STATEMENT OF ADDITIONAL INFORMATION
April 22, 1996
SELIGMAN HIGH INCOME FUND SERIES
100 Park Avenue
New York, New York 10017
New York City Telephone (212) 850-1864
Toll Free Telephone (800) 221-2450 all continental United States
For Retirement Plan Information - Toll-Free Telephone (800) 445-1777
This Statement of Additional Information expands upon and supplements
the information contained in the current Prospectus for each Series of Seligman
High Income Fund Series (the "Fund"), each dated April 22, 1996. It should be
read in conjunction with the Prospectuses, which may be obtained by writing or
calling the Fund at the above address or telephone numbers. This Statement of
Additional Information, although not in itself a Prospectus, is incorporated by
reference into each Prospectus in its entirety.
The Fund offers two classes of shares (Class A and Class D) for the
Seligman U.S. Government Securities Series ("U.S. Government Securities Series")
and three classes of shares (Class A, Class B and Class D) for the Seligman
High-Yield Bond Series. Class A shares may be purchased at net asset value plus
a sales load of up to 4.75%. Class B shares may be purchased at net asset value
and are subject to a contingent deferred sales load ("CDSL"), if applicable, in
the following amount (as a percentage of the current net asset value or the
original purchase price, whichever is less, if redemption occurs within the
indicated number of years of purchase of such shares: 5% (less than 1 year), 4%
(1 but less than 2 years), 3% (2 but less than 4 years), 2% (4 but less than 5
years), 1% (5 but less than 6 years) and 0% (6 or more years). Class B shares
automatically convert to class A shares after approximately eight years
resulting in lower ongoing fees. Shares purchased through reinvestment of
dividends and distributions on Class B shares also will convert automatically to
Class A shares along with the underlying shares on which they were earned. Class
D shares may be purchased at net asset value and are subject to a CDSL of 1% (of
the current net asset value or the original purchase price, whichever is less)
if redeemed within one year of purchase.
Each Class A, Class B and Class D share represents an identical legal
interest in the investment portfolio of its respective Series and has the same
rights except for certain class expenses and except that Class B and Class D
shares bear a higher distribution fee that generally will cause the Class B and
Class D shares to have a higher expense ratio and pay lower dividends than Class
A shares. Each Class has exclusive voting rights with respect to its
distribution plan. Although holders of Class A, Class B and Class D shares have
identical legal rights, the different expenses borne by each Class will result
in different net asset values and dividends. The three classes also have
different exchange privileges.
TABLE OF CONTENTS
Page
Investment Objectives, Policies And Risks...... 2
Investment Limitations......................... 3
Trustees And Officers.......................... 4
Management And Expenses........................ 8
Administration, Shareholder Services
And Distribution Plan....................... 10
Portfolio Transactions......................... 10
Purchase And Redemption Of
Fund Shares................................. 11
Distribution Services.......................... 13
Valuation...................................... 14
Performance ................................... 15
General Information............................ 17
Financial Statements........................... 18
Appendix ...................................... 18
TX1A
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISKS
The investment objective of each Series is a fundamental policy and may
not be changed by the Trustees of the Fund without the vote of a majority of
such Series' outstanding voting securities. The objective of each Series is as
follows:
The U.S. Government Securities Series seeks to produce high current
income. To achieve its objective, the Series invests primarily in debt
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities and backed by the full faith and credit of the U.S. Government
which have maturities greater than one year at the date of purchase by the
Series.
The High-Yield Bond Series seeks to produce maximum current income. To
achieve its objective, the Series invests primarily in high-yielding, high-risk
corporate bonds and notes, which generally are unrated or carry lower ratings
(Baa or lower by Moody's Investors Service, Inc ("Moody's") or BBB or lower by
Standard & Poors's Corporation ("S&P")) than those assigned by S&P or Moody's to
investment grade bonds and notes. Except for temporary defensive purposes, the
Series will invest at least 80% of the value of its assets in high-yielding,
income-producing corporate bonds and notes. Investments other than in such
corporate bonds will be in short-term money market instruments, including
certificates of deposit, commercial paper, securities issued, guaranteed or
insured by the U.S. Government, its agencies and instrumentalities, and other
income producing cash items. The The High-Yield Bond Series may invest up to 10%
of its total assets in debt securities of foreign issuers. Foreign investments
may be affected favorably or unfavorably by changes in currency rates and
exchange control regulations. There may be less information available about a
foreign company than about a U.S. company, and foreign companies may not be
subject to reporting standards and requirements comparable to those applicable
to U.S. companies. Foreign debt securities and their markets may not be as
liquid as U.S. securities and their markets. Securities and some foreign
companies may involve greater market risk than securities of U.S. companies, and
foreign brokerage commissions and custody fees are generally higher than in the
United States. Investments in foreign debt securities may also be subject to
local economic or political risks, such as political instability of some foreign
governments and the possibility of nationalization of issuers.
The following information regarding the investment policies of the Series
supplements the information contined in each Series' Prospectus.
Lending of Securities. Each Series of the Fund may lend portfolio securities to
certain institutional borrowers of securities and may invest the cash collateral
and obtain additional income or receive an agreed upon amount of interest from
the borrower. Loans will generally be short-term. Loans are subject to
termination at the option of the Series or the borrower. Each Series may pay
reasonable administrative and custodial fees in connection with a loan and may
pay a negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker. Loaned securities may not be
returned by a borrower; however, a borrower must maintain with the Series from
which it has borrowed securities, cash, or equivalent collateral, equal to at
least 100% of the market value of the securities borrowed.
Repurchase Agreements. Each Series of the Fund may enter into repurchase
agreements with commercial banks and with broker/dealers to invest cash for the
short-term. A repurchase agreement is an agreement under which the Series
acquires a money market instrument, generally a U.S. Government obligation,
qualified for purchase by the Series, subject to resale at an agreed upon price
and date. Such resale price reflects an agreed upon interest rate effective for
the period of time the instrument is held by the Series and is unrelated to the
interest rate on the instrument. Repurchase agreements usually are for short
periods, such as one week or less, but may be for longer periods. As a matter of
fundamental policy, a Series will not enter into repurchase agreements of more
than one week's duration if more than 10% of its total assets would be invested
in such agreements and in "restricted" and other illiquid securities.
When-Issued Securities. Each Series may purchase securities on a when-issued
basis, in which case delivery and payment normally take place within 45 days
after the date of the commitment to purchase. The payment obligation and the
interest rate that will be received on the securities are each fixed at the time
the buyer enters into the commitment. Although a Series will only purchase a
security on a when-issued basis with the intention of actually acquiring the
securities, the Series may sell these securities before the settlement date if
it is deemed advisable.
Securities purchased on a when-issued basis and the securities held in
each Series are subject to changes in market value based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates (which will generally result in
similar changes in value, i.e., both experiencing appreciation when interest
rates decline and depreciation when interest rates rise). Therefore, to the
extent a Series remains substantially fully invested at the same time that it
has purchased securities on a when-issued basis, there will be a greater
possibility that the market value of the Series' assets will vary more than
otherwise. Purchasing a security on a when-issued basis can involve a risk that
the yields available in the market when the delivery takes place may be higher
than those obtained on the security so purchased.
2
<PAGE>
A separate account of each of the Series consisting of cash or liquid
high-grade debt securities equal to the amount of the when-issued commitments
will be established with Investors Fiduciary Trust Company, the Fund's portfolio
securities custodian, and marked to market daily, with additional cash or liquid
high grade debt securities added when necessary. When the time comes to pay for
when-issued securities, each Series will meet its respective obligations from
then available cash flow, sale of securities held in the separate account, sale
of other securities or, although they would not normally expect to do so, from
the sale of the when-issued securities themselves (which may have a value
greater or less than the Series' payment obligations). Sale of securities to
meet such obligations carries with it a greater potential for the realization of
capital gain or loss.
Except as described above and under Investment Limitations below, the
foregoing investment policies are not fundamental and the Trustees of the Fund
may change such policies without the vote of a majority of the outstanding
voting securities of the Fund or any Series (as defined on page 7).
Portfolio Turnover. Each Series' portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities of the Series
for the fiscal year by the monthly average value of the portfolio securities of
the Series owned during the fiscal year. The portfolio turnover rates for the
U.S. Government Securities Series and the the High-Yield Bond Series,
respectively, for the fiscal years ended 1995 and 1994 were 213.06% and 445.18%,
and 173.39% and 184.75%, respectively. Securities whose maturities or expiration
dates at the time of acquisition were one year or less are excluded from the
calculation. High portfolio turnover involves correspondingly greater
transactions costs and a possible increase in short-term capital gains or
losses.
INVESTMENT LIMITATIONS
Under each Series' fundamental policies, which cannot be changed except by
a vote of a majority of its outstanding voting securities, a Series may not:
- - Borrow money, except from banks for temporary or emergency purposes (but not
for the purchase of portfolio securities) in an amount not to exceed 15% of
the value of the total assets of the Series. A Series will not purchase
additional portfolio securities if such Series has outstanding borrowings in
excess of 5% of the value of its total assets;
- - Mortgage or pledge any of its assets, except to the extent necessary to
effect borrowings permitted by the preceding paragraph and provided that this
limitation does not prohibit escrow, collateral or margin arrangements in
connection with (a) the writing of covered call options by the U.S.
Government Securities Series; (b) the purchase of put options by the U.S.
Government Securities Series or (c) the sale of interest rate futures
contracts and the purchase or sale of options on such contracts by the U.S.
Government Securities Series;
- - Make "short" sales of securities, or purchase securities on "margin" except
that for purposes of this limitation, initial and variation payments or
deposits in connection with interest rate futures contracts and related
options by the U.S. Government Securities Series will not be deemed to be the
purchase of securities on margin; write or purchase put or call options
except that the U.S. Government Securities Series may write covered call
options and the U.S. Government Securities Series may purchase put options
and may purchase and sell options on interest rate futures and may engage in
closing transactions with respect to such options. The Series has no present
intention of investing in these types of securities, and will not do so
without the prior approval of the Fund's Board of Trustees;
- - Purchase securities of any issuer if immediately thereafter more than 5% of
total assets at market would be invested in the securities of any one issuer,
other than the U.S. Government, its agencies or instrumentalities; buy more
than 10% of the voting securities of any one issuer, other than U.S.
Government agencies or instrumentalities, or invest to control or manage any
company;
- - Invest more than 25% of the market value of its total assets in securities of
issuers in any one industry; for the purpose of this limitation,
mortgage-related securities do not constitute an industry;
3
<PAGE>
- - Invest in securities issued by other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization;
- - Purchase or hold any real estate including limited partnership interests in
real property;
- - Purchase or sell commodities and commodity futures contracts except that the
U.S. Government Securities Series may sell interest rate futures contracts
and may write call options and may purchase put options with respect to such
contracts and may engage in closing transactions with respect to all such
transactions. The Series has no present intention of investing in these types
of securities, and will not do so without the prior approval of the Fund's
Board of Trustees;
- - Invest more than 5% of the value of its total assets, at market value, in
securities of any company which, with their predecessors, have been in
operation less than three continuous years, provided, however, that
securities are guaranteed by a company that (including predecessors) has been
in operation at least three continuous years shall be excluded from this
calculation;
- - Purchase or hold the securities of any issuer, if to its knowledge, Trustees
or officers of the Fund individually owning beneficially more than 0.5% of
the securities of that other company own in the aggregate more than 5% of
such securities;
- - Engage in transactions with its Trustees and officers, or firms they are
associated with, in connection with the purchase or sale of securities,
except as broker;
- - Underwrite the securities of other issuers, except that in connection with
the disposition of a security a Series may be deemed to be an underwriter as
defined in the Securities Act of 1933; or
- - Make loans, except loans of securities of the Series and except to the extent
the purchase of notes, bonds or other evidences of indebtedness, or the entry
into repurchase agreements may be considered loans.
Although not fundamental policies subject to shareholder vote, as long as the
Fund's shares are registered in certain states, a Series may not mortgage,
pledge or hypothecate its assets to the extent that the value of such encumbered
assets exceed 10% of the per share offering price of shares of the Series, it
may not invest in interests in oil, gas, mineral leases or other mineral
exploration or development programs and it must limit to 5% of its gross assets
at market value its combined investments in securities of companies in operation
for less than three years (excluding securities guaranteed by a company which,
including predecessors, has been in operation at least three continuous years).
Under the Investment Company Act of 1940 (the "1940 Act"), a "vote of a
majority of the outstanding voting securities" of the Fund or of a particular
Series means the affirmative vote of the lesser of (l) more than 50% of the
outstanding shares of the Fund or of such Series or (2) 67% or more of the
shares of the Fund or of such Series present at a shareholder's meeting if more
than 50% of the outstanding shares of the Fund or of such Series are represented
at the meeting in person or by proxy.
TRUSTEES AND OFFICERS
Trustees and officers of the Fund, together with information as to their
principal business occupations during the past five years, are shown below. Each
Trustee who is an "interested person" of the Fund, as defined in the 1940 Act,
is indicated by an asterisk. Unless otherwise indicated, their addresses are 100
Park Avenue, New York, NY 10017.
WILLIAM C. MORRIS* Trustee, Chairman of the Board, Chief Executive
(57) Officer and Chairman of the Executive Committee
Managing Director, Chairman and President, J. &
W. Seligman & Co. Incorporated, investment
managers and advisers; and Seligman Advisors,
Inc., advisers; Chairman and Chief Executive
Officer, the Seligman Group of Investment
Companies; Chairman, Seligman Financial
Services, Inc., broker/dealer; Seligman
Holdings, Inc., holding company; Seligman
Services, Inc., broker/dealer; and Carbo
Ceramics Inc., ceramic proppants for oil and
gas industry; Director or Trustee, Seligman
Data Corp., shareholder service agent;
Kerr-McGee Corporation, diversified energy
company; and Sarah Lawrence College; and a
Member of the Board of Governors of the
Investment Company Institute; formerly,
Chairman, Seligman Securities, Inc.,
broker/dealer; and J. & W. Seligman Trust
Company, trust company.
4
<PAGE>
BRIAN T. ZINO* Trustee, President and Member of the Executive
(43) Committee
Director and Managing Director (formerly, Cheif
Administrative and Financial Officer), J. & W.
Seligman & Co. Incorporated, investment
managers; and advisers and Seligman Advisors,
Inc, advisers; Director or Trustee, the
Seligman Group of Investment Companies;
President, the Seligman Group of Investment
Companies, except Seligman Quality Municipal
Fund, Inc. and Seligman Select Municipal Fund,
Inc.; Chairman, Seligman Data Corp.,
shareholder service agent; Director, Seligman
Financial Services, Inc., broker/dealer;
Seligman Services, Inc., broker/dealer; and
Senior Vice President, Seligman Henderson Co.,
advisers; formerly, Director and Secretary,
Chuo Trust - JWS Advisors, Inc., advisers; and
Director, Seligman Securities, Inc.,
broker/dealer; and J. & W. Seligman Trust
Company, trust company.
FRED E. BROWN* Director
(82)
Director and Consultant, J. & W. Seligman & Co.
Incorporated, investment managers and advisers;
and Seligman Advisrs, Inc., advisers; Director
or Trustee, the Seligman Group of Investment
Companies; Seligman Financial Services, Inc.,
broker/dealer; Seligman Services Inc.,
broker/dealer; Trudeau Institute, nonprofit
biomedical research organization; Lake Placid
Center for the Arts, cultural organization; and
Lake Placid Education Foundation, education
foundation; formerly, Director, J. & W.
Seligman Trust Company, trust company; and
Seligman Securities, Inc., broker/dealer.
JOHN R. GALVIN Director
(66)
Dean, Fletcher School of Law and Diplomacy at
Tufts University; Director or Trustee, the
Seligman Group of Investment Companies;
Chairman of the American Council on Germany; a
Governor of the Center for Creative Leadership;
Director of USLIFE, insurance; National
Committee on U.S.-China Relations, National
Defense University; the Institute for Defense
Analysis; and Raytheon Co., electronics;
formerly, Ambassador, U.S. State Department;
Distinguished Policy Analyst at Ohio State
University and Olin Distinguished Professor of
National Security Studies at the United States
Military Academy. From June, 1987 to June,
1992, he was the Supreme Allied Commander,
Europe and the Commander-in-Chief, United
States European Command. Tufts University,
Packard Avenue, Medford, MA 02105.
ALICE S. ILCHMAN Director
(60)
President, Sarah Lawrence College; Director or
Trustee, the Seligman Group of Investment
Companies; Chairman, The Rockefeller
Foundation, charitable foundation; and
Director, NYNEX, telephone company; and the
Committee for Economic Development; formerly,
Trustee, The Markle Foundation, philanthropic
organization; and Director, International
Research and Exchange Board, intellectual
exchanges. Sarah Lawrence College, Bronxville,
NY 10708
5
<PAGE>
FRANK A. McPHERSON Director
(62)
Chairman of the Board and Chief Executive
Officer, Kerr-McGee Corporation, energy and
chemicals; Director or Trustee, the Seligman
Group of Investment Companies; Director,
Kimberly-Clark Corporation, consumer products,
Bank of Oklahoma Holding Company, American
Petroleum Institute, Oklahoma City Chamber of
Commerce, Baptist Medical Center, Oklahoma
Chapter of the Nature Conservancy, Oklahoma
Medical Research Foundation and United Way
Advisory Board; Chairman, Oklahoma City Public
Schools Foundation; and Member of the Business
Roundtable and National Petroleum Council. 123
Robert S. Kerr Avenue, Oklahoma City, OK 73102
JOHN E. MEROW* Director
(66)
Chaiman and Senior Partner, Sullivan &
Cromwell, law firm; Director or Trustee, the
Seligman Group of Investment Companies; The
Municipal Art Society of New York; Commonwealth
Aluminum Corporation; the U. S. Council for
International Business; and the U. S.-New
Zealand Council; Chairman, American Australian
Association; Member of the American Law
Institute and Council on Foreign Relations; and
Member of the Board of Governors of the Foreign
Policy Association and New York Hospital.
125 Broad Street, New York, NY 10004
BETSY S. MICHEL Director
(53)
Attorney; Director or Trustee, the Seligman
Group of Investment Companies; and Chairman of
the Board of Trustees of St. George's School
(Newport, RI); formerly, Director, the National
Association of Independent Schools (Washington,
DC). St. Bernard's Road, P.O. Box 449,
Gladstone, NJ 07934
JAMES C. PITNEY Director
(69)
Partner, Pitney, Hardin, Kipp & Szuch, law
firm; Director or Trustee, the Seligman Group
of Investment Companies; and Public Service
Enterprise Group, public utility. Park Avenue
at Morris County, P.O. Box 1945, Morristown, NJ
07962-1945
JAMES Q. RIORDAN Director
(68)
Director, Various Corporations; Director or
Trustee, the Seligman Group of Investment
Companies; The Brooklyn Museum; The Brooklyn
Union Gas Company; The Committee for Economic
Development; Dow Jones & Co., Inc.; and Public
Broadcasting Service; formerly, Co-Chairman of
the Policy Council of the Tax Foundation;
Director and Vice Chairman, Mobil Corporation;
Director, Tesoro Petroleum Companies, Inc.; and
Director and President, Bekaert Corporation.
675 Third Avenue, Suite 3004, New York, NY
10017
RONALD T. SCHROEDER* Director and Member of the Executive Committee
(48)
Director, Managing Director and Chief
Investment Officer, Institutional, J. & W.
Seligman & Co. Incorporated, investment
managers and advisers; and Seligman Advisors,
Inc., advisers; Director or Trustee, the
Seligman Group of Investment Companies;
Director, Seligman Holdings, Inc., holding
company; Seligman Financial Services, Inc.,
broker/dealer; Seligman Henderson Co.,
advisers; and Seligman Services, Inc.,
broker/dealer; formerly, President, the
Seligman Group of Investment Companies, except
Seligman Quality Municipal Fund, Inc. and
Seligman Select Municipal Fund, Inc.; and
Director, J. & W. Seligman Trust Company, trust
company; Seligman Data Corp., shareholder
service agent; and Seligman Securities, Inc.,
broker/dealer.
6
<PAGE>
ROBERT L. SHAFER Director
(63)
Vice President, Pfizer Inc., pharmaceuticals;
Director or Trustee, the Seligman Group of
Investment Companies; and USLIFE Corporation,
life insurance.
235 East 42nd Street, New York, NY 10017
JAMES N. WHITSON Director
(61)
Executive Vice President, Chief Operating
Officer and Director, Sammons Enterprises,
Inc.; Director or Trustee, the Seligman Group
of Investment Companies; Red Man Pipe and
Supply Company, piping and other materials; and
C-SPAN. 300 Crescent Court, Suite 700, Dallas,
TX 75201
DANIEL J. CHARLESTON Portfolio Manager
(36)
Vice President, Investment Officer, J. & W.
Seligman & Co. Incorporated, investment
managers and advisers; and Vice President and
Portfolio Manager of one other open-end
investment company in the Seligman Group of
Investment Companies.
LEONARD J. LOVITO Vice President and Portfolio Manager
(35)
Vice President, Investment Officer, J. & W.
Seligman & Co. Incorporated, investment
managers and advisers; Vice President and
Portfolio Manager, two other open-end
investment companies in the Seligman Group of
Investment Companies.
LAWRENCE P. VOGEL Vice President
(39)
Senior Vice President, Finance, J. & W.
Seligman & Co. Incorporated, investment
managers and advisers; Seligman Financial
Services, Inc., broker/dealer; and Seligman
Advisors, Inc., advisers; Vice President, the
Seligman Group of Investment Companies; Senior
Vice President, Finance (formerly, Treasurer),
Seligman Data Corp., shareholder service agent;
Treasurer, Seligman Holdings, Inc., holding
company; and Seligman Henderson Co., advisers;
formerly, Senior Vice President, Seligman
Securities, Inc., broker/dealer; and Vice
President, Finance, J & W Seligman Trust
Company, trust company.
FRANK J. NASTA Secretary
(31)
Senior Vice President, Law and Regulation and
Corporate Secretary, J. & W. Seligman & Co.
Incorporated, investment managers and advisers;
and Seligman Advisors, Inc., advisers;
Corporate Secretary, the Seligman Group of
Investment Companies; Seligman Financial
Services, Inc., broker/dealer; Seligman
Henderson Co., advisers; Seligman Services,
Inc., broker/dealer; and Seligman Data Corp.,
shareholder service agent; formerly, Secretary,
J. & W. Seligman Trust Company; and attorney,
Seward and Kissel, law firm.
THOMAS G. ROSE Treasurer
(38)
Treasurer, the Seligman Group of Investment
Companies; and Seligman Data Corp., shareholder
service agent; formerly, Treasurer, American
Investors Advisers, Inc. and the American
Investors Family of Funds.
The Executive Committee of the Trustees acts on behalf of the Trustees
between meetings to determine the value of securities and assets owned by the
Fund for which no market valuation is available and to elect or appoint officers
of the Fund to serve until the next meeting of the Trustees.
7
<PAGE>
<TABLE>
<CAPTION>
Compensation Table
Pension or
Aggregate Retirement Benefits Total Compensation
Compensation Accrued as part of from Fund and
Position With Registrant from Fund (1) Fund Expenses Fund Complex (2)
------------------------ ------------- ------------- ----------------
<S> <C> <C> <C>
William C. Morris, Trustee and Chairman N/A N/A N/A
Brian T. Zino, Trustee and President N/A N/A N/A
Ronald T. Schroeder, Trustee N/A N/A N/A
Fred E. Brown, Trustee N/A N/A N/A
John R. Galvin, Trustee $ 1,618.32 N/A $41,252.75
Alice S. Ilchman, Trustee 2,662.12 N/A 68,000.00
Frank A. McPherson, Trustee 1,618.32 N/A 41,252.75
John E. Merow, Trustee 2,590.70(d) N/A 66,000.00(d)
Betsy S. Michel, Trustee 2,840.73 N/A 67,000.00
Douglas R. Nichols, Jr., Trustee* 972.38 N/A 24,747.25
James C. Pitney, Trustee 2,662.12 N/A 68,000.00(d)
James Q. Riordan, Trustee 2,947.80 N/A 70,000.00
Herman J. Schmidt, Trustee* 972.38 N/A 24,747.25
Robert L. Shafer, Trustee 2,947.86 N/A 70,000.00
James N. Whitson, Trustee 2,876.38(d) N/A 68,000.00(d)
</TABLE>
- ---------------------
(1) Based on remuneration received by the Directors of the Fund for the year
ended December 31, 1995.
(2) As defined in the Fund's Prospectus, the Seligman Group of Investment
Companies consists of seventeen investment companies.
* Retired May 18, 1995.
(d) Deferred. As of December 31, 1995, the total amounts of deferred
compensation (including interest) payable to Messrs. Merow, Pitney and Whitson
were $29,945, $23,316 and $7,516, respectively. Mr. Pitney no longer defers
current compensation.
The Fund has a compensation arrangement under which outside Trustees may
elect to defer receiving their fees. Under this arrangement, interest would be
accrued on the deferred balances. The actual cost of such interest is included
in the Trustee's fees and expenses, and the accumulated balance thereof is
included in "Liabilities" in the Fund's financial statements.
Trustees and officers of the Fund are also directors, trustees and
officers of some or all of the other investment companies in the Seligman Group.
Trustees and officers of the Fund as a group owned less than than 1% of the U.S
Government Securities Series' Class A Capital Stock and less than 1% of the
High-Yield Bond Series' Class A Capital Stock as of March 29, 1996. As of that
date, no Directors or officers owned shares of either Series' Class D capital
stock.
As of March 29, 1996, 3,654,449 Class A shares of the High-Yield Bond
Series, or 11.4% of the Series' Class A capital stock and 6.3% of the
Series'capital stock then outstanding; and 5,202,028 Class D shares of the
High-Yield Bond Series, or 29.9% of the Series' Class D capital stock and 9.0%
of the Series' capital stock then outstanding were registered in the name of
Merrill Lynch Pierce Fenner & Smith, P.O. Box 45286, Jacksonville, Florida
32232-5286.
MANAGEMENT AND EXPENSES
Under each Series' Management Agreement, dated December 29, 1988 for the
U.S. Government Securities Series and December 29, 1988, as amended January 1,
1996, for the High-Yield Bond Series, subject to the control of the Trustees, J.
& W. Seligman & Co. Incorporated (the "Manager") manages the investment of the
assets of each Series, including making purchases and sales of portfolio
securities consistent with the Series' investment objectives and policies, and
administers its business and other affairs. The Manager provides the Fund with
such office space, administrative and other services and executive and other
personnel as are necessary for Fund operations. The Manager pays all of the
compensation of Trustees of the Fund who are employees or consultants of the
Manager and the officers and employees of the Fund. The Manager also provides
senior management for Seligman Data Corp., the Fund's shareholder service agent.
8
<PAGE>
The Manager is entitled to receive a management fee from each Series for
its services to such Series, calculated daily and payable monthly. For the U.S.
Government Securities Series, the fee is equal to .50% of the average daily net
assets of the Series on an annual basis. Effective January 1, 1996, the
management fee for the High-Yield Bond Series is equal to .65% of the Series'
average daily net assets on the first $1 billion of net assets and .55% of the
Series's average daily net assets in excess of $1 billion. The management fees
paid by each Series for each of 1995, 1994 and 1993 equaled .50% of the average
daily net assets of each Series; or for the U.S. Government Securities Series
and the High-Yield Bond Series, $301,343, $338,362 and $296,325; and $723,340,
$329,652 and $251,812, respectively.
The Fund pays all its expenses other than those assumed by the Manager or
subadviser including brokerage commissions, administration, shareholder services
and distribution fees, if any, fees and expenses of independent attorneys and
auditors, taxes and governmental fees including fees and expenses of qualifying
the Fund and its shares under federal and state securities laws, cost of stock
certificates and expenses of repurchase or redemption of shares, expenses of
printing and distributing reports, notices and proxy materials and prospectuses
to existing shareholders, expenses of printing and filing reports and other
documents filed with governmental agencies, expenses of shareholders' meetings,
expenses of corporate data processing and related services, shareholder
recordkeeping and shareholder account services, fees and disbursements of
transfer agents and custodians, expenses of disbursing dividends and
distributions, fees payable under the Administration, Shareholder Services and
Distribution Plan described below, fees and expenses of Trustees of the Fund not
employed by (or serving as a Trustee of) the Manager or its affiliates,
insurance premiums and extraordinary expenses such as litigation expenses. The
Fund's expenses are allocated among the Series in a manner determined by the
Trustees to be fair and equitable.
The Manager has undertaken to one state securities administrator, so long
as required, to reimburse each Series for each year in the amount by which total
expenses, including the management fee but excluding interest, taxes, brokerage
commissions, distribution fees and extraordinary expenses, exceed 2 1/2% of the
first $30,000,000 of average net assets, 2% of the next $70,000,000 of average
net assets, and 1 1/2% thereafter. Such reimbursement, if any, will be paid
monthly.
Each Series' Management Agreement was initially approved by the Board of
Directors on September 30, 1988 and by the shareholders at a special meeting
held on December 16, 1988. The amendments to the Management Agreement of the
High-Yield Bond Series, to increase the fee rate payable to the Manager by the
Fund, were approved by the Board of Directors on September 21, 1995 and by the
shareholders at a special meeting held on December 12, 1995. The Management
Agreements will continue until December 31 of each year (1) if such continuance
is approved in the manner required by the 1940 Act (by a vote of a majority of
the Trustees or of the outstanding voting securities of each Series and by a
vote of a majority of the Trustees who are not parties to the Management
Agreement or interested persons of any such party) and, (2) if the Manager shall
not have notified the Series at least 60 days prior to December 31 of any year
that it does not desire such continuance. Each Management Agreement may be
terminated by the appropriate Series, without penalty, on 60 days' written
notice to the Manager and will terminate automatically in the event of its
assignment. Each Series has agreed to change its name upon termination of its
Management Agreement if continued use of the name would cause confusion in the
context of the Manager's business.
The Manager is a successor firm to an investment banking business founded
in 1864 which has thereafter provided investment services to individuals,
families, institutions and corporations. On December 29, 1988, a majority of the
outstanding voting securities of the Manager was purchased by Mr. William C.
Morris and a simultaneous recapitalization of the Manager occurred. See the
Appendix for further history of the Manager.
Officers, directors and employees of the Manager are permitted to
engage in personal securities transactions, subject to the Manager's Code of
Ethics (the "Ethics Code"). The Ethics Code proscribes certain practices with
regard to personal securities transactions and personal dealings, provides a
framework for the reporting and monitoring of personal securities transactions
by the Manager's Director of Compliance, and sets forth a procedure of
identifying, for disciplinary action, those individuals who violate the Ethics
Code. The Ethics Code prohibits each of the officers, directors and employees
(including all portfolio managers) of the Manager from purchasing or selling any
security that the officer, director or employee knows or believes (i) was
recommended by the Manager for purchase or sale by any client, including the
Fund, within the preceding two weeks, (ii) has been reviewed by the Manager for
possible purchase or sale within the preceding two weeks, (iii) is being
purchased or sold by any client, (iv) is being considered by a research analyst,
(v) is being acquired in a private placement, unless prior approval has been
obtained from the Manager's Director of Compliance, or (vi) is being acquired
during an initial or secondary public offering. The Ethics Code also imposes a
strict standard of confidentiality and requires portfolio managers to disclose
any interest they may have in the securities or issuers that they recommend for
purchase by any client.
9
<PAGE>
The Ethics Code also prohibits (i) each portfolio manager or member of
an investment team from purchasing or selling any security within seven calendar
days of the purchase or sale of the security by a client's account (including
investment company accounts) for which the portfolio manager or investment team
manages and (ii) each employee from engaging in short-term trading (a purchase
and sale or vice-versa within 60 days). Any profit realized pursuant to either
of these prohibitions must be disgorged.
Officers, directors and employees are required, except under very
limited circumstances, to engage in personal securities transactions through the
Manager's order desk. The order desk maintains a list of securities that may not
be purchased due to a possible conflict with clients. All officers, directors
and employees are also required to disclose all securities beneficially owned by
them on December 31 of each year.
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
The Fund has adopted an Administration, Shareholder Services and
Distribution Plan (the "Plan") under Section 12(b) of the 1940 Act and Rule
12b-1 thereunder (the "Rule") for each Series.
The Plan was last approved on November 19, 1992 by the Board of Trustees
of the Fund, including a majority of the Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Fund and who have no direct or
indirect financial interest in the operation of the Plan or in any agreement
related to the Plan (the "Qualified Trustees") and by the shareholders of each
Series at a meeting of shareholders on April 10, 1986. The Plan was approved in
respect of the Class B shares on March 21, 1996 by the Board of Directors of the
Fund, including a majority of the Qualified Directors, and became effective in
respect of Class B shares on April 22, 1996. The Plan was approved in respect of
the Class D shares on July 15, 1993 by the Board of Trustees of the Fund,
including a majority of the Qualified Trustees, and became effective in respect
of the Class D shares of the U.S. Government Securities Series and the
High-Yield Bond Series on September 21, 1993. The Plan will continue in effect
until December 31 of each year so long as such continuance is approved annually
by a majority vote of both the Trustees and the Qualified Trustees of the Fund,
cast in person at a meeting called for the purpose of voting on such approval.
The Plan may not be amended to increase materially the amounts payable to
Service Organizations (as defined in each Series' Prospectus) with respect to a
class of shares of the U.S. Government Securities Series and the High-Yield Bond
Series without the approval of a majority of the outstanding voting securities
of a class. If the amount payable in respect of Class A shares under the Plan is
proposed to be increased materially, the Fund will either (i) permit holders of
Class B shares of the High-Yield Bond Series to vote as a separate class on the
proposed increase or (ii) establish a new class of shares subject to the same
payment under the Plan as existing Class A shares, in which case the Class B
shares of the High-Yield Bond Series will thereafter convert into the new class
instead of into Class A shares. No material amendment to the Plan may be made
except by a majority of both the Trustees and Qualified Trustees.
The Plans require that the Treasurer of the Fund shall provide to the
Trustees, and the Trustees shall review, at least quarterly, a written report of
the amounts expended (and purposes therefor) for each Series under the Plans.
Rule 12b-1 also requires that the selection and nomination of Trustees who are
not "interested persons" of the Fund be made by such disinterested Trustees.
10
<PAGE>
PORTFOLIO TRANSACTIONS
No brokerage commissions were paid by the Fund during 1995, 1994 and 1993.
When two or more of the investment companies in the Seligman Group or other
investment advisory clients of the Manager desire to buy or sell the same
security at the same time, the securities purchased or sold are allocated by the
Manager in a manner believed to be equitable to each. There may be possible
advantages or disadvantages of such transactions with respect to price or the
size of positions readily obtainable or saleable.
PURCHASE AND REDEMPTION OF FUND SHARES
The U.S. Government Securities Series offers two classes of shares (Class
A and Class D) and the High-Yield Bond Series three classes of shares (Class A,
Class B and Class D): Class A shares may be purchased at a price equal to the
next determined net asset value per share, plus a sales load. Class B shares may
be purchased at a price equal to the next determined net asset value without an
initial sales load, but a CDSL may be charged on redemptions within 6 years of
purchase. Class D shares may be purchased at a price equal to the next
determined net asset value without an initial sales load, but a CDSL may be
charged on redemptions within one year of purchase. See "Alternative
Distribution System," "Purchase Of Shares," and "Redemption Of Shares" as
applicable in each Series' respective Prospectus.
Specimen Price Make-Up
Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold at a maximum sales load of 4.75% and Class
B and Class D shares are sold at net asset value.* Using each Series' net asset
value at December 31, 1995, the maximum offering price of a Series' shares is as
follows:
U.S. Government Securities Series
Class A
Net asset value per share.............................................. $ 7.15
-----
Maximum sales load (4.75% of offering price)........................... 0.36
----
Maximum offering price per share....................................... $ 7.51
======
Class B and Class D
Net asset value and maximum offering price per share*.................. $ 7.16
======
High-Yield Bond Series
Class A
Net asset value per share.............................................. $ 6.96
-----
Maximum sales load (4.75% of offering price)........................... 0.35
------
Maximum offering price per share....................................... $ 7.31
======
Class B and Class D
Net asset value and maximum offering price per share*.................. $ 6.96
======
- ----------
* Class B shares are subject to a CDSL declining from 5% in the first year
after purchase to 0% after six years. Class D shares are subject to a CDSL
of 1% on redemptions within one year of purchase. See "Redemption Of
Shares" in the Series' Prospectuses.
11
<PAGE>
Class A Shares - Reduced Front-End Sales Loads
Reductions Available. Shares of any Seligman Mutual Fund sold with a front-end
sales load in a continuous offering will be eligible for the following
reductions:
Volume Discounts are provided if the total amount being invested in Class A
shares of the Series or in any combination of shares of the other mutual funds
in the Seligman Group which are sold with a front-end sales load, reaches levels
indicated in the sales load schedule set forth in the Prospectuses.
The Right of Accumulation allows an investor to combine the amount being
invested in Class A shares of the other mutual funds in the Seligman Group sold
with a front-end sales load with the total net asset value of shares of those
Seligman Mutual Funds already owned that were sold with a front-end sales load
and the total net asset value of shares of Seligman Cash Management Fund which
were acquired through an exchange of shares of another mutual fund in the
Seligman Group on which there was a front-end sales load at the time of purchase
to determine reduced sales loads in accordance with the schedule in the
Prospectuses. The value of the shares owned, including the value of shares of
Seligman Cash Management Fund acquired in an exchange of shares of another
mutual fund in the Seligman Group on which there is a front-end sales load at
the time of purchase will be taken into account in orders placed through a
dealer, however, only if Seligman Financial Services, Inc. ("SFSI") is notified
by an investor or a dealer of the amount owned by the investor at the time the
purchase is made and is furnished sufficient information to permit confirmation.
A Letter of Intent allows an investor to purchase Class A shares of the
Series shares over a 13-month period at reduced sales loads in accordance with
the schedule in the Prospectuses, based on the total amount of Class A shares of
the Series that the letter states the investor intends to purchase plus the
total net asset value of shares that were sold with a front-end sales load of
the other mutual funds in the Seligman Group already owned and the total net
asset value of shares of Seligman Cash Management Fund which were acquired
through an exchange of shares of another mutual fund in the Seligman Group on
which there was a front-end sales load at the time of purchase. Reduced sales
loads also may apply to purchases made within a 13-month period starting up to
90 days before the date of execution of a letter of intent. For more information
concerning the terms of the letter of intent, see "Terms and Conditions --
Letter of Intent" accompanying the Account Application.
Persons Entitled to Reductions. Reductions in sales loads apply to purchases of
Class A shares of the Series by a "single person," including an individual;
members of a family unit comprising husband, wife and minor children; or a
trustee or other fiduciary purchasing for a single fiduciary account. Employee
benefit plans qualified under Section 401 of the Internal Revenue Code of 1986,
as amended, tax-exempt organizations under Section 501 (c)(3) or (13), and
non-qualified employee benefit plans that satisfy uniform criteria are
considered "single persons" for this purpose. The uniform criteria are as
follows:
1. Employees must authorize the employer, if requested by the Fund, to receive
in bulk and to distribute to each participant on a timely basis the Fund
prospectuses, reports and other shareholder communications.
2. Employees participating in a plan will be expected to make regular periodic
investments (at least annually). A participant who fails to make such
investments may be dropped from the plan by the employer or the Fund 12 months
and 30 days after the last regular investment in his account. In such event, the
dropped participant would lose the discount on share purchases to which the plan
might then be entitled.
3. The employer must solicit its employees for participation in such an employee
benefit plan or authorize and assist an investment dealer in making enrollment
solicitations.
Eligible Employee Benefit Plans. The table of sales loads in the Prospectuses
applies to sales to "eligible employee benefit plans," except that the Fund may
sell shares at net asset value to "eligible employee benefit plans," (i) which
have at least $1 million invested in the Seligman Group of Mutual Funds of (ii)
of employers who have at least 50 eligible employees to whom such plan is made
available or, regardless of the number of employees, if such plan is established
or maintained by any dealer which has a sales agreement with Seligman Financial
Services, Inc ("SFSI"). Such sales must be made in connection with a payroll
deduction system of plan funding or other systems acceptable to Seligman Data
Corp., the Fund's shareholder service agent. Such sales are believed to require
limited sales effort and sales related expenses and therefore are made at net
asset value. Contributions or account information for plan participation also
should be transmitted to Seligman Data Corp. by methods which it accepts.
Additional information about "eligible employee benefit plans" is available from
investment dealers or SFSI. The term "eligible employee benefit plan" means any
plan or arrangement, whether or not tax qualified, which provides for the
purchase of Series shares.
12
<PAGE>
Payment in Securities. In addition to cash, a Series may accept securities in
payment for shares of the Series sold at the applicable public offering price
(net asset value plus any applicable sales load) although the Series do not
presently intend to accept securities in payment for Series' shares. Generally,
a Series will only consider accepting securities (l) to increase its holdings in
a portfolio security of the Series, or (2) if the Manager determines that the
offered securities are a suitable investment for the Series and in a sufficient
amount for efficient management. Although no minimum has been established, it is
expected that a Series would not accept securities with a value of less than
$100,000 per issue in payment for shares. A Series may reject in whole or in
part offers to pay for shares of the Series with securities, may require partial
payment in cash for applicable sales loads, and may discontinue accepting
securities as payment for shares of the Series at any time without notice. The
Fund will not accept restricted securities in payment for Series shares. The
Fund will value accepted securities in the manner provided for valuing portfolio
securities of the Fund. Any securities accepted by the Fund in payment for Fund
shares will have an active and substantial market and have a value which is
readily ascertainable (See "Valuation"). In accordance with Texas securities
regulations, should the Fund accept securities in payment for shares, such
transactions would be limited to a bona fide reorganization, statutory merger,
or to other acquisitions of portfolio securities (except for municipal debt
securities issued by state political subdivisions or their agencies or
instrumentalities) which meet the investment objectives and policies of the
investment company; are acquired for investment and not for resale; are liquid
securities which are not restricted as to transfer either by law or liquidity of
market; and have a value which is readily ascertainable (and not established
only by evaluation procedures) as evidenced by a listing on the American Stock
Exchange, the New York Stock Exchange or NASDAQ.
Further Types of Reductions. Class A shares of the Series may be issued without
a sales load in connection with the acquisition of cash and securities owned by
other investment companies and personal holding companies to financial
institution trust departments, to registered investment advisers exercising
discretionary investment authority with respect to the purchase of Fund shares,
or pursuant to sponsored arrangements with organizations which make
recommendations to, or permit group solicitation of, its employees, members or
participants in connection with the purchase of shares of the Fund, to separate
accounts established and maintained by an insurance company which are exempt
from registration under Section 3(c)(11) of the 1940 Act, to registered
representatives and employees (and their spouses and minor children) of any
dealer that has a sales agreement with SFSI, to shareholders of mutual funds
with investment objectives and policies similar to the Series' who purchase
shares with redemption proceeds of such funds and to certain unit investment
trusts as described in each Series Prospectus.
Class A shares of each Series also may be issued without a sales load to
present and retired directors, trustees, officers, employees (and their family
members, as defined in the Prospectus) of the Funds, the other investment
companies in the Seligman Group, the Manager and other companies affiliated with
the Manager. Such sales may also be made to employee benefit plans and thrift
plans for such persons and to any investment advisory, custodial, trust or other
fiduciary account managed or advised by the Manger or any affiliate. These sales
may be made for investment purposes only, and shares may be resold only to the
Fund.
Class A shares may be sold at net asset value to these persons since such
sales require less sales effort and lower sales related expenses as compared
with sales to the general public.
More About Redemptions. The procedures for redemption of Fund shares under
ordinary circumstances are set forth in the Prospectuses. In unusual
circumstances, payment may be postponed, or the right of redemption postponed
for more than seven days, if the orderly liquidation of portfolio securities is
prevented by the closing of, or restricted trading on the New York Stock
Exchange ("NYSE") during periods of emergency, or such other periods as ordered
by the Commission. Payment may be made in securities, subject to the review of
some state securities commissions. If payment is made in securities, a
shareholder may incur brokerage expenses in converting these securities to cash.
13
<PAGE>
DISTRIBUTION SERVICES
SFSI, an affiliate of the Manager, acts as a general distributor of the shares
of the Fund and of the other mutual funds in the Seligman Group. The Fund and
SFSI are parties to a Distributing Agreement dated January 1, 1993. As general
distributor of the Fund's share of beneficial interest, SFSI allows commissions
to dealers as indicated in each Series' Prospectus. SFSI receives the balance of
sales loads and any CDSL, if applicable, paid by investors. The following table
sets forth the concessions received by SFSI, dealer commissions, and CDSL
retained for each Series for 1995, 1994 and 1993.
<TABLE>
<CAPTION>
Series SFSI Concessions Dealer Commissions CDSL Retained
1995 1994 1993 1995 1994 1993 1995 1994 1993*
---- ---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government $ 11,889 $ 8,580 $12,563 $ 87,970 $ 61,645 $91,712 $2,634 $8,280 --
Securities Series
High-Yield Series 459,779 45,213 67,466 3,554,416 353,427 519,151 33,929 8,610 --
</TABLE>
* For the period 9/21/93 to 12/31/93.
No Class B shares were outstanding throughout the 3 year period ended
December 31, 1995.
Effective April 1, 1995, Seligman Services, Inc. ("SSI"), an affiliate of
the Manager, became eligible to receive commissions from certain sales of Series
shares, as well as distribution and service fees pursuant to the Plan. For the
period ended December 31, 1995, SSI received commissions from sales of Series
shares and distribution and service fees pursuant to the Plan as follows:
<TABLE>
<CAPTION>
Distribution and
Commissions Service Fees
<S> <C> <C>
U.S. Government $ 8,380 $ 2,952
Securities Series
High-Yield 7,087 19,702
Bond Series
</TABLE>
VALUATION
Net asset value per share of each class of a Series is determined as of the
close of trading on the NYSE, (normally, 4:00 p.m., Eastern time), each day that
the NYSE is open. The NYSE is currently closed on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. The Fund will also determine nest asset value for each class
of a Series on each day in which there is a sufficient degree of trading in a
Series' portolio securities that the net asset value of Series shares might be
materially affected. Net asset value per share for a class of a Series is
computed by dividing that class' share of the value of the net assets of such
Series (i.e., the value of its assets less liabilities) by the total number of
outstanding shares of such class. All expenses of a Series, including the
Manager's fee, are accrued daily and taken into account for the purpose of
determining net asset value. The net asset value of Class B and Class D shares
will generally be lower than the net asset value of Class A shares as a result
of the larger distribution fee with respect to such shares.
Portfolio securities, including open short positions and options written,
are valued at the last sale price on the securities exchange or securities
market on which such securities primarily are traded. Securities not listed on
an exchange or securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked price,
except in the case of open short positions where the asked price is available.
Any securities for which recent market quotations are not readily available,
including restricted securities, are valued at fair value as determined in
ccordance with procedures approved by the Fund's Trustees. This value generally
is determined as the amount which a Series could reasonably expect to receive
from an orderly disposition of these securities over a reasonable period of time
Short-term obligations with less than sixty days remaining to maturity are
generally valued at amortized cost. Short-term obligations with more than sixty
days remaining to maturity will be valued at current market value until the
sixtieth day prior to maturity, and will then be valued on an amortized cost
basis based on the value on such date unless the Board determines that this
amortized cost value does not represent fair market value. Premiums received on
the sale of call options will be included in the net asset value, and current
market value of the options sold by a Series will be subtracted from net asset
value.
14
<PAGE>
PERFORMANCE
The annualized yield for the 30-day period ended December 31, 1995 for the
Class A shares of the U.S. Government Securities Series and the High-Yield Bond
Series was 5.09% and 8.99%, respectively. The annualized yield was computed by
dividing each Series' net investment income per share earned during the 30-day
period by the maximum offering price per share (i.e., the net asset value plus
the maximum sales load of 4.75% of the net amount invested) on December 31,
1995, which was the last day of this period. The average number of Class A
shares of the U.S. Government Securities Series and the High-Yield Bond Series
was 7,762,497 and 25,045,807, respectively which was the average daily number of
shares outstanding during the 30-day period that were eligible to receive
dividends. The Class D shares of the U.S. Government Securities Series and the
High-Yield Bond Series annualized yield for the 30-day period ended December 31,
1995 was 4.50% and 8.66%, respectively. The annualized yield was computed by
dividing each Series' net investment income per share earned during the 30-day
period by the maximum offering price per share (i.e., the net asset value) on
December 31, 1995, which was the last day of this period. The average number of
Class D shares of the U.S. Government Securities Series and the High-Yield Bond
Series was 1,122,691 and 12,328,074, respectively which was the average daily
number of shares outstanding during the 30-day period that were eligible to
receive dividends. Income was computed by totaling the interest earned on all
debt obligations during the 30-day period and subtracting from that amount the
total of all recurring expenses incurred during the period. The 30-day yield was
then annualized on a bond-equivalent basis assuming semi-annual reinvestment and
compounding of net investment income, as described in each Series' Prospectus.
The average annual total returns for Class A shares of the U.S. Government
Securities Series and the High-Yield Bond Series for the one-year, five-year and
ten-year periods ended on December 31, 1995 were 12.58%, 7.01% and 7.09%; and
14.92%, 16.73% and 10.73%, respectively. These returns were computed by
subtracting the maximum sales load of 4.75% of public offering price and
assuming that all of the dividends and distributions by the Series over the
relevant time period were reinvested. It was then assumed that at the end of
each period, the entire amount was redeemed. The average annual total return was
then calculated by calculating the annual rate required for the initial payment
to grow to the amount which would have been received upon redemption (i.e., the
average annual compound rate of return). Total return for Class D shares of the
U.S. Government Securities Series and the High-Yield Bond Series for the
one-year period and since inception through December 31, 1995 were 16.10% and
4.47%; and 18.67% and 10.19%, respectively. These amounts were computed assuming
that all of the dividends and distributions paid by each Series' Class D shares,
if any, were reinvested over the relevant time period. It was then assumed that
at the end of each period, the entire amount was redeemed, subtracting the 1%
CDSL, if applicable. Performance information is not provided for Class B shares
because no Class B shares were outstanding prior to April 22, 1996.
Table A below illustrates the total return (income and capital) on Class A
shares of each Series of the Fund with dividends invested and gain distributions
taken in shares. It shows that a $1,000 investment in Class A shares of the U.S.
Government Securities Series, assuming payment of the 4.75% sales load, made on
January 1, 1986 had a value of $ 1,983 on December 31, 1995, resulting in an
aggregrate total return of 98.33% and a $1,000 investment in Class A shares of
the High-Yield Bond Series, assuming payment of the 4.75% sales load, made on
September 21, 1993(commencement of operations) had a value of $2,772 on December
31, 1995, resulting in an aggregrate total return of 177.17%. Table B
illustrates the total return (income and capital) on Class D shares of the U.S.
Government Securities Series and the High-Yield Bond Series with dividends
invested and gain distributions taken in shares.
15
<PAGE>
<TABLE>
<CAPTION>
TABLE A - CLASS A SHARES
Value of
Period/Year Value of Capital Gain Value of Total
Ended Initial Investment(2) Distributions Dividends Total Value (2) Return (3)
- -------------- --------------------- ------------- --------- --------------- ----------
<S> <C> <C> <C> <C> <C>
U.S. Government
Securities Series
12/31/86 $956 $68 $82 $1,106
12/31/87 836 83 156 1,075
12/31/88 829 82 248 1,159
12/31/89 826 82 358 1,266
12/31/90 809 80 458 1,347
12/31/91 857 85 594 1,536
12/31/92 844 83 698 1,625
12/31/93 843 83 820 1,746
12/31/94 759 76 844 1,679
12/31/95 839 83 1,061 1,983 98.33%
High-Yield
Bond Series
12/31/86 $982 $ 0 $120 $1,102
12/31/87 887 19 230 1,136
12/31/88 881 19 365 1,265
12/31/89 803 17 494 1,314
12/31/90 654 14 550 1,218
12/31/91 748 16 828 1,592
12/31/92 805 17 1,089 1,911
12/31/93 871 18 1,389 2,278
12/31/94 797 17 1,482 2,296
12/31/95 874 18 1,880 2,772 177.17%
</TABLE>
<TABLE>
<CAPTION>
TABLE B - CLASS D SHARES
Value of
Period/Year Value of Capital Gain Value of Total
Ended Initial Investment(2) Distributions Dividends Total Value (2) Return (3)
- ------------- --------------------- ------------- --------- --------------- ----------
U.S. Government
Securities Series
<C> <C> <C> <C> <C> <C> <C>
12/31/93(1) $ 982 $ -- $ 12 $ 994
12/31/94 884 59 943
12/31/95 977 -- 128 1,105 (10.47)%
High-Yield
Bond Series
12/31/93(1) $ 1,030 $ -- $ 15 $ 1,045
12/31/94 942 -- 100 1,042
12/31/95 1,033 -- 214 1,247 24.73%
</TABLE>
1 From commencement of offering of Class D shares on September 21, 1993.
2 The "Value of Initial Investment" as of the date indicated reflects the
effect of the maximum sales load, assumes that all dividends and capital gain
distributions were taken in cash and reflects changes in the net asset value
of the shares purchased with the hypothetical initial investment. "Total
Value" reflects the effect of the CDSL, if applicable, assumes investment of
all dividends and capital gain distributions and reflects changes in the net
asset value.
3 "Total Return" for each Series is calculated by assuming a hypothetical
initial investment of $1,000 at the beginning of the period specified,
subtracting the maximum sales load or Class A shares; determining total value
of all dividends and distributions that would have been paid during the
period on such shares assuming that each dividend or distribution was
invested in additional shares at net asset value; calculating the total value
of the investment at the end of the period; subtracting the CDSL on Class D
shares, if applicable; and finally, by dividing the difference between the
amount of the hypothetical initial investment at the beginning of the period
and its total value at the end of the period by the amount of the
hypothetical initial investment.
No adjustments have been made for any income taxes payable by investors on
dividends invested or gain distributions taken in shares.
16
<PAGE>
Each of the Series may also include its aggregate total return over a
specified period in advertisements or in information furnished to present or
prospective shareholders.
GENERAL INFORMATION
Information About Business Trusts. As indicated in each Series' Prospectus, the
Fund is organized as a business trust under the laws of the Commonwealth of
Massachusetts. Under the Declaration of Trust, the Fund's Trustees are
authorized to classify or reclassify and issue any shares of beneficial interest
of the Fund into any number of other Series without further action by
shareholders. The 1940 Act requires that where more than one Series exists, each
Series must be preferred over all other Series in respect of assets specifically
allocated to such Series.
As a general matter, the Fund will not hold annual or other meetings of the
shareholders. This is because the Declaration of Trust provides for shareholder
voting only (a) for the election or removal of one or more Trustees if a meeting
is called for that purpose, (b) with respect to any contract as to which
shareholder approval is required by the 1940 Act, (c) with respect to any
termination or reorganization of the Fund or any Series to the extent and as
provided in the Declaration of Trust, (d) with respect to any amendment of the
Declaration of Trust (other than amendments establishing and designating new
Series, abolishing Series when there are no units thereof outstanding, changing
the name of the Fund or the name of any Series, supplying any omission, curing
any ambiguity or curing, correcting or supplementing any provision thereof which
is internally inconsistent with any other provision thereof or which is
defective or inconsistent with the 1940 Act or with the requirements of the
Internal Revenue Code of 1986, as amended, or applicable regulations for the
Fund's obtaining the most favorable treatment thereunder available to regulated
investment companies), which amendments require approval by a majority of the
shares entitled to vote, (e) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding, or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Fund or the shareholders, and (f) with
respect to such additional matters relating to the Fund as may be required by
the 1940 Act, the Declaration of Trust, the By-laws of the Fund, any
registration of the Fund with the Securities and Exchange Commission or any
state, or as the Trustees may consider necessary or desirable. Each Trustee
serves until the next meeting of shareholders, if any, called for the purpose of
considering the election or reelection of such Trustee or of a successor to such
Trustee, and until the election and qualification of his successor, if any,
elected at such meeting, or until such Trustee sooner dies, resigns, retires or
is removed by the shareholders or two-thirds of the Trustees.
The shareholders of the Fund have the right, upon the declaration in writing
or vote of more than two-thirds of the Fund's outstanding shares, to remove a
Trustee. The Trustees will call a meeting of shareholders to vote on the removal
of a Trustee upon the written request of the record holders of ten percent of
its shares. In addition, whenever ten or more shareholders of record who have
been such for at least six months preceding the date of application, and who
hold in the aggregate either shares having a net asset value of at least $25,000
or at least 1 per centum of the outstanding shares, whichever is less, shall
apply to the Trustees in writing, stating that they wish to communicate with
other shareholders with a view to obtaining signatures to a request for a
meeting for the purpose of voting upon the question of removal of any Trustee or
Trustees and accompanied by a form of communication and request which they wish
to transmit, the Trustee shall within five business days after receipt of such
application either: (1) afford to such applicants access to a list of the names
and addresses of all shareholders as recorded on the books of the Fund; or (2)
inform such applicants as to the approximate number of shareholders of record,
and the approximate cost of mailing to them the proposed communication and form
of requests. If the Trustees elect to follow the latter course, the Trustees,
upon the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall, with
reasonable promptness, mail such material to all shareholders of record at their
addresses as recorded on the books, unless within five business days after such
tender the Trustees shall mail to such applicants and file with the Securities
and Exchange Commission (the "Commission"), together with a copy of the material
to be mailed, a written statement signed by at least a majority of the Trustees
to the effect that in their opinion either such material contains untrue
statements of fact or omits to state facts necessary to make the statements
contained therein not misleading, or would be in violation of applicable law,
and specifying the basis of such opinion. After opportunity for hearing upon the
objections specified in the written statement so filed, the Commission may, and
if demanded by the Trustees or by such applicants shall, enter an order either
sustaining one or more of such objections or refusing to sustain any of them. If
the Commission shall enter an order refusing to sustain any of such objections,
or if, after the entry of an order sustaining one or more of such objections,
the Commission shall find, after notice and opportunity for hearing, that all
objections so sustained have been met, and shall enter an order so declaring,
the Trustees shall mail copies of such material to all shareholders with
reasonable promptness after the entry of such order and the renewal of such
tender.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted by the provisions of the 1940 Act or applicable state law, or
otherwise, to the holders of the outstanding voting securities of an investment
company such as the Fund shall not be deemed to have been effectively acted upon
unless approved by the holders of a majority of the outstanding shares of each
Series affected by such matter. Rule 18f-2 further provides that a Series shall
be deemed to be affected by a matter unless it is clear that the interests of
each Series in the matter are substantially identical or that the matter does
not significantly affect any interest of such Series. However, the Rule exempts
the selection of independent auditors, the approval of principal distributing
contracts and the election of trustees from the separate voting requirements of
the Rule.
17
<PAGE>
The shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust. The Declaration of Trust also
provides for indemnification and reimbursement of expenses out of a Series'
assets for any shareholder held personally liable for obligations of such
Series.
Custodian. Investor Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, serves as custodian for the Fund. It also maintains, under the
general supervision of the Manager, the accounting records and determines the
net asset values for the Fund.
Auditors. Deloitte & Touche LLP, independent auditors, have been selected as
auditors of the Fund. Their address is Two World Financial Center, New York, New
York 10281.
FINANCIAL STATEMENTS
The Annual Report to shareholders for the year ended December 31, 1995 is
incorporated by reference into this Statement of Additional Information. The
Annual Report contains schedules of the investments of each of the Fund's Series
as of December 31, 1995, as well as certain other financial information as of
that date. The Annual Report will be furnished, without charge, to investors who
request copies of the Fund's Statement of Additional Information.
APPENDIX
HISTORY OF J. & W. SELIGMAN & CO. INCORPORATED
Seligman's beginnings date back to 1837, when Joseph Seligman, the
oldest of eight brothers, arrived in the United States from Germany. He earned
his living as a pack peddler in Pennsylvania, and began sending for his
brothers. The Seligmans became successful merchants, establishing businesses in
the South and East.
Backed by nearly thirty years of business success - culminating in the
sale of government securities to help finance the Civil War - Joseph Seligman,
with his brothers, established the international banking and investment firm of
J. & W. Seligman & Co. In the years that followed, the Seligman complex played a
major role in the geographical expansion and industrial development of the
United States.
18
<PAGE>
The Seligman Complex:
.... Prior to 1900
o Helps finance America's fledgling railroads through underwritings.
o Is admitted to the New York Stock Exchange in 1869. Seligman remained a
member of the NYSE until 1993, when the evolution of its business made it
unnecessary.
o Becomes a prominent underwriter of corporate securities, including New
York Mutual Gas Light Company, later part of Consolidated Edison.
o Provides financial assistance to Mary Todd Lincoln and urges the Senate
to award her a pension. Is appointed U.S. Navy fiscal agent by President
Grant. Becomes a leader in raising capital for America's industrial and
urban development.
...1900-1910
o Helps Congress finance the building of the Panama Canal.
...1910s
o Participates in raising billions for Great Britain, France and Italy,
helping to finance World War I.
...1920s
o Participates in hundreds of underwritings including those for some of the
country's largest companies: Briggs Manufacturing, Dodge Brothers,
General Motors, Minneapolis-Honeywell Regulatory Company, Maytag Company,
United Artists Theater Circuit and Victor Talking Machine Company.
o Forms Tri-Continental Corporation in 1929, today the nation's largest,
diversified closed-end equity investment company, with over $2 billion in
assets, and one of its oldest.
...1930s
o Assumes management of Broad Street Investing Co. Inc., its first mutual
fund, today known as Seligman Common Stock Fund, Inc.
o Establishes Investment Advisory Service.
...1940s
o Helps shape the Investment Company Act of 1940.
o Leads in the purchase and subsequent sale to the public of Newport News
Shipbuilding and Dry Dock Company, a prototype transaction for the
investment banking industry.
o Assumes management of National Investors Corporation, today Seligman
Growth Fund, Inc. Establishes Whitehall Fund, Inc., today Seligman Income
Fund, Inc.
19
<PAGE>
...1950-1989
o Develops new open-end investment companies. Today, manages more than 40
mutual fund portfolios.
o Helps pioneer state-specific, tax-exempt municipal bond funds, today
managing a national and 18 state-specific tax-exempt funds.
o Establishes Seligman Portfolios, Inc., an investment vehicle offered
through variable annuity products.
...1990s
o Introduces Seligman Select Municipal Fund and Seligman Quality Municipal
Fund, two closed-end funds that invest in high-quality municipal bonds.
o In 1991 establishes a joint venture with Henderson Administration Group
plc, of London, known as Seligman Henderson Co., to offer global and
international investment products.
o Introduces Seligman Frontier Fund, Inc., a small capitalization mutual
fund.
o Launches Seligman Henderson Global Fund Series, Inc., which today offers
four separate series: Seligman Henderson International Fund, Seligman
Henderson Global Smaller Companies Fund, Seligman Henderson Global
Technology Fund and Seligman Henderson Global Growth Opportunities Fund.
