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Seligman
High
Income
Fund
Series
-----------------------------------------------------------------
10th Annual Report
1994
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J&WS
<PAGE>
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To the Shareholders
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We are pleased to provide you with Seligman High Income Fund Series' Annual
Report, and to update you on the U.S. Government Securities Series and the
High-Yield Bond Series for the year ended December 31, 1994.
Economic Comment
Looking back on 1994, the one generalization that can be made with
confidence is that it was a turbulent and trying year for investors. The Federal
Reserve Board (FRB) exhibited an aggressive stance against inflation, putting
through six short-term interest rate hikes by the end of the year. The federal
funds rate--the interest rate charged for interbank loans--increased from 3.00%
on January 3, 1994, to 5.50% on January 3, 1995, and the discount rate--the
interest rate the FRB charges member banks--rose from 3.00% on December 31,
1993, to 4.75% on December 31, 1994. These increases reverberated into the
fixed-income markets and sent the benchmark 30-year Treasury bond yield from
6.35% on December 31, 1993, up to 7.88% at December 31, 1994. Due to the inverse
relationship between price and yield of fixed-income securities, the prices of
these securities declined during the period.
U.S. Government Securities Series
For your Series' Class A shares, net asset value per share was $6.47 at
December 31, compared to $6.71 at June 30, and $7.18 a year ago. Dividends
totaling $0.4386 per share were paid during the year. The total return, assuming
the investment of all dividends paid in additional shares, was -0.26% for the
six months and -3.88% for the 12 months ended December 31. Current annualized
yield for the 30 days ended December 31 was 6.41%, calculated at the maximum
offering price of $6.79 per share on December 31.
For your Fund's Class D shares, net asset value per share was $6.48 at
December 31, compared to $6.72 at June 30, and $7.20 a year ago. Dividends
totaling $0.3647 per share were paid during the year. The total return, assuming
the investment of all dividends paid in additional shares, was -0.83% for the
six months and -5.05% for the 12 months ended December 31. Current annualized
yield for the 30 days ended December 31 was 5.23%, calculated at the net asset
value on December 31.
The U.S. Government Securities Series' net assets totaled $61 million at
year end.
High-Yield Bond Series
For your Series' Class A shares, net asset value per share was $6.35 at
December 31, compared to $6.58 at June 30, and $6.94 a year ago. Dividends
totaling $0.6415 per share were paid during the year. The total return, assuming
the investment of all dividends paid in additional shares, was 1.49% for the six
months and 0.78% for the 12 months ended December 31. Current annualized yield
for the 30 days ended December 31 was 10.31%, calculated at the maximum offering
price of $6.67 per share on December 31.
For your Series' Class D shares, net asset value per share was $6.35 at
December 31, compared to $6.59 at June 30, and $6.94 a year ago. Dividends
totaling $0.5703 per share were paid during the year. The total return, assuming
the investment of all dividends paid in additional shares, was 0.77% for the six
months and -0.30% for the 12 months ended December 31. Current annualized yield
for the 30 days ended December 31 was 9.73%, calculated at the net asset value
on December 31.
The High-Yield Bond Series' net assets totaled $68 million at year end.
Please refer to page 3 for discussions with your Portfolio Managers about
your Series' performance in 1994, followed by the charts and tables that analyze
longer-term performance.
By order of the Trustees,
/s/ William C. Morris
William C. Morris
Chairman
/s/ Ronald T. Schroeder
Ronald T. Schroeder
President
February 3, 1995
1
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Seligman High Income Fund Series
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HIGHLIGHTS December 31, 1994
<TABLE>
<CAPTION>
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U.S. Government High-Yield
Securities Series Bond Series
-------------------------------------------------------------------------------
Class A Class D Class A Class D
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets (millions) $54.7 $6.1 $59.0 $9.2
- ---------------------------------------------------------------------------------------------------------------
Yield* 6.41% 5.23% 10.31% 9.73%
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Dividends** $0.4414 $0.3662 $0.6447 $0.5731
- ---------------------------------------------------------------------------------------------------------------
Net asset value per share $6.47 $6.48 $6.35 $6.35
- ---------------------------------------------------------------------------------------------------------------
Maximum offering
price per share $6.79 $6.48 $6.67 $6.35
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Holdings by U.S. Treasury Securities 94.7% Corporate Bonds 90.0%
Market Sector Net Cash & Short- Convertible Bonds 2.6
Term Holdings 5.3 Net Cash & Short-
Term Holdings 7.4
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Weighted Average
Maturity 12.3 years 8.2 years
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Current yield representing the annualized yield based upon maximum offering
price for the 30-day period ended December 31, 1994.
** Represents per share amount paid or declared for the year ended December
31, 1994.
Note: Results reflect past performance, which is not indicative of future
results. The yield has been computed in accordance with SEC regulations and will
vary, and the principal value of an investment will fluctuate. Shares, if
redeemed, may be worth more or less than their original cost.
2
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Performance Overview -- Seligman U.S. Government Securities Series
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Your Portfolio Manager
Leonard J. Lovito is a Vice President of J. & W. Seligman & Co. Incorporated and
Portfolio Manager of Seligman U.S. Government Securities Series. Mr. Lovito also
serves as Portfolio Manager of Seligman Cash Management Fund. Mr. Lovito joined
Seligman in 1984 as a fixed-income trader and has more than 11 years of
fixed-income trading and portfolio management experience.
Economic Factors Affecting Seligman U.S. Government
Securities Series
"Stronger economic growth and anticipation of higher
inflation, which prompted the Federal Reserve Board to raise
[PICTURE] short-term interest rates six times, adversely
affected all bond funds in 1994. However, because your
Series held issues with shorter maturities than its peers,
it outperformed the average return of all Government bond
funds for the year."
Your Manager's Investment Strategy
"Once the Federal Reserve Board raised short-term interest rates for the first
time on February 4, 1994, we began to shorten the maturity of your Series'
holdings. This was done in order to lessen the impact of the rate increase, as
short-term bonds react with less volatility than long-term bonds in a period of
changing interest rates. Shorter maturities were kept throughout the year,
resulting in your Series' stronger relative performance. In addition, we favored
U.S. Treasury issues over GNMA securities, as we felt liquidity was somewhat
more important than yield, given the volatile investment environment. Finally,
we did not invest in `risky' derivative securities as a means of achieving
greater yields, nor are we permitted to do so under your Series' investment
policies."
Looking Ahead
"Because the Federal Reserve Board is expected to continue to raise short-term
interest rates until it believes they are high enough to slow the economy's
growth to a non-inflationary pace, the short term may remain difficult for bond
markets. However, the higher interest rates should slow the economy's growth in
1995, resulting in a stabilized bond market in which valuations can begin to
recover. In this situation, we may then begin to purchase longer-term bonds to
take advantage of the possible increase in prices."
3
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Performance Comparison Chart and Table December 31, 1994
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This chart compares a $10,000 hypothetical investment made in Seligman U.S.
Government Securities Series Class A shares, with and without the maximum
initial sales charge of 4.75%, since inception on March 11, 1985, through
December 31, 1994, to a $10,000 investment made in the Lehman Brothers
Government/ Mortgage Index (Lehman Index) for the same period. The performance
of Seligman U.S. Government Securities Series Class D shares is not shown in
this chart, but is included in the table below. It is important to keep in mind
that the Index excludes the effect of any fees or sales charges.
[The Table below was represented as a graph in the printed material]
Lehman Brothers
Government/
with sales charge without sales charge Mortgage Index
3/31/85 $ 9,520 $10,000 $10,000
6/30/85 $10,460 $10,987 $10,820
9/30/85 $10,585 $11,118 $11,058
12/31/85 $11,742 $12,334 $11,886
3/31/86 $13,301 $13,972 $12,793
6/30/86 $13,349 $14,022 $12,943
9/30/86 $13,304 $13,975 $13,261
12/31/86 $13,629 $14,316 $13,663
3/31/87 $13,587 $14,272 $13,867
6/30/87 $12,878 $13,527 $13,642
9/30/87 $12,259 $12,877 $13,301
12/31/87 $13,242 $13,910 $14,052
3/31/88 $13,806 $14,502 $14,561
6/30/88 $13,940 $14,643 $14,733
9/30/88 $14,152 $14,865 $15,014
12/31/88 $14,281 $15,001 $15,118
3/31/89 $14,299 $15,020 $15,287
6/30/89 $15,059 $15,818 $16,504
9/30/89 $15,153 $15,917 $16,686
12/31/89 $15,602 $16,389 $17,328
3/31/90 $15,220 $15,987 $17,195
6/30/90 $15,657 $16,446 $17,814
9/30/90 $15,746 $16,540 $18,003
12/31/90 $16,597 $17,434 $18,960
3/31/91 $16,862 $17,712 $19,431
6/30/91 $17,104 $17,967 $19,732
9/30/91 $18,041 $18,950 $20,843
12/31/91 $18,928 $19,883 $21,893
3/31/92 $18,525 $19,459 $21,580
6/30/92 $19,243 $20,213 $22,439
9/30/92 $20,029 $21,039 $23,390
12/31/92 $20,023 $21,032 $23,458
3/31/93 $20,599 $21,638 $24,387
6/30/93 $21,080 $22,142 $25,002
9/30/93 $21,586 $22,675 $25,612
12/31/93 $21,515 $22,600 $25,637
3/31/94 $21,072 $22,135 $24,927
6/30/94 $20,735 $21,780 $24,693
9/30/94 $20,789 $21,837 $24,836
12/31/94 $20,681 $21,724 $24,930
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The table below shows the average annual total returns for the one-year,
five-year, and since-inception periods through December 31, 1994, for Seligman
U.S. Government Securities Series Class A shares, with and without the maximum
initial sales charge of 4.75%, and for the Lehman Index. Also included in the
table are the average annual total returns for the one-year and since-inception
periods through December 31, 1994, for Seligman U.S. Government Securities
Series Class D shares, with and without the effect of the 1% contingent deferred
sales load ("CDSL") imposed on shares redeemed within one year of purchase, and
the Lehman Index. Average
<TABLE>
<CAPTION>
Annual Total Returns
Since Since
One Five Inception One Inception
Year Years 3/11/85 Year 9/21/93
---- ----- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Seligman U.S. Government Seligman U.S. Government
Securities Series+ Securities Series+
Class A with sales charge (8.47)% 4.78% 7.68% Class D with CDSL (5.95)% N/A
Class A without sales charge (3.88) 5.80 8.23 Class D without CDSL (5.05) (4.46)%
Lehman Index (2.76) 7.55 9.81* Lehman Index (2.76) (2.13)**
*Calculated from 3/31/85. **Calculated from 9/30/93.
</TABLE>
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THE PERFORMANCE OF CLASS 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. Performance data quoted represent changes in
prices and assume that all distributions within the period are invested in
additional shares. The investment return and principal value of an investment
will fluctuate so that shares, if redeemed, may be worth more or less than their
original cost. Past performance is not indicative of future investment results.
+ Although the payment of principal and interest with respect to certain
long-term securities held in the U.S. Government Securities Series is guaranteed
by the U.S. Government or its agencies, the rate of return will vary and the
principal value of an investment in the Series will fluctuate.
4
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Performance Overview -- Seligman High-Yield Bond Series
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Your Portfolio Manager
Daniel Charleston is a Vice President of J. & W. Seligman & Co. Incorporated and
has served as Portfolio Manager of Seligman High-Yield Bond Series since
November 1988. Dan joined Seligman in 1987 as a Portfolio Assistant with
responsibility for valuation analysis of U.S. Treasury instruments and
mortgage-backed securities.
Economic Factors Affecting Seligman High-Yield Bond Series
"The Federal Reserve Board's decision to tighten monetary
policy by raising short-term interest rates had a negative
impact on fixed-income markets in 1994. However, the
[PICTURE] high-yield market in general, and your Series in
particular, outperformed other fixed-income asset classes on
a relative basis."
Your Manager's Investment Strategy
"As a result of several successful strategies, your Series finished 1994 as one
of the top-performing high-yield bond mutual funds. Your portfolio's assets were
significantly invested in `single B' rated issues whose market valuations rely
on the issuing company's financial performance more than the movement of
interest rates. Therefore, these issues are less susceptible to decreasing
values in a rising interest rate environment. In addition, decisions to maintain
a low weighting in zero coupon bonds and to avoid foreign markets contributed to
your Series' strong performance."
Individual Sector Performance
"The continued consolidation in the health care industry resulted in the
improved credit rating of several health care issuers. Many high-yield health
care companies were acquired by investment-grade strategic buyers, leading to
the improvement of their credit ratings. An example is OrNda HealthCorp, the
Series' largest holding, which was upgraded to a `B2' rating from a `B3' rating
due to the company's improved financials. Within cyclical issues, producers of
paper products are enjoying very favorable industry conditions; we continue to
view the credit prospects of both Stone Container and Gaylord Container as very
positive.
"The gaming sector, on the other hand, experienced a turbulent year because of
concerns of overexpansion in riverboat properties--primarily surrounding the
Mississippi Gulf Coast region. Atlantic City issues also performed poorly due to
the threat of an increase in competition from the growing number of gaming
properties in the surrounding areas. Due to poor financial performance and
increased pressure on valuations, we eliminated several gaming positions from
the portfolio."
Looking Ahead
"We believe the high-yield market to be attractive based on its current premium
to U.S. Treasuries, especially within `single B' rated issues. In the year
ahead, we will continue to screen the `single B' rated segment of the market for
fundamentally sound credits with the prospect for future appreciation."
5
<PAGE>
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Performance Comparison Chart and Table December 31, 1994
- --------------------------------------------------------------------------------
This chart compares a $10,000 hypothetical investment made in Seligman
High-Yield Bond Series Class A shares, with and without the maximum initial
sales charge of 4.75%, since inception on March 11, 1985, through December 31,
1994, to a $10,000 investment made in the Merrill Lynch Master Index and the
Lipper High-Yield Index for the same period. The performance of Seligman
High-Yield Bond Series Class D shares is not shown in this chart, but is
included in the table below. It is important to keep in mind that the Indices
exclude the effect of any fees or sales charges.
[The Table below was represented as a graph in the printed material]
<TABLE>
<CAPTION>
High Income Fund High Income Fund Merrill Lynch Lipper
with sales charge without sales charge Master Index High-Yield Index
----------------- -------------------- ------------ ----------------
<S> <C> <C> <C> <C>
3/31/85 $ 9,507 $ 9,986 $10,000 $10,000
6/30/85 $10,276 $10,794 $10,793 $10,675
9/30/85 $10,623 $11,158 $11,171 $10,942
12/31/85 $11,217 $11,783 $11,847 $11,603
3/31/86 $12,056 $12,664 $12,706 $12,329
6/30/86 $12,475 $13,104 $13,187 $12,731
9/30/86 $12,653 $13,291 $13,363 $12,718
12/31/86 $12,982 $13,637 $13,783 $13,068
3/31/87 $13,574 $14,259 $14,566 $13,915
6/30/87 $13,222 $13,888 $14,380 $13,783
9/30/87 $12,837 $13,484 $14,268 $13,978
12/31/87 $13,378 $14,052 $14,427 $14,255
3/31/88 $14,019 $14,725 $15,199 $15,061
6/30/88 $14,346 $15,070 $15,615 $15,523
9/30/88 $14,549 $15,282 $15,991 $15,812
12/31/88 $14,899 $15,651 $16,370 $16,115
3/31/89 $15,183 $15,948 $16,713 $16,421
6/30/89 $15,765 $16,560 $17,312 $16,926
9/30/89 $15,773 $16,568 $17,314 $16,700
12/31/89 $15,472 $16,252 $17,063 $16,034
3/31/90 $14,896 $15,647 $16,709 $15,425
6/30/90 $15,408 $16,185 $17,428 $16,090
9/30/90 $14,750 $15,493 $16,371 $14,888
12/31/90 $14,346 $15,069 $16,321 $14,359
3/31/91 $16,099 $16,911 $18,545 $16,483
6/30/91 $16,983 $17,839 $19,687 $17,614
9/30/91 $18,072 $18,983 $20,845 $18,818
12/31/91 $18,750 $19,696 $21,964 $19,759
3/31/92 $20,466 $21,498 $23,622 $21,427
6/30/92 $21,059 $22,121 $24,474 $22,100
9/30/92 $22,213 $23,333 $25,589 $22,982
12/31/92 $22,514 $23,649 $25,953 $23,246
3/31/93 $24,090 $25,305 $27,566 $24,817
6/30/93 $25,106 $26,371 $28,666 $26,021
9/30/93 $25,548 $26,836 $29,394 $26,526
12/31/93 $26,835 $28,188 $30,413 $27,757
3/31/94 $26,673 $28,018 $29,850 $27,475
6/30/94 $26,648 $27,991 $29,504 $27,105
9/30/94 $26,768 $28,117 $29,905 $27,089
12/31/94 $27,045 $28,408 $30,058 $26,726
</TABLE>
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The table below shows the average annual total returns for the one-year,
five-year, and since-inception periods through December 31, 1994, for Seligman
High-Yield Bond Series Class A shares, with and without the maximum initial
sales charge of 4.75%, the Merrill Lynch Master Index, and the Lipper High-Yield
Index. Also included in the table are the average annual total returns for the
one-year and since-inception periods through December 31, 1994, for Seligman
High-Yield Bond Series Class D shares, with and without the effect of the 1%
contingent deferred sales load ("CDSL") imposed on shares redeemed within one
year of purchase, the Merrill Lynch Master Index, and the Lipper High-Yield
Index.
<TABLE>
<CAPTION>
Average Annual Total Returns
Since Since
One Five Inception One Inception
Year Years 3/11/85 Year 9/21/93
---- ----- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Seligman High-Yield Bond Series Seligman High-Yield Bond Series
Class A with sales charge (4.06)% 10.73% 10.67% Class D with CDSL (1.21)% N/A
Class A without sales charge 0.78 11.82 11.23 Class D without CDSL (0.30) 3.29%
Merrill Lynch Master Index (1.17) 11.99 11.94* Merrill Lynch Master Index (1.17) 1.80**
Lipper High-Yield Index (3.71) 10.76 10.60* Lipper High-Yield Index (3.71) 0.60**
*Calculated from 3/31/85. **Calculated from 9/30/93.
</TABLE>
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THE PERFORMANCE OF CLASS 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. Performance data quoted represent changes in
prices and assume that all distributions within the periods are invested in
additional shares. The investment return and principal value of an investment
will fluctuate so that shares, if redeemed, may be worth more or less than their
original stated cost. Past performance is not indicative of future investment
results.
6
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Portfolios of Investments December 31, 1994
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U.S. GOVERNMENT SECURITIES SERIES
Principal
Amount Value
--------- -----------
U.S. Treasury Securities--94.7%
U.S. Treasury Bonds:
8 1/2%, due 2/15/2020 .......................... $10,000,000 $10,531,250
8 7/8%, due 2/15/2019 .......................... 15,000,000 16,368,750
U.S. Treasury Notes:
8 3/4%, due 10/15/1997 ......................... 15,000,000 15,346,875
8 1/2%, due 4/15/1997 .......................... 10,000,000 10,153,120
9 3/8%, due 4/15/1996 .......................... 5,000,000 5,114,060
-----------
Total U.S. Treasury Securities
(Cost $57,980,313) ............................. 57,514,055
Repurchase Agreement--3.4%
(Cost $2,085,000) .............................. 2,085,000
-----------
Total Investments--98.1%
(Cost $60,065,313) ............................. 59,599,055
Other Assets Less Liabilities--1.9% ............... 1,177,086
-----------
Net Assets--100.0% ................................ $60,776,141
===========
HIGH-YIELD BOND SERIES
Corporate Bonds--90.0%
Aluminum--2.2%
Kaiser Aluminum Corp. 12 3/4%, due 2/1/2003 ....... $ 1,500,000 $ 1,511,250
-----------
Automotive and Related--2.2%
SPX Corp. 11 3/4%, due 6/1/2002 .................. 1,500,000 1,501,875
-----------
Broadcasting--8.1%
Allbritton Communications Co. 11 1/2%, due 8/15/2004 1,500,000 1,503,750
Chancellor Communications Corp. 12 1/2%,
due 10/1/2004 .................................. 1,000,000 985,000
SFX Broadcasting, Inc. 11 3/8%, due 10/1/2000 ..... 1,500,000 1,492,500
Young Broadcasting, Inc. 11 3/4%, due 11/15/2004 .. 1,500,000 1,522,500
-----------
5,503,750
-----------
Building Materials--1.4%
Associated Materials, Inc. 11 1/2%, due 8/15/2003 . 1,000,000 945,000
-----------
Cable Systems--6.6%
Cablevision Systems, Inc. 10 3/4%, due 4/1/2004 ... 1,500,000 1,507,500
Comcast Corp. 10 5/8%, due 7/15/2012 .............. 1,500,000 1,473,750
Continental Cablevision, Inc. 11%, due 6/1/2007 ... 1,500,000 1,530,000
-----------
4,511,250
-----------
Cellular--1.0%
Pricellular Corp. 0%/14%, due 11/15/2001 .......... 1,000,000 662,500
-----------
Chemicals--2.0%
Arcadian Partners L.P. 10 1/4%, due 5/1/2005 ...... 1,500,000 1,402,500
-----------
- ----------
See notes to financial statements.
7
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Portfolios of Investments (continued)
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HIGH-YIELD BOND SERIES (continued)
Principal
Amount Value
--------- -----------
Container--2.3%
Silgan Corp. 11 3/4%, due 6/15/2002 ............... $ 1,500,000 $ 1,552,500
-----------
Environmental Services--2.1%
Allied Waste Industries 10 3/4%, due 2/1/2004 ..... 1,500,000 1,402,500
-----------
Financial Services--4.0%
Bell & Howell Co. 10 3/4%, due 10/1/2002 .......... 1,500,000 1,417,500
Comdata Network, Inc. 13 1/4%, due 12/15/2002 ..... 1,250,000 1,350,000
-----------
2,767,500
-----------
Food Products--2.8%
Pilgrim's Pride Corp. 10 7/8%, due 8/1/2003 ....... 2,000,000 1,900,000
-----------
Food Wholesale--2.1%
Di Giorgio Corp. 12%, due 2/15/2003 ............... 1,500,000 1,410,000
-----------
Gaming/Hotel--10.5%
Aztar Corp. 133/4%, due 10/1/2004 ................. 2,500,000 2,537,500
Casino America, Inc. 11 1/2%, due 11/15/2001 ...... 1,500,000 1,275,000
Showboat, Inc. 9 1/4%, due 5/1/2008 ............... 1,000,000 850,000
Showboat, Inc. 13%, due 8/1/2009 .................. 1,000,000 960,000
Trump Plaza Funding, Inc. 10 7/8%, due 6/15/2001 .. 2,000,000 1,530,000
-----------
7,152,500
-----------
Health Care--7.5%
Dade International 13%, due 2/1/2005* ............. 1,500,000 1,511,250
Hillhaven Corp. 10 1/8%, due 9/1/2001 ............. 1,000,000 1,002,500
OrNda HealthCorp 12 1/4%, due 5/15/2002 ........... 1,500,000 1,597,500
OrNda HealthCorp 11 3/8%, due 8/15/2004 ........... 1,000,000 1,040,000
-----------
5,151,250
-----------
Home Building and Land Development--2.1%
Continental Homes Holding Corp. 12%, due 8/1/1999 . 1,500,000 1,462,500
-----------
Leisure--3.5%
Icon Health & Fitness, Inc. 13%, due 7/15/2002* ... 1,000,000 980,000
Roadmaster Industries 11 3/4%, due 7/15/2002 ...... 1,500,000 1,408,125
-----------
2,388,125
-----------
Manufacturing--5.1%
Applied Extrusion Technologies 11 1/2%, due 4/1/2002 1,500,000 1,492,500
IMO Industries 12%, due 11/1/2001 ................. 2,000,000 2,010,000
-----------
3,502,500
-----------
Motion Pictures--1.5%
Act III Theatres, Inc. 11 7/8%, due 2/1/2003 ...... 1,000,000 1,040,000
-----------
- ----------
* Rule 144A security.
See notes to financial statements.
8
<PAGE>
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December 31, 1994
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HIGH-YIELD BOND SERIES (continued)
Principal
Amount Value
--------- -----------
Paper and Packaging--9.9%
Crown Packaging Ltd. 10 3/4%, due 11/1/2000 ....... $ 1,500,000 $ 1,455,000
Gaylord Container 0%/12 3/4%, due 5/15/2005 ....... 2,000,000 1,775,000
Stone Container 10 3/4%, due 10/1/2002 ............ 1,500,000 1,500,000
Stone Container 11 1/2%, due 10/1/2004 ............ 1,000,000 1,005,000
Warren (S.D.) Co. 12%, due 12/15/2004* ............ 1,000,000 1,022,500
-----------
6,757,500
-----------
Publishing--5.2%
Affinity Group, Inc. 11 1/2%, due 10/15/2003 ...... 1,000,000 960,000
American Media Operations, Inc. 11 5/8%,
due 11/15/2004 ................................. 1,000,000 1,025,000
Marvel Holdings, Inc. 0%/11 1/4%, due 4/15/1998 ... 2,500,000 1,550,000
-----------
3,535,000
-----------
Restaurants--2.1%
Flagstar Corp. 10 3/4%, due 9/15/2001 ............. 1,500,000 1,406,250
-----------
Retailing--2.1%
Finlay Fine Jewelry Corp. 10 5/8%, due 5/1/2003 ... 1,500,000 1,421,250
-----------
Supermarkets--3.7%
Mayfair Supermarkets, Inc. 11 3/4%, due 3/30/2003 . 1,500,000 1,252,500
Pathmark Stores, Inc. 0%/10 1/4%, due 11/1/2003 ... 2,500,000 1,287,500
-----------
2,540,000
-----------
Total Corporate Bonds (Cost $62,795,477) .......... 61,427,500
-----------
Convertible Bonds--2.6% (Cost $1,710,000)
Computers and Related Services--2.6%
EMC Corp. 4 1/4%, due 1/1/2001 .................... 1,500,000 1,816,875
-----------
Short-Term Holdings--5.0% (Cost $3,395,000)
Bank of Nova Scotia, Grand Cayman, Fixed Time
Deposit, 5 1/2%, due 1/3/1995 .................. 3,395,000 3,395,000
-----------
Total Investments--97.6% (Cost $67,900,477) ....... 66,639,375
Other Assets Less Liabilities--2.4% ............... 1,642,709
-----------
Net Assets--100.0% ................................ $68,282,084
===========
- ----------
*Rule 144A security.
See notes to financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Statements of Assets and Liabilities December 31, 1994
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Government High-Yield
Securities Series Bond Series
----------------- -----------
<S> <C> <C>
Assets:
Investments, at value (see portfolios of investments):
Long-term holdings .......................................................... $ 57,514,055 $ 63,244,375
Short-term holdings ......................................................... 2,085,000 3,395,000
------------ ------------
59,599,055 66,639,375
Cash ........................................................................... 62,808 55,869
Interest receivable ............................................................ 1,388,349 1,613,095
Receivable for Shares of Beneficial Interest sold .............................. 115,075 544,049
Expenses prepaid to shareholder service agent .................................. 21,513 27,249
Other .......................................................................... 2,323 8,984
------------ ------------
Total Assets ................................................................... 61,189,123 68,888,621
------------ ------------
Liabilities:
Payable for Shares of Beneficial Interest repurchased .......................... 151,729 257,766
Dividends payable .............................................................. 146,018 252,725
Accrued expenses, taxes, and other ............................................. 115,235 96,046
------------ ------------
Total Liabilities .............................................................. 412,982 606,537
------------ ------------
Net Assets ..................................................................... $ 60,776,141 $ 68,282,084
============ ============
Composition of Net Assets:
Shares of Beneficial Interest, at par (unlimited shares authorized; $.001 par
value; 9,396,187 and 10,752,623 shares outstanding):
Class A ..................................................................... $ 8,461 $ 9,297
Class D ..................................................................... 935 1,456
Additional paid-in capital ..................................................... 88,793,725 82,882,733
Accumulated net realized loss .................................................. (27,560,722) (13,350,300)
Net unrealized depreciation of investments ..................................... (466,258) (1,261,102)
------------ ------------
Net Assets ..................................................................... $ 60,776,141 $ 68,282,084
============ ============
Net Assets:
Class A ........................................................................ $ 54,713,957 $ 59,032,776
Class D ........................................................................ $ 6,062,184 $ 9,249,308
Shares of Beneficial Interest outstanding:
Class A ........................................................................ 8,460,817 9,297,066
Class D ........................................................................ 935,370 1,455,557
Net Asset Value per share:
Class A ........................................................................ $6.47 $6.35
===== =====
Class D ........................................................................ $6.48 $6.35
===== =====
</TABLE>
See notes to financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Statements of Operations For the year ended December 31, 1994
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Government High-Yield
Securities Series Bond Series
----------------- -----------
<S> <C> <C>
Investment Income:
Interest ......................................................................... $ 5,138,684 $ 7,160,270
----------- -----------
Expenses:
Management fees .................................................................. 338,362 329,652
Distribution and service fees .................................................... 174,946 176,546
Shareholder account services ..................................................... 128,293 158,110
Registration ..................................................................... 58,515 58,469
Auditing and legal fees .......................................................... 42,226 43,192
Custody and related services ..................................................... 28,349 17,798
Trustees' fees and expenses ...................................................... 14,419 13,940
Shareholder reports and communications ........................................... 5,591 8,059
Miscellaneous .................................................................... 19,512 9,900
----------- -----------
Total expenses ................................................................... 810,213 815,666
----------- -----------
Net investment income ............................................................ 4,328,471 6,344,604
----------- -----------
Net realized and unrealized gain (loss) on investments:
Net realized loss on investments ................................................. (8,470,786) (2,208,378)
Net change in unrealized appreciation/depreciation
of investments ................................................................. 1,282,482 (3,676,736)
----------- -----------
Net loss on investments .......................................................... (7,188,304) (5,885,114)
----------- -----------
Increase (decrease) in net assets from operations ................................ $(2,859,833) $ 459,490
=========== ===========
</TABLE>
- ----------------
See notes to financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Statements of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Government High-Yield Bond
Securities Series Series
Year Ended December 31 Year Ended December 31
------------------------------ ------------------------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operations:
Net investment income ...................................... $ 4,328,471 $ 4,272,919 $ 6,344,604 $ 4,869,514
Net realized gain (loss) on investments .................... (8,470,786) 2,657,296 (2,208,378) 2,662,860
Net change in unrealized appreciation/depre-
ciation of investments ................................... 1,282,482 (2,848,730) (3,676,736) 1,013,074
------------ ------------ ------------ ------------
Increase (decrease) in net assets from operations .......... (2,859,833) 4,081,485 459,490 8,545,448
------------ ------------ ------------ ------------
Distributions to shareholders:
Net investment income:
Class A .................................................. (4,008,490) (4,256,437) (5,767,970) (4,848,219)
Class D .................................................. (319,981) (16,482) (576,634) (21,295)
------------ ------------ ------------ ------------
Decrease in net assets from distributions .................. (4,328,471) (4,272,919) (6,344,604) (4,869,514)
------------ ------------ ------------ ------------
Transactions in shares of beneficial interest:*
Net proceeds from sale of shares:
Class A .................................................. 4,137,872 7,502,107 11,688,898 19,348,362
Class D .................................................. 6,115,820 2,419,886 8,015,004 2,338,480
Net proceeds from transfer of
Secured Mortgage Income Series-Class A ................... -- 14,239,034 -- --
Net asset value of shares issued in payment
of dividends:
Class A .................................................. 1,780,986 1,958,778 2,261,113 2,130,339
Class D .................................................. 217,588 4,906 302,588 8,193
Exchanged from associated Funds:
Class A .................................................. 933,673 2,667,271 6,483,870 4,487,520
Class D .................................................. 677,329 29,766 1,164,394 18,106
------------ ------------ ------------ ------------
Total ...................................................... 13,863,268 28,821,748 29,915,867 28,331,000
------------ ------------ ------------ ------------
Cost of shares repurchased:
Class A .................................................. (12,487,426) (9,903,241) (11,886,183) (7,437,727)
Class D .................................................. (1,068,325) (59,119) (1,040,965) --
Exchanged into associated Funds:
Class A .................................................. (2,888,033) (2,230,375) (5,594,008) (1,653,137)
Class D .................................................. (1,577,342) (46,890) (935,241) (10,667)
------------ ------------ ------------ ------------
Total ...................................................... (18,021,126) (12,239,625) (19,456,397) (9,101,531)
------------ ------------ ------------ ------------
Increase (decrease) in net assets from trans-
actions in shares of beneficial interest ................. (4,157,858) 16,582,123 10,459,470 19,229,469
------------ ------------ ------------ ------------
Increase (decrease) in net assets .......................... (11,346,162) 16,390,689 4,574,356 22,905,403
Net Assets:
Beginning of year .......................................... 72,122,303 55,731,614 63,707,728 40,802,325
------------ ------------ ------------ ------------
End of year ................................................ $ 60,776,141 $ 72,122,303 $ 68,282,084 $ 63,707,728
============ ============ ============ ============
</TABLE>
- ----------------
*The Fund began offering Class D shares on September 21, 1993.
See notes to financial statements.
12
<PAGE>
================================================================================
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Seligman High Income Fund Series (the "Fund") consists of two separate series
(collectively the "Series"): the "U.S. Government Securities Series" and the
"High-Yield Bond Series." Effective September 21, 1993, the Fund began offering
two classes of shares for each Series. All shares existing prior to September
21, 1993, have been classified as Class A 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 D shares are sold without an initial sales
charge but are subject to a higher distribution fee and a contingent deferred
sales load ("CDSL") of 1% imposed on certain redemptions made within one year of
purchase. The two 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 class
expenses and has exclusive voting rights with respect to any matter to which a
separate vote of any class is required.
2. Significant accounting policies followed, all in conformity with
generally accepted accounting principles, are given below:
a. All U.S. Government and Government agency securities and bonds are valued
at current market values or, in their absence, at fair value determined in
accordance with procedures approved by the trustees. Securities traded on
national exchanges are valued at last sales prices or, in their absence and
in the case of over-the-counter securities, based on valuations provided by
an independent pricing service approved by the trustees. Short-term
holdings maturing in 60 days or less are valued at amortized cost.
b. There is no provision for federal income or excise tax. Each Series has
elected to be taxed as a regulated investment company and intends to
distribute substantially all taxable net income and net gain realized.
Dividends are declared daily and paid monthly.
c. Investment transactions are recorded on trade dates. Identified cost of
investments sold is used for both financial statement and federal income
tax purposes. Interest income is recorded on the accrual basis. Each Series
accretes original issue discounts and market discounts on purchases of
portfolio securities.
d. 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 proportion of the value of settled shares
outstanding of each class. Class-specific expenses, which include
distribution and service fees and any other items that can be specifically
attributed to a particular class, are charged directly to such class.
e. The treatment for financial statement purposes of distributions made 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 capital gain for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net assets based on their ultimate
characterization for federal income tax purposes. Any such
reclasssification will have no effect on net assets, results of operations,
or net asset value per share of the Fund.
3. Purchases and sales of portfolio securities, excluding short-term
investments, for the year ended December 31, 1994, were as follows:
Series Purchases Sales
- --------------------------------------------------------------------------------
U.S. Government
Securities $293,960,475 $299,893,486
High-Yield Bond 123,730,644 114,642,687
At December 31, 1994, 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
were as follows:
Total Total
Unrealized Unrealized
Series Appreciation Depreciation
- --------------------------------------------------------------------------------
U.S. Government
Securities $134,374 $ 600,632
High-Yield Bond 636,070 1,897,172
4. 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 trustees of the Fund who are employees or
13
<PAGE>
================================================================================
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
consultants of the Manager, and all personnel of the Fund and the Manager is
paid by the Manager. The Manager's fee is calculated daily and payable monthly,
equal to 0.50% per annum of each Series' average daily net assets.
Seligman Financial Services, Inc. (the "Distributor"), agent for the
distribution of each Series' shares, received the following commissions after
concessions were paid to dealers for sale of Class A shares:
Seligman
Financial Services' Dealer
Series Commissions Concessions
- --------------------------------------------------------------------------------
U.S. Government
Securities $ 8,580 $ 61,645
High-Yield Bond 45,213 353,427
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to Class A shares under which 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 organization
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, 1994, such fees paid by the U.S. Government Securities Series
and the High-Yield Bond Series aggregated $115,296 and $109,232, or 0.22% and
0.21% per annum, respectively, of average daily net assets of Class A shares.
Effective September 21, 1993, the Fund adopted a Plan with respect to Class
D shares under which 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 D shares for which the organizations are
responsible, and 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. For the year ended December
31, 1994, fees paid by the U.S. Government Securities Series and the High-Yield
Bond Series aggregated $59,650 and $67,314, respectively, or 1% per annum of the
average daily net assets of Class D shares.
The Distributor is entitled to retain any CDSL imposed on certain redemptions
occurring within one year of purchase. For the year ended December 31, 1994,
such charges imposed were $8,280 for the U.S. Government Securities Series and
$8,610 for the High-Yield Bond Series.
Seligman Data Corp., which is owned by certain associated investment
companies, charged at cost for shareholder account services the following
amounts: U.S. Government Securities Series $128,293 and High-Yield Bond Series
$158,110.
Certain officers and trustees of the Fund are officers or directors of the
Manager, the Distributor, and/or Seligman Data Corp.
Fees of $18,000 were incurred by the Fund for legal services of Sullivan &
Cromwell, a member of which firm is a trustee of the Fund.
The Fund has a compensation agreement under which trustees who receive fees
may elect to defer receiving such fees. Interest is accrued on the deferred
balances. The annual cost of such fees and interest is included in trustees'
fees and expenses, and the accumulated balances thereof at December 31, 1994, of
$33,419 in the U.S. Government Securities Series and $18,812 in the High-Yield
Bond Series are included in other liabilities. Deferred fees and the related
accrued interest are not deductible for federal income tax purposes until such
amounts are paid.
5. Class-specific expenses charged to Class A and Class D during the year ended
December 31, 1994, which are included in the corresponding captions of the
Statements of Operations, were as follows:
U.S. Government High-Yield
Securities Series Bond Series
-------------------- --------------------
Class A Class D Class A Class D
------- ------- ------- -------
Distribution and
service fees $115,296 $59,650 $109,232 $67,314
Registration 21,946 20,340 21,843 17,749
Shareholder reports
and communications 2,550 73 2,256 261
14
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
6. In accordance with current federal income tax law, the net realized capital
gains and losses of each Series are considered separately for purposes of
determining taxable capital gains. At December 31, 1994, net capital loss
carryforwards for the U.S. Government Securities Series and the High-Yield Bond
Series amounted to $30,698,968 (including $3,138,246 transferred from the
Secured Mortgage Income Series) and $13,350,300, respectively, which are
available for offset against future taxable net capital gains, expiring in
various amounts through 2002.
Accordingly, no capital gain distributions are expected to be paid to
shareholders of the respective Series until net capital gains have been realized
in excess of the available capital loss carryforwards.
7. Transactions in Shares of Beneficial Interest were as follows:
<TABLE>
<CAPTION>
U.S. Government High-Yield Bond
Securities Series Series
----------------------------- -----------------------------
Year Ended December 31 Year Ended December 31
----------------------------- -----------------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sale of shares:
Class A .............................................. 602,628 1,033,362 1,760,781 2,856,884
Class D .............................................. 879,410 331,787 1,191,967 339,838
Class A shares issued in transfer of
Secured Mortgage Income Series ....................... -- 1,965,329 -- --
Shares issued in payment of dividends:
Class A .............................................. 262,571 269,033 341,325 315,616
Class D .............................................. 32,428 679 46,166 1,185
Exchanged from associated Funds:
Class A .............................................. 139,088 368,217 986,393 662,388
Class D .............................................. 99,435 4,121 177,753 2,622
---------- ---------- ---------- ----------
Total .................................................. 2,015,560 3,972,528 4,504,385 4,178,533
---------- ---------- ---------- ----------
Shares repurchased:
Class A .............................................. (1,835,575) (1,363,719) (1,793,114) (1,100,482)
Class D .............................................. (159,362) (8,177) (161,121) --
Exchanged into associated Funds:
Class A .............................................. (426,650) (306,327) (840,972) (244,261)
Class D .............................................. (238,485) (6,466) (141,316) (1,537)
---------- ---------- ---------- ----------
Total .................................................. (2,660,072) (1,684,689) (2,936,523) (1,346,280)
---------- ---------- ---------- ----------
Increase (decrease) in shares .......................... (644,512) 2,287,839 1,567,862 2,832,253
========== ========== ========== ==========
</TABLE>
8. On November 3, 1993, shareholders of the Secured Mortgage Income Series
approved a transfer of its net assets to the U.S. Government Securities Series
in a tax-free exchange, whereby 1,965,329 shares of the U.S. Government
Securities Series valued at $14,239,034 were exchanged for the net assets of the
Secured Mortgage Income Series. For each share of beneficial interest owned,
shareholders of the Secured Mortgage Income Series received .9061 of a share of
beneficial interest of the U.S. Government Securities Series.
15
<PAGE>
================================================================================
Financial Highlights
- --------------------------------------------------------------------------------
The financial highlights for each Series are presented below. The per share
operating performance data is designed to allow investors to trace the operating
performance, on a per share basis, from a Series' beginning net asset value to
the ending net asset value so that they can understand what effect the
individual items have on their investments, assuming they were held throughout
the period. Generally, the per share amounts are derived by converting the
actual dollar amounts incurred for each item, as disclosed in the financial
statements, to their equivalent per share amount.
<TABLE>
<CAPTION>
U.S. Government Securities Series
-------------------------------------------------------------------------------
Class A Class D
------------------------------------------------------ --------------------
Year Ended December 31 Year 9/21/93*
------------------------------------------------------ Ended to
1994 1993 1992 1991 1990 12/31/94 12/31/93
------- ------- ------- ------ ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning
of period .................................. $ 7.18 $ 7.19 $ 7.30 $ 6.89 $ 7.04 $ 7.20 $ 7.33
------- ------- ------- ------ ------- ------- -------
Net investment income ......................... .44 .53 .51 .51 .59 .37 .09
Net realized and unrealized
investment gain (loss) ..................... (.71) (.01) (.11) .41 (.15) (.72) (.13)
------- ------- ------- ------ ------- ------- -------
Increase (decrease) from
investment operations ...................... (.27) .52 .40 .92 .44 (.35) (.04)
Dividends paid or declared .................... (.44) (.53) (.51) (.51) (.59) (.37) (.09)
------- ------- ------- ------ ------- ------- -------
Net increase (decrease) in
net asset value ............................ (.71) (.01) (.11) .41 (.15) (.72) (.13)
------- ------- ------- ------ ------- ------- -------
Net asset value, end of period ................ $ 6.47 $ 7.18 $ 7.19 $ 7.30 $ 6.89 $ 6.48 $ 7.20
======= ======= ======= ====== ======= ======= =======
Total return based on
net asset value ............................ (3.88)% 7.46% 5.78% 14.05% 6.37% (5.05)% (.65)%
Ratios/Supplemental Data:
Expenses to average net assets ................ 1.10% 1.11% 1.05% 1.10% 1.06% 2.22% 2.09%+
Net investment income
to average net assets ...................... 6.49% 7.22% 7.17% 7.39% 8.66% 5.40% 5.28%+
Portfolio turnover ............................ 445.18% 170.35% 126.17% 95.46% 306.05% 445.18% 170.35%++
Net assets, end of period
(000's omitted) ............................ $54,714 $69,805 $55,732 $64,440 $71,735 $ 6,062 $ 2,317
</TABLE>
- ----------------
* Commencement of offering of Class D shares.
+ Annualized.
++ For the year ended December 31, 1993.
See notes to financial statements.
16
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
The total returns based on net asset value measure a Series' performance
assuming investors purchased shares at net asset value as of the beginning of
the period, reinvested dividends and capital gains paid at net asset value, and
then sold their shares at the net asset value per share on the last day of the
period. The total return computations do not reflect any sales charges investors
may incur in purchasing shares of any Series. Total returns for periods of less
than one year are not annualized.
<TABLE>
<CAPTION>
High-Yield Bond Series
--------------------------------------------------------------------------------
Class A Class D
------------------------------------------------------- --------------------
Year Ended December 31 Year 9/21/93*
------------------------------------------------------- Ended to
1994 1993 1992 1991 1990 12/31/94 12/31/93
------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning
of period ................................. $ 6.94 $ 6.42 $ 5.96 $ 5.21 $ 6.40 $ 6.94 $ 6.74
------- ------- ------- ------- ------- ------- -------
Net investment income ........................ .65 .66 .69 .77 .78 .57 .12
Net realized and unrealized
investment gain (loss) .................... (.59) .52 .46 .75 (1.19) (.59) .20
------- ------- ------- ------- ------- ------- -------
Increase (decrease) from
investment operations ..................... .06 1.18 1.15 1.52 (.41) (.02) .32
Dividends paid or declared ................... (.65) (.66) (.69) (.77) (.78) (.57) (.12)
------- ------- ------- ------- ------- ------- -------
Net increase (decrease) in
net asset value ........................... (.59) .52 .46 .75 (1.19) (.59) .20
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period ............... $ 6.35 $ 6.94 $ 6.42 $ 5.96 $ 5.21 $ 6.35 $ 6.94
======= ======= ======= ======= ======= ======= =======
Total return based on
net asset value ........................... 0.78% 19.19% 20.08% 30.70% (7.27)% (.30)% 4.53%
Ratios/Supplemental Data:
Expenses to average net assets ............... 1.13% 1.20% 1.21% 1.29% 1.21% 2.19% 2.04%+
Net investment income
to average net assets ..................... 9.73% 9.68% 10.82% 13.36% 13.40% 8.68% 7.93%+
Portfolio turnover ........................ 184.75% 193.91% 145.66% 181.08% 117.51% 184.75% 193.91%++
Net assets, end of period
(000's omitted) ........................... $59,033 $61,333 $40,802 $32,287 $27,558 $ 9,249 $ 2,375
</TABLE>
- ----------------
* Commencement of offering of Class D shares.
+ Annualized.
++ For the year ended December 31, 1993.
See notes to financial statements.
17
<PAGE>
================================================================================
Report of Independent Auditors
- --------------------------------------------------------------------------------
The Trustees and Shareholders,
Seligman High Income Fund Series:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of the U.S. Government Securities Series and the
High-Yield Bond Series of Seligman High Income Fund Series as of December 31,
1994, 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 the 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, 1994 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 the U.S. Government
Securities Series and the High-Yield Bond Series of Seligman High Income Fund
Series as of December 31, 1994, the results of their operations, the changes in
their net assets, and the financial highlights for the respective stated
periods, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 3, 1995
18
<PAGE>
================================================================================
Trustees
- --------------------------------------------------------------------------------
Fred E. Brown
Director and Consultant,
J. & W. Seligman & Co. Incorporated
Alice S. Ilchman 3
President, Sarah Lawrence College
Trustee, Committee for Economic Development
Director, NYNEX
Trustee, The Rockefeller Foundation
John E. Merow
Partner, Sullivan & Cromwell, Attorneys
Betsy S. Michel 2
Director or Trustee,
Various Organizations
William C. Morris 1
Chairman
Chairman of the Board and President,
J. & W. Seligman & Co. Incorporated
Chairman, Carbo Ceramics Inc.
Director, Daniel Industries, Inc.
Director, Kerr-McGee Corporation
Douglas R. Nichols, Jr. 2
Management Consultant
James C. Pitney 3
Partner, Pitney, Hardin, Kipp & Szuch, Attorneys
Director, Public Service Enterprise Group
James Q. Riordan 3
Director, The Brooklyn Union Gas Company
Trustee, Committee for Economic Development
Director, Dow Jones & Co., Inc.
Director, Public Broadcasting Service
Herman J. Schmidt 2
Director, H.J. Heinz Company
Director, HON Industries, Inc.
Director, MAPCO, Inc.
Ronald T. Schroeder 1
President
Managing Director,
J. & W. Seligman & Co. Incorporated
Robert L. Shafer 3
Vice President, Pfizer Inc.
Director, USLIFE Corporation
James N. Whitson 2
Executive Vice President and Director,
Sammons Enterprises, Inc.
Director, C-SPAN
Brian T. Zino 1
Managing Director,
J. & W. Seligman & Co. Incorporated
- ----------
Member: 1 Executive Committee; 2 Audit Committee; 3 Trustee Nominating
Committee.
- --------------------------------------------------------------------------------
Executive Officers
William C. Morris Leonard J. Lovito Frank J. Nasta
Chairman Vice President Secretary
Ronald T. Schroeder Lawrence P. Vogel
President Vice President
Daniel J. Charleston Thomas G. Rose
Vice President Treasurer
- --------------------------------------------------------------------------------
Manager
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
General Counsel
Sullivan & Cromwell
Independent Auditors
Deloitte & Touche LLP
General Distributor
Seligman Financial Services, Inc.
100 Park Avenue
New York, NY 10017
Shareholder Service Agent
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
Important Telephone Numbers
(800) 221-2450 Shareholder Services
(800) 445-1777 Retirement Plan
Services
(800) 622-4597 24-Hour Automated
Telephone Access
Service
19
<PAGE>
Seligman Financial Services, Inc.
an affiliate of
J&WS
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 beneficial interest of
Seligman High Income Fund Series, which contains information about the sales
charges, management fees, and other costs. Please read the prospectus carefully
before investing or sending money.
TX2 12/94
