SELIGMAN FINANCIAL SERVICES, INC.
AN AFFILIATE OF
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
THIS REPORT IS INTENDED ONLY FOR THE INFORMATION OF SHAREHOLDERS OR THOSE WHO
HAVE RECEIVED THE OFFERING PROSPECTUS COVERING SHARES OF CAPITAL STOCK OF
SELIGMAN COMMUNICATIONS AND INFORMATION FUND, INC., WHICH CONTAINS INFORMATION
ABOUT THE SALES CHARGES, MANAGEMENT FEE, AND OTHER COSTS. PLEASE READ THE
PROSPECTUS CAREFULLY BEFORE INVESTING OR SENDING MONEY.
EQC13c 9/96
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THIRD QUARTER REPORT
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SELIGMAN
COMMUNICATIONS
AND INFORMATION
FUND, INC.
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September 30, 1996
[LOGO]
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A Capital Gain Fund
Established in 1983
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To the Shareholders
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Seligman Communications and Information Fund improved its performance in the
third quarter of 1996, outpacing both the Standard & Poor's 500 Composite Stock
Price Index (S&P 500) and the Lipper Science and Technology Funds Average.
However, the Fund still lagged the S&P 500 and its Lipper competitors for the
nine months ended September 30, 1996. Specific performance information and a
discussion with your Portfolio Manager about the past three months begin on page
2.
In the third quarter of 1996, the economy continued to grow at a healthy
pace with virtually no inflationary repercussions and no action from the Federal
Reserve Board to alter interest rates. Reports issued in September reflected the
economy's health, showing improvement in production, new home sales, wages, and
spending.
With the lowest unemployment rate since June 1990, strong personal incomes,
interest rates far below their 1980s levels, and few signs of inflationary
pressure, consumer confidence as measured by The Conference Board rose 25% above
its January 1996 level.
In the technology sector, the third quarter witnessed wide fluctuations in
stock prices. The strength of the economy produced fears of inflation which,
coupled with concerns over future earnings, aggravated losses in July as
investors who had been participating in technology's momentum abruptly
retreated. In particular, semiconductor stocks endured a steep decline. Though
it took the remainder of the quarter for the sector to recover, Intel's strong
earnings report helped many blue-chip technology stocks regain most of the lost
ground by the end of September. Even semiconductor companies, which had
underperformed all year due to inventory problems, started to rebound. Despite
the third quarter's volatility, we remain positive on the long-term prospects
for the technology market as most technology stocks are now trading at more
reasonable valuations.
Going forward, we foresee continued, albeit moderate, economic growth and a
benign level of inflation. This environment of modest growth, combined with
relatively stable interest rates, should be beneficial for financial markets --
including the technology sector -- in the months ahead. As always, there could
be short-term volatility, but we remain confident in the long-term outlook.
As we near the end of the year, we encourage you to review your overall
investment portfolio. When doing so, you may wish to consult your financial
advisor to discuss financial issues such as tax planning, and to ensure that you
are following the best investment strategy to help you seek your financial
goals.
We thank you for your continued interest in Seligman Communications and
Information Fund, and look forward to serving your investment needs in the many
years to come.
By order of the Board of Directors,
/s/ William C. Morris
- ---------------------
William C. Morris
Chairman
/s/ Brian T. Zino
-----------------
Brian T. Zino
President
October 30, 1996
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IMPORTANT TELEPHONE NUMBERS
- ---------------------------
SHAREHOLDER
SERVICES
(800) 221-2450
RETIREMENT PLAN
SERVICES
(800) 445-1777
24-HOUR AUTOMATED
TELEPHONE ACCESS SERVICE
(800) 622-4597
1
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INTERVIEW WITH YOUR PORTFOLIO MANAGER
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----------
[PHOTO]
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Paul H. Wick
HOW DID SELIGMAN COMMUNICATIONS AND INFORMATION FUND PERFORM IN THE PAST THREE
MONTHS?
In the third quarter of 1996, the Fund's performance improved despite the July
correction in the equity markets, which significantly impacted technology
issues. The Fund regained much of the ground that was lost in the first half of
the year, and outperformed both the Standard & Poor's 500 Composite Stock Price
Index (S&P 500) and the Lipper Science and Technology Funds Average.
Year-to-date, however, Seligman Communications and Information Fund still lagged
its two benchmarks.
WHAT MARKET EVENTS AFFECTED SELIGMAN COMMUNICATIONS AND
INFORMATION FUND IN THE THIRD QUARTER?
Technology stock prices fluctuated a great deal in the three months ended
September 30, 1996. In July, a brief but sharp downturn was brought on by fears
of inflation and negative earnings reports from bellwether companies such as
Motorola. Technology stocks as a whole suffered in the sell-off as investors
moved toward defensive stocks. Unexpectedly strong earnings news, however,
contributed to the August and September recovery of the technology sector, which
ended the third quarter on a positive note. Accordingly, the Fund's performance
improved significantly during the quarter as valuations rose with the rebounding
markets.
WHAT PROMPTED THE RECOVERY IN THE TECHNOLOGY MARKET?
The recovery was spurred by several factors. First, despite overall negative
expectations for the industry, evidence of renewed strength in the global
personal computer market provided encouragement. The pick-up in the PC market
also helped stabilize the prices of commodity memory chips, such as DRAMS, which
had performed poorly earlier in the year. Second, confidence in the US
technology market was rekindled by Microsoft's prompt release of the newest
version of Windows NT and by Intel's pre-announcement of greater-than-expected
third quarter earnings. Both events were catalysts which focused investors on
technology's attractive valuations. Lastly, robust growth continued in the
communications infrastructure markets.
WHAT INVESTMENT STRATEGY DID YOU FOLLOW THIS QUARTER?
In the third quarter, we continued to reduce the portfolio's weighting in
semiconductor capital equipment stocks, given our expectation that the downturn
in semiconductor spending would be deeper, and more prolonged, than originally
anticipated. Our reduced weighting should make the Fund less vulnerable to the
lingering overcapacity issues which are still impacting the sector. In the
computer hardware/peripherals sector, we took profits in Dell Computer after
seeing substantial appreciation, and built up new positions in Compaq Computer
and Gateway 2000, both of which were more reasonably valued. We further
increased our positions in this sector, purchasing Storage Technology and Mylex.
We have increased the Fund's exposure to PC makers so that it may more fully
participate in this sector's advantageous valuations and positive growth trends.
Finally, we substantially added to positions in Glenayre Technologies and U.S.
Robotics amid panic selling during the quarter, as these companies have strong
underlying fundamentals and good long-term prospects. Going forward, we will
continue to selectively purchase technology issues that we believe have
outstanding growth and earnings prospects.
2
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WHAT IS YOUR OUTLOOK FOR THE FUND?
The outlook for Seligman Communications and Information Fund is quite good.
Technology is entering its seasonally stronger fourth quarter; there is
typically an increase in European activity, a pre-Christmas production build-up
related to new product releases, and a "use it or lose it" corporate budget
attitude. Another positive factor is the rise in the semiconductor industry's
book-to-bill ratio which is now close to 1.0 for the first time since December
of 1995 and reflects improved demand conditions. Finally, we anticipate strong
earnings reports from Intel and the top US personal computer companies. As of
the time of this writing, we have reduced the portfolio's cash position to 4%,
as we are participating in the market more aggressively. While short-term
volatility in the technology sector is a continuing possibility, the current
environment holds promise, and we are optimistic for the fourth quarter and for
the new year.
3
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Seligman Communications and Information Fund, Inc.
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<TABLE>
<CAPTION>
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS*
FOR PERIODS ENDED SEPTEMBER 30, 1996
AVERAGE ANNUAL
----------------------------------------------
CLASS B CLASS D
SINCE SINCE
INCEPTION THREE NINE ONE FIVE 10 INCEPTION
4/22/96 MONTHS MONTHS YEAR YEARS YEARS 5/3/93
------- ------ ------ ---- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A
With Sales Charge n/a 1.10% (4.20)% (18.00) 27.21% 21.21% n/a
Without Sales Charge n/a 6.14 0.59 (13.92) 28.46 21.81 n/a
Class B
With 5% CDSL (5.66)% 0.95 n/a n/a n/a n/a n/a
Without CDSL (0.70) 5.95 n/a n/a n/a n/a n/a
Class D
With 1% CDSL n/a 4.90 (1.00) (15.36) n/a n/a n/a
Without CDSL n/a 5.90 0.00 (14.57) n/a n/a 31.88%
S&P 500** 6.15+ 3.09 13.50 20.33 15.23 14.95 16.99++
LIPPER SCIENCE &
TECHNOLOGY
FUNDS AVERAGE*** 1.96+ 5.62 13.91 7.67 23.80 18.03 25.02++
<CAPTION>
NET ASSET VALUE
SEPTEMBER 30, 1996 JUNE 30, 1996 MARCH 31, 1996 DECEMBER 31, 1995
--------------------- -------------- ---------------- --------------------
<S> <C> <C> <C> <C>
CLASS A $22.12 $20.84 $20.81 $21.99
CLASS B 21.36 20.16 21.51(0) n/a
CLASS D 21.35 20.16 20.16 21.35
</TABLE>
CAPITAL GAIN INFORMATION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
CAPITAL GAIN
-------------------------------------
REALIZED UNREALIZED+++
-------------- -------------
CLASS A $0.413 $0.746
CLASS B $0.413 $0.746
CLASS D $0.413 $0.746
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A fund that concentrates its investments in one economic sector may be subject
to greater share price fluctuations than a more diversified fund.
* Return figures reflect any change in price per share and assume the
reinvestment of capital gain distributions. Return figures for Class A
shares are calculated with and without the effect of the initial 4.75%
maximum sales charge. Class A share returns reflect the effect of the 0.25%
Administration, Shareholder Services and Distribution Plan after January 1,
1993, only. Returns for Class B shares are calculated with and without the
effect of the maximum 5% contingent deferred sales load ("CDSL"), charged
only on certain redemptions made within one year of the date of purchase,
declining to 1% in the sixth year and 0% thereafter. Returns for Class D
shares are calculated with and without the effect of the 1% CDSL, charged
only on redemptions made within one year of the date of purchase. The rates
of return will vary and the principal value of an investment will
fluctuate. Shares, if redeemed, may be worth more or less than their
original cost. Past performance is not indicative of future investment
results.
** The S&P 500 is an unmanaged index that assumes reinvestment of estimated
dividends, and does not reflect fees and expenses. Investors may not invest
directly in an index.
*** The Lipper Science & Technology Funds Average is an average of 40 Science
and Technology Funds and does not reflect commissions that may be incurred
in connection with purchases or sales. Investors may not invest directly in
an average.
(0) As of April 22, 1996.
+ From April 30, 1996.
++ From April 30, 1993.
+++ Represents the per share amount of net unrealized appreciation of portfolio
securities as of September 30, 1996.
4
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SELIGMAN COMMUNICATIONS AND INFORMATION FUND, INC.
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LARGEST PORTFOLIO CHANGES
During Past Three Months
SHARES
-----------------------
HOLDINGS
ADDITIONS INCREASE 9/30/96
- --------- ----------- ----------
Cabletron Systems .................. 500,000 1,200,000
Compaq Computer .................... 700,000 700,000
Electronic Data Systems ............ 600,000 600,000
Gateway 2000 ....................... 800,000 800,000
Glenayre Technologies .............. 1,000,000 2,100,000
Infinity Broadcasting (Class A) .... 1,500,000 1,500,000
Mylex .............................. 1,800,000 1,800,000
Storage Technology ................. 1,200,000 1,500,000
U.S. Robotics ...................... 500,000 700,000
VeriFone ........................... 600,000 600,000
MAJOR PORTFOLIO HOLDINGS
At September 30, 1996
SHARES
-----------------------
HOLDINGS
REDUCTIONS DECREASE 9/30/96
- ---------- ----------- ----------
American Telephone
& Telegraph ...................... 700,000 --
Atmel .............................. 1,400,000 500,000
C-Cube Mircrosystems ............... 1,100,000 --
Dell Computer ...................... 250,000 --
Intel .............................. 200,000 1,200,000
KLA Instruments .................... 1,200,000 --
Microchip Technology ............... 900,000 1,100,000
Synopsys ........................... 420,000 1,380,000
Tektronix .......................... 850,000 --
Zilog .............................. 1,294,000 200,000
Largest portfolio changes from the previous quarter to the current quarter are
based on cost of purchases and proceeds from sales of securities.
SECURITY VALUE
- -------- ------------
Cisco Systems ................... $142,743,750
EMC ............................. 117,650,000
Intel ........................... 114,525,000
3Com ............................ 84,087,500
Parametric Technology ........... 84,043,750
Cabletron Systems ............... 82,050,000
Xilinx .......................... 81,450,000
Seagate Technology .............. 72,637,500
Synopsys ........................ 63,652,500
Storage Technology .............. 56,812,500
MAJOR SECTORS
At September 30, 1996
[The following table represents a pie chart in the printed piece.]
Computer Hardware/Peripherals ....... 19.6%
Communications Infrastructure ....... 19.4%
Semiconductors ...................... 15.8%
Computer Software ................... 15.5%
Short-Term Holdings ................. 8.2%
Semiconductor Capital Equipment ..... 5.8%
Contract Manufacturing/Circuit Boards 3.8%
Information Services ................ 3.2%
Other ............................... 8.7%
5
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PORTFOLIO OF INVESTMENTS (unaudited)
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SHARES VALUE
------ -----
COMMON STOCKS 91.8%
COMMUNICATIONS
INFRASTRUCTURE 19.4%
Bay Networks* .................. 1,500,000 $ 40,875,000
Black Box* ..................... 116,200 3,849,125
Cabletron Systems* ............. 1,200,000 82,050,000
CIDCO* ......................... 1,500,000 30,937,500
Cisco Systems* ................. 2,300,000 142,743,750
Digi International* ............ 500,000 7,187,500
ECI Telecommunications ......... 2,000,000 42,000,000
Fore Systems* .................. 300,000 12,431,250
Glenayre Technologies* ......... 2,100,000 48,037,500
Network General* ............... 1,300,000 29,900,000
Oak Industries* ................ 600,000 19,950,000
3Com* .......................... 1,400,000 84,087,500
U.S. Robotics .................. 700,000 45,325,000
-------------
589,374,125
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COMPUTER HARDWARE/
PERIPHERALS 19.6%
Adaptec* ....................... 400,000 23,975,000
Compaq Computer* ............... 700,000 44,887,500
Electronics for Imaging* ....... 450,000 32,512,500
EMC* ........................... 5,200,000 117,650,000
Gateway 2000* .................. 800,000 38,350,000
In Focus Systems* .............. 500,000 7,125,000
Komag* ......................... 1,900,000 40,137,500
Lexmark International
Group (Class A)* ............. 2,300,000 46,862,500
Mylex* ......................... 1,800,000 28,350,000
Seagate Technology* ............ 1,300,000 72,637,500
Storage Technology* ............ 1,500,000 56,812,500
Sun Microsystems* .............. 192,900 11,971,856
Vicor* ......................... 290,000 7,195,625
Western Digital* ............... 500,000 20,062,500
Xerox .......................... 900,000 48,262,500
-------------
596,792,481
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COMPUTER SOFTWARE 15.5%
Activision* .................... 1,000,000 14,187,500
Ansys* ......................... 800,000 9,300,000
Applix* ........................ 100,000 2,650,000
BMC Software ................... 300,000 23,887,500
Cadence Design Systems* ........ 900,000 32,175,000
Hummingbird
Communications* .............. 400,000 11,450,000
Informix* ...................... 1,300,000 36,318,750
Mentor Graphics* ............... 3,400,000 30,387,500
Microsoft* ..................... 350,000 46,134,375
Oracle Systems* ................ 1,200,000 51,075,000
PC Docs Group International* ... 300,000 4,087,500
Parametric Technology* ......... 1,700,000 84,043,750
Sterling Software* ............. 300,000 22,912,500
Structural Dynamics Research* .. 1,200,000 28,800,000
Synopsys* ...................... 1,380,000 63,652,500
3DO* ........................... 2,200,000 12,100,000
-------------
473,161,875
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CONTRACT MANUFACTURING/
CIRCUIT BOARDS 3.8%
ADFlex Solutions* .............. 750,000 8,156,250
Altron* ........................ 900,000 12,375,000
Hadco* ......................... 1,050,000 33,534,375
Merix * ........................ 600,000 11,700,000
Praegitzer Industries* ......... 500,000 4,656,250
Sanmina* ....................... 200,000 8,100,000
SCI Systems* ................... 650,000 36,603,125
-------------
115,125,000
-------------
INFORMATION SERVICES 3.2%
Automatic Data Processing ...... 450,000 19,631,250
Electronic Data Systems ........ 600,000 36,825,000
MetroMail* ..................... 700,000 15,137,500
VeriFone* ...................... 600,000 26,850,000
-------------
98,443,750
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INTERNET/ON-LINE 2.1%
America Online* ................ 1,400,000 49,875,000
CompuServe* .................... 1,000,000 13,625,000
-------------
63,500,000
-------------
MEDIA 2.1%
Cox Radio* ..................... 129,000 2,838,000
Infinity Broadcasting (Class A)* 1,500,000 47,250,000
Leap Group* .................... 88,000 902,000
New World Communications
Group (Class A)* ............. 300,000 6,918,750
Univision Communications* ...... 66,700 2,234,450
Young Broadcasting (Class A)* .. 111,000 3,607,500
-------------
63,750,700
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PUBLISHING 1.3%
News Corp. (ADRs -- Voting
Preference Shares) ........... 2,000,000 34,000,000
Scholastic* .................... 70,000 5,057,500
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39,057,500
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6
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September 30, 1996
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SHARES VALUE
------ -----
SEMICONDUCTORS 15.8%
Analog Devices* ................ 1,000,000 $ 27,125,000
Atmel* ......................... 500,000 15,406,250
ESS Technology* ................ 900,000 15,356,250
Intel .......................... 1,200,000 114,525,000
International Rectifier* ....... 1,850,000 25,668,750
Lattice Semiconductor* ......... 1,950,000 56,428,125
Maxim Integrated Products* ..... 1,550,000 54,928,125
Microchip Technology* .......... 1,100,000 41,387,500
S3* ............................ 1,900,000 37,643,750
Tower Semiconductor* ........... 1,000,000 7,250,000
Xilinx* ........................ 2,400,000 81,450,000
Zilog* ......................... 200,000 3,825,000
-------------
480,993,750
-------------
SEMICONDUCTOR CAPITAL
EQUIPMENT 5.8%
Asyst Technologies* ............ 500,000 9,750,000
Credence Systems* .............. 1,800,000 28,125,000
Electroglas* ................... 1,000,000 13,812,500
Etec Systems* .................. 300,000 10,275,000
Fusion Systems* ................ 590,000 10,472,500
Novellus Systems* .............. 1,000,000 42,312,500
Silicon Valley Group* .......... 370,000 6,544,375
Tencor Instruments* ............ 2,100,000 38,062,500
Ultratech Stepper* ............. 850,000 15,990,625
-------------
175,345,000
-------------
TELECOMMUNICATIONS 1.0%
Frontier ....................... 500,000 13,312,500
Metromedia International
Group* ....................... 1,000,000 10,625,000
Millicom International Cellular* 200,000 8,100,000
-------------
32,037,500
-------------
SHARES OR
PRIN. AMT.
----------
MISCELLANEOUS 2.2%
Cognex* ........................ 2,100,000shs. $ 34,387,500
Electro Scientific Industries* . 800,000 14,900,000
VanStar* ....................... 700,000 16,975,000
-------------
66,262,500
-------------
TOTAL COMMON STOCKS
(Cost $2,690,324,753) ........ 2,793,844,181
-------------
SHORT-TERM
HOLDINGS 8.2%
Canadian Imperial Bank of
Commerce, Grand Cayman,
Fixed Time Deposit,
5 3/4%, 10/1/1996 ............ 100,000,000 100,000,000
National Westminster Bank,
Nassau, Fixed Time Deposit,
5 3/4%, 10/1/1996 ............ 100,000,000 100,000,000
Union Bank of Switzerland,
Grand Cayman,
Fixed Time Deposit
5 3/8%, 10/1/1996 ............ 49,500,000 49,500,000
-------------
TOTAL SHORT-TERM HOLDINGS
(Cost $249,500,000) .......... 249,500,000
-------------
TOTAL INVESTMENTS 100.0%
(Cost $2,939,824,753) ........ 3,043,344,181
OTHER ASSETS
LESS LIABILITIES ............. (988,684)
-------------
NET ASSETS 100.0% .............. 3,042,355,497
==============
- ----------
* Non-income producing security
Note: Investments in stocks are valued at current market values or, in their
absence, at fair values determined in accordance with procedures approved by the
Board of Directors. Securities traded on national exchanges are valued at last
sales prices or, in their absence and in the case of over-the-counter
securities, a mean of bid and asked prices. Short-term holdings maturing in 60
days or less are valued at amoritized cost.
7
