================================================================================
SELIGMAN HIGH INCOME FUND SERIES
- --------------------------------------------------------------------------------
HIGHLIGHTS June 30, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT HIGH-YIELD
SECURITIES SERIES BOND SERIES
------------------------------------------------------------------------------------------------------
CLASS A CLASS D CLASS A CLASS B CLASS D
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets (millions) $48.3 $8.1 $260.0 $18.9 $155.9
- ------------------------------------------------------------------------------------------------------------------------------------
Yield* 5.58% 5.09% 8.78% 8.46% 8.46%
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends** $0.2048 $0.1787 $0.3433 $0.1234 $0.3161
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value per share $6.67 $6.68 $7.05 $7.05 $7.05
- ------------------------------------------------------------------------------------------------------------------------------------
Maximum offering
price per share $7.00 $6.68 $7.40 $7.05 $7.05
- ------------------------------------------------------------------------------------------------------------------------------------
Holdings by US Treasury Securities 60.8% Corporate Bonds 94.2%
market sector Government Agency Convertible Securities 2.9
Securities 31.4 Net Cash & Short-
Net Cash & Short- Term Holdings 2.9
Term Holdings 7.8
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average
maturity 14.8 years 8.2 years
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Current yield representing the annualized yield for the 30-day period ended
June 30, 1996. See pages 4 and 7 for investment results.
** Represents per share amount paid or declared for the six months ended June
30, 1996.
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.
1
<PAGE>
================================================================================
TO THE SHAREHOLDERS
- --------------------------------------------------------------------------------
Seligman High Income Fund Series' results for the six months ended June 30,
1996, were mixed: the U.S. Government Securities Series had a difficult six
months due to the increase in interest rates, while the High-Yield Bond Series
had a strong half year.
In the first half of 1996, the Federal Reserve Board's continuing efforts
to achieve a "soft landing" -- a healthy moderation of economic growth that does
not slip into recession -- appeared to have come to fruition. Inflation remained
low and, more important, commodity price indices declined from their recent
eight-year highs, which suggested that future inflationary pressures were in
check. Additionally, economic data for the second quarter of 1996 indicated
continued growth in output, employment, and incomes. More than half the early
corporate earnings reports reflected the positive effects of the strong economy,
and earnings estimates rose to higher levels. Overall, the economy seemed quite
healthy at the end of the second quarter.
In the fixed-income markets, low inflation and uncertainty over the future
direction of interest rates created much confusion. The benchmark 30-year
Treasury bond yield widely fluctuated, reacting to the shifting perceptions of
economic growth and inflationary pressures. It ended the month of June at 6.87%,
up from 5.95% at the beginning of the year. Additionally, the Lehman Brothers
Government Bond Index posted a 1.79% loss for the six months ended June 30.
In July, the equity markets experienced several downward adjustments.
Though this did not directly impact Seligman High Income Fund Series, the events
in the equity markets remind us of the importance of long-term investing. Since
the ups and downs of the markets are unavoidable, it benefits you, our
Shareholders, to adopt a long-term investment plan whenever possible. Time is a
powerful investment tool that succeeds where market timing often fails. If you
invest over the long term, short-term market swings have less of an impact on
your overall financial goals. As investors, you have already taken steps to
reduce your overall risk by purchasing shares of a mutual fund, which provides
portfolio diversification by investing in numerous issues and industries.
With the help of your investment advisor, you can formulate a long-term
investment strategy that further reduces your risk, increases your
diversification, and allows you to benefit from the advantages of mutual fund
investments.
Specific performance information and interviews with your Portfolio
Managers begin on page 3.
By order of the Trustees,
/s/ William C. Morris
William C. Morris
Chairman
/s/ Brian T. Zino
Brian T. Zino
President
July 31, 1996
2
<PAGE>
================================================================================
INTERVIEW WITH YOUR PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
Leonard J. Lovito
Seligman U.S. Government Securities Series
What economic factors influenced the Series in the past six months?
In the six-month period ended June 30, 1996, the Series underperformed both the
Lipper U.S. Government Funds Index and the Lehman Brothers Government Bond
Index, due in part to the stronger-than-expected growth in the economy. As we
entered 1996, the expectation was that the bond market rally of 1995 would
continue into this year. We therefore concentrated the Series' holdings in
long-term bonds. Unfortunately, due to strong economic growth which led to
higher inflationary expectations, the bond market rally ended early in 1996. Due
to its long-term weighting, the Series was particularly affected by the rise in
interest rates and the prices of its securities declined.
What strategy did you adopt to respond to these economic and market factors?
As the year progressed, we sold most of the Series' long-term bonds in favor of
short-term issues, reducing the average maturity of the portfolio. Short-term
bonds are less price-sensitive to rising interest rates and perform better than
long-term bonds in such an environment. We also increased the Series' weighting
in mortgage-backed securities from 18% to 32% of the portfolio. Mortgage-backed
securities provide higher yields and usually outperform Treasury securities when
interest rates rise. As a result of these changes, the Series currently holds a
neutral position versus its peers.
What will impact the Series' performance for the rest of the year?
The possibility of a slower economy later this year, coupled with benign
inflation, could lead to a bond market rally which would improve the Series'
performance. Inflation remains in check year to date, as indicated by favorable
Consumer and Producer Price Index reports (CPI & PPI). Additionally, commodity
prices have declined over the second quarter, which also supports our low
inflation forecast.
Though bond prices have stabilized through June, we are currently holding a
neutral stance, waiting for further economic statistics to be released before we
can determine whether it is necessary to adjust the average maturity of the
portfolio.
3
<PAGE>
================================================================================
SELIGMAN U.S. GOVERNMENT SECURITIES SERIES*
- --------------------------------------------------------------------------------
INVESTMENT RESULTS
TOTAL RETURNS**
For Periods Ended June 30, 1996
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-----------------------------------------------------------------
CLASS D
SINCE
SIX ONE FIVE 10 INCEPTION
MONTHS YEAR YEARS YEARS 9/21/93
------ ---- ----- ----- -------
<S> <C> <C> <C> <C>
CLASS A
With Sales Charge (8.47)% (1.79)% 5.52% 5.30% n/a
Without Sales Charge (3.86) 3.05 6.55 5.82 n/a
CLASS D
With 1% CDSL (5.23) 1.26 n/a n/a n/a
Without CDSL (4.23) 2.23 n/a n/a 2.05%
LEHMAN BROTHERS GOVERNMENT
BOND INDEX*** (1.79) 4.51 8.21 8.14 4.18+
LIPPER GENERAL U.S.
GOVERNMENT FUNDS INDEX*** (2.15) 3.73 6.82 6.99 3.07+
NET ASSET VALUE PER SHARE
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
------------- ------------------
<S> <C> <C>
CLASS A $6.67 $7.15
CLASS D 6.68 7.16
DIVIDEND INFORMATION
For the Six Months Ended June 30, 1996
<CAPTION>
DIVIDENDS PER SHARE
-------------------
<S> <C>
CLASS A $0.2048
CLASS D 0.1787
</TABLE>
* Although the payment of principal and interest with respect to certain
long-term securities held in the U.S. Government Securities Series are
guaranteed by the US Government or its agencies, the rate of return will
vary and the principal value of an investment in the Series will
fluctuate. Shares, if redeemed, may be worth more or less than their
original cost. Past performance is not indicative of future investment
results.
** Return figures reflect any change in price per share and assume the
reinvestment of dividends and capital gain distributions. Return figures
for Class A shares are calculated without and with the effect of the
initial 4.75% maximum sales charge. Returns for Class D shares are
calculated without and with the effect of the 1% contingent deferred sales
load ("CDSL"), charged only on redemptions made within one year of the
date of purchase.
*** The Lehman Brothers Government Bond Index and the Lipper General U.S.
Government Funds Index are unmanaged indices that assume reinvestment of
estimated dividends and do not reflect fees and expenses. Investors may
not invest directly in an index.
+ From September 30, 1993.
4
<PAGE>
================================================================================
SELIGMAN U.S. GOVERNMENT SECURITIES SERIES
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
As of June 30, 1996
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
U.S. Treasury Securities 61.4%
GNMAs 18.7%
FNMAs 13.0%
Short-Term Holdings 6.9%
SELIGMAN U.S. GOVERNMENT SECURITIES SERIES CLASS A
GROWTH OF AN ASSUMED $10,000 INVESTMENT
June 30, 1986, to June 30, 1996
[THE FOLLOWING TABLE WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED
MATERIAL.]
The performance of Class D shares will be greater or less than the performance
shown for Class A shares, based on the difference in sales charges and fees paid
by shareholders.
5
<PAGE>
================================================================================
INTERVIEW WITH YOUR PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
Daniel J. Charleston
Seligman High-Yield Bond Series
How did Seligman High-Yield Bond Series perform in the past six months?
In the last six months, Seligman High-Yield Bond Series continued its strong
performance, outpacing both the Lipper High-Yield Bond Index and the Merrill
Lynch High-Yield Master Index.
What economic factors influenced the Series in the past six months?
The stronger-than-expected economic growth in the first and second quarters of
1996 led many investors to believe that the Federal Reserve Board would raise
short-term interest rates in an effort to slow the economy and head off
inflation. The bond market retreated in the face of inflationary fears and
yields rose. The 10-year Treasury bond yield increased from 5.57% on January 1,
1996, to 6.71% on June 28, 1996, causing the most interest rate-sensitive
securities in the portfolio to decline in price. We reduced the portfolio's
duration (a measurement of a security's sensitivity to changes in interest
rates) and locked in profits, by selling the zero-coupon bonds of companies such
as Echostar Communications and American Telecasting.
What market factors affected the Series in the past six months?
Strong demand for higher yielding investments has continued to attract capital
into high-yield bond mutual funds and, more important, into the Series. In
addition, investment-grade buyers, in search of higher yields, turned to the
high-yield bond marketplace, which further strengthened the demand for BB-rated
and strong B-rated securities. These two positive factors increased the
valuations of several of the Series' investments, including Unisys, Dade
International, and Benton Oil & Gas. Otherwise, the high interest rate levels of
the past six months reduced the value of those securities in the portfolio with
the highest quality and longest durations, such as Comcast Corp. and Rogers
Cablesystems. In response, we used this as a purchasing opportunity, increasing
our investments in these holdings at lower prices, as they have positive
long-term fundamentals.
What other changes were made to the portfolio's composition?
No major industry shifts were made during the last six months. However, we did
expand into several new industries, such as aerospace, consumer products,
energy, and manufacturing, increasing portfolio diversification.
What industries, specifically, performed well within the portfolio?
The gaming/hotel industry had the strongest performance in the high-yield market
and in the Series' portfolio, primarily due to solid fundamentals. In addition,
overall valuations in the industry have risen in response to takeover activity
from investment-grade companies such as Hilton Hotels and ITT. As the portfolio
is overweighted in the gaming/hotel industry, these developments improved its
performance. Overall, we have a positive outlook for the gaming industry,
particularly the Atlantic City concerns, as we anticipate that the addition of
rooms and increased tourism during the summer should improve revenues.
What industries performed poorly in the past six months?
Several industries have not performed well in the high-yield market over the
last six months. For example, the food retailing industry continues to struggle
with pricing competition and the continued demand for capital to either expand
or remodel retail stores. As the portfolio is underweighted in the food
industry, this sector's recent market difficulties did not affect the Series'
performance. The paging sector, which has been consolidating, was also weak, as
there is continued difficulty in integrating subscribers and an ongoing price
erosion in average revenue per unit.
What is your outlook for the Series?
Our outlook for the Series is consistent with our positive long-term view on the
high-yield bond market. We anticipate that well structured B-rated bonds, with
attractive pricing relative to government bonds, will continue to outperform the
overall high-yield bond market going forward.
6
<PAGE>
================================================================================
SELIGMAN HIGH-YIELD BOND SERIES
- --------------------------------------------------------------------------------
INVESTMENT RESULTS
TOTAL RETURNS*
For Periods Ended June 30, 1996
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-------------------------------------------------------
CLASS B CLASS D
SINCE SINCE
INCEPTION SIX ONE FIVE 10 INCEPTION
4/22/96 MONTHS YEAR YEARS YEARS 9/21/93
------- ------ ---- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
With Sales Charge n/a 1.22% 9.37% 14.24% 10.23% n/a
Without Sales Charge n/a 6.31 14.88 15.37 10.77 n/a
CLASS B
With 5% CDSL (3.72)% n/a n/a n/a n/a n/a
Without CDSL 1.27 n/a n/a n/a n/a n/a
CLASS D
With 1% CDSL n/a 4.90 12.99 n/a n/a n/a
Without CDSL n/a 5.90 13.99 n/a n/a 10.55%
LIPPER HIGH-YIELD BOND INDEX** 0.88++ 4.27 10.86 13.55 9.22 8.06+
MERRILL LYNCH HIGH-YIELD
MASTER INDEX** 1.33++ 2.85 9.37 13.49 10.89 8.80+
NET ASSET VALUE PER SHARE
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
<S> <C> <C>
CLASS A $7.05 $6.96
CLASS B 7.05 n/a
CLASS D 7.05 6.96
DIVIDEND INFORMATION
For the Six Months Ended June 30, 1996
<CAPTION>
DIVIDENDS PER SHARE
-------------------
<S> <C>
CLASS A $0.3433
CLASS B 0.1234+++
CLASS D 0.3161
</TABLE>
- ----------
* Return figures reflect any change in price per share and assume the
reinvestment of dividends and capital gain distributions. Return figures
for Class A shares are calculated without and with the effect of the
intitial 4.75% maximum sales charge. Returns for Class B shares are
calculated without and with the effect of the maximum 5% contingent
deferred sales load ("CDSL"), charged only on certain redemptions made
within one year of the date of purchase, declining to 1% in the sixth year
and 0% thereafter. Returns for Class D shares are calculated without and
with the effect of the 1% CDSL, charged only on redemptions made within one
year of the date of purchase. The securities in which the Series invests
are subject to a greater risk of loss of principal and interest than are
higher-rated investment-grade bonds. Investors should carefully assess the
risks associated with an investment in the Series. The rates of return 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.
** The Lipper High-Yield Bond Index and the Merrill Lynch High-Yield Master
Index are unmanaged indices that assume reinvestment of estimated dividends
and do not reflect fees and expenses. Investors may not invest directly in
an index.
+ From September 30, 1993.
++ From April 30, 1996.
+++ For the period April 22, 1996, to June 30, 1996.
7
<PAGE>
================================================================================
SELIGMAN HIGH-YIELD BOND SERIES
- --------------------------------------------------------------------------------
QUALITY COMPOSITION
As of June 30, 1996
[THE FOLLOWING TABLES WERE REPRESENTED BY TWO PIE CHARTS IN THE PRINTED
MATERIAL.]
MOODY'S S&P RATINGS
------- -----------
B 86.5% B 75.1%
Caa 5.3% BB 13.3%
Ba 4.8% Non-rated 8.2%
Non-rated 3.4% CCC 3.4%
SELIGMAN HIGH-YIELD BOND SERIES CLASS A
GROWTH OF AN ASSUMED $10,000 INVESTMENT
June 30, 1986, to June 30, 1996
[THE FOLLOWING TABLE WAS REPRESENTED BY A MOUNTAIN CHART IN THE PRINTED
MATERIAL.]
The performance of Class B and Class D shares will be greater or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders and the length of the holding period.
8
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
PORTFOLIOS OF INVESTMENTS June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES SERIES
PRINCIPAL
AMOUNT VALUE
------------ ------------
<S> <C> <C>
U.S. TREASURY SECURITIES 60.8%
U.S. Treasury Bonds 8 3/4%, due 5/15/2020 .............................................. $ 7,000,000 $ 8,367,184
U.S. Treasury Notes:
8 3/4%, due 8/15/2000 .............................................................. 2,000,000 2,166,250
8 3/4%, due 10/15/1997 ............................................................. 4,800,000 4,965,000
8%, due 5/15/2001 .................................................................. 5,000,000 5,314,060
7 3/4%, due 1/31/2000 .............................................................. 5,000,000 5,214,060
7 1/4%, due 8/15/2004 .............................................................. 8,000,000 8,285,000
------------
TOTAL U.S. TREASURY SECURITIES (Cost $35,399,797) ...................................... 34,311,554
------------
GOVERNMENT AGENCY SECURITIES 31.4%
Federal National Mortgage Association 7%, due 5/1/2026** ............................... 7,548,305 7,272,264
Government National Mortgage Association Obligations,
Mortgage-backed Pass-through Certificates:
7 1/2%, with various maturities from 9/15/2021 to 8/15/2024** ...................... 10,577,838 10,435,619
------------
TOTAL GOVERNMENT AGENCY SECURITIES (Cost $17,516,167) .................................. 17,707,883
------------
REPURCHASE AGREEMENTS 6.8% (Cost $3,830,000)
HSBC Securities Inc., 5.30%, maturing 7/1/1996 collateralized by: $3,850,000
U.S. Treasury Notes 6 1/2%, due 4/30/1997, with a fair market
value of $3,908,692 ................................................................ 3,830,000
------------
TOTAL INVESTMENTS 99.0% (Cost $56,745,964) ............................................. 55,849,437
OTHER ASSETS LESS LIABILITIES 1.0% ..................................................... 559,604
------------
NET ASSETS 100.0% ...................................................................... $ 56,409,041
============
HIGH-YIELD BOND SERIES
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------ ------------
<S> <C> <C>
CORPORATE BONDS 94.1%
AEROSPACE 1.3%
UNC Inc. 11%, due 6/1/2006* ............................................................ $ 5,500,000 $ 5,596,250
------------
AUTOMOTIVE 1.2%
Hayes Wheels International Inc. 11%, due 7/15/2006 ..................................... 5,000,000 5,112,500
------------
BROADCASTING 3.9%
Allbritton Communications Co. 11 1/2%, due 8/15/2004 ................................... 5,000,000 5,112,500
Paxson Communications Corp. 11 5/8%, due 10/1/2002 ..................................... 5,000,000 5,225,000
SFX Broadcasting, Inc. 10 3/4%, due 5/15/2006* ......................................... 6,500,000 6,500,000
------------
16,837,500
------------
CABLE SYSTEMS 12.2%
American Telecasting (Warrants expiring 8/15/2000) ..................................... 5,000 wts. 137,500
Cablevision Systems Corp. 10 1/2%, due 5/15/2016 ....................................... $ 6,500,000 6,337,500
Charter Communications Southeast L.P. 11 1/4%, due 3/15/2006* .......................... 5,000,000 5,000,000
Charter Communications Southeast Holdings L.P. 0% (14%+), due 3/15/2007* ............... 6,500,000 3,656,250
</TABLE>
- ----------
See footnotes on page 12.
9
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
PORTFOLIOS OF INVESTMENTS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
HIGH-YIELD BOND SERIES
PRINCIPAL
AMOUNT VALUE
------------ ------------
<S> <C> <C>
CABLE SYSTEMS (continued)
Comcast Corp. 10 5/8%, due 7/15/2012 ................................................... $ 10,000,000 $ 10,475,000
Le Groupe Videotron Ltee. 10 5/8%, due 2/15/2005 ....................................... 5,000,000 5,262,500
Rogers Cablesystems Inc. 11%, due 12/1/2015 ............................................ 6,500,000 6,711,250
Rogers Communications Inc. 10 7/8%, due 4/15/2004 ...................................... 6,500,000 6,630,000
United International Holdings Inc. 0% (14%++), due 11/15/1999 .......................... 5,000,000 3,300,000
Wireless One Inc. 13%, due 10/15/2003 .................................................. 5,000,000 5,325,000
Wireless One Inc. (Warrants expiring 10/9/2000) ........................................ 15,000 wts. 127,500
------------
52,962,500
------------
CELLULAR 4.7%
Centennial Cellular Corp. 10 1/8%, due 5/15/2005 ....................................... $ 6,500,000 6,288,750
Commnet Cellular Corp. 11 1/4%, due 7/1/2005 ........................................... 5,800,000 6,206,000
Pricellular Wireless Corp. 0% (12 1/4%+), due 10/1/2003 ................................ 10,000,000 7,950,000
------------
20,444,750
------------
CHEMICALS 2.7%
NL Industries Inc. 11 3/4%, due 10/15/2003 ............................................. 6,500,000 6,662,500
Texas Petrochemicals Corp. 11 1/8%, due 7/1/2006* ...................................... 5,000,000 5,100,000
------------
11,762,500
------------
COMPUTER AND RELATED SERVICES 2.9%
Exide Electronics Group, Inc. 11 1/2%, due 3/15/2006 ................................... 5,000,000 5,125,000
Unisys Corp. 12%, due 4/15/2003* ....................................................... 7,500,000 7,706,250
------------
12,831,250
------------
CONSUMER PRODUCTS 3.3%
Remington Products Co., Inc. 11%, due 5/15/2006* ....................................... 3,000,000 2,985,000
Williamhouse-Regency of Delaware, Inc. 13%, due 11/15/2005* ............................ 10,000,000 11,325,000
------------
14,310,000
------------
CONTAINERS 1.5%
Silgan Corp. 11 3/4%, due 6/15/2002 .................................................... 6,500,000 6,743,750
------------
ENERGY 2.6%
Benton Oil & Gas 11 5/8%, due 5/1/2003* ................................................ 5,000,000 5,175,000
Mesa Operating Co. 10 5/8%, due 7/1/2006 ............................................... 3,000,000 3,063,750
United Meridian Corp. 10 3/8%, due 10/15/2005 .......................................... 3,000,000 3,086,250
------------
11,325,000
------------
ENVIRONMENTAL SERVICES 0.6%
Allied Waste Industries Inc. 12%, due 2/1/2004 ......................................... 2,500,000 2,750,000
------------
FOOD 0.9%
Keebler 10 3/4%, due 7/1/2006* ......................................................... 4,000,000 4,130,000
------------
GAMING/HOTEL 19.0%
Alliance Gaming Corp. 12 7/8%, due 6/30/2003 ........................................... 5,000,000 5,012,500
Argosy Gaming Co. 13 1/4%, due 6/1/2004* ............................................... 6,500,000 6,630,000
Aztar Corp. 13 3/4%, due 10/1/2004 ..................................................... 6,500,000 7,491,250
Coast Hotels & Casino Inc. 13%, due 12/15/2002* ........................................ 5,000,000 5,443,750
Hollywood Casino Corp. 12 3/4%, due 11/1/2003 .......................................... 6,500,000 6,532,500
Majestic Star Casino L.L.C. 12 3/4%, due 5/15/2003* .................................... 3,000,000 3,255,000
PRT Funding Corp. 11 5/8%, due 4/15/2004 ............................................... 5,000,000 4,625,000
Showboat, Inc. 13%, due 8/1/2009 ....................................................... 3,500,000 4,042,500
Showboat Marina Casino Partnership 13 1/2%, due 3/15/2003* ............................. 6,500,000 7,020,000
</TABLE>
- ----------
See footnotes on page 12.
10
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
HIGH-YIELD BOND SERIES (continued)
PRINCIPAL
AMOUNT VALUE
------------ ------------
<S> <C> <C>
GAMING/HOTEL (continued)
Stratosphere Corporation 14 1/4%, due 5/15/2002 ........................................ $ 6,500,000 $ 7,247,500
Trump Atlantic City Funding, Inc. 11 1/4%, due 5/1/2006 ................................ 8,500,000 8,585,000
Trump Hotels & Casino Resorts Funding, Inc. 15 1/2%, due 6/15/2005 ..................... 10,000,000 11,875,000
Wyndham Hotel Corp. 10 1/2%, due 5/15/2006 ............................................. 5,000,000 4,993,750
------------
82,753,750
------------
HEALTH CARE/MEDICAL PRODUCTS 3.6%
Dade International Inc. 11 1/8%, due 5/1/2006* ......................................... 5,000,000 5,200,000
Graphic Controls Corp. 12%, due 9/15/2005 .............................................. 5,000,000 5,325,000
Paracelsus Healthcare Corp. 9 7/8%, due 10/15/2003 ..................................... 5,000,000 4,950,000
------------
15,475,000
------------
INDUSTRIAL 1.5%
Imo Industries Inc. 11 3/4%, due 5/1/2006* ............................................. 6,500,000 6,678,750
------------
LEISURE 1.7%
Cobblestone Golf Group, Inc. 11 1/2%, due 6/1/2003* .................................... 1,000,000 1,010,000
Cobblestone Holdings, Inc. 0% (13 1/2%+), due 6/1/2004* ................................ 5,500,000 2,062,500
Premier Parks, Inc. 12%, due 8/15/2003 ................................................. 4,000,000 4,270,000
------------
7,342,500
------------
MANUFACTURING 1.2%
BPC Holdings Corp. 12 1/2%, due 6/15/2006* ............................................. 5,000,000 5,075,000
------------
METALS 0.7%
Renco Metals, Inc. 11 1/2%, due 7/1/2003 ............................................... 3,000,000 3,045,000
------------
PAGING 5.6%
Metrocall 10 3/8%, due 10/1/2007 ....................................................... 5,000,000 4,700,000
Mobile Telecommunication Technologies Corp. 13 1/2%, due 12/15/2002 .................... 10,000,000 10,575,000
ProNet Inc. 11 7/8%, due 6/15/2005 ..................................................... 7,500,000 7,443,750
ProNet Communications 10 7/8%, due 9/15/2006 ........................................... 1,475,000 1,419,687
------------
24,138,437
------------
PAPER AND PACKAGING 2.3%
Crown Packaging Ltd. 10 3/4%, due 11/1/2000 ............................................ 5,000,000 4,725,000
S.D. Warren Co. 12%, due 12/15/2004 .................................................... 5,000,000 5,325,000
------------
10,050,000
------------
SUPERMARKETS 4.4%
Jitney-Jungle Stores of America, Inc. 12%, due 3/1/2006 ................................ 7,500,000 7,687,500
Pathmark Stores, Inc. 12 5/8%, due 6/15/2002 ........................................... 1,500,000 1,515,000
Pathmark Stores, Inc. 11 5/8%, due 6/15/2002 ........................................... 5,000,000 5,000,000
Smiths Food & Drugs Centers, Inc. 11 1/4%, due 5/15/2007 ............................... 5,000,000 5,087,500
------------
19,290,000
------------
STEEL 0.6%
Oregon Steel Mills 11%, due 6/15/2003 .................................................. 2,450,000 2,526,563
------------
TELECOMMUNICATIONS 9.9%
American Communications Services 0%(13%+), due 11/1/2005 ............................... 5,000,000 2,800,000
American Communications Services (Warrants expiring 11/1/2005) ......................... 5,000 wts. 525,000
Brooks Fiber Properties Inc. 0% (10 7/8%+), due 3/1/2006* .............................. $ 5,000,000 2,687,500
Fonorola Inc. 12 1/2%, due 8/15/2002 ................................................... 7,500,000 8,137,500
Intermedia Communications of Florida, Inc. 13 1/2%, due 6/1/2005 ....................... 5,000,000 5,600,000
Intermedia Communications of Florida, Inc. 0% (12 1/2%+), due 5/15/2006 ................ 5,000,000 2,775,000
Intermedia Communications of Florida, Inc. (Warrants expiring 6/1/2000) ................ 4,000 wts. 160,000
</TABLE>
- ----------
See footnotes on page 12.
11
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
PORTFOLIOS OF INVESTMENTS (continued) June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
HIGH-YIELD BOND SERIES (continued)
PRINCIPAL
AMOUNT
OR SHARES VALUE
------------ ------------
<S> <C> <C>
TELECOMMUNICATIONS (continued)
IXC Communications Inc. 13%, due 10/1/2005* ............................................ $ 10,000,000 $ 10,500,000
NextLink Communications L.L.C. 12 1/2%, due 4/15/2006* ................................. 5,000,000 5,000,000
Teleport Communications Group Inc. 9 7/8%, due 7/1/2006 ................................ 1,975,000 1,984,875
Teleport Communications Group Inc. 0% (11 1/8%+), due 7/1/2007 ......................... 4,900,000 2,878,750
------------
43,048,625
------------
THEATERS 1.5%
Plitt Theatres, Inc. 10 7/8%, due 6/15/2004 ............................................ 6,500,000 6,565,000
------------
UTILITIES 3.4%
AES Corp. 10 1/4%, due 7/15/2006 ....................................................... 4,000,000 4,035,000
Midland Cogeneration Venture 11 3/4%, due 7/23/2005 .................................... 10,000,000 10,575,000
------------
14,610,000
------------
MISCELLANEOUS 0.9%
Herff Jones, Inc. 11%, due 8/15/2005 ................................................... 3,750,000 3,918,750
------------
TOTAL CORPORATE BONDS (Cost $403,533,172) 409,323,375
------------
CONVERTIBLE BONDS 1.7%
COMPUTER AND RELATED SERVICES 1.2%
EMC Corp. 4 1/4%, due 1/1/2001 ......................................................... 5,000,000 5,387,500
------------
SEMICONDUCTORS 0.5%
Altera Corp. 5 3/4%, due 6/15/2002* .................................................... 2,000,000 2,020,000
------------
TOTAL CONVERTIBLE BONDS (Cost $7,721,875) .............................................. 7,407,500
------------
CONVERTIBLE PREFERRED STOCKS 1.3% (Cost $5,400,000)
PAPER AND PACKAGING 1.3%
S.D. Warren Co., 14% ................................................................... 150,000 shs. 5,400,000
------------
SHORT-TERM HOLDINGS 6.3%
First National Bank of Chicago, Grand Cayman, Fixed Time Deposit 5 7/16%, due 7/1/1996 . $ 20,580,000 20,586,000
National Westminster Bank, Nassau, Fixed Time Deposit 5 1/2%, due 7/1/1996 ............. 7,000,000 7,000,000
------------
TOTAL SHORT-TERM HOLDINGS (Cost $27,586,000) ........................................... 27,586,000
------------
TOTAL INVESTMENTS 103.4%
(Cost $444,241,047) ................................................................ 449,716,875
OTHER ASSETS LESS LIABILITIES (3.4)% ................................................... (14,878,703)
------------
NET ASSETS 100.0% ...................................................................... $434,838,172
============
</TABLE>
- ----------
* 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
original 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.
12
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
STATEMENTS OF ASSETS AND LIABILITIES June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT HIGH-YIELD
SECURITIES SERIES BOND SERIES
----------------- -----------
<S> <C> <C>
ASSETS:
Investments, at value (see portfolios of investments):
Long-term holdings ....................................................................... $ 52,019,437 $ 422,130,875
Short-term holdings ...................................................................... 3,830,000 27,586,000
------------- -------------
55,849,437 449,716,875
Cash ..................................................................................... 110,385 103,561
Interest receivable ...................................................................... 775,485 7,835,928
Receivable for Shares of Beneficial Interest sold ........................................ 11,640 7,093,179
Expenses prepaid to shareholder service agent ............................................ 11,017 47,356
Receivable for securities sold ........................................................... -- 5,099,365
Other .................................................................................... 38,835 97,055
------------- -------------
Total Assets ............................................................................. 56,796,799 469,993,319
------------- -------------
LIABILITIES:
Payable for Shares of Beneficial Interest repurchased .................................... 144,997 663,550
Dividends payable ........................................................................ 121,990 1,488,818
Payable for securities purchased ......................................................... -- 32,421,233
Accrued expenses, taxes, and other ....................................................... 120,771 581,546
------------- -------------
Total Liabilities ........................................................................ 387,758 35,155,147
------------- -------------
Net Assets ............................................................................... $ 56,409,041 $ 434,838,172
============= =============
COMPOSITION OF NET ASSETS:
Shares of Beneficial Interest, at par (unlimited
shares authorized; $.001 par value; 8,457,514
and 61,692,317 shares outstanding):
Class A ................................................................................ $ 7,238 $ 36,895
Class B ................................................................................ -- 2,685
Class D ................................................................................ 1,220 22,112
Additional paid-in capital ............................................................... 73,313,897 435,810,682
Accumulated net realized loss ............................................................ (16,016,787) (6,510,030)
Net unrealized appreciation (depreciation) of investments ................................ (896,527) 5,475,828
------------- -------------
Net Assets ............................................................................... $ 56,409,041 $ 434,838,172
============= =============
NET ASSETS:
Class A .................................................................................. $ 48,257,970 $ 260,023,306
Class B .................................................................................. -- $ 18,931,258
Class D .................................................................................. $ 8,151,071 $ 155,883,608
SHARES OF BENEFICIAL INTEREST OUTSTANDING:
Class A .................................................................................. 7,237,333 36,895,278
Class B .................................................................................. -- 2,685,431
Class D .................................................................................. 1,220,181 22,111,608
NET ASSET VALUE PER SHARE:
Class A .................................................................................. $6.67 $7.05
Class B .................................................................................. -- $7.05
Class D .................................................................................. $6.68 $7.05
</TABLE>
- ----------------
See notes to financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
STATEMENTS OF OPERATIONS For the Six Months Ended June 30, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT HIGH-YIELD
SECURITIES SERIES BOND SERIES
----------------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Interest ..................................................................... $ 2,129,043 $ 19,116,312
------------ ------------
EXPENSES:
Management fees .............................................................. 147,478 1,137,349
Distribution and service fees ................................................ 96,920 884,095
Shareholder account services ................................................. 55,957 351,242
Auditing and legal fees ...................................................... 20,891 21,045
Registration ................................................................. 19,566 71,281
Custody and related services ................................................. 10,977 47,509
Shareholder reports and communications ....................................... 10,584 13,738
Shareholders' meeting ........................................................ 9,594 8,579
Trustees' fees and expenses .................................................. 7,027 7,027
Miscellaneous ................................................................ 4,922 6,911
------------ ------------
Total expenses ............................................................... 383,916 2,548,776
------------ ------------
Net Investment Income ........................................................ 1,745,127 16,567,536
------------ ------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments ............................................. 282,475 5,229,280
Net change in unrealized appreciation
of investments ............................................................. (4,476,626) (2,579,842)
------------ ------------
Net Gain (Loss) on Investments ............................................... (4,194,151) 2,649,438
------------ ------------
Increase (Decrease) in Net Assets from Operations ............................ $ (2,449,024) $ 19,216,974
============ ============
</TABLE>
- ----------------
See notes to financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT HIGH-YIELD BOND
SECURITIES SERIES SERIES
------------------------------- --------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
6/30/96 12/31/95 6/30/96 12/31/95
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 1,745,127 $ 3,990,174 $ 16,567,536 $ 13,558,330
Net realized gain on investments ........................... 282,475 2,039,308 5,229,280 1,610,990
Net change in unrealized appreciation/
depreciation of investments .............................. (4,476,626) 4,046,357 (2,579,842) 9,316,772
------------- ------------- ------------- -------------
Increase (decrease) in net assets from operations .......... (2,449,024) 10,075,839 19,216,974 24,486,092
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A .................................................. (1,535,695) (3,598,301) (10,923,959) (10,106,642)
Class B .................................................. -- -- (142,023) --
Class D .................................................. (209,432) (391,873) (5,501,554) (3,451,688)
------------- ------------- ------------- -------------
Decrease in net assets from distributions .................. (1,745,127) (3,990,174) (16,567,536) (13,558,330)
------------- ------------- ------------- -------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:*
Net proceeds from sale of shares:
Class A .................................................. 3,821,790 3,825,303 97,727,016 105,673,183
Class B .................................................. -- -- 19,164,286 --
Class D .................................................. 2,130,255 2,880,957 70,767,085 73,974,274
Net asset value of shares issued in payment
of dividends:
Class A .................................................. 778,979 1,701,734 5,539,990 4,574,683
Class B .................................................. -- -- 46,602 --
Class D .................................................. 150,336 277,256 3,439,592 1,987,440
Exchanged from associated Funds:
Class A .................................................. 1,252,613 7,127,733 26,161,111 40,995,621
Class B .................................................. -- -- 38,177 --
Class D .................................................. 1,327,745 3,553,259 13,376,993 17,689,110
------------- ------------- ------------- -------------
Total ...................................................... 9,461,718 19,366,242 236,260,852 244,894,311
------------- ------------- ------------- -------------
Cost of shares repurchased:
Class A .................................................. (4,484,140) (11,627,920) (27,791,791) (11,822,223)
Class B .................................................. -- -- (100,658) --
Class D .................................................. (807,391) (1,974,060) (8,281,513) (5,891,925)
Exchanged into associated Funds:
Class A .................................................. (4,534,857) (6,070,037) (25,619,047) (24,535,126)
Class B .................................................. -- -- (153,618) --
Class D .................................................. (2,274,326) (3,313,843) (14,407,687) (9,572,687)
------------- ------------- ------------- -------------
Total ...................................................... (12,100,714) (22,985,860) (76,354,314) (51,821,961)
------------- ------------- ------------- -------------
Increase (decrease) in net assets from transactions
in shares of beneficial interest ......................... (2,638,996) (3,619,618) 159,906,538 193,072,350
------------- ------------- ------------- -------------
Increase (decrease) in net assets .......................... (6,833,147) 2,466,047 162,555,976 204,000,112
NET ASSETS:
Beginning of period ........................................ 63,242,188 60,776,141 272,282,196 68,282,084
------------- ------------- ------------- -------------
End of period .............................................. $ 56,409,041 $ 63,242,188 $ 434,838,172 $ 272,282,196
============= ============= ============= =============
</TABLE>
- ----------------
* The High-Yield Bond Series began offering Class B shares on April 22, 1996.
See notes to financial statements.
15
<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" which
offers two classes of shares - Class A and Class D shares, and the "High-Yield
Bond Series" which offers three classes of shares - Class A, Class B and Class D
shares. All shares existing prior to September 21, 1993, the commencement of
Class D shares, were classified as Class A shares. The High-Yield Bond Series
began offering Class B shares on April 22, 1996. 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 B 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"), if
applicable, of 5% on redemptions in the first year after purchase, declining to
1% in the sixth year and 0% thereafter. Class B shares will automatically
convert 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 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 CDSL of 1% imposed on
certain redemptions made within one year of purchase. 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 certain other 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 US Government and Government agency securities, bonds and stocks 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. The Fund may enter into repurchase agreements with commercial banks and
with broker/dealers deemed to be creditworthy by J. & W. Seligman & Co.
Incorporated (the "Manager"). Securities received as collateral subject to
repurchase agreements are deposited with the Fund's custodian and, pursuant
to the terms of the repurchase agreement, must have an aggregate market
value greater than or equal to the repurchase price plus accrued interest,
at all times. Procedures have been established to monitor, on a daily
basis, the market value of repurchase agreements' underlying securities to
ensure the existence of the proper level of collateral.
e. 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. For the six months ended June 30, 1996,
distribution and service fees were the only class-specific expenses.
f. 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 Series.
3. For the six months ended June 30, 1996, the High-Yield Bond Series had
purchases and sales of portfolio securities, excluding US Government obligations
and short-term investments of $400,457,280 and $238,465,705, respectively. The
U.S. Government Securities Series had purchases and sales of US Government
obligations of $58,359,178 and $62,165,036, respectively.
16
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
At June 30, 1996, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes, and the
tax basis gross unrealized appreciation and depreciation of portfolio securities
were as follows:
TOTAL TOTAL
UNREALIZED UNREALIZED
SERIES APPRECIATION DEPRECIATION
- --------------------------------------------------------------------------------
U.S. Government
Securities $ 350,867 $1,247,394
High-Yield Bond 9,353,287 3,877,459
4. The Manager manages the affairs of the Fund and provides the necessary
personnel and facilities. Compensation of all officers of the Fund, all trustees
of the Fund who are employees or consultants of the Manager, and all personnel
of the Fund and the Manager is paid by the Manager. The Manager's fee is
calculated daily and payable monthly, equal to 0.50% per annum of the U.S.
Government Securities Series' average daily net assets, and 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 the Series' average daily net assets in excess of $1
billion. Prior to January 1, 1996, the management fee rate of the High-Yield
Bond Series was 0.50% per annum of the Series' average daily net assets. The
management fees reflected in the Statements of Operations represent 0.50% and
0.65% per annum of the average daily net assets of the U.S. Government
Securities Series and the High-Yield Bond Series, respectively.
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 $ 43,213 $ 5,373
High-Yield Bond 2,487,198 318,707
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to Class A shares under which service organizations
can enter into agreements with the Distributor and receive a continuing fee of
up to 0.25% on an annual basis, payable quarterly, of the average daily net
assets of the Class A shares attributable to the particular service organization
for providing personal services and/or the maintenance of shareholder accounts.
The Distributor charges such fees to the Fund pursuant to the Plan. For the six
months ended June 30, 1996, such fees paid by the U.S. Government Securities and
High-Yield Bond Series aggregated $57,016 and $260,608, or 0.22% and 0.23% per
annum, respectively, of average daily net assets of Class A shares.
The Fund has a Plan with respect to Class B (High-Yield Bond Series only)
and 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 B and Class D shares
for which the organizations are responsible; and for Class D shares only, 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.
With respect to Class B shares, a distribution fee of up to 0.75% on an
annual basis of average daily net assets is payable monthly by the Fund to the
Distributor; however, the Distributor has sold its rights to substantially all
of this fee to a third party (the "Purchaser"), which provided funding to the
Distributor to enable it to pay commissions to dealers at the time of the sale
of the related Class B shares.
For the six months ended June 30, 1996, for the U.S. Government Securities
Series Class D shares, fees incurred under the Plan amounted to $39,904, or 1%
per annum of average daily assets, and for the High-Yield Bond Series, fees
incurred under the Plan, equivalent to 1% per annum of the average daily net
assets of Class B and Class D shares, amounted to $15,139 and $608,348,
respectively.
The Distributor is entitled to retain any CDSL imposed on certain
redemptions of Class D shares occurring within one year of purchase. For the six
months ended June 30, 1996, such charges incurred were $1,534 for the U.S.
Government Securities Series and $40,094 for the High-Yield Bond Series.
The Distributor has sold its rights to collect any CDSL imposed on
redemptions of Class B shares to the Purchaser. In connection with the sale of
its rights to collect any CDSL and the distribution fees with respect to Class B
shares described above, the Distributor
17
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
receives payments from the Purchaser based on the value of Class B shares sold.
The aggregate amount of such payments and the Class B share distribution fees
retained by the Distributor for the six months ended June 30, 1996, amounted to
$46,995 for the High-Yield Bond Series.
Seligman Services, Inc., an affiliate of the Manager, is 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 six months ended
June 30, 1996, 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 $ 2,196 $6,143
High-Yield Bond 12,266 8,913
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, $55,957, and High-Yield Bond Series,
$351,242.
Certain officers and trustees of the Fund are officers or directors of the
Manager, the Distributor, Seligman Services, Inc., and/or Seligman Data Corp.
Fees of $9,000 were incurred by the Fund for legal services of Sullivan &
Cromwell, a member of which firm is a trustee of the Fund.
The Fund has a compensation agreement under which trustees who receive fees
may elect to defer receiving such fees. Interest is accrued on the deferred
balances. The cost of such fees and interest is included in trustees' fees and
expenses, and the accumulated balances thereof at June 30, 1996, of $39,984 in
the U.S. Government Securities Series and $24,053 in the High-Yield Bond Series
are included in other liabilities. Deferred fees and the related accrued
interest are not deductible for federal income tax purposes until such amounts
are paid.
5. 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.
18
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
6. Transactions in Shares of Beneficial Interest were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT HIGH-YIELD BOND
SECURITIES SERIES SERIES*
-------------------------------- --------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED 6/30/96 ENDED 12/31/95 ENDED 6/30/96 ENDED 12/31/95
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Sale of shares:
Class A............................................. 563,582 563,170 13,796,396 15,520,966
Class B............................................. -- -- 2,709,263 --
Class D............................................. 310,713 420,595 9,989,250 10,865,793
Shares issued in payment of dividends:
Class A............................................. 114,004 250,361 783,000 673,431
Class B............................................. -- -- 6,612 --
Class D............................................. 21,981 40,634 486,071 290,559
Exchanged from associated Funds:
Class A............................................. 180,156 1,037,221 3,698,359 6,014,478
Class B............................................. -- -- 5,391 --
Class D............................................. 193,977 519,691 1,893,385 2,589,157
---------- ---------- ----------- ----------
Total................................................. 1,384,413 2,831,672 33,367,727 35,954,384
---------- ---------- ----------- ----------
Shares repurchased:
Class A............................................. (655,535) (1,727,109) (3,934,604) (1,735,886)
Class B............................................. -- -- (14,171) --
Class D............................................. (118,773) (288,754) (1,171,203) (859,011)
Exchanged into associated Funds:
Class A............................................. (665,563) (883,771) (3,616,935) (3,600,993)
Class B............................................. -- -- (21,664) --
Class D............................................. (329,666) (485,587) (2,034,952) (1,392,998)
---------- ---------- ----------- ----------
Total................................................. (1,769,537) (3,385,221) (10,793,529) (7,588,888)
---------- ---------- ----------- ----------
Increase (decrease) in shares......................... (385,124) (553,549) 22,574,198 28,365,496
========== ========== =========== ==========
</TABLE>
* The Series began offering Class B shares on April 22, 1996.
19
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights for each Series are presented below. The per share
operating performance data is designed to allow investors to trace the operating
performance, on a per share basis, from a Series' beginning net asset value to
the ending net asset value so that they can understand what effect the
individual items have on their investments, assuming they were held throughout
the period. Generally, the per share amounts are derived by converting the
actual dollar amounts incurred for each item, as disclosed in the financial
statements,
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES SERIES
----------------------------------------------------------------------------------------------------
CLASS A CLASS D
------------------------------------------------------------ -------------------------------------
SIX SIX YEAR ENDED
MONTHS YEAR ENDED DECEMBER 31, MONTHS DECEMBER 31, 9/21/93*
ENDED ------------------------------------------------- ENDED ---------------- TO
6/30/96 1995 1994 1993 1992 1991 6/30/96 1995 1994 12/31/93
------- ------- ------- ------- ------- ------- ------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period ................ $7.15 $6.47 $7.18 $7.19 $7.30 $6.89 $7.16 $6.48 $7.20 $7.33
------- ------- ------- ------- ------- ------- ------ ------- ------ ------
Net investment income ........ .20 .46 .44 .53 .51 .51 .18 .40 .37 .09
Net realized and unrealized
investment gain (loss) ... (.48) .68 (.71) (.01) (.11) .41 (.48) .68 (.72) (.13)
------- ------- ------- ------- ------- ------- ------ ------- ------ ------
Increase (decrease) from
investment operations .... (.28) 1.14 (.27) .52 .40 .92 (.30) 1.08 (.35) (.04)
Dividends paid or declared ... (.20) (.46) (.44) (.53) (.51) (.51) (.18) (.40) (.37) (.09)
------- ------- ------- ------- ------- ------- ------ ------- ------ ------
Net increase (decrease) in
net asset value .......... (.48) .68 (.71) (.01) (.11) .41 (.48) .68 (.72) (.13)
------- ------- ------- ------- ------- ------- ------ ------- ------ ------
Net asset value, end of period $6.67 $7.15 $6.47 $7.18 $7.19 $7.30 $6.68 $7.16 $6.48 $7.20
======= ======= ======= ======= ======= ======= ====== ======= ====== ======
TOTAL RETURN BASED ON
NET ASSET VALUE: ......... (3.86)% 18.15% (3.88)% 7.46% 5.78% 14.05% (4.23)% 17.10% (5.05)% (.65)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets 1.20%+ 1.14% 1.10% 1.11% 1.05% 1.10% 1.98%+ 2.01% 2.22% 2.09%+
Net investment income
to average net assets .... 6.03%+ 6.71% 6.49% 7.22% 7.17% 7.39% 5.25%+ 5.84% 5.40% 5.28%+
Portfolio turnover ........... 109.72% 213.06% 445.18% 170.35% 126.17% 95.46% 109.72% 213.06% 445.18% 170.35%++
Net assets, end of period
(000's omitted) .......... $48,258 $55,061 $54,714 $69,805 $55,732 $64,440 $8,151 $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.
20
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
to their equivalent per share amounts.
The total returns based on net asset value measure a Series' performance
assuming investors purchased shares at net asset value as of the beginning of
the period, reinvested dividends and capital gains paid at net asset value, and
then sold their shares at the net asset value per share on the last day of the
period. The total return computations do not reflect any sales charges investors
may incur in purchasing shares of any Series. The total returns for periods of
less than one year are not annualized.
<TABLE>
<CAPTION>
HIGH-YIELD BOND SERIES
--------------------------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------------------------------
SIX
MONTHS YEAR ENDED DECEMBER 31,
ENDED ---------------------------------------------------------------------------
6/30/96 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period ................ $6.96 $6.35 $6.94 $6.42 $5.96 $5.21
----------- ----------- ----------- ----------- ----------- -----------
Net investment income ........ .34 .65 .65 .66 .69 .77
Net realized and unrealized
investment gain (loss) ... .09 .61 (.59) .52 .46 .75
----------- ----------- ----------- ----------- ----------- -----------
Increase (decrease) from
investment operations .... .43 1.26 .06 1.18 1.15 1.52
Dividends paid or declared ... (.34) (.65) (.65) (.66) (.69) (.77)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in
net asset value .......... .09 .61 (.59) .52 .46 .75
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $7.05 $6.96 $6.35 $6.94 $6.42 $5.96
=========== =========== =========== =========== =========== ===========
TOTAL RETURN BASED ON
NET ASSET VALUE: ......... 6.31% 20.72% 0.78% 19.19% 20.08% 30.70%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets 1.18%+ 1.09% 1.13% 1.20% 1.21% 1.29%
Net investment income
to average net assets .... 9.75%+ 9.73% 9.73% 9.68% 10.82% 13.36%
Portfolio turnover ........... 70.77% 173.39% 184.75% 193.91% 145.66% 181.08%
Net assets, end of period
(000's omitted) .......... $260,023 $182,129 $59,033 $61,333 $40,802 $32,287
<CAPTION>
HIGH-YIELD BOND SERIES
-------------------------------------------------------------------------------
CLASS B CLASS D
----------- ------------------------------------------------------------
SIX YEAR ENDED
4/22/96* MONTHS DECEMBER 31, 9/21/93*
TO ENDED --------------------------- TO
6/30/96 6/30/96 1995 1994 12/31/93
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period ................ $7.06 $6.96 $6.35 $6.94 $6.74
----------- ----------- ----------- ----------- -----------
Net investment income ........ .12 .32 .60 .57 .12
Net realized and unrealized
investment gain (loss) ... (.01) .09 .61 (.59) .20
----------- ----------- ----------- ----------- -----------
Increase (decrease) from
investment operations .... .11 .41 1.21 (.02) .32
Dividends paid or declared ... (.12) (.32) (.60) (.57) (.12)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in
net asset value .......... (.01) .09 .61 (.59) .20
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $7.05 $7.05 $6.96 $6.35 $6.94
=========== =========== =========== =========== ===========
TOTAL RETURN BASED ON
NET ASSET VALUE: ......... 1.27% 5.90% 19.67% (.30)% 4.53%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets 1.93%+ 1.95%+ 1.91% 2.19% 2.04%+
Net investment income
to average net assets .... 9.22%+ 8.98%+ 8.86% 8.68% 7.93%+
Portfolio turnover ........... 70.77%+++ 70.77% 173.39% 184.75% 193.91%++
Net assets, end of period
(000's omitted) .......... $18,931 $155,884 $90,153 $9,249 $2,375
</TABLE>
- ----------
* Commencement of offering of shares.
+ Annualized.
++ For the year ended December 31, 1993.
+++ For the six months ended June 30, 1996.
See notes to financial statements.
21
<PAGE>
================================================================================
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Trustees and Shareholders,
Seligman High Income Fund Series:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of the U.S. Government Securities Series and the
High-Yield Bond Series of Seligman High Income Fund Series as of June 30, 1996,
the related statements of operations for the six months then ended and of
changes in net assets for the six months then ended and for the year ended
December 31, 1995, and the financial highlights for each of the periods
presented. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements.
Our procedures included confirmation of securities owned as of June 30, 1996 by
correspondence with the Fund's custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the U.S. Government
Securities Series and the High-Yield Bond Series of Seligman High Income Fund
Series as of June 30, 1996, the results of their operations, the changes in
their net assets, and the financial highlights for the respective stated periods
in conformity with generally accepted accounting principles.
/S/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
New York, New York
July 31, 1996
22
<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
Director or Trustee,
Various Organizations
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
23
<PAGE>
================================================================================
MID-YEAR REPORT
- --------------------------------------------------------------------------------
SELIGMAN
HIGH INCOME
FUND SERIES
- --------------------------------------------------------------------------------
June 30, 1996
[LOGO]
- --------------------------------------------------------------------------------
A High Current Income Series
Established in 1985
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 fee, and other costs. Please read the prospectus carefully
before investing or sending money.
TX3 6/96
