File No. 2-93076
811-4103
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 24 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 26 [X]
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SELIGMAN HIGH INCOME FUND SERIES
(Exact name of registrant as specified in charter)
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100 PARK AVENUE, NEW YORK, NEW YORK 10017
(Address of principal executive offices)
Registrant's Telephone Number: 212-850-1864 or Toll Free: 800-221-2450
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THOMAS G. ROSE, Treasurer, 100 Park Avenue, New York, New York 10017
(Name and address of agent for service)
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It is proposed that this filing will become effective (check appropriate box):
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2(a)(1) and a Rule 24f-2 Notice for
Registrant's most recent fiscal year was filed with the Commission on March 27,
1998.
<PAGE>
File No. 2-93076
811-4103
SELIGMAN HIGH INCOME FUND SERIES
FORM N-1A CROSS REFERENCE SHEET
POST-EFFECTIVE AMENDMENT NO. 24
Pursuant to Rule 481 (a)
<TABLE>
<CAPTION>
Item in Part A of Form N-1A Location in Prospectus
- --------------------------- ----------------------
<S> <C>
1. Cover Page Cover Page
2. Synopsis Summary of Series' Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; Organization And Capitalization
5. Management of the Fund Management Services
5a. Manager's Discussion of Fund Performance Management Services
6. Capital Stock and Other Securities Cover Page; Organization and Capitalization
7. Purchase of Securities Being Offered Alternative Distribution System; Purchase of Shares; Administration,
Shareholder Services and Distribution Plan
8. Redemption or Repurchase Telephone Transactions; Redemption of Shares; Exchange Privilege
9. Pending Legal Proceedings Not Applicable
Item in Part B of Form N-1A Location in Statement of Additional Information*
- --------------------------- ------------------------------------------------
10. Cover Page Cover Page
11. Table of Contents Table Of Contents
12. General Information and History General Information; Appendix
13. Investment Objectives and Policies Investment Objectives, Policies And Risks; Investment Limitations
14. Management of the Registrant Management And Expenses
15. Control Persons and Principal Trustees and Officers; General Information
Holders of Services
16. Investment Advisory and Other Services Management and Expenses; Distribution Services
17. Brokerage Allocation Portfolio Transactions; Administration, Shareholder Services and Distribution
Plans
18. Capital Stock and Other Securities General Information
19. Purchase, Redemption and Pricing Purchase and Redemption of Series' Shares; Valuation
of Securities being Offered
20. Tax Status Federal Income Taxes (Prospectus)
21. Underwriters Distribution Services
22. Calculation of Performance Data Performance
23. Financial Statements Financial Statements
</TABLE>
* Each of Registrant's two Series has a separate Prospectus; Registrant's
Statement of Additional Information applies to both Series.
<PAGE>
SELIGMAN
--------
U.S. GOVERNMENT
SECURITIES SERIES
[GRAPHIC]
PROSPECTUS
----------
MAY 1, 1998
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
<PAGE>
TABLE OF CONTENTS
Summary of Series Expenses 2
Financial Highlights 3
Alternative Distribution System 5
Investment Objective, Policies and Risks 7
Management Services 9
Purchase of Shares 11
Telephone Transactions 17
Redemption of Shares 18
Administration, Shareholder Services
and Distribution Plan 21
Exchange Privilege 22
Further Information about Transactions
in the Series 24
Dividends and Capital Gain Distributions 25
Federal Income Taxes 26
Shareholder Information 27
Advertising the Series' Performance 29
Organization and Capitalization 29
TIMES CHANGE ... VALUES ENDURE
<PAGE>
SELIGMAN U.S. GOVERNMENT SECURITIES SERIES
a series of
Seligman High Income Fund Series
100 Park Avenue o New York, NY 10017 o New York City Telephone: (212) 850-1864
Toll-Free Telephone: (800) 221-2450
For Retirement Plan Information--Toll-Free Telephone: (800) 445-1777
May 1, 1998
Seligman High Income Fund Series (the "Fund") is a diversified, open-end
management investment company that offers two series which each seek to earn
high current income by investing in debt securities but have different
investment objectives and investment policies. Investment advisory and
management services are provided to the Fund by J. & W. Seligman & Co.
Incorporated (the "Manager"); the Fund's distributor is Seligman Financial
Services, Inc., an affiliate of the Manager.
The investment objective of the SELIGMAN U.S. GOVERNMENT SECURITIES SERIES
(the "Series") is to produce high current income. The Series seeks to achieve
its objective by investing primarily in debt obligations issued or guaranteed by
the United States Government, its agencies or instrumentalities. While certain
debt obligations in the Series are issued or guaranteed by the United States
Government or by United States Government-related instrumentalities, such
investments are still subject to the risk of market value fluctuations. For a
description of the Series' investment objective and policies, including the risk
factors associated with an investment in the Series, see "Investment Objective,
Policies and Risks." There can be no assurance that the Series' investment
objective will be achieved.
The Series offers three classes of shares. Class A shares are sold subject
to an initial sales load of up to 4.75% and an annual service fee currently
charged at a rate of up to .25% of the average daily net asset value of the
Class A shares. Class A shares purchased in an amount of $1,000,000 or more are
sold without an initial sales load 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 load but are subject to a CDSL,
if applicable, of 5% on redemptions in the first year after purchase of such
shares, declining to 1% in the sixth year and 0% thereafter, an annual
distribution fee of .75% and an annual service fee of up to .25% of the average
daily net asset value of the Class B shares. Class B shares will convert
automatically 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 load but are subject to a CDSL of 1% imposed on redemptions within
one year of purchase, an annual distribution fee of up to .75% and an annual
service fee of up to .25% of the average daily net asset value of the Class D
shares. Any CDSL payable upon redemption of shares will be assessed on the
lesser of the current net asset value or the original purchase price of the
shares redeemed. No CDSL will be imposed on shares acquired through the
reinvestment of dividends or gain distributions received from any class of
shares. See "Alternative Distribution System." Shares of the Series may be
purchased through any authorized investment dealer.
This Prospectus sets forth concisely the information a prospective investor
should know about the Series before investing. Please read it carefully before
you invest and keep it for future reference. Additional information about the
Series, including a Statement of Additional Information, has been filed with the
Securities and Exchange Commission. The Statement of Additional Information is
available upon request and without charge by calling or writing the Fund at the
telephone numbers or the address set forth above. The Statement of Additional
Information is dated the same date as this Prospectus and is incorporated herein
by reference in its entirety.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
SUMMARY OF SERIES EXPENSES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
--------- ----------- -----------
(Initial Sales (Deferred Sales (Deferred Sales
Load Alternative) Load Alternative) Load Alternative)
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price)............................................. 4.75% None None
Sales Load on Reinvested Dividends................................ None None None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, whichever is lower)..... None; 5% in 1st year 1% in 1st year
except 1% 4% in 2nd year None thereafter
in first 18 months 3% in 3rd and
if initial sales 4th years
load was waived 2% in 5th year
in full due to 1% in 6th year
size of purchase None thereafter
Redemption Fees................................................... None None None
Exchange Fees..................................................... None None None
ANNUAL SERIES OPERATING EXPENSES FOR 1997 CLASS A CLASS B CLASS D
--------- ----------- -----------
(as a percentage of average net assets)
Management Fees................................................... .50% .50% .50%
12b-1 Fees........................................................ .22% 1.00%* 1.00%*
Other Expenses.................................................... .51% .51% .51%
----- ----- -----
Total Series Operating Expenses................................... 1.23% 2.01% 2.01%
===== ===== =====
</TABLE>
The purpose of this table is to assist investors in understanding the
various costs and expenses which shareholders of the Series bear directly or
indirectly. The sales load on Class A shares is a one-time charge paid at the
time of purchase of shares. Reductions in initial sales loads are available in
certain circumstances. The CDSLs on Class B and Class D shares are one-time
charges paid only if shares are redeemed within six years or one year of
purchase, respectively. Class A shares are not subject to an initial sales load
for purchases of $1,000,000 or more; however, such shares are subject to a
contingent deferred sales load, a one-time charge, only if the shares are
redeemed within eighteen months of purchase. For more information concerning
reductions in sales loads and for a more complete description of the various
costs and expenses, see "Purchase of Shares", "Redemption of Shares" and
"Management Services" herein. The Series' Administration, Shareholder Services
and Distribution Plan to which the caption "12b-1 Fees" relates, is discussed
under "Administration, Shareholder Services and Distribution Plan" herein.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period....................... Class A $59 $85 $112 $189
Class B+ 70 93 128 214
Class D 30 63 108 234
An investor would pay the following expenses on the same
investment, assuming no redemption........................... Class A $59 $85 $112 $189
Class B+ 20 63 108 214
Class D 20 63 108 234
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN AND THE 5%
ANNUAL RETURN USED IN THIS EXAMPLE IS A HYPOTHETICAL RATE.
- ----------
*Includes an annual distribution fee of .75% and an annual service fee of
.25%. Pursuant to the Rules of the National Association of Securities
Dealers, Inc. the aggregate deferred sales loads and annual distribution fees
on Class B and Class D shares of the Series may not exceed 6.25% of total
gross sales, subject to certain exclusions. The maximum sales charge rule is
applied separately for each class. The 6.25% limitation is imposed on the
Series rather than on a per shareholder basis. Therefore, a long-term Class B
or Class D shareholder of the Series may pay more in total sales loads
(including distribution fees) than the economic equivalent of 6.25% of such
shareholder's investment in such shares.
+The expenses shown for the ten-year period reflect the conversion of Class B
shares to Class A shares after 8 years.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights for the Series' Class A, Class B and Class D
shares for the periods presented below have been audited by Deloitte & Touche
LLP, independent auditors. This information, which is derived from the financial
and accounting records of the Series should be read in conjunction with the
financial statements and notes contained in the Fund's 1997 Annual Report, which
is incorporated by reference in the Fund's Statement of Additional Information,
copies of which may be obtained free of charge from the Fund at the telephone
numbers or address provided on the cover page of this Prospectus.
"Per share operating performance" data is designed to allow investors to
trace the operating performance, on a per share basis, from the beginning net
asset value to the ending net asset value so that they can understand what
effect the individual items have on their investment, assuming it was 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 amount.
"Total return based on net asset value" measures the Class's performance
assuming investors purchased shares of the Series at the 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 per share on the
last day of the period. The total return computations do not reflect any sales
loads investors may incur in purchasing or selling shares of the Series. Total
returns for periods of less than one year are not annualized.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning
of year .................. $ 6.71 $ 7.15 $ 6.47 $ 7.18 $ 7.19 $ 7.30 $ 6.89 $ 7.04 $ 7.06 $ 7.12
------- ------- ------- ------- ------- ------- ------- -------- ------- -------
Net investment income ...... .38 .41 .46 .44 .53 .51 .51 .59 .65 .60
Net realized and unrealized
investment gain (loss) ... .17 (.44) .68 (.71) (.01) (.11) .41 (.15) (.02) (.06)
------- ------- ------- ------- ------- ------- ------- -------- ------- -------
Increase (decrease) from
investment operations .... .55 (.03) 1.14 (.27) .52 .40 .92 .44 .63 .54
Dividends paid or declared . (.38) (.41) (.46) (.44) (.53) (.51) (.51) (.59) (.65) (.60)
------- ------- ------- ------- ------- ------- ------- -------- ------- -------
Net increase (decrease) in
net asset value .......... .17 (.44) .68 (.71) (.01) (.11) .41 (.15) (.02) (.06)
------- ------- ------- ------- ------- ------- ------- -------- ------- -------
Net asset value, end of year $ 6.88 $ 6.71 $ 7.15 $ 6.47 $ 7.18 $ 7.19 $ 7.30 $ 6.89 $ 7.04 $ 7.06
======= ======= ======= ======= ======= ======= ======= ======= ======== =======
TOTAL RETURN BASED ON
NET ASSET VALUE: ......... 8.53% (0.29)% 18.15% (3.88)% 7.46% 5.78% 14.05% 6.37% 9.25% 7.84%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets 1.23% 1.14% 1.14% 1.10% 1.11% 1.05% 1.10% 1.06% 1.09% 1.09%
Net investment income to
average net assets ....... 5.68% 6.05% 6.71% 6.49% 7.22% 7.17% 7.39% 8.66% 9.16% 8.33%
Portfolio turnover ......... 193.90% 175.25% 213.06% 445.18% 170.35% 126.17% 95.46% 306.05% 226.25% 263.15%
Net assets, end of year
(000s omitted) ........... $45,426 $46,889 $55,061 $54,714 $69,805 $55,732 $64,440 $71,735 $83,850 $106,720
</TABLE>
3
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B CLASS D
--------- -------------------------------------------- ---------
1/1/97* YEAR ENDED 9/21/93*
TO DECEMBER 31, TO
-------- -------------------------------------------- --------
12/31/97 1997 1996 1995 1994 12/31/93
-------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning
of period $ 6.73 $ 6.73 $ 7.16 $ 6.48 $ 7.20 $ 7.33
------- ------- ------- ------- ------- -------
Net investment income .33 .33 .36 .40 .37 .09
Net realized and unrealized
investment gain (loss) .16 .16 (.43) .68 (.72) (.13)
------- ------- ------- ------- ------- -------
Increase (decrease) from
investment operations .49 .49 (.07) 1.08 (.35) (.04)
Dividends paid or declared (.33) (.33) (.36) (.40) (.37) (.09)
------- ------- ------- ------- ------- -------
Net increase (decrease) in net
asset value .16 .16 (.43) .68 (.72) (.13)
------- ------- ------- ------- ------- -------
Net asset value, end of period $ 6.89 $ 6.89 $ 6.73 $ 7.16 $ 6.48 $ 7.20
======= ======= ======= ======= ======= =======
TOTAL RETURN BASED ON NET ASSET
VALUE: 7.32% 7.53% (0.92)% 17.10% (5.05)% (0.65)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets 2.01% 2.01% 1.92% 2.01% 2.22% 2.09%+
Net investment income to average
net assets 4.90% 4.90% 5.27% 5.84% 5.40% 5.28%+
Portfolio turnover 193.90% 193.90% 175.25% 213.06% 445.18% 170.35%++
Net assets, end of period
(000s omitted) $3,219 $12,350 $9,283 $8,181 $6,062 $2,317
</TABLE>
- ----------
*Commencement of offering of shares.
+Annualized.
++For the year ended December 31, 1993.
4
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEM
The Series offers three classes of shares. Class A shares are sold to
investors who have concluded that they would prefer to pay an initial sales load
and have the benefit of lower continuing fees. Class B shares are sold to
investors choosing to pay no initial sales load, a higher distribution fee and a
CDSL with respect to redemptions within six years of purchase and who desire
shares to convert automatically to Class A shares after eight years. Class D
shares are sold to investors choosing to pay no initial sales load, a higher
distribution fee and, with respect to redemptions within one year of purchase, a
CDSL. The Alternative Distribution System allows investors to choose the method
of purchasing shares that is most beneficial in light of the amount of the
purchase, the length of time the shares are expected to be held and other
relevant circumstances. Investors should determine whether under their
particular circumstances it is more advantageous to incur an initial sales load
and be subject to lower ongoing fees, as discussed below, or to have the entire
initial purchase price invested in the Series with the investment thereafter
being subject to higher ongoing fees and either a CDSL for a six-year period
with automatic conversion to Class A shares after eight years or a CDSL for a
one-year period with no automatic conversion to Class A shares.
Investors who expect to maintain their investment for an extended period of
time might choose to purchase Class A shares because over time the accumulated
continuing distribution fees of Class B and Class D shares may exceed the
initial sales load and lower ongoing fee of Class A shares. This consideration
must be weighed against the fact that the amount invested in the Series will be
reduced by the initial sales load on Class A shares deducted at the time of
purchase. Furthermore, the higher distribution fees on Class B and Class D
shares will be offset to the extent any return is realized on the additional
funds initially invested therein that would have been equal to the amount of the
initial sales load on Class A shares.
Investors who qualify for reduced initial sales loads, as described under
"Purchase of Shares" below, might also choose to purchase Class A shares because
the initial sales load deducted at the time of purchase would be less. However,
investors should consider the effect of the 1% CDSL imposed on shares on which
the initial sales load was waived because the amount of Class A shares purchased
was $1,000,000 or more. In addition, Class B shares will be converted into Class
A shares after a period of approximately eight years, and thereafter investors
will be subject to lower ongoing fees. Shares purchased through reinvestment of
dividends and distributions on Class B shares also will convert automatically to
Class A shares along with the underlying shares on which they were earned.
Alternatively, some investors might choose to have all of their funds
invested initially in Class B or Class D shares, although remaining subject to a
higher continuing distribution fee and, for a six-year or one-year period, a
CDSL as described below. For example, an investor who does not qualify for
reduced sales loads would have to hold Class A shares for more than 6.33 years
for the Class B or Class D distribution fee to exceed the initial sales load
plus the distribution fee on Class A shares. This example does not take into
account the time value of money, which further reduces the impact of the Class B
and Class D shares' 1% distribution fee, other expenses charged to each class,
fluctuations in net asset value or the effect of the return on the investment
over this period of time.
Investors should bear in mind that the total asset based sales charges
(i.e., the higher continuing distribution fee plus the CDSL) on Class B shares
that are redeemed may exceed the total asset based sales charges that would be
payable on the same amount of Class A or Class D shares, particularly if the
Class B shares are redeemed shortly after purchase or if the investor qualifies
for a reduced sales load on the Class A shares.
Investors should understand that the purpose and function of the initial
sales load (and deferred sales load, when applicable) with respect to Class A
shares is the same as those of the deferred sales loads and higher distribution
fees with respect to Class B and Class D shares in that the sales loads and
distribution fees applicable to each class provide for the financing of the
distribution of the shares of the Series.
5
<PAGE>
Class B and Class D shares are subject to the same ongoing distribution
fees but Class D shares are subject to a CDSL for a shorter period of time (one
year as opposed to six years) than Class B shares. However, unlike Class D
shares, Class B shares automatically convert to Class A shares, which are
subject to lower ongoing fees.
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, potentially, certain
other class expenses and has exclusive voting rights with respect to any matter
to which a separate vote of any class is required by the Investment Company Act
of 1940, as amended (the "1940 Act"), or Massachusetts law. The net income
attributable to each class and dividends payable on the shares of each class
will be reduced by the amount of distribution and other expenses of each class.
Class B and Class D shares bear higher distribution fees, which will cause the
Class B and Class D shares to pay lower dividends than the Class A shares. The
three classes also have separate exchange privileges.
The Trustees of the Fund believe that no conflict of interest currently
exists between the Class A, Class B and Class D shares of the Series. On an
ongoing basis, the Trustees, in the exercise of their fiduciary duties under the
1940 Act and Massachusetts law, will seek to ensure that no such conflict
arises. For this purpose, the Trustees will monitor the Series for the existence
of any material conflict among the classes and will take such action as is
reasonably necessary to eliminate any such conflicts that may develop.
DIFFERENCES BETWEEN CLASSES. The primary differences between Class A, Class
B and Class D shares are their sales load structures and ongoing expenses as set
forth below. The primary differences between Class B and Class D shares are that
Class D shares are subject to a shorter CDSL period and a lower CDSL rate but
Class B shares automatically convert to Class A shares after eight years,
resulting in a reduction in ongoing fees. Investors in Class B shares should
take into account whether they intend to redeem their shares within the CDSL
period and, if not, whether they intend to remain invested until the end of the
conversion period and thereby take advantage of the reduction in ongoing fees
resulting from the conversion to Class A shares. Other investors, however, may
elect to purchase Class D shares if they determine that it is advantageous to
have all their assets invested initially and they are uncertain as to the length
of time they intend to hold their assets in the Series or another mutual fund in
the Seligman Group for which the exchange privilege is available. Although Class
D shareholders are subject to a shorter CDSL period at a lower rate, they forgo
the Class B automatic conversion feature, making their investment subject to
higher distribution fees for an indefinite period of time. Each class has
advantages and disadvantages for different investors, and investors should
choose the class that best suits their circumstances and their objectives.
ANNUAL 12B-1 FEES
INITIAL (AS A % OF AVERAGE
SALES LOAD DAILY NET ASSETS) OTHER INFORMATION
---------- --------------- ---------------
CLASS A Maximum initial Service fee of Initial sales load
sales load of .25%. waived or reduced
4.75% of the for certain
public offering purchases.
price. CDSL of 1%
on redemptions
within 18 months
of purchase on
shares on which
initial sales load was
waived in full due to
the size of purchase.
CLASS B None Service fee of CDSL of:
.25%; Distribution 5% in 1st year
fee of .75% until 4% in 2nd year
conversion.* 3% in 3rd and
4th years
2% in 5th year
1% in 6th year
0% after 6th year.
CLASS D None Service fee of CDSL of 1% on
.25%; Distribution redemptions
fee of up to .75%. within one year of
purchase.
*Conversion occurs at the end of the month which precedes the 8th anniversary of
the purchase date. If Class B shares of the Series are exchanged for Class B
shares of another Seligman Mutual Fund, the conversion period applicable to the
Class B shares acquired in the exchange will apply, and the holding period of
the shares exchanged will be tacked onto the holding period of the shares
acquired.
6
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund is a diversified open-end management investment company organized
under the laws of the Commonwealth of Massachusetts by a Declaration of Trust
dated July 27, 1984. The Fund offers one other separate investment series: the
Seligman High-Yield Bond Series. The High-Yield Bond Series' investment
objective and policies and other important information with respect to its
operations are set forth in a separate Prospectus.
The objective of the Series is to produce high current income. The Series
seeks to achieve its objective by investing at least 80% of the value of its
total assets in direct obligations of the U.S. Treasury, such as Treasury Bills,
Treasury Notes and Treasury Bonds, and in debt securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities and backed by the full
faith and credit of the U.S. Government which have maturities greater than one
year at the date of purchase by the Series, except for temporary defensive
purposes. This investment policy is a fundamental policy and may not be changed
by the Trustees of the Fund without the vote of a majority of the Series'
outstanding voting securities (as defined below). There can be no assurance that
the Series' investment objective will be obtained.
The Series may invest up to 20% of the value of its total assets in direct
obligations of the U.S. Treasury and in securities issued or guaranteed by the
United States Government, its agencies or instrumentalities which have
maturities of less than one year at the date of purchase by the Series.
Obligations issued by U.S. Government agencies include obligations issued by
such entities as Federal Land Banks, Federal Home Loan Banks and the Government
National Mortgage Association ("GNMA"). "GNMA Certificates" or "GNMAs,"
represent interests in pools of residential mortgages. The timely payment of
principal and interest is guaranteed by GNMA and backed by the full faith and
credit of the U.S. Government. GNMAs differ from other forms of debt securities
which normally provide for periodic payment of interest in fixed amounts with
principal payments at maturity or specified call dates. Instead, GNMAs provide a
"pass through" of monthly payments of interest and principal made by the
borrowers on their residential mortgage loans, net of certain expenses. A pool's
stated maturity may be shortened by prepayments of principal on the underlying
mortgage obligations. Factors affecting mortgage prepayments include, among
other things, the level of interest rates, general economic and social
conditions and the location and age of the mortgage. Such prepayments may
shorten the effective maturity of GNMAs. High interest rate mortgages are more
likely to be prepaid than lower rate mortgages; consequently, the effective
maturities of GNMAs with pass through payments of higher rate mortgages are
likely to be shorter than those of obligations with pass through payments of
lower rate mortgages.
RISK FACTORS. U.S. government securities are considered among the safest of
fixed-income investments; however, their market values, like those of other debt
securities, will fluctuate with changes in interest rates. The net asset value
of the Series' shares will fluctuate with changes in the market value of its
portfolio securities and the Series' yield will vary based on the yield of its
portfolio securities. Generally, as interest rates decline, the value of the
U.S. government securities held by the Series will increase. Conversely, if
interest rates rise, the value of the securities held by the Series will
decline. This effect is usually more pronounced for longer-term securities,
which generally tend to produce higher yields but are subject to greater market
fluctuations as a result of changes in interest rates than debt securities with
shorter maturities. Neither the Series' net asset value nor its yield is
guaranteed by the U.S. government.
Mortgage-backed securities in which the Series invests may benefit less
than other fixed-income securities from declining interest rates because of the
risk of prepayment. Although the extent of prepayments on a pool of mortgage
loans depends on various factors, including the prevailing interest rates and
general economic conditions, mortgage prepayments generally increase during a
period of declining interest rates and decrease with rising interest rates.
Prepayments in-
7
<PAGE>
crease the amounts available for reinvestment by the Series and such amounts
would have to be reinvested at lower interest rates. In addition, prepayments on
underlying mortgages result in a loss of anticipated interest, and the actual
yield to the Series may be different than the quoted yield on the securities. As
a result, when interest rates are declining, the value of mortgage-backed
securities may not increase as much as other fixed-income securities of
comparable maturities, although they may have a similar risk of decline when
interest rates rise.
YEAR 2000 RISKS. The Series is dependent upon service providers and their
computer systems for its day-to-day operations, and many of the Series' service
providers in turn depend upon computer systems of other persons. Many computer
systems currently cannot properly recognize or process date sensitive
information relating to the year 2000 and beyond. The Manager, Seligman
Financial Services, Inc., and the Series' custodian have been evaluating the
impact the year 2000 issue may have on their computer systems. They expect that
any modifications to their computer systems necessary to address the year 2000
issue will be made and tested in a timely manner. They are also working with
vendors and other persons whose systems are linked to theirs to obtain
satisfactory assurances regarding the year 2000 issue. Seligman Data Corp.,
which provides certain corporate and shareholder account services to the Series
at cost, has informed the Series that it does not expect that the cost to the
Series of its services will increase materially as a result of the modifications
to its computer systems necessary to prepare for the year 2000. The costs of
systems remediation by persons other than Seligman Data Corp. will not be borne
directly by the Series. There can be no assurance that the remedial actions
taken by the Series' service providers will be sufficient or timely. Inadequate
remediation could have an adverse effect on the Series' operations, including
pricing and securities trading and settlement, and the provision of shareholder
services.
LENDING OF PORTFOLIO SECURITIES. The Series may lend portfolio securities
to brokers or dealers, banks, or other institutional borrowers of securities.
The borrower must maintain with the Series cash or equivalent collateral such as
Treasury Bills, equal to at least 100% of the market value of the securities
loaned. During the time portfolio securities are on loan, the borrower pays the
Series any income accruing on the loaned securities and the Series may invest
the cash collateral and earn additional income or may receive an agreed upon
amount of interest income from the borrower. The lending of portfolio securities
may involve certain risks such as: 1) an increase in the market value of the
borrowed securities without a corresponding increase in the value of the posted
collateral might result in an imbalance in value between the borrowed securities
and the collateral; 2) in the event the borrower sought protection under the
Federal bankruptcy laws, repayment of the borrowed securities to the Fund might
be delayed; and 3) the borrower might refuse to repay the borrowed securities.
The Series may lend portfolio securities to the extent that the Manager deems
appropriate in seeking to achieve the Series' investment objective and with only
a prudent degree of risk.
REPURCHASE AGREEMENTS. The Series may enter into repurchase agreements with
commercial banks and with broker/dealers to invest cash for the short-term. A
repurchase agreement is an agreement under which the Series acquires a money
market instrument, generally a U.S. Government obligation qualified for purchase
by the Series, subject to resale at an agreed upon price and date. Such resale
price reflects an agreed upon interest rate effective for the period of time the
instrument is held by the Series and is unrelated to the interest rate on the
instrument. Repurchase agreements could involve certain risks in the event of
bankruptcy or other default by the seller, including possible delays and
expenses in liquidating the securities underlying the agreement, decline in
value of the underlying securities and loss of interest. Repurchase agreements
usually are for short periods, such as one week or less, but may be for longer
periods. Although the Series may enter into repurchase agreements with respect
to any money market instruments qualified for purchase, such agreements
generally involve U.S. Government securities and
8
<PAGE>
will only involve securities issued or guaranteed by the U.S. Government. As a
matter of fundamental policy, the Series will not enter into repurchase
agreements of more than one week's duration if more than 10% of its total assets
would be invested in such agreements and in restricted and other illiquid
securities.
WHEN-ISSUED SECURITIES. The Series may purchase securities on a when-issued
basis, in which case delivery and payment normally take place within 45 days
after the date of the commitment to purchase. The payment obligation and the
interest rate that will be received on the securities are each fixed at the time
the buyer enters into the commitment. Although the Series will only purchase a
security on a when-issued basis with the intention of actually acquiring the
securities, the Series may sell these securities before the purchase settlement
date if it is deemed advisable.
Securities held by the Series and securities purchased on a when-issued
basis are subject to changes in market value based upon investors' perceptions
of the creditworthiness of the issuer and upon changes, real or anticipated, in
the level of interest rates. If the Series remains substantially fully invested
at the same time that it has purchased securities on a when-issued basis, the
market value of the Series' assets may fluctuate more than otherwise would be
the case. Purchasing a security on a when-issued basis can involve a risk that
the yields available in the market when the delivery takes place may be higher
than those obtained on the security so purchased.
An account for the Series consisting of cash or liquid high-grade debt
securities equal to the amount of the when-issued commitments will be
established with the Series' Custodian, and marked to market daily, with
additional cash or liquid high-grade debt securities added when necessary. When
the time comes to pay for when-issued securities, the Series will meet its
respective obligations from then available cash flow, sale of securities held in
the separate account, sale of other securities or, although they would not
normally expect to do so, from the sale of the when-issued securities themselves
(which may have a value greater or less than the Series' payment obligations).
Sale of securities to meet such obligations carries with it a greater potential
for the realization of capital gain or loss.
GENERAL. Except as noted above or in the Statement of Additional
Information, the foregoing investment policies are not fundamental and the
Trustees of the Fund may change such policies without the vote of a majority of
the outstanding voting securities of the Series. As a matter of policy, the
Trustees will not change the Series' investment objective of producing high
current income without such a vote. Under the 1940 Act a "vote of a majority of
the outstanding voting securities" of the Series means the affirmative vote of
the lesser of (1) more than 50% of the outstanding shares of the Series or (2)
67% or more of the shares of the Series present at a shareholders' meeting if
more than 50% of the outstanding shares of the Series are represented at the
meeting in person or by proxy.
MANAGEMENT SERVICES
The Trustees provide broad supervision over the affairs of the Series and
the Fund as a whole. Pursuant to a Management Agreement approved by the Trustees
and the shareholders of the Series, the Manager manages the investments of the
Series and administers the business and other affairs of the Series. The address
of the Manager is 100 Park Avenue, New York, NY 10017.
The Manager also serves as manager of seventeen other investment companies
which, together with the Fund, comprise the "Seligman Group." These companies
are: Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc., Seligman
Common Stock Fund, Inc., Seligman Communications and Information Fund, Inc.,
Seligman Frontier Fund, Inc., Seligman Growth Fund, Inc., Seligman Henderson
Global Fund Series, Inc., Seligman Income Fund, Inc., Seligman Municipal Fund
Series, Inc., Seligman Municipal Series Trust, Seligman New Jersey Municipal
Fund, Inc., Seligman Pennsylvania Municipal Fund Series, Seligman Portfolios,
Inc., Seligman Quality Municipal Fund, Inc., Seligman Select
9
<PAGE>
Municipal Fund, Inc., Seligman Value Fund Series, Inc. and Tri-Continental
Corporation. The aggregate assets of the Seligman Group were approximately $20.2
billion at March 31, 1998. The Manager also provides investment management or
advice to institutional and other accounts having an aggregate value at March
31, 1998 of approximately $7.4 billion.
Mr. William C. Morris is Chairman of the Manager and Chairman of the Board
and Chief Executive Officer of the Fund. Mr. Morris owns a majority of the
outstanding voting securities of the Manager.
The Manager provides senior management for Seligman Data Corp., a
wholly-owned subsidiary of certain investment companies in the Seligman Group,
which performs, at cost, certain recordkeeping functions for the Series,
maintains the records of shareholder accounts and furnishes dividend paying,
redemption and related services.
The Manager is entitled to receive a management fee, calculated daily and
payable monthly, equal to .50% of the daily average net assets of the Series on
an annual basis. The Fund pays all of its expenses other than those assumed by
the Manager. The Fund's expenses are allocated among the series of the Fund in a
manner determined by the Trustees to be fair and equitable. Total expenses of
the Series' Class A, Class B and Class D shares for the year ended December 31,
1997 amounted to 1.23%, 2.01% and 2.01%, respectively, of the average daily net
assets of such class.
PORTFOLIO MANAGEMENT. Mr. Leonard J. Lovito, Vice President of the Manager,
has been Vice President and Portfolio Manager of the Series since January 1994.
Mr. Lovito also serves as Vice President and Portfolio Manager of Seligman Cash
Management Fund, Inc. and Vice President of Seligman Portfolios, Inc. ("SPI")
and Portfolio Manager of SPI's Seligman Cash Management Portfolio and Seligman
Bond Portfolio. Mr. Lovito joined the Manager in 1984 as a fixed income trader.
The Portfolio Manager's discussion of the Series' performance as well as a
line graph illustrating comparative performance information between the Series
and the Lipper General U.S. Government Bond Funds Average, Lipper General U.S.
Government Bond Fund Index and the Lehman Brothers Government Bond Index is
included in the Series' 1997 Annual Report to Shareholders. Copies of the 1997
Annual Report may be obtained, without charge, by calling or writing the Series
at the telephone numbers or address listed on the cover page of this Prospectus.
PORTFOLIO TRANSACTIONS. Fixed-income securities are generally traded on the
over-the-counter market on a "net" basis without a stated commission, through
dealers acting for their own account and not as brokers. The Series will engage
in transactions with these dealers or deal directly with the issuer. Prices paid
to dealers will generally include a "spread," i.e., the difference between the
prices at which a dealer is willing to purchase or to sell the security at that
time. The Management Agreement recognizes that in the purchase and sale of
portfolio securities, the Manager will seek the most favorable price and
execution and consistent with that policy, may give consideration to the
research, statistical and other services furnished by dealers to the Manager for
its use in connection with its services to the Fund as well as to other clients.
Consistent with the Rules of the National Association of Securities
Dealers, Inc. and subject to seeking the most favorable price and execution
available and such other policies as the Trustees of the Fund may determine, the
Manager may consider sales of shares of the Series and, if permitted under
applicable laws, may consider sales of shares of the other mutual funds in the
Seligman Group as a factor in the selection of brokers or dealers to execute
portfolio transactions for the Series.
PORTFOLIO TURNOVER. A change in securities held by the Series is known as
"portfolio turnover" which may result in the payment by the Series of dealer
spreads or underwriting commissions and other transactions costs on the sale of
securities as well as on the reinvestment of the
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<PAGE>
proceeds in other securities. Higher portfolio turnover involves greater
transactions costs and a possible increase in short-term capital gains or
losses. Although it is the policy of the Series to hold securities for
investment, changes will be made from time to time when the Manager believes
such changes will strengthen the Series' portfolio. The portfolio turnover rate
will vary from year to year as well as within a year and has exceeded 100% in
recent years.
PURCHASE OF SHARES
Seligman Financial Services, Inc. ("SFSI"), an affiliate of the Manager,
acts as general distributor of the Series' shares. Its address is 100 Park
Avenue, New York, NY 10017.
The Fund issues three classes of shares: Class A shares are sold to
investors choosing the initial sales load alternative; Class B shares are sold
to investors choosing to pay no initial sales load, a higher distribution fee
and a CDSL with respect to redemptions within six years of purchase and who
desire shares to convert automatically to Class A shares after eight years; and
Class D shares are sold to investors choosing no initial sales load, a higher
distribution fee and a CDSL on redemptions within one year of purchase. See
"Alternative Distribution System" above.
Shares of the Series may be purchased through any authorized investment
dealer. All orders will be executed at the net asset value per share next
determined after receipt of the purchase order plus, in the case of Class A
shares, a sales load which, except for shares purchased under one of the reduced
sales load plans, will vary with the size of the purchase as shown in the
schedule under "Class A Shares -- Initial Sales Load" below.
THE MINIMUM AMOUNT FOR INITIAL INVESTMENT IN THE SERIES IS $1,000;
SUBSEQUENT INVESTMENTS MUST BE IN THE MINIMUM AMOUNT OF $100 (EXCEPT FOR
INVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS). THE FUND RESERVES THE
RIGHT TO RETURN INVESTMENTS WHICH DO NOT MEET THESE MINIMUMS. EXCEPTIONS TO
THESE MINIMUMS ARE AVAILABLE FOR ACCOUNTS BEING ESTABLISHED CONCURRENTLY WITH
THE INVEST-A-CHECK(R) SERVICE. THE MINIMUM AMOUNT FOR INITIAL INVESTMENT IN THE
SELIGMAN TIME HORIZON MATRIXSM ASSET ALLOCATION PROGRAM IS $10,000. FOR
INFORMATION ABOUT THIS PROGRAM, CONTACT YOUR FINANCIAL ADVISOR.
The minimum amount for initial investment in the Series is $500 for
investors who purchase shares of the Fund through Merrill Lynch's MFA or MFA
Select programs. There is no minimum investment required for investors who
purchase shares of the Series through wrap fee programs.
Purchase orders placed for Class B shares must be for LESS THAN $250,000.
Orders received by an authorized dealer by the close of regular trading on
the New York Stock Exchange ("NYSE") (normally, 4:00 p.m. Eastern time) and
accepted by SFSI before the close of business (5:00 p.m. Eastern time) on the
same day will be executed at the Series' net asset value determined as of the
close of regular trading on the NYSE on that day plus, in the case of Class A
shares, any applicable sales load. Orders accepted by dealers after the close of
regular trading on the NYSE, or received by SFSI after the close of business,
will be executed at the Series' net asset value as next determined plus, in the
case of Class A shares, any applicable sales load. The authorized dealer through
which a shareholder purchases shares is responsible for forwarding the order to
SFSI promptly.
Payment for dealer purchases may be made by check or by wire. To wire
payment, dealer orders must first be placed through SFSI's order desk and
assigned a purchase confirmation number. Funds in payment of the purchase may
then be wired to Mellon Bank, N.A., ABA #043000261, A/C Seligman U.S. Government
Securities Series (A, B or D), A/C #107-1011. WIRE TRANSFERS MUST INCLUDE THE
PURCHASE CONFIRMATION NUMBER AND CLIENT ACCOUNT REGISTRATION AND ACCOUNT NUMBER.
Persons other than dealers who wish to wire payment should contact
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<PAGE>
Seligman Data Corp. for specific wire instructions. Although the Fund makes no
charge for this service, the transmitting bank may impose a wire service fee.
Current shareholders may purchase additional shares of the Series through
any authorized dealer or by sending a check payable to the "Seligman Group of
Funds" in our postage-paid return envelope or directly to P.O. BOX 9766,
PROVIDENCE, RI 02940-9766. Checks for investment must be in U.S. dollars drawn
on a domestic bank. The check should be accompanied by an investment slip
(provided on the bottom of shareholder account statements or with periodic
reports) and include the shareholder's name, address, account number, name of
Series and class of shares (A, B or D). Checks sent directly to Seligman Data
Corp. and received in good order will be invested at the Series' net asset value
determined as of the close of regular trading on the NYSE on that day plus, in
the case of Class A shares, any applicable sales load.
IF A SHAREHOLDER DOES NOT PROVIDE THE REQUIRED INFORMATION, SELIGMAN DATA
CORP. WILL SEEK FURTHER CLARIFICATION AND MAY BE FORCED TO RETURN THE CHECK TO
THE SHAREHOLDER. IF ONLY THE CLASS DESIGNATION IS MISSING, THE INVESTMENT WILL
AUTOMATICALLY BE MADE IN CLASS A SHARES FOR NEW ACCOUNTS OR IN THE SHAREHOLDER'S
EXISTING CLASS FOR ADDITIONAL PURCHASES. Credit card convenience checks and
third party checks (i.e., checks made payable to someone other than the
"Seligman Group of Funds") may not be used to open a new fund account or
purchase additional shares of the Series.
Seligman Data Corp. may charge a $10.00 service fee for checks returned to
it as uncollectable. This charge may be deducted from the shareholder's account.
For the protection of the Fund and its shareholders, no redemption proceeds will
be remitted to a shareholder with respect to shares purchased by check (unless
certified) until Seligman Data Corp. receives notice that the check has cleared,
which may be up to 15 days from the credit of the shares to the shareholder's
account.
Current shareholders may also purchase additional shares by having funds
electronically transferred directly from an employer, the Internal Revenue
Service or other government agency, or any institution capable of transmitting
payments through the Automated Clearing House ("ACH") network. Purchases may be
one-time transactions, or, for those institutions that offer direct deposit
programs, may be made on a systematic basis. To utilize this service, the
following bank information must be provided to the paying institution:
Mellon Bank, N.A.
ABA #043000261
A/C No. 600FFFNNNNNNNNNN
"600" IDENTIFIES THE SELIGMAN GROUP OF FUNDS, "FFF" IS THE FUND CODE
REPRESENTING THE FUND AND CLASS OF SHARES IN WHICH THE PURCHASE SHOULD BE MADE
(this code is available on the back of all shareholder account statements), AND
"NNNNNNNNNN" INDICATES THE SHAREHOLDER'S TEN-DIGIT ACCOUNT NUMBER. In addition,
the shareholder must indicate that this is a checking account at Mellon Bank.
For IRA and group retirement accounts, all electronic purchases will be
designated as current year contributions. For more information about this
service, please contact Seligman Data Corp.
VALUATION. The net asset value of the Series' shares is determined each
day, Monday through Friday, as of the close of regular trading on the NYSE
(normally, 4:00 p.m. Eastern time) on each day that the NYSE is open for
business. Net asset value is calculated separately for each class. Securities
are valued at market value or, in the absence thereof, at fair value as
determined in
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<PAGE>
accordance with procedures approved by the Fund's Trustees. Short-term holdings
maturing in 60 days or less are valued at amortized cost if their original
maturity was 60 days or less and securities purchased with maturities in excess
of 60 days which currently have maturities of 60 days or less are valued by
amortizing their fair market value on the 61st day prior to maturity.
Although the legal rights of Class A, Class B and Class D shares are
substantially identical, the different expenses borne by each class will result
in different net asset values and dividends. The net asset value of Class B and
Class D shares will generally be lower than the net asset value of Class A
shares as a result of the higher distribution fees charged to Class B and Class
D shares.
CLASS A SHARES--INITIAL SALES LOAD. Class A shares are subject to an
initial sales load which varies with the size of the purchase as shown in the
following schedule, and an annual service fee of up to .25% of the average daily
net asset value of Class A shares. See "Administration, Shareholder Services and
Distribution Plan" below.
- --------------------------------------------------------------------------------
CLASS A SHARES--SALES LOAD SCHEDULE
SALES LOAD AS A REGULAR
PERCENTAGE OF DEALER
------------------ DISCOUNT
NET AMOUNT AS A
INVESTED %OF
OFFERING (NET ASSET OFFERING
AMOUNT OF PURCHASE PRICE VALUE) PRICE
----------------------- ------- --------- -------
Less than $ 50,000 4.75% 4.99% 4.25%
$ 50,000- 99,999 4.00 4.17 3.50
100,000- 249,999 3.50 3.63 3.00
250,000- 499,999 2.50 2.56 2.25
500,000- 999,999 2.00 2.04 1.75
1,000,000- or more* 0 0 0
*Shares acquired at net asset value pursuant to the above schedule will be
subject to a CDSL of 1% if redeemed within 18 months of purchase. See
"Purchase of Shares--Contingent Deferred Sales Load."
- --------------------------------------------------------------------------------
There is no initial sales load on purchases of Class A shares of $1,000,000
or more ("NAV sales"); however, such shares are subject to a CDSL of 1% if
redeemed within eighteen months of purchase.
SFSI shall pay broker/dealers, from its own resources, a fee on NAV sales,
calculated as follows: 1.00% of NAV sales up to but not including $2 million;
.80% of NAV sales from $2 million up to but not including $3 million; .50% of
NAV sales from $3 million up to but not including $5 million; and .25% of NAV
sales from $5 million and above. The calculation of the fee will be based on
assets held by a "single person" as defined below.
SFSI shall also pay broker/dealers, from its own resources, a fee on assets
of certain Class A shares of the Seligman Mutual Funds, including the Series,
participating in an "eligible employee benefit plan" (as defined below under
"Special Programs") that are attributable to the particular broker/dealer. The
shares eligible for the fee are those on which an initial sales load was not
paid because either the participating eligible employee benefit plan has at
least (i) $500,000 invested in the Seligman Group of Mutual Funds or (ii) 50
eligible employees to whom such plan is made available. Class A shares
representing only an initial purchase of Seligman Cash Management Fund are not
eligible for the fee. Such shares will become eligible for the fee once they are
exchanged for shares of another Seligman Mutual Fund. The payment is based on
cumulative sales for each Plan during a calendar year, or portion thereof. The
payment schedule, for each calendar year, is as follows: 1.00% of sales up to
but not including $2 million; .80% of sales from $2 million up to but not
including $3 million; .50% of sales from $3 million up to but not including $5
million; and .25% of sales from $5 million and above.
REDUCED SALES LOADS. Reductions in initial sales loads apply to purchases
of Class A shares by a "single person," including an individual, members of a
family unit comprising husband, wife, and minor children purchasing securities
for their own account, or a trustee or other fiduciary purchasing for a single
fiduciary account or single trust. Purchases made by a trustee or other
fiduciary for a fiduciary account may not be aggregated with purchases made on
behalf of any other fiduciary or individual account.
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<PAGE>
Shares purchased without an initial sales load in accordance with the sales
load schedule or pursuant to a Volume Discount, Right of Accumulation or Letter
of Intent are subject to a CDSL of 1% on redemptions within eighteen months of
purchase.
o VOLUME DISCOUNTS are provided if the total amount being invested in Class
A shares of the Series alone, or in any combination of shares of the Seligman
Mutual Funds that are sold with an initial sales load, reaches levels indicated
in the above sales load schedule.
o THE RIGHT OF ACCUMULATION allows an investor to combine the amount being
invested in shares of any Seligman Mutual Fund sold with an initial sales load
with the total net asset value of shares already owned that were sold with an
initial sales load, including shares of Seligman Cash Management Fund that were
acquired by the investor through an exchange of shares of another Seligman
Mutual Fund on which there was an initial sales load, to determine reduced sales
loads in accordance with the sales load schedule. An investor or a dealer
purchasing shares on behalf of any investor must indicate that the investor has
existing accounts when making investments or opening new accounts.
o A LETTER OF INTENT allows an investor to purchase Class A shares of the
Series over a 13-month period at reduced initial sales loads, based on the total
amount of shares the investor intends to purchase plus the total net asset value
of shares of the other Seligman Mutual Funds already owned that were sold with
an initial sales load and the total net asset value of shares of Seligman Cash
Management Fund that were acquired through an exchange of shares of another
Seligman Mutual Fund on which there was an initial sales load. An investor or a
dealer purchasing Class A shares on behalf of any investor must indicate that
the investor has existing accounts when making investments or opening new
accounts. For more information concerning terms of Letters of Intent, see "Terms
and Conditions."
SPECIAL PROGRAMS. The Series may sell Class A shares at net asset value to
present and retired directors, trustees, officers, employees and their spouses
(and family members of the foregoing) of the Fund, the other investment
companies in the Seligman Group, the Manager and other companies affiliated with
the Manager. Family members are defined to include lineal descendants and lineal
ancestors, siblings (and their spouses and children) and any company or
organization controlled by any of the foregoing. Such sales also may be made to
employee benefit and thrift plans for such persons and to any investment
advisory, custodial, trust or other fiduciary account managed or advised by the
Manager or any affiliate.
Class A shares also may be issued without an initial sales load in
connection with the acquisition of cash and securities owned by other investment
companies; to any registered unit investment trust which is the issuer of
periodic payment plan certificates, the net proceeds of which are invested in
Series shares; to separate accounts established and maintained by an insurance
company which are exempt from registration under Section 3(c)(11) of the 1940
Act; to registered representatives and employees (and their spouses and minor
children) of any dealer that has a sales agreement with SFSI; to financial
institution trust departments; to registered investment advisers exercising
discretionary investment authority with respect to the purchase of Series
shares; to accounts of financial institutions or broker/dealers that charge
account management fees, provided the Manager or one of its affiliates has
entered into an agreement with respect to such accounts; pursuant to sponsored
arrangements with organizations which make recommendations to or permit group
solicitations of, its employees, members or participants in connection with the
purchase of shares of the Series; to other investment companies in the Seligman
Group in connection with a deferred fee arrangement for outside directors; and
to "eligible employee benefit plans" which have at least (i) $500,000 invested
in the Seligman Mutual Funds or (ii) 50 eligible employees to whom such plan is
made available. "Eligible employee benefit plan" means any plan or arrangement,
whether or not tax qualified, which provides for the purchase of Series shares.
Sales of shares to such plans must be made in connection
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<PAGE>
with a payroll deduction system of plan funding or other system acceptable to
Seligman Data Corp.
Section 403(b) plans sponsored by public educational institutions are not
eligible for net asset value purchases based on the aggregate investment made by
the plan or number of eligible employees. Employee benefit plans eligible for
net asset value sales, as described above, will be subject to a CDSL of 1% for
terminations at the plan level only, on redemptions of shares purchased within
eighteen months prior to plan termination. Sales pursuant to a 401(k) or other
retirement alliance program the sponsor of which has an agreement with SFSI
pursuant to which shares are made available at net asset value are not subject
to a CDSL.
CLASS B SHARES. Class B shares are sold without an initial sales load but
are subject to a CDSL if the shares are redeemed within six years of purchase at
rates set forth in the table below, charged as a percentage of the current net
asset value or the original purchase price, whichever is less.
YEARS SINCE PURCHASE CDSL
- -------------------- ----
less than 1 year...................................... 5%
1 year or more but less than 2 years.................. 4%
2 years or more but less than 3 years................. 3%
3 years or more but less than 4 years................. 3%
4 years or more but less than 5 years................. 2%
5 years or more but less than 6 years................. 1%
6 years or more....................................... 0%
Class B shares are also subject to an annual distribution fee of .75% and
an annual service fee of up to .25% of the average daily net asset value of the
Class B shares. SFSI will make a 4% payment to dealers in respect of purchases
of Class B shares. Approximately eight years after purchase, Class B shares will
convert automatically to Class A shares, which are subject to an annual service
fee of .25% but no distribution fee. Shares purchased through reinvestment of
dividends and capital gain distributions on Class B shares also will convert
automatically to Class A shares along with the underlying shares on which they
were earned. Conversion occurs at the end of the month which precedes the eighth
anniversary of the purchase date. If Class B shares of the Series are exchanged
for Class B shares of another Seligman Mutual Fund, the conversion period
applicable to the Class B shares acquired in the exchange will apply, and the
holding period of the shares exchanged will be tacked onto the holding period of
the shares acquired. Class B shareholders of the Series exercising the exchange
privilege will continue to be subject to the Series' CDSL schedule if such
schedule is higher or longer than the CDSL schedule relating to the new Class B
shares. In addition, Class B shares of the Series acquired by exchange will be
subject to the Series' CDSL schedule if such schedule is higher or longer than
the CDSL schedule relating to the original Class B shares.
CLASS D SHARES. Class D shares are sold without an initial sales load but
are subject to a 1% CDSL if the shares are redeemed within one year, an annual
distribution fee of up to .75% and an annual service fee of up to .25%, of the
average daily net asset value of the Class D shares. SFSI will make a 1% payment
to dealers in respect of purchases of Class D shares. Unlike Class B shares,
Class D shares do not automatically convert to Class A shares after eight years.
CONTINGENT DEFERRED SALES LOAD. A CDSL will be imposed on redemptions of
Class B or Class D shares which were purchased during the preceding six years
(for Class B shares) or twelve months (for Class D shares). The amount of any
CDSL will be used by SFSI to defray the expense of the payment of 4% (in the
case of Class B shares) or 1% (in the case of Class D shares) made by it to
Service Organizations (as defined under "Administration, Shareholder Services
and Distribution Plan") at the time of sale. Pursuant to an agreement with FEP
Capital, L.P. ("FEP") to fund payments in respect of Class B shares, SFSI has
agreed to assign any Class B CDSL to FEP.
A CDSL of 1% will also be imposed on redemptions of Class A shares
purchased during the preceding eighteen months if such shares were acquired at
net asset value pursuant to the sales load schedule provided under "Class A
Shares--Initial Sales Load." Employee benefit plans eligible for net asset value
sales as described above under "Special Programs" may be subject to a CDSL of
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1% for terminations at the plan level only, on redemptions of shares purchased
within eighteen months prior to plan termination.
The 1% CDSL normally imposed on redemptions of certain Class A shares
(i.e., those purchased during the preceding eighteen months at net asset value
pursuant to the sales load schedule provided under "Class A Shares--Initial
Sales Load") will be waived on shares that were purchased through Morgan Stanley
Dean Witter & Co. ("Morgan Stanley") by certain Chilean institutional investors
(i.e., pension plans, insurance companies and mutual funds). Upon redemption of
such shares within an eighteen month period, Morgan Stanley will reimburse SFSI
a pro rata portion of the fee it received from SFSI at the time of sale of such
shares.
To minimize the application of a CDSL to a redemption, shares acquired
pursuant to the investment of dividends and capital gain distributions (which
are not subject to a CDSL) will be redeemed first; followed by shares held for a
period of time longer than the applicable CDSL period. Shares held for the
longest period of time within the applicable period will then be redeemed.
Additionally, for those shares determined to be subject to a CDSL, the CDSL will
be assessed on the current net asset value or original purchase price, whichever
is less. No CDSL will be imposed on shares acquired though the investment of
dividends or capital gain distributions from any Class A, Class B or Class D
shares of mutual funds in the Seligman Group.
For example, assume an investor purchased 100 Class D shares in January at
a price of $10.00 per share. During the first year, 5 additional Class D shares
were acquired through investment of dividends and distributions. In January of
the following year, an additional 50 Class D shares were purchased at a price of
$12.00 per share. In March of that year, the investor chooses to redeem
$1,500.00 from the account which now holds 155 Class D shares with a total value
of $1,898.75 ($12.25 per share). The CDSL for this transaction would be
calculated as follows:
Total shares to be redeemed
(122.449 @ $12.25) as follows:......... $1,500.00
=========
Dividend/Distribution shares
(5 @ $12.25)........................ $ 61.25
Shares held more than 1 year
(100 @ $12.25)...................... 1,225.00
Shares held less than 1 year subject to
CDSL (17.449 @ $12.25).............. 213.75
---------
Gross proceeds of redemption........ $1,500.00
Less CDSL (17.449 shares @
$12.00 = $209.39 x 1% = $2.09)......... (2.09)
---------
Net proceeds of redemption.......... $1,497.91
=========
For federal income tax purposes, the amount of the CDSL will reduce the
gain or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.
The CDSL will be waived or reduced in the following instances:
(a) on redemptions following the death or disability (as defined in section
72 (m)(7) of the Internal Revenue Code of 1986, as amended (the "Code")) of a
shareholder or beneficial owner; (b) in connection with (i) distributions from
retirement plans qualified under section 401(a) of the Code when such
redemptions are necessary to make distributions to plan participants (such
payments include, but are not limited to death, disability, retirement, or
separation of service), (ii) distributions from a custodial account under
section 403 (b)(7) of the Code or an individual retirement account (an "IRA")
due to death, disability, minimum distribution requirements after attainment of
age 70 1/2, or, for accounts established prior to January 1, 1998, attainment of
age 59 1/2, and (iii) a tax-free return of an excess contribution to an IRA; (c)
in whole or in part, in connection with shares sold to current and retired
Trustees of the Fund; (d) in whole or in part, in connection with shares sold to
any state, county, or city
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<PAGE>
or any instrumentality, department, authority, or agency thereof, which is
prohibited by applicable investment laws from paying a sales load or commission
in connection with the purchase of shares of any registered investment
management company; (e) in whole or in part, in connection with systematic
withdrawals; (f) in connection with participation in the Merrill Lynch Small
Market 401(k) Program; and (g) in connection with the redemption of shares of
the Series if the Series is combined with another Seligman Mutual Fund, or
another similar reorganization transaction.
If, with respect to a redemption of any Class A, Class B or Class D shares
sold by a dealer, the CDSL is waived because the redemption qualifies for a
waiver as set forth above, the dealer shall remit to SFSI promptly upon notice,
an amount equal to the payment or a portion of the payment made by SFSI at the
time of sale of such shares.
SFSI may from time to time assist dealers by, among other things, providing
sales literature to, and holding informational programs for the benefit of,
dealers' registered representatives. Dealers may limit the participation of
registered representatives in such informational programs by means of sales
incentive programs which may require the sale of minimum dollar amounts of
shares of the Seligman Mutual Funds. SFSI may from time to time pay a bonus or
other incentive to dealers that sell shares of the Seligman Mutual Funds. In
some instances, these bonuses or incentives may be offered only to certain
dealers which employ registered representatives who have sold or may sell a
significant amount of shares of the Series and/or certain other funds managed by
the Manager during a specified period of time. Such bonus or other incentive may
take the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and members
of their families to places within or outside the United States. The cost to
SFSI of such promotional activities and payments shall be consistent with the
Rules of the National Association of Securities Dealers, Inc., as then in
effect.
TELEPHONE TRANSACTIONS
A shareholder with telephone transaction privileges, AND THE SHAREHOLDER'S
BROKER/DEALER REPRESENTATIVE, has the ability to effect the following
transactions via telephone: (i) redemption of Series shares with the proceeds
sent to the address of record (up to $50,000 per day per fund account), (ii)
exchange of Series shares for shares of the same class of another Seligman
Mutual Fund, (iii) change of a dividend and/or capital gain distribution option,
and (iv) change of address. In addition, a shareholder who has current bank
information on file with Seligman Data Corp. may redeem shares via telephone and
have the proceeds electronically transferred from the shareholder's fund account
to the shareholder's predesignated bank account. See "Redemption of Shares." All
telephone transactions are effected through Seligman Data Corp. at (800)
221-2450.
FOR INVESTORS WHO PURCHASE SHARES BY COMPLETING AND SUBMITTING AN ACCOUNT
APPLICATION: Unless an election is made otherwise on the Account Application, a
shareholder and the shareholder's broker/dealer of record, as designated on the
Account Application, will automatically receive telephone services. A
shareholder must provide bank information on the Account Application or a
supplemental election form in order to have redemptions via telephone sent to
the shareholder's bank account.
FOR INVESTORS WHO PURCHASE SHARES THROUGH A BROKER/DEALER: Telephone
services for a shareholder and the shareholder's representative may be elected
by completing a supplemental election form available from the broker/dealer of
record.
FOR ACCOUNTS REGISTERED AS IRAS: Telephone services will include only
exchanges or address changes.
FOR CORPORATIONS OR GROUP RETIREMENT PLANS: Telephone redemptions are not
permitted. Additionally, group retirement plans are not permitted to change a
dividend or gain distribution option. Group retirement plans that may allow
17
<PAGE>
plan participants to place telephone exchanges directly with the Fund must first
provide a letter of authorization signed by the plan's custodian or trustee, and
provide a telephone services election form signed by each plan participant.
All Seligman Mutual Funds with the same account number (i.e., registered
exactly the same) as an existing account, including any new fund in which the
shareholder invests in the future, will automatically include telephone services
if the existing account has telephone services. Telephone services may also be
elected at any time on a supplemental telephone services election form.
For accounts registered jointly (such as joint tenancies, tenants in common
and community property registrations), each owner, by accepting or requesting
telephone services, authorizes each of the other owners to effect telephone
transactions on his or her behalf.
During times of drastic economic or market changes, a shareholder or the
shareholder's representative may experience difficulty in contacting Seligman
Data Corp. to request a redemption or exchange of Series shares via telephone.
In these circumstances, the shareholder or the shareholder's representative
should consider using other redemption or exchange procedures. (See "Redemption
of Shares" below.) Use of these other redemption or exchange procedures may
result in the request being processed at a later time than if a telephone
transaction had been used, and the Series' net asset value may fluctuate during
such periods.
The Fund and Seligman Data Corp. will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These will
include: recording all telephone calls requesting account activity, requiring
that the caller provide certain requested personal and/or account information at
the time of the call for the purpose of establishing the caller's identity, and
sending a written confirmation of redemptions, exchanges or address changes to
the address of record each time activity is initiated by telephone. As long as
the Fund and Seligman Data Corp. follow instructions communicated by telephone
that were reasonably believed to be genuine at the time of their receipt,
neither they nor any of their affiliates will be liable for any loss to the
shareholder caused by an unauthorized transaction. In any instance where the
Fund or Seligman Data Corp. is not reasonably satisfied that instructions
received by telephone are genuine, the requested transaction will not be
executed, and neither they nor any of their affiliates will be liable for any
losses which may occur due to a delay in implementing the transaction. If the
Fund or Seligman Data Corp. does not follow the procedures described above, the
Fund or Seligman Data Corp. may be liable for any losses due to unauthorized or
fraudulent instructions. Telephone transactions must be effected through a
representative of Seligman Data Corp., i.e., requests may not be communicated
via Seligman Data Corp.'s automated telephone answering system. Shareholders, of
course, may refuse or cancel telephone services. Telephone services may be
terminated by a shareholder at any time by sending a written request to Seligman
Data Corp. TELEPHONE SERVICES MAY NOT BE ESTABLISHED BY A SHAREHOLDER'S
BROKER/DEALER WITHOUT THE WRITTEN AUTHORIZATION OF THE SHAREHOLDER. Written
acknowledgment of the addition of telephone services to an existing account or
termination of telephone services will be sent to the shareholder at the address
of record.
REDEMPTION OF SHARES
A shareholder may redeem shares held in book credit ("uncertificated") form
without charge, except a CDSL, if applicable, at any time by SENDING A WRITTEN
REQUEST to Seligman Data Corp., P.O. Box 9759, Providence, RI 02940-9759; or if
request is being sent by overnight delivery service, to 100 Park Avenue, New
York, NY 10017. The redemption request must be signed by all persons in whose
name the shares are registered. A shareholder may redeem shares that are not in
book credit form without charge, except a CDSL, if applicable, by surrendering
certificates in proper form to the same address. Certificates should be sent
certified or registered mail. Return receipt is advisable; however, this may
increase mailing time. Share certificates must be endorsed for
18
<PAGE>
transfer or accompanied by an endorsed stock power signed by all share owners
exactly as their name(s) appear(s) on the account registration. The
shareholder's letter of instruction or endorsed stock power should specify the
Series name, account number, class of shares (A, B or D) and the number of
shares or dollar amount to be redeemed. The Fund cannot accept conditional
redemption requests (i.e., requests to sell shares at a specific price or on a
future date). If the redemption proceeds are (i) $50,000 or more, (ii) to be
paid to someone other than the shareholder of record (regardless of the amount)
or (iii) to be mailed to other than the address of record (regardless of the
amount), the signature(s) of the shareholder(s) must be guaranteed by an
eligible financial institution including, but not limited to, the following:
banks, trust companies, credit unions, securities brokers and dealers, savings
and loan associations and participants in the Securities Transfer Association
Medallion Program (STAMP), the Stock Exchanges Medallion Program (SEMP) and the
New York Stock Exchange Medallion Signature Program (MSP). The Fund reserves the
right to reject a signature guarantee where it is believed that the Fund will be
placed at risk by accepting such guarantee. A signature guarantee is also
necessary in order to change the account registration. Notarization by a notary
public is not an acceptable signature guarantee. A signature guarantee is not
required if redemption proceeds are transferred electronically to the
shareholder's predesignated bank account.
ADDITIONAL DOCUMENTATION MAY ALSO BE REQUIRED BY SELIGMAN DATA CORP. IN THE
EVENT OF A REDEMPTION BY A CORPORATION, EXECUTOR, ADMINISTRATOR, TRUSTEE,
CUSTODIAN OR RETIREMENT PLAN. FOR FURTHER INFORMATION WITH RESPECT TO REDEMPTION
REQUIREMENTS, PLEASE CONTACT THE SHAREHOLDER SERVICES DEPARTMENT OF SELIGMAN
DATA CORP. FOR ASSISTANCE.
In the case of Class A shares (except for shares purchased without an
initial sales load due to the size of the purchase), and in the case of Class B
shares redeemed after six years and Class D shares redeemed after one year, a
shareholder will receive the net asset value per share next determined after
receipt of a request in good order. If Class A shares which were purchased
without an initial sales load because the purchase amount was $1,000,000 or more
are redeemed within eighteen months of purchase, a shareholder will receive the
net asset value per share next determined after receipt of a request in good
order, less a CDSL of 1% as described under "Purchase of Shares--Class A
Shares-Initial Sales Load" above. If Class B shares are redeemed within six
years of purchase, a shareholder will receive the net asset value per share next
determined after receipt of a request in good order, less the applicable CDSL as
described under "Purchase of Shares--Class B Shares" above. If Class D shares
are redeemed within one year of purchase, a shareholder will receive the net
asset value per share next determined after receipt of a request in good order,
less a CDSL of 1% as described under "Purchase of Shares--Class D Shares" above.
A shareholder also may "sell" shares to the Fund through an investment
dealer and, in that way, be certain, providing the order is timely, of receiving
the net asset value established at the end of the day on which the dealer is
given the repurchase order (less any applicable CDSL). The Fund makes no charge
for this transaction, but the dealer may charge a service fee. "Sell" or
repurchase orders received from an authorized dealer before the close of the
NYSE and received by SFSI, the repurchase agent, before the close of business on
the same day will be executed at the net asset value per share determined as of
the close of the NYSE on that day, less any applicable CDSL. Repurchase orders
received from authorized dealers after the close of the NYSE or not received by
SFSI prior to the close of business, will be executed at the net asset value
determined as of the close of the NYSE on the next trading day, less any
applicable CDSL. Shares held in a "street name" account with a broker/dealer may
be sold to the Fund only through a broker/dealer.
TELEPHONE REDEMPTIONS. Telephone redemptions of uncertificated shares may
be made once per day, in an amount of up to $50,000 per fund account. Proceeds
will be sent to the address of record. A shareholder whose bank is a member of
the ACH network
19
<PAGE>
and who has current bank information on file with Seligman Data Corp. may have
redemption proceeds transferred electronically to the shareholder's
predesignated bank account. Telephone redemption requests received by Seligman
Data Corp. at (800) 221-2450 by the close of regular trading on the NYSE
(normally, 4:00 p.m. Eastern time) will be processed at the Series' net asset
value determined as of the close of business on that day. Redemption requests by
telephone will not be accepted within 30 days following an address change. IRAs,
group retirement plans, corporations and trusts for which the name of the
current trustee does not appear in the account registration are not eligible for
telephone redemptions. The Fund reserves the right to suspend or terminate the
telephone redemption service at any time without notice.
For more information about telephone redemptions and the circumstances
under which a shareholder may bear the risk of loss for a fraudulent
transaction, see "Telephone Transactions" above.
CHECK REDEMPTION SERVICE. The Check Redemption Service allows a shareholder
who owns or purchases shares in the Series worth $25,000 or more to request
Seligman Data Corp. to provide redemption checks to be drawn on the
shareholder's account in amounts of $500 or more. The shareholder may elect to
use this Service on the Account Application or by later written request to
Seligman Data Corp. Shares for which certificates have been issued will not be
available for redemption under this service. Holders of Class A shares should
bear in mind that check redemptions of Class A shares acquired at net asset
value due to the size of the purchase may be subject to a CDSL. Holders of Class
B shares may use this service although check redemptions of Class B shares may
be subject to a CDSL. Holders of Class D shares may use this service with
respect to shares that have been held for at least one year. Dividends continue
to be earned through the date preceding the date the check clears for payment.
Use of this service is subject to Boston Safe Deposit and Trust Co. rules and
regulations covering checking accounts. Separate checkbooks will be furnished
for each series of the Fund.
There is no charge for use of checks. When honoring a check that was
processed for payment, Boston Safe Deposit and Trust Co. will cause the Series
to redeem exactly enough full and fractional shares from an account to cover the
amount of the check and any applicable CDSL. If shares are owned jointly,
redemption checks must be signed by all persons, unless otherwise elected on the
Account Application, in which case a single signature will be acceptable.
In view of daily fluctuations in share value, the shareholder should be
certain that the amount of shares in the account is sufficient to cover the
amount of checks written. If insufficient shares are in the account, the check
will be returned, marked "insufficient funds." THE FUND WILL NOT REDEEM SHARES
IN ONE SERIES TO COVER A CHECK WRITTEN ON ANOTHER SERIES. SELIGMAN DATA CORP.
MAY CHARGE A $10.00 PROCESSING FEE FOR ANY CHECK REDEMPTION DRAFT RETURNED AS
UNCOLLECTABLE. THIS CHARGE MAY BE DEDUCTED FROM THE SHAREHOLDER'S ACCOUNT.
Check redemption books cannot be reordered unless the shareholder's account
has a value of $25,000 or more and the Fund has a certified Taxpayer
Identification Number on file.
Cancelled checks will be returned to a shareholder under separate cover the
month after they clear. The Check Redemption Service may be terminated at any
time by the Fund or Boston Safe Deposit and Trust Co. See "Terms and
Conditions."
GENERAL. With respect to shares redeemed, a check for the proceeds, less
any applicable CDSL, will be sent to the shareholders' address of record within
seven calendar days after acceptance of the redemption order and will be made
payable to all of the registered owners on the account. With respect to shares
repurchased by the Fund, a check for the proceeds will be sent to the investment
dealer within seven calendar days after acceptance of the repurchase order and
will be made payable to the investment dealer. Redemptions via telephone to the
shareholder's bank account will be transferred electronically within five
business days. Pay-
20
<PAGE>
ment of redemption proceeds will be delayed on redemptions of shares purchased
by check (unless certified) until Seligman Data Corp. receives notice that the
check has cleared, which may be up to 15 days from the credit of the shares to
the shareholder's account. No interest is earned on the redemption proceeds
during this period. The proceeds of a redemption or repurchase may be more or
less than the shareholder's cost.
The Fund reserves the right to redeem shares owned by a shareholder whose
investment in the Series has a value of less than a minimum amount specified by
the Fund's Trustees, which is presently $500. Shareholders would be sent a
notice before such redemption is processed stating that the value of their
investment in the Series is less than the specified minimum and that they have
sixty days to make an additional investment.
REINSTATEMENT PRIVILEGE. If a shareholder redeems Class A shares and then
decides to reinvest them, or to shift the investment to one of the other
Seligman Mutual Funds, the shareholder may, within 120 calendar days of the date
of redemption, use all or any part of the proceeds of the redemption to
reinstate, free of an initial sales load, all or any part of the investment in
shares of the Series or in shares of one of the other Seligman Mutual Funds. If
a shareholder redeems shares and the redemption was subject to a CDSL, the
shareholder may reinstate all or any part of the investment in shares of the
same class of the Series or any of the other Seligman Mutual Funds within 120
calendar days of the date of redemption and receive a credit for the applicable
CDSL paid. Such investment will be reinstated at the net asset value per share
established as of the close of the NYSE on the day the request is received.
Seligman Data Corp. must be informed that the purchase is a reinstated
investment. REINSTATED SHARES MUST BE REGISTERED EXACTLY AND BE OF THE SAME
CLASS AS THE SHARES PREVIOUSLY REDEEMED; AND THE FUND'S MINIMUM INVESTMENT MUST
BE MET AT THE TIME OF REINSTATEMENT.
Generally, exercise of the Reinstatement Privilege does not alter the
Federal income tax status of any capital gain realized on a sale of Series
shares, but to the extent that any shares are sold at a loss and the proceeds
are reinvested in shares of the same Series, some or all of the loss will not be
allowed as a deduction, depending upon the percentage of the proceeds
reinvested.
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
Under the Series' Administration, Shareholder Services and Distribution
Plan (the "Plan"), the Series may pay to SFSI an administration, shareholder
services and distribution fee in respect of the Series' Class A, Class B and
Class D shares. Payments under the Plan may include, but are not limited to: (i)
compensation to securities dealers and other organizations ("Service
Organizations") for providing distribution assistance with respect to assets
invested in the Series, (ii) compensation to Service Organizations for providing
administration, accounting and other shareholder services with respect to Series
shareholders, and (iii) otherwise promoting the sale of shares of the Series,
including paying for the preparation of advertising and sales literature and the
printing and distribution of such promotional materials and prospectuses to
prospective investors and defraying SFSI's costs incurred in connection with its
marketing efforts with respect to shares of the Series. The Manager, in its sole
discretion, may also make similar payments to SFSI from its own resources, which
may include the management fee that the Manager receives from the Series.
Under the Plan, the Series reimburses SFSI for its expenses with respect to
Class A shares at an annual rate of up to .25% of the average daily net asset
value of Class A shares. It is expected that the proceeds from the fee in
respect of Class A shares will be used primarily to compensate Service
Organizations which enter into agreements with SFSI. Such Service Organizations
will receive from SFSI a continuing fee of up to .25% on an annual basis,
payable quarterly, of the average daily net assets of Class A shares
attributable to the particular Service Organization for providing personal
service and/or the maintenance of shareholder
21
<PAGE>
accounts. The fee payable from time to time is, within such limit, determined by
the Trustees of the Fund.
The Plan, as it relates to Class A shares, was approved by the Trustees on
October 9, 1984 and was approved by the shareholders of the Series on April 10,
1986. The Plan is reviewed by the Trustees annually. The total amount paid for
the year ended December 31, 1997 in respect of the Series' Class A shares
pursuant to the Plan was equal to .22% of the Class A shares' average daily net
assets.
Under the Plan, the Series reimburses SFSI for its expenses with respect to
Class B and Class D shares at an annual rate of up to 1% of the respective
average daily net asset value of the Class B and Class D shares. Proceeds from
the Class B distribution fees are used to pay Service Organizations a continuing
fee of up to .25% on an annual basis of the average daily net asset value of
Class B shares attributable to particular Service Organizations for providing
personal service and/or the maintenance of shareholder accounts and will also be
used by SFSI to defray the expense of the payment of 4% made by it to Service
Organizations at the time of the sale of Class B shares. In that connection,
SFSI has assigned FEP its interest in the fees payable to it in respect of the
Class B shares, other than the portion payable to Service Organizations on a
continuing basis. Proceeds from the Class D distribution fees are used primarily
to compensate Service Organizations for administration, shareholder services and
distribution assistance (including a continuing fee of up to .25% on an annual
basis of the average daily net asset value of Class D shares attributable to
particular Service Organizations for providing personal service and/or
maintenance of shareholder accounts) and will initially be used by SFSI to
defray the expense of the payment of 1% made by it to Service Organizations at
the time of sale of Class D shares. The amounts expended by SFSI in any one year
upon the initial purchase of Class B and Class D shares may exceed the amounts
received by it from Plan payments retained. Expenses of administration,
shareholder services and distribution of Class B and Class D shares in one
fiscal year may be paid from Class B and Class D Plan fees, respectively,
received in any other fiscal year.
The Plan, as it relates to Class B shares, was approved by the Trustees on
September 19, 1996 and became effective January 1, 1997. The Plan, as it relates
to Class D shares, was amended by the Trustees of the Fund on July 15, 1993. The
total amount paid for the year ended December 31, 1997 by the Series' Class B
and Class D shares pursuant to the Plan was 1% per annum of the average daily
net assets of the Class B and Class D shares. The Plan is reviewed by the Fund's
Trustees annually.
Seligman Services, Inc. ("SSI"), an affiliate of the Manager, is a limited
purpose broker/dealer. SSI acts as broker/dealer of record for most shareholder
accounts that do not have a designated broker/dealer of record, including all
such shareholder accounts established after April 1, 1995 and will receive
compensation for providing personal service and account maintenance to its
accounts of record.
EXCHANGE PRIVILEGE
A shareholder of the Series may, without charge, exchange at net asset
value any part or all of an investment in the Series for shares of the other
series of the Fund or for shares of any of the other Seligman Mutual Funds.
Exchanges may be made by mail, or by telephone if the shareholder has telephone
services.
Class A, Class B and Class D shares may be exchanged only for Class A,
Class B and Class D shares, respectively, of the other series of the Fund or
another mutual fund in the Seligman Group on the basis of relative net asset
value.
If shares that are subject to a CDSL are exchanged for shares of another
Seligman Mutual Fund, then for purposes of assessing the CDSL payable upon
disposition of the exchanged shares, the applicable holding period shall be
reduced by the period for which the original shares were held.
Class B shareholders of the Series exercising the exchange privilege will
continue to be subject to the
22
<PAGE>
Series' CDSL schedule if such schedule is higher or longer than the CDSL
schedule relating to the new Class B shares. In addition, Class B shares of the
Series acquired through exchange will be subject to the Series' CDSL schedule if
such schedule is higher or longer than the CDSL schedule relating to the Class B
shares of the fund from which such shares were exchanged.
The Seligman Mutual Funds available under the Exchange Privilege are:
o SELIGMAN CAPITAL FUND, INC. seeks aggressive capital appreciation.
Current income is not an objective.
O SELIGMAN CASH MANAGEMENT FUND, INC. invests in high quality money market
instruments. Shares are sold at net asset value.
O SELIGMAN COMMON STOCK FUND, INC. seeks favorable current income and
long-term growth of both income and capital value without exposing capital to
undue risk.
O SELIGMAN COMMUNICATIONS AND INFORMATION FUND, INC. invests in shares of
companies in the communications, information and related industries to produce
capital gain. Income is not an objective.
O SELIGMAN FRONTIER FUND, INC. seeks to produce growth in capital value.
Income may be considered but will only be incidental to the fund's investment
objective.
O SELIGMAN GROWTH FUND, INC. seeks longer-term growth in capital value and
an increase in future income.
O SELIGMAN HENDERSON GLOBAL FUND SERIES, INC. consists of the Seligman
Henderson International Fund, the Seligman Henderson Emerging Markets Growth
Fund, the Seligman Henderson Global Growth Opportunities Fund, the Seligman
Henderson Global Smaller Companies Fund and the Seligman Henderson Global
Technology Fund, which seek long-term capital appreciation primarily by
investing in companies either globally or internationally.
O SELIGMAN HIGH INCOME FUND SERIES seeks high current income by investing
in debt securities. In addition to the Series, the Fund consists of the
High-Yield Bond Series.
O SELIGMAN INCOME FUND, INC. seeks high current income and the possibility
of improvement of future income and capital value.
O SELIGMAN MUNICIPAL FUND SERIES, INC. consists of several State Series and
a National Series. The National Municipal Series seeks to provide maximum income
exempt from regular federal income taxes; individual state series, each seeking
to maximize income exempt from regular federal income taxes and from personal
income taxes in designated states are available for Colorado, Georgia,
Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New York,
Ohio, Oregon and South Carolina. (Does not currently offer Class B shares.)
O SELIGMAN MUNICIPAL SERIES TRUST includes the California Municipal
High-Yield Series, the California Municipal Quality Series, the Florida
Municipal Series and the North Carolina Municipal Series, each of which invests
in municipal securities of its designated state. (Does not currently offer Class
B shares.)
O SELIGMAN NEW JERSEY MUNICIPAL FUND, INC. invests in investment grade New
Jersey municipal securities. (Does not currently offer Class B shares.)
O SELIGMAN PENNSYLVANIA MUNICIPAL FUND SERIES invests in investment grade
Pennsylvania municipal securities. (Does not currently offer Class B shares.)
O SELIGMAN VALUE FUND SERIES, INC. consists of the Seligman Large-Cap Value
Fund and the Seligman Small-Cap Value Fund each of which seeks long-term capital
appreciation by investing in equity securities of value companies primarily
located in the U.S.
All permitted exchanges will be based on the net asset values of the
respective funds determined at the close of regular trading on the NYSE on that
day. Telephone requests for exchanges received by the close of regular trading
on the NYSE (normally, 4:00 p.m.
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Eastern time) by Seligman Data Corp. at (800) 221-2450, will be processed as of
the close of business on that day. Requests received after the close of regular
trading on the NYSE will be processed at the net asset values per share
calculated the following business day. The registration of an account into which
an exchange is made must be identical to the registration of the account from
which shares are exchanged. When establishing a new account by an exchange of
shares, the shares being exchanged must have a value of at least the minimum
initial investment required by the mutual fund into which the exchange is being
made. THE METHOD OF RECEIVING DISTRIBUTIONS, UNLESS OTHERWISE INDICATED, WILL BE
CARRIED OVER TO THE NEW FUND ACCOUNT, AS WILL TELEPHONE SERVICES. ACCOUNT
SERVICES, SUCH AS INVEST-A-CHECK(R) SERVICE, DIRECTED DIVIDENDS, SYSTEMATIC
WITHDRAWAL PLAN AND CHECK WRITING PRIVILEGE WILL NOT BE CARRIED OVER TO THE NEW
FUND ACCOUNT UNLESS SPECIFICALLY REQUESTED AND PERMITTED BY THE NEW FUND.
Exchange orders may be placed to effect an exchange of a specific number of
shares, an exchange of shares equal to a specific dollar amount or an exchange
of all shares held. Shares for which certificates have been issued may not be
exchanged via telephone and may be exchanged only upon receipt of a written
exchange request together with certificates representing shares to be exchanged
in proper form.
The Exchange Privilege via mail is generally applicable to investments in
group retirement plans, although some restrictions may apply. The terms of the
exchange offers described herein may be modified at any time; and not all of the
Seligman Mutual Funds are available to residents of all states. Before making
any exchange, a shareholder should contact an authorized investment dealer or
Seligman Data Corp. to obtain prospectuses of any of the Seligman Mutual Funds.
A broker/dealer representative of record will be able to effect exchanges
on behalf of a shareholder only if the shareholder has telephone services or the
broker/dealer has entered into a Telephone Exchange Agreement with SFSI wherein
the broker/dealer must agree to indemnify SFSI and the Seligman Mutual Funds
from any loss or liability incurred as a result of the acceptance of telephone
exchange orders.
Written confirmation of all exchanges will be forwarded to the shareholder
to whom the exchanged shares are registered and a duplicate confirmation will be
sent to the broker/dealer of record listed on the account. SFSI reserves the
right to reject any telephone exchange request. Any rejected telephone exchange
order may be processed by mail. For more information about telephone exchange
privileges, which unless objected to, are assigned to most shareholders
automatically, and the circumstances under which shareholders may bear the risk
of loss for a fraudulent transaction, see "Telephone Transactions" above.
Exchanges of shares are sales and may result in a gain or loss for federal
income tax purposes.
FURTHER INFORMATION ABOUT TRANSACTIONS IN THE SERIES
BECAUSE EXCESSIVE TRADING (INCLUDING SHORT-TERM, "MARKET TIMING" TRADING)
CAN HURT THE SERIES' PERFORMANCE, THE FUND MAY REFUSE ANY EXCHANGE (1) FROM ANY
SHAREHOLDER ACCOUNT FROM WHICH THERE HAVE BEEN TWO EXCHANGES IN THE PRECEDING
THREE MONTH PERIOD, OR (2) WHERE THE EXCHANGED SHARES EQUAL IN VALUE THE LESSER
OF $1,000,000 OR 1% OF THE SERIES' NET ASSETS. THE FUND MAY ALSO REFUSE ANY
EXCHANGE OR PURCHASE ORDER FROM ANY SHAREHOLDER ACCOUNT IF THE SHAREHOLDER OR
THE SHAREHOLDER'S BROKER/DEALER HAS BEEN ADVISED THAT PREVIOUS PATTERNS OF
PURCHASES AND REDEMPTIONS OR EXCHANGES HAVE BEEN CONSIDERED EXCESSIVE. Accounts
under common ownership or control, including those with the same taxpayer ID
number and those administered so as to redeem or purchase shares based upon
certain predetermined market indicators, will be considered one account for this
purpose. Additionally, the Fund reserves the right to refuse any order for the
purchase of shares.
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DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Series' net investment income is distributed to shareholders monthly in
the form of additional shares, unless the shareholder elects otherwise. Payments
vary in amount depending on income received from the Series' investments and the
costs of operations. Shares begin earning dividends on the day on which the Fund
receives payment. Shares continue to earn dividends through the date preceding
the date they are redeemed.
The Series distributes substantially all of any taxable net long-term and
short-term gain realized on investments to shareholders at least annually. In
determining amounts of capital gains to be distributed, any capital loss
carryforwards from prior years will offset capital gains. For federal income tax
purposes, the Series had a capital loss carryforward as of December 31, 1997 of
$14,118,544 (including $768,276 transferred from the Seligman Secured Mortgage
Income Series), of which $4,632,918 expires in 1998, $12,467 expires in 2001,
$8,470,786 expires in 2002, $390,430 expires in 2004 and $611,943 expires in
2005. Accordingly, the Series may not distribute capital gains (short-term or
long-term) to shareholders until net gains have been realized in excess of the
capital loss carryforward.
Shareholders may elect: (1) to receive both dividends and gain
distributions in shares; (2) to receive dividends in cash and gain distributions
in shares; (3) to receive both dividends and gain distributions in cash. Cash
dividends and gain distributions are paid by check and sent to the shareholder's
address of record or, if elected by a shareholder who has current bank
information on file with Seligman Data Corp., electronically deposited into the
shareholder's predesignated bank account. Such deposits will normally be
credited to the shareholder's bank account in 3 to 4 business days after the
payable date of the dividend or gain distribution.
In the case of prototype retirement plans, dividends and gain distributions
are reinvested in additional shares. Unless another election is made, dividends
and capital gain distributions will be credited to shareholder accounts in
additional shares. Shares acquired through a dividend or gain distribution and
credited to a shareholder's account are not subject to an initial sales load or
a CDSL. Dividends and gain distributions paid in shares are invested on the
payable date using the net asset value of the ex-dividend date. Shareholders may
elect to change their dividend and gain distribution options by writing Seligman
Data Corp. at the address listed below. If the shareholder has telephone
services, changes may also be telephoned to Seligman Data Corp. between 8:30
a.m. and 6:00 p.m. Eastern time, by either the shareholder or the broker/dealer
of record on the account. For information about telephone services, see
"Telephone Transactions." These elections must be received by Seligman Data
Corp. before the record date for the dividend or gain distribution in order to
be effective for such dividend or gain distribution. For information on how to
have dividend or gain distributions electronically deposited into a
shareholder's bank account, contact Seligman Data Corp.
The per share dividends from net investment income on Class B and Class D
shares will be lower than the per share dividends on Class A shares as a result
of the higher distribution fees applicable with respect to Class B and Class D
shares. Per share dividends of the three classes may also differ as a result of
differing class expenses. Distributions of net capital gains, if any, will be
paid in the same amount for Class A, Class B and Class D shares. See "Purchase
of Shares--Valuation."
Shareholders exchanging shares of one mutual fund for shares of another
mutual fund in the Seligman Group will continue to receive dividends and gains
as elected prior to such exchange unless otherwise specified. In the event that
a shareholder redeems all shares in an account between the record date and the
payable date, the value of any dividends or gain distributions declared will be
paid in cash regardless of the existing election. A transfer or exchange of all
shares (closing an account), between the record date and payable date, will
result in the value of dividends or gain distributions being paid to the new
fund account in accordance with
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the option on the closed account, unless Seligman Data Corp. is instructed
otherwise.
FEDERAL INCOME TAXES
The Series intends to continue to qualify as a regulated investment company
under the Code. For each year so qualified, the Series will not be subject to
federal income taxes on its net investment income and capital gains, if any,
realized during any taxable year, which it distributes to its shareholders,
provided that at least 90% of its net investment income and net short-term
capital gains are distributed to shareholders each year.
Dividends from net investment income and distributions from net short-term
capital gains are taxable as ordinary income to shareholders, whether received
in cash or reinvested in additional shares, and are, generally, not eligible for
the dividends received deduction for corporations.
Distributions of net capital gain (i.e., the excess of net long-term
capital gains over any net short-term losses) are taxable as long-term capital
gain, whether received in cash or invested in additional shares, regardless of
how long shares have been held by a shareholder. Such distributions are not
eligible for the dividends received deduction allowed to corporate shareholders.
Shareholders receiving distributions in the form of additional shares issued by
the Series will be treated for federal income tax purposes as having received a
distribution in an amount equal to the fair market value on the date of
distribution of the shares received. Individual shareholders will be subject to
federal income tax on distributions of net capital gains at a maximum rate of
28% if designated as derived from the Series' capital gains from property held
for more than one year and at a maximum rate of 20% if designated as derived
from the Series' capital gains from property held for more than eighteen months.
As noted above, the Series must exhaust its capital loss carry forward before it
may make capital gain distributions to shareholders.
Any gain or loss realized upon a sale or redemption of shares in the Series
by a shareholder who is not a dealer in securities will generally be treated as
a long-term capital gain or loss if the shares have been held for more than one
year and otherwise as a short-term capital gain or loss. Individual shareholders
will be subject to federal income tax on net capital gain at a maximum rate of
28% in respect of shares held for more than one year and at a maximum rate of
20% in respect of shares held for more than eighteen months. Net capital gain of
a corporate shareholder is taxed at the same rate as ordinary income. However,
if shares on which a long-term capital gain distribution has been received are
subsequently sold or redeemed and such shares have been held for six months or
less, any loss realized will be treated as long-term capital loss to the extent
that it offsets the long-term capital gain distribution. In addition, no loss
will be allowed on the sale or other disposition of shares of the Series if,
within a period beginning 30 days before the date of such sale or disposition
and ending 30 days after such date, the holder acquires (such as through
dividend reinvestment) securities that are substantially identical to the shares
of the Series.
In determining gain or loss on shares of the Series that are sold or
exchanged within 90 days after acquisition, a shareholder generally will not be
permitted to include in the tax basis attributable to such shares the sales load
incurred in acquiring such shares to the extent of any subsequent reduction in
the sales load by reason of the Exchange or Reinstatement Privilege offered by
the Series. Any sales load not taken into account in determining the tax basis
of shares sold or exchanged within 90 days after acquisition will be added to
the shareholder's tax basis in the shares acquired pursuant to the Exchange or
Reinstatement Privilege.
The Series will generally be subject to an excise tax of 4% on the amount
of any income or capital gains, above certain permitted levels, distributed to
shareholders on a basis such that such income or gain is not taxable to
shareholders in the calendar year in which it was earned. Furthermore, dividends
declared in October, November or December payable to shareholders of record on a
specified date in such a month and paid in the following January will be treated
as having been paid by the Series and received by each shareholder in December.
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Under this rule, therefore, shareholders may be taxed in one year on dividends
or gain distributions actually received in January of the following year.
Shareholders are urged to consult their tax advisors concerning the effect
of federal income taxes in their individual circumstances.
UNLESS A SHAREHOLDER INCLUDES A CERTIFIED TAXPAYER IDENTIFICATION NUMBER
(SOCIAL SECURITY NUMBER FOR INDIVIDUALS) ON THE ACCOUNT APPLICATION AND
CERTIFIES THAT THE SHAREHOLDER IS NOT SUBJECT TO BACKUP WITHHOLDING, THE FUND IS
REQUIRED TO WITHHOLD AND REMIT TO THE U.S. TREASURY A PORTION OF DISTRIBUTIONS
AND OTHER REPORTABLE PAYMENTS TO THE SHAREHOLDER. THE RATE OF BACKUP WITHHOLDING
IS 31%. SHAREHOLDERS SHOULD BE AWARE THAT, UNDER REGULATIONS PROMULGATED BY THE
INTERNAL REVENUE SERVICE, THE FUND MAY BE FINED $50 ANNUALLY FOR EACH ACCOUNT
FOR WHICH A CERTIFIED TAXPAYER IDENTIFICATION NUMBER IS NOT PROVIDED. IN THE
EVENT THAT SUCH A FINE IS IMPOSED, THE FUND MAY CHARGE A SERVICE FEE OF UP TO
$50 THAT MAY BE DEDUCTED FROM THE SHAREHOLDER'S ACCOUNT AND OFFSET AGAINST ANY
UNDISTRIBUTED DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS. THE FUND ALSO RESERVES
THE RIGHT TO CLOSE ANY ACCOUNT WHICH DOES NOT HAVE A CERTIFIED TAXPAYER
IDENTIFICATION NUMBER.
SHAREHOLDER INFORMATION
Shareholders will be sent reports semi-annually regarding the Series.
General information about the Series may be requested by writing the Corporate
Communications/Investor Relations Department, J. & W. Seligman & Co.
Incorporated, 100 Park Avenue, New York, NY 10017 or by telephoning the
Corporate Communications/Investor Relations Department toll-free at (800)
221-7844 from all continental United States or (212) 850-1864 in the New York
City area. Information about shareholder accounts may be requested by writing
Shareholder Services, Seligman Data Corp. at the same address or by calling
toll-free (800) 221-2450 from all continental United States, or (212) 682-7600
outside the continental United States. Seligman Data Corp. may be telephoned
Monday through Friday (except holidays), between the hours of 8:30 a.m. and 6:00
p.m. Eastern time, and calls will be answered by a service representative.
24 HOUR TELEPHONE ACCESS IS AVAILABLE BY DIALING (800) 622-4597 ON A
TOUCHTONE PHONE, WHICH PROVIDES INSTANT ACCESS TO PRICE, YIELD, ACCOUNT BALANCE,
MOST RECENT TRANSACTION AND OTHER INFORMATION. IN ADDITION, ACCOUNT STATEMENTS,
FORM 1099-DIV AND CHECKBOOKS MAY BE ORDERED. TO INSURE PROMPT DELIVERY OF
DISTRIBUTION CHECKS, ACCOUNT STATEMENTS AND OTHER INFORMATION, SELIGMAN DATA
CORP. SHOULD BE NOTIFIED IMMEDIATELY IN WRITING OF ANY ADDRESS CHANGE. ADDRESS
CHANGES MAY BE TELEPHONED TO SELIGMAN DATA CORP. IF THE SHAREHOLDER HAS
TELEPHONE SERVICES. FOR MORE INFORMATION ABOUT TELEPHONE SERVICES, SEE
"TELEPHONE TRANSACTIONS" ABOVE.
ACCOUNT SERVICES. Shareholders are sent confirmation of financial
transactions in their account. Other investor services are available. These
include:
o INVEST-A-CHECK(R) SERVICE enables a shareholder to authorize additional
purchases of shares automatically by electronic funds transfer from the
shareholders savings or checking account, if the shareholder's bank is a member
of the Automated Clearing House ("ACH"), or by preauthorized checks to be drawn
on the shareholder's checking account at regular monthly intervals in fixed
amounts of $100 or more per fund, or regular quarterly intervals in fixed
amounts of $250 or more per fund, to purchase shares. Accounts may be
established concurrently with the Invest-A-Check(R) Service only iF accompanied
by a check for at least $100 in conjunction with the monthly investment option
or a check for at least $250 in conjunction with the quarterly investment
option. By utilizing the Invest-A-Check(R) Service to establish an account, you
are agreeing to continue the service until the Series' minimum investment amount
is met. If you elect to cancel the service prior to meeting the minimum, your
account may be subject to closure. (See "Terms and Conditions.")
o AUTOMATIC DOLLAR-COST-AVERAGING SERVICE permits a shareholder of the
Seligman Cash Management Fund
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to exchange a specified amount, at regular monthly intervals in fixed amounts of
$100 or more per fund, or regular quarterly intervals in fixed amounts of $250
or more per fund, from shares of any class of the Cash Management Fund into
shares of the same class of any other Seligman Mutual Fund registered in the
same name. The shareholder's Cash Management Fund account must have a value of
at least $5,000 at the initiation of the service. Exchanges will be made at the
public offering price.
o DIVIDENDS FROM OTHER INVESTMENTS permits a shareholder to order dividends
payable on shares of other companies to be paid to and invested in additional
shares of the Series or another Seligman Mutual Fund. (Dividend checks must
include the shareholder's name, account number, the name of the fund and the
class of shares in which the investment is to be made.) If the dividends are to
be invested in a new fund account, the first investment must meet the required
minimum purchase amount for such fund.
A shareholder may also direct that dividends payable on shares of other
companies be transferred electronically to purchase shares of any Seligman
Mutual Fund, if the other company provides this service. See "Purchase of
Shares" or contact Seligman Data Corp. for more information.
o AUTOMATIC CD TRANSFER SERVICE permits a shareholder to instruct a bank to
invest the proceeds of a maturing bank certificate of deposit ("CD") in shares
of any designated Seligman Mutual Fund. Shareholders who wish to use this
service should contact Seligman Data Corp. or a broker to obtain the necessary
documentation. Banks may charge a penalty on CD assets withdrawn prior to
maturity. Accordingly, it will not normally be advisable to liquidate a CD
before its maturity.
o SYSTEMATIC WITHDRAWAL PLAN permits payments in fixed amounts of $50 or
more at regular intervals to be made to a shareholder who owns or purchases
shares worth $5,000 or more held as book credits. Payments will be sent by check
to the address designated by the shareholder or, if elected by a shareholder who
has current bank information on file with Seligman Data Corp., electronically
deposited into the shareholder's predesignated bank account. Such deposits will
normally be credited to the shareholder's bank account in 2 to 3 business days
after the shares are redeemed from the shareholder's fund account. Holders of
Class A shares purchased at net asset value because the purchase amount was
$1,000,000 or more should bear in mind that withdrawals will be subject to a
CDSL if made within eighteen months of purchase of such shares. Holders of Class
B and Class D shares may elect to use this plan immediately, although certain
withdrawals may be subject to a CDSL. (See "Terms and Conditions.")
o DIRECTED DIVIDENDS allows a shareholder to pay dividends to another
person or to direct the payment of such dividends to another Seligman Mutual
Fund for purchase at net asset value. Dividends on Class A, Class B and Class D
shares may only be directed to shares of the same class of another Seligman
Mutual Fund.
o OVERNIGHT DELIVERY to service shareholder requests is available for a
$15.00 fee which may be deducted from a shareholder's account, if requested.
o COPIES OF ACCOUNT STATEMENTS will be sent to each shareholder free of
charge for the current year and most recent prior year. Copies of year-end
statements for prior years back to 1985 are available for a fee of $10.00 per
year, per account, with a maximum charge of $150 per account. Statement requests
should be forwarded, along with a check, to Seligman Data Corp.
o TAX-DEFERRED PLANS. Shares of the Series may be purchased for:
-Individual Retirement Accounts (IRAs), including Traditional IRAs, Roth
IRAs and Education IRAs;
-Savings Incentive Match Plans for Employees (SIMPLE IRAs);
-Simplified Employee Pension Plans (SEPs);
-Section 401(k) Plans for corporations and their employees;
-Section 403(b)(7) Plans for employees of public school systems and certain
non-profit organizations who wish to make deferred compensation arrangements;
and
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-Money Purchase Pension and Profit Plans for sole proprietorships,
partnerships and corporations.
These types of plans may be established only upon receipt of a written
application form. The Fund may register an IRA investment for which an account
application has not been received as an ordinary taxable account.
For more information, write Retirement Plan Services, Seligman Data Corp.,
100 Park Avenue, New York, NY 10017 or telephone toll-free (800) 445-1777 from
all continental United States. You also may receive information through an
authorized dealer.
ADVERTISING THE SERIES' PERFORMANCE
From time to time the Series advertises its "yield," "total return" and
"average annual total return," each of which are calculated separately for Class
A, Class B and Class D shares. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS
AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "yield" of a class of
the Series refers to the income generated by an investment in that class over a
30-day period. This income is then "annualized." That is, the amount of income
generated by the investment during that 30-day period is assumed to be generated
each 30-day period for twelve periods and is shown as a percentage of the
investment. The income earned on the investment is also assumed to be reinvested
at the end of the sixth 30-day period. The "total return" shows what an
investment in shares of a class of the Series would have earned over a specified
period of time (for example, one, five and ten years or from the inception)
assuming the payment of the maximum sales load, if any, when the investment was
first made and that all distributions and dividends by that class were
reinvested on the reinvestment dates during the period. The "average annual
total return" is the annual rate required for the initial payment to grow to the
amount which would be received at the end of the specified period (one, five and
ten years or from the inception); i.e., the average annual compound rate of
return. Total return and average annual total return may also be presented
without the effect of the initial sales load or CDSL, as applicable.
From time to time, reference may be made in advertising or promotional
material to performance information, including mutual fund rankings, prepared by
Lipper Analytical Services, Inc. ("Lipper"), an independent reporting service
which monitors the performance of mutual funds. In calculating the total return
of the Series' Class A, Class B and Class D shares, the Lipper analysis assumes
investment of all dividends and distributions paid but does not take into
account applicable sales loads. The Series may also refer in advertisements or
in other promotional material to articles, comments, listings and columns in the
financial press pertaining to the Series' performance. Examples of such
financial and other press publications include BARRON'S, BUSINESS WEEK,
CDA/WEISENBERGER MUTUAL FUNDS INVESTMENT REPORT, CHRISTIAN SCIENCE MONITOR,
FINANCIAL PLANNING, FINANCIAL TIMES, FINANCIAL WORLD, FORBES, FORTUNE,
INDIVIDUAL INVESTOR, INVESTMENT ADVISOR, INVESTORS BUSINESS DAILY, KIPLINGER'S,
LOS ANGELES TIMES, MONEY MAGAZINE, MORNINGSTAR, INC., PENSION AND INVESTMENTS,
SMART MONEY, THE NEW YORK TIMES, USA TODAY, U.S. NEWS AND WORLD REPORT, THE WALL
STREET JOURNAL, WASHINGTON POST, WORTH MAGAZINE and YOUR MONEY.
ORGANIZATION AND CAPITALIZATION
The Fund is a diversified, open-end management investment company organized
under the laws of the Commonwealth of Massachusetts by a Declaration of Trust
dated July 27, 1984. The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest, $.001 par
value. The Trustees also have the power to create additional series of shares.
Shares of beneficial interest of two series have been authorized, which
shares of beneficial interest constitute interests in the Series and the
Seligman High-Yield Bond Series. Shares of beneficial interest of the Series and
the Seligman High-Yield Bond Series are divided into three classes (Class A,
Class B and Class D). Each share
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of beneficial interest of the Series' and the Seligman High-Yield Bond Series'
respective classes is equal as to earnings, assets and voting privileges, except
that each class bears its own separate distribution and, potentially, certain
other class expenses and has exclusive voting rights with respect to any matter
to which a separate vote of any class is required by the 1940 Act or
Massachusetts law. The Fund has adopted a plan (the `Multiclass Plan") pursuant
to Rule 18f-3 under the 1990 Act permitting the issuance and sale of multiple
classes of shares of beneficial interest. In accordance with the Declaration of
Trust, the Trustees may authorize the creation of additional classes of shares
of beneficial interest with such characteristics as are permitted by the
Multiclass Plan and Rule 18f-3. The 1940 Act requires that where more than one
class exists, each class must be preferred over all other classes in respect of
assets specifically allocated to such class. Shares entitle their holders to one
vote per share. Shares have noncumulative voting rights, do not have preemptive
or subscription rights and are transferable. It is the intention of the Fund not
to hold Annual Meetings of Shareholders. The Trustees may call Special Meetings
of Shareholders for action by shareholder vote as may be required by the 1940
Act or Declaration of Trust. Pursuant to the 1940 Act, shareholders have to
approve the adoption of any management contract, distribution plan and any
changes in fundamental investment policies. Shareholders also have the right to
call a meeting of shareholders for the purpose of voting on the removal of one
or more Trustees. Such removal can be effected upon the action of two-thirds of
the outstanding shares of the Fund.
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TERMS AND CONDITIONS
GENERAL ACCOUNT INFORMATION
Investments will be made in as many shares, including fractions to the third
decimal place, as can be purchased at the net asset value plus a sales load, if
applicable, at the close of business on the day payment is received. If a check
received in payment of a purchase of shares is dishonored for any reason,
Seligman Data Corp. may cancel the purchase and may also redeem additional
shares, if any, held in the shareholder's account in an amount sufficient to
reimburse the Fund for any loss it may have incurred and charge a $10.00 return
check fee. Shareholders will receive dividends from investment income and any
distributions from gain realized on investments in shares or in cash according
to the option elected. Dividend and gain options may be changed by notifying
Seligman Data Corp. These option changes must be received by Seligman Data Corp.
before the record date for the dividend or distribution to be effective for such
dividend or distribution. Stock certificates will not be issued unless
requested. Replacement stock certificates and certain waiver of probate
procedures will be subject to a surety fee.
INVEST-A-CHECK(R) SERVICE
The Invest-A-Check(R) Service is available to all shareholders. The
application is subject to acceptance by thE shareholder's bank and Seligman Data
Corp. The electronic funds transfer ("ACH debit") or preauthorized check in the
amount specified will be drawn automatically on the shareholder's bank on the
fifth day (unless otherwise specified) of each month (or on the prior business
day if such day of the month falls on a weekend or holiday) in which an
investment is scheduled and invested at the close of business on the same date.
By utilizing the Invest-A-Check(R) Service tO establish an account, you are
agreeing to continue the service until the Fund's minimum investment amount is
met. If you elect to cancel the service prior to meeting the minimum, your
account may be subject to closure. If a check is not honored by the
shareholder's bank, or if the value of shares held falls below the required
minimum, the Invest-A-Check(R) Service may be suspended. In the event that a
check or ACH debit is returned as uncollectable, Seligman Data Corp. will cancel
the purchase, redeem shares held in the shareholder's account for an amount
sufficient to reimburse the Fund for any loss it may have incurred as a result,
and charge a $10.00 return check fee. This fee will be deducted from the
shareholder's account. The Invest-A-Check(R) Service may be reinstated upon
written request indicating that the cause of interruption has been corrected.
The Invest-A-Check(R) Service may be terminated by the shareholder's or Seligman
Data Corp. at any time by written notice. The shareholder agrees to hold the
Fund and its agents free from all liability which may result from acts done in
good faith and pursuant to these terms. Instructions for establishing
Invest-A-Check(R) Service are given on the Account Application. In the event a
shareholder exchanges all of the shares from one Seligman Mutual Fund to
another, the Invest-A-Check(R) Service will be terminated in the Seligman Mutual
Fund that was closed as a result of the exchange of all shares and the
shareholder must re-apply for the Invest-A-Check(R) Service in the Seligman
Mutual Fund into which the exchange was made. In the event of a partial
exchange, the Invest-A-Check(R) Service will be continued, subject to the above
conditions, in the Seligman Mutual Fund from which the exchange was made.
Accounts established in conjunction with the Invest-A-Check(R) Service must be
accompanied by a check for at least $100 in connection with the monthly
investment option or a check for at least $250 in connection with the quarterly
investment option. If a shareholder uses the Invest-A-Check(R) Service to make
an IRA or group retirement plan investment, the purchase will be credited as a
current year contribution.
SYSTEMATIC WITHDRAWAL PLAN
A sufficient number of full and fractional shares will be redeemed to
provide the amount required for a scheduled payment and any applicable CDSL.
Redemptions will be made at the net asset value at the close of business on the
specific day of each month designated by the shareholder (or on the prior
business day if the day specified falls on a weekend or holiday), less, in the
case of Class B or Class D shares, any applicable CDSL. Systematic withdrawals
of Class A shares which were purchased at net asset value because the purchase
amount was $1,000,000 or more will be subject to a CDSL if made within eighteen
months of purchase of such shares. Under this plan, a Class B or Class D
shareholder who requests both dividends and capital gain distributions in
additional shares may withdraw up to 12% or 10%, respectively, of the value of
the shareholder's fund account (at the time of election) per annum, without the
imposition of a CDSL. A minimum payment amount of $50 per cycle is needed to
establish this plan. A shareholder may change the amount of scheduled payments
or may suspend payments by written notice to Seligman Data Corp. at least ten
days prior to the effective date of such a change or suspension. The plan may be
terminated by the shareholder or Seligman Data Corp. at any time by written
notice. It will be terminated upon proper notification of the death or legal
incapacity of the shareholder. This plan is considered terminated in the event a
withdrawal of shares, other than to make scheduled withdrawal payments, reduces
the value of shares remaining on deposit to less than $5,000. Continued payments
in excess of dividend income invested will reduce and ultimately exhaust
capital. Withdrawals, concurrent with purchases of shares of this or any other
investment company, will be disadvantageous because of the payment of
duplicative sales loads, if applicable. For this reason, additional purchases of
Series shares are discouraged when the Withdrawal Plan is in effect.
LETTER OF INTENT -- CLASS A SHARES ONLY
Seligman Financial Services, Inc. will hold in escrow shares equal to 5% of
the minimum purchase amount specified. Dividends and distributions on the
escrowed shares will be paid to the shareholder or credited to the shareholder's
account. Upon completion of the specified minimum purchase within the
thirteen-month period, all shares held in escrow will be deposited into the
shareholder's account or delivered to the shareholder. A shareholder may include
toward the completion of a Letter of Intent the total asset value of shares of
the Seligman Mutual Funds on which an initial sales load was paid as of the date
of the Letter. If the total amount invested within the thirteen-month period
does not equal or exceed the specified minimum purchase, the shareholder will be
requested to pay the difference between the amount of the sales load paid and
the amount of the sales load applicable to the total purchase made. If, within
20 days following the mailing of a written request, the shareholder has not paid
this additional sales load to Seligman Financial Services Inc., sufficient
escrowed shares will be redeemed for payment of the additional sales load.
Shares remaining in escrow after this payment will be released to the
shareholder's account. The intended purchase amount may be increased at any time
during the thirteen-month period by filing a revised Agreement for the same
period, provided that a Dealer furnishes evidence that an amount representing
the reduction in sales load under the new Agreement, which becomes applicable on
purchases already made under the original Agreement, will be refunded to the
Fund and that the required additional escrowed shares will be purchased by the
shareholder.
Shares of Seligman Cash Management Fund, Inc. which have been acquired by an
exchange of shares of another Seligman Mutual Fund on which there is an initial
sales load may be taken into account in completing a Letter of Intent, or for
Right of Accumulation. However, shares of the Seligman Cash Management Fund
which have been purchased directly may not be used for purposes of determining
reduced sales loads on additional purchases of the other Seligman Mutual Funds.
CHECK REDEMPTION SERVICE
The Check Redemption Service is available to Class A shareholders, to Class
B shareholders and to Class D shareholders with respect to Class D shares held
for one year or more. For Class A shares which were purchased at net asset value
because the purchase amount was $1,000,000 or more, check redemptions within 18
months of purchase may be subject to a CDSL. Check redemptions of Class B shares
also may be subject to a CDSL. If shares are held in joint names, all
shareholders must sign the Check Redemption section of the Account Application.
All checks will require all signatures unless a lesser number is indicated in
the Check Redemption section. Accounts in the names of corporations, trusts,
partnerships, etc. must list all authorized signatories. In all cases, each
signature guarantees the genuineness of the other signatures. Checks may not be
drawn for less than $500.
The shareholder authorizes Boston Safe Deposit and Trust Co. to honor checks
drawn by the shareholder on the account of Seligman U.S. Government Securities
Series and to effect a redemption of sufficient shares in the shareholder's Fund
account to cover payment of the check and any applicable CDSL. The shareholder
understands that shares in one series cannot be redeemed to cover a check
written on another series.
Boston Safe Deposit and Trust Co. shall be liable only for its own
negligence. The Fund will not be liable for any loss, expense or cost arising
out of check redemptions. The Fund reserves the right to change, modify or
terminate this service at any time upon notification mailed to the address of
record of the shareholder(s).
Seligman Data Corp. will charge a $10.00 processing fee for any check
redemption draft returned as uncollectable. This charge may be deducted from the
account against which the check was drawn. No redemption proceeds will be
remitted to a shareholder with respect to shares purchased by check (unless
certified) until Seligman Data Corp. receives notice that the check has cleared
which may be up to 15 days from the credit of the shares to the shareholder's
account.
5/98
31
<PAGE>
This page intentionally left blank.
<PAGE>
SELIGMAN
U.S. GOVERNMENT SECURITIES SERIES
SELIGMAN FINANCIAL SERVICES, INC.
AN AFFILIATE OF
[LOGO]
J.& W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
TXUSG1 5/98
<PAGE>
S E L I G M A N
- ---------------------
High-Yield Bond
Series
(PICTURE)
PROSPECTUS
------
MAY 1, 1998
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
<PAGE>
TABLE OF CONTENTs
SUMMARY OF SERIES EXPENSES 2
FINANCIAL HIGHLIGHTS 3
ALTERNATIVE DISTRIBUTION SYSTEM 5
INVESTMENT OBJECTIVE, POLICIES AND RISKS 7
MANAGEMENT SERVICES 10
PURCHASE OF SHARES 11
TELEPHONE TRANSACTIONS 18
REDEMPTION OF SHARES 19
ADMINISTRATION, SHAREHOLDER SERVICES
AND DISTRIBUTION PLAN 22
EXCHANGE PRIVILEGE 23
FURTHER INFORMATION ABOUT
TRANSACTIONS IN THE SERIES 24
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS 25
FEDERAL INCOME TAXES 26
SHAREHOLDER INFORMATION 27
ADVERTISING THE SERIES' PERFORMANCE 29
ORGANIZATION AND CAPITALIZATION 30
TIMES CHANGE ... VALUES ENDUE
<PAGE>
SELIGMAN HIGH-YIELD BOND SERIES
a series of
Seligman High Income Fund Series
100 Park Avenue o New York, NY 10017 o New York City Telephone: (212) 850-1864
Toll-Free Telephone: (800) 221-2450
For Retirement Plan Information--Toll-Free Telephone: (800) 445-1777
May 1, 1998
Seligman High Income Fund Series (the "Fund") is a diversified, open-end
management investment company that offers two series which each seek to earn
high current income by investing in debt securities but have different
investment objectives and investment policies. Investment advisory and
management services are provided to the Fund by J. & W. Seligman & Co.
Incorporated (the "Manager"); the Fund's distributor is Seligman Financial
Services, Inc., an affiliate of the Manager.
The investment objective of the SELIGMAN HIGH-YIELD BOND SERIES (the
"Series") is to produce maximum current income. The Series seeks to achieve its
objective by investing primarily in high-yielding, high risk corporate bonds and
corporate notes, which, generally, are unrated or carry ratings lower than those
assigned to investment grade bonds by Standard & Poor's Rating Service ("S&P")
or Moody's Investors Service, Inc. ("Moody's"). An investment in the Series is
appropriate for you only if you can bear the high risk inherent in investing in
such securities. There can, of course, be no assurance that the Series will meet
its objective.
THE SERIES WILL INVEST UP TO 100% OF ITS PORTFOLIO IN LOWER RATED BONDS,
COMMONLY KNOWN AS "JUNK BONDS," WHICH ARE SUBJECT TO A GREATER RISK OF LOSS OF
PRINCIPAL AND INTEREST THAN HIGHER RATED INVESTMENT GRADE BONDS. PURCHASERS
SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE SERIES.
SEE "INVESTMENT OBJECTIVE, POLICIES AND RISKS."
The Series offers three classes of shares. Class A shares are sold subject
to an initial sales load of up to 4.75% and an annual service fee currently
charged at a rate of up to .25% of the average daily net asset value of the
Class A shares. Class A shares purchased in an amount of $1,000,000 or more are
sold without an initial sales load 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 load but are subject to a CDSL,
if applicable, of 5% on redemptions in the first year after purchase of such
shares, declining to 1% in the sixth year and 0% thereafter, an annual
distribution fee of .75% and an annual service fee of up to .25% of the average
daily net asset value of the Class B shares. Class B shares will convert
automatically 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 load but are subject to a CDSL of 1% imposed on redemptions within
one year of purchase, an annual distribution fee of up to .75% and an annual
service fee of up to .25% of the average daily net asset value of the Class D
shares. Any CDSL payable upon redemption of Class B or Class D shares will be
assessed on the lesser of the current net asset value or the original purchase
price of the shares redeemed. No CDSL will be imposed on shares acquired through
the reinvestment of dividends or gain distributions received from any class of
shares. See "Alternative Distribution System." Shares of the Series may be
purchased through any authorized investment dealer.
This Prospectus sets forth concisely the information a prospective investor
should know about the Series before investing. Please read it carefully before
you invest and keep it for future reference. Additional information about the
Series, including a Statement of Additional Information, has been filed with the
Securities and Exchange Commission. The Statement of Additional Information is
available upon request and without charge by calling or writing the Fund at the
telephone numbers or the address set forth above. The Statement of Additional
Information is dated the same date as this Prospectus and is incorporated herein
by reference in its entirety.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. SUMMARY OF SERIES EXPENSES
<PAGE>
SUMMARY OF SERIES OF EXPENSES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
---------------- ---------------- ----------------
(INITIAL SALES (DEFERRED SALES (DEFERRED SALES
LOAD LOAD LOAD
ALTERNATIVE) ALTERNATIVE) ALTERNATIVE)
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ............................. 4.75% None None
Sales Load on Reinvested Dividends ................................ None None None
Deferred Sales Load (as a percentage of original purchase price
or redemption proceeds, whichever is lower)...................... None; 5% in 1st year 1% in 1st year
except 1% in 4% in 2nd year None thereafter
first 18 months 3% in 3rd and
if initial sales 4th years
load was waived 2% in 5th year
in full due to size 1% in 6th year
of purchase None thereafter
Redemption Fees ................................................... None None None
Exchange Fees ..................................................... None None None
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
-------- -------- --------
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES FOR 1997
(as a percentage of average net assets)
Management Fees ................................................... .62% .62% .62%
12b-1 Fees ........................................................ .24% 1.00%* 1.00%*
Other Expenses .................................................... .28% .28% .28%
----- ----- -----
Total Series Operating Expenses ................................... 1.14% 1.90% 1.90%
===== ===== =====
</TABLE>
The purpose of this table is to assist investors in understanding the
various costs and expenses which shareholders of the Series may bear directly or
indirectly. The sales load on Class A shares is a one-time charge paid at the
time of purchase of shares. Reductions in initial sales loads are available in
certain circumstances. Class A shares are not subject to an initial sales load
for purchases of $1,000,000 or more; however such shares are subject to a CDSL,
a one-time charge, only if the shares are redeemed within eighteen months of
purchase. The CDSLs on Class B and Class D shares are one-time charges paid only
if shares are redeemed within six years or one year of purchase, respectively.
For More information concerning reductions in sales loads and for a more
complete description of the various costs and expenses, see "Purchase of
Shares," "Redemption of Shares" and "Management Services" herein. The Series'
Administration, Shareholder Services and Distribution Plan to which the caption
"12b-1 Fees" relates, is discussed under "Administration, Shareholder Services
and Distribution Plan" herein.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C>
Aninvestor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period....................... Class A $59 $82 $107 $180
Class B+ 69 90 123 202
Class D 29 60 103 222
An investor would pay the following expenses on the same
investment, assuming no redemption........................... Class A $59 $82 $107 $180
Class B+ 19 60 103 202
Class D 19 60 103 222
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN AND THE 5%
ANNUAL RETURN USED IN THIS EXAMPLE IS A HYPOTHETICAL RATE.
- ----------
* Includes an annual distribution fee of .75% and an annual service fee of
.25%. Pursuant to the Rules of the National Association of Securities
Dealers, Inc., the aggregate deferred sales loads and annual distribution
fees on Class B and Class D shares of the Series may not exceed 6.25% of
total gross sales, subject to certain exclusions. The maximum sales charge
rule is applied separately to each class. The 6.25% limitation is imposed on
the Series rather than on a per shareholder basis. Therefore, a long-term
Class D shareholder of the Series may pay more in total sales loads
(including distribution fees) than the economic equivalent of 6.25% of such
shareholder's investment in such shares.
+ The expenses shown for the ten-year period reflect the conversion of Class B
shares to Class A shares after 8 years.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights for the Series' Class A, Class B and Class D
shares for the periods presented below have been audited by Deloitte & Touche
LLP, independent auditors. This information, which is derived from the financial
and accounting records of the Series should be read in conjunction with the
financial statements and notes contained in the Fund's 1997 Annual Report, which
is incorporated by reference in the Fund's Statement of Additional Information,
copies of which may be obtained free of charge from the Fund at the telephone
numbers or address provided on the cover page of this Prospectus.
Per share operating performance data is designed to allow investors to
trace the operating performance, on a per share basis, from the beginning net
asset value to the ending net asset value so that they can understand what
effect the individual items have on their investment, assuming it was 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 amount.
"Total return based on net asset value" measures each Class's performance
assuming investors purchased shares of the Series at the 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 per share on the
last day of the period. The total return computations do not reflect any sales
loads investors may incur in purchasing or selling shares of the Series. Total
returns for periods of less than one year are not annualized.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- ------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year.. $ 7.25 $ 6.96 $ 6.35 $ 6.94 $ 6.42 $ 5.96 $ 5.21 $ 6.40 $ 7.02 $ 7.07
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Net investment income .............. .70 .69 .65 .65 .66 .69 .77 .78 .89 .82
Net realized and unrealized
investment gain (loss) ........... .28 .29 .61 (.59) .52 .46 .75 (1.19) (.62) (.05)
------- ------- ------ ----- ------ ------ ------ ------ ------ ------
Increase (decrease) from
investment operations ............ .98 .98 1.26 .06 1.18 1.15 1.52 (.41) .27 .77
Dividends paid or declared ......... (.68) (.69) (.65) (.65) (.66) (.69) (.77) (.78) (.89) (.82)
------- ------- ------ ----- ------ ------ ------ ------ ------ ------
Net increase (decrease) in
net asset value .................. .30 .29 .61 (.59) .52 .46 .75 (1.19) (.62) (.05)
------- ------- ------ ----- ------ ------ ------ ------ ------ ------
Net asset value, end of year ....... $ 7.55 $ 7.25 $ 6.96 $ 6.35 $ 6.94 $ 6.42 $ 5.96 $ 5.21 $ 6.40 $ 7.02
======= ======= ======= ====== ======= ====== ====== ====== ====== ======
TOTAL RETURN BASED ON NET ASSET VALUE: 14.26% 14.82% 20.72% 0.78% 19.19% 20.08% 30.70% (7.27)% 3.84% 11.38%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ..... 1.14% 1.16% 1.09% 1.13% 1.20% 1.21% 1.29% 1.21% 1.13% 1.14%
Net investment income to
average net assets ............... 9.42% 9.80% 9.73% 9.73% 9.68% 10.82% 13.36% 13.40% 13.02% 11.41%
Portfolio turnover ................. 61.78% 119.33% 173.39% 184.75% 193.91% 145.66% 181.08% 117.51% 135.17% 95.20%
Net assets, end of year
(000s omitted) ................... $750,461 $408,303 $182,129 $59,033 $61,333 $40,802 $32,287 $27,558 $45,511 $62,268
</TABLE>
- ------------
The data provided above reflects historical information and therefore
through December 31, 1995 does not reflect the effect of the increase in the
management fee rate payable by the Series, which was approved by shareholders on
December 12, 1995 and became effective on January 1, 1996.
3
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B CLASS D
--------------------- ---------------------------------------------------------
YEAR 4/22/96* YEAR ENDED DECEMBER 31, 9/21/93*
ENDED TO ------------------------------------------- TO
12/31/97 12/31/96 1997 1996 1995 1994 12/31/93
-------- -------- ----- ----- ----- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $7.26 $7.06 $7.26 $6.96 $6.35 $6.94 $6.74
----- ----- ----- ----- ----- ----- -----
Net investment income ............. .64 .45 .64 .64 .60 .57 .12
Net realized and unrealized
investment gain (loss) .......... .28 .20 .28 .30 .61 (.59) .20
----- ----- ----- ----- ----- ----- -----
Increase (decrease) from
investment operations ........... .92 .65 .92 .94 1.21 (.02) .32
Dividends paid or declared ........ (.63) (.45) (.63) (.64) (.60) (.57) (.12)
----- ----- ----- ----- ----- ----- -----
Net increase (decrease) in
net asset value ................. .29 .20 .29 .30 .61 (.59) .20
----- ----- ----- ----- ----- ----- -----
Net asset value, end of period .... $7.55 $7.26 $7.55 $7.26 $6.96 $6.35 $6.94
===== ===== ===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET
ASSET VALUE: 13.24% 9.11% 13.24% 14.10% 19.67% (.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 .............. 8.66% 9.11%+ 8.66% 9.02% 8.86% 8.68% 7.93%+
Portfolio turnover ................ 61.78% 119.33%+++ 61.78% 119.33% 173.39% 184.75% 193.91%++
Net assets, end of period
(000s omitted) .................. $581,235 $147,970 $534,998 $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.
The data provided above reflects historical information and therefore
through December 31, 1995 does not reflect the effect of the increase in the
management fee rate payable by the Series, which was approved by shareholders on
December 12, 1995 and became effective on January 1, 1996.
4
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEM
The Series offers three classes of shares. Class A shares are sold to
investors who have concluded that they would prefer to pay an initial sales load
and have the benefit of lower continuing fees. Class B shares are sold to
investors choosing to pay no initial sales load, a higher distribution fee and a
CDSL with respect to redemptions within six years of purchase and who desire
shares to convert automatically to Class A shares after eight years. Class D
shares are sold to investors choosing to pay no initial sales load, a higher
distribution fee and, with respect to redemptions within one year of purchase, a
CDSL. The Alternative Distribution System allows investors to choose the method
of purchasing shares that is most beneficial in light of the amount of the
purchase, the length of time the shares are expected to be held and other
relevant circumstances. Investors should determine whether under their
particular circumstances it is more advantageous to incur an initial sales load
and be subject to lower ongoing charges, as discussed below, or to have the
entire initial purchase price invested in the Series with the investment
thereafter being subject to higher ongoing fees and either a CDSL for a six-year
period with automatic conversion to Class A shares after eight years or a CDSL
for a one-year period with no automatic conversion to Class A shares.
Investors who expect to maintain their investment for an extended period of
time might also choose to purchase Class A shares because over time the
accumulated continuing distribution fees of Class B and Class D shares may
exceed the initial sales load and lower ongoing fee of Class A shares. This
consideration must be weighed against the fact that the amount invested in the
Fund will be reduced by the initial sales load on Class A shares deducted at the
time of purchase. Furthermore, the higher distribution fees on Class B and Class
D Shares will be offset to the extent any return is realized on the additional
funds initially invested therein that would have been equal to the amount of the
initial sales load on Class A shares.
Investors who qualify for reduced initial sales loads, as described under
"Purchase of Shares" below, might also choose to purchase Class A shares because
the sales load deducted at the time of purchase would be less or waived in full.
However, investors should consider the effect of the 1% CDSL imposed on shares
on which the initial sales load was waived because the amount of Class A shares
purchased was $1,000,000 or more. In addition, Class B shares will be converted
automatically to Class A shares after a period of approximately eight years, and
thereafter investors will be subject to lower ongoing fees. Shares purchased
through reinvestment of dividends and distributions on Class B shares also will
convert automatically to Class A shares along with the underlying shares on
which they were earned.
Alternatively, some investors might choose to have all of their funds
invested initially in Class B or Class D shares although remaining subject to a
higher continuing distribution fee and, for a six-year or one-year period, a
CDSL as described below. For example, an investor who does not qualify for
reduced sales loads would have to hold Class A shares for more than 6.33 years
for the Class B or Class D distribution fee to exceed the initial sales load
plus the distribution fee on Class A shares. This example does not take into
account the time value of money, which further reduces the impact of the Class B
and Class D shares' 1% distribution fee, other expenses charged to each class,
fluctuations in net asset value or the effect of the return on the investment
over this period of time.
Investors should bear in mind that total asset based sales charges (i.e.,
the higher continuing distribution fee plus the CDSL) on Class B shares that are
redeemed may exceed the total asset based sales charges that would be payable on
the same amount of Class A or Class D shares, particularly if the Class B shares
are redeemed shortly after purchase or if the investor qualifies for a reduced
sales load on the Class A shares.
Investors should understand that the purpose and function of the initial
sales load (and deferred sales load, when applicable) with respect to Class A
shares is the same as those of the deferred sales loads and higher distribution
fees with respect to Class B and Class D shares in that the sales loads and
distribution fees applicable to each class provide for the financing of the
distribution of the shares of the Series.
5
<PAGE>
Class B and Class D shares are subject to the same ongoing distribution
fees but Class D shares are subject to a CDSL for a shorter period of time (one
year as opposed to six years) than Class B shares. However, unlike Class D
shares, Class B shares automatically convert to Class A shares, which are
subject to lower ongoing fees.
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, potentially, certain
other class expenses and has exclusive voting rights with respect to any matter
to which a separate vote of any class is required by the Investment Company Act
of 1940, as amended (the "1940 Act"), or Massachusetts law. The net income
attributable to each class and dividends payable on the shares of each class
will be reduced by the amount of distribution and other expenses of each class.
Class B and Class D shares bear higher distribution fees, which will cause the
Class B and Class D shares to pay lower dividends than the Class A shares. The
three classes also have separate exchange privileges.
The Trustees of the Fund believe that no conflict of interest currently
exists between the Class A, Class B and Class D shares of the Series. On an
ongoing basis, the Trustees, in the exercise of their fiduciary duties under the
1940 Act and Massachusetts law, will seek to ensure that no such conflict
arises. For this purpose, the Trustees will monitor the Series for the existence
of any material conflict among the classes and will take such action as is
reasonably necessary to eliminate any such conflicts that may develop.
DIFFERENCES BETWEEN CLASSES. The primary differences between Class A, Class
B and Class D shares are their sales load structures and ongoing expenses as set
forth below. The primary differences between Class B and Class D shares are that
Class D shares are subject to a shorter CDSL period and a lower CDSL rate but
Class B shares automatically convert to Class A Shares after eight years,
resulting in a reduction in ongoing fees. Investors in Class B shares should
take into account whether they intend to redeem their shares within the CDSL
period and, if not, whether they intend to remain invested until the end of the
conversion period and thereby take advantage of the reduction in ongoing fees
resulting from the conversion to Class A shares. Other investors, however, may
elect to purchase Class D shares if they determine that it is advantageous to
have all their assets invested initially and they are uncertain as to the length
of time they intend to hold their assets in the Fund or another mutual fund in
the Seligman Group for which the exchange privilege is available. Although Class
D shareholders are subject to a shorter CDSL period at a lower rate, they forgo
the Class B automatic conversion feature, making their investment subject to
higher distribution fees for an indefinite period of time. Each class has
advantages and disadvantages for different investors, and investors should
choose the class that best suits their circumstances and their objectives.
ANNUAL 12b-1 FEES
INITIAL (AS A % OF AVERAGE
SALES LOAD DAILY NET ASSETS OTHER INFORMATION
---------- --------------- ---------------
CLASS A Maximum initial Service fee of Initial sales load
sales load of .25%. waived or
4.75% of the reduced for
public offering certain
price. purchases.
CDSL of 1% on
redemptions within
18 months of purchase
on shares on which
initial sales load was
waived in full due to
the size of the
purchase.
CLASS B None Service fee of CDSL of:
.25%; Distribution 5% in 1st year
fee of .75% until 4% in 2nd year
conversion.* 3% in 3rd and
4th years
2% in 5th year
1% in 6th year 0%
after 6th year.
CLASS D None Service fee of CDSL of 1% on
.25%; Distribution redemptions
fee of up to .75%. within one year
of purchase.
*Conversion occurs at the end of the month which precedes the 8th anniversary
of the purchase date. If Class B shares of the Series are exchanged for Class B
shares of another Seligman Mutual Fund, the conversion period applicable to the
Class B shares acquired in the exchange will apply, and the holding period of
the shares exchanged will be tacked onto the holding period of the shares
acquired.
6
<PAGE>
INVESTMENT OBJECTIVE, POLICIES
AND RISKS
The Fund is a diversified open-end management investment company organized
under the laws of the Commonwealth of Massachusetts by a Declaration of Trust
dated July 27, 1984. The Fund offers one other separate investment series: the
Seligman U.S. Government Securities Series. The U.S. Government Securities
Series' investment objective and policies and other important information with
respect to its operations are set forth in a separate Prospectus.
The objective of this Series is to produce maximum current income. The
Series seeks to achieve its objective by following a policy of investing in a
diversified range of high-yield, high-risk, medium and lower quality corporate
bonds and notes, commonly referred to as "junk bonds." Generally, bonds and
notes providing the highest yield are unrated or carry lower ratings (Baa or
lower by Moody's or BBB or lower by S&P) than those assigned by S&P or Moody's
to investment-grade bonds and notes. A description of the S&P and Moody's rating
categories is set forth in the Appendix to this Prospectus. While providing
higher yields, these bonds and notes are subject to greater risks of loss of
principal and income than higher-rated bonds and notes and are considered to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal. They are also generally considered to be subject to greater
price volatility due to market risks than higher-rated bonds and notes. There
can be no assurance that the Series' investment objective will be attained.
The value of the Series' bonds and notes will be affected like all
fixed-income securities by market conditions relating to changes in prevailing
interest rates. However, the value of lower-rated or unrated corporate bonds and
notes is also affected by investors' perceptions. When economic conditions
appear to be deteriorating, lower-rated or unrated corporate bonds and notes may
decline in market value due to investors' heightened concerns and perceptions
over credit quality. If a security is downgraded, the Series may retain the
security. The Series invests in "zero coupon" (interest payments accrue until
maturity) and "pay-in-kind" (interest payments are made in cash or additional
shares) bonds. Such securities may be subject to greater fluctuations in value
as they tend to be more speculative than income bearing securities. Fluctuations
in the market prices of the securities owned by the Series result in
corresponding fluctuations and volatility in the net asset value of the shares
of the Series. Additionally, because they do not pay current income, these
securities will detract from the Series' objective of producing maximum current
income.
Lower-rated and unrated corporate bonds and notes in which the Series
invests are traded principally by dealers in the over-the-counter market. The
market for these securities may be less active and less liquid than for
higher-rated securities. Under adverse market or economic conditions, the
secondary market for these bonds and notes could contract further, causing the
Series difficulties in valuing and selling the securities in its portfolio.
The ratings of fixed-income securities by Moody's and S&P are a generally
accepted barometer of credit risk. They are, however, subject to certain
limitations from an investor's standpoint. The rating of an issuer is heavily
weighted by past developments and does not necessarily reflect probable future
conditions. There is frequently a lag between the time the rating is assigned
and the time it is updated. In addition there may be varying degrees of
difference in credit risk of securities within each rating category.
7
<PAGE>
The following table sets forth the weighted average percentages of the
Series' portfolio invested in debt securities for each rating category during
the year ended December 31, 1997. When securities receive different ratings from
S&P and Moody's, the table reflects the lower rating.
PERCENTAGE OF
S&P/MOODY'S RATINGS TOTAL INVESTMENTS
------------------- ---------------
AAA/Aaa................................ --
AA/Aa.................................. --
A/A.................................... --
BBB/Baa................................ --
BB/Ba.................................. .4%
B/B.................................... 83.2%
CCC/Caa................................ 6.2%
CC/Ca.................................. --
Non-rated.............................. 3.6%
The Manager will try to minimize the risk inherent in the Series'
investment objective through credit analysis, diversification and attention to
current developments and trends in interest rates and economic conditions.
However, there can be no assurance that losses will not occur and an investment
in the Series is appropriate for an investor only if the investor can bear the
high risk inherent in seeking maximum current income by investing in
high-yielding corporate bonds and notes which are unrated or carry lower ratings
than those assigned by S&P or Moody's to investment-grade bonds.
Except for temporary defensive purposes, at least 80% of the value of the
Series' total assets will be invested in high-yielding, income-producing
corporate bonds. This investment policy is a fundamental policy and may not be
changed by the Trustees of the Fund without the vote of a majority of the
Series' outstanding voting securities. The Series may invest up to 20% of the
value of its total assets in a range of high-yield, medium and lower quality
corporate notes; short-term money market instruments, including certificates of
deposit of banks having total assets of more than $1 billion and which are
members of the FDIC, bankers' acceptances and interest-bearing savings or time
deposits of such banks; commercial paper of prime quality, rated A-1 or higher
by S&P or P-1 or higher by Moody's or, if not rated, issued by companies which
have an outstanding debt issue rated AA or higher by S&P or Aa or higher by
Moody's; securities issued, guaranteed or insured by the U.S. Government, its
agencies and instrumentalities; and other income-producing cash items. The
Series may invest temporarily for defensive purposes without limit in the
foregoing securities.
PREFERRED STOCK. In accordance with its objective of producing maximum
current income, the Series may invest up to 10% of its total assets in preferred
stock, including non-investment grade preferred stock. Certain preferred stock
issues may offer higher yields than similar bond issues because their rights are
subordinated to the bonds. Consequently, such preferred stock issues will have a
greater risk potential. The Manager will try to minimize this greater risk
potential through its investment process. However, there can be no assurance
that losses will not occur and, as stated above, an investment in the Series is
appropriate only for an investor who can bear the high risk in seeking maximum
current income by investing in high-yielding securities, including
non-investment grade preferred stock.
FOREIGN SECURITIES. The Series may invest up to 10% of its total assets in
debt securities of foreign issuers. Foreign investments may be affected
favorably or unfavorably by changes in currency rates and exchange control
regulations. There may be less information available about a foreign company
than about a U.S. company, and foreign companies may not be subject to reporting
standards and requirements comparable to those applicable to U.S. companies.
Foreign debt securities and their markets may not be as liquid as U.S.
securities and their markets. Securities of foreign companies may involve
greater market risk than securities of U.S. companies, and foreign brokerage
commissions and custody fees are generally higher than in the United States.
Investments in foreign debt securities may also be subject to local economic or
political risks, such as political instability of some foreign governments and
the possibility of nationalization of issuers.
ILLIQUID SECURITIES. The Series may invest up to 15% of its net assets in
illiquid securities, including restricted securities (i.e., securities not
readily marketable without registration under the Securities Act of 1933 (the
"1933 Act")) and other securities that are not readily marketable, such as
repurchase agreements of more than one week's duration. A Series may purchase
restricted
8
<PAGE>
securities that may be offered and sold only to "qualified institutional buyers"
under Rule 144A of the 1933 Act, and the Manager, acting pursuant to procedures
approved by the Fund's Board of Directors, may determine, when appropriate, that
specific Rule 144A securities are liquid and not subject to the 15% limitation
on illiquid securities. Should this determination be made, the Manager, acting
pursuant to such procedures, will carefully monitor the security (focusing on
such factors, among others, as trading activity and availability of information)
to determine that the Rule 144A security continues to be liquid. It is not
possible to predict with assurance exactly how the market for Rule 144A
securities will further evolve. This investment practice could have the effect
of increasing the level of illiquidity in the Series, if and to the extent that
qualified institutional buyers become for a time uninterested in purchasing Rule
144A securities.
BORROWING. The Series may borrow money only from banks and only for
temporary or emergency purposes (but not for the purchase of portfolio
securities) in an amount not to exceed 15% of the value of its total assets. The
Series will not purchase additional portfolio securities if the Series has
outstanding borrowings in excess of 5% of the value of its total assets.
LENDING OF PORTFOLIO SECURITIES. The Series may lend portfolio securities
to brokers or dealers, banks or other institutional borrowers of securities. The
borrower must maintain with the Series cash or equivalent collateral such as
Treasury Bills, equal to at least 100% of the market value of the securities
loaned. During the time portfolio securities are on loan, the borrower pays the
Series any income accruing on the loaned securities and the Series may invest
the cash collateral and earn additional income or may receive an agreed upon
amount of interest income from the borrower. The Series may lend portfolio
securities to the extent that the Manager deems appropriate in seeking to
achieve the Series' investment objective.
REPURCHASE AGREEMENTS. The Series may enter into repurchase agreements with
commercial banks and with broker/dealers to invest cash for the short-term. A
repurchase agreement is an agreement under which the Series acquires a money
market instrument, generally a U.S. Government obligation qualified for purchase
by the Series, subject to resale at an agreed upon price and date. Such resale
price reflects an agreed upon interest rate effective for the period of time the
instrument is held by the Series and is unrelated to the interest rate on the
instrument. Repurchase agreements could involve certain risks in the event of
bankruptcy or other default by the seller, including possible delays and
expenses in liquidating the securities underlying the agreement, decline in
value of the underlying securities and loss of interest. Repurchase agreements
usually are for short periods, such as one week or less, but may be for longer
periods. As a matter of fundamental policy, the Series will not enter into
repurchase agreements of more than one week's duration if more than 10% of its
total assets would be invested in such agreements and in restricted and other
illiquid securities.
WHEN-ISSUED SECURITIES. The Series may purchase securities on a when-issued
basis, in which case delivery and payment normally take place within 45 days
after the date of the commitment to purchase. The payment obligation and the
interest rate that will be received on the securities are each fixed at the time
the buyer enters into the commitment. Although the Series will only purchase a
security on a when-issued basis with the intention of actually acquiring the
securities, the Series may sell these securities before the purchase settlement
date if it is deemed advisable.
Securities held by the Series and securities purchased on a when-issued
basis are subject to changes in market value based upon investors' perceptions
of the creditworthiness of the issuer and upon changes, real or anticipated, in
the level of interest rates. If the Series remains substantially fully invested
at the same time that it has purchased securities on a when-issued basis, the
market value of the Series' assets may fluctuate more than would otherwise be
the case. Purchasing a security on a when-issued basis can involve a risk that
the yields available in the market when the delivery takes place may be higher
than those obtained on the security so purchased.
An account for the Series consisting of cash or liquid high-grade debt
securities equal to the amount of the when-issued commitments will be
established with
9
<PAGE>
the Series' Custodian, and marked to market daily, with additional cash or
liquid high-grade debt securities added when necessary. When the time comes to
pay for when-issued securities, the Series will meet its obligations from then
available cash flow, sale of securities held in the separate account, sale of
other securities or, although the Series would not normally expect to do so,
from the sale of the when-issued securities themselves (which may have a value
greater or less than the Series' payment obligations). Sale of securities to
meet such obligations carries with it a greater potential for the realization of
capital gain or loss.
GENERAL. Except as noted above or in the Statement of Additional
Information, the foregoing investment policies are not fundamental and the
Trustees of the Fund may change such policies without the vote of a majority of
the outstanding voting securities of the Series. As a matter of policy, the
Trustees will not change the Series' investment objective of producing maximum
current income without such a vote. Under the 1940 Act, a "vote of a majority of
the outstanding voting securities" of the Series means the affirmative vote of
the lesser of (1) more than 50% of the outstanding shares of the Series or (2)
67% or more of the shares of the Series present at a shareholders' meeting if
more than 50% of the outstanding shares of the Series are represented at the
meeting in person or by proxy.
YEAR 2000 RISKS. The Series is dependent upon service providers and their
computer systems for its day-to-day operations, and many of the Series' service
providers in turn depend upon computer systems of other persons. Many computer
systems currently cannot properly recognize or process date sensitive
information relating to the year 2000 and beyond. The Manager, Seligman
Financial Services, Inc., and the Series' custodian have been evaluating the
impact the year 2000 issue may have on their computer systems. They expect that
any modifications to their computer systems necessary to address the year 2000
issue will be made and tested in a timely manner. They are also working with
vendors and other persons whose systems are linked to theirs to obtain
satisfactory assurances regarding the year 2000 issue. Seligman Data Corp.,
which provides certain corporate and shareholder account services to the Series
at cost, has informed the Series that it does not expect that the cost to the
Series of its services will increase materially as a result of the modifications
to its computer systems necessary to prepare for the year 2000. The costs of
systems remediation by persons other than Seligman Data Corp. will not be borne
directly by the Series. There can be no assurance that the remedial actions
taken by the Series' service providers will be sufficient or timely. Inadequate
remediation could have an adverse effect on the Series' operations, including
pricing and securities trading and settlement, and the provision of shareholder
services.
MANAGEMENT SERVICES
The Trustees provide broad supervision over the affairs of the Series and
the Fund as a whole. Pursuant to a Management Agreement approved by the Trustees
and the shareholders of the Series, the Manager manages the investments of the
Series and administers the business and other affairs of the Series. The address
of the Manager is 100 Park Avenue, New York, NY 10017.
The Manager also serves as manager of seventeen other investment companies
which, together with the Fund, comprise the "Seligman Group." These companies
are: Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc., Seligman
Common Stock Fund Inc., Seligman Communications and Information Fund, Inc.,
Seligman Frontier Fund, Inc., Seligman Growth Fund, Inc., Seligman Henderson
Global Fund Series, Inc., Seligman Income Fund, Inc., Seligman Municipal Fund
Series, Inc., Seligman Municipal Series Trust, Seligman New Jersey Municipal
Fund, Inc., Seligman Pennsylvania Municipal Fund Series, Seligman Portfolios,
Inc., Seligman Quality Municipal Fund, Inc., Seligman Select Municipal Fund,
Inc., Seligman Value Fund Series, Inc., and Tri-Continental Corporation. The
aggregate assets of the Seligman Group were approximately $20.2 billion at March
31, 1998. The Manager also provides investment management or advice to
institutional and other accounts having an aggregate value at March 31, 1998 of
approximately $7.4 billion.
Mr. William C. Morris is Chairman of the Manager and Chairman of the Board
and Chief Executive Officer
10
<PAGE>
of the Fund. Mr. Morris owns a majority of the outstanding voting securities of
the Manager.
The Manager provides senior management for Seligman Data Corp., a
wholly-owned subsidiary of certain investment companies in the Seligman Group,
which performs, at cost, certain recordkeeping functions for the Series,
maintains the records of shareholder accounts and furnishes dividend paying,
redemption and related services.
The Manager is entitled to receive a management fee, calculated daily and
payable monthly. The management fee is equal to an annual rate of .65% of the
Series' average daily net assets on the first $1 billion of net assets and .55%
of the Series' average daily net assets in excess of $1 billion. In 1997, the
management fee paid by the Fund was equal to an annual rate of .62% of the
average daily net assets of the Series.
The Fund pays all of its expenses other than those assumed by the Manager.
The Fund's expenses are allocated among the series in a manner determined by the
Trustees to be fair and equitable. Total expenses of the Series' Class A, Class
B and Class D shares, respectively, for the year ended December 31, 1997
amounted to 1.14%, 1.90% and 1.90%, respectively, of the average daily net
assets of such class.
PORTFOLIO MANAGEMENT. Mr. Daniel J. Charleston, a Managing Director of the
Manager, is a Vice President of the Fund and has been Portfolio Manager of the
Series since January 1990. Mr. Charleston is also a Vice President of Seligman
Portfolios, Inc. and Portfolio Manager of its High-Yield Bond Portfolio.
The Manager's discussion of the Series' performance as well as a line graph
illustrating comparative performance information between the Series, the Merrill
Lynch High Yield Master Index, Lipper High Current Yield and the Lipper
High-Yield Bond Fund Index is included in the Fund's 1997 Annual Report to
Shareholders. Copies of the 1997 Annual Report may be obtained, without charge,
by calling or writing the Series at the telephone numbers or address listed on
the cover page of this Prospectus.
PORTFOLIO TRANSACTIONS. Corporate bonds and other fixed-income securities
are generally traded on the over-the-counter market on a "net" basis without a
stated commission, through dealers acting for their own account and not as
brokers. The Series will engage in transactions with these dealers or deal
directly with the issuer. Prices paid to dealers will generally include a
"spread," i.e., the difference between the prices at which a dealer is willing
to purchase or to sell the security at that time. The Management Agreement
recognizes that in the purchase and sale of portfolio securities, the Manager
will seek the most favorable price and execution and, consistent with that
policy, may give consideration to the research, statistical and other services
furnished by dealers to the Manager for its use in connection with its services
to the Fund as well as to other clients.
Consistent with the Rules of the National Association of Securities
Dealers, Inc. and subject to seeking the most favorable price and execution
available and such other policies as the Trustees of the Fund may determine, the
Manager may consider sales of shares of the Series and, if permitted under
applicable laws, may consider sales of shares of the other mutual funds in the
Seligman Group as a factor in the selection of brokers or dealers to execute
portfolio transactions for the Series.
PORTFOLIO TURNOVER. A change in securities held by the Series is known as
"portfolio turnover" which may result in the payment by the Series of dealer
spreads or underwriting commissions and other transactions costs on the sale of
securities as well as on the reinvestment of the proceeds in other securities.
Higher portfolio turnover involves greater transactions costs and a possible
increase in short-term capital gains or losses. Although it is the policy of the
Series to hold securities for investment, changes will be made from time to time
when the Manager believes such changes will strengthen the Series' portfolio.
The portfolio turnover rate will vary from year to year as well as within a year
and is likely to exceed 100% and has done so in prior years.
PURCHASE OF SHARES
Seligman Financial Services, Inc. ("SFSI"), an affiliate of the Manager,
acts as general distributor of the Series' shares. Its address is 100 Park
Avenue, New York, NY 10017.
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<PAGE>
The Fund issues three classes of shares: Class A shares are sold to
investors choosing the initial sales load alternative; Class B shares are sold
to investors choosing to pay no initial sales load, a higher distribution fee
and a CDSL with respect to redemptions within six years of purchase and who
desire shares to convert automatically to Class A shares after eight years; and
Class D shares are sold to investors choosing no initial sales load, a higher
distribution fee and a CDSL on redemptions within one year of purchase. See
"Alternative Distribution System" above.
Shares of the Series may be purchased through any authorized investment
dealer. All orders will be executed at the net asset value per share next
determined after receipt of the purchase order plus, in the case of Class A
shares, a sales load which, except for shares purchased under one of the reduced
sales load plans, will vary with the size of the purchase as shown in the
schedule under "Class A shares -- Initial Sales Load" below.
THE MINIMUM AMOUNT FOR INITIAL INVESTMENT IN THE SERIES IS $1,000;
SUBSEQUENT INVESTMENTS MUST BE IN THE MINIMUM AMOUNT OF $100 (EXCEPT FOR
INVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS). THE FUND RESERVES THE
RIGHT TO RETURN INVESTMENTS WHICH DO NOT MEET THESE MINIMUMS. EXCEPTIONS TO
THESE MINIMUMS ARE AVAILABLE FOR ACCOUNTS BEING ESTABLISHED CONCURRENTLY WITH
THE INVEST-A-CHECK(R) SERVICE. THE MINIMUM AMOUNT FOR INITIAL INVESTMENT IN THE
SELIGMAN TIME HORIZON MATRIXSM ASSET ALLOCATION PROGRAM IS $10,000. FOR
INFORMATION ABOUT THIS PROGRAM, CONTACT YOUR FINANCIAL ADVISOR.
The minimum amount for initial investment in the Series is $500 for
investors who purchase shares of the Fund through Merrill Lynch's MFA or MFA
Select Programs. There is no minimum investment required for investors who
purchase shares of the Series through wrap fee programs.
Purchase orders placed for Class B shares must be for an amount LESS THAN
$250,000.
Orders received by an authorized dealer by the close of regular trading on
the New York Stock Exchange ("NYSE") (normally, 4:00 p.m. Eastern time) and
accepted by SFSI before the close of business (5:00 p.m. Eastern time) on the
same day will be executed at the Series' net asset value determined as of the
close of regular trading on the NYSE on that day plus, in the case of the Class
A shares, any applicable sales load. Orders accepted by dealers after the close
of regular trading on the NYSE, or received by SFSI after the close of business,
will be executed at the Series' net asset value as next determined plus, in the
case of Class A shares, any applicable sales load. The authorized dealer through
which the shareholder purchases shares is responsible for forwarding the order
to SFSI promptly.
Payment for dealer purchases may be made by check or by wire. To wire
payment, dealer orders must first be placed through SFSI's order desk and
assigned a purchase confirmation number. Funds in payment of the purchase may
then be wired to Mellon Bank, N.A. ABA #043000261, A/C Seligman High-Yield Bond
Series (A, B or D), A/C#107-1011. WIRE TRANSFERS MUST INCLUDE THE PURCHASE
CONFIRMATION NUMBER AND CLIENT ACCOUNT REGISTRATION AND ACCOUNT NUMBER. Persons
other than dealers who wish to wire payment should contact Seligman Data Corp.
for specific wire instructions. Although the Fund makes no charge for this
service, the transmitting bank may impose a wire service fee.
Current shareholders may purchase additional shares of the Series through
any authorized dealer or by sending a check payable to the "Seligman Group of
Funds," in a postage-paid return envelope or directly to P.O. BOX 9766,
PROVIDENCE, RI 02940-9766. The check should be accompanied by an investment slip
(provided on the bottom of shareholder account statements) and include the
shareholder's name, address, account number, Series name and class of shares (A,
B or D). Checks sent directly to Seligman Data Corp. and received in good order
will be invested at the Series' net asset value determined as of the close of
regular trading on the NYSE on that day plus, in the case of Class A shares, any
applicable sales load.
IF A SHAREHOLDER DOES NOT PROVIDE THE REQUIRED INFORMATION, SELIGMAN DATA
CORP. WILL SEEK FURTHER
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<PAGE>
CLARIFICATION AND MAY BE FORCED TO RETURN THE CHECK TO THE SHAREHOLDER. IF ONLY
THE CLASS DESIGNATION IS MISSING, THE INVESTMENT WILL AUTOMATICALLY BE MADE IN
CLASS A SHARES FOR NEW ACCOUNTS OR IN THE SHAREHOLDER'S EXISTING CLASS FOR
ADDITIONAL PURCHASES. Checks for investment must be in U.S. dollars drawn on a
domestic bank. Credit card convenience checks and third party checks (i.e.,
checks made payable to someone other than the "Seligman Group of Funds") may not
be used to open a new fund account or purchase additional shares of the Series.
Seligman Data Corp. may charge a $10.00 service fee for checks returned to
it uncollectable. This charge may be deducted from the Shareholder's account.
For the protection of the Fund and its shareholders, no redemption proceeds will
be remitted to a shareholder with respect to shares purchased by check (unless
certified) until Seligman Data Corp. receives notice that the check has cleared,
which may be up to 15 days from the credit of the shares to the shareholder's
account.
Current shareholders may also purchase additional shares by having funds
electronically transferred directly from an employer, the Internal Revenue
Service or other government agency, or any institution capable of transmitting
payments through the Automated Clearing House ("ACH") network. Purchases may be
one-time transactions, or, for those institutions that offer direct deposit
programs, may be made on a systematic basis. To utilize this service, the
following bank information must be provided to the paying institution:
Mellon Bank, N.A.
ABA #043000261
A/C No. 600FFFNNNNNNNNNN
"600" IDENTIFIES THE SELIGMAN GROUP OF FUNDS, "FFF" IS THE FUND CODE
REPRESENTING THE FUND AND CLASS OF SHARES IN WHICH THE PURCHASE SHOULD BE MADE
(this code is available on the back of all shareholder account statements), AND
"NNNNNNNNNN" INDICATES THE SHAREHOLDER'S TEN-DIGIT ACCOUNT NUMBER. In addition,
the shareholder must indicate that this is a checking account at Mellon Bank.
For IRA and group retirement accounts, all electronic purchases will be
designated as current year contributions. For more information about this
service, please contact Seligman Data Corp.
VALUATION. The net asset value of the Series' shares is determined each
day, Monday through Friday, as of the close of regular trading on the NYSE
(normally, 4:00 p.m. Eastern time) on each day that the NYSE is open for
business. Net asset value is calculated separately for each class. Securities
traded on a U.S. or foreign exchange or over-the-counter market are valued at
the last sales price on the primary exchange or market on which they are traded.
United Kingdom securities and securities for which there are no recent sales
transactions are valued based on quotations provided by primary market makers in
such securities. Short-term holdings maturing in 60 days or less are generally
valued at amortized cost if their original maturity was 60 days or less.
Short-term holdings with more than 60 days remaining to maturity will be valued
at current market value until the 61st day prior to maturity, and will then be
valued on an amortized cost basis based on the value as of such date unless the
Trustees determine that amortized cost value does not represent fair market
value. Any securities for which recent market quotations are not readily
available are valued at fair value determined in accordance with procedures
approved by the Fund's Trustees.
Although the legal rights of Class A, Class B and Class D shares are
substantially identical, the different expenses borne by each class will result
in different net asset values and dividends. The net asset values of Class B and
Class D shares will generally be lower than the net asset value of Class A
shares as a result of the higher distribution fees charged to Class B and Class
D shares. In addition, net asset value per shares of the three classes will be
affected to the extent any other expenses differ among classes.
CLASS A SHARES--INITIAL SALES LOAD. Class A shares are subject to an
initial sales load which varies with the size of the purchase as shown in the
schedule below, and an annual service fee of up to .25% of the average daily net
asset value of Class A shares. See "Administration, Shareholder Services and
Distribution Plan."
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- ------------------------------------------------------------------
CLASS A SHARES--SALES LOAD SCHEDULE
SALES LOAD
AS A PERCENTAGE OF REGULAR
---------------------- DEALER
NET AMOUNT DISCOUNT
OFFERING INVESTED (NET AS A % OF
AMOUNT OF PURCHASE PRICE ASSET VALUE) OFFERING PRICE
------------------ ---------------------------------------
Less than $ 50,000..... 4.75% 4.99% 4.25%
50,000-- 99,999..... 4.00 4.17 3.50
100,000-- 249,999..... 3.50 3.63 3.00
250,000-- 499,999..... 2.50 2.56 2.25
500,000-- 999,999..... 2.00 2.04 1.75
1,000,000-- or more*..... 0 0 0
-------
*Shares acquired at net asset value pursuant to the above Schedule will be
subject to a CDSL of 1% if redeemed within 18 months of purchase. See
"Purchase of Shares--Contingent Deferred Sales Load."
- ------------------------------------------------------------------
There is no initial sales load on purchases of Class A shares of $1,000,000
or more ("NAV sales"); however, such shares are subject to a CDSL of 1% if
redeemed within eighteen months of purchase.
SFSI shall pay broker/dealers, from its own resources, a fee on NAV sales,
calculated as follows: 1.00% of NAV sales up to but not including $2 million;
.80% of NAV sales from $2 million up to but not including $3 million; .50% of
NAV sales from $3 million up to but not including $5 million; and .25% of NAV
sales from $5 million and above. The calculation of the fee will be based on
assets held by a "single person" as defined below.
SFSI shall also pay broker/dealers, from its own resources, a fee on assets
of certain investments in Class A shares of the Seligman Mutual Funds
participating in an "eligible employee benefit plan" (as defined below under
"Special Programs") that are attributable to the particular broker/dealer. The
shares eligible for the fee are those on which an initial sales load was not
paid because either the participating eligible employee benefit plan has at
least (i) $500,000 invested in the Seligman Mutual Funds or (ii) 50 eligible
employees to whom such plan is made available. Class A shares representing only
an initial purchase of Seligman Cash Management Fund are not eligible for the
fee. Such shares will become eligible for the fee once they are exchanged for
shares of another Seligman Mutual Fund. The payment is based on cumulative sales
for each Plan during a single calendar year, or portion thereof. The payment
schedule, for each calendar year, is as follows: 1.00% of sales up to but not
including $2 million; .80% of sales from $2 million up to but not including $3
million; .50% of sales from $3 million up to but not including $5 million; and
.25% of sales from $5 million and above.
REDUCED SALES LOADS. Reductions in sales loads apply to purchases of Class
A shares by a "single person," including an individual, members of a family unit
comprising husband, wife, and minor children purchasing securities for their own
account, or a trustee or other fiduciary purchasing for a single fiduciary
account or single trust. Purchases made by a trustee or other fiduciary for a
fiduciary account may not be aggregated with purchases made on behalf of any
other fiduciary or individual account.
Shares purchased without an initial sales load in accordance with the sales
load schedule or pursuant to a Volume Discount, Right of Accumulation or Letter
of Intent are subject to a CDSL of 1% on redemptions within eighteen months of
purchase.
o VOLUME DISCOUNTS are provided if the total amount being invested in Class
A shares of the Series alone, or in any combination of shares of the Seligman
Mutual Funds that are sold with an initial sales load, reaches levels indicated
in the above sales load schedule.
o THE RIGHT OF ACCUMULATION allows an investor to combine the amount being
invested in shares of any Seligman Mutual Fund sold with an initial sales load
with the total net asset value of shares already owned that were sold with an
initial sales load, including shares of Seligman Cash Management Fund that were
acquired by the investor through an exchange of shares of another Seligman
Mutual Fund on which there was an initial sales load, to determine reduced sales
loads in accordance with the sales load schedule. An investor or a dealer
purchasing shares on behalf of an investor must indicate that the investor has
existing accounts when making investments or opening new accounts.
o LETTER OF INTENT allows an investor to purchase Class A shares of the
Series over a 13-month period at reduced initial sales loads, based on the total
amount the investor intends to purchase plus the total net asset
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<PAGE>
value of the other Seligman Mutual Funds already owned that were sold with an
initial sales load and the total net asset value of shares of Seligman Cash
Management Fund that were acquired through an exchange of shares of another
Seligman Mutual Fund on which there was an initial sales load. An investor or a
dealer purchasing Class A shares on behalf of an investor must indicate that the
investor has existing accounts when making investments or opening new accounts.
For more information concerning terms of Letters of Intent, see "Terms and
Conditions."
SPECIAL PROGRAMS. The Series may sell Class A shares at net asset value to
present and retired directors, trustees, officers, employees and their spouses
(and family members of the foregoing) of the Fund, the other investment
companies in the Seligman Group, the Manager and other companies affiliated with
the Manager. Family members are defined to include lineal descendants and lineal
ancestors, siblings (and their spouses and children) and any company or
organization controlled by any of the foregoing. Such sales also may be made to
employee benefit and thrift plans for such persons and to any investment
advisory, custodial, trust or other fiduciary account managed or advised by the
Manager or any affiliate.
Class A shares also may be issued without an initial sales load in
connection with the acquisition of cash and securities owned by other investment
companies; to any registered unit investment trust which is the issuer of
periodic payment plan certificates, the net proceeds of which are invested in
Series shares; to separate accounts established and maintained by an insurance
company which are exempt from registration under Section 3(c)(11) of the 1940
Act; to registered representatives and employees (and their spouses and minor
children) of any dealer that has a sales agreement with SFSI; to financial
institution trust departments; to registered investment advisers exercising
discretionary investment authority with respect to the purchase of Series'
shares; to accounts of financial institutions or broker/dealers that charge
account management fees, provided the Manager or one of its affiliates has
entered into an agreement with respect to such accounts; pursuant to sponsored
arrangements with organizations which make recommendations to or permit group
solicitations of, its employees, members or participants in connection with the
purchase of shares of the Series; to other investment companies in the Seligman
Group in connection with a deferred fee arrangement for outside directors; and
to "eligible employee benefit plans" which have at least (i) $500,000 invested
in the Seligman Mutual Funds or (ii) 50 eligible employees to whom such plan is
made available. "Eligible employee benefit plan" means any plan or arrangement,
whether or not tax qualified, which provides for the purchase of Series shares.
Sales of shares to such plans must be made in connection with a payroll
deduction system of plan funding or other system acceptable to Seligman Data
Corp.
Section 403(b) plans sponsored by public educational institutions are not
eligible for net asset value purchases based on the aggregate investment made by
the plan or number of eligible employees. Employee benefit plans eligible for
net asset value sales, as described above, will be subject to a CDSL of 1% for
terminations at the plan level only, on redemptions of shares purchased within
eighteen months of plan termination. Sales pursuant to a 401(k) or other
retirement alliance program the sponsor of which has an agreement with SFSI
pursuant to which shares are made available at net asset value are not subject
to a CDSL.
CLASS B SHARES. Class B shares are sold without an initial sales load but
are subject to a CDSL if the shares are redeemed within six years of purchase at
rates set forth in the table below, charged as a percentage of the current net
asset value or the original purchase price, whichever is less.
YEARS SINCE PURCHASE CDSL
- -------------------- ----
less than 1 year................................... 5%
1 year or more but less than 2 years............... 4%
2 years or more but less than 3 years.............. 3%
3 years or more but less than 4 years.............. 3%
4 years or more but less than 5 years.............. 2%
5 years or more but less than 6 years.............. 1%
6 years or more.................................... 0%
Class B shares are also subject to an annual distribution fee of .75% and
an annual service fee of up to .25% of the average daily net asset value of the
Class B shares. SFSI will make a 4% payment to dealers in
15
<PAGE>
respect of purchases of Class B shares. Approximately eight years after
purchase, Class B shares will convert automatically to Class A shares, which are
subject to an annual service fee of .25% but no distribution fee. Shares
purchased through reinvestment of dividends and capital gain distributions on
Class B shares also will convert automatically to Class A shares along with the
underlying shares on which they were earned. Conversion occurs at the end of the
month which precedes the eighth anniversary of the purchase date. If Class B
shares of the Series are exchanged for Class B shares of another Seligman Mutual
Fund, the conversion period applicable to the Class B shares acquired in the
exchange will apply, and the holding period of the shares exchanged will be
tacked onto the holding period of the shares acquired. Class B shareholders of
the Series exercising the exchange privilege will continue to be subject to the
Series' CDSL schedule if such schedule is higher or longer than the CDSL
schedule relating to the new Class B shares. In addition, Class B shares of the
Series acquired by exchange will be subject to the Series' CDSL schedule if such
schedule is higher or longer than the CDSL schedule relating to the original
Class B shares.
CLASS D SHARES. Class D shares are sold without an initial sales load but
are subject to a 1% CDSL if the shares are redeemed within one year, an annual
distribution fee of up to .75% and an annual service fee of up to .25%, of the
average daily net asset value of the Class D shares. SFSI will make a 1% payment
to dealers in respect of purchases of Class D shares. Unlike Class B shares,
Class D shares do not automatically convert to Class A shares after eight years.
CONTINGENT DEFERRED SALES LOAD. A CDSL will be imposed on redemptions of
Class B or Class D shares which were purchased during the preceding six years
(for Class B shares) or twelve months (for Class D shares); however, no CDSL
will be imposed on shares acquired through the investment of dividends or
distributions from any Class B or Class D shares of mutual funds within the
Seligman Group. The amount of any CDSL will initially be used by SFSI to defray
the expense of the payment of 4% (in the case of Class B shares) or 1% (in the
case of Class D Shares) made by it to Service Organizations (as defined under
"Administration, Shareholder Services and Distribution Plan") at the time of
sale. Pursuant to an agreement with FEP Capital, L.P. ("FEP") to fund payments
in respect of Class B shares, SFSI has agreed to assign any Class B CDSL to FEP.
A CDSL of 1% will also be imposed on redemptions of Class A shares
purchased during the preceding eighteen months if such shares were acquired at
net asset value pursuant to the sales load schedule provided under "Class A
Shares--Initial Sales Load." Employee benefit plans eligible for net asset sales
as described above under "Special Programs" may be subject to a CDSL of 1% for
terminations at the plan level only, or redemption of shares purchased within
eighteen months prior to plan termination.
The 1% CDSL normally imposed on redemptions of certain Class A shares
(i.e., those purchased during the preceding eighteen months at net asset value
pursuant to the sales load schedule provided under "Class A Shares--Initial
Sales Load") will be waived on shares that were purchased through Morgan Stanley
Dean Witter & Co. ("Morgan Stanley") by certain Chilean institutional investors
(i.e., pension plans, insurance companies and mutual funds). Upon redemption of
such shares within an eighteen month period, Morgan Stanley will reimburse SFSI
a pro rata portion of the fee it received from SFSI at the time of sale of such
shares.
To minimize the application of a CDSL to a redemption, shares acquired
pursuant to the investment of dividends and capital gain distributions (which
are not subject to a CDSL) will be redeemed first; followed by shares held for a
period of time longer than the applicable CDSL period. Shares held for the
longest period of time within the applicable period will then be redeemed.
Additionally, for those shares determined to be subject to a CDSL, the CDSL will
be assessed on the current net asset value or original purchase price, whichever
is less. No CDSL will be imposed on shares acquired through the investment of
dividends or capital gain distributions from any Class A, Class B or Class D
shares of Seligman Mutual Funds.
For example, assume an investor purchased 100 Class D shares in January at
a price of $10.00 per share. During the first year, 5 additional Class D shares
were
16
<PAGE>
acquired through investment of dividends and distributions. In January of the
following year, an additional 50 Class D shares were purchased at a price of
$12.00 per share. In March of that year, the investor chooses to redeem
$1,500.00 from the account which now holds 155 Class D shares with a total value
of $1,898.75 ($12.25 per share). The CDSL for this transaction would be
calculated as follows:
Total shares to be redeemed
(122.449 @ $12.25) as follows: .......... $1,500.00
=========
Dividend/Distribution shares
(5 @ $12.25) ............................. $ 61.25
Shares held more than 1 year
(100 @ $12.25) .......................... 1,225.00
Shares held less than 1 year subject to
CDSL (17.449 @ $12.25) ................... 213.75
--------
Gross proceeds of redemption ............. $1,500.00
Less CDSL (17.449 shares @
$12.00 = $209.39 x 1% = $2.09) ......... (2.09)
--------
Net proceeds of redemption ................. $1,497.91
=========
For federal income tax purposes, the amount of the CDSL will reduce the
gain or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.
The CDSL will be waived or reduced in the following instances:
(a) on redemptions following the death or disability (as defined in section
72(m)(7) of the Internal Revenue Code of 1986, as amended (the "Code")) of a
shareholder or beneficial owner; (b) in connection with (i) distributions from
retirement plans qualified under section 401 (a) of the Code when such
redemptions are necessary to make distributions to plan participants (such
payments include, but are not limited to death, disability, retirement, or
separation of service), (ii) distributions from a custodial account under
section 403(b)(7) of the Code or an individual retirement account (an "IRA") due
to death, disability, minimum distribution requirements after attainment of age
701/2, or, for accounts established prior to January 1, 1998, attainment of age
591/2, and (iii) a tax-free return of an excess contribution to an IRA; (c) in
whole or in part, in connection with shares sold to current and retired Trustees
of the Fund; (d) in whole or in part, in connection with shares sold to any
state, county, or city or any instrumentality, department, authority, or agency
thereof, which is prohibited by applicable investment laws from paying a sales
load or commission in connection with the purchase of shares of any registered
investment management company; (e) in whole or in part, in connection with
systematic withdrawals; (f) in connection with participation in the Merrill
Lynch Small Market 401(k) Program; and (g) in connection with the redemption of
shares of the Series if the Series is combined with another Seligman Mutual
Fund, or another similar reorganization transaction.
If, with respect to a redemption of any Class A, Class B or Class D shares
sold by a dealer, the CDSL is waived because the redemption qualifies for a
waiver as set forth above, the dealer shall remit to SFSI promptly upon notice,
an amount equal to the payment or a portion of the payment made by SFSI at the
time of sale of such shares.
SFSI may from time to time assist dealers by, among other things, providing
sales literature to, and holding informational programs for the benefit of,
dealers' registered representatives. Dealers may limit the participation of
registered representatives in such informational programs by means of sales
incentive programs which may require the sale of minimum dollar amounts of
shares of the Seligman Mutual Funds. SFSI may from time to time pay a bonus or
other incentive to dealers that sell shares of the Seligman Mutual Funds. In
some instances, these bonuses or incentives may be offered only to certain
dealers which employ registered representatives who have sold or may sell a
significant amount of shares of the Series and/or certain other mutual funds
managed by the Manager during a specified period of time. Such bonus or other
incentive may take the form of payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered representatives
and members of their families to places within
17
<PAGE>
or outside the United States. The cost to SFSI of such promotional activities
and payments shall be consistent with the Rules of the National Association of
Securities Dealers, Inc., as then in effect.
TELEPHONE TRANSACTIONS
A shareholder with telephone transaction privileges, AND THE SHAREHOLDER'S
BROKER/DEALER REPRESENTATIVE, has the ability to effect the following
transactions via telephone: (i) redemption of Series shares with proceeds sent
to the address of record (up to $50,000 per day per fund account), (ii) exchange
of Series shares for shares of the same class of another Seligman Mutual Fund,
(iii) change of a dividend and/or capital gain distribution option, and (iv)
change of address. In addition, a shareholder who has current bank information
on file with Seligman Data Corp. may redeem shares via telephone and have the
proceeds transferred electronically from the shareholder's fund account to the
shareholder's predesignated bank account. See "Redemption of Shares." All
telephone transactions are effected through Seligman Data Corp. at (800)
221-2450.
FOR INVESTORS WHO PURCHASE SHARES BY COMPLETING AND SUBMITTING AN ACCOUNT
APPLICATION: Unless an election is made otherwise on the Account Application, a
shareholder and the shareholder's broker/dealer of record, as designated on the
Account Application, will automatically receive telephone services. A
shareholder must provide bank information on the Account Application or a
supplemental election form in order to have redemptions via telephone sent to
the shareholder's bank account.
FOR INVESTORS WHO PURCHASE SHARES THROUGH A BROKER/DEALER: Telephone
services for a shareholder and the shareholder's representative may be elected
by completing a supplemental election form available from the broker/dealer of
record.
FOR ACCOUNTS REGISTERED AS IRAS: Telephone services will include only
exchanges or address changes.
FOR CORPORATIONS OR GROUP RETIREMENT PLANS: Telephone redemptions are not
permitted. Additionally, group retirement plans are not permitted to change a
dividend or gain distribution option. Group retirement plans that may allow plan
participants to place telephone exchanges directly with the Fund, must first
provide a letter of authorization signed by the plan's custodian or trustee, and
provide a telephone services election form signed by each plan participant.
All Seligman Mutual Fund accounts with the same account number (i.e.,
registered exactly the same) as an existing account, including any new fund in
which the shareholder invests in the future, will automatically include
telephone services if the existing account has telephone services. Telephone
services may also be elected at any time on a supplemental telephone services
election form.
For accounts registered jointly (such as joint tenancies, tenants in common
and community property registrations), each owner, by accepting or requesting
telephone services, authorizes each of the other owners to effect telephone
transactions on his or her behalf.
During times of drastic economic or market changes, a shareholder or the
shareholder's representative may experience difficulty in contacting Seligman
Data Corp. to request a redemption or exchange of Series shares via telephone.
In these circumstances, the shareholder or the shareholder's representative
should consider using other redemption or exchange procedures. (See "Redemption
of Shares" below.) Use of these other redemption or exchange procedures may
result in the request being processed at a later time than if a telephone
transaction had been used, and the Series' net asset value may fluctuate during
such periods.
The Fund and Seligman Data Corp. will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These will
include: recording all telephone calls requesting account activity, requiring
that the caller provide certain requested personal and/or account information at
the time of the call for the purpose of establishing the caller's identity, and
sending a written confirmation of redemptions, exchanges or address changes to
the address of record each time activity is initiated by telephone. As long as
the Fund and Seligman Data Corp. follow instructions
18
<PAGE>
communicated by telephone that were reasonably believed to be genuine at the
time of their receipt, neither they nor any of their affiliates will be liable
for any loss to the shareholder caused by an unauthorized transaction. In any
instance where the Fund or Seligman Data Corp. is not reasonably satisfied that
instructions received by telephone are genuine, the requested transaction will
not be executed, and neither they nor any of their affiliates will be liable for
any losses which may occur due to a delay in implementing the transaction. If
the Fund or Seligman Data Corp. does not follow the procedures described above,
the Fund or Seligman Data Corp. may be liable for any losses due to unauthorized
or fraudulent instructions. Telephone transactions must be effected through a
representative of Seligman Data Corp., i.e., requests may not be communicated
via Seligman Data Corp.'s automated telephone answering system. Shareholders, of
course, may refuse or cancel telephone services. Telephone services may be
terminated by a shareholder at any time by sending a written request to Seligman
Data Corp. TELEPHONE SERVICES MAY NOT BE ESTABLISHED BY A SHAREHOLDER'S
BROKER/DEALER WITHOUT THE WRITTEN AUTHORIZATION OF THE SHAREHOLDER. Written
acknowledgment of the addition of telephone services to an existing account or
termination of telephone services will be sent to the shareholder at the address
of record.
REDEMPTION OF SHARES
A shareholder may redeem shares held in book credit ("uncertificated") form
without charge, except a CDSL, if applicable, at any time by SENDING A WRITTEN
REQUEST to Seligman Data Corp., P.O. Box 9759, Providence, RI 02940-9759; or if
request is being sent by overnight delivery service to 100 Park Avenue, New
York, NY 10017. The redemption request must be signed by all persons in whose
name the shares are registered. A shareholder may redeem shares that are not in
book credit form without charge, except a CDSL, if applicable, by surrendering
certificates in proper form to the same address. Certificates should be sent by
certified or registered mail. Return receipt is advisable; however, this may
increase mailing time. Share certificates must be endorsed for transfer or
accompanied by an endorsed stock power signed by all share owners exactly as
their name(s) appear(s) on the account registration. The shareholder's letter of
instruction or endorsed stock power should specify the Series or Fund name,
account number, class of shares (A, B or D) and the number of shares or dollar
amount to be redeemed. The Fund cannot accept conditional redemption requests
(i.e., requests to sell shares at a specific price or on a future date).
If the redemption proceeds are (i) $50,000 or more, (ii) to be paid to
someone other than the shareholder of record (regardless of the amount) or (iii)
to be mailed to other than the address of record (regardless of the amount), the
signature(s) of the shareholder(s) must be guaranteed by an eligible financial
institution including, but not limited to, the following: banks, trust
companies, credit unions, securities brokers and dealers, savings and loan
associations and participants in the Securities Transfer Association Medallion
Program (STAMP), the Stock Exchanges Medallion Program (SEMP) and the New York
Stock Exchange Medallion Signature Program (MSP). The Fund reserves the right to
reject a signature guarantee where it is believed that the Fund will be placed
at risk by accepting such guarantee. A signature guarantee is also necessary in
order to change the account registration. Notarization by a notary public is not
an acceptable signature guarantee. A signature guarantee is not required if
redemption proceeds are transferred electronically to the shareholder's
predesignated bank account.
ADDITIONAL DOCUMENTATION MAY ALSO BE REQUIRED BY SELIGMAN DATA CORP. IN THE
EVENT OF A REDEMPTION BY A CORPORATION, EXECUTOR, ADMINISTRATOR, TRUSTEE,
CUSTODIAN OR RETIREMENT PLAN. FOR FURTHER INFORMATION WITH RESPECT TO REDEMPTION
REQUIREMENTS, PLEASE CONTACT THE SHAREHOLDER SERVICES DEPARTMENT OF SELIGMAN
DATA CORP. FOR ASSISTANCE.
In the case of Class A shares, (except for shares purchased without an
initial sales load due to the size of the purchase), and in the case of Class B
shares redeemed after six years and Class D shares redeemed after one year, a
shareholder will receive the net asset value per share next determined after
receipt of a request in good order. If Class A shares which were purchased
without an initial sales load because the pur-
19
<PAGE>
chase amount was $1,000,000 or more are redeemed within eighteen months of
purchase, a shareholder will receive the net asset value per share next
determined after receipt of a request in good order, less a CDSL of 1% as
described under "Purchase of Shares--Class A Shares--InitiaL Sales Load" above.
If Class B shares are redeemed within six years of purchase, a shareholder will
receive the net asset value per share next determined after receipt of a request
in good order, less the applicable CDSL as described under "Purchase of
Shares--Class B Shares" above. If Class D shares are redeemed within one year of
purchase, a shareholder will receive the net asset value per share next
determined after receipt of a request in good order, less a CDSL of 1% as
described under "Purchase of Shares--Class D Shares" above.
A shareholder also may "sell" shares to the Fund through an investment
dealer and, in that way, be certain, providing the order is timely, of receiving
the net asset value established at the end of the day on which the dealer is
given the repurchase order (less any applicable CDSL). The Fund makes no charge
for this transaction, but the dealer may charge a service fee. "Sell" or
repurchase orders received from an authorized dealer before the close of regular
trading on the NYSE (normally, 4:00 p.m. Eastern time) and received by SFSI, the
repurchase agent, before the close of business on the same day will be executed
at the net asset value per share determined as of the close of the NYSE on that
day, less any applicable CDSL. Repurchase orders received from authorized
dealers after the close of the NYSE or not received by SFSI prior to the close
of business, will be executed at the net asset value determined as of the close
of the NYSE on the next trading day, less any applicable CDSL. Shares held in a
"street name" account with a broker/dealer may be sold to the Fund only through
a broker/dealer.
TELEPHONE REDEMPTIONS. Telephone redemptions of uncertificated shares may
be made once per day, in an amount of up to $50,000 per fund account. Proceeds
will be sent to the address of record. A shareholder whose bank is a member of
the ACH network and who has current bank information on file with Seligman Data
Corp. may have redemption proceeds transferred electronically to the
shareholder's predesignated bank account. Telephone redemption requests received
by Seligman Data Corp. at (800) 221-2450 by the close of regular trading on the
NYSE (normally, 4:00 p.m. Eastern time) will be processed at the Fund's net
asset value determined as of the close of business on that day. Redemption
requests by telephone will not be accepted within 30 days following an address
change. IRAs, group retirement plans, corporations and trusts for which the name
of the current trustee does not appear in the account registration are not
eligible for telephone redemptions. The Fund reserves the right to suspend or
terminate its telephone redemption service at any time without notice.
For more information about telephone redemptions and the circumstances
under which shareholders may bear the risk of loss for a fraudulent transaction,
see "Telephone Transactions" above.
CHECK REDEMPTION SERVICE. The Check Redemption Service allows a shareholder
who owns or purchases shares in the Series worth $25,000 or more to request
Seligman Data Corp. to provide redemption checks to be drawn on the
shareholder's account in amounts of $500 or more. The shareholder may elect to
use this service on the Account Application or by later written request to
Seligman Data Corp. Shares for which certificates have been issued will not be
available for redemption under this Service. Holders of Class B shares may use
this service although check redemptions of Class B shares will be subject to a
CDSL. Holders of Class D shares may use this service with respect to shares that
have been held for at least one year. Dividends continue to be earned through
the date preceding the date the check clears for payment. Use of this service is
subject to Boston Safe Deposit and Trust Co. rules and regulations covering
checking accounts. Separate checkbooks will be furnished for each series of the
Fund.
There is no charge for use of checks. When honoring a check that was
processed for payment, Boston Safe Deposit and Trust Co. will cause the Series
to redeem exactly enough full and fractional shares from an account to cover the
amount of the check. If shares are
20
<PAGE>
owned jointly, redemption checks must be signed by all persons, unless otherwise
elected on the Account Application, in which case a single signature will be
acceptable.
In view of daily fluctuations in share value, the shareholder should be
certain that the amount of shares in the account is sufficient to cover the
amount of checks written. If insufficient shares are in the account, the check
will be returned, marked "insufficient funds." THE FUND WILL NOT REDEEM SHARES
IN ONE SERIES TO COVER A CHECK WRITTEN ON ANOTHER SERIES. SELIGMAN DATA CORP.
WILL CHARGE A $10.00 PROCESSING FEE FOR ANY CHECK REDEMPTION DRAFT RETURNED AS
UNCOLLECTABLE. THIS CHARGE MAY BE DEDUCTED FROM THE SHAREHOLDER'S ACCOUNT.
Check Redemption books cannot be reordered unless the shareholder's account
has a value of $25,000 or more and the Fund has a certified Taxpayer
Identification Number on file.
Cancelled checks will be returned to the shareholder under separate cover
the month after they clear. The Check Redemption Service may be terminated at
any time by the Fund or Boston Safe Deposit and Trust Co. See "Terms and
Conditions."
GENERAL. With respect to shares redeemed, a check for the proceeds, less
any applicable CDSL, will be sent to the address of record within seven calendar
days after acceptance of the redemption order and will be made payable to all of
the registered owners on the account. With respect to shares repurchased by the
Fund, a check for the proceeds will be sent to the investment dealer within
seven calendar days after acceptance of the repurchase order and will be made
payable to the investment dealer. Redemptions via telephone to the shareholder's
bank account will be transferred electronically within five business days.
Payment of redemption proceeds will be delayed on redemptions of shares
purchased by check (unless certified) until Seligman Data Corp. receives notice
that the check has cleared, which may be up to 15 days from the credit of the
shares to the shareholder's account. No interest is earned on the redemption
proceeds during this period. The proceeds of a redemption or repurchase may be
more or less than the shareholder's cost.
The Fund reserves the right to redeem shares owned by a shareholder whose
investment in the Series has a value of less than a minimum amount specified by
the Fund's Trustees, which is presently $500. Shareholders would be sent a
notice before the redemption is processed stating that the value of their
investment in the Series is less than the specified minimum and that they have
sixty days to make an additional investment.
REINSTATEMENT PRIVILEGE. If a shareholder redeems Class A shares and then
decides to reinvest them, or to shift the investment to the other series of the
Fund or one of the other Seligman Mutual Funds the shareholder may, within 120
calendar days of the date of redemption, use all or any part of the proceeds of
the redemption to reinstate, free of an initial sales load, all or any part of
the investment in shares of the Series or in shares of the other series of the
Fund or one of the other Seligman Mutual Funds. If a shareholder redeems Class B
or Class D shares and the redemption was subject to a CDSL, the shareholder may
reinstate all or any part of the investment in shares of the same class of the
Series or of any of the other Seligman Mutual Funds within 120 calendar days of
the date of redemption and receive a credit for the applicable CDSL paid. Such
investment will be reinstated at the net asset value per share established as of
the close of the NYSE on the day the request is received. Seligman Data Corp.
must be informed that the purchase is a reinstated investment. REINSTATED SHARES
MUST BE REGISTERED EXACTLY AS THE SHARES PREVIOUSLY REDEEMED AND THE FUND'S
MINIMUM INITIAL INVESTMENT AMOUNT MUST BE MET AT THE TIME OF REINSTATEMENT.
Generally, exercise of the Reinstatement Privilege does not alter the
Federal income tax status of any capital gain realized on a sale of Series
shares, but to the extent that any shares are sold at a loss and the proceeds
are reinvested in shares of the same Series, some or all of the loss will not be
allowed as a deduction, depending upon the percentage of the proceeds
reinvested.
21
<PAGE>
ADMINISTRATION, SHAREHOLDER SERVICES
AND DISTRIBUTION PLAN
Under the Series' Administration, Shareholder Services and Distribution
Plan (the "Plan") the Series may pay to SFSI an administration, shareholder
services and distribution fee in respect of the Series' Class A, Class B and
Class D shares. Payments under the Plan may include, but are not limited to: (i)
compensation to securities dealers and other organizations ("Service
Organizations") for providing distribution assistance with respect to assets
invested in the Series, (ii) compensation to Service Organizations for providing
administration, accounting and other shareholder services with respect to Series
shareholders, and (iii) otherwise promoting the sale of shares of the Series,
including paying for the preparation of advertising and sales literature and the
printing and distribution of such promotional materials and prospectuses to
prospective investors and defraying SFSI's costs incurred in connection with its
marketing efforts with respect to shares of the Series. The Manager, in its sole
discretion, may also make similar payments to SFSI from its own resources, which
may include the management fee that the Manager receives from the Series.
Under the Plan, the Series reimburses SFSI for its expenses with respect to
Class A shares at an annual rate of up to .25% of the average daily net asset
value of Class A shares. It is expected that the proceeds from the fee in
respect of Class A shares will be used primarily to compensate Service
Organizations which enter into agreements with SFSI. Such Service Organizations
will receive from SFSI a continuing fee of up to .25% on an annual basis,
payable quarterly, of the average daily net assets of Class A shares
attributable to the particular Service Organization for providing personal
service and/or the maintenance of shareholder accounts. The fee payable from
time to time is, within such limit, determined by the Trustees of the Fund.
The Plan, as it relates to Class A shares, was approved by the Trustees on
October 9, 1984 and was approved by the shareholders of the Series on April 10,
1986. The total amount paid for the year ended December 31, 1997 in respect of
the Series' Class A shares pursuant to the Plan was equal to .24% of the Class A
shares' average daily net assets.
Under the Plan, the Fund reimburses SFSI for its expenses with respect to
Class B and Class D shares at an annual rate of up to 1% of the respective
average daily net asset value of the Class B and Class D shares. Proceeds from
the Class B distribution fees are used to pay Service Organizations a continuing
fee of up to .25% on an annual basis of the average net asset value of Class B
shares attributable to particular Service Organizations for providing personal
service and/or the maintenance of shareholder accounts and will also be used by
SFSI to defray the expense of the payment of 4% made by it to Service
Organizations at the time of sale of Class B shares. In that connection, SFSI
has assigned FEP its interest in the fees payable to it in respect of the Class
B shares, other than the portion payable to Service Organizations on a
continuing basis. Proceeds from the Class D distribution fees are used primarily
to compensate Service Organizations for administration, shareholder services and
distribution assistance (including a continuing fee of up to .25% on an annual
basis of the average daily net asset value of Class D shares attributable to
particular Service Organizations for providing personal service and/or the
maintenance of shareholder accounts) and will initially be used by SFSI to
defray the expense of the payment of 1% made by it to Service Organizations at
the time of the sale of Class D shares. The amounts expended by SFSI in any one
year upon the initial purchase of Class B and Class D shares may exceed the
amounts received by it from Plan payments retained. Expenses of administration,
shareholder services and distribution of Class B and Class D shares in one
fiscal year may be respectively, paid from Class B and Class D Plan fees
received in any other fiscal year.
The Plan, as it relates to Class B shares, was approved by the Trustees of
the Fund on March 21, 1996 and became effective April 22, 1996. The Plan, as it
relates to Class D shares, was amended by the Trustees of the Fund on July 15,
1993. The total amount paid for the year ended December 31, 1997 by the Series'
Class B and Class D shares pursuant to the Plan was 1% per annum of the average
daily net assets of the Class B and Class D shares. The Plan is reviewed by the
Fund's Trustees annually.
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Seligman Services, Inc. ("SSI"), an affiliate of the Manager, is a limited
purpose broker/dealer. SSI acts as a broker/dealer of record for most
shareholder accounts that do not have a designated broker/dealer of record
including all such shareholder accounts established after April 1, 1995 and
receives compensation for providing personal service and account maintenance to
such accounts of record.
EXCHANGE PRIVILEGE
A shareholder of the Series may, without charge, exchange at net asset
value any part or all of an investment in the Series for shares of the other
series of the Fund or for shares of any of the other Seligman Mutual Funds.
Exchanges may be made by mail, or by telephone if the shareholder has telephone
services.
Class A, Class B and Class D shares may be exchanged only for Class A,
Class B and Class D shares, respectively, of another Seligman Mutual Fund on the
basis of relative net asset value.
If shares that are subject to a CDSL are exchanged for shares, of another
Seligman Mutual Fund, then for purposes of assessing the CDSL payable upon
disposition of the exchanged shares, the applicable holding period shall be
reduced by the period for which the original shares were held.
Class B shareholders of the Series exercising the exchange privilege will
continue to be subject to the Series' CDSL schedule if such schedule is higher
or longer than the CDSL schedule relating to the new Class B shares. In
addition, Class B shares of the Series acquired through use of the exchange
privilege will be subject to the Series' CDSL schedule if such schedule is
higher or longer than the CDSL schedule relating to the Class B shares of the
fund from which such shares were exchanged.
The Seligman Mutual Funds available under the Exchange Privilege are:
o SELIGMAN CAPITAL FUND, INC. seeks aggressive capital appreciation. Current
income is not an objective.
o SELIGMAN CASH MANAGEMENT FUND, INC. invests in high quality money market
instruments. Shares are sold at net asset value.
o SELIGMAN COMMON STOCK FUND, INC. seeks favorable current income and long-term
growth of both income and capital value without exposing capital to undue
risk.
o SELIGMAN COMMUNICATIONS AND INFORMATION FUND, INC. invests in shares of
companies in the communications, information and related industries to
produce capital gain. Income is not an objective.
o SELIGMAN FRONTIER FUND, INC. seeks to produce growth in capital value. Income
may be considered but will only be incidental to the fund's investment
objective.
o SELIGMAN GROWTH FUND, INC. seeks longer-term growth in capital value and an
increase in future income.
o SELIGMAN HENDERSON GLOBAL FUND SERIES, INC. consists of the Seligman
Henderson International Fund, the Seligman Henderson Emerging Markets Growth
Fund, the Seligman Henderson Global Growth Opportunities Fund, the Seligman
Henderson Global Smaller Companies Fund and the Seligman Henderson Global
Technology Fund, which seek long-term capital appreciation primarily through
investing in companies either globally or internationally.
o SELIGMAN HIGH INCOME UND SERIES seeks high current income by investing in
debt securities. In addition to the Series, the Fund consists of the Seligman
U.S. Government Securities Series.
o SELIGMAN INCOME FUND, INC. seeks high current income and the possibility of
improvement of future income and capital value.
o SELIGMAN MUNICIPAL FUND SERIES, INC. consists of several State Series and a
National Series. The National Municipal Series seeks to provide maximum
income exempt from federal income taxes; individual state series, each
seeking to maximize income exempt from federal income taxes and from personal
income taxes in designated states are available for Colorado, Georgia,
Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New York,
Ohio, Oregon and South Carolina. (Does not currently offer Class B shares.)
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o SELIGMAN MUNICIPAL SERIES TRUST includes the Seligman California Municipal
High-Yield Series, the Seligman California Municipal Quality Series, the
Seligman Florida Municipal Series and the Seligman North Carolina Municipal
Series, each of which invests in municipal securities of its designated
state. (Does not currently offer Class B shares.)
o SELIGMAN NEW JERSEY MUNICIPAL FUND, INC. invests in investment-grade New
Jersey municipal securities. (Does not currently offer Class B shares.)
o SELIGMAN PENNSYLVANIA MUNICIPAL FUND SERIES invests in investment-grade
Pennsylvania municipal securities. (Does not currently offer Class B shares.)
o SELIGMAN VALUE FUND SERIES, INC. consists of the Seligman Large-Cap Value
Fund and the Seligman Small-Cap Value Fund each of which seeks long-term
capital appreciation by investing in equity securities of value companies
primarily located in the U.S.
All permitted exchanges will be based on the net asset values of the
respective funds determined at the close of regular trading on the NYSE on that
day. Telephone requests for exchanges received by the close of regular trading
on the NYSE (normally, 4:00 p.m. Eastern time), by Seligman Data Corp. at (800)
221-2450, will be processed as of the close of business on that day. Requests
received after the close of regular trading on the NYSE will be processed at the
net asset values per share calculated the following business day. The
registration of an account into which an exchange is made must be identical to
the registration of the account from which shares are exchanged. When
establishing a new account by an exchange of shares, the shares being exchanged
must have a value of at least the minimum initial investment required by the
mutual fund into which the exchange is being made. THE METHOD OF RECEIVING
DISTRIBUTIONS, UNLESS OTHERWISE INDICATED, WILL BE CARRIED OVER TO THE NEW FUND
ACCOUNT, AS WILL TELEPHONE SERVICES. ACCOUNT SERVICES, SUCH AS INVEST-A-CHECK(R)
SERVICE, DIRECTED DIVIDENDS, SYSTEMATIC WITHDRAWAL PLAN AND CHECK WRITING
PRIVILEGE WILL NOT BE CARRIED OVER TO THE NEW FUND ACCOUNT UNLESS SPECIFICALLY
REQUESTED AND PERMITTED BY THE NEW FUND. Exchange orders may be placed to effect
an exchange of a specific number of shares, an exchange of shares equal to a
specific dollar amount or an exchange of all shares held. Shares for which
certificates have been issued may not be exchanged via telephone and may be
exchanged only upon receipt of a written exchange request together with
certificates representing shares to be exchanged in proper form.
The Exchange Privilege via mail is generally applicable to group retirement
plans, although some restrictions may apply. The terms of the Exchange Privilege
described herein may be modified at any time; and not all of the Seligman Mutual
Funds are available to residents of all states. Before making any exchange, a
shareholder should contact an authorized investment dealer or Seligman Data
Corp. to obtain prospectuses of any of the Seligman Mutual Funds.
A broker/dealer representative of record will be able to effect exchanges
on behalf of a shareholder only if the shareholder has telephone services or if
the broker/dealer has entered into a Telephone Exchange Agreement with SFSI
wherein the broker/dealer must agree to indemnify SFSI and the Seligman Mutual
Funds from any loss or liability incurred as a result of the acceptance of
telephone exchange orders.
Written confirmation of all exchanges will be forwarded to the shareholder
to whom the exchanged shares are registered and a duplicate confirmation will be
sent to the dealer of record listed on the account. SFSI reserves the right to
reject any telephone exchange request. Any rejected telephone exchange order may
be processed by mail. For more information about telephone exchanges, including
the circumstances under which shareholders may bear the risk of loss for a
fraudulent transaction, see "Telephone Transactions."
Exchanges of shares are sales and may result in a gain or loss for federal
income tax purposes.
FURTHER INFORMATION ABOUT
TRANSACTIONS IN THE SERIES
Because excessive trading (including short-term, "market timing" trading)
can hurt the Series' performance, the Fund may refuse any exchange (1) from
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anyshareholder account from which there have been two exchanges in the preceding
three month period, or (2) where the exchanged shares equal in value the lesser
of $1,000,000 or 1% of the Series' net assets. The Fund may also refuse any
exchange or purchase order from any shareholder account if the shareholder or
the shareholder's broker/dealer has been advised that previous patterns of
purchases and redemptions or exchanges have been considered excessive. Accounts
under common ownership or control, including those with the same taxpayer ID
number and those administered so as to redeem or purchase shares based upon
certain predetermined market indicators, will be considered one account for this
purpose. Additionally, the Fund reserves the right to refuse any order for the
purchase of shares.
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Series' net investment income is distributed to shareholders monthly in
the form of additional shares, unless the shareholder elects otherwise. Payments
vary in amount depending on income received from the Series' investments and
costs of operations. Shares begin earning dividends on the day on which the Fund
receives payment. Shares continue to earn dividends through the date preceding
the date they are redeemed.
The Series distributes substantially all of any taxable net long-term and
short-term gain realized on investments to shareholders at least annually. In
determining amounts of capital gains to be distributed, any capital loss
carryforwards from prior years will offset capital gains. Such distributions
will generally be taxable to shareholders in the year in which they are declared
by the Series if paid before February 1 of the following year.
Shareholders may elect: (1) to receive both dividends and gain
distributions in shares; (2) to receive dividends in cash and gain distributions
in shares; (3) to receive both dividends and gain distributions in cash. Cash
dividends and gain distributions are paid by check and sent to the shareholder's
address of record or, if elected by a shareholder who has current bank
information on file with Seligman Data Corp., electronically deposited into the
shareholder's predesignated bank account. Such deposits will normally be
credited to the shareholder's bank account in 3 to 4 business days after the
payable date of the dividend or distribution.
In the case of prototype retirement plans, dividends and gain distributions
are reinvested in additional shares. Unless another election is made, dividends
and capital gain distributions will be credited to shareholder accounts in
additional shares. Shares acquired through a dividend or gain distribution and
credited to a shareholder's account are not subject to an initial sales load or
a CDSL. Dividends and gain distributions paid in shares are invested on the
payable date using the net asset value of the payable date. Shareholders may
elect to change their dividend and gain distribution options by writing Seligman
Data Corp. at the address listed below. If the shareholder has telephone
services, changes may also be telephoned to Seligman Data Corp. between 8:30
a.m. and 6:00 p.m. Eastern time, by either the shareholder or the broker/dealer
of record on the account. For information about electing telephone services, see
"Telephone Transactions." These elections must be received by Seligman Data
Corp. before the record date for the dividend or gain distribution in order to
be effective for such dividend or gain distribution. For information on how to
have dividend or gain distributions electronically deposited into a
shareholder's bank account, contact Seligman Data Corp.
The per share dividends from net investment income on Class B and Class D
shares will be lower than the per share dividends on Class A shares as a result
of the higher distribution fees applicable with respect to Class B and Class D
shares. Per share dividends of the three classes may also differ as a result of
differing class expenses. Distributions of net capital gains, if any, will be
paid in the same amount for Class A, Class B and Class D shares. See "Purchase
of Shares--Valuation."
Shareholders exchanging shares of one mutual fund for shares of another
mutual fund in the Seligman Group will continue to receive dividends and gains
as elected prior to such exchange unless otherwise specified. In the event that
a shareholder redeems, transfers or exchanges all shares in an account between
the
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record date and the payable date, the value of any dividends or gain
distributions declared will be paid in cash regardless of the existing election.
A transfer or exchange of all shares (closing an account), between the record
date and payable date, will result in the value of dividends or gain
distributions being paid to the new fund account in accordance with the option
on the closed account, unless Seligman Data Corp. is instructed otherwise.
FEDERAL INCOME TAXES
The Series intends to continue to qualify as a regulated investment company
under the Code. For each year so qualified, the Series will not be subject to
federal income taxes on its net investment income and capital gains, if any,
realized during any taxable year which it distributes to its shareholders,
provided that at least 90% of its net investment income and net short-term
capital gains are distributed to shareholders each year.
Dividends from net investment income and distributions from net short-term
capital gains are taxable as ordinary income to shareholders, whether received
in cash or reinvested in additional shares, and are, generally, not eligible for
the dividends received deduction for corporations.
Distributions of net capital gain (i.e., the excess of net long-term
capital gains over any net short-term losses) are taxable as long-term capital
gain, whether received in cash or invested in additional shares, regardless of
how long shares have been held by a shareholder. Such distributions are not
eligible for the dividends received deduction allowed to corporate shareholders.
Shareholders receiving distributions in the form of additional shares issued by
the Series will be treated for federal income tax purposes as having received a
distribution in an amount equal to the fair market value on the date of
distribution of the shares received. Individual shareholders will be subject to
federal income tax on distributions of net capital gains at a maximum rate of
28% if designated as derived from the Series' capital gains from property held
for more than one year and at a maximum rate of 20% if designated as derived
from the Series' capital gains from property held for more than eighteen months.
The Series must exhaust its capital loss carryforward before it may make capital
gain distributions to shareholders.
Any gain or loss realized upon a sale or redemption of shares in the Series
by a shareholder who is not a dealer in securities will generally be treated as
a long-term capital gain or loss if the shares have been held for more than one
year and otherwise as a short-term capital gain or loss. Individual shareholders
will be subject to federal income tax on net capital at a maximum rate of 28% in
respect of shares held for more than one year and at a maximum rate of 20% in
respect of shares held for more than eighteen months. Net capital gain of a
corporate shareholder is taxed at the same rate as ordinary income. However, if
shares on which a long-term capital gain distribution has been received are
subsequently sold or redeemed and such shares have been held for six months or
less, any loss realized will be treated as long-term capital loss to the extent
that it offsets the long-term capital gain distribution. In addition, no loss
will be allowed on the sale or other disposition of shares of the Series if,
within a period beginning 30 days before the date of such sale or disposition
and ending 30 days after such date, the holder acquires (such as through
dividend reinvestment) securities that are substantially identical to the shares
of the Series.
In determining gain or loss on shares of the Series that are sold or
exchanged within 90 days after acquisition, a shareholder generally will not be
permitted to include in the tax basis attributable to such shares the sales load
incurred in acquiring such shares to the extent of any subsequent reduction in
the sales load by reason of the Exchange or Reinstatement Privilege offered by
the Series. Any sales load not taken into account in determining the tax basis
of shares sold or exchanged within 90 days after acquisition will be added to
the shareholder's tax basis in the shares acquired pursuant to the Exchange or
Reinstatement Privilege.
The Series will generally be subject to an excise tax of 4% on the amount
of any income or capital gains, above certain permitted levels, distributed to
shareholders on a basis such that such income or gain is not tax-
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able to shareholders in the calendar year in which it was earned. Furthermore,
dividends declared in October, November or December payable to shareholders of
record on a specified date in such a month and paid in the following January
will be treated as having been paid by the Series and received by each
shareholder in December. Under this rule, therefore, shareholders may be taxed
in one year on dividends or gain distributions actually received in January of
the following year.
Shareholders are urged to consult their tax advisors concerning the effect
of federal income taxes in their individual circumstances.
UNLESS A SHAREHOLDER INCLUDES A CERTIFIED TAXPAYER IDENTIFICATION NUMBER
(SOCIAL SECURITY NUMBER FOR INDIVIDUALS) ON THE ACCOUNT APPLICATION AND
CERTIFIES THAT THE SHAREHOLDER IS NOT SUBJECT TO BACKUP WITHHOLDING, THE FUND IS
REQUIRED TO WITHHOLD AND REMIT TO THE U.S. TREASURY A PORTION OF DISTRIBUTIONS
AND OTHER REPORTABLE PAYMENTS TO THE SHAREHOLDER. THE RATE OF BACKUP WITHHOLDING
IS 31%. SHAREHOLDERS SHOULD BE AWARE THAT, UNDER REGULATIONS PROMULGATED BY THE
INTERNAL REVENUE SERVICE, THE FUND MAY BE FINED $50 ANNUALLY FOR EACH ACCOUNT
FOR WHICH A CERTIFIED TAXPAYER IDENTIFICATION NUMBER IS NOT PROVIDED. IN THE
EVENT THAT SUCH A FEE IS IMPOSED, THE FUND MAY CHARGE A SERVICE FEE OF UP TO $50
THAT MAY BE DEDUCTED FROM THE SHAREHOLDER'S ACCOUNT AND OFFSET AGAINST ANY
UNDISTRIBUTED DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. THE FUND ALSO RESERVES
THE RIGHT TO CLOSE ANY ACCOUNT WHICH DOES NOT HAVE A CERTIFIED TAXPAYER
IDENTIFICATION NUMBER.
SHAREHOLDER INFORMATION
Shareholders will be sent reports semi-annually regarding the Series.
General information about the Series may be requested by writing the Corporate
Communications/Investor Relations Department, J. & W. Seligman & Co.
Incorporated, 100 Park Avenue, New York, NY 10017 or by telephoning the
Corporate Communications/Investor Relations Department toll-free at (800)
221-7844 from all continental United States, except New York, or (212) 850-1864
in New York State and the Greater New York City area. Information about
shareholder accounts may be requested by writing Shareholder Services, Seligman
Data Corp. at the same address or by toll-free telephone by dialing (800)
221-2450 from all continental United States, or (212) 682-7600 outside the
continental United States. Seligman Data Corp. may be telephoned Monday through
Friday (except holidays), between the hours of 8:30 a.m. and 6:00 p.m. Eastern
time, and calls will be answered by a service representative.
24 HOUR TELEPHONE ACCESS IS AVAILABLE BY DIALING (800) 622-4597 ON A
TOUCHTONE PHONE, WHICH PROVIDES INSTANT ACCESS TO PRICE, YIELD, ACCOUNT BALANCE,
MOST RECENT TRANSACTION AND OTHER INFORMATION. IN ADDITION, ACCOUNT STATEMENTS
AND FORM 1099-DIV MAY BE ORDERED. TO INSURE PROMPT DELIVERY OF DISTRIBUTION
CHECKS, ACCOUNT STATEMENTS AND OTHER INFORMATION, SELIGMAN DATA CORP. SHOULD BE
NOTIFIED IMMEDIATELY IN WRITING OF ANY ADDRESS CHANGE. ADDRESS CHANGES MAY BE
TELEPHONED TO SELIGMAN DATA CORP. IF THE SHAREHOLDER HAS TELEPHONE SERVICES. FOR
MORE INFORMATION ABOUT TELEPHONE SERVICES, SEE "TELEPHONE TRANSACTIONS" ABOVE.
ACCOUNT SERVICES. Shareholders are sent confirmation of financial
transactions in their Account.
Other investor services are available. These include:
O INVEST-A-CHECK(R) SERVICE enables a shareholder to authorize additional
purchases of shares automatically bY electronic funds transfer from the
shareholder's savings or checking account, if the shareholder's bank is a member
of ACH, or by preauthorized checks to be drawn on the shareholder's checking
account at regular monthly intervals in fixed amounts of $100 or more per fund,
or regular quarterly intervals in fixed amounts of $250 or more per fund, to
purchase shares. Accounts may be established concurrently with the
Invest-A-Check(R) Service only if accompanied by a check for at least $100 in
conjunction with the monthly investment option or a check for at least $250 in
conjunction with the quarterly investment option. For investments in the
Seligman Time Horizon
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Matrix(SM) Asset Allocation Program, the minimum amount is
$500 at regular monthly intervals or $1,000 at regular quarterly intervals. By
utilizing the Invest-A-Check(R) Service to establish an account, you are
agreeing to continue the service until the Series' minimum investment is met. If
you elect to cancel the service prior to meeting the minimum, your account may
be subject to closure. (See "Terms and Conditions.")
O AUTOMATIC DOLLAR-COST-AVERAGING SERVICE permits a shareholder of Seligman
Cash Management Fund to exchange a specified amount, at regular monthly
intervals in fixed amounts of $100 or more per fund, or regular quarterly
intervals in fixed amounts of $250 or more per fund, from shares of any class of
the Cash Management Fund into shares of the same class of any other Seligman
Mutual Fund registered in the same name. For exchanges into the Seligman Time
Horizon MatrixSM Asset Allocation Program, the minimum amount is $500 at regular
monthly intervals or $1,000 at regular quarterly intervals. The shareholder's
Cash Management Fund account must have a value of at least $5,000 at the
initiation of the service. Exchanges will be made at the public offering price.
O DIVIDENDS FROM OTHER INVESTMENTS permits a shareholder to order dividends
payable on shares of other companies to be paid to and invested in additional
shares of the Series or another Seligman Mutual Fund. (Dividend checks must
include the shareholder's name, account number, the name of the fund and the
class of shares in which the investment is to be made.) If the dividends are to
be invested in a new fund account, the first investment must meet the required
minimum purchase amount for such fund.
A shareholder may also direct that dividends payable on shares of other
companies be transferred electronically to purchase shares of any Seligman
Mutual Fund, if the other company provides this service. See "Purchase of
Shares" or contact Seligman Data Corp. for more information.
O AUTOMATIC CD TRANSFER SERVICE permits a shareholder to instruct a bank to
invest the proceeds of a maturing bank certificate of deposit ("CD") in shares
of any designated Seligman Mutual Fund. Shareholders who wish to use this
service should contact Seligman Data Corp. or a broker to obtain the necessary
documentation. Banks may charge a penalty on CD assets withdrawn prior to
maturity. Accordingly, it will not normally be advisable to liquidate a CD
before its maturity.
O SYSTEMATIC WITHDRAWAL PLAN permits payments in fixed amounts of $50 or
more at regular intervals to be made to a shareholder who owns or purchases
shares worth $5,000 or more held as book credits. Payments will be sent by check
to the address designated by the shareholder or, if elected by a holder who has
current bank information on file with Seligman Data Corp., electronically
deposited into the shareholder's predesignated bank account. Such deposits will
normally be credited to the shareholder's bank account in 2 to 3 business days
after the shares are redeemed from the shareholder's fund account. Holders of
Class A shares purchased at net asset value because the purchase amount was
$1,000,000 or more should bear in mind that withdrawals may be subject to a 1%
CDSL if made within eighteen months of purchase of such shares. Holders of Class
B and Class D shares may elect to use this plan immediately, although certain
withdrawals may be subject to a CDSL. (See "Terms and Conditions.")
O DIRECTED DIVIDENDS allows a shareholder to pay dividends to another
person or to direct the payment of such dividends to another Seligman Mutual
Fund for purchase at net asset value. Dividends on Class A, Class B and Class D
shares may only be directed to shares of the same class of another Seligman
Mutual Fund.
O OVERNIGHT DELIVERY to service shareholder requests is available for a
$15.00 fee which will be debited from a shareholder's account, if requested.
O COPIES OF ACCOUNT STATEMENTS will be sent to each shareholder free of
charge for the current year and most recent prior year. Copies of year-end
statements for prior years back to 1985 are available for a fee of $10.00 per
year, per account, with a maximum charge of $150 per account. Statement requests
should be forwarded, along with a check, to Seligman Data Corp.
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TAX-DEFERRED PLANS. Shares of the Series may be purchased for:
--Individual Retirement Accounts (IRAs), including Traditional IRAs, Roth
IRAs and Education IRAs;
--Savings Incentive Match Plans for Employees (SIMPLE IRAs);
--Simplified Employee Pension Plans (SEPs);
--Section 401(k) Plans for corporations and their employees;
--Section 403(b)(7) Plans for employees of public school systems and
certain non-profit organizations who wish to make deferred compensation
arrangements; and
--Money Purchase Pension and Profit Plans for sole proprietorships,
partnerships and corporations.
These types of plans may be established only upon receipt of a written
application form. The Fund may register an IRA investment for which an account
application has not been received as an ordinary taxable account.
For more information, write Retirement Plan Services, Seligman Data Corp.,
100 Park Avenue, New York, NY 10017, or telephone toll-free (800) 445-1777 from
all continental United States. You also may receive information through an
authorized dealer.
ADVERTISING THE SERIES' PERFORMANCE
From time to time the Series advertises its "yield," "total return" and
"average annual total return", each of which are calculated separately for Class
A, Class B and Class D shares. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS
AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The "yield" of a class of
the Series refers to the income generated by an investment in that class over a
30-day period. This income is then "annualized." That is, the amount of income
generated by the investment during that 30-day period is assumed to be generated
each 30-day period for twelve periods and is shown as a percentage of the
investment. The income earned on the investment is also assumed to be reinvested
at the end of the sixth 30-day period. The "total return" shows what an
investment in shares of a class of the Series would have earned over a specified
period of time (for example, one, five and ten year periods or since inception)
assuming the payment of the maximum sales load, if any, when the investment was
first made (or CDSL upon redemption, if applicable) and that all distributions
and dividends by that class were reinvested on the reinvestment dates during the
period. The "average annual total return" is the annual rate required for the
initial payment to grow to the amount which would be received at the end of the
specified period (one, five and ten year periods or since inception); i.e., the
average annual compound rate of return. The total return and average total
return for both Class A and Class D shares for periods prior to January 1, 1996
do not reflect the increase in the management fee payable by the Fund effective
on such date, which if reflected would reduce the performance quoted. Total
return and average annual total return may also be presented without the effect
of the initial sales load or CDSL, as applicable.
From time to time, reference may be made in advertising or promotional
material to performance information, including mutual fund rankings, prepared by
Lipper Analytical Services, Inc. ("Lipper"), an independent reporting service
which monitors the performance of mutual funds. In calculating the total return
of the Series' Class A, Class B and Class D shares, the Lipper analysis assumes
investment of all dividends and distributions paid but does not take into
account applicable sales loads. The Series may also refer in advertisements or
in other promotional material to articles, comments, listings and columns in the
financial press pertaining to the Series' performance. Examples of such
financial and other press publications include BARRON'S, BUSINESS WEEK,
CDA/WEISENBERGER MUTUAL FUNDS INVESTMENT REPORT, CHRISTIAN SCIENCE MONITOR,
FINANCIAL PLANNING, FINANCIAL TIMES, FINANCIAL WORLD, FORBES, FORTUNE,
INDIVIDUAL INVESTOR, INVESTMENT ADVISOR, INVESTORS BUSINESS DAILY, KIPLINGER'S,
LOS ANGELES TIMES, MONEY MAGAZINE, MORNINGSTAR, INC., PENSIONS AND INVESTMENTS,
SMART MONEY, THE NEW YORK TIMES, USA TODAY, U.S. NEWS AND WORLD REPORT, THE WALL
STREET JOURNAL, WASHINGTON POST, WORTH MAGAZINE and YOUR MONEY.
29
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ORGANIZATION AND CAPITALIZATION
The Fund is a diversified, open-end management investment company organized
under the laws of the Commonwealth of Massachusetts by a Declaration of Trust
dated July 27, 1984. The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest, $.001 par
value, in separate series. The Trustees also have the power to create additional
series of shares.
At present, shares of beneficial interest of two series are authorized,
which shares of beneficial interest constitute interest in the Series and the
Seligman U.S. Government Securities Series. Shares of beneficial interest of the
Series and the Seligman U.S. Government Securities Series are divided into three
classes (Class A, Class B and Class D). Each of the Series' and the Seligman
U.S. Government Securities Series' Class A, Class B and Class D shares of
beneficial interest is equal as to earnings, assets and voting privileges,
except that each class bears its own separate distribution and, potentially,
certain other class expenses and has exclusive voting rights with respect to any
matter to which a separate vote of any class is required by the 1940 Act or
Massachusetts law. The Fund has adopted a plan (the "Multiclass Plan") pursuant
to Rule 18f-3 under the 1940 Act permitting the issuance and sale of multiple
classes of beneficial interest. In accordance with the Declaration of Trust, the
Trustees may authorize the creation of additional classes of shares of
beneficial interest with such characteristics as are permitted by the Multiclass
Plan and Rule 18f-3. The 1940 Act requires that where more than one class
exists, each class must be preferred over all other classes in respect of assets
specifically allocated to such class. Shares entitle their holders to one vote
per share. Shares have noncumulative voting rights, do not have preemptive or
subscription rights and are transferable. It is the intention of the Fund not to
hold Annual Meetings of Shareholders. The Trustees may call Special Meetings of
Shareholders for action by shareholder vote as may be required by the 1940 Act
or Declaration of Trust. Pursuant to the 1940 Act, shareholders have to approve
the adoption of any management contract, distribution plan and any changes in
fundamental investment policies. Shareholders also have the right to call a
meeting of shareholders for the purpose of voting on the removal of one or more
Trustees. Such removal can be effected upon the action of two-thirds of the
outstanding shares of the Fund.
30
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APPENDIX
Moody's Investors Service, Inc.
Bonds and Notes
BAA: Bonds and notes which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds or notes lack outstanding
investment characteristics and in fact may have speculative characteristics as
well.
BA: Bonds and notes which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and therefore not well
safeguarded during other good and bad times over the future. Uncertainty of
position characterizes bonds and notes in this class.
B: Bonds and notes which are rated B generally lack characteristics of a
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
CAA: Bonds and notes which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
CA: Bonds and notes which are rated Ca represent obligations which are
speculative in high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds and notes which are rated C are the lowest rated class of bonds or
notes, and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Standard & Poor's Rating Service ("S&P")
Bonds
BBB: Bonds rated BBB are regarded as having a satisfactory degree of safety and
capacity to pay principal and interest and repay principal. Whereas they
normally exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds in higher
rated categories.
BB, B, CCC, CC: Bonds rated BB, B, CCC and CC are regarded on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the bond. BB indicates the lowest
degree of speculation and CC the highest degree of speculation. While such bonds
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
C: The rating C is reserved for bonds on which no interest is being paid.
D: Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of bond as a matter of policy.
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TERMS AND CONDITIONS
GENERAL ACCOUNT INFORMATION
Investments will be made in as many shares of the Series, including
fractions to the third decimal place, as can be purchased at the net asset value
plus a sales load, if applicable, at the close of business on the day payment is
received. If a check received in payment of a purchase of shares is dishonored
for any reason, Seligman Data Corp. may cancel the purchase and may also redeem
additional shares, if any, held in the shareholder's account in an amount
sufficient to reimburse the Fund for any loss it may have incurred and charge a
$10.00 return check fee. Shareholders will receive dividends from investment
income and any distributions from gain realized on investments in shares or in
cash according to the option elected. Dividend and gain options may be changed
by notifying Seligman Data Corp. These option changes must be received by
Seligman Data Corp. before the record date for the dividend or distribution to
be effective for such dividend or distribution. Stock certificates will not be
issued unless requested. Replacement stock certificates and certain waiver of
probate proceedings will be subject to a surety fee.
INVEST-A-CHECK(R) SERVICE
The Invest-A-Check(R) Service is available to all shareholders. The
application is subject to acceptance by the shareholder's bank and Seligman Data
Corp. The electronic funds transfer ("ACH debit") or preauthorized check in the
amount specified will be drawn automatically on the shareholder's bank on the
fifth day (unless otherwise specified) of each month (or on the prior business
day if such day of the month falls on a weekend or holiday) in which an
investment is scheduled and invested at the close of business on the same date.
By utilizing the Invest-A-Check(R) Service to establish an account, you are
agreeing to continue the service until the Series' minimum investment amount is
met. If you elect to cancel the Service prior to meeting the minimum, your
account may be subject to closure. If an ACH debit or preauthorized check is not
honored by the shareholder's bank, or if the value of shares held falls below
the required minimum, the Invest-A-Check(R) Service may be suspended. In the
event that a check or ACH debit is returned uncollectable, Seligman Data Corp.
will cancel the purchase, redeem shares held in the shareholder's account for an
amount sufficient to reimburse the Fund for any loss it may have incurred as a
result, and charge a $10.00 return check fee. This fee will be deducted from the
shareholder's account. The Invest-A-Check(R) Service may be reinstated upon
written request indicating that the cause of interruption has been corrected.
The Invest-A-Check(R) Service may be terminated by the shareholder or Seligman
Data Corp. at any time by written notice. The shareholder agrees to hold the
Fund and its agents free from all liability which may result from acts done in
good faith and pursuant to these terms. Instructions for establishing
Invest-A-Check(R) Service are given on the Account Application. In the event the
shareholder exchanges all of the shares from one mutual fund in the Seligman
Group to another, the Invest-A-Check(R) Serivce will be terminated in the
Seligman Mutual Fund that was closed as result of the exchange of all shares and
the shareholder must re-apply for the Invest-A-Check(R) Service in the Seligman
Mutual Fund into which the exchange was made. In the event of a partial
exchange, the Invest-A-Check(R) Service will be continued, subject to the above
conditions, in the Seligman Mutual Fund from which the exchange was made.
Accounts established in conjunction with the Invest-A-Check(R) Service must be
accompanied by a check for at least $100 in connection with the monthly
investment option or a check for at least $250 in connection with the quarterly
investment option. If the shareholder uses the Invest-A-Check(R) Service to make
an IRA or group retirement plan investment, the purchase will be credited as a
current year contribution.
SYSTEMATIC WITHDRAWAL PLAN
A sufficient number of full and fractional shares will be redeemed to
provide the amount required for a scheduled payment and any applicable CDSL.
Redemptions will be made at the asset value at the close of business on the
specific day of each month designated by the shareholder (or on the prior
business day if the day specified falls on a weekend or holiday) less, in the
case of Class B and Class D shares, any applicable CDSL. Systematic withdrawals
of Class A shares which were purchased at net asset value because the purchase
amount was $1,000,000 or more will be subject to a CDSL if made within eighteen
months of purchase of such shares. Under this plan, a Class B or Class D
shareholder who requests both dividends and capital gain distributions in
additional shares may withdraw up to 12%, or 10%, respectively of the value of
the shareholder's fund account (at the time of election) per annum, without the
imposition of a CDSL. A minimum payment amount of $50 per cycle is needed to
establish this plan. A shareholder may change the amount of scheduled payments
or may suspend payments by written notice to Seligman Data Corp. at least ten
days prior to the effective date of such a change or suspension. The plan may be
terminated by the shareholder or Seligman Data Corp. at any time by written
notice. It will be terminated upon proper notification of the death or legal
incapacity of the shareholder. This plan is considered terminated in the event a
withdrawal of shares, other than to make scheduled withdrawal payments, reduces
the value of shares remaining on deposit to less than $5,000. Continued payments
in excess of dividend income invested will reduce and ultimately exhaust
capital. Withdrawals, concurrent with purchases of shares of this or any other
investment company, will be disadvantageous because of the payment of
duplicative sales loads, if applicable. For this reason, additional purchases of
Series shares are discouraged when the Withdrawal Plan is in effect.
LETTER OF INTENT -- CLASS A SHARES ONLY
Seligman Financial Services, Inc. will hold in escrow shares equal to 5% of
the minimum purchase amount specified. Dividends and distributions on the
escrowed shares will be paid to the shareholder or credited to their account.
Upon completion of the specified minimum purchase within the thirteen-month
period, all shares held in escrow will be deposited into the shareholder's
account or delivered to the shareholder. A shareholder may include toward
completion of a Letter of Intent the total asset value of shares of the Seligman
Mutual Funds on which an initial sales load was paid as of the date of the
Letter. If the total amount invested within the thirteen-month period does not
equal or exceed the specified minimum purchase, the shareholder will be
requested to pay the difference between the amount of the sales load paid and
the amount of the sales load applicable to the total purchase made. If, within
20 days following the mailing of a written request, the shareholder has not paid
this additional sales load to Seligman Financial Services, Inc., sufficient
escrowed shares will be redeemed for payment of the additional sales load.
Shares remaining in escrow after this payment will be released to the
shareholder's account. The intended purchase amount may be increased at any time
during the thirteen-month period by filing a revised Agreement for the same
period, provided that the Dealer furnishes evidence that an amount representing
the reduction in sales load under the new Agreement, which becomes applicable on
purchases already made under the original Agreement, will be refunded to the
Fund and that the required additional escrowed shares will be purchased by the
shareholder.
Shares of Seligman Cash Management Fund, Inc. which have been acquired by an
exchange of shares of another Seligman Mutual Fund on which there is an initial
sales load may be taken into account in completing a Letter of Intent, or for
Right of Accumulation. However, shares of the Seligman Cash Management Fund
which have been purchased directly may not be used for purposes of determining
reduced sales loads on additional purchases of the other Seligman Mutual Funds .
CHECK REDEMPTION SERVICE
The check Redemption Service is available to Class A shareholders, to Class
B shareholders and to Class D shareholders with respect to Class D shares held
for one year or more.
If shares are held in joint names, all shareholders must sign the Check
Redemption section of the Account Application. All checks will require all
signatures unless a lesser number is indicated in the Check Redemption section.
Accounts in the names of corporations, trusts, partnerships, etc. must list all
authorized signatories.
In all cases, each signature guarantees the genuineness of the other
signatures. Checks may not be drawn for less than $500.
The shareholder authorizes Boston Safe Deposit and Trust Co. to honor checks
drawn by the shareholder on the account of Seligman High-Yield Bond Series and
to effect a redemption of sufficient shares in the shareholder's account to
cover payment of the check and, in the case of Class B shares, any applicable
CDSL. The shareholder understands that shares in one series of the Fund cannot
be redeemed to cover a check written on another series.
Boston Safe Deposit and Trust Co. shall be liable only for its own
negligence. The Fund will not be liable for any loss, expense or cost arising
out of check redemptions. The Fund reserves the right to change, modify or
terminate this service at any time upon notification mailed to the address of
record of the shareholder(s).
Seligman Data Corp. will charge a $10.00 processing fee for any check
redemption draft returned marked "unpaid." This charge may be DEBITED from the
account the check was drawn against. NO REDEMPTION PROCEEDS WILL BE REMITTED TO
A SHAREHOLDER WITH RESPECT TO SHARES PURCHASED BY CHECK (UNLESS CERTIFIED) UNTIL
SELIGMAN DATA CORP. RECEIVES NOTICE THAT THE CHECK HAS CLEARED WHICH MAY BE UP
TO 15 DAYS FROM THE CREDIT OF THE SHARES TO A SHAREHOLDER'S ACCOUNT.
5/98
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SELIGMAN
HIGH-YIELD BOND SERIES
SELIGMAN FINANCIAL SERVICES, INC.
AN AFFILIATE OF
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
TXHY1 5/98
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
MAY 1, 1998
SELIGMAN U.S. GOVERNMENT SECURITIES SERIES
SELIGMAN HIGH-YIELD BOND SERIES
series of
SELIGMAN HIGH INCOME FUND SERIES
100 Park Avenue
New York, New York 10017
New York City Telephone (212) 850-1864
Toll Free Telephone (800) 221-2450
For Retirement Plan Information - Toll-Free Telephone (800) 445-1777
This Statement of Additional Information expands upon and supplements the
information contained in the current Prospectus for each series of Seligman High
Income Fund Series (the "Fund"), dated May 1, 1998. It should be read in
conjunction with the Prospectuses, which may be obtained by writing or calling
the Fund at the above address or telephone numbers. This Statement of Additional
Information, although not in itself a Prospectus, is incorporated by reference
into each Prospectus in its entirety.
The Fund consists of the Seligman U.S. Government Securities Series ("U.S.
Government Securities Series") and the Seligman High-Yield Bond Series
("High-Yield Bond Series") (the "Series"). Each Series of the Fund offers three
classes of shares. Class A shares may be purchased at net asset value plus an
initial sales load of up to 4.75%. Class A shares purchased in an amount of
$1,000,000 or more are sold without an initial sales load but are subject to a
contingent deferred sales load ("CDSL") of 1% (of the current net asset value or
the original purchase price, whichever is less) if such shares are redeemed
within eighteen months of purchase. Class B shares may be purchased at net asset
value and are subject to a CDSL, if applicable, in the following amount (as a
percentage of the current net asset value or the original purchase price,
whichever is less), if redemption occurs within the indicated number of years of
purchase of such shares: 5% (less than 1 year), 4% (1 but less than 2 years), 3%
(2 but less than 4 years), 2% (4 but less than 5 years), 1% (5 but less than 6
years) and 0% (6 or more years). Class B shares automatically convert to class A
shares after approximately eight years, resulting in lower ongoing fees. Shares
purchased through reinvestment of dividends and gain distributions on Class B
shares also will convert automatically to Class A shares along with the
underlying shares on which they were earned. Class D shares may be purchased at
net asset value and are subject to a CDSL of 1% (of the current net asset value
or the original purchase price, whichever is less) if redeemed within one year
of purchase.
Each Series' Class A, Class B and Class D shares represent an identical
legal interest in the investment portfolio of such Series and has the same
rights except for certain class expenses and except that Class B and Class D
shares bear higher ongoing fees that generally will cause the Class B and Class
D shares to have higher expense ratios and pay lower dividends than Class A
shares. Each Class has exclusive voting rights with respect to its distribution
plan. Although holders of Class A, Class B and Class D shares have identical
legal rights, the different expenses borne by each Class will result in
different net asset values and dividends. The three classes also have different
exchange privileges.
TABLE OF CONTENTS
PAGE
----
Investment Objectives,
Policies and Risks............................. 2
Investment Limitations......................... 3
Trustees and Officers.......................... 4
Management and Expenses........................ 9
Administration, Shareholder Services
and Distribution Plans........................ 10
Portfolio Transactions......................... 11
Purchase and Redemption of
Fund Shares................................. 11
Distribution Services.......................... 14
Valuation...................................... 15
Performance ................................... 15
General Information............................ 18
Financial Statements........................... 20
Appendix ...................................... 21
TX1A
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INVESTMENT OBJECTIVES, POLICIES AND RISKS
The investment objective of each Series is a fundamental policy and may not
be changed by the Trustees of the Fund without the vote of a majority of such
Series' outstanding voting securities. The objective of each Series is as
follows:
The U.S. Government Securities Series seeks to produce high current income.
To achieve its objective, the Series invests primarily in debt obligations
issued or guaranteed by the U.S. Government or its agencies or instrumentalities
and backed by the full faith and credit of the U.S. Government which have
maturities of greater than one year at the date of purchase by the Series.
The High-Yield Bond Series seeks to produce maximum current income. To
achieve its objective, the Series invests primarily in high-yielding, high-risk
corporate bonds and notes, which generally are unrated or carry lower ratings
(Baa or lower by Moody's Investors Service, Inc. ("Moody's") or BBB or lower by
Standard & Poor's Rating Service ("S&P") than those assigned by S&P or Moody's
to investment grade bonds and notes. Except for temporary defensive purposes,
the Series will invest at least 80% of the value of its assets in high-yielding,
income-producing corporate bonds and notes. Investments other than in such
corporate bonds will be in short-term money market instruments, including
certificates of deposit, commercial paper, securities issued, guaranteed or
insured by the U.S. Government, its agencies and instrumentalities, and other
income producing cash items. The High-Yield Bond Series may invest up to 10% of
its total assets in debt securities of foreign issuers. Foreign investments may
be affected favorably or unfavorably by changes in currency rates and exchange
control regulations. There may be less information available about a foreign
company than about a U.S. company, and foreign companies may not be subject to
reporting standards and requirements comparable to those applicable to U.S.
companies. Foreign debt securities and their markets may not be as liquid as
U.S. securities and their markets. Securities and some foreign companies may
involve greater market risk than securities of U.S. companies, and foreign
brokerage commissions and custody fees are generally higher than in the United
States. Investments in foreign debt securities may also be subject to local
economic or political risks, such as political instability of some foreign
governments and the possibility of nationalization of issuers.
The following information regarding the investment policies of each Series
supplements the information contained in each Series' Prospectus.
LENDING OF Securities. Each Series of the Fund may lend portfolio securities to
certain institutional borrowers of securities and may invest the cash collateral
and obtain additional income or receive an agreed upon amount of interest from
the borrower. Loans will generally be short-term. Loans are subject to
termination at the option of the Series or the borrower. Each Series may pay
reasonable administrative and custodial fees in connection with a loan and may
pay a negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker. Loaned securities may not be
returned by a borrower; however, a borrower must maintain with the Series from
which it has borrowed securities, cash, or equivalent collateral, equal to at
least 100% of the market value of the securities borrowed.
REPURCHASE Agreements. Each Series of the Fund may enter into repurchase
agreements with commercial banks and with broker/dealers to invest cash for the
short-term. A repurchase agreement is an agreement under which the Series
acquires a money market instrument, generally a U.S. Government obligation,
qualified for purchase by the Series, subject to resale at an agreed upon price
and date. Such resale price reflects an agreed upon interest rate effective for
the period of time the instrument is held by the Series and is unrelated to the
interest rate on the instrument. Repurchase agreements usually are for short
periods, such as one week or less, but may be for longer periods. As a matter of
fundamental policy, a Series will not enter into repurchase agreements of more
than one week's duration if more than 10% of its total assets would be invested
in such agreements and in "restricted" and other illiquid securities.
WHEN-ISSUED Securities. Each Series may purchase securities on a when-issued
basis, in which case delivery and payment normally take place within 45 days
after the date of the commitment to purchase. The payment obligation and the
interest rate that will be received on the securities are each fixed at the time
the buyer enters into the commitment. Although a Series will only purchase
securities on a when-issued basis with the intention of actually acquiring the
securities, the Series may sell these securities before the settlement date if
it is deemed advisable.
Securities purchased on a when-issued basis and the securities held in each
Series are subject to changes in market value based upon the public's perception
of the creditworthiness of the issuer and changes, real or anticipated, in the
level of interest rates (which will generally result in similar changes in
value, i.e., both experiencing appreciation when interest rates
-2-
<PAGE>
decline and depreciation when interest rates rise). Therefore, to the extent a
Series remains substantially fully invested at the same time that it has
purchased securities on a when-issued basis, there will be a greater possibility
that the market value of the Series' assets will vary more than otherwise.
Purchasing a security on a when-issued basis can involve a risk that the yields
available in the market when the delivery takes place may be higher than those
obtained on the security so purchased.
A separate account of each of the Series consisting of cash or liquid
high-grade debt securities equal to the amount of the when-issued commitments
will be established with Investors Fiduciary Trust Company, the Fund's portfolio
securities custodian, and marked to market daily, with additional cash or liquid
high grade debt securities added when necessary. When the time comes to pay for
when-issued securities, each Series will meet its respective obligations from
then available cash flow, sale of securities held in the separate account, sale
of other securities or, although they would not normally expect to do so, from
the sale of the when-issued securities themselves (which may have a value
greater or less than the Series' payment obligations). Sale of securities to
meet such obligations carries with it a greater potential for the realization of
capital gain or loss.
Except as described above and under Investment Limitations below, the
foregoing investment policies are not fundamental and the Trustees of the Fund
may change such policies without the vote of a majority of the outstanding
voting securities of the Fund or any Series (as defined on page 4).
PORTFOLIO TURNOVER. Each Series' portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities of the Series
for the fiscal year by the monthly average value of the portfolio securities of
the Series owned during the fiscal year. High portfolio turnover involves
correspondingly greater transactions costs and a possible increase in short-term
capital gains or losses. Securities whose maturities or expiration dates at the
time of acquisition were one year or less are excluded from the calculation. The
portfolio turnover rates for the U.S. Government Securities Series and the
High-Yield Bond Series for the years ended December 31, 1997 and 1996 were
193.90% and 175.25% and 61.78% and 119.33%, respectively. The decrease in
portfolio turnover was due to the increase in the size of the Series.
INVESTMENT LIMITATIONS
Under each Series' fundamental policies, which cannot be changed except by
a vote of a majority of its outstanding voting securities, a Series may not:
- - Borrow money, except from banks for temporary or emergency purposes (but not
for the purchase of portfolio securities) in an amount not to exceed 15% of
the value of the total assets of the Series. A Series will not purchase
additional portfolio securities if such Series has outstanding borrowings in
excess of 5% of the value of its total assets;
- - Mortgage or pledge any of its assets, except to the extent necessary to
effect borrowings permitted by the preceding paragraph and provided that this
limitation does not prohibit escrow, collateral or margin arrangements in
connection with (a) the writing of covered call options by the U.S.
Government Securities Series; (b) the purchase of put options by the U.S.
Government Securities Series or (c) the sale of interest rate futures
contracts and the purchase or sale of options on such contracts by the U.S.
Government Securities Series;
- - Make "short" sales of securities, or purchase securities on "margin" except
that for purposes of this limitation, initial and variation payments or
deposits in connection with interest rate futures contracts and related
options by the U.S. Government Securities Series will not be deemed to be the
purchase of securities on margin; write or purchase put or call options
except that the U.S. Government Securities Series may write covered call
options and the U.S. Government Securities Series may purchase put options
and may purchase and sell options on interest rate futures and may engage in
closing transactions with respect to such options. The Series has no present
intention of investing in these types of securities, and will not do so
without the prior approval of the Fund's Board of Trustees;
- - Purchase securities of any issuer if immediately thereafter more than 5% of
total assets at market would be invested in the securities of any one issuer,
other than the U.S. Government, its agencies or instrumentalities; buy more
than 10% of the voting securities of any one issuer, other than U.S.
Government agencies or instrumentalities; or invest to control or manage any
company;
- - Invest more than 25% of the market value of its total assets in securities of
issuers in any one industry; for the purpose of this limitation,
mortgage-related securities do not constitute an industry;
-3-
<PAGE>
- - Invest in securities issued by other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization;*
- - Purchase or hold any real estate including limited partnership interests in
real property;
- - Purchase or sell commodities and commodity futures contracts except that the
U.S. Government Securities Series may sell interest rate futures contracts
and may write call options and may purchase put options with respect to such
contracts and may engage in closing transactions with respect to all such
transactions. The Series has no present intention of investing in these types
of securities, and will not do so without the prior approval of the Fund's
Board of Trustees;
- - Invest more than 5% of the value of its total assets, at market value, in
securities of any company which, with its predecessors, has been in operation
less than three continuous years, provided, however, that securities
guaranteed by a company that (including predecessors) has been in operation
at least three continuous years shall be excluded from this calculation;
- - Purchase or hold the securities of any issuer, if to its knowledge, Trustees
or officers of the Fund individually owning beneficially more than 0.5% of
the securities of that other company own in the aggregate more than 5% of
such securities;
- - Engage in transactions with its Trustees and officers, or firms they are
associated with, in connection with the purchase or sale of securities,
except as broker;
- - Underwrite the securities of other issuers, except that in connection with
the disposition of a security a Series may be deemed to be an underwriter as
defined in the Securities Act of 1933; or
- - Make loans, except loans of securities of the Series and except to the extent
the purchase of notes, bonds or other evidences of indebtedness, or the entry
into repurchase agreements may be considered loans.
Under the Investment Company Act of 1940 (the "1940 Act"), a "vote of a
majority of the outstanding voting securities" of the Fund or of a particular
Series means the affirmative vote of the lesser of (l) more than 50% of the
outstanding shares of the Fund or of such Series or (2) 67% or more of the
shares of the Fund or of such Series present at a shareholder's meeting if more
than 50% of the outstanding shares of the Fund or of such Series are represented
at the meeting in person or by proxy.
TRUSTEES AND OFFICERS
Trustees and officers of the Fund, together with information as to their
principal business occupations during the past five years, are shown below. Each
Trustee who is an "interested person" of the Fund, as defined in the 1940 Act,
is indicated by an asterisk. Unless otherwise indicated, their addresses are 100
Park Avenue, New York, NY 10017.
- --------
* The Fund has applied for and received an exemptive order from the Securities
and Exchange Commission that would permit it to purchase shares of other
investment companies advised by the Manager for the limited purpose of hedging
its obligations in connection with the deferred fee arrangement for outside
directors referred to under "Trustees and Officers" below.
-4-
<PAGE>
WILLIAM C. MORRIS* Trustee, Chairman of the Board, Chief Executive Officer
(60) and Chairman of the Executive Committee
Chairman, J. & W. Seligman & Co. Incorporated, investment
managers and advisers; Chairman and Chief Executive
Officer, the Seligman Group of Investment Companies;
Chairman, Seligman Financial Services, Inc.,
broker/dealer; Seligman Services, Inc., broker/dealer;
and Carbo Ceramics Inc., ceramic proppants for oil and
gas industry; Director, Seligman Data Corp., shareholder
service agent; Kerr-McGee Corporation, diversified energy
company; and Sarah Lawrence College; and a Member of the
Board of Governors of the Investment Company Institute;
formerly, President, J. & W. Seligman & Co. Incorporated,
Chairman, Seligman Advisors, Inc., advisers; Seligman
Holdings, Inc., holding company; Seligman Securities,
Inc., broker/dealer and J. & W. Seligman Trust Company,
trust company; and Director, Daniel Industries, Inc.,
manufacturer of oil and gas metering equipment.
BRIAN T. ZINO* Trustee, President and Member of the Executive Committee
(45)
Director and President, J. & W. Seligman & Co.
Incorporated, investment managers and advisers; President
(with the exception of Seligman Quality Municipal Fund,
Inc. and Seligman Select Municipal Fund, Inc.) and
Director or Trustee, the Seligman Group Investment
Companies; Chairman, Seligman Data Corp., shareholder
service agent; and Director, Seligman Financial Services,
Inc., broker/dealer; Seligman Services, Inc.,
broker/dealer; and Seligman Henderson Co., advisers;
formerly, Director, Seligman Advisors, Inc., advisers;
Seligman Securities, Inc., broker/dealer and J. & W.
Seligman Trust Company, trust company.
RICHARD R. SCHMALTZ* Trustee and Member of the Executive Committee
(57)
Director and Managing Director, Director of Investments,
J. & W. Seligman & Co. Incorporated; Director of Seligman
Henderson Co. and Trustee Emeritus of Colby College;
formerly, Director, Investment Research at Neuberger &
Berman from May 1993 to September 1996 and Executive Vice
President of McGlinn Capital from July 1987 to May 1993.
JOHN R. GALVIN Trustee
(68)
Dean, Fletcher School of Law and Diplomacy at Tufts
University; Director or Trustee, the Seligman Group of
Investment Companies; Chairman, American Council on
Germany; a Governor of the Center for Creative
Leadership; National Committee on U.S.-China Relations;
National Defense University; the Institute for Defense
Analysis; and Raytheon Co., electronics; formerly,
Director, USLIFE Corporation, life insurance; Ambassador,
U.S. State Department for negotiations in Bosnia;
Distinguished Policy Analyst at Ohio State University and
Olin Distinguished Professor of National Security Studies
at the United States Military Academy. From June, 1987 to
June, 1992, he was the Supreme Allied Commander, Europe
and the Commander-in-Chief, United States European
Command.
Tufts University, Packard Avenue, Medford, MA 02105.
ALICE S. ILCHMAN Trustee
(63)
President, Sarah Lawrence College; Director or Trustee,
the Seligman Group of Investment Companies; the Committee
for Economic Development; Chairman, The Rockefeller
Foundation, charitable foundation; formerly, Trustee, The
Markle Foundation, philanthropic organization; and
Director, NYNEX, telephone company; and International
Research and Exchange Board, intellectual exchanges.
Sarah Lawrence College, Bronxville, NY 10708
-5-
<PAGE>
FRANK A. McPHERSON Trustee
(65)
Director, various corporations; Director or Trustee, the
Seligman Group of Investment Companies; Kimberly-Clark
Corporation, consumer products; Bank of Oklahoma Holding
Company; Baptist Medical Center; Oklahoma Chapter of the
Nature Conservancy; Oklahoma Medical Research Foundation;
and National Boys and Girls Clubs of America; and Member
of the Business Roundtable and National Petroleum
Council; formerly, Chairman of the Board and Chief
Executive Officer, Kerr-McGee Corporation, diversified
energy company; Chairman, Oklahoma City Public Schools
Foundation; and Director, Federal Reserve System's Kansas
City Reserve Bank; and the Oklahoma City Chamber of
Commerce. 123 Robert S. Kerr Avenue, Oklahoma City, OK
73102
JOHN E. MEROW Trustee
(68)
Retired Chairman and Senior Partner, Sullivan & Cromwell,
law firm; Director or Trustee, the Seligman Group of
Investment Companies; Commonwealth Industries, Inc.,
manufacturer of aluminum sheet products; the Foreign
Policy Association; Municipal Art Society of New York;
U.S. Council for International Business; and The New York
and Presbyterian Hospital; Chairman, American Australian
Association; and The New York and Presbyterian Hospital
Care Network, Inc.; Vice-Chairman, U.S.-New Zealand
Council; Member of the American Law Institute and Council
on Foreign Relations.
125 Broad Street, New York, NY 10004
BETSY S. MICHEL Trustee
(55)
Attorney; Director or Trustee, the Seligman Group of
Investment Companies; Trustee, The Geraldine R. Dodge
Foundation, charitable foundation; and Chairman of the
Board of Trustees of St. George's School (Newport, RI);
formerly, Director, The National Association of
Independent Schools (Washington, DC).
St. Bernard's Road, P.O. Box 449, Gladstone, NJ 07934
JAMES C. PITNEY Trustee
(71)
Retired Partner, Pitney, Hardin, Kipp & Szuch, law firm;
Director or Trustee, the Seligman Group of Investment
Companies; and Director, Public Broadcasting Service
(PBS); formerly, Director, Public Service Enterprise
Group, public utility.
Park Avenue at Morris County, P.O. Box 1945, Morristown,
NJ 07962-1945
JAMES Q. RIORDAN Trustee
(70)
Director, Various Corporations; Director or Trustee, the
Seligman Group of Investment Companies; The Houston
Exploration Company; The Brooklyn Museum; The Brooklyn
Union Gas Company; The Committee for Economic
Development; and Public Broadcasting Service (PBS);
formerly, Co-Chairman of the Policy Council of the Tax
Foundation; Director and Vice Chairman, Mobil
Corporation; Director, Tesoro Petroleum Companies, Inc.;
Dow Jones & Co., Inc. and Director and President, Bekaert
Corporation.
675 Third Avenue, Suite 3004, New York, NY 10017
ROBERT L. SHAFER Trustee
(65)
Director, various corporations; Director or Trustee, the
Seligman Group of Investment Companies; formerly, Vice
President, Pfizer, Inc., pharmaceuticals; Director,
USLIFE Corporation, life insurance.
235 East 42nd Street, New York, NY 10017
-6-
<PAGE>
JAMES N. WHITSON Trustee
(63)
Director, Sammons Enterprises, Inc.; Director or Trustee,
the Seligman Group of Investment Companies; C-SPAN; and
CommScope, Inc., manufacturer of coaxial cables;
formerly, Executive Vice President and Chief Operating
Officer, Sammons Enterprises, Inc.; Director, Red Man
Pipe and Supply Company, piping and other materials.
5949 Sherry Lane, Suite 1900, Dallas, TX 75225
DANIEL J. CHARLESTON Vice President and Portfolio Manager
(38)
Vice President, Investment Officer and a Managing
Director of J. & W. Seligman & Co. Incorporated,
investment managers and advisers; and Vice President and
Portfolio Manager of one other open-end investment
company in the Seligman Group of Investment Companies.
LEONARD J. LOVITO Vice President and Portfolio Manager
(38)
Vice President, Investment Officer, J. & W. Seligman &
Co. Incorporated, investment managers and advisers; Vice
President and Portfolio Manager, two other open-end
investment companies in the Seligman Group of Investment
Companies.
LAWRENCE P. VOGEL Vice President
(41)
Senior Vice President, Finance, J. & W. Seligman & Co.
Incorporated, investment managers and advisers; Seligman
Financial Services, Inc., broker/dealer; and Seligman
Data Corp., shareholder service agent; Vice President,
the Seligman Group of Investment Companies and Seligman
Services, Inc., broker/dealer; and Treasurer, Seligman
Henderson Co., advisers; formerly, Senior Vice President,
Seligman Advisors, Inc., advisers; and Treasurer,
Seligman Holdings, Inc., holding company.
FRANK J. NASTA Secretary
(33)
Senior Vice President, Law and Regulation and Corporate
Secretary, J. & W. Seligman & Co. Incorporated,
investment managers and advisers; Secretary, the Seligman
Group of Investment Companies; Seligman Financial
Services, Inc., broker/dealer; Seligman Henderson Co.,
advisers; Seligman Services, Inc., broker/dealer; and
Seligman Data Corp., shareholder service agent; formerly,
Senior Vice President, Law and Regulation and Corporate
Secretary, Seligman Advisors, Inc., advisers; and an
attorney at Seward and Kissel, law firm.
THOMAS G. ROSE Treasurer
(40)
Treasurer, the Seligman Group of Investment Companies;
and Seligman Data Corp., shareholder service agent.
The Executive Committee of the Trustees acts on behalf of the Trustees
between meetings to determine the value of securities and assets owned by the
Fund for which no market valuation is available and to elect or appoint officers
of the Fund to serve until the next meeting of the Trustees.
-7-
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
PENSION OR
AGGREGATE RETIREMENT BENEFITS TOTAL COMPENSATION
COMPENSATION ACCRUED AS PART OF FROM FUND AND
POSITION WITH REGISTRANT FROM FUND (1) FUND EXPENSES FUND COMPLEX (1)(2)
------------------------- ------------ ----------------- --------------------
<S> <C> <C> <C>
William C. Morris, Trustee and Chairman N/A N/A N/A
Brian T. Zino, Trustee and President N/A N/A N/A
Richard R. Schmaltz, Trustee N/A N/A N/A
Fred E. Brown, Trustee Emeritus** N/A N/A N/A
John R. Galvin, Trustee $2,877.11 N/A $69,000.00
Alice S. Ilchman, Trustee 2,777.55 N/A 65,000.00
Frank A. McPherson, Trustee 2,813.27 N/A 66,000.00
John E. Merow, Trustee 2,777.57 N/A 65,000.00
Betsy S. Michel, Trustee 2,877.11 N/A 69,000.00
James C. Pitney, Trustee 2,756.28 N/A 64,000.00
James Q. Riordan, Trustee 2,834.55 N/A 67,000.00
Robert L. Schafer, Trustee 2,834.55 N/A 67,000.00
James N. Whitson, Trustee 2,855.83(d) N/A 68,000.00(d)
</TABLE>
- ----------
(1) Based on remuneration received by the Trustees of the Fund for the year
ended December 31, 1997. Effective January 16, 1998, the per meeting fee
for Directors was increased by $1,000, which is allocated among all Funds
in the Fund Complex.
(2) As defined in each Series' Prospectus, the Seligman Group of Investment
Companies consists of eighteen investment companies.
** Retired as Trustee and designated Trustee Emeritus on March 20, 1997.
(d) Deferred.
The Fund has a compensation arrangement under which outside Trustees may
elect to defer receiving their fees. Under this arrangement, interest would be
accrued on the deferred balances. The actual cost of such interest is included
in the Trustee's fees and expenses, and the accumulated balance thereof is
included in "Liabilities" in the Fund's financial statements. As of December 31,
1997, the total amount of deferred compensation (including interest) payable in
respect of the Fund to Mr. Whitson was $14,086. Messrs. Merow and Pitney no
longer defer current compensation; however, they have accrued deferred
compensation in the amounts of $35,986 and $25,797, respectively, as of December
31, 1997. The Fund has applied for and received exemptive relief that would
permit a director who has elected deferral of his or her fees to choose a rate
of return equal to either (i) the interest rate on short-term Treasury bills, or
(ii) the rate of return on the shares of any of the investment companies advised
by the Manager, as designated by the director. The Fund may, but is not
obligated to, purchase shares of such investment companies to hedge its
obligations in connection with this deferral arrangement.
Trustees and officers of the Fund are also directors, trustees and officers
of some or all of the other investment companies in the Seligman Group. Trustees
and officers of the Fund as a group owned less than 1% of both the U.S.
Government Securities Series' and the High-Yield Bond Series' Class A capital
stock as of March 31, 1998. As of that date, no Trustees or officers owned
shares of either Series' Class B or Class D capital stock.
As of March 31, 1998, 19,107,682 Class A shares of the High-Yield Bond
Series, which equaled 6.31% of the High-Yield Bond Series' capital stock and
16.41% of the High-Yield Bond Series' Class A capital stock then outstanding;
31,460,652 Class B shares of the High-Yield Bond Series, which equaled 10.38% of
the High-Yield Bond Series' capital stock and 32.75% of the High-Yield Bond
Series' Class B capital stock then outstanding; and 32,369,129 Class D shares of
the High-Yield Bond Series, which equaled 10.68% of the High-Yield Bond Series'
capital stock and 39.48% of the High-
-8-
<PAGE>
Yield Bond Series' Class D capital stock then outstanding, were owned of record
by MLPF&S For the Sole Benefit of Its Customers, 4800 Deer Lake Drive East, 3rd
Floor, Jacksonville, FL 32246.
MANAGEMENT AND EXPENSES
Under each Series' Management Agreement, dated December 29, 1988 for the
U.S. Government Securities Series and December 29, 1988, as amended January 1,
1996, for the High-Yield Bond Series, subject to the control of the Trustees, J.
& W. Seligman & Co. Incorporated (the "Manager") manages the investment of the
assets of each Series, including making purchases and sales of portfolio
securities consistent with each Series' investment objectives and policies, and
administers the business and other affairs of each Series. The Manager provides
the Fund with such office space, administrative and other services and executive
and other personnel as are necessary for Fund operations. The Manager pays all
of the compensation of Trustees of the Fund who are employees or consultants of
the Manager and the officers and employees of the Fund. The Manager also
provides senior management for Seligman Data Corp., the Fund's shareholder
service agent.
The Manager is entitled to receive a management fee from each Series for
its services to such Series, calculated daily and payable monthly. For the U.S.
Government Securities Series, the fee is equal to .50% of the average daily net
assets of the Series on an annual basis. The management fee for the High-Yield
Bond Series is equal to .65% of the Series' average daily net assets on the
first $1 billion of net assets and .55% of the Series' average daily net assets
in excess of $1 billion. The management fees paid by the U.S. Government Series
for each of the years 1997, 1996 and 1995 equaled .50% of the average daily net
assets of such Series, or $271,995, $290,879 and $301,343, respectively. The
management fees paid by the High-Yield Bond Series for 1997, 1996 and 1995
equaled .62%, .65%, and .50%, respectively, of the average daily net assets of
such Series or $8,248,354, $3,107,117 and $723,340, respectively.
The Fund pays all its expenses other than those assumed by the Manager
including brokerage commissions, administration, shareholder services and
distribution fees, if any, fees and expenses of independent attorneys and
auditors, taxes and governmental fees including fees and expenses of qualifying
the Fund and its shares under federal and state securities laws, cost of stock
certificates and expenses of repurchase or redemption of shares, expenses of
printing and distributing reports, notices and proxy materials and prospectuses
to existing shareholders, expenses of printing and filing reports and other
documents filed with governmental agencies, expenses of shareholders' meetings,
expenses of corporate data processing and related services, shareholder
recordkeeping and shareholder account services, fees and disbursements of
transfer agents and custodians, expenses of disbursing dividends and
distributions, fees payable under the Administration, Shareholder Services and
Distribution Plan described below, fees and expenses of Trustees of the Fund not
employed by (or serving as a Trustee of) the Manager or its affiliates,
insurance premiums and extraordinary expenses such as litigation expenses. The
Fund's expenses are allocated among the Series in a manner determined by the
Trustees to be fair and equitable.
Each Series' Management Agreement was initially approved by the Board of
Trustees on September 30, 1988 and by the shareholders at a special meeting held
on December 16, 1988. The amendments to the Management Agreement of the
High-Yield Bond Series, to increase the fee rate payable to the Manager by the
Series, were approved by the Board of Trustees on September 21, 1995 and by the
shareholders at a special meeting held on December 12, 1995. The Management
Agreements will continue until December 31 of each year (1) if such continuance
is approved in the manner required by the 1940 Act (by a vote of a majority of
the Trustees or of the outstanding voting securities of each Series and by a
vote of a majority of the Trustees who are not parties to the Management
Agreement or interested persons of any such party) and (2) if the Manager shall
not have notified a Series at least 60 days prior to December 31 of any year
that it does not desire such continuance. Each Management Agreement may be
terminated by the appropriate Series, without penalty, on 60 days' written
notice to the Manager and will terminate automatically in the event of its
assignment. Each Series has agreed to change its name upon termination of its
Management Agreement if continued use of the name would cause confusion in the
context of the Manager's business.
The Manager is a successor firm to an investment banking business founded
in 1864 which has thereafter provided investment services to individuals,
families, institutions and corporations. On December 29, 1988, a majority of the
outstanding voting securities of the Manager was purchased by Mr. William C.
Morris and a simultaneous recapitalization of the Manager occurred. See the
Appendix for further history of the Manager.
-9-
<PAGE>
Officers, directors and employees of the Manager are permitted to engage in
personal securities transactions, subject to the Manager's Code of Ethics (the
"Ethics Code"). The Ethics Code proscribes certain practices with regard to
personal securities transactions and personal dealings, provides a framework for
the reporting and monitoring of personal securities transactions by the
Manager's Compliance Officer, and sets forth a procedure of identifying, for
disciplinary action, those individuals who violate the Ethics Code. The Ethics
Code prohibits each of the officers, directors and employees (including all
portfolio managers) of the Manager from purchasing or selling any security that
the officer, director or employee knows or believes (i) was recommended by the
Manager for purchase or sale by any client, including the Fund, within the
preceding two weeks, (ii) has been reviewed by the Manager for possible purchase
or sale within the preceding two weeks, (iii) is being purchased or sold by any
client, (iv) is being considered by a research analyst, (v) is being acquired in
a private placement, unless prior approval has been obtained from the Manager's
Compliance Officer, or (vi) is being acquired during an initial or secondary
public offering. The Ethics Code also imposes a strict standard of
confidentiality and requires portfolio managers to disclose any interest they
may have in the securities or issuers that they recommend for purchase by any
client.
The Ethics Code also prohibits (i) each portfolio manager or member of an
investment team from purchasing or selling any security within seven calendar
days of the purchase or sale of the security by a client's account (including
investment company accounts) for which the portfolio manager or investment team
manages and (ii) each employee from engaging in short-term trading (a purchase
and sale or vice-versa within 60 days). Any profit realized pursuant to either
of these prohibitions must be disgorged.
Officers, directors and employees are required, except under very limited
circumstances, to engage in personal securities transactions through the
Manager's order desk. The order desk maintains a list of securities that may not
be purchased due to a possible conflict with clients. All officers, directors
and employees are also required to disclose all securities beneficially owned by
them on December 31 of each year.
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLANS
Each Series of the Fund has adopted an Administration, Shareholder Services
and Distribution Plan for each Class (the "Plan") under Section 12(b) of the
1940 Act and Rule 12b-1 thereunder.
The Plan was originally approved with respect to each Series on April 8,
1986 by the Board of Trustees of the Fund, including a majority of the Trustees
who are not "interested persons" (as defined in the 1940 Act) of the Fund and
who had no direct or indirect financial interest in the operation of the Plan or
in any agreement related to the Plan (the "Qualified Trustees") and by the
shareholders of each Series at a meeting of shareholders on April 10, 1986. The
Plan was approved in respect of the Class D shares of both Series on July 15,
1993 by the Board of Trustees of the Fund, including a majority of the Qualified
Trustees, and became effective in respect of the Class D shares of both Series
on September 21, 1993. The Plan was approved in respect of the Class B shares of
the High-Yield Bond Series on March 21, 1996 by the Board of Trustees of the
Fund, including a majority of the Qualified Trustees, and became effective in
respect of the Class B shares of the High-Yield Bond Series on April 22, 1996.
The Plan was approved in respect of the Class B shares of the U.S. Government
Securities Series on September 19, 1996 by the Board of Trustees of the Fund,
including a majority of the Qualified Trustees, and became effective in respect
of the Class B shares of the U.S. Government Securities Series on January 1,
1997. The Plans will continue in effect until December 31 of each year so long
as such continuance is approved annually by a majority vote of both the Trustees
and the Qualified Trustees of the Fund, cast in person at a meeting called for
the purpose of voting on such approval. The Plan may not be amended to increase
materially the amounts payable to Service Organizations (as defined in each
Series' Prospectus) with respect to a class without the approval of a majority
of the outstanding voting securities of such class. If the amount payable in
respect of Class A shares under the Plans is proposed to be increased
materially, the Fund will either (i) permit holders of Class B shares to vote as
a separate class on the proposed increase or (ii) establish a new class of
shares subject to the same payment under the Plans as existing Class A shares,
in which case the Class B shares will thereafter convert into the new class
instead of into Class A shares. No material amendment to the Plans may be made
except by a majority of both the Trustees and Qualified Trustees.
For the year ended December 31, 1997, Seligman Financial Services, Inc.,
("SFSI"), an affiliate of the Manager, received payments under the Plan in
respect of Class A shares of the U.S. Government Securities Series and the
High-Yield Bond Series of $97,552 and $1,399,223, or 0.22% and 0.24% per annum,
respectively, of the average daily net assets of each Series' Class A shares.
This amount was used primarily to pay Service Organizations on a continuing
basis for providing personal services and/or maintenance of shareholder
accounts. For the year ended December 31, 1997, fees
-10-
<PAGE>
incurred by the U.S. Government Securities Series and the High-Yield Bond Series
in respect of each Series' Class B shares amounted to $9,412 and $3,531,268,
respectively, or 1.00% per annum of the average daily net assets of each Series'
Class B shares. Of this amount, 0.725% per annum was paid directly to FEP
Capital, L.P. ("FEP") to compensate it for having funded, at the time of sale
(i) the 4% commission paid to selling brokers and (ii) a payment of 0.25% of
Class B sales to SFSI; 0.025% per annum was paid to SFSI; and the remaining
0.25% per annum was paid to SFSI which, in turn, made an equal payment to
Service Organizations for providing personal services and/or maintenance of
shareholder accounts. For the year ended December 31, 1997, fees incurred in
respect of Class D shares of the U.S. Government Series and the High-Yield Bond
Series amounted to $90,486 and $3,979,998, respectively, or 1.00% per annum of
the average daily net assets of each Series' Class D shares. This amount was
paid to SFSI and, in the first twelve months after a sale, reimbursed it
primarily for the 1% payment made to dealers at the time of sale and for certain
other direct distribution costs. After the first twelve months, fees paid to
SFSI are used to pay a continuing fee to Service Organizations.
The Plans require that the Treasurer of the Fund shall provide to the
Trustees, and the Trustees shall review, at least quarterly, a written report of
the amounts expended (and purposes therefor) for each Series under the Plans.
Rule 12b-1 also requires that the selection and nomination of Trustees who are
not "interested persons" of the Fund be made by such disinterested Trustees.
PORTFOLIO TRANSACTIONS
No brokerage commissions were paid by the Fund during 1997, 1996 and 1995.
When two or more of the investment companies in the Seligman Group or other
investment advisory clients of the Manager desire to buy or sell the same
security at the same time, the securities purchased or sold are allocated by the
Manager in a manner believed to be equitable to each. There may be possible
advantages or disadvantages of such transactions with respect to price or the
size of positions readily obtainable or saleable.
PURCHASE AND REDEMPTION OF FUND SHARES
Each Series offers three classes of shares. Class A shares may be purchased
at a price equal to the next determined net asset value per share, plus an
initial sales load. Class A shares purchased at net asset value without an
initial sales load due to the size of the purchase are subject to a CDSL if such
shares are redeemed within eighteen months of purchase. Class B shares may be
purchased at a price equal to the next determined net asset value without an
initial sales load, but a CDSL may be charged on redemptions within 6 years of
purchase. Class D shares may be purchased at a price equal to the next
determined net asset value without an initial sales load, but a CDSL may be
charged on redemptions within one year of purchase. See "Alternative
Distribution System," "Purchase of Shares" and "Redemption of Shares" as
applicable, in each Series' Prospectus.
SPECIMEN PRICE MAKE-UP
Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold at a maximum sales load of 4.75% and Class
B and Class D shares are sold at net asset value.* Using the net asset value at
December 31, 1997 for each class of the Series, the maximum offering price of
each Series' shares is as follows:
U.S. GOVERNMENT SECURITIES SERIES
CLASS A
Net asset value per share ..................................... $6.88
Maximum sales load (4.75% of offering price). ................. 0.34
-----
Maximum offering price per share .............................. $7.22
=====
CLASS B AND CLASS D
Net asset value and maximum offering prices per share* ........ $6.89
=====
-11-
<PAGE>
HIGH-YIELD BOND SERIES
CLASS A
Net asset value per share ................................... $7.55
Maximum sales load (4.75% of offering price) ................ 0.38
-----
Maximum offering price per share ............................ $7.93
=====
CLASS B AND CLASS D
Net asset value and maximum offering prices per share* ...... $7.55
=====
- ----------
* Class B shares are subject to a CDSL declining from 5% in the first year
after purchase to 0% after six years.
Class D shares are subject to a CDSL of 1% on redemptions within one year
of purchase. See "Redemption of Shares" in each Series' Prospectus.
CLASS A SHARES - REDUCED INITIAL SALES LOADS
REDUCTIONS AVAILABLE. Shares of any Seligman Mutual Fund sold with an initial
sales load in a continuous offering will be eligible for the following
reductions:
VOLUME DISCOUNTS are provided if the total amount being invested in Class A
shares of a Series or in any combination of shares of the other Seligman Mutual
Funds which are sold with an initial sales load, reaches levels indicated in the
sales load schedule set forth in each Series' Prospectus.
THE RIGHT OF ACCUMULATION allows an investor to combine the amount being
invested in Class A shares of any Seligman Mutual Fund sold with an initial
sales load with the total net asset value of shares already owned that were sold
with an initial sales load, including shares of Seligman Cash Management Fund
that were acquired by the investor through an exchange of shares of another
Seligman Mutual Fund on which there was an initial sales load, to determine
reduced sales loads in accordance with the schedule in each Series' Prospectus.
The value of the shares owned, including the value of shares of Seligman Cash
Management Fund acquired in an exchange of shares of another Seligman Mutual
Fund on which there is an initial sales load at the time of purchase, will be
taken into account in orders placed through a dealer, however, only if SFSI is
notified by an investor or a dealer of the amount owned by the investor at the
time the purchase is made and is furnished sufficient information to permit
confirmation.
A LETTER OF INTENT allows an investor to purchase Class A shares of a
Series' shares over a 13-month period at reduced initial sales loads in
accordance with the sales load schedule in each Series' Prospectus, based on the
total amount of Class A shares of the Series that the letter states the investor
intends to purchase plus the total net asset value of shares that were sold with
an initial sales load of the other Seligman Mutual Funds already owned and the
total net asset value of shares of Seligman Cash Management Fund which were
acquired through an exchange of shares of another Seligman Mutual Fund on which
there was an initial sales load at the time of purchase. Reduced sales loads
also may apply to purchases made within a 13-month period starting up to 90 days
before the date of execution of a letter of intent. For more information
concerning the terms of the letter of intent, see "Terms and Conditions --
Letter of Intent" in the back of the Prospectus.
Class A shares purchased without an initial sales load in accordance with
the sales load schedule in each Series' Prospectus, or pursuant to a Volume
Discount, Right of Accumulation or Letter of Intent are subject to a CDSL of 1%
on redemptions of such shares within eighteen months of purchase.
PERSONS ENTITLED TO REDUCTIONS. Reductions in initial sales loads apply to
purchases of Class A shares of a Series by a "single person," including an
individual; members of a family unit comprising husband, wife and minor
children; or a trustee or other fiduciary purchasing for a single fiduciary
account. Employee benefit plans qualified under Section 401 of the Internal
Revenue Code of 1986, as amended (the "Code"), tax-exempt organizations under
Section 501(c)(3) or (13), and non-qualified employee benefit plans that satisfy
uniform criteria are considered "single persons" for this purpose. The uniform
criteria are as follows:
-12-
<PAGE>
1. Employees must authorize the employer, if requested by the Fund, to receive
in bulk and to distribute to each participant on a timely basis the Fund
prospectuses, reports and other shareholder communications.
2. Employees participating in a plan will be expected to make regular periodic
investments (at least annually). A participant who fails to make such
investments may be dropped from the plan by the employer or the Fund 12 months
and 30 days after the last regular investment in his account. In such event, the
dropped participant would lose the discount on share purchases to which the plan
might then be entitled.
3. The employer must solicit its employees for participation in such an employee
benefit plan or authorize and assist an investment dealer in making enrollment
solicitations.
ELIGIBLE EMPLOYEE BENEFIT PLANS. The table of sales loads in each Series'
Prospectus applies to sales to "eligible employee benefit plans," except that
the Fund may sell shares at net asset value to "eligible employee benefit plans"
which have at least (i) $500,000 invested in the Seligman Mutual Funds or (ii)
50 eligible employees to whom such plan is made available. Such sales must be
made in connection with a payroll deduction system of plan funding or other
systems acceptable to Seligman Data Corp., the Fund's shareholder service agent.
Such sales are believed to require limited sales effort and sales related
expenses and therefore are made at net asset value. Contributions or account
information for plan participation also should be transmitted to Seligman Data
Corp. by methods which it accepts. Additional information about "eligible
employee benefit plans" is available from investment dealers or SFSI. The term
"eligible employee benefit plan" means any plan or arrangement, whether or not
tax qualified, which provides for the purchase of Fund shares.
PAYMENT IN Securities. In addition to cash, the Fund may accept securities in
payment for shares of a Series sold at the applicable public offering price (net
asset value plus any applicable sales load) although the Fund does not presently
intend to accept securities in payment for Series shares. Generally, the Fund
will only consider accepting securities (l) to increase its holdings in a
portfolio security of a Series, or (2) if the Manager determines that the
offered securities are a suitable investment for a Series and in a sufficient
amount for efficient management. Although no minimum has been established, it is
expected that the Fund would not accept securities with a value of less than
$100,000 per issue in payment for shares. The Fund may reject in whole or in
part offers to pay for shares of a Series with securities, may require partial
payment in cash for applicable sales loads, and may discontinue accepting
securities as payment for shares of the Series at any time without notice. The
Fund will not accept restricted securities in payment for Series shares. The
Fund will value accepted securities in the manner provided for valuing portfolio
securities of the Fund. Any securities accepted by the Fund in payment for Fund
shares will have an active and substantial market and have a value which is
readily ascertainable. (See "Valuation.")
FURTHER TYPES OF REDUCTIONS. Class A shares also may be issued without an
initial sales load in connection with the acquisition of cash and securities
owned by other investment companies and personal holding companies; to any
registered unit investment trust which is the issuer of periodic payment plan
certificates, the net proceeds of which are invested in fund shares; to separate
accounts established and maintained by an insurance company which are exempt
from registration under Section 3(c)(11) of the 1940 Act; to registered
representatives and employees (and their spouses and minor children) of any
dealer that has a sales agreement with SFSI; to financial institution trust
departments; to registered investment advisers exercising discretionary
investment authority with respect to the purchase of Fund shares; to accounts of
financial institutions or broker/dealers that charge account management fees,
provided the manager or one of its affiliates has entered into an agreement with
respect to such accounts; pursuant to sponsored arrangements with organizations
which make recommendations to or permit group solicitations of, its employees,
members or participants in connection with the purchase of shares of the Fund;
to other investment companies in the Seligman Group in connection with a
deferred fee arrangement for outside directors; and to "eligible employee
benefit plans" which have at least (i) $500,000 invested in the Seligman Mutual
Funds or (ii) 50 eligible employees to whom such plan is made available.
"Eligible employee benefit plan" means any plan or arrangement, whether or not
tax qualified, which provides for the purchase of Fund shares. Sales of shares
to such plans must be made in connection with a payroll deduction system of plan
funding or other system acceptable to Seligman Data Corp.
The Fund may sell Class A shares at net asset value to present and retired
directors, trustees, officers, employees and their spouses (and family members
of the foregoing) of the Fund, the other investment companies in the Seligman
Group, the Manager, and other companies affiliated with the Manager. Family
members are defined to include lineal descendants and lineal ancestors, siblings
(and their spouses and children) and any company or organization controlled by
any of the
-13-
<PAGE>
foregoing. Such sales also may be made to employee benefit and thrift plans for
such persons and to any investment advisory, custodial, trust or other fiduciary
account managed or advised by the Manager or any affiliate. These sales may be
made for investment purposes only, and shares may be resold only to the Fund.
Class A shares may be sold at net asset value to these persons since such
sales require less sales effort and lower sales related expenses as compared
with sales to the general public.
MORE ABOUT Redemptions. The procedures for redemption of Fund shares under
ordinary circumstances are set forth in each Series' Prospectus. In unusual
circumstances, payment may be postponed, or the right of redemption postponed
for more than seven days, if the orderly liquidation of portfolio securities is
prevented by the closing of, or restricted trading on the NYSE during periods of
emergency, or such other periods as ordered by the Securities and Exchange
Commission. Payment may be made in securities, subject to the review of some
state securities commissions. If payment is made in securities, a shareholder
may incur brokerage expenses in converting these securities to cash.
DISTRIBUTION SERVICES
SFSI acts as a general distributor of the shares of the Fund and of the
other Seligman Mutual Funds. The Fund and SFSI are parties to a Distributing
Agreement dated January 1, 1993. As general distributor of the Fund's shares of
beneficial interest, SFSI allows commissions to dealers as indicated in each
Series' Prospectus. SFSI receives the balance of sales loads and any CDSL, if
applicable, paid by investors. The following table sets forth the concessions
received by SFSI, dealer commissions, and CDSL retained for each Series for
1997, 1996 and 1995.
<TABLE>
<CAPTION>
SERIES SFSI CONCESSIONS DEALER COMMISSIONS CDSL RETAINED
- ------ --------------- ----------------- -------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government
Securities Series $ 4,683 $ 9,862 $ 11,889 $ 36,460 $ 77,484 $ 87,970 $ 3,312 $3,630 $ 2,634
High-Yield
Bond Series 1,047,484 709,561 459,799 8,095,350 5,466,375 3,554,416 185,777 88,949 33,929
</TABLE>
SFSI has assigned its rights to collect any CDSL imposed on redemptions of
Class B shares to FEP Capital, L.P. ("FEP"). SFSI has also assigned its rights
to the distribution fees with respect of Class B shares received by it pursuant
to the Plans (other than the portion of such fees used to make ongoing
shareholder servicing payments to Service Organizations as described in the
Prospectus) to FEP, which provides funding to SFSI to enable it to pay
commissions to dealers at the time of the sale of the related Class B shares. In
connection with the assignment of its rights to collect any CDSL and the
distribution fees with respect to Class B shares, SFSI receives payments from
FEP based on the value of Class B shares sold. The aggregate amounts of such
payments from FEP and the Class B distribution fees retained by SFSI for the
year ended December 31, 1997 was $2,003 for the U.S. Government Securities
Series. The aggregate amounts of such payments from FEP and the Class B
distribution fees retained by SFSI for the year ended December 31, 1997 and the
period ended December 31, 1996 were $1,149,148 and $368,282, respectively, for
the High-Yield Bond Series.
Effective April 1, 1995, Seligman Services, Inc. ("SSI"), an affiliate of
the Manager, became eligible to receive commissions from certain sales of Series
shares, as well as distribution and service fees pursuant to the Plan. For the
years ended December 31, 1997 and 1996 and for the period ended December 31,
1995, SSI received commissions from sales of Series shares and distribution and
service fees pursuant to the Plan as follows:
-14-
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
Distribution and Distribution and Distribution and
COMMISSIONS SERVICE FEES COMMISSIONS SERVICE FEES COMMISSIONS SERVICE FEES
----------- ------------ ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government
Securities Series $ 954 $13,630 $ 3,172 $ 12,113 $ 8,380 $ 2,952
High-Yield
Bond Series 47,851 35,679 29,500 20,797 7,087 19,702
</TABLE>
VALUATION
Net asset value per share of each class of a Series is determined as of the
close of regular trading on the NYSE, (normally, 4:00 p.m. Eastern time), each
day that the NYSE is open. The NYSE is currently closed on New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The Fund will
also determine net asset value for each class of a Series on each day in which
there is a sufficient degree of trading in a Series' portfolio securities that
the net asset value of Series shares might be materially affected. Net asset
value per share for a class of a Series is computed by dividing that class'
share of the value of the net assets of such Series (i.e., the value of its
assets less liabilities) by the total number of outstanding shares of such
class. All expenses of a Series, including the Manager's fee, are accrued daily
and taken into account for the purpose of determining net asset value. The net
asset value of Class B and Class D shares will generally be lower than the net
asset value of Class A shares as a result of the larger distribution fee with
respect to such shares.
Portfolio securities, including open short positions and options written,
are valued at the last sale price on the securities exchange or securities
market on which such securities primarily are traded. Securities not listed on
an exchange or securities market, or securities in which there were no
transactions, are valued at the average of the most recent bid and asked price,
except in the case of open short positions where the asked price is available.
Any securities for which recent market quotations are not readily available,
including restricted securities, are valued at fair value as determined in
accordance with procedures approved by the Fund's Trustees. This value generally
is determined as the amount which a Series could reasonably expect to receive
from an orderly disposition of these securities over a reasonable period of
time. Short-term obligations with less than sixty days remaining to maturity are
generally valued at amortized cost. Short-term obligations with more than sixty
days remaining to maturity will be valued at current market value until the
sixtieth day prior to maturity, and will then be valued on an amortized cost
basis based on the value on such date unless the Board determines that this
amortized cost value does not represent fair market value. Premiums received on
the sale of call options will be included in the net asset value, and current
market value of the options sold by a Series will be subtracted from net asset
value.
PERFORMANCE
The annualized yield for the 30-day period ended December 31, 1997 for the
Class A shares of the U.S. Government Securities Series and the High-Yield Bond
Series was 5.04% and 8.01%, respectively. The annualized yield was computed by
dividing each Series' net investment income per share earned during the 30-day
period by the maximum offering price per share (i.e., the net asset value plus
the maximum sales load of 4.75% of the net amount invested) on December 31,
1997, which was the last day of this period. The average number of Class A
shares of the U.S. Government Securities Series and the High-Yield Bond Series
was 6,673,276 and 97,445,070, respectively, which was the average daily number
of shares outstanding during the 30-day period that were eligible to receive
dividends. The annualized yield for the 30-day period ended December 31, 1997
for the Class B shares of the U. S. Government Securities Series and the
High-Yield Bond Series was 4.52% and 7.65%, respectively. The annualized yield
was computed by dividing the Series' net investment income per share earned
during the 30-day period by the maximum offering price per share (i.e., the net
asset value) on December 31, 1997, which was the last day of the period. The
average number of Class B shares of the U.S. Government Securities Series and
the High-Yield Bond Series was 432,072 and 73,866,904, respectively, which was
the average daily number of shares outstanding during the 30-day period that
were eligible to receive dividends. The annualized yield for the 30-day period
ended December 31, 1997 for the Class D shares of the U.S. Government Securities
Series and the High-Yield Bond Series was 4.52% and 7.65%, respectively. The
annualized yield was computed by dividing each Series' net investment income per
share earned during the 30-day period by the maximum offering price per share
(i.e., the net asset
-15-
<PAGE>
value) on December 31, 1997, which was the last day of this period. The average
number of Class D shares of the U.S. Government Securities Series and the
High-Yield Bond Series was 1,774,675 and 68,792,824, respectively, which was the
average daily number of shares outstanding during the 30-day period that were
eligible to receive dividends. Income was computed by totaling the interest
earned on all debt obligations during the 30-day period and subtracting from
that amount the total of all recurring expenses incurred during the period. The
30-day yield was then annualized on a bond-equivalent basis assuming semi-annual
reinvestment and compounding of net investment income, as described in each
Series' Prospectus.
The average annual total returns for the Class A shares of the U.S.
Government Securities Series and the High-Yield Bond Series for the one-year,
five-year and ten-year periods ended on December 31, 1997 were 3.44%, 4.69% and
6.63%, and 8.86%, 12.63% and 11.80%, respectively. These returns were computed
by subtracting the maximum sales load of 4.75% of public offering price and
assuming that all of the dividends and gain distributions by the Series over the
relevant time period were reinvested. It was then assumed that at the end of
each period, the entire amount was redeemed. The average annual total return was
then determined by calculating the annual rate required for the initial
investment to grow to the amount which would have been received upon redemption
(i.e., the average annual compound rate of return). The average annual total
return for the Class B shares of the U.S. Government Securities Series for the
period January 1, 1997 (commencement of operations) to December 31, 1997 was
2.32%. The average annual total returns for the Class B shares of the High-Yield
Bond Series for the one-year period ended December 31, 1997 and the period April
22, 1996 (commencement of operations) to December 31, 1997 were 8.24% and
11.13%, respectively. This return was computed assuming that all of the
dividends and gain distributions paid by the Fund's Class B shares, if any, were
reinvested over the relevant time period. It was then assumed that at the end of
the period the entire amount was redeemed, subtracting the applicable CDSL (5%
for the one-year period and 4% for the period since inception). The average
annual total returns for the Class D shares of the U.S. Government Securities
Series and the High-Yield Bond Series for the one-year period and since
inception through December 31, 1997 were 6.53% and 3.88%, and 12.24% and 11.80%,
respectively. These amounts were computed assuming that all of the dividends and
gain distributions paid by each Series' Class D shares, if any, were reinvested
over the relevant time period. It was then assumed that at the end of each
period, the entire amount was redeemed, subtracting the 1% CDSL, if applicable.
Table A below illustrates the total return (income and capital) on Class A
shares of each Series of the Fund with dividends invested and gain
distributions, if any, taken in shares. It shows that a $1,000 investment in
Class A shares of the U.S. Government Securities Series, assuming payment of the
4.75% sales load, made on January 1, 1988 had a value of $1,901 on December 31,
1997, resulting in an aggregate total return of 90.05%; and a $1,000 investment
in Class A shares of the High-Yield Bond Series, assuming payment of the 4.75%
sales load, made on January 1, 1988 had a value of $3,051 on December 31, 1997,
resulting in an aggregate total return of 205.06%. Table B illustrates the total
return (income and capital) on Class B shares of the U.S. Government Securities
Series and the High-Yield Bond Series with dividends invested and gain
distributions, if any, taken in shares. It shows that a $1,000 investment in
Class B shares of the U.S. Government Securities Series, made on January 1, 1997
(commencement of offering of Class B shares), had a value of $1,023 on December
31, 1997, after payment of the 5% CDSL, resulting in an aggregate total return
of 2.32%; and a $1,000 investment in Class B shares of the High-Yield Bond
Series, made on April 22, 1996 (commencement of offering of Class B shares), had
a value of $1,196 on December 31, 1997, after payment of the 4% CDSL, resulting
in an aggregate total return of 19.55%. Table C illustrates the total return
(income and capital) on Class D shares of the U.S. Government Securities Series
and the High-Yield Bond Series with dividends invested and gain distributions,
if any, taken in shares. It shows that a $1,000 investment in Class D shares of
the U.S. Government Securities Series made on September 21, 1993 (commencement
of offering of Class D shares) had a value of $1,177 on December 31, 1997,
resulting in an aggregate total return of 17.69% and a $1,000 investment in
Class D shares of the High-Yield Bond Series made on September 21, 1993
(commencement of offering of Class D shares) had a value of $1,612 on December
31, 1997, resulting in an aggregate total return of 61.16%. The results shown
should not be considered a representation of the dividend income or gain or loss
in capital value which may be realized from an investment made in a class of
shares of the Fund today.
-16-
<PAGE>
TABLE A - CLASS A SHARES
<TABLE>
<CAPTION>
VALUE OF
YEAR VALUE OF CAPITAL GAIN VALUE OF TOTAL
ENDED 1 INITIAL INVESTMENT 2 DISTRIBUTIONS DIVIDENDS TOTAL VALUE 2 RETURN 1,3
- ------- ------------------- ------------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
U.S. Government
Securities Series
- -----------------
12/31/88 $ 944 $-- $ 83 $1,027
12/31/89 942 -- 180 1,122
12/31/90 921 -- 272 1,193
12/31/91 976 -- 385 1,361
12/31/92 961 -- 478 1,439
12/31/93 960 -- 587 1,547
12/31/94 865 -- 622 1,487
12/31/95 956 -- 800 1,756
12/31/96 897 -- 854 1,751
12/31/97 920 -- 981 1,901 90.05%
High-Yield
Bond Series
- -----------
12/31/88 $ 946 $-- $ 115 $1,061
12/31/89 863 -- 239 1,102
12/31/90 702 -- 320 1,022
12/31/91 803 -- 532 1,335
12/31/92 866 -- 738 1,604
12/31/93 935 -- 976 1,911
12/31/94 856 -- 1,070 1,926
12/31/95 938 -- 1,387 2,325
12/31/96 977 -- 1,693 2,670
12/31/97 1,018 -- 2,033 3,051 205.06%
</TABLE>
TABLE B - CLASS B SHARES
<TABLE>
<CAPTION>
VALUE OF
PERIOD/YEAR VALUE OF CAPITAL GAIN VALUE OF TOTAL
ENDED 1 INITIAL INVESTMENT 2 DISTRIBUTIONS DIVIDENDS TOTAL VALUE 2 RETURN 1,3
- ------- ------------------ ------------ --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
U.S. Government
Securities Series
- -----------------
12/31/97 $ 974 $-- $ 49 $1,023 2.32%
High-Yield
Bond Series
- -----------
12/31/96 $1,028 $-- $ 63 $1,091
12/31/97 1,030 -- 166 1,196 19.55%
</TABLE>
-17-
<PAGE>
TABLE C - CLASS D SHARES
<TABLE>
<CAPTION>
VALUE OF
PERIOD/YEAR VALUE OF CAPITAL GAIN VALUE OF TOTAL
ENDED 1 INITIAL INVESTMENT 2 DISTRIBUTIONS DIVIDENDS TOTAL VALUE 2 RETURN 1,3
- ------- -------------------- ------------ --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
U.S. Government
Securities Series
- -----------------
12/31/93 $ 982 $-- $ 12 $ 994
12/31/94 884 -- 59 943
12/31/95 977 -- 128 1,105
12/31/96 919 -- 176 1,095
12/31/97 940 -- 237 1,177 17.69%
High-Yield
Bond Series
- -----------
12/31/93 $1,030 $-- $ 15 $1,045
12/31/94 942 -- 100 1,042
12/31/95 1,033 -- 214 1,247
12/31/96 1,077 -- 346 1,423
12/31/97 1,121 -- 491 1,612 61.16%
</TABLE>
1 For the ten years ended December 31, 1997 for Class A shares; from
commencement of offering of Class B shares of the U.S. Government
Securities Series on January 1, 1997 and commencement of offering of Class
B shares of the High-Yield Bond Series on April 22, 1996; from commencement
of offering of Class D shares on September 21, 1993.
2 The "Value of Initial Investment" as of the date indicated reflects the
effect of the maximum sales load or CDSL, if applicable, assumes that all
dividends and capital gain distributions were taken in cash and reflects
changes in the net asset value of the shares purchased with the
hypothetical initial investment. "Total Value" reflects the effect of the
CDSL, if applicable, assumes investment of all dividends and capital gain
distributions and reflects changes in the net asset value.
3 "Total Return" for each Series is calculated by assuming a hypothetical
initial investment of $1,000 at the beginning of the period specified,
subtracting the maximum sales load on Class A shares; determining total
value of all dividends and capital gain distributions that would have been
paid during the period on such shares assuming that each dividend or
capital gain distribution was invested in additional shares at net asset
value; calculating the total value of the investment at the end of the
period; subtracting the CDSL on Class B or Class D shares, if applicable;
and finally, by dividing the difference between the amount of the
hypothetical initial investment at the beginning of the period and its
total value at the end of the period by the amount of the hypothetical
initial investment.
No adjustments have been made for any income taxes payable by investors on
dividends invested or gain distributions taken in shares.
Each of the Series may also include its aggregate total return over a
specified period in advertisements or in information furnished to present or
prospective shareholders.
GENERAL INFORMATION
INFORMATION ABOUT BUSINESS TRUSTS. As indicated in each Series' Prospectus, the
Fund is organized as a business trust under the laws of the Commonwealth of
Massachusetts. Under the Declaration of Trust, the Fund's Trustees are
authorized to classify or reclassify and issue any shares of beneficial interest
of the Fund into any number of other Series without further action by
shareholders. The 1940 Act requires that where more than one Series exists, each
Series must be preferred over all other Series in respect of assets specifically
allocated to such Series.
As a general matter, the Fund will not hold annual or other meetings of the
shareholders. This is because the Declaration of Trust provides for shareholder
voting only (a) for the election or removal of one or more Trustees if a meeting
is called for that purpose, (b) with respect to any contract as to which
shareholder approval is required by the 1940 Act, (c)
-18-
<PAGE>
with respect to any termination or reorganization of the Fund or any Series to
the extent and as provided in the Declaration of Trust, (d) with respect to any
amendment of the Declaration of Trust (other than amendments establishing and
designating new Series, abolishing Series when there are no units thereof
outstanding, changing the name of the Fund or the name of any Series, supplying
any omission, curing any ambiguity or curing, correcting or supplementing any
provision thereof which is internally inconsistent with any other provision
thereof or which is defective or inconsistent with the 1940 Act or with the
requirements of the Code or applicable regulations for the Fund's obtaining the
most favorable treatment thereunder available to regulated investment
companies), which amendments require approval by a majority of the shares
entitled to vote, (e) to the same extent as the stockholders of a Massachusetts
business corporation as to whether or not a court action, proceeding, or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Fund or the shareholders, and (f) with respect to such
additional matters relating to the Fund as may be required by the 1940 Act, the
Declaration of Trust, the By-laws of the Fund, any registration of the Fund with
the Securities and Exchange Commission (the "Commission") or any state, or as
the Trustees may consider necessary or desirable. Each Trustee serves until the
next meeting of shareholders, if any, called for the purpose of considering the
election or reelection of such Trustee or of a successor to such Trustee, and
until the election and qualification of his successor, if any, elected at such
meeting, or until such Trustee sooner dies, resigns, retires or is removed by
the shareholders or two-thirds of the Trustees.
The shareholders of the Fund have the right, upon the declaration in
writing or vote of more than two-thirds of the Fund's outstanding shares, to
remove a Trustee. The Trustees will call a meeting of shareholders to vote on
the removal of a Trustee upon the written request of the record holders of ten
percent of its shares. In addition, whenever ten or more shareholders of record
who have been such for at least six months preceding the date of application,
and who hold in the aggregate either shares having a net asset value of at least
$25,000 or at least 1 per centum of the outstanding shares, whichever is less,
shall apply to the Trustees in writing, stating that they wish to communicate
with other shareholders with a view to obtaining signatures to a request for a
meeting for the purpose of voting upon the question of removal of any Trustee or
Trustees and accompanied by a form of communication and request which they wish
to transmit, the Trustees shall within five business days after receipt of such
application either: (1) afford to such applicants access to a list of the names
and addresses of all shareholders as recorded on the books of the Fund; or (2)
inform such applicants as to the approximate number of shareholders of record,
and the approximate cost of mailing to them the proposed communication and form
of requests. If the Trustees elect to follow the latter course, the Trustees,
upon the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall, with
reasonable promptness, mail such material to all shareholders of record at their
addresses as recorded on the books, unless within five business days after such
tender the Trustees shall mail to such applicants and file with the Commission,
together with a copy of the material to be mailed, a written statement signed by
at least a majority of the Trustees to the effect that in their opinion either
such material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such opinion. After
opportunity for hearing upon the objections specified in the written statement
so filed, the Commission may, and if demanded by the Trustees or by such
applicants shall, enter an order either sustaining one or more of such
objections or refusing to sustain any of them. If the Commission shall enter an
order refusing to sustain any of such objections, or if, after the entry of an
order sustaining one or more of such objections, the Commission shall find,
after notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Trustees shall mail copies
of such material to all shareholders with reasonable promptness after the entry
of such order and the renewal of such tender.
Rule 18f-2 under the 1940 Act provides that any matter required by the
provisions of the 1940 Act or applicable state law, or otherwise, to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Fund shall not be deemed to have been effectively acted upon
unless approved by the holders of a majority of the outstanding shares of each
Series affected by such matter. Rule 18f-2 further provides that a Series shall
be deemed to be affected by a matter unless it is clear that the interests of
such Series in the matter are substantially identical or that the matter does
not significantly affect any interest of such Series. However, the Rule exempts
the selection of independent auditors, the approval of principal distributing
contracts and the election of trustees from the separate voting requirements of
the Rule.
The shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust. The Declaration of Trust also
provides for indemnification and reimbursement of expenses out of a Series'
assets for any shareholder held personally liable for obligations of such
Series.
-19-
<PAGE>
CUSTODIAN. Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City,
Missouri 64105, serves as custodian for the Fund. It also maintains, under the
general supervision of the Manager, the accounting records and determines the
net asset values for the Fund.
AUDITORS. Deloitte & Touche LLP, independent auditors, have been selected as
auditors of the Fund. Their address is Two World Financial Center, New York, New
York 10281.
FINANCIAL STATEMENTS
The Annual Reports to shareholders for the year ended December 31, 1997
contains schedules of the investments of each of the Fund's Series as of
December 31, 1997 as well as certain other financial information as of the
applicable date. The financial statements and notes included in the Annual
Reports, and the Independent Auditor's Reports thereon, are incorporated herein
by reference. These Reports will be furnished without charge to investors who
request copies of this Statement of Additional Information.
-20-
<PAGE>
APPENDIX
HISTORY OF J. & W. SELIGMAN & CO. INCORPORATED
Seligman's beginnings date back to 1837, when Joseph Seligman, the
oldest of eight brothers, arrived in the United States from Germany. He earned
his living as a pack peddler in Pennsylvania, and began sending for his
brothers. The Seligmans became successful merchants, establishing businesses in
the South and East.
Backed by nearly thirty years of business success culminating in the
sale of government securities to help finance the Civil War - Joseph Seligman,
with his brothers, established the international banking and investment firm of
J. & W. Seligman & Co. In the years that followed, the Seligman complex played a
major role in the geographical expansion and industrial development of the
United States.
THE SELIGMAN COMPLEX:
.... Prior to 1900
o Helps finance America's fledgling railroads through underwritings.
o Is admitted to the New York Stock Exchange in 1869. Seligman remained a
member of the NYSE until 1993, when the evolution of its business made it
unnecessary. o Becomes a prominent underwriter of corporate securities,
including New York Mutual Gas Light Company, later part of Consolidated
Edison. o Provides financial assistance to Mary Todd Lincoln and urges the
Senate to award her a pension.
o Is appointed U.S. Navy fiscal agent by President Grant. Becomes a leader in
raising capital for America's industrial and urban development.
...1900-1910
o Helps Congress finance the building of the Panama Canal.
...1910s
o Participates in raising billions for Great Britain, France and Italy,
helping to finance World War I.
...1920s
o Participates in hundreds of underwritings including those for some of the
country's largest companies: Briggs Manufacturing, Dodge Brothers, General
Motors, Minneapolis-Honeywell Regulatory Company, Maytag Company, United
Artists Theater Circuit and Victor Talking Machine Company.
o Forms Tri-Continental Corporation in 1929, today the nation's largest,
diversified closed-end equity investment company, with over $3 billion in
assets, and one of its oldest.
...1930s
o Assumes management of Broad Street Investing Co. Inc., its first mutual
fund, today known as Seligman Common Stock Fund, Inc.
o Establishes Investment Advisory Service.
-21-
<PAGE>
...1940s
o Helps shape the Investment Company Act of 1940.
o Leads in the purchase and subsequent sale to the public of Newport News
Shipbuilding and Dry Dock Company, a prototype transaction for the
investment banking industry.
o Assumes management of National Investors Corporation, today Seligman Growth
Fund, Inc.
o Establishes Whitehall Fund, Inc., today Seligman Income Fund, Inc.
...1950-1989
o Develops new open-end investment companies. Today, manages more than 40
mutual fund portfolios.
o Helps pioneer state-specific, municipal bond funds, today managing a
national and 18 state-specific municipal funds.
o Establishes Seligman Portfolios, Inc., an investment vehicle offered
through variable annuity products.
...1990s
o Introduces Seligman Select Municipal Fund, Inc. and Seligman Quality
Municipal Fund, Inc., two closed-end funds that invest in high-quality
municipal bonds.
o In 1991 establishes a joint venture with Henderson plc, of London, known
as Seligman Henderson Co., to offer global and international investment
products.
o Introduces to the public Seligman Frontier Fund, Inc., a small
capitalization mutual fund.
o Launches Seligman Henderson Global Fund Series, Inc., which today offers
five separate series: Seligman Henderson International Fund, Seligman
Henderson Global Smaller Companies Fund, Seligman Henderson Global
Technology Fund, Seligman Henderson Global Growth Opportunities Fund and
Seligman Henderson Emerging Markets Growth Fund.
o Launches Seligman Value Fund Series, Inc., which currently offers two
separate series: Seligman Large-Cap Value Fund and Seligman Small-Cap Value
Fund.
-22-
<PAGE>
Financial Statements - High-Yield Bond Series
================================================================================
PORTFOLIO OF INVESTMENTS
December 31, 1997
PRINCIPAL
AMOUNT
OR WARRANTS VALUE
------------- --------
CORPORATE BONDS 88.9%
ADVERTISING 0.6%
ADAMS OUTDOOR ADVERTISING
10 3/4%, due 3/15/2006 $10,000,000 $ 11,000,000
-------------
AGRICULTURE 0.4%
IOWA SELECT FARM
10 3/4%, due 12/1/2005* 7,500,000 7,734,375
-------------
BROADCASTING 2.7%
CAPSTAR BROADCASTING PARTNERS
0% (12 3/4%+), due 2/1/2009 20,000,000 14,600,000
PAXSON COMMUNICATIONS
11 5/8%, due 10/1/2002 15,000,000 16,125,000
SFX BROADCASTING
10 3/4%, due 5/15/2006 17,500,000 19,250,000
-------------
49,975,000
-------------
CABLE SYSTEMS 12.5%
AMERICAN TELECASTING 0
(Warrants expiring 8/15/2000) 5,000wts. 5,000
CABLEVISION SYSTEMS
10 1/2%, due 5/15/2016 $20,000,000 23,350,000
CHARTER COMMUNICATIONS
SOUTHEAST HOLDINGS
11 1/4%, due 3/15/2006 17,500,000 19,512,500
CHARTER COMMUNICATIONS
SOUTHEAST HOLDINGS
0% (14%+), due 3/15/2007 25,000,000 19,875,000
COMCAST
10 5/8%, due 7/15/2012 7,500,000 9,412,500
DIGITAL TELEVISION SERVICES
12 1/2%, due 8/1/2007* 15,000,000 17,025,000
ECHOSTAR DBS
12 1/2%, due 7/1/2002 20,000,000 21,700,000
HEARTLAND WIRELESS COMMUNICATIONS
14%, due 10/15/2004 20,000,000 7,500,000
INTERMEDIA CAPITAL PARTNERS IV
11 1/4%, due 8/1/2006 30,000,000 33,000,000
NORTHLAND CABLE TELEVISION
10 1/4%, due 11/15/2007* 10,000,000 10,575,000
NTL
10%, due 2/15/2007 5,000,000 5,287,500
ROGERS CABLESYSTEMS
11%, due 12/1/2015 21,500,000 24,940,000
TCI SATELLITE ENTERTAINMENT
10 7/8%, due 2/15/2007* 30,000,000 31,575,000
TCI SATELLITE ENTERTAINMENT
0% (121/4% ), due 2/15/2007* 8,250,000 5,527,500
WIRELESS ONE
13%, due 10/15/2003 10,500,000 3,832,500
WIRELESS ONE 0
(Warrants expiring 10/15/2000) 15,000wts. 15,000
-------------
233,132,500
-------------
CELLULAR 3.7%
CENTENNIAL CELLULAR
10 1/8%, due 5/15/2005 9,500,000 10,355,000
CROWN CASTLE INTEMATIONAL
0% (105/8%+), due 11/15/2007* 15,000,000 9,412,500
METROCALL
9 3/4%, due 11/1/2007* 10,000,000 9,925,000
PRICE COMMUNICATIONS WIRELESS
11 3/4%, due 7/15/2007* 20,000,000 21,800,000
PRICELLULAR WIRELESS
10 3/4%, due 11/1/2004 16,000,000 17,400,000
-------------
68,892,500
-------------
CHEMICALS 0.9%
TEXAS PETROCHEMICALS
11 1/8%, due 7/1/2006 15,000,000 16,200,000
-------------
COMPUTER AND RELATED
SERVICES 4.1%
DECISIONONE
9 3/4%, due 8/1/2007 8,600,000 8,879,500
DECISIONONE HOLDINGS
0% (11 1/2%+), due 8/1/2008 17,500,000 11,287,500
UNISYS
12%, due 4/15/2003 25,000,000 28,437,500
UNISYS
11 3/4%, due 10/15/2004 25,000,000 28,687,500
-------------
77,292,000
-------------
- ----------------
See footnotes on page .
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
December 31, 1997
PRINCIPAL
AMOUNT VALUE
------------- --------
CONSUMER PRODUCTS 3.8%
AMERICAN PAD & PAPER
13%, due 11/15/2005 $ 5,000,000 $ 5,625,000
AMSCAN HOLDINGS
9 7/8%, due 12/15/2007* 10,000,000 10,275,000
ANCHOR ADVANCED PRODUCTS
11 3/4%, due 4/1/2004 8,000,000 8,640,000
CARSON
10 3/8%, due 11/1/2007* 10,000,000 10,050,000
FRENCH FRAGRANCES
10 3/8%, due 5/15/2007 10,000,000 10,500,000
NORTH ATLANTIC TRADING
11%, due 6/15/2004 7,250,000 7,612,500
RYDER TRS
10%, due 12/1/2006 18,500,000 18,592,500
-------------
71,295,000
-------------
CONTAINERS 1.1%
PLASTIC CONTAINERS
10%, due 12/15/2006 10,000,000 10,650,000
U.S. CAN
10 1/8%, due 10/15/2006 10,000,000 10,650,000
-------------
21,300,000
-------------
ENERGY 0.6%
ABRAXAS PETROLEUM
11 1/2%, due 11/1/2004 10,000,000 10,975,000
-------------
EQUIPMENT 1.1%
WILLIAMS SCOTSMAN
9 7/8%, due 6/1/2007 20,000,000 20,900,000
-------------
FINANCIAL SERVICES 2.3%
AMRESCO
10%, due 3/15/2004 10,000,000 10,425,000
DOLLAR FINANCIAL GROUP
10 7/8%, due 11/15/2006 10,750,000 11,663,750
OCWEN CAPITAL TRUST I
10 7/8%, due 8/1/2027 10,000,000 10,900,000
SUPERIOR NATIONAL CAPITAL TRUST I
10 3/4%, due 12/1/2017* 2,275,000 2,337,562
VERITAS CAPITAL TRUST
10%, due 1/1/2028* 6,825,000 6,978,563
-------------
42,304,875
-------------
FOOD 3.8%
AFC ENTERPRISES
10 1/4%, due 5/15/2007 15,000,000 15,825,000
AMERIKING
10 3/4%, due 12/1/2006 15,000,000 15,825,000
AMERISERVE FOOD
10 1/8%, due 7/15/2007 20,000,000 21,100,000
GORGES/QUIK-TO-FIX FOODS
11 1/2%, due 12/1/2006 12,000,000 12,720,000
INTERNATIONAL HOME FOODS
10 3/8%, due 11/1/2006 5,000,000 5,512,500
-------------
70,982,500
-------------
GAMING/HOTEL 11.1%
ALLIANCE GAMING
10%, due 8/1/2007* 7,500,000 7,546,875
AMERISTAR CASINOS
10 1/2%, due 8/1/2004* 17,250,000 17,681,250
AZTAR
13 3/4%, due 10/1/2004 15,000,000 17,250,000
CASINO AMERICA
12 1/2%, due 8/1/2003 30,000,000 32,737,500
CASINO MAGIC OF LOUISIANA
13%, due 8/15/2003 15,000,000 14,475,000
COAST HOTELS & CASINOS
13%, due 12/15/2002 23,000,000 26,105,000
FITZGERALDS GAMING
12 1/4%, due 12/15/2004* 9,750,000 9,920,625
SHOWBOAT
13%, due 8/1/2009 8,500,000 10,582,500
SHOWBOAT MARINA CASINO
PARTNERSHIP
13 1/2%, due 3/15/2003 15,000,000 18,075,000
TRUMP ATLANTIC CITY FUNDING
11 1/4%, due 5/1/2006 28,795,000 28,219,100
TRUMP ATLANTIC CITY FUNDING
11 1/4%, due 5/1/2006* 3,785,000 3,671,450
TRUMP HOTELS & CASINO
RESORTS
15 1/2%, due 6/15/2005 18,000,000 20,610,000
-------------
206,874,300
-------------
- ------------
See footnotes on page 12.
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
December 31, 1997
PRINCIPAL
AMOUNT VALUE
------------- --------
HEALTH CARE/MEDICAL
PRODUCTS 4.9%
ALARIS MEDICAL SYSTEMS
9 3/4%, due 12/1/2006 $16,000,000 $ 16,880,000
ALLIANCE IMAGING
9 5/8%, due 12/15/2005 4,500,000 4,601,250
DADE INTERNATIONAL
11 1/8%, due 5/1/2006 16,000,000 17,680,000
GRAPHIC CONTROLS
12%, due 9/15/2005 13,000,000 14,560,000
PARACELSUS HEALTHCARE
10%, due 8/15/2006 17,000,000 17,425,000
PARAGON HEALTH NETWORK
0% (10 1/2%+), due 11/1/2007* 15,000,000 9,375,000
SUN HEALTHCARE GROUP
9 1/2%, due 7/1/2007* 10,000,000 10,300,000
-------------
90,821,250
-------------
LEISURE 2.3%
AFFINITY GROUP HOLDING
11%, due 4/1/2007 17,000,000 18,190,000
AMF GROUP
0% (12 1/4%+), due 3/15/2006 10,000,000 7,912,500
PREMIER PARKS
12%, due 8/15/2003 11,000,000 12,292,500
PREMIER PARKS
9 3/4%, due 1/15/2007 3,750,000 4,012,500
-------------
42,407,500
-------------
MANUFACTURING 1.8%
AIRXCEL
11%, due 11/15/2007* 10,000,000 10,350,000
BPC HOLDING
12 1/2%, due 6/15/2006 12,000,000 13,260,000
CLARK-SCHWEBEL
12 1/2%, due 7/15/2007* 4,231,448 4,548,807
INTERNATIONAL KNIFE & SAW
11 3/8%, due 11/15/2006 2,950,000 3,200,750
WERNER HOLDINGS
10%, due 11/15/2007* 2,275,000 2,343,250
-------------
33,702,807
-------------
METALS 1.8%
KOPPERS INDUSTRY
9 7/8%, due 12/1/2007* 2,275,000 2,354,625
RENCO METALS
11 1/2%, due 7/1/2003 15,000,000 16,012,500
ROYAL OAK MINES
11%, due 8/15/2006 20,750,000 14,628,750
-------------
32,995,875
-------------
PAGING 4.6%
MOBILE TELECOMMUNICATION
TECHNOLOGIES
13 1/2%, due 12/15/2002 26,500,000 30,872,500
PAGING NETWORK
10%, due 10/15/2008 35,000,000 36,443,750
PRONET
11 7/8%, due 6/15/2005 18,000,000 19,440,000
-------------
86,756,250
-------------
PAPER AND PACKAGING 1.1%
CROWN PAPER
11%, due 9/1/2005 20,000,000 20,700,000
-------------
PUBLISHING 2.3%
AMERICAN LAWYER MEDIA HOLDINGS
9 3/4%, due 12/15/2007* 10,000,000 10,200,000
AMERICAN LAWYER MEDIA HOLDINGS
0% (12 1/4%+), due 12/15/2008* 3,450,000 1,966,500
PERRY-JUDD
10 5/8%, due 12/15/2007* 3,800,000 3,971,000
PETERSEN PUBLISHING
11 1/8%, due 11/15/2006 10,000,000 11,350,000
TRANSWESTERN HOLDINGS
0% (11 7/8%+), due 11/15/2008* 9,150,000 5,535,750
TRANSWESTERN PUBLISHING
9 5/8%, due 11/15/2007* 2,270,000 2,372,150
VON HOFFMAN PRESS
10 3/8%, due 5/15/2007*+ 6,750,000 7,256,250
-------------
42,651,650
-------------
- --------------
See footnotes on page 12.
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
December 31, 1997
PRINCIPAL
AMOUNT
OR WARRANTS VALUE
------------- --------
RECORD STORAGE 0.5%
PIERCE LEAHY
11 1/8%, due 7/15/2006 $ 7,500,000 $ 8,512,500
-------------
RETAILING 1.4%
CENTRAL TRACTOR
10 5/8%, due 4/1/2007 15,000,000 15,900,000
COLE NATIONAL GROUP
9 7/8%, due 12/31/2006 10,000,000 10,750,000
-------------
26,650,000
-------------
SUPERMARKETS 2.0%
JITNEY-JUNGLE STORES OF AMERICA
12%, due 3/1/2006 16,000,000 18,240,000
JITNEY-JUNGLE STORES OF AMERICA
10 3/8%, due 9/15/2007 10,000,000 10,425,000
PATHMARK STORES
11 5/8%, due 6/15/2002 11,250,000 9,168,750
-------------
37,833,750
-------------
TECHNOLOGY 2.3%
ADVANCED MICRO DEVICES
11%, due 8/1/2003 20,000,000 21,500,000
THERMA-WAVE
10 5/8%, due 5/15/2004 10,500,000 10,972,500
VIASYSTEMS
9 3/4%, due 6/1/2007 10,000,000 10,387,500
-------------
42,860,000
-------------
TELECOMMUNICATIONS 12.7%
BTI TELECOM
10 1/2%, due 9/15/2007* 15,000,000 15,375,000
GCI
9 3/4%, due 8/1/2007 11,250,000 11,728,125
GLOBALSTAR
11 1/4%, due 6/15/2004 12,500,000 12,593,750
ICG HOLDINGS
0% (11 5/8%+), due 3/15/2007 15,500,000 10,617,500
INTERMEDIA COMMUNICATIONS
0% (12 1/2%+), due 5/15/2006 10,000,000 7,900,000
INTERMEDIA COMMUNICATIONS
0% (11 1/4%+), due 7/15/2007 10,000,000 7,175,000
INTERMEDIA COMMUNICATIONS
(Warrants expiring 6/1/2000)*o 4,000wts. 440,000
ITC DELTACOM
11%, due 6/1/2007 15,600,000 17,238,000
IXC COMMUNICATIONS
12 1/2%, due 10/1/2005 25,000,000 28,937,500
NEXTEL COMMUNICATIONS
0% (10.65%+), due 9/15/2007* 25,000,000 15,875,000
NEXTLINK COMMUNICATIONS
12 1/2%, due 4/15/2006 22,500,000 25,762,500
POWERTEL
11 1/8%, due 6/1/2007 17,500,000 19,075,000
RCN
10%, due 10/15/2007* 15,000,000 15,637,500
RCN
0% (11 1/8%+), due 10/15/2007* 12,500,000 7,875,000
SPRINT SPECTRUM
11%, due 8/15/2006 15,000,000 16,950,000
TALTON HOLDINGS
11%, due 6/30/2007* 10,000,000 10,900,000
VERIO
13 1/2%, due 6/15/2004* 10,500,000 12,600,000
-------------
236,679,875
-------------
THEATERS 1.2%
HOLLYWOOD THEATERS
10 5/8%, due 8/1/2007* 11,500,000 12,276,250
PLITT THEATERS
10 7/8%, due 6/15/2004 10,000,000 10,850,000
-------------
23,126,250
-------------
TRANSPORTATION 0.7%
ATLAS AIR
10 3/4%, due 8/1/2005 12,500,000 13,250,000
-------------
UTILITIES 0.6%
MIDLAND COGENERATION VENTURE
11 3/4%, due 7/23/2005 10,000,000 11,999,060
-------------
TOTAL CORPORATE BONDS
(Cost $1,601,001,632) 1,659,804,817
--------------
- --------------
See footnotes on page 12.
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
December 31, 1997
SHARES VALUE
------------- --------
PREFERRED STOCKS 3.8%
BROADCASTING 2.2%
CAPSTAR BROADCASTING PARTNERS 12% 60,000 $ 6,915,000
CHANCELLOR MEDIA 12% 105,881 12,202,785
SFX BROADCASTING 12 5/8% 100,000 11,425,000
SINCLAIR CAPITAL 11 5/8% 100,000 11,075,000
--------------
41,617,785
--------------
CABLE SYSTEMS 0.6%
ECHOSTAR COMMUNICATIONS 12 1/8%* 6,450 6,756,375
PEGASUS COMMUNICATIONS 12 3/4% 3,500 3,911,250
--------------
10,667,625
--------------
TELECOMMUNICATIONS 1.0%
IXC COMMUNICATIONS 12 1/2%* 9,346 10,958,172
NEXTLINK COMMUNICATIONS 14% 110,911 6,904,210
--------------
17,862,382
--------------
TOTAL PREFERRED STOCKS
(Cost $62,111,991) 70,147,792
--------------
CONVERTIBLE BONDS 1.1%
TECHNOLOGY 1.1%
EMC
3 1/4%, due 3/15/2002 $ 6,250,000 $ 8,492,187
XILINX
5 1/4%, due 11/1/2002* 12,500,000 12,171,875
--------------
TOTAL CONVERTIBLE BONDS
(Cost $20,354,052) 20,664,062
--------------
CONVERTIBLE PREFERRED STOCKS 0.4%
(Cost $5,059,500)
BROADCASTING 0.4%
CHANCELLOR MEDIA $3* 100,000shs. 7,737,500
--------------
SHORT-TERM HOLDINGS 3.4%
(Cost $64,100,000) 64,100,000
--------------
TOTAL INVESTMENTS 97.6%
(Cost $1,752,627,175) 1,822,454,171
OTHER ASSETS LESS LIABILITIES 2.4% 44,239,395
--------------
NET ASSETS 100.0% $1,866,693,566
==============
- ----------------
* Rule 144A security.
o Non-income producing 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.
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================================================
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
ASSETS:
Investments, at value:
<S> <C> <C>
Long-term holdings (cost $1,688,527,175) ............................. $1,758,354,171
Short-term holdings (cost $64,100,000) ............................... 64,100,000 $1,822,454,171
--------------
Cash ............................................................................................. 2,433,724
Receivable for interest and dividends ............................................................ 40,793,668
Receivable for Shares of Beneficial Interest sold ................................................ 17,383,621
Expenses prepaid to shareholder service agent .................................................... 240,631
Other ............................................................................................ 65,471
--------------
TOTAL ASSETS ..................................................................................... 1,883,371,286
--------------
LIABILITIES:
Dividends payable ................................................................................ 6,069,772
Payable for Shares of Beneficial Interest repurchased ............................................ 5,363,844
Payable for securities purchased ................................................................. 2,306,281
Accrued expenses, taxes, and other ............................................................... 2,937,823
--------------
TOTAL LIABILITIES ................................................................................ 16,677,720
--------------
NET ASSETS ....................................................................................... $1,866,693,566
==============
COMPOSITION OF NET ASSETS:
Shares of Beneficial Interest, at par (unlimited shares authorized; $.001 par
value; 247,239,953 shares outstanding):
Class A ........................................................................................ $ 99,415
Class B ........................................................................................ 76,978
Class D ........................................................................................ 70,847
Additional paid-in capital ....................................................................... 1,788,969,465
Undistributed net investment income .............................................................. 2,353,433
Undistributed net realized gain .................................................................. 5,296,432
Net unrealized appreciation of investments ....................................................... 69,826,996
--------------
NET ASSETS ....................................................................................... $1,866,693,566
==============
NET ASSET VALUE PER SHARE:
CLASS A ($750,460,846 / 99,414,744 shares) ....................................................... $ 7.55
==============
CLASS B ($581,234,711 / 76,978,009 shares) ....................................................... $ 7.55
==============
CLASS D ($534,998,009 / 70,847,200 shares) ....................................................... $ 7.55
==============
- -----------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================================================
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
<S> <C>
INVESTMENT INCOME:
Interest ............................................................... $133,942,745
Dividends .............................................................. 5,554,714
------------
TOTAL INVESTMENT INCOME ........................................................................... $139,497,459
EXPENSES:
Distribution and service fees .......................................... 8,910,489
Management fee ......................................................... 8,248,354
Shareholder account services ........................................... 2,371,527
Registration ........................................................... 633,159
Custody and related services ........................................... 242,372
Shareholder reports and communications ................................. 170,217
Auditing and legal fees ................................................ 90,262
Trustees' fees and expenses ............................................ 20,939
Miscellaneous .......................................................... 40,993
------------
TOTAL EXPENSES .................................................................................... 20,728,312
------------
NET INVESTMENT INCOME ............................................................................. 118,769,147
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on investments ....................................... 8,663,643
Net change in unrealized appreciation of investments ................... 47,951,783
------------
NET GAIN ON INVESTMENTS ........................................................................... 56,615,426
------------
INCREASE IN NET ASSETS FROM OPERATIONS ............................................................ $175,384,573
============
</TABLE>
- -----------------
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996
-------------- ------------
OPERATIONS:
<S> <C> <C>
Net investment income .......................................................... $ 118,769,147 $ 45,266,028
Net realized gain on investments ............................................... 8,663,643 8,372,099
Net change in unrealized appreciation of investments ........................... 47,951,783 13,819,543
-------------- ------------
INCREASE IN NET ASSETS FROM OPERATIONS ......................................... 175,384,573 67,457,670
-------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ..................................................................... (52,770,232) (27,035,063)
Class B ..................................................................... (29,874,994) (3,418,270)
Class D ..................................................................... (33,770,488) (14,812,695)
-------------- ------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS ...................................... (116,415,714) (45,266,028)
-------------- ------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1996
----------- -----------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:*
Net proceeds from sale of shares:
<S> <C> <C> <C> <C>
Class A ................................. 50,672,448 33,317,666 373,051,522 236,713,393
Class B ................................. 57,673,666 20,232,066 424,606,561 144,036,057
Class D ................................. 37,881,266 24,388,635 278,799,066 173,325,163
Investment of dividends:
Class A ................................. 3,776,320 1,948,207 27,853,774 13,828,199
Class B ................................. 1,826,561 192,948 13,519,667 1,378,143
Class D ................................. 2,805,300 1,287,945 20,704,607 9,145,648
Exchanged from associated Funds:
Class A ................................. 17,851,841 13,049,554 131,875,215 92,654,186
Class B ................................. 3,688,065 480,781 27,115,290 3,420,798
Class D ................................. 6,529,814 4,652,741 47,980,993 32,988,466
----------- ----------- -------------- ------------
Total ...................................... 182,705,281 99,550,543 1,345,506,695 707,490,053
----------- ----------- -------------- ------------
Cost of shares repurchased:
Class A ................................. (13,770,227) (7,112,332) (101,399,738) (50,385,557)
Class B ................................. (2,704,575) (214,512) (20,021,448) (1,530,923)
Class D ................................. (7,327,368) (2,819,462) (53,826,777) (20,024,403)
Exchanged into associated Funds:
Class A ................................. (15,408,040) (11,079,755) (114,001,958) (78,716,704)
Class B ................................. (3,899,595) (297,396) (28,866,957) (2,104,964)
Class D ................................. (5,638,449) (3,862,279) (41,466,552) (27,399,898)
----------- ----------- -------------- ------------
Total ...................................... (48,748,254) (25,385,736) (359,583,430) (180,162,449)
----------- ----------- -------------- ------------
Increase in Net Assets from
Transactions in Shares of Beneficial
Interest ................................... 133,957,027 74,164,807 985,923,265 527,327,604
----------- ----------- -------------- ------------
Increase in Net Assets ......................................................... 1,044,892,124 549,519,246
NET ASSETS:
Beginning of year .............................................................. 821,801,442 272,282,196
-------------- ------------
End of Year (including undistributed net investment income of
$2,353,433 and $0, respectively) ............................................ $1,866,693,566 $821,801,442
============== ============
- ----------------
* The Fund began offering Class B shares on April 22, 1996.
See Notes to Financial Statements.
</TABLE>
<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 of 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 of 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, if applicable, of 1% imposed on 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 -- 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. The Fund accretes original issue
discounts and market discounts on purchases of portfolio securities.
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 year ended December 31, 1997,
distribution and service fees were the only class-specific expenses.
f. DISTRIBUTIONS TO SHAREHOLDERS-- Dividends are declared daily and paid
monthly. Other distributions paid by the Fund are recorded on ex-dividend
dates. 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 year ended December 31, 1997, amounted to $1,686,931,836 and $780,115,415,
respectively.
At December 31, 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 $97,236,023 and $27,409,027, respectively.
4. SHORT-TERM INVESTMENTS -- At December 31, 1997, the Fund owned short-term
investments which matured in less than seven days.
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
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 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 0.62% 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 $1,047,484 from sales of Class A shares after commissions of
$8,095,350 were 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 year ended December 31,
1997, fees incurred aggregated $1,399,223, 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 year ended December 31, 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 $3,531,268 and $3,979,998, respectively.
The Distributor is entitled to retain any CDSL imposed on redemptions of
Class D shares occurring within one year of purchase and on certain redemptions
of Class A shares occurring within 18 months of purchase. For the year ended
December 31, 1997, such charges amounted to $185,777.
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
year ended December 31, 1997, amounted to $1,149,148.
Seligman Services, Inc., an affiliate of the Manager, is eligible to receive
commissions from certain sales of shares of beneficial interest of the Fund, as
well as distribution and service fees pursuant to the Plan. For the year ended
December 31, 1997, Seligman Services, Inc. received commissions of $47,851 from
the sales of Fund shares.
Seligman Services, Inc. also received distribution and service fees of
$35,679, pursuant to the Plan. Seligman Data Corp., which is owned by certain
associated investment companies, charged the Fund at cost $2,371,527 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 annual cost of such fees and interest is included in trustees'
fees and expenses and the accumulated balance thereof at December 31, 1997, of
$33,589 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. 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 incurs 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. To date, the Fund has not borrowed from the credit
facility.
<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
--------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ........................ $ 7.25 $ 6.96 $ 6.35 $ 6.94 $ 6.42
-------- -------- -------- ------- -------
Net investment income ..................................... .70 .69 .65 .65 .66
Net realized and unrealized investment gain (loss) ........ .28 .29 .61 (.59) .52
-------- -------- -------- ------- -------
INCREASE FROM INVESTMENT OPERATIONS ....................... .98 .98 1.26 .06 1.18
Dividends paid or declared ................................ (.68) (.69) (.65) (.65) (.66)
-------- -------- -------- ------- -------
NET INCREASE (DECREASE) IN NET ASSET VALUE ................ .30 .29 .61 (.59) .52
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF YEAR .............................. $ 7.55 $ 7.25 $ 6.96 $ 6.35 $ 6.94
======== ======== ======== ======= =======
TOTAL RETURN BASED ON NET ASSET VALUE: .................... 14.26% 14.82% 20.72% .78% 19.19%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ............................ 1.14% 1.16% 1.09% 1.13% 1.20%
Net investment income to average net assets ............... 9.42% 9.80% 9.73% 9.73% 9.68%
Portfolio turnover ........................................ 61.78% 119.33% 173.39% 184.75% 193.91%
NET ASSETS, END OF YEAR (000S omitted) .................... $750,461 $408,303 $182,129 $59,033 $61,333
</TABLE>
- -----------------
See footnotes on page .
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================================================
FINANCIAL HIGHLIGHTS
CLASS B CLASS D
--------------------- --------------------------------------------------------
YEAR 4/22/96* 9/21/93*
ENDED TO YEAR ENDED DECEMBER 31, TO
---------------------------------------------
12/31/97 12/31/96 1997 1996 1995 1994 12/31/93
-------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE,
BEGINNING OF YEAR $ 7.26 $ 7.06 $ 7.26 $ 6.96 $ 6.35 $ 6.94 $ 6.74
-------- -------- -------- -------- ------- ------- -------
Net investment income .64 .45 .64 .64 .60 .57 .12
Net realized and unrealized
investment gain (loss) .28 .20 .28 .30 .61 (.59) .20
-------- -------- -------- -------- ------- ------- -------
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS .92 .65 .92 .94 1.21 (.02) .32
Dividends paid or declared (.63) (.45) (.63) (.64) (.60) (.57) (.12)
-------- -------- -------- -------- ------- ------- -------
NET INCREASE (DECREASE) IN
NET ASSET VALUE .29 .20 .29 .30 .61 (.59) .20
-------- -------- -------- -------- ------- ------- -------
NET ASSET VALUE, END OF YEAR $ 7.55 $ 7.26 $ 7.55 $ 7.26 $ 6.96 $ 6.35 $ 6.94
======== ======== ======== ======== ======= ======= =======
TOTAL RETURN BASED ON NET
ASSET VALUE: 13.24% 9.11% 13.24% 14.10% 19.67% (.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 8.66% 9.11%+ 8.66% 9.02% 8.86% 8.68% 7.93%++
Portfolio turnover 61.78% 119.33%++ 61.78% 119.33% 173.39% 184.75% 193.91%+++
NET ASSETS, END OF YEAR (000S omitted) $581,235 $147,970 $534,998 $265,528 $90,153 $ 9,249 $ 2,375
- ---------------------
* 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.
</TABLE>
<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 December
31, 1997, 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 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, 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 December 31, 1997, the results of its operations, the changes
in its net assets, and the financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
January 30, 1998
- --------------------------------------------------------------------------------
<PAGE>
U.S. Government Securities Series - Financial Statements.
- ------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- -----------
<S> <C> <C>
US GOVERNMENT SECURITIES 60.4%
US Treasury Bonds:
8 3/4%, due 5/15/2020....................................................... $ 6,000,000 $ 7,991,256
6 5/8%, due 2/15/2027....................................................... 15,000,000 16,284,390
US Treasury Notes:
6 1/4%, due 6/30/2002....................................................... 4,000,000 4,082,504
6 5/8%, due 5/15/2007....................................................... 8,000,000 8,472,504
-----------
TOTAL US GOVERNMENT SECURITIES (Cost $35,627,812).............................. 36,830,654
-----------
US GOVERNMENT AGENCY SECURITIES 36.2% (Cost $20,992,978)
Government National Mortgage Association Obligations,
Mortgage-backed Pass-through Certificates:
7 1/2%, with various maturities from 1/15/2023 to 4/15/2027*................ 21,478,908 22,053,688
-----------
REPURCHASE AGREEMENTS 6.0% (Cost $3,671,000)
HSBC Securities Inc., 5%, maturing 1/2/1998 collateralized by:
$2,856,000 US Treasury Notes 11 7/8%, due 11/15/2003, with a fair
market value of $3,757,681.................................................. 3,671,000 3,671,000
-----------
TOTAL INVESTMENTS 102.6% (Cost $60,291,790).......................................................... 62,555,342
OTHER ASSETS LESS LIABILITIES (2.6)%................................................................. (1,560,453)
-----------
NET ASSETS 100.0%.................................................................................... $60,994,889
===========
</TABLE>
- -------------
* Investments in mortgage-backed securities are subject to principal paydowns.
As a result of prepayments from refinancing or satisfaction of the underlying
mortgage instruments, the average life may be less than the original maturity.
This, in turn, may impact the ultimate yield realized from these securities.
See Notes to Financial Statements.
<PAGE>
- ------------------------------------------------------------------------------
Statement of Assets and Liabilities
December 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value:
Long-term holdings (cost $56,620,790)............................................. $58,884,342
Short-term holdings (cost $3,671,000)............................................. 3,671,000 $62,555,342
-----------
Cash 30,049
Interest receivable................................................................................ 647,776
Receivable for shares of Beneficial Interest sold.................................................. 149,884
Expenses prepaid to shareholder service agent...................................................... 9,884
Other.............................................................................................. 19,821
-----------
Total Assets....................................................................................... 63,412,756
-----------
LIABILITIES:
Payable for shares of Beneficial Interest repurchased.............................................. 2,175,708
Dividends payable.................................................................................. 121,889
Accrued expenses, taxes, and other................................................................. 120,270
-----------
Total Liabilities.................................................................................. 2,417,867
-----------
Net Assets......................................................................................... $60,994,889
===========
COMPOSITION OF NET ASSETS:
Shares of Beneficial Interest, at par ($.001 par value; unlimited shares
authorized; 8,865,994 shares outstanding):
Class A.......................................................................................... $ 6,606
Class B.......................................................................................... 467
Class D.......................................................................................... 1,793
Additional paid-in capital......................................................................... 72,981,796
Accumulated net realized loss...................................................................... (14,259,325)
Net unrealized appreciation of investments......................................................... 2,263,552
-----------
Net Assets......................................................................................... $60,994,889
===========
NET ASSET VALUE PER SHARE:
Class A ($45,425,627 / 6,605,989 shares)........................................................... $6.88
=====
Class B ($3,219,604 / 467,356 shares).............................................................. $6.89
=====
Class D ($12,349,658 / 1,792,649 shares)........................................................... $6.89
=====
</TABLE>
- -------------
See Notes to Financial Statements.
<PAGE>
- ------------------------------------------------------------------------------
Statement of Operations
For the Year Ended December 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest......................................................................................... $3,758,646
EXPENSES:
Management fee.................................................................... $ 271,995
Distribution and service fees..................................................... 197,450
Shareholder account services...................................................... 117,897
Registration...................................................................... 83,220
Shareholder reports and communications............................................ 28,461
Custody and related services...................................................... 18,851
Auditing and legal fees........................................................... 9,561
Trustees' fees and expenses....................................................... 9,458
Miscellaneous..................................................................... 8,512
----------
Total Expenses................................................................................... 745,405
----------
Net Investment Income............................................................................ 3,013,241
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments.................................................. (611,943)
Net change in unrealized appreciation of investments.............................. 1,949,757
----------
Net Gain on Investments.......................................................................... 1,337,814
----------
Increase in Net Assets from Operations........................................................... $4,351,055
==========
</TABLE>
- --------------
See Notes to Financial Statements.
<PAGE>
- ------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1997 1996
------------ -----------
<S> <C> <C>
OPERATIONS:
Net investment income................................................................... $ 3,013,241 $3,451,825
Net realized loss on investments........................................................ (611,943) (531,212)
Net change in unrealized appreciation of investments.................................... 1,949,757 (3,266,304)
---------- ----------
Increase (Decrease) in Net Assets from Operations....................................... 4,351,055 (345,691)
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A.............................................................................. (2,522,929) (2,998,077)
Class B.............................................................................. (45,289) --
Class D.............................................................................. (445,023) (453,748)
---------- ----------
Decrease in Net Assets from Distributions .............................................. (3,013,241) (3,451,825)
---------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SHARES
------------------------------
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996
----------- -----------
<S> <C> <C> <C> <C>
TRANSACTIONS IN SHARES
OF BENEFICIAL INTEREST:*
Net proceeds from sale of shares:
Class A............................................ 829,234 781,071 5,624,748 5,275,155
Class B............................................ 182,897 -- 1,228,800 --
Class D............................................ 198,244 428,534 1,326,662 2,920,596
Investment of dividends:
Class A ........................................... 202,913 224,948 1,359,967 1,522,409
Class B............................................ 5,291 -- 35,836 --
Class D............................................ 42,659 48,704 286,730 329,724
Exchanged from associated Funds:
Class A............................................ 1,572,537 487,261 10,660,240 3,303,371
Class B ........................................... 574,598 -- 3,899,673 --
Class D ........................................... 1,591,469 585,467 10,742,800 3,947,861
--------- --------- ---------- ----------
Total................................................. 5,199,842 2,555,985 35,165,456 17,299,116
--------- --------- ---------- ----------
Cost of shares repurchased:
Class A ........................................... (1,364,274) (1,236,706) (9,183,343) (8,375,696)
Class B ........................................... (14,942) -- (101,411) --
Class D ........................................... (369,696) (333,282) (2,477,886) (2,247,483)
Exchanged into associated Funds:
Class A ........................................... (1,618,861) (972,823) (10,932,716) (6,587,848)
Class B ........................................... (280,488) -- (1,910,778) --
Class D ........................................... (1,050,159) (491,240) (7,074,255) (3,360,753)
--------- --------- ---------- ----------
Total ................................................ (4,698,420) (3,034,051) (31,680,389) (20,571,780)
--------- --------- ---------- ----------
Increase (Decrease) in Net Assets from
Transactions in Shares of Beneficial Interest ........ 501,422 (478,066) 3,485,067 (3,272,664)
========= ========== ---------- ----------
Increase (Decrease) in Net Assets ................................................... 4,822,881 (7,070,180)
NET ASSETS:
Beginning of year ................................................................... 56,172,008 63,242,188
----------- -----------
End of Year ......................................................................... $60,994,889 $56,172,008
=========== ===========
</TABLE>
- -------------
* The Fund began offering Class B shares on January 1, 1997.
See Notes to Financial Statements.
<PAGE>
- ------------------------------------------------------------------------------
Notes to Financial Statements
1. Multiple Classes of Shares -- Seligman U.S. Government Securities Series
(the "Fund"), a series of Seligman High Income Fund Series, offers three classes
of shares. All shares existing prior to September 21, 1993, the commencement of
Class D shares, were classified as Class A shares. The Fund began offering Class
B shares on January 1, 1997. Class A shares are sold with an initial sales
charge of up to 4.75% and a continuing service fee of up to 0.25% on an annual
basis. Class A shares purchased in an amount of $1,000,000 or more are sold
without an initial sales charge but are subject to a contingent deferred sales
load ("CDSL") of 1% on redemptions within 18 months of 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 of 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, if applicable, 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 -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Fund:
a. Security Valuation -- Investments in US Government and Government agency
securities are valued at current market values or, in their absence, at fair
values determined in accordance with procedures approved by the Trustees.
Securities traded on national exchanges are valued at last sales prices or,
in their absence and in the case of over-the-counter securities, at the mean
of bid and asked prices. Short-term holdings maturing in 60 days or less are
valued at amortized cost.
b. Federal Taxes -- There is no provision for federal income tax. The Fund has
elected to be taxed as a regulated investment company and intends to
distribute substantially all taxable net income and net gain realized.
c. Security Transactions and Related Investment Income -- Investment
transactions are recorded on trade dates. Identified cost of
investments sold is used for both financial statement and federal
income tax purposes. Dividends receivable and payable are recorded on
ex-dividend dates. Interest income is recorded on an accrual basis. The Fund
accretes original issue discounts and market discounts on purchases of
portfolio securities.
d. Repurchase Agreements -- The Fund may enter into repurchase agreements with
commerical banks and with broker/dealers deemed to be creditworthy by J. &
W. Seligman & Co. Incorporated (the "Manager"). Securities received as
collateral subject to repurchase agreements are deposited with the Fund's
custodian and, pursuant to the terms of the repurchase agreement, must have
an aggregate market value greater than or equal to the repurchase price plus
accrued interest, at all times. Procedures have been established to monitor,
on a daily basis, the market value of repurchase agreements' underlying
securities to ensure the existence of the proper level of collateral.
e. Multiple Class Allocations -- All income, expenses (other than
class-specific expenses), and realized and unrealized gains or losses are
allocated daily to each class of shares based upon the relative value of
shares of each class. Class-specific expenses, which include distribution
and service fees and any other items that are specifically attributable to a
particular class, are charged directly to such class. For the year ended
December 31, 1997, distribution and service fees were the only
class-specific expenses.
<PAGE>
- ------------------------------------------------------------------------------
Notes to Financial Statements
f. Distributions to Shareholders -- Dividends are declared daily and paid
monthly. Other distributions paid by the Fund are recorded on the
ex-dividend date. The treatment for financial statement purposes of
distributions made to shareholders during the year from net investment
income or net realized gains may differ from their ultimate treatment for
federal income tax purposes. These differences are caused primarily by
differences in the timing of the recognition of certain components of
income, expense, or realized capital gain for federal income tax purposes.
Where such differences are permanent in nature, they are reclassified
in the components of net assets based on their ultimate characterization
for federal income tax purposes. Any such reclassification will have no
effect on net assets, results of operations, or net asset value per share of
the Fund.
3. Purchases and Sales of Securities -- Purchases and sales of US Government
obligations, excluding short-term investments, for the year ended December 31,
1997, amounted to $99,697,220 and $95,957,706, respectively.
At December 31, 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 of portfolio
securities amounted to $2,263,552.
4. Management Fee, Administrative Services, and Other Transactions -- The
Manager manages the affairs of the Fund and provides the necessary personnel
and facilities. Compensation of all officers of the Fund, all trustees of
the Fund who are employees or consultants of the Manager, and all personnel
of the Fund and the Manager is paid by the Manager. The Manager receives a
fee, calculated daily and payable monthly, equal to 0.50% per annum of
the Fund's average daily net assets.
Seligman Financial Services, Inc. (the "Distributor"), agent for the
distribution of the Fund's shares, and an affiliate of the Manager, received
concessions of $4,683 from sales of Class A shares after commissions of
$36,460 were 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 year ended December 31,
1997, fees incurred aggregated $97,552, or 0.22% per annum of the average daily
net assets of Class A shares.
Under the Plan, with respect to Class B and Class D shares, service
organizations can enter into agreements with the Distributor and receive a
continuing fee for providing personal services and/or the maintenance of share
holder accounts of up to 0.25% on an annual basis of the average daily net
assets of the Class B and Class D shares for which the organizations are
responsible; and, for Class D shares only, fees for providing other distribution
assistance of up to 0.75% on an annual basis of such average daily net assets.
Such fees are paid monthly by the Fund to the Distributor pursuant to the Plan.
With respect to Class B shares, a distribution fee of 0.75% on an annual
basis of average daily net assets is payable monthly by the Fund to the
Distributor; however, the Distributor has sold its rights to substantially all
of this fee to a third party (the "Purchaser"), which provides funding to the
Distributor to enable it to pay commissions to dealers at the time of the sale
of the related Class B shares.
For the year ended December 31, 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 $9,412 and $90,486, respectively.
<PAGE>
- ------------------------------------------------------------------------------
Notes to Financial Statements
The Distributor is entitled to retain any CDSL imposed on redemptions of
Class D shares occurring within one year of purchase and on certain
redemptions of Class A shares occurring within 18 months of purchase. For the
year ended December 31, 1997, such charges amounted to $3,312.
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
year ended December 31, 1997, amounted to $2,003.
Seligman Services, Inc., an affiliate of the Manager, is eligible to receive
commissions from certain sales of shares of beneficial interest of the Fund, as
well as distribution and service fees pursuant to the Plan. For the year ended
December 31, 1997, Seligman Services, Inc. received commissions of $954 from the
sales of Fund shares. Seligman Services, Inc. also received distribution and
service fees of $13,630, pursuant to the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged the Fund at cost $117,897 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 annual cost of such fees and interest is included in trustees'
fees and expenses and the accumulated balance thereof at December 31, 1997,
of $42,280 is included in other liabilities. Deferred fees and the related
accrued interest are not deductible for federal income tax purposes until such
amounts are paid.
5. Loss Carryforward -- At December 31, 1997, the Fund had a net loss
carryforward for federal income tax purposes of $14,118,544, which is available
for offset against future taxable net capital gains, expiring in various amounts
through 2005. 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.
<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
--------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Year $6.71 $7.15 $6.47 $7.18 $7.19
----- ----- ----- ----- -----
Net investment income ............................... .38 .41 .46 .44 .53
Net realized and unrealized investment gain (loss)... .17 (.44) .68 (.71) (.01)
----- ----- ----- ----- -----
Increase (Decrease) from Investment
Operations........................................... .55 (.03) 1.14 (.27) .52
Dividends paid or declared........................... (.38) (.41) (.46) (.44) (.53)
----- ----- ----- ----- -----
Net Increase (Decrease) in Net Asset Value........... .17 (.44) .68 (.71) (.01)
----- ----- ----- ----- -----
Net Asset Value, End of Year ........................ $6.88 $6.71 $7.15 $6.47 $7.18
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET
ASSET VALUE: 8.53% (0.29)% 18.15% (3.88)% 7.46%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ...................... 1.23% 1.14% 1.14% 1.10% 1.11%
Net investment income to average net assets ......... 5.68% 6.05% 6.71% 6.49% 7.22%
Portfolio turnover .................................. 193.90% 175.25% 213.06% 445.18% 170.35%
Net Assets, End of Year (000s omitted)............... $45,426 $46,889 $55,061 $54,714 $69,805
</TABLE>
- --------------
See footnotes on page .
<PAGE>
- ------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
CLASS B CLASS D
-------- -------------------------------------
1/1/97* YEAR ENDED DECEMBER 31, 9/21/93*
TO -------------------------------------- TO
12/31/97 1997 1996 1995 1994 12/31/93
----- ----- ----- ----- ----- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Year................. $6.73 $6.73 $7.16 $6.48 $7.20 $7.33
----- ----- ----- ----- ----- -----
Net investment income ............................. .33 .33 .36 .40 .37 .09
Net realized and unrealized investment gain (loss) .16 .16 (.43) .68 (.72) (.13)
----- ----- ----- ----- ----- -----
Increase (Decrease) from Investment
Operations ........................................ .49 .49 (.07) 1.08 (.35) (.04)
Dividends paid or declared ........................ (.33) (.33) (.36) (.40) (.37) (.09)
----- ----- ----- ----- ----- -----
Net Increase (Decrease) in Net Asset Value ........ .16 .16 (.43) .68 (.72) (.13)
----- ----- ----- ----- ----- -----
Net Asset Value, End of Year ...................... $6.89 $6.89 $6.73 $7.16 $6.48 $7.20
===== ===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET
ASSET VALUE: 7.32% 7.53% (0.92)% 17.10% (5.05)% (0.65)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets .................... 2.01% 2.01% 1.92% 2.01% 2.22% 2.09%+
Net investment income to average net assets ...... 4.90% 4.90% 5.27% 5.84% 5.40% 5.28%+
Portfolio turnover ................................ 193.90% 193.90% 175.25% 213.06% 445.18% 170.35%++
Net Assets, End of Year (000s omitted) ............ $3,219 $12,350 $9,283 $8,181 $6,062 $2,317
</TABLE>
- --------------
* Commencement of offering of shares.
+ Annualized.
++ For the year ended December 31, 1993.
See Notes to Financial Statements.
<PAGE>
- ------------------------------------------------------------------------------
Report of Independent Auditors
The Trustees and Shareholders,
Seligman U.S. Government Securities Series:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Seligman U.S. Government Securities
Series as of December 31, 1997, 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 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, 1997, by correspondence with the Fund's custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Seligman U.S.
Government Securities Series as of December 31, 1997, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New York, New York
January 30, 1998
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements and Schedules:
Part A- Financial Highlights for the Class A shares of each Series of the
Registrant for the ten years ended December 31, 1997; Financial
Highlights for the Class B shares of the Seligman U.S. Government
Securities Series for the period January 1, 1997 (commencement of
offering) to December 31, 1997; Financial Highlights for the
Class B shares of the Seligman High-Yield Bond Series for the
period April 22, 1996 (commencement of offering) to December 31,
1997; and for the Class D shares of each Series of the Registrant
for the period September 21, 1993 (commencement of offering) to
December 31, 1997.
Part B- Financial Statements for each Series, which are included in the
Fund's Annual Report to Shareholders dated December 31, 1997, are
incorporated by reference in the Fund's Statement of Additional
Information. These Financial Statements are: Portfolio of
Investments as of December 31, 1997; Statement of Assets and
Liabilities as of December 31, 1997; Statement of Operations for
the year ended December 31, 1997; Statement of Changes in Net
Assets for the years ended December 31, 1997 and 1996; Notes to
Financial Statements; Financial Highlights for the five years
ended December 31, 1997 for each Series' Class A shares; for the
period January 1, 1997 (commencement of offering) to December 31,
1997 for the Seligman U.S. Government Securities Series' Class B
shares; for the period April 22, 1996 (commencement of offering)
to December 31, 1997 for the Seligman High-Yield Bond Series'
Class B shares; and for the period September 21, 1993
(commencement of offering) to December 31, 1997 for each Series'
Class D shares; Report of Independent Auditors.
(b) Exhibits: All Exhibits have been previously filed except Exhibits
marked with an asterisk (*) which are incorporated herein.
(1) Form of Amended and Restated Declaration of Trust. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 22, filed on
December 31, 1996.)
(2) Form of Restatement of Bylaws. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 22, filed on December 31, 1996.)
(3) Not applicable.
(4) Specimen Stock Certificate for Class A Shares. (Incorporated by Reference
to Post-Effective Amendment No. 18 filed on April 29, 1994.)
(4a) Specimen Stock Certificate for Class B Shares. (Incorporated by reference
to Form SE filed on April 16, 1996).
(4b) Specimen Stock Certificate for Class D Shares. (Incorporated by Reference
to Post-Effective Amendment No. 17 filed on September 21, 1993.)
(5) Copy of Management Agreement between Seligman High-Yield Bond Series of
the Registrant and J. & W. Seligman & Co. Incorporated. (Incorporated by
Reference to Post-Effective Amendment No. 20 filed April 19, 1996.)
(5a) Copy of Management Agreement between U.S. Government Securities Series of
the Registrant and J & W. Seligman & Co. Incorporated. (Incorporated by
Reference to Post-Effective Amendment No. 19 filed on May 1, 1995.)
(6) Copy of the new Distributing Agreement between Registrant and Seligman
Financial Services, Inc. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 23, filed April 29, 1997.)
(6a) Copy of amended Sales Agreement between Seligman Financial Services, Inc.
and Dealers. (Incorporated by Reference to Post-Effective Amendment No.
20 filed April 19, 1996.)
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION (continued)
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS (continued)
(6b) Form of Sales Agreement between Seligman Financial Services, Inc. and
Dean Witter Reynolds, Inc. (Incorporated by reference to Exhibit 6b of
Registration Statement No. 2-33566, Post-Effective Amendment No. 53,
filed on April 28, 1997.)
(6c) Form of Sales Agreement between Seligman Financial Services, Inc. and
Dean Witter Reynolds, Inc. with respect to certain Chilean institutional
investors. (Incorporated by reference to Exhibit 6c of Registration
Statement No. 2-33566, Post-Effective Amendment No. 53, filed on April
28, 1997.)
(6d) Form of Dealer Agreement between Seligman Financial Services, Inc. and
Smith Barney Inc. (Incorporated by reference to Exhibit 6d of
Registration Statement No. 2-33566, Post-Effective Amendment No. 53,
filed on April 28, 1997.)
(7) Matched Accumulation Plan of J. & W. Seligman & Co. Incorporated.
(Incorporated by Reference to Exhibit 7 of Registration Statement No.
2-92487, Post-Effective Amendment No. 21, filed on January 29, 1997.)
(7a) Deferred Compensation Plan for Directors of Seligman High Income Fund.*
(8) Copy of Custodian Agreement between Registrant and Investors Fiduciary
Trust Company. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 23, filed April 29, 1997.)
(9) Not applicable.
(10) Opinion and Consent of Counsel. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 23, filed April 29, 1997.)
(11) Report and Consent of Independent Auditors.*
(12) Not applicable.
(13) Purchase Agreement for Initial Capital between Registrant & J. & W.
Seligman & Co. Incorporated with respect to Class B shares of the U.S.
Government Securities Series. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 22, filed on December 31, 1996.)
(13a) Purchase Agreement for Initial Capital between Registrant and J. & W.
Seligman & Co. Incorporated with respect to Class B shares of the
Seligman High-Yield Bond Series. (Incorporated by reference to
Post-Effective Amendment No. 20 filed on April 19, 1996.)
(13b) Purchase Agreement for Initial Capital between Registrant and J. & W.
Seligman & Co. Incorporated with respect to Registrants' Class D shares.
(Incorporated by reference to Post-Effective Amendment No. 17, filed on
September 21, 1993.)
(14) The Seligman Roth/Traditional IRA Information Kit. (Incorporated by
reference to Exhibit q(1) of Registration Statement No. 333-50295,
Form N-2, filed on April 16, 1998.)
(14a) The Seligman Simple IRA Plan Set-Up Kit. (Incorporated by reference to
Exhibit 14 of Registration Statement No. 333-20621, Pre-Effective
Amendment No. 2, filed on April 17, 1997.)
(14b) The Seligman Simple IRA Plan Agreement. (Incorporated by reference to
Exhibit 14 of Registration Statement No. 333-20621, Pre-Effective
Amendment No. 2, filed on April 17, 1997.)
(14c) Qualified Plan and Trust Basic Plan Document. (Incorporated by reference
to Exhibit q(4) to Registration No. 333-50295, Form N-2, filed on
April 16, 1998.)
(14d) Flexible Standardized 401(k) Profit Sharing Plan Adoption Agreement.
(Incorporated by reference to Exhibit q(4) to Registration No. 333-50295,
Form N-2, filed on April 16, 1998.)
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION (continued)
(14e) Flexible Nonstandardized Safe Harbor 401(k) Profit Sharing Plan Adoption
Agreement. (Incorporated by reference to Exhibit q(4) to Registration No.
333-50295, Form N-2, filed on April 16, 1998.)
(14f) Simplified Employee Pension Plan. (Incorporated by reference to Exhibit
14(f) to Registration No. 2-10835, Post-Effective Amendment No. 76, filed
on April 29, 1998.)
(14g) Educational IRA. (Incorporated by reference to Exhibit 14(f) to
Registration No. 2-10835, Post-Effective Amendment No. 76, filed on April
29, 1998.)
(15) Form of Administration, Shareholder Services and Distribution Plan of
Registrant. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 22, filed on December 31, 1996.)
(15a) Form of Administration, Shareholder Services and Distribution Agreement
between Seligman Financial Services, Inc. and Dealers. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 22, filed on
December 31, 1996.)
(16) Schedule of Computation of Performance Data provided in Registration
Statement in response to Item 22. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 23, filed April 29, 1997.)
(17) Financial Data Schedules meeting the requirements of Rule 483 under the
Securities Act of 1933.*
(18) Copy of Multiclass Plan entered into by Registrant pursuant to Rule 18f-3
under the Investment Company Act of 1940. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 22, filed on December 31,
1996.)
Other Exhibits: Powers of Attorney
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT -
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
Number of Record
Title of Class Holders as of March 31, 1998
-------------- ----------------------------
High-Yield Bond Series
Class A Common Stock 28,017
Class B Common Stock 19,772
Class D Common Stock 14,857
U.S. Government Securities Series
Class A Common Stock 2,377
Class B Common Stock 191
Class D Common Stock 565
ITEM 27. INDEMNIFICATION
Reference is made to the provisions of Articles Twelfth and
Thirteenth of Registrant's Amended and Restated Articles of
Incorporation filed as Exhibit 24(b)(1) and Article VII of
Registrant's Amended and Restated By-laws filed as Exhibit 24(b)(2)
to Registrant's Post-Effective Amendment No. 22 to the Registration
Statement.
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION (continued)
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised by the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER - J. & W.
Seligman & Co. Incorporated, a Delaware corporation ("Manager"), is
the Registrant's investment manager. The Manager also serves as
investment manager to seventeen other associated investment
companies. They are Seligman Capital Fund, Inc. Seligman Cash
Management Fund, Inc., Seligman Common Stock Fund, Inc., Seligman
Communications and Information Fund, Inc., Seligman Frontier Fund,
Inc., Seligman Growth Fund, Inc., Seligman Henderson Global Fund
Series, Inc., Seligman Income Fund, Inc., Seligman Municipal Fund
Series, Inc., Seligman Municipal Series Trust, Seligman New Jersey
Municipal Fund, Inc., Seligman Pennsylvania Municipal Fund Series,
Seligman Portfolios, Inc., Seligman Quality Municipal Fund, Inc.,
Seligman Select Municipal Fund, Inc., Seligman Value Fund Series,
Inc. and Tri-Continental Corporation.
The Manager has an investment advisory service division which
provides investment management or advice to private clients. The
list required by this Item 28 of officers and directors of the
Manager, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged
in by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV, filed
by the Manager pursuant to the Investment Advisers Act of 1940 (SEC
File No. 801-15798), which was filed on March 31, 1998.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) The names of each investment company (other than the Registrant)
for which Registrant's principal underwriter is currently
distributing securities of the Registrant and also acts as a
principal underwriter, depositor or investment adviser are as
follows:
Seligman Capital Fund, Inc.
Seligman Cash Management Fund, Inc.
Seligman Common Stock Fund, Inc.
Seligman Communications and Information Fund, Inc.
Seligman Frontier Fund, Inc.
Seligman Henderson Global Fund Series, Inc.
Seligman Growth Fund, Inc.
Seligman Income Fund, Inc.
Seligman Municipal Fund Series, Inc.
Seligman Municipal Series Trust
Seligman New Jersey Municipal Fund, Inc.
Seligman Pennsylvania Municipal Fund Series
Seligman Portfolios, Inc.
Seligman Value Fund Series, Inc.
(b) Name of each director, officer or partner of Registrant's
principal underwriter named in the answer to Item 21:
<PAGE>
<TABLE>
<CAPTION>
File No. 2-93076
811-4103
Seligman Financial Services, Inc.
---------------------------------
As of March 31, 1998
--------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C> <C>
William C. Morris* Director Chairman of the Board
and Chief Executive Officer
Brian T. Zino* Director President and Trustee
Ronald T. Schroeder* Director None
Fred E. Brown* Director Trustee Emeritus
William H. Hazen* Director None
Thomas G. Moles* Director None
David F. Stein* Director None
Stephen J. Hodgdon* President None
Charles W. Kadlec* Chief Investment Strategist None
Lawrence P. Vogel* Senior Vice President, Finance Vice President
Ed Lynch* Senior Vice President, Director None
of Marketing
Mark R. Gordon* Senior Vice President, National None
Sales Manager
Gerald I. Cetrulo, III Senior Vice President of Sales None
140 West Parkway
Pompton Plains, NJ 07444
Jonathan G. Evans Senior Vice President of Sales None
222 Fairmont Way
Ft. Lauderdale, FL 33326
Bradley W. Larson Senior Vice President of Sales None
367 Bryan Drive
Alamo, CA 94526
Bruce M. Tuckey Senior Vice President of Sales None
41644 Chathman Drive
Novi, MI 48375
Andrew S. Veasey Senior Vice President of Sales None
14 Woodside Drive
Rumson, NJ 07760
Michelle L. McCann Vice President, Manager, Retirement None
Plans Marketing
Scott H. Novak Vice President, Insurance Products None
Manager
Michael R. Sanders Vice President, Product Manager None
Managed Money Services
Charles L. von Breitenbach, II* Vice President, Product Manager None
Managed Money Services
Robert T. Hausler* Vice President, Global Mutual Funds, None
Product Management
Marsha E. Jacoby* Vice President, Offshore Funds None
William W. Johnson* Vice President, Order Desk None
Tracy A. Salomon* Vice President, Retirement None
Marketing Manager
Helen Simon* Vice President, Sales None
Administration Manager
J. Brereton Young* Vice President, Mutual Funds None
Product Manager
Peter J. Campagna Vice President, Regional Retirement None
1130 Green Meadow Court Plans Manager
Acworth, GA 30102
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION (continued)
Seligman Financial Services, Inc.
---------------------------------
As of March 31, 1998
--------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C> <C>
Mason S. Flinn Vice President, Regional Retirement None
159 Varennes Plans Manager
San Francisco, CA 94133
Charles E. Wenzel Vice President, Regional Retirement None
703 Greenwood Road Plans Manager
Wilmington, DE 19807
James R. Besher Regional Vice President None
14000 Margaux Lane
Town & Country, MO 63017
Richard B. Callaghan Regional Vice President None
7821 Dakota Lane
Orland Park, IL 60462
Bradford C. Davis Regional Vice President None
241 110th Avenue SE
Bellevue, WA 98004
Christopher J. Derry Regional Vice President None
2380 Mt. Lebanon Church Road
Alvaton, KY 42122
Kenneth Dougherty Regional Vice President None
8640 Finlarig Drive
Dublin, OH 43017
Andrew Draluck Regional Vice President None
4032 E. Williams Drive
Phoenix, AZ 85024
Edward S. Finocchiaro Regional Vice President None
120 Screenhouse Lane
Duxbury, MA 02332
Michael C. Forgea Regional Vice President None
32 W. Anapamu Street # 186
Santa Barbara, CA 93101
David L. Gardner Regional Vice President None
2403 Cayenne Drive
McKinney, TX 75070
Carla A. Goehring Regional Vice President None
11426 Long Pine Drive
Houston, TX 77077
T. Wayne Knowles Regional Vice President None
104 Morninghills Court
Cary, NC 27511
Judith L. Lyon Regional Vice President None
7105 Harbour Landing
Alpharetta, GA 30005
David L. Meyncke Regional Vice President None
4957 Cross Pointe Drive
Oldsmar, FL 34677
Tim O'Connell Regional Vice President None
11908 Acacia Glen Court
San Diego, CA 92128
Thomas Parnell Regional Vice President None
1575 Edgecomb Road
St. Paul, MN 55116
Juliana Perkins Regional Vice President None
2348 Adrian Street
Newbury Park, CA 91320
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION (continued)
Seligman Financial Services, Inc.
---------------------------------
As of March 31, 1998
--------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C> <C>
Dave Petzke Regional Vice President None
4016 Saint Lucia Street
Boulder, CO 80301
Nicholas Roberts Regional Vice President None
200 Broad Street, Apt. 2225
Stamford, CT 06901
Diane H. Snowden Regional Vice President None
11 Thackery Lane
Cherry Hill, NJ 08003
Steve Wilson Regional Vice President None
83 Kaydeross Park
Saratoga Springs, NY 12866
Kelli A. Wirth-Dumser Regional Vice President None
7121 Jardiniere Court
Charlotte, NC 28226
Frank J. Nasta* Secretary Secretary
Aurelia Lacsamana* Treasurer None
Jeffrey S. Dean* Assistant Vice President, Marketing None
Sandra Floris* Assistant Vice President, Order Desk None
Keith Landry* Assistant Vice President, Order Desk None
Gail S. Cushing* Assistant Vice President None
National Accounts Manager
Joseph M. McGill* Vice President and None
Compliance Officer
Jack Talvy* Assistant Vice President, Internal None
Marketing Services Manager
Joyce Peress* Assistant Secretary None
</TABLE>
* The principal business address of each of these directors and/or
officers is 100 Park Avenue, New York, NY 10017.
(c) Not applicable
ITEM 30. Location of Accounts and Records
(1) Investors Fiduciary Trust Company
801 Pennsylvania
Kansas City, Missouri 64105 and
(2) Seligman Data Corp.
100 Park Avenue
New York, NY 10017
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION (continued)
ITEM 31. MANAGEMENT SERVICES - Seligman Data Corp. ("SDC") the Registrant's
shareholder service agent, has an agreement with First Data
Investor Services Group ("FDISG") pursuant to which FDISG provides
a data processing system for certain shareholder accounting and
recordkeeping functions performed by SDC, which commenced in July
1990. For the years ended December 31, 1997, 1996 and 1995 the
approximate cost of these services for each Series were:
1997 1996 1995
---- ---- ----
U.S. Government Securities Series $ 18,700 $17,900 $17,700
High-Yield Bond Series 261,800 96,000 28,200
ITEM 32. UNDERTAKINGS - The Registrant undertakes, (1) to furnish a copy of
the Registrant's latest annual report, upon request and without
charge, to every person to whom a prospectus is delivered and (2)
if requested to do so by the holders of at least ten percent of its
outstanding shares, to call a meeting of shareholders for the
purpose of voting upon the removal of a director or directors and
to assist in communications with other shareholders as required by
Section 16(c) of the Investment Company Act of 1940.
<PAGE>
File No. 2-93076
811-4103
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it meets all of the
requirements for effectiveness of this Post-Effective Amendment pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 24 to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 29th day of April, 1998.
SELIGMAN HIGH INCOME FUND SERIES
By: /s/ WILLIAM C. MORRIS
-----------------------------------
William C. Morris, Chairman
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Post-Effective Amendment No. 24 has been
signed below by the following persons in the capacities indicated on April 29,
1998.
Signature Title
--------- -----
/s/ WILLIAM C. MORRIS Chairman of the Trustees (Principal
- --------------------------------------- executive officer) and Trustee
William C. Morris*
/s/ Brian T. Zino Trustee and President
- ---------------------------------------
Brian T. Zino
/s/ Thomas G. Rose Treasurer (Principal financial and
- --------------------------------------- Accounting Officer)
Thomas G. Rose
John R. Galvin, Trustee )
Alice S. Ilchman, Trustee )
Frank A. McPherson, Trustee )
John E. Merow, Trustee )
Betsy S. Michel, Trustee )
James C. Pitney, Trustee ) /s/ Brian T. Zino
James Q. Riordan, Trustee ) -----------------------------------------
Richard R. Schmaltz, Trustee ) *Brian T. Zino, Attorney-In-Fact
Robert L. Shafer, Trustee )
James N. Whitson, Trustee )
<PAGE>
File No. 2-93076
811-4103
SELIGMAN HIGH INCOME FUND SERIES
Post-Effective Amendment No. 24 to the
Registration Statement on Form N-1A
EXHIBIT INDEX
Form N-1A Item No. Description
- ------------------ -----------
24(b)(7)(a) Deferred Compensation Plan for Directors
24(b)(11) Consent of Independent Auditors
24(b)(17) Financial Data Schedules
Other Exhibits Power of Attorney
- -----
20
DEFERRED COMPENSATION PLAN FOR DIRECTORS
OF
SELIGMAN HIGH INCOME FUND SERIES
("FUND")
1. ELECTION TO DEFER PAYMENTS. Any member of the Board of Directors (herein, a
"Director") of the Fund may elect to have payment of that Director's annual
retainer or meeting fees or both for Board service deferred as provided in this
Plan. The election shall be made in writing prior to, and to take effect from,
the beginning of a calendar year. For any Director in the year in which this
Plan is adopted or for a person elected a director in other than the last
calendar month of a year, the election shall be made within 30 days after that
event and prior to, and to take effect from, the beginning of the calendar
quarter next ensuing after that event. Elections shall continue in effect until
terminated in writing, any such termination to take effect on the first day of
the calendar year beginning after receipt of the notice of termination. An
election shall be irrevocable as to payments deferred in conformity with that
election.
2. DEFERRED PAYMENT ACCOUNT. Each deferred retainer or fee shall be credited at
the time when it otherwise would have been payable to an account to be
established in the name of the Director on the books of the Fund (the "Deferred
Payment Account") adjusted for notional investment experience as hereinafter
described.
3. RETURN ON DEFERRED PAYMENT ACCOUNT BALANCE. (a) For purposes of measuring the
investment return on his Deferred Payment Account, the Director may elect to
have the aggregate amount of his deferred compensation (or a specified portion
thereof) receive a return (i) at a rate equal to the return earned on
three-month U.S. Treasury Bills at the beginning of each calendar quarter (the
"Treasury Bill Rate") and such interest shall be credited to the account
quarterly at the end of each calendar quarter, or (ii) at a rate of return
(positive or negative) equal to the rate of return on the shares of any of the
registered investment companies managed by J. & W. Seligman & Co. Incorporated
("Seligman") or any other entity controlling, controlled by, or under common
control with (as such terms are defined in the Investment Company Act of 1940)
Seligman (each, a "Notional Fund"), assuming reinvestment of dividends and
distributions from the Notional Funds. (b) A Director may amend his designation
of investment return as of the end of each calendar quarter by giving written
notice to the President of the Fund at least 30 days prior to the end of such
calendar quarter. A timely change to a Director's designation of investment
return shall become effective on the first day of the calendar quarter following
receipt by the President of the Fund (the "President").
4. NOTIONAL INVESTMENT EXPERIENCE. Amounts credited to a Deferred Payment
Account shall be periodically adjusted for notional investment experience. In
each case such notional investment experience shall be determined by treating
the Deferred Payment Account as though an equivalent dollar amount had been
invested and reinvested in one or more of the Notional Funds. The Notional Funds
used as a basis for determining notional investment experience with respect to
any Director's Deferred Payment Account shall be designated by the Director in
writing by instrument of election substantially in the form attached hereto as
Exhibit C and may be changed prospectively by similar written election effective
as of the first day of any calendar quarter. The President may from time to time
limit the Notional Funds available for purposes of such election. If at any time
any Notional Fund that has previously been
(3/98)
<PAGE>
designated by a Director as a notional investment shall cease to exist or shall
be unavailable for any reason, or if the Director fails to designate one or more
Notional Funds pursuant to this Section 4, the President may, at his discretion
and upon notice to the Director, treat any amounts notionally invested in such
Notional Fund (whether representing past amounts credited to a Director's
Deferred Payment Account or subsequent fee deferrals or both) as having been
invested at the Treasury Bill Rate, only until such time as the Director shall
have made another investment election in accordance with the foregoing
procedures. Deferred Payment Accounts shall continue to be adjusted for notional
investment experience until distributed in full in accordance with the
distribution method elected by the Director pursuant to Section 5 hereof.
5. PAYMENT OF DEFERRED AMOUNTS. All amounts credited to an account pursuant to
any election by the Director made as provided in Section 1 hereof shall be paid
to the Director
(a) in, or beginning in, the calendar year following the calendar
year in which the Director ceases to be a Director of the
Fund, or
(b) in, or beginning in, the calendar year following the earlier
of the calendar year in which the Director ceases to be a
Director of the Fund or attains age 70,
and shall be paid
(c) in a lump sum payable on the first day of the calendar year in
which payment is to be made, or
(d) in 10 or fewer installments, payable on the first day of each
year commencing with the calendar year in which payment is to
begin, all as the Director shall specify in making the
election. If the payment is to be made in installments, the
amount of each installment shall be equal to a fraction of the
total of the amounts in the account at the date of the payment
the numerator of which shall be one and the denominator of
which shall be the then remaining number of unpaid
installments (including the installment then to be paid). If
the Director dies at any time before all amounts in the
account have been paid, such amounts shall be paid at that
time in a lump sum to the beneficiary or beneficiaries
designated by the Director in writing to receive such payments
or in the absence of such a designation to the estate of the
Director.
The Board of Directors may, in the case of an unforseeable emergency, at its
sole discretion accelerate the payment of any unpaid amount for any or all
Directors. For purposes of this paragraph, an unforseeable emergency is severe
financial hardship to the Director resulting from a sudden and unexpected
illness or accident of the Director or of a dependent (as defined in section
152(a) of the Internal Revenue Code) of the Director, loss of the Director's
property due to casualty, or other similar extraordinary and unforseeable
circumstances arising as a result of events beyond the control of the Director.
Payment due to an unforseeable emergency may not be made to the extent that such
hardship is or may be relieved (i) through reimbursement or compensation by
insurance or otherwise; (ii) by liquidation of the Director's assets, to the
extent the liquidation of such assets would not itself cause severe financial
hardship, or (iii) by cessation of deferrals under the Plan. Examples of what
are not considered to be unforseeable emergencies include the need to send a
Director's child to college or the desire to purchase a home.
(3/98)
<PAGE>
Withdrawals of amounts because of an unforseeable emergency are only permitted
to the extent reasonably necessary to satisfy the emergency need.
6. ASSIGNMENT. No deferred amount or unpaid portion thereof may be assigned or
transferred by the Director except by will or the laws of descent and
distribution.
7. WITHHOLDING TAXES. The Fund shall deduct from all payments any federal, state
or local taxes and other charges required by law to be withheld with respect to
such payments.
8. NATURE OF RIGHTS; NONALIENATION. A Director's rights to deferred payment
under the Plan shall be solely those of an unsecured general creditor of the
Fund, and any payments by the Fund pursuant to the Plan will be made solely from
the Fund's general assets and property. The Fund will be under no obligation to
purchase, hold or dispose of any investment for the specific benefit of any
Director but, if the Fund should choose to purchase shares of any Notional Fund
in order to cover all or a portion of its obligations under the Plan, then such
investments will continue to be a part of the general assets and property of the
Fund. A Director's rights under the Plan may not be transferred, assigned,
pledged or otherwise alienated, and any attempt by the Director to do so shall
be null and void.
9. STATUS OF DIRECTOR. Nothing in the Plan nor any election hereunder shall be
construed as conferring on any Director the right to remain a Director of the
Fund or to receive fees at any particular rate.
10. AMENDMENT AND ACCELERATION. The Board of Directors may at any time at its
sole discretion amend or terminate this Plan, provided that no such amendment or
termination shall adversely affect the right of Directors to receive deferred
amounts credited to their account.
11. ADMINISTRATION. The Plan shall be administered by the President or by such
person or persons as the President may designate to carry out administrative
functions hereunder. The President shall have complete discretion to interpret
and administer the Plan in accordance with its terms, and his determinations
shall be binding on all persons.
Amended as of March 19, 1998
(3/98)
<PAGE>
EXHIBIT A
SELIGMAN INVESTMENT COMPANIES
DEFERRED COMPENSATION PLAN
ELECTION FORM
Pursuant to the Deferred Compensation Plan for Directors, as amended as
of March 19, 1998, (the "Plan") adopted by each of the Seligman Investment
Companies (the "Funds"), I hereby elect to have ___% of my annual retainer fees
and ___% of my meeting fees for service to the Funds deferred as provided in the
Plan. This election will take effect at such time as is provided in section 1 of
the Plans, and shall continue in effect until terminated in writing, any such
termination to take effect of the first day of the next calendar year beginning
after receipt of the notice of termination.
The Deferred Compensation Plan Return Designation Form attached hereto
indicates the percentage of each of the above amounts that should earn the
designated returns. Such designations shall remain in effect until changed by
submission of a new form as provided in the Plan.
All amounts deferred with respect to any Fund and the earnings thereon
made pursuant to any election by me shall be credited to an account for my
benefit and shall be paid to me:
CHECK (a) OR (b)
(a) in, or beginning in, the calendar year following the
calendar year in which I cease to be a director of the
------ Fund, or
(b) in, or beginning in, the calendar year following the
earlier of the calendar year in which I cease to be a
------ director of the Fund or attain age 70,
and shall be paid
CHECK (c) OR (d)
(c) in a lump sum payable on the first day of the calendar
------ year in which payment is to be made, or
(d) in 10 or fewer installments, payable on the first day of
each year commencing with the calendar year in which
------ payment is to begin.
IF (d) IS SELECTED, ENTER NUMBER OF ANNUAL INSTALLMENTS _________.
If the payment is to be made in installments, the amount of each
installment shall be equal to a fraction of the total of the amounts in the
account at the date of the payment the numerator of which shall be one and the
denominator of which shall be the then remaining number of unpaid installments
(including the installment then to be paid). If I die at any time before all
amounts in the account have been paid, such amounts shall be paid at that time
in a lump sum to the beneficiary or beneficiaries designated by me on the
attached Beneficiary Designation Form or in the absence of such a designation to
my estate.
- -------------------------------- --------------------------------------
Date Signature
(3/98)
<PAGE>
EXHIBIT B
DEFERRED COMPENSATION PLAN
BENEFICIARY DESIGNATION FORM
I hereby designate the following beneficiary or beneficiaries to receive at my
death the amounts held in my Deferred Payment Accounts from my participation in
the Deferred Compensation Plans for Directors/Trustees of all registered
investment companies advised by J. & W. Seligman & Co. Incorporated for which I
serve as a director or trustee (the "Plans").
A. PRIMARY BENEFICIARY(IES)
1. Name: % Share:
----------------------------- ----------------------------
Address:
---------------------------------------------------------------
Relationship: DOB: Social Security #:
---------- ------- ----------------
Trustee Name and Date (if beneficiary is a trust):
---------------------
Trustee of Trust:
------------------------------------------------------
2. Name: % Share:
----------------------------- ----------------------------
Address:
---------------------------------------------------------------
Relationship: DOB: Social Security #:
---------- ------- ----------------
Trustee Name and Date (if beneficiary is a trust):
---------------------
Trustee of Trust:
------------------------------------------------------
B. CONTINGENT BENEFICIARY(IES)
1. Name: % Share:
----------------------------- ----------------------------
Address:
---------------------------------------------------------------
Relationship: DOB: Social Security #:
---------- ------- ----------------
Trustee Name and Date (if beneficiary is a trust):
---------------------
Trustee of Trust:
------------------------------------------------------
2. Name: % Share:
----------------------------- ----------------------------
Address:
---------------------------------------------------------------
Relationship: DOB: Social Security #:
---------- ------- ----------------
Trustee Name and Date (if beneficiary is a trust):
---------------------
Trustee of Trust:
------------------------------------------------------
<PAGE>
I understand that I may revoke or amend the above designation at any time. I
understand that payment will be made to my Contingent Beneficiary(ies) only if
there is no surviving Primary Beneficiary(ies). I further understand that if I
am not survived by any Primary or Contingent Beneficiaries, payment will be made
to my estate as set forth under the Plans.
- -------------------------------- --------------------------------------
Date Signature
--------------------------------------
Participant's Name Printed
<PAGE>
EXHIBIT C
SELIGMAN INVESTMENT COMPANIES
DEFERRED COMPENSATION PLANS
RETURN DESIGNATION FORM
I elect to have my deferred compensation for all registered investment companies
advised by J. & W. Seligman & Co. Incorporated for which I serve as a Director
or Trustee deemed to be invested as specified below:
<TABLE>
<CAPTION>
- ------------------------------------------------------- --------------- ---------------
% Allocation
% Allocation for accumulated
for future fees balances
- ------------------------------------------------------- --------------- ---------------
<S> <C> <C>
At the prevailing three-month U.S. Treasury Bill Rate
- ------------------------------------------------------- --------------- ---------------
Seligman Capital Fund, Inc.
- ------------------------------------------------------- --------------- ---------------
Seligman Cash Management Fund, Inc.
- ------------------------------------------------------- --------------- ---------------
Seligman Common Stock Fund, Inc.
- ------------------------------------------------------- --------------- ---------------
Seligman Communications and Information Fund, Inc.
- ------------------------------------------------------- --------------- ---------------
Seligman Frontier Fund, Inc.
- ------------------------------------------------------- --------------- ---------------
Seligman Growth Fund, Inc.
- ------------------------------------------------------- --------------- ---------------
Seligman Henderson Global Fund Series, Inc. -
Seligman Henderson Emerging Markets Growth Fund
- ------------------------------------------------------- --------------- ---------------
Seligman Henderson Global Fund Series, Inc. -
Seligman Henderson Global Growth Opportunities Fund
- ------------------------------------------------------- --------------- ---------------
Seligman Henderson Global Fund Series, Inc. -
Seligman Henderson Global Smaller Companies Fund
- ------------------------------------------------------- --------------- ---------------
Seligman Henderson Global Fund Series, Inc. -
Seligman Henderson Global Technology Fund
- ------------------------------------------------------- --------------- ---------------
Seligman Henderson Global Fund Series, Inc. -
Seligman Henderson International Fund
- ------------------------------------------------------- --------------- ---------------
Seligman High Income Fund Series -
Seligman High-Yield Bond Series
- ------------------------------------------------------- --------------- ---------------
Seligman High Income Fund Series -
Seligman U.S. Government Securities Series
- ------------------------------------------------------- --------------- ---------------
Seligman Income Fund, Inc.
- ------------------------------------------------------- --------------- ---------------
Seligman Value Fund Series, Inc. -
Seligman Large-Cap Value Fund
- ------------------------------------------------------- --------------- ---------------
Seligman Value Fund Series, Inc. -
Seligman Small-Cap Value Fund
- ------------------------------------------------------- --------------- ---------------
Tri-Continental Corporation
- ------------------------------------------------------- --------------- ---------------
Total 100% 100%
- ------------------------------------------------------- --------------- ---------------
</TABLE>
I acknowledge that I may amend this Return Designation in the manner,
and at such time as permitted, under the Plans. Furthermore, I acknowledge that
in certain circumstances, and pursuant to Section 4 of the Plans, the President
may at his discretion, and upon notice to me, disregard the designations made
above and cause all or a portion of my Deferred Account to receive a return
equal to the prevailing three-month U.S. Treasury Bill Rate.
- --------------------------- ----------------------------------
Date Signature
CONSENT OF INDEPENDENT AUDITORS
Seligman High Income Fund Series:
We consent to the use in Post-Effective Amendment No. 24 to Registration
Statement No. 2-93076 of our report dated January 30, 1998, appearing in the
Annual Report to Shareholders for the year ended December 31, 1997, which is
incorporated by reference in the Statement of Additional Information, which is
included in such Registration Statement, and to the references to us under the
captions "Financial Highlights" in the Prospectus and "General Information" in
the Statement of Additional Information, which are also included in such
Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
April 24, 1998
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN HIGH
INCOME FUND SERIES, a Massachusetts Business Trust, which proposes to file with
the Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 1st day of April, 1998.
/s/ RICHARD R. SCHMALTZ (L.S.)
--------------------------------------
Richard R. Schmaltz
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 031
<NAME> SELIGMAN HIGH-YIELD BOND SERIES CL. A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1752627
<INVESTMENTS-AT-VALUE> 1822454
<RECEIVABLES> 58418
<ASSETS-OTHER> 2499
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1883371
<PAYABLE-FOR-SECURITIES> 2306
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14371
<TOTAL-LIABILITIES> 16677
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1789217
<SHARES-COMMON-STOCK> 99415<F1>
<SHARES-COMMON-PRIOR> 56292<F1>
<ACCUMULATED-NII-CURRENT> 2353
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5297
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 69827
<NET-ASSETS> 750461<F1>
<DIVIDEND-INCOME> 2397<F1>
<INTEREST-INCOME> 57798<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (6482)<F1>
<NET-INVESTMENT-INCOME> 53713<F1>
<REALIZED-GAINS-CURRENT> 8664
<APPREC-INCREASE-CURRENT> 47952
<NET-CHANGE-FROM-OPS> 175385
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (52770)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 68525<F1>
<NUMBER-OF-SHARES-REDEEMED> (29178)<F1>
<SHARES-REINVESTED> 3776<F1>
<NET-CHANGE-IN-ASSETS> 1044892
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3367)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3570<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6482<F1>
<AVERAGE-NET-ASSETS> 569722<F1>
<PER-SHARE-NAV-BEGIN> 7.25<F1>
<PER-SHARE-NII> .70<F1>
<PER-SHARE-GAIN-APPREC> .28<F1>
<PER-SHARE-DIVIDEND> (.68)<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 7.55<F1>
<EXPENSE-RATIO> 1.14<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 032
<NAME> SELIGMAN HIGH-YIELD BOND SERIES CL. B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1752627
<INVESTMENTS-AT-VALUE> 1822454
<RECEIVABLES> 58418
<ASSETS-OTHER> 2499
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1883371
<PAYABLE-FOR-SECURITIES> 2306
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14371
<TOTAL-LIABILITIES> 16677
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1789217
<SHARES-COMMON-STOCK> 76978<F1>
<SHARES-COMMON-PRIOR> 20394<F1>
<ACCUMULATED-NII-CURRENT> 2353
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5297
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 69827
<NET-ASSETS> 581235<F1>
<DIVIDEND-INCOME> 1487<F1>
<INTEREST-INCOME> 35853<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (6708)<F1>
<NET-INVESTMENT-INCOME> 30632<F1>
<REALIZED-GAINS-CURRENT> 8664
<APPREC-INCREASE-CURRENT> 47952
<NET-CHANGE-FROM-OPS> 175385
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (29875)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 61362<F1>
<NUMBER-OF-SHARES-REDEEMED> (6604)<F1>
<SHARES-REINVESTED> 1826<F1>
<NET-CHANGE-IN-ASSETS> 1044892
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3367)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2191<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6708<F1>
<AVERAGE-NET-ASSETS> 353535<F1>
<PER-SHARE-NAV-BEGIN> 7.26<F1>
<PER-SHARE-NII> .64<F1>
<PER-SHARE-GAIN-APPREC> .28<F1>
<PER-SHARE-DIVIDEND> (.63)<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 7.55<F1>
<EXPENSE-RATIO> 1.90<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class B only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 034
<NAME> SELIGMAN HIGH-YIELD BOND SERIES CL. D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 1752627
<INVESTMENTS-AT-VALUE> 1822454
<RECEIVABLES> 58418
<ASSETS-OTHER> 2499
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1883371
<PAYABLE-FOR-SECURITIES> 2306
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14371
<TOTAL-LIABILITIES> 16677
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1789217
<SHARES-COMMON-STOCK> 70847<F1>
<SHARES-COMMON-PRIOR> 36597<F1>
<ACCUMULATED-NII-CURRENT> 2353
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 5297
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 69827
<NET-ASSETS> 534998<F1>
<DIVIDEND-INCOME> 1670<F1>
<INTEREST-INCOME> 40292<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (7538)<F1>
<NET-INVESTMENT-INCOME> 34424<F1>
<REALIZED-GAINS-CURRENT> 8664
<APPREC-INCREASE-CURRENT> 47952
<NET-CHANGE-FROM-OPS> 175385
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (33771)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 44411<F1>
<NUMBER-OF-SHARES-REDEEMED> (12966)<F1>
<SHARES-REINVESTED> 2805<F1>
<NET-CHANGE-IN-ASSETS> 1044892
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3367)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2487<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7538<F1>
<AVERAGE-NET-ASSETS> 397502<F1>
<PER-SHARE-NAV-BEGIN> 7.26<F1>
<PER-SHARE-NII> .64<F1>
<PER-SHARE-GAIN-APPREC> .28<F1>
<PER-SHARE-DIVIDEND> (.63)<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 7.55<F1>
<EXPENSE-RATIO> 1.90<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> SELIGMAN U.S.GOVERNMENT SECURITIES CLASS A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 60292
<INVESTMENTS-AT-VALUE> 62555
<RECEIVABLES> 808
<ASSETS-OTHER> 50
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 63413
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2418
<TOTAL-LIABILITIES> 2418
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 72991
<SHARES-COMMON-STOCK> 6606<F1>
<SHARES-COMMON-PRIOR> 6984<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (14259)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2263
<NET-ASSETS> 45426<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3067<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (544)<F1>
<NET-INVESTMENT-INCOME> 2523<F1>
<REALIZED-GAINS-CURRENT> (612)
<APPREC-INCREASE-CURRENT> 1950
<NET-CHANGE-FROM-OPS> 4351
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2523)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2402<F1>
<NUMBER-OF-SHARES-REDEEMED> (2983)<F1>
<SHARES-REINVESTED> 203<F1>
<NET-CHANGE-IN-ASSETS> 4823
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (15178)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 222<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 544<F1>
<AVERAGE-NET-ASSETS> 44386<F1>
<PER-SHARE-NAV-BEGIN> 6.71<F1>
<PER-SHARE-NII> .38<F1>
<PER-SHARE-GAIN-APPREC> .17<F1>
<PER-SHARE-DIVIDEND> (.38)<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 6.88<F1>
<EXPENSE-RATIO> 1.23<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> SELIGMAN U.S.GOVERNMENT SECURITIES CLASS B
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 60292
<INVESTMENTS-AT-VALUE> 62555
<RECEIVABLES> 808
<ASSETS-OTHER> 50
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 63413
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2418
<TOTAL-LIABILITIES> 2418
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 72991
<SHARES-COMMON-STOCK> 467<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (14259)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2263
<NET-ASSETS> 3219<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 63<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (18)<F1>
<NET-INVESTMENT-INCOME> 45<F1>
<REALIZED-GAINS-CURRENT> (612)
<APPREC-INCREASE-CURRENT> 1950
<NET-CHANGE-FROM-OPS> 4351
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (45)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 757<F1>
<NUMBER-OF-SHARES-REDEEMED> (295)<F1>
<SHARES-REINVESTED> 5<F1>
<NET-CHANGE-IN-ASSETS> 4823
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (15178)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 19<F1>
<AVERAGE-NET-ASSETS> 947<F1>
<PER-SHARE-NAV-BEGIN> 6.73<F1>
<PER-SHARE-NII> .33<F1>
<PER-SHARE-GAIN-APPREC> .16<F1>
<PER-SHARE-DIVIDEND> (.33)<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 6.89<F1>
<EXPENSE-RATIO> 2.01<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class B only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 014
<NAME> SELIGMAN U.S.GOVERNMENT SECURITIES CLASS D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 60292
<INVESTMENTS-AT-VALUE> 62555
<RECEIVABLES> 808
<ASSETS-OTHER> 50
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 63413
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2418
<TOTAL-LIABILITIES> 2418
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 72991
<SHARES-COMMON-STOCK> 1793<F1>
<SHARES-COMMON-PRIOR> 1380<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (14259)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2263
<NET-ASSETS> 12350<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 628<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (183)<F1>
<NET-INVESTMENT-INCOME> 445<F1>
<REALIZED-GAINS-CURRENT> (612)
<APPREC-INCREASE-CURRENT> 1950
<NET-CHANGE-FROM-OPS> 4351
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (445)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1790<F1>
<NUMBER-OF-SHARES-REDEEMED> (1420)<F1>
<SHARES-REINVESTED> 43<F1>
<NET-CHANGE-IN-ASSETS> 4823
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (15178)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 45<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 183<F1>
<AVERAGE-NET-ASSETS> 9064<F1>
<PER-SHARE-NAV-BEGIN> 6.73<F1>
<PER-SHARE-NII> .33<F1>
<PER-SHARE-GAIN-APPREC> .16<F1>
<PER-SHARE-DIVIDEND> (.33)<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 6.89<F1>
<EXPENSE-RATIO> 2.01<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
