================================================================================
SELIGMAN
[GRAPHIC]
SELIGMAN
HIGH-YIELD
BOND SERIES
================================================================================
SEEKING MAXIMUM CURRENT INCOME BY INVESTING IN A
DIVERSIFIED PORTFOLIO OF HIGH-YIELDING CORPORATE BONDS
JUNE 30, 1997 o MID-YEAR REPORT
<PAGE>
================================================================================
OVER THE LONG TERM -- J. & W. SELIGMAN & CO. INCORPORATED
- --------------------------------------------------------------------------------
TIME IS THE TEST
In an industry that has changed dramatically in recent years, it's
comforting to know that stability, tradition, and consistent professional
service can still be found in an investment management firm.
J. & W. Seligman & Co. Incorporated has been providing financial services
for more than 130 years. From its beginning, Seligman has followed a long-term
approach to making money for its clients, by managing investment products and
services of the highest quality. Today, Seligman manages the Seligman Group of
Funds, which offers investors more than 50 investment options.
A PLACE IN HISTORY
Established in 1864, Seligman played a major role in the geographical
expansion and industrial development of the United States. The firm helped
finance the westward path of the railroads and the building of the Panama Canal.
In the late 1800s and early 1900s, the firm was instrumental in financing the
fledgling automobile and steel industries. Seligman also participated in the
original underwritings for some of the nation's most prominent companies,
including General Motors, Victor Talking Machine, United Artists Theater
Circuit, and Maytag. In 1929, Seligman introduced Tri-Continental Corporation --
which today is the nation's largest diversified closed-end investment company.
In 1930, Seligman began managing its first mutual fund, Broad Street Investing
Co., now known as Seligman Common Stock Fund.
[PHOTO OF THE FOLLOWING INDIVIDUALS OMITTED:]
JAMES, JESSE, AND JOSEPH SELIGMAN
SELIGMAN HIGH-YIELD BOND SERIES
Seligman High-Yield Bond Series was introduced on March 11, 1985, with the
objective of maximizing current income for its shareholders. Seligman High-Yield
Bond Series invests in high-yield, higher-risk, medium- and lower-quality
corporate bonds. Astute professional management has been key to the Fund's
success -- employing a highly disciplined approach to controlling the risks
inherent in investing in lower-rated corporate issues.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
To the Shareholders ...................................... 1
Interview with Your Portfolio Manager .................... 2
Performance Overview ..................................... 4
Portfolio Overview ....................................... 6
Portfolio of Investments ................................. 8
Statement of Assets and Liabilities ...................... 12
Statement of Operations .................................. 13
Statements of Changes in Net Assets ...................... 14
Notes to Financial Statements ............................ 15
Financial Highlights ..................................... 17
Report of Independent Auditors ........................... 19
Trustees and Executive Officers .......................... 20
Glossary of Financial Terms .............................. 21
"Management applies stringent investment disciplines in selecting appropriate
bonds for the portfolio. These disciplines focus on fundamental credit and
equity analysis, which is intended to protect the portfolio against potential
downgrades or defaults on bonds held."
--FRED E. BROWN,
FUND CHAIRMAN
1985-1988
"Your portfolio continues to maintain its conservative investment strategy by
seeking out and targeting high-yielding bonds of companies whose credit
characteristics place them primarily within the upper tier of high-yield
issues."
--WILLIAM C. MORRIS,
FUND CHAIRMAN
1989-PRESENT
<PAGE>
================================================================================
TO THE SHAREHOLDERS
Seligman High-Yield Bond Series has performed well thus far in 1997,
maintaining an attractive yield despite volatility in the high-yield market. The
Fund's total return of 5.40% based on the net asset value of Class A shares was
in line with the 5.66% total return of its peers, as measured by the Lipper
High-Yield Bond Fund Index. Additional information on the Fund's investment
results appears on page 4.
The high-yield asset class continues to become an important investment in the
fixed-income realm, attracting an ever-increasing number of institutional and
mutual fund investors. High-yield domestic bonds now represent approximately 23%
of the total US corporate bond market. The record number of offerings thus far
in 1997 and the continued strong demand for high-yield issues are evidence of
the growing prominence of the high-yield asset class. The increased demand has
provoked a greater number of "overbought" initial public offerings, meaning that
the high level of demand drove the prices of the new issues to a premium. In
this environment, the Fund was very selective in reviewing new offerings, and
remained focused on finding the best value in the marketplace. The Fund
continues to invest in domestic companies that we believe have good prospects.
The portfolio has been constructed to find the best call protection and the
highest yields available in securities issued by companies in attractive
business areas.
While the difference in yields between the high-yield market and Treasury
bonds has narrowed, we believe that the strong underlying fundamentals of the
high-yield marketplace, including the historically low default rates, make
investments in this area attractive. The long-term outlook for the US economy
and financial markets remains positive, which generally supports the continued
performance of the high-yield marketplace and individual issuers. Therefore, the
outlook for the marketplace as a whole and for your Fund is quite good.
We welcome Jeanne Cruz to the Seligman High-Yield Team. Ms. Cruz provides
specialized knowledge in consumer products, retailers, and restaurants. This
addition to the Fund's investment team should help it meet the challenges of
investing in the growing high-yield marketplace.
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 High-Yield Bond Series,
and look forward to serving your investment needs in the many years to come.
A discussion with your Portfolio Manager and information on the Fund's
performance and 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
----
1
<PAGE>
================================================================================
INTERVIEW WITH YOUR PORTFOLIO MANAGER, DANIEL J. CHARLESTON
Q. HOW DID SELIGMAN HIGH-YIELD BOND SERIES PERFORM IN THE LAST SIX MONTHS?
A. The Fund performed well in the first half of the year as it achieved an
attractive current yield while realizing modest price appreciation. The Fund
posted a total return of 5.40% based on the net asset value of Class A
shares, which was in line with the 5.84% total return of the Merrill Lynch
High-Yield Master Index, a benchmark for the high-yield marketplace, and the
5.66% total return of the Lipper High-Yield Bond Fund Index, a benchmark of
the Fund's peers.
Q. WHAT WAS YOUR INVESTMENT STRATEGY?
A. The investment strategy remains consistent. As always, we underweight
cyclical and zero coupon bonds, and avoid the emerging markets, distressed,
and defaulted issues. Although these types of bonds performed well in the
first half of the year, we believe that defensive, domestic, cash-paying
bonds return more with less volatility over the long term. As for individual
issues, we look for predictable cash flow, adequate ability to cover
interest payments, good call protection, and, of course, high relative
value.
Q. WHICH ECONOMIC AND MARKET FACTORS AFFECTED THE FUND'S PERFORMANCE IN THE
FIRST HALF OF 1997?
A. Overall, the Fund and the high-yield market performed well in the last six
months. The market recovered quickly from the Federal Reserve Board's
decision to increase the federal funds rate in March. In the second quarter,
it became clear that the economy was slowing and that chances of further Fed
intervention were remote. The healthy growth of the economy and the low
inflation environment supported cash flows and led to few defaults, which
aided the high-yield market's performance.
Q. WHAT CHANGES WERE MADE TO THE FUND'S PORTFOLIO?
A. As mentioned earlier, we have maintained our investment strategy. We
continue to build a solid core of bonds in the cable, gaming, and
telecommunications industries, and have rounded out the portfolio with a
variety of other non-cyclical industries. Portfolio turnover was relatively
modest in the first half of the year.
Q. HOW DO YOU VIEW THE CABLE TV SECTOR?
A. Our aim in cable is to invest in those companies with the best prospects for
growing cash flow. We buy both large multiple systems operators (MSOs) and
smaller cable companies, but all have solid growth prospects that translate
to improving credit ratings. Among the MSOs, we look for those with large
concentrations of customers in densely populated urban areas and upgraded
systems which provide customers with the highest level of cable television
service. These characteristics imply stable cash flow, and, when coupled
with attractive programming assets, MSOs have cash flow growth. Comcast and
Cablevision Systems are two of our favorites.
Demographics are the key to our selection of smaller cable companies.
Here again we look for large concentrations of customers and upgraded
systems. Although these operators service smaller areas, this is acceptable
if the household formation rate is strong (a growing number of people are
moving into the area). Two companies that fit these criteria are Intermedia
Capital Partners and Charter
- --------------------------------------------------------------------------------
A TEAM APPROACH
Seligman High-Yield Bond Series is managed by the Seligman High-Yield Team,
headed by Daniel J. Charleston. Mr. Charleston is assisted by seasoned research
professionals who are responsible for evaluating companies in specific industry
groups. Mr. Charleston draws on his team to select companies whose bonds have
the potential for high yields at acceptable levels of investment risk consistent
with the Fund's objective.
[GRAPHIC OMITTED - PHOTOGRAPH OF THE INDIVIDUALS LISTED BELOW:]
SELIGMAN HIGH-YIELD TEAM: (FROM LEFT) TIMOTHY FINN,
BRIAN HESSEL, JEANNE CRUZ, (SEATED) DANIEL J. CHARLESTON
(PORTFOLIO MANAGER)
- --------------------------------------------------------------------------------
- ----
2
<PAGE>
================================================================================
INTERVIEW WITH YOUR PORTFOLIO MANAGER, DANIEL J. CHARLESTON
Communications Southeast, both of which are located in Sun Belt states and
have been adding subscribers much more quickly than the average.
Recently, Microsoft invested $1 billion in Comcast, which we view as a
ringing endorsement for broadband telecommunications. The battle with the
phone companies will come eventually, but first the phone companies must
spend billions of dollars installing sophisticated new systems to compete
with the cable industry's systems.
Q. WHAT IS HAPPENING IN GAMING?
A. You have to look at each gaming market separately -- Las Vegas, Atlantic
City, and the smaller jurisdictions. The Las Vegas market is further
segmented by local and tourist casinos. Both are expanding rapidly. Las
Vegas is now the nation's largest destination resort city in America, which
is good for the tourist casinos, and one of the fastest growing cities in
the US, which is good for the local casinos. On the tourist side, we like
the Aztar-owned Tropicana which, although it is not the most glamorous
casino, has a terrific location on the same intersection as the newly-opened
New York-New York and several other popular casinos. As for local casinos,
the Fund's Coast Hotels & Casinos holdings have performed well, having
strong market share in the local segment of the Las Vegas market.
In Atlantic City, the market has firmed up considerably. The competitive
"bus wars" appear to have ended and the casinos are once again reporting
solid cash flow margins. Aztar has benefited from the improved conditions in
Atlantic City, and we have had excellent results in the Fund's Trump
holdings.
Within emerging jurisdictions, we have some exposure to Casino Magic and
Casino America in Bossier City, Louisiana. We visited Bossier City in May,
and both companies appear to be well positioned in that jurisdiction.
Admittedly, these represent some of the more speculative investments in the
portfolio.
We remain positive on gaming in general and continue to monitor the
results closely.
Q. WHO DO YOU LIKE IN TELECOMMUNICATIONS?
A. In the telecommunications sector, we like to invest in companies that sell
directly to small- and medium-sized business customers, own their own
facilities, and offer their customers superior service and
attractively-priced products. Companies in the competitive local exchange
carrier (CLEC) business, such as Brooks Fiber Properties, Intermedia
Communications of Florida, and NEXTLINK Communications, offer their business
customers a bundled package of local, long distance, data, and Internet
services at prices 10% to 15% below those of the regional Bell operating
companies (RBOCs). And because these companies have installed
state-of-the-art fiber networks and switches, the customers are getting good
value for their dollars.
In a matter of only a few years, some CLECs have captured as much as 20%
market share from the RBOCs in certain markets. With a $100 billion local
market opportunity to go after, we believe the CLECs will be successful in
taking market share away from the RBOCs in the same way that the likes of
MCI, Sprint, and WorldCom took more than 45% of AT&T's long distance market
share in the last 10 years.
Q. WHICH OTHER INDUSTRIES AFFECTED THE FUND'S PERFORMANCE?
A. We increased our paging exposure in the second quarter, which has worked out
nicely. Here, Mobile Telecommunication Technologies has performed
particularly well. We also like outdoor advertising companies such as
Outdoor Systems and Adams Outdoor Advertising, which face increasing demand
as the billboard supply is limited. We have also seen good results in record
storage companies. This is a rapidly consolidating industry with Pierce
Leahy and Iron Mountain leading the way. Finally, the Fund owns the issues
of the leaders in the rapidly consolidating radio broadcasting industry,
including SFX Broadcasting, Chancellor Radio, Evergreen Media, and Capstar
Broadcasting.
Q. WHAT IS THE OUTLOOK?
A. We will remain fully invested and will maintain the core holdings in cable,
gaming, and telecommunications. We expect issuers to stay healthy with the
strong economy. On the demand side, strong inflows into high-yield mutual
funds, the increasing popularity of collateralized bond obligations -- a
relatively new financial instrument -- and increased pension fund
allocations to high-yield bode well for the asset class.
----
3
<PAGE>
<TABLE>
<CAPTION>
==========================================================================================================================
PERFORMANCE OVERVIEW
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS*
FOR PERIODS ENDED JUNE 30, 1997
AVERAGE ANNUAL
----------------------------------------------------------------
CLASS B CLASS D
SINCE SINCE
SIX ONE FIVE 10 INCEPTION INCEPTION
MONTHS YEAR YEARS YEARS 4/22/96 9/21/93
---------- ---------- ------- ------- ------- ------------
CLASS A
<S> <C> <C> <C> <C> <C> <C>
With Sales Charge 0.42% 8.46% 12.30% 11.03% n/a n/a
Without Sales Charge 5.40 13.84 13.41 11.57 n/a n/a
CLASS B
With CDSL+ (0.15) 7.97 n/a n/a 8.68% n/a
Without CDSL 4.85 12.97 n/a n/a 11.98 n/a
CLASS D
With 1% CDSL 3.85 11.97 n/a n/a n/a n/a
Without CDSL 4.85 12.97 n/a n/a n/a 11.19%
LIPPER HIGH-YIELD BOND FUND INDEX** 5.66 14.24 11.14 9.77 12.87++ 9.65+++
MERRILL LYNCH HIGH-YIELD MASTER INDEX** 5.84 14.30 11.60 11.41 13.41++ 10.24+++
</TABLE>
NET ASSET VALUE
JUNE 30, 1997 DECEMBER 31, 1996 JUNE 30, 1996
------------- -------------------- -------------
CLASS A $7.29 $7.25 $7.05
CLASS B 7.29 7.26 7.05
CLASS D 7.29 7.26 7.05
DIVIDEND AND YIELD INFORMATION
FOR THE SIX MONTHS ENDED JUNE 30, 1997
DIVIDENDS YIELD#
------------ ------
CLASS A $0.3388 8.41%
CLASS B 0.3108 8.07
CLASS D 0.3108 8.07
The securities in which the Fund 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 Fund.
- -------------------
* Return figures reflect any change in price per share and assume the
investment of dividend 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.
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 the principal value of an
investment will fluctuate. Shares, if redeemed, may be worth more or less
than their original cost. Past performance is not indicative of future
investment results.
** The Lipper High-Yield Bond Fund Index and the Merrill Lynch High-Yield
Master Index are unmanaged indices that assume investment of dividends, and
do not reflect fees or sales charges. Investors cannot invest directly in
an index.
+ The CDSL is 5% for periods of one year or less, and 4% since inception.
++ From April 30, 1996.
+++ 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.
- ----
4
<PAGE>
================================================================================
PERFORMANCE OVERVIEW
[THE FOLLOWING TABLES REPRESENT GRAPHS IN THE PRINTED PIECE]
- --------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000
INVESTMENT IN CLASS A SHARES
JUNE 30, 1987, TO JUNE 30, 1997
SELIGMAN HIGH-YIELD BOND FUND, INC. - CLASS A
DATE AMOUNT
---- ------
6/30/87 $ 9,525* - INITIAL AMOUNT INVESTED
9/30/87 9,248
12/31/87 9,637
3/31/88 10,099
6/30/88 10,335
9/30/88 10,481
12/31/88 10,734
3/31/89 10,938
6/30/89 11,357
9/30/89 11,363
12/31/89 11,146
3/31/90 10,731
6/30/90 11,100
9/30/90 10,626
12/31/90 10,335
3/31/91 11,598
6/30/91 12,234
9/30/91 13,019
12/31/91 13,508
3/31/92 14,744
6/30/92 15,171
9/30/92 16,002
12/31/92 16,219
3/31/93 17,355
6/30/93 18,086
9/30/93 18,405
12/31/93 19,332
3/31/94 19,215
6/30/94 19,197
9/30/94 19,283
12/31/94 19,483
3/31/95 20,496
6/30/95 21,765
9/30/95 22,770
12/31/95 23,519
3/31/96 24,460
6/30/96 25,004
9/30/96 26,098
12/31/96 27,005
3/31/97 26,800
6/30/97 $28,464 - TOTAL VALUE AT JUNE 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000
INVESTMENT IN CLASS B SHARES
APRIL 22, 1996+, TO JUNE 30, 1997
SELIGMAN HIGH-YIELD BOND FUND, INC. - CLASS B
DATE AMOUNT
---- ------
04/22/96 $10,000 - INITIAL AMOUNT INVESTED
06/30/96 10,127
09/30/96 10,565
12/31/96 10,911
03/31/97 10,792
06/30/97 $11,440** - TOTAL VALUE AT JUNE 30, 1997
- --------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000
INVESTMENT IN CLASS D SHARES
SEPTEMBER 21, 1993+, TO JUNE 30, 1997
SELIGMAN HIGH-YIELD BOND FUND, INC. - CLASS D
DATE AMOUNT
---- ------
09/21/93 $10,000 - INITIAL AMOUNT INVESTED
09/30/93 10,030
12/31/93 10,453
03/31/94 10,381
06/30/94 10,342
09/30/94 10,360
12/31/94 10,422
03/31/95 10,937
06/30/95 11,588
09/30/95 12,100
12/31/95 12,472
03/31/96 12,965
06/30/96 13,209
09/30/96 13,780
12/31/96 14,232
03/31/97 14,078
06/30/97 $14,922 - TOTAL VALUE AT JUNE 30, 1997
- --------------------------------------------------------------------------------
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.
The securities in which the Fund 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 Fund.
- -------------------
* Net of the 4.75% maximum initial sales charge.
** Excludes the effect of the 4% CDSL.
+ Inception date.
----
5
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================
PORTFOLIO OVERVIEW
DIVERSIFICATION OF ASSETS
JUNE 30, 1997
PERCENT OF NET ASSETS
---------------------
JUNE 30, DEC. 31,
ISSUES COST VALUE 1997 1996
------ -------------- -------------- ----- ----
<S> <C> <C> <C> <C> <C>
SHORT-TERM HOLDINGS AND OTHER
ASSETS LESS LIABILITIES ............ 1 $ 58,307,072 $ 58,307,072 4.5 4.4
--- -------------- -------------- ----- -----
CORPORATE BONDS, CONVERTIBLE ISSUES, AND
PREFERRED STOCKS:
ADVERTISING ....................... 2 11,621,438 11,930,000 0.9 --
AEROSPACE ......................... -- -- -- -- 0.8
AUTOMOTIVE AND RELATED ............ 1 6,124,375 6,255,000 0.5 --
BROADCASTING ...................... 9 87,265,703 93,203,250 7.2 5.2
CABLE SYSTEMS ..................... 14 177,689,104 171,582,250 13.2 15.9
CELLULAR .......................... 5 50,699,995 52,652,500 4.0 4.1
CHEMICALS ......................... 2 22,595,000 23,406,250 1.8 2.0
COMPUTER AND RELATED SERVICES ..... 2 41,355,786 43,450,000 3.3 3.0
CONSUMER PRODUCTS ................. 13 81,084,413 83,154,094 6.4 4.1
CONTAINERS ........................ 2 17,840,637 18,543,750 1.4 2.1
ENERGY ............................ 4 20,843,000 21,439,050 1.6 0.9
ENVIRONMENTAL SERVICES ............ -- -- -- -- 1.1
EQUIPMENT ......................... 2 14,294,744 14,442,225 1.1 --
FINANCIAL SERVICES ................ 2 20,070,979 20,950,000 1.6 1.1
FOOD .............................. 4 33,697,138 34,245,775 2.6 3.3
FUNERAL ........................... 1 6,673,288 7,117,500 0.6 0.9
GAMING/HOTEL ...................... 9 140,057,542 147,775,450 11.4 12.7
HEALTH CARE/MEDICAL PRODUCTS ...... 4 38,039,723 40,372,500 3.1 4.1
INDUSTRIAL ........................ -- -- -- -- 0.6
LEISURE ........................... 5 33,813,833 35,006,350 2.7 1.3
MANUFACTURING ..................... 3 12,422,463 13,301,300 1.0 2.1
METALS ............................ 2 28,218,596 28,173,000 2.2 2.5
PAGING ............................ 3 51,084,432 50,431,250 3.9 3.0
PAPER AND PACKAGING ............... 3 32,841,405 33,738,305 2.6 2.5
PUBLISHING ........................ 2 21,965,962 23,657,500 1.8 1.5
RECORD STORAGE .................... 2 19,367,687 20,115,000 1.6 1.4
RESTAURANTS ....................... 1 5,012,375 5,025,000 0.4 --
RETAILING ......................... 2 19,522,875 20,135,625 1.6 1.1
SUPERMARKETS ...................... 2 30,320,575 31,602,500 2.4 4.5
TECHNOLOGY ........................ 3 18,071,144 18,545,156 1.4 --
TELECOMMUNICATIONS ................ 18 127,327,006 135,036,305 10.3 10.8
TEXTILES .......................... 1 5,031,719 5,075,000 0.4 --
THEATERS .......................... 1 14,974,840 15,900,000 1.2 0.9
UTILITIES ......................... 1 15,698,543 17,512,500 1.3 2.1
--- -------------- -------------- ----- -----
125 1,205,626,320 1,243,774,385 95.5 95.6
--- -------------- -------------- ----- -----
NET ASSETS........................... 126 $1,263,933,392 $1,302,081,457 100.0 100.0
=== ============== ============== ===== =====
</TABLE>
LARGEST PORTFOLIO HOLDINGS
AT JUNE 30, 1997
SECURITY VALUE
- ---------- -----------
Trump Atlantic City Funding 11 1/4%, 5/1/2006 .................. $24,500,000
IXCCommunications 12 1/2%, 10/1/2005 ........................... 22,800,000
Coast Hotels & Casinos 13%, 12/15/2002 ......................... 22,450,000
Casino America 12 1/2%, 8/1/2003 ............................... 22,154,000
Cablevision Systems 10 1/2%, 5/15/2016 ......................... 22,100,000
Intermedia Capital Partners IV 11 1/4%, 8/1/2006 ............... 21,900,000
Unisys 12%, 4/15/2003 .......................................... 21,750,000
Unisys 11 3/4%, 10/15/2004 ..................................... 21,700,000
Mobile Telecommunication Technologies 13 1/2%, 12/15/2002 ...... 21,200,000
Trump Hotels & Casino Resorts Funding 15 1/2%, 6/15/2005 ....... 20,970,000
- ----
6
<PAGE>
================================================================================
PORTFOLIO OVERVIEW
LARGEST PORTFOLIO CHANGES
DURING PAST SIX MONTHS
<TABLE>
<CAPTION>
SHARES OR PRINCIPAL AMOUNT
------------------------------
HOLDINGS
ADDITIONS INCREASE 6/30/97
- ------------ ----------- ------------
PREFERRED STOCKS:
<S> <C> <C>
Sinclair Capital 11 5/8% ........................... 100,000 shs. 100,000 shs.
CORPORATE BONDS:
Affinity Group 11%, 4/1/2007 ....................... $11,500,000 $11,500,000
Casino America 12 1/2%, 8/1/2003 ................... 13,700,000 21,200,000
Central Tractor 10 5/8%, 4/1/2007 .................. 10,000,000 10,000,000
Crown Paper 11%, 9/1/2005 .......................... 15,000,000 15,000,000
Heartland Wireless Communications 14%, 10/15/2004 .. 11,400,000 20,000,000
Paging Network 10%, 10/15/2008 ..................... 17,500,000 17,500,000
TCI Satellite Entertainment 10 7/8%, 2/15/2007 ..... 20,000,000 20,000,000
Unisys 11 3/4%, 10/15/2004 ......................... 10,000,000 20,000,000
Williams Scotsman 9 7/8%, 6/1/2007 ................. 12,500,000 12,500,000
HOLDINGS
REDUCTIONS DECREASE 6/30/97
- ----------- ---------- --------
CORPORATE BONDS:
Allbritton Communications 11 1/2%, 8/15/2004 ....... $ 5,000,000 --
Allied Waste North America 10 1/4%, 12/1/2006 ...... 8,500,000 --
Comcast UKCable Partners 0% (11.20%), 11/15/2007 ... 10,000,000 --
Grand Union 12%, 9/1/2004 .......................... 12,500,000 --
IMO Industries 11 3/4%, 5/1/2006 ................... 5,050,000 --
Omnipoint 11 5/8%, 8/15/2006 ....................... 10,000,000 --
Rogers Communications 10 7/8%, 4/15/2004 ........... 7,500,000 --
Silgan 11 3/4%, 6/15/2002 .......................... 6,500,000 --
Stuart Entertainment 12 1/2%, 11/15/2004 ........... 6,500,000 --
UNC 11%, 6/1/2006 .................................. 6,000,000 --
</TABLE>
Largest portfolio changes from the previous period to the current period are
based on cost of purchases and proceeds from sales of securities.
[THE FOLLOWING TABLE REPRESENTS A GRAPHIC BAR CHART.]
LARGEST INDUSTRIES
AT JUNE 30, 1997
- --------------------------------------------------------------------------------
PERCENT OF
INDUSTRY VALUE NET ASSETS
-------- ------ ----------
CABLE SYSTEMS $171,582,250 13.2%
GAMING/HOTEL $147,775,450 11.4%
TELECOMMUNICATIONS $135,036,305 10.3%
BROADCASTING $ 93,203,250 7.2%
CONSUMER PRODUCTS $ 83,154,094 6.4%
- --------------------------------------------------------------------------------
----
7
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
June 30, 1997
PRINCIPAL
AMOUNT
OR WARRANTS VALUE
----------- -----
CORPORATE BONDS 90.9%
ADVERTISING 0.9%
ADAMS OUTDOOR ADVERTISING
10 3/4%, DUE 3/15/2006 $ 7,500,000 $ 8,025,000
OUTDOOR SYSTEMS 8 7/8%,
DUE 6/15/2007* 4,000,000 3,905,000
--------------
11,930,000
--------------
AUTOMOTIVE AND RELATED 0.5%
PETRO STOPPING CENTERS 10 1/2%,
DUE 2/1/2007* 6,000,000 6,255,000
--------------
BROADCASTING 3.8%
ALLBRITTON COMMUNICATIONS
9 3/4%+ DUE 11/30/2007 7,500,000 7,350,000
CAPSTAR BROADCASTING 0%
(12 3/4%+), DUE 2/1/2009* 15,000,000 9,675,000
PAXSON COMMUNICATIONS
11 5/8%, DUE 10/1/2002 15,000,000 16,312,500
SFX BROADCASTING
10 3/4%, DUE 5/15/2006 15,000,000 16,200,000
--------------
49,537,500
--------------
CABLE SYSTEMS 13.2%
AMERICAN TELECASTING
(Warrants expiring 8/15/2000) 5,000 wts. 5,000
CABLEVISION SYSTEMS
10 1/2%, DUE 5/15/2016 $ 20,000,000 22,100,000
CHARTER COMMUNICATIONS
SOUTHEAST 11 1/4%,
DUE 3/15/2006 15,000,000 16,237,500
CHARTER COMMUNICATIONS
SOUTHEAST HOLDINGS
0% (14%+), DUE 3/15/2007 20,000,000 13,600,000
COMCAST 10 5/8%,
DUE 7/15/2012 16,500,000 19,635,000
ECHOSTAR 12 1/2%,
DUE 7/1/2002* 8,550,000 8,507,250
HEARTLAND WIRELESS
COMMUNICATIONS
14%, DUE 10/15/2004 20,000,000 8,100,000
INTERMEDIA CAPITAL PARTNERS IV
11 1/4%, DUE 8/1/2006 20,000,000 21,900,000
NTL 0% (11 1/2%+),
DUE 2/1/2006 10,000,000 6,975,000
NTL 10%, DUE 2/15/2007* 10,000,000 10,225,000
ROGERS CABLESYSTEMS 11%,
DUE 12/1/2015 16,000,000 17,520,000
TCI SATELLITE ENTERTAINMENT
10 7/8%, DUE 2/15/2007* 20,000,000 20,200,000
WIRELESS ONE 13%,
DUE 10/15/2003 10,500,000 6,562,500
WIRELESS ONE (Warrants
expiring 10/15/2000) 15,000 wts. 15,000
--------------
171,582,250
--------------
CELLULAR 4.0%
CENTENNIAL CELLULAR
10 1/8%, DUE 5/15/2005 $ 9,500,000 9,903,750
COMMNET CELLULAR
11 1/4%, DUE 7/1/2005 6,500,000 7,523,750
DOBSON COMMUNICATIONS
11 3/4%, DUE 4/15/2007 7,500,000 7,312,500
PRICELLULAR WIRELESS
0% (12 1/4%+), DUE 10/1/2003 10,000,000 9,450,000
PRICELLULAR WIRELESS
10 3/4%, DUE 11/1/2004 17,500,000 18,462,500
--------------
52,652,500
--------------
CHEMICALS 1.8%
NL INDUSTRIES 11 3/4%,
DUE 10/15/2003 9,000,000 9,843,750
TEXAS PETROCHEMICALS
11 1/8%, DUE 7/1/2006 12,500,000 13,562,500
--------------
23,406,250
--------------
COMPUTER AND RELATED
SERVICES 3.3%
UNISYS 12%,
DUE 4/15/2003 20,000,000 21,750,000
UNISYS 11 3/4%,
DUE 10/15/2004 20,000,000 21,700,000
--------------
43,450,000
--------------
CONSUMER PRODUCTS 6.4%
AMERICAN PAD & PAPER 13%,
DUE 11/15/2005 5,000,000 5,825,000
ANCHOR ADVANCED PRODUCTS
11 3/4%, DUE 4/1/2004* 8,000,000 8,520,000
BERRY PLASTICS 12 1/4%,
DUE 4/15/2004 500,000 553,750
FRENCH FRAGRANCES 10 3/8%,
DUE 5/15/2007* 6,500,000 6,727,500
LEINER HEALTH PRODUCTS
9 5/8%, DUE 7/10/2007* 1,275,000 1,295,719
LESLIE'S POOLMART 10 3/8%,
DUE 7/15/2004* 3,500,000 3,587,500
NORTH ATLANTIC TRADING 11%,
DUE 6/15/2004* 5,000,000 5,087,500
- ----------
See footnotes on page 11.
- ----
8
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
June 30, 1997
PRINCIPAL
AMOUNT VALUE
----------- -----
CONSUMER PRODUCTS (continued)
RENAISSANCE COSMETICS 11 3/4%,
DUE 2/15/2004 $ 6,250,000 $ 6,593,750
RIDDELL SPORTS 10 1/2%,
DUE 7/15/2007* 5,350,000 5,497,125
RYDER TRS 10%,
DUE 12/1/2006 10,000,000 10,350,000
SPINNAKER INDUSTRIES
10 3/4%, DUE 10/15/2006 12,500,000 12,656,250
SYRATECH 11%,
DUE 4/15/2007 9,000,000 9,618,750
WILLIAM CARTER 10 3/8%,
DUE 12/1/2006 6,500,000 6,841,250
--------------
83,154,094
--------------
CONTAINERS 1.4%
PLASTIC CONTAINERS 10%,
DUE 12/15/2006* 10,000,000 10,500,000
US CAN 10 1/8%,
DUE 10/15/2006 7,500,000 8,043,750
--------------
18,543,750
--------------
ENERGY 1.6%
ABRAXAS PETROLEUM 11 1/2%,
DUE 11/1/2004* 8,000,000 8,680,000
ICO 10 3/8%,
DUE 6/1/2007* 5,000,000 5,162,500
PACALTA RESOURCES 10 3/4%,
DUE 6/15/2004* 5,000,000 5,087,500
TRANSAMERICAN ENERGY
11 1/2%, DUE 6/15/2002* 2,580,000 2,509,050
--------------
21,439,050
--------------
EQUIPMENT 1.1%
EV INTERNATIONAL 11%,
DUE 3/15/2007* 1,765,000 1,879,725
WILLIAMS SCOTSMAN 9 7/8%,
DUE 6/1/2007* 12,500,000 12,562,500
--------------
14,442,225
--------------
FINANCIAL SERVICES 1.6%
AMRESCO 10%,
DUE 3/15/2004 10,000,000 10,200,000
DOLLAR FINANCIAL GROUP
10 7/8%, DUE 11/15/2006 10,000,000 10,750,000
--------------
20,950,000
--------------
FOOD 2.4%
AMERIKING 10 3/4%,
DUE 12/1/2006 10,000,000 10,475,000
GORGES/QUIK-TO-FIX FOODS
11 1/2%, DUE 12/1/2006 10,000,000 10,350,000
INTERNATIONAL HOME FOODS
10 3/8%, DUE 11/1/2006 10,000,000 10,350,000
--------------
31,175,000
--------------
FUNERAL 0.6%
PRIME SUCCESSION ACQUISITION
10 3/4%, DUE 8/15/2004 6,500,000 7,117,500
--------------
GAMING/HOTEL 11.4%
ALLIANCE GAMING 12 7/8%,
DUE 6/30/2003 6,500,000 7,377,500
AZTAR 13 3/4%,
DUE 10/1/2004 15,000,000 17,175,000
CASINO AMERICA 12 1/2%,
DUE 8/1/2003 21,200,000 22,154,000
CASINO MAGIC OF LOUISIANA
13%, DUE 8/15/2003* 7,000,000 5,950,000
COAST HOTELS & CASINOS
13%, DUE 12/15/2002 20,000,000 22,450,000
SHOWBOAT 13%,
DUE 8/1/2009 8,660,000 10,023,950
SHOWBOAT MARINA CASINO
PARTNERSHIP 13 1/2%,
DUE 3/15/2003 15,000,000 17,175,000
TRUMP ATLANTIC CITY
FUNDING 11 1/4%,
DUE 5/1/2006 25,000,000 24,500,000
TRUMP HOTELS & CASINO RESORTS
FUNDING 15 1/2%,
DUE 6/15/2005 18,000,000 20,970,000
--------------
147,775,450
--------------
HEALTH CARE/MEDICAL
PRODUCTS 3.1%
DADE INTERNATIONAL 11 1/8%,
DUE 5/1/2006 10,000,000 11,225,000
GRAPHIC CONTROLS 12%,
DUE 9/15/2005 5,500,000 6,160,000
IMED 9 3/4%,
DUE 12/1/2006* 12,500,000 12,750,000
PARACELSUS HEALTHCARE
10%, DUE 8/15/2006 10,000,000 10,237,500
--------------
40,372,500
--------------
LEISURE 2.7%
AFFINITY GROUP HOLDING
11%, DUE 4/1/2007* 11,500,000 12,103,750
AMF GROUP 10 7/8%,
DUE 3/15/2006 3,560,000 3,862,600
AMF GROUP 0% (12 1/4%+),
DUE 3/15/2006 10,000,000 7,162,500
- ----------
See footnotes on page 11.
----
9
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
June 30, 1997
PRINCIPAL
AMOUNT VALUE
----------- -----
LEISURE (continued)
PREMIER PARKS 12%,
DUE 8/15/2003 $ 6,000,000 $ 6,690,000
PREMIER PARKS 9 3/4%,
DUE 1/15/2007 5,000,000 5,187,500
--------------
35,006,350
--------------
MANUFACTURING 1.0%
BLUE BIRD BODY 10 3/4%,
DUE 11/15/2006 3,050,000 3,255,875
BPC HOLDING 12 1/2%,
DUE 6/15/2006 6,500,000 7,117,500
INTERNATIONAL KNIFE & SAW
11 3/8%, DUE 11/15/2006 2,730,000 2,927,925
--------------
13,301,300
--------------
METALS 2.2%
RENCO METALS 11 1/2%,
DUE 7/1/2003 15,000,000 16,125,000
ROYAL OAK MINES 11%,
DUE 8/15/2006 12,550,000 12,048,000
--------------
28,173,000
--------------
PAGING 3.9%
MOBILE TELECOMMUNICATION
TECHNOLOGIES 13 1/2%,
DUE 12/15/2002 20,000,000 21,200,000
PAGING NETWORK 10%,
DUE 10/15/2008 17,500,000 16,887,500
PRONET 11 7/8%,
DUE 6/15/2005 12,500,000 12,343,750
--------------
50,431,250
--------------
PAPER AND PACKAGING 2.0%
CROWN PAPER 11%,
DUE 9/1/2005 15,000,000 15,075,000
S.D. WARREN 12%,
DUE 12/15/2004 10,000,000 11,175,000
--------------
26,250,000
--------------
PUBLISHING 1.8%
PETERSEN PUBLISHING
11 1/8%, DUE 11/15/2006 15,000,000 16,800,000
VON HOFFMANN PRESS 10 3/8%,
DUE 5/15/2007* 6,500,000 6,857,500
--------------
23,657,500
--------------
RECORD STORAGE 1.6%
IRON MOUNTAIN 10 1/8%,
DUE 10/1/2006 3,000,000 3,210,000
PIERCE LEAHY 11 1/8%,
DUE 7/15/2006 15,540,000 16,905,000
--------------
20,115,000
--------------
RESTAURANTS 0.4%
AFC ENTERPRISES 10 1/4%,
DUE 5/15/2007* 5,000,000 5,025,000
--------------
RETAILING 1.6%
CENTRAL TRACTOR 10 5/8%,
DUE 4/1/2007 10,000,000 10,400,000
COLE NATIONAL GROUP
9 7/8%, DUE 12/31/2006 9,250,000 9,735,625
--------------
20,135,625
--------------
SUPERMARKETS 2.4%
JITNEY-JUNGLE STORES OF AMERICA
12%, DUE 3/1/2006 16,000,000 17,900,000
PATHMARK STORES 11 5/8%,
DUE 6/15/2002 13,500,000 13,702,500
--------------
31,602,500
--------------
TECHNOLOGY 1.4%
THERMA-WAVE 10 5/8%,
DUE 5/15/2004* 7,000,000 7,455,000
VIASYSTEMS 9 3/4%,
DUE 6/1/2007* 6,500,000 6,630,000
WAVETEK 10 1/8%,
DUE 6/15/2007* 4,325,000 4,460,156
--------------
18,545,156
--------------
TELECOMMUNICATIONS 9.9%
BROOKS FIBER PROPERTIES
0% (10 7/8%+), DUE 3/1/2006 11,000,000 7,548,750
BROOKS FIBER PROPERTIES
10%, DUE 6/1/2007* 2,600,000 2,645,500
FONOROLA 12 1/2%,
DUE 8/15/2002 7,500,000 8,362,500
GLOBALSTAR 11 1/4%,
DUE 6/15/2004* 2,570,000 2,422,225
ICG HOLDINGS 0% (11 5/8%+),
DUE 3/15/2007* 11,500,000 6,785,000
INTERMEDIA COMMUNICATIONS
OF FLORIDA 13 1/2%,
DUE 6/1/2005 10,500,000 12,862,500
- ----------
See footnotes on page 11.
- ----
10
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
June 30, 1997
PRINCIPAL
AMOUNT
OR WARRANTS VALUE
----------- -----
TELECOMMUNICATIONS (continued)
INTERMEDIA COMMUNICATIONS OF
FLORIDA 0% (12 1/2%)+,
DUE 5/15/2006 $ 10,000,000 $ 6,925,000
INTERMEDIA COMMUNICATIONS OF
FLORIDA (WARRANTS EXPIRING
6/1/2000)* 4,000 wts. 150,000
ITC DELTACOM, INC. 11%,
DUE 6/1/2007* $ 5,000,000 5,106,250
IXC COMMUNICATIONS
12 1/2%, DUE 10/1/2005 20,000,000 22,800,000
NEXTLINK COMMUNICATIONS
12 1/2%, DUE 4/15/2006 15,000,000 16,125,000
POWERTEL 11 1/8%
DUE 6/1/2007* 3,445,000 3,479,450
QWEST COMMUNICATIONS
INTERNATIONAL 10 7/8%,
DUE 4/1/2007* 5,000,000 5,475,000
SPRINT SPECTRUM 11%,
DUE 8/15/2006 15,000,000 16,650,000
TALTON HOLDINGS 11%,
DUE 6/30/2007* 5,000,000 5,050,000
VERIO 13 1/2%, DUE 6/15/2004* 7,000,000 7,087,500
--------------
129,474,675
--------------
TEXTILES 0.4%
ANVIL KNITWEAR 10 7/8%,
DUE 3/15/2007* 5,000,000 5,075,000
--------------
THEATERS 1.2%
PLITT THEATERS 10 7/8%,
DUE 6/15/2004 15,000,000 15,900,000
--------------
UTILITIES 1.3%
MIDLAND COGENERATION VENTURE
11 3/4%, DUE 7/23/2005 15,000,000 17,512,500
--------------
TOTAL CORPORATE BONDS
(COST $1,149,789,731) 1,183,987,925
--------------
SHARES
OR WARRANTS VALUE
----------- -----
PREFERRED STOCKS 4.2%
BROADCASTING 3.0%
CAPSTAR BROADCASTING
PARTNERSHIP 12%* 60,000 shs. $ 6,075,000
CHANCELLOR RADIO 12%* 100,000 11,425,000
SFX BROADCASTING 12 5/8% 100,000 10,825,000
SINCLAIR CAPITAL 11 5/8%* 100,000 10,600,000
--------------
38,925,000
--------------
FOOD 0.2%
AMERIKING 13% 108,700 3,070,775
--------------
PAPER AND PACKAGING 0.6%
S.D. WARREN 14% 173,140 7,488,305
--------------
TELECOMMUNICATIONS 0.4%
NEXTLINK COMMUNICATIONS 14% 103,538 5,461,630
NEXTLINK COMMUNICATIONS* 100,000 wts. 100,000
--------------
5,561,630
--------------
TOTAL PREFERRED STOCKS
(COST $51,536,589) 55,045,710
--------------
CONVERTIBLE PREFERRED
STOCKS 0.4%
(Cost $4,300,000)
BROADCASTING 0.4%
EVERGREEN MEDIA 6%* 86,000 shs. 4,740,750
--------------
SHORT-TERM HOLDINGS 1.9%
(COST $24,000,000) 24,000,000
--------------
TOTAL INVESTMENTS 97.4%
(COST $1,229,626,320) 1,267,774,385
OTHER ASSETS LESS
LIABILITIES 2.6% 34,307,072
--------------
NET ASSETS 100.0% $1,302,081,457
==============
- -------------
* Rule 144A security.
+ 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.
----
11
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997
ASSETS:
<S> <C> <C>
INVESTMENTS, AT VALUE:
Long-term Holdings (Cost $1,205,626,320)........... $1,243,774,385
Short-term Holdings (Cost $24,000,000)............. 24,000,000 $1,267,774,385
--------------
Cash .................................................................. 6,348,601
Receivable for interest and dividends ................................. 26,354,902
Receivable for Shares of Beneficial Interest sold ..................... 14,841,799
Receivable for securities sold ........................................ 8,006,059
Expenses prepaid to shareholder service agent ......................... 177,040
Other ................................................................. 410,127
--------------
TOTAL ASSETS .......................................................... 1,323,912,913
--------------
LIABILITIES:
Payable for securities purchased ...................................... 13,464,914
Dividends Payable ..................................................... 4,071,271
Payable for Shares of Beneficial Interest repurchased.................. 2,352,756
Accrued expenses, taxes, and other .................................... 1,942,515
--------------
TOTAL LIABILITIES ..................................................... 21,831,456
--------------
NET ASSETS ............................................................ $1,302,081,457
==============
COMPOSITION OF NET ASSETS:
Shares of Beneficial Interest, at par (unlimited shares
authorized; $.001 par value; 178,592,147 shares outstanding):
Class A ............................................................. $ 77,057
Class B ............................................................. 47,620
Class D ............................................................. 53,915
Additional paid-in capital ............................................ 1,275,205,310
Undistributed net investment income ................................... 71,094
Accumulated net realized loss ......................................... (11,521,604)
Net unrealized appreciation of investments ............................ 38,148,065
--------------
NET ASSETS ............................................................ $1,302,081,457
==============
NET ASSET VALUE PER SHARE:
CLASS A ($561,700,100 / 77,057,219 SHARES) ............................ $7.29
=====
CLASS B ($347,208,004 / 47,619,628 SHARES) ............................ $7.29
=====
CLASS D ($393,173,353 / 53,915,300 SHARES) ............................ $7.29
=====
</TABLE>
- ----------
See Notes to Financial Statements.
- ----
12
<PAGE>
<TABLE>
<CAPTION>
========================================================================================
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997
<S> <C> <C>
INVESTMENT INCOME:
Interest .............................................. $53,820,313
Dividends ............................................. 1,366,010
----------
TOTAL INVESTMENT INCOME ............................................ $55,186,323
EXPENSES:
Distribution and service fees ......................... 3,417,342
Management fee ........................................ 3,347,410
Shareholder account services .......................... 981,171
Registration .......................................... 160,129
Custody and related services .......................... 90,000
Auditing and legal fees ............................... 38,268
Shareholder reports and communications ................ 29,645
Trustees' fees and expenses ........................... 9,243
Miscellaneous ......................................... 21,514
----------
TOTAL EXPENSES ..................................................... 8,094,722
----------
NET INVESTMENT INCOME .............................................. 47,091,601
NET REALIZED AND UNREALIZED
GAIN (LOSS)ON INVESTMENTS:
Net realized loss on investments ...................... (8,154,393)
Net change in unrealized appreciation of investments .. 16,272,852
----------
NET GAIN ON INVESTMENTS ............................................ 8,118,459
-----------
INCREASE IN NET ASSETS FROM OPERATIONS ............................. $55,210,060
===========
- ----------
See Notes to Financial Statements.
----
13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
OPERATIONS:
<S> <C> <C>
Net investment income .......................................................... $ 47,091,601 $ 45,266,028
Net realized gain (loss) on investments ........................................ (8,154,393) 8,372,099
Net change in unrealized appreciation of investments ........................... 16,272,852 13,819,543
------------- ------------
INCREASE IN NET ASSETS FROM OPERATIONS ......................................... 55,210,060 67,457,670
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ..................................................................... (22,501,467) (27,035,063)
Class B ..................................................................... (10,359,301) (3,418,270)
Class D ..................................................................... (14,159,739) (14,812,695)
------------- ------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS ...................................... (47,020,507) (45,266,028)
------------- ------------
</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 ..................................... 23,709,862 33,317,666 171,255,409 236,713,393
Class B ..................................... 27,206,283 20,232,066 196,596,476 144,036,057
Class D ..................................... 19,143,565 24,388,635 138,520,632 173,325,163
Shares issued in payment of dividends:
Class A ..................................... 1,660,864 1,948,207 11,996,186 13,828,199
Class B ..................................... 647,100 192,948 4,674,051 1,378,143
Class D ..................................... 1,208,293 1,287,945 8,727,915 9,145,648
Exchanged from associated Funds:
Class A ..................................... 6,892,048 13,049,554 49,484,791 92,654,186
Class B ..................................... 1,789,195 480,781 12,842,539 3,420,798
Class D ..................................... 3,386,155 4,652,741 24,420,582 32,988,466
---------- ---------- ------------- ------------
Total .......................................... 85,643,365 99,550,543 618,518,581 707,490,053
---------- ---------- ------------- ------------
Cost of shares repurchased:
CLASS A ..................................... (6,142,920) (7,112,332) (44,262,217) (50,385,557)
Class B ..................................... (875,395) (214,512) (6,303,642) (1,530,923)
Class D ..................................... (3,689,660) (2,819,462) (26,590,382) (20,024,403)
Exchanged into associated Funds:
Class A ..................................... (5,355,037) (11,079,755) (38,507,176) (78,716,704)
Class B ..................................... (1,541,442) (297,396) (11,108,774) (2,104,964)
Class D ..................................... (2,729,690) (3,862,279) (19,655,928) (27,399,898)
---------- ---------- ------------- ------------
Total .......................................... (20,334,144) (25,385,736) (146,428,119) (180,162,449)
---------- ---------- ------------- ------------
INCREASE IN NET ASSETS FROM
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST ....................................... 65,309,221 74,164,807 472,090,462 527,327,604
========== ========== ------------- ------------
INCREASE IN NET ASSETS ......................................................... 480,280,015 549,519,246
NET ASSETS:
Beginning of period ............................................................ 821,801,442 272,282,196
-------------- ------------
END OF PERIOD .................................................................. $1,302,081,457 $821,801,442
============== ============
</TABLE>
- ----------
* The Fund began offering Class B shares on April 22, 1996.
See Notes to Financial Statements.
- ----
14
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
1. MULTIPLE CLASSES OF SHARES -- Seligman High-Yield Bond 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
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 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 bonds, stocks and convertible securities
are valued at current market values or, in their absence, at fair values
determined in accordance with procedures approved by the Board of Directors.
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
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. 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.
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 portfolio
securities, excluding US Government obligations and short-term investments, for
the six months ended June 30, 1997, amounted to $790,212,743 and $343,320,381,
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 $55,298,150 and $17,150,085, respectively.
4. SHORT-TERM INVESTMENTS-- At June 30, 1997, the Fund owned short-term
investments which matured in less than seven days.
5. 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
----
15
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
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 0.65% per annum of the first $1
billion of the Fund's average daily net assets, 0.55% per annum of the Fund's
average daily net assets in excess of $1 billion. The management fee reflected
in the Statement of Operations represents 0.64% 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 $506,183 from sales of Class A shares, after commissions of
$3,937,383 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 $579,851, or 0.24% 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
shareholder accounts of up to 0.25% on an annual basis of the average daily net
assets of the Class B and Class D shares for which the organizations are
responsible; and, for Class D shares only, fees for providing other distribution
assistance of up to 0.75% on an annual basis of such average daily net assets.
Such fees are paid monthly by the Fund to the Distributor pursuant to the Plan.
With respect to Class B shares, a distribution fee of 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 $1,197,739 and $1,639,752, 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 $85,325.
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 Bshares 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 $523,171.
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 $18,430 from the sales of Fund
shares. Seligman Services, Inc. also received distribution and service fees of
$16,358, pursuant to the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged the Fund at cost $981,171 for shareholder 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 trustees' fees and
expenses and the accumulated balance thereof at June 30, 1997, of $30,461 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.
6. LOSS CARRYFORWARD -- At December 31, 1996, the Fund had a net loss
carryforward for federal income tax purposes of $3,292,211, which is available
for offset against future taxable net capital gains, expiring in various amounts
through 2002. Accordingly, no capital gain distributions are expected to be paid
to shareholders until net capital gains have been realized in excess of the
available capital loss carryforwards.
7. COMMITTED LINE OF CREDIT -- Effective July 23, 1997, the Fund entered into
a $110 million committed line of credit facility with a group of banks.
Borrowings pursuant to the credit facility will be subject to interest at a rate
equal to the federal funds rate plus 0.50% per annum. The Fund will incur a
commitment fee of 0.10% per annum on the unused portion of the credit facility.
The credit facility may be drawn upon only for temporary purposes and is subject
to certain other customary restrictions. The credit facility commitment will
expire one year from the date of the agreement but is renewable with the consent
of the participating banks.
- ----
16
<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
---------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ...... $7.25 $6.96 $6.35 $6.94 $6.42 $5.96
----- ----- ----- ----- ----- -----
Net investment income ..................... .34 .69 .65 .65 .66 .69
Net realized and unrealized investment
gain (loss) .............................. .04 .29 .61 (.59) .52 .46
----- ----- ----- ----- ----- -----
INCREASE FROM INVESTMENT OPERATIONS ....... .38 .98 1.26 .06 1.18 1.15
Dividends paid or declared ................ (.34) (.69) (.65) (.65) (.66) (.69)
----- ----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE .04 .29 .61 (.59) .52 .46
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ............ $7.29 $7.25 $6.96 $6.35 $6.94 $6.42
===== ===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: 5.40% 14.82% 20.72% 0.78% 19.19% 20.08%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ............ 1.14%+ 1.16% 1.09% 1.13% 1.20% 1.21%
Net investment income to average net assets 9.48%+ 9.80% 9.73% 9.73% 9.68% 10.82%
Portfolio turnover ........................ 34.44% 119.33% 173.39% 184.75% 193.91% 145.66%
NET ASSETS, END OF PERIOD
(000s omitted) ............................ $561,700 $408,303 $182,129 $59,033 $61,333 $40,802
- ----------
See footnotes on page 18.
----
17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================
FINANCIAL HIGHLIGHTS
CLASS B CLASS D
---------------------- --------------------------------------------------------
SIX SIX
MONTHS 4/22/96* MONTHS YEAR ENDED DECEMBER 31, 9/21/93*
ENDED TO ENDED --------------------------- TO
6/30/97 12/31/96 6/30/97 1996 1995 1994 12/31/93
-------- --------- -------- ---- ---- ----- --------
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD .......... $ 7.26 $ 7.06 $ 7.26 $ 6.96 $ 6.35 $ 6.94 $ 6.74
---------- ---------- -------- ---------- --------- ---------- ---------
Net investment income ........ .31 .45 .31 .64 .60 .57 .12
Net realized and unrealized
investment gain (loss) ....... .03 .20 .03 .30 .61 (.59) .20
---------- ---------- -------- ---------- --------- ---------- ---------
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS ........ .34 .65 .34 .94 1.21 (.02) .32
Dividends paid or declared ... (.31) (.45) (.31) (.64) (.60) (.57) (.12)
---------- ---------- -------- ---------- --------- ---------- ---------
NET INCREASE (DECREASE) IN
NET ASSET VALUE .............. .03 .20 .03 .30 .61 (.59) .20
---------- ---------- -------- ---------- --------- ---------- ---------
NET ASSET VALUE, END OF PERIOD $ 7.29 $ 7.26 $ 7.29 $ 7.26 $ 6.96 $ 6.35 $ 6.94
========== ========== ======== ========== ========= ========== =========
TOTAL RETURN BASED ON NET
ASSET VALUE: 4.85% 9.11% 4.85% 14.10% 19.67% (0.30)% 4.53%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets 1.90%+ 1.90%+ 1.90%+ 1.92% 1.91% 2.19% 2.04%+
Net investment income to
average net assets ........... 8.72%+ 9.11%+ 8.72%+ 9.02% 8.86% 8.68% 7.93%+
Portfolio turnover ........... 34.44% 119.33%++ 34.44% 119.33% 173.39% 184.75% 193.91%+++
NET ASSETS, END OF PERIOD
(000s omitted) ............... $ 347,208 $ 147,970 $ 393,173 $ 265,528 $ 90,153 $ 9,249 $ 2,375
</TABLE>
- ----------
* Commencement of offering of shares.
+ Annualized.
++ For the year ended December 31, 1996.
+++ For the year ended December 31, 1993.
See Notes to Financial Statements.
- ----
18
<PAGE>
================================================================================
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
THE TRUSTEES AND SHAREHOLDERS,
SELIGMAN HIGH-YIELD BOND SERIES:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman High-Yield Bond 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 High-Yield
Bond 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.
/s/ Deloitte & Toche LLP
- ------------------------
DELOITTE & TOUCHE LLP
New York, New York
August 1, 1997
- --------------------------------------------------------------------------------
----
19
<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
- --------------------------------------------------------------------------------
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
William C. Morris
CHAIRMAN
Brian T. Zino
PRESIDENT
Daniel J. Charleston
VICE PRESIDENT
Lawrence P. Vogel
VICE PRESIDENT
Thomas G. Rose
TREASURER
Frank J. Nasta
SECRETARY
- --------------------------------------------------------------------------------
- ----
20
<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.
----
21
<PAGE>
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
SELIGMAN FINANCIAL SERVICES, INC.
an affiliate of
[GRAPHIC LOGO 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-YIELD BOND SERIES, WHICH CONTAINS
INFORMATION ABOUT THE SALES CHARGES, MANAGEMENT FEE, AND
OTHER COSTS. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING OR SENDING MONEY.
TXHY3 6/97 Printed on Recycled Paper
