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SELIGMAN
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[photo of flag]
SELIGMAN
U.S.
GOVERNMENT
SECURITIES
SERIES
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Seeking High Current Income By
Investing In US Government Securities
JUNE 30, 1997 * MID-YEAR REPORT
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To the Shareholders
Seligman U.S. Government Securities Series continued to provide a solid yield
in the first six months of the year. Information on the Fund's results for the
first half of 1997 appears on page 3.
Thus far, 1997 has shown great promise for the domestic economy, leading to
improved performance in the fixed-income markets. Instead of increasing
inflation, the growing economy actually generated lower producer prices for six
consecutive months. Low unemployment and high consumer confidence levels
continued, while consumer spending was relatively restrained. Moreover, economic
growth and the ensuing increases in corporate revenues resulted in increased tax
receipts, improving national, state, and municipal budgets.
After the uncertainties of the first quarter, when the inflationary outlook
was unclear, bond market participants became optimistic in the second quarter as
the low interest rate environment persisted. The Federal Reserve Board's
decision to leave the federal funds rate unchanged in May, after an initial 25
basis point increase in March, tamed remaining fears of inflation and supported
a rally in the bond markets, with bond prices rising and yields falling. The
yield on the benchmark 30-year US Treasury bond fell slightly to 6.78% on June
30, from a high of 7.17% on April 14.
The long-term outlook for the US economy and bond market remains positive. We
expect the fixed-income market's rally to continue unless there is a significant
change in the economic forecast due either to increased inflationary pressures
or a surge in economic growth, as either event may prompt a Fed tightening of
short-term interest rates.
We are pleased to introduce your redesigned Shareholder Report. This change
is part of a corporate effort to enhance the overall clarity and quality of all
communications to our Shareholders. We hope you find the additional information
contained herein helpful.
We thank you for your continued support of Seligman U.S. Government
Securities Series, and look forward to serving your investment needs in the many
years to come.
A discussion with your Portfolio Manager and the Fund's portfolio of
investments follow this letter.
By order of the Trustees,
/s/ William C. Morris
William C. Morris
Chairman
/s/ Brian T. Zino
Brian T. Zino
President
August 1, 1997
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1
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Interview with Your Portfolio Manager, Leonard J. Lovito
Q. How did Seligman U.S. Government Securities Series perform in the last six
months?
A. In the six-month period ended June 30, 1997, Seligman U.S. Government
Securities Series had a total return of 2.14% based on the net asset value
of Class A Shares. The Fund's return slightly lagged the 2.61% total return
of the Lipper General U.S. Government Fund Index, as we took a more
conservative approach, relative to the Fund's peers, by maintaining a
shorter-than-average maturity for most of the period.
Q. Which economic factors affected the Fund's performance?
A. Robust economic growth during the first quarter ignited fears of inflation,
which prompted the Federal Reserve Board to raise the federal funds rate by
25 basis points in March. The potential for higher inflation and additional
increases in short-term interest rates drove long-term government bond
yields higher, and correspondingly, bond prices declined. However, despite
fears to the contrary, inflationary indicators remained remarkably tame
through the second quarter, and as clearer signs of a moderating economy
appeared, bond prices rebounded and long-term yields retreated. The yield on
the benchmark 30-year US Treasury bond fell to 6.78% by June 30.
Q. What was your investment strategy?
A. The Fund kept a shorter-than-average maturity for most of the six-month
period, due to the rate of economic growth and the possibility of interest
rate increases by the Fed. Additionally, the Fund's weighting in
mortgage-backed securities was increased. Mortgage-backed securities provide
higher yields and usually outperform Treasury securities in a rising
interest rate environment, which was present through mid-April. In the
second quarter, as the economy moderated and inflation declined from already
low levels, the Fund slightly lengthened maturities in order to take
advantage of the falling bond yields and rising bond prices.
Q. What is the outlook?
A. For bond prices to improve in the remainder of 1997, both economic
fundamentals and bond market technicals must remain favorable. Healthy yet
moderate economic growth and continued low inflation, combined with falling
commodity prices and rising productivity, could restore confidence in the
credit markets as we enter a new era of low inflation. Falling budget
deficits lead to reduced issuance of Treasury securities, which alters the
balance of supply and demand as more capital chases fewer bonds. If this
scenario comes to pass, the average maturity of the portfolio would
gradually be lengthened to take advantage of rising bond prices.
[photo]
Seligman Taxable Fixed Income Team: (from left) Nicholas Walsh, Susan Egan,
(seated)Leonard J. Lovito (Portfolio Manager)
A TEAM APPROACH
Seligman U.S. Government Securities Series is managed by the Seligman
Taxable Fixed Income Team. Leonard J. Lovito, Portfolio Manager, is assisted by
seasoned research professionals who are responsible for identifying securities
that are backed by the full faith and credit of the US Government that will
position the Fund to minimize the negative effects of any sharp rise in interest
rates while maximizing current income.
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2
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Performance Overview
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS*
For Periods Ended June 30, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL
---------------------------------------------------
CLASS D
SINCE
ONE FIVE 10 INCEPTION
SIX MONTHS YEAR YEARS YEARS 9/21/93
------------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
CLASS A
With Sales Charge (2.64)% 0.94% 4.25% 6.29% n/a
Without Sales Charge 2.14 5.93 5.28 6.81 n/a
CLASS B
With 5% CDSL (3.55)** n/a n/a n/a n/a
Without CDSL 1.40** n/a n/a n/a n/a
CLASS D
With 1% CDSL 0.61 4.11 n/a n/a n/a
Without CDSL 1.60 5.11 n/a n/a 2.85%
LEHMAN BROTHERS GOVERNMENT
BOND INDEX*** 2.63 7.40 6.98 8.47 5.03+
LIPPER GENERAL U.S.
GOVERNMENT FUND INDEX*** 2.61 7.14 5.65 7.31 4.09+
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND AND YIELD INFORMATION
For Six Months Ended June 30, 1997
JUNE 30, DECEMBER 31,
1997 1996 DIVIDENDS# YIELD++
---------- ---------------- ------------ -------
<S> <C> <C> <C> <C> <C>
CLASS A $6.66 $6.71 CLASS A $0.1890 5.31%
CLASS B 6.67 6.73** CLASS B 0.1638 4.80
CLASS D 6.67 6.73 CLASS D 0.1638 4.80
WEIGHTED AVERAGE MATURITY 17.2 years
</TABLE>
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* Return figures reflect any change in price per share and assume the
investment of dividends and capital gain distributions. Return figures for
Class A shares are calculated with and without the effect of the initial
4.75% maximum sales charge. Returns for Class B shares are calculated with
and without the effect of the maximum 5% contingent deferred sales load
("CDSL"), charged 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 with and without the effect of the 1%
CDSL, charged only on redemptions made within one year of the date of
purchase.
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 Fund will fluctuate.
Shares, if redeemed, may be worth more or less than their original cost.
Past performance is not indicative of future investment results.
** From January 1, 1997, inception date of Class B shares.
*** The Lehman Brothers Government Bond Index and the Lipper General U.S.
Government Fund Index are unmanaged indices that assume investment of
dividends and do not reflect fees and expenses. Investors cannot invest
directly in an index.
+ From September 30, 1993.
++ Current yield representing the annualized yield for the 30-day period ended
June 30, 1997, has been computed in accordance with SEC
regulations and will vary.
# Represents per share amount paid or declared for the six months ended June
30, 1997.
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3
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Performance Overview
GROWTH OF AN ASSUMED $10,000 INVESTMENT IN CLASS A SHARES
June 30, 1987, to June 30, 1997
$9,528*
Initial Amount Invested
$18,412 Total Value
at June 30, 1997
Date Value
- ---- -----
6/30/87 9,528
9/30/98 9,070
12/31/87 9,798
3/31/88 10,215
6/30/88 10,314
9/30/88 10,471
12/31/88 10,566
3/31/89 10,580
6/30/89 11,142
9/30/89 11,212
12/31/89 11,544
3/31/90 11,261
6/30/90 11,584
9/30/90 11,651
12/31/90 12,280
3/31/91 12,476
6/30/91 12,656
9/30/91 13,348
12/31/91 14,005
3/31/92 13,706
6/30/92 14,238
9/30/92 14,819
12/31/92 14,815
3/31/93 15,241
6/30/93 15,597
9/30/93 15,972
12/31/93 15,919
3/31/94 15,591
6/30/94 15,342
9/30/94 15,382
12/31/94 15,302
3/31/95 15,858
6/30/95 16,866
9/30/95 17,126
12/31/95 18,079
3/31/96 17,449
6/30/96 17,381
9/30/96 17,601
12/31/96 18,026
3/31/97 17,849
6/30/97 18,412
GROWTH OF AN ASSUMED $10,000
INVESTMENT IN CLASS B SHARES
January 1, 1997+, to June 30, 1997
$10,000
Initial Amount Invested
$10,140** Total Value
at June 30, 1997
Date Value
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1/1/97 10,000
3/31/97 9,850
6/30/97 10,140
GROWTH OF AN ASSUMED $10,000
INVESTMENT IN CLASS D SHARES
September 21, 1993+, to June 30, 1997
$10,000
Initial Amount Invested
$11,121 Total Value
at June 30, 1997
Date Value
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9/21/93 10,000
12/31/93 9,935
3/31/94 9,694
6/30/94 9,513
9/30/94 9,511
12/31/94 9,434
3/31/95 9,765
6/30/95 10,349
9/30/95 10,502
12/31/95 11,047
3/31/96 10,642
6/30/96 10,580
9/30/96 10,693
12/31/96 10,945
3/31/97 10,802
6/30/97 11,121
These charts reflect the growth of a $10,000 investment for a 10-year period for
Class A shares and since inception for Class B and Class D shares. Since the
measured periods vary, the charts are plotted using different scales and are not
comparable.
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* Net of the 4.75% maximum initial sales charge.
** Excludes the effect of the 5% CDSL.
+ Inception date.
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4
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Portfolio of Investments
June 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------------- --------
US TREASURY SECURITIES 48.3%
<S> <C> <C>
US Treasury Bonds
8 3/4%, due 5/15/2020 ........................................ $ 8,000,000 $ 9,710,008
US Treasury Notes:
8%, due 5/15/2001 ............................................ 5,000,000 5,284,380
6 1/4%, due 7/31/1998 ........................................ 10,000,000 10,046,880
-----------
TOTAL US TREASURY SECURITIES (Cost $25,268,125) ................. 25,041,268
US GOVERNMENT AGENCY SECURITIES 43.9% (Cost $22,112,570)
Government National Mortgage Association Obligations,
Mortgage-backed Pass-through Certificates:
7 1/2%, with various maturities from 1/15/2023 to 4/15/2027* .. 22,635,438 22,771,458
REPURCHASE AGREEMENTS 7.4% (Cost $3,834,000)
HSBC Securities Inc., 5%, maturing 7/1/1997 collateralized by:
$3,681,000 US Treasury Notes 7 1/4%, due 8/15/2004, with a fair
market value of $3,933,516 ................................... 3,834,000
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TOTAL INVESTMENTS 99.6% (Cost $51,214,695) ..................... 51,646,726
OTHER ASSETS LESS LIABILITIES 0.4% .............................. 214,358
-----------
NET ASSETS 100.0% ............................................... $51,861,084
===========
</TABLE>
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* Investments in mortgage-backed securities are subject to principal paydowns.
As a result of prepayments from refinancing or satisfaction
of the underlying mortgage instruments, the average life may be less than the
original maturity. This in turn may impact the ultimate yield realized from
these securities.
See Notes to Financial Statements.
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5
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Statement of Assets and Liabilities
June 30, 1997
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C>
Investments, at value:
Long-term holdings (cost $47,380,695) .................. $ 47,812,726
Short-term holdings (cost $3,834,000) .................. 3,834,000 $ 51,646,726
------------
Cash ................................................................... 12,892
Interest receivable .................................................... 543,198
Expenses prepaid to shareholder service agent .......................... 11,065
Receivable for shares of Beneficial Interest sold ...................... 6,069
Other .................................................................. 67,197
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Total Assets ........................................................... 52,287,147
------------
LIABILITIES:
Payable for shares of Beneficial Interest repurchased .................. 173,597
Dividends payable ...................................................... 103,361
Accrued expenses, taxes, and other ..................................... 149,105
------------
Total Liabilities ...................................................... 426,063
------------
Net Assets ............................................................. $ 51,861,084
============
COMPOSITION OF NET ASSETS:
Shares of Beneficial Interest, at par ($.001 par value; unlimited shares
authorized; 7,783,636 shares outstanding):
Class A .............................................................. $ 6,498
Class B .............................................................. 99
Class D .............................................................. 1,187
Additional paid-in capital ............................................. 67,168,703
Accumulated net realized loss .......................................... (15,747,434)
Net unrealized appreciation of investments ............................. 432,031
------------
Net Assets ............................................................. $ 51,861,084
============
NET ASSET VALUE PER SHARE:
Class A ($43,278,773 / 6,497,595 shares) ............................... $6.66
=====
Class B ($661,001 / 99,057 shares) ..................................... $6.67
=====
Class D ($7,921,310 / 1,186,984 shares) ................................ $6.67
=====
</TABLE>
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See Notes to Financial Statements.
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6
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Statement of Operations
For the Six Months Ended June 30, 1997
INVESTMENT INCOME:
<TABLE>
<S> <C> <C>
Interest ......................................................... $ 1,855,001
EXPENSES:
Management fee ..................................... $ 132,446
Distribution and service fees ...................... 91,971
Shareholder account services ....................... 58,658
Registration ....................................... 38,448
Shareholder reports and communications ............. 18,148
Custody and related services ....................... 7,500
Directors' fees and expenses ....................... 6,181
Auditing and legal fees ............................ 1,944
Miscellaneous ...................................... 5,411
----------
Total Expenses ................................................... 360,707
----------
Net Investment Income ............................................ 1,494,294
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments ................... (569,520)
Net change in unrealized appreciation of investments 118,236
----------
Net Loss on Investments .......................................... (451,284)
----------
Increase in Net Assets from Operations ........................... $1,043,010
==========
</TABLE>
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See Notes to Financial Statements.
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7
<PAGE>
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Statements of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
OPERATIONS:
<S> <C> <C>
Net investment income ................................................... $ 1,494,294 $ 3,451,825
Net realized loss on investments ........................................ (569,520) (531,212)
Net change in unrealized appreciation of investments .................... 118,236 (3,266,304)
---------- -----------
Increase (Decrease) in Net Assets from Operations ....................... 1,043,010 (345,691)
---------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A .............................................................. (1,274,519) (2,998,077)
Class B .............................................................. (5,173) --
Class D .............................................................. (214,602 (453,748)
---------- ------------
Decrease in Net Assets from Distributions ............................... (1,494,294) (3,451,825)
---------- ------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
---------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------ -----------------
TRANSACTIONS IN SHARES
OF BENEFICIAL INTEREST:*
Net proceeds from sale of shares:
<S> <C> <C> <C> <C>
Class A ............................. 174,725 781,071 1,162,488 5,275,155
Class B ............................. 86,068 -- 572,363 --
Class D ............................. 110,275 428,534 732,706 2,920,596
Shares issued in payment of dividends:
Class A ............................. 102,698 224,948 683,114 1,522,409
Class B ............................. 560 -- 3,726 --
Class D ............................. 21,741 48,704 144,972 329,724
Exchanged from associated Funds:
Class A ............................. 240,941 487,261 1,595,553 3,303,371
Class B ............................. 16,290 -- 108,127 --
Class D ............................. 377,005 585,467 2,500,311 3,947,861
------------ ------------ ------------ ------------
Total .................................. 1,130,303 2,555,985 7,503,360 17,299,116
------------ ------------ ------------ ------------
Cost of shares repurchased:
Class A ............................. (578,904) (1,236,706) (3,841,419) (8,375,696)
Class B ............................. (3,846) -- (25,766) --
Class D ............................. (248,009) (333,282) (1,652,027) (2,247,483)
Exchanged into associated Funds:
Class A ............................. (426,305) (972,823) (2,827,815) (6,587,848)
Class B ............................. (15) -- (103) --
Class D ............................. (454,160) (491,240) (3,015,870) (3,360,753)
------------ ------------ ------------ ------------
Total .................................. (1,711,239) (3,034,051) (11,363,000) (20,571,780)
------------ ------------ ------------ ------------
Decrease in Net Assets from Transactions
in Shares of Beneficial Interest ....... (580,936) (478,066) (3,859,640) (3,272,664)
============ ============ ------------ ------------
Decrease in Net Assets ......................................... (4,310,924) (7,070,180)
NET ASSETS:
Beginning of period ............................................ 56,172,008 63,242,188
------------ ------------
End of Period .................................................. $ 51,861,084 $ 56,172,008
============ ============
</TABLE>
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* The Fund began offering Class B shares on January 1, 1997.
See Notes to Financial Statements.
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8
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Notes to Financial Statements
1. MULTIPLE CLASSES OF SHARES -- Seligman U.S. Government Securities Series (the
"Fund"), a series of Seligman High Income Fund Series, offers three classes of
shares. All shares existing prior to September 21, 1993, the commencement of
Class D shares, were classified as Class A shares. The Fund began offering Class
B shares on January 1, 1997. 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 A shares purchased in an amount of $1,000,000 or more are sold
without an initial sales charge but are subject to a contingent deferred sales
load ("CDSL") of 1% on redemptions within 18 months after purchase. Class B
shares are sold without an initial sales charge but are subject to a
distribution fee of 0.75%, a service fee of up to 0.25% on an annual basis, and
a 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 after 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 on which a separate vote of
any class is required.
2. SIGNIFICANT ACCOUNTING POLICIES -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Fund:
A. SECURITY VALUATION -- Investments in US Government and Government agency
securities are valued at current market values or, in their absence, at fair
values 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, at the mean
of bid and asked prices. Short-term holdings maturing in 60 days or less are
valued at amortized cost.
B. FEDERAL TAXES -- There is no provision for federal income tax. The Fund has
elected to be taxed as a regulated investment company and intends to
distribute substantially all taxable net income and net gain realized.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Investment
transactions are recorded on trade dates. Identified cost of investments
sold is used for both financial statement and federal income tax purposes.
Dividends receivable and payable are recorded on ex-dividend dates. Interest
income is recorded on an accrual basis.
D. REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements with
commerical 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. MULTIPLE CLASS ALLOCATIONS -- All income, 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 attributable to a
particular class, are charged directly to such class. For the six months
ended June 30, 1997, distribution and service fees were the only
class-specific expenses.
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9
<PAGE>
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Notes to Financial Statements
F. DISTRIBUTIONS TO SHAREHOLDERS -- The treatment for financial statement
purposes of distributions made to shareholders 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 realized 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
reclassification will have no effect on net assets, results of operations,
or net asset value per share of the Fund.
3. PURCHASES AND SALES OF SECURITIES -- Purchases and sales of US Government
obligations, excluding short-term investments, for the six months ended June 30,
1997, amounted to $43,634,564 and $49,142,517, respectively.
At June 30, 1997, 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 amounted to $775,776 and $343,745, respectively.
4. MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS -- 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 receives a fee,
calculated daily and payable monthly, equal to 0.50% per annum of the Fund's
average daily net assets.
Seligman Financial Services, Inc. (the "Distributor"), agent for the
distribution of the Fund's shares and an affiliate of the Manager, received
concessions of $2,788 from sales of Class A shares, after commissions of $22,079
paid to dealers.
The Fund has an Administration, Shareholder Services and Distribution
Plan (the "Plan") with respect to distribution of its shares. Under the Plan,
with respect to Class A shares, 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 organizations 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,
1997, fees incurred aggregated $47,967, or 0.22% per annum of the average daily
net assets of Class A shares.
Under the Plan, with respect to Class B and Class D shares, service
organizations can enter into agreements with the Distributor and receive a
continuing fee for providing personal services and/or the maintenance of share
holder 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 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 provides 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, 1997, 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 $1,037 and $42,967, 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, 1997, such charges amounted to $2,603.
The Distributor has sold its rights to collect any CDSL imposed on
redemptions of Class B shares to the Purchaser.
<PAGE>
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Notes to Financial Statements
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 receives payments from the Purchaser based on the value of Class
B shares sold. The aggregate amount of such payments and the Class B shares
distribution fees retained by the Distributor, for the six months ended June 30,
1997, was $1,457.
Seligman Services, Inc., an affiliate of the Manager, is eligible to
receive commissions from certain sales of Fund shares, as well as distribution
and service fees pursuant to the Plan. For the six months ended June 30, 1997,
Seligman Services, Inc. received commissions of $563 from the sales of Fund
shares. Seligman Services, Inc. also received distribution and service fees of
$6,667, pursuant to the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged the Fund at cost $58,658 for share holder account services.
Certain officers and trustees of the Fund are officers or
directors of the Manager, the Distributor, Seligman Services, Inc., and/or
Seligman Data Corp.
The Fund has a compensation arrangement 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 directors' fees and
expenses and the accumulated balance thereof at June 30, 1997, of $42,150 is
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. LOSS CARRYFORWARD -- At December 31, 1996, the Fund had a net loss
carryforward for federal income tax purposes of $15,037,132, which is available
for offset against future taxable net capital gains, expiring in various amounts
through 2004. Accordingly, no capital gain distributions are expected to be paid
to shareholders until net capital gains have been realized in excess of the
available capital loss carryforwards.
----
11
<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
The Fund's financial highlights are presented below. "Per share operating
performance" data is designed to allow investors to trace the operating
performance of each Class, on a per share basis, from the beginning net asset
value to the ending net asset value, so that investors can understand what
effect the individual items have on their investment, assuming it was held
throughout the period. Generally, 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, using average shares
outstanding.
"Total return based on net asset value" measures each Class's performance
assuming that investors purchased Fund shares at net asset value as of the
beginning of the period, invested dividends and capital gains paid at net asset
value, and then sold their shares at the net asset value on the last day of the
period. The total return computations do not reflect any sales charges investors
may incur in purchasing or selling shares of the Fund. Total returns for periods
of less than one year are not annualized.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------
SIX
MONTHS YEAR ENDED DECEMBER 31,
ENDED ------------------------------------------------
6/30/97 1996 1995 1994 1993 1992
---------- ------ ------ ------ ------ ------
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............. $6.71 $7.15 $6.47 $7.18 $7.19 $7.30
----- ----- ------ ----- ------ -----
Net investment income ............................ .19 .41 .46 .44 .53 .51
Net realized and unrealized investment gain (loss) (.05) (.44) .68 (.71) (.01) (.11)
----- ----- ------ ----- ------ -----
Increase (Decrease) from Investment
Operations ....................................... .14 (.03) 1.14 (.27) .52 .40
Dividends paid or declared ....................... (.19) (.41) (.46) (.44) (.53) (.51)
----- ----- ------ ----- ------ -----
Net Increase (Decrease) in Net Asset Value ....... (.05) (.44) .68 (.71) (.01) (.11)
----- ----- ------ ----- ------ -----
Net Asset Value, End of Period ................... $6.66 $6.71 $ 7.15 $6.47 $7.18 $7.19
===== ===== ====== ===== ===== =====
TOTAL RETURN BASED ON NET
ASSET VALUE: 2.14% (0.29)% 18.15% (3.88)% 7.46% 5.78%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................... 1.22%+ 1.14% 1.14% 1.10% 1.11% 1.05%
Net investment income to average net assets ...... 5.74%+ 6.05% 6.71% 6.49% 7.22% 7.17%
Portfolio turnover ............................... 91.39% 175.25% 213.06% 445.18% 170.35% 126.17%
Net Assets, End of Period
(000s omitted) ................................... $43,279 $46,889 $55,061 $54,714 $69,805 $55,732
</TABLE>
- -----------------
See footnotes on page 13.
- ----
12
<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
CLASS B CLASS D
---------- ----------------------------------------------------
SIX
1/1/97* MONTHS 9/21/93*
TO ENDED YEAR ENDED DECEMBER 31, TO
6/30/97 6/30/97 1996 1995 1994 12/31/93
------- -------- ----- ----- ----- -------
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............. $6.73 $6.73 7.16 $6.48 $7.20 $7.33
----- ----- ----- ----- ----- -----
Net investment income ............................ .16 .16 .36 .40 .37 .09
Net realized and unrealized investment gain (loss) (.06) (.06) (.43) .68 (.72) (.13)
----- ----- ----- ----- ----- -----
Increase (Decrease) from Investment
Operations ....................................... .10 .10 (.07) 1.08 (.35) (.04)
Dividends paid or declared ....................... (.16) (.16) (.36) (.40) (.37) (.09)
----- ----- ----- ----- ----- -----
Net Increase (Decrease) in Net Asset Value (.06) . (.06) (.06) (.43) .68 (.72) (.13)
----- ----- ----- ----- ----- -----
Net Asset Value, End of Period ................... $6.67 $6.67 $6.73 $7.16 $6.48 $ 7.20
===== ===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET
ASSET VALUE: ..................................... 1.40% 1.60% (0.92)% 17.10% (5.05)% (0.65)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................... 2.00%+ 2.00%+ 1.92% 2.01% 2.22% 2.09%+
Net investment income to average net assets....... 4.96%+ 4.96%+ 5.27% 5.84% 5.40% 5.28%+
Portfolio turnover ............................... 91.39% 91.39% 175.25% 213.06% 445.18% 170.35%++
Net Assets, End of Period
(000s omitted) ................................... $661 $7,921 $9,283 $8,181 $6,062 $2,317
</TABLE>
- ---------------------
* Commencement of offering of shares.
+ Annualized.
++ For the year ended December 31, 1993.
See Notes to Financial Statements.
----
13
<PAGE>
- -------------------------------------------------------------------------------
Report of Independent Auditors
The Trustees and Shareholders,
Seligman U.S. Government Securities Series:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman U.S. Government Securities Series as
of June 30, 1997, 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, 1996, and the financial highlights for each of the
periods presented. These financial statements and 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, 1997, 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 Seligman U.S.
Government Securities Series as of June 30, 1997, the results of its operations,
the changes in its net assets, and the financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
August 1, 1997
- ----
14
<PAGE>
- -------------------------------------------------------------------------------
Trustees
Fred E. Brown
Trustee Emeritus
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
Chairman, The Rockefeller Foundation
Frank A. McPherson 2
Director, Kimberly-Clark Corporation
Director, Baptist Medical Center
John E. Merow
Retired Chairman and Senior 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, J. & W. Seligman & Co.
Incorporated
Chairman, Carbo Ceramics Inc.
Director, Kerr-McGee Corporation
James C. Pitney 3
Retired Partner, Pitney, Hardin, Kipp & Szuch,
Law Firm
James Q. Riordan 3
Director, The Brooklyn Union Gas Company
Trustee, Committee for Economic Development
Director, Dow Jones & Co., Inc.
Director, Public Broadcasting Service
Richard R. Schmaltz 1
Managing Director, J. & W. Seligman & Co. Incorporated
Trustee Emeritus, Colby College
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
President, J. & W. Seligman & Co. Incorporated
Chairman, Seligman Data Corp.
- ----------------
Member: 1 Executive Committee
2 Audit Committee
3 Trustee Nominating Committee
----
15
<PAGE>
- -------------------------------------------------------------------------------
Executive Officers
William C. Morris
Chairman
Brian T. Zino
President
Leonard J. Lovito
Vice President
Lawrence P. Vogel
Vice President
Thomas G. Rose
Treasurer
Frank J. Nasta
Secretary
FOR MORE INFORMATION
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
- ----
16
<PAGE>
- -------------------------------------------------------------------------------
Glossary of Financial Terms
CAPITAL GAIN DISTRIBUTION -- A payment to mutual fund shareholders of profits
realized on the sale of securities in the fund's portfolio. The fund generates
short-term capital gains when portfolio securities held for less than one year
are sold at a profit. The fund generates long-term capital gains when portfolio
securities held for one year or more are sold at a profit. Short-term capital
gains are taxed as ordinary income. Long-term capital gains are taxed at the
federal capital gains rate appropriate to the shareholder's tax bracket.
CAPITAL APPRECIATION/DEPRECIATION -- An increase or decrease in the market
value of a mutual fund's portfolio securities, which is reflected in the net
asset value of the fund's shares. Capital appreciation/depreciation of an
individual security is in relation to the original purchase price.
COMPOUNDING -- The increase in the value of an investment as shareholders
receive earnings on their investment's earnings. For example, if $1,000 is
invested at a fixed rate of 7% a year, the initial investment is worth $1,070
after one year. Assuming the same rate of return, second year earnings will not
be based on the original $1,000, but on the $1,070, which includes the first
year's earnings.
CONTINGENT DEFERRED SALES LOAD (CDSL) -- Depending on the class of shares
owned, a fee charged by a mutual fund when shares are sold back to the fund (the
CDSL expires after a fixed time period).
DIVIDEND -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
DIVIDEND YIELD -- A measurement of a fund's dividend as a percentage of the
maximum offering price.
EXPENSE RATIO -- The cost of doing business for a mutual fund, expressed as
a percent of the fund's net assets.
INVESTMENT OBJECTIVE -- The shared investment goal of the fund and its
shareholders.
MANAGEMENT FEE -- The amount paid by a mutual fund to its investment
advisor(s).
MULTIPLE CLASSES OF SHARES -- Although an individual mutual fund invests in
only one portfolio of securities, it may offer investors several purchase
options which are "classes" of shares. Multiple classes permit shareholders to
choose the fee structure that best meets their needs and goals. Generally, each
class will differ in terms of how and when sales charges and certain fees are
assessed.
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (NASD) -- A
self-regulatory body with authority over firms that distribute mutual funds.
NET ASSET VALUE (NAV) PER SHARE -- The market worth of one fund share,
obtained by adding a mutual fund's total assets (securities, cash, and any
accrued earnings), subtracting liabilities, and dividing the resulting net
assets by the number of shares outstanding.
OFFERING PRICE (OP) -- The price at which a mutual fund's shares can be
purchased. The offering price is the current net asset value per share plus any
sales charge.
PORTFOLIO TURNOVER -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
PROSPECTUS -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission, such as the fund's investment objective and policies, services,
investment restrictions, officers and directors, how shares are bought and
redeemed, fund fees and other charges, and the fund's financial statements.
SECURITIES AND EXCHANGE COMMISSION (SEC) -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
STATEMENT OF
ADDITIONAL INFORMATION -- Document that contains updated or more detailed
information about a mutual fund and supplements the prospectus. It is available
at no charge upon request.
TOTAL RETURN -- A measure of fund performance
encompassing all elements of return. Reflects the change in share price over a
given period and assumes all distributions are taken in additional fund shares.
The Average Annual Total Return represents the average annual compounded rate of
return for the periods presented.
YIELD -- For bonds, the current yield is the coupon rate of interest,
divided by the purchase price. For stocks, the yield is measured by dividing
dividends paid by the maximum offering price of the stock.
- -------------
Adapted from the Investment Company Institute's 1996 Mutual Fund Fact Book.
----
17
<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 U.S. Government Securities Series, which contains information about
the sales charges, management fee, and other costs. Please read the prospectus
carefully before investing or sending money.
TXUSG3 6/97
