File No. 2-93076
811-4103
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 20 |X|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 22 |X|
- --------------------------------------------------------------------------------
SELIGMAN HIGH INCOME FUND SERIES
(Exact name of registrant as specified in charter)
- --------------------------------------------------------------------------------
100 PARK AVENUE, NEW YORK, NEW YORK 10017
(Address of principal executive offices)
Registrant's Telephone Number: 212-850-1864 or Toll Free: 800-221-2450
- --------------------------------------------------------------------------------
THOMAS G. ROSE, Treasurer, 100 Park Avenue, New York, New York 10017
(Name and address of agent for service)
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective (check appropriate box):
|_| immediately upon filing pursuant to paragraph (b) of rule 485
|X| on April 22, 1996 pursuant to paragraph (b) of rule 485
|_| 60 days after filing pursuant to paragraph (a)(i) of rule 485
|_| on (date) pursuant to paragraph (a)(i) of rule 485
|_| 75 days after filing pursuant to paragraph (a)(ii) of rule 485
|_| on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2(a)(1) and a Rule 24f-2 Notice for
Registrant's most recent fiscal year was filed with the Commission on February
28, 1996.
<PAGE>
<TABLE>
<CAPTION>
File No. 2-93076
811-4103
SELIGMAN HIGH INCOME FUND SERIES
FORM N-1A CROSS REFERENCE SHEET
POST-EFFECTIVE AMENDMENT NO. 20
PURSUANT TO RULE 481 (A)
<S> <C> <C>
ITEM IN PART A OF FORM N-1A LOCATION IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Summary of Series' Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; Organization And Capitalization
5. Management of the Fund Management Services
5a. Manager's Discussion of Fund Performance Management Services
6. Capital Stock and Other Securities Cover Page; Organization and Capitalization
7. Purchase of Securities Being Offered Alternative Distribution System; Purchase of Shares; Administration,
Shareholder Services and Distribution Plan
8. Redemption or Repurchase Telephone Transactions; Redemption of Shares; Exchange Privilege
9. Pending Legal Proceedings Not Applicable
ITEM IN PART B OF FORM N-1A LOCATION IN STATEMENT OF ADDITIONAL INFORMATION*
10. Cover Page Cover Page
11. Table of Contents Table Of Contents
12. General Information and History General Information; Organization and Capitalization (Prospectus); Appendix
13. Investment Objectives and Policies Investment Objective, Policies And Risks; Investment Limitations
14. Management of the Registrant Management And Expenses
15. Control Persons and Principal Trustees and Officers; General Information
Holders of Services
16. Investment Advisory and Other Services Management and Expenses; Distribution Services
17. Brokerage Allocation Portfolio Transactions; Administration, Shareholder Services and Distribution
Plan
18. Capital Stock and Other Securities General Information; Organization And Capitalization (Prospectus)
19. Purchase, Redemption and Pricing Purchase and Redemption of Series' Shares; Valuation
of Securities being Offered
20. Tax Status Federal Income Taxes (Prospectus)
21. Underwriters Distribution Services
22. Calculation of Performance Data Performance
23. Financial Statements Financial Statements
* Each of Registrant's two Series has a separate Prospectus; Registrant's
Statement of Additional Information applies to both Series.
</TABLE>
<PAGE>
SELIGMAN HIGH-YIELD BOND SERIES
a series of
Seligman High Income Fund Series
100 Park Avenue o New York, NY 10017 o 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
April 22, 1996
Seligman High Income Fund Series (the "Fund") is a diversified, open-end
management investment company that offers two different series which seek to
earn high current income by investing in debt securities but have differing
investment objectives and investment policies. Investment advisory and
management services are provided to the Fund by J. & W. Seligman & Co.
Incorporated (the "Manager"); the Fund's distributor is Seligman Financial
Services, Inc., an affiliate of the Manager.
The investment objective of the Seligman High-Yield Bond Series (the
"Series") is to produce maximum current income. The Series seeks to achieve its
objective by investing primarily in high-yielding, high risk corporate bonds and
corporate notes, which, generally, are unrated or carry ratings lower than those
assigned to investment grade bonds by Standard & Poor's Corporation ("S&P") or
Moody's Investors Service, Inc. ("Moody's"). An investment in the Series is
appropriate for you only if you can bear the high risk inherent in investing in
such securities. There can, of course, be no assurance that the Series will meet
its objective.
The Series will invest up to 100% of its portfolio in lower rated bonds,
commonly known as "junk bonds," which are subject to a greater risk of loss of
principal and interest than higher rated investment grade bonds. Purchasers
should carefully assess the risks associated with an investment in the Series.
See "Investment Objective, Policies And Risks."
The Series offers three classes of shares. Class A shares are sold subject
to an initial sales load of up to 4.75% and an annual service fee currently
charged at a rate of up to .25% of the average daily net asset value of the
Class A shares. Class B shares are sold without an initial sales load but are
subject to a contingent deferred sales load ("CDSL"), if applicable, of 5% on
redemptions in the first year after purchase of such shares, declining to 1% in
the sixth year and 0% thereafter, an annual distribution fee of up to .75% and
an annual service fee of up to .25% of the average daily net asset value of the
Class B shares. Class B shares will convert automatically to Class A shares on
the last day of the month that precedes the eighth anniversary of their date of
purchase. Class D shares are sold without an initial sales load but are subject
to a CDSL of 1% imposed on certain redemptions within one year of purchase, an
annual distribution fee of up to .75% and an annual service fee of up to .25% of
the average daily net asset value of the Class D shares. Any CDSL payable upon
redemption of Class B or Class D shares will be assessed on the lesser of the
current net asset value or the original purchase price of the shares redeemed.
See "Alternative Distribution System." Shares of the Series may be purchased
through any authorized investment dealer.
This Prospectus sets forth concisely the information a prospective investor
should know about the Series before investing. Please read it carefully before
you invest and keep it for future reference. Additional information about the
Series, including a Statement of Additional Information, has been filed with the
Securities and Exchange Commission. The Statement of Additional Information is
available upon request and without charge by calling or writing the Fund at the
telephone numbers or the address set forth above. The Statement of Additional
Information is dated the same date as this Prospectus and is incorporated herein
by reference in its entirety.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF SERIES EXPENSES
Class A Class B Class D
---------- ------------- -------------
(Initial Sales (Deferred Sales (Deferred Sales
Load Load Load
SHAREHOLDER TRANSACTION EXPENSES Alternative) Alternative) Alternative)
<S> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ................................ 4.75% None None
Sales Load on Reinvested Dividends ................................... None None None
Deferred Sales Load (as a percentage of original purchase price
or redemption proceeds, whichever is lower)......................... None 5% in 1st year 1% in 1st year
4% in 2nd year None thereafter
3% in 3rd and
4th years
2% in 5th year
1% in 6th year
None thereafter
Redemption Fee None None None
Exchange Fees None None None
ANNUAL SERIES OPERATING EXPENSES FOR 1995 Class A Class B* Class D
------- ------- -------
(as a percentage of average net assets)
Management Fee ....................................................... .65% .65% .65%
12b-1 Fees ........................................................... .22% 1.00%** 1.00%**
Other Expenses ....................................................... .37% .37% .37%
----- -----
Total Series Operating Expenses ...................................... 1.24% 2.02% 2.02%
===== ===== =====
</TABLE>
The purpose of this table is to assist investors in understanding the
various costs and expenses which shareholders of the Series may bear directly or
indirectly. The sales load on Class A shares is a one-time charge paid at the
time of purchase of shares. Reductions in sales loads are available in certain
circumstances. The contingent deferred sales loads on Class B and Class D shares
are one-time charges paid only if shares are redeemed within six years or one
year of purchase, respectively. The management fees disclosed for Class A and
Class D shares have been restarted to reflect the increase in the management fee
rate paid by the Series, which was approved by Shareholders on December 12, 1995
and became effective on January 1, 1996. The "Other Expenses" disclosed for
Class D shares have been restated to reflect the expense allocation methodology
currently being used by the Series. For more information concerning reductions
in sales loads and for a more complete description of the various costs and
expenses, see "Purchase Of Shares," "Redemption Of Shares" and "Management
Services" herein. The Series' Administration, Shareholder Services and
Distribution Plan to which the caption "12b-1 Fees" relates, is discussed under
"Administration, Shareholder Services and Distribution Plan" herein.
<TABLE>
<CAPTION>
Example 1 Year 3 Years 5 Years 10 Years
- -------- ----- ------ ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end
of each time period.............................................. Class A $60 $85 $112 $190
Class B+ $71 $93 $129 $215
Class D $31++ $63 $109 $235
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN AND THE 5%
ANNUAL RETURN USED IN THIS EXAMPLE IS A HYPOTHETICAL RATE.
- -----------
* Expenses for Class B shares are estimated because no shares of that Class
were outstanding in the year ended December 31, 1995.
** Includes an annual distribution fee of up to .75% and an annual service fee
of up to .25%. Pursuant to the Rules of the National Association of
Securities Dealers, Inc., the aggregate deferred sales loads and annual
distribution fees on Class B and Class D shares of the Series may not exceed
6.25% of total gross sales, subject to certain exclusions. The maximum sales
charge rule is applied separately to each class. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a
long-term Class D shareholder of the Series may pay more in total sales loads
(including distribution fees) than the economic equivalent of 6.25% of such
shareholder's investment in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of the period,
the expenses on a $1,000 investment would be $21 for 1 year, $63 for 3 years
and $109 for 5 years. The expenses shown for the ten-year period reflect the
conversion of Class B shares to Class A shares after 8 years.
++ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be $21.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights for the Series' Class A and Class D shares for the
periods presented below have been audited by Deloitte & Touche LLP, independent
auditors. This information, which is derived from the financial and accounting
records of the Series should be read in conjunction with the financial
statements and notes contained in the Fund's 1995 Annual Report, which is
incorporated by reference in the Fund's Statement of Additional Information,
copies of which may be obtained free of charge from the Fund at the telephone
numbers or address provided on the cover page of this Prospectus. Financial
highlights are not presented for the Class B shares because no shares of that
Class were outstanding during the periods set forth below.
The per share operating performance data is designed to allow investors to
trace the operating performance, on a per share basis, from the Series'
beginning net asset value to its ending net asset value so that they may
understand what effect the individual items have on their investment, assuming
it was held throughout the period. Generally, the per share amounts are derived
by converting the actual dollar amounts incurred for each item, as disclosed in
the financial statements, to their equivalent per share amount.
The total return based on net asset value measures the Series' performance
assuming investors purchased shares of the Series at the net asset value as of
the beginning of the period, invested 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
loads investors may incur in purchasing or selling shares of the Series. Total
returns for periods of less than one year are not annualized.
<TABLE>
<CAPTION>
Class A Class D
----------------------------------------------------------------------------- ----------------------
Year Ended
Year Ended December 31 December 31, 9/21/93*
----------------------------------------------------------------------------- ------------- to
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1995 1994 12/31/93
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- -- -- --
<S> <C> <C> <C> <C> <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 $ 7.02 $ 7.07 $ 7.83 $ 7.59 $ 6.35 $ 6.94 $ 6.74
------ ------ ------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Net investment income**.. .65 .65 .66 .69 .77 .78 .89 .82 .79 .90 .60 .57 .12
Net realized and unrealized
investment gain (loss). .61 (.59) .52 .46 .75 (1.19) (.62) (.05) (.59) .24 .61 (.59) .20
------ ------ ------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Increase (decrease) from
investment operations.. 1.26 .06 1.18 1.15 1.52 (.41) .27 .77 .20 1.14 1.21 (.02) .32
Dividends paid or
declared .............. (.65) (.65) (.66) (.69) (.77) (.78) (.89) (.82) (.79) (.90) (.60) (.57) (.12)
Distributions from net
gain realized -- -- -- -- -- -- -- -- (.15) -- -- -- --
Return of capital........ -- -- -- -- -- -- -- -- (.02) -- -- -- --
Net increase (decrease) in
net asset value........ .61 (.59) .52 .46 .75 (1.19) (.62) (.05) (.76) .24 .61 (.59) .20
------ ------ ------ ------ ------ ------ ------ ------- ------ ------ ------ ------ ------
Net asset value, end of
period ................ $ 6.96 $ 6.35 $ 6.94 $ 6.42 $ 5.96 $ 5.21 $ 6.40 $ 7.02 $ 7.07 $ 7.83 $ 6.96 $ 6.35 $ 6.94
====== ====== ====== ====== ====== ====== ====== ======= ====== ====== ====== ====== ======
TOTAL RETURN BASED ON NET
ASSET VALUE .......... 20.72% 0.78% 19.19% 20.08% 30.70% (7.27)% 3.84% 11.38% 3.05% 15.74% 19.67% (.30)% 4.53%
RATIOS/SUPPLEMENTAL DATA**
Expenses to average net
assets ................ 1.09% 1.13% 1.20% 1.21% 1.29% 1.21% 1.13% 1.14% 1.20% 1.08% 1.91% 2.19% 2.04%+
Net investment income to
average net assets..... 9.73% 9.73% 9.68% 10.82% 13.36% 13.40% 13.02% 11.41% 10.64% 11.32% 8.86% 8.68% 7.93%+
Portfolio turnover....... 173.39% 184.75% 193.91% 145.66% 181.08% 117.51% 135.17% 95.20% 103.01% 110.30% 173.39% 184.75% 193.91%++
Net assets, end of period
(000's omitted)........$182,129 $59,033 $61,333 $40,802 $32,287 $27,558 $45,511 $62,268 $66,042 $71,904 $90,153 $9,249 $2,375
</TABLE>
- -----------------
* Commencement of offering of Class D shares.
** Had the Manager, at its discretion, not waived portions of its fees and not
reimbursed certain expenses, the net investment income per share for the
Series would have been $.90 for the year ended December 31, 1986. The
annualized ratios of expenses to average net assets and net investment income
to average net assets for the Series would have been 1.12% and 11.28%,
respectively, for the same period.
+ Annualized.
++ For the year ended December 31, 1993.
The data provided above reflects historical information and therefore
through December 31, 1995 does not reflect the effect of the increase in the
management fee rate payable by the Series, which was approved by shareholders on
December 12, 1995 and became effective on January 1, 1996.
3
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEM
The Series offers three classes of shares. Class A shares are sold to
investors who have concluded that they would prefer to pay an initial sales load
and have the benefit of lower continuing fees. Class B shares are sold to
investors choosing to pay no initial sales load, a higher distribution fee and a
CDSL with respect to redemptions within six years of purchase and who desire
shares to convert automatically to Class A shares after eight years. Class D
shares are sold to investors choosing to pay no initial sales load, a higher
distribution fee and, with respect to redemptions within one year of purchase, a
CDSL. The Alternative Distribution System allows investors to choose the method
of purchasing shares that is most beneficial in light of the amount of the
purchase, the length of time the shares are expected to be held and other
relevant circumstances. Investors should determine whether under their
particular circumstances it is more advantageous to incur an initial sales load
and be subject to lower ongoing charges, as discussed below, or to have the
entire initial purchase price invested in the Series with the investment
thereafter being subject to higher ongoing fees and either a CDSL for a six-year
period with automatic conversion to Class A shares after eight years or a CDSL
for a one-year period with no automatic conversion to Class A shares.
Investors who qualify for reduced sales loads, as described under "Purchase
Of Shares" below, might choose to purchase Class A shares because Class A shares
would be subject to lower ongoing fees. The amount invested in the Fund,
however, is reduced by the initial sales load deducted at the time of purchase.
Investors who do not qualify for reduced initial sales loads but expect to
maintain their investment for an extended period of time might also choose to
purchase Class A shares because over time the accumulated continuing
distribution fees of Class B and Class D shares may exceed the initial sales
load and lower distribution fee of Class A shares. This consideration must be
weighed against the fact that the amount invested in the Fund will be reduced by
the initial sales load on Class A shares deducted at the time of purchase.
Furthermore, the higher distribution fees on Class B and Class D Shares will be
offset to the extent any return is realized on the additional funds initially
invested therein that would have been equal to the amount of the initial sales
load on Class A shares. In addition, Class B shares will be converted
automatically to Class A shares after a period of approximately eight years, and
thereafter investors will be subject to 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.
Alternatively, some investors might choose to have all of their funds
invested initially in Class B or Class D shares although remaining subject to a
higher continuing distribution fee and, for a six-year or one-year period, a
CDSL as described below. For example, an investor who does not qualify for
reduced sales loads would have to hold Class A shares for more than 6.33 years
for the Class B or Class D distribution fee to exceed the initial sales load
plus the distribution fee on Class A shares. This example does not take into
account the time value of money, which further reduces the impact of the Class B
and Class D shares' 1% distribution fee, other expenses charged to each class,
fluctuations in net asset value or the effect of the return on the investment
over this period of time.
Investors should bear in mind that total asset based sales charges (i.e.,
the higher continuing distribution fee plus the CDSL) on Class B shares that are
redeemed may exceed the total asset based sales charges that would be payable on
a purchase of the same amount of Class A or Class D shares, particularly if the
Class B shares are redeemed shortly after purchase or if the investor qualifies
for a reduced sales load on the Class A shares.
Investors should understand that the purpose and function of the initial
sales load with respect to Class A shares is the same as those of the deferred
sales loads and higher distribution fees with respect to Class B and Class D
shares in that the sales loads and distribution fees applicable to each class
provide for the financing of the distribution of the shares of the Series.
4
<PAGE>
Class B and Class D shares are subject to the same ongoing distribution
fees but Class D shares are subject to a CDSL for a shorter period of time (one
year as opposed to six years) than Class B shares. However, unlike Class D
shares, Class B shares automatically convert to Class A shares, which are
subject to lower ongoing distribution fees.
The three classes of shares represent interests in the same portfolio of
investments, have the same rights and are generally identical in all respects
except that each class bears its separate distribution and, potentially, certain
other class expenses and has exclusive voting rights with respect to any matter
to which a separate vote of any class is required by the Investment Company Act
of 1940, as amended (the "1940 Act"), or Massachusetts law. The net income
attributable to each class and dividends payable on the shares of each class
will be reduced by the amount of distribution and other expenses of each class.
Class B and Class D shares bear higher distribution fees, which will cause the
Class B and Class D shares to pay lower dividends than the Class A shares. The
three classes also have separate exchange privileges.
The Trustees of the Fund believe that no conflict of interest currently
exists between the Class A, Class B and Class D shares of the Series. On an
ongoing basis, the Trustees, in the exercise of their fiduciary duties under the
1940 Act and Massachusetts law, will seek to ensure that no such conflict
arises. For this purpose, the Trustees will monitor the Series for the existence
of any material conflict among the classes and will take such action as is
reasonably necessary to eliminate any such conflicts that may develop.
DIFFERENCES BETWEEN CLASSES. The primary differences between Class A, Class
B and Class D shares are their sales load structures and ongoing expenses as set
forth below. The primary differences between Class B and Class D shares are that
Class D shares are subject to a shorter CDSL period but Class B shares
automatically convert to Class A Shares after eight years, resulting in a
reduction in ongoing fees. Investors in Class B shares should take into account
whether they intend to redeem their shares within the CDSL period and, if not,
whether they intend to remain invested until the end of the conversion period
and thereby take advantage of the reduction in ongoing fees resulting from the
conversion to Class A shares. Other investors, however, may elect to purchase
Class D shares if they determine that it is advantageous to have all their
assets invested initially and they are uncertain as to the length of time they
intend to hold their assets in the Fund or another mutual fund in the Seligman
Group for which the exchange privilege is available. Although Class D
shareholders are subject to a shorter CDSL period at a lower rate, they forgo
the Class B automatic conversion feature, making their investment subject to
higher distribution fees for an indefinite period of time. Each class has
advantages and disadvantages for different investors, and investors should
choose the class that best suits their circumstances and their objectives.
ANNUAL 12B-1 FEES
INITIAL (AS A % OF AVERAGE
SALES LOAD DAILY NET ASSETS) OTHER INFORMATION
---------- --------------- ---------------
CLASS A Maximum initial Service fee of Initial sales loads
sales load of .25%. waived or
4.75% of the reduced for
public offering certain
price. purchases.
CLASS B None Service fee of CDSL of:
.25%; Distribution 5% in 1st year
fee of .75% until 4% in 2nd year
conversion.* 3% in 3rd and
4th years
2% in 5th year
1% in 6th year
0% after 6th year.
CLASS D None Service fee of CDSL of 1% on
.25%; Distribution redemptions
fee of .75%. within one year
of purchase.
*Conversion occurs at the end of the month which precedes the 8th anniversary
of the purchase date. If Class B shares of the Series are exchanged for Class B
shares of another Seligman Mutual Fund, the conversion period applicable to the
Class B shares acquired in the exchange will apply, and the holding period of
the shares exchanged will be tacked onto the holding period of the shares
acquired.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund is a diversified open-end management investment company organized
under the laws of the Commonwealth of Massachusetts by a Declaration of Trust
dated July 27, 1984. The Fund offers one other separate investment series: the
Seligman U.S. Government Securities Series. The U.S. Government Securities
5
<PAGE>
Series' investment objective and policies and other important information with
respect to its operations are set forth in a separate Prospectus.
The objective of this Series is to produce maximum current income. The
Series seeks to achieve its objective by following a policy of investing in a
diversified range of high-yield, high-risk, medium and lower quality corporate
bonds and notes, commonly referred to as "junk bonds." Generally, bonds and
notes providing the highest yield are unrated or carry lower ratings (Baa or
lower by Moody's or BBB or lower by S&P) than those assigned by S&P or Moody's
to investment-grade bonds and notes. A description of the S&P and Moody's rating
categories is set forth in the Appendix to this Prospectus. While providing
higher yields, these bonds and notes are subject to greater risks of loss of
principal and income than higher-rated bonds and notes and are considered to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal. They are also generally considered to be subject to greater
price volatility due to market risks than higher-rated bonds and notes. There
can be no assurance that the Series' investment objective will be attained.
The amount of outstanding high-yield, lower-rated corporate securities has
recently proliferated. Based on industry estimates, the market grew from $20
billion in outstanding securities to an excess of $300 billion, principally over
the past ten years, a period of national economic expansion. An economic
downturn could adversely impact issuers' abilities to pay interest and repay
principal and could result in issuers' defaulting on such payments. The value of
the Series' bonds and notes will be affected like all fixed-income securities by
market conditions relating to changes in prevailing interest rates. However, the
value of lower-rated or unrated corporate bonds and notes is also affected by
investors' perceptions. When economic conditions appear to be deteriorating,
lower-rated or unrated corporate bonds and notes may decline in market value due
to investors' heightened concerns and perceptions over credit quality. If a
security is downgraded, the Series may retain the security. The Series invests
in "zero coupon" (interest payments accrue until maturity) and "pay-in-kind"
(interest payments are made in cash or additional shares) bonds. Such securities
may be subject to greater fluctuations in value as they tend to be more
speculative than income bearing securities. Fluctuations in the market prices of
the securities owned by the Series result in corresponding fluctuations and
volatility in the net asset value of the shares of the Series. Additionally,
because they do not pay current income, these securities will detract from the
Series' objective of producing maximum current income.
Lower-rated and unrated corporate bonds and notes in which the Series
invests are traded principally by dealers in the over-the-counter market. The
market for these securities may be less active and less liquid than for
higher-rated securities. Under adverse market or economic conditions, the
secondary market for these bonds and notes could contract further, causing the
Series difficulties in valuing and selling the securities in its portfolio.
The ratings of fixed-income securities by Moody's and S&P are a generally
accepted barometer of credit risk. They are, however, subject to certain
limitations from an investor's standpoint. The rating on an issuer is heavily
weighted by past developments and does not necessarily reflect probable future
conditions. There is frequently a lag between the time the rating is assigned
and the time it is updated. In addition there may be varying degrees of
difference in credit risk of securities within each rating category.
During the year ended December 31, 1995, the weighted average percentages
of the Series' portfolio invested in each rating category were as follows:
PERCENTAGE OF
S&P/MOODY'S RATINGS TOTAL INVESTMENTS
------------------- ---------------
AAA/Aaa................................ --
AA/Aa.................................. --
A/A.................................... --
BBB/Baa................................ --
BB/Ba.................................. 3.9%
B/B.................................... 83.1%
CCC/Caa................................ 5.4%
Non-rated.............................. 2.1%
The Manager will try to minimize the risk inherent in the Series'
investment objective through credit analysis, diversification and attention to
current developments and trends in interest rates and economic conditions.
6
<PAGE>
However, there can be no assurance that losses will not occur and an investment
in the Series is appropriate for an investor only if the investor can bear the
high risk inherent in seeking maximum current income by investing in
high-yielding corporate bonds and notes which are unrated or carry lower ratings
than those assigned by S&P or Moody's to investment-grade bonds.
Except for temporary defensive purposes, at least 80% of the value of the
Series' total assets will be invested in high-yielding, income-producing
corporate bonds. This investment policy is a fundamental policy and may not be
changed by the Trustees of the Fund without the vote of a majority of the
Series' outstanding voting securities. The Series may invest up to 20% of the
value of its total assets in a range of high-yield, medium and lower quality
corporate notes; short-term money market instruments, including certificates of
deposit of banks having total assets of more than $1 billion and which are
members of the FDIC, bankers' acceptances and interest-bearing savings or time
deposits of such banks; commercial paper of prime quality, rated A-1 or higher
by S&P or Prime-1 or higher by Moody's or, if not rated, issued by companies
which have an outstanding debt issue rated AA or higher by S&P or Aa or higher
by Moody's; securities guaranteed or insured by the U.S. Government, its
agencies and instrumentalities; and other income-producing cash items. The
Series may invest temporarily for defensive purposes without limit in the
foregoing securities.
PREFERRED STOCK. In accordance with its objective of producing maximum
current income, the Series may invest up to 10% of its total assets in preferred
stock, including non-investment grade preferred stock. Certain preferred stock
issues may offer higher yields than similar bond issues because their rights are
subordinated to the bonds. Consequently, such preferred stock issues will have a
greater risk potential. The Manager will try to minimize this greater risk
potential through its investment process. However, there can be no assurance
that losses will not occur and, as stated above, an investment in the Series is
appropriate only for an investor who can bear the high risk in seeking maximum
current income by investing in high-yielding securities, including
non-investment grade preferred stock.
FOREIGN SECURITIES. The 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 of 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.
ILLIQUID SECURITIES. The Series may invest up to 15% of its net assets in
illiquid securities, including restricted securities (i.e., securities not
readily marketable without registration under the Securities Act of 1933 (the
"1933 Act")) and other securities that are not readily marketable, such as
repurchase agreements of more than one week's duration. A Series may purchase
restricted securities that may be offered and sold only to "qualified
institutional buyers" under Rule 144A of the 1933 Act, and the Manager, acting
pursuant to procedures approved by the Fund's Board of Directors, may determine,
when appropriate, that specific Rule 144A securities are liquid and not subject
to the 15% limitation on illiquid securities. Should this determination be made,
the Manager, acting pursuant to such procedures, will carefully monitor the
security (focusing on such factors, among others, as trading activity and
availability of information) to determine that the Rule 144A security continues
to be liquid. It is not possible to predict with assurance exactly how the
market for Rule 144A securities will further evolve. This investment practice
could have the effect of increasing the level of illiquidity in the Series, if
and to the extent that qualified institutional buyers become for a time
uninterested in purchasing Rule 144A securities.
BORROWING. The Series may borrow money only from banks and only for
temporary or emergency purposes (but not for the purchase of portfolio
7
<PAGE>
securities) in an amount not to exceed 15% of the value of its total assets. The
Series will not purchase additional portfolio securities if the Series has
outstanding borrowings in excess of 5% of the value of its total assets.
LENDING OF PORTFOLIO SECURITIES. The Series may lend portfolio securities
to brokers or dealers, banks or other institutional borrowers of securities. The
borrower must maintain with the Series cash or equivalent collateral such as
Treasury Bills, equal to at least 100% of the market value of the securities
loaned. During the time portfolio securities are on loan, the borrower pays the
Series any income accruing on the loaned securities and the Series may invest
the cash collateral and earn additional income or may receive an agreed upon
amount of interest income from the borrower. The Series may lend portfolio
securities to the extent that the Manager deems appropriate in seeking to
achieve the Series' investment objective.
REPURCHASE AGREEMENTS. The Series 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 could involve certain risks in the event of
bankruptcy or other default by the seller, including possible delays and
expenses in liquidating the securities underlying the agreement, decline in
value of the underlying securities and loss of interest. 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, the 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. The 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 the 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 purchase settlement
date if it is deemed advisable.
Securities held by the Series and securities purchased on a when-issued
basis are subject to changes in market value based upon investors' perceptions
of the creditworthiness of the issuer and upon changes, real or anticipated, in
the level of interest rates. If the Series remains substantially fully invested
at the same time that it has purchased securities on a when-issued basis, the
market value of the Series' assets may fluctuate more than would otherwise be
the case. 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.
An account for the Series consisting of cash or liquid high-grade debt
securities equal to the amount of the when-issued commitments will be
established with the Series' 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, the Series will meet its
obligations from then available cash flow, sale of securities held in the
separate account, sale of other securities or, although the Series 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.
GENERAL. Except as noted above or in the Statement of Additional
Information, 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 Series. As a matter of policy, the
Trustees will not change the Series' investment objective of producing maximum
current income without such a vote. Under the 1940 Act, a "vote of a majority of
the outstanding voting securities" of the Series means the affirmative vote of
8
<PAGE>
the lesser of (1) more than 50% of the outstanding shares of the Series or (2)
67% or more of the shares of the Series present at a shareholders' meeting if
more than 50% of the outstanding shares of the Series are represented at the
meeting in person or by proxy.
MANAGEMENT SERVICES
The Trustees provide broad supervision over the affairs of the Series and
the Fund as a whole. Pursuant to a Management Agreement approved by the Trustees
and the shareholders of the Series, the Manager manages the investments of the
Series and administers the business and other affairs of the Series. The address
of the Manager is 100 Park Avenue, New York, NY 10017.
The Manager also serves as manager of sixteen other investment companies
which, together with the Fund, comprise the "Seligman Group." These companies
are: Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc., Seligman
Common Stock Fund Inc., Seligman Communications and Information Fund, Inc.,
Seligman Frontier Fund, Inc., Seligman Growth Fund, Inc., Seligman Henderson
Global Fund Series, Inc., Seligman Income Fund, Inc., Seligman New Jersey
Tax-Exempt Fund, Inc., Seligman Pennsylvania Tax-Exempt Fund Series, Seligman
Portfolios, Inc., Seligman Quality Municipal Fund, Inc., Seligman Select
Municipal Fund, Inc., Seligman Tax-Exempt Fund Series, Inc., Seligman Tax-Exempt
Series Trust and Tri-Continental Corporation. The aggregate assets of the
Seligman Group were approximately $11.9 billion at February 29, 1996. The
Manager also provides investment management or advice to institutional accounts
having an aggregate value at February 29, 1996 of approximately $3.9 billion.
Mr. William C. Morris is Chairman and President of the Manager and Chairman
of the Board and Chief Executive Officer of the Fund. Mr. Morris owns a majority
of the outstanding voting securities of the Manager.
The Manager provides senior management for Seligman Data Corp., a
wholly-owned subsidiary of certain investment companies in the Seligman Group,
which performs, at cost, certain recordkeeping functions for the Series,
maintains the records of shareholder accounts and furnishes dividend paying,
redemption and related services.
The Manager is entitled to receive a management fee, calculated daily and
payable monthly. The management fee, which became effective on January 1, 1996,
is equal to an annual rate of .65% of the Series' average daily net assets on
the first $1 billion of net assets and .55% of the Series' average daily net
assets in excess of $1 billion. In 1995, the management fee paid by the Fund was
equal to an annual rate of .50% of the average daily net assets of the Series.
The Fund pays all of its expenses other than those assumed by the Manager.
The Fund's expenses are allocated among the series in a manner determined by the
Trustees to be fair and equitable. Total expenses of the Series' Class A and
Class D shares, respectively, for the year ended December 31, 1995 amounted to
1.09% and 1.91%, respectively, of the average daily net assets of each class. No
Class B shares of the Series were outstanding during this period.
PORTFOLIO MANAGER. Mr. Daniel J. Charleston, a Managing Director of the
Manager, is a Vice President of the Fund and has been Portfolio Manager of the
Series since January 1990. Mr. Charleston is also a Vice President of Seligman
Portfolios, Inc. and Portfolio Manager of its High-Yield Bond Portfolio.
The Manager's discussion of the Series' performance as well as a line graph
illustrating comparative performance information between the Series, the Merrill
Lynch High-Yield Master Index and the Lipper High-Yield Index is included in the
Fund's 1995 Annual Report to Shareholders. Copies of the 1995 Annual Report may
be obtained, without charge, by calling or writing the Fund at the telephone
numbers or address listed on the cover page of this Prospectus.
PORTFOLIO TRANSACTIONS. Corporate bonds and other fixed-income securities
are generally traded on the over-the-counter market on a "net" basis without a
stated commission, through dealers acting for their own account and not as
brokers. The Series will engage in transactions with these dealers or deal
directly with the issuer. Prices paid to dealers will generally include a
"spread," i.e., the difference between the prices at which a dealer is willing
to purchase or to sell the security at that time. The Management Agreement
recognizes that in the purchase and sale of portfolio securities, the Manager
9
<PAGE>
will seek the most favorable price and execution and, consistent with that
policy, may give consideration to the research, statistical and other services
furnished by dealers to the Manager for its use in connection with its services
to the Fund as well as to other clients.
Consistent with the Rules of the National Association of Securities
Dealers, Inc. and subject to seeking the most favorable price and execution
available and such other policies as the Trustees of the Fund may determine, the
Manager may consider sales of shares of the Series and, if permitted under
applicable laws, may consider sales of shares of the other mutual funds in the
Seligman Group as a factor in the selection of brokers or dealers to execute
portfolio transactions for the Series.
PORTFOLIO TURNOVER. A change in securities held by the Series is known as
"portfolio turnover" which may result in the payment by the Series of dealer
spreads or underwriting commissions and other transactions costs on the sale of
securities as well as on the reinvestment of the proceeds in other securities.
Although it is the policy of the Series to hold securities for investment,
changes will be made from time to time when the Manager believes such changes
will strengthen the Series' portfolio. The portfolio turnover rate will vary
from year to year as well as within a year and is likely to exceed 100% and has
done so in prior years.
PURCHASE OF SHARES
Seligman Financial Services, Inc. ("SFSI"), an affiliate of the Manager,
acts as general distributor of the Series' shares. Its address is 100 Park
Avenue, New York, NY 10017.
The Fund issues three classes of shares: Class A shares are sold to
investors choosing the initial sales load alternative; Class B shares are sold
to investors choosing to pay no initial sales load, a higher distribution fee
and a CDSL with respect to redemptions within six years of purchase and who
desire shares to convert automatically to Class A shares after eight years; and
Class D shares are sold to investors choosing no initial sales load, a higher
distribution fee and a CDSL on redemptions within one year of purchase. See
"Alternative Distribution System" above.
Shares of the Series may be purchased through any authorized investment
dealer. All orders will be executed at the net asset value per share next
computed after receipt of the purchase order plus, in the case of Class A
shares, a sales load which, except for shares purchased under one of the reduced
sales load plans, will vary with the size of the purchase as shown in the
schedule under "Class A shares -- Initial Sales Load" below.
THE MINIMUM AMOUNT FOR INITIAL INVESTMENT IN THE SERIES IS $1,000;
SUBSEQUENT INVESTMENTS MUST BE IN THE MINIMUM AMOUNT OF $100 (EXCEPT FOR
INVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS). THE FUND RESERVES THE
RIGHT TO RETURN INVESTMENTS WHICH DO NOT MEET THESE MINIMUMS. EXCEPTIONS TO
THESE MINIMUMS ARE AVAILABLE FOR ACCOUNTS BEING ESTABLISHED CONCURRENTLY WITH
THE INVEST-A-CHECK(R) SERVICE OR THE SELIGMAN TIME HORIZON MATRIX(SM).
No purchase order may be placed for Class B shares for an amount of
$250,000 or more; or for Class D shares for an amount of $4,000,000 or more.
Orders received by an authorized dealer before the close of business on the
New York Stock Exchange ("NYSE") (normally, 4:00 p.m. Eastern time) and accepted
by SFSI before the close of business (5:00 p.m. Eastern time) on the same day
will be executed at the Series' net asset value determined as of the close of
the NYSE on that day plus, in the case of the Class A shares, the applicable
sales load. Orders accepted by dealers after the close of the NYSE, or received
by SFSI after the close of business, will be executed at the Series' net asset
value as next determined plus, in the case of Class A shares, the applicable
sales load. The authorized dealer through which the shareholder purchases shares
is responsible for forwarding the order to SFSI promptly.
Payment for dealer purchases may be made by check or by wire. To wire
payment, dealer orders must first be placed through SFSI's order desk and
assigned a purchase confirmation number. Funds in payment of the purchase may
then be wired to Mellon Bank, N.A. ABA #043000261, A/C Seligman High-Yield Bond
Series (A, B or D), A/C#107-1011. WIRE TRANSFERS MUST INCLUDE THE PURCHASE
CONFIRMATION NUMBER AND CLIENT ACCOUNT REGISTRATION AND ACCOUNT NUMBER. Persons
10
<PAGE>
other than dealers who wish to wire payment should contact Seligman Data Corp.
for specific wire instructions. Although the Fund makes no charge for this
service, the transmitting bank may impose a wire service fee.
Current shareholders may purchase additional shares of the Series through
any authorized dealer or by sending a check payable to the "Seligman Group of
Funds" directly to P.O. Box 3936, New York, NY 10008-3936. Checks for investment
must be in U.S. dollars drawn on a domestic bank. The check should be
accompanied by an investment slip (provided on the bottom of shareholder account
statements) and include the shareholder's name, address, account number, Series
name and class of shares (A, B or D). If a shareholder does not provide the
required information, Seligman Data Corp. will seek further clarification and
may be forced to return the check to the shareholder. Orders sent directly to
Seligman Data Corp. will be executed at the Series' net asset value next
determined after the order is accepted plus, in the case of Class A shares, the
applicable sales load.
Seligman Data Corp. will charge a $10.00 service fee for checks returned to
it uncollectable. This charge may be deducted from the Shareholder's account.
For the protection of the Fund and its shareholders, no redemption proceeds will
be remitted to a shareholder with respect to shares purchased by check (unless
certified) until Seligman Data Corp. receives notice that the check has cleared,
which may be up to 15 days from the credit of the shares to the shareholder's
account.
VALUATION. The net asset value of the Series' shares is determined each
day, Monday through Friday, as of the close of trading on the NYSE (normally,
4:00 p.m. Eastern time) on each day that the NYSE is open for business. Net
asset value is calculated separately for each class. Securities traded on a U.S.
or foreign exchange or over-the-counter market are valued at the last sales
price on the primary exchange or market on which they are traded. United Kingdom
securities and securities for which there are no recent sales transactions are
valued based on quotations provided by primary market makers in such securities.
Any securities for which recent market quotations are not readily available are
valued at fair value determined in accordance with procedures approved by the
Fund's Trustees. Short-term holdings maturing in 60 days or less are generally
valued at amortized cost if their original maturity was 60 days or less.
Short-term holdings with more than 60 days remaining to maturity will be valued
at current market value until the 61st day prior to maturity, and will then be
valued on an amortized cost basis based on the value as of such date unless the
Trustees determine that amortized cost value does not represent fair market
value.
Although the legal rights of Class A, Class B and Class D shares are
substantially identical, the different expenses borne by each class will result
in different net asset values and dividends. The net asset values 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 higher distribution fees charged to Class B and Class
D shares. In addition, net asset value per shares of the three classes will be
affected to the extent any other expenses differ among classes.
CLASS A SHARES--INITIAL SALES LOAD. Class A shares are subject to an
initial sales load which varies with the size of the purchase as shown in the
schedule below, and an annual service fee of up to .25% of the average daily net
asset value of Class A shares. See "Administration, Shareholder Services and
Distribution Plan" below.
- --------------------------------------------------------------------------------
Class A Shares--Sales Load Schedule
Sales Load
as a percentage of Regular
-------------------------- Dealer
Net Amount Discount
Offering Invested (Net as a % of
Amount of Purchase Price Asset Value) Offering Price
------------------ ----- ----------- --------------
Less than $ 50,000..... 4.75% 4.99% 4.25%
50,000-- 99,999..... 4.00 4.17 3.50
100,000-- 249,999..... 3.50 3.63 3.00
250,000-- 499,999..... 2.50 2.56 2.25
500,000-- 999,999..... 2.00 2.04 1.75
1,000,000--3,999,999..... 1.00 1.01 .90
4,000,000-- or more..... 0 0 0
-------
* Dealers will receive a fee of .15% on sales of $4,000,000 or more.
- --------------------------------------------------------------------------------
11
<PAGE>
SFSI shall pay broker/dealers, from its own resources, an additional fee in
respect of certain investments in Class A shares of the Seligman Mutual Funds by
an "eligible employee benefit plan" (as defined below under "Special Programs")
which are attributable to the particular broker/dealer. The shares eligible for
the fee are those on which an initial front-end sales load was not paid because
either (i) the participating eligible employee benefit plan has at least $1
million invested in the Seligman Mutual Funds or (ii) the participating employer
has at least 50 eligible employees to whom such plan is made available. The fee,
which is paid monthly, is a percentage of the average daily net asset value of
eligible shares based on the length of time the shares have been invested in a
Seligman Mutual Fund, as follows: for shares held up to 1 year, .50% per annum;
for shares held more than 1 year up to 2 years, .25% per annum; for shares held
from 2 years up to 5 years, .10% per annum; and nothing thereafter.
REDUCED SALES LOADS. Reductions in sales loads apply to purchases of Class
A shares by a "single person," including an individual, members of a family unit
comprising husband, wife, and minor children purchasing securities for their own
account, or a trustee or other fiduciary purchasing for a single fiduciary
account or single trust. Purchases made by a trustee or other fiduciary for a
fiduciary account may not be aggregated with purchases made on behalf of any
other fiduciary or individual account.
O VOLUME DISCOUNTS are provided if the total amount being invested in Class
A shares of the Series alone, or in any combination of shares of the Seligman
Mutual Funds that are sold with a front-end sales load, reaches levels indicated
in the above sales load schedule.
O THE RIGHT OF ACCUMULATION allows an investor to combine the amount being
invested in shares of the other Seligman Mutual Funds 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 that were acquired by the
investor through an exchange of shares of another Seligman Mutual Fund on which
there was a front-end sales load to determine reduced sales loads in accordance
with the sales load schedule. An investor or a dealer purchasing shares on
behalf of an investor must indicate that the investor has existing accounts when
making investments or opening new accounts.
o LETTER OF INTENT allows an investor to purchase Class A shares of the
Series over a 13-month period at reduced sales loads, based on the total amount
the investor intends to purchase plus the total net asset value of the other
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 that
were acquired through an exchange of shares of another Seligman Mutual Fund on
which there was a front-end sales load. An investor or a dealer purchasing Class
A shares on behalf of an investor must indicate that the investor has existing
accounts when making investments or opening new accounts. For more information
concerning terms of Letters of Intent, see "Terms and Conditions" on page 28.
SPECIAL PROGRAMS. The Series may sell Class A shares at net asset value to
present and retired directors, trustees, officers, employees and their spouses
(and family members of the foregoing) of the Fund, the other investment
companies in the Seligman Group, the Manager and other companies affiliated with
the Manager. Family members are defined to include lineal descendants and lineal
ancestors, siblings (and their spouses and children) and any company or
organization controlled by any of the foregoing. Such sales also may be made to
employee benefit and thrift plans for such persons and to any investment
advisory, custodial, trust or other fiduciary account managed or advised by the
Manager or any affiliate.
Class A shares also 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 any registered unit investment trust which is the
issuer of periodic payment plan certificates, the net proceeds of which are
invested in Series shares; 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
12
<PAGE>
shareholders of mutual funds with objectives and policies similar to the Series
who purchase shares with redemption proceeds of such funds; to financial
institution trust departments; to registered investment advisers exercising
discretionary investment authority with respect to the purchase of Series'
shares; to accounts of financial institutions or broker/dealers that charge
account management fees, provided the Manager or one of its affiliates has
entered into an agreement with respect to such accounts; pursuant to sponsored
arrangements with organizations which make recommendations to or permit group
solicitations of, its employees, members or participants in connection with the
purchase of shares of the Series; and to "eligible employee benefit plans" (i)
which have at least $1 million invested in the Seligman Group of Mutual Funds or
(ii) of employers who have at least 50 eligible employees to whom such plan is
made available and, regardless of the number of employees, if such plan is
established and maintained by any dealer that has a sales agreement with SFSI.
"Eligible employee benefit plan" means any plan or arrangement, whether or not
tax qualified, which provides for the purchase of Series shares. Sales of shares
to such plans must be made in connection with a payroll deduction system of plan
funding or other system acceptable to Seligman Data Corp.
Section 403(b) plans sponsored by public educational institutions are not
eligible for net asset value purchases based on the aggregate investment made by
the plan or number of eligible employees. Participants in such plans are
eligible for reduced sales loads based solely on their individual investments.
CLASS B SHARES. Class B shares are sold without an initial sales load but
are subject to a CDSL if the shares are redeemed within six years of purchase at
rates set forth in the table below, charged as a percentage of the current net
asset value or the original purchase price, whichever is less.
Years since purchase CDSL
- -------------------- ----
less than 1 year................................... 5%
1 year or more but less than 2 years............... 4%
2 years or more but less than 3 years.............. 3%
3 years or more but less than 4 years.............. 3%
4 years or more but less than 5 years.............. 2%
5 years or more but less than 6 years.............. 1%
6 years or more.................................... 0%
Class B shares are also subject to an annual distribution fee of up to .75%
and an annual service fee of up to .25% of the average daily net asset value of
the Class B shares. SFSI will make a 4% payment to dealers in respect of
purchases of Class B shares. Approximately eight years after purchase, Class B
shares will convert automatically to Class A shares, which are subject to an
annual service fee of .25% but no distribution fee. Shares purchased through
reinvestment of dividends and distributions on Class B shares also will convert
automatically to Class A shares along with the underlying shares on which they
were earned. Conversion occurs at the end of the month which precedes the eighth
anniversary of the purchase date. If Class B shares of the Series are exchanged
for Class B shares of another Seligman Mutual Fund, the conversion period
applicable to the Class B shares acquired in the exchange will apply, and the
holding period of the shares exchanged will be tacked onto the holding period of
the shares acquired. Class B shareholders of the Series exercising the exchange
privilege will continue to be subject to the Series' CDSL schedule if such
schedule is higher or longer than the CDSL schedule relating to the new Class B
shares. In addition, Class B shares of the Series acquired by exchange will be
subject to the Series' CDSL schedule if such schedule is higher or longer than
the CDSL schedule relating to the original Class B shares.
CLASS D SHARES. Class D shares are sold without an initial sales load but
are subject to a CDSL if the shares are redeemed within one year, an annual
distribution fee of up to .75% and an annual service fee of up to .25%, of the
average daily net asset value of the Class D shares. SFSI will make a 1% payment
to dealers in respect of purchases of Class D shares. Unlike Class B shares,
Class D shares do not automatically convert to Class A shares after eight years.
CONTINGENT DEFERRED SALES LOAD. A CDSL will be imposed on any redemption of
Class B or Class D shares which were purchased during the preceding six years
(for Class B shares) or twelve months (for Class D shares); however, no CDSL
will be imposed on shares acquired through the investment of dividends or
distributions from any Class B or Class D shares of mutual funds within the
Seligman Group. The amount of any CDSL will initially be used by SFSI to defray
13
<PAGE>
the expense of the payment of 4% (in the case of Class B shares) or 1% (in the
case of Class D Shares) made by it to Service Organizations (as defined under
"Administration, Shareholder Services and Distribution Plan") at the time of
sale.
To minimize the application of a CDSL to a redemption, shares acquired
pursuant to the investment of dividends and distributions (which are not subject
to a CDSL) will be redeemed first; followed by shares purchased at least six
years prior to redemption (in the case of Class B shares) or one year prior to
redemption (in the case of Class D shares). Shares held for the longest period
of time within the applicable period will then be redeemed. Additionally, for
those shares determined to be subject to a CDSL, the CDSL will be assessed on
the current net asset value or original purchase price, whichever is less.
For example, assume an investor purchased 100 Class D shares in January at
a price of $10.00 per share. During the first year, 5 additional Class D shares
were acquired through investment of dividends and distributions. In January of
the following year, an additional 50 Class D shares were purchased at a price of
$12.00 per share. In March of that year, the investor chooses to redeem
$1,500.00 from the account which now holds 155 Class D shares with a total value
of $1,898.75 ($12.25 per share). The CDSL for this transaction would be
calculated as follows:
Total shares to be redeemed
(122.449 @ $12.25) as follows: $1,500.00
---------
Dividend/Distribution shares
(5 @ $12.25) $ 61.25
Shares held more than 1 year
(100 @ $12.25) 1,225.00
Shares held less than 1 year subject to
CDSL (17.449 @ $12.25) 213.75
---------
Gross proceeds of redemption 1,500.00
Less CDSL
(17.449 shares @ $12.00 =
$209.39 x 1% = $2.09) (2.09)
---------
Net proceeds of redemption $1,497.91
=========
For Federal income tax purposes, the amount of the CDSL will reduce the
gain or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.
The CDSL will be waived or reduced in the following instances:
(a) on redemptions following the death or disability of a shareholder, as
defined in section 72(m)(7) of the Internal Revenue Code of 1986, as amended
(the "Code"); (b) in connection with (i) distributions from retirement plans
qualified under section 401 (a) of the Code when such redemptions are necessary
to make distributions to plan participants (such payments include, but are not
limited to death, disability, retirement, or separation of service), (ii)
distributions from a custodial account under section 403(b)(7) of the Code or an
individual retirement account ("IRA") due to death, disability, or attainment of
age 591/2, and (iii) a tax-free return of an excess contribution to an IRA; (c)
in whole or in part, in connection with shares sold to current and retired
Trustees of the Fund; (d) in whole or in part, in connection with shares sold to
any state, county, or city or any instrumentality, department, authority, or
agency thereof, which is prohibited by applicable investment laws from paying a
sales load or commission in connection with the purchase of shares of any
registered investment management company; (e) pursuant to an automatic cash
withdrawal service; and (f) in connection with the redemption of Class B or
Class D shares of the Series if the Series is combined with another mutual fund
in the Seligman Group, or another similar reorganization transaction.
If, with respect to a redemption of any Class B or Class D shares sold by a
dealer, the CDSL is waived because the redemption qualifies for a waiver as set
forth above, the dealer shall remit to SFSI promptly upon notice, an amount
equal to the payment or a portion of the payment made by SFSI at the time of
sale of such shares.
SFSI may from time to time assist dealers by, among other things, providing
sales literature to, and holding informational programs for the benefit of,
dealers' registered representatives. Dealers may limit the participation of
registered representatives in such informational programs by means of sales
incentive programs which may require the sale of minimum dollar amounts of
shares of the mutual funds in the Seligman Group. SFSI may from time to time pay
14
<PAGE>
a bonus or other incentive to dealers that sell shares of the Seligman Mutual
Funds. In some instances, these bonuses or incentives may be offered only to
certain dealers which employ registered representatives who have sold or may
sell a significant amount of shares of the Series and/or certain other mutual
funds managed by the Manager during a specified period of time. Such bonus or
other incentive may take the form of payment for travel expenses, including
lodging, incurred in connection with trips taken by qualifying registered
representatives and members of their families to places within or outside the
United States. The cost to SFSI of such promotional activities and payments
shall be consistent with the Rules of the National Association of Securities
Dealers, Inc., as then in effect.
TELEPHONE TRANSACTIONS
A shareholder with telephone transaction privileges, AND THE SHAREHOLDER'S
BROKER/DEALER REPRESENTATIVE, will have the ability to effect the following
transactions via telephone: (i) redemption of Series shares, (ii) exchange of
Series shares for shares of the same class of another Seligman Mutual Fund,
(iii) change of a dividend and/or capital gain distribution option, and (iv)
change of address. All telephone transactions are effected through Seligman Data
Corp. at (800) 221-2450.
For investors who purchase shares by completing and submitting an Account
Application (except those accounts registered as trusts (unless the trustee and
sole beneficiary are the same person), corporations or group retirement plans):
Unless an election is made otherwise on the Account Application, a shareholder
and the shareholder's broker/dealer of record, as designated on the Account
Application, will automatically receive telephone services.
For investors who purchase shares through a broker/dealer: Telephone
services for a shareholder and the shareholder's representative may be elected
by completing a supplemental election application available from the
broker/dealer of record.
For accounts registered as IRAs: Telephone services will include only
exchanges or address changes.
For accounts registered as trusts (unless the trustee and sole beneficiary
are the same person), corporations or group retirement plans: Telephone
redemptions are not permitted. Additionally, group retirement plans are not
permitted to change a dividend or gain distribution option.
All Seligman Mutual Fund accounts with the same account number (i.e.,
registered exactly the same) as an existing account, including any new Seligman
Mutual Fund in which the shareholder invests in the future, will automatically
include telephone services if the existing account has telephone services.
Telephone services may also be elected at any time on a supplemental election
application.
For accounts registered jointly (such as joint tenancies, tenants in common
and community property registrations), each owner, by accepting or requesting
telephone services, authorizes each of the other owners to effect telephone
transactions on his or her behalf.
During times of drastic economic or market changes, a shareholder or the
shareholder's representative may experience difficulty in contacting Seligman
Data Corp. to request a redemption or exchange of Series shares via telephone.
In these circumstances, the shareholder or the shareholder's representative
should consider using other redemption or exchange procedures. (See "Redemption
of Shares" below.) Use of these other redemption or exchange procedures will
result in the request being processed at a later time than if a telephone
transaction had been used, and the Series' net asset value may fluctuate during
such periods.
The Fund and Seligman Data Corp. will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These will
include: recording all telephone calls requesting account activity, requiring
that the caller provide certain requested personal and/or account information at
the time of the call for the purpose of establishing the caller's identity, and
sending a written confirmation of redemptions, exchanges or address changes to
the address of record each time activity is initiated by telephone. As long as
the Fund and Seligman Data Corp. follow instructions communicated by telephone
that were reasonably believed to be genuine at the time of their receipt,
neither they nor any of their affiliates will be liable for any loss to the
shareholder caused by an unauthorized transaction. In any instance where the
15
<PAGE>
Fund or Seligman Data Corp. is not reasonably satisfied that instructions
received by telephone are genuine, the requested transaction will not be
executed, and neither they nor any of their affiliates will be liable for any
losses which may occur due to a delay in implementing the transaction. If the
Fund or Seligman Data Corp. does not follow the procedures described above, the
Fund or Seligman Data Corp. may be liable for any losses due to unauthorized or
fraudulent instructions. Telephone transactions must be effected through a
representative of Seligman Data Corp., i.e., requests may not be communicated
via Seligman Data Corp.'s automated telephone answering system. Shareholders, of
course, may refuse or cancel telephone services. Telephone services may be
terminated by a shareholder at any time by sending a written request to Seligman
Data Corp. TELEPHONE SERVICES MAY NOT BE ESTABLISHED BY A SHAREHOLDER'S
BROKER/DEALER WITHOUT THE WRITTEN AUTHORIZATION OF THE SHAREHOLDER. Written
acknowledgment of termination of telephone services will be sent to the
shareholder at the address of record.
REDEMPTION OF SHARES
A shareholder may redeem shares held in book credit form without charge
(except a CDSL, if applicable) at any time by sending a written request to
Seligman Data Corp., 100 Park Avenue, New York, NY 10017. The redemption request
must be signed by all persons in whose name the shares are registered. A
shareholder may redeem shares that are not in book credit form by surrendering
certificates in proper form to the same address. Certificates should be sent by
registered mail. Share certificates must be endorsed for transfer or accompanied
by an endorsed stock power signed by all share owners exactly as their name(s)
appear(s) on the account registration. The shareholder's letter of instruction
or endorsed stock power should specify the Series or Fund name, account number,
class of shares (A, B or D) and the number of shares or dollar amount to be
redeemed. The Fund cannot accept conditional redemption requests. If the
redemption proceeds are (i) $50,000 or more, (ii) to be paid to someone other
than the shareholder of record (regardless of the amount) or (iii) to be mailed
to other than the address of record (regardless of the amount), the signature(s)
of the shareholder(s) must be guaranteed by an eligible financial institution
including, but not limited to, the following: banks, trust companies, credit
unions, securities brokers and dealers, savings and loan associations and
participants in the Securities Transfer Association Medallion Program (STAMP),
the Stock Exchanges Medallion Program (SEMP) and the New York Stock Exchange
Medallion Signature Program (MSP). The Fund reserves the right to reject a
signature guarantee where it is believed that the Fund will be placed at risk by
accepting such guarantee. A signature guarantee is also necessary in order to
change the account registration. Notarization by a notary public is not an
acceptable signature guarantee. ADDITIONAL DOCUMENTATION MAY ALSO BE REQUIRED BY
SELIGMAN DATA CORP. IN THE EVENT OF A REDEMPTION BY CORPORATIONS, EXECUTORS,
ADMINISTRATORS, TRUSTEES, CUSTODIANS OR RETIREMENT PLANS. FOR FURTHER
INFORMATION WITH RESPECT TO REDEMPTION REQUIREMENTS, PLEASE CONTACT THE
SHAREHOLDER SERVICES DEPARTMENT OF SELIGMAN DATA CORP. FOR ASSISTANCE.
In the case of Class A shares, and in the case of Class B shares redeemed
after six years and Class D shares redeemed after one year, a shareholder will
receive the net asset value per share next determined after receipt of a request
in good order. If Class B shares are redeemed within six years of purchase, a
shareholder will receive the net asset value per share next determined after
receipt of a request in good order, less the applicable CDSL as described under
"Purchase Of Shares--Class B Shares" above. If Class D shares are redeemed
within one year of purchase, a shareholder will receive the net asset value per
share next determined after receipt of a request in good order, less a CDSL of
1% as described under "Purchase Of Shares--Class D Shares" above.
A shareholder also may "sell" shares to the Fund through an investment
dealer and, in that way, be certain, providing the order is timely, of receiving
the net asset value established at the end of the day on which the dealer is
given the repurchase order (less any applicable CDSL). The Fund makes no charge
for this transaction, but the dealer may charge a service fee. "Sell" or
16
<PAGE>
repurchase orders received from an authorized dealer before the close of the
NYSE and received by SFSI, the repurchase agent, before the close of business on
the same day will be executed at the net asset value per share determined as of
the close of the NYSE on that day, less any applicable CDSL. Repurchase orders
received from authorized dealers after the close of the NYSE or not received by
SFSI prior to the close of business, will be executed at the net asset value
determined as of the close of the NYSE on the next trading day, less any
applicable CDSL. Shares held in a "street name" account with a broker/dealer may
be sold to the Fund only through a broker/dealer.
TELEPHONE REDEMPTIONS. Telephone redemptions of uncertificated shares may
be made once per day, in an amount of up to $50,000 per account. Telephone
redemption requests received by Seligman Data Corp. at (800) 221-2450 between
8:30 a.m. and 4:00 p.m. Eastern time, on any business day will be processed as
of the close of business on that day. Redemption requests by telephone will not
be accepted within 30 days following an address change. Keogh Plans, IRAs or
other retirement plans are not eligible for telephone redemptions. The Fund
reserves the right to suspend or terminate its telephone redemption service at
any time without notice.
For more information about telephone redemptions and the circumstances
under which shareholders may bear the risk of loss for a fraudulent transaction,
see "Telephone Transactions" above.
CHECK REDEMPTION SERVICE. The Check Redemption Service allows a shareholder
who owns or purchases shares in the Series worth $25,000 or more to request
Seligman Data Corp. to provide redemption checks to be drawn on the
shareholder's account in amounts of $500 or more. The shareholder may elect to
use this service on the Account Application or by later written request to
Seligman Data Corp. Shares for which certificates have been issued will not be
available for redemption under this Service. Holder of Class B shares may use
this service although check redemptions of Class B shares will be subject to a
CDSL. Holders of Class D shares may use this service with respect to shares that
have been held for at least one year. Dividends continue to be earned through
the date preceding the date the check clears for payment. Use of this service is
subject to Boston Safe Deposit and Trust Co. rules and regulations covering
checking accounts. Separate checkbooks will be furnished for each series of the
Fund.
There is no charge for use of checks. When honoring a check that was
processed for payment, Boston Safe Deposit and Trust Co. will cause the Series
to redeem exactly enough full and fractional shares from an account to cover the
amount of the check. If shares are owned jointly, redemption checks must be
signed by all persons, unless otherwise elected on the Account Application, in
which case a single signature will be acceptable.
In view of daily fluctuations in share value, the shareholder should be
certain that the amount of shares in the account is sufficient to cover the
amount of checks written. If insufficient shares are in the account, the check
will be returned, marked "insufficient funds." THE FUND WILL NOT REDEEM SHARES
IN ONE SERIES TO COVER A CHECK WRITTEN ON ANOTHER SERIES. SELIGMAN DATA CORP.
WILL CHARGE A $10.00 PROCESSING FEE FOR ANY CHECK REDEMPTION DRAFT RETURNED AS
UNCOLLECTABLE. THIS CHARGE MAY BE DEDUCTED FROM THE SHAREHOLDER'S ACCOUNT.
Check Redemption books cannot be reordered unless the shareholder's account
has a value of $25,000 or more and the Fund has a certified Taxpayer
Identification Number on file.
Cancelled checks will be returned to the shareholder under separate cover
the month after they clear. The Check Redemption Service may be terminated at
any time by the Fund or Boston Safe Deposit and Trust Co. See "Terms and
Conditions" on page 28.
GENERAL. With respect to shares redeemed, a check for the proceeds will be
sent to the Shareholder's address of record within seven calendar days after
acceptance of the redemption order and will be made payable to all of the
registered owners on the account. With respect to shares repurchased by the
Fund, a check for the proceeds will be sent to the investment dealer within
seven calendar days after acceptance of the repurchase order and will be made
payable to the investment dealer. The Fund will not permit redemptions of shares
17
<PAGE>
with respect to shares purchased by check (unless certified) until Seligman Data
Corp. receives notice that the check has cleared, which may be up to 15 days
from the credit of the shares to the shareholder's account. The proceeds of a
redemption or repurchase may be more or less than the shareholder's cost.
The Fund reserves the right to redeem shares owned by a shareholder whose
investment in the Series has a value of less than a minimum amount specified by
the Fund's Trustees, which is presently $500. Shareholders would be sent a
notice before the redemption is processed stating that the value of their
investment in the Series is less than the specified minimum and that they have
sixty days to make an additional investment.
REINSTATEMENT PRIVILEGE. If a shareholder redeems Class A shares and then
decides to reinvest them, or to shift the investment to the other series of the
Fund or one of the other Seligman Mutual Funds the shareholder may, within 120
calendar days of the date of redemption, use all or any part of the proceeds of
the redemption to reinstate, free of sales load, all or any part of the
investment in shares of the Series or in shares of the other series of the Fund
or one of the other Seligman Mutual Funds. If a shareholder redeems Class B or
Class D shares and the redemption was subject to a CDSL, the shareholder may
reinstate the investment in shares of the same class of the Series or of any of
the other Seligman Mutual Funds within 120 calendar days of the date of
redemption and receive a credit for the CDSL paid. Such investment will be
reinstated at the net asset value per share established as of the close of the
NYSE on the day the request is received. Seligman Data Corp. must be informed
that the purchase is a reinstated investment. REINSTATED SHARES MUST BE
REGISTERED EXACTLY AS THE SHARES PREVIOUSLY REDEEMED.
Generally, exercise of the Reinstatement Privilege does not alter the
Federal income tax status of any capital gain realized on a sale of Series
shares, but to the extent that any shares are sold at a loss and the proceeds
are reinvested in shares of the same Series, some or all of the loss will not be
allowed as a deduction, depending upon the percentage of the proceeds
reinvested.
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
Under the Series' Administration, Shareholder Services and Distribution
Plan (the "Plan") the Series may pay to SFSI an administration, shareholder
services and distribution fee in respect of the Series' Class A, Class B and
Class D shares. Payments under the Plan may include, but are not limited to: (i)
compensation to securities dealers and other organizations ("Service
Organizations") for providing distribution assistance with respect to assets
invested in the Series, (ii) compensation to Service Organizations for providing
administration, accounting and other shareholder services with respect to Series
shareholders, and (iii) otherwise promoting the sale of shares of the Series,
including paying for the preparation of advertising and sales literature and the
printing and distribution of such promotional materials and prospectuses to
prospective investors and defraying SFSI's costs incurred in connection with its
marketing efforts with respect to shares of the Series. The Manager, in its sole
discretion, may also make similar payments to SFSI from its own resources, which
may include the management fee that the Manager receives from the Fund.
Under the Plan, the Series reimburses SFSI for its expenses with respect to
Class A shares at an annual rate of up to .25% of the average daily net asset
value of Class A shares. It is expected that the proceeds from the fee in
respect of Class A shares will be used primarily to compensate Service
Organizations which enter into agreements with SFSI. Such Service Organizations
will receive from SFSI a continuing fee of up to .25% on an annual basis,
payable quarterly, of the average daily net assets of Class A shares
attributable to the particular Service Organization for providing personal
service and/or the maintenance of shareholder accounts. The fee payable from
time to time is, within such limit, determined by the Trustees of the Fund.
The Plan, as it relates to Class A shares, was approved by the Trustees on
October 9, 1984 and was approved by the shareholders of the Series on April 10,
1986. The Plan is reviewed by the Trustees annually. The total amount paid for
the year ended December 31, 1995 in respect of the Series' Class A shares
18
<PAGE>
pursuant to the Plan was equal to .22% of the Class A shares' average daily net
assets.
Under the Plan, the Fund reimburses SFSI for its expenses with respect to
Class B and Class D shares at an annual rate of up to 1% of the respective
average daily net asset value of the Class B and Class D shares. Proceeds from
the Class B and Class D distribution fees are used primarily to compensate
Service Organizations for administration, shareholder services and distribution
assistance (including a continuing fee of up to .25% on an annual basis of the
average daily net asset value of Class B and Class D shares attributable to
particular Service Organizations for providing personal service and/or the
maintenance of shareholder accounts) and will initially be used by SFSI to
defray the expense of the payment of 4% (in the case of Class B shares) or 1%
(in the case of Class D shares) made by it to Service Organizations at the time
of the sale of Class B and Class D shares. The amounts expended by SFSI in any
one year upon the initial purchase of Class B and Class D shares may exceed the
amounts received by it from Plan payments retained. Expenses of administration,
shareholder services and distribution of Class B and Class D shares in one
fiscal year may be respectively, paid from Class B and Class D Plan fees
received in any other fiscal year.
The Plan, as it relates to Class B shares, was approved by the Trustees of
the Fund on March 21, 1996. The Plan, as it relates to Class D shares, was
amended by the Trustees of the Fund on July 15, 1993. The total amount paid for
the year ended December 31, 1995 by the Series' Class D shares pursuant to the
Plan was 1% per annum of the average daily net assets of Class D shares. The
Plan is reviewed by the Fund's Trustees annually.
Seligman Services, Inc. ("SSI"), an affiliate of the Manager, is a limited
purpose broker/dealer. SSI acts as a broker/dealer of record for most
shareholder accounts that do not have a designated broker/dealer of record
including all such shareholder accounts established after April 1, 1995 and
receives compensation for providing personal service and account maintenance to
such accounts of record.
EXCHANGE PRIVILEGE
A shareholder of the Series may, without charge, exchange at net asset
value any part or all of an investment in the Series for shares of the other
series of the Fund or for shares of any of the other mutual funds in the
Seligman Group. Exchanges may be made by mail, or by telephone if the
shareholder has telephone services.
Class A, Class B and Class D shares may be exchanged only for Class A,
Class B and Class D shares, respectively, of another Seligman Mutual Fund on the
basis of relative net asset value.
If Class B or Class D shares that are subject to a CDSL are exchanged for
Class B or Class D shares, respectively, of another Seligman Mutual Fund, then
for purposes of assessing the CDSL payable upon disposition of the exchanged
Class B or Class D shares, the applicable holding period shall be reduced by the
holding period of the original Class B or Class D shares.
Class B shareholders of the Series exercising the exchange privilege will
continue to be subject to the Series' CDSL schedule if such schedule is higher
or longer than the CDSL schedule relating to the new Class B shares. In
addition, Class B shares of the Series acquired through use of the exchange
privilege will be subject to the Series' CDSL schedule if such schedule is
higher or longer than the CDSL schedule relating to the Class B shares of the
fund from which the exchange has been made.
The Seligman Mutual Fund available under the Exchange Privilege are:
o SELIGMAN CAPITAL FUND, Inc. seeks aggressive capital appreciation. Current
income is not an objective.
o SELIGMAN CASH MANAGEMENT FUND, Inc. invests in high quality money market
instruments. Shares are sold at net asset value.
o SELIGMAN COMMON STOCK FUND, INC. seeks favorable current income and
long-term growth of both income and capital value without exposing capital
to undue risk.
19
<PAGE>
o SELIGMAN COMMUNICATIONS AND INFORMATION FUND, INC. invests in shares of
companies in the communications, information and related industries to
produce capital gain. Income is not an objective.
o SELIGMAN FRONTIER FUND, INC. seeks to produce growth in capital value.
Income may be considered but will only be incidental to the fund's
investment objective.
o SELIGMAN GROWTH FUND, INC. seeks longer-term growth in capital value and an
increase in future income.
o SELIGMAN HENDERSON GLOBAL FUND SERIES, INC. consists of the Seligman
Henderson International Fund, the Seligman Henderson Global Growth
Opportunities Fund, the Seligman Henderson Global Smaller Companies Fund
and the Seligman Henderson Global Technology Fund, which seek long-term
capital appreciation primarily through investing in companies either
globally or internationally.
o SELIGMAN HIGH INCOME FUND SERIES seeks high current income by investing in
debt securities. In addition to the Series, the Fund consists of the U.S.
Government Securities Series (which does not currently offer Class B
shares).
o SELIGMAN INCOME FUND, INC. seeks high current income and the possibility of
improvement of future income and capital value.
o SELIGMAN NEW JERSEY TAX-EXEMPT FUND, INC. invests in investment-grade New
Jersey tax-exempt securities. (Does not currently offer Class B shares.)
o SELIGMAN PENNSYLVANIA TAX-EXEMPT FUND SERIES invests in investment-grade
Pennsylvania tax-exempt securities. (Does not currently offer Class B
shares.)
o SELIGMAN TAX-EXEMPT FUND SERIES, INC. consists of several State Series and
a National Series. The National Tax-Exempt Series seeks to provide maximum
income exempt from Federal income taxes; individual state series, each
seeking to maximize income exempt from Federal income taxes and from
personal income taxes in designated states are available for Colorado,
Georgia, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri,
New York, Ohio, Oregon and South Carolina. (Does not currently offer Class
B shares.)
o SELIGMAN TAX-EXEMPT SERIES TRUST includes the California Tax-Exempt
High-Yield Series, the California Tax-Exempt Quality Series, the Florida
Tax-Exempt Series and the North Carolina Tax-Exempt Series, each of which
invests in tax-exempt securities of its designated state. (Does not
currently offer Class B shares.)
All permitted exchanges will be based on the net asset values of the
respective funds determined at the close of the NYSE on that day. Telephone
requests for exchanges received between 8:30 a.m. and 4:00 p.m. Eastern time, on
any business day, by Seligman Data Corp. at (800) 221-2450, will be processed as
of the close of business on that day. The registration of an account into which
an exchange is made must be identical to the registration of the account from
which shares are exchanged. When establishing a new account by an exchange of
shares, the shares being exchanged must have a value of at least the minimum
initial investment required by the mutual fund into which the exchange is being
made. The method of receiving distributions, unless otherwise indicated, will be
carried over to the new fund account, as will telephone services. Account
services, such as Invest-A-Check(R) Service, Directed Dividends, Automatic Cash
Withdrawal Service and Check Writing Privilege will not be carried over to the
new fund account unless specifically requested and permitted by the new fund.
Exchange orders may be placed to effect an exchange of a specific number of
shares, an exchange of shares equal to a specific dollar amount or an exchange
of all shares held. Shares for which certificates have been issued may not be
exchanged via telephone and may be exchanged only upon receipt of a written
exchange request together with certificates representing shares to be exchanged
in proper form.
The Exchange Privilege via mail is generally applicable to group retirement
plans, although some restrictions may apply. The terms of the Exchange Privilege
20
<PAGE>
described herein may be modified at any time; and not all of the mutual funds in
the Seligman Group are available to residents of all states. Before making any
exchange, a shareholder should contact an authorized investment dealer or
Seligman Data Corp. to obtain prospectuses of any of the Seligman Mutual Funds.
A broker/dealer representative of record will be able to effect exchanges
on behalf of a shareholder only if the shareholder has telephone services or if
the broker/dealer has entered into a Telephone Exchange Agreement with SFSI
wherein the broker/dealer must agree to indemnify SFSI and the Seligman Mutual
Funds from any loss or liability incurred as a result of the acceptance of
telephone exchange orders.
Written confirmation of all exchanges will be forwarded to the shareholder
to whom the exchanged shares are registered and a duplicate confirmation will be
sent to the dealer of record listed on the account. SFSI reserves the right to
reject any telephone exchange request. Any rejected telephone exchange order may
be processed by mail. For more information about telephone exchanges, including
the circumstances under which shareholders may bear the risk of loss for a
fraudulent transaction, see "Telephone Transactions."
Exchanges of shares are sales and may result in a gain or loss for Federal
income tax purposes.
FURTHER INFORMATION ABOUT TRANSACTIONS IN THE SERIES
Because excessive trading (including short-term, "market timing" trading)
can hurt the Series' performance, the Fund may refuse any exchange (1) from any
shareholder account from which there have been two exchanges in the preceding
three month period, or (2) where the exchanged shares equal in value the lesser
of $1,000,000 or 1% of the Series' net assets. The Fund may also refuse any
exchange or purchase order from any shareholder account if the shareholder or
the shareholder's broker/dealer has been advised that previous patterns of
purchases and redemptions or exchanges have been considered excessive. Accounts
under common ownership or control, including those with the same taxpayer ID
number and those administered so as to redeem or purchase shares based upon
certain predetermined market indicators, will be considered one account for this
purpose. Additionally, the Fund reserves the right to refuse any order for the
purchase of shares.
DIVIDENDS AND DISTRIBUTIONS
The Series' net investment income is distributed to shareholders monthly in
the form of additional shares, unless the shareholder elects otherwise. Payments
vary in amount depending on income received from the Series' investments and
costs of operations. Shares begin earning dividends on the day on which the Fund
receives payment. Shares continue to earn dividends through the date preceding
the date they are redeemed.
The Series distributes substantially all of any taxable net long-term and
short-term gain realized on investments to shareholders at least annually. In
determining amounts of capital gains to be distributed, any capital loss
carryforwards from prior years will offset capital gains. For Federal income tax
purposes, the Series had a capital loss carryforward as of December 31, 1995 of
approximately $11,174,550 of which $1,680,021 expires in 1997, $7,286,151
expires in 1998 and $2,208,378 expires in 2002. Accordingly, the Series may not
distribute capital gains (short-term or long-term) to shareholders until net
gains have been realized in excess of the carryforward.
Shareholders may elect: (1) to receive both dividends and gain
distributions in shares; (2) to receive dividends in cash and gain distributions
in shares; (3) to receive both dividends and gain distributions in cash. Cash
dividends and gain distributions are paid by check. If the payment option you
prefer is not listed, contact Seligman Data Corp. at (800) 221-2450 to request
information on other available options. In the case of prototype retirement
plans, dividends and gain distributions are reinvested in additional shares.
Unless another election is made, dividends and capital gain distributions will
be credited to shareholder accounts in additional shares. Shares acquired
through a dividend or gain distribution and credited to a shareholder's account
are not subject to an initial sales load or a CDSL. Dividends and gain
21
<PAGE>
distributions paid in shares are invested on the payable date using the net
asset value of the payable date. Shareholders may elect to change their dividend
and gain distribution options by writing Seligman Data Corp. at the address
listed below. If the shareholder has telephone services, changes may also be
telephoned to Seligman Data Corp. between 8:30 a.m. and 6:00 p.m. Eastern time,
by either the shareholder or the broker/dealer of record on the account. For
information about electing telephone services, see "Telephone Transactions."
These elections must be received by Seligman Data Corp. before the record date
for the dividend or distribution in order to be effective for such dividend or
distribution.
The per share dividends from net investment income on Class B and Class D
shares will be lower than the per share dividends on Class A shares as a result
of the higher distribution fees applicable with respect to Class B and Class D
shares. Per share dividends of the three classes may also differ as a result of
differing class expenses. Distributions of net capital gains, if any, will be
paid in the same amount for Class A, Class B and Class D shares. See "Purchase
Of Shares --Valuation."
Shareholders exchanging shares of one mutual fund for shares of another
mutual fund in the Seligman Group will continue to receive dividends and gains
as elected prior to such exchange unless otherwise specified. In the event that
a shareholder redeems all shares in an account between the record date and the
payable date, the value of any dividends or gain distributions declared will be
paid in cash regardless of the existing election.
FEDERAL INCOME TAXES
The Series intends to continue to qualify as a regulated investment company
under the Code. For each year so qualified, the Series will not be subject to
Federal income taxes on its net investment income and capital gains, if any,
realized during any taxable year which it distributes to its shareholders,
provided that at least 90% of its net investment income and net short-term
capital gains are distributed to shareholders each year.
Dividends from net investment income and distributions from net short-term
capital gains are taxable as ordinary income to the shareholders, whether
received in cash or reinvested in additional shares, and are, generally, not
eligible for the dividends received deduction for corporations.
Distributions of net capital gain, i.e., the excess of net long-term
capital gains over any net short-term losses, are taxable as long-term capital
gain, whether received in cash or invested in additional shares, regardless of
how long shares have been held by the shareholders; such distributions are not
eligible for the dividends received deduction allowed to corporate shareholders.
As noted above, the Series must exhaust its capital loss carryforward before it
may make capital gain distributions to shareholders.
Any gain or loss realized upon a sale or redemption of shares in the Series
by a shareholder who is not a dealer in securities will generally be treated as
a long-term capital gain or loss if the shares have been held for more than one
year and otherwise as a short-term capital gain or loss. However, if shares on
which a long-term capital gain distribution has been received are subsequently
sold or redeemed and such shares have been held for six months or less, any loss
realized will be treated as long-term capital loss to the extent that it offsets
the long-term capital gain distribution. In addition, no loss will be allowed on
the sale or other disposition of shares of the Series if, within a period
beginning 30 days before the date of such sale or disposition and ending 30 days
after such date, the holder acquires (such as through dividend reinvestment)
securities that are substantially identical to the shares of the Series.
In determining gain or loss on shares of the Series that are sold or
exchanged within 90 days after acquisition, a shareholder generally will not be
permitted to include in the tax basis attributable to such shares the sales load
incurred in acquiring such shares to the extent of any subsequent reduction in
the sales load by reason of the Exchange or Reinstatement Privilege offered by
the Series. Any sales load not taken into account in determining the tax basis
of shares sold or exchanged within 90 days after acquisition will be added to
22
<PAGE>
the shareholder's tax basis in the shares acquired pursuant to the Exchange or
Reinstatement Privilege.
The Series will generally be subject to an excise tax of 4% on the amount
of any income or capital gains, above certain permitted levels, distributed to
shareholders on a basis such that such income or gain is not taxable to
shareholders in the calendar year in which it was earned. Furthermore, dividends
declared in October, November or December payable to shareholders of record on a
specified date in such a month and paid in the following January will be treated
as having been paid by the Series and received by each shareholder in December.
Under this rule, therefore, shareholders may be taxed in one year on dividends
or distributions actually received in January of the following year.
Shareholders are urged to consult their tax advisers concerning the effect
of Federal income taxes in their individual circumstances.
UNLESS A SHAREHOLDER INCLUDES A CERTIFIED TAXPAYER IDENTIFICATION NUMBER
(SOCIAL SECURITY NUMBER FOR INDIVIDUALS) ON THE ACCOUNT APPLICATION AND
CERTIFIES THAT THE SHAREHOLDER IS NOT SUBJECT TO BACKUP WITHHOLDING, THE FUND IS
REQUIRED TO WITHHOLD AND REMIT TO THE U.S. TREASURY A PORTION OF DISTRIBUTIONS
AND OTHER REPORTABLE PAYMENTS TO THE SHAREHOLDER. THE RATE OF BACKUP WITHHOLDING
IS 31%. SHAREHOLDERS SHOULD BE AWARE THAT, UNDER REGULATIONS PROMULGATED BY THE
INTERNAL REVENUE SERVICE, THE FUND MAY BE FINED $50 ANNUALLY FOR EACH ACCOUNT
FOR WHICH A CERTIFIED TAXPAYER IDENTIFICATION NUMBER IS NOT PROVIDED. IN THE
EVENT THAT SUCH A FEE IS IMPOSED, THE FUND MAY CHARGE A SERVICE FEE OF UP TO $50
THAT MAY BE DEDUCTED FROM THE SHAREHOLDER'S ACCOUNT AND OFFSET AGAINST ANY
UNDISTRIBUTED DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. THE FUND ALSO RESERVES
THE RIGHT TO CLOSE ANY ACCOUNT WHICH DOES NOT HAVE A CERTIFIED TAXPAYER
IDENTIFICATION NUMBER.
SHAREHOLDER INFORMATION
Shareholders will be sent reports semi-annually regarding the Series.
General information about the Series may be requested by writing the Corporate
Communications/Investor Relations Department, J. & W. Seligman & Co.
Incorporated, 100 Park Avenue, New York, NY 10017 or by telephoning the
Corporate Communications/Investor Relations Department toll-free at (800)
221-7844 from all continental United States, except New York, or (212) 850-1864
in New York State and the Greater New York City area. Information about
shareholder accounts may be requested by writing Shareholder Services, Seligman
Data Corp. at the same address or by toll-free telephone by dialing (800)
221-2450 from all continental United States. Seligman Data Corp. may be
telephoned Monday through Friday (except holidays), between the hours of 8:30
a.m. and 6:00 p.m. Eastern time, and calls will be answered by a service
representative.
24 HOUR TELEPHONE ACCESS IS AVAILABLE BY DIALING (800) 622-4597 ON A
TOUCHTONE PHONE, WHICH PROVIDES INSTANT ACCESS TO PRICE, YIELD, ACCOUNT BALANCE,
MOST RECENT TRANSACTION AND OTHER INFORMATION. IN ADDITION, ACCOUNT STATEMENTS,
FORM 1099-DIVS AND CHECKBOOKS MAY BE ORDERED. TO INSURE PROMPT DELIVERY OF
DISTRIBUTION CHECKS, ACCOUNT STATEMENTS AND OTHER INFORMATION, SELIGMAN DATA
CORP. SHOULD BE NOTIFIED IMMEDIATELY IN WRITING OF ANY ADDRESS CHANGE. ADDRESS
CHANGES MAY BE TELEPHONED TO SELIGMAN DATA CORP. IF THE SHAREHOLDER HAS
TELEPHONE SERVICES. FOR MORE INFORMATION ABOUT TELEPHONE SERVICES, SEE
"TELEPHONE TRANSACTIONS" ABOVE.
ACCOUNT SERVICES. Shareholders are sent confirmation of financial
transactions in their Account. Other investor services are available. These
include:
O INVEST-A-CHECK(R) Service enables a shareholder to authorize additional
purchases of shares automatically by electronic funds transfer from the
shareholder's savings or checking account, if the shareholder's bank is a member
of the Automated Clearing House ("ACH"), or by preauthorized checks to be drawn
on the shareholder's checking account at regular monthly intervals in fixed
amounts of $100 or more per fund, or regular quarterly intervals in fixed
amounts of $250 or more per fund, to purchase shares. Accounts may be
established concurrently with the Invest-A-Check(R) Service only if accompanied
by a $100 minimum investment in conjunction with the monthly investment option
23
<PAGE>
or a $250 minimum investment in conjunction with the quarterly investment
option. (See "Terms and Conditions" on page 28.)
o AUTOMATIC DOLLAR-COST-AVERAGING SERVICE permits a shareholder of Seligman
Cash Management Fund to exchange a specified amount, at regular monthly
intervals in fixed amounts of $100 or more per fund, or regular quarterly
intervals in fixed amounts of $250 or more per fund, from shares of any class of
the Cash Management Fund into shares of the same class of any other Seligman
Mutual Fund registered in the same name. The shareholder's Cash Management Fund
account must have a value of at least $5,000 at the initiation of the service.
Exchanges will be made at the public offering price.
o DIVIDENDS FROM OTHER INVESTMENTS permits a shareholder to order dividends
payable on shares of other companies to be paid to and invested in additional
shares of the Series or another Seligman Mutual Fund. (Dividend checks must meet
or exceed the required minimum purchase amount and include the shareholder's
name, account number, the name of the fund and the class of shares in which the
investment is to be made.)
O AUTOMATIC CD TRANSFER SERVICE permits a shareholder to instruct a bank to
invest the proceeds of a maturing bank certificate of deposit ("CD") in shares
of any designated Seligman Mutual Fund. Shareholders who wish to use this
service should contact Seligman Data Corp. or a broker to obtain the necessary
documentation. Banks may charge a penalty on CD assets withdrawn prior to
maturity. Accordingly, it will not normally be advisable to liquidate a CD
before its maturity.
o AUTOMATIC CASH WITHDRAWAL SERVICE permits payments at regular Intervals
to be made to a shareholder who owns or purchases shares worth $5,000 or more
held as book credits. Holders of Class B shares may elect to use this service
immediately, although certain withdrawals may be subject to a CDSL. Please
contact Seligman Data Corp. at (800) 221-2450 for more information. Holders of
Class D shares may elect to use this service with respect to shares that have
been held for at least one year. (See "Terms and Conditions" on page 28.)
o DIRECTED DIVIDENDS allows a shareholder to pay dividends to another
person or to direct the payment of such dividends to another Seligman Mutual
Fund for purchase at net asset value. Dividends on Class A, Class B and Class D
shares may only be directed to shares of the same class of another Seligman
Mutual Fund.
o OVERNIGHT DELIVERY to service shareholder requests is available for a
$15.00 fee which may be debited from a shareholder's account, if requested.
o COPIES OF ACCOUNT STATEMENTS will be sent to each shareholder free of
charge for the current year and most recent prior year. Copies of year-end
statements for prior years back to 1985 are available for a fee of $10.00 per
year, per account, with a maximum charge of $150 per account. Statement requests
should be forwarded, along with a check, to Seligman Data Corp.
TAX-DEFERRED RETIREMENT PLANS. Shares of the Series may be purchased for
all types of tax-deferred retirement plans. SFSI makes available plans, plan
forms and custody agreements for:
--Individual Retirement Accounts (IRAs);
--Simplified Employee Pension Plans (SEPs);
--Section 401(k) Plans for corporations and their employees;
--Section 403(b)(7) Plans for employees of public school systems and
certain non-profit organizations who wish to make deferred compensation
arrangements; and
--Pension and Profit Plans for sole proprietorships, partnerships and
corporations.
These types of plans may be established only upon receipt of a written
application form. The Fund may register an IRA investment for which an account
application has not been received as an ordinary taxable account.
For more information, write Retirement Plan Services, Seligman Data Corp.,
100 Park Avenue, New York, NY 10017, or telephone toll-free (800) 445-1777 from
all continental United States. You also may receive information through an
authorized dealer.
24
<PAGE>
ADVERTISING THE SERIES' PERFORMANCE
From time to time the Series advertises its "yield," "total return" and
"average annual total return", each of which are calculated separately for Class
A, Class B and Class D shares. These figures are based on historical earnings
and are not intended to indicate future performance. The "yield" of a class of
the Series refers to the income generated by an investment in that class over a
30-day period. This income is then "annualized." That is, the amount of income
generated by the investment during that 30-day period is assumed to be generated
each 30-day period for twelve periods and is shown as a percentage of the
investment. The income earned on the investment is also assumed to be reinvested
at the end of the sixth 30-day period. The "total return" shows what an
investment in shares of a class of the Series would have earned over a specified
period of time (for example, one, five and ten year periods or since inception)
assuming the payment of the maximum sales load, if any, when the investment was
first made (or CDSL upon redemption, if applicable) and that all distributions
and dividends by that class were reinvested on the reinvestment dates during the
period. The "average annual total return" is the annual rate required for the
initial payment to grow to the amount which would be received at the end of the
specified period (one, five and ten year periods or since inception); i.e., the
average annual compound rate of return. The total return and average total
return for both Class A and Class D shares for periods prior to January 1, 1996
do not reflect the increase in the management fee payable by the Fund effective
on such date, which if reflected would reduce the performance quoted. Total
return and average annual total return may also be presented without the effect
of the initial sales load or CDSL, as applicable.
From time to time, reference may be made in advertising or promotional
material to performance information, including mutual fund rankings, prepared by
Lipper Analytical Service, Inc. ("Lipper"), an independent reporting service
which monitors the performance of mutual funds. In calculating the total return
of the Series' Class A, Class B and Class D shares, the Lipper analysis assumes
investment of all dividends and distributions paid but does not take into
account applicable sales loads. The Series may also refer in advertisements or
in other promotional material to articles, comments, listings and columns in the
financial press pertaining to the Series' performance. Examples of such
financial and other press publications include Barron's, Business Week,
CDA/Weisenberger Mutual Funds Investment Report, Christian Science Monitor,
Financial Planning, Financial Times, Financial World, Forbes, Fortune,
Individual Investor, Investment Advisor, Investors Business Daily, Kiplinger's,
Los Angeles Times, MONEY Magazine, Morningstar, Inc., Pensions and Investments,
Smart Money, The New York Times, USA Today, U.S. News and World Report, The Wall
Street Journal, Washington Post, Worth Magazine and Your Money.
ORGANIZATION AND CAPITALIZATION
The Fund is a diversified, open-end management investment company organized
under the laws of the Commonwealth of Massachusetts by a Declaration of Trust
dated July 27, 1984. The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest, $.001 par
value, in separate series. The Trustees also have the power to create additional
series of shares.
At present, shares of beneficial interest of two series are authorized,
which shares of beneficial interest constitute interest in the Series and the
Seligman U.S. Government Securities Series. Shares of beneficial interest of the
Series and the Seligman U.S. Government Securities Series are divided into three
classes. Each of the Series' and the Seligman U.S. Government Securities Series'
Class A, Class B and Class D shares of beneficial interest is equal as to
earnings, assets and voting privileges, except that each class bears its own
separate distribution and, potentially, certain other class expenses and has
exclusive voting rights with respect to any matter to which a separate vote of
any class is required by the 1940 Act or Massachusetts law. The Fund has adopted
a plan (the "Multiclass Plan") pursuant to Rule 18f-3 under the 1940 Act
permitting the issuance and sale of multiple classes of beneficial interest. In
accordance with the Declaration of Trust, the Trustees may authorize the
creation of additional classes of shares of beneficial interest with such
characteristics as are permitted by the Multiclass Plan and Rule 18f-3. The 1940
Act requires that where more than one class exists, each class must be preferred
over all other classes in respect of assets specifically allocated to such
class. Shares entitle their holders to one vote per share. Shares have
25
<PAGE>
noncumulative voting rights, do not have preemptive or subscription rights and
are transferable. It is the intention of the Trust not to hold Annual Meetings
of Shareholders. The Trustees may call Special Meetings of Shareholders for
action by shareholder vote as may be required by the 1940 Act or Declaration of
Trust. Pursuant to the 1940 Act, shareholders have to approve the adoption of
any management contract, distribution plan and any changes in fundamental
investment policies. Shareholders also have the right to call a meeting of
shareholders for the purpose of voting on the removal of one or more Trustees.
Such removal can be effected upon the action of two-thirds of the outstanding
shares of the Fund.
26
<PAGE>
APPENDIX
Moody's Investors Service, Inc.
Bonds and Notes
Baa: Bonds and notes which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds or notes lack outstanding
investment characteristics and in fact may have speculative characteristics as
well.
Ba: Bonds and notes which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and therefore not well
safeguarded during other good and bad times over the future. Uncertainty of
position characterizes bonds and notes in this class.
B: Bonds and notes which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds and notes which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds and notes which are rated Ca represent obligations which are
speculative in high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds and notes which are rated C are the lowest rated class of bonds or
notes, and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Standard & Poor's Corporation ("S&P")
Bonds
BBB: Bonds rated BBB are regarded as having a satisfactory degree of safety and
capacity to pay principal and interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds in higher
rated categories.
BB, B, CCC, CC: Bonds rated BB, B, CCC and CC are regarded on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the bond. BB indicates the lowest
degree of speculation and CC the highest degree of speculation. While such bonds
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
C: The rating C is reserved for bonds on which no interest is being paid.
D: Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of bond as a matter of policy.
27
<PAGE>
TERMS AND CONDITIONS
GENERAL ACCOUNT INFORMATION
Investments will be made in as many shares of the Series, including
fractions to the third decimal place, as can be purchased at the net asset value
plus a sales load, if applicable, at the close of business on the day payment is
received. If a check received in payment of a purchase of shares is dishonored
for any reason, Seligman Data Corp. may cancel the purchase and may also redeem
additional shares, if any, held in the shareholder's account in an amount
sufficient to reimburse the Fund for any loss it may have incurred and charge a
$10.00 return check fee. Shareholders will receive dividends from investment
income and any distributions from gain realized on investments in shares or in
cash according to the option elected. Dividend and gain options may be changed
by notifying Seligman Data Corp. These option changes must be received by
Seligman Data Corp. before the record date for the dividend or distribution to
be effective for such dividend or distribution. Stock certificates will not be
issued unless requested. Replacement stock certificates will be subject to a
surety fee.
INVEST-A-CHECK(R) SERVICE
The Invest-A-Check(R) Service is available to all shareholders. The
application is subject to acceptance by the shareholder's bank and Seligman Data
Corp. The electronic funds transfer ("ACH debit") or preauthorized check in the
amount specified will be drawn automatically on the shareholder's bank on the
fifth day (unless otherwise specified) of each month (or on the prior business
day if such day of the month falls on a weekend or holiday) in which an
investment is scheduled and invested at the public offering price at the close
of business on the same date. After the initial investment, the value of shares
held in the shareholder's account must equal not less than two regularly
scheduled investments. If an ACH debit or preauthorized check is not honored by
the shareholder's bank, or if the value of shares held falls below the required
minimum, the Invest-A-Check(R) Service may be suspended. In the event that a
check or ACH debit is returned uncollectable, Seligman Data Corp. will cancel
the purchase, redeem shares held in the shareholder's account for an amount
sufficient to reimburse the Fund for any loss it may have incurred as a result,
and charge a $10.00 return check fee. This fee may be deducted from the
shareholder's account. The Invest-A-Check(R) Service may be reinstated upon
written request indicating that the cause of interruption has been corrected.
The Invest-A-Check(R) Service may be terminated by the shareholder or Seligman
Data Corp. at any time by written notice. The shareholder agrees to hold the
Fund and its agents free from all liability which may result from acts done in
good faith and pursuant to these terms. Instructions for establishing
Invest-A-Check(R) Service are given on the Account Application. In the event the
shareholder exchanges all of the shares from one mutual fund in the Seligman
Group to another, the Invest-A-Check(R) Serivce will be terminated in the
Seligman Mutual Fund that was closed as as result of the exchange of all shares
and the shareholder must re-apply for the Invest-A-Check(R) Service in the
Seligman Mutual Fund into which the exchange was made. In the event of a partial
exchange, the Invest-A-Check(R) Service will be continued, subject to the above
conditions, in the Seligman Mutual Fund from which the exchange was made.
Accounts established in conjunction with the Invest-A-Check(R) Service must be
accompanied by a minimum initial investment of at least $100 in connection with
the monthly investment option or $250 in connection with the quarterly
investment option. If the shareholder uses the Invest-A-Check(R) Service to make
an IRA investment, the purchase will be credited as a current year contribution.
If the shareholder uses the Invest-A-Check(R) service to make an investment in a
pension or profit sharing plan, the purchase will be credited a current year
employer contribution.
AUTOMATIC CASH WITHDRAWAL SERVICE
The Automatic Cash Withdrawal Service is available to Class A shareholders,
to Class B shareholders and to Class D shareholders with respect to Class D
shares held for one year or more. A sufficient number of full and fractional
shares will be redeemed to provide the amount required for a scheduled payment.
Redemptions will be made at the asset value at the close of business on the
specific day designated by the shareholder of each month (or on the prior
business day if the day specified falls on a weekend or holiday) less, in the
case of Class B shares, any applicable CDSL. A shareholder may change the amount
of scheduled payments or may suspend payments by written notice to Seligman Data
Corp. at least ten days prior to the effective date of such a change or
suspension. The Service may be terminated by the shareholder or Seligman Data
Corp. at any time by written notice. It will be terminated upon proper
notification of the death or legal incapacity of the shareholder. This Service
is considered terminated in the event a withdrawal of shares, other than to make
scheduled withdrawal payments, reduces the value of shares remaining on deposit
to less than $5,000. Continued payments in excess of dividend income invested
will reduce and ultimately exhaust capital. Withdrawals, concurrent with
purchases of shares of this or any other investment company, will be
disadvantageous because of the payment of duplicative sales loads, if
applicable. For this reason, additional purchases of Series shares are
discouraged when the Withdrawal Service is in effect.
LETTER OF INTENT -- CLASS A SHARES ONLY
Seligman Financial Services, Inc. will hold in escrow shares equal to 5% of
the minimum purchase amount specified. Dividends and distributions on the
escrowed shares will be paid to the shareholder or credited to their account.
Upon completion of the specified minimum purchase within the thirteen-month
period, all shares held in escrow will be deposited to the shareholder's account
or delivered to the shareholder. A shareholder may include toward completion of
a Letter of Intent the total asset value of shares of the Seligman Mutual Funds
on which a front-end sales load was paid as of the date of the Letter. If the
total amount invested within the thirteen-month period does not equal or exceed
the specified minimum purchase, the shareholder will be requested to pay the
difference between the amount of the sales load paid and the amount of the sales
load applicable to the total purchase made. If, within 20 days following the
mailing of a written request, the shareholder has not paid this additional sales
load to Seligman Financial Services, Inc., sufficient escrowed shares will be
redeemed for payment of the additional sales load. Shares remaining in escrow
after this payment will be released to the shareholder's account. The intended
purchase amount may be increased at any time during the thirteen-month period by
filing a revised Agreement for the same period, provided that the Dealer
furnishes evidence that an amount representing the reduction in sales load under
the new Agreement, which becomes applicable on purchases already made under the
original Agreement, will be refunded to the Fund and that the required
additional escrowed shares will be purchased by the shareholder.
Shares of Seligman Cash Management Fund, Inc. which have been acquired by an
exchange of shares of another Seligman Mutual Fund on which there is a front-end
sales load may be taken into account in completing a Letter of Intent, or for
Right of Accumulation. However, shares of the Seligman Cash Management Fund
which have been purchased directly may not be used for purposes of determining
reduced sales loads on additional purchases of the other mutual funds in the
Seligman Group.
CHECK REDEMPTION SERVICE
The check Redemption Service is available to Class A shareholders, to Class
B shareholders and to Class D shareholders with respect to Class D shares held
for one year or more.
If shares are held in joint names, all shareholders must sign the Check
Redemption section of the Account Application. All checks will require all
signatures unless a lesser number is indicated in the Check Redemption section.
Accounts in the names of corporations, trusts, partnerships, etc. must list all
authorized signatories.
In all cases, each signature guarantees the genuineness of the other
signatures. Checks may not be drawn for less than $500.
The shareholder authorizes Boston Safe Deposit and Trust Co. to honor
checks drawn by the shareholder on the account of Seligman High-Yield Bond
Series and to effect a redemption of sufficient shares in the shareholder's
account to cover payment of the check and, in the case of Class B shares, any
applicable CDSL. The shareholder understands that shares in one series of the
Fund cannot be redeemed to cover a check written on another series.
Boston Safe Deposit and Trust Co. shall be liable only for its own
negligence. The Fund will not be liable for any loss, expense or cost arising
out of check redemptions. The Fund reserves the right to change, modify or
terminate this service at any time upon notification mailed to the address of
record of the shareholder(s).
Seligman Data Corp. will charge a $10.00 processing fee for any check
redemption draft returned marked "unpaid." This charge may be DEBITED from the
account the check was drawn against. NO REDEMPTION PROCEEDS WILL BE REMITTED TO
A SHAREHOLDER WITH RESPECT TO SHARES PURCHASED BY CHECK (UNLESS CERTIFIED) UNTIL
SELIGMAN DATA CORP. RECEIVES NOTICE THAT THE CHECK HAS CLEARED WHICH MAY BE UP
TO 15 DAYS FROM THE CREDIT OF THE SHARES TO A SHAREHOLDER'S ACCOUNT.
4/96
28
<PAGE>
This page intentionally left blank.
<PAGE>
This page intentionally left blank.
<PAGE>
This page intentionally left blank.
<PAGE>
SELIGMAN
HIGH-YIELD BOND
SERIES
100 Park Avenue
New York, New York 10017
Table of Contents
Page
----
Summary Of Series Expenses .................. 2
Financial Highlights ........................ 3
Alternative Distribution System ............. 4
Investment Objective, Policies And Risks .... 5
Management Services ......................... 9
Purchase Of Shares .......................... 10
Telephone Transactions ...................... 15
Redemption Of Shares ........................ 16
Administration, Shareholder Services
- --And Distribution Plan ..................... 18
Exchange Privilege .......................... 19
Further Information About Transactions
- --In The Series ............................. 21
Dividends And Distributions ................. 21
Federal Income Taxes ........................ 22
Shareholder Information ..................... 23
Advertising The Series| Performance ......... 25
Organization And Capitalization ............. 25
TXHY1 4/96
- --------------------------------------------------------------------------------
PROSPECTUS
--------------------------
SELIGMAN
HIGH-YIELD BOND
SERIES
--------------------------
APRIL 22, 1996
[LOGO}
- --------------------------------------------------------------------------------
<PAGE>
SELIGMAN U.S. GOVERNMENT SECURITIES SERIES
a series of
Seligman High Income Fund Series
100 Park Avenue o New York, NY 10017 o 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
April 22, 1996
Seligman High Income Fund Series (the "Fund") is a diversified, open-end
management investment company that offers two different series which seek to
earn high current income by investing in debt securities but have differing
investment objectives and investment policies. Investment advisory and
management services are provided to the Fund by J. & W. Seligman & Co.
Incorporated (the "Manager"); the Fund's distributor is Seligman Financial
Services, Inc., an affiliate of the Manager.
The investment objective of the Seligman U.S. Government Securities Series
(the "Series") is to produce high current income. The Series seeks to achieve
its objective by investing primarily in debt obligations issued or guaranteed by
the United States Government, its agencies or instrumentalities and by writing
covered call options against such securities. In order to reduce risks that may
be associated with changes in interest rates, the Series may also purchase put
options on such securities and may engage in transactions involving interest
rate futures contracts and options on such contracts. While certain debt
obligations in the Series are issued or guaranteed by the United States
Government or by United States Government-related instrumentalities, such
investments are still subject to the risk of market value fluctuations. For a
description of the Series' investment objective and policies, including the risk
factors associated with an investment in the Series, see "Investment Objective,
Policies And Risks." There can be no assurance that the Series' investment
objective will be achieved.
The Series offers two classes of shares. Class A shares are sold subject to
an initial sales load of up to 4.75% and an annual service fee currently charged
at a rate of up to .25% of the average daily net asset value of the Class A
shares. Class D shares are sold without an initial sales load but are subject to
a contingent deferred sales load ("CDSL") of 1% imposed on certain redemptions
within one year of purchase, an annual distribution fee of up to .75% and an
annual service fee of up to .25% of the average daily net asset value of the
Class D shares. See "Alternative Distribution System." Shares of the Series may
be purchased through any authorized investment dealer.
This Prospectus sets forth concisely the information a prospective investor
should know about the Series before investing. Please read it carefully before
you invest and keep it for future reference. Additional information about the
Series, including a Statement of Additional Information, has been filed with the
Securities and Exchange Commission. The Statement of Additional Information is
available upon request and without charge by calling or writing the Fund at the
telephone numbers or the address set forth above. The Statement of Additional
Information is dated the same date as this Prospectus and is incorporated herein
by reference in its entirety.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------
TABLE OF CONTENTS
PAGE
----
Summary Of Series Expenses .......................... 2
Financial Highlights ................................ 3
Alternative Distribution System ..................... 4
Investment Objective, Policies And Risks ............ 5
Management Services ................................. 7
Purchase Of Shares .................................. 8
Telephone Transactions .............................. 12
Redemption Of Shares ................................ 13
Administration, Shareholder Services And Distribution
Plan .............................................. 16
Exchange Privilege .................................. 16
Further Information About Transactions In The Series. 18
Dividends And Distributions ......................... 18
Federal Income Taxes ................................ 19
Shareholder Information ............................. 20
Advertising The Series' Performance ................. 22
Organization And Capitalization ..................... 22
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF SERIES EXPENSES
CLASS A CLASS D
SHARES SHARES
-------------- ---------------
(Initial Sales (Deferred Sales
Load Load
Alternative) Alternative)
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price) ............................................... 4.75% None
Sales Load on Reinvested Dividends None None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, whichever is lower) .... None 1% in 1st year
None thereafter
Redemption Fees .................................................. None None
Exchange Fees .................................................... None None
ANNUAL FUND OPERATING EXPENSES FOR 1995 CLASS A CLASS D
------- -------
(as a percentage of average net assets)
Management Fees .................................................. .50% .50%
12b-1 Fees ....................................................... .21% 1.00%*
Other Expenses ................................................... .45% .45%
----- -----
Total Fund Operating Expenses .................................... 1.16% 1.95%
===== =====
</TABLE>
The purpose of this table is to assist investors in understanding the
various costs and expenses which shareholders of the Series bear directly or
indirectly. The sales load on Class A shares is a one-time charge paid at the
time of purchase of shares. Reductions in sales loads are available in certain
circumstances. The contingent deferred sales load on Class D shares is a
one-time charge paid only if shares are redeemed within one year of purchase.
The "Other Expenses" disclosed for Class A and Class D shares have been restated
to reflect the expense allocation methodology currently being used by the
Series. For more information concerning reduction in sales loads and for a more
complete description of the various costs and expenses, see "Purchase Of Shares"
and "Redemption Of Shares" and "Management Services" herein. The Series'
Administration, Shareholder Services and Distribution Plan to which the caption
"12b-1 Fees" relates, is discussed under "Administration, Shareholder Services
and Distribution Plan" herein.
<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period..................Class A $59 $83 $108 $182
Class D $30+ $61 $105 $227
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN AND THE 5%
ANNUAL RETURN USED IN THIS EXAMPLE IS A HYPOTHETICAL RATE.
* Includes an annual distribution fee of .75% and an annual service fee of .25%.
Pursuant to the Rules of the National Association of Securities Dealers, Inc.
the aggregate deferred sales loads and annual distribution fees on Class D
shares of the Fund may not exceed 6.25% of total gross sales, subject to
certain exclusions. The 6.25% limitation is imposed on the Fund rather than on
a per shareholder basis. Therefore, a long-term Class D shareholder of the
Fund may pay more in total sales loads (including distribution fees) than the
economic equivalent of 6.25% of such shareholder's investment in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be $20.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The Series' financial highlights for the periods presented below have been
audited by Deloitte & Touche LLP, independent auditors. This information, which
is derived from the financial and accounting records of the Series should be
read in conjunction with the financial statements and notes contained in the
Fund's 1995 Annual Report, which is incorporated by reference in the Fund's
Statement of Additional Information, copies of which may be obtained free of
charge from the Fund at the telephone numbers or address provided on the cover
page of this Prospectus.
The per share operating performance data is designed to allow investors to
trace the operating performance, on a per share basis, from the Series'
beginning net asset value to its ending net asset value so that they may
understand what effect the individual items have on their investment, assuming
it was held throughout the period. Generally, the per share amounts are derived
by converting the actual dollar amounts incurred for each item, as disclosed in
the financial statements, to their equivalent per share amount. The total return
based on net asset value measures the Series' performance assuming investors
purchased shares of the Series at the net asset value as of the beginning of the
period, invested 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 loads investors
may incur in purchasing shares of the Series. Total returns for periods of less
than one year are not annualized.
<TABLE>
<CAPTION>
CLASS A CLASS D
--------------------------------------------------------------------- ----------------------
YEAR ENDED
YEAR ENDED DECEMBER 31 DECEMBER 31, 9/21/93*
--------------------------------------------------------------------- ------------ TO
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1995 1994 12/31/93
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <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 $ 7.06 $ 7.12 $ 8.15 $ 8.12 $ 6.48 $ 7.20 $ 7.33
----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment income**. .46 .44 .53 .51 .51 .59 .65 .60 .59 .65 .40 .37 .09
Net realized and unrealized
investment gain (loss) .68 (.71) (.01) (.11) .41 (.15) (.02) (.06) (.84) .56 .68 (.72) (.13)
----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Increase (decrease) from
investment operations. 1.14 (.27) .52 .40 .92 .44 .63 .54 (.25) 1.21 1.08 (.35) (.04)
Dividends paid or
declared. ............ (.46) (.44) (.53) (.51) (.51) (.59) (.65) (.60) (.59) (.65) (.40) (.37) (.09)
Distributions from net
gain realized ........ -- -- -- -- -- -- -- -- (.13) (.53) -- -- --
Return of capital....... -- -- -- -- -- -- -- -- (.06) -- -- --
----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net increase (decrease)
in net asset value.... .68 (.71) (.01) (.11) .41 (.15) (.02) (.06) (1.03) .03 .68 (.72) (.13)
----- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period ...............$7.15 $ 6.47 $ 7.18 $ 7.19 $ 7.30 $ 6.89 $ 7.04 $ 7.06 $ 7.12 $ 8.15 $ 7.16 $ 6.48 $ 7.20
===== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN BASED ON
NET ASSET VALUE ..... 18.15%. (3.88)% 7.46% 5.78% 14.05% 6.37% 9.25% 7.84% (2.84)% 16.08% 17.10% (5.05)% (.65)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net
assets** 1.14 %1.10 %1.11 %1.05 %1.10 %1.06 %1.09 %1.09 %1.13 %1.10 %2.01 %2.22 %2.09%+
Net investment income to
average net assets**. 6.71% 6.49% 7.22% 7.17% 7.39% 8.66% 9.16% 8.33% 7.82% 7.19% 5.84% 5.40% 5.28%+
Portfolio turnover.....213.06% 445.18% 170.35% 126.17% 95.46% 306.05% 226.25% 263.15% 282.99% 245.86% 213.06% 445.18% 170.35%++
Net assets, end of period
(000's omitted).....$55,061 $54,714 $69,805 $55,732 $64,440 $71,735 $83,850 $106,720 $123,556 $154,919 $8,181 $6,062 $2,317
</TABLE>
- --------------
* Commencement of offering of Class D shares.
**Had the Manager, at its discretion, not waived portions of its fees and not
reimbursed certain expenses, the net investment income per share would have
been $.65 and $.58 for the Series for the years ended December 31, 1986 and
1987, respectively. For the same years, the ratios of expenses to average net
assets for the Series would have been 1.14%, and 1.15%, respectively, and the
ratios of net investment income to average net assets for the Series would
have been 7.16% and 7.79%, respectively.
+ Annualized.
++For the year ended December 31, 1993.
3
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEM
The Series offers two classes of shares. Class A shares are sold to
investors who have concluded that they would prefer to pay an initial sales load
and have the benefit of lower continuing fees. Class D shares are sold to
investors choosing to pay no initial sales load, a higher distribution fee and,
with respect to redemptions within one year of purchase, a CDSL. The Alternative
Distribution System allows investors to choose the method of purchasing shares
that is most beneficial in light of the amount of the purchase, the length of
time the shares are expected to be held and other relevant circumstances.
Investors should determine whether under their particular circumstances it is
more advantageous to incur an initial sales load and be subject to lower ongoing
fees, as discussed below, or to have the entire initial purchase price invested
in the Series with the investment thereafter being subject to higher ongoing
fees and, for a one-year period, a CDSL.
Investors who qualify for reduced sales loads, as described under "Purchase
Of Shares" below, might choose to purchase Class A shares because Class A shares
would be subject to lower ongoing fees. The amount invested in the Series,
however, is reduced by the initial sales load deducted at the time of purchase.
Investors who do not qualify for reduced initial sales loads but expect to
maintain their investment for an extended period of time might also choose to
purchase Class A shares because over time the accumulated continuing
distribution fee of Class D shares may exceed the initial sales load and lower
distribution fee of Class A shares. This consideration must be weighed against
the fact that the amount invested in the Series will be reduced by the initial
sales load on Class A shares deducted at the time of purchase. Furthermore, the
distribution higher fee on Class D shares will be offset to the extent any
return is realized on the additional funds initially invested therein that would
have been equal to the amount of the initial sales load on Class A shares.
Alternatively, some investors might choose to have all of their funds
invested initially in Class D shares, although remaining subject to a higher
continuing distribution fee and, for a one-year period, a CDSL as described
below. For example, an investor who does not qualify for reduced sales loads
would have to hold Class A shares for more than 6.33 years for the Class D
distribution fee to exceed the initial sales load plus the distribution fee on
Class A shares. This example does not take into account the time value of money,
which further reduces the impact of the Class D shares' 1% distribution fee,
other expenses charged to each class, fluctuations in net asset value or the
effect of the return on the investment over this period of time.
Investor should understand that the purpose and function of the initial
sales load with respect to Class A shares is the same as those of the deferred
sales load and higher distribution fee with respect to Class D shares in that
the sales loads and distribution fees applicable to each class provide for the
financing of the distribution of the shares of the Series.
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, potentially, certain
other class expenses and has exclusive voting rights with respect to any matter
to which a separate vote of any class is required by the Investment Company Act
of 1940, as amended (the "1940 Act"), or Massachusetts law. The net income
attributable to each class and dividends payable on the shares of each class
will be reduced by the amount of distribution and other expenses of each class.
Class D shares bear higher distribution fees, which will cause the Class D
shares to pay lower dividends than the Class A shares. The two classes also have
separate exchange privileges.
The Trustees of the Fund believe that no conflict of interest currently
exists between the Class A and Class D shares of the Series. On an ongoing
basis, the Trustees, in the exercise of their fiduciary duties under the 1940
Act and Massachusetts law, will seek to ensure that no such conflict arises. For
this purpose, the Trustees will monitor the Series for the existence of any
material conflict among the classes and will take such action as is reasonably
necessary to eliminate any such conflicts that may develop.
4
<PAGE>
DIFFERENCES BETWEEN CLASSES. The primary differences between Class A and
Class D shares are their sales load structures and ongoing expenses as set forth
below. Each class has advantages and disadvantages for different investors, and
investors should choose the class that best suits their circumstances and their
objectives.
ANNUAL 12B-1 FEES
INITIAL (AS A % OF AVERAGE
SALES LOAD DAILY NET ASSETS) OTHER INFORMATION
---------- ------------------ -----------------
CLASS A Maximum initial Service fee of Initial sales load
sales load of 4.75% .25%. waived or reduced
of the public for certain
offering price. purchases.
CLASS D None Service fee of CDSL of 1% on
.25%; Distribution redemptions
fee of .75%. within one year of
purchase.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund is a diversified open-end management investment company organized
under the laws of the Commonwealth of Massachusetts by a Declaration of Trust
dated July 27, 1984. The Fund offers one other separate investment series: the
Seligman High-Yield Bond Series. The High-Yield Bond Series' investment
objective and policies and other important information with respect to its
operations are set forth in a separate Prospectus.
The objective of the Series is to produce high current income. The Series
seeks to achieve its objective by investing at least 80% of the value of its
total assets in direct obligations of the U.S. Treasury, such as Treasury Bills,
Treasury Notes and Treasury Bonds, and in debt securities issued or guaranteed
by the U.S. Government, 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, except for temporary defensive
purposes. This investment policy is a fundamental policy and may not be changed
by the Trustees of the Fund without the vote of a majority of the Series'
outstanding voting securities (as defined below). There can be no assurance that
the Series' investment objective will be obtained.
The Series may invest up to 20% of the value of its total assets in direct
obligations of the U.S. Treasury and in securities issued or guaranteed by the
United States Government, its agencies or instrumentalities which have
maturities of less than one year at the date of purchase by the Series.
Obligations issued by U.S. Government agencies include obligations issued by
such entities as Federal Land Banks, Federal Home Loan Banks and the Government
National Mortgage Association ("GNMA"). "GNMA Certificates" or "GNMAs,"
represent interests in pools of residential mortgages. The timely payment of
principal and interest is guaranteed by GNMA and backed by the full faith and
credit of the U.S. Government. GNMAs differ from other forms of debt securities
which normally provide for periodic payment of interest in fixed amounts with
principal payments at maturity or specified call dates. Instead, GNMAs provide a
"pass through" of monthly payments of interest and principal made by the
borrowers on their residential mortgage loans, net of certain expenses. A pool's
stated maturity may be shortened by prepayments of principal on the underlying
mortgage obligations. Factors affecting mortgage prepayments include, among
other things, the level of interest rates, general economic and social
conditions and the location and age of the mortgage. Such prepayments may
shorten the effective maturity of GNMAs. High interest rate mortgages are more
likely to be prepaid than lower rate mortgages; consequently, the effective
maturities of GNMAs with pass through payments of higher rate mortgages are
likely to be shorter than those of obligations with pass through payments of
lower rate mortgages.
LENDING OF PORTFOLIO SECURITIES. The Series may lend portfolio securities
to brokers or dealers, banks, or other institutional borrowers of securities.
The borrower must maintain with the Series cash or equivalent collateral such as
Treasury Bills, equal to at least 100% of the market value of the securities
loaned. During the time portfolio securities are on loan, the borrower pays the
Series any income accruing on the loaned securities and the Series may invest
5
<PAGE>
the cash collateral and earn additional income or may receive an agreed upon
amount of interest income from the borrower. The lending of portfolio securities
may involve certain risks such as: 1) an increase in the market value of the
borrowed securities without a corresponding increase in the value of the posted
collateral might result in an imbalance in value between the borrowed securities
and the collateral; 2) in the event the borrower sought protection under the
Federal bankruptcy laws, repayment of the borrowed securities to the Fund might
be delayed; and 3) the borrower might refuse to repay the borrowed securities.
The Series may lend portfolio securities to the extent that the Manager deems
appropriate in seeking to achieve the Series' investment objective and with only
a prudent degree of risk.
REPURCHASE AGREEMENTS. The Series 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 could involve certain risks in the event of
bankruptcy or other default by the seller, including possible delays and
expenses in liquidating the securities underlying the agreement, decline in
value of the underlying securities and loss of interest. Repurchase agreements
usually are for short periods, such as one week or less, but may be for longer
periods. Although the Series may enter into repurchase agreements with respect
to any money market instruments qualified for purchase, such agreements
generally involve U.S. Government securities and will only involve securities
issued or guaranteed by the U.S. Government. As a matter of fundamental policy,
the 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. The 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 the 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 purchase settlement
date if it is deemed advisable.
Securities held by the Series and securities purchased on a when-issued
basis are subject to changes in market value based upon investors' perceptions
of the creditworthiness of the issuer and upon changes, real or anticipated, in
the level of interest rates. If the Series remains substantially fully invested
at the same time that it has purchased securities on a when-issued basis, the
market value of the Series' assets may fluctuate more than otherwise would be
the case. 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.
An account for the Series consisting of cash or liquid high-grade debt
securities equal to the amount of the when-issued commitments will be
established with the Series' 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, the 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.
GENERAL. Except as noted above or in the Statement of Additional
Information, the foregoing investment policies are not fundamental and the
6
<PAGE>
Trustees of the Fund may change such policies without the vote of a majority of
the outstanding voting securities of the Series. As a matter of policy, the
Trustees will not change the Series' investment objective of producing high
current income without such a vote. Under the 1940 Act a "vote of a majority of
the outstanding voting securities" of the Series means the affirmative vote of
the lesser of (1) more than 50% of the outstanding shares of the Series or (2)
67% or more of the shares of the Series present at a shareholders' meeting if
more than 50% of the outstanding shares of the Series are represented at the
meeting in person or by proxy.
MANAGEMENT SERVICES
The Trustees provide broad supervision over the affairs of the Series and
the Fund as a whole. Pursuant to a Management Agreement approved by the Trustees
and the shareholders of the Series, the Manager manages the investments of the
Series and administers the business and other affairs of the Series. The address
of the Manager is 100 Park Avenue, New York, NY 10017.
The Manager also serves as manager of sixteen other investment companies
which, together with the Fund, comprise the "Seligman Group." These companies
are: Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc., Seligman
Common Stock Fund, Inc., Seligman Communications and Information Fund, Inc.,
Seligman Frontier Fund, Inc., Seligman Growth Fund, Inc., Seligman Henderson
Global Fund Series, Inc., Seligman Income Fund, Inc., Seligman New Jersey
Tax-Exempt Fund, Inc., Seligman Pennsylvania Tax-Exempt Fund Series, Seligman
Portfolios, Inc., Seligman Quality Municipal Fund, Inc., Seligman Select
Municipal Fund, Inc., Seligman Tax-Exempt Fund Series, Inc., Seligman Tax-Exempt
Series Trust and Tri-Continental Corporation. The aggregate assets of the
Seligman Group were approximately $11.9 billion at February 29, 1996. The
Manager also provides investment management or advice to institutional accounts
having an aggregate value at February 29, 1996 of approximately $3.9 billion.
Mr. William C. Morris is Chairman and President of the Manager and Chairman
of the Board and Chief Executive Officer of the Fund. Mr. Morris owns a majority
of the outstanding voting securities of the Manager.
The Manager provides senior management for Seligman Data Corp., a
wholly-owned subsidiary of certain investment companies in the Seligman Group,
which performs, at cost, certain recordkeeping functions for the Series,
maintains the records of shareholder accounts and furnishes dividend paying,
redemption and related services.
The Manager is entitled to receive a management fee, calculated daily and
payable monthly, equal to .50% of the daily average net assets of the Series on
an annual basis. The Fund pays all of its expenses other than those assumed by
the Manager. The Fund's expenses are allocated among the series of the Fund in a
manner determined by the Trustees to be fair and equitable. Total expenses of
the Series' Class A and Class D shares, respectively, for the year ended
December 31, 1995 amounted to 1.14% and 2.01%, respectively, of the average
daily net assets of each class.
PORTFOLIO MANAGER. Mr. Leonard J. Lovito, Vice President of the Manager,
has been Vice President and Portfolio Manager of the Series since January 1994.
Mr. Lovito also serves as Vice President and Portfolio Manager of Seligman Cash
Management Fund, Inc. and Vice President of Seligman Portfolio's Inc. ("SPI")
and Portfolio Manager of SPI's Seligman Cash Management Portfolio and Seligman
Fixed Income Securities Port-folio. Mr. Lovito joined the Manager in 1984 as a
fixed income trader and has more than 11 years of fixed income trading and
portfolio management experience.
The Manager's discussion of the Series' performance as well as a line graph
illustrating comparative performance information between the Series and the
Lehman Brothers Government/Mortgage Index, the Lipper General U.S. Government
Funds Index and the Lehman Brothers Government Bond Index is included in the
Fund's 1995 Annual Report to Shareholders. Copies of the 1995 Annual Report may
be obtained, without charge, by calling or writing the Fund at the telephone
numbers or address listed on the cover page of this Prospectus.
7
<PAGE>
PORTFOLIO TRANSACTIONS. Fixed-income securities are generally traded on the
over-the-counter market on a "net" basis without a stated commission, through
dealers acting for their own account and not as brokers. The Series will engage
in transactions with these dealers or deal directly with the issuer. Prices paid
to dealers will generally include a "spread," i.e., the difference between the
prices at which a dealer is willing to purchase or to sell the security at that
time. The Management Agreement recognizes that in the purchase and sale of
portfolio securities, the Manager will seek the most favorable price and
execution and consistent with that policy, may give consideration to the
research, statistical and other services furnished by dealers to the Manger for
its use in connection with its services to the Fund as well as to other clients.
Consistent with the Rules of the National Association of Securities
Dealers, Inc. and subject to seeking the most favorable price and execution
available and such other policies as the Trustees of the Fund may determine, the
Manager may consider sales of shares of the Series and, if permitted under
applicable laws, may consider sales of shares of the other mutual funds in the
Seligman Group as a factor in the selection of brokers or dealers to execute
portfolio transactions for the Series.
PORTFOLIO TURNOVER. A change in securities held by the Series is known as
"portfolio turnover" which may result in the payment by the Series of dealer
spreads or underwriting commissions and other transactions costs on the sale of
securities as well as on the reinvestment of the proceeds in other securities.
Although it is the policy of the Series to hold securities for investment,
changes will be made from time to time when the Manager believes such changes
will strengthen the Series' portfolio. The portfolio turnover rate will vary
from year to year as well as within a year and may exceed 100% and has done so
in prior years.
PURCHASE OF SHARES
Seligman Financial Services, Inc. ("SFSI"), an affiliate of the Manager,
acts as general distributor of the Series' shares. Its address is 100 Park
Avenue, New York, NY 10017.
The Fund issues two classes of shares: Class A shares are sold to investors
choosing the initial sales load alternative; and Class D shares are sold to
investors choosing no initial sales load, a higher distribution fee and a CDSL
on redemptions within one year of purchase. See "Alternative Distribution
System" above.
Shares of the Series may be purchased through any authorized investment
dealer. All orders will be executed at the net asset value per share next
computed after receipt of the purchase order plus, in the case of Class A
shares, a sales load which, except for shares purchased under one of the reduced
sales load plans, will vary with the size of the purchase as shown in the
schedule under "Class A Shares -- Initial Sales Load" below.
THE MINIMUM AMOUNT FOR INITIAL INVESTMENT IN THE SERIES IS $1,000;
SUBSEQUENT INVESTMENTS MUST BE IN THE MINIMUM AMOUNT OF $100 (EXCEPT FOR
INVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS). THE FUND RESERVES THE
RIGHT TO RETURN INVESTMENTS WHICH DO NOT MEET THESE MINIMUMS. EXCEPTIONS TO
THESE MINIMUMS ARE AVAILABLE FOR ACCOUNTS BEING ESTABLISHED CONCURRENTLY WITH
THE INVEST-A-CHECK(R) SERVICE OR THE SELIGMAN TIME HORIZON MATRIX(SM).
No purchase order may be placed for Class D shares for an amount of
$4,000,000 or more.
Orders received by an authorized dealer before the close of business on the
New York Stock Exchange ("NYSE") (normally, 4:00 p.m. Eastern time) and accepted
by SFSI before the close of business (5:00 p.m. Eastern time) on the same day
will be executed at the Series' net asset value determined as of the close of
the NYSE on that day plus, in the case of Class A shares, the applicable sales
load. Orders accepted by dealers after the close of the NYSE, or received by
SFSI after the close of business, will be executed at the Series' net asset
value as next determined plus, in the case of Class A shares, the applicable
sales load. The authorized dealer through which a shareholder purchases shares
is responsible for forwarding the order to SFSI promptly.
Payment for dealer purchases may be made by check or by wire. To wire
payment, dealer orders must first be placed through SFSI's order desk and
assigned a purchase confirmation number. Funds in payment of the purchase may
8
<PAGE>
then be wired to Mellon Bank, N.A., ABA #043000261, A/C Seligman U.S. Government
Securities Series (A or D), A/C #107-1011. WIRE TRANSFERS MUST INCLUDE THE
PURCHASE CONFIRMATION NUMBER AND CLIENT ACCOUNT REGISTRATION AND ACCOUNT NUMBER.
Persons other than dealers who wish to wire payment should contact Seligman Data
Corp. for specific wire instructions. Although the Fund makes no charge for this
service, the transmitting bank may impose a wire service fee.
Current shareholders may purchase additional shares of the Series through
any authorized dealer or by sending a check payable to the "Seligman Group of
Funds" directly to P.O. BOX 3936, NEW YORK, NY 10008-3936. Checks for investment
must be in U.S. dollars drawn on a domestic bank. The check should be
accompanied by an investment slip (provided on the bottom of shareholder account
statements) and include the shareholder's name, address, account number, name of
Series and class of shares (A or D). If a shareholder does not provide the
required information, Seligman Data Corp. will seek further clarification and
may be forced to return the check to the shareholder. Orders sent directly to
Seligman Data Corp. will be executed at the Series' net asset value next
determined after the order is accepted plus, in the case of Class A shares, the
applicable sales load.
Seligman Data Corp. will charge a $10.00 service fee for checks returned to
it as uncollectable. This charge may be deducted from the shareholder's account.
For the protection of the Fund and its shareholders, no redemption proceeds will
be remitted to a shareholder with respect to shares purchased by check (unless
certified) until Seligman Data Corp. receives notice that the check has cleared,
which may be up to 15 days from the credit of the shares to the shareholder's
account.
VALUATION. The net asset value of the Series' shares is determined each
day, Monday through Friday, as of the close of trading on the NYSE (normally,
4:00 p.m. Eastern time) on each day that the NYSE is open for business. Net
asset value is calculated separately for each class. Securities are valued at
market value or, in the absence thereof, at fair value as determined in
accordance with procedures approved by the Fund's Trustees. Short-term holdings
maturing in 60 days or less are valued at amortized cost if their original
maturity was 60 days or less and securities purchased with maturities in excess
of 60 days which currently have maturities of 60 days or less are valued by
amortizing their fair market value on the 61st day prior to maturity.
CLASS A SHARES--INITIAL SALES LOAD. Class A shares are subject to an
initial sales load which varies with the size of the purchase as shown in the
following schedule, and an annual service fee of up to .25% of the average daily
net asset value of Class A shares. See "Administration, Shareholder Services and
Distribution Plan" below.
- --------------------------------------------------------------------------------
CLASS A SHARES--SALES LOAD SCHEDULE
SALES LOAD AS A REGULAR
PERCENTAGE OF DEALER
------------------- DISCOUNT
NET AMOUNT AS A
INVESTED %OF
OFFERING (NET ASSET OFFERING
AMOUNT OF PURCHASE PRICE VALUE) PRICE
----------------------- -------- --------- --------
Less than -$ 50,000 4.75% 4.99% 4.25%
$ 50,000- 99,999 4.00 4.17 3.50
100,000- 249,999 3.50 3.63 3.00
250,000- 499,999 2.50 2.56 2.25
500,000- 999,999 2.00 2.04 1.75
1,000,000- 3,999,999 1.00 1.01 .90
4,000,000- or more* 0 0 0
* Dealers will receive a fee of .15% on sales of $4,000,000 or more.
- --------------------------------------------------------------------------------
SFSI shall pay broker/dealers, from its own resources, an additional fee in
respect of certain investments in Class A shares of the Seligman Mutual Funds by
an "eligible employee benefit plan" (as defined below under "Special Programs")
which are attributable to the particular broker/dealer. The shares eligible for
the fee are those on which an initial front-end sales load was not paid because
either (i) the participating eligible employee benefit plan has at least $1
million invested in the Seligman Mutual Funds or (ii) the participating employer
has at least 50 eligible employees to whom such plan is made available. The fee,
9
<PAGE>
which is paid monthly, is a percentage of the average daily net asset value of
eligible shares based on the length of time the shares have been invested in a
Seligman Mutual Fund, as follows: for shares held up to 1 year, .50% per annum;
for shares held more than 1 year up to 2 years, .25% per annum; for shares held
from 2 years up to 5 years, .10% per annum; and nothing thereafter.
REDUCED SALES LOADS. Reductions in sales loads apply to purchases of Class
A shares by a "single person," including an individual, members of a family unit
comprising husband, wife, and minor children purchasing securities for their own
account, or a trustee or other fiduciary purchasing for a single fiduciary
account or single trust. Purchases made by a trustee or other fiduciary for a
fiduciary account may not be aggregated with purchases made on behalf of any
other fiduciary or individual account.
o VOLUME DISCOUNTS are provided if the total amount being invested in Class
A shares of the Series alone, or in any combination of shares of the Seligman
Mutual Funds that are sold with a front-end sales load reaches levels indicated
in the above sales load schedule.
o THE RIGHT OF ACCUMULATION allows an investor to combine the amount being
invested in shares of the other Seligman Mutual Funds 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 that were acquired by the
investor through an exchange of shares of another Seligman Mutual Fund on which
there was a front-end sales load to determine reduced sales loads in accordance
with the sales load schedule. An investor or a dealer purchasing shares on
behalf of any investor must indicate that the investor has existing accounts
when making investments or opening new accounts.
o A LETTER OF INTENT allows an investor to purchase Class A shares of the
Series over a 13-month period at reduced sales loads, based on the total amount
of shares the investor intends to purchase plus the total net asset value of
shares of the other 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 that were acquired through an exchange of shares of another
Seligman Mutual Fund on which there was a front-end sales load. An investor or a
dealer purchasing Class A shares on behalf of any investor must indicate that
the investor has existing accounts when making investments or opening new
accounts. For more information concerning terms of Letters of Intent, see "Terms
and Conditions" on page 24.
SPECIAL PROGRAMS. The Series may sell Class A shares at net asset value to
present and retired directors, trustees, officers, employees and their spouses
(and family members of the foregoing) of the Fund, the other investment
companies in the Seligman Group, the Manager and other companies affiliated with
the Manager. Family members are defined to include lineal descendants and lineal
ancestors, siblings (and their spouses and children) and any company or
organization controlled by any of the foregoing. Such sales also may be made to
employee benefit and thrift plans for such persons and to any investment
advisory, custodial, trust or other fiduciary account managed or advised by the
Manager or any affiliate.
Class A shares also 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 any registered unit investment trust which is the
issuer of periodic payment plan certificates, the net proceeds of which are
invested in Series shares; 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 objectives and policies similar to the Series
who purchase shares with redemption proceeds of such funds; to financial
institution trust departments; to registered investment advisers exercising
discretionary investment authority with respect to the purchase of Series
10
<PAGE>
shares; to accounts of financial institutions or broker/dealers that charge
account management fees, provided the Manager or one of its affiliates has
entered into an agreement with respect to such accounts; pursuant to sponsored
arrangements with organizations which make recommendations to or permit group
solicitations of, its employees, members or participants in connection with the
purchase of shares of the Series; and to "eligible employee benefit plans" (i)
which have at least $1 million invested in the Seligman Group of Mutual Funds or
(ii) of employers who have at least 50 eligible employees to whom such plan is
made available and, regardless of the number of employees, if such plan is
established and maintained by any dealer that has a sales agreement with SFSI.
"Eligible employee benefit plan" means any plan or arrangement, whether or not
tax qualified, which provides for the purchase of Series shares. Sales of shares
to such plans must be made in connection with a payroll deduction system of plan
funding or other system acceptable to Seligman Data Corp.
CLASS D SHARES. Class D shares are sold without an initial sales load but
are subject to a CDSL if the shares are redeemed within one year, an annual
distribution fee of up to .75% and an annual service fee of up to .25%, of the
average daily net asset value of the Class D shares. SFSI will make a 1% payment
to dealers in respect of purchases of Class D shares.
A CDSL will be imposed on any redemption of Class D shares which were
purchased during the preceding twelve months; however, no such CDSL will be
imposed on shares acquired through the investment of dividends or distributions
from any Class D shares of mutual funds within the Seligman Group . The amount
of any CDSL will be paid to and retained by SFSI.
To minimize the application of the CDSL to a redemption, shares acquired
pursuant to the investment of dividends and distributions (which are not subject
to the CDSL) will be redeemed first; followed by shares purchased at least one
year prior to the redemption. Shares held for the longest period of time within
the applicable one year period will then be redeemed. Additionally, for those
shares determined to be subject to the CDSL, the 1% CDSL will be assessed on the
current net asset value or original purchase price, whichever is less.
For example, assume an investor purchased 100 Class D shares in January at
a price of $10.00 per share. During the first year, 5 additional Class D shares
were acquired through investment of dividends and distributions. In January of
the following year, an additional 50 Class D shares were purchased at a price of
$12.00 per share. In March of that year, the investor chooses to redeem
$1,500.00 from the account which now holds 155 Class D shares with a total value
of $1,898.75 ($12.25 per share). The CDSL for this transaction would be
calculated as follows:
Total shares to be redeemed
(122.449 @ $12.25) as follows: $1,500.00
=========
Dividend/Distribution shares
(5 @ $12.25) $ 61.25
Shares held more than 1 year
(100 @ $12.25) 1,225.00
Shares held less than 1 year subject
to CDSL (17.449 @ $12.25) 213.75
---------
Gross proceeds of redemption $1,500.00
Less CDSL (17.449 shares @ $12.00 =
$209.39 x 1% = $2.09) (2.09)
---------
Net proceeds of redemption $1,497.91
=========
For Federal income tax purposes, the amount of the CDSL will reduce the
gain or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.
The CDSL will be waived or reduced in the following instances:
(a) on redemptions following the death or disability of a shareholder, as
defined in section 72 (m)(7) of the Internal Revenue Code of 1986, as amended
(the "Code"); (b) in connection with (i) distributions from retirement plans
qualified under section 401(a) of the Code when such redemptions are necessary
11
<PAGE>
to make distributions to plan participants (such payments include, but are not
limited to death, disability, retirement, or separation of service), (ii)
distributions from a custodial account under section 403 (b)(7) of the Code or
an individual retirement account ("IRA") due to death, disability, or attainment
of age 591/2, and (iii) a tax-free return of an excess contribution to an IRA;
(c) in whole or in part, in connection with shares sold to current and retired
Trustees of the Fund; (d) in whole or in part, in connection with shares sold to
any state, county, or city or any instrumentality, department, authority, or
agency thereof, which is prohibited by applicable investment laws from paying a
sales load or commission in connection with the purchase of shares of any
registered investment management company; (e) pursuant to an automatic cash
withdrawal service; and (f) in connection with the redemption of Class D shares
of the Series if the Series is combined with another mutual fund in the Seligman
Group, or another similar reorganization transaction.
If, with respect to a redemption of any Class D shares sold by a dealer,
the CDSL is waived because the redemption qualifies for a waiver as set forth
above, the dealer shall remit to SFSI promptly upon notice, an amount equal to
the 1% payment or a portion of the 1% payment made by SFSI at the time of sale
of such shares.
SFSI may from time to time assist dealers by, among other things, providing
sales literature to, and holding informational programs for the benefit of,
dealers' registered representatives. Dealers may limit the participation of
registered representatives in such informational programs by means of sales
incentive programs which may require the sale of minimum dollar amounts of
shares of the mutual funds in the Seligman Group. SFSI may from time to time pay
a bonus or other incentive to dealers that sell shares of the Seligman Mutual
Funds. In some instances, these bonuses or incentives may be offered only to
certain dealers which employ registered representatives who have sold or may
sell a significant amount of shares of the Series and/or certain other funds
managed by the Manager during a specified period of time. Such bonus or other
incentive may take the form of payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered representatives
and members of their families to places within or outside the United States. The
cost to SFSI of such promotional activities and payments shall be consistent
with the Rules of the National Association of Securities Dealers, Inc., as then
in effect.
TELEPHONE TRANSACTIONS
A shareholder with telephone transaction privileges, AND THE SHAREHOLDER'S
BROKER/DEALER REPRESENTATIVE, will have the ability to effect the following
transactions via telephone: (i) redemption of Series shares, (ii) exchange of
Series shares for shares of the same class of another Seligman Mutual Fund,
(iii) change of a dividend and/or capital gain distribution option, and (iv)
change of address. All telephone transactions are effected through Seligman Data
Corp. at (800) 221-2450.
For investors who purchase shares by completing and submitting an Account
Application (except those accounts registered as trusts (unless the trustee and
sole beneficiary are the same person), corporations or group retirement plans):
Unless an election is made otherwise on the Account Application, a shareholder
and the shareholder's broker/dealer of record, as designated on the Account
Application, will automatically receive telephone services.
For investors who purchase shares through a broker/dealer: Telephone
services for a shareholder and the shareholder's representative may be elected
by completing a supplemental election application available from the
broker/dealer of record.
For accounts registered as IRAs: Telephone services will include only
exchanges or address changes.
For accounts registered as trusts (unless the trustee and sole beneficiary
are the same person), corporations or group retirement plans: Telephone
redemptions are not permitted. Additionally, group retirement plans are not
permitted to change a dividend or gain distribution option.
12
<PAGE>
All funds with the same account number (i.e., registered exactly the same)
as an existing account, including any new fund in which the shareholder invests
in the future, will automatically include telephone services if the existing
account has telephone services. Telephone services may also be elected at any
time on a supplemental election application.
For accounts registered jointly (such as joint tenancies, tenants in common
and community property registrations), each owner, by accepting or requesting
telephone services, authorizes each of the other owners to effect telephone
transactions on his or her behalf.
During times or drastic economic or market changes, a shareholder or the
shareholder's representative may experience difficulty in contacting Seligman
Data Corp. to request a redemption of exchange of Series shares via telephone.
In these circumstances, the shareholder or the shareholder's representative
should consider using other redemption or exchange procedures. (See "Redemption
Of Shares" below.) Use of these other redemption or exchange procedures will
result in the request being processed at a later time than if a telephone
transaction had been used, and the Series' net asset value may fluctuate during
such periods.
The Fund and Seligman Data Corp. will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These will
include: recording all telephone calls requesting account activity, requiring
that the caller provide certain requested personal and/or account information at
the time of the call for the purpose of establishing the caller's identity, and
sending a written confirmation of redemptions, exchanges or address changes to
the address of record each time activity is initiated by telephone. As long as
the Fund and Seligman Data Corp. follow instructions communicated by telephone
that were reasonably believed to be genuine at the time of their receipt,
neither they nor any of their affiliates will be liable for any loss to the
shareholder caused by an unauthorized transaction. In any instance where the
Fund or Seligman Data Corp. is not reasonably satisfied that instructions
received by telephone are genuine, the requested transaction will not be
executed, and neither they nor any of their affiliates will be liable for any
losses which may occur due to a delay in implementing the transaction. If the
Fund or Seligman Data Corp. does not follow the procedures described above, the
Fund or Seligman Data Corp. may be liable for any losses due to unauthorized or
fraudulent instructions. Telephone transactions must be effected through a
representative of Seligman Data Corp., i.e., requests may not be communicated
via Seligman Data Corp.'s automated telephone answering system. Shareholders, of
course, may refuse or cancel telephone services. Telephone services may be
terminated by a shareholder at any time by sending a written request to Seligman
Data Corp. TELEPHONE SERVICES MAY NOT BE ESTABLISHED BY A SHAREHOLDER'S
BROKER/DEALER WITHOUT THE WRITTEN AUTHORIZATION OF THE SHAREHOLDER. Written
acknowledgment of termination of telephone services will be sent to the
shareholder at the address of record.
REDEMPTION OF SHARES
A shareholder may redeem shares held in book credit form without charge,
(except a CDSL, if applicable) at any time by SENDING A WRITTEN REQUEST to
Seligman Data Corp., 100 Park Avenue, New York, N Y 10017. The redemption
request must be signed by all persons in whose name the shares are registered. A
shareholder may redeem shares that are not in book credit form by surrendering
certificates in proper form to the same address. Certificates should be sent by
registered mail. Share certificates must be endorsed for transfer or accompanied
by an endorsed stock power signed by all share owners exactly as their name(s)
appear(s) on the account registration. The shareholder's letter of instruction
or endorsed stock power should specify the Series or Fund name, account number,
class of shares (A or D) and the number of shares or dollar amount to be
redeemed. The Fund cannot accept conditional redemption requests. If the
redemption proceeds are (i) $50,000 or more, (ii) to be paid to someone other
than the shareholder of record (regardless of the amount) or (iii) to be mailed
13
<PAGE>
to other than the address of record (regardless of the amount), the signature(s)
of the shareholder(s) must be guaranteed by an eligible financial institution
including, but not limited to, the following: banks, trust companies, credit
unions, securities brokers and dealers, savings and loan associations and
participants in the Securities Transfer Association Medallion Program (STAMP),
the Stock Exchanges Medallion Program (SEMP) and the New York Stock Exchange
Medallion Signature Program (MSP). The Fund reserves the right to reject a
signature guarantee where it is believed that the Fund will be placed at risk by
accepting such guarantee. A signature guarantee is also necessary in order to
change the account registration. Notarization by a notary public is not an
acceptable signature guarantee. ADDITIONAL DOCUMENTATION MAY ALSO BE REQUIRED BY
SELIGMAN DATA CORP. IN THE EVENT OF A REDEMPTION BY CORPORATIONS, EXECUTORS,
ADMINISTRATORS, TRUSTEES, CUSTODIANS OR RETIREMENT PLANS. FOR FURTHER
INFORMATION WITH RESPECT TO REDEMPTION REQUIREMENTS, PLEASE CONTACT THE
SHAREHOLDER SERVICES DEPARTMENT OF SELIGMAN DATA CORP. FOR ASSISTANCE.
In the case of Class A shares, and in the case of Class D shares redeemed
after one year, a shareholder will receive the net asset value per share next
determined after receipt of a request in good order. If Class D shares are
redeemed within one year of purchase, a shareholder will receive the net asset
value per share next determined after receipt of a request in good order, less a
CDSL of 1% as described under "Purchase Of Shares--Class D Shares" above.
A shareholder also may "sell" shares to the Fund through an investment
dealer and, in that way, be certain, providing the order is timely, of receiving
the net asset value established at the end of the day on which the dealer is
given the repurchase order (less any applicable CDSL). The Fund makes no charge
for this transaction, but the dealer may charge a service fee. "Sell" or
repurchase orders received from an authorized dealer before the close of the
NYSE and received by SFSI, the repurchase agent, before the close of business on
the same day will be executed at the net asset value per share determined as of
the close of the NYSE on that day, less any applicable CDSL. Repurchase orders
received from authorized dealers after the close of the NYSE or not received by
SFSI prior to the close of business, will be executed at the net asset value
determined as of the close of the NYSE on the next trading day, less any
applicable CDSL. Shares held in a "street name" account with a broker/dealer may
be sold to the Fund only through a broker/dealer.
TELEPHONE REDEMPTIONS. Telephone redemptions of uncertificated shares may
be made once per day, in an amount of up to $50,000 per account. Telephone
redemption requests received by Seligman Data Corp. at (800) 221-2450 between
8:30 a.m. and 4:00 p.m. Eastern time, on any business day will be processed as
of the close of business on that day. Redemption requests by telephone will not
be accepted within 30 days following an address change. Keogh Plans, IRAs or
other retirement plans are not eligible for telephone redemptions. The Fund
reserves the right to suspend or terminate its telephone redemption service at
any time without notice.
For more information about telephone redemptions and the circumstances
under which a shareholder may bear the risk of loss for a fraudulent
transaction, see "Telephone Transactions" above.
CHECK REDEMPTION SERVICE. The Check Redemption Service allows a shareholder
who owns or purchases shares in the Series worth $25,000 or more to request
Seligman Data Corp. to provide redemption checks to be drawn on the
shareholder's account in amounts of $500 or more. The shareholder may elect to
use this Service on the Account Application or by later written request to
Seligman Data Corp. Shares for which certificates have been issued will not be
available for redemption under this service. Holders of Class D shares may use
this service with respect to Class D shares that have been held for at least one
year. Dividends continue to be earned through the date preceding the date the
check clears for payment. Use of this service is subject to Boston Safe Deposit
and Trust Co. rules and regulations covering checking accounts. Separate
checkbooks will be furnished for each series of the Fund.
14
<PAGE>
There is no charge for use of checks. When honoring a check that was
processed for payment, Boston Safe Deposit and Trust Co. will cause the Series
to redeem exactly enough full and fractional shares from an account to cover the
amount of the check. If shares are owned jointly, redemption checks must be
signed by all persons, unless otherwise elected on the Account Application, in
which case a single signature will be acceptable.
In view of daily fluctuations in share value, the shareholder should be
certain that the amount of shares in the account is sufficient to cover the
amount of checks written. If insufficient shares are in the account, the check
will be returned, marked "insufficient funds." THE FUND WILL NOT REDEEM SHARES
IN ONE SERIES TO COVER A CHECK WRITTEN ON ANOTHER SERIES. SELIGMAN DATA CORP.
WILL CHARGE A $10.00 PROCESSING FEE FOR ANY CHECK REDEMPTION DRAFT RETURNED AS
UNCOLLECTABLE. THIS CHARGE MAY BE DEDUCTED FROM THE ACCOUNT THE CHECK WAS DRAWN
AGAINST.
Check redemption books cannot be reordered unless the shareholder's account
has a value of $25,000 or more and the Fund has a certified Taxpayer
Identification Number on file.
Cancelled checks will be returned to a shareholder under separate cover the
month after they clear. The Check Redemption Service may be terminated at any
time by the Fund or Boston Safe Deposit and Trust Co. See "Terms and Conditions"
on page 24.
GENERAL. With respect to shares redeemed, a check for the proceeds will be
sent to the address of record within seven calendar days after acceptance of the
redemption order and will be made payable to all of the registered owners on the
account. With respect to shares repurchased by the Fund, a check for the
proceeds will be sent to the investment dealer within seven calendar days after
acceptance of the repurchase order and will be made payable to the investment
dealer. The Fund will not permit redemptions of shares with respect to shares
purchased by check (unless certified) until Seligman Data Corp. receives notice
that the check has cleared, which may be up to 15 days from the credit of the
shares to the shareholder's account. The proceeds of a redemption or repurchase
may be more or less than the shareholder's cost.
The Fund reserves the right to redeem shares owned by a shareholder whose
investment in the Series has a value of less than a minimum amount specified by
the Fund's Trustees, which is presently $500. Shareholders would be sent a
notice before the redemption is processed stating that the value of their
investment in the Series is less than the specified minimum and that they have
sixty days to make an additional investment.
REINSTATEMENT PRIVILEGE. If a shareholder redeems Class A shares and then
decides to reinvest them, or to shift the investment to the other series of the
Fund or one of the other Seligman Mutual Funds, the shareholder may, within 120
calendar days of the date of redemption, use all or any part of the proceeds of
the redemption to reinstate, free of sales load, all or any part of the
investment in shares of the Series or in shares of the other series of the Fund
or one of the other Seligman Mutual Funds. If a shareholder redeems Class D
shares and the redemption was subject to a CDSL, the shareholder may reinstate
the investment in shares of the same class of the Series or any of the other
Seligman Mutual Funds within 120 calendar days of the date of redemption and
receive a credit for the CDSL paid. Such investment will be reinstated at the
net asset value per share established as of the close of the NYSE on the day the
request is received. Seligman Data Corp. must be informed that the purchase is a
reinstated investment. REINSTATED SHARES MUST BE REGISTERED EXACTLY AS THE
SHARES PREVIOUSLY REDEEMED.
Generally, exercise of the Reinstatement Privilege does not alter the
Federal income tax status of any capital gain realized on a sale of Series
shares, but to the extent that any shares are sold at a loss and the proceeds
are reinvested in shares of the same Series, some or all of the loss will not be
allowed as a deduction, depending upon the percentage of the proceeds
reinvested.
15
<PAGE>
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
Under the Fund's Administration, Shareholder Services and Distribution Plan
(the "Plan"), the Series may pay to SFSI an administration, shareholder services
and distribution fee in respect of the Series' Class A and Class D shares.
Payments under the Plan may include, but are not limited to: (i) compensation to
securities dealers and other organizations ("Service Organizations") for
providing distribution assistance with respect to assets invested in the Series,
(ii) compensation to Service Organizations for providing administration,
accounting and other shareholder services with respect to Series shareholders,
and (iii) otherwise promoting the sale of shares of the Series, including paying
for the preparation of advertising and sales literature and the printing and
distribution of such promotional materials and prospectuses to prospective
investors and defraying SFSI's costs incurred in connection with its marketing
efforts with respect to shares of the Series. The Manager, in its sole
discretion, may also make similar payments to SFSI from its own resources, which
may include the management fee that the Manager receives from the Series.
Under the Plan, the Series reimburses SFSI for its expenses with respect to
Class A shares at an annual rate of up to .25% of the average daily net asset
value of Class A shares. It is expected that the proceeds from the fee in
respect of Class A shares will be used primarily to compensate Service
Organizations which enter into agreements with SFSI. Such Service Organizations
will receive from SFSI a continuing fee of up to .25% on an annual basis,
payable quarterly, of the average daily net assets of Class A shares
attributable to the particular Service Organization for providing personal
service and/or the maintenance of shareholder accounts. The fee payable from
time to time is, within such limit, determined by the Trustees of the Fund.
The Plan, as it relates to Class A shares was approved by the Trustees on
October 9, 1984 and was approved by the shareholders of the Series on April 10,
1986. The Plan is reviewed by the Trustees annually. The total amount paid for
the year ended December 31, 1995 in respect of the Series' Class A shares
pursuant to the Plan was equal to .21% of the Class A shares' average daily net
assets.
Under the Plan, the Series reimburses SFSI for its expenses with respect to
Class D shares at an annual rate of up to 1% of the average daily net asset
value of the Class D shares. Proceeds from the Class D distribution fee are used
primarily to compensate Service Organizations for administration, shareholder
services and distribution assistance (including a continuing fee of up to .25%
on an annual basis of the average daily net asset value of Class D shares
attributable to particular Service Organizations for providing personal service
and/or the maintenance of shareholder accounts) and will initially be used by
SFSI to defray the expense of the 1% payment made by it to Service Organizations
at the time of the sale of Class D shares. The amounts expended by SFSI in any
one year upon the initial purchase of Class D shares may exceed the amounts
received by it from Plan payments retained. Expenses of administration,
shareholder services and distribution of Class D shares in one fiscal year of
the Series may be paid from Class D Plan fees received from the Series in any
other fiscal year.
The Plan, as it relates to class D shares, was amended by the Trustees of
the Fund on July 15, 1993. The Plan is reviewed by the Trustees annually. The
total amount paid for the year ended December 31, 1995 by the Series' Class D
shares pursuant to the Plan was 1% per annum of the average daily net assets of
Class D shares.
Seligman Services, Inc. ("SSI"), an affiliate of the Manager, is a limited
purpose broker/dealer. SSI acts as broker/dealer of record for most shareholder
accounts that do not have a designated broker/dealer of record including all
such shareholder accounts established after April 1, 1995 and will receive
compensation for providing personal service and account maintenance to its
account of record.
EXCHANGE PRIVILEGE
A shareholder of the Series may, without charge, exchange at net asset
value any part or all of an investment in the Series for shares of the other
16
<PAGE>
series of the Fund or for shares of any of the other mutual funds in the
Seligman Group. Exchanges may be made by mail, or by telephone, if the
shareholder has telephone services.
Class A and Class D shares may be exchanged only for Class A and Class D
shares respectively, of the other series of the Fund or another mutual fund in
the Seligman Group on the basis of relative net asset value.
If Class D shares that are subject to a CDSL are exchanged for Class D
shares of another fund, for purposes of assessing the CDSL payable upon
disposition of the exchanged Class D shares, the one year holding period shall
be reduced by the holding period of the original Class D shares.
The Seligman Mutual Funds available under the Exchange Privilege are:
o SELIGMAN CAPITAL FUND, INC. seeks aggressive capital appreciation.
Current income is not an objective.
O SELIGMAN CASH MANAGEMENT FUND, INC. invests in high quality money market
instruments. Shares are sold at net asset value.
O SELIGMAN COMMON STOCK FUND, INC. seeks favorable current income and
long-term growth of both income and capital value without exposing capital to
undue risk.
O SELIGMAN COMMUNICATIONS AND INFORMATION FUND, INC. invests in shares of
companies in the communications, information and related industries to produce
capital gain. Income is not an objective.
O SELIGMAN FRONTIER FUND, INC. seeks to produce growth in capital value.
Income may be considered but will only be incidental to the fund's investment
objective.
O SELIGMAN GROWTH FUND, INC. seeks longer-term growth in capital value and
an increase in future income.
O SELIGMAN HENDERSON GLOBAL FUND SERIES, INC. consists of the Seligman
Henderson International Fund, the Seligman Henderson Global Growth Opportunities
Fund, the Seligman Henderson Global Smaller Companies Fund and the Seligman
Henderson Global Technology Fund, which seek long-term capital appreciation
primarily by investing in companies either globally or internationally.
O SELIGMAN HIGH INCOME FUND SERIES seeks high current income by investing
in debt securities. In addition to the U.S. Government Securities Series, the
Fund consists of the High-Yield Bond Series.
O SELIGMAN INCOME FUND, INC. seeks high current income and the possibility
of improvement of future income and capital value.
O SELIGMAN NEW JERSEY TAX-EXEMPT FUND, INC. invests in investment grade New
Jersey tax-exempt securities.
O SELIGMAN PENNSYLVANIA TAX-EXEMPT FUND SERIES invests in investment grade
Pennsylvania tax-exempt securities.
O SELIGMAN TAX-EXEMPT FUND SERIES, INC. consists of several State Series
and a National Series. The National Tax-Exempt Series seeks to provide maximum
income exempt from Federal income taxes; individual state series, each seeking
to maximize income exempt from Federal income taxes and from personal income
taxes in designated states are available for Colorado, Georgia, Louisiana,
Maryland, Massachusetts, Michigan, Minnesota, Missouri, New York, Ohio, Oregon
and South Carolina.
O SELIGMAN TAX-EXEMPT SERIES TRUST includes the California Tax-Exempt High
Yield Series, the California Tax-Exempt Quality Series, the Florida Tax-Exempt
Series and the North Carolina Tax-Exempt Series each of which invests in
tax-exempt securities of it's designated state.
All permitted exchanges will be based on the net asset values of the
respective funds determined at the close of the NYSE on that day. Telephone
requests for exchanges received between 8:30 a.m. and 4:00 p.m. Eastern time, on
any business day, by Seligman Data Corp. at (800) 221-2450, will be processed as
17
<PAGE>
of the close of business on that day. The registration of an account into which
an exchange is made must be identical to the registration of the account from
which shares are exchanged. When establishing a new account by an exchange of
shares, the shares being exchanged must have a value of at least the minimum
initial investment required by the mutual fund into which the exchange is being
made. The method of receiving distributions, unless otherwise indicated, will be
carried over to the new fund account, as will telephone services. Account
services, such as Invest-A-Check(R) Service, DirecteD Dividends, Automatic Cash
Withdrawal Service and Check Writing Privilege will not be carried over to the
new fund account unless specifically requested and permitted by the new fund.
Exchange orders may be placed to effect an exchange of a specific number of
shares, an exchange of shares equal to a specific dollar amount or an exchange
of all shares held. Shares for which certificates have been issued may not be
exchanged via telephone and may be exchanged only upon receipt of a written
exchange request together with certificates representing shares to be exchanged
in proper form.
The Exchange Privilege via mail is generally applicable to investments in
group retirement plans, although some restrictions may apply. The terms of the
Exchange Privilege described herein may be modified at any time; and not all of
the mutual funds in the Seligman Group are available to residents of all states.
Before making any exchange, a shareholder should contact an authorized
investment dealer or Seligman Data Corp. to obtain prospectuses of any of the
Seligman Mutual Funds.
A broker/dealer representative of record will be able to effect exchanges
on behalf of a shareholder only if the shareholder has telephone services or the
broker/dealer has entered into a Telephone Exchange Agreement with SFSI wherein
the broker/dealer must agree to indemnify SFSI and the Seligman Mutual Funds
from any loss or liability incurred as a result of the acceptance of telephone
exchange orders.
Written confirmation of all exchanges will be forwarded to the shareholder
to whom the exchanged shares are registered and a duplicate confirmation will be
sent to the dealer of record listed on the account. SFSI reserves the right to
reject any telephone exchange request. Any rejected telephone exchange order may
be processed by mail. For more information about telephone exchanges, including
the circumstances under which shareholders may bear the risk of loss for a
fraudulent transaction, see "Telephone Transactions" above.
Exchanges of shares are sales and may result in a gain or loss for Federal
income tax purposes.
FURTHER INFORMATION ABOUT TRANSACTIONS IN THE SERIES
Because excessive trading (including short-term, "market timing" trading)
can hurt the Series' performance, the Fund may refuse any exchange (1) from any
shareholder account from which there have been two exchanges in the preceding
three month period, or (2) where the exchanged shares equal in value the lesser
of $1,000,000 or 1% of the Series' net assets. The Fund may also refuse any
exchange or purchase order from any shareholder account if the shareholder or
the shareholder's broker/dealer has been advised that previous patterns of
purchases and redemptions or exchanges have been considered excessive. Accounts
under common ownership or control, including those with the same taxpayer ID
number and those administered so as to redeem or purchase shares based upon
certain predetermined market indicators, will be considered one account for this
purpose. Additionally, the Fund reserves the right to refuse any order for the
purchase of shares.
DIVIDENDS AND DISTRIBUTIONS
The Series' net investment income is distributed to shareholders monthly in
the form of additional shares, unless the shareholder elects otherwise. Payments
vary in amount depending on income received from the Series' investments and the
18
<PAGE>
costs of operations. Shares begin earning dividends on the day on which the Fund
receives payment. Shares continue to earn dividends through the date preceding
the date they are redeemed.
The Series distributes substantially all of any taxable net long-term and
short-term gain realized on investments, to shareholders at least annually. In
determining amounts of capital gains to be distributed, any capital loss
carryforwards from prior years will offset capital gains. For Federal income tax
purposes, the Series had a capital loss carryforward as of December 31, 1995 of
$16,299,262 (including $2,420,836 transferred from the Seligman Secured Mortgage
Income Series), of which $1,652,560 expires in 1996, $2,286,339 expires in 1997,
$3,877,110 expires in 1998, $12,467 expires in 2001 and $8,470,786 expires in
2002. Accordingly, the Series may not distribute capital gains (short-term or
long-term) to shareholders until net gains have been realized in excess of the
capital loss carryforward.
Shareholders may elect: (1) to receive both dividends and gain
distributions in shares; (2) to receive dividends in cash and gain distributions
in shares; (3) to receive both dividends and gain distributions in cash. Cash
dividends and gain distributions are paid by check. If the payment option you
prefer is not listed, contact Seligman Data Corp. at (800) 221-2450 to request
information on other available options. In the case of prototype retirement
plans, dividends and gain distributions are reinvested in additional shares.
Unless another election is made, dividends and capital gain distributions will
be credited to shareholder accounts in additional shares. Shares acquired
through a dividend or gain distribution and credited to a shareholder's account
are not subject to an initial sales load or a CDSL. Dividends and gain
distributions paid in shares are invested on the payable date using the net
asset value of the ex-dividend date. Shareholders may elect to change their
dividend and gain distribution options by calling or writing Seligman Data Corp.
at the telephone numbers or address listed below. If the shareholder has
telephone services, changes may also be telephoned to Seligman Data Corp.
between 8:30 a.m. and 6:00 p.m. Eastern time, by either the shareholder or the
broker/dealer of record on the account. For information about telephone
services, see "Telephone Transactions." These elections must be received by
Seligman Data Corp. before the record date for the dividend or distribution in
order to be effective for such dividend or distribution.
The per share dividends from net investment income on Class D shares will
be lower than the per share dividends on Class A shares as a result of the
higher distribution fee applicable with respect to Class D shares. Per share
dividends of the two classes may also differ as a result of differing class
expenses. Distributions of net capital gains, if any, will be paid in the same
amount for Class A and Class D shares. See "Purchase Of Shares--Valuation."
Shareholders exchanging shares of one mutual fund for shares of another
mutual fund in the Seligman Group will continue to receive dividends and gains
as elected prior to such exchange unless otherwise specified. In the event that
a shareholder redeems all shares in an account between the record date and the
payable date, the value of any dividends or gain distributions declared will be
paid in cash regardless of the existing election.
FEDERAL INCOME TAXES
The Series intends to continue to qualify as a regulated investment company
under the Code. For each year so qualified, the Series will not be subject to
Federal income taxes on its net investment income and capital gains, if any,
realized during any taxable year, which it distributes to its shareholders,
provided that at least 90% of its net investment income and net short-term
capital gains are distributed to shareholders each year.
Dividends from net investment income and distributions from net short-term
capital gains are taxable as ordinary income to the shareholders, whether
received in cash or reinvested in additional shares, and are, generally, not
eligible for the dividends received deduction for corporations.
Distributions of net capital gain, i.e., the excess of net long-term
capital gains over any net short-term losses, are taxable as long-term capital
19
<PAGE>
gain, whether received in cash or invested in additional shares, regardless of
how long shares have been held by the shareholders; such distributions are not
eligible for the dividends received deduction allowed to corporate shareholders.
As noted above, the Series must exhaust its capital loss carry forward before it
may make capital gain distributions to shareholders.
Any gain or loss realized upon a sale or redemption of shares in the Series
by a shareholder who is not a dealer in securities will generally be treated as
a long-term capital gain or loss if the shares have been held for more than one
year and otherwise as a short-term capital gain or loss. However, if shares on
which a long-term capital gain distribution has been received are subsequently
sold or redeemed and such shares have been held for six months or less, any loss
realized will be treated as long-term capital loss to the extent that it offsets
the long-term capital gain distribution. In addition, no loss will be allowed on
the sale or other disposition of shares of the Series if, within a period
beginning 30 days before the date of such sale or disposition and ending 30 days
after such date, the holder acquires (such as through dividend reinvestment)
securities that are substantially identical to the shares of the Series.
In determining gain or loss on shares of the Series that are sold or
exchanged within 90 days after acquisition, a shareholder generally will not be
permitted to include in the tax basis attributable to such shares the sales load
incurred in acquiring such shares to the extent of any subsequent reduction in
the sales load by reason of the Exchange or Reinstatement Privilege offered by
the Series. Any sales load not taken into account in determining the tax basis
of shares sold or exchanged within 90 days after acquisition will be added to
the shareholder's tax basis in the shares acquired pursuant to the Exchange or
Reinstatement Privilege.
The Series will generally be subject to an excise tax of 4% on the amount
of any income or capital gains, above certain permitted levels, distributed to
shareholders on a basis such that such income or gain is not taxable to
shareholders in the calendar year in which it was earned. Furthermore, dividends
declared in October, November or December payable to shareholders of record on a
specified date in such a month and paid in the following January will be treated
as having been paid by the Series and received by each shareholder in December.
Under this rule, therefore, shareholders may be taxed in one year on dividends
or distributions actually received in January of the following year.
Shareholders are urged to consult their tax advisers concerning the effect
of Federal income taxes in their individual circumstances.
UNLESS A SHAREHOLDER INCLUDES A CERTIFIED TAXPAYER IDENTIFICATION NUMBER
(SOCIAL SECURITY NUMBER FOR INDIVIDUALS) ON THE ACCOUNT APPLICATION AND
CERTIFIES THAT THE SHAREHOLDER IS NOT SUBJECT TO BACKUP WITHHOLDING, THE FUND IS
REQUIRED TO WITHHOLD AND REMIT TO THE U.S. TREASURY A PORTION OF DISTRIBUTIONS
AND OTHER REPORTABLE PAYMENTS TO THE SHAREHOLDER. THE RATE OF BACKUP WITHHOLDING
IS 31%. SHAREHOLDERS SHOULD BE AWARE THAT, UNDER REGULATIONS PROMULGATED BY THE
INTERNAL REVENUE SERVICE, THE FUND MAY BE FINED $50 ANNUALLY FOR EACH ACCOUNT
FOR WHICH A CERTIFIED TAXPAYER IDENTIFICATION NUMBER IS NOT PROVIDED. IN THE
EVENT THAT SUCH A FINE IS IMPOSED, THE FUND MAY CHARGE A SERVICE FEE OF UP TO
$50 THAT MAY BE DEDUCTED FROM THE SHAREHOLDER'S ACCOUNT AND OFFSET AGAINST ANY
UNDISTRIBUTED DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. THE FUND ALSO RESERVES
THE RIGHT TO CLOSE ANY ACCOUNT WHICH DOES NOT HAVE A CERTIFIED TAXPAYER
IDENTIFICATION NUMBER.
SHAREHOLDER INFORMATION
Shareholders will be sent reports semi-annually regarding the Series.
General information about the Series may be requested by writing the Corporate
Communications/Investor Relations Department, J. & W. Seligman & Co.
Incorporated, 100 Park Avenue, New York, NY 10017 or by telephoning the
Corporate Communications/ Investor Relations Department toll-free at (800)
221-7844 from all continental United States, except New York or (212) 850-1864
in New York State and the Greater New York City area. Information about
20
<PAGE>
shareholder accounts may be requested by writing Shareholder Services, Seligman
Data Corp. at the same address or by toll-free telephone by dialing (800)
221-2450 from all continental United States. Seligman Data Corp. may be
telephoned Monday through Friday (except holidays), between the hours of 8:30
a.m. and 6:00 p.m. Eastern time, and calls will be answered by a service
representative.
24 HOUR TELEPHONE ACCESS IS AVAILABLE BY DIALING (800) 622-4597 ON A
TOUCHTONE PHONE, WHICH PROVIDES INSTANT ACCESS TO PRICE, YIELD, ACCOUNT BALANCE,
MOST RECENT TRANSACTION AND OTHER INFORMATION. IN ADDITION, ACCOUNT STATEMENTS,
FORM 1099-DIVS AND CHECKBOOKS MAY BE ORDERED. TO INSURE PROMPT DELIVERY OF
DISTRIBUTION CHECKS, ACCOUNT STATEMENTS AND OTHER INFORMATION, SELIGMAN DATA
CORP. SHOULD BE NOTIFIED IMMEDIATELY IN WRITING OF ANY ADDRESS CHANGE. ADDRESS
CHANGES MAY BE TELEPHONED TO SELIGMAN DATA CORP. IF THE SHAREHOLDER HAS
TELEPHONE SERVICES. FOR MORE INFORMATION ABOUT TELEPHONE SERVICES, SEE
"TELEPHONE TRANSACTIONS" ABOVE.
ACCOUNT SERVICES. Shareholders are sent confirmation of financial
transactions in their Account. Other investor services are available. These
include:
O INVEST-A-CHECK(R) SERVICE enables a shareholder to authorize additional
purchases of shares automatically by electronic fundS transfer from the
shareholders savings or checking account, if the shareholder's bank is a member
of the Automated Clearing House ("ACH"), or by preauthorized checks to be drawn
on the shareholder's checking account at regular monthly intervals in fixed
amounts of $100 or more per fund, or regular quarterly intervals in fixed
amounts of $250 or more per fund, to purchase shares. Accounts may be
established concurrently with the Invest-A-Check(R) Service only if accompanied
by a $100 minimum in conjunction with the monthlY investment option or a $250
minimum in conjunction with the quarterly investment option. (See "Terms and
Conditions" on page 24.)
O AUTOMATIC DOLLAR-COST-AVERAGING SERVICE permits a shareholder to exchange
a specified amount, at regular monthly intervals in fixed amounts of $100 or
more per fund, or regular quarterly intervals in fixed amounts of $250 or more
per fund, from shares of any class of the Cash Management Fund into shares of
the same class of any other Seligman Mutual Fund registered in the same name.
The shareholder's Cash Management Fund account must have a value of at least
$5,000 at the initiation of the service. Exchanges will be made at the public
offering price.
O DIVIDENDS FROM OTHER INVESTMENTS permits a shareholder to order dividends
payable on shares of other companies to be paid to and invested in additional
shares of the Series or another Seligman Mutual Fund. (Dividend checks must meet
or exceed the required minimum purchase amount and include the shareholder's
name, account number, the name of the fund and the class of shares in which the
investment is to be made.
O AUTOMATIC CD TRANSFER SERVICE permits a shareholder to instruct a bank to
invest the proceeds of a maturing bank certificate of deposit ("CD") in shares
of any designated Seligman Mutual Fund. Shareholders who wish to use this
service should contact Seligman Data Corp. or a broker to obtain the necessary
documentation. Banks may charge a penalty on CD assets withdrawn prior to
maturity. Accordingly, it will not normally be advisable to liquidate a CD
before its maturity.
o AUTOMATIC CASH WITHDRAWAL permits payments at regular intervals to be
made to a shareholder who owns or purchases shares worth $5,000 or more held as
book credits. Holders of Class D shares may elect to use this service with
respect to shares that have been held for at least one year. (See "Terms and
Conditions" on page 24.)
O DIRECTED DIVIDENDS allows a shareholder to pay dividends to another
person or to direct the payment of such dividends to another Seligman Mutual
Fund for purchase at net asset value. Dividends on Class A and Class D shares
may only be directed to shares of the same class of another Seligman Mutual
Fund.
O OVERNIGHT DELIVERY to service shareholder requests is available for a
$15.00 fee which may be deducted from a shareholder's account, if requested.
O COPIES OF ACCOUNT STATEMENTS will be sent to each shareholder free of
charge for the current year and most recent prior year. Copies of year-end
21
<PAGE>
statements for prior years back to 1985 are available for a fee of $10.00 per
year, per account, with a maximum charge of $150 per account. Statement requests
should be forwarded, along with a check, to Seligman Data Corp.
O TAX-DEFERRED RETIREMENT PLANS. Shares of the Series may be purchased for
all types of tax-deferred retirement plans. SFSI makes available plans, plan
forms and custody agreements for:
-Individual Retirement Accounts (IRAs);
-Simplified Employee Pension Plans (SEPs);
-Section 401(k) Plans for corporations and their employees;
-Section 403(b)(7) Plans for employees of public school systems and certain
non-profit organizations who wish to make deferred compensation arrangements;
and
-Pension and Profit Plans for sole proprietorships, partnerships and
corporations. These types of plans may be established only upon receipt of
a written application form.
For more information, write Retirement Plan Services, Seligman Data Corp.,
100 Park Avenue, New York, NY 10017 or telephone toll-free (800) 445-1777 from
all continental United States. You also may receive information through an
authorized dealer.
ADVERTISING THE SERIES' PERFORMANCE
From time to time the Series advertises its "yield," "total return" and
"average annual total return," each of which are calculated separately for Class
A and Class D shares. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT
INTENDED TO INDICATE FUTURE PERFORMANCE. The "yield" of a class of the Series
refers to the income generated by an investment in that class over a 30-day
period. This income is then "annualized." That is, the amount of income
generated by the investment during that 30-day period is assumed to be generated
each 30-day period for twelve periods and is shown as a percentage of the
investment. The income earned on the investment is also assumed to be reinvested
at the end of the sixth 30-day period. The "total return" shows what an
investment in shares of a class of the Series would have earned over a specified
period of time (for example, one, five and ten years or from the inception)
assuming the payment of the maximum sales load, if any, when the investment was
first made and that all distributions and dividends by that class were
reinvested on the reinvestment dates during the period. The "average annual
total return" is the annual rate required for the initial payment to grow to the
amount which would be received at the end of the specified period (one, five and
ten years or from the inception); i.e., the average annual compound rate of
return. Total return and average annual total return may also be presented
without the effect of the initial sales load or CDSL, as applicable.
From time to time, reference may be made in advertising or promotional
material to performance information, including mutual fund rankings, prepared by
Lipper Analytical Service, Inc. ("Lipper"), an independent reporting service
which monitors the performance of mutual funds. In calculating the total return
of the Series' Class A and Class D shares, the Lipper analysis assumes
investment of all dividends and distributions paid but does not take into
account applicable sales loads. The Series may also refer in advertisements or
in other promotional material to articles, comments, listings and columns in the
financial press pertaining to the Series' performance. Examples of such
financial and other press publications include Barron's, Business Week,
CDA/Weisenberger Mutual Funds Investment Report, Christian Science Monitor,
Financial Planning, Financial Times, Financial World, Forbes, Fortune,
Individual Investor, Investment Advisor, Investors Business Daily, Kiplinger's,
Los Angeles Times, MONEY Magazine, Morningstar, Inc., Pension and Investments,
Smart Money, The New York Times, USA Today, U.S. News and World Report, The Wall
Street Journal, Washington Post, Worth Magazine and Your Money.
ORGANIZATION AND CAPITALIZATION
The Fund is a diversified, open-end management investment company organized
under the laws of the Commonwealth of Massachusetts by a Declaration of Trust
22
<PAGE>
dated July 27, 1984. The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest, $.001 par
value. The Trustees also have the power to create additional series of shares.
Shares of beneficial interest of two series have been authorized, which
shares of beneficial interest constitute interests in the Series and the
Seligman High-Yield Bond Series. Shares of beneficial interest of the Series are
divided into two classes (Class A and Class D) and shares of beneficial interest
of the Seligman High-Yield Bond Series are divided into three classes (Class A,
Class B and Class D). Each share of beneficial interest of the Series' and the
Seligman High-Yield Bond Series' respective classes is equal as to earnings,
assets and voting privileges, except that each class bears its own separate
distribution and, potentially, certain other class expenses and has exclusive
voting rights with respect to any matter to which a separate vote of any class
is required by the 1940 Act or Massachusetts law. The Fund has adopted a plan
(the `Multiclass Plan") pursuant to Rule 18f-3 under the 1990 Act permitting the
issuance and sale of multiple classes of shares of beneficial interest. In
accordance with the Declaration of Trust, the Trustees may authorize the
creation of additional classes of shares of beneficial interest with such
characteristics as are permitted by the Multiclass Plan and Rule 18f-3. The 1940
Act requires that where more than one class exists, each class must be preferred
over all other classes in respect of assets specifically allocated to such
class. Shares entitle their holders to one vote per share. Shares have
noncumulative voting rights, do not have preemptive or subscription rights and
are transferable. It is the intention of the Fund not to hold Annual Meetings of
Shareholders. The Trustees may call Special Meetings of Shareholders for action
by shareholder vote as may be required by the 1940 Act or Declaration of Trust.
Pursuant to the 1940 Act, shareholders have to approve the adoption of any
management contract, distribution plan and any changes in fundamental investment
policies. Shareholders also have the right to call a meeting of shareholders for
the purpose of voting on the removal of one or more Trustees. Such removal can
be effected upon the action of two-thirds of the outstanding shares of the Fund.
23
<PAGE>
TERMS AND CONDITIONS
GENERAL ACCOUNT INFORMATION
Investments will be made in as many shares of the Series, including
fractions to the third decimal place, as can be purchased at the net asset value
plus a sales load, if applicable, at the close of business on the day payment is
received. If a check received in payment of a purchase of shares is dishonored
for any reason, Seligman Data Corp. may cancel the purchase and may also redeem
additional shares, if any, held in the shareholder's account in an amount
sufficient to reimburse the Fund for any loss it may have incurred and charge a
$10.00 return check fee. Shareholders will receive dividends from investment
income and any distributions from gain realized on investments in shares or in
cash according to the option elected. Dividend and gain options may be changed
by notifying Seligman Data Corp. These option changes must be received by
Seligman Data Corp. before the record date for the dividend or distribution to
be effective for such dividend or distribution. Stock certificates will not be
issued unless requested. Replacement stock certificates will be subject to a
surety fee.
INVEST-A-CHECK(R) SERVICE
The Invest-A-Check(R) Service is available to all shareholders. The
application is subject to acceptance by the shareholder's banK and Seligman Data
Corp. The electronic funds transfer ("ACH debit") or preauthorized check in the
amount specified will be drawn automatically on the shareholder's bank on the
fifth day (unless otherwise specified) of each month (or on the prior business
day if such day of the month falls on a weekend or holiday) in which an
investment is scheduled and invested at the public offering price at the close
of business on the same date. After the initial investment, the value of shares
held in the shareholder's account must equal not less than two regularly
scheduled investments. If a check is not honored by the shareholder's bank, or
if the value of shares held falls below the required minimum, the
Invest-A-Check(R) Service may be suspended. In the event that a check or ACH
debit iS returned as uncollectable, Seligman Data Corp. will cancel the
purchase, redeem shares held in the shareholder's account for an amount
sufficient to reimburse the Fund for any loss it may have incurred as a result,
and charge a $10.00 return check fee. This fee may be deducted from the
shareholder's account. The Invest-A-Check(R) Service may be reinstated upon
written request indicating thaT the cause of interruption has been corrected.
The Invest-A-Check(R) Service may be terminated by the shareholder's or Seligman
DatA Corp. at any time by written notice. The shareholders agree to hold the
Fund and its agents free from all liability which may result from acts done in
good faith and pursuant to these terms. Instructions for establishing
Invest-A-Check(R) Service are given on thE Account Application. In the event the
shareholder exchanges all of the shares from one mutual fund in the Seligman
Group to another, the Invest-A-Check(R) Service will be terminated in the
Seligman Mutual Fund that was closed as a result of the exchange of all shareS
and the shareholder must re-apply for the Invest-A-Check(R) Service in the
Seligman Mutual Fund into which the exchange was made. IN the event of a partial
exchange, the Invest-A-Check(R) Service will be continued, subject to the above
conditions, in the SeligmaN Mutual Fund from which the exchange was made.
Accounts established in conjunction with the Invest-A-Check(R) Service must bE
accompanied by a minimum initial investment of $100 in connection with the
monthly investment option or $250 in connection with the quarterly investment
option. If the shareholder uses the Invest-A-Check(R) Service to make an IRA
investment, the purchase will bE credited as a current year contribution. If the
shareholder uses the Invest-A-Check(R) to make an investment in a pension or
profiT sharing plan, the purchase will be credited as a current year employer
contribution.
AUTOMATIC CASH WITHDRAWAL SERVICE
The Automatic Cash Withdrawal Service is available to Class A shareholders
and to Class D shareholders with respect to Class D shares held for one year or
more. A sufficient number of full and fractional shares will be redeemed to
provide the amount required for a scheduled payment. Redemptions will be made at
the asset value at the close of business on the specific day designated by the
shareholder of each month (or on the prior business day if the day specified
falls on a weekend or holiday). A shareholder may change the amount of scheduled
payments or may suspend payments by written notice to Seligman Data Corp. at
least ten days prior to the effective date of such a change or suspension. The
Service may be terminated by the shareholder or Seligman Data Corp. at any time
by written notice. It will be terminated upon proper notification of the death
or legal incapacity of the shareholder. This Service is considered terminated in
the event a withdrawal of shares, other than to make scheduled withdrawal
payments, reduces the value of shares remaining on deposit to less than $5,000.
Continued payments in excess of dividend income invested will reduce and
ultimately exhaust capital. Withdrawals, concurrent with purchases of shares of
this or any other investment company, will be disadvantageous because of the
payment of duplicative sales loads, if applicable. For this reason, additional
purchases of Series shares are discouraged when the Withdrawal Service is in
effect.
LETTER OF INTENT -- CLASS A SHARES ONLY
Seligman Financial Services, Inc. will hold in escrow shares equal to 5% of
the minimum purchase amount specified. Dividends and distributions on the
escrowed shares will be paid to the shareholder or credited to their account.
Upon completion of the specified minimum purchase within the thirteen-month
period, all shares held in escrow will be deposited into the shareholder's
account or delivered to the shareholder. A shareholder may include toward the
completion of a Letter of Intent the total asset value of shares of the Seligman
Mutual Funds on which a front-end sales load was paid as of the date of the
Letter. If the total amount invested within the thirteen-month period does not
equal or exceed the specified minimum purchase, the shareholder will be
requested to pay the difference between the amount of the sales load paid and
the amount of the sales load applicable to the total purchase made. If, within
20 days following the mailing of a written request, the shareholder has not paid
this additional sales load to Seligman Financial Services Inc. sufficient
escrowed shares will be redeemed for payment of the additional sales load.
Shares remaining in escrow after this payment will be released to the
shareholder's account. The intended purchase amount may be increased at any time
during the thirteen-month period by filing a revised Agreement for the same
period, provided that a Dealer furnishes evidence that an amount representing
the reduction in sales load under the new Agreement, which becomes applicable on
purchases already made under the original Agreement, will be refunded to the
Fund and that the required additional escrowed shares will be purchased by the
shareholder.
Shares of Seligman Cash Management Fund, Inc. which have been acquired by an
exchange of shares of another Seligman Mutual Fund on which there is a front-end
sales load may be taken into account in completing a Letter of Intent, or for
Right of Accumulation. However, shares of the Seligman Cash Management Fund
which have been purchased directly may not be used for purposes of determining
reduced sales loads on additional purchases of the other mutual funds in the
Seligman Group.
CHECK REDEMPTION SERVICE
The Check Redemption Service is available to Class A shareholders and to
Class D shareholders with respect to Class D shares held for one year or more.
If shares are held in joint names, all shareholders must sign the Check
Redemption section of the Account Application. All checks will require all
signatures unless a lesser number is indicated in the Check Redemption section.
Accounts in the names of corporations, trusts, partnerships, etc. must list all
authorized signatories.
In all cases, each signature guarantees the genuineness of the other
signatures. Checks may not be drawn for less than $500.
The shareholder authorizes Boston Safe Deposit and Trust Co. to honor
checks drawn by the shareholder on the account of Seligman U.S. Government
Securities Series and to effect a redemption of sufficient shares in the
shareholder's Fund account to cover payment of the check. The shareholder
understands that shares in one Series cannot be redeemed to cover a check
written on another Series.
Boston Safe Deposit and Trust Co. shall be liable only for its own
negligence. The Fund will not be liable for any loss, expense or cost arising
out of check redemptions. The Fund reserves the right to change, modify or
terminate this service at any time upon notification mailed to the address of
record of the shareholder(s).
SELIGMAN DATA CORP. WILL CHARGE A $10.00 PROCESSING FEE FOR ANY CHECK
REDEMPTION DRAFT RETURNED MARKED "UNPAID." THIS CHARGE MAY BE DEBITED FROM THE
ACCOUNT THE CHECK WAS DRAWN AGAINST. NO REDEMPTION PROCEEDS WILL BE REMITTED TO
A SHAREHOLDER WITH RESPECT TO SHARES PURCHASED BY CHECK (UNLESS CERTIFIED) UNTIL
SELIGMAN DATA CORP. RECEIVES NOTICE THAT THE CHECK HAS CLEARED WHICH MAY BE UP
TO 15 DAYS FROM THE CREDIT OF THE SHARES TO A SHAREHOLDER'S ACCOUNT.
4/96
24
<PAGE>
This page intentionally left blank.
<PAGE>
This page intentionally left blank.
<PAGE>
This page intentionally left blank.
<PAGE>
SELIGMAN
U.S. GOVERNMENT
SECURITIES
SERIES
100 Park Avenue
New York, New York 10017
INVESTMENT MANAGER
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, New York 10017
GENERAL DISTRIBUTOR
Seligman Financial Services, Inc.
100 Park Avenue
New York, New York 10017
SHAREHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, New York 10017
PORTFOLIO SECURITIES CUSTODIAN
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
GENERAL COUNSEL
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
TXUSG1 4/96
- --------------------------------------------------------------------------------
PROSPECTUS
----------------------------------
SELIGMAN
U.S. GOVERNMENT
SECURITIES
SERIES
----------------------------------
APRIL 22, 1996
[LOGO]
<PAGE>
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>
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
Page
Purchase And Redemption Of
Fund Shares................................. 11
Distribution Services.......................... 13
Valuation...................................... 14
Performance ................................... 14
General Information............................ 16
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
-2-
<PAGE>
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.
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 Advisers,
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
-4-
<PAGE>
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.
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 Advisers,
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 Advisers, 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 Advisers, 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; Raytheon Co., electronics;
and the Institute for Defense Analysis.
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 of
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 of 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).
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 Advisers,
Inc., advisers; Director or Trustee, the
Seligman Group of Investment Companies;
Director, Seligman Holdings, Inc., holding
company; Seligman Financial Services, Inc.,
distributor; 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; 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
Advisers, 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 Advisers, 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 N/A 66,000.00(d)
2,590.70(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, 1998, 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,
-8-
<PAGE>
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.
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 $1billion. 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 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. See the Appendix for further history of
the Manager. 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.
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
-9-
<PAGE>
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.
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 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 U.S. Government Securities Series and the High-Yield Bond 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 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
U.S. Government Securities Series and the High-Yield Bond 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 U.S. Government
Securities Series and the High-Yield Bond 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 U.S. Government Securities Series and the High-Yield Bond
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
-12-
<PAGE>
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.
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 U.S. Government Securities
Series and the High Yield Bond 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 spouses (
and family members of the foregoing) of the Funds, the other investment
companies in the Seligman Group, the Manager and other companies affiliated with
the Manager. Family members are defined to include lineal descendants and lineal
ancestors, siblings ( and their spouses and children) and any company or
organization controlled by any of the foregoing. Such sales may also be made to
employee benefit plans and thrift plans for such persons and to any investment
advisory, custodial, trust or other fiduciary account managed or advised by 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 and dealers commissions by a Series
for 1995, 1994 and 1993.
<TABLE>
<CAPTION>
SERIES SFSI CONCESSIONS DEALER COMMISSIONS
------ ---------------- ------------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
U.S. Government
Securities Series $ 11,889 $ 8,580 $ 12,563 $ 87,970 $ 61,645 $ 91,712
High-Yield
Series 459,774 45,213 67,466 3,554,416 353,427 519,151
</TABLE>
No Class B shares were outstanding throughout the 3 year period ended December
31, 1995 and as a result no CDSL charges from Class B shares were retained by
SFSI.
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.
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,
-14-
<PAGE>
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.
<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%
-15-
<PAGE>
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 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
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.
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
-16-
<PAGE>
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.
THE SELIGMAN COMPLEX:
.... Prior to 1900
o Helps finance America's fledgling railroads through underwritings.
o Is admitted to the New York Stock Exchange in 1869. Seligman remained a
member of the NYSE until 1993, when the evolution of its business made
it unnecessary.
o Becomes a prominent underwriter of corporate securities, including New
York Mutual Gas Light Company, later part of Consolidated Edison.
o Provides financial assistance to Mary Todd Lincoln and urges the Senate
to award her a pension.
o Is appointed U.S. Navy fiscal agent by President Grant.
o Becomes a leader in raising capital for America's industrial and urban
development.
...1900-1910
o Helps Congress finance the building of the Panama Canal.
...1910s
o Participates in raising billions for Great Britain, France and Italy,
helping to finance World War I.
-18-
<PAGE>
...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.
o Establishes Whitehall Fund, Inc., today Seligman Income Fund, Inc.
...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.
-19-
<PAGE>
================================================================================
11TH ANNUAL REPORT
SELIGMAN
HIGH INCOME
FUND SERIES
December 31, 1995
{LOGO]
================================================================================
A High Current Income Series
Established in 1985
<PAGE>
================================================================================
TO THE SHAREHOLDERS
- --------------------------------------------------------------------------------
In general, both the U.S. Government Securities Series and High-Yield Bond
Series performed favorably during the past year. Long-term performance results
and interviews with the Portfolio Managers begin on page 3.
The US financial markets had a banner year in 1995. After a pessimistic
start, many factors including low inflation, falling interest rates, and strong
corporate earnings paved the way for a memorable year.
For the fixed-income markets, the benchmark 30-year Treasury bond yield went
from 7.84% on December 29, 1994, to 5.95% on December 31, 1995. Additionally,
the Ibbotson Long-Term Government Bond Index posted a remarkable total return of
31.7%, the second best performance since 1926. Only 1982's 40.4% total return
saw bigger returns to Treasury bond investors.
In spite of the historic advances, the financial markets did teeter towards
the end of the year due to the Federal budget stalemate between the White House
and Congress. Nevertheless, the deadlock in Washington did not deter the Federal
Reserve Board from lowering short-term interest rates on December 19 -- the
second time in 1995. This move quickly rejuvenated the markets.
Looking forward, the slowing economy, the budget negotiations, and the 1996
Presidential election are a few of the factors that may create somewhat more
volatile markets in the year ahead.
U.S. Government Securities Series
For your Series' Class A shares, net asset value per share was $7.15 at
December 31 compared to $6.47 a year ago. Dividends totalling $0.4556 per share
were paid during the year. The total return, assuming the investment of all
dividends paid in additional shares, was 18.15% for the 12 months ended December
31, 1995. Current annualized yield for the 30 days ended December 31 was 5.09%,
calculated at the maximum offering price of $7.51 per share at December 31.
For your Series' Class D shares, net asset value per share was $7.16 at
December 31 compared to $6.48 a year ago. Dividends totalling $0.3965 per share
were paid during the year. The total return, assuming the investment of all
dividends paid in additional shares, was 17.10% for the 12 months ended December
31, 1995. Current annualized yield for the 30 days ended December 31 was 4.50%,
calculated at the maximum offering price of $7.16 per share at December 31.
The U.S. Government Securities Series' net assets totalled $63 million at
year end.
High-Yield Bond Series
For your Series' Class A shares, net asset value per share was $6.96 at
December 31 compared to $6.35 a year ago. Dividends totalling $0.6518 per share
were paid during the year. The total return, assuming the investment of all
dividends paid in additional shares, was 20.72% for the 12 months ended December
31, 1995. Current annualized yield for the 30 days ended December 31 was 8.99%,
calculated at the maximum offering price of $7.31 per share at December 31.
For your Series' Class D shares, net asset value per share was $6.96 at
December 31 compared to $6.35 a year ago. Dividends totalling $0.5932 per share
were paid during the year. The total return, assuming the investment of all
dividends paid in additional shares, was 19.67% for the 12 months ended December
31, 1995. Current annualized yield for the 30 days ended December 31 was 8.66%,
calculated at the maximum offering price of $6.96 per share at December 31.
The High-Yield Bond Series' net assets totalled $272 million at year end.
A Special Meeting of Shareholders was held on December 12, at which several
proposals were voted on. The results of the Special Meeting appear on page 18.
We thank you for your continued investment in Seligman High Income Fund
Series and look forward to serving your investment needs in 1996 and the years
ahead.
By order of the Trustees,
/s/ William Morris
William C. Morris
Chairman
/s/Brian T. Zino
Brian T. Zino
President
February 2, 1996
1
<PAGE>
================================================================================
SELIGMAN HIGH INCOME FUND SERIES
- --------------------------------------------------------------------------------
HIGHLIGHTS December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
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) $55.0 $8.2 $182.1 $90.2
- -----------------------------------------------------------------------------------------------------------
Yield* 5.09% 4.50% 8.99% 8.66%
- -----------------------------------------------------------------------------------------------------------
Dividends** $0.4558 $0.3980 $0.6536 $0.5952
- -----------------------------------------------------------------------------------------------------------
Net asset value per share $7.15 $7.16 $6.96 $6.96
- -----------------------------------------------------------------------------------------------------------
Maximum offering
price per share $7.51 $7.16 $7.31 $6.96
- -----------------------------------------------------------------------------------------------------------
Holdings by U.S. Treasury Securities 76.8% Corporate Bonds 89.2%
market sector Government Agency Convertible Bonds 4.8
Securities 18.1 Net Cash & Short-
Net Cash & Short- Term Holdings 6.0
Term Holdings 5.1
- -----------------------------------------------------------------------------------------------------------
Weighted average
maturity 18.8 years 8.1 years
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Current yield representing the annualized yield for the 30-day period ended
December 31, 1995. See pages 4 and 6 for average annual total returns.
** Represents per share amount paid or declared for the year ended December
31, 1995.
Note: 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. Past performance
is not indicative of future investment results.
2
<PAGE>
================================================================================
ANNUAL PERFORMANCE OVERVIEW -- Seligman U.S. Government Securities Series
- --------------------------------------------------------------------------------
[PHOTO]
Your Portfolio Manager
Leonard J. Lovito is a Vice President of J. & W. Seligman & Co. Incorporated and
Vice President and Portfolio Manager of Seligman U.S. Government Securities
Series. Mr. Lovito, who joined Seligman in 1984 as a fixed-income trader, also
serves as Vice President and Portfolio Manager of Seligman Cash Management Fund,
and Vice President of Seligman Portfolios, Inc. and Portfolio Manager of its
Fixed Income Securities and Cash Management portfolios. Mr. Lovito is supported
by a team of seasoned research professionals who assist him in selecting
securities in accordance with your Series' objectives.
Economic Factors Affecting Seligman U.S. Government Securities Series
"One of the key factors to your Series' performance is the movement of interest
rates. In 1995, moderating economic growth, subdued inflation, and the potential
for a credible deficit reduction accord helped lower interest rates. The Federal
Reserve Board reduced the federal funds rate twice during the year, resulting in
a rally in bond prices. This led to a positive total return for your Series.
Since your Series held issues with longer maturities than its peers, it
outperformed the average return for all Government bond funds for the year."
Your Manager's Investment Strategy
"We began extending the maturities of the issues in the portfolio by purchasing
long-term bonds when economic growth started to moderate and bring down the rate
of inflation and interest rates. We used this strategy in order to take
advantage of declining interest rates, as long-term bonds perform better than
short-term bonds in a declining interest rate environment."
Individual Sector Performance
"We favored US Treasury securities in 1995 over GNMA mortgage-backed securities,
as Treasury securities tend to outperform mortgage-backed securities in a
declining interest rate environment. Mortgage-backed securities' average
maturities shorten as interest rates decline due to the refinancing of
mortgages."
Outlook for the Year Ahead
"Sluggish income growth and high consumer debt will more than likely slow
economic growth in the first half of 1996. This moderating growth trend, coupled
with a potential balanced-budget accord, could prompt the Federal Reserve Board
to ease monetary policy further and lead to continued interest rate declines. If
this scenario comes to fruition, we anticipate that we will continue to hold and
purchase long-maturity Treasury Bonds."
3
<PAGE>
================================================================================
PERFORMANCE COMPARISON CHART AND TABLE December 31, 1995
- --------------------------------------------------------------------------------
This chart compares a $10,000 hypothetical investment made in Seligman U.S.
Government Securities Series Class A shares, with and without the maximum
initial sales charge of 4.75%, for the 10-year period ended December 31, 1995,
to a $10,000 investment made in the Lehman Brothers Government/ Mortgage Index
(Lehman Index), the Lipper General U.S. Government Funds Index (Lipper Index),
and the Lehman Brothers Government Bond Index (Lehman Bond Index) for the same
period. The performance of Seligman U.S. Government Securities Series Class D
shares is not shown in this chart, but is included in the table below. It is
important to keep in mind that the Indices exclude the effect of any fees or
sales charges. Seligman U.S. Government Securities Series will no longer be
compared to the Lehman Brothers Government/Mortgage Index after December 31,
1995, as this Index measures fixed-rate securities backed by mortgage pools of
GNMA, FNMA, and FHLMC and your Series does not invest solely in these types of
securities. Your Manager believes the Lehman Index and the Lipper Index are more
appropriate benchmarks for your Series. Therefore, your Series will continue to
be compared only to the Lipper Index and the Lehman Bond Index.
[The table below was presented as a line chart in the printed document]
<TABLE>
<CAPTION>
with sales without Lehman Brothers Lehman Government
DATE charge sales charge Mortgage Index Lipper Index Bond Index
---- ------ ------------ -------------- ------------ ----------
<C> <C> <C> <C> <C> <C>
12/31/85 $ 9,530 $10,000 $10,000 $10,000 $10,000
3/31/86 $10,796 $11,328 $10,448 $10,522 $10,866
6/30/86 $10,834 $11,369 $10,517 $10,636 $11,009
9/30/86 $10,798 $11,330 $10,930 $10,855 $11,224
12/31/86 $11,062 $11,607 $11,343 $11,185 $11,532
3/31/87 $11,028 $11,571 $11,594 $11,322 $11,667
6/30/87 $10,452 $10,967 $11,435 $11,040 $11,462
9/30/87 $ 9,950 $10,440 $11,197 $10,664 $11,154
12/31/87 $10,748 $11,278 $11,830 $11,241 $11,784
3/31/88 $11,205 $11,757 $12,336 $11,617 $12,173
6/30/88 $11,314 $11,872 $12,542 $11,727 $12,288
9/30/88 $11,486 $12,052 $12,840 $11,919 $12,495
12/31/88 $11,591 $12,162 $12,863 $11,987 $12,613
3/31/89 $11,606 $12,177 $13,022 $12,084 $12,746
6/30/89 $12,222 $12,825 $14,033 $12,941 $13,771
9/30/89 $12,299 $12,905 $14,264 $13,022 $13,886
12/31/89 $12,664 $13,288 $14,835 $13,471 $14,408
3/31/90 $12,353 $12,962 $14,854 $13,304 $14,229
6/30/90 $12,708 $13,334 $15,417 $13,726 $14,727
9/30/90 $12,781 $13,410 $15,645 $13,803 $14,849
12/31/90 $13,471 $14,135 $16,425 $14,555 $15,664
3/31/91 $13,686 $14,360 $16,921 $14,862 $16,004
6/30/91 $13,883 $14,567 $17,250 $15,026 $16,220
9/30/91 $14,643 $15,364 $18,196 $15,888 $17,145
12/31/91 $15,363 $16,120 $19,006 $16,684 $18,064
3/31/92 $15,036 $15,777 $18,842 $16,386 $17,748
6/30/92 $15,619 $16,388 $19,560 $16,989 $18,450
9/30/92 $16,257 $17,058 $20,184 $17,656 $19,362
12/31/92 $16,252 $17,053 $20,329 $17,708 $19,370
3/31/93 $16,720 $17,544 $20,931 $18,333 $20,245
6/30/93 $17,109 $17,953 $21,320 $18,798 $20,830
9/30/93 $17,521 $18,384 $21,525 $19,240 $21,507
12/31/93 $17,463 $18,324 $21,718 $19,180 $21,434
3/31/94 $17,104 $17,947 $21,215 $18,582 $20,789
6/30/94 $16,830 $17,659 $21,096 $18,222 $20,552
9/30/94 $16,873 $17,705 $21,279 $18,247 $20,638
12/31/94 $16,786 $17,613 $21,371 $18,270 $20,711
3/31/95 $17,396 $18,254 $22,491 $19,091 $21,686
6/30/95 $18,502 $19,414 $23,662 $20,135 $23,031
9/30/95 $18,787 $19,713 $24,159 $20,466 $23,438
12/31/95 $19,833 $20,810 $24,961 $21,340 $24,509
</TABLE>
- --------------------------------------------------------------------------------
The table below shows the average annual total returns for the one-, five-, and
10-year periods through December 31, 1995, for Seligman U.S. Government
Securities Series Class A shares, with and without the maximum initial sales
charge of 4.75%, the Lehman Index, the Lipper Index, and the Lehman Bond Index.
Also included in the table are the average annual total returns for the one-year
and since-inception periods through December 31, 1995, for Seligman U.S.
Government Securities Series Class D shares, with and without the effect of the
1% contingent deferred sales load ("CDSL") imposed on shares redeemed within one
year of purchase, the Lehman Index, the Lipper Index, and the Lehman Bond Index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
SINCE
ONE FIVE 10 ONE INCEPTION
YEAR YEARS YEARS YEAR 9/21/93
---- ----- ----- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Seligman U.S. Government Seligman U.S. Government
Securities Series+ Securities Series+
Class A with sales charge 12.58% 7.01% 7.09% Class D with CDSL 16.10% n/a
Class A without sales charge 18.15 8.04 7.60 Class D without CDSL 17.10 4.47%
Lehman Index 16.80 8.73 9.58 Lehman Index 16.80 6.80*
Lipper Index 16.80 7.95 7.87 Lipper Index 16.80 4.71*
Lehman Bond Index 18.34 9.37 9.38 Lehman Bond Index 18.34 5.98*
</TABLE>
*Calculated from 9/30/93.
- --------------------------------------------------------------------------------
+ Although the payment of principal and interest with respect to certain
long-term securities held in the U.S. Government Securities Series is guaranteed
by the U.S. Government or its agencies, the rate of return will vary and the
principal value of an investment in the Series will fluctuate.
4
<PAGE>
================================================================================
ANNUAL PERFORMANCE OVERVIEW -- Seligman High-Yield Bond Series
- --------------------------------------------------------------------------------
[PHOTO]
Your Portfolio Manager
Daniel J. Charleston is a Managing Director of J. & W. Seligman & Co.
Incorporated and has served as Vice President and Portfolio Manager of Seligman
High-Yield Bond Series since January 1990. In addition, Mr. Charleston is Vice
President of Seligman Portfolios, Inc. and is Portfolio Manager of its
High-Yield Bond portfolio. Mr. Charleston joined Seligman in 1987 as a Portfolio
Assistant. Mr. Charleston is supported by a team of research professionals who
assist in selecting companies whose bonds have the potential for high yields at
acceptable levels of investment risk consistent with your Series' objective.
Economic Factors Affecting Seligman High-Yield Bond Series
"The decline in interest rates during 1995 had a positive impact on the
performance and growth of your Series throughout the year. Increased demand for
high current income was evident as investors infused $10.2 billion into
high-yield mutual funds. Your Series benefitted from this, as its size increased
from $68 million at the beginning of the year to $272 million by year end."
Your Manager's Investment Strategy
"Your Series continued its strategy of investing in credits with improving cash
flows, strong industry fundamentals, and seasoned management teams. As a result,
your Series held a number of credits that were upgraded such as Arcadian
Partners L.P., Trump Plaza Funding, Bell & Howell Corporation, and Applied
Extrusion Technologies. Subsequently, these bonds appreciated in price,
contributing to your Series' strong performance."
Individual Sector Performance
"The hotel and gaming sectors performed well, in particular those located in
Atlantic City, as fears of increased competition subsided. Your portfolio, which
increased its weighting in this group, saw notable performance from Aztar Corp.
and Showboat Inc. Additionally, strong demand within the communications area
helped advance names such as Commnet Cellular (regional cellular operator),
ProNet Inc. (paging), and Intermedia Communications of Florida (competitive
access provider). In addition, the health care and utility sectors continued to
show positive trends."
Our Outlook for the Year Ahead
"We continue to find the high-yield marketplace an attractive investment for
those seeking a high level of current income. We expect credit quality to show
steady improvement within the media sectors. We believe telecommunications
reform will drive consolidation among the broadcasting, cable/telephony, and
wireless telecommunications industries. The consolidation, in turn, should lead
to increased economies of scale and cash flow."
5
<PAGE>
================================================================================
PERFORMANCE COMPARISON CHART AND TABLE December 31, 1995
- --------------------------------------------------------------------------------
This chart compares a $10,000 hypothetical investment made in Seligman
High-Yield Bond Series Class A shares, with and without the maximum initial
sales charge of 4.75%, for the 10-year period ended December 31, 1995, to a
$10,000 investment made in the Merrill Lynch High-Yield Master Index and the
Lipper High-Yield Index for the same period. The performance of Seligman
High-Yield Bond Series Class D shares is not shown in this chart, but is
included in the table below. It is important to keep in mind that the Indices
exclude the effect of any fees or sales charges.
[The table below was presented as a line chart in the printed document]
Merrill Lynch Lipper
with sales without High Yield High-Yield
DATE charge sales charge Master Index Index
---- ------ ------------ ------------ -----
12/31/85 $ 9,523 $10,000 $10,000 $10,000
3/31/86 $10,235 $10,748 $10,725 $10,633
6/30/86 $10,591 $11,121 $11,131 $10,995
9/30/86 $10,742 $11,280 $11,280 $10,996
12/31/86 $11,021 $11,573 $11,634 $11,318
3/31/87 $11,524 $12,101 $12,295 $12,058
6/30/87 $11,225 $11,787 $12,138 $11,932
9/30/87 $10,898 $11,443 $12,043 $11,741
12/31/87 $11,357 $11,926 $12,177 $11,536
3/31/88 $11,901 $12,497 $12,828 $12,236
6/30/88 $12,180 $12,789 $13,180 $12,623
9/30/88 $12,351 $12,970 $13,497 $12,861
12/31/88 $12,649 $13,282 $13,817 $13,099
3/31/89 $12,889 $13,535 $14,106 $13,338
6/30/89 $13,384 $14,054 $14,613 $13,703
9/30/89 $13,390 $14,061 $14,614 $13,429
12/31/89 $13,135 $13,793 $14,402 $12,733
3/31/90 $12,646 $13,279 $14,103 $12,173
6/30/90 $13,081 $13,736 $14,710 $12,720
9/30/90 $12,522 $13,149 $13,817 $11,748
12/31/90 $12,179 $12,789 $13,776 $11,320
3/31/91 $13,668 $14,352 $15,652 $13,096
6/30/91 $14,418 $15,140 $16,617 $14,060
9/30/91 $15,342 $16,111 $17,594 $15,087
12/31/91 $15,918 $16,715 $18,538 $15,870
3/31/92 $17,375 $18,245 $19,938 $17,308
6/30/92 $17,879 $18,774 $20,658 $17,867
9/30/92 $18,858 $19,802 $21,598 $18,574
12/31/92 $19,114 $20,071 $21,905 $18,786
3/31/93 $20,452 $21,476 $23,265 $20,090
6/30/93 $21,314 $22,381 $24,193 $21,052
9/30/93 $21,690 $22,776 $24,808 $21,444
12/31/93 $22,782 $23,922 $25,669 $22,509
3/31/94 $22,645 $23,778 $25,194 $22,271
6/30/94 $22,623 $23,756 $24,901 $21,972
9/30/94 $22,725 $23,863 $25,240 $21,966
12/31/94 $22,960 $24,110 $25,369 $21,682
3/31/95 $24,155 $25,364 $26,899 $22,732
6/30/95 $25,649 $26,933 $28,604 $23,907
9/30/95 $26,834 $28,178 $29,439 $24,698
12/31/95 $27,716 $29,105 $30,417 $25,351
- --------------------------------------------------------------------------------
The table below shows the average annual total returns for the one-, five-, and
10-year periods through December 31, 1995, for Seligman High-Yield Bond Series
Class A shares, with and without the maximum initial sales charge of 4.75%, the
Merrill Lynch High-Yield Master Index, and the Lipper High-Yield Index. Also
included in the table are the average annual total returns for the one-year and
since-inception periods through December 31, 1995, for Seligman High-Yield Bond
Series Class D shares, with and without the effect of the 1% contingent deferred
sales load ("CDSL") imposed on shares redeemed within one year of purchase, the
Merrill Lynch High-Yield Master Index, and the Lipper High-Yield Index.
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS
SINCE
ONE FIVE 10 ONE INCEPTION
YEAR YEARS YEARS YEAR 9/21/93
---- ----- ----- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Seligman High-Yield Bond Series Seligman High-Yield Bond Series
Class A with sales charge 14.92% 16.73% 10.73% Class D with CDSL 18.67% n/a
Class A without sales charge 20.72 17.87 11.27 Class D without CDSL 19.67 10.19%
Merrill Lynch High-Yield Merrill Lynch High-Yield
Master Index 19.90 17.16 11.77 Master Index 19.90 9.47*
Lipper High-Yield Index 16.92 17.50 9.31 Lipper High-Yield Index 16.92 7.72*
*Calculated from 9/30/93.
</TABLE>
- --------------------------------------------------------------------------------
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders. Performance data quoted represent changes in
prices and assume that all distributions within the periods are invested in
additional shares. The investment return and principal value of an investment
will fluctuate so that shares, if redeemed, may be worth more or less than their
original stated cost. Past performance is not indicative of future investment
results.
6
<PAGE>
================================================================================
PORTFOLIOS OF INVESTMENTS December 31, 1995
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES SERIES
PRINCIPAL
AMOUNT VALUE
------------ ------------
U.S. TREASURY SECURITIES 76.8%
U.S. Treasury Bonds:
8 7/8%, due 2/15/2019 ......................... $ 9,000,000 $ 12,144,375
9 1/4%, due 2/15/2016 ......................... 7,000,000 9,629,375
12 1/2%, due 8/15/2014 ........................ 12,000,000 19,406,244
U.S. Treasury Notes:
8 3/4%, due 8/15/2000 ......................... 2,000,000 2,273,124
8 3/4%, due 10/15/1997 ........................ 4,800,000 5,086,497
------------
TOTAL U.S. TREASURY SECURITIES (Cost $45,778,353) 48,539,615
------------
GOVERNMENT AGENCY SECURITIES 18.1% (Cost $10,658,823)
Government National Mortgage Association Obligations,
Mortgage-backed Pass-through Certificates:
7 1/2%, with various maturities
from 9/15/2021 to 8/15/2024** ................. 11,150,124 11,477,660
------------
SHORT-TERM HOLDINGS 3.7% (Cost $2,330,000) ....... 2,330,000
------------
TOTAL INVESTMENTS 98.6% (Cost $58,767,176) ....... 62,347,275
OTHER ASSETS LESS LIABILITIES 1.4% ............... 894,913
------------
NET ASSETS 100.0% ................................ $ 63,242,188
============
HIGH-YIELD BOND SERIES
CORPORATE BONDS 89.2%
AUTOMOTIVE 0.8%
Venture Holdings 9 3/4%, due 4/1/2004 ............ $ 2,500,000 $ 2,087,500
------------
BROADCASTING 2.9%
Act III Broadcasting 10 1/4%, due 12/15/2005 ..... 1,500,000 1,539,375
Allbritton Communications Co. 11 1/2%,
due 8/15/2004 ................................. 3,000,000 3,168,750
SFX Broadcasting, Inc. 11 3/8%, due 10/1/2000 .... 3,000,000 3,165,000
------------
7,873,125
------------
CABLE SYSTEMS 13.5%
American Telecasting 0% (14 1/2%+),
due 8/15/2000* ................................ 4,000,000 2,530,000
Comcast Corp. 10 5/8%, due 7/15/2012 ............. 7,500,000 8,503,125
Jones Intercable 10 1/2%, due 3/1/2008 ........... 2,500,000 2,731,250
Le Groupe Videotron Ltee. 10 5/8%,
due 2/15/2005 ................................. 5,000,000 5,356,250
People's Choice TV 0% (13 1/8%+),
due 6/1/2000 .................................. 4,000,000 2,310,000
Rogers Cablesystems 11%, due 12/1/2015 ........... 5,000,000 5,400,000
United International Holdings 0% (14%++),
due 11/15/1999 ................................ 7,500,000 4,687,500
Wireless One Inc. 13%, due 10/15/2003 ............ 5,000,000 5,325,000
------------
36,843,125
------------
CELLULAR 4.4%
Centennial Cellular 10 1/8%, due 5/15/2005 ....... 5,000,000 5,262,500
Commnet Cellular Corp. 11 1/4%, due 7/1/2005 ..... 2,750,000 2,928,750
Pricellular Corp. 0% (12 1/4%+), due 10/1/2003 ... 5,000,000 3,887,500
------------
12,078,750
------------
- ----------
See footnotes on page 9.
7
<PAGE>
================================================================================
PORTFOLIOS OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
HIGH-YIELD BOND SERIES (continued)
PRINCIPAL
AMOUNT VALUE
------------ ------------
CHEMICALS 4.2%
Arcadian Partners L.P. 10 3/4%, due 5/1/2005 ..... $ 3,750,000 $ 4,143,750
Great Lakes Carbon 10%, due 1/1/2006 ............. 3,000,000 3,090,000
NL Industries 11 3/4%, due 10/15/2003 ............ 4,000,000 4,290,000
------------
11,523,750
------------
CONSUMER PRODUCTS 2.3%
Williamhouse-Regency 13%, due 11/15/2005* ........ 6,000,000 6,330,000
------------
CONTAINER 1.2%
Silgan Corp. 11 3/4%, due 6/15/2002 .............. 3,000,000 3,210,000
------------
ENERGY 5.1%
Petroleum Heat & Power Co. Inc. 12 1/4%, due 2/1/2005 3,000,000 3,360,000
TransTexas Gas Corporation 11 1/2%, due 6/15/2002 5,000,000 5,187,500
United Meridian Corp. 10 3/8%, due 10/15/2005 .... 5,000,000 5,312,500
------------
13,860,000
------------
ENVIRONMENTAL SERVICES 1.0%
Allied Waste Industries 12%, due 2/1/2004 ........ 2,500,000 2,725,000
------------
FINANCIAL SERVICES 1.8%
Olympic Financial Ltd. 13%, due 5/1/2000 ......... 4,500,000 4,927,500
------------
GAMING/HOTEL 17.1%
Aztar Corp. 13 3/4%, due 10/1/2004 ............... 5,000,000 5,562,500
Casino Magic Finance Corp. 11 1/2%, due 10/15/2001 5,000,000 4,325,000
Grand Casinos 10 1/8%, due 12/1/2003 ............. 6,000,000 6,285,000
Showboat, Inc. 13%, due 8/1/2009 ................. 3,500,000 3,955,000
Stratosphere Corp. 14 1/4%, due 5/15/2002 ........ 7,500,000 8,512,500
Trump Hotels & Casino Resorts Funding, Inc. 15 1/2%,
due 6/15/2005 ................................. 7,500,000 8,062,500
Trump Plaza Funding, Inc. 10 7/8%, due 6/15/2001 . 5,000,000 5,200,000
Trump Taj Mahal 11.35%, due 11/15/1999 ........... 5,000,000 4,755,639
------------
46,658,139
------------
HEALTH CARE/MEDICAL PRODUCTS 4.6%
Dade International 13%, due 2/1/2005 ............. 3,600,000 4,032,000
Graphic Controls 12%, due 9/15/2005* ............. 4,000,000 4,130,000
Regency Health Services 9 7/8%, due 10/15/2002 ... 4,250,000 4,239,375
------------
12,401,375
------------
INDUSTRIAL 1.0%
IMO Industries 12%, due 11/1/2001 ................ 2,500,000 2,562,500
------------
INSURANCE 1.2%
Terra Nova Insurance 10 3/4%, due 7/1/2005 ....... 3,000,000 3,285,000
------------
LEISURE 1.5%
Premier Parks, Inc. 12%, due 5/15/2003 ........... 4,000,000 4,120,000
------------
MANUFACTURING 2.4%
Howmet Corp. 10%, due 12/1/2003* ................. 2,500,000 2,637,500
RBX Corporation 11 1/4%, due 10/15/2005* ......... 4,000,000 3,940,000
------------
6,577,500
------------
PAGING 6.0%
Metrocall 10 3/8%, due 10/1/2007 ................. 5,000,000 5,325,000
Mobile Telecommunication Technologies Corp.
13 1/2%, due 12/15/2002 ....................... 5,000,000 5,575,000
ProNet Inc. 11 7/8%, due 6/15/2005 ............... 5,000,000 5,525,000
------------
16,425,000
------------
- ----------
See footnotes on page 9.
8
<PAGE>
================================================================================
December 31, 1995
- --------------------------------------------------------------------------------
HIGH-YIELD BOND SERIES (continued)
PRINCIPAL
AMOUNT VALUE
------------ ------------
PAPER AND PACKAGING 1.1%
Crown Packaging Ltd. 10 3/4%, due 11/1/2000 ...... $ 3,000,000 $ 2,880,000
------------
RETAILING 0.8%
Thrifty Payless Inc. 12 1/4%, due 4/15/2004 ...... 2,000,000 2,150,000
------------
SUPERMARKETS 2.1%
Pathmark Stores, Inc. 12 5/8%, due 6/15/2002 ..... 1,500,000 1,545,000
Pathmark Stores, Inc. 11 5/8%, due 6/15/2002 ..... 4,000,000 4,040,000
------------
5,585,000
------------
TELECOMMUNICATIONS 7.0%
American Communication Services 0% (13%+),
due 11/1/2000* ................................ 5,000,000 2,762,500
Fonorola Inc. 12 1/2%, due 8/15/2002 ............. 5,000,000 5,275,000
Intermedia Communications of Florida, Inc. .......
13 1/2%, due 6/1/2005 ......................... 5,000,000 5,625,000
Intermedia Communications of Florida, Inc. .......
(Warrants expiring 6/1/2000)* ................. 5,000 50,000
IXC Communications 13%, due 10/1/2005* ........... 5,000,000 5,362,500
------------
19,075,000
------------
THEATRES 3.3%
Act III Theatres, Inc. 11 7/8%, due 2/1/2003 ..... 3,000,000 3,262,500
Cinemark USA Inc. 12%, due 6/1/2002 .............. 2,000,000 2,155,000
Plitt Theatres, Inc. 10 7/8%, due 6/15/2004 ...... 4,000,000 3,620,000
------------
9,037,500
------------
UTILITIES 2.9%
Midland Cogeneration Venture 11 3/4%, due 7/23/2005 7,500,000 7,894,275
------------
MISCELLANEOUS 1.0%
Herff Jones, Inc. 11%, due 8/15/2005 ............. 2,500,000 2,668,750
------------
TOTAL CORPORATE BONDS (Cost $233,663,512) ........ 242,778,789
------------
CONVERTIBLE BONDS 4.8%
COMPUTERS AND RELATED SERVICES 1.3%
EMC Corp. 4 1/4%, due 1/1/2001 ................... 3,500,000 3,482,500
------------
SEMICONDUCTORS 3.5%
Altera Corp. 5 3/4%, due 6/15/2002* .............. 2,000,000 2,327,500
Integrated Device Technology 5 1/2%, due 6/1/2002 5,000,000 4,112,500
VLSI Technology, Inc. 8 1/4%, due 10/1/2005 ...... 3,500,000 3,228,750
------------
9,668,750
------------
TOTAL CONVERTIBLE BONDS (Cost $14,210,857) ....... 13,151,250
------------
SHORT-TERM HOLDINGS 3.6%
(Cost $9,800,000) ............................. 9,800,000
------------
TOTAL INVESTMENTS 97.6%
(COST $257,674,369) ........................... 265,730,039
OTHER ASSETS LESS LIABILITIES 2.4% ............... 6,552,157
------------
NET ASSETS 100.0% ................................ $272,282,196
============
- ----------
* Rule 144A security.
** 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.
+ 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.
9
<PAGE>
================================================================================
STATEMENTS OF ASSETS AND LIABILITIES December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT HIGH-YIELD
SECURITIES SERIES BOND SERIES
----------------- -----------
<S> <C> <C>
ASSETS:
Investments, at value (see portfolios of investments):
Long-term holdings............................................... $60,017,275 $255,930,039
Short-term holdings.............................................. 2,330,000 9,800,000
----------- ------------
62,347,275 265,730,039
Cash................................................................ 60,546 83,072
Interest receivable................................................. 1,339,215 5,270,668
Receivable for Shares of Beneficial Interest sold................... 62,096 3,480,900
Expenses prepaid to shareholder service agent....................... 4,891 17,033
Other............................................................... 23,221 53,130
----------- ------------
Total Assets........................................................ 63,837,244 274,634,842
----------- ------------
LIABILITIES:
Payable for Shares of Beneficial Interest repurchased............... 321,862 979,003
Dividends payable................................................... 140,803 967,891
Accrued expenses, taxes, and other.................................. 132,391 405,752
----------- ------------
Total Liabilities 595,056 2,352,646
----------- ------------
Net Assets.......................................................... $63,242,188 $272,282,196
=========== ============
COMPOSITION OF NET ASSETS:
Shares of Beneficial Interest, at par (unlimited
shares authorized; $.001 par
value; 8,842,638 and 39,118,119 shares outstanding):
Class A.......................................................... $ 7,701 $ 26,169
Class D.......................................................... 1,142 12,949
Additional paid-in capital.......................................... 75,952,508 275,926,718
Accumulated net realized loss....................................... (16,299,262) (11,739,310)
Net unrealized appreciation of investments.......................... 3,580,099 8,055,670
----------- ------------
Net Assets.......................................................... $63,242,188 $272,282,196
=========== ============
NET ASSETS:
Class A............................................................. $55,061,526 $182,129,203
Class D............................................................. $ 8,180,662 $ 90,152,993
SHARES OF BENEFICIAL INTEREST OUTSTANDING:
Class A............................................................. 7,700,689 26,169,062
Class D............................................................. 1,141,949 12,949,057
NET ASSET VALUE PER SHARE:
Class A............................................................. $7.15 $6.96
Class D............................................................. $7.16 $6.96
</TABLE>
- ----------
See notes to financial statements.
10
<PAGE>
================================================================================
STATEMENTS OF OPERATIONS For the year ended December 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT HIGH-YIELD
SECURITIES SERIES BOND SERIES
----------------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................................... $ 4,739,369 $15,434,135
----------- -----------
EXPENSES:
Management fees........................................................ 301,343 723,340
Distribution and service fees.......................................... 177,326 618,606
Shareholder account services........................................... 113,923 322,572
Registration........................................................... 49,197 92,738
Auditing and legal fees................................................ 43,333 42,403
Custody and related services........................................... 19,500 20,000
Trustees' fees and expenses............................................ 14,493 14,705
Shareholder reports and communications................................. 11,861 21,435
Shareholders' meeting.................................................. 4,040 7,950
Miscellaneous.......................................................... 14,179 12,056
----------- -----------
Total expenses......................................................... 749,195 1,875,805
----------- -----------
Net investment income.................................................. 3,990,174 13,558,330
----------- -----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments....................................... 2,039,308 1,610,990
Net change in unrealized depreciation
of investments....................................................... 4,046,357 9,316,772
----------- -----------
Net gain on investments ............................................... 6,085,665 10,927,762
----------- -----------
Increase in net assets from operations ................................ $10,075,839 $24,486,092
=========== ===========
</TABLE>
- ----------
See notes to financial statements.
11
<PAGE>
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT HIGH-YIELD BOND
SECURITIES SERIES SERIES
----------------------------- ------------------------------
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
----------------------------- ------------------------------
1995 1994 1995 1994
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.......................... $ 3,990,174 $ 4,328,471 $ 13,558,330 $ 6,344,604
Net realized gain (loss) on investments........ 2,039,308 (8,470,786) 1,610,990 (2,208,378)
Net change in unrealized appreciation/
depreciation of investments.................. 4,046,357 1,282,482 9,316,772 (3,676,736)
----------- ----------- ------------ -----------
Increase (decrease) in net assets
from operations ............................. 10,075,839 (2,859,833) 24,486,092 459,490
----------- ----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A...................................... (3,598,301) (4,008,490) (10,106,642) (5,767,970)
Class D...................................... (391,873) (319,981) (3,451,688) (576,634)
----------- ----------- ------------ -----------
Decrease in net assets from distributions...... (3,990,174) (4,328,471) (13,558,330) (6,344,604)
----------- ----------- ------------ -----------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sale of shares:
Class A...................................... 3,825,303 4,137,872 105,673,183 11,688,898
Class D...................................... 2,880,957 6,115,820 73,974,274 8,015,004
Net asset value of shares issued in payment
of dividends:
Class A...................................... 1,701,734 1,780,986 4,574,683 2,261,113
Class D...................................... 277,256 217,588 1,987,440 302,588
Exchanged from associated Funds:
Class A...................................... 7,127,733 933,673 40,995,621 6,483,870
Class D...................................... 3,553,259 677,329 17,689,110 1,164,394
----------- ----------- ------------ -----------
Total.......................................... 19,366,242 13,863,268 244,894,311 29,915,867
----------- ----------- ------------ -----------
Cost of shares repurchased:
Class A...................................... (11,627,920) (12,487,426) (11,822,223) (11,886,183)
Class D...................................... (1,974,060) (1,068,325) (5,891,925) (1,040,965)
Exchanged into associated Funds:
Class A...................................... (6,070,037) (2,888,033) (24,535,126) (5,594,008)
Class D...................................... (3,313,843) (1,577,342) (9,572,687) (935,241)
----------- ----------- ------------ -----------
Total.......................................... (22,985,860) (18,021,126) (51,821,961) (19,456,397)
----------- ----------- ------------ -----------
Increase (decrease) in net assets from
transactions in shares of
beneficial interest.......................... (3,619,618) (4,157,858) 193,072,350 10,459,470
----------- ----------- ------------ -----------
Increase (decrease) in net assets.............. 2,466,047 (11,346,162) 204,000,112 4,574,356
NET ASSETS:
Beginning of year.............................. 60,776,141 72,122,303 68,282,084 63,707,728
----------- ----------- ------------ -----------
End of year.................................... $63,242,188 $60,776,141 $272,282,196 $68,282,084
=========== =========== ============ ===========
</TABLE>
- ----------
See notes to financial statements.
12
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Seligman High Income Fund Series (the "Fund") consists of two separate series
(collectively, the "Series"): the "U.S. Government Securities Series" and the
"High-Yield Bond Series." 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 year from net investment income or net realized gains may differ from
their ultimate treatment for federal income tax purposes. These differences
are caused primarily by differences in the timing of the recognition of
certain components of income, expense, or capital gain for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net assets based on their ultimate
characterization for federal income tax purposes. Any such
reclasssification will have no effect on net assets, results of operations,
or net asset value per share of the Fund.
3. Purchases and sales of portfolio securities, excluding short-term
investments, for the year ended December 31, 1995, were as follows:
SERIES PURCHASES SALES
- --------------------------------------------------------------------------------
U.S. Government
Securities $126,208,807 $129,793,011
High-Yield Bond 417,413,181 236,906,209
At December 31, 1995, the cost of investments for federal income tax
purposes was $58,767,176 and $258,239,129 for the U.S. Government Securities and
High-Yield Bond Series, respectively, 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 $3,580,099 $ --
High-Yield Bond 9,533,545 2,042,635
4. At December 31, 1995, the Fund owned short-term investments which matured in
less than 7 days.
5. J. & W. Seligman & Co. Incorporated (the "Manager") manages the affairs of
the Fund and provides the necessary personnel and facilities. Compensation of
13
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
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
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.
Effective January 1, 1996, the annual management fee rate for the High-Yield
Bond Series is 0.65% of the first $1 billion of the Series' average daily net
assets, and 0.55% of average daily net assets in excess of $1 billion.
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 $ 87,970 $ 11,889
High-Yield Bond 3,554,416 459,774
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to Class A shares under which service organizations
can enter into agreements with the Distributor and receive a continuing fee of
up to 0.25% on an annual basis, payable quarterly, of the average daily net
assets of the Class A shares attributable to the particular service organization
for providing personal services and/or the maintenance of shareholder accounts.
The Distributor charges such fees to the Fund pursuant to the Plan. For the year
ended December 31, 1995, such fees paid by the U.S. Government Securities and
High-Yield Bond Series aggregated $110,109 and $226,287, or 0.21% and 0.22% 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 year ended December 31, 1995,
fees paid by the U.S. Government Securities and High-Yield Bond Series
aggregated $67,217 and $392,319, respectively, or 1% per annum of the average
daily net assets of Class D shares.
The Distributor is entitled to retain any CDSL imposed on certain
redemptions occurring within one year of purchase. For the year ended December
31, 1995, such charges imposed were $2,634 for the U.S. Government Securities
Series and $33,929 for the High-Yield Bond Series.
Effective April 1, 1995, Seligman Services, Inc., an affiliate of the
Manager, became eligible to receive commission from certain sales of shares of
each series, as well as distribution and service fees pursuant to the Plan. For
the period ended December 31, 1995, Seligman Services, Inc., received
commissions from sales of shares of each series and distribution and service
fees pursuant to the Plan, as follows:
DISTRIBUTION AND
SERIES COMMISSIONS SERVICE FEES
- --------------------------------------------------------------------------------
U.S. Government
Securities $ 8,380 $ 2,952
High-Yield Bond 7,087 19,702
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, $113,900, and High-Yield Bond
Series, $315,426.
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 $22,000 were incurred by the Fund for legal services of Sullivan &
Cromwell, a member of which firm is a trustee of the Fund.
The Fund has a compensation agreement under which trustees who receive fees
may elect to defer receiving such fees. Interest is accrued on the deferred
balances. The annual cost of such fees and interest is included in trustees'
fees and expenses, and the accumulated balances thereof at December 31, 1995, of
$37,874 in the U.S. Government Securities Series and $21,943 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.
14
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
6. Class-specific expenses charged to Class A and Class D during the year
ended December 31, 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 $110,109 $ 67,217 $226,287 $392,319
Registration 9,757 5,103 10,277 9,808
Shareholder
reports and
communications 1,808 77 1,525 242
7. 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, 1995, net capital loss
carryforwards for the U.S. Government Securities Series and the High-Yield Bond
Series amounted to $16,299,262 and $11,174,550, 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.
8. Transactions in Shares of Beneficial Interest were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT HIGH-YIELD BOND
SECURITIES SERIES SERIES
----------------------------- -----------------------------
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
----------------------------- -----------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sale of shares:
Class A............................... 563,170 602,628 15,520,966 1,760,781
Class D............................... 420,595 879,410 10,865,793 1,191,967
Shares issued in payment of dividends:
Class A............................... 250,361 262,571 673,431 341,325
Class D............................... 40,634 32,428 290,559 46,166
Exchanged from associated Funds:
Class A............................... 1,037,221 139,088 6,014,478 986,393
Class D............................... 519,691 99,435 2,589,157 177,753
---------- ---------- ---------- ----------
Total................................... 2,831,672 2,015,560 35,954,384 4,504,385
---------- ---------- ---------- ----------
Shares repurchased:
Class A............................... (1,727,109) (1,835,575) (1,735,886) (1,793,114)
Class D............................... (288,754) (159,362) (859,011) (161,121)
Exchanged into associated Funds:
Class A............................... (883,771) (426,650) (3,600,993) (840,972)
Class D............................... (485,587) (238,485) (1,392,998) (141,316)
---------- ---------- ---------- ----------
Total................................... (3,385,221) (2,660,072) (7,588,888) (2,936,523)
---------- ---------- ---------- ----------
Increase (decrease) in shares........... (553,549) (644,512) 28,365,496 1,567,862
========== ========== ========== ==========
</TABLE>
15
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights for each Series are presented below. The per share
operating performance data is designed to allow investors to trace the operating
performance, on a per share basis, from a Series' beginning net asset value to
the ending net asset value so that they can understand what effect the
individual items have on their investments, assuming they were held throughout
the period. Generally, the per share amounts are derived by converting the
actual dollar amounts incurred for each item, as disclosed in the financial
statements, to their equivalent per share 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>
U.S. GOVERNMENT SECURITIES SERIES
--------------------------------------------------------------------------------
CLASS A CLASS D
------------------------------------------ -------------------------------
YEAR ENDED
YEAR ENDED DECEMBER 31 DECEMBER 31 9/21/93*
------------------------------------------ ----------------- TO
1995 1994 1993 1992 1991 1995 1994 12/31/93
----- ----- ----- ----- ----- ----- ----- --------
<S> <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 $6.48 $7.20 $7.33
----- ----- ----- ----- ----- ----- ----- -----
Net investment income......... .46 .44 .53 .51 .51 .40 .37 .09
Net realized and unrealized
investment gain (loss)..... .68 (.71) (.01) (.11) .41 .68 (.72) (.13)
----- ----- ----- ----- ----- ----- ----- -----
Increase (decrease) from
investment operations...... 1.14 (.27) .52 .40 .92 1.08 (.35) (.04)
Dividends paid or declared.... (.46) (.44) (.53) (.51) (.51) (.40) (.37) (.09)
----- ----- ----- ----- ----- ----- ----- -----
Net increase (decrease) in
net asset value............ .68 (.71) (.01) (.11) .41 .68 (.72) (.13)
----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period $7.15 $6.47 $7.18 $7.19 $7.30 $7.16 $6.48 $7.20
===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN BASED ON
NET ASSET VALUE............ 18.15% (3.88)% 7.46% 5.78% 14.05% 17.10% (5.05)% (.65)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets 1.14% 1.10% 1.11% 1.05% 1.10% 2.01% 2.22% 2.09%+
Net investment income
to average net assets...... 6.71% 6.49% 7.22% 7.17% 7.39% 5.84% 5.40% 5.28%+
Portfolio turnover............ 213.06% 445.18% 170.35% 126.17% 95.46% 213.06% 445.18% 170.35%++
Net assets, end of period
(000's omitted)............ $55,061 $54,714 $69,805 $55,732 $64,440 $8,181 $6,062 $2,317
</TABLE>
- ----------
* Commencement of offering of Class D shares.
+ Annualized.
++ For the year ended December 31, 1993.
See notes to financial statements.
16
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH-YIELD BOND SERIES
--------------------------------------------------------------------------------
CLASS A CLASS D
------------------------------------------ -------------------------------
YEAR ENDED
YEAR ENDED DECEMBER 31 DECEMBER 31 9/21/93*
------------------------------------------ ----------------- TO
1995 1994 1993 1992 1991 1995 1994 12/31/93
----- ----- ----- ----- ----- ----- ----- --------
<S> <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 $6.35 $6.94 $6.74
----- ----- ----- ----- ----- ----- ----- -----
Net investment income......... .65 .65 .66 .69 .77 .60 .57 .12
Net realized and unrealized
investment gain (loss)..... .61 (.59) .52 .46 .75 .61 (.59) .20
----- ----- ----- ----- ----- ----- ----- -----
Increase (decrease) from
investment operations...... 1.26 .06 1.18 1.15 1.52 1.21 (.02) .32
Dividends paid or declared.... (.65) (.65) (.66) (.69) (.77) (.60) (.57) (.12)
----- ----- ----- ----- ----- ----- ----- -----
Net increase (decrease) in
net asset value............ .61 (.59) .52 .46 .75 .61 (.59) .20
----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period $6.96 $6.35 $6.94 $6.42 $5.96 $6.96 $6.35 $6.94
===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN BASED ON
NET ASSET VALUE............ 20.72% 0.78% 19.19% 20.08% 30.70% 19.67% (.30)% 4.53%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets 1.09% 1.13% 1.20% 1.21% 1.29% 1.91% 2.19% 2.04%+
Net investment income
to average net assets...... 9.73% 9.73% 9.68% 10.82% 13.36% 8.86% 8.68% 7.93%+
Portfolio turnover............ 173.39% 184.75% 193.91% 145.66% 181.08% 173.39% 184.75% 193.91%++
Net assets, end of period
(000's omitted)............ $182,129 $59,033 $61,333 $40,802 $32,287 $90,153 $9,249 $2,375
</TABLE>
* Commencement of offering of Class D shares.
+ Annualized.
++ For the year ended December 31, 1993.
See notes to financial statements.
17
<PAGE>
================================================================================
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Trustees and Shareholders,
Seligman High Income Fund Series:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of the U.S. Government Securities Series and the
High-Yield Bond Series of Seligman High Income Fund Series as of December 31,
1995, the related statements of operations for the year then ended and of
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the periods presented. These financial
statements and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the Fund's custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the U.S. Government
Securities Series and the High-Yield Bond Series of Seligman High Income Fund
Series as of December 31, 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
New York, New York
February 2, 1996
- --------------------------------------------------------------------------------
PROXY RESULTS
Seligman High Income Fund Series Shareholders voted on the following proposals
at the Special Meeting of Shareholders held on December 12, 1995, in New York,
New York. Each Trustee was elected, and all other proposals were approved. The
description of each proposal and number of shares voted are as follows:
FOR WITHHELD NON-VOTE
--- -------- --------
Election of Trustees:
Fred E. Brown 21,717,907 603,680 15,617,325
John R. Galvin 21,724,130 597,455 15,617,326
Alice S. Ilchman 21,778,782 542,813 15,617,317
Frank A. McPherson 21,737,321 584,267 15,617,323
John E. Merow 21,768,124 553,470 15,617,318
Betsy S. Michel 21,778,055 543,540 15,617,317
William C. Morris 21,780,243 541,452 15,617,217
James C. Pitney 21,763,991 557,603 15,617,319
James Q. Riordan 21,768,540 553,051 15,617,321
Ronald T. Schroeder 21,778,153 543,441 15,617,318
Robert L. Shafer 21,781,740 539,855 15,617,316
James N. Whitson 21,781,740 539,855 15,617,316
Brian T. Zino 21,774,103 547,492 15,617,317
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTE
--- ------- ------- --------
<S> <C> <C> <C> <C>
Ratification of the selection of Deloitte & Touche LLP as independent auditors .... 21,004,197 287,231 1,028,668 15,618,815
Approval for increasing borrowing limits for:
U.S. Government Securities Series ........................................... 4,034,852 369,705 264,056 4,279,317
High-Yield Bond Series ...................................................... 15,088,849 1,523,228 1,039,534 11,339,371
Approval of amendments to the fundamental investment policy regarding investment
in restricted and illiquid securities of the following series:
U.S. Government Securities Series ........................................... 3,887,466 365,411 415,735 4,279,317
High-Yield Bond Series ...................................................... 14,326,512 1,931,265 1,391,745 11,341,461
Approval of amendments to the Management Agreement with respect
to the High-Yield Bond Series .................................................. 12,686,578 3,746,673 1,215,872 11,341,859
</TABLE>
18
<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
Director, Baptist Medical Center
John E. Merow
Partner, Sullivan & Cromwell, Law Firm
Director, Commonwealth Aluminum Corporation
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, 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)
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)
President
Managing Director,
J. & W. Seligman & Co. Incorporated
- ----------
Member:
(1) Executive Committee
(2) Audit Committee
(3) Trustee Nominating Committee
- --------------------------------------------------------------------------------
EXECUTIVE OFFICERS
William C. Morris
Chairman
Brian T. Zino
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
19
<PAGE>
SELIGMAN FINANCIAL SERVICES, INC.
an affiliate of
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
This report is intended only for the information of shareholders or those who
have received the offering prospectus covering shares of beneficial interest of
Seligman High Income Fund Series, which contains information about the sales
charges, management fees, and other costs. Please read the prospectus carefully
before investing or sending money.
TX2 12/95
File No. 2-93076
811-4103
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements and Schedules:
Part A Financial Highlights for Class A shares for the ten years
ended December 31, 1995; Financial Highlights for Class D
shares for the period from September 21, 1993 (commencement
of offering) to December 31, 1995.
Part B Required Financial Statements for each Series are included
in the Fund's Annual Report to Shareholders, dated December
31, 1995, which are incorporated by reference in the
Statement of Additional Information. These Financial
Statements are: Portfolios of Investments as of December 31,
1995; Statements of Assets and Liabilities as of December 31,
1995; Statements of Operations for the year ended December
31, 1995; Statements of Changes in Net Assets for the years
ended December 31, 1995 and 1994; Notes to Financial
Statements; Financial Highlights for the five years ended
through December 31, 1995 for each Series' Class A shares and
for the period September 21, 1993 (commencement of offering)
through December 31, 1995 for each Series' Class D shares;
Report of Independent Auditors.
(b) Exhibits: All Exhibits have been previously filed except
Exhibits marked with an asterisk (*) which are incorporated
herein.
(1a) Declaration of Trust
(Incorporated by Reference to Pre-Effective
Amendment No. 1 filed on March 8, 1985.)
(1b) Certificate of Amendment to the Declaration of Trust of the
Registrant dated September 17, 1993.
(Incorporated by Reference to Post-Effective Amendment No. 17 filed
on September 21, 1993.)
(1c) Certificate of Amendment to the Declaration of Trust of Registrant,
dated April 10, 1996.*
(2) Bylaws.
(Incorporated by Reference to Pre-Effective No. 1 filed on
March 8, 1985.)
(3) N/A
(4a) Specimen Stock Certificate for Class A Shares.
(Incorporated by Reference to Post-Effective Amendment No. 18 filed
on April 29, 1994.)
(4b) Specimen Stock Certificate for Class B Shares.
(Incorporated by reference to Form SE filed on April 16, 1996).
(4c) Specimen Stock Certificate for Class D Shares.
(Incorporated by Reference to Post-Effective Amendment No. 17 filed
on September 21, 1993.)
(5a) Copy of Management Agreement between Seligman High Yield Bond Series
of the Registrant and J. & W. Seligman & Co. Incorporated.*
(5b) Copy of Management Agreement between U.S. Government Securities
Series of the Registrant and J & W. Seligman & Co. Incorporated.
(Incorporated by reference to Post-Effective Amendment No. 19, filed
on May 1, 1995.)
(6a) Copy of the new Distributing Agreement between Registrant and
Seligman Marketing, Inc.
(Incorporated by Reference to Post-Effective Amendment No. 15 filed
on April 30, 1993.)
(6b) Copy of amended Sales Agreement between Seligman Financial Services,
Inc. and Dealers.*
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION (continued)
(7a) Amendments to the Amended Retirement Income Plan of J. & W. Seligman
& Co. Incorporated and Trust.
(Incorporated by Reference to Post-Effective Amendment No. 18 filed
on April 29, 1994.)
(7b) Amendments to the Amended Employees' Thrift Plan of Union Data
Service Center, Inc. and Trust.
(Incorporated by Reference to Post-Effective Amendment No. 18 filed
on April 29, 1994.)
(8) Copy of Custodian Agreement between Registrant and Investors
Fiduciary Trust Company.
(Incorporated by Reference to Post-Effective Amendment No. 13 filed
on April 30, 1991.)
(10) Opinion and Consent of Counsel.
(Incorporated by Reference to Pre-Effective Amendment No. 2 filed on
February 14, 1985.)
(11) Report and Consent of Independent Auditors.*
(12) N/A
(13a) Purchase Agreement for Initial Capital between Registrant's Class B
shares & J. & W. Seligman &Co. Incorporated.*
(13b) Purchase Agreement for Initial Capital between Registrant 's Class D
Shares and J. & W. Seligman & Co. Incorporated.
(Incorporated by Reference to Post-Effective Amendment No. 17 filed
on September 21, 1993.)
(14) Copy of Amended Individual Retirement Account Trust and Related
Documents.
(Incorporated by Reference to Post-Effective Amendment No. 14 filed
on April 30, 1992.)
(14a) Copy of Amended Comprehensive Retirement Plans for Money Purchase
and/or Prototype Profit Sharing Plan.
(Incorporated by Reference to Seligman New Jersey Tax-Exempt Fund,
Inc., File No. 33-13401, Pre-Effective Amendment No. 1 filed on
January 11, 1988.)
(14b) Copy of Amended Basic Business Retirement Plans for Money Purchase
and/or Profit Sharing Plans.
(Incorporated by Reference to Seligman New Jersey Tax-Exempt Fund,
Inc., File No. 33-13401, Pre-Effective Amendment No. 1 filed on
January 11, 1988.)
(14c) Copy of Amended 403(b)(7) Custodial Account Plan.
(Incorporated by Reference to Seligman New Jersey Tax-Exempt Fund,
Inc., File No. 33-13401, Pre-Effective Amendment No. 1 filed on
January 11, 1988.)
(14d) Copy of Amended Simplified Employee Pension Plan (SEP).
(Incorporated by Reference to Post-Effective Amendment No. 14 filed
on April 30, 1992.)
(14e) Copy of the amended J. & W. Seligman & Co. Incorporated (SARSEP)
Salary Reduction and Other Elective Simplified Employee
Pension-Individual Retirement Accounts Contribution Agreement (Under
Section 408(k) of the Internal Revenue Code).
(Incorporated by Reference to Post-Effective Amendment No. 14 filed
on April 30, 1992.)
(15) Copy of amended Administration, Shareholder Services and Distribution
Plan for each Series and form of Agreement of Registrant.*
(16) Schedule of Computation of Performance Data provided in Registration
Statement in response to Item 22.
(Incorporated by Reference to Post-Effective Amendment No. 11 filed
on April 30, 1990.)
(17) Financial Data Schedule meeting the requirements of Rule 483 under
the Securities Act of 1933.*
(18) Copy of Multiclass Plan entered into by Registrant pursuant to Rule
18f-3 under the Investment Company Act of 1940.*
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT - None.
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION (continued)
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
(1) (2)
Number of Record
TITLE OF CLASS HOLDERS AS OF MARCH 29, 1996
-------------- ----------------------------
<S> <C> <C>
High-Yield Bond Series
Class A Common Stock 2,812
Class B Common Stock 0
Class D Common Stock 410
U.S. Government Securities Series
Class A Common Stock 9,370
Class D Common Stock 4,433
</TABLE>
ITEM 27. INDEMNIFICATION - Incorporated by reference to Registrant's
Post-Effective Amendment No. 13 filed on May 1, 1991.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER - J. & W.
Seligman & Co. Incorporated, a Delaware corporation ("Manager"),
is the Registrant's investment manager. The Manager also serves as
investment manager to sixteen other associated investment
companies. They are Seligman Capital Fund, Inc.,Seligman Cash
Management Fund, Inc., Seligman Common Stock Fund, Inc., Seligman
Communications and Information Fund, Inc., Seligman Frontier Fund,
Inc., Seligman Growth Fund, Inc., Seligman Henderson Global Fund
Series, Inc., Seligman Income Fund, Inc., Seligman New Jersey
Tax-Exempt Fund, Inc., Seligman Pennsylvania Tax-Exempt Fund
Series, Seligman Portfolios, Inc., Seligman Quality Municipal
Fund, Inc., Seligman Select Municipal Fund, Inc., Seligman
Tax-Exempt Fund Series, Inc., Seligman Tax-Exempt Series Trust and
Tri-Continental Corporation.
The Manager has an investment advisory service division which
provides investment management or advice to private clients. The
list required by this Item 28 of officers and directors of the
Manager, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged
in by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV, filed
by the Manager pursuant to the Investment Advisers Act of 1940
(SEC File No. 801-5798 which was filed on December 5, 1995).
ITEM 29. PRINCIPAL UNDERWRITERS
(a) The names of each investment company (other than the Registrant)
for which Registrant's principal underwriter currently
distributing securities of the Registrant also acts as a principal
underwriter, depositor or investment adviser follow:
Seligman Capital Fund, Inc.
Seligman Cash Management Fund, Inc.
Seligman Common Stock Fund, Inc.
Seligman Communications and Information Fund, Inc.
Seligman Frontier Fund, Inc.
Seligman Henderson Global Fund Series, Inc.
Seligman Growth Fund, Inc.
Seligman Income Fund, Inc.
Seligman New Jersey Tax-Exempt Fund, Inc.
Seligman Pennsylvania Tax-Exempt Fund Series
Seligman Portfolios, Inc.
Seligman Tax-Exempt Fund Series, Inc.
Seligman Tax-Exempt Series Trust
(b) Name of each trustee, officer or partner of Registrant's principal
underwriter named in the answer to Item 21:
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
SELIGMAN FINANCIAL SERVICES, INC.
AS OF MARCH 29, 1996
(1) (2) (3)
<S> <C> <C>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
----------------- --------------------- ------------------
WILLIAM C. MORRIS* Director Chairman of the Board and
Chief Executive Officer
BRIAN T. ZINO* Director President and Trustee
RONALD T. SCHROEDER* Director Trustee
FRED E. BROWN* Director Trustee
WILLIAM H. HAZEN* Director None
THOMAS G. MOLES* Director None
DAVID F. STEIN* Director None
STEPHEN J. HODGDON* President None
LAWRENCE P. VOGEL* Senior Vice President, Finance Vice President
MARK R. GORDON* Senior Vice President, Director None
of Marketing
GERALD I. CETRULO, III Senior Vice President of Sales, None
140 West Parkway Regional Sales Manager
Pompton Plains, NJ 07444
BRADLEY F. HANSON Senior Vice President of Sales, None
9707 Xylon Court Regional Sales Manager
Bloomington, MN 55438
BRADLEY W. LARSON Senior Vice President of Sales, None
367 Bryan Drive Regional Sales Manager
Danville, CA 94526
D. IAN VALENTINE Senior Vice President of Sales, None
307 Braehead Drive Regional Sales Manager
Fredericksburg, VA 22401
HELEN SIMON* Vice President, Sales None
Administration Manager
MARSHA E. JACOBY* Vice President, National Accounts None
Manager
WILLIAM W. JOHNSON* Vice President, Order Desk None
JAMES R. BESHER Regional Vice President None
14000 Margaux Lane
Town & Country, MO 63017
BRAD DAVIS Regional Vice President None
255 4th Avenue, #2
Kirkland, WA 98033
ANDREW DRALUCK Regional Vice President None
4215 N. Civic Center
Blvd #273
Scottsdale, AZ 85251
JONATHAN EVANS Regional Vice Pesident None
222 Fairmont Way
Ft. Lauderdale, FL 33326
CARLA GOEHRING Regional Vice President None
11426 Long Pine
Houston, TX 77077
SUSAN GUTTERUD Regional Vice President None
820 Humboldt, #6
Denver, CO 80218
MARK LIEN Regional Vice President None
5904 Mimosa
Sedalia, MO 65301
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION (continued)
SELIGMAN FINANCIAL SERVICES, INC.
AS OF MARCH 29, 1996
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
----------------- --------------------- --------------------
RANDY D. LIERMAN Regional Vice President None
2627 R.D. Mize Road
Independence, MO 64057
JUDITH L. LYON Regional Vice President None
163 Haynes Bridge Road, Ste 205
Alpharetta, CA 30201
DAVID MEYNCKE Regional Vice President None
4718 Orange Grove Way
Palm Harbor, FL 34684
HERB W. MORGAN Regional Vice President None
11308 Monticook Court
San Diego, CA 92127
MELINDA NAWN Regional Vice President None
5850 Squire Hill Court
Cincinnati, OH 45241
ROBERT H. RUHM Regional Vice President None
167 Derby Street
Melrose, MA 02176
DIANE H. SNOWDEN Regional Vice President None
11 Thackery Lane
Cherry Hill, NJ 08003
BRUCE TUCKEY Regional Vice President None
41644 Chathman Drive
Novi, MI 48375
ANDREW VEASEY Regional Vice President None
14 Woodside
Rumson, NJ 07760
TODD VOLKMAN Regional Vice President None
4650 Cole Avenue, #216
Dallas, TX 75205
KELLI A. WIRTH-DUMSER Regional Vice President None
8618 Hornwood Court
Charlotte, NC 28215
FRANK P. MARINO* Assistant Vice President, Mutual
Fund Product Manager None
FRANK J. NASTA* Secretary Secretary
AURELIA LACSAMANA* Treasurer None
* The principal business address of each of these directors and/or officers is 100 Park Avenue, New York, NY 10017.
(c) Not applicable.
</TABLE>
Item 30. Location of Accounts and Records
(1) Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105 AND
(2) Seligman Data Corp.
100 Park Avenue
New York, NY 10017
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION
ITEM 31. MANAGEMENT SERVICES - Seligman Data Corp. ("SDC") the
Registrant's shareholder service agent, has an agreement with
First Data Investor Services Group ("FDISG") pursuant to which
FDISG provides a data processing system for certain
shareholder accounting and recordkeeping functions performed
by SDC, which commenced in July 1990. For the fiscal years
ended December 31, 1995, 1994 and 1993 the approximate cost of
these services for each Series were:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
U.S. Government Securities Series
Class A $16,300 $16,274 $ 18,400
Class D $ 1,400 $ 858 N/A
High-Yield Bond Series
Class A $24,900 $ 13,980 $15,400
Class D $3,300 1,597 N/A
</TABLE>
Item 32. Undertakings - The Registrant undertakes, (1) to furnish a
copy of the Registrant's latest annual report, upon request and
without charge, to every person to whom a prospectus is delivered
and (2) if requested to do so by the holders of at least ten
percent of its outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the removal of a
director or directors and to assist in communications with other
shareholders as required by Section 16(c) of the Investment
Company Act of 1940.
<PAGE>
File No. 2-93076
811-4103
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 20 to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 19th day of April, 1996.
SELIGMAN HIGH INCOME FUND SERIES
By: /S/ WILLIAM C. MORRIS
William C. Morris, Chairman
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Post-Effective Amendment No. 20 has been
signed below by the following persons in the capacities indicated on April
19, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
/S/ WILLIAM C. MORRIS Chairman of the Trustees (Principal
- ----------------------- executive officer) and Trustee
William C. Morris*
/S/ BRIAN T. ZINO Trustee and President
- -----------------------
Brian T. Zino
/S/ THOMAS G. ROSE Treasurer (Principal financial and
- -----------------------
Thomas G. Rose Accounting Officer)
Fred E. Brown, Trustee )
Alice S. Ilchman, Trustee )
John E. Merow, Trustee )
Betsy S. Michel, Trustee )
James C. Pitney, Trustee ) /S/ BRIAN T. ZINO
James Q. Riordan, Trustee ) ---------------------------------------
Ronald T. Schroeder, Director ) *Brian T. Zino, Attorney-In-Fact
Robert L. Shafer, Trustee )
James N. Whitson, Trustee )
</TABLE>
SELIGMAN HIGH INCOME FUND SERIES
INSTRUMENT OF ESTABLISHMENT
AND DESIGNATION
(Pursuant to Section 6.9(j) of the
Declaration of Trust)
April 10, 1996
The undersigned, being at least a majority of the Trustees of Seligman
High Income Fund Series (the "Trust"), established pursuant to a Declaration of
Trust dated July 25, 1984 and amended thereafter from time to time (the
"Declaration") do hereby establish an additional class of Shares of the Seligman
High-Yield Bond Series of Shares of the Trust ("High-Yield Bond Series"), to be
designated "Class B Shares of the Seligman High-Yield Bond Series of Shares"
(for purposes of this instrument such shares being referred to as the "Class B
Shares"), such Class B Shares to enjoy all of the rights and preferences of a
Class of Shares of the Trust as are contemplated by the Declaration, and
otherwise to be entitled to all of the rights and privileges of Shares of the
High-Yield Bond Series. Without limiting the generality of the foregoing, the
undersigned state further as follows:
(a) The authorized number of Class B Shares shall be unlimited.
(b) All shares of the High-Yield Bond Series that are currently
issued and outstanding shall continue to be designated "Class
A Shares of the Seligman High-Yield Bond Series of Shares"
(for purposes of this instrument such Shares being referred to
as the "Class A Shares") or "Class D Shares of the Seligman
High-Yield Bond Series of Shares" (for purposes of this
instrument such Shares being referred to as the "Class D
Shares").
(c) The assets belonging to each of the Class A Shares, Class B
Shares and the Class D Shares shall be charged with the
liabilities of the High-Yield Bond Series in respect of such
Class, and all expenses, costs, charges, and reserves
attributable to a Class. Any general liabilities, expenses,
costs, charges or reserves of the High-Yield Bond Series that
are not readily identifiable as belonging to any Class in
particular shall be allocated and charged by the Trustees to
the Classes in such manner and on such basis as the Trustees
in their sole discretion may deem fair and equitable.
(d) Upon liquidation or termination of the High-Yield Bond Series,
Shareholders of a Class shall be entitled to a pro rata share
of the net assets of the High-Yield Bond Series attributable
to such Class.
<PAGE>
(e) At such time as shall be permitted under the Investment
Company Act, any applicable rules and regulations thereunder
and the provisions of any exemptive order applicable to the
High-Yield Bond Series, as may be determined by the Trustees
and disclosed in the then current prospectus of the High-Yield
Bond Series, shares of a particular Class may be automatically
converted into shares of another Class; provided, however,
that such conversion shall be subject to the continuing
availability of an opinion of counsel to the effect that such
conversion does not constitute a taxable event under federal
income tax law. The Trustees, in their sole discretion, may
suspend any conversion rights if such opinion is no longer
available.
(f) Class B Shares shall vote together with all other Shares of
the High-Yield Bond Series from time to time outstanding,
except that the Trustees may provide that any Class of Shares
separately, or together with one or more other Class of Shares
including any future Class shall vote as to any matter when
(i) required by law, rule or exemptive order, (ii) they
determine that such matter affects only the interest of Shares
of such Class or Classes or affects the interests of Shares of
such Class or Classes in a manner different from that of the
other Class or Classes or (iii) they otherwise determine that
to do so is necessary or desirable and in the best interests
of the Shareholders of such Class or Classes under the
circumstances.
(g) The net asset value of each Class of Shares of the High-Yield
Bond Series shall be determined on such days and at such time
or times as the Trustees shall determine. The method of
determination of the net asset value of a Class shall be
determined by the Trustees and shall be as set forth in the
Prospectus.
This instrument shall be effective upon its execution by the majority
of Trustees referred to above and shall have the status of, and shall be, an
amendment to the Declaration.
Capitalized terms not defined herein shall have the meanings attributed
to them in the Declaration.
<PAGE>
IN WITNESS WHEREOF, each of the undersigned Trustees has set his
signature as of the date first above written.
/s/ Fred E. Brown /s/ James Q. Riordan
- --------------------- -----------------------
/s/ William C. Morris /s/ Robert L. Shafer
- --------------------- -----------------------
/s/ Ronald T. Schroeder /s/ John E. Merow
- --------------------- -----------------------
/s/ Brian T. Zino
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT, dated as of December 29, 1988, and amended
January 1, 1996 between THE SELIGMAN HIGH INCOME FUND SERIES, a Massachusetts
business trust (the "Fund") on behalf of the HIGH-YIELD BOND SERIES (the
"Series"), and J. & W. SELIGMAN & CO. INCORPORATED, a Delaware corporation (the
"Manager").
In consideration of the mutual agreements herein made, the parties
hereto agree as follows:
1. DUTIES OF THE MANAGER. The Manager shall manage the affairs of the
Series including, but not limited to, continuously providing the Series with
investment management, including investment research, advice and supervision,
determining which securities shall be purchased or sold by the Series, making
purchases and sales of securities on behalf of the Series and determining how
voting and other rights with respect to securities of each Series shall be
exercised, subject in each case to the control of the trustees of the Fund and
in accordance with the objectives, policies and principles set forth in the
Registration Statement and Prospectus of the Series and the requirements of the
Investment Company Act of 1940 (the "Act") and other applicable law. In
performing such duties, the Manager shall provide such office space, such
bookkeeping, accounting, internal legal, clerical, secretarial and
administrative services (exclusive of, and in addition to, any such services
provided by any others retained by the Series) and such executive and other
personnel as shall be necessary for the operations of the Series. The Series
understands that the Manager also acts as the manager of all of the investment
companies in the Seligman Group.
Subject to Section 36 of the Act, the Manager shall not be liable to
the Series for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the management of the Series
and the performance of its duties under this Agreement except for willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under this
Agreement.
2. EXPENSES. The Manager shall pay all of its expenses arising from the
performance of its obligations under Section 1 and shall pay such Series'
proportional share or any salaries, fees and expenses of the trustees of the
Fund who are employees of the Manager or its affiliates. The Manager shall not
be required to pay any other expenses of the Series, including, but not limited
to, direct charges relating to the purchase and sale of portfolio securities,
interest charges, fees and expenses of independent attorneys and auditors, taxes
and governmental fees, cost of stock certificates and any other expenses
(including clerical expenses) of issue, sale, repurchase or redemption of
shares, expenses of registering and qualifying shares of the Series for sale
under federal and state securities laws, expenses of printing and distributing
reports, notices and proxy materials to existing shareholders, expenses of
corporate data processing and related services, shareholder recordkeeping and
shareholder account services, expenses of printing and filing reports and other
documents filed with governmental agencies, expenses of printing and
distributing prospectuses, expenses of annual and special shareholders'
meetings, fees and disbursements of transfer agents and custodians, expenses of
disbursing dividends and distributions, fees payable under the Administration,
Shareholder Service and Distribution Plan between the Fund and service
organizations, fees and expenses of trustees of the Fund who are not employees
of the Manager or its affiliates, membership dues in the Investment Company
Institute, insurance premiums and extraordinary expenses such as litigation
expenses.
3. COMPENSATION.
(a) As compensation for the services performed and the
facilities and personnel provided by the Manager
pursuant to Section 1, the Series will pay to the
Manager promptly after the end of each month a fee,
<PAGE>
calculated on each day during such month, at an annual
rate of 0.65% of the Series' average daily net assets
on the first $1,000,000,000 of net assets and .55% of
the Series' average daily net assets in excess of
$1,000,000,000.
(b) If the Manager shall serve hereunder for less than the
whole of any month, the fee hereunder shall be
prorated.
4. PURCHASE AND SALE OF SECURITIES. The Manager shall purchase
securities from or through and sell securities to or through such persons,
brokers or dealers (including the Manager or an affiliate of the Manager) as the
Manager shall deem appropriate in order to carry out the policy with respect to
allocation of portfolio transactions as set forth in the Registration Statement
and Prospectus(es) of the Series or as the trustees of the Fund may direct from
time to time. In providing the Series with investment management and
supervision, it is recognized that the Manager will seek the most favorable
price and execution, and, consistent with such policy, may give consideration to
the research, statistical and other services furnished by brokers or dealers to
the Manager for its use, to the general attitude of brokers or dealers toward
investment companies and their support of them, and to such other considerations
as the trustees of the Fund may direct or authorize from time to time.
Notwithstanding the above, it is understood that it is desirable for
the Series that the Manager have access to supplemental investment and market
research and security and economic analysis provided by brokers who execute
brokerage transactions at a higher cost to the Series than may result when
allocating brokerage to other brokers on the basis of seeking the most favorable
price and execution. Therefore, the Manager is authorized to place orders for
the purchase and sale of securities for the Series with such brokers, subject to
review by the trustees of the Series from time to time with respect to the
extent and continuation of this practice. It is understood that the services
provided by such brokers may be useful to the Manager in connection with its
services to other clients as well as the Series.
The placing of purchase and sale orders may be carried out by the
Manager or any wholly-owned subsidiary of the Manager.
If, in connection with purchases and sales of securities for the
Series, the Manager or any subsidiary of the Manager may, without material risk,
arrange to receive a soliciting dealer's fee or other underwriter's or dealer's
discount or commission, the Manager shall, unless otherwise directed by the
trustees of the Fund, obtain such fee, discount or commission and the amount
thereof shall be applied to reduce the compensation to be received by the
Manager pursuant to Section 3 hereof.
Nothing herein shall prohibit the trustees of the Fund from approving
the payment by the Series of additional compensation to others for consulting
services, supplemental research and security and economic analysis.
5. TERM OF AGREEMENT. This Agreement shall continue in full force and
effect until the earlier of December 31, l996, and from year to year thereafter
if such continuance is approved in the manner required by the Act if the Manager
shall not have notified the Series in writing at least 60 days prior to such
December 31 or prior to December 31 of any year thereafter that it does not
desire such continuance. This agreement may be terminated at any time, without
payment of penalty by the Series, on 60 days' written notice to the Manager by
vote of the trustees of the Fund or by vote of a majority of the outstanding
voting securities of the Series (as defined by the Act). This Agreement will
automatically terminate in the event of its assignment (as defined by the Act).
<PAGE>
6. RIGHT OF MANAGER IN CORPORATE NAME. The Manager and the Series each
agree that the word "Seligman", which comprises a component of the Series' name,
is a property right of the Manager. The Series agrees and consents that (i) it
will only use the word "Seligman" as a component of its corporate name and for
no other purpose, (ii) it will not purport to grant to any third party the right
to use the word "Seligman" for any purpose, (iii) the Manager or any corporate
affiliate of the Manager may use or grant to others the right to use the word
"Seligman", or any combination or abbreviation thereof, as all or a portion of a
corporate or business name or for any commercial purpose, including a grant of
such right to any other investment company, and at the request of the Manager,
the Series will take such action as may be required to provide its consent to
the use of the word "Seligman", or any combination or abbreviation thereof, by
the Manager or any corporate affiliate of the Manager, or by any person to whom
the Manager or an affiliate of the Manager shall have granted the right to such
use; and (iv) upon the termination of any management agreement into which the
Manager and the Series may enter, the Series shall, upon request by the Manager,
promptly take such action, at its own expense, as may be necessary to change its
corporate name to one not containing the word "Seligman" and following such
change, shall not use the word Seligman, or any combination thereof, as a part
of its corporate name or for any other commercial purpose, and shall use its
best efforts to cause its officers, trustees and stockholders to take any and
all actions which the Manager may request to effect the foregoing and to
reconvey to the Manager any and all rights to such word.
7. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
Anything herein to the contrary notwithstanding, this
Agreement shall not be construed to require, or to
impose any duty upon either of the parties, to do
anything in violation of any applicable laws or
regulations.
(b) The Trustees of the Fund have authorized the
execution of this Agreement in their capacity as
Trustees and not individually and the Manager agrees
that neither the shareholders nor the Trustees nor
any officer, employee, representative or agent of the
Fund shall be personally liable upon, nor shall
resort be had to their private property for the
satisfaction of, obligations given, executed or
delivered on behalf of or by the Fund, that the
shareholders, Trustees, officers, employees,
representatives and agents of the Fund shall not be
personally liable hereunder, and that the Manager
shall look solely to the property of the Fund for the
satisfaction of any claim hereunder.
IN WITNESS WHEREOF, the Fund on behalf of the Series and the Manager
have caused this Agreement to be executed by their duly authorized officers as
of the date first above written.
SELIGMAN HIGH INCOME FUND SERIES
BY /s/ Brian T. Zino
----------------------------------------
Brian T. Zino
J. & W. SELIGMAN & CO. INCORPORATED
BY /s/ William C. Morris
----------------------------------------
William C. Morris
ADDENDUM
TO
Sales Agreement
covering shares of capital stock
or shares of beneficial interest of
the Seligman Mutual Funds
between
SELIGMAN FINANCIAL SERVICES, INC.
and
DEALER
Dear Dealer:
Your Sales Agreement with Seligman Financial Services, Inc. ("SFSI") is
hereby amended to include the following provisions in connection with the
offering by certain of the Seligman Mutual Funds of Class B shares as described
in each applicable prospectus:
1. Dealer agrees to comply with the attached "Policies and Procedures"
with respect to sales of Seligman Mutual Funds offering three classes
of shares.
2. SFSI shall be entitled to a contingent deferred sales load ("CDSL") on
redemptions within six years of purchase on any Class B shares sold and
within one year of purchase on any Class D shares sold. With respect to
omnibus accounts in which Class B shares or Class D shares are held at
Seligman Data Corp. ("SDC") in Dealer's name, Dealer agrees that by the
tenth day of each month it will furnish to SDC a report of each
redemption in the preceding month to which a CDSL was applicable,
accompanied by a check payable to SFSI in payment of the CDSL due.
3. If, with respect to a redemption of any Class B shares or Class D
shares sold by Dealer, the CDSL is waived because the redemption
qualifies for a waiver set forth in the Fund's prospectus, Dealer shall
promptly remit to SFSI an amount equal to the payment made by SFSI to
Dealer at the time of sale with respect to such Class B shares or Class
D Shares.
4. The Dealer will comply in all respects with Notice to Members 95-80 of
the National Association of Securities Dealers, Inc. regarding members
obligations and responsibilities regarding mutual fund sales practices.
The sale of any Class A,Class B or Class D shares of a Seligman Mutual
Fund will constitute Dealer's acceptance of and agreement with the terms set
forth herein.
<PAGE>
Exhibit C
POLICIES AND PROCEDURES
In connection with the offering by the Funds of three classes of
shares, one subject to a front-end sales load and a service fee ("Class A
Shares"), one subject to a service fee, a distribution fee, no front-end sales
load and a contingent deferred sales load on redemptions within six years of
purchase ("Class B Shares") and one subject to a service fee, a distribution
fee, no front-end sales load and a contingent deferred sales load on redemptions
within one year of purchase ("Class D Shares"), it is important for an investor
to choose the method of purchasing shares which best suits his or her particular
circumstances. To assist investors in these decisions, Seligman Financial
Services has instituted the following policies with respect to orders for
Shares:
1. No purchase order may be placed for Class B Shares or Class D
Shares for amounts of $4,000,000 or more.
2. Any purchase order for less than $4,000,000 may be for either
Class A, Class B or Class D Shares in light of the relevant
facts and circumstances, including:
a. the specific purchase order dollar amount;
b. the length of time the investor expects to hold his
Shares; and
c. any other relevant circumstances such as the
availability of purchases under a Letter of Intent,
Volume Discount, or Right of Accumulation.
There are instances when one method of purchasing Shares may be more
appropriate than another. For example, an investor who would qualify for a
significant discount from the maximum sales load on Class A Shares may determine
that payment of such a reduced front-end sales load and service fee is
preferable to payment of higher ongoing distribution fee. On the other hand, an
investor whose order would not qualify for such a discount may wish to have all
of his or her funds invested in Class B or Class D Shares. An investor who
expects to hold his or her shares for longer than eight years might prefer Class
B Shares over Class D Shares because of the conversion feature; once the Class B
Shares have converted to Class A Shares, the ongoing distribution fees will be
reduced. Class D Shares may remain a more attractive choice for shorter-term
investors because of the contingent deferred sales load on such shares is only
1%, and it does not apply if the investor owns his or her shares for at least
one year. If an investor anticipates that he or she will redeem his or her Class
B Shares or Class D Shares while still subject to a contingent deferred sales
charge, the investor may, depending on the amount of the purchase, pay an amount
greater than the sales load and service fee attributable to Class A Shares.
Appropriate supervisory personnel within your organization must ensure
that all employees receiving investor inquiries about the purchase of Shares of
a Fund advise the investor of then available pricing structures offered by the
Fund, and the impact of choosing one method over another. In some instances it
may be appropriate for a supervisory person to discuss a purchase with the
investor.
Questions relating to this policy should be directed to Stephen J.
Hodgdon, President, Seligman Financial Services at (212) 850-1217.
<PAGE>
SALES AGREEMENT
covering shares of capital stock
and/or shares of beneficial interest of
THE SELIGMAN MUTUAL FUNDS
Seligman Capital Fund, Inc.
Seligman Common Stock Fund, Inc.
Seligman Communications and Information Fund, Inc.
Seligman Frontier Fund, Inc.
Seligman Growth Fund, Inc.
Seligman Henderson Global Fund Series, Inc.
Seligman High Income Fund Series
Seligman Income Fund, Inc.
Seligman New Jersey Tax-Exempt Fund, Inc.
Seligman Pennsylvania Tax-Exempt Fund Series
Seligman Tax-Exempt Fund Series, Inc.
Seligman Tax-Exempt Series Trust
between
SELIGMAN FINANCIAL SERVICES, INC.
and
----------------------------------------------------------------------------
Dealer
The Dealer named above and Seligman Financial Services, Inc., exclusive agent
for distribution of shares of capital stock of Seligman Capital Fund, Inc.,
Seligman Common Stock Fund, Inc., Seligman Communications and Information Fund,
Inc., Seligman Frontier Fund, Inc., Seligman Growth Fund, Inc., Seligman
Henderson Global Fund Series, Inc., Seligman Income Fund, Inc., Seligman New
Jersey Tax-Exempt Fund, Inc., and Seligman Tax-Exempt Fund Series, Inc., and
shares of beneficial interest of Seligman High Income Fund Series, Seligman
Pennsylvania Tax-Exempt Fund, and Seligman Tax-Exempt Series Trust, agree to the
terms and conditions set forth in this agreement.
Dealer Signature Seligman Financial Services, Inc. Acceptance
- -------------------------- ---------------------------------
Principal Officer Stephen J. Hodgdon, President
SELIGMAN FINANCIAL SERVICES, INC.
- -------------------------- 100 Park Avenue
Address New York, New York 10017
- -------------------------- ---------------------------------
Employer Identification No. Date
REV 1/95
<PAGE>
The Dealer and Seligman Financial Services, Inc. ("Seligman Financial
Services"), as exclusive agent for distribution of Class A and Class D Shares
(as described in the "Policies and Procedures," as set forth below) of the
Capital Stock and/or Class A and Class D Shares of beneficial interest
(collectively, the "Shares") of Seligman Capital Fund, Inc., Seligman Common
Stock Fund, Inc., Seligman Communications and Information Fund, Inc., Seligman
Frontier Fund, Inc., Seligman Growth Fund, Inc., Seligman Henderson Global Fund
Series, Inc., Seligman High Income Fund Series, Seligman Income Fund, Inc.,
Seligman New Jersey Tax-Exempt Fund, Inc., Seligman Pennsylvania Tax-Exempt
Fund, Seligman Tax-Exempt Fund Series, Inc. and Seligman Tax-Exempt Series Trust
and or any other mutual fund for which Seligman Financial Services is exclusive
agent for distribution (herein called the Funds), agree as follows:
1. The Dealer agrees to comply with the attached "Policies and Procedures"
with respect to sales of Seligman Mutual Funds offering two classes of
shares, as set forth below.
2. An order for Shares of one or more of the Funds, placed by the Dealer
with Seligman Financial Services, will be confirmed at the public
offering price as described in each Fund's current prospectus. Unless
otherwise agreed when an order is placed, the Dealer shall remit the
purchase price to the Fund, or Funds, with issuing instruction, within
the period of time prescribed by existing regulations. No wire orders
under $1,000 may be placed for initial purchases.
3. Shares of the Funds shall be offered for sale and sold by the Dealer
only at the applicable public offering price currently in effect,
determined in the manner prescribed in each Fund's prospectus. Seligman
Financial Services will make a reasonable effort to notify the Dealer
of any redetermination or suspension of the current public offering
price, but Seligman Financial Services shall be under no liability for
failure to do so.
4. On each purchase of Shares by the Dealer, the Dealer shall be entitled,
based on the Class of Shares purchased and except as provided in each
Fund's current prospectus, to a concession determined as a percentage
of the price to the investor as set forth in each Fund's current
prospectus. On each purchase of Class A Shares, Seligman Financial
Services reserves the right to receive a minimum concession of $.75 per
transaction. No concessions will be paid to the Dealer for the
investment of dividends in additional shares.
5. Except for sales to and purchases from the Dealer's retail customers,
all of which shall be made at the applicable current public offering
price or the current price bid by Seligman Financial Services on behalf
of the Fund, the Dealer agrees to buy Shares only through Seligman
Financial Services and not from any other sources and to sell shares
only to Seligman Financial Services, the Fund or its redemption agent
and not to any other purchasers.
6. By signing this Agreement, both Seligman Financial Services and the
Dealer warrant that they are members of the National Association of
Securities Dealers, Inc., and agree that termination of such membership
at any time shall terminate this Agreement forthwith regardless of the
provisions of paragraph 10 hereof. Each party further agrees to comply
with all rules and regulations of such Association and specifically to
observe the following provisions:
(a) Neither Seligman Financial Services nor the Dealer shall
withhold placing customers' orders for Shares so as to profit
itself as a result of such withholding.
(b) Seligman Financial Services shall not purchase Shares from any
of the Funds except for the purpose of covering purchase
orders already received, and the Dealer shall not purchase
Shares of any of the Funds through Seligman Financial Services
other than for investment, except for the purpose of covering
purchase orders already received.
<PAGE>
(c) Seligman Financial Services shall not accept a conditional
order for Shares on any basis other than at a specified
definite price. The Dealer shall not, as principal, purchase
Shares of any of the Funds from a recordholder at a price
lower than the bid price, if any, then quoted by or for the
Fund, but the Dealer shall not be prevented from selling
Shares for the account of a record owner to Seligman Financial
Services, the Fund or its redemption agent at the bid price
currently quoted by or for such Fund, and charging the
investor a fair commission for handling the transaction.
(d) If Class A Shares are repurchased by a Fund or by Seligman
Financial Services as its agent, or are tendered for
redemption within seven business days after confirmation by
Seligman Financial Services of the original purchase order of
the Dealer for such Shares, (i) the Dealer shall forthwith
refund to Seligman Financial Services the full concession
allowed to the Dealer on the original sales and (ii) Seligman
Financial Services shall forthwith pay to the Fund Seligman
Financial Services' share of the "sales load" on the original
sale by Seligman Financial Services, and shall also pay to the
Fund the refund which Seligman Financial Services received
under (i) above. The Dealer shall be notified by Seligman
Financial Services of such repurchase or redemption within ten
days of the date that such redemption or repurchase is placed
with Seligman Financial Services, the Fund or its authorized
agent. Termination or cancellation of this Agreement shall not
relieve the Dealer or Seligman Financial Services from the
requirements of this clause (d).
7. (a) Seligman Financial Services shall be entitled to a
contingent deferred sales load ("CDSL") on redemptions within
one year of purchase on any Class D Shares sold. With respect
to omnibus accounts in which Class D Shares are held at
Seligman Data Corp. ("SDC") in the Dealer's name, the Dealer
agrees that by the tenth day of each month it will furnish to
SDC a report of each redemption in the preceding month to
which a CDSL was applicable, accompanied by a check payable to
Seligman Financial Services in payment of the CDSL due.
(b) If, with respect to a redemption of any Class D Shares sold by
the Dealer, the CDSL is waived because the redemption
qualifies for a waiver set forth in the Fund's prospectus, the
Dealer shall promptly remit to Seligman Financial Services an
amount equal to the payment made by Seligman Financial
Services to the Dealer at the time of sale with respect to
such Class D Shares.
8. In all transactions between Seligman Financial Services and the Dealer
under this Agreement, the Dealer will act as principal in purchasing
from or selling to Seligman Financial Services. The dealer is not for
any purposes employed or retained as or authorized to act as broker,
agent or employee of any Fund or of Seligman Financial Services and the
Dealer is not authorized in any manner to act for any Fund or Seligman
Financial Services or to make any representations on behalf of Seligman
Financial Services. In purchasing and selling Shares of any Fund under
this Agreement, the Dealer shall be entitled to rely only upon matters
stated in the current offering prospectus of the applicable Fund and
upon such written representations, if any, as may be made by Seligman
Financial Services to the Dealer over the signature of Seligman
Financial Services.
9. Seligman Financial Services will furnish to the Dealer, without charge,
reasonable quantities of the current offering prospectus of each Fund
and sales material issued from time to time by Seligman Financial
Services.
10. Either Party to this Agreement may cancel this Agreement by written
notice to the other party. Such cancellation shall be effective at the
close of business on the 5th day following the date on which such
notice was given. Seligman Financial Services may modify this Agreement
at any time by written notice to the Dealer. Such notice shall be
deemed to have been given on the date upon which it was either
delivered personally to the other party or any officer or member
thereof, or was mailed postage-paid, or delivered to a telegraph office
for transmission to the other party at his or its address as shown
herein.
<PAGE>
11. This Agreement shall be construed in accordance with the laws of the
State of New York and shall be binding upon both parties hereto when
signed by Seligman Financial Services and by the Dealer in the spaces
provided on the cover of this Agreement. This Agreement shall not be
applicable to Shares of a Fund in a state in which such Fund Shares are
not qualified for sale.
POLICIES AND PROCEDURES
In connection with the offering by the Funds of three classes of
shares, one subject to a front-end sales load and a service fee ("Class A
Shares"), one subject to a service fee, a distribution fee, no front-end sales
load and a contingent deferred sales load on redemptions within six years of
purchase ("Class B Shares") and one subject to a service fee, a distribution
fee, no front-end sales load and a contingent deferred sales load on redemptions
within one year of purchase ("Class D Shares"), it is important for an investor
to choose the method of purchasing shares which best suits his or her particular
circumstances. To assist investors in these decisions, Seligman Financial
Services has instituted the following policies with respect to orders for
Shares:
1. No purchase order may be placed for Class B Shares or Class D
Shares for amounts of $4,000,000 or more.
2. Any purchase order for less than $4,000,000 may be for either
Class A, Class B or Class D Shares in light of the relevant
facts and circumstances, including:
a. the specific purchase order dollar amount;
b. the length of time the investor expects to hold his
Shares; and
c. any other relevant circumstances such as the
availability of purchases under a Letter of Intent,
Volume Discount, or Right of Accumulation.
There are instances when one method of purchasing Shares may be more
appropriate than another. For example, an investor who would qualify for a
significant discount from the maximum sales load on Class A Shares may determine
that payment of such a reduced front-end sales load and service fee is
preferable to payment of higher ongoing distribution fee. On the other hand, an
investor whose order would not qualify for such a discount may wish to have all
of his or her funds invested in Class B or Class D Shares. An investor who
expects to hold his or her shares for longer than eight years might prefer Class
B Shares over Class D Shares because of the conversion feature; once the Class B
Shares have converted to Class A Shares, the ongoing distribution fees will be
reduced. Class D Shares may remain a more attractive choice for shorter-term
investors because of the contingent deferred sales load on such shares is only
1%, and it does not apply if the investor owns his or her shares for at least
one year. If an investor anticipates that he or she will redeem his or her Class
B Shares or Class D Shares while still subject to a contingent deferred sales
charge, the investor may, depending on the amount of the purchase, pay an amount
greater than the sales load and service fee attributable to Class A Shares.
Appropriate supervisory personnel within your organization must ensure
that all employees receiving investor inquiries about the purchase of Shares of
a Fund advise the investor of then available pricing structures offered by the
Fund, and the impact of choosing one method over another. In some instances it
may be appropriate for a supervisory person to discuss a purchase with the
investor.
Questions relating to this policy should be directed to Stephen J.
Hodgdon, President, Seligman Financial Services at (212) 850-1217.
Consent of Independent Auditors
Seligman High Income Fund Series:
We consent to the incorporation by reference in the Statement of Additional
Information in this Post-Effective Amendment No. 20 to Registration Statement
No. 2-93076 of our report dated February 2, 1996, appearing in the Annual Report
to shareholders for the year ended December 31, 1995, and to the reference to us
under the caption "Financial Highlights" in the Prospectus, which is a part of
such Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
April 17, 1996
INVESTMENT LETTER
SELIGMAN HIGH INCOME FUND SERIES
Seligman High Income Fund Series (the "Trust"), an open-end diversified
management investment company, and the undersigned ("Purchaser"), intending to
be legally bound, hereby agree as follows:
1. The Trust hereby sells to Purchaser and Purchaser purchases 1 Class B
share (the "Share") of Capital Stock (each par value $.001) of the
Seligman High-Yield Bond Series (the "Series"), a series of the Trust
at a price equivalent to the net asset value of one share of the series
as of the close of business on April 18, 1996. The Trust hereby
acknowledges receipt from the Purchaser of funds in such amount in full
payment for the Share.
2. Purchaser represents and warrants to the Trust that the Share is being
acquired for investment and not with a view to distribution thereof,
and that Purchaser has no present intention to redeem or dispose of the
Share.
IN WITNESS WHEREOF, the parties have executed this agreement as of the 17th day
of April, 1996 ("Purchase Date").
SELIGMAN HIGH INCOME FUND SERIES
By: /s/ Lawrence P. Vogel
-------------------------------
Name: Lawrence P. Vogel
Title: Vice President
J. & W. SELIGMAN & CO. INCORPORATED
By: /s/ Lawrence P. Vogel
-------------------------------
Name: Lawrence P. Vogel
Title: Senior Vice President
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
Section 1. Seligman High-Yield Bond Series (the "Series"), a
series of Seligman High Income Fund Series (the "Trust") will pay fees to
Seligman Financial Services, Inc., the principal underwriter of its shares (the
"Distributor"), for administration, shareholder services and distribution
assistance for the Class A, Class B and Class D shares of the Series. As a
result, the Series is adopting this Administration, Shareholder Services and
Distribution Plan (the "Plan") pursuant to Section 12(b) of the Investment
Company Act of 1940, as amended (the "Act") and Rule 12b-1 thereunder.
Section 2. Pursuant to this Plan, the Series may pay to the
Distributor a shareholder servicing fee of up to .25% on an annual basis of the
average daily net assets of the Series (payable quarterly with respect to Class
A and monthly with respect to Class B and Class D) and a distribution fee of
.75% on an annual basis, payable monthly, of the average daily net assets of the
Series attributable to the Class B Shares and a distribution fee of up to .75%
on an annual basis, payable monthly, of the average daily net assets of the
Series attributable to Class D shares. Such fees will be used in their entirety
by the Distributor to make payments for administration, shareholder services and
distribution assistance, including, but not limited to (i) compensation to
securities dealers and other organizations (each, a "Service Organization" and
collectively, the "Service Organizations"), for providing distribution
assistance with respect to assets invested in the Series, (ii) compensation to
Service Organizations for providing administration, accounting and other
shareholder services with respect to the Series' shareholders, and (iii)
otherwise promoting the sale of shares of the Series, including paying for the
preparation of advertising and sales literature and the printing and
distribution of such promotional materials and prospectuses to prospective
investors and defraying the Distributor's costs incurred in connection with its
marketing efforts with respect to shares of the Series. To the extent a Service
Organization provides administration, accounting and other shareholder services,
payment for which is not required to be made pursuant to a plan meeting the
requirements of Rule 12b-1, a portion of the fee paid by the Series shall be
deemed to include compensation for such services. The fees received from the
Series hereunder in respect of the Class A shares may not be used to pay any
interest expense, carrying charges or other financing costs, and fees received
hereunder may not be used to pay any allocation of overhead of the Distributor.
The fees of any particular class of the Series may not be used to subsidize the
sale of shares of any other class. The fees payable to Service Organizations
from time to time shall, within such limits, be determined by the Trustees of
the Trust.
Section 3. J. & W. Seligman & Co. Incorporated, investment
manager to the Series (the "Manager"), in its sole discretion, may make
payments to the Distributor for similar purposes. These payments will be made
by the Manager from its own resources, which may include the management fee
that the Manager receives from the Series.
Section 4. This Plan shall continue in effect through December
31 of each year so long as such continuance is specifically approved at least
annually by vote of a majority of both (a) the Trustees of the Trust and (b) the
Qualified Trustees, cast in person at a meeting called for the purpose of voting
on such approval.
1
<PAGE>
Section 5. The Distributor shall provide to the Trust's
Trustees, and the Trustees shall review, at least quarterly, a written report of
the amounts so expended by the Series and the purposes for which such
expenditures were made.
Section 6. This Plan may be terminated with respect to any
class at any time by vote of a majority of the Qualified Trustees, or by vote of
a majority of the outstanding voting securities of such class. If this Plan is
terminated in respect of a class, no amounts (other than amounts accrued but not
yet paid) would be owed by the Series to the Distributor with respect to such
class.
Section 7. All agreements related to this Plan shall be in
writing, and shall be approved by vote of a majority of both (a) the Trustees of
the Trust and (b) the Qualified Trustees, cast in person at a meeting called for
the purpose of voting on such approval, provided, however, that the identity of
a particular Service Organization executing any such agreement may be ratified
by such a vote within 90 days of such execution. Any agreement related to this
Plan shall provide:
A. That such agreement may be terminated in respect of any class
of the Series at any time, without payment of any penalty, by
vote of a majority of the Qualified Trustees or by vote of a
majority of the outstanding voting securities of the class, on
not more than 60 days' written notice to any other party to
the agreement; and
B. That such agreement shall terminate automatically in the
event of its assignment.
Section 8. This Plan may not be amended to increase materially
the amount of fees permitted pursuant to Section 2 hereof without the approval
of a majority of the outstanding voting securities of the relevant class and no
material amendment to this Plan shall be approved other than by vote of a
majority of both (a) the Trustees of the Trust and (b) the Qualified Trustees,
cast in person at a meeting called for the purpose of voting on such approval.
This Plan shall not be amended to reduce the distribution fee payable to the
Distributor pursuant to Section 2 hereof in respect of Class B shares, unless
the shareholder servicing fee payable pursuant to Section 2 hereof for
compensation to Service Organizations for providing administration, accounting
and other shareholder services has been eliminated, provided, however that the
distribution fee in respect of Class B shares may be reduced without change to
the shareholder servicing fee, if and to the extent required in order to comply
with any applicable laws or regulations, including applicable rules of the
National Association of Securities Dealers, Inc. regulating maximum sales
charges.
Section 9. The Series is not obligated to pay any
administration, shareholder services or distribution expense in excess of the
fee described in Section 2 hereof, and, in the case of Class A shares, any
expenses of administration, shareholder services and distribution of Class A
2
<PAGE>
shares of the Series accrued in one fiscal year of the Series may not be paid
from administration, shareholder services and distribution fees received from
the Series in respect of Class A shares in any other fiscal year.
Section 10. As used in this Plan, (a) the terms "assignment",
"interested person" and "vote of a majority of the outstanding voting
securities" shall have the respective meanings specified in the Act and the
rules and regulations thereunder, subject to such exemptions as may be granted
by the Securities and Exchange Commission and (b) the term "Qualified Trustees"
shall mean the Trustees of the Trust who are not "interested persons" of the
Trust and have no direct or indirect financial interest in the operation of this
Plan or in any agreement related to this Plan.
3
<PAGE>
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
Section 1. Seligman U.S. Government Securities Series (the
"Series"), a series of Seligman High Income Fund Series (the "Trust") will pay
fees to Seligman Financial Services, Inc., the principal underwriter of its
shares (the "Distributor"), for administration, shareholder services and
distribution assistance for the Class A and Class D shares of the Series. As a
result, the Series is adopting this Administration, Shareholder Services and
Distribution Plan (the "Plan pursuant to Section 12(b) of the Investment Company
Act of 1940, as amended (the "Act") and Rule 12b-1 thereunder.
Section 2. Pursuant to this Plan, the Series may pay to the
Distributor a shareholder servicing fee of up to .25% on an annual basis of the
average daily net assets of the Series (payable quarterly with respect to Class
A and monthly with respect to Class D) and a distribution fee of up to .75% on
an annual basis, payable monthly, of the average daily net assets of the Series
attributable to Class D shares. Such fees will be used in their entirety by the
Distributor to make payments for administration, shareholder services and
distribution assistance, including, but not limited to (i) compensation to
securities dealers and other organizations (each, a "Service Organization" and
collectively, the "Service Organizations"), for providing distribution
assistance with respect to assets invested in the Series, (ii) compensation to
Service Organizations for providing administration, accounting and other
shareholder services with respect to the Series' shareholders, and (iii)
otherwise promoting the sale of shares of the Series, including paying for the
preparation of advertising and sales literature and the printing and
distribution of such promotional materials and prospectuses to prospective
investors and defraying the Distributor's costs incurred in connection with its
marketing efforts with respect to shares of the Series. To the extent a Service
Organization provides administration, accounting and other shareholder services,
payment for which is not required to be made pursuant to a plan meeting the
requirements of Rule 12b-1, a portion of the fee paid by the Series shall be
deemed to include compensation for such services. The fees received from the
Series hereunder in respect of the Class A shares may not be used to pay any
interest expense, carrying charges or other financing costs, and fees received
hereunder may not be used to pay any allocation of overhead of the Distributor.
The fees of any particular class of the Series may not be used to subsidize the
sale of shares of any other class. The fees payable to Service Organizations
from time to time shall, within such limits, be determined by the Trustees of
the Trust.
Section 3. J. & W. Seligman & Co. Incorporated, investment
manager to the Series (the "Manager"), in its sole discretion, may make
payments to the Distributor for similar purposes. These payments will be made
by the Manager from its own resources, which may include the management fee
that the Manager receives from the Series.
Section 4. This Plan shall continue in effect through December
31 of each year so long as such continuance is specifically approved at least
annually by vote of a majority of both (a) the Trustees of the Trust and (b) the
Qualified Trustees, cast in person at a meeting called for the purpose of voting
on such approval.
1
<PAGE>
Section 5. The Distributor shall provide to the Trust's
Trustees, and the Trustees shall review, at least quarterly, a written report of
the amounts so expended by the Series and the purposes for which such
expenditures were made.
Section 6. This Plan may be terminated with respect to any
class at any time by vote of a majority of the Qualified Trustees, or by vote of
a majority of the outstanding voting securities of such class. If this Plan is
terminated in respect of a class, no amounts (other than amounts accrued but not
yet paid) would be owed by the Series to the Distributor with respect to such
class.
Section 7. All agreements related to this Plan shall be in
writing, and shall be approved by vote of a majority of both (a) the Trustees of
the Trust and (b) the Qualified Trustees, cast in person at a meeting called for
the purpose of voting on such approval, provided, however, that the identity of
a particular Service Organization executing any such agreement may be ratified
by such a vote within 90 days of such execution. Any agreement related to this
Plan shall provide:
A. That such agreement may be terminated in respect of any class
of the Series at any time, without payment of any penalty, by
vote of a majority of the Qualified Trustees or by vote of a
majority of the outstanding voting securities of the class, on
not more than 60 days' written notice to any other party to
the agreement; and
B. That such agreement shall terminate automatically in the
event of its assignment.
Section 8. This Plan may not be amended to increase materially
the amount of fees permitted pursuant to Section 2 hereof without the approval
of a majority of the outstanding voting securities of the relevant class of such
Series and no material amendment to this Plan shall be approved other than by
vote of a majority of both (a) the Trustees of the Trust and (b) the Qualified
Trustees, cast in person at a meeting called for the purpose of voting on such
approval.
Section 9. The Series is not obligated to pay any
administration, shareholder services or distribution expense in excess of the
fee described in Section 2 hereof, and, in the case of Class A shares, any
expenses of administration, shareholder services and distribution of Class A
shares of the Series accrued in one fiscal year of the Series may not be paid
from administration, shareholder services and distribution fees received from
the Series in respect of Class A shares in any other fiscal year.
Section 10. As used in this Plan, (a) the terms "assignment",
"interested person" and "vote of a majority of the outstanding voting
securities" shall have the respective meanings specified in the Act and the
rules and regulations thereunder, subject to such exemptions as may be granted
by the Securities and Exchange Commission and (b) the term "Qualified Trustees"
shall mean the Trustees of the Trust who are not "interested persons" of the
2
<PAGE>
Trust and have no direct or indirect financial interest in the operation of this
Plan or in any agreement related to this Plan.
3
<PAGE>
ADMINISTRATION, SHAREHOLDER SERVICES AND
DISTRIBUTION AGREEMENT
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION AGREEMENT, dated as of
___________________________ , 19 between Seligman Financial Services, Inc.
("Seligman Financial Services") and _______________________________________ (the
"Service Organization").
The Parties hereto enter into a Administration, Shareholder Services
and Distribution Agreement ("Service Agreement") with respect to the shares of
Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc., Seligman
Common Stock Fund, Inc., Seligman Communications and Information Fund, Inc.,
Seligman Frontier Fund, Inc., Seligman Growth Fund, Inc., Seligman Henderson
Global Fund Series, Inc., Seligman High Income Fund Series, Seligman Income
Fund, Inc., Seligman New Jersey Tax-Exempt Fund, Inc., Seligman Pennsylvania
Tax-Exempt Fund Series, Seligman Tax-Exempt Fund Series, Inc., Seligman
Tax-Exempt Series Trust (the "Funds"), and any other future mutual funds that
may become members of the Seligman Group of Investment Companies which adopt an
Administration, Shareholder Services and Distribution Plan, pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended (the "Act"), and in
consideration of the mutual agreements herein made, agree as follows:
The Service Organization shall make such use of or provide such
information and services as may be necessary or appropriate (i) to provide
shareholder services to shareholders of the Funds and (ii) to assist Seligman
Financial Services in any distribution of shares of the Funds, including,
without limitation, making use of the Service Organization's name, client lists,
and publications, for the solicitation of sales of shares of the Funds to
Service Organization clients, and such other assistance as Seligman Financial
Services reasonably requests, to the extent permitted by applicable statute,
rule or regulation.
1. Except with respect to the Class D shares of a Fund for the first year
following the sale thereof, Seligman Financial Services shall pay to
the Service Organization a service fee (as defined in the National
Association of Securities Dealers, Inc. Rules of Fair Practice) not to
exceed .25 of 1% per annum of the average daily net assets of each
class of shares of each Fund attributable to the clients of the Service
Organization.
2. With respect to the first year following the sale of Class D shares
of a Fund, Seligman Financial Services shall pay to the Service
Organization at or promptly after the time of sale a service fee (as
defined in the National Association of Securities Dealers, Inc. Rules
of Fair Practice) not to exceed .25 of 1% of the net asset value of
the Class D shares sold by the Service Organization. Such service
fee shall be paid to the Service Organization solely for personal
services and/or the maintenance of shareholder accounts to be
provided by the Service Organization to the purchaser of such Class D
Shares over the course of the first year following the sale.
3. Any service fee paid hereunder shall be paid solely for personal
services and/or the maintenance of shareholder accounts. For greater
certainty, no part of a service fee shall be paid for subtransfer
agency services, subaccounting services, or administrative services.
<PAGE>
4. In addition to payment of the service fee, from time to time Seligman
Financial Services may make payments to the Service Organization in
addition to those contemplated above for providing distribution
assistance with respect to assets invested in each Fund by its clients.
5. Neither the Service Organization nor any of its employees or agents are
authorized to make any representation concerning the Funds or the
Funds' shares except those contained in the then current Prospectus,
copies of which will be supplied by Seligman Financial Services. The
Service Organization shall have no authority to act as agent for
Seligman Financial Services or the Funds.
6. In consideration of the services provided pursuant to paragraphs 1, 2
and/or 4 above, the Service Organization shall be entitled to receive
fees as are set forth in Exhibit A hereto as may be amended from time
to time by Seligman Financial Services. Seligman Financial Services
has no obligation to make any such payments and the Service
Organization agrees to waive payment of its fee until Seligman
Financial Services is in receipt of the fee from the Fund(s). The
payment of fees has been authorized pursuant to an Administration,
Shareholder Services and Distribution Plans (the "Plans") approved by
the Directors/Trustees and the shareholders of the Funds pursuant to
the requirements of the Act and such authorizations may be withdrawn
at any time.
7. It is understood that the Funds reserve the right, at their discretion
and without notice, to suspend or withdraw the sale of shares of the
Funds. This Agreement shall not be construed to authorize the Service
Organization to perform any act that Seligman Financial Services would
not be permitted to perform under the respective Distributing
Agreements between each of the Funds and Seligman Financial Services.
8. Subject to the proviso in Section 6 of the Plans, this Agreement
shall continue until December 31 of the year in which any Plan has
first been approved by shareholders and through December 31 of each
year thereafter provided such continuance is specifically approved at
least annually by a vote of a majority of (i) the Fund's
Directors/Trustees and (ii) the Qualified Directors/Trustees cast in
person at a meeting called for the purpose of voting on such approval
and provided further that the Service Organization shall not have
notified Seligman Financial Services in writing at least 60 days
prior to the anniversary date of the previous continuance that it
does not desire such continuance. This Agreement may be terminated
at any time without payment of any penalty with respect to any of the
Funds by vote of a majority of the Qualified Directors/Trustees, or
by vote of a majority of the outstanding voting securities of the
particular Fund or class or series of a Fund, on 60 days' written
notice to the Service Organization and Seligman Financial Services.
Notwithstanding anything contained herein, in the event that any of
the Plans shall be terminated or any of the Plans or any part thereof
shall be found invalid or ordered terminated by any regulatory or
judicial authority, or the Service Organization shall fail to perform
the services contemplated by this Agreement, such determination to be
made in good faith by Seligman Financial Services, this Agreement may
be terminated with respect to such Plan effective upon receipt of
written notice thereof by the Service Organization. This Agreement
will also terminate automatically in the event of its assignment.
<PAGE>
9. All communications to Seligman Financial Services shall be sent to it
at its offices, 100 Park Avenue, New York, New York 10017.
Any notice to the Service Organization shall be duly given if mailed or
telegraphed to it at the address shown below.
10. As used in this Agreement, the terms "assignment", "interested
person" and "vote of a majority of the outstanding voting securities"
shall have the respective meanings specified in the Act and in the
rules and regulations thereunder and the term "Qualified
Directors/Trustees" shall mean the Directors/Trustees of a Fund who
are not interested persons of the Fund and have no direct or indirect
financial interest in its Plan or in any agreements related to the
Plan.
11. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York. Anything herein to the contrary
notwithstanding, this Agreement shall not be construed to require, or
to impose any duty upon, any of the parties to do anything in violation
of any applicable laws or regulations.
IN WITNESS WHEREOF, Seligman Financial Services and the Service Organization
have caused this Agreement to be executed by their duly authorized offices as of
the date first above written.
SELIGMAN FINANCIAL SERVICES, INC.
By
-----------------------------------
Stephen J. Hodgdon, President
SERVICE ORGANIZATION
-----------------------------------
By
-----------------------------------
Address
-----------------------------------
1/95
<PAGE>
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION AGREEMENT
EXHIBIT A
The payment schedule for Service Organizations is
set forth immediately below:
<TABLE>
<CAPTION>
AVERAGE DAILY FEES AS A PERCENTAGE
NET ASSETS OF EACH FUND'S/SERIES'
ATTRIBUTABLE TO NET ASSETS ATTRIBUTABLE
FUND NAME SERVICE ORGANIZATIONS TO SERVICE ORGANIZATIONS*
- --------- --------------------- -------------------------
CLASS A SHARES CLASS A SHARES/ CLASS D
CLASS B SHARES+ SHARES**
--------------- --------
<S> <C>
Seligman Capital Fund, Inc. $100,000 or more .25% 1.00%
Seligman Cash Management Fund, Inc: $100,000 or more -0-/.25% 1.00%
Seligman Common Stock Fund, Inc. $100,000 or more .25% 1.00%
Seligman Communications and Information Fund, Inc. $100,000 or more .25% 1.00%
Seligman Frontier Fund, Inc. $100,000 or more .25% 1.00%
Seligman Growth Fund, Inc. $100,000 or more .25% 1.00%
Seligman Henderson Global Fund Series, Inc:
Seligman Henderson Emerging Markets Growth Fund $100,000 or more .25% 1.00%
Seligman Henderson Global Smaller Companies Fund $100,000 or more .25% 1.00%
Seligman Henderson Global Growth Opportunities Fund $100,000 or more .25% 1.00%
Seligman Henderson Global Technology Fund $100,000 or more .25% 1.00%
Seligman Henderson International Fund $100,000 or more .25% 1.00%
Seligman High Income Fund Series:
U.S. Government Securities Portfolio $100,000 or more .25% 1.00%
High-Yield Bond Portfolio $100,000 or more .25% 1.00%
Seligman Income Fund, Inc. $100,000 or more .25% 1.00%
Seligman New Jersey Tax-Exempt Fund, Inc. $100,000 or more .25% 1.00%
Seligman Pennsylvania Tax-Exempt Fund Series $100,000 or more .25% 1.00%
Seligman Tax-Exempt Fund Series, Inc:
National Series $100,000 or more .10% 1.00%
Colorado Series $100,000 or more .10% 1.00%
Georgia Series $100,000 or more .10% 1.00%
Louisiana Series $100,000 or more .10% 1.00%
Maryland Series $100,000 or more .10% 1.00%
Massachusetts Series $100,000 or more .10% 1.00%
Michigan Series $100,000 or more .10% 1.00%
Minnesota Series $100,000 or more .10% 1.00%
Missouri Series $100,000 or more .10% 1.00%
New York Series $100,000 or more .10% 1.00%
Ohio Series $100,000 or more .10% 1.00%
Oregon Series $100,000 or more .10% 1.00%
South Carolina Series $100,000 or more .10% 1.00%
Seligman Tax-Exempt Series Trust:
California Tax-Exempt Quality Series $100,000 or more .10% 1.00%
California Tax-Exempt High-Yield Series $100,000 or more .10% 1.00%
Florida Tax-Exempt Series $100,000 or more .25% 1.00%
North Carolina Tax-Exempt Series $100,000 or more .25% 1.00%
</TABLE>
March 21, 1996
* Included in each of the percentages above is the service fee (as defined in
the National Association of Securities Dealers, Inc. Rules of Fair Practice)
with respect to each class of shares referred to in paragraph 1 of this
Agreement. Except as provided in Footnote ** below, Seligman Financial Services
shall pay the fees provided for above to the Service Organization quarterly. **
At or promptly after the time of sale of any Class D Shares, a Service
Organization shall be paid 1.00% of the net asset value of the Class D Shares
sold by it. The difference between .75% and the amount paid is comprised of the
service fee referred to in paragraph 1 of this Agreement for services to be
provided to Class D shareholders over the course of the one year period
immediately following the sale. + Class B Shares are not available for the U.S.
Government Securities Portfolio of Seligman High Income Fund Series, Selligman
New Jersey Tax-Exempt Fund, Inc., Seligman Pennsylvania Tax-Exempt Fund Series
or any Series of Seligman Tax-Exempt Fund Series, Inc. or Seligman Tax-Exempt
Series Trust.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 021
<NAME> SELIGMAN HIGH-YIELD BOND SERIES CL. A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 257674
<INVESTMENTS-AT-VALUE> 265730
<RECEIVABLES> 8769
<ASSETS-OTHER> 136
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 274635
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2353
<TOTAL-LIABILITIES> 2353
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 275965
<SHARES-COMMON-STOCK> 26169<F1>
<SHARES-COMMON-PRIOR> 9297<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (11739)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8056
<NET-ASSETS> 182129<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0<F1>
<OTHER-INCOME> 11238
<EXPENSES-NET> (1132)<F1>
<NET-INVESTMENT-INCOME> 10106<F1>
<REALIZED-GAINS-CURRENT> 1611
<APPREC-INCREASE-CURRENT> 9317
<NET-CHANGE-FROM-OPS> 24486
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10106)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 21536<F1>
<NUMBER-OF-SHARES-REDEEMED> (5337)<F1>
<SHARES-REINVESTED> 673<F1>
<NET-CHANGE-IN-ASSETS> 204000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (13350)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 526<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1132)<F1>
<AVERAGE-NET-ASSETS> 103914<F1>
<PER-SHARE-NAV-BEGIN> 6.35<F1>
<PER-SHARE-NII> .65<F1>
<PER-SHARE-GAIN-APPREC> .61<F1>
<PER-SHARE-DIVIDEND> (.65)<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 6.96<F1>
<EXPENSE-RATIO> 1.09<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 024
<NAME> SELIGMAN HIGH-YIELD BOND SERIES CL. D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 257674
<INVESTMENTS-AT-VALUE> 265730
<RECEIVABLES> 8769
<ASSETS-OTHER> 136
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 274635
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2353
<TOTAL-LIABILITIES> 2353
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 275965
<SHARES-COMMON-STOCK> 12949<F1>
<SHARES-COMMON-PRIOR> 1456<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (11739)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8056
<NET-ASSETS> 90153<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4196<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (744)<F1>
<NET-INVESTMENT-INCOME> 3452<F1>
<REALIZED-GAINS-CURRENT> 1611
<APPREC-INCREASE-CURRENT> 9317
<NET-CHANGE-FROM-OPS> 24486
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3452)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13455<F1>
<NUMBER-OF-SHARES-REDEEMED> (2252)<F1>
<SHARES-REINVESTED> 290<F1>
<NET-CHANGE-IN-ASSETS> 204000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (13350)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 197<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (744)<F1>
<AVERAGE-NET-ASSETS> 38968<F1>
<PER-SHARE-NAV-BEGIN> 6.35<F1>
<PER-SHARE-NII> .60<F1>
<PER-SHARE-GAIN-APPREC> .61<F1>
<PER-SHARE-DIVIDEND> (.60)<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 6.96<F1>
<EXPENSE-RATIO> 1.91<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> SELIGMAN U.S.GOVERNMENT SECURITIES CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 58767
<INVESTMENTS-AT-VALUE> 62347
<RECEIVABLES> 1427
<ASSETS-OTHER> 63
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 63837
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 595
<TOTAL-LIABILITIES> 595
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75961
<SHARES-COMMON-STOCK> 7701<F1>
<SHARES-COMMON-PRIOR> 8461<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (16299)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3580
<NET-ASSETS> 55061<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4212<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (614)<F1>
<NET-INVESTMENT-INCOME> 3598<F1>
<REALIZED-GAINS-CURRENT> 2039
<APPREC-INCREASE-CURRENT> 4047
<NET-CHANGE-FROM-OPS> 10076
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3598)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1600<F1>
<NUMBER-OF-SHARES-REDEEMED> (2610)<F1>
<SHARES-REINVESTED> 250<F1>
<NET-CHANGE-IN-ASSETS> 2466
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (27561)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 268<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 614<F1>
<AVERAGE-NET-ASSETS> 53599<F1>
<PER-SHARE-NAV-BEGIN> 6.47<F1>
<PER-SHARE-NII> .46<F1>
<PER-SHARE-GAIN-APPREC> .68<F1>
<PER-SHARE-DIVIDEND> (.46)<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 7.15<F1>
<EXPENSE-RATIO> 1.14<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 014
<NAME> SELIGMAN U.S.GOVERNMENT SECURITIES CLASS D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 58767
<INVESTMENTS-AT-VALUE> 62347
<RECEIVABLES> 1427
<ASSETS-OTHER> 63
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 63837
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 595
<TOTAL-LIABILITIES> 595
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 75961
<SHARES-COMMON-STOCK> 1142<F1>
<SHARES-COMMON-PRIOR> 935<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (16299)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3580
<NET-ASSETS> 8181<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 527<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (135)<F1>
<NET-INVESTMENT-INCOME> 392<F1>
<REALIZED-GAINS-CURRENT> 2039
<APPREC-INCREASE-CURRENT> 4047
<NET-CHANGE-FROM-OPS> 10076
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (392)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 940<F1>
<NUMBER-OF-SHARES-REDEEMED> (774)<F1>
<SHARES-REINVESTED> 41<F1>
<NET-CHANGE-IN-ASSETS> 2466
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (27561)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 33<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 135<F1>
<AVERAGE-NET-ASSETS> 6706<F1>
<PER-SHARE-NAV-BEGIN> 6.48<F1>
<PER-SHARE-NII> .40<F1>
<PER-SHARE-GAIN-APPREC> .68<F1>
<PER-SHARE-DIVIDEND> (.40)<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 7.16<F1>
<EXPENSE-RATIO> 2.01<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
SELIGMAN GROUP OF MUTUAL FUNDS
Plan for Multiple Classes of Shares (three classes)
THIS PLAN, as it may be amended from time to time, sets forth
the separate arrangement and expense allocation of each class of shares (a
"Class") of each registered open-end management investment company, or series
thereof, in the Seligman Group of Mutual Funds that offers multiple classes of
shares (each, a "Fund"). The Plan has been adopted pursuant to Rule 18f-3(d)
under the Investment Company Act of 1940, as amended (the "Act"), by a majority
of the Board of Directors or Trustees, as applicable ("Directors"), of each Fund
listed on Schedule I hereto, including a majority of the Directors who are not
interested persons of such Fund within the meaning of Section 2(a)(19) of the
Act ("Disinterested Directors"). Any material amendment to this Plan is subject
to the prior approval of the Board of Directors of each Fund to which it
relates, including a majority of the Disinterested Directors.
1. General
A. Any Fund may issue more than one Class of voting stock,
provided that each Class:
i. Shall have a different arrangement for shareholder
services or the distribution of securities or both,
and shall pay all of the expenses of that
arrangement;
ii. May pay a different share of other expenses, not
including advisory or custodial fees or other
expenses related to the management of the Fund's
assets, if these expenses are actually incurred in
a different amount by that Class, or if the Class
receives services of a different kind or to a
different degree than other Classes of the same
Fund ("Class Level Expenses");
iii. May pay a different advisory fee to the extent that
any difference in amount paid is the result of the
application of the same performance fee provisions
in the advisory contract of the Fund to the
different investment performance of each Class;
iv. Shall have exclusive voting rights on any matter
submitted to shareholders that relates solely to
its arrangement;
-1-
<PAGE>
v. Shall have separate voting rights on any matter
submitted to shareholders in which the interests of
one Class differ from the interests of any other
Class; and
vi. Shall have in all other respects the same rights
and obligations as each other Class of the Fund.
B. i. Except as expressly contemplated by this paragraph
B., no types or categories of expenses shall be
designated Class Level Expenses.
ii. The Directors recognize that certain expenses
arising in certain sorts of unusual situations are
properly attributable solely to one Class and
therefore should be borne by that Class. These
expenses ("Special Expenses") may include, for
example: (i) the costs of preparing a proxy
statement for, and holding, a special meeting of
shareholders to vote on a matter affecting only one
Class; (ii) the costs of holding a special meeting
of Directors to consider such a matter; (iii) the
costs of preparing a special report relating
exclusively to shareholders of one Class; and
(iv) the costs of litigation affecting one Class
exclusively. J. & W. Seligman & Co. Incorporated
(the "Manager") shall be responsible for
identifying expenses that are potential Special
Expenses.
iii. Subject to clause iv. below, any Special Expense
identified by the Manager shall be treated as a
Class Level Expense.
iv. Any Special Expense identified by the Manager that
is material to the Class in respect of which it is
incurred shall be submitted by the Manager to the
Directors of the relevant Fund on a case by case
basis with a recommendation by the Manager as to
whether it should be treated as a Class Level
Expense. If approved by the Directors, such
Special Expense shall be treated as a Class Level
Expense of the affected class.
C. i. Realized and unrealized capital gains and losses of
a Fund shall be allocated to each class of that
Fund on the basis of the aggregate net asset value
of all outstanding shares ("Record Shares") of the
Class in relation to the aggregate net asset value
of Record Shares of the Fund.
-2-
<PAGE>
ii. Income and expenses of a Fund not charged directly
to a particular Class shall be allocated to each
Class of that Fund on the following basis:
a. For periodic dividend funds, on the basis of
the aggregate net asset value of Record
Shares of each Class in relation to the
aggregate net asset value of Record Shares
of the Fund.
b. For daily dividend funds, on the basis of
the aggregate net asset value of Settled
Shares of each Class in relation to the
aggregate net asset value of Settled
Shares of the Fund. "Settled Shares"
means Record Shares minus the number of
shares of that Class or Fund that have
been issued but for which payment has not
cleared and plus the number of shares of
that Class or Fund which have been
redeemed but for which payment has not yet
been issued.
D. On an ongoing basis, the Directors, pursuant to their
fiduciary responsibilities under the Act and otherwise, will
monitor each Fund for the existence of any material
conflicts among the interests of its several Classes. The
Directors, including a majority of the Disinterested
Directors, shall take such action as is reasonably necessary
to eliminate any such conflicts that may develop. The
Manager and Seligman Financial Services, Inc. (the
"Distributor") will be responsible for reporting any
potential or existing conflicts to the Directors. If a
conflict arises, the Manager and the Distributor will be
responsible at their own expense for remedying such conflict
by appropriate steps up to and including separating the
classes in conflict by establishing a new registered
management company to operate one of the classes.
E. The plan of each Fund adopted pursuant to Rule 12b-1 under
the Act (the "Rule 12b-1 Plan") provides that the Directors
will receive quarterly and annual statements complying with
paragraph (b)(3)(ii) of Rule 12b-1, as it may be amended
from time to time. To the extent that the Rule 12b-1 Plan
in respect of a specific Class is a reimbursement plan, then
only distribution expenditures properly attributable to the
sale of shares of that Class will be used in the statements
to support the Rule 12b-1 fee charged to shareholders of
such Class. In such cases expenditures not related to the
sale of a specific Class will not be presented to the
Directors to support Rule 12b-1 fees charged to shareholders
of such Class. The statements, including the allocations
upon which they are based, will be subject to the review of
the Disinterested Directors.
-3-
<PAGE>
F. Dividends paid by a Fund with respect to each Class, to the
extent any dividends are paid, will be calculated in the same
manner, at the same time and on the same day and will be in
the same amount, except that fee payments made under the Rule
12b-1 Plan relating to the Classes will be borne exclusively
by each Class and except that any Class Level Expenses shall
be borne by the applicable Class.
G. The Directors of each Fund hereby instruct such Fund's
independent auditors to review expense allocations each year
as part of their regular audit process, to inform the
Directors and the Manager of any irregularities detected
and, if specifically requested by the Directors, to prepare
a written report thereon. In addition, if any Special
Expense is incurred by a Fund and is classified as a Class
Level Expense in the manner contemplated by paragraph B.
above, the independent auditors for such Fund, in addition
to reviewing such allocation, are hereby instructed to
report thereon to the Audit Committee of the relevant Fund
and to the Manager. The Manager will be responsible for
taking such steps as are necessary to remedy any
irregularities so detected, and will do so at its own
expense to the extent such irregularities should reasonably
have been detected and prevented by the Manager in the
performance of its services to the Fund.
2. Specific Arrangements for Each Class
The following arrangements regarding shareholder services,
expense allocation and other indicated matters shall be in effect with respect
to the Class A shares, Class B shares and Class D shares of each Fund. The
following descriptions are qualified by reference to the more detailed
description of such arrangements set forth in the prospectus relating to each
Fund, as the same may from time to time be amended or supplemented (for each
Fund, the "Relevant Prospectus"), provided that no Relevant Prospectus may
modify the provisions of this Plan applicable to Rule 12b-1 fees or Class Level
Expenses.
(a) Class A Shares
i. Class A shares are subject to an initial sales load
which varies with the size of the purchase, to a
maximum of 4.75% of the public offering price.
Reduced sales loads shall apply in certain
circumstances. Class A shares of Seligman Cash
Management Fund, Inc. shall not be subject to an
initial sales load.
-4-
<PAGE>
ii. Class A shares shall be subject to a Rule 12b-1
service fee of up to 0.25% of average daily net
assets.
iii. Special Expenses attributable to the Class A
shares, except those determined by the Directors
not to be Class Level Expenses of the Class A
shares in accordance with paragraph 1.B.iv., shall
be Class Level Expenses and attributed solely to
the Class A shares. No other expenses shall be
treated as Class Level Expenses of the Class A
shares.
iv. The Class A shares shall be entitled to the
shareholder services, including exchange
privileges, described in the Relevant Prospectus.
(b) Class B Shares
i. Class B shares are sold without an initial sales
load but are subject to a contingent deferred sales
load ("CDSL") in certain cases. The CDSL in
respect of any Class B share, if applicable, will
be in the following amount (as a percentage of the
current net asset value or the original purchase
price, whichever is less) if the redemption occurs
within the indicated number of years of issuance of
such share:
Years since issuance
CDSL
less than one
5%
one but less than two
4%
two but less than four
3%
four but less than five
2%
five but less than six
1%
six or more
0%
ii. Class B shares shall be subject to a Rule 12b-1 fee
of up to 1.00% of average daily net assets,
consisting of an asset-based distribution fee of up
to 0.75% and a service fee of up to 0.25%.
iii. Each Class B share shall automatically convert to a
Class A share on the last day of the month which
precedes the eighth anniversary of its date of issue
occurs.
iv. Special Expenses attributable to the Class B
shares, except those determined by the Directors
not to be Class Level Expenses of the Class B
shares in accordance with paragraph 1.B.iv., shall
-5-
<PAGE>
be Class Level Expenses and attributed solely to
the Class B shares. No other expenses shall be
treated as Class Level Expenses of the Class B
shares.
v. The Class B shares shall be entitled to the
shareholder services, including exchange
privileges, described in the Relevant Prospectus.
(c) Class D Shares
i. Class D shares are sold without an initial sales load
but are subject to a CDSL of 1% of the lesser of the
current net asset value or the original purchase
price in certain cases if the shares are redeemed
within one year.
ii. Class D shares shall be subject to a Rule 12b-1 fee
of up to 1.00% of average daily net assets,
consisting of an asset-based distribution fee of up
to 0.75% and a service fee of up to 0.25%.
iii. Special Expenses attributable to the Class D
shares, except those determined by the Directors
not to be Class Level Expenses of the Class D
shares in accordance with paragraph 1.B.iv., shall
be Class Level Expenses and attributed solely to
the Class D shares. No other expenses shall be
treated as Class Level Expenses of the Class D
shares.
iv. The Class D shares shall be entitled to the
shareholder services, including exchange
privileges, described in the Relevant Prospectus.
-6-
<PAGE>
Schedule I
Seligman Cash Management Fund, Inc.
Seligman Capital Fund, Inc.
Seligman Common Stock, Inc.
Seligman Communications and Information Fund, Inc.
Seligman Frontier Fund, Inc.
Seligman Growth Fund, Inc.
Seligman Income Fund, Inc.
Seligman Henderson Emerging Markets Growth Fund
Seligman Henderson Global Growth Opportunities Fund
Seligman Henderson Global Smaller Companies Fund
Seligman Henderson Global Technology Fund
Seligman Henderson International Fund
Seligman High-Yield Bond Fund
