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11TH ANNUAL REPORT
SELIGMAN
HIGH INCOME
FUND SERIES
December 31, 1995
{LOGO]
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A High Current Income Series
Established in 1985
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TO THE SHAREHOLDERS
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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
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SELIGMAN HIGH INCOME FUND SERIES
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HIGHLIGHTS December 31, 1995
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<TABLE>
<CAPTION>
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U.S. GOVERNMENT HIGH-YIELD
SECURITIES SERIES BOND SERIES
--------------------------------------------------------------------------
CLASS A CLASS D CLASS A CLASS D
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<S> <C> <C> <C> <C>
Net Assets (millions) $55.0 $8.2 $182.1 $90.2
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Yield* 5.09% 4.50% 8.99% 8.66%
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Dividends** $0.4558 $0.3980 $0.6536 $0.5952
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Net asset value per share $7.15 $7.16 $6.96 $6.96
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Maximum offering
price per share $7.51 $7.16 $7.31 $6.96
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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
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Weighted average
maturity 18.8 years 8.1 years
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</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
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ANNUAL PERFORMANCE OVERVIEW -- Seligman U.S. Government Securities Series
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[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
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PERFORMANCE COMPARISON CHART AND TABLE December 31, 1995
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This chart compares a $10,000 hypothetical investment made in Seligman U.S.
Government Securities Series Class A shares, with and without the maximum
initial sales charge of 4.75%, 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>
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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.
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+ Although the payment of principal and interest with respect to certain
long-term securities held in the U.S. Government Securities Series is guaranteed
by the U.S. Government or its agencies, the rate of return will vary and the
principal value of an investment in the Series will fluctuate.
4
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ANNUAL PERFORMANCE OVERVIEW -- Seligman High-Yield Bond Series
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[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
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PERFORMANCE COMPARISON CHART AND TABLE December 31, 1995
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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
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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>
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The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders. Performance data quoted represent changes in
prices and assume that all distributions within the periods are invested in
additional shares. The investment return and principal value of an investment
will fluctuate so that shares, if redeemed, may be worth more or less than their
original stated cost. Past performance is not indicative of future investment
results.
6
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PORTFOLIOS OF INVESTMENTS December 31, 1995
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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
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PORTFOLIOS OF INVESTMENTS (continued)
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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
