SELIGMAN
--------
HIGH-YIELD
BOND SERIES
MID-YEAR REPORT
JUNE 30, 1999
--------
SEEKING TO
MAXIMIZE
CURRENT INCOME BY
INVESTING IN A
DIVERSIFIED
PORTFOLIO OF
HIGH-YIELDING
CORPORATE BONDS
[logo]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
<PAGE>
SELIGMAN -- TIMES CHANGE...VALUES ENDURE
J. & W. SELIGMAN & CO. INCORPORATED IS A FIRM WITH A LONG TRADITION OF
INVESTMENT EXPERTISE, OFFERING A BROAD ARRAY OF INVESTMENT CHOICES TO HELP
TODAY'S INVESTORS SEEK THEIR LONG-TERM FINANCIAL GOALS.
[PHOTO]
JAMES, JESSE, AND JOSEPH SELIGMAN, 1870
TIMES CHANGE...
Established in 1864, Seligman has a history of providing financial services
marked not by fanfare, but rather by a quiet and firm adherence to financial
prudence. While the world has changed dramatically in the 135 years since
Seligman first opened its doors, the firm has continued to offer its clients
high-quality investment solutions through changing times.
In the late 19th century, as the country grew, Seligman helped finance the
westward expansion of the railroads, the construction of the Panama Canal, and
the launching of urban transit systems. In the first part of the 20th century,
as America became an industrial power, the firm helped fund the growing capital
needs of the nascent automobile and steel industries.
With the formation of Tri-Continental Corporation in 1929 -- today, the nation's
largest diversified publicly-traded closed-end investment company -- Seligman
began shifting its emphasis from investment banking to investment management.
Despite the stock market crash and ensuing depression, Seligman was convinced of
the importance that investment companies could have in building wealth for
individual investors and began managing its first mutual fund in 1930.
In the decades that followed, Seligman has continued to offer forward-looking
investment solutions, including equity funds that specialize in small companies,
technology, or international securities, and bond funds that focus on high-yield
issuers, US government bonds, or municipal securities.
...VALUES ENDURE
Seligman is proud of its distinctive past and of the traditional values that
continue to shape the firm's business decisions and investment judgment. While
much has changed over the years, the firm's commitment to providing prudent
investment management that seeks to build wealth for clients over time is an
enduring value that will guide Seligman into the new millennium.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
To the Shareholders .................................. 1
Interview With Your Portfolio Manager ................ 2
Performance Overview ................................. 4
Portfolio Overview ................................... 6
Portfolio of Investments ............................. 8
Statement of Assets and Liabilities .................. 13
Statement of Operations .............................. 14
Statements of Changes in Net Assets .................. 15
Notes to Financial Statements ........................ 16
Financial Highlights ................................. 19
Report of Independent Auditors ....................... 21
Trustees ............................................. 22
Executive Officers and For More Information .......... 23
Glossary of Financial Terms .......................... 24
- --------------------------------------------------------------------------------
<PAGE>
TO THE SHAREHOLDERS
During the first six months of 1999, Seligman High-Yield Bond Series posted a
total return of 0.62% based on the net asset value of Class A shares. During the
same period, the DLJ High Yield Market Index returned 3.15% and the Lipper High
Current Yield returned 3.50%. The Fund's underperformance relative to its
benchmarks was caused by surprisingly poor operating results for several of the
Fund's holdings. Also, the Fund's low exposure to cyclical issues, as well as
the fact that the Fund invests only in US-domiciled companies, penalized
results.
In the fixed-income markets, continued concerns regarding inflation pushed bond
yields higher and bond prices lower. Although economic data indicated a benign
inflationary environment, market participants correctly anticipated that the
Federal Reserve Board would raise rates at its June 30 meeting in response to
the improved global outlook and continued US economic strength. This tightening
was a partial reversal of the Fed's actions last fall when it lowered interest
rates three times in response to the global financial crisis.
While the past six-month period was difficult for bond investors, the high-yield
sector weathered the overall price weakness better than most fixed-income areas.
Current high interest rates in the high-yield area, coupled with the fact that
high-yield bonds typically have a shorter average duration relative to many
other fixed-income securities, cushioned the sector's performance to a large
degree. In addition, credit quality has a more significant influence on
high-yield performance than does short-term moderate swings in interest rates.
Thus, high-yield bonds in general offered very competitive results for
fixed-income investors during the period.
Our outlook for the high-yield market is positive. If US economic growth
moderates while overseas expansion accelerates, profits and cash flow forecasts
for most American companies should meet or exceed expectations. Meanwhile,
interest rates should move within a tighter trading range, reducing pressure on
all fixed-income markets and producing favorable results over the next six
months.
As the millennium approaches, we have become concerned that the media's focus on
the Year 2000 (Y2K) computer issue, and the fears that this attention may spark,
will cause some investors to take actions that are not in their best long-term
interests. In our view, the primary danger to investors is losing sight of their
long-term financial goals, and altering their portfolios and asset allocations,
in an attempt to respond to the confusion surrounding this issue.
In the US, governments and businesses have committed substantial resources to
this issue and, while there may be scattered inconveniences, we believe that the
US will enter the year 2000 relatively seamlessly and that much of the rest of
the developed world is also well positioned to deal with the new millennium.
For the past several years, J. & W. Seligman & Co. Incorporated (Seligman), your
Fund's manager, and Seligman Data Corp. (Seligman Data), your Fund's shareholder
service agent, have been working to ensure that shareholders do not experience
any Y2K-related inconveniences. We are pleased to report that the early start
has paid off. During the spring of this year, Seligman and Seligman Data
participated in Y2K testing conducted by the Securities Industry Association.
These tests were completed without any Y2K-related problems on the part of
Seligman or Seligman Data. Tests with key service providers were also conducted,
all of which were successfully completed in a Y2K environment.
Thank you for your continued support of Seligman High-Yield Bond Series. We look
forward to serving your investment needs for many years to come.
By order of the Trustees,
/s/William Morris
- -----------------
William C. Morris
Chairman
/s/Brian T. Zino
----------------
Brian T. Zino
President
August 6, 1999
1
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGER,
DANIEL J. CHARLESTON
Q: HOW DID SELIGMAN HIGH-YIELD BOND SERIES PERFORM DURING THE FIRST SIX MONTHS
OF 1999?
A: For the six-month period ended June 30, 1999, Seligman High-Yield Bond
Series posted a total return of 0.62% based on the net asset value of Class
A shares. This compares to a 3.15% total return for the DLJ High Yield
Market Index and a 3.50% total return for the Lipper High Current Yield.
While the Fund outperformed many fixed-income alternatives, the Fund's
performance was not as favorable versus its benchmarks. As mentioned in the
preceding letter to shareholders, the primary reason for the shortfall
related to several companies delivering negative operating results,
especially in the health care and telecom sectors. Also, our lack of
exposure to the very volatile international areas had a negative impact, as
these areas performed well during this period. Finally, we remain
underweighted in economically sensitive areas, which we believe are less
attractive investments for the long term.
Q: WHAT ECONOMIC AND MARKET FACTORS IMPACTED FUND PERFORMANCE?
A: During this period, concerns regarding inflation caused fixed-income
securities to fall in value. While economic data has indicated little or no
inflation, strong consumer demand and tight labor markets have sparked
renewed concerns by market participants and by the Federal Reserve Board.
At its May meeting, the Fed signaled its fears by adopting a tightening
bias. Then, on June 30, in a move widely anticipated by the markets, the Fed
raised the federal funds rate by 25 basis points. This preemptive strike
against inflation suggested that the Fed is worried that US economic growth
may be strong enough to pose an inflationary threat. However, anxiety in the
bond market was eased somewhat by the Fed's announcement that it was
shifting its bias from tightening to neutral.
It is important to remember that, while interest rates have increased
dramatically (long-term rates rose by 100 basis points during the six-month
period), they are only at the levels they were at before last fall's global
economic crisis. Central banks around the world, led by the US Federal
Reserve Board, were successful in coordinating an easier monetary policy
that enabled the world to recover.
In the rising-rate environment of the past six months, high-yield bonds
outperformed most longer-duration fixed-income securities because high-yield
bonds are less affected by changes in interest rates.
- --------------------------------------------------------------------------------
A TEAM APPROACH
Seligman High-Yield Bond Series is managed by the Seligman High-Yield Team,
headed by Daniel J. Charleston. Mr. Charleston is assisted by seasoned research
professionals who are responsible for evaluating companies in specific industry
groups. He draws on his team to select companies whose bonds have the potential
for high yields at acceptable levels of investment risk consistent with the
Fund's objective.
[photo]
HIGH-YIELD TEAM: (STANDING FROM LEFT) DEBORAH JOSEPH (ADMINISTRATIVE ASSISTANT),
TIMFINN, JEANNE CRUZ, JAMES DIDDEN, (SEATED) BRIAN HESSEL, DANIEL J. CHARLESTON
(PORTFOLIO MANAGER)
- --------------------------------------------------------------------------------
2
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGER,
DANIEL J. CHARLESTON
The high-yield market was also impacted by reduced demand. Most new money
flowing into the bond market during the past six months, and particularly
during the second quarter, came from Collateralized Bond Obligations (CBOs).
CBOs are often restricted from buying certain types of securities, including
lower-rated bonds. They also face industry diversification requirements.
Therefore, the telecom sector, which comprises a large portion of the
high-yield universe, was under particular pressure in the first half of the
year, as CBO demand could not absorb the supply in this sector.
Defaults, which increased slightly during the period despite strong economic
conditions, also impacted high-yield bonds. This divergence was largely due
to the market dislocation last summer, which effectively barred start-up and
finance companies from the capital markets. The resulting cash flow problems
led to an increased number of defaults on outstanding bond obligations.
Fortunately, we avoided most of the defaults of the last year. Looking
ahead, we expect the default rate among high-yield issuers to decrease.
Q: WHICH SECTORS OUTPERFORMED DURING THE PERIOD?
A: Cyclicals, such as paper, steel, metals, and mining, after significantly
underperforming last year, were the biggest gainers during the first half of
1999. The Fund has little exposure to these issues because of the
unpredictable nature of their cash flows and the resulting price volatility.
The best-performing sectors of the Fund were rural cellular providers and
satellite TV providers.
Q: WHICH SECTORS UNDERPERFORMED?
A: Telecom was down slightly because so much of the new money flows into the
bond market were from CBOs, which must be well diversified across industries
and so could not purchase the large number of telecom issues in the market.
Other sectors were down significantly because of fundamental factors. Health
care, for example, has been struggling against changes in Medicare
reimbursement programs. In retail, supermarkets have been facing intense
competition from wholesale clubs as well as deep-pocketed national and
international chains. The mobile satellite telephone sector as a whole has
been under pressure because of the difficulties of a single company within
the industry.
Q: WHAT SECTORS HAVE YOU BEEN BUYING AND SELLING?
A: We continue to build our core holdings. We've been adding to rural cellular,
publishing, and communications towers. We have reduced our exposure to
health care and consumer products issuers.
Q: WHAT IS YOUR OUTLOOK?
A: We believe that interest rate movements, whose upward trend negatively
impacted the Fund's overall performance during the past six months, will
moderate and possibly trend lower for the balance of the year. Markets are
expecting an August interest rate hike, and this increase is already mostly
reflected in market rates. In addition, we believe that US economic growth
will slow over the balance of the year, which should allow the Fed to hold
rates steady after its August meeting.
The high-yield market should do well as the interest-rate environment
improves and as defaults among high-yield issues decrease. In this
environment, we do not plan any changes to our portfolio strategy. We
continue to look for domestic credits with predictable cash flows,
defensible market shares, high cash flow margins, and strong management
teams. We have no direct emerging market exposure, and we continue to avoid
purchasing distressed and defaulted issues.
3
<PAGE>
PERFORMANCE OVERVIEW
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------------------------------
CLASS C CLASS B CLASS D
SINCE SINCE SINCE
INCEPTION SIX ONE FIVE 10 INCEPTION INCEPTION
5/27/99* MONTHS* YEAR YEARS YEARS 4/22/96 9/21/93
------------ --------- ----- ------ ------ ----------- ---------
CLASS A**
<S> <C> <C> <C> <C> <C> <C> <C>
With Sales Charge n/a (4.20)% (8.09)% 9.31% 10.19% n/a n/a
Without Sales Charge n/a 0.62 (3.50) 10.38 10.72 n/a n/a
CLASS B**
With CDSC+ n/a (4.54) (8.59) n/a n/a 6.36% n/a
Without CDSC n/a 0.25 (4.23) n/a n/a 7.13 n/a
CLASS C**
With Sales Charge and CDSC (2.90)% n/a n/a n/a n/a n/a n/a
Without Sales Charge and CDSC (0.93) n/a n/a n/a n/a n/a n/a
CLASS D**
With 1% CDSC n/a (0.71) (5.22) n/a n/a n/a n/a
Without CDSC n/a 0.25 (4.35) 9.46 n/a n/a 8.77%
DLJ HIGH YIELD MARKET INDEX*** 0.09o 3.15 (0.42) 9.51 10.53 8.09++ 8.49+++
LIPPER HIGH CURRENT YIELD*** --o 3.50 (1.41) 8.91 9.34 8.53++ 8.12+++
</TABLE>
NET ASSET VALUE
JUNE 30, 1999 DECEMBER 31, 1998 JUNE 30, 1998
------------- ------------------- -------------
CLASS A $6.65 $6.95 $7.61
CLASS B 6.65 6.95 7.61
CLASS C 6.65 N/A N/A
CLASS D 6.65 6.95 7.62
DIVIDEND, YIELD, AND CAPITAL GAIN INFORMATION
FOR THE SIX MONTHS ENDED JUNE 30, 1999
CAPITAL
DIVIDENDSoo YIELDooo LOSS
--------- ----- ---------
CLASS A $0.3455 10.22% REALIZED $(0.123)
CLASS B 0.3198 9.95 UNREALIZED (0.489)ss
CLASS C 0.0601 9.86
CLASS D 0.3198 9.96
RATINGS#
JUNE 30, 1999
MOODY'S S&P
------- -----
Ba/BB 3.8% 4.0%
B/B 76.1 73.9
Caa/CCC 15.1 16.0
Ca/CC 0.3 --
D/D -- 0.1
Non-rated 4.7 6.0
WEIGHTED AVERAGE
MATURITY 7.79 years
The rates of return will vary and the principal value of an investment will
fluctuate. Shares, if redeemed, may be worth more or less than their original
cost. Past performance is not indicative of future investment results.
- ----------
* Returns for periods of less than one year are not annualized.
** Return figures reflect any change in price per share and assume the
investment of dividend and capital gain distributions. Returns for Class A
shares are calculated with and without the effect of the initial 4.75%
maximum sales charge. Returns for Class B shares are calculated with and
without the effect of the maximum 5% contingent deferred sales charge
("CDSC"), charged on redemptions made within one year of the date of
purchase, declining to 1% in the sixth year and 0% thereafter. Returns for
Class C shares are calculated with and without the effect of the initial 1%
maximum sales charge and the 1% CDSC that is charged on redemptions made
within 18 months of the date of purchase. Returns for Class D shares are
calculated with and without the effect of the 1% CDSC, charged on
redemptions made within one year of the date of purchase.
*** The DLJ High Yield Market Index and the Lipper High Current Yield are
unmanaged benchmarks that assume investment of dividends and exclude the
effect of fees or sales charges. The monthly performance of the Lipper High
Current Yield is used in the Performance Overview. Investors cannot invest
directly in an average or an index.
+ The CDSC is 5% for periods of one year or less, and 3% since inception.
++ From April 30, 1996.
+++ From September 30, 1993.
o From May 31, 1999.
oo Represents per share amount paid or declared during the six months ended
June 30, 1999 (for Class C shares, for the period May 27, 1999 to June 30,
1999).
ooo Current yield, representing the annualized yield for the 30-day period
ended June 30, 1999, has been computed in accordance with SEC regulations
and will vary.
# Percentages based on current market values of long-term holdings.
ss Represents the per share amount of net unrealized depreciation of portfolio
securities as of June 30, 1999.
4
<PAGE>
PERFORMANCE OVERVIEW
GROWTH OF AN ASSUMED $10,000 INVESTMENT
[The following tables represent four line charts in the printed piece.]
CLASS A SHARES
JUNE 30, 1989 TO JUNE 30, 1999
6/30/89 9523
9527
9346
8998
6/30/90 9307
8910
8666
9725
6/30/91 10258
10916
11326
12363
6/30/92 12721
13418
13600
14552
6/30/93 15165
15432
16209
16112
6/30/94 16097
16169
16336
17186
6/30/95 18250
19093
19720
20510
6/30/96 20965
21883
22643
22471
6/30/97 23867
25331
25872
27041
6/30/98 27334
25484
26214
26596
6/30/99 26377
CLASS B SHARES
APRIL 22, 1996+ TO JUNE 30,
4/22/96 10000
10057
10153
6/30/96 10127
10117
10254
10565
10539
10725
12/31/96 10911
10999
11224
10792
10936
11236
6/30/97 11440
11742
11795
12119
12078
12207
12/31/97 12356
12662
12727
12891
12935
12949
6/30/98 13007
13083
12183
12103
11798
12457
12/31/98 12427
12635
12532
12585
12780
12523
6/30/99 12457
CLASS C SHARES
MAY 27, 1999+ TO JUNE 30, 1999
5/27/99 9900
5/28/99 9885
5/31/99 9885
6/4/99 9827
6/11/99 9768
6/18/99 9808
6/25/99 9778
6/30/99 9808
CLASS D SHARES
SEPTEMBER 21, 1993+ TO JUNE 30, 1999
9/21/93 10000
10030
10453
10381
6/30/94 10342
10360
10422
10937
6/30/95 11588
12100
12472
12965
6/30/96 13209
13780
14232
14078
6/30/97 14923
15808
16116
16814
6/30/98 16987
15786
16208
16415
6/30/99 16248
These charts reflect the growth of a $10,000 investment for a 10-year period for
Class A shares and since inception for Class B, Class C, and Class D shares,
assuming that all distributions within the periods are invested in additional
shares. Since the measured periods vary, the charts are plotted using different
scales and are not comparable.
- ----------
* Net of the 4.75% or 1% maximum initial sales charge for Class A or Class C
shares, respectively.
** Excludes the effects of the 3% or 1% CDSC for Class B or Class C shares,
respectively.
+ Inception date.
5
<PAGE>
PORTFOLIO OVERVIEW
DIVERSIFICATION OF NET ASSETS
JUNE 30, 1999
<TABLE>
<CAPTION>
PERCENT OF NET ASSETS
--------------------------
JUNE 30, DECEMBER 31,
ISSUES COST VALUE 1999 1998
------ ----------- ----------- -------- ------------
CORPORATE BONDS, CONVERTIBLE ISSUES,
AND STOCKS:
<S> <C> <C> <C> <C> <C>
Advertising ........................................... 1 $ 7,104,937 $ 7,135,500 0.2 0.4
Aerospace ............................................. 2 8,000,000 7,814,750 0.3 --
Automotive and Related ................................ 1 13,898,500 13,381,875 0.4 0.2
Broadcasting .......................................... 11 119,627,851 137,271,566 4.5 4.0
Cable Systems and Satellite Video ..................... 13 194,300,851 199,545,075 6.6 9.0
Cellular .............................................. 6 139,870,923 148,114,318 4.9 3.8
Chemicals ............................................. 5 78,552,493 74,684,037 2.5 1.6
Computer and Related Services ......................... 1 19,943,056 20,683,250 0.7 1.8
Consumer Products ..................................... 11 121,028,424 103,839,713 3.4 4.9
Containers ............................................ 1 16,069,531 16,019,656 0.5 0.7
Energy ................................................ 1 13,236,914 8,096,250 0.3 0.4
Environmental Services ................................ 1 3,650,000 3,522,250 0.1 --
Equipment ............................................. 6 72,416,294 70,199,175 2.3 2.0
Financial Services .................................... 4 69,915,281 58,048,375 1.9 1.9
Food .................................................. 7 114,201,998 93,223,102 3.1 4.0
Gaming/Hotel .......................................... 8 164,562,648 156,907,687 5.2 7.5
Health Care/Medical Products .......................... 10 193,977,167 155,195,532 5.1 6.3
Industrial/Manufacturing .............................. 9 130,921,928 123,441,223 4.1 3.8
Leisure ............................................... 3 45,581,802 44,436,375 1.5 1.8
Metals ................................................ 2 36,833,590 19,483,500 0.6 1.0
Paging ................................................ 5 185,206,314 156,185,750 5.1 5.3
Paper and Packaging ................................... 2 21,159,065 14,388,750 0.5 0.6
Printing and Publishing ............................... 12 237,919,671 222,339,311 7.3 6.1
Record Storage ........................................ 1 8,415,812 8,338,500 0.3 0.3
Retailing ............................................. 6 63,973,193 61,927,250 2.0 2.5
Supermarkets .......................................... 3 53,270,093 33,703,538 1.1 2.0
Technology ............................................ 9 230,526,180 208,409,277 6.8 4.4
Telecommunications .................................... 41 671,635,874 645,424,572 21.2 15.9
Textiles .............................................. 2 16,824,287 17,154,813 0.6 0.4
Theaters .............................................. -- -- -- -- 0.6
Transportation ........................................ 1 25,992,977 25,804,375 0.8 0.8
Utilities ............................................. 1 14,080,912 14,535,001 0.5 0.4
--- -------------- -------------- ----- -----
186 3,092,698,566 2,869,254,346 94.4 94.4
SHORT-TERM HOLDINGS AND
OTHER ASSETS LESS LIABILITIES ......................... 2 169,631,477 169,631,477 5.6 5.6
--- -------------- -------------- ----- -----
NET ASSETS ............................................... 188 $3,262,330,043 $3,038,885,823 100.0 100.0
=== ============== ============== ===== =====
</TABLE>
LARGEST INDUSTRIES
JUNE 30, 1999
[The following table represents a bar chart in the printed piece.]
Percent of Dollar
Net Assets Amount
---------- ------
TELECOMMUNICATIONS 21.2% $645,424,572
PRINTING AND PUBLISHING 7.3% 222,339,311
TECHNOLOGY 6.80% 208,409,277
CABLE SYSTEMS AND SATELLITE VIDEO 6.6% 199,545,075
GAMING/HOTEL 5.2% 156,907,687
6
<PAGE>
PORTFOLIO OVERVIEW
LARGEST PORTFOLIO CHANGES
DURING PAST SIX MONTHS
PRINCIPAL AMOUNT OR SHARES
--------------------------
HOLDINGS
ADDITIONS INCREASE 6/30/99
- --------- -------- --------
CORPORATE BONDS:
Advanced Micro Devices
11%, 8/1/2003 .............. $14,715,000 $49,715,000
American Media Operations
101/4%, 5/1/2009 ........... 25,000,000 25,000,000
Amkor Technology
101/2%, 5/1/2009 ........... 34,450,000 34,450,000
Charter Communications
Southeast Holdings
0% (9.92%), 4/1/2011 ....... 60,000,000 60,000,000
Fairchild Semiconductor
103/8%, 10/1/2007 .......... 15,000,000 15,000,000
Hollywood Casino
111/4%, 5/1/2007 ........... 15,095,000 15,095,000
ORBCOMM Global
14%, 8/15/2004 ............. 17,405,000 24,875,000
Viasystems 93/4%, 6/1/2007 .... 17,140,000 54,640,000
Viatel 111/2%, 3/15/2009 ...... 15,750,000 15,750,000
PREFERRED STOCKS:
Global Crossing Holding
101/2% ..................... 208,275 shs. 276,825 shs.
PRINCIPAL AMOUNT
-----------------------
HOLDINGS
REDUCTIONS INCREASE 6/30/99
- ---------- -------- --------
CORPORATE BONDS:
Casino America
121/2%, 8/1/2003 ........... $37,450,000 --
Charter Communications
Southeast Holdings
111/4%, 3/15/2006 .......... 21,500,000 --
Charter Communications
Southeast Holdings
0% (14%), 3/15/2007 ........ 26,750,000 --
Coast Hotels & Casinos
13%, 12/15/2002 ............ 19,750,000 --
EchoStar DBS
121/2%, 7/1/2002 ........... 33,500,000 --
Pathmark Stores
115/8%, 6/15/2002 .......... 14,785,000 $7,565,000
Price Communications
Cellular Holdings
111/4%, 8/15/2008 .......... 18,400,000 --
Showboat Marina Casino
Partnership
131/2%, 3/15/2003 .......... 14,500,000 --
TCI Satellite Entertainment
107/8%, 2/15/2007 .......... 39,500,000 --
Unisys 12%, 4/15/2003 ......... 15,000,000 --
Largest portfolio changes from the previous period to the current period are
based on cost of purchases and proceeds from sales of securities.
- --------------------------------------------------------------------------------
LARGEST PORTFOLIO HOLDINGS
JUNE 30, 1999
SECURITY VALUE
- -------- -----------
Paging Network 10%, 10/15/2008 .......... $57,892,500
Trump Atlantic City Funding
111/4%, 5/1/2006 ..................... 54,202,500
Advanced Micro Devices
11%, 8/1/2003 ........................ 50,212,150
Viasystems 93/4%, 6/1/2007 .............. 48,083,200
Price Communications Wireless
113/4%, 7/15/2007 .................... 44,116,875
NEXTLINK Communications
121/2%, 4/15/2006 .................... $41,355,500
Charter Communications Southeast
Holdings 0% (9.92%), 4/1/2011 ........ 37,500,000
Williams Scotsman 97/8%, 6/1/2007 ....... 36,690,625
Pinnacle Holdings 0% (10%),
3/15/2008 ............................ 36,007,125
Golden Sky Systems
123/8%, 8/1/2006 ..................... 33,750,000
- --------------------------------------------------------------------------------
7
<PAGE>
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999
PRINCIPAL
AMOUNT VALUE
------------ ------------
CORPORATE BONDS 84.5%
ADVERTISING 0.2%
Adams Outdoor Advertising
10 3/4%, due 3/15/2006 $ 6,700,000 $ 7,135,500
--------------
AEROSPACE 0.3%
Condor Systems 11 7/8%,
due 5/1/2009* 4,350,000 4,219,500
Fairchild 10 3/4%,
due 4/15/2009* 3,650,000 3,595,250
--------------
7,814,750
--------------
AUTOMOTIVE AND
RELATED 0.4%
Diamond Triumph Automotive
9 1/4%, due 4/1/2008* 13,725,000 13,381,875
BROADCASTING 2.3%
Capstar Broadcasting 0%
(12 3/4%+), due 2/1/2009 25,250,000 21,462,500
Cumulus Media 10 3/8%,
due 7/1/2008 12,150,000 12,939,750
Muzak 9 7/8%, due 3/15/2009* 14,000,000 13,930,000
Paxson Communications
11 5/8%, due 10/1/2002 8,150,000 8,516,750
SFX Broadcasting 10 3/4%,
due 5/15/2006 11,225,000 12,235,250
--------------
69,084,250
--------------
CABLE SYSTEMS AND
SATELLITE VIDEO 5.8%
Avalon Cable Holdings 0%
(11 7/8%+), due 12/1/2008* 17,775,000 11,864,812
Charter Communications
Southeast Holdings
8 5/8%, due 4/1/2009* 11,700,000 11,290,500
Charter Communications
Southeast Holdings 0%
(9.92%+), due 4/1/2011 60,000,000 37,500,000
CSC Holdings 10 1/2%,
due 5/15/2016 6,475,000 7,357,219
Digital Television Services
12 1/2%, due 8/1/2007 18,025,000 19,895,094
Echostar DBS 9 3/8%,
due 2/1/2009* 12,500,000 12,781,250
Intermedia Capital Partners IV
11 1/4%, due 8/1/2006 26,975,000 30,144,562
Northland Cable Television
10 1/4%, due 11/15/2007 13,750,000 14,403,125
Pegasus Communications
9 3/4%, due 12/1/2006 7,375,000 7,411,875
Rogers Cablesystems 11%,
due 12/1/2015 20,250,000 23,439,375
--------------
176,087,812
--------------
CELLULAR 3.3%
American Cellular 10 1/2%,
due 5/15/2008 $ 22,525,000 $ 22,975,500
Centennial Cellular 10 3/4%,
due 12/15/2008* 32,000,000 33,200,000
Price Communications
Wireless 11 3/4%,
due 7/15/2007 39,215,000 44,116,875
--------------
100,292,375
--------------
CHEMICALS 2.5%
Huntsman ICI Chemicals
10 1/8%, due 7/1/2009* 3,040,000 3,085,600
Koppers Industry 9 7/8%,
due 12/1/2007 17,175,000 16,831,500
Lyondell Chemical 9 7/8%,
due 5/1/2007 11,325,000 11,636,437
Lyondell Chemical 10 7/8%,
due 5/1/2009* 13,950,000 14,577,750
Texas Petrochemicals 11 1/8%,
due 7/1/2006 31,550,000 28,552,750
--------------
74,684,037
--------------
COMPUTER AND RELATED
SERVICES 0.7%
Unisys 11 3/4%,
due 10/15/2004 18,550,000 20,683,250
CONSUMER PRODUCTS 3.4%
AKI 10 1/2%, due 7/1/2008 7,650,000 7,458,750
Amscan Holdings 9 7/8%,
due 12/15/2007 8,750,000 7,273,438
Anchor Advanced Products
11 3/4%, due 4/1/2004 20,875,000 21,501,250
Diamond Brands Operating
10 1/8, due 4/15/2008 17,500,000 14,262,500
Diamond Brands 0% (12 7/8%+),
due 4/15/2009 11,975,000 2,454,875
French Fragrances 10 3/8%,
due 5/15/2007 15,435,000 15,666,525
Iron Age 9 7/8%, due 5/1/2008 21,850,000 17,370,750
Iron Age Holding 0%
(12 1/8%+), due 5/1/2009 6,550,000 1,899,500
Moll Industries 10 1/2%,
due 7/1/2008 7,950,000 7,035,750
United Industries 9 7/8%,
due 4/1/2009* 7,725,000 7,068,375
Windmere-Durable Holdings
10%, due 7/31/2008 1,925,000 1,848,000
--------------
103,839,713
--------------
See footnotes on page 12.
8
<PAGE>
PRINCIPAL
AMOUNT VALUE
------------ ------------
CONTAINERS 0.5%
US Can 10 1/8%,
due 10/15/2006 $ 15,275,000 $ 16,019,656
--------------
ENERGY 0.3%
Abraxas Petroleum 11 1/2%,
due 11/1/2004 12,750,000 8,096,250
--------------
ENVIRONMENTAL
SERVICES 0.1%
The IT Group 11 1/4%,
due 4/1/2009* 3,650,000 3,522,250
--------------
EQUIPMENT 2.3%
Budget Group 9 1/8%,
due 4/1/2006 3,630,000 3,394,050
Neff 10 1/4%, due 6/1/2008 14,660,000 15,026,500
Universal Compression 0%
(9 7/8%+), due 2/15/2008 11,225,000 7,071,750
Universal Compression
Holdings 0% (11 3/8%+),
due 2/15/2009 13,250,000 8,016,250
Williams Scotsman 9 7/8%,
due 6/1/2007 36,875,000 36,690,625
--------------
70,199,175
--------------
FINANCIAL SERVICES 1.9%
AMRESCO 10%,
due 3/15/2004 19,000,000 14,535,000
Dollar Financial Group 10 7/8%,
due 11/15/2006 20,475,000 20,372,625
Ocwen Capital Trust I 10 7/8%,
due 8/1/2027 16,700,000 13,109,500
Veritas Capital Trust 10%,
due 1/1/2028 12,500,000 10,031,250
--------------
58,048,375
--------------
FOOD 2.8%
AFC Enterprises 10 1/4%,
due 5/15/2007 16,775,000 17,278,250
AmeriKing 10 3/4%,
due 12/1/2006 14,050,000 14,260,750
AmeriServe Food Distributors
10 1/8%, due 7/15/2007 30,225,000 25,842,375
Carrols 9 1/2%, 12/1/2008 8,275,000 7,757,812
New World Pasta 9 1/4%,
due 2/15/2009* 4,230,000 4,134,825
Packaged Ice 9 3/4%,
due 2/1/2005 14,600,000 14,381,000
--------------
83,655,012
--------------
GAMING/HOTEL 5.2%
Alliance Gaming 10%,
due 8/1/2007 $ 9,625,000 $ 6,400,625
Ameristar Casinos 10 1/2%,
due 8/1/2004 25,650,000 26,355,375
Casino Magic of Louisiana
13%, due 8/15/2003 6,100,000 6,931,125
Hollywood Casino 11 1/4%,
due 5/1/2007* 15,095,000 15,283,687
Hollywood Park 9 1/4%,
due 2/15/2007 7,850,000 7,830,375
Isle of Capri Casinos 8 3/4%,
due 4/15/2009* 7,150,000 6,738,875
Trump Atlantic City Funding
11 1/4%, due 5/1/2006 60,225,000 54,202,500
Trump Hotels & Casino
Resorts Funding 15 1/2%,
due 6/15/2005 32,675,000 33,165,125
--------------
156,907,687
--------------
HEALTH CARE/MEDICAL
PRODUCTS 4.8%
ALARIS Medical 9 3/4%,
due 12/1/2006 25,600,000 25,088,000
ALARIS Medical 0% (11 1/8%+),
due 8/1/2008 19,575,000 10,717,312
Alliance Imaging 9 5/8%,
due 12/15/2005 14,850,000 14,293,125
Dade International 11 1/8%,
due 5/1/2006 27,275,000 28,843,312
Everest Healthcare Services
9 3/4%, due 5/1/2008 18,000,000 17,370,000
Genesis Health Ventures
9 7/8%, due 1/15/2009 2,125,000 1,710,625
Global Health Sciences 11%,
due 5/1/2008 30,925,000 23,039,125
Paracelsus Healthcare 10%,
due 8/15/2006 24,000,000 18,840,000
Sun Healthcare Group
9 1/2%, due 7/1/20070 26,700,000 5,073,000
--------------
144,974,499
--------------
INDUSTRIAL/
MANUFACTURING 3.8%
Airxcel 11%, due 11/15/2007 23,550,000 23,314,500
Alliance Laundry System
9 5/8%, due 5/1/2008 17,825,000 16,443,563
Berry Plastics 11%,
due 7/15/2007* 5,300,000 5,353,000
BPC Holding 12 1/2%,
due 6/15/2006 15,550,000 15,472,250
Coyne International Enterprises
11 1/4%, due 6/1/2008 13,800,000 12,903,000
Day International Group
9 1/2%, due 3/15/2008 19,475,000 17,917,000
- ----------
See footnotes on page 12.
9
<PAGE>
PRINCIPAL
AMOUNT VALUE
------------ ------------
INDUSTRIAL/
MANUFACTURING (CONTINUED)
Great Lakes Acquisition 0%
(13 1/8%+), due 5/15/2009 $ 6,350,000 $ 3,452,813
Great Lakes Carbon 10 1/4%,
due 5/15/2008 21,375,000 20,947,500
--------------
115,803,626
--------------
LEISURE 1.5%
Affinity Group Holding 11%,
due 4/1/2007 26,400,000 26,763,000
AMF Group 10 7/8%,
due 3/15/2006 6,375,000 5,323,125
Premier Parks 9 1/4%,
due 4/1/2006 12,475,000 12,350,250
--------------
44,436,375
--------------
METALS 0.6%
Renco Metals 11 1/2%,
due 7/1/2003 16,050,000 16,371,000
Royal Oak Mines 12 3/4%,
due 8/15/20060 20,750,000 3,112,500
--------------
19,483,500
--------------
PAGING 5.1%
Metrocall 9 3/4%,
due 11/1/2007 32,000,000 23,360,000
Metrocall 11%,
due 9/15/2008* 32,550,000 25,226,250
Mobile Telecommunication
Technologies 13 1/2%,
due 12/15/2002 23,075,000 26,190,125
Paging Network 10%,
due 10/15/2008 74,700,000 57,892,500
ProNet 11 7/8%,
due 6/15/2005 23,875,000 23,516,875
--------------
156,185,750
--------------
PAPER AND PACKAGING 0.5%
Consolidated Container
10 1/8%, due 7/15/2009* 1,125,000 1,141,875
Crown Paper 11%,
due 9/1/2005 19,625,000 13,246,875
--------------
14,388,750
--------------
PRINTING AND
PUBLISHING 6.4%
Advanstar Communications
9 1/4%, due 5/1/2008 20,000,000 19,750,000
American Lawyer Media
9 3/4%, due 12/15/2007 17,925,000 18,373,125
American Media Operations
10 1/4%, due 5/1/2009* 25,000,000 25,312,500
Liberty Group Publishing
9 3/8%, due 2/1/2008 23,825,000 22,514,625
Liberty Group Publishing 0%
(11 5/8%+), due 2/1/2009 $ 40,000,000 $ 21,800,000
NBC Acquisition 0% (10 3/4%+),
due 2/15/2009 38,350,000 17,065,750
Nebraska Book 8 3/4%,
due 2/15/2008 3,615,000 3,054,675
Perry-Judd 10 5/8%,
due 12/15/2007 17,125,000 17,039,375
Regional Independent Media
Group 10 1/2%, due 7/1/2008 23,600,000 23,718,000
TransWestern Holdings 0%
(11 7/8%+), due 11/15/2008 21,825,000 15,604,875
Von Hoffman Press 10 7/8%,
due 5/15/2007* 12,000,000 12,060,000
--------------
196,292,925
--------------
RECORD STORAGE 0.3%
Pierce Leahy 11 1/8%,
due 7/15/2006 7,650,000 8,338,500
--------------
RETAILING 2.0%
Central Tractor 10 5/8%,
due 4/1/2007 16,300,000 16,707,500
Cole National Group 9 7/8%,
due 12/31/2006 7,875,000 6,969,375
Frank's Nursery & Crafts
10 1/4%, due 3/1/2008 9,250,000 9,250,000
Jo-Ann Stores 10 3/8%,
due 5/1/2007 3,775,000 3,737,250
Musicland Group 9 7/8%,
due 3/15/2008 15,000,000 14,325,000
TM Group Holdings 11%,
due 5/15/2008 10,750,000 10,938,125
--------------
61,927,250
--------------
SUPERMARKETS 1.1%
Jitney-Jungle Stores of America
12%, due 3/1/2006 20,640,000 16,615,200
Jitney-Jungle Stores of America
10 3/8%, due 9/15/2007 25,625,000 9,353,125
Pathmark Stores 11 5/8%,
due 6/15/2002 7,565,000 7,735,213
--------------
33,703,538
--------------
TECHNOLOGY 6.5%
Advanced Micro Devices 11%,
due 8/1/2003 49,715,000 50,212,150
Amkor Technology 10 1/2%,
due 5/1/2009* 34,450,000 33,330,375
Fairchild Semiconductor
10 3/8%, due 10/1/2007* 15,000,000 14,812,500
Hadco 9 1/2%, due 6/15/2008 24,275,000 23,728,813
- ----------
See footnotes on page 12.
10
<PAGE>
PRINCIPAL
AMOUNT VALUE
------------ ------------
TECHNOLOGY (CONTINUED)
Integrated Circuit Systems
11 1/2%, due 5/15/2009* $ 3,400,000 $ 3,408,500
MCMS 93/4%, due 3/1/2008 21,300,000 11,821,500
Therma-Wave 10 5/8%,
due 5/15/2004 16,700,000 13,485,250
Viasystems 9 3/4%,
due 6/1/2007 54,640,000 48,083,200
--------------
198,882,288
--------------
TELECOMMUNICATIONS 18.0%
BTI Telecom 10 1/2%,
due 9/15/2007 22,750,000 19,565,000
CapRock Communications
12%, due 7/15/2008 23,100,000 23,908,500
CapRock Communications
11 1/2%, due 5/1/2009* 6,025,000 6,115,375
Crown Castle International 0%
(10 5/8%+), due 11/15/2007 14,625,000 10,237,500
Exodus Communications
11 1/4%, due 7/1/2008* 6,070,000 6,403,850
Exodus Communications
11 1/4%, due 7/1/2008 13,000,000 13,715,000
Facilicom International
10 1/2%, due 1/15/2008 25,325,000 19,880,125
GCI 9 3/4%, due 8/1/2007 21,250,000 21,037,500
GlobalStar 11 1/4%,
due 6/15/2004 32,000,000 21,440,000
GlobalStar 10 3/4%,
due 11/1/2004 21,520,000 14,095,600
Golden Sky DBS 0%
(13 1/2%+), due 3/1/2007* 12,425,000 7,455,000
Golden Sky Systems 12 3/8%,
due 8/1/2006 30,000,000 33,750,000
ICG Holdings 0% (11 5/8%+),
due 3/15/2007 18,900,000 13,182,750
IXC Communications 9%,
due 4/15/2008 8,675,000 8,328,000
Level 3 Communications 0%
(10 1/2%+), due 12/1/2008 7,525,000 4,665,500
Loral Space & Communications
9 1/2%, due 1/15/2006 8,175,000 7,132,688
Nextel Communications 0%
(10.65%+), due 9/15/2007 25,000,000 18,312,500
NEXTLINK Communications
12 1/2%, due 4/15/2006 38,650,000 41,355,500
NEXTLINK Communications
10 3/4%, due 6/1/2009 6,725,000 6,926,750
ORBCOMM Global 14%,
due 8/15/2004 24,875,000 24,253,125
Pinnacle Holdings 0%
(10%+), due 3/15/2008 62,350,000 36,007,125
Powertel 11 1/8%,
due 6/1/2007 $ 22,825,000 $ 22,254,375
PSINet 10%, due 2/15/2005 22,265,000 22,487,650
PSINet 11 1/2%,
due 11/1/2008 6,875,000 7,287,500
RCN 10%, due 10/15/2007 10,000,000 10,100,000
SpectraSite Holdings 0%
(11 1/4%+), due 4/15/2009* 25,000,000 14,125,000
Splitrock Services 11 3/4%,
due 7/15/2008 7,500,000 7,050,000
Talton Holdings 11%,
due 6/30/2007 20,075,000 19,071,250
Verio 10 3/8%, due 4/1/2005 16,300,000 16,666,750
Verio 11 1/4%, due 12/1/2008 13,875,000 14,603,438
Verio 13 1/2%, due 6/15/2004 23,250,000 26,156,250
Viatel 11 1/4%, due 4/15/2008 11,625,000 11,915,625
Viatel 11 1/2%, due 3/15/2009* 15,750,000 16,301,250
--------------
545,786,476
--------------
TEXTILE 0.6%
Supreme International
12 1/4%, due 4/1/2006 7,375,000 7,485,625
Tropical Sportswear Int'l. 11%,
due 6/15/2008 9,275,000 9,669,188
--------------
17,154,813
--------------
TRANSPORTATION 0.8%
Atlas Air 10 3/4%,
due 8/1/2005 25,175,000 25,804,375
--------------
UTILITIES 0.5%
Midland Cogeneration
Venture 11 3/4%,
due 7/23/2005 13,000,000 14,535,001
--------------
TOTAL CORPORATE BONDS
Cost ($2,785,069,643) 2,567,149,633
--------------
PREFERRED STOCKS 8.1%
BROADCASTING 1.3%
Capstar Broadcasting
Partnership 12% 89,164 shs. 10,365,315
Capstar Communications
12 5/8% 44,011 5,116,279
Cumulus Media 13 3/4% 8,728 9,622,620
Sinclair Capital 11 5/8% 145,000 15,188,750
--------------
40,292,964
--------------
- ----------
See footnotes on page 12.
11
<PAGE>
SHARES VALUE
------------ ------------
CABLE SYSTEMS AND
SATELLITE VIDEO 0.8%
Pegasus Communications
(Series A) 12 3/4% 18,685 $ 19,292,263
Pegasus Communications
(units) 12 3/4% 3,500 4,112,500
--------------
23,404,763
--------------
CELLULAR 0.8%
Dobson
Communications 13% 3,820 3,753,150
Rural Cellular 11 3/8% 18,788 19,022,850
--------------
22,776,000
--------------
FOOD 0.3%
Nebco Evans
Holding 11 1/4% 240,706 9,568,090
--------------
HEALTH CARE/MEDICAL
PRODUCTS 0.3%
River Holding 11 1/2% 155,158 10,221,033
--------------
INDUSTRIAL/
MANUFACTURING 0.3%
Day International
Group 12 1/4% 9,229 7,637,597
--------------
PRINTING AND
PUBLISHING 0.9%
Liberty Group
Publishing 14 3/4% 1,031,540 26,046,386
--------------
TECHNOLOGY 0.3%
MCMS 12 1/2% 126,605 9,526,989
--------------
TELECOMMUNICATIONS 3.1%
Crown Castle International
12 3/4% 16,928 17,816,451
Global Crossing
Holding 10 1/2% 276,825 29,412,656
IXC
Communications 12 1/2% 15,412 14,834,080
Nextel
Communications 11 1/8% 24,928 24,990,320
NEXTLINK
Communications 14% 163,769 8,311,281
--------------
95,364,788
--------------
TOTAL PREFERRED
STOCKS (Cost $265,952,007) 244,838,610
--------------
SHARES
OR WARRANTS VALUE
------------ ------------
CONVERTIBLE PREFERRED
STOCKS 1.0%
BROADCASTING 0.9%
Chancellor Media $3 153,010shs. $ 16,869,352
Chancellor Media $3* 100,000 11,025,000
--------------
27,894,352
--------------
TELECOMMUNICATIONS 0.1%
IXC Communications 6 3/4%* 90,655 3,320,239
IXC Communications 6 3/4% 15,950 584,169
--------------
3,904,408
--------------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(Cost $20,789,462) 31,798,760
--------------
COMMON STOCKS/
WARRANTS 0.8%
CABLE SYSTEMS AND
SATELLITE VIDEO
Pegasus Communications
(expiring 1/1/2007)o 875wts. 52,500
--------------
CELLULAR 0.8%
Price Communications 1,669,729shs. 25,045,943
--------------
TELECOMMUNICATIONS
Splitrock Services
(expiring 7/15/2008)o 4,340wts. 368,900
--------------
TOTAL COMMON STOCKS/
WARRANTS
(Cost $20,887,454) 25,467,343
--------------
SHORT-TERM HOLDINGS 3.2%
(Cost $95,800,000) 95,800,000
--------------
TOTAL INVESTMENTS 97.6%
(Cost $3,188,498,566) 2,965,054,346
OTHER ASSETS
LESS LIABILITIES 2.4% 73,831,477
--------------
NET ASSETS 100.0% $3,038,885,823
==============
- ----------
* 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.
12
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
ASSETS:
Investments, at value:
Long-term holdings (cost $3,092,698,566) $2,869,254,346
Short-term holdings (cost $95,800,000) . 95,800,000 $2,965,054,346
--------------
Cash ......................................................... 277,893
Receivable for interest and dividends ........................ 65,940,068
Receivable for Shares of Beneficial
Interest sold ............................................. 27,547,553
Receivable for securities sold ............................... 19,989,538
Expenses prepaid to shareholder
service agent ............................................. 484,754
Other ........................................................ 68,966
---------------
TOTAL ASSETS ................................................. 3,079,363,118
---------------
LIABILITIES:
Payable for securities purchased ............................. 15,811,578
Dividend payable ............................................. 10,673,601
Payable for Shares of Beneficial
Interest repurchased ...................................... 9,664,197
Accrued expenses and other ................................... 4,327,919
---------------
TOTAL LIABILITIES ............................................ 40,477,295
---------------
NET ASSETS ................................................... $3,038,885,823
===============
COMPOSITION OF NET ASSETS:
Shares of Beneficial Interest, at par (unlimited shares authorized; $0.001
par value; 457,064,882 shares outstanding):
Class A ...................................................... $ 158,438
Class B ...................................................... 175,505
Class C ...................................................... 1,540
Class D ...................................................... 121,582
Additional paid-in capital ................................... 3,316,335,045
Undistributed net investment income .......................... 4,630,076
Accumulated net realized loss ................................ (59,092,143)
Net unrealized depreciation of investments ................... (223,444,220)
---------------
NET ASSETS ................................................... $3,038,885,823
==============
NET ASSET VALUE PER SHARE:
CLASS A ($1,053,372,727 / 158,437,887 shares) ................ $6.65
======
CLASS B ($1,166,626,617 / 175,504,597 shares) ................ $6.65
======
CLASS C ($10,236,087 / 1,539,869 shares) ..................... $6.65
======
CLASS D ($808,650,392 / 121,582,529 shares) .................. $6.65
======
- ----------
See Notes to Financial Statements.
13
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
INVESTMENT INCOME:
Interest ....................................... $151,916,271
Dividends ...................................... 15,490,720
------------
TOTAL INVESTMENT INCOME ...................................... $167,406,991
EXPENSES:
Distribution and service fees .................. 10,985,770
Management fee ................................. 8,734,235
Shareholder account services ................... 2,910,039
Custody and related services ................... 225,961
Shareholder reports and communications ......... 149,353
Registration ................................... 115,860
Auditing and legal fees ........................ 35,456
Trustees' fees and expenses .................... 27,306
Miscellaneous .................................. 36,575
------------
TOTAL EXPENSES ............................................... 23,220,555
------------
NET INVESTMENT INCOME ........................................ 144,186,436
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments ............... (56,303,989)
Net change in unrealized depreciation
of investments ............................... (79,026,342)
------------
NET LOSS ON INVESTMENTS ...................................... (135,330,331)
------------
INCREASE IN NET ASSETS FROM OPERATIONS ....................... $ 8,856,105
============
- ----------
See Notes to Financial Statements.
14
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six months ended Year ended
June 30, 1999 December 31, 1998
---------------- -----------------
OPERATIONS:
<S> <C> <C>
Net investment income ........................ $ 144,186,436 $ 218,868,384
Net realized loss on investments ............. (56,303,989) (1,259,258)
Net change in unrealized appreciation
(depreciation) of investments ............. (79,026,342) (214,244,874)
--------------- ---------------
INCREASE IN NET ASSETS FROM OPERATIONS ....... 8,856,105 3,364,252
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ................................... (54,067,819) (87,074,109)
Class B ................................... (52,483,006) (71,515,694)
Class C ................................... (29,665) --
Class D ................................... (37,761,982) (57,845,902)
Net realized gain on investments:
Class A ................................... -- (2,685,568)
Class B ................................... -- (2,340,978)
Class D ................................... -- (1,929,912)
--------------- ---------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS .... (144,342,472) (223,392,163)
--------------- ---------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Net proceeds from sales of shares ............ 598,180,372 1,553,522,257
Investment of dividends ...................... 78,595,083 116,307,811
Exchanged from associated Funds .............. 373,083,289 559,311,795
Shares issued in payment of gain distributions -- 4,984,811
--------------- ---------------
Total ........................................ 1,049,858,744 2,234,126,674
--------------- ---------------
Cost of shares repurchased ................... (321,510,876) (398,760,907)
Exchanged into associated Funds .............. (412,137,363) (623,869,737)
--------------- ---------------
Total ........................................ (733,648,239) (1,022,630,644)
--------------- ---------------
INCREASE IN NET ASSETS FROM
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST ....................... 316,210,505 1,211,496,030
--------------- ---------------
INCREASE IN NET ASSETS ....................... 180,724,138 991,468,119
NET ASSETS:
Beginning of period .......................... 2,858,161,685 1,866,693,566
--------------- ---------------
END OF PERIOD (including undistributed net
investment income of $4,630,076 and
$4,786,112, respectively) ................. $ 3,038,885,823 $ 2,858,161,685
=============== ===============
</TABLE>
- ----------
See Notes to Financial Statements.
15
<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 four classes of shares. 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 charge ("CDSC") 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% and a service fee of up to
0.25% on an annual basis, and a CDSC, 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. The
Fund began offering Class C shares on May 27, 1999. Class C shares are sold with
an initial sales charge of up to 1% and 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 CDSC, if
applicable, of 1% imposed on redemptions made within 18 months 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 CDSC, if applicable, of 1% imposed on redemptions made within one
year of purchase. The four 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 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 discounts but does
not amortize premiums on purchases of portfolio securities.
D. MULTIPLE CLASS ALLOCATIONS -- All income, expenses (other than class-specific
expenses), and realized and unrealized gains or losses are allocated daily to
each class of shares based upon the relative value of shares of each class.
Class-specific expenses, which include distribution and service fees and any
other items that are specifically attributable to a particular class, are
charged directly to such class. For the six months ended June 30, 1999,
distribution and service fees were the only class-specific expenses.
E. 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 six months ended June 30, 1999, amounted to $875,031,108 and $587,377,385,
respectively.
At June 30, 1999, 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 $49,896,917 and $273,341,137, respectively.
4. SHORT-TERM INVESTMENTS -- At June 30, 1999, the Fund owned short-term
investments which matured in less than seven days.
16
<PAGE>
Notes to Financial Statements
5. Transactions in Shares of Beneficial Interest -- The Fund has authorized
unlimited shares of $0.001 par value Shares of Beneficial Interest. Transactions
in Shares of Beneficial Interest were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
------------------------------------ -----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
Net proceeds from
sales of shares 30,210,010 $ 208,369,451 80,413,014 $ 594,288,030
Investment of
dividends 4,567,491 31,407,491 6,694,630 48,928,569
Exchanged from
associated Funds 45,580,815 313,890,777 61,852,001 452,271,367
Shares issued in
payment of gain
distributions -- -- 258,290 1,968,170
- ------------------------------------------------------------------------------- ----------------------------------
Total 80,358,316 553,667,719 149,217,935 1,097,456,136
- ------------------------------------------------------------------------------- ----------------------------------
Cost of shares
repurchased (24,722,694) (169,877,251) (30,909,303) (226,531,287)
Exchanged into
associated Funds (48,380,640) (333,270,692) (66,540,471) (488,820,731)
- ------------------------------------------------------------------------------- ----------------------------------
Total (73,103,334) (503,147,943) (97,449,774) (715,352,018)
- ------------------------------------------------------------------------------- ----------------------------------
Increase in Shares 7,254,982 $ 50,519,776 51,768,161 $ 382,104,118
- ------------------------------------------------------------------------------- ----------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
------------------------------------ -----------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------- -----------------------------------
Net proceeds from
sales of shares 33,451,068 $ 230,600,859 78,733,227 $ 579,656,818
Investment of
dividends 3,548,680 24,378,400 4,467,385 32,568,827
Exchanged from
associated Funds 4,376,475 30,248,420 6,769,539 48,425,027
Shares issued in
payment of gain
distributions -- -- 201,710 1,537,030
- ------------------------------------------------------------------------------- ----------------------------------
Total 41,376,223 285,227,679 90,171,861 662,187,702
- ------------------------------------------------------------------------------- ----------------------------------
Cost of shares
repurchased (9,000,716) (61,794,930) (8,616,802) (62,888,247)
Exchanged into
associated Funds (6,306,684) (43,221,145) (9,097,294) (65,245,307)
- ------------------------------------------------------------------------------- ----------------------------------
Total (15,307,400) (105,016,075) (17,714,096) (128,133,554)
- ------------------------------------------------------------------------------- ----------------------------------
Increase in Shares 26,068,823 $ 180,211,604 72,457,765 $ 534,054,148
- ------------------------------------------------------------------------------- ----------------------------------
MAY 27, 1999*
TO JUNE 30, 1999
------------------------------------
CLASS D SHARES AMOUNT
- -------------------------------------------------------------------------------
Net proceeds from
sales of shares 1,539,600 $10,257,543
Investment of
dividends 602 3,999
- -------------------------------------------------------------------------------
Total 1,540,202 10,261,542
- -------------------------------------------------------------------------------
Cost of shares
repurchased (333) (2,214)
- -------------------------------------------------------------------------------
Total (333) (2,214)
- -------------------------------------------------------------------------------
Increase in Shares 1,539,869 $10,259,328
- -------------------------------------------------------------------------------
* Commencement of offering of shares.
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31, 1998
------------------------------------ -----------------------------------
CLASS D SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------- -----------------------------------
Net proceeds from
sales of shares 21,565,257 $ 148,952,519 51,489,047 $ 379,577,409
Investment of
dividends 3,317,834 22,805,193 4,758,316 34,810,415
Exchanged from
associated Funds 4,199,378 28,944,092 8,049,511 58,615,401
Shares issued in
payment of gain
distributions -- -- 194,174 1,479,611
- ------------------------------------------------------------------------------- ----------------------------------
Total 29,082,469 200,701,804 64,491,048 474,482,836
- ------------------------------------------------------------------------------- ----------------------------------
Cost of shares
repurchased (13,065,384) (89,836,481) (14,976,376) (109,341,373)
Exchanged into
associated Funds (5,203,115) (35,645,526) (9,593,313) (69,803,699)
- ------------------------------------------------------------------------------- ----------------------------------
Total (18,268,499) (125,482,007) (24,569,689) (179,145,072)
- ------------------------------------------------------------------------------- ----------------------------------
Increase in Shares 10,813,970 $ 75,219,797 39,921,359 $ 295,337,764
- ------------------------------------------------------------------------------- ----------------------------------
</TABLE>
6. MANAGEMENT FEE, DISTRIBUTION SERVICES, AND OTHER TRANSACTIONS -- J. & W.
Seligman & Co. Incorporated (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 and
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 0.58% per
annum of the Fund's average daily net assets.
Seligman Advisors, Inc. (the "Distributor"), agent for the distribution of
the Fund's shares, and an affiliate of the Manager, received concessions of
$385,816 from sales of Class A shares. Commissions of $2,951,295 and $91,251
were paid to dealers from sales of Class A and Class C shares, respectively.
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distribution of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive a continuing fee of up to 0.25% on an annual basis,
payable quarterly, of the average daily net assets of the Class A shares
attributable to the particular service organizations for providing personal
services and/or the maintenance of shareholder accounts. The Distributor charges
such fees to the Fund pursuant to the Plan. For the six months ended June 30,
1999, fees incurred under the Plan aggregated $1,343,311 or 0.25% per annum of
the average daily net assets of Class A shares.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Under the Plan, with respect to Class B shares, Class C shares, 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, Class C, and Class D shares for which the
organizations are responsible; and, for Class C and Class D shares, 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 this fee to a third
party (the "Purchaser"), which provides funding to the Distributor to enable it
to pay commissions to dealers at the time of the sale of the related Class B
shares.
For the six months ended June 30, 1999, fees incurred under the Plan,
equivalent to 1% per annum of the average daily net assets of Class B, Class C,
and Class D shares, amounted to $5,606,983, $3,610 and $4,031,866, respectively.
The Distributor is entitled to retain any CDSC imposed on certain redemptions
of Class A and Class C shares occurring within 18 months of purchase and on
redemptions of Class D shares occurring within one year of purchase. For the six
months ended June 30, 1999, such charges amounted to $268,895.
The Distributor has sold its rights to collect any CDSC imposed on
redemptions of Class B shares to the Purchaser. In connection with the sale of
its rights to collect any CDSC 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 of such payments
retained by the Distributor, for the six months ended June 30, 1999, amounted to
$230,349.
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 six months
ended June 30, 1999, Seligman Services, Inc. received commissions of $31,160
from the sales of shares of the Fund. Seligman Services, Inc. also received
distribution and service fees of $31,058, pursuant to the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged the Fund at cost $2,910,039 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. Trustees may elect to have their
deferred fees accrue interest or earn a return based on the performance of the
Fund or other funds in the Seligman Group of Investment Companies. The cost of
such fees and earnings accrued thereon is included in trustees' fees and
expenses, and the accumulated balance thereof at June 30, 1999, of $40,294 is
included in other liabilities. Deferred fees and related accrued earnings are
not deductible for federal income tax purposes until such amounts are paid.
7. CAPITAL LOSS CARRYFORWARD -- At December 31, 1998, the Fund had a net capital
loss carryforward for federal income tax purposes of $443,841, which is
available for offset against future taxable net capital gains, expiring in 2006.
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.
8. COMMITTED LINE OF CREDIT -- The Fund is a participant in a joint $750 million
committed line of credit that is shared by substantially all funds in the
Seligman Group of Investment Companies. The Fund's borrowings are limited to 10%
of its net assets. Borrowings pursuant to the credit facility are subject to
interest at a rate equal to the overnight federal funds rate plus 0.50%. The
Fund incurs a commitment fee of 0.08% per annum on its share of 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 expires 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.
18
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below are intended to help you understand each Class's financial
performance for the past five and one-half years or from its inception if less
than five and one-half years. Certain information reflects financial results for
a single share of Beneficial Interest of a Class that was held throughout the
periods shown. Per share amounts are calculated using average shares
outstanding. "Total return" shows the rate that you would have earned (or lost)
on an investment in each Class, assuming you reinvested all your dividends and
capital gain distributions. Total returns do not reflect any sales charges and
are not annualized for periods of less than one year.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED -------------------------------------------------------------
6/30/99 1998 1997 1996 1995 1994
------- ---- ---- ---- ---- ----
PER SHARE DATA:
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................ $6.95 $7.55 $7.25 $6.96 $6.35 $6.94
----- ----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................... 0.34 0.70 0.70 0.69 0.65 0.65
Net realized and unrealized gain
(loss) on investments ............................. (0.29) (0.59) 0.28 0.29 0.61 (0.59)
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS .................... 0.05 0.11 0.98 0.98 1.26 0.06
----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income ................ (0.35) (0.69) (0.68) (0.69) (0.65) (0.65)
Distributions from net realized capital gains ....... -- (0.02) -- -- -- --
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ................................. (0.35) (0.71) (0.68) (0.69) (0.65) (0.65)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ...................... $6.65 $6.95 $7.55 $7.25 $6.96 $6.35
===== ===== ===== ===== ===== =====
TOTAL RETURN: 0.62% 1.32% 14.26% 14.82% 20.72% 0.78%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) ............ $1,053,373 $1,050,340 $750,461 $408,303 $182,129 $59,033
Ratio of expenses to average net assets ............. 1.07%+ 1.10% 1.14% 1.16% 1.09% 1.13%
Ratio of net income to average net assets ........... 10.11%+ 9.46% 9.42% 9.80% 9.73% 9.73%
Portfolio turnover rate ............................. 20.83% 35.34% 61.78% 119.33% 173.39% 184.75%
- ----------
See footnotes on page 20.
</TABLE>
19
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------------------ --------
SIX MONTHS YEAR ENDED DECEMBER 31, 4/22/96* 5/27/99*
ENDED ------------------------------ TO TO
6/30/99 1998 1997 12/31/96 6/30/99
------- ---- ---- -------- -------
PER SHARE DATA:
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........ $6.95 $7.55 $7.26 $7.06 $6.75
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ....................... 0.32 0.64 0.64 0.45 0.03
Net realized and unrealized gain
(loss) on investments ..................... (0.30) (0.59) 0.28 0.20 (0.07)
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ............ 0.02 0.05 0.92 0.65 (0.04)
----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income ........ (0.32) (0.63) (0.63) (0.45) (0.06)
Distributions from net
realized capital gains .................... -- (0.02) -- -- --
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ......................... (0.32) (0.65) (0.63) (0.45) (0.06)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD .............. $6.65 $6.95 $7.55 $7.26 $6.65
===== ===== ===== ===== =====
TOTAL RETURN: 0.25% 0.57% 13.24% 9.11% (0.93)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) .... $1,166,627 $1,037,994 $581,235 $147,970 $10,236
Ratio of expenses to average net assets ..... 1.82%+ 1.85% 1.90% 1.90%+ 1.63%+
Ratio of net income to average net assets ... 9.36%+ 8.71% 8.66% 9.11%+ 7.41%+
Portfolio turnover rate ..................... 20.83% 35.34% 61.78% 119.33%++ 20.83%**
</TABLE>
<TABLE>
<CAPTION>
CLASS D
-----------------------------------------------------------------------
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED -------------------------------------------------------------
6/30/99 1998 1997 1996 1995 1994
------- ---- ---- ---- ---- ----
PER SHARE DATA:
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................ $6.95 $7.55 $7.26 $6.96 $6.35 $6.94
----- ----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................... 0.32 0.64 0.64 0.64 0.60 0.57
Net realized and unrealized gain
(loss) on investments ............................. (0.30) (0.59) 0.28 0.30 0.61 (0.59)
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS .................... 0.02 0.05 0.92 0.94 1.21 (0.02)
----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income ................ (0.32) (0.63) (0.63) (0.64) (0.60) (0.57)
Distributions from net realized capital gains ....... -- (0.02) -- -- -- --
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ................................. (0.32) (0.65) (0.63) (0.64) (0.60) (0.57)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ...................... $6.65 $6.95 $7.55 $7.26 $6.96 $6.35
===== ===== ===== ===== ===== =====
TOTAL RETURN: 0.25% 0.57% 13.24% 14.10% 19.67% (0.30)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) ............ $808,650 $769,828 $534,998 $265,528 $90,153 $9,249
Ratio of expenses to average net assets ............. 1.82%+ 1.85% 1.90% 1.92% 1.91% 2.19%
Ratio of net income to average net assets ........... 9.36%+ 8.71% 8.66% 9.02% 8.86% 8.68%
Portfolio turnover rate ............................. 20.83% 35.34% 61.78% 119.33% 173.39% 184.75%
</TABLE>
+ Annualized.
++ For the year ended December 31, 1996.
* Commencement of offering of shares.
** For the six months ended June 30, 1999.
See Notes to Financial Statements.
20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE TRUSTEES AND SHAREHOLDERS,
SELIGMAN HIGH-YIELD BOND SERIES:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman High-Yield Bond Series as of June 30,
1999, the related statements of operations for the six months then ended and of
changes in net assets for the six months then ended and for the year ended
December 31, 1998, and the financial highlights for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1999, 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 referred to
above present fairly, in all material respects, the financial position of
Seligman High-Yield Bond Series as of June 30, 1999, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New York, New York
August 6, 1999
21
<PAGE>
TRUSTEES
JOHN R. GALVIN 2, 4
DEAN, Fletcher School of Law and Diplomacy
at Tufts University
DIRECTOR, Raytheon Company
ALICE S. ILCHMAN 3, 4
TRUSTEE, Committee for Economic Development
CHAIRMAN, The Rockefeller Foundation
FRANK A. MCPHERSON 2, 4
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
DIRECTOR, Conoco Inc.
JOHN E. MEROW 2, 4
RETIRED CHAIRMAN AND SENIOR PARTNER,
Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Industries, Inc.
DIRECTOR, New York Presbyterian Hospital
BETSY S. MICHEL 2, 4
TRUSTEE, The Geraldine R. Dodge Foundation
WILLIAM C. MORRIS 1
CHAIRMAN
CHAIRMAN OF THE BOARD,
J. & W. Seligman & Co. Incorporated
CHAIRMAN, Carbo Ceramics Inc.
DIRECTOR, Kerr-McGee Corporation
JAMES C. PITNEY 3, 4
RETIRED PARTNER, Pitney, Hardin, Kipp & Szuch, Law Firm
JAMES Q. RIORDAN 3, 4
DIRECTOR, KeySpan Energy Corporation
TRUSTEE, Committee for Economic Development
DIRECTOR, Public Broadcasting Service
RICHARD R. SCHMALTZ 1
MANAGING DIRECTOR, DIRECTOR OF INVESTMENTS,
J. & W. Seligman & Co. Incorporated
TRUSTEE EMERITUS, Colby College
ROBERT L. SHAFER 3, 4
RETIRED VICE PRESIDENT, Pfizer Inc.
JAMES N. WHITSON 2, 4
DIRECTOR AND CONSULTANT, Sammons Enterprises, Inc.
DIRECTOR, C-SPAN
DIRECTOR, CommScope, Inc.
BRIAN T. ZINO 1
PRESIDENT
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.
DIRECTOR, ICI Mutual Insurance Company
MEMBER OF THE BOARD OF GOVERNORS,
Investment Company Institute
TRUSTEE EMERITUS
FRED E. BROWN
DIRECTOR AND CONSULTANT,
J. & W. Seligman & Co. Incorporated
- ----------------
Member: 1 Executive Committee
2 Audit Committee
3 Trustee Nominating Committee
4 Board Operations Committee
22
<PAGE>
EXECUTIVE OFFICERS
WILLIAM C. MORRIS
CHAIRMAN
BRIAN T. ZINO
PRESIDENT
DANIEL J. CHARLESTON
VICE PRESIDENT
LAWRENCE P. VOGEL
VICE PRESIDENT
THOMAS G. ROSE
TREASURER
FRANK J. NASTA
SECRETARY
FOR MORE INFORMATION
MANAGER
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
GENERAL COUNSEL
Sullivan & Cromwell
INDEPENDENT AUDITORS
Deloitte & Touche LLP
GENERAL DISTRIBUTOR
Seligman Advisors, Inc.
100 Park Avenue
New York, NY 10017
SHAREHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
IMPORTANT TELEPHONE NUMBERS
(800) 221-2450 Shareholder Services
(800) 445-1777 Retirement Plan Services
(212) 682-7600 Outside the United States
(800) 622-4597 24-Hour Automated Telephone Access Service
23
<PAGE>
GLOSSARY OF FINANCIAL TERMS
CAPITAL GAIN DISTRIBUTION -- A payment to mutual fund shareholders of profits
realized on the sale of securities in a fund's portfolio.
CAPITAL APPRECIATION/DEPRECIATION -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.
COMPOUNDING -- The change in the value of an investment as shareholders receive
earnings on their investment's earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will not be based on the
original $1,000, but on the $1,070, which includes the first year's earnings.
CONTINGENT DEFERRED SALES CHARGE (CDSC) -- Depending on the class of shares
owned, a fee charged by a mutual fund when shares are sold back to the fund. The
CDSC expires after a fixed time period.
DIVIDEND -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
DIVIDEND YIELD -- A measurement of a fund's dividend as a percentage of the
maximum offering price or net asset value.
EXPENSE RATIO -- The cost of doing business for a mutual fund, expressed as a
percent of the fund's net assets.
INVESTMENT OBJECTIVE -- The shared investment goal of a fund and its
shareholders.
MANAGEMENT FEE -- The amount paid by a mutual fund to its investment advisor(s).
MULTIPLE CLASSES OF SHARES -- Although an individual mutual fund invests in only
one portfolio of securities, it may offer investors several purchase options
which are "classes" of shares. Multiple classes permit shareholders to choose
the fee structure that best meets their needs and goals. Generally, each class
will differ in terms of how and when sales charges and certain fees are
assessed.
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (NASD) -- A self-regulatory
body with authority over firms that distribute mutual funds.
NET ASSET VALUE (NAV) PER SHARE -- The market worth of one fund share, obtained
by adding a mutual fund's total assets (securities, cash, and any accrued
earnings), subtracting liabilities, and dividing the resulting net assets by the
number of shares outstanding.
OFFERING PRICE -- The price at which a mutual fund's share can be purchased. The
offering price per share is the current net asset value plus any sales charge.
PORTFOLIO TURNOVER -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
PROSPECTUS -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission (SEC), such as a fund's investment objective and policies, services,
investment restrictions, how shares are bought and sold, fund fees and other
charges, and the fund's financial highlights.
SEC YIELD -- SEC Yield refers to the net income earned by a fund during a recent
30-day period. This income is annualized and then divided by the maximum
offering price per share on the last day of the 30-day period. The SEC Yield
formula reflects semiannual compounding.
SECURITIES AND EXCHANGE COMMISSION -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
STATEMENT OF ADDITIONAL INFORMATION -- A document that contains more detailed
information about an investment company and that supplements the prospectus. It
is available at no charge upon request.
TOTAL RETURN -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The AVERAGE ANNUAL TOTAL
RETURN represents the average annual compounded rate of return for the periods
presented.
YIELD ON SECURITIES -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.
- ----------
Adapted from the Investment Company Institute's 1999 MUTUAL FUND FACT BOOK.
24
<PAGE>
THIS REPORT IS INTENDED ONLY FOR THE INFORMATION OF SHAREHOLDERS OR THOSE WHO
HAVE RECEIVED THE OFFERING PROSPECTUS COVERING SHARES OF BENEFICIAL INTEREST OF
SELIGMAN HIGH-YIELD BOND SERIES, WHICH CONTAINS INFORMATION ABOUT THE SALES
CHARGES, MANAGEMENT FEE, AND OTHER COSTS. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING OR SENDING MONEY.
SELIGMAN ADVISORS, INC.
AN AFFILIATE OF
[LOGO]
J.&W. Seligman & Co.
INCORPORATED
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
TXHY3 6/99 Printed on Recycled Paper
