<PAGE>
==============================================================================
SELIGMAN HIGH INCOME FUND SERIES
- ------------------------------------------------------------------------------
SELIGMAN U.S. GOVERNMENT
SECURITIES SERIES
A mutual fund that seeks to produce high current income by investing primarily
in debt obligations issued or guaranteed by the US Government or its agencies
and backed by the full faith and credit of the US Government.
SELIGMAN HIGH-YIELD
BOND SERIES
A mutual fund that seeks to maximize current income by investing in a
diversified portfolio of high-yielding, high-risk corporate bonds, commonly
referred to as "junk bonds."
<TABLE>
HIGHLIGHTS OF 1996
- ------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT
SECURITIES SERIES HIGH-YIELD BOND SERIES
--------------------- ------------------------------
CLASS A CLASS D CLASS A CLASS B CLASS D
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Assets (millions)............ $46.9 $9.3 $408.3 $148.0 $265.5
- ------------------------------------------------------------------------------------------------------------------
Yield*........................... 5.44% 5.00% 8.99% 8.63% 8.68%
- ------------------------------------------------------------------------------------------------------------------
Dividends**...................... $0.4096 $0.3570 $0.6947 $0.4472 $0.6404
- ------------------------------------------------------------------------------------------------------------------
Net Asset Value per Share........ $6.71 $6.73 $7.25 $7.26 $7.26
- ------------------------------------------------------------------------------------------------------------------
Maximum Offering
Price per Share................. $7.04 $6.73 $7.61 $7.26 $7.26
- ------------------------------------------------------------------------------------------------------------------
Holdings by Market Sector........ US Treasury Securities 64.5% Corporate Bonds 95.1%
USGovernment Convertible Bonds 0.5
Agency Securities 31.2 Net Cash & Short-
Net Cash & Short- Term Holdings 4.4
Term Holdings 4.3
- ------------------------------------------------------------------------------------------------------------------
Weighted Average
Maturity ..................... 16.8 years 8.8 years
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Current yield representing the annualized yield for the 30-day period
ended December 31, 1996. See pages 5 and 9 for investment results.
** Represents per share amount paid or declared for the year ended
December 31, 1996 (from April 22, 1996, for Class B shares of the
High-Yield Bond Series).
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-Yield Bond Series and Seligman U.S. Government Securities Series
had contrasting results in 1996. Seligman High-Yield Bond Series had an
outstanding year, while Seligman U.S. Government Securities Series had a
difficult year. The Series' investment results begin on page 4.
The assets of Seligman High-Yield Bond Series grew significantly in 1996.
The Series posted exceptional performance due to the strength of the
overall high-yield market and the bond selection discipline followed by
the Series' investment team. The optimism in the high-yield market was
fueled by the resiliency of high-yield bonds in the higher interest rate
environment. Record inflows into high-yield mutual funds, very low default
rates, and an abundance of new issue offerings also supported the high-yield
marketplace and the Series.
On the other hand, the U.S. Government Securities Series had a
difficult year. Due to its exposure to long-term bonds, the Series was
particularly vulnerable to the increases in long-term interest rates and the
accompanying decline of bond prices seen in the year. In the first two quarters
of 1996, the bond market was hindered by persistent concerns that the
economy's unexpected vigor would produce higher levels of inflation and
an increase in interest rates. However, the market improved somewhat in the
last two quarters of the year, as the prevalence of low inflation and moderate
economic growth quelled fears of future increases in interest rates. The yield
on the benchmark 30-year Treasury bond reflected the changing perceptions
of inflationary pressure, rising from 5.95% on December 31, 1995, to 6.87%
on June 30, 1996, and ending the year slightly lower at 6.64%.
Currently, there are no clear indications that there will be either
runaway economic expansion or recession in 1997. The environment for the US
high-yield and fixed-income markets remains generally positive, given
continued modest economic growth, low inflation, and bipartisan efforts to
balance the federal budget without raising taxes. While we always
recognize that there could be short-term volatility, we remain positive about
the long-term outlook.
On a final note, the volatility witnessed in the financial markets in 1996
is not unusual in the challenging world of investing. Because it is time,
not timing, that counts, we believe the best strategy is one of long-term
investing. A professional financial advisor can help you formulate a long-term
investment plan to help you seek your financial goals, and can provide the
insight and support needed to weather the day-to-day uncertainty that
accompanies investing.
Discussions with your Portfolio Managers and each Series' portfolio
of investments follow this letter.
We thank you for your continued interest in Seligman High Income Fund
Series and look forward to serving your investment needs in the many years to
come.
By order of the Trustees,
[GRAPHIC OMITTED]
William C. Morris
Chairman
[GRAPHIC OMITTED]
Brian T. Zino
President
January 31, 1997
2
<PAGE>
============================================================================
ANNUAL PERFORMANCE OVERVIEW -- Seligman U.S. Government Securities Series
- ----------------------------------------------------------------------------
[GRAPHIC OMITTED]
Seligman Taxable Fixed Income Team: (from left)
Nicholas Walsh, James Auchterlonie, (seated)
Leonard J. Lovito (Portfolio Manager), Susan Egan
YOUR PORTFOLIO MANAGER
Leonard J. Lovito is a Vice President of J. & W. Seligman & Co. Incorporated,
and Vice President of Seligman High Income Fund Series and Portfolio Manager of
its Seligman U.S. Government Securities Series. Mr. Lovito also serves as Vice
President and Portfolio Manager of Seligman Cash Management Fund, and Vice
President of Seligman Portfolios, Inc. and Portfolio Manager of its Seligman
Bond and Seligman Cash Management Portfolios. Mr. Lovito joined Seligman in
1984 as a fixed-income analyst and has more than 13 years of fixed-income
trading and portfolio management experience. Mr. Lovito is supported by a team
of seasoned research professionals which assists him in selecting investments
in accordance with your Series' objectives.
How did U.S. Government Securities Series perform in the last 12 months?
"In 1996, the U.S. Government Securities Series underperformed its peers for
the first time in three years, due to the higher interest rate environment.
The Series' total return of -0.29% based on the net asset value of Class A
shares lagged both the 2.77% total return of the Lehman Brothers Government
Bond Index and the 2.01% total return of the Lipper US Government Fund Index."
How did the economy affect the performance of the Series?
"It was a year of mixed economic signals for the bond market. The
expectations for slow growth, which predominated in January of 1996,
changed abruptly in early March, resulting in a market decline. The steps the
Federal Reserve Board might take to contain growth were similarly difficult
to predict in the year. After acting in February to maintain slow growth by
reducing the fed funds rate, the Fed refrained from further action despite
market fears of inflation. As a result, yields in the bond market increased,
and prices fell, through the first half of 1996, and then fluctuated through
the remainder of the year. The yield on a 30-year Treasury bond, which is a
good indicator of the overall market, rose from a low of 5.95% in January to
a high of 7.20% in July, to end the year at 6.64%. The long-term bond market
endured similar swings, and the Series, which invests primarily in
long-term bonds, saw the value of its holdings decline."
What was your investment strategy?
"As interest rates increased during the second and third quarters of 1996,
we took two significant steps to protect the Series' portfolio. First, the
average maturity of the portfolio was reduced. The portfolio's exposure
to more intermediate-term issues was increased, as these are less sensitive
to changes in interest rates and have better performance when interest rates
rise. Second, additional mortgage-backed securities were purchased, as they
have higher yields and have historically outperformed Treasury securities in a
rising interest rate environment.
"During the fourth quarter, the economy showed signs of slowing, which helped
bond prices recover through October and November. The portfolio's maturity
was increased to take advantage of the rising bond prices, and the prices
of the Series' holdings appreciated. In December, however, news of renewed
strength in the economy once again drove bond yields higher, negatively
affecting the value of the Series' portfolio."
What is the outlook?
"As we enter 1997, most market analysts expect moderate economic growth
and continued low levels of inflation. The Series will enter the new year
with an average maturity that is in line with its peers, and the portfolio
will be better positioned to respond to any change in economic fundamentals.
Given signs of slower economic growth, the portfolio's average maturity will
be lengthened. If there are signs of stronger-than-expected economic growth,
the portfolio's interest rate risk will be reduced by investing in
securities with shorter maturities."
3
<PAGE>
==============================================================================
PERFORMANCE COMPARISON CHART December 31, 1996
- ------------------------------------------------------------------------------
This chart compares a $10,000 hypothetical investment made in Seligman
U.S. Government Securities Series Class A shares, with and without the
maximum initial sales charge of 4.75%, for the 10-year period ended December
31, 1996, to a $10,000 investment made in the Lehman Brothers Government
Bond Index (Lehman Bond Index), and the Lipper General US Government Fund
Index (Lipper Index) for the same period. The performance of Seligman
U.S. Government Securities Series Class D shares is not shown in this chart,
but is included in the table on page 5. It is important to keep in mind that
the Lehman Bond Index excludes the effect of fees or sales charges and the
Lipper Index excludes the effect of sales charges.
with without Lehman Government
DATE sales charge sales charge Lipper Index Bond Index
12/31/86 $9,521.03 $10,000.00 $10,000.00 $10,000.00
3/31/87 $9,491.55 $9,969.03 $10,123.00 $10,118.00
6/30/87 $8,996.04 $9,448.59 $9,870.94 $9,940.94
9/30/87 $8,563.55 $8,994.34 $9,534.34 $9,673.52
12/31/87 $9,250.76 $9,716.11 $10,050.15 $10,220.08
3/31/88 $9,644.25 $10,129.40 $10,386.83 $10,557.34
6/30/88 $9,738.01 $10,227.87 $10,485.50 $10,656.58
9/30/88 $9,886.01 $10,383.32 $10,657.46 $10,836.68
12/31/88 $9,976.25 $10,478.11 $10,720.34 $10,938.54
3/31/89 $9,988.84 $10,491.32 $10,805.03 $11,054.49
6/30/89 $10,519.50 $11,048.67 $11,571.11 $11,943.27
9/30/89 $10,585.79 $11,118.30 $11,646.32 $12,042.40
12/31/89 $10,899.38 $11,447.68 $12,051.61 $12,495.19
3/31/90 $10,632.19 $11,167.04 $11,899.76 $12,340.25
6/30/90 $10,937.44 $11,487.64 $12,276.99 $12,772.16
9/30/90 $11,000.00 $11,553.35 $12,348.19 $12,878.17
12/31/90 $11,594.13 $12,177.37 $13,017.46 $13,585.18
3/31/91 $11,779.08 $12,371.62 $13,298.64 $13,879.98
6/30/91 $11,948.74 $12,549.82 $13,442.27 $14,067.36
9/30/91 $12,602.76 $13,236.73 $14,209.82 $14,869.20
12/31/91 $13,222.70 $13,887.86 $14,921.73 $15,666.19
3/31/92 $12,940.97 $13,591.97 $14,656.13 $15,392.03
6/30/92 $13,442.48 $14,118.71 $15,194.01 $16,001.56
9/30/92 $13,991.72 $14,695.58 $15,789.61 $16,792.03
12/31/92 $13,987.27 $14,690.90 $15,833.82 $16,798.75
3/31/93 $14,390.11 $15,114.00 $16,394.34 $17,558.05
6/30/93 $14,725.63 $15,466.40 $16,809.12 $18,065.48
9/30/93 $15,079.58 $15,838.15 $17,204.13 $18,652.61
12/31/93 $15,030.10 $15,786.18 $17,150.80 $18,589.19
3/31/94 $14,720.65 $15,461.16 $16,615.69 $18,029.65
6/30/94 $14,484.88 $15,213.52 $16,293.35 $17,824.12
9/30/94 $14,522.59 $15,253.13 $16,316.16 $17,898.98
12/31/94 $14,447.07 $15,173.81 $16,339.00 $17,961.62
3/31/95 $14,972.49 $15,725.67 $17,077.52 $18,807.62
6/30/95 $15,924.16 $16,725.21 $18,023.62 $19,973.69
9/30/95 $16,169.75 $16,983.16 $18,339.03 $20,327.22
12/31/95 $17,069.18 $17,927.84 $19,105.60 $21,256.18
3/31/96 $16,474.34 $17,303.08 $18,650.89 $20,775.79
6/30/96 $16,410.20 $17,235.72 $18,665.81 $20,875.51
9/30/96 $16,618.15 $17,454.13 $18,960.73 $21,226.22
12/31/96 $17,018.92 $17,875.06 $19,489.73 $21,846.03
Performance data quoted represent changes in prices and assume that all
distributions within the periods are invested in additional shares. The rates
of return will vary and principal value of an investment will fluctuate.
Shares, if redeemed, may be worth more or less than their original stated
cost. Past performance is not indicative of future investment results.
4
<PAGE>
SELIGMAN U.S. GOVERNMENT SECURITIES SERIES*
<TABLE>
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS**
For Periods Ended December 31, 1996
AVERAGE ANNUAL
-------------------------------------------------------------------
CLASS D
SINCE
SIX ONE FIVE 10 INCEPTION
MONTHS YEAR YEARS YEARS 9/21/93
---------- ------ ------- ------- ------------
<S> <C> <C> <C> <C> <C>
CLASS A
With Sales Charge (1.18)% (5.07)% 4.17% 5.46% n/a
Without Sales Charge 3.71 (0.29) 5.18 5.98 n/a
CLASS D
With 1% CDSL 2.46 (1.86) n/a n/a n/a
Without CDSL 3.46 (0.92) n/a n/a 2.79%
LEHMAN BOND INDEX*** 3.06 2.77 6.87 8.12 4.98+
LIPPER INDEX*** 2.91 2.01 5.48 6.89 5.41+
NET ASSET VALUE
<S> <C> <C> <C>
DECEMBER 31, 1996 JUNE 30, 1996 DECEMBER 31, 1995
-------------------- -------------- --------------------
CLASS A $6.71 $6.67 $7.15
CLASS D 6.73 6.68 7.16
DIVIDEND INFORMATION
For the Year Ended December 31, 1996
<S> <C> <C>
CLASS A CLASS D
--------- ---------
$0.4096 $0.3570
</TABLE>
The performance of Class D shares will be greater than or less than the
perfomance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
- --------------
* 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 with and without the effect of the
initial 4.75% maximum sales charge. Returns for Class D shares are
calculated with and without 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 Bond Index and the Lipper Index are unmanaged indices that
assume investment of dividends. The Lehman Bond Index does not reflect fees
or sales charges, and the Lipper Index does not reflect sales charges.
Investors may not invest directly in an index.
+ From September 30, 1993.
5
<PAGE>
==============================================================================
ANNUAL PERFORMANCE OVERVIEW -- Seligman High-Yield Bond Series
- ------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Seligman High-Yield Team: (from left)
Timothy Finn, Brian Hessel, (seated)
Daniel J. Charleston (Portfolio Manager)
YOUR PORTFOLIO MANAGER
Daniel J. Charleston is a Managing Director of J. & W. Seligman & Co.
Incorporated and has served as Vice President of Seligman High Income Fund
Series and Portfolio Manager of its Seligman High-Yield Bond Series since
January 1990. In addition, Mr. Charleston is Vice President of Seligman
Portfolios, Inc. and is Portfolio Manager of its Seligman High-Yield Bond
Portfolio. Mr. Charleston joined Seligman in 1987 as a Portfolio Assistant. Mr.
Charleston is supported by a team of research professionals which assists him
in selecting companies whose bonds have the potential for high yields at
acceptable levels of investment risk, consistent with your Series' objective.
How did Seligman High-Yield Bond Series perform in the last 12 months?
"Seligman High-Yield Bond Series had an outstanding year, posting a total return
of 14.82% based on the net asset value of Class A shares, and significantly
outperforming the 12.66% total return of the Lipper High-Yield Bond Index and
the 11.07% total return of the Merrill Lynch High-Yield Master Index."
Which market factors affected the Series' performance in the past 12 months?
"In 1996, high-yield bonds demonstrated tremendous resiliency in a generally
rising interest rate environment. One factor that supported performance was the
more than $15 billion net inflow into high-yield mutual funds. The near-record
levels of new issues offered in 1996 and the historically low default rates also
contributed to an overall positive market sentiment. Further, high-yield
securities continued to deliver outstanding yields versus other taxable
fixed-income investments, and grew in acceptance as a viable institutional asset
class. The Series' assets increased from $272 million at year-end 1995 to $822
million at year-end 1996."
Which sectors improved the Series' performance in 1996?
"Competitive local exchange carriers (CLECs) produced solid performance in 1996.
CLECs provide their customers with an alternative to their local telephone
company for local transport of private lines, special access, and interstate
transport of switched telecommunications services. Though the sector is at an
early stage in its evolution, we believe that as companies build their networks
and sign on new customers they stand poised for growth in both revenues and cash
flow. Some of the Series' strongest holdings in this sector included Brooks
Fiber Properties Inc., NEXTLINK Communications, Inc., and Intermedia
Communications of Florida, Inc.
"In the gaming sector, overall performance was mixed during the year because
of concerns of increased
capacity and promotional wars. However, there were some standout performers in
the Series' portfolio. These included Showboat Marina Casino Partnership, Coast
Hotels & Casinos, Inc., and Trump Hotels & Casino Resorts Funding, Inc. Finally,
within the utility sector, Midland Cogeneration Venture, L.P. posted improved
operating results and delivered high risk-adjusted returns during the year."
Which sector impaired the Series' performance?
"The paging sector experienced a difficult year in the market. The industry
continued to be plagued by declining average revenue per unit and unanticipated
systems integration problems amongst consolidating companies. The portfolio's
holdings in this industry were therefore reduced."
6
<PAGE>
==============================================================================
- ------------------------------------------------------------------------------
What was your investment strategy?
"Investment strategy focused on investing in B-rated domestic corporate issues
and avoiding distressed, defaulted, and foreign dollar-denominated securities.
We placed an emphasis on individual company selection and on non-cyclical
industries such as cable operators and telecommunications providers. The Series'
core positions in cable systems, gaming, and telecommunications were also
expanded as portfolio assets increased. In a year where many high-yield fund
managers had significant exposure to the more volatile emerging markets, the
Series remained a true high-yield fund investing in US corporate issuers."
What is the outlook?
"The outlook for Seligman High-Yield Bond Series continues to be positive.
Strong fundamental and technical factors point to another solid year in the
high-yield bond market. A stable, growing economy with relatively steady
interest rates and strong inflows into high-yield investment vehicles translate
to a positive outlook for the high-yield asset class and your Series."
7
<PAGE>
==============================================================================
PERFORMANCE COMPARISON CHART December 31, 1996
- ------------------------------------------------------------------------------
This chart compares a $10,000 hypothetical investment made in Seligman
High-Yield Bond Series Class A shares, with and without the maximum initial
sales charge of 4.75%, for the 10-year period ended December 31, 1996, to a
$10,000 investment made in the Lipper High-Yield Bond Index (Lipper High-Yield
Index) and the Merrill Lynch High-Yield Master Index (Merrill Master Index) for
the same period. The performances of Seligman High-Yield Bond Series Class B and
D shares are not shown in this chart, but are included in the table on page 9.
It is important to keep in mind that the Lipper High-Yield Index excludes the
effect of sales charges and the Merrill Master Index excludes the effect of any
fees or sales charges.
Merrill Lynch Lipper
with without High Yield High-Yield
DATE sales charge sales charge Master Index Index
12/31/86 $9,525.55 $10,000.00 $10,000.00 $10,000.00
3/31/87 $9,959.90 $10,455.90 $10,568.00 $10,653.00
6/30/87 $9,701.29 $10,184.50 $10,432.73 $10,542.21
9/30/87 $9,418.62 $9,887.70 $10,350.31 $10,373.53
12/31/87 $9,815.71 $10,304.60 $10,465.20 $10,192.00
3/31/88 $10,285.93 $10,798.20 $11,025.09 $10,810.65
6/30/88 $10,526.47 $11,050.80 $11,327.18 $11,153.35
9/30/88 $10,675.02 $11,206.70 $11,600.16 $11,364.15
12/31/88 $10,932.27 $11,476.70 $11,875.08 $11,576.66
3/31/89 $11,140.06 $11,694.80 $12,123.27 $11,785.04
6/30/89 $11,567.64 $12,143.70 $12,558.50 $12,103.23
9/30/89 $11,572.85 $12,149.20 $12,559.75 $11,863.59
12/31/89 $11,352.11 $11,917.40 $12,377.64 $11,254.99
3/31/90 $10,929.71 $11,474.00 $12,120.18 $10,755.26
6/30/90 $11,305.34 $11,868.40 $12,642.56 $11,238.18
9/30/90 $10,822.30 $11,361.20 $11,875.16 $10,381.83
12/31/90 $10,526.22 $11,050.50 $11,839.53 $10,003.93
3/31/91 $11,812.61 $12,400.90 $13,453.26 $11,575.55
6/30/91 $12,460.80 $13,081.40 $14,281.98 $12,429.82
9/30/91 $13,260.04 $13,920.40 $15,121.76 $13,333.47
12/31/91 $13,757.80 $14,443.00 $15,933.80 $14,028.14
3/31/92 $15,016.62 $15,764.50 $17,136.80 $15,297.69
6/30/92 $15,452.40 $16,221.60 $17,755.44 $15,791.80
9/30/92 $16,298.50 $17,110.10 $18,565.09 $16,415.58
12/31/92 $16,519.60 $17,342.20 $18,828.72 $16,602.72
3/31/93 $17,675.79 $18,556.00 $19,997.98 $17,756.61
6/30/93 $18,421.00 $19,338.30 $20,795.90 $18,608.92
9/30/93 $18,745.62 $19,679.00 $21,324.11 $18,956.91
12/31/93 $19,689.32 $20,669.70 $22,064.06 $19,899.07
3/31/94 $19,570.80 $20,545.40 $21,655.88 $19,688.14
6/30/94 $19,552.19 $20,525.80 $21,404.67 $19,424.32
9/30/94 $19,640.33 $20,618.30 $21,695.77 $19,418.49
12/31/94 $19,843.57 $20,831.70 $21,806.42 $19,166.05
3/31/95 $20,875.77 $21,915.30 $23,121.35 $20,101.35
6/30/95 $22,167.51 $23,271.40 $24,587.24 $21,160.70
9/30/95 $23,191.63 $24,346.50 $25,305.19 $21,890.74
12/31/95 $23,954.15 $25,147.00 $26,145.32 $22,497.11
3/31/96 $24,912.72 $26,153.30 $26,527.04 $23,070.79
6/30/96 $25,466.41 $26,734.50 $26,890.46 $23,442.23
9/30/96 $26,580.75 $27,904.40 $27,939.19 $24,529.95
12/31/96 $27,504.58 $28,874.20 $29,037.20 $25,344.34
Performance data quoted represent changes in prices and assume that all
distributions within the periods are invested in additional shares. The rates of
return will vary and principal value of an investment will fluctuate. Shares,
if redeemed, may be worth more or less than their original stated cost. Past
performance is not indicative of future investment results.
8
<PAGE>
=============================================================================
SELIGMAN HIGH-YIELD BOND SERIES
- -----------------------------------------------------------------------------
<TABLE>
INVESTMENT RESULTS PER SHARE TOTAL RETURNS* For Periods Ended December 31, 1996
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>
CLASS A
With Sales Charge n/a 2.90% 9.32% 13.74% 10.65% n/a
Without Sales Charge n/a 8.00 14.82 14.86 11.19 n/a
CLASS B
With 5% CDSL 4.11% 2.74 n/a n/a n/a n/a
Without CDSL 9.11 7.74 n/a n/a n/a n/a
CLASS D
With 1% CDSL n/a 6.74 13.10 n/a n/a n/a
Without CDSL n/a 7.74 14.10 n/a n/a 11.36%
LIPPER HIGH-YIELD INDEX** 9.01+ 5.32 12.66 12.54 9.74 9.33++
MERRILL MASTER INDEX** 9.42+ 5.23 11.07 12.74 11.24 9.95++
</TABLE>
<TABLE>
NET ASSET VALUE
DECEMBER 31, 1996 JUNE 30, 1996 DECEMBER 31, 1995
-------------------- -------------- --------------------
<S> <C> <C> <C>
CLASS A $7.25 $7.05 $6.96
CLASS B 7.26 7.05 n/a
CLASS D 7.26 7.05 6.96
DIVIDEND INFORMATION
For the Year Ended December 31, 1996
</TABLE>
<TABLE>
CLASS A CLASS B CLASS D
---------- ------------ ---------
<S> <C> <C> <C>
$0.6947 $0.4472+++ $0.6404
</TABLE>
The securities in which the Series invests are subject to 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 this Series.
The performances of Class B and D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
- --------------
* 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 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 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 with and
without the effect of the 1% CDSL, charged only on redemptions made within
one year of the date of purchase.
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 Index and the Merrill Master Index are unmanaged
indices that assume investment of dividends. The Lipper High-Yield Index
does not reflect sales charges, and the Merrill Master Index does not
reflect fees or sales charges. Investors may not invest directly in an
index.
+ From April 30, 1996.
++ From September 30, 1993.
+++ For the period April 22, 1996, to December 31, 1996.
9
<PAGE>
==============================================================================
SELIGMAN HIGH-YIELD BOND SERIES
- ------------------------------------------------------------------------------
<TABLE>
DIVERSIFICATION OF ASSETS PERCENT OF NET ASSETS
December 31, 1996 DECEMBER 31,
---------------------
ISSUES COST VALUE 1996 1995
------ ---- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Net Cash and Short-Term Holdings 1 $ 36,522,104 $ 36,522,104 4.4 6.0
--- ------------ ------------ ----- -----
Corporate Bonds and
Convertible Issues:
Aerospace 1 6,082,406 6,450,000 0.8 --
Automotive -- -- -- -- 0.8
Broadcasting 5 42,080,663 43,068,088 5.2 2.9
Cable Systems 15 131,230,962 131,071,750 15.9 13.5
Cellular 4 33,416,371 33,952,500 4.1 4.4
Chemicals 2 16,161,250 16,565,000 2.0 4.2
Computers and Related Services 2 22,932,713 24,418,750 3.0 1.3
Consumer Products 4 32,271,531 33,728,750 4.1 2.3
Containers 2 16,961,350 17,387,500 2.1 1.2
Energy 1 6,540,500 7,003,750 0.9 5.1
Environmental Services 1 8,603,341 8,956,875 1.1 1.0
Financial Services 2 8,652,719 8,864,000 1.1 1.8
Food 3 26,407,169 27,100,625 3.3 --
Funeral 1 6,673,287 7,068,750 0.9 --
Gaming/Hotel 9 100,951,587 104,137,500 12.7 17.1
Health Care/Medical Products 4 32,027,903 33,375,000 4.1 4.6
Industrial 1 5,042,499 4,696,500 0.6 1.0
Insurance -- -- -- -- 1.2
Leisure 2 10,561,500 11,026,250 1.3 1.5
Manufacturing 3 16,661,531 17,342,500 2.1 2.4
Metals 2 20,401,875 20,725,000 2.5 --
Paging 2 26,645,146 24,718,750 3.0 6.0
Paper and Packaging 2 20,221,788 20,857,500 2.5 1.1
Publishing 1 12,140,538 12,600,000 1.5 --
Record Storage 2 10,772,062 11,410,000 1.4 --
Retailing 1 8,616,875 8,797,500 1.1 0.8
Semiconductors -- -- -- -- 3.5
Supermarkets 3 35,381,851 36,875,000 4.5 2.1
Telecommunications 11 83,074,304 88,537,750 10.8 7.0
Theaters 1 7,193,540 7,668,750 0.9 3.3
Utilities 1 15,696,864 16,875,000 2.1 2.9
Miscellaneous -- -- -- -- 1.0
--- ------------ ------------ ----- -----
88 763,404,125 785,279,338 95.6 94.0
--- ------------ ------------ ----- -----
Net Assets 89 $799,926,229 $821,801,442 100.0 100.0
--- ------------ ------------ ----- -----
--- ------------ ------------ ----- -----
</TABLE>
10
<PAGE>
==============================================================================
PORTFOLIOS OF INVESTMENTS December 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
U.S. GOVERNMENT SECURITIES SERIES
PRINCIPAL AMOUNT
OR WARRANTS Value
------------- -------
US TREASURY SECURITIES 64.5%
<S> <C> <C>
US Treasury Bonds:
8 3/4%, due 5/15/2020........ ................................................... $ 7,000,000 $ 8,612,191
7 7/8%, due 2/15/2021. .......................................................... 3,000,000 3,390,003
US Treasury Notes:
8%, due 5/15/2001................................................................. 5,000,000 5,343,755
7%, due 7/15/2006................................................................. 9,000,000 9,354,384
6 1/4%, due 10/31/2001... ....................................................... 9,500,000 9,508,911
-----------
TOTAL US TREASURY SECURITIES (Cost $36,505,781)...................................... 36,209,244
-----------
US GOVERNMENT AGENCY SECURITIES 31.2% Mortgage-Backed Pass-through Certificates:
Federal National Mortgage Association 7 1/2%, due 10/1/2026........................ 7,394,914 7,401,850
Government National Mortgage Association Obligations,
7 1/2%, with various maturities from 9/15/2021 to 8/15/2024**................... 10,116,809 10,135,778
-----------
TOTAL US GOVERNMENT AGENCY SECURITIES (Cost $16,927,926).......................... 17,537,628
-----------
SHORT-TERM HOLDINGS 3.2% (Cost $1,800,000)....................................... 1,800,000
-----------
TOTAL INVESTMENTS 98.9% (Cost $55,233,077)....................................... 55,546,872
OTHER ASSETS LESS LIABILITIES 1.1%............................................... 625,136
-----------
NET ASSETS 100.0%................................................................ $56,172,008
-----------
-----------
- ----------------------------------------------------------------------------------------------------------------------
HIGH-YIELD BOND SERIES
CORPORATE BONDS 95.1%
AEROSPACE 0.8%
UNC Inc. 11%, due 6/1/2006........................................................... $ 6,000,000 $ 6,450,000
-----------
BROADCASTING 4.7%
Allbritton Communications Co. 11 1/2%, due 8/15/2004............................... 5,000,000 5,300,000
Jacor Communications Co. 9 3/4%, due 12/15/2006.................................... 2,970,000 3,047,963
Paxson Communications Corp. 11 5/8%, due 10/1/2002................................. 14,000,000 14,700,000
SFX Broadcasting, Inc. 10 3/4%, due 5/15/2006...................................... 15,000,000 15,937,500
-----------
38,985,463
-----------
CABLE SYSTEMS 15.9%
American Telecasting, Inc. 0% ( 14 1/2%+), due 8/15/2005............................ 10,000,000 3,650,000
American Telecasting, Inc. (Warrants expiring 8/15/2000).......................... 5,000 wts. 50,000
Cablevision Systems Corp. 10 1/2%, due 5/15/2016................................... $16,500,000 17,160,000
Charter Communications Southeast L.P. 11 1/4%, due 3/15/2006....................... 12,000,000 12,600,000
Charter Communications Southeast Holdings L.P. 0% (14%+), due 3/15/2007.......... 15,000,000 8,925,000
Comcast Corp. 10 5/8%, due 7/15/2012............................................... 15,000,000 16,725,000
Comcast U.K. Cable Partners Ltd. 0% (11.20%+), due 11/15/2007..................... 10,000,000 7,175,000
Heartland Wireless Communications, Inc. 14%, due 10/15/2004*...................... 8,600,000 8,965,500
Intermedia Capital Partners IV, L.P. 11 1/4%, due 8/1/2006......................... 15,000,000 15,712,500
International CableTel, Inc. 0% (11 1/2%+), due 2/1/2006........................... 10,000,000 6,850,000
</TABLE>
- -----------------------
See footnoes on page 14.
11
<PAGE>
=============================================================================
PORTFOLIOS OF INVESTMENTS (continued) December 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
HIGH-YIELD BOND SERIES (continued)
PRINCIPAL AMOUNT
OR WARRANTS Value
------------- -------
<S> <C> <C>
CABLE SYSTEMS (continued)
People's Choice TV Corp. 0% (13 1/8%+), due 6/1/2004............................... $ 10,000,000 $ 4,300,000
Rogers Cablesystems Inc. 11%, due 12/1/2015....................................... 10,000,000 10,775,000
Rogers Communications Inc. 10 7/8%, due 4/15/2004.................................. 7,500,000 7,931,250
Wireless One Inc. 13%, due 10/15/2003............................................. 10,500,000 10,237,500
Wireless One Inc. (Warrants expiring 10/15/2000) 15,000 wts. 15,000
-----------
131,071,750
CELLULAR 4.1%
Centennial Cellular Corp. 10 1/8%, due 5/15/2005................................... $ 7,500,000 7,575,000
Commnet Cellular Corp. 11 1/4%, due 7/1/2005....................................... 6,500,000 6,922,500
PriCellular Wireless Corp. 0%(12 1/4%+), due 10/1/2003............................. 10,500,000 9,030,000
PriCellular Wireless Corp. 10 3/4%, due 11/1/2004* 10,000,000 10,425,000
-----------
33,952,500
-----------
CHEMICALS 2.0%
NL Industries Inc. 11 3/4%, due 10/15/2003......................................... 10,000,000 10,625,000
Texas Petrochemicals Corp. 11 1/8%, due 7/1/2006 5,500,000 5,940,000
-----------
16,565,000
-----------
COMPUTERS AND RELATED SERVICES 3.0%
Unisys Corp. 12%, due 4/15/2003................................................... 12,750,000 13,706,250
Unisys Corp. 11 3/4%, due 10/15/2004 10,000,000 10,712,500
-----------
24,418,750
-----------
CONSUMER PRODUCTS 4.1%
American Pad & Paper Co. 13%, due 11/15/2005...................................... 6,500,000 7,670,000
Ryder TRS Inc. 10%, due 12/1/2006*................................................ 8,500,000 8,861,250
Spinnaker Industries Inc. 103 1/44%, due 10/15/2006*................................. 7,500,000 7,837,500
William Carter Co. 10 3/4%, due 12/1/2006* 9,000,000 9,360,000
-----------
33,728,750
-----------
CONTAINERS 2.1%
Plastic Containers, Inc. 10%, due 12/15/2006*..................................... 10,000,000 10,400,000
Silgan Corp. 11 3/4%, due 6/15/2002 6,500,000 6,987,500
-----------
17,387,500
-----------
ENERGY 0.9%
Abraxas Petroleum Corp. 11 1/2%, due 11/1/2004* 6,500,000 7,003,750
-----------
ENVIRONMENTAL SERVICES 1.1%
Allied Waste North America, Inc. 10 1/4%, due 12/1/2006* 8,500,000 8,956,875
-----------
FINANCIAL SERVICES 1.1 %
Dollar Financial Group, Inc. 10 7/8%, due 11/15/2006*.............................. 6,750,000 6,986,250
Veritas Holdings GmbH 9 5/8%, due 12/15/2003* 1,850,000 1,877,750
-----------
8,864,000
-----------
FOOD 3.3%
AmeriKing Inc. 10 3/4%, due 12/1/2006 .............................................. 7,500,000 7,800,000
Gorges/Quik-to-Fix Foods, Inc. 11 1/2%, due 12/1/2006* ............................. 8,500,000 8,850,625
International Home Foods, Inc. 10 3/8%, due 11/1/2006* 10,000,000 10,450,000
-----------
27,100,625
-----------
- -----------------------
See footnoes on page 14.
</TABLE>
12
<PAGE>
=============================================================================
PORTFOLIOS OF INVESTMENTS (continued) December 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
HIGH-YIELD BOND SERIES (continued)
PRINCIPAL AMOUNT
OR WARRANTS Value
------------- -------
<S> <C> <C>
FUNERAL 0.9%
Prime Succession Acquisition Corp. 10 3/4%, due 8/15/2004.......................... $ 6,500,000 $ 7,068,750
-----------
GAMING/HOTEL 12.7%
Alliance Gaming Corp. 12 7/8%, due 6/30/2003 ....................................... 6,500,000 6,922,500
Aztar Corp. 13 3/4%, due 10/1/2004 ................................................. 15,000,000 16,050,000
Casino America, Inc. 12 1/2%, due 8/1/2003 ......................................... 7,500,000 7,153,125
Casino Magic of Louisiana Corp. 13%, due 8/15/2003*............................... 7,500,000 7,443,750
Coast Hotels & Casinos, Inc. 13%, due 12/15/2002..................................... 12,500,000 13,812,500
Showboat, Inc. 13%, due 8/1/2009..................................................... 7,675,000 8,480,875
Showboat Marina Casino Partnership 13 1/4%, due 3/15/2003 .......................... 10,950,000 12,099,750
Trump Atlantic City Funding, Inc. 11 1/4%, due 5/1/2006 ............................ 15,000,000 14,925,000
Trump Hotels & Casino Resorts Funding, Inc. 15 1/2%, due 6/15/2005 ................. 15,000,000 17,250,000
-----------
104,137,500
-----------
HEALTH CARE/MEDICAL PRODUCTS 4.1%
Dade International Inc. 11 1/8%, due 5/1/2006 ...................................... 7,500,000 8,137,500
Graphic Controls Corp. 12%, due 9/15/2005........................................... 5,000,000 5,562,500
IMED Corp. 9 3/4%, due 12/1/2006* .................................................. 10,000,000 10,250,000
Paracelsus Healthcare Corp. 10%, due 8/15/2006....................................... 10,000,000 9,425,000
-----------
33,375,000
-----------
INDUSTRIAL 0.6%
IMO Industries Inc. 11 3/4%, due 5/1/2006 .......................................... 5,050,000 4,696,500
-----------
LEISURE 1.3%
Premier Parks Inc. 12%, due 8/15/2003.............................................. 4,000,000 4,380,000
Stuart Entertainment, Inc. 12 1/2%, due 11/15/2004* ................................ 6,500,000 6,646,250
-----------
11,026,250
-----------
MANUFACTURING 2.1%
Blue Bird Body Co. 10 3/4%, due 11/15/2006 ......................................... 3,500,000 3,692,500
BPC Holding Corp. 12 1/2%, due 6/15/2006 ........................................... 6,500,000 6,890,000
International Knife &Saw, Inc. 11 3/8%, due 11/15/2006* ............................ 6,500,000 6,760,000
-----------
17,342,500
-----------
METALS 2.5%
Renco Metals, Inc. 11 1/2%, due 7/1/2003 ........................................... 10,000,000 10,525,000
Royal Oak Mines, Inc. 11%, due 8/15/2006............................................. 10,000,000 10,200,000
-----------
20,725,000
-----------
PAGING 3.0%
Mobile Telecommunication Technologies Corp. 13 1/2%, due 12/15/2002 ................ 17,500,000 17,631,250
ProNet Inc. 117 1/48%, due 6/15/2005................................................. 7,500,000 7,087,500
-----------
24,718,750
-----------
PAPER AND PACKAGING 2.5%
U.S. Can Corp. 10 1/8%, due 10/15/2006* ............................................ 10,000,000 10,550,000
S.D. Warren Co. 12%, due 12/15/2004.................................................. 9,500,000 10,307,500
-----------
20,857,500
-----------
PUBLISHING 1.5%
Petersen Publishing Co., L.L.C. 11 1/8%, due 11/15/2006* 12,000,000 12,600,000
-----------
</TABLE>
- -----------------------
See footnoes on page 14.
13
<PAGE>
=============================================================================
PORTFOLIOS OF INVESTMENTS (continued) December 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH-YIELD BOND SERIES (continued)
PRINCIPAL AMOUNT
OR WARRANTS Value
------------- -------
<S> <C> <C>
RECORD STORAGE 1.4%
Iron Mountain Inc. 10 1/8%, due 10/1/2006 .......................................... $ 3,500,000 $ 3,727,500
Pierce Leahy Corp. 11 1/8%, due 7/15/2006 .......................................... 7,000,000 7,682,500
-----------
11,410,000
-----------
RETAILING 1.1%
Cole National Group, Inc. 9 7/8%, due 12/31/2006* ................................ 8,500,0000 8,797,500
-----------
SUPERMARKETS 4.5%
Grand Union 12%, due 9/1/2004........................................................ 12,500,000 13,312,500
Jitney-Jungle Stores of America, Inc. 12%, due 3/1/2006.............................. 12,500,000 13,312,500
Pathmark Stores Inc. 11 5/8%, due 6/15/2002 ........................................ 10,000,000 10,250,000
-----------
36,875,000
-----------
TELECOMMUNICATIONS 10.8%
Brooks Fiber Properties, Inc. 0% (10 7/8%+), due 3/1/2006* ......................... 5,000,000 3,362,500
Brooks Fiber Properties, Inc. 0% (11 7/8%+), due 11/1/2006 ......................... 5,000,000 3,212,500
Fonorola Inc. 12 1/2%, due 8/15/2002 ............................................... 7,500,000 8,250,000
Intermedia Communications of Florida, Inc. 13 1/2%, due 6/1/2005 ................... 5,000,000 5,737,500
Intermedia Communications of Florida, Inc. 0%(12 1/2%+), due 5/15/2006 ............. 5,000,000 3,350,000
Intermedia Communications of Florida, Inc. (Warrants expiring 6/1/2000).......... 4,000 wts. 160,000
IXC Communications Inc. 12 1/2%, due 10/1/2005 ..................................... $18,500,000 20,442,500
NEXTLINK Communications, Inc. 12 1/2%, due 4/15/2006 ............................... 12,500,000 13,468,750
Omnipoint Corp. 11 5/8%, due 8/15/2006 ............................................. 10,000,000 10,450,000
Phonetel Technologies, Inc. 12%, due 12/15/2006...................................... 2,600,000 2,704,000
Sprint Spectrum L.P. 11%, due 8/15/2006.............................................. 16,000,000 17,400,000
-----------
88,537,750
-----------
THEATERS 0.9%
Plitt Theaters, Inc. 10 7/8%, due 6/15/2004 ...................................... 7,500,000 7,668,750
-----------
UTILITIES 2.1%
Midland Cogeneration Venture, L.P. 11 3/4%, due 7/23/2005 ........................ 15,000,000 16,875,000
-----------
TOTAL CORPORATE BONDS (Cost $759,374,937).......................................... 781,196,713
-----------
CONVERTIBLE PREFERRED STOCKS 0.5% (Cost $4,029,188)
BROADCASTING 0.5%
Paxson Communications Corp. 12 1/2% .............................................. 4,275 shs. 4,082,625
-----------
SHORT-TERM HOLDINGS 1.9% (Cost $15,900,000) ........................................ 15,900,000
-----------
TOTAL INVESTMENTS 97.5% (Cost $779,304,125) ......................................... 801,179,338
OTHER ASSETS LESS LIABILITIES 2.5% ................................................. 20,622,104
-----------
NET ASSETS 100.0% .................................................................. $821,801,442
-----------
-----------
</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.
See Notes to Financial Statements.
14
<PAGE>
=============================================================================
STATEMENTS OF ASSETS AND LIABILITIES December 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
U.S. GOVERNMENT HIGH-YIELD
SECURITIES SERIES BOND SERIES
______________ ____________
<S> <C> <C>
ASSETS:
Investments, at value (see portfolios of investments):
Long-term holdings............................................... $53,746,872 $785,279,338
Short-term holdings.............................................. 1,800,000 15,900,000
----------- ------------
55,546,872 801,179,338
Cash................................................................ 164,514 87,099
Interest receivable................................................. 722,659 17,460,320
Receivable for Shares of Beneficial Interest sold................... 101,286 10,725,096
Expenses prepaid to shareholder service agent....................... 9,970 107,010
Other............................................................... 24,991 89,386
----------- ------------
Total Assets........................................................ 56,570,292 829,648,249
----------- ------------
LIABILITIES:
Payable for Shares of Beneficial Interest repurchased............... 157,573 2,241,823
Dividends payable................................................... 121,753 2,896,003
Payable for securities purchased.................................... -- 1,561,547
Accrued expenses, taxes, and other.................................. 118,958 1,147,434
----------- ------------
Total Liabilities 398,284 7,846,807
----------- ------------
Net Assets.......................................................... $56,172,008 $821,801,442
----------- ------------
----------- ------------
COMPOSITION OF NET ASSETS:
Shares of Beneficial Interest, at par (unlimited shares authorized;
$.001 par value; 8,364,572 and 113,282,926 shares outstanding):
Class A.......................................................... $ 6,984 $ 56,292
Class B.......................................................... -- 20,394
Class D.......................................................... 1,380 36,597
Additional paid-in capital.......................................... 71,027,763 803,180,157
Accumulated net realized loss....................................... (15,177,914) (3,367,211)
Net unrealized appreciation of investments.......................... 313,795 21,875,213
----------- ------------
Net Assets.......................................................... $56,172,008 $821,801,442
----------- ------------
----------- ------------
NET ASSETS:
Class A............................................................. $46,889,264 $408,303,361
Class B............................................................. -- $147,970,334
Class D............................................................. $9,282,744 $265,527,747
SHARES OF BENEFICIAL INTEREST OUTSTANDING:
Class A............................................................. 6,984,440 56,292,402
Class B............................................................. -- 20,393,887
Class D............................................................. 1,380,132 36,596,637
NET ASSET VALUE PER SHARE:
Class A............................................................. $6.71 $7.25
Class B............................................................. -- $7.26
Class D............................................................. $6.73 $7.26
</TABLE>
- ------------------------
See Notes to Financial Statements.
15
<PAGE>
=============================================================================
STATEMENTS OF OPERATIONS For the Year Ended December 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
U.S. GOVERNMENT HIGH-YIELD
SECURITIES SERIES BOND SERIES
----------------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................................... $ 4,185,228 $52,323,055
----------- -----------
EXPENSES:
Management fees........................................................ 290,879 3,107,117
Distribution and service fees.......................................... 193,344 2,678,641
Shareholder account services........................................... 110,713 899,087
Registration........................................................... 36,495 139,693
Shareholder reports and communications................................. 26,015 41,257
Custody and related services........................................... 20,721 75,100
Shareholders' meeting.................................................. 19,188 14,096
Trustees' fees and expenses............................................ 14,067 16,070
Auditing and legal fees................................................ 11,424 66,715
Miscellaneous.......................................................... 10,557 19,251
----------- -----------
Total Expenses......................................................... 733,403 7,057,027
----------- -----------
Net Investment Income.................................................. 3,451,825 45,266,028
----------- -----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments................................ (531,212) 8,372,099
Net change in unrealized appreciation of investments................... (3,266,304) 13,819,543
----------- -----------
Net Gain (Loss) on Investments......................................... (3,797,516) 22,191,642
----------- -----------
Increase (Decrease) in Net Assets from Operations...................... $ (345,691) $67,457,670
----------- -----------
----------- -----------
</TABLE>
- ------------------------
See Notes to Financial Statements.
16
<PAGE>
=============================================================================
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
U.S. GOVERNMENT HIGH-YIELD BOND
SECURITIES SERIES SERIES
---------------------------- -----------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
---------------------------- -----------------------------
1996 1995 1996 1995
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.......................... $ 3,451,825 $ 3,990,174 $ 45,266,028 $ 13,558,330
Net realized gain (loss) on investments........ (531,212) 2,039,308 8,372,099 1,610,990
Net change in unrealized appreciation/
depreciation of investments.................. (3,266,304) 4,046,357 13,819,543 9,316,772
----------- ----------- ------------ ------------
Increase (decrease) in net assets from operations (345,691) 10,075,839 67,457,670 24,486,092
----------- ----------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:.........................
Class A...................................... (2,998,077) (3,598,301) (27,035,063) (10,106,642)
Class B...................................... -- -- (3,418,270) --
Class D...................................... (453,748) (391,873) (14,812,695) (3,451,688)
----------- ----------- ------------ ------------
Decrease in net assets from distributions...... (3,451,825) (3,990,174) (45,266,028) (13,558,330)
----------- ----------- ------------ ------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:*
Net proceeds from sale of shares:
Class A...................................... 5,275,155 3,825,303 236,713,393 105,673,183
Class B...................................... -- -- 144,036,057 --
Class D...................................... 2,920,596 2,880,957 173,325,163 73,974,274
Net asset value of shares issued in payment
of dividends:................................
Class A...................................... 1,522,409 1,701,734 13,828,199 4,574,683
Class B...................................... -- -- 1,378,143 --
Class D...................................... 329,724 277,256 9,145,648 1,987,440
Exchanged from associated Funds:
Class A...................................... 3,303,371 7,127,733 92,654,186 40,995,621
Class B...................................... -- -- 3,420,798 --
Class D...................................... 3,947,861 3,553,259 32,988,466 17,689,110
----------- ----------- ------------ ------------
Total.......................................... 17,299,116 19,366,242 707,490,053 244,894,311
----------- ----------- ------------ ------------
Cost of shares repurchased:
Class A...................................... (8,375,696) (11,627,920) (50,385,557) (11,822,223)
Class B...................................... -- -- (1,530,923) --
Class D...................................... (2,247,483) (1,974,060) (20,024,403) (5,891,925)
Exchanged into associated Funds:
Class A...................................... (6,587,848) (6,070,037) (78,716,704) (24,535,126)
Class B...................................... -- -- (2,104,964) --
Class D...................................... (3,360,753) (3,313,843) (27,399,898) (9,572,687)
----------- ----------- ------------ ------------
Total.......................................... (20,571,780) (22,985,860) (180,162,449) (51,821,961)
----------- ----------- ------------ ------------
Increase (decrease) in net assets from transactions
in shares of beneficial interest............. (3,272,664) (3,619,618) 527,327,604 193,072,350
----------- ----------- ------------ ------------
Increase (decrease) in net assets.............. (7,070,180) 2,466,047 549,519,246 204,000,112
NET ASSETS:
Beginning of year.............................. 63,242,188 60,776,141 272,282,196 68,282,084
----------- ----------- ------------ ------------
End of year.................................... $56,172,008 $63,242,188 $821,801,442 $272,282,196
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
</TABLE>
* The High-Yield Bond Series began offering Class B shares on April 22, 1996.
See Notes to Financial Statements.
17
<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 commence ment 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 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 eighteen months of
purchase. 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 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 on 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,
stocks, and warrants 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, 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 sub stantially 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 year ended December 31, 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
18
<PAGE>
=============================================================================
- -----------------------------------------------------------------------------
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 Series.
3. For the year ended December 31, 1996, the U.S. Government
Securities Series had purchases and sales of US Government obligations
of $92,940,428 and $95,414,903, respectively. The
High-Yield Bond Series had purchases and sales of portfolio securities,
excluding US Government obligations and short-term investments of
$1,055,652,426 and $552,842,346, respectively.
At December 31, 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 $ 763,000 $ 449,205
High-Yield Bond 29,618,783 7,743,570
4. At December 31, 1996, the Fund owned short-term investments which matured
in less than 7 days.
5. The Man ager 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, the fee 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:
DISTRIBUTOR DEALER
SERIES CONCESSIONS COMMISSIONS
- --------------------------------------------------------------
U.S. Government
Securities $ 9,862 $ 77,484
High-Yield Bond 709,561 5,466,375
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distri bu tion of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive a continu ing 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 organ ization for providing personal
services and/or the maintenance of shareholder accounts. The Distributor charges
such fees to the Fund pursuant to the Plan. For the year ended December 31,
1996, such fees paid by the U.S. Government Securities and High-Yield Bond
Series aggregated $107,621 and $664,216, or 0.22% and 0.24% per annum,
respectively, of 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
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
19
<PAGE>
=============================================================================
NOTES TO FINANCIAL STATEMENTS (continued)
- -----------------------------------------------------------------------------
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; how-ever, 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 year ended December 31, 1996, for the U.S. Government Securities
Series Class D shares, fees in-curred under the Plan amounted to $85,723, 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 $380,684 and $1,633,741,
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 year ended
December 31, 1996, such charges incurred were $3,630 for the U.S. Government
Securities Series and $88,949 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 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 year ended
December 31, 1996, was $368,282 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 year ended December 31, 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 $ 3,172 $12,113
High-Yield Bond 29,500 20,797
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, $110,713,
and High-Yield Bond Series, $899,087.
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 $15,000 were incurred by the Fund for legal services of Sullivan &
Cromwell, a member of which 1/2rm is a trustee of the Fund.
The Fund has a compensation agreement un der which trustees who receive
fees may elect to defer receiving such fees. Interest is accrued
on the deferred balances. The annual cost of such fees and interest is
included in trustees' fees and expenses, and the accumulated balances thereof at
December 31, 1996, of $41,631 in the U.S. Government Securities Series and
$27,704 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.
6. 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, 1996, net capital loss carryforwards for the U.S. Government
Securities Series and the High-Yield Bond Series amounted to $15,037,132 and
$3,292,211, respectively, which are available for offset against future taxable
net capital gains, expiring in various amounts through 2004 and 2002,
respectively.
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.
20
<PAGE>
=============================================================================
- -----------------------------------------------------------------------------
7. Transactions in Shares of Bene1/2cial Interest were as follows:
<TABLE>
U.S. GOVERNMENT HIGH-YIELD BOND
SECURITIES SERIES SERIES*
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sale of shares:
Class A............................... 781,071 563,170 33,317,666 15,520,966
Class B............................... -- -- 20,232,066 --
Class D............................... 428,534 420,595 24,388,635 10,865,793
Shares issued in payment of dividends:
Class A............................... 224,948 250,361 1,948,207 673,431
Class B............................... -- -- 192,948 --
Class D............................... 48,704 40,634 1,287,945 290,559
Exchanged from associated Funds:
Class A............................... 487,261 1,037,221 13,049,554 6,014,478
Class B............................... -- -- 480,781 --
Class D............................... 585,467 519,691 4,652,741 2,589,157
---------- ---------- ---------- ----------
Total................................... 2,555,985 2,831,672 99,550,543 35,954,384
---------- ---------- ---------- ----------
Shares repurchased:
Class A............................... (1,236,706) (1,727,109) (7,112,332) (1,735,886)
Class B............................... -- -- (214,512) --
Class D............................... (333,282) (288,754) (2,819,462) (859,011)
Exchanged into associated Funds:
Class A............................... (972,823) (883,771) (11,079,755) (3,600,993)
Class B............................... -- -- (297,396) --
Class D............................... (491,240) (485,587) (3,862,279) (1,392,998)
---------- ---------- ---------- ----------
Total................................... (3,034,051) (3,385,221) (25,385,736) (7,588,888)
---------- ---------- ---------- ----------
Increase (decrease) in shares........... (478,066) (553,549) 74,164,807 28,365,496
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
- ---------------
* The Series began offering Class B shares on April 22, 1996.
21
<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 each Class's beginning net asset value to the ending net asset value
so that they can understand what effect the individual items have on their
investments, assuming they were held throughout the period. Generally, the per
share amounts are derived by converting the actual dollar amounts incurred for
each item, as disclosed in the financial statements, to their equivalent per
share amounts.
The total returns based on net asset value measure each Class's 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>
U.S. GOVERNMENT SECURITIES SERIES
----------------------------------------------------------------------------------
CLASS A CLASS D
--------------------------------------------- ---------------------------------
YEAR ENDED 9/21/93*
YEAR ENDED DECEMBER 31, DECEMBER 31, TO
--------------------------------------------- ---------------------------------
1996 1995 1994 1993 1992 1996 1995 1994 12/31/93
----- ----- ----- ----- ----- ----- ----- ----- -------
PER SHARE OPERATING
PERFORMANCE:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $7.15 $6.47 $7.18 $7.19 $7.30 $7.16 $6.48 $7.20 $7.33
----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment income......... .41 .46 .44 .53 .51 .36 .40 .37 .09
Net realized and unrealized
investment gain (loss)..... (.44) .68 (.71) (.01) (.11) (.43) .68 (.72) (.13)
----- ----- ----- ----- ----- ----- ----- ----- -----
Increase (decrease) from
investment operations...... (.03) 1.14 (.27) .52 .40 (.07) 1.08 (.35) (.04)
Dividends paid or declared.... (.41) (.46) (.44) (.53) (.51) (.36) (.40) (.37) (.09)
----- ----- ----- ----- ----- ----- ----- ----- -----
Net increase (decrease) in
net asset value............ (.44) .68 (.71) (.01) (.11) (.43) .68 (.72) (.13)
----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period $6.71 $7.15 $6.47 $7.18 $7.19 $6.73 $7.16 $6.48 $7.20
----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL RETURN BASED
ON NET ASSET VALUE: (0.29)% 18.15% (3.88)% 7.46% 5.78% (0.92)% 17.10% (5.05)% (0.65)%
RATIOS/SUPPLEMENTAL
DATA:
Expenses to average net assets 1.14% 1.14% 1.10% 1.11% 1.05% 1.92% 2.01% 2.22% 2.09%+
Net investment income
to average net assets...... 6.05% 6.71% 6.49% 7.22% 7.17% 5.27% 5.84% 5.40% 5.28%+
Portfolio turnover............ 175.25% 213.06% 445.18% 170.35% 126.17% 175.25% 213.06% 445.18% 170.35%++
Net assets, end of period
(000s omitted)............. $46,889 $55,061 $54,714 $69,805 $55,732 $9,283 $8,181 $6,062 $2,317
</TABLE>
- -----------------
See page 23 for footnotes.
22
<PAGE>
=============================================================================
- -----------------------------------------------------------------------------
<TABLE>
HIGH-YIELD BOND SERIES
-------------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS D
4/22/96* YEAR ENDED 9/21/93*
YEAR ENDED DECEMBER 31, TO DECEMBER 31, TO
1996 1995 1994 1993 1992 12/31/96 1996 1995 1994 12/31/93
----- ----- ----- ----- ----- -------- ---- ---- ---- --------
PER SHARE OPERATING
PERFORMANCE:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $6.96 $6.35 $6.94 $6.42 $5.96 $7.06 $6.96 $6.35 $6.94 $6.74
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment income .69 .65 .65 .66 .69 .45 .64 .60 .57 .12
Net realized and unrealized
investment gain (loss) .29 .61 (.59) .52 .46 .20 .30 .61 (.59) .20
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Increase (decrease) from
investment operations .98 1.26 .06 1.18 1.15 .65 .94 1.21 (.02) .32
Dividends paid or declared (.69) (.65) (.65) (.66) (.69) (.45) (.64) (.60) (.57) (.12)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net increase (decrease) in
net asset value .29 .61 (.59) .52 .46 .20 .30 .61 (.59) .20
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period $7.25 $6.96 $6.35 $6.94 $6.42 $7.26 $7.26 $6.96 $6.35 $6.94
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL RETURN BASED
ON NET ASSET VALUE: 14.82% 20.72% 0.78% 19.19% 20.08% 9.11% 14.10% 19.67% (0.30)% 4.53%
RATIOS/SUPPLEMENTAL
DATA:
Expenses to average net assets 1.16% 1.09% 1.13% 1.20% 1.21% 1.90%+ 1.92% 1.91% 2.19% 2.04%+
Net investment income
to average net assets 9.80% 9.73% 9.73% 9.68% 10.82% 9.11%+ 9.02% 8.86% 8.68% 7.93%+
Portfolio turnover 119.33% 173.39% 184.75% 193.91% 145.66% 119.33%+++ 119.33% 173.39% 184.75% 193.91%++
Net assets, end of period
(000s omitted) $408,303 $182,129 $59,033 $61,333 $40,802 $147,970 $265,528 $90,153 $9,249 $2,375
</TABLE>
* Commencement of offering of shares.
+ Annualized.
++ For the year ended December 31, 1993.
+++ For the year ended December 31, 1996.
See Notes to Financial Statements.
23
<PAGE>
=============================================================================
REPORT OF INDEPENDENT AUDITORS
- -----------------------------------------------------------------------------
The Trustees and Shareholders,
Seligman High Income Fund Series:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of the U.S. Government Securities Series and the
High-Yield Bond Series of Seligman High Income Fund Series as of December 31,
1996, the related statements of operations for the year then ended and of
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the periods presented. These financial
statements and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 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 December 31, 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.
DELOITTE & TOUCHE LLP
New York, New York
January 31, 1997
24
<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
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
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
President and Managing Director,
J. & W. Seligman & Co. Incorporated
Chairman and President, Seligman Data Corp.
- ------------------
Member: 1 Executive Committee
2 Audit Committee
3 Trustee Nominating Committee
25
<PAGE>
=============================================================================
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
26
<PAGE>
SELIGMAN FINANCIAL SERVICES, INC.
an affiliate of
[GRAPHIC OMITTED]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
This report is intended only for the information of shareholders or those who
have received the offering prospectus covering shares of beneficial interest of
Seligman High Income Fund Series, which contains information about the sales
charges, management fees, and other costs. Please read the prospectus carefully
before investing or sending money.
TX2 12/96
- -----------------------------------------------------------------------------
12TH ANNUAL REPORT
SELIGMAN
HIGH INCOME
FUND SERIES
December 31, 1996
[GRAPHIC OMITTED]
- -----------------------------------------------------------------------------
A High Current Income Series
Established in 1985
