fund. Those individuals identified above
under "Management Information" as directors or officers of both the Fund and
Seligman Advisors are affiliated persons of both entities.
Services Provided by the Investment Manager
Under the Management Agreement, dated December 29, 1988, as amended April 10,
1991 and January 1, 1996, subject to the control of the Board of Directors,
Seligman manages the investment of the assets of the Fund, including making
purchases and sales of portfolio securities consistent with the Fund's
investment objectives and policies, and administers its business and other
affairs. Seligman provides the Fund with such office space, administrative and
other services and executive and other personnel as are necessary for Fund
operations. Seligman pays all of the compensation of directors of the Fund who
are employees or consultants of Seligman and of the officers and employees of
the Fund. Seligman also provides senior management for Seligman Data Corp., the
Fund's shareholder service agent.
Service Agreements
There are no other management-related service contracts under which services are
provided to the Fund.
Other Investment Advice
No person or persons, other than directors, officers, or employees of Seligman,
regularly advise the Fund with respect to its investments.
Dealer Reallowances
Dealers and financial advisors receive a percentage of the initial sales charge
on sales of Class A shares and Class C shares of the Fund, as set forth below:
Class A shares:
Regular Dealer
Sales Charge Sales Charge Reallowance
As a % of as a % of Net As a % of
Amount of Purchase Offering Price(1) Amount Invested Offering Price
- ------------------ ----------------- --------------- --------------
Less than $50,000 4.75% 4.99% 4.25%
$50,000 - $99,999 4.00 4.17 3.50
$100,000 - $249,999 3.50 3.63 3.00
$250,000 - $499,999 2.50 2.56 2.25
$500,000 - $999,999 2.00 2.04 1.75
$1,000,000 and over(2) 0 0 0
(1) "Offering Price" is the amount that you actually pay for Fund shares; it
includes the initial sales charge.
(2) You will not pay a sales charge on purchases of $1 million or more, but you
will be subject to a 1% CDSC if you sell your shares within 18 months.
15
<PAGE>
Class C shares:
Regular Dealer
Sales Charge Sales Charge Reallowance
As a % of as a % of Net As a % of
Amount of Purchase Offering Price(1) Amount Invested Offering Price
- ------------------ ----------------- --------------- --------------
Less than $100,000 1.00% 1.01% 1.00%
$100,000 - $249,999 0.50 0.50 0.50
$250,000 - $1,000,000(2) 0 0 0
(1) "Offering Price" is the amount that you actually pay for Fund shares; it
includes the initial sales charge.
(2) Your purchase of Class C shares must be for less than $1,000,000 because if
you invest $1,000,000 or more, you will pay less in fees and charges if you
buy Class A shares.
Seligman Services, Inc. (Seligman Services), an affiliate of Seligman, is a
limited purpose broker/dealer. Seligman Services is eligible to receive
commissions from certain sales of Fund shares. For the years ended December 31,
1998, 1997 and 1996, Seligman Services received commissions in the amounts of
$3,545, $8,141 and $10,898, respectively.
Rule 12b-1 Plan
The Fund has adopted an Administration, Shareholder Services and Distribution
Plan (12b-1 Plan) in accordance with Section 12(b) of the 1940 Act and Rule
12b-1 thereunder.
Under the 12b-1 Plan, the Fund may pay to Seligman Advisors an administration,
shareholder services and distribution fee in respect of the Fund's Class A,
Class B, Class C, and Class D shares. Payments under the 12b-1 Plan may include,
but are not limited to: (1) compensation to securities dealers and other
organizations (Service Organizations) for providing distribution assistance with
respect to assets invested in the Fund; (2) compensation to Service
Organizations for providing administration, accounting and other shareholder
services with respect to Fund shareholders; and (3) otherwise promoting the sale
of shares of the Fund, including paying for the preparation of advertising and
sales literature and the printing and distribution of such promotional materials
and prospectuses to prospective investors and defraying Seligman Advisors' costs
incurred in connection with its marketing efforts with respect to shares of the
Fund. Seligman, in its sole discretion, may also make similar payments to
Seligman Advisors from its own resources, which may include the management fee
that Seligman receives from the Fund. Payments made by the Fund under the 12b-1
Plan are intended to be used to encourage sales of the Fund, as well as to
discourage redemptions.
Fees paid by the Fund under the 12b-1 Plan with respect to any class of shares
may not be used to pay expenses incurred solely in respect of any other class or
any other Seligman fund. Expenses attributable to more than one class of the
Fund are allocated between the classes in accordance with a methodology approved
by the Fund's Board of Directors. Expenses of distribution activities that
benefit both the Fund and other Seligman funds will be allocated among the
applicable funds based on relative gross sales during the quarter in which such
expenses are incurred, in accordance with a methodology approved by the Board.
Class A
Under the 12b-1 Plan, the Fund, with respect to Class A shares, pays quarterly
to Seligman Advisors a service fee at an annual rate of up to .25% of the
average daily net asset value of the Class A shares. These fees are used by
Seligman Advisors exclusively to make payments to Service Organizations which
have entered into agreements with Seligman Advisors. Such Service Organizations
receive from Seligman Advisors a continuing fee of up to .25% on an annual
basis, payable quarterly, of the average daily net assets of Class A shares
attributable to the particular Service Organization for providing personal
service and/or maintenance of shareholder accounts. The fee payable to Service
Organizations from time to time shall, within such limits, be determined by the
Directors of the Fund. The Fund is not
16
<PAGE>
obligated to pay Seligman Advisors for any such costs it incurs in excess of the
fee described above. No expense incurred in one year by Seligman Advisors with
respect to Class A shares of the Fund may be paid from Class A 12b-1 fees
received from the Fund in any other year. If the Fund's 12b-1 Plan is terminated
in respect of Class A shares, no amounts (other than amounts accrued but not yet
paid) would be owed by the Fund to Seligman Advisors with respect to Class A
shares. The total amount paid by the Fund to Seligman Advisors in respect of
Class A shares for the year ended December 31, 1998 was $650,606, equivalent to
0.24% per annum of the average daily net assets of Class A shares.
Class B
Under the 12b-1 Plan, the Fund, with respect to Class B shares, pays monthly a
12b-1 fee at an annual rate of up to 1% of the average daily net asset value of
the Class B shares. The fee is comprised of (1) a distribution fee equal to .75%
per annum, which is paid directly to a third party, FEP Capital, L.P., to
compensate it for having funded, at the time of sale of Fund shares (i) a 4%
commission payment to Service Organizations in connection with the sale of the
Class B shares and (ii) a payment of up to .25% of sales to Seligman Advisors to
help defray its costs of distributing Class B shares; and (2) a service fee of
up to .25% per annum which is paid to Seligman Advisors. The service fee is used
by Seligman Advisors exclusively to make payments to Service Organizations which
have entered into agreements with Seligman Advisors. Such Service Organizations
receive from Seligman Advisors a continuing service fee of up to .25% on an
annual basis, payable quarterly, of the average daily net assets of Class B
shares attributable to the particular Service Organization for providing
personal service and/or maintenance of shareholder accounts. The amounts
expended by Seligman Advisors or FEP Capital, L.P. in any one year upon the
initial purchase of Class B shares of the Fund may exceed the 12b-1 fees paid by
the Fund in that year. The Fund's 12b-1 Plan permits expenses incurred in
respect of Class B shares in one year to be paid from Class B 12b-1 fees
received from the Fund in any other year; however, in any fiscal year the Fund
is not obligated to pay any 12b-1 fees in excess of the fees described above.
Seligman Advisors and FEP Capital, L.P. are not reimbursed for expenses which
exceed such fees. If the Fund's 12b-1 Plan is terminated in respect of Class B
shares, no amounts (other than amounts accrued but not yet paid) would be owed
by that Fund to Seligman Advisors or FEP Capital, L.P. with respect to Class B
shares. The total amount paid by the Fund in respect of Class B shares for the
year ended December 31, 1998 was $139,400, equivalent to 1% per annum of the
average daily net assets of Class B shares.
Class C
Under the 12b-1 Plan, the Fund, with respect to Class C shares, pays monthly to
Seligman Advisors a 12b-1 fee at an annual rate of up to 1% of the average daily
net asset value of the Class C shares. The fee is used by Seligman Advisors as
follows: During the first year following the sale of Class C shares, a
distribution fee of .75% of the average daily net assets attributable to Class C
shares is used, along with any CDSC proceeds during the first eighteen months,
to (1) reimburse Seligman Advisors for its payment at the time of sale of Class
C shares of a 1.25% sales commission to Service Organizations, and (2) pay for
other distribution expenses, including paying for the preparation of advertising
and sales literature and the printing and distribution of such promotional
materials and prospectuses to prospective investors and other marketing costs of
Seligman Advisors. In addition, during the first year following the sale of
Class C shares, a service fee of up to .25% of the average daily net assets
attributable to such Class C shares is used to reimburse Seligman Advisors for
its prepayment to Service Organizations at the time of sale of Class C shares of
a service fee of .25% of the net asset value of the Class C share sold (for
shareholder services to be provided to Class C shareholders over the course of
the one year immediately following the sale). The payment of service fees to
Seligman Advisors is limited to amounts Seligman Advisors actually paid to
Service Organizations at the time of sale as service fees. After the initial
one-year period following a sale of Class C shares, the entire 12b-1 fee
attributable to such Class C shares is paid to Service Organizations for
providing continuing shareholder services and distribution assistance in respect
of the Fund. The Fund did not pay any 12b-1 fees in respect of Class C shares
for the fiscal year ended September 30, 1998 because no Class C shares were
issued or outstanding during such period.
17
<PAGE>
Class D
Under the 12b-1 Plan, the Fund, with respect to Class D shares, pays monthly to
Seligman Advisors a 12b-1 fee at an annual rate of up to 1% of the average daily
net asset value of the Class D shares. The Fee is used by Seligman Advisors as
follows: During the first year following the sale of Class D shares, a
distribution fee of .75% of the average daily net assets attributable to such
Class D shares is used, along with any CDSC proceeds, to (1) reimburse Seligman
Advisors for its payment at the time of sale of Class D shares of a .75% sales
commission to Service Organizations, and (2) pay for other distribution
expenses, including paying for the preparation of advertising and sales
literature and the printing and distribution of such promotional materials and
prospectuses to prospective investors and other marketing costs of Seligman
Advisors. In addition, during the first year following the sale of Class D
shares, a service fee of up to .25% of the average daily net assets attributable
to such Class D shares is used to reimburse Seligman Advisors for its prepayment
to Service Organizations at the time of sale of Class D shares of a service fee
of .25% of the net asset value of the Class D shares sold (for shareholder
services to be provided to Class D shareholders over the course of the one year
immediately following the sale). The payment of service fees to Seligman
Advisors is limited to amounts Seligman Advisors actually paid to Service
Organizations at the time of sale as service fees. After the initial one-year
period following a sale of Class D shares, the entire 12b-1 fee attributable to
such Class D shares is paid to Service Organizations for providing continuing
shareholder services and distribution assistance in respect of the Fund. The
total amount paid by the Fund in respect of Class D shares for the year ended
December 31, 1998 was $783,824, equivalent to 1% per annum of the average daily
net assets of Class D shares.
The amounts expended by Seligman Advisors in any one year with respect to Class
D shares of the Fund may exceed the 12b-1 fees paid by the Fund in that year.
The Fund's 12b-1 Plan permits expenses incurred by Seligman Advisors in respect
of Class D shares in one year to be paid from Class D 12b-1 fees in any other
year; however, in any year the Fund is not obligated to pay any 12b-1 fees in
excess of the fees described above.
As of December 31, 1998, Seligman Advisors has incurred $210,934 of unreimbursed
expenses in respect of the Fund's Class D shares. This amount is equal to 0.27%
of the net assets of Class D shares at December 31, 1998.
If the Fund's 12b-1 Plan is terminated in respect of Class D shares of the Fund,
no amounts (other than amounts accrued but not yet paid) would be owed by the
Fund to Seligman Advisors with respect to Class D shares.
Payments made by the Fund under the 12b-1 Plan for its year ended December 31,
1998, were spent on the following activities in the following amounts (no Class
C shares were outstanding during such fiscal year):
Class A Class B Class D
------- ------- -------
Compensation to underwriters -- -- $75,837
Compensation to broker/dealers $650,606 $ 34,882 $707,987
Other* -- $104,518 --
* Payment is made to FEP Capital, L.P. to compensate it for having funded at
the time of sale, payments to broker/dealers and underwriters.
The 12b-1 Plan was approved on July 16, 1992 by the Directors, including a
majority of the Directors who are not "interested persons" (as defined in the
1940 Act) of the Fund and who have no direct or indirect financial interest in
the operation of the 12b-1 Plan or in any agreement related to the 12b-1 Plan
(the "Qualified Directors") and was approved by shareholders of the Fund at a
Special Meeting of the Shareholders held on November 23, 1992. The 12b-1 Plan
became effective in respect of the Class A
18
<PAGE>
shares on January 1, 1993. The 12b-1 Plan was approved in respect of the Class B
shares on March 21, 1996 by the Board of Directors of the Fund, including a
majority of the Qualified Directors, and became effective in respect of the
Class B shares on April 22, 1996. The 12b-1 Plan was approved in respect of the
Class D shares on March 18, 1993 by the Directors, including a majority of the
Qualified Directors, and became effective in respect of the Class D shares on
May 1, 1993. The 12b-1 Plan was approved in respect of the Class C shares on May
20, 1999 by the Directors, including a majority of the Qualified Directors, and
became effective in respect of the Class C shares on June 1, 1999. The 12b-1
Plan will continue in effect until December 31 of each year so long as such
continuance is approved annually by a majority vote of both the Directors of the
Fund and the Qualified Directors, cast in person at a meeting called for the
purpose of voting on such approval. The 12b-1 Plan may not be amended to
increase materially the amounts payable to Service Organizations with respect to
a class without the approval of a majority of the outstanding voting securities
of the class. If the amount payable in respect of Class A shares under the 12b-1
Plan is proposed to be increased materially, the Fund will either (1) permit
holders of Class B shares to vote as a separate class on the proposed increase
or (2) establish a new class of shares subject to the same payment under the
12b-1 Plan as existing Class A shares, in which case the Class B shares will
thereafter convert into the new class instead of into Class A shares. No
material amendment to the 12b-1 Plan may be made except by vote of a majority of
both the Directors and the Qualified Directors.
The 12b-1 Plan requires that the Treasurer of the Fund shall provide to the
Directors, and the Directors shall review, at least quarterly, a written report
of the amounts expended (and purposes therefor) under the 12b-1 Plan. Rule 12b-1
also requires that the selection and nomination of Directors who are not
"interested persons" of the Fund be made by such disinterested Directors. The
12b-1 Plan is reviewed by the Directors annually.
Seligman Services acts as a broker/dealer of record for shareholder accounts
that do not have a designated financial advisor and receives compensation from
the Fund pursuant to the 12b-1 Plan for providing personal services and account
maintenance to such accounts and other distribution services. For the years
ended December 31, 1998, 1997 and 1996, Seligman Services received distribution
and service fees from the Fund pursuant to its 12b-1 Plan of $50,371, $51,665
and $57,842, respectively.
Brokerage Allocation and Other Practices
Brokerage Transactions
Seligman will seek the most favorable price and execution in the purchase and
sale of portfolio securities of the Fund. When two or more of the investment
companies in the Seligman Group or other investment advisory clients of Seligman
desire to buy or sell the same security at the same time, the securities
purchased or sold are allocated by Seligman in a manner believed to be equitable
to each. There may be possible advantages or disadvantages of such transactions
with respect to price or the size of positions readily obtainable or saleable.
In over-the-counter markets, the Fund deals with responsible primary market
makers unless a more favorable execution or price is believed to be obtainable.
The Fund may buy securities from or sell securities to dealers acting as
principal, except dealers with which its directors and/or officers are
affiliated.
For the years ended December 31, 1998, 1997 and 1996, the Fund paid total
brokerage commissions to others for execution, research and statistical services
in the amounts of $677,449, $298,513 and $86,967, respectively. The amount of
brokerage commissions paid by the Fund has increased materially from 1996 due to
both a realignment of the Fund which decreased its convertible debt holdings and
increased its equity holdings and the Fund's sale of international securities.
19
<PAGE>
Commissions
For the years ended December 31, 1998, 1997 and 1996, the Fund did not execute
any portfolio transactions with, and therefore did not pay any commissions to,
any broker affiliated with either the Fund, Seligman, or Seligman Advisors.
Brokerage Selection
Consistent with seeking the most favorable price and execution when buying or
selling portfolio securities, Seligman may give consideration to the research,
statistical, and other services furnished by brokers or dealers to Seligman for
its use, as well as the general attitude toward and support of investment
companies demonstrated by such brokers or dealers. Such services include
supplemental investment research, analysis, and reports concerning issuers,
industries, and securities deemed by Seligman to be beneficial to the Fund. In
addition, Seligman is authorized to place orders with brokers who provide
supplemental investment and market research and security and economic analysis
although the use of such brokers may result in a higher brokerage charge to the
Fund than the use of brokers selected solely on the basis of seeking the most
favorable price and execution and although such research and analysis may be
useful to Seligman in connection with its services to clients other than the
Fund.
Directed Brokerage
During the year ended December 31, 1998, neither the Fund nor Seligman directed
any of the Fund's brokerage transactions to a broker because of research
services provided.
Regular Broker-Dealers
During the year ended December 31, 1998, the Fund did not acquire securities of
its regular brokers or dealers (as defined in Rule 10b-1 under the 1940 Act) or
of their parents.
Capital Stock and Other Securities
Capital Stock
The Fund is authorized to issue 500,000,000 shares of capital stock, each with a
par value of $1.00, divided into four classes, designated Class A common stock,
Class B common stock, Class C common stock and Class D common stock. Each share
of the Fund's Class A, Class B, Class C and Class D common stock is equal as to
earnings, assets, and voting privileges, except that each class bears its own
separate distribution and, potentially, certain other class expenses and has
exclusive voting rights with respect to any matter to which a separate vote of
any class is required by the 1940 Act or Maryland law. The Fund has adopted a
multiclass plan pursuant to Rule 18f-3 under the 1940 Act permitting the
issuance and sale of multiple classes of common stock. In accordance with the
Articles of Incorporation, the Board of Directors may authorize the creation of
additional classes of common stock with such characteristics as are permitted by
the multiclass plan and Rule 18f-3. The 1940 Act requires that where more than
one class exists, each class must be preferred over all other classes in respect
of assets specifically allocated to such class. All shares have noncumulative
voting rights for the election of directors. Each outstanding share is fully
paid and non-assessable, and each is freely transferable. There are no
liquidation, conversion, or preemptive rights.
Other Securities
The Fund has no authorized securities other than common stock.
20
<PAGE>
Purchase, Redemption, and Pricing of Shares
Purchase of Shares
Class A
Class A shares may be purchased at a price equal to the next determined net
asset value per share, plus an initial sales charge.
Purchases of Class A shares by a "single person" (as defined below under
"Persons Entitled to Reductions") may be eligible for the following reductions
in initial sales charges:
Volume Discounts are provided if the total amount being invested in Class A
shares of the Fund alone, or in any combination of shares of the other mutual
funds in the Seligman Group which are sold with an initial sales charge, reaches
levels indicated in the sales charge schedule set forth in the Prospectus.
The Right of Accumulation allows an investor to combine the amount being
invested in Class A shares of the Fund and shares of the other Seligman mutual
funds sold with an initial sales charge with the total net asset value of shares
of those mutual funds already owned that were sold with an initial sales charge
and the total net asset value of shares of Seligman Cash Management Fund which
were acquired through an exchange of shares of another Seligman mutual fund on
which there was an initial sales charge at the time of purchase to determine
reduced sales charges in accordance with the schedule in the prospectus. The
value of the shares owned, including the value of shares of Seligman Cash
Management Fund acquired in an exchange of shares of another Seligman mutual
fund on which there was an initial sales charge at the time of purchase will be
taken into account in orders placed through a dealer, however, only if Seligman
Advisors is notified by an investor or a dealer of the amount owned by the
investor at the time the purchase is made and is furnished sufficient
information to permit confirmation.
A Letter of Intent allows an investor to purchase Class A shares over a 13-month
period at reduced initial sales charges in accordance with the schedule in the
Prospectus, based on the total amount of Class A shares of the Fund that the
letter states the investor intends to purchase plus the total net asset value of
shares that were sold with an initial sales charge of the other Seligman mutual
funds already owned and the total net asset value of shares of Seligman Cash
Management Fund which were acquired through an exchange of shares of another
Seligman mutual fund on which there was an initial sales charge at the time of
purchase. Reduced sales charges also may apply to purchases made within a
13-month period starting up to 90 days before the date of execution of a letter
of intent.
Persons Entitled To Reductions. Reductions in initial sales charges apply to
purchases of Class A shares by a "single person," including an individual;
members of a family unit comprising husband, wife and minor children; or a
trustee or other fiduciary purchasing for a single fiduciary account. Employee
benefit plans qualified under Section 401 of the Internal Revenue Code of 1986,
as amended, organizations tax exempt under Section 501(c)(3) or (13) of the
Internal Revenue Code, and non-qualified employee benefit plans that satisfy
uniform criteria are considered "single persons" for this purpose. The uniform
criteria are as follows:
1. Employees must authorize the employer, if requested by the Fund, to
receive in bulk and to distribute to each participant on a timely basis the Fund
prospectus, reports, and other shareholder communications.
2. Employees participating in a plan will be expected to make regular
periodic investments (at least annually). A participant who fails to make such
investments may be dropped from the plan by the employer or the Fund 12 months
and 30 days after the last regular investment in his account. In such event, the
dropped participant would lose the discount on share purchases to which the plan
might then be entitled.
21
<PAGE>
3. The employer must solicit its employees for participation in such an
employee benefit plan or authorize and assist an investment dealer in making
enrollment solicitations.
Eligible Employee Benefit Plans. The table of sales charges in the Prospectus
applies to sales to "eligible employee benefit plans," except that the Fund may
sell shares at net asset value to "eligible employee benefit plans" which have
at least (1) $500,000 invested in the Seligman Group of mutual funds or (2) 50
eligible employees to whom such plan is made available. Such sales must be made
in connection with a payroll deduction system of plan funding or other systems
acceptable to Seligman Data Corp., the Fund's shareholder service agent.
"Eligible employee benefit plan" means any plan or arrangement, whether or not
tax qualified, which provides for the purchase of Fund shares. Sales of shares
to such plans must be made in connection with a payroll deduction system of plan
funding or other system acceptable to Seligman Data Corp. Section 403(b) plans
sponsored by public educational institutions are not eligible for net asset
value purchases based on the aggregate investment made by the plan or number of
eligible employees.
Such sales are believed to require limited sales effort and sales-related
expenses and therefore are made at net asset value. Contributions or account
information for plan participation also should be transmitted to Seligman Data
Corp. by methods which it accepts. Additional information about "eligible
employee benefit plans" is available from financial advisors or Seligman
Advisors.
Further Types of Reductions. Class A shares may also be issued without an
initial sales charge in the following instances:
(1) to any registered unit investment trust which is the issuer of periodic
payment plan certificates, the net proceeds of which are invested in Fund
shares;
(2) to separate accounts established and maintained by an insurance company
which are exempt from registration under Section 3(c)(11) of the 1940 Act;
(3) to registered representatives and employees (and their spouses and minor
children) of any dealer that has a sales agreement with Seligman Advisors;
(4) to financial institution trust departments;
(5) to registered investment advisers exercising discretionary investment
authority with respect to the purchase of Fund shares;
(6) to accounts of financial institutions or broker/dealers that charge account
management fees, provided Seligman or one of its affiliates has entered
into an agreement with respect to such accounts;
(7) pursuant to sponsored arrangements with organizations which make
recommendations to, or permit group solicitations of, its employees,
members or participants in connection with the purchase of shares of the
Fund;
(8) to other investment companies in the Seligman Group in connection with a
deferred fee arrangement for outside directors;
(9) to certain "eligible employee benefit plans" as discussed above;
(10) to those partners and employees of outside counsel to the Fund or its
directors or trustees who regularly provide advice and services to the
Fund, to other funds managed by Seligman, or to their directors or
trustees; and
(11) in connection with sales pursuant to a 401(k) alliance program which has an
agreement with Seligman Advisors.
22
<PAGE>
CDSC Applicable to Class A Shares. Class A shares purchased without an initial
sales charge due to a purchase of $1,000,000 or more either alone or through a
Volume Discount, Right of Accumulation, or Letter of Intent are subject to a
CDSC of 1% on redemptions of such shares within eighteen months of purchase.
Employee benefit plans eligible for net asset value sales may be subject to a
CDSC of 1% for terminations at the plan level only, on redemptions of shares
purchased within eighteen months prior to plan termination. The 1% CDSC will be
waived on shares that were purchased through Morgan Stanley Dean Witter & Co. by
certain Chilean institutional investors (i.e., pension plans, insurance
companies, and mutual funds). Upon redemption of such shares within an
eighteen-month period, Morgan Stanley Dean Witter will reimburse Seligman
Advisors a pro rata portion of the fee it received from Seligman Advisors at the
time of sale of such shares.
See "CDSC Waivers" below for other waivers which may be applicable to Class A
shares.
Class B
Class B shares may be purchased at a price equal to the next determined net
asset value, without an initial sales charge. However, Class B shares are
subject to a CDSC if the shares are redeemed within six years of purchase at
rates set forth in the table below, charged as a percentage of the current net
asset value or the original purchase price, whichever is less.
Years Since Purchase CDSC
- -------------------- ----
Less than 1 year .......................................... 5%
1 year or more but less than 2 years ...................... 4%
2 years or more but less than 3 years ..................... 3%
3 years or more but less than 4 years ..................... 3%
4 years or more but less than 5 years ..................... 2%
5 years or more but less than 6 years ..................... 1%
6 years or more ........................................... 0%
Approximately eight years after purchase, Class B shares will convert
automatically to Class A shares. Shares purchased through reinvestment of
dividends and distributions on Class B shares also will convert automatically to
Class A shares along with the underlying shares on which they were earned.
Conversion occurs at the end of the month which precedes the eighth anniversary
of the purchase date. If Class B shares of the Fund are exchanged for Class B
shares of another Seligman mutual fund, the conversion period applicable to the
Class B shares acquired in the exchange will apply, and the holding period of
the shares exchanged will be tacked onto the holding period of the shares
acquired. Class B shareholders of the Fund exercising the exchange privilege
will continue to be subject to the Fund's CDSC schedule if such schedule is
higher or longer than the CDSC schedule relating to the new Class B shares. In
addition, Class B shares of the Fund acquired by exchange will be subject to the
Fund's CDSC schedule if such schedule is higher or longer than the CDSC schedule
relating to the Class B shares of the Seligman mutual fund from which the
exchange has been made.
Class C
Class C shares may be purchased at a price equal to the next determined net
asset value, plus an initial sales charge. Purchases of Class C shares by a
"single person" may be eligible for the reductions in initial sales charges
described above for Class A shares. Class C shares are subject to a CDSC of 1%
if the shares are redeemed within eighteen months of purchase, charged as a
percentage of the current net asset value or the original purchase price,
whichever is less.
Class D
Class D shares may be purchased at a price equal to the next determined net
asset value, without an initial sales charge. However, Class D shares are
subject to a CDSC of 1% if the shares are redeemed within one year of purchase,
charged as a percentage of the current net asset value or the original
23
<PAGE>
purchase price, whichever is less. Unlike Class B shares, Class D shares do not
automatically convert to Class A shares after eight years.
Systematic Withdrawals. Class B, Class C and Class D shareholders who reinvest
both their dividends and capital gain distributions to purchase additional
shares of the Fund may use the Systematic Withdrawal Plan to withdraw up to 12%,
10% and 10%, respectively, of the value of their accounts per year without the
imposition of a CDSC. Account value is determined as of the date the systematic
withdrawals begin.
CDSC Waivers. The CDSC on Class B and Class D shares (and certain Class A
shares, as discussed above) will be waived or reduced in the following
instances:
(1) on redemptions following the death or disability (as defined in Section
72(m)(7) of the Internal Revenue Code) of a shareholder or beneficial
owner;
(2) in connection with (1) distributions from retirement plans qualified under
Section 401(a) of the Internal Revenue Code when such redemptions are
necessary to make distributions to plan participants (such payments
include, but are not limited to, death, disability, retirement, or
separation of service), (2) distributions from a custodial account under
Section 403(b)(7) of the Internal Revenue Code or an IRA due to death,
disability, minimum distribution requirements after attainment of age 70
1/2 or, for accounts established prior to January 1, 1998, attainment of
age 59 1/2, and (3) a tax-free return of an excess contribution to an IRA;
(3) in whole or in part, in connection with shares sold to current and retired
Directors of the Fund;
(4) in whole or in part, in connection with shares sold to any state, county,
or city or any instrumentality, department, authority, or agency thereof,
which is prohibited by applicable investment laws from paying a sales load
or commission in connection with the purchase of any registered investment
management company;
(5) in whole or in part, in connection with systematic withdrawals;
(6) in connection with participation in the Merrill Lynch Small Market 401(k)
Program.
If, with respect to a redemption of any Class A, Class B, Class C or Class D
shares sold by a dealer, the CDSC is waived because the redemption qualifies for
a waiver as set forth above, the dealer shall remit to Seligman Advisors
promptly upon notice, an amount equal to the payment or a portion of the payment
made by Seligman Advisors at the time of sale of such shares.
Payment in Securities. In addition to cash, the Fund may accept securities in
payment for Fund shares sold at the applicable public offering price (net asset
value and, if applicable, any sales charge), although the Fund does not
presently intend to accept securities in payment for Fund shares. Generally, the
Fund will only consider accepting securities (l) to increase its holdings in a
portfolio security, or (2) if Seligman determines that the offered securities
are a suitable investment for the Fund and in a sufficient amount for efficient
management. Although no minimum has been established, it is expected that the
Fund would not accept securities with a value of less than $100,000 per issue in
payment for shares. The Fund may reject in whole or in part offers to pay for
Fund shares with securities, may require partial payment in cash for applicable
sales charges, and may discontinue accepting securities as payment for Fund
shares at any time without notice. The Fund will not accept restricted
securities in payment for shares. The Fund will value accepted securities in the
manner provided for valuing portfolio securities of the Fund.
Fund Reorganizations
Class A shares and Class C shares may be issued without an initial sales charge
in connection with the acquisition of cash and securities owned by other
investment companies. Any CDSC will be waived in
24
<PAGE>
connection with the redemption of shares of the Fund if the Fund is combined
with another Seligman mutual fund, or in connection with a similar
reorganization transaction.
Offering Price
When you buy or sell Fund shares, you do so at the Class's net asset value (NAV)
next calculated after Seligman Advisors accepts your request. Any applicable
sales charge will be added to the purchase price for Class A shares.
NAV per share of each class of the Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time), on
each day that the NYSE is open for business. The NYSE is currently closed on New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. The Fund
will also determine NAV for each class on each day in which there is a
sufficient degree of trading in the Fund's portfolio securities that the NAV of
Fund shares might be materially affected. NAV per share for a class is computed
by dividing such class's share of the value of the net assets of the Fund (i.e.,
the value of its assets less liabilities) by the total number of outstanding
shares of such class. All expenses of the Fund, including the management fee,
are accrued daily and taken into account for the purpose of determining NAV. The
NAV of Class B, Class C and Class D shares will generally be lower than the NAV
of Class A shares as a result of the higher 12b-1 fees with respect to such
shares.
Portfolio securities are valued at the last sales price on the securities
exchange or securities market on which such securities primarily are traded.
Securities not listed on an exchange or securities market, or securities in
which there were no transactions, are valued at the average of the most recent
bid and asked price, except in the case of open short positions where the asked
price is available. Securities traded on a foreign exchange or over-the-counter
market are valued at the last sales price on the primary exchange or market on
which they are traded. United Kingdom securities and securities for which there
are no recent sales transactions are valued based on quotations provided by
primary market makers in such securities. Any securities or other assets for
which recent market quotations are not readily available are valued at fair
value as determined in accordance with procedures approved by the Board of
Directors. Short-term obligations with less than 60 days remaining to maturity
are generally valued at amortized cost. Short-term obligations with more than 60
days remaining to maturity will be valued at current market value until the
sixtieth day prior to maturity, and will then be valued on an amortized cost
basis based on the value on such date unless the Board determines that this
amortized cost value does not represent fair market value. Expenses and fees,
including the investment management fee, are accrued daily and taken into
account for the purpose of determining the net asset value of Fund shares.
Generally, trading in foreign securities, as well as US Government securities,
money market instruments and repurchase agreements, is substantially completed
each day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the shares of the Fund are
determined as of such times. Foreign currency exchange rates are also generally
determined prior to the close of the NYSE.
For purposes of determining the net asset value per share of the Fund, all
assets and liabilities initially expressed in foreign currencies will be
converted into US dollars at the mean between the bid and offer prices of such
currencies against US dollars quoted by a major bank that is a regular
participant in the foreign exchange market or on the basis of a pricing service
that takes into account the quotes provided by a number of such major banks.
Specimen Price Make-Up
Under the current distribution arrangements between the Fund and Seligman
Advisors, Class A shares and Class C shares are sold with a maximum initial
sales charge of 4.75% and 1.00%(1), respectively, and Class B and Class D shares
are sold at NAV(2). Using each Class's NAV at December 31, 1998, (except Class C
shares, which commences operations effective June 1, 1999), the maximum offering
price of the Fund's shares is as follows:
25
<PAGE>
Class A
Net asset value per share...................................... $14.35
------
Maximum sales charge (4.75% of offering price)................. .72
------
Offering price to public....................................... $15.07
======
Class B
Net asset value and offering price per share(2) ............... $14.30
======
Class D
Net asset value and offering price per share(2) ............... $14.30
======
- --------------
(1) In addition to the front-end sales charge of 1.00%, Class C shares are
subject to a 1% CDSC if you redeem your shares within eighteen months of
purchase.
(2) Class B shares are subject to a CDSC declining from 5% in the first year
after purchase to 0% after six years. Class D shares are also subject to a
1% CDSC if you redeem your shares within one year of purchase.
Redemption in Kind
The procedures for selling Fund shares under ordinary circumstances are set
forth in the Prospectus. In unusual circumstances, payment may be postponed, or
the right of redemption postponed for more than seven days, if the orderly
liquidation of portfolio securities is prevented by the closing of, or
restricted trading on, the NYSE during periods of emergency, or such other
periods as ordered by the Securities and Exchange Commission. Under these
circumstances, redemption proceeds may be made in securities. If payment is made
in securities, a shareholder may incur brokerage expenses in converting these
securities to cash.
Taxation of the Fund
The Fund is qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code. For each
year so qualified, the Fund will not be subject to federal income taxes on its
net investment income and capital gains, if any, realized during any taxable
year, which it distributes to its shareholders, provided that at least 90% of
its net investment income and net short-term capital gains are distributed to
shareholders each year.
Dividends from net investment income and distributions from net short-term
capital gains are taxable as ordinary income to shareholders, whether received
in cash or reinvested in additional shares. To the extent designated as derived
from the Fund's dividend income that would be eligible for the dividends
received deduction if the Fund were not a regulated investment company, they are
eligible, subject to certain restrictions, for the 70% dividends received
deduction for corporations.
Distributions of net capital gains (i.e., the excess of net long-term capital
gains over any net short-term losses) are taxable as long-term capital gain,
whether received in cash or invested in additional shares, regardless of how
long the shares have been held by a shareholder. Such distributions are not
eligible for the dividends received deduction allowed to corporate shareholders.
Shareholders receiving distributions in the form of additional shares issued by
the Fund will be treated for federal income tax purposes as having received a
distribution in an amount equal to the fair market value on the date of
distribution of the shares received. Individual shareholders generally will be
subject to federal tax on distributions of net capital gains at a maximum rate
of 20% if designated as derived from the Fund's capital gains from property held
for more than one year.
Any gain or loss realized upon a sale or redemption of shares in the Fund by a
shareholder who is not a dealer in securities will generally be treated as a
long-term capital gain or loss if the shares have been held for more than one
year and otherwise as a short-term capital gain or loss. Individual shareholders
will be subject to federal income tax on net capital gains at a maximum rate of
20% in respect of shares held for more than one year. Net capital gain of a
corporate shareholder is taxed at the same rate as
26
<PAGE>
ordinary income. However, if shares on which a long-term capital gain
distribution has been received are subsequently sold or redeemed and such shares
have been held for six months or less, any loss realized will be treated as a
long-term capital loss to the extent that it offsets the long-term capital gain
distribution. In addition, no loss will be allowed on the sale or other
disposition of shares of the Fund if, within a period beginning 30 days before
the date of such sale or disposition and ending 30 days after such date, the
holder acquires (including shares acquired through dividend reinvestment)
securities that are substantially identical to the shares of the Fund.
In determining gain or loss on shares of the Fund that are sold or exchanged
within 90 days after acquisition, a shareholder generally will not be permitted
to include in the tax basis attributable to such shares the sales charge
incurred in acquiring such shares to the extent of any subsequent reduction of
the sales charge by reason of the Exchange or Reinstatement Privilege offered by
the Fund. Any sales charge not taken into account in determining the tax basis
of shares sold or exchanged within 90 days after acquisition will be added to
the shareholder's tax basis in the shares acquired pursuant to the Exchange or
Reinstatement Privilege.
The Fund will generally be subject to an excise tax of 4% on the amount of any
income or capital gains, above certain permitted levels, distributed to
shareholders on the basis such that such income or gain is not taxable to
shareholders in the calendar year in which it was earned by the Fund.
Furthermore, dividends declared in October, November or December, payable to
shareholders of record on a specified date in such a month and paid in the
following January will be treated as having been paid by the Fund and received
by each shareholder in December. Under this rule, therefore, shareholders may be
taxed in one year on dividends or distributions actually received in January of
the following year.
Shareholders are urged to consult their tax advisors concerning the effect of
federal income taxes in their individual circumstances.
Unless a shareholder includes a certified taxpayer identification number (social
security number for individuals) on the account application and certifies that
the shareholder is not subject to backup withholding, the fund is required to
withhold and remit to the US Treasury a portion of distributions and other
reportable payments to the shareholder. The rate of backup withholding is 31%.
Shareholders should be aware that, under regulations promulgated by the Internal
Revenue Service, the Fund may be fined $50 annually for each account for which a
certified taxpayer identification number is not provided. In the event that such
a fine is imposed, the Fund may charge a service fee of up to $50 that may be
deducted from the shareholder's account and offset against any undistributed
dividends and capital gain distributions. The Fund also reserves the right to
close any account which does not have a certified taxpayer identification
number.
Underwriters
Distribution of Securities
The Fund and Seligman Advisors are parties to a Distributing Agreement dated
January 1, 1993 under which Seligman Advisors acts as the exclusive agent for
distribution of shares of the Fund. Seligman Advisors accepts orders for the
purchase of Fund shares, which are offered continuously. As general distributor
of the Fund's capital stock, Seligman Advisors allows reallowances to all
dealers on sales of Class A shares, as set forth above under "Dealer
Reallowances." Seligman Advisors retains the balance of sales charges and any
CDSCs paid by investors.
Total initial sales charges paid by shareholders of Class A shares of the Fund
for the years ended December 31, 1998, 1997 and 1996, amounted to $282,867,
$312,439 and $568,667, respectively, of which $32,669, $36,070 and $65,484,
respectively, was retained by Seligman Advisors. No Class C shares of the Fund
were issued or outstanding during such fiscal years.
27
<PAGE>
Compensation
Seligman Advisors, which is an affiliated person of Seligman, which is an
affiliated person of the Fund, received the following commissions and other
compensation from the Fund during its year ended December 31, 1998:
Net Underwriting Compensation on
Discounts and Redemptions and
Commissions Repurchases
(Class A Sales (CDSC on Class A and Brokerage Other
Charge Retained) Class D Retained) Commissions Compensation (1)
---------------- ---------- ----------- ----------------
$32,669 $67,370 $0 $13,034
(1) Seligman Advisors has sold its rights to collect the distribution fees paid
by the Fund in respect of Class B shares and any CDSC imposed on
redemptions of Class B shares to FEP Capital, L.P., in connection with an
arrangement with FEP Capital, L.P. as discussed above under "12b-1 Plan."
In connection with this arrangement, Seligman Advisors receives payments
from FEP Capital, L.P. based on the value of Class B shares sold. Such
payments received for the year ended December 31, 1998 are reflected in the
table.
Other Payments
Seligman Advisors shall pay broker/dealers, from its own resources, a fee on
purchases of Class A shares of $1,000,000 or more (NAV sales), calculated as
follows: 1.00% of NAV sales up to but not including $2 million; .80% of NAV
sales from $2 million up to but not including $3 million; .50% of NAV sales from
$3 million up to but not including $5 million; and .25% of NAV sales from $5
million and above. The calculation of the fee will be based on assets held by a
"single person," including an individual, members of a family unit comprising
husband, wife and minor children purchasing securities for their own account, or
a trustee or other fiduciary purchasing for a single fiduciary account or single
trust. Purchases made by a trustee or other fiduciary for a fiduciary account
may not be aggregated purchases made on behalf of any other fiduciary or
individual account.
Seligman Advisors shall also pay broker/dealers, from its own resources, a fee
on assets of certain investments in Class A shares of the Seligman mutual funds
participating in an "eligible employee benefit plan" that are attributable to
the particular broker/dealer. The shares eligible for the fee are those on which
an initial sales charge was not paid because either the participating eligible
employee benefit plan has at least (1) $500,000 invested in the Seligman mutual
funds or (2) 50 eligible employees to whom such plan is made available. Class A
shares representing only an initial purchase of Seligman Cash Management Fund
are not eligible for the fee. Such shares will become eligible for the fee once
they are exchanged for shares of another Seligman mutual fund. The payment is
based on cumulative sales for each Plan during a single calendar year, or
portion thereof. The payment schedule, for each calendar year, is as follows:
1.00% of sales up to but not including $2 million; .80% of sales from $2 million
up to but not including $3 million; .50% of sales from $3 million up to but not
including $5 million; and .25% of sales from $5 million and above.
Seligman Advisors may from time to time assist dealers by, among other things,
providing sales literature to, and holding informational programs for the
benefit of, dealers' registered representatives. Seligman Advisors may from time
to time pay a bonus or other incentive to dealers that sell shares of the
Seligman mutual funds. Such bonus or other incentive may take the form of
payment for travel expenses, including lodging, incurred in connection with
trips taken by qualifying registered representatives and members of their
families to places within or outside the United States. The cost to Seligman
Advisors of such promotional activities and payments shall be consistent with
the rules of the National Association of Securities Dealers, Inc., as then in
effect.
28
<PAGE>
Calculation of Performance Data
The average annual total returns for the Fund's Class A shares for the one-,
five-, and ten-year periods through December 31, 1998, were 2.16%, 7.54% and
10.41%, respectively. These returns were computed by subtracting the maximum
sales charge of 4.75% of public offering price and assuming that all of the
dividends and capital gain distributions paid by the Fund over the relevant time
period were reinvested. It was then assumed that at the end of each period, the
entire amount was redeemed. The average annual total return was then calculated
by calculating the annual rate required for the initial payment to grow to the
amount which would have been received upon such redemption (i.e., the average
annual compound rate of return). Table A below illustrates the total return
(income and capital) on Class A shares of the Fund, assuming all dividend and
capital gain distributions are reinvested in additional shares. It shows that a
$1,000 investment in Class A shares, assuming payment of the initial 4.75% sales
charge, made on December 31, 1988, had a value of $2,693 on December 31, 1998,
resulting in an aggregate total return of 169.29%.
The average annual total returns for the Fund's Class B shares for the one-year
period ended December 31, 1998 and for the period from April 22, 1996
(inception) through December 31, 1998, were 1.45% and 9.12%, respectively. These
returns were computed assuming that all dividends and capital gain distributions
paid by the Fund's Class B shares, if any, were reinvested over the relevant
time period. It was then assumed that at the end of each period, the entire
amount was redeemed, subtracting the applicable CDSC. Table B illustrates the
total return (income and capital) on Class B shares of the Fund, assuming all
dividends and capital gain distributions are reinvested in additional shares. It
shows that a $1,000 investment in Class B shares on April 22, 1996 (commencement
of operations of Class B shares) had a value of $1,265 on December 31, 1998,
resulting in an aggregate total return of 26.51%.
The average annual total returns for the Fund's Class D shares for the one- and
five-year periods ended December 31, 1998 and for the period from May 3, 1993
(inception) through December 31, 1998, were 5.39%, 7.74% and 8.26%,
respectively. These returns were computed assuming that all of the dividends and
capital gain distributions paid by the Fund's Class D shares, if any, were
reinvested over the relevant time period. It was then assumed that at the end of
each period, the entire amount was redeemed, subtracting for the one year period
the 1% CDSC, if applicable. Table C illustrates the total return (income and
capital) on Class D shares of the Fund, assuming all dividends and capital gain
distributions are reinvested in additional shares. It shows that a $1,000
investment in Class D shares made on May 3, 1993 (commencement of operations of
Class D shares) had a value of $1,568 on December 31, 1998, resulting in an
aggregate total return of 56.77%.
Class C shares is a new class, effective June 1, 1999, so not performance data
is presented.
The results shown below should not be considered a representation of the
dividend income or gain or loss in capital value which may be realized from an
investment made in a class of shares of the Fund today.
29
<PAGE>
TABLE A - CLASS A
Value of Value of Total Value
Year Initial Capital Gain Value of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
- -------- ------------- ------------- --------- ------------- ------------
12/31/89 $ 984 $ 29 $83 $1,096
12/31/90 821 24 160 1,005
12/31/91 985 29 295 1,309
12/31/92 1,083 32 423 1,538
12/31/93 1,153 93 537 1,783
12/31/94 1,033 83 571 1,687
12/31/95 1,157 131 746 2,034
12/31/96 1,184 147 870 2,201
12/31/97 1,172 367 972 2,511
12/31/98 1,135 506 1,052 2,693 169.29%
TABLE B - CLASS B
Value of Value of Total Value
Period Initial Capital Gain Value of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
- -------- ------------- ------------- --------- ------------- ------------
12/31/96 $1,036 $ 6 $ 34 $1,076
12/31/97 1,025 114 79 1,218
12/31/98 961 184 120 1,265 26.51%
TABLE C - CLASS D
Value of Value of Total Value
Period Initial Capital Gain Value of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
- -------- ------------- ------------- --------- ------------- ------------
12/31/93 $1,009 $ 36 $ 35 $1,080
12/31/94 902 32 79 1,013
12/31/95 1,012 59 141 1,212
12/31/96 1,037 68 198 1,303
12/31/97 1,025 198 251 1,474
12/31/98 991 280 297 1,568 56.77%
- ----------
(1) For the ten-year period ended December 31, 1998 for Class A shares, from
commencement of operations of Class B shares on April 22, 1996 and from
commencement of operations of Class D shares on May 3, 1993.
(2) The "Value of Initial Investment" as of the date indicated (1) reflects the
effect of the maximum initial sales charge or CDSC, if applicable, (2)
assumes that all dividends and capital gain distributions were taken in
cash, and (3) reflects changes in the net asset value of the shares
purchased with the hypothetical initial investment. "Total Value of
Investment" (1) reflects the effect of the CDSC, if applicable, and (2)
assumes investment of all dividends and capital gain distributions.
(3) Total return for each Class of shares of the Fund is calculated by assuming
a hypothetical initial investment of $1,000 at the beginning of the period
specified; subtracting the maximum sales charge for Class A shares;
determining total value of all dividends and capital gain distributions
that would have been paid during the period on such shares assuming that
each dividend or capital gain distribution was invested in additional
shares at net asset value; calculating the total value of the investment at
the end of the period; subtracting the CDSC on Class B and Class D shares,
if applicable; and finally, by dividing the difference between the amount
of the hypothetical initial investment at the beginning of the period and
its total value at the end of the period by the amount of the hypothetical
initial investment.
The total returns and average annual total returns of Class A shares quoted from
time to time for periods through December 31, 1992, do not reflect the deduction
of 12b-1 fees because the 12b-1 Plan was implemented on January 1, 1993. The
total returns and average annual total returns of Class A shares quoted from
time to time for periods through April 10, 1991, do not reflect the increased
management fee approved by shareholders on April 10, 1991. The total returns and
average annual returns of the Class A and Class D shares quoted from time to
time for periods through December 31, 1995, do not
30
<PAGE>
reflect the increased management fee approved by shareholders on December 12,
1995, and effective on January 1, 1996. These fees, if reflected, would reduce
the performance quoted.
From time to time, reference may be made in advertising or promotional material
to performance information, including mutual fund rankings, prepared by Lipper
Analytical Services, Inc., an independent reporting service which monitors the
performance of mutual funds. In calculating the total return of the Fund's Class
A, Class B, Class C and Class D shares, the Lipper analysis assumes investment
of all dividends and distributions paid but does not take into account
applicable sales charges. The Fund may also refer in advertisements in other
promotional material to articles, comments, listings and columns in the
financial press pertaining to the Fund's performance. Examples of such financial
and other press publications include BARRON'S, BUSINESS WEEK, CDA/WIESENBERGER
MUTUAL FUNDS INVESTMENT REPORT, CHRISTIAN SCIENCE MONITOR, FINANCIAL PLANNING,
FINANCIAL TIMES, FINANCIAL WORLD, FORBES, FORTUNE, INDIVIDUAL INVESTOR,
INVESTMENT ADVISOR, INVESTORS BUSINESS DAILY, KIPLINGER'S, LOS ANGELES TIMES,
MONEY MAGAZINE, MORNINGSTAR, INC., PENSION AND INVESTMENTS, SMART MONEY, THE NEW
YORK TIMES, THE WALL STREET JOURNAL, USA TODAY, U.S. NEWS AND WORLD REPORT,
WORTH MAGAZINE, WASHINGTON POST AND YOUR MONEY.
The Fund's advertising or promotional material may make reference to the Fund's
"Beta," "Standard Deviation," or "Alpha." Beta measures the volatility of the
Fund, as compared to that of the overall market. Standard deviation measures how
widely the Fund's performance has varied from its average performance, and is an
indicator of the Fund's potential for volatility. Alpha measures the difference
between the returns of the Fund and the returns of the market, adjusted for
volatility.
Financial Statements
The Annual Report to shareholders for the year ended December 31, 1998 contains
a schedule of the investments of the Fund as of December 31, 1998, as well as
certain other financial information as of that date. The financial statements
and notes included in the Annual Report, and the Independent Auditors' Report
thereon, are incorporated herein by reference. The Annual Report will be
furnished without charge to investors who request copies of this SAI.
General Information
Custodian. Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City,
Missouri 64105 serves as custodian of the Fund. It also maintains, under the
general supervision of the Manager, the accounting records and determines the
net asset value for the Fund.
Auditors. Deloitte & Touche, LLP, independent auditors, have been selected as
auditors of the Fund. Their address is Two World Financial Center, New York, NY
10281.
31
<PAGE>
Appendix A
MOODY'S INVESTORS SERVICE, INC. (MOODY'S)
DEBT SECURITIES
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than Aaa bonds because margins of protection may not
be as large or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be characteristically lacking or may be unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact may have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in high
degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers (1, 2 and 3) in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; modifier 2 indicates a mid-range ranking; and modifier 3
indicates that the issuer ranks in the lower end of its generic rating category.
32
<PAGE>
COMMERCIAL PAPER
Moody's Commercial Paper Ratings are opinions of the ability of issuers to repay
punctually promissory senior debt obligations not having an original maturity in
excess of one year. Issuers rated "Prime-1" or "P-1" indicates the highest
quality repayment ability of the rated issue.
The designation "Prime-2" or "P-2" indicates that the issuer has a strong
ability for repayment of senior short-term promissory obligations. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.
The designation "Prime-3" or "P-3" indicates that the issuer has an acceptable
capacity for repayment of short-term promissory obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high Financial leverage.
Adequate alternate liquidity is maintained.
Issues rated "Not Prime" do not fall within any of the Prime rating categories.
STANDARD & POOR'S RATING SERVICE (S&P)
DEBT SECURITIES
AAA: Debt issues rated AAA are highest grade obligations. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt issues rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A: Debt issues rated A are regarded as upper medium grade. They have a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB: Debt issues rated BBB are regarded as having an adequate capacity to pay
interest and re-pay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and re-pay principal for
bonds in this category than for bonds in higher rated categories.
BB, B, CCC, CC: Debt issues rated BB, B, CCC and CC are regarded on balance, as
predominantly speculative with respect to capacity to pay interest and re-pay
principal in accordance with the terms of the bond. BB indicates the lowest
degree of speculation and CC the highest degree of speculation. While such bonds
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposure to adverse conditions.
C: The rating C is reserved for income bonds on which no interest is being paid.
D: Debt issues rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of bond as a matter of policy.
33
<PAGE>
COMMERCIAL PAPER
S&P Commercial Paper ratings are current assessments of the likelihood of timely
payment of debts having an original maturity of no more than 365 days.
A-1: The A-1 designation indicates that the degree of safety regarding timely
payment is very strong.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-3: Issues carrying this designation have adequate capacity for timely payment.
They are, however more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B: Issues rated "B" are regarded as having only a speculative capacity for
timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful
capacity of payment.
D: Debt rated "D" is in payment default.
The ratings assigned by S&P may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within its major rating categories.
34
<PAGE>
Appendix B
HISTORY OF J. & W. SELIGMAN & CO. INCORPORATED
Seligman's beginnings date back to 1837, when Joseph Seligman, the oldest of
eight brothers, arrived in the United States from Germany. He earned his living
as a pack peddler in Pennsylvania, and began sending for his brothers. The
Seligmans became successful merchants, establishing businesses in the South and
East.
Backed by nearly thirty years of business success - culminating in the sale of
government securities to help finance the Civil War Joseph Seligman, with his
brothers, established the international banking and investment firm of J. & W.
Seligman & Co. In the years that followed, the Seligman Complex played a major
role in the geographical expansion and industrial development of the United
States.
The Seligman Complex:
...Prior to 1900
o Helps finance America's fledgling railroads through underwritings.
o Is admitted to the New York Stock Exchange in 1869. Seligman remained a
member of the NYSE until 1993, when the evolution of its business made it
unnecessary.
o Becomes a prominent underwriter of corporate securities, including New York
Mutual Gas Light Company, later part of Consolidated Edison.
o Provides financial assistance to Mary Todd Lincoln and urges the Senate to
award her a pension.
o Is appointed U.S. Navy fiscal agent by President Grant.
o Becomes a leader in raising capital for America's industrial and urban
development.
...1900-1910
o Helps Congress finance the building of the Panama Canal.
...1910s
o Participates in raising billions for Great Britain, France and Italy,
helping to finance World War I.
...1920s
o Participates in hundreds of successful underwritings including those for
some of the country's largest companies: Briggs Manufacturing, Dodge
Brothers, General Motors, Minneapolis-Honeywell Regulatory Company, Maytag
Company, United Artists Theater Circuit and Victor Talking Machine Company.
o Forms Tri-Continental Corporation in 1929, today the nation's largest,
diversified closed-end equity investment company, with over $2 billion in
assets, and one of its oldest.
...1930s
o Assumes management of Broad Street Investing Co. Inc., its first mutual
fund, today known as Seligman Common Stock Fund, Inc.
o Establishes Investment Advisory Service.
35
<PAGE>
...1940s
o Helps shape the Investment Company Act of 1940.
o Leads in the purchase and subsequent sale to the public of Newport News
Shipbuilding and Dry Dock Company, a prototype transaction for the
investment banking industry.
o Assumes management of National Investors Corporation, today Seligman Growth
Fund, Inc.
o Establishes Whitehall Fund, Inc., today Seligman Income Fund, Inc.
...1950-1989
o Develops new open-end investment companies. Today, manages more than 50
mutual fund portfolios.
o Helps pioneer state-specific municipal bond funds, today managing a
national and 18 state-specific municipal funds.
o Establishes J. & W. Seligman Trust Company and J. & W. Seligman Valuations
Corporation.
o Establishes Seligman Portfolios, Inc., an investment vehicle offered
through variable annuity products.
...1990s
o Introduces Seligman Select Municipal Fund, Inc. and Seligman Quality
Municipal Fund, Inc. two closed-end funds that invest in high quality
municipal bonds.
o In 1991 establishes a joint venture with Henderson plc, of London, known as
Seligman Henderson Co., to offer global investment products.
o Introduces to the public Seligman Frontier Fund, Inc., a small
capitalization mutual fund.
o Launches Seligman Henderson Global Fund Series, Inc., which today offers
five separate series: Seligman Henderson International Fund, Seligman
Henderson Global Smaller Companies Fund, Seligman Henderson Global
Technology Fund, Seligman Henderson Global Growth Opportunities Fund and
Seligman Henderson Emerging Markets Growth Fund.
o Launches Seligman Value Fund Series, Inc., which currently offers two
separate series: Seligman Large-Cap Value Fund and Seligman Small-Cap Value
Fund.
SAIIB699
36
<PAGE>
S E L I G M A N
- ------------------
INCOME
FUND, INC.
ANNUAL REPORT
DECEMBER 31, 1998
-------------------------
SEEKING HIGH
CURRENT INCOME
AND IMPROVEMENT OF INCOME AND
CAPITAL VALUE OVER
THE LONGER TERM
[GRAPHIC OMITTED]
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.
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
[GRAPHIC changed dramatically in the 134 years since Seligman first opened
OMITTED] its doors, the firm has continued to offer its clients
high-quality investment solutions through changing times.
In the late 19th century, as the country grew, Seligman helped
finance the westward expansion of the railroads, the construction
of the Panama Canal, and the launching of urban transit systems.
In the first part of the 20th century, as America became an
industrial power, the firm helped fund the growing capital needs
of the nascent automobile and steel industries.
With the formation of Tri-Continental Corporation in 1929 --
today, the nation's largest diversified publicly-traded
closed-end investment company -- Seligman began shifting its emphasis from
investment banking to investment management. Despite the stock market crash and
ensuing depression, Seligman was convinced of the importance that investment
companies could have in building wealth for individual investors and began
managing its first mutual fund in 1930.
In the decades that followed, Seligman has continued to offer forward-looking
investment solutions, including funds that focus on technology stocks, municipal
bonds, and international securities.
...Values Endure
Seligman is proud of its distinctive past and of the traditional values that
continue to shape the firm's business decisions and investment judgment. While
much has changed over the years, the firm's commitment to providing prudent
investment management that seeks to build wealth for clients over time is an
enduring value that will guide Seligman into the new millennium.
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 ....................... 19
Federal Tax Status of 1998 Dividend and
Gain Distributions for Taxable Accounts ............ 20
Board of Directors ................................... 21
Executive Officers and For More Information .......... 22
Glossary of Financial Terms .......................... 23
<PAGE>
TO THE SHAREHOLDERS
For 1998, Seligman Income Fund posted a total return of 7.26% based on the net
asset value of Class A shares. This return compares to the 7.85% total return of
the Fund's peers, as measured by the Lipper Income Funds Average, and the 8.69%
return of the Lehman Brothers Aggregate Bond Index, which measures the
performance of the bond markets. A discussion with your Portfolio Managers
begins on page 2.
The past year was one of continued growth for the US economy, with real domestic
growth of 3.9%, marking the eighth year of economic expansion. A widely watched
stock market measure, the S&P 500, rose 28.58% in 1998, the first time in
history that the S&P 500 registered more than 20% gains four years in a row.
But, despite the strong year-end numbers, 1998 gave investors quite a ride. In
fact, the past year was the most volatile for both stock and bond markets since
1987.
A number of factors led to the markets' volatility in 1998--some domestic, many
international. The international economic background in 1998 was one of steadily
deteriorating conditions as the financial crisis, originally limited to a few
Asian countries, spread throughout other regions. Worldwide concern grew in
August of 1998 when Russia defaulted on its debt and devalued its currency. Fear
then spread to Latin America as Brazil struggled in vain to protect its
currency, the real.
The uncertain international economic environment led investors to seek
high-quality investments, particularly US Treasury securities. This "flight to
quality," combined with the first Federal budget surplus in three decades, drove
US Treasury bond yields to 30-year lows. (Bonds prices, which move in the
opposite direction of their yields, headed higher.) The 30-year US Treasury bond
yield closed the year at 5.09%, down from 5.92% on December 31, 1997. The yield
had fallen as low as 4.70% before ending the year above the 5% level. Corporate
bonds did not fare as well, by comparison to US Treasury bonds.
Bond prices gained additional support when the Federal Reserve Board cut the
federal-funds rate three times during the second half of the year. These actions
confirmed the Fed's resolve to protect the US economy from the global financial
crisis and markets responded favorably throughout November and December.
The economic outlook for 1999 remains positive for US stock and bond markets,
with subdued inflation, low interest rates, improving prospects in Asia, and a
Federal Reserve leading the fight against global recession. However, we believe
that the coming year will be a challenging one, confronted with economic
uncertainties and continued high volatility.
Seligman continues to work to ensure that all of its operations are prepared for
the challenges posed by the Year 2000 (Y2K) computer problem. We are confident
that there will be no disruption in the investment and shareholder services
provided by your Fund as a result of Y2K. In addition, your portfolio management
team considers the potential ramifications of Y2K when making decisions on which
securities should be held by the Fund.
Thank you for your continued support of Seligman Income Fund in 1998. We look
forward to serving your investment needs in 1999.
By order of the Board of Directors,
/s/ William C. Morris
- --------------------------
William C. Morris
Chairman
/s/ Brian T. Zino
-------------------------
Brian T. Zino
President
January 29, 1999
1
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGERS,
CHARLES C. SMITH, JR. AND RODNEY COLLINS
Q. HOW DID SELIGMAN INCOME FUND PERFORM IN THE LAST 12 MONTHS?
A. For the 12 months ended December 31, 1998, Seligman Income Fund posted a
total return of 7.26% based on the net asset value of Class A shares.
During the same time, the Lipper Income Funds Average posted a total return
of 7.85%, and the Lehman Brothers Aggregate Bond Index, which measures the
results of the bond markets, posted a total return of 8.69%. The Fund
continued to maintain a favorable dividend yield compared to the Standard &
Poor's 500 Composite Stock Price Index (S&P 500) and its fund peer group.
Q. WHICH ECONOMIC AND MARKET FACTORS AFFECTED THE FUND'S INVESTMENT RESULTS IN
1998?
A. In 1998, the US economy expanded for the eighth year in a row. Low
inflation, continued corporate earnings growth, and a benign interest rate
environment all helped propel US equity and fixed-income markets higher.
The year was one of tremendous investor demand for US stocks and bonds.
Much of this demand was caused by the continuing "flight to quality" as
investors tried to insulate themselves from troubles in Asia and Latin
America by investing in the US. On the equity side, this trend, while
positive for the biggest stocks in the US, caused a narrowing of the market
that left many stocks with much lower returns. In fact, 50 stocks in the
S&P 500 accounted for about 94% of the performance of the entire Index. On
the fixed-income side, this trend proved positive for US Treasuries, as
investors around the world rushed to buy securities backed by the US
government. US corporate bonds, on the other hand, did not fare as well in
comparison.
Seligman Income Fund benefited from the strong demand for US large-cap
stocks as well as from declining interest rates. But market performance in
1998 was far from a straight line that moved continually higher. In the
third quarter of the year, the equity market actually weakened
significantly. The bond markets also experienced considerable volatility
throughout the year as investors sought the safety and stability of US
government bonds during periods of equity market turmoil. Your Fund did
well during this period, primarily because of its more conservative nature.
Q. What is your investment strategy?
A. As we have reported previously, we have repositioned the Fund's equity
portfolio to increase earnings stability and reduce overall volatility.
While still diversified among industry groups and individual holdings, the
portfolio has been pared down to focus on companies with dividend yields
equal to or greater than the S&P
A TEAM APPROACH
Seligman Income Fund is managed by the Seligman Growth and Income Team,
headed by Charles C. Smith, Jr. Mr. Smith and Rodney 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.
[GRAHIC OMITTED]
GROWTH AND INCOME TEAM: (FROM LEFT) AMY FUJII, JOHN ROTH, MELANIE RAVENELL
(ADMINISTRATIVE ASSISTANT), (SEATED) CHARLES SMITH (PORTFOLIO MANAGER), RODNEY
COLLINS (CO-PORTFOLIO MANAGER)
2
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGERS,
CHARLES C. SMITH, JR. AND RODNEY COLLINS
500. Valuations of the companies we invest in must beat the lower end of
their industry group. Our investment approach led us to be underweight in
many of the excessively valued large-capitalization stocks that were hit
the hardest by last summer's market downturn.
Due to our concerns regarding large-capitalization equity valuations, we
ended 1998 underweighted in equities. If the stock market corrects in 1999,
we would use that opportunity to add to positions in high-quality companies
at more attractive valuations.
In 1998, we significantly reduced the Fund's international holdings. With
ongoing problems in the global economy, we felt that the US market offered
greater return potential. We continued to reduce the convertible securities
in Seligman Income Fund's portfolio, which helped increase the Fund's
returns without increasing overall risk. We also increased the Fund's
fixed-income holdings, as we felt that interest rates were at attractive
levels.
With the strong results in the equity markets in 1998, our underweighting
in stocks impacted our performance relative to our peer group, while our
fixed-income exposure was heavily weighted to corporate bonds, which
underperformed Treasuries. However, our investment strategy continues to
offer a significant yield advantage and less investment risk than is
offered by our average competitor.
Q. WHAT IS YOUR OUTLOOK?
A. We continue to believe that the US economy offers an attractive environment
for investing in financial markets. We do not anticipate a significant rise
in interest rates in 1999, as long as corporate profits and overall
economic growth continue to moderate.
Deflationary concerns outside the US should benefit the fixed-income
marketplace. At the same time, we remain cautious of the high valuations of
many of the largest stocks in the market. We fear that many of these
valuations have been driven by liquidity concerns, not fundamentals.
Therefore, we are focusing on identifying companies whose valuations more
fully reflect their future prospects, and where there is a catalyst for
earnings acceleration going forward.
We believe that difficulties in world markets are likely to continue to
have an impact on US stocks in 1999 and that volatility, which was an
ever-present market factor last year, will not subside quickly. In such an
environment, Seligman Income Fund will continue to adhere to its
disciplined investment strategy based on fundamental analysis.
3
<PAGE>
PERFORMANCE OVERVIEW
This chart compares a $10,000 hypothetical investment made in Seligman Income
Fund Class A shares, with and without the initial 4.75% maximum sales charge,
and assumes that all distributions within the period are invested in additional
shares, for the 10-year period ended December 31, 1998, to a $10,000 investment
made in the Lehman Brothers Aggregate Bond Index (Lehman Bond Index), the Lipper
Income Funds Average and the Standard & Poor's 500 Composite Stock Price Index
(S&P 500) for the same period. The performances of Seligman Income Fund Class B
and Class D shares are not shown in this chart but are included in the table on
page 5. It is important to keep in mind that the Lehman Bond Index, the Lipper
Income Funds Average, and the S&P 500 exclude the effect of fees and/or sales
charges.
[The following table represents a chart in the printed material]
W/O Load With load Lipper Lehman Bro S&P 500
12/31/88 10,000 9,525 10,000 10,000 10,000
3/31/89 10,342 9,851 10,428 10,114 10,709
6/30/89 11,038 10,514 11,111 10,920 11,655
9/30/89 11,253 10,719 11,633 11,043 12,903
12/31/89 11,511 10,964 11,823 11,454 13,169
3/31/90 11,418 10,876 11,558 11,363 12,772
6/30/90 11,484 10,939 11,901 11,779 13,576
9/30/90 10,248 9,761 11,071 11,880 11,710
12/31/90 10,555 10,054 11,702 12,481 12,760
3/31/91 11,714 11,158 12,777 12,830 14,614
6/30/91 12,076 11,503 12,878 13,038 14,580
9/30/91 13,137 12,513 13,817 13,779 15,360
12/31/91 13,734 13,082 14,640 14,477 16,647
3/31/92 14,440 13,754 14,640 14,292 16,226
6/30/92 15,003 14,291 15,059 14,870 16,534
9/30/92 15,689 14,944 15,587 15,509 17,055
12/31/92 16,143 15,377 15,987 15,551 17,913
3/31/93 17,193 16,377 16,952 16,193 18,696
6/30/93 17,625 16,788 17,326 16,622 18,787
9/30/93 18,244 17,378 17,944 17,056 19,272
12/31/93 18,722 17,834 18,051 17,066 19,719
3/31/94 17,973 17,120 17,377 16,576 18,972
6/30/94 17,684 16,845 17,308 16,406 19,051
9/30/94 18,040 17,184 17,751 16,506 19,983
12/31/94 17,706 16,865 17,425 16,568 19,979
3/31/95 18,658 17,772 18,493 17,404 21,925
6/30/95 20,021 19,071 19,694 18,463 24,019
9/30/95 20,831 19,842 20,697 18,825 25,928
12/31/95 21,353 20,340 21,596 19,627 27,489
3/31/96 21,456 20,438 22,062 19,280 28,965
6/30/96 21,765 20,732 22,468 19,390 30,266
9/30/96 22,069 21,021 22,894 19,748 31,201
12/31/96 23,108 22,012 23,958 20,341 33,803
3/31/97 23,277 22,172 23,993 20,227 34,709
6/30/97 24,649 23,479 25,833 20,969 40,770
9/30/97 25,791 24,567 27,337 21,666 43,823
12/31/97 26,357 25,106 27,801 22,302 45,082
3/31/98 27,833 26,512 29,311 22,650 51,371
6/30/98 27,949 26,623 29,427 23,180 53,066
9/30/98 27,381 26,081 28,168 24,161 47,786
12/31/98 28,271 26,929 29,983 24,243 57,964
The performances of Class B and D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
4
<PAGE>
PERFORMANCE OVERVIEW
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-------------------------------------------------------------------------------------
CLASS B CLASS D
SINCE SINCE
SIX ONE FIVE 10 INCEPTION INCEPTION
MONTHS* YEAR YEARS YEARS 4/22/96 5/3/93
---------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge (3.66)% 2.16% 7.54% 10.41% n/a n/a
Without Sales Charge 1.15 7.26 8.59 10.95 n/a n/a
CLASS B**
With CDSC+ (4.03) 1.45 n/a n/a 9.12% n/a
Without CDSC 0.67 6.28 n/a n/a 10.07 n/a
CLASS D**
With 1% CDSC (0.20) 5.39 n/a n/a n/a n/a
Without CDSC 0.74 6.36 7.74 n/a n/a 8.26%
LEHMAN BROS. AGGREGATE BOND INDEX*** 4.58 8.69 7.27 9.26 9.20++ 7.25+++
LIPPER INCOME FUNDS AVERAGE*** 1.89 7.85 10.68 11.61 11.98++ 10.62+++
S&P 500*** 9.22 28.58 24.06 19.21 29.00++ 22.63+++
NET ASSET VALUE
<CAPTION>
DECEMBER 31, 1998 JUNE 30, 1998 DECEMBER 31, 1997
---------------------- ---------------- ----------------------
<S> <C> <C> <C>
CLASS A $14.35 $15.23 $14.81
CLASS B 14.30 15.19 14.79
CLASS D 14.30 15.18 14.78
DIVIDEND AND CAPITAL GAIN INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1998
<CAPTION>
DIVIDENDS
PAID CAPITAL GAIN
------------- ---------------
<S> <C> <C> <C>
CLASS A $0.650 PAID $0.856o
CLASS B 0.540 UNDISTRIBUTED REALIZED --
CLASS D 0.540 UNREALIZED 1.024oo
</TABLE>
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 charge ("CDSC"), 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% CDSC, charged on redemptions made within one
year of the date of purchase.
*** The Lehman Bros. Aggregate Bond Index, the Lipper Income Funds Average, 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 Lehman Bros. Aggregate Bond Index and the S&P 500
exclude the effect of fees and sales charges. Investors cannot invest
directly in an index or an average.
+ The CDSC is 5% for periods of one year or less, and 3% since inception.
++ From April 30, 1996.
+++ From April 30, 1993.
o Includes the $0.132 of undistributed realized capital gains from 1997,
which were paid on June 24, 1998. ooRepresents the per share amount of net
unrealized appreciation of portfolio securities as of December 31, 1998.
5
<PAGE>
PORTFOLIO OVERVIEW
DIVERSIFICATION OF NET ASSETS
PERCENT OF TOTAL
DECEMBER 31,
--------------------
1998 1997
--------- ---------
Aerospace and Defense 0.7 0.6
Automotive and Related 1.2 1.9
Banking and Finance 14.5 19.4
Business Services 1.4 1.3
Capital Goods 0.2 --
Chemicals 1.8 3.2
Consumer Goods and Services 8.4 5.5
Diversified -- 1.2
Drugs and Health Care 4.4 4.1
Electric and Gas Utilities 4.4 5.7
Electronics -- 1.4
Energy 7.1 9.1
Environmental Services -- 1.0
Food 0.5 0.5
Funeral Services 1.3 1.4
Hotels/Motels -- 0.6
Insurance 4.0 4.4
Leisure 1.4 --
Machinery 1.0 2.1
Media 4.8 3.2
Metals -- 0.3
Office Equipment -- 0.6
Paper and Packaging 0.2 2.2
Retailing 5.0 4.5
Technology 7.5 1.8
Tobacco 2.9 0.8
Transportation 0.8 0.2
Utilities/Telecommunications9.3 4.3
Miscellaneous -- 0.2
--------- ---------
Total Corporate
Fixed-Income Securities
and Common Stocks 82.8 81.5
US Government and
Government Agency
Securities 13.1 17.9
SHORT-TERM HOLDINGS
AND OTHER ASSETS
LESS LIABILITIES 4.1 0.6
--------- ---------
TOTAL 100.0 100.0
===================
LARGEST INDUSTRIES+
DECEMBER 31, 1998
[The following table represents a chart in the printed material]
BANKING AND FINANCE ............. 14.5% $51,519,197
UTILITIES/TELECOMMUNICATIONS .... 9.3% 33,423,101
CONSUMER GOODS AND SERVICES ..... 8.4% 29,670,197
ENERGY .......................... 7.1% 25,117,995
RETAILING ....................... 5.0% 17,546,620
- --------------------------
+ Excludes US Government and Government Agency securities.
COMPOSITION OF NET ASSETS
PERCENT OF TOTAL
DECEMBER 31,
----------------------
1998 1997
--------- ---------
Corporate Bonds .................... 43.9 31.3
Convertible Preferred Stocks ....... 3.1 7.5
Convertible Bonds .................. -- 3.8
Asset-Backed Securities ............ -- 2.8
- --------------------------------------------------------------------------------
Total Corporate
Fixed-Income Securities .......... 47.0 45.4
- --------------------------------------------------------------------------------
Common Stocks ...................... 35.8 36.1
- --------------------------------------------------------------------------------
US Government and
Government Agency
Securities ....................... 13.1 17.9
Short-Term Holdings and
Other Assets Less Liabilities .... 4.1 0.6
- --------------------------------------------------------------------------------
TOTAL .............................. 100.0 100.0
- --------------------------------------------------------------------------------
6
<PAGE>
PORTFOLIO OVERVIEW
LARGEST PORTFOLIO CHANGES
DURING PAST SIX MONTHS
PRINCIPAL AMOUNT
-------------------------------
HOLDINGS
ADDITIONS INCREASE 12/31/98
- ------------- ------------ ------------
US GOVERNMENT AND
GOVERNMENT AGENCY
SECURITIES:
FHLMCGold
5 1/2%, 7/1/2013 $9,217,171 $9,217,171
Federal National
Mortgage Association:
5.90%, 6/19/2003 5,000,000 5,000,000
6.35%, 5/18/2005 5,000,000 5,000,000
5.795%, 1/1/2009 4,800,000 4,800,000
6%, 12/1/2028 5,750,025 5,750,025
Government National
Mortgage Association:
6 1/2%, 12/15/2028 5,000,000 5,000,000
6%, 12/20/2028 5,500,000 5,500,000
CORPORATE BONDS:
GMAC
6 1/2%, 12/5/2005 4,200,000 4,200,000
International Business
Machines
5.37%, 9/22/2003 4,500,000 4,500,000
Sprint Capital
6 1/8%, 11/15/2008 4,500,000 4,500,000
PRINCIPAL AMOUNT
OR SHARES
---------------------------------
HOLDINGS
REDUCTIONS DECREASE 12/31/98
- -------------- -------------------------
US GOVERNMENT AND
GOVERNMENT AGENCY
SECURITIES:
US Treasury Notes:
6 1/4%, 8/31/2002 $6,000,000 $4,000,000
6 5/8%, 5/15/2007 4,000,000 --
6 3/8%, 8/15/2027 5,000,000 --
Government National
Mortgage Association
6 1/2%, 8/15/2027 36,037,703 --
CORPORATE BONDS:
Chase Manhattan
6 3/8%, 4/1/2008 5,000,000 --
Mid America Energy
6 3/8%, 6/15/2006 3,000,000 --
COMMON STOCKS:
Avon Products 42,900 shs. --
Edison International 111,200 --
Texaco 54,000 --
ASSET-BACKED SECURITIES:
The Money Store
Home Equity Trust
6.47%, 12/15/2025 $5,000,000 --
Largest portfolio changes from the previous period to the current period are
based on cost of purchases and proceeds from sales of securities.
LARGEST PORTFOLIO HOLDINGS
DECEMBER 31, 1998
SECURITY VALUE
- ---------- ---------------
FHLMCGold 5 1/2%, 7/1/2013 $9,104,842
Tele-Communications
9.80%, 2/1/2012 6,687,635
Time Warner 9 1/8%, 1/15/2013 6,344,705
Salomon Smith Barney
Holdings 7 5/8% 6,325,000
GTE 6,305,406
Federal National Mortgage
Association 6%, 12/1/2028 $5,676,356
MCI WorldCom 7 3/4%, 4/1/2007 5,649,175
Viacom 7 3/4%, 6/1/2005 5,466,535
Anheuser-Busch 5,453,438
Government National Mortgage
Association 6%, 12/20/2028 5,451,875
7
<PAGE>
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
PRINCIPAL
AMOUNT VALUE
------------- ------------
US GOVERNMENT AND
GOVERNMENT AGENCY
SECURITIES 13.1%
US Treasury Notes
6 1/4%, 8/31/2002 $4,000,000 $ 4,205,000
Bay Transportation
7.30%, 6/1/2021 1,750,000 1,911,490
FHLMC Gold
5 1/2%, 7/1/2013+ 9,217,171 9,104,842
Federal National
Mortgage Association:
5.90%, 6/19/2003 5,000,000 5,066,980
6.35%, 5/18/2005 5,000,000 5,117,940
5.795%, 1/1/2009 4,800,000 4,824,000
6%, 12/1/2028+ 5,750,025 5,676,356
Government National
Mortgage Association,
Mortgage-backed
Passed-through Certificates:
6 1/2%, 12/15/2028+ 5,000,000 5,054,700
6%, 12/20/2028+ 5,500,000 5,451,875
---------------
TOTAL US GOVERNMENT
AND GOVERNMENT
AGENCY SECURITIES
(Cost $46,121,599) 46,413,183
---------------
CORPORATE BONDS 43.9%
BANKING AND FINANCE 8.6%
American General Finance
6.20%, 3/15/2003 4,000,000 4,074,704
AT&T Capital
6 1/4%, 5/15/2001 5,000,000 4,936,380
Capital One Bank
8 1/8%, 3/1/2000 5,000,000 5,088,555
Franchise Finance
7%, 11/30/2000 5,000,000 4,973,835
GMAC
6 1/2%, 12/5/2005 4,200,000 4,411,113
Heller Financial
5 7/8%, 11/1/2000 3,800,000 3,797,842
United Companies Financial
9.35%, 11/1/1999 2,000,000 1,769,572
United Companies Financial
8 3/8%, 7/1/2005 3,000,000 1,659,564
---------------
30,711,565
---------------
CHEMICALS 1.4%
Praxair
6 5/8%, 10/15/2007 5,000,000 5,042,180
---------------
CONSUMER GOODS
AND SERVICES 3.4%
Equifax
6.30%, 7/1/2005 1,500,000 1,546,877
Service Corp. International
6 1/2%, 3/15/2008 5,000,000 5,138,360
CONSUMER GOODS
AND SERVICES (continued)
Whitman
7 1/2%, 2/1/2003 5,000,000 5,324,260
---------------
12,009,497
---------------
DRUGS AND
HEALTH CARE 0.6%
Cardinal Health
6 1/4%, 7/15/2008 2,000,000 2,051,176
---------------
ELECTRIC AND
GAS UTILITIES 1.4%
Consumers Energy
6 3/8%, 2/1/2008 5,000,000 5,049,970
---------------
ENERGY 2.4%
Barrett Resources
7.55%, 2/1/2007 3,300,000 3,180,939
Petroleum Geo-Services
7 1/2%, 3/31/2007 5,000,000 5,327,305
---------------
8,508,244
---------------
FUNERAL SERVICES 1.3%
Loewen Group International
7 1/2%, 4/15/2001 5,000,000 4,475,000
---------------
LEISURE 1.4%
Royal Caribbean Cruises
6 3/4%, 3/15/2008 5,000,000 4,958,930
---------------
MEDIA 4.8%
News America Holdings
7.43%, 10/1/2026 5,000,000 5,379,080
Time Warner 9 1/8%, 1/15/2013 5,000,000 6,344,705
Viacom 7 3/4%, 6/1/2005 5,000,000 5,466,535
---------------
17,190,320
---------------
RETAILING 4.3%
Sears, Roebuck
6%, 3/20/2003 5,000,000 5,054,730
Staples
7 1/8%, 8/15/2007 5,000,000 5,159,805
Woolworth
7%, 6/1/2000 5,000,000 5,001,610
---------------
15,216,145
---------------
TECHNOLOGY 7.5%
Dell Computer
6.55%, 4/15/2008 5,000,000 5,202,775
First Data
5.80%, 12/15/2008 2,400,000 2,378,030
International
Business Machines
5.37%, 9/22/2003 4,500,000 4,552,015
Lexmark International
6 3/4%, 5/15/2008 5,000,000 5,080,360
8
<PAGE>
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
PRINCIPAL
AMOUNT
0R SHARES VALUE
------------- ------------
TECHNOLOGY (continued)
Raytheon
6.55%, 3/15/2010 $5,000,000 $ 5,251,595
Solectron
7 3/8%, 3/1/2006 4,000,000 4,219,496
---------------
26,684,271
---------------
TOBACCO 1.5%
Philip Morris
7 1/8%, 8/15/2002 5,000,000 5,246,620
---------------
UTILITIES/
TELECOMMUNICATIONS 5.3%
MCI WorldCom
6.40%, 8/15/2005 2,000,000 2,075,678
MCI WorldCom
7 3/4%, 4/1/2007 5,000,000 5,649,175
Sprint Capital
6 1/8%, 11/15/2008 4,500,000 4,600,044
Tele-Communications
9.80%, 2/1/2012 5,000,000 6,687,635
---------------
19,012,532
---------------
TOTAL CORPORATE BONDS
(Cost $154,375,309) 156,156,450
---------------
CONVERTIBLE PREFERRED
STOCKS 3.1%
BANKING AND FINANCE 1.8%
Salomon Smith Barney
Holdings 7 5/8% 137,500 shs. 6,325,000
---------------
INSURANCE 1.3%
St. Paul Capital 6% 75,000 4,837,500
---------------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(Cost $7,513,938) 11,162,500
---------------
COMMON STOCKS 35.8%
AEROSPACE AND
DEFENSE 0.7%
General Dynamics 40,000 2,345,000
---------------
AUTOMOTIVE AND
RELATED 1.2%
DaimlerChrysler 45,999 4,418,779
---------------
BANKING AND FINANCE 4.1%
Bank of New York 91,000 3,662,750
BankAmerica 21,387 1,285,893
Citigroup 43,500 2,153,250
Hartford Financial Services
Group 60,400 3,314,450
Morgan (J.P.) 7,500 787,969
Washington Mutual 85,848 3,278,320
---------------
14,482,632
---------------
BUSINESS SERVICES 1.4%
Electronic Data Systems 22,000 $ 1,105,500
Xerox 33,500 3,953,000
---------------
5,058,500
---------------
CAPITAL GOODS 0.2%
Crown Cork & Seal 27,500 847,344
---------------
CHEMICALS 0.4%
duPont (E.I.) de Nemours 26,400 1,400,850
---------------
CONSUMER GOODS
AND SERVICES 5.0%
Anheuser-Busch 83,100 5,453,438
General Mills 51,400 3,996,350
Russell 100,000 2,031,250
Sara Lee 177,000 4,989,187
Stanley Works 42,900 1,190,475
---------------
17,660,700
---------------
DRUGS AND
HEALTH CARE 3.8%
Abbott Laboratories 80,000 3,920,000
American Home Products 75,000 4,223,437
Baxter International 19,000 1,221,937
Bristol-Myers Squibb 30,200 4,041,137
---------------
13,406,511
---------------
ELECTRIC AND
GAS UTILITIES 3.0%
Sonat 115,000 3,112,187
Unicom 96,300 3,713,569
The Williams Companies 123,800 3,861,013
---------------
10,686,769
---------------
ENERGY 4.7%
BP Amoco (ADRs)
(United Kingdom) 17,500 1,568,438
Chevron 27,900 2,313,956
Exxon 49,000 3,583,125
Mobil 43,200 3,763,800
Royal Dutch Petroleum
(Netherlands) 47,700 2,283,638
Unocal 106,100 3,096,794
---------------
16,609,751
---------------
FOOD 0.5%
ConAgra 60,000 1,890,000
---------------
INSURANCE 2.7%
American General 55,900 4,360,200
Chubb 30,000 1,946,250
Lincoln National 38,800 3,174,325
---------------
9,480,775
---------------
9
<PAGE>
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
SHARES VALUE
------ -----
MACHINERY 1.0%
GATX 97,600 $ 3,696,600
---------------
PAPER AND PACKAGING 0.2%
Mead 28,800 844,200
----------------
RETAILING
0.7%
May Department Stores 38,600 2,330,475
----------------
TOBACCO 1.4%
Philip Morris 90,200 4,825,700
----------------
TRANSPORTATION 0.8%
Norfolk Southern 84,900 2,690,269
----------------
UTILITIES/
TELECOMMUNICATIONS 4.0%
DQE 45,000 1,977,188
GTE 93,500 6,305,406
Harris 25,000 915,625
SBC Communications 97,200 5,212,350
----------------
14,410,569
----------------
TOTAL COMMON STOCKS
(Cost $107,419,221) $ 127,085,424
----------------
SHORT-TERM HOLDINGS 3.3%
(Cost $11,900,000) 11,900,000
----------------
TOTAL INVESTMENTS 99.2%
(Cost $327,330,067) 352,717,557
OTHER ASSETS
LESS LIABILITIES 0.8% 2,701,302
-----------------
NET ASSETS 100.0% $355,418,859
=================
+ Investments in mortgage-backed securities are subject to principal paydowns.
As a result of prepayments from refinancing or satisfaction of the underlying
mortgage instruments, the average life may be less than the original
maturity. This in turn may impact the ultimate yield realized from these
instruments.
See Notes to Financial Statements.
10
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments, at value:
Bonds and stocks (cost $269,308,468) ...................................... $294,404,374
US Government and Government Agency securities
(cost $46,121,599) ...................................................... 46,413,183
Short-term holdings (cost $11,900,000) .................................... 11,900,000 $352,717,557
---------------
Cash ............................................................................................. 366,922
Receivable for interest and dividends ............................................................ 3,478,629
Receivable for Capital Stock sold ................................................................ 366,153
Investment in, and expenses prepaid to, shareholder service agent ................................ 69,397
Other ............................................................................................ 18,504
------------
TOTAL ASSETS ..................................................................................... 357,017,162
------------
LIABILITIES:
Payable for Capital Stock repurchased ............................................................ 911,973
Accrued expenses, taxes, and other ............................................................... 686,330
------------
TOTAL LIABILITIES ................................................................................ 1,598,303
------------
NET ASSETS ....................................................................................... $355,418,859
============
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($1 par value; 500,000,000 shares authorized; 24,791,885
shares outstanding):
Class A ........................................................................................ $ 17,845,034
Class B ........................................................................................ 1,475,432
Class D ........................................................................................ 5,471,419
Additional paid-in capital ....................................................................... 306,229,551
Undistributed net investment income .............................................................. 317,364
Distributions in excess of net realized gain ..................................................... (1,307,478)
Net unrealized appreciation of investments ....................................................... 25,387,537
------------
NET ASSETS ....................................................................................... $355,418,859
============
NET ASSET VALUE PER SHARE:
CLASS A ($256,059,779 / 17,845,034 shares) ....................................................... $14.35
======
CLASS B ($21,095,963 / 1,475,432 shares) ......................................................... $14.30
======
CLASS D ($78,263,117 / 5,471,419 shares) ......................................................... $14.30
======
</TABLE>
- -------------------
See Notes to Financial Statements.
11
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest ................................................................... $13,967,498
Dividends 5,269,476
........................................................................... -----------
TOTAL INVESTMENT INCOME (net of foreign tax withheld of $7,629) .................................. $19,236,974
EXPENSES:
Management fee ................................................. 2,159,063
Distribution and service fees .................................. 1,573,830
Shareholder account services ................................... 548,213
Shareholder reports and communications ......................... 93,493
Registration ................................................... 79,407
Auditing and legal fees ........................................ 77,050
Custody and related services ................................... 74,786
Directors' fees and expenses ................................... 13,131
Miscellaneous .................................................. 23,115
-----------
TOTAL EXPENSES ................................................................................... 4,642,088
-----------
NET INVESTMENT INCOME ............................................................................ 14,594,886
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments 20,162,078
Net realized loss from foreign currency transactions (1,061,463)
Net change in unrealized appreciation of investments (10,362,195)
Net change in unrealized depreciation on translation of
assets and liabilities denominated in foreign currencies 904,932
----------
NET GAIN ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS ........................................ 9,643,352
-----------
INCREASE IN NET ASSETS FROM OPERATIONS ........................................................... $24,238,238
===========
</TABLE>
- -----------------
See Notes to Financial Statements.
12
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 14,594,886 $ 16,391,245
Net realized gain on investments 20,162,078 28,464,970
Net realized loss from foreign currency transactions (1,061,463) (330,664)
Net change in unrealized appreciation of investments (10,362,195) 4,951,521
Net change in unrealized appreciation/depreciation on translation of
assets and liabilities denominated in foreign currencies 904,932 (2,024,316)
------------- -------------
INCREASE IN NET ASSETS FROM OPERATIONS 24,238,238 47,452,756
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A (11,531,796) (13,456,408)
Class B (532,468) (246,429)
Class D (2,819,673) (3,132,293)
Net realized gain on investments:
Class A (14,780,662) (25,021,509)
Class B (1,022,227) (633,473)
Class D (4,478,944) (6,970,215)
------------- -------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS (35,165,770) (49,460,327)
------------- -------------
<CAPTION>
SHARES
----------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------
1998 1997
------------ --------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
NET PROCEEDS FROM SALE OF SHARES:
Class A 917,312 650,380 13,784,723 9,972,700
Class B 582,101 343,682 8,737,987 5,230,021
Class D 559,494 404,112 8,434,652 6,155,758
Investment of dividends:
Class A 536,032 606,682 7,981,473 9,216,525
Class B 25,995 11,758 383,370 178,238
Class D 153,899 167,968 2,285,557 2,546,388
Exchanged from associated Funds:
Class A 811,991 330,769 12,301,020 5,064,541
Class B 443,306 79,482 6,464,374 1,207,365
Class D 605,553 418,908 9,058,873 6,386,380
Shares issued in payment of gain distributions:
Class A 848,226 1,378,265 12,180,374 20,340,211
Class B 56,336 34,906 803,601 512,347
Class D 282,564 423,625 4,039,407 6,229,511
------------ ------------- ---------------- ----------------
Total 5,822,809 4,850,537 86,455,411 73,039,985
------------ ------------- ---------------- ----------------
Cost of shares repurchased:
Class A (2,451,497) (3,510,451) (36,932,180) (53,806,277)
Class B (91,901) (46,830) (1,368,093) (709,661)
Class D (807,198) (1,022,412) (12,051,407) (15,638,553)
Exchanged into associated Funds:
Class A (1,088,419) (971,157) (16,267,382) (14,983,726)
Class B (122,524) (39,006) (1,801,440) (600,589)
Class D (478,295) (720,259) (7,177,392) (11,014,316)
------------ ------------- ---------------- ----------------
Total (5,039,834) (6,310,115) (75,597,894) (96,753,122)
------------ ------------- ---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL SHARE TRANSACTIONS 782,975 (1,459,578) 10,857,517 (23,713,137)
------------ ------------- ---------------- ----------------
------------ -------------
DECREASE IN NET ASSETS (70,015) (25,720,708)
NET ASSETS:
Beginning of year 355,488,874 381,209,582
---------------- ----------------
END OF YEAR (including undistributed net investment income of
$317,364 and $406,565, respectively) $355,418,859 $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 charge
("CDSC") of 1% on redemptions within 18 months of purchase. Class B shares are
sold without an initial sales charge but are subject to a distribution fee of
0.75%, a service fee of up to 0.25% on an annual basis, and a CDSC, if
applicable, of 5% on redemptions in the first year of purchase, declining to 1%
in the sixth year and 0% thereafter. Class B shares will automatically convert
to Class A shares on the last day of the month that precedes the eighth
anniversary of their date of purchase. Class D shares are sold without an
initial sales charge but are subject to a distribution fee of up to 0.75% and a
service fee of up to 0.25% on an annual basis, and a CDSC, if applicable, of 1%
imposed on redemptions made within one year of purchase. The three classes of
shares represent interests in the same portfolio of investments, have the same
rights and are generally identical in all respects except that each class bears
its separate distribution and certain other class expenses, and has exclusive
voting rights with respect to any matter on which a separate vote of any class
is required.
2. SIGNIFICANT ACCOUNTING POLICIES -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Fund:
a. SECURITY VALUATION -- Investments in 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 year ended December 31, 1998,
distribution and service fees were the only class-specific expenses.
f. DISTRIBUTIONS TO SHAREHOLDERS -- The treatment for financial statement
purposes of distributions made to shareholders during the year from net
investment income or net realized gains may differ from their ultimate
treatment for federal income tax purposes. These differences are caused
primarily by differences in the timing of the recognition of certain
components of income, expense, or realized capital gain for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net assets based on their ultimate
characterization for
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS
federal income tax purposes. Any such reclassification will have no effect
on net assets, results of operations, or net asset value per share of the
Fund.
For the year ended December 31, 1998, the Fund redeemed 5,039,834 of its
shares from shareholders aggregating $75,597,894, of which approximately
$3,200,000 represents capital gain distributions. This information is
provided for federal income tax purposes only.
3. PURCHASES AND SALES OF SECURITIES -- Purchases and sales of portfolio
securities, excluding US Government obligations and short-term investments, for
the year ended December 31, 1998, amounted to $332,924,029 and $336,264,185,
respectively; purchases and sales of USGovernment obligations were $100,281,147
and $114,198,314, respectively.
At December 31, 1998, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes, and the
tax basis gross unrealized appreciation and depreciation of portfolio securities
amounted to $31,684,058 and $6,296,568, respectively.
4. SHORT-TERM INVESTMENTS -- At December 31, 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 Advisors, Inc. (the "Distributor") (formerly Seligman Financial
Services, Inc.), agent for the distribution of the Fund's shares and an
affiliate of the Manager, received concessions of $32,669 from sales of Class A
shares, after commissions of $250,198 were paid to dealers.
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distribution of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive a continuing fee of up to 0.25% on an annual basis,
payable quarterly, of the average daily net assets of the Class A shares
attributable to the particular service organizations for providing personal
services and/or the maintenance of shareholder accounts. The Distributor charges
such fees to the Fund pursuant to the Plan. For the year ended December 31,
1998, fees incurred under the Plan aggregated $650,606, or 0.24% per annum of
the average daily net assets of Class A shares.
Under the Plan, with respect to Class B and Class D shares, service
organizations can enter into agreements with the Distributor and receive a
continuing fee for providing personal services and/or the maintenance of
shareholder accounts of up to 0.25% on an annual basis of the average daily net
assets of the Class B and Class D shares for which the organizations are
responsible; and, for Class D shares only, fees for providing other distribution
assistance of up to 0.75% on an annual basis of such average daily net assets.
Such fees are paid monthly by the Fund to the Distributor pursuant to the Plan.
With respect to Class B shares, a distribution fee of 0.75% on an annual
basis of average daily net assets is payable monthly by the Fund to the
Distributor; however, the Distributor has sold its rights to this fee to a third
party (the "Purchaser"), which provides funding to the Distributor to enable it
to pay commissions to dealers at the time of the sale of the related Class B
shares.
For the year ended December 31, 1998, fees incurred under the Plan,
equivalent to 1% per annum of the average daily net assets of Class B and Class
D shares, amounted to $139,400 and $783,824, respectively.
The Distributor is entitled to retain any CDSC imposed on redemptions of
Class D shares occurring within one year of purchase and on certain redemptions
of Class A shares occurring within 18 months of purchase. For the year ended
December 31, 1998, such charges amounted to $67,370.
15
<PAGE>
The Distributor has sold its rights to collect any CDSC imposed on
redemptions of Class B shares to the Purchaser. In connection with the sale of
its rights to collect any CDSC and the distribution fees with respect to Class B
shares described above, the Distributor receives payments from the Purchaser
based on the value of Class Bshares sold. The aggregate amount of such payments
retained by the Distributor for the year ended December 31, 1998, amounted to
$13,034.
Seligman Services, Inc., an affiliate of the Manager, is eligible to receive
commissions from certain sales of shares of the Fund, as well as distribution
and service fees pursuant to the Plan. For the year ended December 31, 1998,
Seligman Services, Inc. received commissions of $3,545 from the sale of shares
of the Fund. Seligman Services, Inc. also received distribution and service fees
of $50,371, pursuant to the Plan.
Seligman Data Corp., which is owned by the Fund and certain associated
investment companies, charged the Fund at cost $548,213 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 December 31, 1998, of $104,230
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%. 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 tables below are intended to help you understand each Class's financial
performance for the past five years or from its inception, if less than five
years. Certain information reflects financial results for a single share of a
Class that was held throughout the periods shown. Per share amounts are
calculated using average shares outstanding. "Total return" shows the rate that
you would have earned (or lost) on an investment in each Class, assuming you
reinvested all your dividends and capital gain distributions. Total returns do
not reflect any sales charges, and are not annualized for periods of less than
one year.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR $14.81 $14.97 $14.63 $13.05 $14.58
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.64 0.71 0.74 0.76 0.76
Net realized and unrealized gain (loss) on investments 0.41 1.41 0.38 1.89 (1.57)
Net realized and unrealized gain (loss) from
foreign currency transactions -- (0.10) 0.04 (0.01) 0.03
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 1.05 2.02 1.16 2.64 (0.78)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.65) (0.74) (0.73) (0.78) (0.75)
Distributions from net realized capital gain (0.86) (1.44) (0.09) (0.28) --
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (1.51) (2.18) (0.82) (1.06) (0.75)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $14.35 $14.81 $14.97 $14.63 $13.05
====== ====== ====== ====== ======
TOTAL RETURN: 7.26% 14.06% 8.22% 20.60% (5.43)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000s omitted) $256,060 $270,688 $296,291 $318,307 $286,355
Ratio of expenses to average net assets 1.10% 1.14% 1.14% 1.00% 1.02%
Ratio of net income to average net assets 4.25% 4.66% 5.11% 5.38% 5.51%
Portfolio turnover rate 124.79% 138.90% 125.92% 111.78% 66.62%
</TABLE>
- ------------------
See footnotes on page 18.
17
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B
-------------------------------------
YEAR ENDED 4/22/96*
DECEMBER 31, TO
---------------------------
1998 1997 12/31/96
--------- --------- ---------
<S> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $14.79 $14.95 $14.43
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.52 0.59 0.43
Net realized and unrealized gain on investments 0.39 1.41 0.59
Net realized and unrealized gain (loss) from
foreign currency transactions -- (0.10) 0.05
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.91 1.90 1.07
------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.54) (0.62) (0.46)
Distributions from net realized capital gain (0.86) (1.44) (0.09)
------ ------ ------
TOTAL DISTRIBUTIONS (1.40) (2.06) (0.55)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $14.30 $14.79 $14.95
====== ====== ======
TOTAL RETURN: 6.28% 13.24% 7.58%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $21,096 $8,607 $2,961
Ratio of expenses to average net assets 1.86% 1.90% 1.89%+
Ratio of net income to average net assets 3.49% 3.90% 4.36%+
Portfolio turnover rate 124.79% 138.90% 125.92%++
<CAPTION>
CLASS D
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR $14.78 $14.95 $14.60 $13.01 $14.55
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.52 0.59 0.63 0.65 0.65
Net realized and unrealized gain (loss) on investments 0.40 1.40 0.38 1.88 (1.57)
Net realized and unrealized gain (loss) from
foreign currency transactions -- (0.10) 0.04 (0.01) 0.03
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.92 1.89 1.05 2.52 (0.89)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.54) (0.62) (0.61) (0.65) (0.65)
Distributions from net realized capital gain (0.86) (1.44) (0.09) (0.28) --
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (1.40) (2.06) (0.70) (0.93) (0.65)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $14.30 $14.78 $14.95 $14.60 $13.01
====== ====== ====== ====== ======
TOTAL RETURN: 6.36% 13.17% 7.43% 19.66% (6.20)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000s omitted) $78,263 $76,194 $81,957 $86,701 $67,946
Ratio of expenses to average net assets 1.86% 1.90% 1.90% 1.79% 1.82%
Ratio of net income to average net assets 3.49% 3.90% 4.37% 4.58% 4.74%
Portfolio turnover rate 124.79% 138.90% 125.92% 111.78% 66.62%
</TABLE>
- ---------------------------
* Commencement of offering of shares.
+ Annualized.
++ For the year ended December 31, 1996.
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 December 31,
1998, the related statements of operations for the year then ended and of
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 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 December 31, 1998, the results of its operations, the changes
in its net assets, and the financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
/S/ Deloitte & Touche LLP
- -------------------------
DELOITTE & TOUCHE LLP
New York, New York
January 29, 1999
19
<PAGE>
FEDERAL TAX STATUS OF 1998 DIVIDEND AND
GAIN DISTRIBUTIONS FOR TAXABLE ACCOUNTS
The quarterly dividends paid to Class A, B, and D shareholders in 1998 are
taxable as ordinary income for federal tax purposes, regardless of whether they
were received in cash or in shares. Under the Internal Revenue Code, 19.94% of
the dividends paid to Class A, B, and D shareholders has been designated as
qualifying for the dividends received deduction available to corporate
shareholders. In order to claim the dividends received deduction for these
distributions, corporate shareholders must have held the Fund's shares for at
least 46 days or more during the 90-day period beginning 45 days before each
ex-dividend date.
A distribution of $0.132 per share, from net long-term gain realized on
investments during the period November 1, 1997, to December 31, 1997, was paid
on June 24, 1998, to Class A, B, and D shareholders. On November 23, 1998, a
distribution of $0.724 per share, from net long-term gain realized on
investments in 1998, was paid to Class A, B and D shareholders. In 1997,
Congress revised the capital gains provisions, so that depending on how long a
security was owned when it was sold, investors may have been faced with a 28%
capital gains rate, a 20% rate, or both. In October 1998, Congress simplified
the capital gains provisions so that, generally, all gains on securities held
more than one year are to be taxed at a maximum 20% rate. The distributions from
net long-term gain are designated as "capital gain dividends" for federal income
tax purposes and are taxable to shareholders in 1998 as a long-term gain from
the sale of capital assets, no matter how long shares have been owned or whether
the distribution was paid in additional shares or cash. However, if shares on
which a long-term capital gain distribution was received are subsequently sold,
and such shares were held for six months or less, any loss on the sale would be
treated as long-term to the extent it offsets the long-term capital gain
distribution.
If the gain distributions were paid in shares, the per share cost basis for
federal income tax purposes is $15.09 for Class A shares and $15.05 for Class B
and D shares for the June 24 distribution, and $14.23 for Class A shares and
$14.17 for Class B and D shares for the November 23 distribution.
A 1998 year-end statement of account activity and a 1998 tax package, which
may include a Form 1099-DIV, a Form 1099-B, and/or a Cost Basis Statement, have
been mailed to each shareholder. Form 1099-DIV shows the distributions paid to
the shareholder during the year. Form 1099-B shows the proceeds of any
redemptions paid to the shareholder during the year. Cost Basis Statements
report all sales or exchanges from a shareholder's account which may have
resulted in a capital gain or loss in 1998. The information shown on Forms
1099-DIV and 1099-B is reported to the Internal Revenue Service as required by
federal regulations.
20
<PAGE>
BOARD OF DIRECTORS
JOHN R. GALVIN 2, 4
DEAN, Fletcher School of Law and Diplomacy
at Tufts University
DIRECTOR, Raytheon Company
ALICE S. ILCHMAN 3, 4
TRUSTEE, Committee for Economic Development
CHAIRMAN, The Rockefeller Foundation
FRANK A. MCPHERSON 2, 4
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
JOHN E. MEROW 2, 4
RETIRED CHAIRMAN AND SENIOR PARTNER,
Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Industries, Inc.
DIRECTOR, New York Presbyterian Hospital
BETSY S. MICHEL 2, 4
TRUSTEE, The Geraldine R. Dodge Foundation
CHAIRMAN OF THE BOARD OF TRUSTEES, St. George's School
WILLIAM C. MORRIS 1
CHAIRMAN
CHAIRMAN OF THE BOARD,
J. & W. Seligman & Co. Incorporated
CHAIRMAN, Carbo Ceramics Inc.
DIRECTOR, Kerr-McGee Corporation
James C. Pitney 3, 4
RETIRED PARTNER, Pitney, Hardin, Kipp & Szuch, Law Firm
JAMES Q. RIORDAN 3, 4
DIRECTOR, KeySpan Energy Corporation
TRUSTEE, Committee for Economic Development
DIRECTOR, Public Broadcasting Service
RICHARD R. SCHMALTZ 1
MANAGING DIRECTOR, DIRECTOR OF INVESTMENTS,
J. & W. Seligman & Co. Incorporated
TRUSTEE EMERITUS, Colby College
ROBERT L. SHAFER 3, 4
RETIRED VICE PRESIDENT, Pfizer Inc.
JAMES N. WHITSON 2, 4
DIRECTOR AND CONSULTANT, Sammons Enterprises, Inc.
DIRECTOR, C-SPAN
DIRECTOR, CommScope, Inc.
BRIAN T. ZINO 1
PRESIDENT
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.
DIRECTOR, ICI Mutual Insurance Company
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
21
<PAGE>
EXECUTIVE OFFICERS
WILLIAM C. MORRIS
CHAIRMAN
BRIAN T. ZINO
PRESIDENT
CHARLES C. SMITH, JR.
VICE PRESIDENT
LAWRENCE P. VOGEL
VICE PRESIDENT
THOMAS G. ROSE
TREASURER
FRANK J. NASTA
SECRETARY
FOR MORE INFORMATION
MANAGER
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
GENERAL COUNSEL
Sullivan & Cromwell
INDEPENDENT AUDITORS
Deloitte & Touche LLP
GENERAL DISTRIBUTOR
Seligman Advisors, Inc.
100 Park Avenue
New York, NY 10017
SHAREHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
IMPORTANT TELEPHONE NUMBERS
(800) 221-2450 Shareholder Services
(800) 445-1777 Retirement Plan Services
(212) 682-7600 Outside the United States
(800) 622-4597 24-Hour Automated
Telephone Access
Service
22
<PAGE>
GLOSSARY OF FINANCIAL TERMS
CAPITAL GAIN DISTRIBUTION -- A payment to mutual fund shareholders of profits
realized on the sale of securities in a fund's portfolio.
CAPITAL APPRECIATION/DEPRECIATION -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.
COMPOUNDING -- The change in the value of an investment as shareholders receive
earnings on their investment's earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will not be based on the
original $1,000, but on the $1,070, which includes the first year's earnings.
CONTINGENT DEFERRED SALES CHARGE (CDSC) -- Depending on the class of shares
owned, a fee charged by a mutual fund when shares are sold back to the fund (the
CDSC expires after a fixed time period).
DIVIDEND -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
DIVIDEND YIELD -- A measurement of a fund's dividend as a percentage of the
maximum offering price.
EXPENSE RATIO -- The cost of doing business for a mutual fund, expressed as a
percent of the fund's net assets.
INVESTMENT OBJECTIVE -- The shared investment goal of a fund and its
shareholders.
MANAGEMENT FEE -- The amount paid by a mutual fund to its investment advisor(s).
MULTIPLE CLASSES OF SHARES -- Although an individual mutual fund invests in only
one portfolio of securities, it may offer investors several purchase options
which are "classes" of shares. Multiple classes permit shareholders to choose
the fee structure that best meets their needs and goals. Generally, each class
will differ in terms of how and when sales charges and certain fees are
assessed.
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (NASD) -- A self-regulatory
body with authority over firms that distribute mutual funds.
NET ASSET VALUE (NAV) PER SHARE -- The market worth of one fund share, obtained
by adding a mutual fund's total assets (securities, cash, and any accrued
earnings), subtracting liabilities, and dividing the resulting net assets by the
number of shares outstanding.
OFFERING PRICE (OP) -- The price at which a mutual fund's share can be
purchased. The offering price per share is the current net asset value plus any
sales charge.
PORTFOLIO TURNOVER -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
PROSPECTUS -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission (SEC), such as a fund's investment objective and policies, services,
investment restrictions, how shares are bought and sold, fund fees and other
charges, and the fund's financial highlights.
SEC YIELD -- SEC Yield refers to the net income earned by a fund during a recent
30-day period. This income is annualized and then divided by the maximum
offering price per share on the last day of the 30-day period. The SEC Yield
formula reflects semiannual compounding.
SECURITIES AND EXCHANGE COMMISSION -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
STATEMENT OF ADDITIONAL INFORMATION -- A document that contains updated or more
detailed information about an investment company and that supplements the
prospectus. It is available at no charge upon request.
TOTAL RETURN -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The AVERAGE ANNUAL TOTAL
RETURN represents the average annual compounded rate of return for the periods
presented.
YIELD ON SECURITIES -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.
- ------------------------
Adapted from the Investment Company Institute's 1998 MUTUAL FUND FACT BOOK.
23
<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 ADVISORS, INC.
AN AFFILIATE OF
[GRAPHIC OMITTED]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
EQIN2 12/98 [GRAHIC OMITTED] Printed on Recycled Paper
<PAGE>
PART C. OTHER INFORMATION
- ------ -----------------
ITEM 23. EXHIBITS.
- ------- ---------
All Exhibits have been previously filed, except Exhibits marked with an
asterisk (*) which are filed herewith.
(a) *Articles Supplementary dated May 24, 1999.
(a)(1) Articles of Amendment and Articles Supplementary to Articles of
Incorporation of Registrant. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 74, filed on April 29, 1997.)
(b) By-laws of the Corporation. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 74, filed on April 29, 1997.)
(c) Specimen Stock Certificate of Class B Capital Stock. (Incorporated by
reference to Form SE filed on April 16, 1996).
(c)(1) Specimen Stock Certificate of Class D Capital Stock. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 70 filed on
April 23, 1993.)
(d) Amended Management Agreement between Registrant and J. & W. Seligman &
Co. Incorporated. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 73 filed on April 19, 1996.)
(e) *Addendum to Sales/Bank Agreement. (Incorporated by reference to
Post-Effective Amendment No. 57 to the Registration Statement of
Seligman Capital Fund, Inc. (File #811-1886) filed on May 28, 1999.)
(e)(1) *Form of Bank Agreement between Seligman Advisors, Inc. and Banks.
(Incorporated by reference to Post-Effective Amendment No. 57 to the
Registration Statement of Seligman Capital Fund, Inc. (File #811-1886)
filed on May 28, 1999.)
(e)(2) Form of Amended Distributing Agreement between Registrant and Seligman
Advisors, Inc. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 74, filed on April 29, 1997.)
(e)(3) Form of Amended Sales Agreement between Registrant and Seligman
Advisors, Inc. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 73 filed on April 19, 1996.)
(e)(4) Form of Sales Agreement between Seligman Advisors, Inc. and Morgan
Stanley Dean Witter & Co. (formerly, Dean Witter Reynolds, Inc.).
(Incorporated by reference to Exhibit 6b of Registration Statement No.
2-33566, to Registrant's Post-Effective Amendment No. 53 filed on April
28, 1997.)
(e)(5) Form of Sales Agreement between Seligman Advisors, Inc. and Morgan
Stanley Dean Witter & Co. (formerly, Dean Witter Reynolds, Inc.) with
respect to certain Chilean institutional investors. (Incorporated by
reference to Exhibit 6c of Registration Statement No. 2-33566, to
Registrant's Post-Effective Amendment No. 53 filed on April 28, 1997.)
(e)(6) Form of Dealer Agreement between Seligman Advisors, Inc. and Salomon
Smith Barney Inc. (formerly, Smith Barney Inc.) (Incorporated by
reference to Exhibit 6d of Registration Statement No. 2-33566, to
Registrant's Post-Effective Amendment No. 53, filed on April 28, 1997.)
(f) Matched Accumulation Plan of J. & W. Seligman & Co. Incorporated.
(Incorporated by reference to Exhibit 7 of Registration Statement No.
2-92487, to Registrant's Post-Effective Amendment No. 21, filed on
January 29, 1997.)
(f)(1) Deferred Compensation Plan for Directors of Seligman Income Fund, Inc.
(Incorporated by reference to Registrant's Post-Effective Amendment No.
75, filed on April 29, 1998.)
C-1
<PAGE>
FILE NO. 2-33566
811-1886
PART C. OTHER INFORMATION (CONTINUED)
- ------ -----------------
(g) Copy of Custodian Agreement between Registrant and Investors Fiduciary
Trust Company. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 74, filed on April 29, 1997.)
(h) Not applicable.
(i) *Opinion and Consent of Counsel in respect of Class C shares.
(i)(1) Opinion and Consent of Counsel. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 74 filed on April 29, 1997.)
(j) *Consent of Independent Auditors.
(k) Not applicable.
(l) *Form of Purchase Agreement (Investment Letter) for Initial Capital
between Registrant's Class C shares and J. & W. Seligman & Co.
Incorporated.
(l)(1) Purchase Agreement (Investment Letter) for Initial Capital between
Registrant's Class B shares and J. & W. Seligman & Co. Incorporated.
(Incorporated by reference to Registrant's Post-Effective Amendment No.
73 filed on April 19, 1996.)
(l)(2) Purchase Agreement (Investment Letter) for Initial Capital between
Registrant's Class D shares and J. & W. Seligman & Co. Incorporated.
(Incorporated by reference to Registrant's Post-Effective Amendment No.
74 filed on April 29, 1997.)
(m) *Amended Administration, Shareholder Services and Distribution Plan of
Registrant.
(m)(1) *Amended Administration, Shareholder Services and Distribution
Agreement between Seligman Advisors, Inc. and Dealers. (Incorporated by
reference to Post-Effective Amendment No. 57 to the Registration
Statement of Seligman Capital Fund, Inc. (File #811-1886) filed on May
28, 1999.)
(n) Financial Data Schedules. (Incorporated by reference to Post-Effective
Amendment No. 77 filed on April 30, 1999.)
(o) *Plan of Multiple Classes of Shares (four Classes) pursuant to Rule
18f-3 under the Investment Company Act of 1940. . (Incorporated by
reference to Post-Effective Amendment No. 57 to the Registration
Statement of Seligman Capital Fund, Inc. (File #811-1886) filed on May
28, 1999.)
OTHER EXHIBITS: Power of Attorney for Richard R. Schmaltz. (Incorporated by
- -------------- reference to Registrant's Post-Effective Amendment No. 75
filed on April 29, 1998.)
Powers of Attorney. (Incorporated by reference to
Registrant's Post-Effective Amendment No.74 filed on April
29, 1997.)
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT. Seligman
- -------- Data Corp. ("SDC"), a New York corporation, is owned by the Registrant
and certain associated investment companies. The Registrant's
investment in SDC is recorded at a cost of $3,553.
C-2
<PAGE>
PART C. OTHER INFORMATION (CONTINUED)
- ------ ----------------
ITEM 25. INDEMNIFICATION. Reference is made to the provisions of Articles
-------- Twelfth and Thirteenth of Registrant's Amended and Restated Articles
of Incorporation filed as Exhibit 24(b)(1) and Article IV of
Registrant's Amended and Restated By-laws filed as Exhibit 24(b)(2) to
Registrant's Post-Effective Amendment No. 74 to the Registration
Statement.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised by the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER. J. & W. Seligman
- -------- & Co. Incorporated, a Delaware corporation, ("Manager"), is the
Registrant's investment manager. The Manager also serves as investment
manager to eighteen associated investment companies. They are:
Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc.,
Seligman Common Stock Fund, Inc., Seligman Communications and
Information Fund, Inc., Seligman Frontier Fund, Inc., Seligman Growth
Fund, Inc., Seligman Henderson Global Fund Series, Inc., Seligman High
Income Fund Series, Seligman Municipal Fund Series, Inc., Seligman
Municipal Series Trust, Seligman New Jersey Municipal Fund, Inc.,
Seligman Pennsylvania Municipal Fund Series, Seligman Portfolios,
Inc., Seligman Quality Municipal Fund, Inc., Seligman Select Municipal
Fund, Inc., Seligman Value Fund Series, Inc. and Tri-Continental
Corporation.
The Manager has an investment advisory service division which provides
investment management or advice to private clients. The list required
by this Item 28 of officers and directors of the Manager, together
with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to
Schedules A and D of Form ADV, filed by the Manager, pursuant to the
Investment Advisers Act of 1940 (SEC File No. 801-15798), which was
filed on March 31, 1999.
ITEM 27. PRINCIPAL UNDERWRITERS.
- -------- -----------------------
(a) The names of each investment company (other than the Registrant) for
which Registrant's principal underwriter is currently distributing
securities of the Registrant and also acts as a principal underwriter,
depositor or investment adviser are as follows: Seligman Capital Fund,
Inc., Seligman Cash Management Fund, Inc., Seligman Common Stock Fund,
Inc., Seligman Communications and Information Fund, Inc., Seligman
Frontier Fund, Inc., Seligman Growth Fund, Inc., Seligman Henderson
Global Fund Series, Inc., Seligman High Income Fund Series, Seligman
Municipal Fund Series, Inc., Seligman Municipal Series Trust, Seligman
New Jersey Municipal Fund, Inc., Seligman Pennsylvania Municipal Fund
Series, Seligman Portfolios, Inc., Seligman Value Fund Series, Inc.
C-3
<PAGE>
PART C. OTHER INFORMATION (CONTINUED)
- ------- -----------------
(b) Name of each director, officer or partner of Registrant's principal
underwriter named in response to Item 20:
<TABLE>
<CAPTION>
SELIGMAN ADVISORS, INC.
AS OF APRIL 30, 1999
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
---------------- ---------------- ---------------
<S> <C> <C>
WILLIAM C. MORRIS* Director Chairman of the Board and
Chief Executive Officer
BRIAN T. ZINO* Director President and Director
RONALD T. SCHROEDER* Director None
FRED E. BROWN* Director Director Emeritus
WILLIAM H. HAZEN* Director None
THOMAS G. MOLES* Director None
DAVID F. STEIN* Director None
STEPHEN J. HODGDON* President and Director None
CHARLES W. KADLEC* Chief Investment Strategist None
LAWRENCE P. VOGEL* Senior Vice President, Finance Vice President
EDWARD F. LYNCH* Senior Vice President, National None
Sales Director
JAMES R. BESHER Senior Vice President, Division None
14000 Margaux Lane Sales Director
Town & Country, MO 63017
GERALD I. CETRULO, III Senior Vice President, Sales None
140 West Parkway
Pompton Plains, NJ 07444
MATTHEW A. DIGAN* Senior Vice President, None
Domestic Funds
JONATHAN G. EVANS Senior Vice President, Sales None
222 Fairmont Way
Ft. Lauderdale, FL 33326
ROBERT T. HAUSLER* Senior Vice President, International None
Funds
T. WAYNE KNOWLES Senior Vice President, None
104 Morninghills Court Division Sales Director
Cary, NC 27511
JOSEPH LAM Senior Vice President, Regional None
Seligman International Inc. Director, Asia
Suite 1133, Central Building
One Pedder Street
Central Hong Kong
BRADLEY W. LARSON Senior Vice President, Sales None
367 Bryan Drive
Alamo, CA 94526
MICHELLE L. MCCANN-RAPPA* Senior Vice President, None
Retirement Plans
SCOTT H. NOVAK* Senior Vice President, Insurance None
RICHARD M. POTOCKI Senior Vice President, Regional None
Seligman International UK Limited Director, Europe and the Middle East
Berkeley Square House 2nd Floor
Berkeley Square
London, United Kingdom W1X 6EA
</TABLE>
C-4
<PAGE>
PART C. OTHER INFORMATION (CONTINUED)
- ------- -----------------
<TABLE>
<CAPTION>
SELIGMAN ADVISORS, INC.
AS OF APRIL 30, 1999
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
---------------- ---------------- ---------------
<S> <C> <C>
BRUCE M. TUCKEY Senior Vice President, Sales None
41644 Chathman Drive
Novi, MI 48375
ANDREW S. VEASEY Senior Vice President, Sales None
14 Woodside Drive
Rumson, NJ 07760
CHARLES L. VON BREITENBACH, II* Senior Vice President, None
Managed Money
J. BRERETON YOUNG* Senior Vice President, Director None
of Sales Development
JEFFREY S. DEAN* Vice President, Business Analysis None
MASON S. FLINN Vice President, Regional Retirement None
159 Varennes Plans Manager
San Francisco, CA 94133
MARSHA E. JACOBY* Vice President, Offshore Business None
Manager
WILLIAM W. JOHNSON* Vice President, Order Desk None
JOAN M. O'CONNELL Vice President, Regional Retirement None
3707 Fifth Avenue #136 Plans Manager
San Diego, CA 92103
RONALD W. POND* Vice President, Portfolio Advisor None
JEFFERY C. PLEET* Vice President, Regional Retirement None
Plans Manager
TRACY A. SALOMON* Vice President, Retirement Marketing None
HELEN SIMON* Vice President, Sales Administration None
GARY A. TERPENING* Vice President, Director of Business None
Development
CHARLES E. WENZEL Vice President, Regional Retirement None
703 Greenwood Road Plans Manager
Wilmington, DE 19807
JEFF BOTWINICK Regional Vice President None
11508 Foster Road
Overland Park, KS 66210
KEVIN CASEY Regional Vice President None
19 Bayview Avenue
Babylon, NY 11702
RICHARD B. CALLAGHAN Regional Vice President None
7821 Dakota Lane
Orland Park, IL 60462
</TABLE>
C-5
<PAGE>
PART C. OTHER INFORMATION (CONTINUED)
- ------ -----------------
<TABLE>
<CAPTION>
SELIGMAN ADVISORS, INC.
AS OF APRIL 30, 1999
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
---------------- ---------------- ---------------
<S> <C> <C>
BRADFORD C. DAVIS Regional Vice President None
241 110th Avenue SE
Bellevue, WA 98004
CHRISTOPHER J. DERRY Regional Vice President None
2380 Mt. Lebanon Church Road
Alvaton, KY 42122
KENNETH DOUGHERTY Regional Vice President None
8640 Finlarig Drive
Dublin, OH 43017
KELLI A. WIRTH DUMSER Regional Vice President None
7121 Jardiniere Court
Charlotte, NC 28226
EDWARD S. FINOCCHIARO Regional Vice President None
120 Screenhouse Lane
Duxbury, MA 02332
MICHAEL C. FORGEA Regional Vice President None
32 W. Anapamu Street # 186
Santa Barbara, CA 93101
CARLA A. GOEHRING Regional Vice President None
11426 Long Pine
Houston, TX 77077
CATHY DES JARDINS Regional Vice President None
PMB 152
1705 14th Street
Boulder, CO 80302
MICHAEL K. LEWALLEN Regional Vice President None
908 Tulip Poplar Lane
Birmingham, AL 35244
JUDITH L. LYON Regional Vice President None
7105 Harbour Landing
Alpharetta, GA 30005
TIM O'CONNELL Regional Vice President None
11908 Acacia Glen Court
San Diego, CA 92128
GEORGE M. PALMER, JR. Regional Vice President None
1805 Richardson Place
Tampa, FL 33606
THOMAS PARNELL Regional Vice President None
1575 Edgecomb Road
St. Paul, MN 55116
CRAIG PRICHARD Regional Vice President None
300 Spyglass Drive
Fairlawn, OH 44333
</TABLE>
C-6
<PAGE>
PART C. OTHER INFORMATION (CONTINUED)
- ------- -----------------
<TABLE>
<CAPTION>
SELIGMAN ADVISORS, INC.
AS OF APRIL 30, 1999
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
--------------- ---------------- ---------------
<S> <C> <C>
NICHOLAS ROBERTS Regional Vice President None
200 Broad Street, Apt. 2225
Stamford, CT 06901
DIANE H. SNOWDEN Regional Vice President None
11 Thackery Lane
Cherry Hill, NJ 08003
EUGENE P. SULLIVAN Regional Vice President None
4858 Battery Lane Bethesda, MD 21814
JAMES TAYLOR Regional Vice President None
1145 Kenilworth Circle
Naperville, IL 60540
STEVE WILSON Regional Vice President None
83 Kaydeross Park Road
Saratoga Springs, NY 12866
FRANK J. NASTA* Secretary Secretary
AURELIA LACSAMANA* Treasurer None
GAIL S. CUSHING* Assistant Vice President, National None
Accounts Manager
SANDRA G. FLORIS* Assistant Vice President, Order Desk None
KEITH LANDRY* Assistant Vice President, Order Desk None
ALBERT A. PISANO* Assistant Vice President and None
Compliance Officer
JOYCE PERESS* Assistant Secretary Assistant Secretary
</TABLE>
* The principal business address of each of these directors and/or officers is
100 Park Avenue, New York, NY 10017.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
- -------- ---------------------------------
Custodian: Investors Fiduciary Trust Company
801 Pennsylvania
Kansas City, Missouri 64105 AND
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
ITEM 29. MANAGEMENT SERVICES. Not applicable.
- -------- -------------------
ITEM 30. UNDERTAKINGS. The Registrant undertakes: (1) to furnish a copy of
- ------- the Registrant's latest annual report, upon request and without
charge, to every person to whom a prospectus is delivered and (2) if
requested to do so by the holders of at least 10% of its outstanding
shares, to call a meeting of shareholders for the purpose of voting
upon the removal of a director or directors and to assist in
communications with other shareholders as required by Section 16(c)
of the Investment Company Act of 1940, as amended.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement under Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 78 to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 27th day of May, 1999.
SELIGMAN INCOME FUND, INC.
By: /s/ WILLIAM C. MORRIS
-------------------------------
William C. Morris, Chairman
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Post-Effective Amendment No. 78 has been
signed below by the following persons in the capacities indicated on May 27,
1999.
SIGNATURE TITLE
--------- -----
/s/ Brian T. Zino Chairman of the Board (Principal executive
- ------------------------------ officer) and Director
William C. Morris*
/s/ Brian T. Zino Director and President
- ------------------------------
Brian T. Zino
/s/ Thomas G. Rose Treasurer
- ------------------------------
Thomas G. Rose
John R. Galvin, Director )
Alice S. Ilchman, Director )
Frank A. McPherson, Director )
John E. Merow, Director )
Betsy S. Michel, Director ) /s/ BRIAN T. ZINO
---------------------------
James C. Pitney, Director ) * Brian T. Zino, Attorney-in-fact
James Q. Riordan, Director )
Richard R. Schmaltz, Director )
Robert L. Shafer, Director )
James N. Whitson, Director )
<PAGE>
SELIGMAN INCOME FUND, INC.
POST-EFFECTIVE AMENDMENT NO. 78 TO THE
REGISTRATION STATEMENT ON FORM N-1A
EXHIBIT INDEX
FORM N-1A ITEM NO. DESCRIPTION
- ----------------- -----------
Item 23(a) Articles Supplementary
Item 23(i) Opinion and Consent of Counsel
Item 23 (j) Consent of Independent Auditors
Item 23(l) Form of Purchase Agreement for Initial Capital
Item 23(m) Amended Administration, Shareholder
Services and Distribution Plan
SELIGMAN INCOME FUND, INC.
ARTICLES SUPPLEMENTARY
Seligman Income Fund, Inc., a Maryland corporation having its
principal office in Baltimore City, Maryland (hereinafter called the
"Corporation") and registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The total number of shares of capital stock of all
classes which the Corporation has authority to issue is 500,000,000 shares,
which were previously classified by the Board of Directors of the Corporation
into three classes designated as Class A Common Stock, Class B Common Stock and
Class D Common Stock. The number of authorized shares of Class A Common Stock,
Class B Common Stock and Class D Common Stock each consisted of the sum of x and
y, where x equaled the issued and outstanding shares of such class and y equaled
one-third of the authorized but unissued shares of Common Stock of all classes;
PROVIDED that at all times the aggregate authorized, issued and outstanding
shares of Class A, Class B and Class D Common Stock shall not exceed the
authorized number of shares of Common Stock; and, in the event application of
the formula above would have resulted, at any time, in fractional shares, the
applicable number of authorized shares of each class was to have been rounded
down to the nearest whole number of shares of such class.
SECOND: Pursuant to the authority of the Board of Directors to
classify and reclassify unissued shares of capital stock, the Board of Directors
has reclassified the unissued shares of Class A Common Stock, Class B Common
Stock and Class D Common Stock into the following classes and has provided for
the issuance of shares of such classes. The terms of the Common Stock as set by
the Board of Directors are as follows:
(a) The total number of shares of all classes of stock which
the Corporation has authority to issue is 500,000,000 shares of common
stock ("Shares") of the par value of $1.00 each having an aggregate par
value of $500,000,000. The Common Stock of the Corporation shall have
four classes of shares, which shall be designated Class A Common Stock,
Class B Common Stock, Class C Common Stock and Class D Common Stock.
The number of authorized shares of Class A Common Stock, of Class B
Common Stock, of Class C Common Stock and of Class D Common Stock shall
each consist of the sum of x and y, where x equals the issued and
outstanding shares of such class and y equals one-fourth of the
authorized but unissued shares of Common Stock of all classes; PROVIDED
that at all times the aggregate authorized, issued and outstanding
shares of Class A, Class B, Class C and Class D Common Stock shall not
exceed the authorized number of shares of Common Stock (I.E.,
500,000,000 shares of Common Stock until changed by further action of
the Board of Directors in accordance with Section 2-208.1 of the
Maryland General Corporation Law, or any successor provision); and, in
the event application of the formula above would result, at any time,
in fractional shares, the applicable number of authorized shares of
each class shall be rounded down to the nearest whole number of shares
of such
-1-
<PAGE>
class. Any class of Common Stock shall be referred to herein
individually as a "Class" and collectively, together with any further
class or classes from time to time established, as the "Classes".
(b) All Classes shall represent the same interest in the
Corporation and have identical voting, dividend, liquidation, and other
rights; PROVIDED, HOWEVER, that notwithstanding anything in the charter
of the Corporation to the contrary:
(1) Class A shares may be subject to such front-end
sales loads as may be established by the Board of Directors
from time to time in accordance with the Investment Company
Act and applicable rules and regulations of the National
Association of Securities Dealers, Inc. (the "NASD").
(2) Class B shares may be subject to such contingent
deferred sales charges as may be established from time to time
by the Board of Directors in accordance with the Investment
Company Act and applicable rules and regulations of the NASD.
Subject to subsection (6) below, each Class B share shall
convert automatically into Class A shares on the last business
day of the month that precedes the eighth anniversary of the
date of issuance of such Class B share; such conversion shall
be effected on the basis of the relative net asset values of
Class B shares and Class A shares as determined by the
Corporation on the date of conversion.
(3) Class C shares may be subject to such front-end
sales loads and such contingent deferred sales charges as may
be established from time to time by the Board of Directors in
accordance with the Investment Company Act and applicable
rules and regulations of the NASD.
(4) Class D shares may be subject to such contingent
deferred sales charges as may be established from time to time
by the Board of Directors in accordance with the Investment
Company Act and applicable rules and regulations of the NASD.
(5) Expenses related solely to a particular Class
(including, without limitation, distribution expenses under a
Rule 12b-1 plan and administrative expenses under an
administration or service agreement, plan or other
arrangement, however designated, which may differ between the
Classes) shall be borne by that Class and shall be
appropriately reflected (in the manner determined by the Board
of Directors) in the net asset value, dividends, distribution
and liquidation rights of the shares of that Class.
(6) At such time as shall be permitted under the
Investment Company Act, any applicable rules and regulations
thereunder and the provisions of any exemptive order
applicable to the Corporation, and as may be determined by the
Board of Directors and disclosed in the then current
prospectus of the Corporation, shares of a
-2-
<PAGE>
particular Class may be automatically converted into shares of
another Class; PROVIDED, HOWEVER, that such conversion shall
be subject to the continuing availability of an opinion of
counsel to the effect that such conversion does not constitute
a taxable event under Federal income tax law. The Board of
Directors, in its sole discretion, may suspend any conversion
rights if such opinion is no longer available.
(7) As to any matter with respect to which a separate
vote of any Class is required by the Investment Company Act or
by the Maryland General Corporation Law (including, without
limitation, approval of any plan, agreement or other
arrangement referred to in subsection (5) above), such
requirement as to a separate vote by the Class shall apply in
lieu of single Class voting, and, if permitted by the
Investment Company Act or any rules, regulations or orders
thereunder and the Maryland General Corporation Law, the
Classes shall vote together as a single Class on any such
matter that shall have the same effect on each such Class. As
to any matter that does not affect the interest of a
particular Class, only the holders of shares of the affected
Class shall be entitled to vote.
THIRD: These Articles Supplementary do not change the total number of
authorized shares of the Corporation.
IN WITNESS WHEREOF, SELIGMAN INCOME FUND, INC. has caused
these Articles Supplementary to be signed in its name and on its behalf by its
President and witnessed by its Secretary, and each of said officers of the
Corporation has also acknowledged these Articles Supplementary to be the
corporate act of the Corporation and has stated under penalties of perjury that
to the best of his knowledge, information and belief that the matters and facts
set forth with respect to approval are true in all material respects, all on May
24, 1999.
SELIGMAN INCOME FUND, INC.
By: /s/ BRIAN T. ZINO
---------------------------------
Brian T. Zino, President
Witness:
/s/ FRANK J. NASTA
- -------------------------------
Frank J. Nasta, Secretary
-3-
SULLIVAN & CROMWELL
May 27, 1999
Seligman Income Fund, Inc.,
100 Park Avenue,
New York, N.Y. 10017.
Dear Sirs:
In connection with Post-Effective Amendment No.78 to the Registration
Statement on Form N-1A (File No. 2-10837) of Seligman Income Fund, Inc., a
Maryland corporation (the "Fund"), which you expect to file under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to an indefinite
number of shares of capital stock, par value $1.000 per share, of the class
designated as Class C shares (the "Shares"), we, as your counsel, have examined
such corporate records, certificates and other documents, and such questions of
law, as we have considered necessary or appropriate for the purposes of this
opinion.
The number of shares of each class of capital stock that the Fund is
authorized to issue at any time is determined by adding to the number of shares
of such class then outstanding additional authorized shares in an amount
determined according to a formula set forth in the Fund's charter. The formula
allocates to each class an equal portion of the number of shares representing
the difference between the number of shares that the Fund is authorized to issue
and the total number of shares of all classes outstanding at such time.
Upon the basis of such examination, we advise you that, in our opinion, the
Fund is authorized to issue the number of Shares determined in accordance with
the charter of the Fund as described above and, when the Post-Effective
Amendment referred to above has become effective under the Securities Act and
the Shares have been issued (a) for at least the par value thereof in accordance
with the Registration Statement referred to above, (b) so as not to exceed the
then authorized number of Shares and (c) in accordance with the authorization of
the Board of Directors, the Shares will be duly and validly issued, fully paid
and non-assessable.
<PAGE>
The foregoing opinion is limited to the Federal laws of the United States
and the General Corporation Law of the State of Maryland, and we are expressing
no opinion as to the effect of the laws of any other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the
Post-Effective Amendment referred to above. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act.
Very truly yours,
SULLIVAN & CROMWELL
-2-
CONSENT OF INDEPENDENT AUDITORS
Seligman Income Fund, Inc.:
We consent to the use in Post-Effective Amendment No. 78 to Registration
Statement No. 2-10837 of our report dated January 29, 1999, appearing in the
Annual Report to Shareholders for the year ended December 31, 1998, which is
incorporated by reference in the Statement of Additional Information, which is
included in such Registration Statement, and to the references to us under the
captions "Financial Highlights" in the Prospectus and "General Information" in
the Statement of Additional Information, which are also included in such
Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
May 26, 1999
INVESTMENT LETTER
SELIGMAN INCOME FUND, INC.
Seligman Income Fund, Inc. (the "Fund"), an open-end diversified management
investment company, and the undersigned ("Purchaser"), intending to be legally
bound, hereby agree as follows:
1. The Fund hereby sells to Purchaser and Purchaser purchases 1 Class C
share (the "Share") of Capital Stock (par value $1.00) of the Fund at a
price equivalent to the net asset value of one Class D share of the
Fund as of the close of business on May 27, 1999. The Fund hereby
acknowledges receipt from Purchaser of funds in such amount in full
payment for the Share.
2. Purchaser represents and warrants to the Fund that the Share is being
acquired for investment and not with a view to distribution thereof,
and that Purchaser has no present intention to redeem or dispose of the
Share.
IN WITNESS WHEREOF, the parties have executed this agreement as of the 28th day
of May, 1999 ("Purchase Date").
SELIGMAN INCOME FUND, INC.
By:
----------------------------
Name: Lawrence P. Vogel
Title: Vice President
J & W. SELIGMAN & CO. INCORPORATED
By:
----------------------------
Name: Brian T. Zino
Title: President
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
----------------------------------------------------------
As amended and restated through June 1, 1999
SECTION 1. Seligman Income Fund, Inc. (the "Fund") will pay
fees to Seligman Advisors, Inc., the principal underwriter of its shares (the
"Distributor"), for administration, shareholder services and distribution
assistance for the Class A, Class B, Class C and Class D shares of the Fund. As
a result, the Fund is adopting this Administration, Shareholder Services and
Distribution Plan (the "Plan") pursuant to Section 12(b) of the Investment
Company Act of 1940, as amended (the "Act") and Rule 12b-1 thereunder.
SECTION 2. . Pursuant to this Plan, the Fund may pay to the
Distributor a shareholder servicing fee of up to .25% on an annual basis of the
average daily net assets of the Fund (payable quarterly with respect to Class A
and monthly with respect to Class B, Class C and Class D) and a distribution fee
of .75% on an annual basis, payable monthly, of the average daily net assets of
the Fund attributable to the Class B Shares and a distribution fee of up to .75%
on an annual basis, payable monthly, of the average daily net assets of the Fund
attributable to Class C and Class D shares. Such fees will be used in their
entirety by the Distributor to make payments for administration, shareholder
services and distribution assistance, including, but not limited to (i)
compensation to securities dealers and other organizations (each, a "Service
Organization" and collectively, the "Service Organizations"), for providing
distribution assistance with respect to assets invested in the Fund, (ii)
compensation to Service Organizations for providing administration, accounting
and other shareholder services with respect to Fund shareholders, and (iii)
otherwise promoting the sale of shares of the Fund, including paying for the
preparation of advertising and sales literature and the printing and
distribution of such promotional materials and prospectuses to prospective
investors and defraying the Distributor's costs incurred in connection with its
marketing efforts with respect to shares of the Fund. To the extent a Service
Organization provides administration, accounting and other shareholder services,
payment for which is not required to be made pursuant to a plan meeting the
requirements of Rule 12b-1, a portion of the fee paid by the Fund shall be
deemed to include compensation for such services. The fees received from the
Fund hereunder in respect of the Class A shares may not be used to pay any
interest expense, carrying charges or other financing costs, and fees received
hereunder may not be used to pay any allocation of overhead of the Distributor.
The fees of any particular class of the Fund may not be used to subsidize the
sale of shares of any other class. The fees payable to Service Organizations
from time to time shall, within such limits, be determined by the Directors of
the Fund.
SECTION 3. J. & W. Seligman & Co. Incorporated, the Fund's
investment manager (the "Manager"), in its sole discretion, may make payments to
the Distributor for similar purposes. These payments will be made by the Manager
from its own resources, which may include the management fee that the Manager
receives from the Fund.
SECTION 4. This Plan shall continue in effect through December
31 of each year so long as such continuance is specifically approved at least
annually by vote of a majority of both (a) the Directors of the Fund and (b) the
Qualified Directors, cast in person at a meeting called for the purpose of
voting on such approval.
<PAGE>
SECTION 5. The Distributor shall provide to the Fund's
Directors, and the Directors shall review, at least quarterly, a written report
of the amounts so expended and the purposes for which such expenditures were
made.
SECTION 6. This Plan may be terminated by the Fund with
respect to any class at any time by vote of a majority of the Qualified
Directors, or by vote of a majority of the outstanding voting securities of such
class. If this Plan is terminated in respect of a class, no amounts (other than
amounts accrued but not yet paid) would be owed by the Fund to the Distributor
with respect to such class.
SECTION 7. All agreements related to this Plan shall be in
writing, and shall be approved by vote of a majority of both (a) the Directors
of the Fund and (b) the Qualified Directors, cast in person at a meeting called
for the purpose of voting on such approval, provided, however, that the identity
of a particular Service Organization executing any such agreement may be
ratified by such a vote within 90 days of such execution. Any agreement related
to this Plan shall provide:
A. That such agreement may be terminated in respect of any class
of the Fund at any time, without payment of any penalty, by
vote of a majority of the Qualified Directors or by vote of a
majority of the outstanding voting securities of the class, on
not more than 60 days' written notice to any other party to
the agreement; and
B. That such agreement shall terminate automatically in the event
of its assignment.
SECTION 8. This Plan may not be amended to increase materially
the amount of fees permitted pursuant to Section 2 hereof without the approval
of a majority of the outstanding voting securities of the relevant class and no
material amendment to this Plan shall be approved other than by vote of a
majority of both (a) the Directors of the Fund and (b) the Qualified Directors,
cast in person at a meeting called for the purpose of voting on such approval.
This Plan shall not be amended to reduce the distribution fee payable to the
Distributor pursuant to Section 2 hereof in respect of Class B shares, unless
the shareholder servicing fee payable pursuant to Section 2 hereof for
compensation to Service Organizations for providing administration, accounting
and other shareholder services has been eliminated, provided, however that the
distribution fee in respect of Class B shares may be reduced without change to
the shareholder servicing fee, if and to the extent required in order to comply
with any applicable laws or regulations, including applicable rules of the
National Association of Securities Dealers, Inc. regulating maximum sales
charges.
SECTION 9. The Fund is not obligated to pay any
administration, shareholder services or distribution expense in excess of the
fee described in Section 2 hereof, and, in the case of Class A shares, any
expenses of administration, shareholder services and distribution of Class A
shares of the Fund accrued in one fiscal year of the Fund may not be paid from
administration, shareholder services and distribution fees received from the
Fund in respect of Class A shares in any other fiscal year.
2
<PAGE>
SECTION 10. As used in this Plan, (a) the terms "assignment",
"interested person" and "vote of a majority of the outstanding voting
securities" shall have the respective meanings specified in the Act and the
rules and regulations thereunder, subject to such exemptions as may be granted
by the Securities and Exchange Commission and (b) the term "Qualified Directors"
shall mean the Directors of the Fund who are not "interested persons" of the
Fund and have no direct or indirect financial interest in the operation of this
Plan or in any agreement related to this Plan.
