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MID-YEAR REPORT
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SELIGMAN
HIGH INCOME
FUND SERIES
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June 30, 1995
[LOGO] J&WS
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A High Current Income Series
Established in 1977
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TO THE SHAREHOLDERS
- --------------------------------------------------------------------------------
We are pleased to provide you with Seligman High Income Fund Series' Mid-Year
Report, and to update you on your Series' performance for the six months ended
June 30, 1995.
Market Comment
After four years of expansion, the recent stream of economic reports shows
that the long awaited slowdown is under way. The Federal Reserve Board (FRB),
concerned that growth at an accelerated rate would swell inflationary pressures,
increased short-term interest rates seven times, beginning in early 1994. In the
past six months, the federal funds rate -- the interest rate charged for
interbank loans -- went from 5.50% on December 31, 1994, to 6.00% on June 30,
1995, and the discount rate -- the interest rate the FRB charges member banks --
went from 4.75% to 5.25% for the same period. More recently, evidence of this
current slowdown and moderate inflation led the FRB to lower the federal funds
rate on July 6 to 5.75% -- the first decrease in three years.
In the financial markets, with signs pointing toward a slowing economy and
prospects favoring declining interest rates, the bond market rallied this past
quarter. The benchmark 30-year Treasury bill yield began the year at 7.88%, and
on June 30 was 6.62%. (Due to the inverse relationship of price and yield of
fixed income securities, the prices of these securities increased during the
period.) Investor demand for equities also continued to be strong, as shown by
the Dow Jones Industrial Average moving to new highs and all broad market equity
indices posting positive returns.
Looking ahead, we believe the economy is likely to regain strength later this
year as consumers respond to lower interest rates, exports are stimulated by a
weaker dollar, and business capital spending remains strong.
U.S. Government Securities Series
For your Series' Class A shares, net asset value per share was $6.89 at June
30, up from $6.47 at December 31, 1994. Dividends totaling $0.2329 per share
were paid during the six months. The total return, assuming the investment of
all dividends paid in additional shares, was 10.23%. Current annualized yield
for the 30 days ended June 30 was 5.71%, calculated at the maximum offering
price of $7.23 per share on June 30.
For your Series' Class D shares, net asset value per share was $6.90 at June
30, up from $6.48 at December 31, 1994. Dividends totaling $0.2033 per share
were paid during the period. The total return, assuming the investment of all
dividends paid in additional shares, was 9.71% for the six months. Current
annualized yield for the 30 days ended June 30, was 5.01%, calculated at the net
asset value on June 30. The U.S. Government Securities Series' net assets
totaled $60 million at midyear.
Since mid-November 1994, the peak for yields on long-term bonds, interest
rates have gradually declined due to signs of slower economic growth and
prospects for lower inflation. This, in turn, prompted fixed income participants
to purchase U.S. Treasury securities, which are more favorable in a declining
interest rate environment. In addition, the prospect of declining mortgage rates
has put GNMA securities out of favor as lower mortgage rates usually lead to
more refinancings, which prompts prepayments. Therefore, your Series remains
heavily weighted in U.S. Treasury securities.
Additionally, because long-term bonds tend to appreciate more favorably than
short-term bonds in a declining interest rate environment, your Manager extended
the maturities of the portfolio holdings in order to take advantage of rising
bond prices.
1
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TO THE SHAREHOLDERS (continued)
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High-Yield Bond Series
For your Series' Class A shares, net asset value per share was $6.75 at June
30, up from $6.35 at December 31, 1994. Dividends totaling $0.3269 per share
were paid during the six months. The total return, assuming the investment of
all dividends paid in additional shares, was 11.71% for the six months. Current
annualized yield for the 30 days ended June 30, was 8.74%, calculated at the
maximum offering price of $7.09 per share on June 30.
For your Series' Class D shares, net asset value per share was $6.75 at June
30, up from $6.35 at December 31, 1994. Dividends totaling $0.2961 per share
were paid during the six months. The total return, assuming the investment of
all dividends paid in additional shares, was 11.19% for the six months. Current
annualized yield for the 30 days ended June 30 was 8.35%, calculated at the net
asset value on June 30. The High-Yield Bond Series' net assets totaled $130
million at midyear.
Your Manager's strategy in the fourth quarter of 1994 of allocating more
assets to the gaming sector was key to your Series' performance thus far in
1995. Aztar Corp., the portfolio's largest holding, significantly contributed to
the sector's positive showing. In addition, the supermarket sector also
performed particularly well. An example is Mayfair Supermarkets, which
appreciated in value when Royal Ahold, an investment-grade Dutch retailer,
announced its intentions to acquire the company.
Your Series' outstanding performance resulted in a number of exceptional
rankings in various publications, including Morningstar, Inc., a prominent
mutual fund ranking service, that awarded the Series a five-star rating.
Additionally, your Series' assets have almost doubled since the beginning of the
year, reflecting the appreciation of its portfolio holdings and the increased
interest from the investing public.
Looking forward, your Manager remains positive about the high-yield market,
as it remains attractive on a risk/reward basis. Continued improvement in
overall credit quality is also expected.
By order of the Trustees,
/s/ William Morris
William C. Morris
Chairman
/s/ Ronald T. Schroeder
Ronald T. Schroeder
President
August 4, 1995
2
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SELIGMAN HIGH INCOME FUND SERIES
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HIGHLIGHTS June 30, 1995
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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) $53.4 $6.5 $95.7 $34.5
- ---------------------------------------------------------------------------------------------------------------------------
Yield* 5.71% 5.01% 8.74% 8.35%
- ---------------------------------------------------------------------------------------------------------------------------
Dividends** $0.2329 $0.2033 $0.3269 $0.2961
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Net asset value per share $6.89 $6.90 $6.75 $6.75
- ---------------------------------------------------------------------------------------------------------------------------
Maximum offering
price per share $7.23 $6.90 $7.09 $6.75
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Average annual total return
One Year:
With sales charge (1) 4.78% 7.79% 7.96% 11.05%
Without sales charge (2) 9.94 8.79 13.38 12.05
Five Years:
With sales charge (1) 6.75 13.30
Without sales charge (2) 7.80 14.42
Ten Years:
With sales charge (1) 7.58 10.85
Without sales charge (2) 8.10 11.39
Since inception -
September 21, 1993:
With CDSL (1) n/a n/a
Without CDSL (2) 1.96% 8.67%
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Holdings by U.S. Treasury Securities 78.5% Corporate Bonds 91.1%
market sector Government Agency Convertible Bonds 4.5
Securities 19.5 Net Cash & Short-
Net Cash & Short- Term Holdings 4.4
Term Holdings 2.0
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Weighted average
maturity 17.1 years 8.1 years
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</TABLE>
* Current yield representing the annualized yield for the 30-day period ended
June 30, 1995.
** Represents per share amount paid or declared for the six months ended June
30, 1995.
(1) Represents the average compound rate of return per year over the specified
period, and reflects change in price and assumes all distributions within
the period are reinvested in additional shares; also reflects the effect of
the 4.75% maximum initial sales charge or contingent deferred sales load
("CDSL") of 1%, if applicable.
(2) Represents the rate of return as above, but does not reflect the effect of
the 4.75% maximum initial sales charge or 1% CDSL.
+ Although the payment of principal and interest with respect to certain
long-term securities held in the U.S. Government Securities Series are
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.
Note: Results reflect past performance. 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.
3
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PORTFOLIOS OF INVESTMENTS
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U.S. GOVERNMENT SECURITIES SERIES
PRINCIPAL
AMOUNT VALUE
--------- -----
<S> <C> <C>
U.S. TREASURY SECURITIES 78.5%
U.S. Treasury Bonds:
8 7/8%, due 2/15/2019.......................................................... $ 5,000,000 $ 6,267,185
9 1/4%, due 2/15/2016.......................................................... 7,000,000 8,999,375
12%, due 8/15/2013............................................................. 12,000,000 17,767,500
U.S. Treasury Notes:
8 3/4%, due 10/15/1997......................................................... 5,000,000 5,306,250
9 3/8%, due 4/15/1996.......................................................... 8,500,000 8,733,750
------------
TOTAL U.S. TREASURY SECURITIES (Cost $45,969,568)................................. 47,074,060
------------
GOVERNMENT AGENCY SECURITIES 19.5%
(Cost $11,089,721)
Government National Mortgage Association Obligations,
Mortgage-backed Pass-through Certificates:
7 1/2%, with various maturities from 9/15/2021 to 8/15/2024+................... 11,600,885 11,669,771
------------
TOTAL INVESTMENTS 98.0%
(Cost $57,059,289).............................................................. 58,743,831
OTHER ASSETS LESS LIABILITIES 2.0%................................................ 1,219,143
------------
NET ASSETS 100.0%................................................................. $ 59,962,974
============
</TABLE>
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+ 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
stated maturity. This in turn may impact the ultimate yield realized from
these securities.
See notes to financial statements.
4
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June 30, 1995
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HIGH-YIELD BOND SERIES
PRINCIPAL
AMOUNT VALUE
--------- -----
<S> <C> <C>
CORPORATE BONDS 91.1%
ALUMINUM 2.1%
Kaiser Aluminum Corp. 12 3/4%, due 2/1/2003....................................... $ 2,500,000 $ 2,687,500
------------
BROADCASTING 6.2%
Allbritton Communications Co. 11 1/2%, due 8/15/2004.............................. 2,500,000 2,637,500
NWCG Holding Corp. 0%/13 1/2%++, due 6/15/1999.................................... 2,000,000 1,245,000
SFX Broadcasting, Inc. 11 3/8%, due 10/1/2000..................................... 1,500,000 1,571,250
Young Broadcasting Inc. 10 1/8%, due 6/1/2005*.................................... 1,500,000 1,515,000
Young Broadcasting Inc. 11 3/4%, due 11/15/2004................................... 1,000,000 1,100,000
------------
8,068,750
------------
CABLE SYSTEMS 9.9%
Australis Media Limited 0%/14%, due 5/15/2003+.................................... 3,000,000 1,575,000
Cablevision Systems, Inc. 10 3/4%, due 4/1/2004................................... 1,500,000 1,573,125
Comcast Corp. 10 5/8%, due 7/15/2012.............................................. 2,000,000 2,147,500
Continental Cablevision, Inc. 11%, due 6/1/2007................................... 1,500,000 1,665,000
Jones Intercable 10 1/2%, due 3/1/2008............................................ 2,500,000 2,662,500
Le Groupe Videotron Ltee. 10 5/8%, due 2/15/2005.................................. 1,500,000 1,590,000
Videotron Holdings 0%/11 1/8%, due 7/1/2004+...................................... 2,500,000 1,656,250
------------
12,869,375
------------
CELLULAR 3.5%
Centennial Cellular 10 1/8%, due 5/15/2005........................................ 2,500,000 2,487,500
Commnet Cellular Corp. 11 1/4%, due 7/1/2005...................................... 2,000,000 2,020,000
------------
4,507,500
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CHEMICALS 1.9%
Arcadian Partners L.P. 10 3/4%, due 5/1/2005...................................... 2,500,000 2,525,000
------------
CONSUMER PRODUCTS 2.3%
Coleman Holdings 0%/10 7/8%++, due 5/27/1998...................................... 4,000,000 2,980,000
------------
CONTAINER 1.6%
Silgan Corp. 11 3/4%, due 6/15/2002............................................... 2,000,000 2,080,000
------------
ENERGY 3.2%
Falcon Drilling Company, Inc. 12 1/2%, due 3/15/2005*............................. 1,000,000 1,045,000
Petroleum Heat & Power Co. Inc. 12 1/4%, due 2/1/2005............................. 1,000,000 1,075,000
TransTexas Gas Corporation 11 1/2%, due 6/15/2002................................. 2,000,000 2,045,000
------------
4,165,000
------------
ENVIRONMENTAL SERVICES 2.0%
Allied Waste Industries 12%, due 2/1/2004......................................... 2,500,000 2,637,500
------------
</TABLE>
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See footnotes on page 7.
5
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PORTFOLIOS OF INVESTMENTS (continued)
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HIGH-YIELD BOND SERIES (continued)
PRINCIPAL
AMOUNT VALUE
--------- -----
<S> <C> <C>
FINANCIAL SERVICES 2.9%
Comdata Network, Inc. 13 1/4%, due 12/15/2002..................................... $ 1,500,000 $ 1,695,000
Olympic Financial Ltd. 13%, due 5/1/2000.......................................... 2,000,000 2,060,000
------------
3,755,000
------------
GAMING/HOTEL 13.5%
Aztar Corp. 13 3/4%, due 10/1/2004................................................ 4,000,000 4,530,000
Casino America, Inc. 11 1/2%, due 11/15/2001...................................... 2,000,000 2,040,000
Hollywood Casino Corp. 14%, due 4/1/1998.......................................... 1,500,000 1,657,500
Showboat, Inc. 13%, due 8/1/2009.................................................. 2,500,000 2,584,375
Stratosphere Corporation 14 1/4%, due 5/15/2002................................... 2,000,000 2,045,000
Trump Hotels & Casino Resorts Funding, Inc. 15 1/2%, due 6/15/2005................ 2,000,000 1,955,000
Trump Plaza Funding, Inc. 10 7/8%, due 6/15/2001.................................. 3,000,000 2,775,000
------------
17,586,875
------------
HEALTH CARE 2.0%
Dade International 13%, due 2/1/2005*............................................. 2,500,000 2,650,000
------------
HOME BUILDING AND LAND DEVELOPMENT 1.4%
Continental Homes Holding Corp. 12%, due 8/1/1999................................. 1,750,000 1,776,250
------------
INDUSTRIAL 3.5%
IMO Industries 12%, due 11/1/2001................................................. 2,500,000 2,543,750
International Wire Group, Inc. 11 3/4%, due 6/1/2005*............................. 2,000,000 2,020,000
------------
4,563,750
------------
INSURANCE 2.3%
Terra Nova Insurance 10 3/4%, due 7/1/2005........................................ 3,000,000 3,045,000
------------
LEISURE 4.7%
Icon Health & Fitness, Inc. 13%, due 7/15/2002 *.................................. 2,000,000 2,080,000
Roadmaster Industries 11 3/4%, due 7/15/2002...................................... 2,000,000 1,910,000
Six Flags Theme Park 0%/12 1/4%, due 6/15/2005*+.................................. 3,000,000 2,160,000
------------
6,150,000
------------
MANUFACTURING 1.6%
Applied Extrusion Technologies, Inc. 11 1/2%, due 4/1/2002*....................... 2,000,000 2,110,000
------------
PAGING 1.6%
ProNet Inc. 11 7/8%, due 6/15/2005*............................................... 2,000,000 2,045,000
------------
PAPER AND PACKAGING 6.3%
Crown Packaging Ltd. 10 3/4%, due 11/1/2000....................................... 1,500,000 1,470,000
Stone Container Corp. 10 3/4%, due 10/1/2002...................................... 1,500,000 1,582,500
Stone Container Corp. 9 7/8%, due 2/1/2001........................................ 3,000,000 3,000,000
Warren (S.D.) Co. 12%, due 12/15/2004*............................................ 2,000,000 2,160,000
------------
8,212,500
------------
</TABLE>
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See footnotes on page 7.
6
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<TABLE>
<CAPTION>
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June 30, 1995
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HIGH-YIELD BOND SERIES (continued)
PRINCIPAL
AMOUNT VALUE
--------- -----
<S> <C> <C>
PUBLISHING 1.6%
Marvel Holdings, Inc. 0%/11 1/4%++, due 4/15/1998................................. $ 3,000,000 $ 2,141,250
------------
RETAILING 2.4%
Thrifty Payless Inc. 12 1/4%, due 4/15/2004....................................... 3,000,000 3,090,000
------------
SUPERMARKETS 3.8%
Dominick's Finer Foods, Inc. 10 7/8%, due 5/5/2005*............................... 1,500,000 1,518,750
Pathmark Stores, Inc. 12 5/8%, due 6/15/2002...................................... 750,000 802,500
Pathmark Stores, Inc. 11 5/8%, due 6/15/2002...................................... 2,500,000 2,637,500
------------
4,958,750
------------
TELECOMMUNICATIONS 4.8%
Intermedia Communications of Florida, Inc. 13 1/2%, due 6/1/2005.................. 3,000,000 3,022,500
Mobile Telecommunication Technologies Corp. 13 1/2%, due 12/15/2002............... 3,000,000 3,202,500
------------
6,225,000
------------
THEATER 2.9%
Act III Theatres, Inc. 11 7/8%, due 2/1/2003...................................... 1,500,000 1,582,500
Cinemark USA Inc. 12%, due 6/1/2002............................................... 2,000,000 2,150,000
------------
3,732,500
------------
UTILITIES 3.1%
California Energy Inc. 0%/10 1/4%, due 1/15/2004+................................. 1,000,000 870,001
Midland Cogeneration Venture 11 3/4%, due 7/23/2005............................... 3,000,000 3,099,444
------------
3,969,445
------------
TOTAL CORPORATE BONDS (Cost $115,313,142 )........................................ 118,531,945
------------
CONVERTIBLE BONDS 4.5%
COMPUTERS AND RELATED SERVICES 2.1%
EMC Corp. 4 1/4%, due 1/1/2001.................................................... 2,000,000 2,700,000
SEMICONDUCTOR 2.4%
Altera Corp. 5 3/4%, due 6/15/2002*............................................... 3,000,000 3,187,500
------------
TOTAL CONVERTIBLE BONDS (Cost $5,206,207)......................................... 5,887,500
------------
SHORT-TERM HOLDINGS 1.2%
(Cost $1,570,000).............................................................. 1,570,000
------------
TOTAL INVESTMENTS 96.8%
(Cost $122,089,349) ........................................................... 125,989,445
OTHER ASSETS LESS LIABILITIES 3.2% ............................................... 4,197,286
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NET ASSETS 100.0% ................................................................ $130,186,731
============
</TABLE>
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* Rule 144A security.
+ Deferred-interest debentures pay no interest for a stipulated number of
years, after which they pay the indicated coupon rate.
++ Represents effective yield on zero coupon bond.
See notes to financial statements.
7
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<TABLE>
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STATEMENTS OF ASSETS AND LIABILITIES June 30, 1995
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U.S. GOVERNMENT HIGH-YIELD
SECURITIES SERIES BOND SERIES
----------------- -----------
<S> <C> <C>
ASSETS:
Investments, at value (see portfolios of investments):
Long-term holdings............................................... $ 58,743,831 $124,419,445
Short-term holdings.............................................. -- 1,570,000
------------ ------------
58,743,831 125,989,445
Cash................................................................ -- 5,416,523
Receivable for securities sold...................................... -- 4,571,525
Interest receivable................................................. 1,308,571 2,885,245
Receivable for Shares of Beneficial Interest sold................... 290,443 1,773,927
Expenses prepaid to shareholder service agent....................... 30,620 26,463
Other............................................................... 3,823 29,177
------------ ------------
Total Assets........................................................ 60,377,288 140,692,305
------------ ------------
LIABILITIES:
Dividends payable................................................... 154,779 443,729
Payable for Shares of Beneficial Interest repurchased............... 81,405 325,479
Payable to custodian................................................ 41,720 --
Payable for securities purchased.................................... -- 9,572,521
Accrued expenses, taxes, and other.................................. 136,410 163,845
------------ ------------
Total Liabilities 414,314 10,505,574
------------ ------------
Net Assets.......................................................... $ 59,962,974 $130,186,731
============ ============
COMPOSITION OF NET ASSETS:
Shares of Beneficial Interest, at par (unlimited
shares authorized; $.001 par value; 8,705,854
and 19,282,829 shares outstanding):
Class A.......................................................... $ 7,757 $ 14,173
Class D.......................................................... 949 5,109
Additional paid-in capital.......................................... 84,248,067 139,158,929
Accumulated net realized loss....................................... (25,978,341) (12,891,576)
Net unrealized appreciation of investments.......................... 1,684,542 3,900,096
------------ ------------
Net Assets.......................................................... $ 59,962,974 $130,186,731
============ ============
NET ASSETS:
Class A............................................................. $ 53,415,424 $ 95,678,361
Class D............................................................. $ 6,547,550 $ 34,508,370
SHARES OF BENEFICIAL INTEREST OUTSTANDING:
Class A............................................................. 7,756,954 14,173,450
Class D............................................................. 948,900 5,109,379
NET ASSET VALUE PER SHARE:
Class A............................................................. $6.89 $6.75
===== =====
Class D............................................................. $6.90 $6.75
===== =====
</TABLE>
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See notes to financial statements.
8
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<CAPTION>
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STATEMENTS OF OPERATIONS For the six months ended June 30, 1995
- ---------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT HIGH-YIELD
SECURITIES SERIES BOND SERIES
----------------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................................... $ 2,421,044 $ 5,064,968
----------- -----------
EXPENSES:
Management fees........................................................ 149,248 233,649
Distribution and service fees.......................................... 89,918 169,656
Shareholder account services........................................... 58,885 89,148
Registration........................................................... 22,561 26,965
Auditing and legal fees................................................ 21,232 18,563
Trustees' fees and expenses............................................ 6,945 6,978
Custody and related services........................................... 6,848 12,214
Shareholder reports and communications................................. 6,373 6,842
Miscellaneous.......................................................... 4,180 6,125
----------- -----------
Total expenses......................................................... 366,190 570,140
----------- -----------
Net investment income.................................................. 2,054,854 4,494,828
----------- -----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments....................................... 1,582,381 458,724
Net change in unrealized depreciation
of investments....................................................... 2,150,800 5,161,198
----------- -----------
Net gain on investments ............................................... 3,733,181 5,619,922
----------- -----------
Increase in net assets from operations ................................ $ 5,788,035 $10,114,750
=========== ===========
</TABLE>
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See notes to financial statements.
9
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<CAPTION>
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STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT HIGH-YIELD BOND
SECURITIES SERIES SERIES
----------------------------- -----------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED 6/30/95 12/31/94 ENDED 6/30/95 12/31/94
------------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.......................... $ 2,054,854 $ 4,328,471 $ 4,494,828 $ 6,344,604
Net realized gain (loss) on investments........ 1,582,381 (8,470,786) 458,724 (2,208,378)
Net change in unrealized appreciation/depre-
ciation of investments....................... 2,150,800 1,282,482 5,161,198 (3,676,736)
----------- ----------- ------------ -----------
Increase (decrease) in net assets
from operations 5,788,035 (2,859,833) 10,114,750 459,490
----------- ----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A...................................... (1,868,108) (4,008,490) (3,647,150) (5,767,970)
Class D...................................... (186,746) (319,981) (847,678) (576,634)
----------- ----------- ------------ -----------
Decrease in net assets from distributions...... (2,054,854) (4,328,471) (4,494,828) (6,344,604)
----------- ----------- ------------ -----------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sale of shares:
Class A...................................... 2,031,659 4,137,872 31,668,316 11,688,898
Class D...................................... 1,215,729 6,115,820 23,108,981 8,015,004
Net asset value of shares issued in payment
of dividends:
Class A...................................... 855,454 1,780,986 1,542,817 2,261,113
Class D...................................... 128,442 217,588 451,343 302,588
Exchanged from associated Funds:
Class A...................................... 2,831,604 933,673 9,836,501 6,483,870
Class D...................................... 1,237,860 677,329 3,107,150 1,164,394
----------- ----------- ------------ -----------
Total.......................................... 8,300,748 13,863,268 69,715,108 29,915,867
----------- ----------- ------------ -----------
Cost of shares repurchased:
Class A...................................... (7,123,690) (12,487,426) (3,359,663) (11,886,183)
Class D...................................... (1,260,604) (1,068,325) (1,067,381) (1,040,965)
Exchanged into associated Funds:
Class A...................................... (3,237,318) (2,888,033) (7,509,485) (5,594,008)
Class D...................................... (1,225,484) (1,577,342) (1,493,854) (935,241)
----------- ----------- ------------ -----------
Total.......................................... (12,847,096) (18,021,126) (13,430,383) (19,456,397)
----------- ----------- ------------ -----------
Increase (decrease) in net assets from
transactions in shares of beneficial
interest............. (4,546,348) (4,157,858) 56,284,725 10,459,470
----------- ----------- ------------ -----------
Increase (decrease) in net assets.............. (813,167) (11,346,162) 61,904,647 4,574,356
NET ASSETS:
Beginning of period............................ 60,776,141 72,122,303 68,282,084 63,707,728
----------- ----------- ------------ -----------
End of period.................................. $59,962,974 $60,776,141 $130,186,731 $68,282,084
=========== =========== ============ ===========
</TABLE>
- ----------
See notes to financial statements.
10
<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." The Fund offers two classes of shares for each Series.
All shares existing prior to September 21, 1993, were 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 distribution fee of up
to 0.75% and a service fee of up to 0.25% on an annual basis, 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 and 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 attributed to a particular class, are charged
directly to such class.
e. The treatment for financial statement purposes of distributions made during
the period 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 six months ended June 30, 1995, were as follows:
SERIES PURCHASES SALES
- --------------------------------------------------------------------------------
U.S. Government
Securities $ 97,620,484 $99,972,225
High-Yield Bond 125,939,210 70,768,638
At June 30, 1995, 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 $1,684,542 $ --
High-Yield Bond 4,222,018 321,922
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
consultants of the Manager, and all personnel of the Fund and the Manager is
11
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
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 concessions after
commissions were paid to dealers for sale of Class A shares:
DEALER DISTRIBUTOR
SERIES COMMISSIONS CONCESSIONS
- --------------------------------------------------------------------------------
U.S. Government
Securities $ 40,006 $ 5,364
High-Yield Bond 1,118,154 144,619
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 six
months ended June 30, 1995, such fees paid by the U.S. Government Securities
Series and the High-Yield Bond Series aggregated $59,193 and $73,152, or 0.22%
and 0.20% per annum, respectively, of average daily net assets of Class A
shares.
The Fund has 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 six months ended June 30, 1995,
fees paid by the U.S. Government Securities Series and the High-Yield Bond
Series aggregated $30,725 and $96,504, 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 six months ended June
30, 1995, such charges imposed were $1,443 for the U.S. Government Securities
Series and $4,265 for the High-Yield Bond Series.
For the six months ended June 30, 1995, Seligman Services, Inc., an
affiliate of the Manager, received commissions from sales of shares as follows:
SERIES CLASS A CLASS D
- --------------------------------------------------------------------------------
U.S. Government
Securities $ 487 $ 518
High-Yield Bond 3,288 1,778
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 $58,862 and High-Yield Bond Series
$89,125.
Certain officers and trustees of the Fund are officers or directors of the
Manager, the Distributor, Seligman Services, Inc., and/or Seligman Data Corp.
Fees of $9,000 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 cost of such fees and interest is included in trustees' fees and
expenses, and the accumulated balances thereof at June 30, 1995, of $35,651 in
the U.S. Government Securities Series and $19,720 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 six months
ended June 30, 1995, 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 $59,193 $30,725 $73,152 $96,504
Registration 6,194 4,244 9,232 7,638
Shareholder reports
and communications 1,490 66 1,260 179
12
<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 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
---------------------------- ---------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
6/30/95 12/31/94 6/30/95 12/31/94
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Sale of shares:
Class A............................... 303,710 602,628 4,793,860 1,760,781
Class D............................... 180,174 879,410 3,495,334 1,191,967
Shares issued in payment of dividends:
Class A............................... 128,178 262,571 234,536 341,325
Class D............................... 19,206 32,428 68,373 46,166
Exchanged from associated Funds:
Class A............................... 416,256 139,088 1,489,013 986,393
Class D............................... 184,076 99,435 473,980 177,753
---------- ---------- ---------- ----------
Total................................... 1,231,600 2,015,560 10,555,096 4,504,385
---------- ---------- ---------- ----------
Shares repurchased:
Class A............................... (1,075,177) (1,835,575) (510,604) (1,793,114)
Class D............................... (186,026) (159,362) (160,939) (161,121)
Exchanged into associated Funds:
Class A............................... (476,830) (426,650) (1,130,421) (840,972)
Class D............................... (183,900) (238,485) (222,926) (141,316)
---------- ---------- ---------- ----------
Total................................... (1,921,933) (2,660,072) (2,024,890) (2,936,523)
---------- ---------- ---------- ----------
Increase (decrease) in shares........... (690,333) (644,512) 8,530,206 1,567,862
========== ========== ========== ==========
</TABLE>
13
<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,
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES SERIES
----------------------------------------------------------------------------------------
CLASS A CLASS D
---------------------------------------------------------- -----------------------------
SIX MONTHS YEAR ENDED DECEMBER 31 SIX MONTHS YEAR 9/21/93*
ENDED -------------------------------------------- ENDED ENDED TO
6/30/95 1994 1993 1992 1991 1990 6/30/95 12/31/94 12/31/93
--------- ---- ---- ---- ---- ---- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period ..................... $ 6.47 $ 7.18 $ 7.19 $ 7.30 $ 6.89 $ 7.04 $ 6.48 $ 7.20 $ 7.33
------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income ............ .23 .44 .53 .51 .51 .59 .20 .37 .09
Net realized and unrealized
investment gain (loss) ........ .42 (.71) (.01) (.11) .41 (.15) .42 (.72) (.13)
------- ------- ------- ------- ------- ------- ------- ------- -------
Increase (decrease) from
investment operations ......... .65 (.27) .52 .40 .92 .44 .62 (.35) (.04)
Dividends paid or declared ....... (.23) (.44) (.53) (.51) (.51) (.59) (.20) (.37) (.09)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net increase (decrease) in
net asset value ............... .42 (.71) (.01) (.11) .41 (.15) .42 (.72) (.13)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period ... $ 6.89 $ 6.47 $ 7.18 $ 7.19 $ 7.30 $ 6.89 $ 6.90 $ 6.48 $ 7.20
======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN BASED ON
NET ASSET VALUE: .............. 10.23% (3.88)% 7.46% 5.78% 14.05% 6.37% 9.71% (5.05)% (.65)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ... 1.13%+ 1.10% 1.11% 1.05% 1.10% 1.06% 2.02%+ 2.22% 2.09%+
Net investment income
to average net assets ......... 6.96%+ 6.49% 7.22% 7.17% 7.39% 8.66% 6.07%+ 5.40% 5.28%+
Portfolio turnover ............... 164.55% 445.18% 170.35% 126.17% 95.46% 306.05% 164.55% 445.18% 170.35%++
Net assets, end of period
(000's omitted) ............... $53,415 $54,714 $69,805 $55,732 $64,440 $71,735 $ 6,548 $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.
14
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
to their equivalent per share amounts.
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. The total returns for periods of
less than one year are not annualized.
<TABLE>
<CAPTION>
HIGH-YIELD BOND SERIES
--------------------------------------------------------------------------------------------
CLASS A CLASS D
---------------------------------------------------------- -------------------------------
SIX MONTHS YEAR ENDED DECEMBER 31 SIX MONTHS YEAR 9/21/93*
ENDED --------------------------------------------- ENDED ENDED TO
6/30/95 1994 1993 1992 1991 1990 6/30/95 12/31/94 12/31/93
------- ---- ---- ---- ---- ---- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period.................. $6.35 $6.94 $6.42 $5.96 $5.21 $6.40 $6.35 $6.94 $6.74
----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment income......... .33 .65 .66 .69 .77 .78 .30 .57 .12
Net realized and unrealized
investment gain (loss)..... .40 (.59) .52 .46 .75 (1.19) .40 (.59) .20
----- ----- ----- ----- ----- ----- ----- ----- -----
Increase (decrease) from
investment operations...... .73 .06 1.18 1.15 1.52 (.41) .70 (.02) .32
Dividends paid or declared.... (.33) (.65) (.66) (.69) (.77) (.78) (.30) (.57) (.12)
----- ----- ----- ----- ----- ----- ----- ----- -----
Net increase (decrease) in
net asset value............ .40 (.59) .52 .46 .75 (1.19) .40 (.59) .20
----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period $6.75 $6.35 $6.94 $6.42 $5.96 $5.21 $6.75 $6.35 $6.94
===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN BASED ON
NET ASSET VALUE ........... 11.71% 0.78% 19.19% 20.08% 30.70% (7.27)% 11.19% (.30)% 4.53%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets 1.05%+ 1.13% 1.20% 1.21% 1.29% 1.21% 1.96%+ 2.19% 2.04%+
Net investment income
to average net assets...... 9.95%+ 9.73% 9.68% 10.82% 13.36% 13.40% 9.02%+ 8.68% 7.93%+
Portfolio turnover............ 82.13% 184.75% 193.91% 145.66% 181.08% 117.51% 82.13% 184.75% 193.91%++
Net assets, end of period
(000's omitted)............ $95,678 $59,033 $61,333 $40,802 $32,287 $27,558 $34,509 $9,249 $2,375
- ----------
* Commencement of offering of Class D shares.
+ Annualized.
++ For the year ended December 31, 1993.
See notes to financial statements.
</TABLE>
15
<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 June 30, 1995,
the related statements of operations for the six months then ended and of
changes in net assets for the six months then ended and the year ended December
31, 1994 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 June
30, 1995 by correspondence with the Fund's custodian and brokers; where replies
were not received from brokers we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the U.S. Government
Securities Series and the High-Yield Bond Series of Seligman High Income Fund
Series as of June 30, 1995, 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.
/s/Deloitte & Touche LLP
---------------------
DELOITTE & TOUCHE LLP
New York, New York
August 4, 1995
16
<PAGE>
================================================================================
TRUSTEES
- --------------------------------------------------------------------------------
Fred E. Brown
Director and Consultant,
J. & W. Seligman & Co. Incorporated
John R. Galvin 2
Dean, Fletcher School of Law and Diplomacy
at Tufts University
Director, USLIFE Corporation
Alice S. Ilchman 3
President, Sarah Lawrence College
Trustee, Committee for Economic Development
Director, NYNEX
Chairman, The Rockefeller Foundation
Frank A. McPherson 2
Chairman and CEO, Kerr-McGee Corporation
Director, Kimberly-Clark Corporation
Chairman and Director, Baptist Medical Center
John E. Merow
Partner, Sullivan & Cromwell, Law Firm
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
James C. Pitney 3
Partner, Pitney, Hardin, Kipp & Szuch, Law Firm
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
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
Director, Red Man Pipe and Supply Company
Brian T. Zino 1
Managing Director,
J. & W. Seligman & Co. Incorporated
- -----------------------
Member:
1 Executive Committee
2 Audit Committee
3 Trustee Nominating Committee
17
<PAGE>
================================================================================
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
William C. Morris
Chairman
Ronald T. Schroeder
President
Daniel J. Charleston
Vice President
Leonard J. Lovito
Vice President
Lawrence P. Vogel
Vice President
Thomas G. Rose
Treasurer
Frank J. Nasta
Secretary
- --------------------------------------------------------------------------------
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
18
<PAGE>
SELIGMAN FINANCIAL SERVICES, INC.
an affiliate of
[LOGO] 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.
TX3 6/95
