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. 27 |X|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 28 |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)
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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):
|_| immediately upon filing pursuant to paragraph (b)
|X| on May 28, 1999 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.
<PAGE>
SELIGMAN
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HIGH-YIELD
BOND SERIES
The Securities and Exchange Commission has neither approved nor disapproved this
Fund, and it has not determined the prospectus to be accurate or adequate. Any
representation to the contrary is a criminal offense.
An investment in this Fund or any other fund cannot provide a complete
investment program. The suitability of an investment in the Fund should be
considered based on the investment objective, strategies and risks described
herein, considered in light of all of the other investments in your portfolio,
as well as your risk tolerance, financial goals and time horizons. We recommend
that you consult your financial advisor to determine if this Fund is suitable
for you.
TXHY1 6/99
[GRAPHIC]
PROSPECTUS
JUNE 1, 1999
------
Seeking to Maximize Current
Income by Investing
in a Diversified Portfolio
of High-Yielding
Corporate Bonds
managed by
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
<PAGE>
Table of Contents
The Fund
Investment Objective/Principal Strategies 1
Principal Risks 2
Past Performance 3
Fees and Expenses 4
Management 5
Year 2000 6
Shareholder Information
Deciding Which Class of Shares to Buy 7
Pricing of Fund Shares 9
Opening Your Account 9
How to Buy Additional Shares 10
How to Exchange Shares Among
the Seligman Mutual Funds 10
How to Sell Shares 11
Important Policies That May Affect
Your Account 12
Dividends and Capital Gain Distributions 13
Taxes 13
The Seligman Mutual Funds 14
Financial Highlights 15
How to Contact Us 17
For More Information back cover
TIMES CHANGE ... VALUES ENDURE
<PAGE>
The Fund
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The Fund's objective is to produce maximum current income.
The Fund uses the following principal strategies to seek its objective:
The Fund has a fundamental policy which requires that, except for temporary
defensive purposes, it invest at least 80% of the value it its total assets in
high-yielding, income-producing corporate bonds.
The Fund invests in a diversified range of high-yield, high-risk, medium and
lower quality corporate bonds and notes. Generally, bonds and notes providing
the highest yield are unrated or carry lower ratings (Baa or lower by Moody's
Investors Service, Inc. (Moody's) or BBB or lower by Standard and Poor's Rating
Service (S&P)). The Fund may purchase restricted securities that may be offered
and sold only to "qualified institutional buyers" under Rule 144A of the
Securities Act of 1933 (Rule 144A Securities).
The Fund uses a bottom-up security selection process. This means the investment
manager concentrates first on individual company fundamentals, before industry
considerations. The investment manager then looks at the particular bond
characteristics of the securities considered for purchase. In selecting
individual securities, the investment manager looks to identify companies that
it believes display one or more of the following:
o Strong operating cash flow and margins
o Improving financial ratios (i.e., creditworthiness)
o Leadership in market share or other competitive advantage
o Superior management
o Attractive relative pricing
The Fund will generally sell a security if the investment manager believes that
the company displays deteriorating cash flows, an ineffective management team,
or an unattractive relative valuation.
The Fund may invest up to 20% 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 FDIC member banks having total assets of
more than $1 billion; bankers' acceptances and interest-bearing savings or time
deposits of such banks; prime commercial paper; securities issued, guaranteed,
or insured by the US Government, its agencies or instrumentalities; and other
income-producing cash items, including repurchase agreements.
The Fund may invest up to 15% of its net assets in illiquid securities (i.e.,
securities that cannot be readily sold). Rule 144A Securities deemed to be
liquid by the investment manager are not included in this limitation. The Fund
may invest up to 10% of its total assets in debt securities of foreign issuers.
In accordance with its objective of producing maximum current income, the Fund
may invest up to 10% of its total assets in preferred stock, including
non-investment grade preferred stock. While the Fund favors cash-paying bonds
over deferred pay securities, it may invest in "zero-coupon" bonds (interest
payments accrue until maturity) and "pay-in-kind" bonds (interest payments are
made in additional shares).
The Fund may, from time to time, take temporary defensive positions that are
inconsistent with its principal strategies in seeking to minimize extreme
volatility caused by adverse market, economic, or other conditions. This could
prevent the Fund from achieving its objective.
Except for its fundamental policy, the Fund may change its principal strategies
if the Fund's Board of Directors believes doing so is consistent with the Fund's
objective. The Fund's objective and its fundamental policy may be changed only
with shareholder approval.
As with any mutual fund, there is no guarantee the Fund will achieve its
objective.
1
<PAGE>
PRINCIPAL RISKS
The Fund's net asset value, yield and total return will fluctuate with
fluctuations in the yield and market value of the individual securities held by
the Fund. The types of securities in which the Fund invests are generally
subject to higher volatility in yield and market value than securities of higher
quality. Factors that may affect the performance of the securities held by the
Fund are discussed below.
Higher-yielding, higher-risk, medium and lower quality corporate bonds and
notes, like the securities in which the Fund invests, are subject to greater
risk of loss of principal and income than higher-rated bonds and notes and are
considered to be predominantely speculative with respect to the issuer's
capacity to pay interest and repay principal.
An economic downturn could adversely impact issuers' ability to pay interest and
repay principal and could result in issuers' defaulting on such payments. The
value of the Fund's 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.
Lower-rated and unrated corporate bonds and notes 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 Fund difficulties in valuing and selling its
securities.
Foreign securities or illiquid securities in the Fund's portfolio involve higher
risk and may subject the Fund to higher price volatility. Investing in
securities of foreign issuers involves risks not associated with US investments,
including settlement risks, currency fluctuations, foreign taxation, differences
in financial reporting practices, and changes in political conditions.
"Zero-coupon" and "pay-in-kind" securities may be subject to greater
fluctuations in value because they tend to be more speculative than income
bearing securities. Fluctuations in the market prices of these securities owned
by the Fund will result in corresponding fluctuations and volatility in the net
asset value of the shares of the Fund. Additionally, because they do not pay
current income, they will detract from the Fund's objective of producing maximum
current income.
The Fund may actively and frequently trade securities in its portfolio to carry
out its principal strategies. A high portfolio turnover rate increases
transaction costs which may increase the Fund's expenses. There may also be
adverse tax consequences for investors in the Fund due to an increase in
short-term capital gains.
An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE>
PAST PERFORMANCE
The Fund offers four Classes of shares. The information below provides some
indication of the risks of investing in the Fund by showing how the performance
of Class A shares has varied year to year, as well as how the performance of
each Class (except Class C) compares to one widely-used measure of high-yield
corporate bond performance and one measure of the performance of mutual funds
with investment objectives similar to the Fund. Class C is a new class of
shares, effective June 1, 1999, so no performance information is available.
The following performance information is designed to assist you in comparing the
returns of the Fund with the returns of other mutual funds. How the Fund has
performed in the past, however, is not necessarily an indication of how the Fund
will perform in the future. Total returns will vary between each Class of shares
due to the different fees and expenses of each Class.
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table below the chart
do reflect the effect of the applicable sales charges. Both the bar chart and
table assume that all dividends and capital gain distributions were reinvested.
Class A Annual Total Returns
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR GRAPH IN THE PRINTED MATERIALS.]
1989 3.84%
1990 -7.27%
1991 30.70%
1992 20.08%
1993 19.19%
1994 0.78%
1995 20.72%
1996 14.82%
1997 14.26%
1998 1.32%
Best quarter return: 12.22% - quarter ended 3/31/91
Worst quarter return: -6.77% - quarter ended 9/30/98
Average Annual Total Returns - Periods Ended 12/31/98
<TABLE>
<CAPTION>
Class B Class D
One Five Ten Since Inception Since Inception
Year Years Years 4/22/96 9/21/93
------- ------- ------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Class A -3.54% 9.01% 10.74% -- --
Class B -4.03 n/a n/a 7.44% --
Class D -0.35 9.17 n/a -- 9.58%
Merrill Lynch High Yield Master Index 3.66 9.01 11.08 9.69(1) 9.27(2)
Lipper High Current Yield -0.44 7.65 9.47 8.35(1) 8.18(2)
</TABLE>
The Merrill Lynch High Yield Master Index and the Lipper High Current Yield are
unmanaged benchmarks that assume the reinvestment of dividends and exclude the
effect of fees or sales charges. The Merrill Lynch High Yield Master Index
measures the performance of high yield corporate bonds, and the Lipper High
Current Yield measures the performance of mutual funds with investment
objectives similar to the Fund.
(1) From April 30, 1996.
(2) From September 30, 1993.
3
<PAGE>
FEES AND EXPENSES
The table below summarizes the fees and expenses that you may pay as a
shareholder of the Fund. Each Class of shares has its own sales charge schedule
and is subject to different ongoing 12b-1 fees. Shareholder fees are charged
directly to you. Annual fund operating expenses are deducted from Fund assets
and are therefore paid indirectly by you and other shareholders of the Fund.
<TABLE>
<CAPTION>
Shareholder Fees Class A Class B Class C Class D
- ---------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) on Purchases
(as a % of offering price) ........................................ 4.75%(1) none 1% none
Maximum Contingent Deferred Sales Charge (Load) (CDSC)
on Redemptions (as a % of original purchase price or
current net asset value, whichever is less)........................ none(1) 5% 1% 1%
Annual Fund Operating Expenses for Fiscal Year 1998
- ---------------------------------------------------
(as a percentage of average net assets)
Management Fees ..................................................... .59% .59% .59% .59%
Distribution and/or Service (12b-1) Fees ............................ .25% 1.00% 1.00% 1.00%
Other Expenses ...................................................... .26% .26% .26% .26%
---- ---- ---- ----
Total Annual Fund Operating Expenses ................................ 1.10% 1.85% 1.85% 1.85%
==== ==== ==== ====
</TABLE>
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
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Management Fees:
Fees paid out of Fund assets to the investment manager to compensate it for
managing the Fund.
12b-1 Fees:
Fees paid by each Class, pursuant to a plan adopted by the Fund under Rule 12b-1
of the Investment Company Act of 1940. The plan allows each Class to pay
distribution and/or service fees for the sale and distribution of its shares and
for providing services to shareholders.
Other Expenses:
Miscellaneous expenses of running the Fund, including such things as transfer
agency, registation, custody, and auditing and legal fees.
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Example
- -------
This example is intended to help you compare the expenses of investing in the
Fund with the expenses of investing in other mutual funds. It assumes (1) you
invest $10,000 in the Fund for each period and then sell all of your shares at
the end of that period, (2) your investment has a 5% return each year, and (3)
the Fund's operating expenses remain the same. Although your actual expenses may
be higher or lower, based on these assumptions your expenses would be:
1 Year 3 Years 5 Years 10 Years
----- ------- ------- -------
Class A $582 $808 $1,052 $1,752
Class B 688 882 1,201 1,973+
Class C 386 676 1,091 2,247
Class D 288 582 1,001 2,169
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
----- ------- ------- -------
Class A $582 $808 $1,052 $1,752
Class B 188 582 1,001 1,973+
Class C 286 676 1,091 2,247
Class D 188 582 1,001 2,169
+ Class B shares will automatically convert to Class A shares after eight years.
4
<PAGE>
MANAGEMENT
The Fund's Board of Directors provides broad supervision over the affairs of the
Fund.
J. & W. Seligman & Co. Incorporated (Seligman), 100 Park Avenue, New York, New
York 10017, is the manager of the Fund. Seligman manages the investment of the
Fund's assets, including making purchases and sales of portfolio securities
consistent with the Fund's investment objective and strategies, and administers
the Fund's business and other affairs.
Established in 1864, Seligman currently serves as manager to 18 US registered
investment companies, which offer more than 50 investment portfolios with
approximately $12.5 billion in assets as of April 30, 1999. Seligman also
provides investment management or advice to institutional or other accounts
having an aggregate value at April 30, 1999, of approximately $10.2 billion.
The Fund pays Seligman a fee for its management services. The fee rate declines
as the Fund's net assets increase. It is equal to an annual rate of .65% of the
Fund's average daily net assets on the first $1 billion of net assets and .55%
of the average daily net assets in excess of $1 billion. For the year ended
December 31, 1998, the management fee paid by the Fund to Seligman was equal to
an annual rate of .59% of the Fund's average daily net assets.
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Affiliates of Seligman:
Seligman Advisors, Inc.:
The Fund's general distributor; responsible for accepting orders for purchases
and sales of Fund shares.
Seligman Services, Inc.:
A limited purpose broker/dealer; acts as the broker/dealer of record for
shareholder accounts that do not have a designated broker or financial advisor.
Selgiman Data Corp. (SDC):
The Fund's shareholder service agent; provides shareholder account services to
the Fund at cost.
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Portfolio Management
The Fund is managed by the Seligman High-Yield Team, headed by Mr. Daniel J.
Charleston. Mr. Charleston, a Managing Director of Seligman, is a Vice President
of the Fund and has been Portfolio Manager of the Fund since January 1990. Mr.
Charleston joined Seligman in 1987 as an Assistant Portfolio Manager. He became
Vice President, Investment Officer in August 1991, and Managing Director in
January 1996. Mr. Charleston also manages the Seligman High-Yield Bond
Portfolio, a series of Seligman Portfolios, Inc.
5
<PAGE>
YEAR 2000
As the millennium approaches, mutual funds, financial and business
organizations, and individuals could be adversely affected if their computer
systems do not properly process and calculate date-related information and data
on and after January 1, 2000. Like other mutual funds, the Fund relies upon
service providers and their computer systems for its day-to-day operations. Many
of the Fund's service providers in turn depend upon computer systems of their
vendors. Seligman and SDC have established a year 2000 project team. The team's
purpose is to assess the state of readiness of Seligman and SDC and the Fund's
other service providers and vendors. The team is comprised of several
information technology and business professionals as well as outside
consultants. The Project Manager of the team reports directly to the
Administrative Committee of Seligman. The Project Manager and other members of
the team also report to the Board of Directors of the Fund and its Audit
Committee.
The team has identified the service providers and vendors who furnish critical
services or software systems to the Fund, including securities firms that
execute portfolio transactions for the Fund and firms responsible for
shareholder account recordkeeping. The team is working with these critical
service providers and vendors to evaluate the impact year 2000 issues may have
on their ability to provide uninterrupted services to the Fund. The team will
assess the feasibility of their year 2000 plans. The team has made progress on
its year 2000 contingency plans - recovery efforts the team will employ in the
event that year 2000 issues adversely affect the Fund. The team anticipates
finalizing these plans in the near future.
The Fund anticipates the team will implement all significant components of the
team's year 2000 plans by mid-1999, including appropriate testing of critical
systems and receipt of satisfactory assurances from critical service providers
and vendors regarding their year 2000 compliance. The Fund believes that the
critical systems on which it relies will function properly on and after the year
2000, but this is not guaranteed. If these systems do not function properly, or
the Fund's critical service providers are not successful in implementing their
year 2000 plans, the Fund's operations may be adversely affected, including
pricing, securities trading and settlement, and the provision of shareholder
services.
In addition, the Fund may hold securities of issuers whose underlying business
leaves them susceptible to year 2000 issues. The Fund may also hold securities
issued by governmental or quasi-governmental issuers, which, like other
organizations, are also susceptible to year 2000 concerns. Year 2000 issues may
affect an issuer's operations, creditworthiness, and ability to make timely
payment on any indebtedness and could have an adverse impact on the value of its
securities. If the Fund holds these securities, the Fund's performance could be
negatively affected. Seligman seeks to identify an issuer's state of year 2000
readiness as part of the research it employs. However, the perception of an
issuer's year 2000 preparedness is only one of the many factors considered in
determining whether to buy, sell, or continue to hold a security. Information
provided by issuers concerning their state of readiness may or may not be
accurate or readily available. Further, the Fund may be adversely affected if
the domestic or foreign exchanges, markets, depositories, clearing agencies, or
governments or third parties responsible for infrastructure needs do not address
their year 2000 issues in a satisfactory manner.
SDC has informed the Fund that it does not expect the cost of its services to
increase materially as a result of the modifications to its computer systems
necessary to prepare for the year 2000. The Fund will not pay to remediate the
systems of Seligman or bear directly the costs to remediate the systems of any
other service providers or vendors, other than SDC.
6
<PAGE>
Shareholder Information
DECIDING WHICH CLASS OF SHARES TO BUY
Each of the Fund's Classes represents an interest in the same portfolio of
investments. However, each Class has its own sales charge schedule, and its
ongoing 12b-1 fees may differ from other classes. When deciding which Class of
shares to buy, you should consider, among other things:
o The amount you plan to invest.
o How long you intend to remain invested in the Fund, or another
Seligman mutual fund.
o If you would prefer to pay an initial sales charge and lower ongoing
12b-1 fees, or be subject to a CDSC and pay higher ongoing 12b-1 fees.
o Whether you may be eligible for reduced or no sales charges when you
buy or sell shares.
Your financial advisor will be able to help you decide which Class of shares
best meets your needs.
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Class A
o Initial sales charge on Fund purchases, as set forth below:
<TABLE>
<CAPTION>
Sales Charge Regular Dealer
Sales Charge as a % Discount
as a % of Net as a % of
Amount of your Investment of Offering Price(1) Amount Invested Offering Price
------------------------- -------------------- --------------- --------------
<S> <C> <C> <C>
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 and over(2) 0.00 0.00 0.00
</TABLE>
(1) "Offering Price" is the amount that you actually pay for Fund shares;
it includes the initial sales charge.
(2) You will not pay a sales charge on purchases of $1 million or more,
but you will be subject to a 1% CDSC if you sell your shares within 18
months.
o Annual 12b-1 fee (for shareholder services) of up to 0.25%.
o No sales charge on reinvested dividends or capital gain distributions.
o Certain employer-sponsored defined contribution-type plans can
purchase shares with no initial sales charge.
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- --------------------------------------------------------------------------------
Class B
o No initial sales charge on purchases.
o A declining CDSC on shares sold within 6 years of purchase:
Years Since Purchase CDSC
-------------------- ----
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
o Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
o Automatic conversion to Class A shares after eight years, resulting in
lower ongoing 12b-1 fees.
o No CDSC when you sell shares purchased with reinvested dividends
or capital gain distributions.
-----------------------------------------------------------
Your purchase of Class B shares must be for less than
$250,000, because if you are investing $250,000 or more you
will pay less in fees and charges if you buy another Class
of shares.
-----------------------------------------------------------
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7
<PAGE>
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Class C
o Initial sales charge on Fund purchases, as set forth below:
<TABLE>
<CAPTION>
Regular Dealer
Sales Charge Sales Charge Discount
as a % as a % of Net as a % of
Amount of your Investment of Offering Price(1) Amount Invested Offering Price
------------------------- -------------------- --------------- --------------
<S> <C> <C> <C>
Less than $100,000 1.00% 1.01% 1.00%
$100,000-$249,999 0.50 0.50 0.50
$250,000-$1,000,000(2) 0.00 0.00 0.00
</TABLE>
(1) "Offering Price" is the amount that you actually pay for Fund shares;
it includes the initial sales charge.
(2) Your purchase of Class C shares must be for less than $1,000,000
because if you invest $1,000,000 or more you will pay less in fees and
charges if you buy Class A shares.
o A 1% CDSC on shares sold within eighteen months of purchase.
o Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
o No automatic conversion to Class A shares, so you will be subject to
higher ongoing 12b-1 fees indefinitely.
o No CDSC when you sell shares purchased with reinvested dividends
or capital gain distributions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D*
o No initial sales charge on purchases.
o A 1% CDSC on shares sold within one year of purchase.
o Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
o No automatic conversion to Class A shares, so you will be subject to
higher ongoing 12b-1 fees indefinitely.
o No CDSC when you sell shares purchased with reinvested dividends
or capital gain distributions.
* Class D shares are not available to all investors. Beginning June 1,
1999, you may purchase Class D shares only if (1) you already own
Class D shres of the Fund or another Seligman mutual fund, (2) if your
financial advisor of record maintains an omnibus account at SDC, or
(3) pursuant to a 401(k) or other retirement plan program for which
Class D shres are already available or for which the sponsor requests
Class D shares because the sales charge structure of Class D shares is
comprable to the sales charge structure of the other funds offered
under the program.
- --------------------------------------------------------------------------------
Because the Fund's 12b-1 fees are paid out of each Class's assets on an ongoing
basis, over time these fees will increase your investment expenses and may cost
you more than other types of sales charges.
The Fund's Board of Directors believes that no conflict of interest currently
exists between the Fund's Class A, Class B, Class C, and Class D shares. On an
ongoing basis, the Directors, in the exercise of their fiduciary duties under
the Investment Company Act of 1940 and Maryland law, will seek to ensure that no
such conflict arises.
How CDSCs Are Calculated
To minimize the amount of the CDSC you may pay when you sell your shares, the
Fund assumes that shares acquired through reinvested dividends and capital gain
distributions (which are not subject to a CDSC) are sold first. Shares that have
been in your account long enough so they are not subject to a CDSC are sold
next. After these shares are exhausted, shares will be sold in the order they
were purchased (oldest to youngest). The amount of any CDSC that you pay will be
based on the shares' original purchase price or current net asset value,
whichever is less.
You will not pay a CDSC when you exchange shares of the Fund to buy the same
class of shares of any other Seligman mutual fund. For the purpose of
calculating the CDSC when you sell shares that you acquired by exchanging shares
of the Fund, it will be assumed that you held the shares since the date you
purchased the shares of the Fund.
8
<PAGE>
PRICING OF FUND SHARES
When you buy or sell shares, you do so at the Class's net asset value (NAV) next
calculated after Seligman Advisors accepts your request. Any applicable sales
charge will be added to the purchase price for Class A shares and Class C
shares. Purchase or sale orders received by an authorized dealer or financial
advisor by the close of regular trading on the New York Stock Exchange (NYSE)
(normally 4:00 p.m. Eastern time) and accepted by Seligman Advisors before the
close of business (5:00 p.m. Eastern time) on the same day will be executed at
the Class's NAV calculated as of the close of regular trading on the NYSE on
that day. Your broker/dealer or financial advisor is responsible for forwarding
your order to Seligman Advisors before the close of business.
- --------------------------------------------------------------------------------
NAV:
Computed separately for each Class by dividing that Class's share of the net
assets of the Fund (i.e., its assets less liabilities) by the total number of
outstanding shares of the Class.
- --------------------------------------------------------------------------------
If your buy or sell order is received by your broker/dealer or financial advisor
after the close of regular trading on the NYSE, or is accepted by Seligman
Advisors after the close of business, the order will be executed at the Class's
NAV calculated as of the close of regular trading on the next NYSE trading day.
When you sell shares, you receive the Class's per share NAV, less any applicable
CDSC.
The NAV of the Fund's shares is determined each day, Monday through Friday, on
days that the NYSE is open for trading. Because of their higher 12b-1 fees, the
NAV of Class B, Class C, and Class D shares will generally be lower than the NAV
of Class A shares of the Fund.
Securities owned by the Fund are valued at current market prices. If reliable
market prices are unavailable, securities are valued in accordance with
procedures approved by the Fund's Board of Directors.
OPENING YOUR ACCOUNT
The Fund's shares are sold through authorized broker/dealers or financial
advisors who have sales agreements with Seligman Advisors. There are several
programs under which you may be eligible for reduced sales charges or lower
minimum investments. Ask your financial advisor if any of these programs apply
to you. Class D shares are not available to all investors. For more information,
see "Deciding Which Class of Shares to Buy--Class D."
To make your initial investment in the Fund, contact your financial advisor or
complete an account application and send it with your check directly to SDC at
the address provided on the account application. If you do not choose a Class,
your investment will automatically be made in Class A shares.
The required minimum initial investments are:
o Regular (non-retirement) accounts: $1,000
o For accounts opened concurrently with Invest-A-Check(R):
$100 to open if you will be making monthly investments
$250 to open if you will be making quarterly investments
If you buy shares by check and subsequently sell the shares, SDC will not send
your proceeds until your check clears, which could take up to 15 calendar days
from the date of your purchase.
- --------------------------------------------------------------------------------
You may buy shares of the Fund for all types of tax-deferred retirement plans.
Contact Retirement Plan Services at the address or phone number listed on the
inside back cover of this prospectus for information and to receive the proper
forms.
- --------------------------------------------------------------------------------
You will be sent a statement confirming your purchase, and any subsequent
transactions in your account. You will also be sent quarterly and annual
statements detailing your transactions in the Fund and the other Seligman funds
you own under the same account number. Duplicate account statements will be sent
to you free of charge for the current year and most recent prior year. Copies of
year-end statements for prior years are available for a fee of $10 per year, per
account, with a maximum charge of $150 per account. Send your request and a
check for the fee to SDC.
If you want to be able to buy, sell, or exchange shares by telephone,
you should complete an application when you open your account. This
will prevent you from having to complete a supplemental election form
(which may require a signature guarantee) at a later date.
9
<PAGE>
HOW TO BUY ADDITIONAL SHARES
After you have made your initial investment, there are many options available to
make additional purchases of Fund shares. Subsequent investments must be for
$100 or more.
Shares may be purchased through your authorized financial advisor, or you may
send a check directly to SDC. Please provide either an investment slip or a note
that provides your name(s), Fund name, and account number. Unless you indicate
otherwise, your investment will be made in the Class you already own. Send
investment checks to:
Seligman Data Corp.
P.O. Box 9766
Providence, RI 02940-9766
Your check must be in US dollars and be drawn on a US bank. You may not use
third party and credit card convenience checks for investment. You may also use
the following account services to make additional investments:
Invest-A-Check(R).
You may buy Fund shares electronically from a savings or checking account of an
Automated Clearing House (ACH) member bank. If your bank is not a member of ACH,
the Fund will debit your checking account by preauthorized checks. You may buy
Fund shares at regular monthly intervals in fixed amounts of $100 or more, or
regular quarterly intervals in fixed amounts of $250 or more. If you use
Invest-A-Check(R), you must continue to make automatic investments until the
Fund's minimum initial investment of $1,000 is met or your account may be
closed.
Automatic Dollar-Cost-Averaging.
If you have at least $5,000 in Seligman Cash Management Fund, you may exchange
uncertificated shares of that fund to buy shares of the same class of another
Seligman mutual fund at regular monthly intervals in fixed amounts of $100 or
more or regular quarterly intervals in fixed amounts of $250 or more. If you
exchange Class A shares or Class C shares, you may pay an initial sales charge
to buy Fund shares.
Automatic CD Transfer.
You may instruct your bank to invest the proceeds of a maturing bank certificate
of deposit (CD) in shares of the Fund. If you wish to use this service, contact
SDC or your financial advisor to obtain the necessary forms. Because your bank
may charge you a penalty, it is not normally advisable to withdraw CD assets
before maturity.
Dividends From Other Investments.
You may have your dividends from other companies paid to the Fund. (Dividend
checks must include your name, account number, Fund name, and Class of shares.)
Direct Deposit. You may buy Fund shares electronically with funds from your
employer, the IRS, or any other institution that provides direct deposit. Call
SDC for more information.
Seligman Time Horizon Matrix(SM).
(Requires an initial total investment of $10,000.) This is a needs-based
investment process, designed to help you and your financial advisor plan to seek
your long-term financial goals. It considers your financial needs, and helps
frame a personalized asset allocation strategy around the cost of your future
commitments and the time you have to meet them. Contact your financial advisor
for more information.
Seligman Harvester.
If you are a retiree or nearing retirement, this program is designed to help you
establish an investment strategy that seeks to meet your needs throughout your
retirement. The strategy is customized to your personal financial situation by
allocating your assets to seek to address your income requirements, prioritizing
your expenses, and establishing a prudent withdrawal schedule. Contact your
financial advisor for more information.
HOW TO EXCHANGE SHARES AMONG THE SELIGMAN MUTUAL FUNDS
You may sell Fund shares to buy shares of the same Class of another Seligman
mutual fund, or you may sell shares of another Seligman mutual fund to buy Fund
shares. Exchanges will be made at each fund's respective NAV. You will not pay
an initial sales charge when you exchange, unless you exchange Class A shares or
Class C shares of Seligman Cash Management Fund to buy shares of the same Class
of the Fund or another Seligman mutual fund. Only your dividend and capital gain
distribution options and telephone services will be automatically carried over
to any new fund account. If you wish to carry over any other account options
(for example, Invest-A-Check(R) or Systematic Withdrawals) to the new fund, you
must specifically request so at the time of your exchange.
If you exchange into a new fund, you must exchange enough to meet the new fund's
minimum initial investment.
10
<PAGE>
See "The Seligman Mutual Funds" for a list of the funds available
for exchange. Before making an exchange, contact your financial advisor or SDC
to obtain the applicable fund prospectus(es). You should read and understand a
fund's prospectus before investing. Some funds may not offer all classes of
shares.
HOW TO SELL SHARES
The easiest way to sell Fund shares is by phone. If you have telephone services,
you may be able use this service to sell Fund shares. Restrictions apply to
certain types of accounts. Please see "Important Policies That May Affect Your
Account."
When you sell Fund shares by phone, a check for the proceeds is sent to your
address of record. If you have current ACH bank information on file, you may
have the proceeds of the sale of your Fund shares directly deposited into your
bank account (typically, 3-4 business days after your shares are sold).
You may sell shares to the Fund through a broker/dealer or your financial
advisor. The Fund does not charge any fees or expenses, other than any
applicable CDSC for this transaction; however, the dealer or financial advisor
may charge a service fee. Contact your financial advisor for more information.
You may always send a written request to sell Fund shares; however, it may take
longer to get your money.
As an additional measure to protect you and the Fund, SDC may confirm written
redemption requests that are (1) for $25,000 or more, or (2) directed to be paid
to an alternate payee or sent to an address other than the address of record,
with you or your financial advisor by telephone before sending you your money.
This will not affect the date on which your redemption request is actually
processed.
If your Fund shares are represented by certificates, you will need to surrender
the certificates to SDC before you sell your shares.
You will need to guarantee your signature(s) if the proceeds are:
(1) $50,000 or more;
(2) to be paid to someone other than all account owners; or
(3) mailed to other than your address of record.
- --------------------------------------------------------------------------------
Signature Guarantee:
Protects you and the Fund from fraud. It guarantees that a signature is genuine.
A guarantee must be obtained from an eligible financial institution.
Notarization by a notary public is not an acceptable guarantee.
- --------------------------------------------------------------------------------
You may need to provide additional documents to sell Fund shares if you are:
o a corporation;
o an executor or administrator;
o a trustee or custodian; or
o in a retirement plan.
Contact your financial advisor or SDC's Shareholder Services Department for
information on selling your shares under any of the above circumstances.
You may also use the following account services to sell Fund shares:
Systematic Withdrawal Plan. If you have at least $5,000 in the Fund, you may
withdraw (sell) a fixed dollar amount (minimum of $50) of uncertificated shares
at regular intervals. A check will be sent to you at your address of record or,
if you have current ACH bank information on file, you may have your payments
directly deposited to your predesignated bank account in 3-4 business days after
your shares are sold. If you bought $1,000,000 or more of Class A shares without
an initial sales charge, your withdrawals may be subject to a 1% CDSC if they
occur within 18 months of purchase. If you own Class B, Class C, or Class D
shares and reinvest your dividends and capital gain distributions, you may
withdraw 12%, 10%, or 10%, respectively, of the value of your Fund account (at
the time of election) annually without a CDSC.
Check Redemption Service. If you have at least $25,000 in the Fund, you may ask
SDC to provide checks which may be drawn against your account in amounts of $500
or more. You can elect this service on your initial application, or contact SDC
for the appropriate forms to establish this service.
If you own Class A shares that were bought at NAV because of the size of your
purchase, or if you own Class B shares, check redemptions may be subject to
CDSC. If you own Class D or Class C shares, you may use this service only with
respect to shares that you have held for at least one year or eighteen months,
respectively.
11
<PAGE>
IMPORTANT POLICIES THAT MAY AFFECT YOUR ACCOUNT
To protect you and other shareholders, the Fund reserves the right to:
o Refuse an exchange request if:
1. you have exchanged twice from the same fund in any three-month
period;
2. the amount you wish to exchange equals the lesser of $1,000,000
or 1% of the Fund's net assets; or
3. you or your financial advisor have been advised that previous
patterns of purchases and sales or exchanges have been considered
excessive.
o Refuse any request to buy Fund shares;
o Reject any request received by telephone;
o Suspend or terminate telephone services;
o Reject a signature guarantee that SDC believes may be fraudulent;
o Close your fund account if its value falls below $500;
o Close your account if it does not have a certified taxpayer
identification number.
Telephone Services
You and your broker/dealer or financial advisor will be able to place the
following requests by telephone, unless you indicate on your account application
that you do not want telephone services:
o Sell uncertificated shares (up to $50,000 per day, payable to account
owner(s) and mailed to address of record);
o Exchange shares between funds;
o Change dividend and/or capital gain distribution options;
o Change your address;
o Establish systematic withdrawals to address of record.
If you do not complete an account application when you open your account,
telephone services must be elected on a supplemental election form (which may
require a signature guarantee).
Restrictions apply to certain types of accounts:
o Trust accounts on which the current trustee is not listed may not sell
Fund shares by phone;
o Corporations may not sell Fund shares by phone;
o IRAs may only exchange Fund shares or request address changes by
phone;
o Group retirement plans may not sell Fund shares by phone; plans that
allow participants to exchange by phone must provide a letter of
authorization signed by the plan custodian or trustee and provide a
supplemental election form signed by all plan participants.
Unless you have current ACH bank information on file, you will not be able to
sell Fund shares by phone within thirty days following an address change.
Your request must be communicated to an SDC representative. You may not request
any phone transactions via the automated access line.
You may cancel telephone services at any time by sending a written request to
SDC. Each account owner, by accepting or adding telephone services, authorizes
each of the other owners to make requests by phone. Your broker/dealer or
financial advisor representative may not establish telephone services without
your written authorization. SDC will send written confirmation to the address of
record when telephone services are added or terminated.
During times of heavy call volume, you may not be able to get through to SDC by
phone to request a sale or exchange of Fund shares. In this case, you may need
to write, and it may take longer for your request to be processed. The Fund's
NAV may fluctuate during this time.
The Fund and SDC will not be liable for processing requests received by phone as
long as it was reasonable to believe that the request was genuine.
Reinstatement Privilege
If you sell Fund shares, you may, within 120 calendar days, use part or all of
the proceeds to buy shares of the Fund or any other Seligman mutual fund
(reinstate your investment) without paying an initial sales charge or, if you
paid a CDSC when you sold your shares, receiving a credit for the applicable
CDSC paid. This privilege is available only once each calendar year. Contact
your financial advisor for more information. You should consult your tax advisor
concerning possible tax consequences of exercising this privilege.
12
<PAGE>
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Fund generally pays dividends from its net investment income monthly and
distributes any net capital gains realized on investments annually.
You may elect to:
(1) reinvest both dividends and capital gain distributions;
(2) receive dividends in cash and reinvest capital gain distributions; or
(3) receive both dividends and capital gain distributions in cash.
Your dividends and capital gain distributions will be reinvested if you do not
instruct otherwise or if you own Fund shares in a Seligman tax-deferred
retirement plan.
If you want to change your election, you may write SDC at the address listed on
the back cover of this prospectus or, if you have telephone services, you or
your financial advisor may call SDC. Your request must be received by SDC before
the record date to be effective for that dividend or capital gain distribution.
Cash dividends or capital gain distributions will be sent by check to your
address of record or, if you have current ACH bank information on file, directly
deposited into your predesignated bank account within 3-4 business days from the
payable date.
Dividends and capital gain distributions are reinvested to buy additional Fund
shares on the payable date using the NAV of the ex-dividend date.
Dividends on Class B, Class C, and Class D shares will be lower than the
dividends on Class A shares as a result of their higher 12b-1 fees. Capital gain
distributions will be paid in the same amount for each Class.
- --------------------------------------------------------------------------------
Dividend:
A payment by a mutual fund, usually derived from the fund's net investment
income (dividends and interest earned on portfolio securities less expenses).
Capital Gain Distribution:
A payment to mutual fund shareholders which represents profits realized on the
sale of securities in a fund's portfolio.
Ex-dividend Date:
The day on which any declared distributions (dividends or capital gains) are
deducted from a fund's assets before it calculates its NAV.
- --------------------------------------------------------------------------------
TAXES
The tax treatment of dividends and capital gain distributions is the same
whether you take them in cash or reinvest them to buy additional Fund shares.
Tax-deferred retirement plans are not taxed currently on dividends or capital
gain distributions or on exchanges.
Dividends paid by the Fund are taxable to you as ordinary income. You may be
taxed at different rates on capital gains distributed by the Fund depending on
the length of time the Fund holds its assets.
When you sell Fund shares, any gain or loss you realize will generally be
treated as a long-term capital gain or loss if you held your shares for more
than one year, or as a short-term capital gain or loss if you held your shares
for one year or less. However, if you sell Fund shares on which a long-term
capital gain distribution has been received and you held the shares for six
months or less, any loss you realize will be treated as a long-term capital loss
to the extent that it offsets the long-term capital gain distribution.
An exchange of Fund shares is a sale and may result in a gain or loss for
federal income tax purposes.
Each January, you will be sent information on the tax status of any
distributions made during the previous calendar year. Because each shareholder's
situation is unique, you should always consult your tax advisor concerning the
effect income taxes may have on your individual investment.
13
<PAGE>
THE SELIGMAN MUTUAL FUNDS
EQUITY
SPECIALTY
- --------------------------------------------------------------------------------
Seligman Communications and Information Fund
Seeks capital appreciation by investing in companies operating in all aspects of
the communications, information, and related industries.
Seligman Henderson Global Technology Fund
Seeks long-term capital appreciation by investing primarily in global securities
(US and non-US) of companies in the technology and technology-related
industries.
Seligman Henderson Emerging Markets Growth Fund
Seeks long-term capital appreciation by investing primarily in equity securities
of companies in emerging markets.
SMALL COMPANY
- --------------------------------------------------------------------------------
Seligman Frontier Fund
Seeks growth of capital by investing primarily in small company growth stocks.
Seligman Small-Cap Value Fund
Seeks long-term capital appreciation by investing in equities of small
companies, deemed to be "value" companies by the investment manager.
Seligman Henderson Global Smaller Companies Fund
Seeks long-term capital appreciation by investing in securities of smaller
companies around the world, including the US.
MEDIUM COMPANY
- --------------------------------------------------------------------------------
Seligman Capital Fund
Seeks capital appreciation by investing in the common stocks of companies with
significant potential for growth.
LARGE COMPANY
- --------------------------------------------------------------------------------
Seligman Growth Fund
Seeks long-term growth of capital value and an increase in future income.
Seligman Henderson Global Growth Opportunities Fund
Seeks capital appreciation by investing primarily in equity securities of
companies that have the potential to benefit from global economic or social
trends.
Seligman Large-Cap Value Fund
Seeks long-term capital appreciation by investing in equities of large
companies, deemed to be "value" companies by the investment manager.
Seligman Common Stock Fund
Seeks favorable, but not the highest, current income and long-term growth of
both income and capital, without exposing capital to undue risk.
Seligman Henderson International Fund
Seeks long-term capital appreciation by investing in securities of medium- to
large-sized companies, primarily in the developed markets outside the US.
BALANCED
- --------------------------------------------------------------------------------
Seligman Income Fund
Seeks high current income and improvement in capital value over the long term,
consistent with prudent risk of capital.
FIXED-INCOME
INCOME
- --------------------------------------------------------------------------------
Seligman High-Yield Bond Fund
Seeks to maximize current income by investing in a diversified portfolio of
high-yielding, high-risk corporate bonds, commonly referred to as "junk bonds."
Seligman U.S. Government Securities Fund
Seeks high current income primarily by investing in a diversified portfolio of
securities guaranteed by the US government, its agencies, or instrumentalities,
which have maturities greater than one year.
MUNICIPAL
- --------------------------------------------------------------------------------
Seligman Municipal Funds:
National Fund
Seeks maximum income, exempt from regular federal income taxes.
State-specific funds:*
Seek to maximize income exempt from regular federal income taxes and from
regular income taxes in the designated state.
California Louisiana New Jersey
o High-Yield Maryland New York
o Quality Massachusetts North Carolina
Colorado Michigan Ohio
Florida Minnesota Oregon
Georgia Missouri Pennsylvania
South Carolina
* A small portion of income may be subject to state taxes.
MONEY MARKET
- --------------------------------------------------------------------------------
Seligman Cash Management Fund
Seeks to preserve capital and to maximize liquidity and current income, by
investing only in high-quality money market securities having a maturity of 90
days or less. The fund seeks to maintain a constant net asset value of $1.00 per
share.
14
<PAGE>
Financial Highlights
The tables below are intended to help you understand the financial performance
of the Fund's Classes for the past five years or, if less than five years, the
period of the Class's operations. Class C is a new Class, effective June 1,
1999, so no financial highlights are available. Certain information reflects
financial results for a single share of a Class that was held throughout the
periods shown. "Total return" shows the rate that you would have earned (or
lost) on an investment in the Fund, assuming you reinvested all your dividends
and capital gain distributions. Total returns do not reflect any sales charges.
Deloitte & Touche, LLP, independent auditors, have audited this information.
Their report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request.
<TABLE>
<CAPTION>
CLASS A
Year ended December 31,
----------------------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period........ $7.55 $7.25 $6.96 $6.35 $6.94
----- ----- ----- ----- -----
Income from investment operations:
Net investment income .................... 0.70 0.70 0.69 0.65 0.65
Net gains or losses on securities (both
realized and unrealized) ................ (0.59) 0.28 0.29 0.61 (0.59)
----- ----- ----- ----- -----
Total from investment operations............ 0.11 0.98 0.98 1.26 0.06
----- ----- ----- ----- -----
Less distributions:
Dividends (from net investment income).... (0.69) (0.68) (0.69) (0.65) (0.65)
Distributions (from capital gains)........ (0.02) -- -- -- --
----- ----- ----- ----- -----
Total distributions......................... (0.71) (0.68) (0.69) (0.65) (0.65)
----- ----- ----- ----- -----
Net asset value, end of period.............. $6.95 $7.55 $7.25 $6.96 $6.35
===== ===== ===== ===== =====
Total Return: 1.32% 14.26% 14.82% 20.72% 0.78%
Ratios/Supplemental Data:
Net assets, end of period (in thousands).... $1,050,340 $750,461 $408,303 $182,129 $59,033
Ratio of expenses to average net assets..... 1.10% 1.14% 1.16% 1.09% 1.13%
Ratio of net income to average net assets .. 9.46% 9.42% 9.80% 9.73% 9.73%
Portfolio turnover rate .................... 35.34% 61.78% 119.33% 173.39% 184.75%
</TABLE>
- ----------
* Per share amounts are calculated based on average shares outstanding.
15
<PAGE>
<TABLE>
<CAPTION>
CLASS B
Year ended
December 31, 4/22/96**
-------------------- to
1998 1997 12/31/96
----- ----- ------
<S> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period ....... $7.55 $7.26 $7.06
----- ----- -----
Income from investment operations:
Net investment income .................... 0.64 0.64 0.45
Net gains or losses on securities (both
realized and unrealized) ................ (0.59) 0.28 0.20
----- ----- -----
Total from investment operations ........... 0.05 0.92 0.65
----- ----- -----
Less distributions:
Dividends (from net investment income).... (0.63) (0.63) (0.45)
Distributions (from capital gains)........ (0.02) -- --
----- ----- -----
Total distributions......................... (0.65) (0.63) (0.45)
----- ----- -----
Net asset value, end of period ............. $6.95 $7.55 $7.26
===== ===== =====
Total Return: 0.57% 13.24% 9.11%
Ratios/Supplemental Data:
Net assets, end of period (in thousands).... $1,037,994 $581,235 $147,970
Ratio of expenses to average net assets..... 1.85% 1.90% 1.90%+
Ratio of net income to average net assets .. 8.71% 8.66% 9.11%+
Portfolio turnover rate .................... 35.34% 61.78% 119.33%++
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------------
CLASS D 1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period ....... $7.55 $7.26 $6.96 $6.35 $6.94
----- ----- ----- ----- -----
Income from investment operations:
Net investment income .................... 0.64 0.64 0.64 0.60 0.57
Net gains or losses on securities (both
realized and unrealized) ............... (0.59) 0.28 0.30 0.61 (0.59)
----- ----- ----- ----- -----
Total from investment operations ........... 0.05 0.92 0.94 1.21 (0.02)
----- ----- ----- ----- -----
Less Distributions:
Dividends (from net investment income).... (0.63) (0.63) (0.64) (0.60) (0.57)
Distributions (from capital gains)........ (0.02) -- -- -- --
----- ----- ----- ----- -----
Total distributions......................... (0.65) (0.63) (0.64) (0.60) (0.57)
----- ----- ----- ----- -----
Net asset value, end of period ............. $6.95 $7.55 $7.26 $6.96 $6.35
===== ===== ===== ===== =====
Total Return: 0.57% 13.24% 14.10% 19.67% (0.30)%
Ratios/Supplemental Data:
Net assets, end of period (in thousands).... $769,828 $534,998 $265,528 $90,153 $9,249
Ratio of expenses to average net assets..... 1.85% 1.90% 1.92% 1.91% 2.19%
Ratio of net income to average net assets .. 8.71% 8.66% 9.02% 8.86% 8.68%
Portfolio turnover rate .................... 35.34% 61.78% 119.33% 173.39% 184.75%
</TABLE>
- ----------
* Per share amounts are calculated based on average shares outstanding.
** Commencement of offering of shares.
+ Annualized.
++ For the year ended December 31, 1996.
16
<PAGE>
How to Contact Us
The Fund
Write: Corporate Communications/
Investor Relations Department
J. & W. Seligman & Co. Incorporated
100 Park Avenue, New York, NY 10017
Phone: Toll-Free (800) 221-7844 in the US or
(212) 850-1864 outside the US
Website: http://www.seligman.com
Your Regular
(Non-Retirement)
Account
Write: Shareholder Services Department
Seligman Data Corp.
100 Park Avenue, New York, NY 10017
Phone: Toll-Free (800) 221-2450 in the US or
(212) 682-7600 outside the US
Website: http://www.seligman.com
Your Retirement
Account
Write: Retirement Plan Services
Seligman Data Corp.
100 Park Avenue, New York, NY 10017
Phone: Toll-Free (800) 445-1777
- --------------------------------------------------------------------------------
24-hour telephone access is available by dialing (800) 622-4597 on a touchtone
telephone. You will have instant access to price, yield, account balance, most
recent transaction, and other information.
- --------------------------------------------------------------------------------
17
<PAGE>
For More Information
- --------------------------------------------------------------------------------
The following information is available without charge upon request: Call
toll-free (800) 221-2450 in the US or (212) 682-7600 outside the US.
Statement of Additional Information (SAI) contains additional information about
the Fund. It is on file witht he Securities and Exchange Commission (SEC) and is
incorporated by reference into (is legally part of) this prospectus.
Annual/Semi-Annual Reports contain additional information about the Fund's
investments. In the Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.
- --------------------------------------------------------------------------------
SELIGMAN ADVISORS, INC.
an affiliate of
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
Information about the Fund, including the SAI, can be viewed and copied at the
SEC's Public Reference Room in Washington, DC. For information about the
operation of the Public Reference Room, call (800) SEC-0330. The SAI,
Annual/Semi-Annual reports and other information about the Fund are also
available on the SEC's Internet site: http://www.sec.gov.
Copies of this information may be obtained, upon payment of a duplicating fee,
by writing: Public Reference Section of the SEC, Washingon, DC 20549-6009.
SEC FILE NUMBER: 811-4103
<PAGE>
SELIGMAN
-----------------
U.S. GOVERNMENT
SECURITIES SERIES
The Securities and Exchange Commission has neither approved nor disapproved this
Fund, and it has not determined the prospectus to be accurate or adequate. Any
representation to the contrary is a criminal offense.
An investment in this Fund or any other fund cannot provide a complete
investment program. The suitability of an investment in the Fund should be
considered based on the investment objective, strategies and risks described
herein, considered in light of all of the other investments in your portfolio,
as well as your risk tolerance, financial goals and time horizons. We recommend
that you consult your financial advisor to determine if this Fund is suitable
for you.
[GRAPHIC]
PROSPECTUS
JUNE 1, 1999
----------
Seeking High Current
Income by Investing in
US Government Securities
managed by
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
TXUSG1 6/99
<PAGE>
Table of Contents
The Fund
Investment Objective/Principal Strategies 1
Principal Risks 2
Past Performance 3
Fees and Expenses 4
Management 5
Year 2000 6
Shareholder Information
Deciding Which Class of Shares to Buy 7
Pricing of Fund Shares 9
Opening Your Account 9
How to Buy Additional Shares 10
How to Exchange Shares Among the Seligman Mutual Funds 10
How to Sell Shares 11
Important Policies That May Affect Your Account 12
Dividends and Capital Gain Distributions 13
Taxes 13
The Seligman Mutual Funds 14
Financial Highlights 15
How to Contact Us 17
For More Information back cover
TIMES CHANGE ... VALUES ENDURE
<PAGE>
The Fund
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The Fund's objective is high current income.
The Fund uses the following principal strategies to seek its objective:
The Fund has a fundamental policy that, except for temporary defensive purposes,
it will invest at least 80% of its total assets in direct obligations of the US
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 (US Government Securities) which are backed by the full faith
and credit of the US Government and have maturities greater than one year at the
date of purchase by the Fund.
The Fund may invest up to 20% of its total assets in direct obligations of the
US Treasury and in US Government Securities which have maturities of any
duration at the date of purchase by the Fund.
US Government Securities include obligations of the US Government and US
Government agencies, such as the Federal Home Loan Banks, the Federal Home Loan
Mortgage Corporation (Freddie Mac); the Government National Mortgage Association
(Ginnie Mae) and the Federal National Mortgage Association (Fannie Mae). These
include mortgage pass-through securities, collateralized mortgage obligations,
repurchase agreements involving these securities, and obligations that, while
not issued by the US Government or its agencies, are backed by the full faith
and credit of the US Government, such as Title XI bonds.
When selecting individual securities for purchase by the Fund, the investment
manager:
o seeks to determine long-term trends in interest rates and adjust
maturities of portfolio securities accordingly. For example, if the
manager believes interest rates will decline or remain flat, the Fund
will seek to purchase securities with longer maturities, and if the
investment manager expects rates to rise, the Fund will seek to
purchase securities with shorter maturities.
o after determining the appropriate maturity, seeks to identify
securities of the same maturity that offer higher yields, which will
provide more income to the Fund.
The Fund generally sells securities in response to its belief in the changing
direction of long-term interest rates; when yield spreads become exceedingly
narrow and the investment manager believes that the Fund is not being amply
rewarded for buying securities with longer maturities (which generally offer
higher yields but are subject to more price volatility than securities with
shorter maturities); or when the Fund must meet cash requirements.
The Fund may, from time to time, take temporary defensive positions that are
inconsistent with its principal strategies in seeking to minimize extreme
volatility caused by adverse market, economic, or other conditions. This could
prevent the Fund from achieving its objective.
Except for its fundamental policy, the Fund may change its principal strategies
if the Fund's Board of Directors believes doing so is consistent with the Fund's
objective. The Fund's objective and its fundamental policy may be changed only
with shareholder approval.
As with any mutual fund, there is no guarantee the Fund will achieve its
objective.
1
<PAGE>
PRINCIPAL RISKS
The US Government does not guarantee the market value or the current yield of
government securities. The Fund's net asset value, yield, and total return will
fluctuate and are not guaranteed by the US Government.
The securities in which the Fund invests are considered among the safest of
fixed-income investments. However, their market values, like those of other debt
securities, will fluctuate with changes, real or anticipated, in the level of
interest rates. The Fund's net asset value per share will fluctuate with changes
in the market value of the securities held in its portfolio. Additionally, the
Fund's yield will vary based on the yield of its portfolio securities.
Generally, as interest rates rise, the value of the securities held by the Fund
will decline. Conversely, if interest rates decline, the value of the securities
held by the Fund will increase. This effect is usually more pronounced for
longer-term securities, like those in which the Fund invests. Longer-term
securities generally tend to produce higher yields but are subject to greater
market fluctuations as a result of changes in interest rates than fixed-income
securities with shorter maturities.
Mortgage-backed securities in which the Fund invests may benefit less than other
fixed-income securities from declining interest rates because of the risk of
prepayment. Mortgage prepayments generally increase during a period of declining
interest rates. Prepayments increase the cash amounts available to the Fund for
investment and these amounts would have to be reinvested at lower interest
rates. In addition, prepayments on underlying mortgages result in a loss of
anticipated interest, and, therefore, the actual yield to the Fund may be
different from the quoted yield on the securities. As a result, when interest
rates are declining, 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.
The Fund may purchase securities on a when-issued or forward commitment basis,
in which case delivery and payment take place after the date of the commitment
to purchase the securities. Because the price to be paid and the interest rate
that will be received on the securities are each fixed at the time the Fund
enters into the commitment, there is a risk that yields available in the market
when delivery takes place may be higher than the yields obtained on the
securities. This would tend to reduce the value of these securities. In
addition, the market value of these securities may fluctuate between the time
the Fund commits to purchase the securities and the time of delivery of the
securities.
Repurchase agreements in which the Portfolio invests could involve certain risks
in the event of the default by the seller, including possible delays and
expenses in liquidating the securities underlying the agreement, decline in the
value of the underlying securities and loss of interest.
An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE>
PAST PERFORMANCE
The Fund offers four Classes of shares. The information below provides some
indication of the risks of investing in the Fund by showing how the performance
of Class A shares has varied year to year, as well as how the performance of
each Class (except Class C) compares to one widely-used measure of US Government
Bond performance and one measure of the performance of mutual funds with
investment objectives similar to the Fund. Class C is a new class of shares,
effective June 1, 1999, so no performance information is available.
The following performance information is designed to assist you in comparing the
returns of the Fund with the returns of other mutual funds. How the Fund has
performed in the past, however, is not necessarily an indication of how the Fund
will perform in the future. Total returns will vary between each Class of shares
due to the different fees and expenses of each Class.
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table below the chart
do reflect the effect of the applicable sales charges. Both the bar chart and
table assume that all dividends and capital gain distributions were reinvested.
Class A Annual Total Returns
[THE FOLLOWING CHART WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1989 9.25%
1990 6.37%
1991 14.05%
1992 5.78%
1993 7.46%
1994 -3.88%
1995 18.15%
1996 -0.29%
1997 8.53%
1998 8.46%
Best quarter return: 6.36% - quarter ended 6/30/95
Worst quarter return: -3.48% - quarter ended 3/31/96
- --------------------------------------------------------------------------------
Average Annual Total Returns - Periods Ended 12/31/98
<TABLE>
<CAPTION>
Class B Class D
One Five Ten Since Inception Since Inception
Year Years Years 1/1/97 9/21/93
---- ----- ----- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Class A 3.35% 4.88% 6.70% -- --
Class B 2.78 n/a n/a 5.68% --
Class D 6.78 5.01 n/a -- 4.61%
Lehman Brothers Government
Bond Index 9.85 7.19 9.17 9.72 6.76(1)
Lipper General US Government
Bond Funds Average 8.08 6.16 8.15 8.55 5.77(1)
</TABLE>
The Lipper General US Government Bond Funds Average and the Lehman Brothers
Government Bond Index are unmanaged benchmarks that assume investment of
dividends. The Lipper General US Government Bond Funds Average excludes the
effect of sales charges and The Lehman Brothers Government Bond Index excludes
the effect of fees and sales charges. The Lehman Brothers Government Bond Index
measures the performance of US Government Bonds and The Lipper General US
Government Bond Funds Average measures the performance of mutual funds with
investment objectives similar to the fund.
(1) From september 30, 1993.
- --------------------------------------------------------------------------------
3
<PAGE>
FEES AND EXPENSES
The table below summarizes the fees and expenses that you may pay as a
shareholder of the Fund. Each Class of shares has its own sales charge schedule
and is subject to different ongoing 12b-1 fees. Shareholder fees are charged
directly to you. Annual fund operating expenses are deducted from Fund assets
and are therefore paid indirectly by you and other shareholders of the Fund.
<TABLE>
<CAPTION>
Shareholder Fees Class A Class B Class C Class D
- ---------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Maximum Sales Charge (Load) on Purchases
(as a % of offering price) ......................... 4.75%(1) none 1% none
Maximum Contingent Deferred Sales Charge (Load) (CDSC)
on Redemptions (as a % of original purchase price or
current net asset value, whichever is less) ........ none(1) 5% 1% 1%
Annual Fund Operating Expenses for Fiscal Year 1998
(as a percentage of average net assets)
Management Fees ......................................... .50% .50% .50% .50%
Distribution and/or Service (12b-1) Fees ................ .22% 1.00% 1.00% 1.00%
Other Expenses .......................................... .33% .33% .33% .33%
----- ----- ----- -----
Total Annual Fund Operating Expenses .................... 1.05% 1.83% 1.83% 1.83%
===== ===== ===== =====
</TABLE>
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
- -------
This example is intended to help you compare the expenses of investing in the
Fund with the expenses of investing in other mutual funds. It assumes (1) you
invest $10,000 in the Fund for each period and then sell all of your shares at
the end of that period, (2) your investment has a 5% return each year, and (3)
the Fund's operating expenses remain the same. Although your actual expenses may
be higher or lower, based on these assumptions your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $577 $793 $1,027 $1,697
Class B 686 876 1,190 1,943+
Class C 384 670 1,080 2,226
Class D 286 576 990 2,148
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $577 $793 $1,027 $1,697
Class B 186 576 990 1,943+
Class C 284 670 1,080 2,226
Class D 186 576 990 2,148
+ Class B shares will automatically convert to Class A shares after eight
years.
- --------------------------------------------------------------------------------
Management Fees:
Fees paid out of Fund assets to the investment manager to compensate it for
managing the Fund.
12b-1 Fees:
Fees paid by each Class, pursuant to a plan adopted by the Fund under Rule 12b-1
of the Investment Company Act of 1940. The plan allows each Class to pay
distribution and/or service fees for the sale and distribution of its shares and
for providing services to shareholders.
Other Expenses:
Miscellaneous expenses of running the Fund, including such things as transfer
agency, registration, custody, and auditing and legal fees.
- --------------------------------------------------------------------------------
4
<PAGE>
MANAGEMENT
The Fund's Board of Directors provides broad supervision over the affairs of the
Fund.
J. & W. Seligman & Co. Incorporated (Seligman), 100 Park Avenue, New York, New
York 10017, is the manager of the Fund. Seligman manages the investment of the
Fund's assets, including making purchases and sales of portfolio securities
consistent with the Fund's investment objective and strategies, and administers
the Fund's business and other affairs.
Established in 1864, Seligman currently serves as manager to 18 US registered
investment companies, which offer more than 50 investment portfolios with
approximately $21.5 billion in assets as of April 30, 1999. Seligman also
provides investment management or advice to institutional or other accounts
having an aggregate value at April 30, 1999, of approximately $10.2 billion.
The Fund pays Seligman a fee for its management services. For the year ended
December 31, 1998, the management fee paid by the Fund to Seligman was equal to
an annual rate of .50% Of the Fund's average daily net assets.
Portfolio Management
The Fund is managed by the Seligman Taxable Fixed Income Team, headed by Mr.
Gary S. Zeltzer. Mr. Zeltzer joined Seligman in March 1998 as Senior Vice
President, Manager Taxable Fixed Income. He is a Vice President of the Fund and
has been a Portfolio Manager of the Fund since March 1998. Prior to joining
Seligman, Mr. Zeltzer was a Group Vice President and Portfolio Manager at
Schroder Capital Management from July 1979 to March 1998. Mr. Zeltzer also
manages Seligman Cash Management Fund, Inc.; and he manages the Seligman Bond
Portfolio and the Seligman Cash Management Portfolio, two portfolios of Seligman
Portfolios, Inc.
- --------------------------------------------------------------------------------
Affiliates of Seligman:
Seligman Advisors, Inc.:
The Fund's general distributor; responsible for accepting orders for purchases
and sales of Fund shares.
Seligman Services, Inc.:
A limited purpose broker/dealer; acts as the broker/dealer of record for
shareholder accounts that do not have a designated broker or financial advisor.
Seligman Data Corp. (SDC):
The Fund's shareholder service agent; provides shareholder account services to
the Fund at cost.
- --------------------------------------------------------------------------------
5
<PAGE>
YEAR 2000
As the millennium approaches, mutual funds, financial and business
organizations, and individuals could be adversely affected if their computer
systems do not properly process and calculate date-related information and data
on and after January 1, 2000. Like other mutual funds, the Fund relies upon
service providers and their computer systems for its day-to-day operations. Many
of the Fund's service providers in turn depend upon computer systems of their
vendors. Seligman and SDC have established a year 2000 project team. The team's
purpose is to assess the state of readiness of Seligman and SDC and the Fund's
other service providers and vendors. The team is comprised of several
information technology and business professionals as well as outside
consultants. The Project Manager of the team reports directly to the
Administrative Committee of Seligman. The Project Manager and other members of
the team also report to the Board of Directors of the Fund and its Audit
Committee.
The team has identified the service providers and vendors who furnish critical
services or software systems to the Fund, including securities firms that
execute portfolio transactions for the Fund and firms responsible for
shareholder account recordkeeping. The team is working with these critical
service providers and vendors to evaluate the impact year 2000 issues may have
on their ability to provide uninterrupted services to the Fund. The team will
assess the feasibility of their year 2000 plans. The team has made progress on
its year 2000 contingency plans - recovery efforts the team will employ in the
event that year 2000 issues adversely affect the Fund. The team anticipates
finalizing these plans in the near future.
The Fund anticipates the team will implement all significant components of the
team's year 2000 plans by mid-1999, including appropriate testing of critical
systems and receipt of satisfactory assurances from critical service providers
and vendors regarding their year 2000 compliance. The Fund believes that the
critical systems on which it relies will function properly on and after the year
2000, but this is not guaranteed. If these systems do not function properly, or
the Fund's critical service providers are not successful in implementing their
year 2000 plans, the Fund's operations may be adversely affected, including
pricing, securities trading and settlement, and the provision of shareholder
services.
In addition, the Fund may hold securities of issuers whose underlying business
leaves them susceptible to year 2000 issues. The Fund may also hold securities
issued by governmental or quasi-governmental issuers, which, like other
organizations, are also susceptible to year 2000 concerns. Year 2000 issues may
affect an issuer's operations, creditworthiness, and ability to make timely
payment on any indebtedness and could have an adverse impact on the value of its
securities. If the Fund holds these securities, the Fund's performance could be
negatively affected. Seligman seeks to identify an issuer's state of year 2000
readiness as part of the research it employs. However, the perception of an
issuer's year 2000 preparedness is only one of the many factors considered in
determining whether to buy, sell, or continue to hold a security. Information
provided by issuers concerning their state of readiness may or may not be
accurate or readily available. Further, the Fund may be adversely affected if
the domestic or foreign exchanges, markets, depositories, clearing agencies, or
governments or third parties responsible for infrastructure needs do not address
their year 2000 issues in a satisfactory manner.
SDC has informed the Fund that it does not expect the cost of its services to
increase materially as a result of the modifications to its computer systems
necessary to prepare for the year 2000. The Fund will not pay to remediate the
systems of Seligman or bear directly the costs to remediate the systems of any
other service providers or vendors, other than SDC.
6
<PAGE>
Shareholder Information
DECIDING WHICH CLASS OF SHARES TO BUY
Each of the Fund's Classes represents an interest in the same portfolio of
investments. However, each Class has its own sales charge schedule, and its
ongoing 12b-1 fees may differ from other Classes. When deciding which Class of
shares to buy, you should consider, among other things:
o The amount you plan to invest.
o How long you intend to remain invested in the Fund, or another
Seligman mutual fund.
o If you would prefer to pay an initial sales charge and lower ongoing
12b-1 fees, or be subject to a CDSC and pay higher ongoing 12b-1 fees.
o Whether you may be eligible for reduced or no sales charges when you
buy or sell shares.
Your financial advisor will be able to help you decide which Class of shares
best meets your needs.
- --------------------------------------------------------------------------------
Class A
o Initial sales charge on Fund purchases, as set forth below:
<TABLE>
<CAPTION>
Sales Charge Regular Dealer
Sales Charge as a % Discount
as a % of Net as a % of
Amount of your Investment of Offering Price(1) Amount Invested Offering Price
- ------------------------- -------------------- --------------- --------------
<S> <C> <C> <C>
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 and over(2) 0.00 0.00 0.00
</TABLE>
(1) "Offering Price" is the amount that you actually pay for Fund shares;
it includes the initial sales charge.
(2) You will not pay a sales charge on purchases of $1 million or more,
but you will be subject to a 1% CDSC if you sell your shares within 18
months.
o Annual 12b-1 fee (for shareholder services) of up to 0.25%.
o No sales charge on reinvested dividends or capital gain distributions.
o Certain employer-sponsored defined contribution-type plans can purchase
shares with no initial sales charge.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B
o No initial sales charge on purchases.
o A declining CDSC on shares sold within 6 years of purchase:
Years Since Purchase CDSC
- -------------------- ----
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
- --------------------------------------------------------------------------------
Your purchase of Class B shares must be for less than $250,000, because if you
invest $250,000 or more, you will pay less in fees and charges if you buy
another Class of shares.
- --------------------------------------------------------------------------------
o Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
o Automatic conversion to Class A shares after eight years, resulting in
lower ongoing 12b-1 fees.
o No CDSC when you sell shares purchased with reinvested dividends or
capital gain distributions.
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
Class C
o Initial sales charge on Fund purchases, as set forth below:
<TABLE>
<CAPTION>
Regular Dealer
Sales Charge Sales Charge Discount
as a % as a % of Net as a % of
Amount of your Investment of Offering Price(1) Amount Invested Offering Price
- ------------------------- -------------------- --------------- --------------
<S> <C> <C> <C>
Less than $100,000 1.00% 1.01% 1.00%
$100,000 - $249,999 0.50 0.50 0.50
$250,000 - $1,000,000(2) 0.00 0.00 0.00
</TABLE>
(1) "Offering Price" is the amount that you actually pay for Fund shares;
it includes the initial sales charge.
(2) Your purchase of Class C shares must be for less than $1,000,000
because if you invest $1,000,000 or more you will pay less in fees and
charges if you buy Class A shares.
o A 1% CDSC on shares sold within eighteen months of purchase.
o Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
o No automatic conversion to Class A shares, so you will be subject to higher
ongoing 12b-1 fees indefinitely.
o No CDSC when you sell shares purchased with reinvested dividends or
capital gain distributions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D*
o No initial sales charge on purchases.
o A 1% CDSC on shares sold within one year of purchase.
o Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
o No automatic conversion to Class A shares, so you will be subject to higher
ongoing 12b-1 fees indefinitely.
o No CDSC when you sell shares purchased with reinvested dividends or
capital gain distributions.
* Class D shares are not available to all investors. Beginning June 1,
1999, you may purchase Class D shares only if (1) you already own
Class D shares of the Fund or another Seligman mutual fund, (2) if
your financial advisor of record maintains an omnibus account at
SDC, or (3) pursuant to a 401(k) or other retirement plan program for
which Class D shares are already available or for which the sponsor
requests Class D shares because the sales charge structure of Class D
shares is comparable to the sales charge structure of the other funds
offered under the program.
- --------------------------------------------------------------------------------
Because the Fund's 12b-1 fees are paid out of each Class's assets on an ongoing
basis, over time these fees will increase your investment expenses and may cost
you more than other types of sales charges.
The Fund's Board of Directors believes that no conflict of interest currently
exists between the Fund's Class A, Class B, Class C, and Class D shares. On an
ongoing basis, the Directors, in the exercise of their fiduciary duties under
the Investment Company Act of 1940 and Maryland law, will seek to ensure that no
such conflict arises.
How CDSCs Are Calculated
To minimize the amount of the CDSC you may pay when you sell your shares, the
Fund assumes that shares acquired through reinvested dividends and capital gain
distributions (which are not subject to a CDSC) are sold first. Shares that have
been in your account long enough so they are not subject to a CDSC are sold
next. After these shares are exhausted, shares will be sold in the order they
were purchased (oldest to youngest). The amount of any CDSC that you pay will be
based on the shares' original purchase price or current net asset value,
whichever is less.
You will not pay a CDSC when you exchange shares of the Fund to buy the same
class of shares of any other Seligman mutual fund. For the purpose of
calculating the CDSC when you sell shares that you acquired by exchanging shares
of the Fund, it will be assumed that you held the shares since the date you
purchased the shares of the Fund.
8
<PAGE>
PRICING OF FUND SHARES
When you buy or sell shares, you do so at the Class's net asset value (NAV) next
calculated after Seligman Advisors accepts your request. Any applicable sales
charge will be added to the purchase price for Class A shares and Class C
shares. Purchase or sale orders received by an authorized dealer or financial
advisor by the close of regular trading on the New York Stock Exchange (NYSE)
(normally 4:00 p.m. Eastern time) and accepted by Seligman Advisors before the
close of business (5:00 p.m. Eastern time) on the same day will be executed at
the Class's NAV calculated as of the close of regular trading on the NYSE on
that day. Your broker/dealer or financial advisor is responsible for forwarding
your order to Seligman Advisors before the close of business.
If your buy or sell order is received by your broker/dealer or financial advisor
after the close of regular trading on the NYSE, or is accepted by Seligman
Advisors after the close of business, the order will be executed at the Class's
NAV calculated as of the close of regular trading on the next NYSE trading day.
When you sell shares, you receive the Class's per share NAV, less any applicable
CDSC.
The NAV of the Fund's shares is determined each day, Monday through Friday, on
days that the NYSE is open for trading. Because of their higher 12b-1 fees, the
NAV of Class B, Class C, and Class D shares will generally be lower than the NAV
of Class A shares of the Fund.
Securities owned by the Fund are valued at current market prices. If reliable
market prices are unavailable, securities are valued in accordance with
procedures approved by the Fund's Board of Directors.
- --------------------------------------------------------------------------------
NAV:
Computed separately for each Class by dividing that Class's share of the net
assets of the Fund (i.e., its assets less liabilities) by the total number of
outstanding shares of the Class.
- --------------------------------------------------------------------------------
OPENING YOUR ACCOUNT
The Fund's shares are sold through authorized broker/dealers or financial
advisors who have sales agreements with Seligman Advisors. There are several
programs under which you may be eligible for reduced sales charges or lower
minimum investments. Ask your financial advisor if any of these programs apply
to you. Class D shares are not available to all investors. For more information,
see "Deciding Which Class of Shares to Buy-Class D."
To make your initial investment in the Fund, contact your financial advisor or
complete an account application and send it with your check directly to SDC at
the address provided on the account application. If you do not choose a Class,
your investment will automatically be made in Class A shares.
The required minimum initial investments are:
o Regular (non-retirement) accounts: $1,000
o For accounts opened concurrently with Invest-A-Check(R):
$100 to open if you will be making monthly investments
$250 to open if you will be making quarterly investments
If you buy shares by check and subsequently sell the shares, SDC will not send
your proceeds until your check clears, which could take up to 15 calendar days
from the date of your purchase.
- --------------------------------------------------------------------------------
You may buy shares of the Fund for all types of tax-deferred retirement plans.
Contact Retirement Plan Services at the address or phone number listed on the
inside back cover of this prospectus for information and to receive the proper
forms.
- --------------------------------------------------------------------------------
You will be sent a statement confirming your purchase, and any subsequent
transactions in your account. You will also be sent quarterly and annual
statements detailing your transactions in the Fund and the other Seligman funds
you own under the same account number. Duplicate account statements will be sent
to you free of charge for the current year and most recent prior year. Copies of
year-end statements for prior years are available for a fee of $10 per year, per
account, with a maximum charge of $150 per account. Send your request and a
check for the fee to SDC.
If you want to be able to buy, sell, or exchange shares by telephone, you
should complete an application when you open your account. This will
prevent you from having to complete a supplemental election form (which may
require a signature guarantee) at a later date.
9
<PAGE>
HOW TO BUY ADDITIONAL SHARES
After you have made your initial investment, there are many options available to
make additional purchases of Fund shares. Subsequent investments must be for
$100 or more.
Shares may be purchased through your authorized financial advisor, or you may
send a check directly to SDC. Please provide either an investment slip or a note
that provides your name(s), Fund name, and account number. Unless you indicate
otherwise, your investment will be made in the Class you already own. Send
investment checks to:
Seligman Data Corp.
P.O. Box 9766
Providence, RI 02940-9766
Your check must be in US dollars and be drawn on a US bank. You may not use
third party or credit card convenience checks for investment.
You may also use the following account services to make additional investments:
Invest-A-Check(R). You may buy Fund shares electronically from a savings or
checking account of an Automated Clearing House (ACH) member bank. If your bank
is not a member of ACH, the Fund will debit your checking account by
preauthorized checks. You may buy Fund shares at regular monthly intervals in
fixed amounts of $100 or more, or regular quarterly intervals in fixed amounts
of $250 or more. If you use Invest-A-Check(R), you must continue to make
automatic investments until the Fund's minimum initial investment of $1,000 is
met or your account may be closed.
Automatic Dollar-Cost-Averaging. If you have at least $5,000 in Seligman Cash
Management Fund, you may exchange uncertificated shares of that fund to buy
shares of the same class of another Seligman mutual fund at regular monthly
intervals in fixed amounts of $100 or more or regular quarterly intervals in
fixed amounts of $250 or more. If you exchange Class A shares or Class C shares,
you may pay an initial sales charge to buy Fund shares.
Automatic CD Transfer. You may instruct your bank to invest the proceeds of a
maturing bank certificate of deposit (CD) in shares of the Fund. If you wish to
use this service, contact SDC or your financial advisor to obtain the necessary
forms. Because your bank may charge you a penalty, it is not normally advisable
to withdraw CD assets before maturity.
Dividends From Other Investments. You may have your dividends from other
companies paid to the Fund. (Dividend checks must include your name, account
number, Fund name, and Class of shares.)
Direct Deposit. You may buy Fund shares electronically with funds from your
employer, the IRS, or any other institution that provides direct deposit. Call
SDC for more information.
Seligman Time Horizon Matrix(SM). (Requires an initial total investment of
$10,000.) This is a needs-based investment process, designed to help you and
your financial advisor plan to seek your long-term financial goals. It considers
your financial needs, and helps frame a personalized asset allocation strategy
around the cost of your future commitments and the time you have to meet them.
Contact your financial advisor for more information.
Seligman Harvester. If you are a retiree or nearing retirement, this program is
designed to help you establish an investment strategy that seeks to meet your
needs throughout your retirement. The strategy is customized to your personal
financial situation by allocating your assets to seek to address your income
requirements, prioritizing your expenses, and establishing a prudent withdrawal
schedule. Contact your financial advisor for more information.
HOW TO EXCHANGE SHARES AMONG THE SELIGMAN MUTUAL FUNDS
You may sell Fund shares to buy shares of the same Class of another Seligman
mutual fund, or you may sell shares of another Seligman mutual fund to buy Fund
shares. Exchanges will be made at each fund's respective NAV. You will not pay
an initial sales charge when you exchange, unless you exchange Class A shares of
Seligman Cash Management Fund to buy Class A shares of the Fund or another
Seligman mutual fund.
10
<PAGE>
Only your dividend and capital gain distribution options and telephone services
will be automatically carried over to any new fund account. If you wish to carry
over any other account options (for example, Invest-A-Check(R) or Systematic
Withdrawals) to the new fund, you must specifically request so at the time of
your exchange.
If you exchange into a new fund, you must exchange enough to meet the new fund's
minimum initial investment.
See "The Seligman Mutual Funds" for a list of the funds available for exchange.
Before making an exchange, contact your financial advisor or SDC to obtain the
applicable fund prospectus(es). You should read and understand a fund's
prospectus before investing. Some funds may not offer all classes of shares.
HOW TO SELL SHARES
The easiest way to sell Fund shares is by phone. If you have telephone services,
you may be able use this service to sell Fund shares. Restrictions apply to
certain types of accounts. Please see "Important Policies That May Affect Your
Account."
When you sell Fund shares by phone, a check for the proceeds is sent to your
address of record. If you have current ACH bank information on file, you may
have the proceeds of the sale of your Fund shares directly deposited into your
bank account (typically, 3-4 business days after your shares are sold).
You may sell shares to the Fund through a broker/dealer or your financial
advisor. The Fund does not charge any fees or expenses, other than any
applicable CDSC, for this transaction; however, the dealer or financial advisor
may charge a service fee. Contact your financial advisor for more information.
You may always send a written request to sell Fund shares; however, it may take
longer to get your money.
As an additional measure to protect you and the Fund, SDC may confirm written
redemption requests that are (1) for $25,000 or more, or (2) directed to be paid
to an alternate payee or sent to an address other than the address of record,
with you or your financial advisor by telephone before sending you your money.
This will not effect the date on which your redemption request is actually
processed.
You will need to guarantee your signature(s) if the proceeds are:
(1) $50,000 or more;
(2) to be paid to someone other than all account owners; or
(3) mailed to other than your address of record.
- --------------------------------------------------------------------------------
Signature Guarantee:
Protects you and the Fund from fraud. It guarantees that a signature is genuine.
A guarantee must be obtained from an eligible financial institution.
Notarization by a notary public is not an acceptable guarantee.
- --------------------------------------------------------------------------------
If your Fund shares are represented by certificates, you will need to surrender
the certificates to SDC before you sell your shares. You may need to provide
additional documents to sell Fund shares if you are:
o a corporation;
o an executor or administrator;
o a trustee or custodian; or
o in a retirement plan.
Contact your financial advisor or SDC's Shareholder Services Department for
information on selling your shares under any of the above circumstances.
You may also use the following account service to sell Fund shares:
Systematic Withdrawal Plan. If you have at least $5,000 in the Fund, you may
withdraw (sell) a fixed dollar amount (minimum of $50) of uncertificated shares
at regular intervals. A check will be sent to you at your address of record or,
if you have current ACH bank information on file, you may have your payments
directly deposited to your predesignated bank account in 3-4 business days after
your shares are sold. If you bought $1,000,000 or more of Class A shares without
an initial sales charge, your withdrawals may be subject to a 1% CDSC if they
occur within 18 months of purchase. If you own Class B, Class C, or Class D
shares and reinvest your dividends and capital gain distributions, you may
withdraw 12%, 10%, or 10%, respectively, of the value of your Fund account (at
the time of election) annually without a CDSC.
Check Redemption Service. If you have at least $25,000 in the Fund, you may ask
SDC to provide checks which may be drawn against your account in amounts of $500
or more. You can elect this service on your initial application, or contact SDC
for the appropriate forms to establish this service.
If you own Class A shares that were bought at NAV because of the size of your
purchase, or if you own Class B shares, check redemptions may be subject to a
CDSC. If you own Class D or Class C shares, you may use this service only with
respect to shares that you have held for at least one year or eighteen months,
respectively.
11
<PAGE>
IMPORTANT POLICIES THAT MAY AFFECT YOUR ACCOUNT
To protect you and other shareholders, the fund reserves the right to:
o Refuse an exchange request if:
1. you have exchanged twice from the same fund in any three-month period;
2. the amount you wish to exchange equals the lesser of $1,000,000 or 1%
of the Fund's net assets; or
3. you or your financial advisor have been advised that previous patterns
of purchases and sales or exchanges have been considered excessive.
o Refuse any request to buy Fund shares.
o Reject any request received by telephone.
o Suspend or terminate telephone services.
o Reject a signature guarantee that SDC believes may be fraudulent.
o Close your fund account if its value falls below $500.
o Close your account if it does not have a certified taxpayer identification
number.
Telephone Services
You and your broker/dealer or financial advisor will be able to place the
following requests by telephone, unless you indicate on your account application
that you do not want telephone services:
o Sell uncertificated shares (up to $50,000 per day, payable to account
owner(s) and mailed to address of record);
o Exchange shares between funds;
o Change dividend and/or capital gain distribution options;
o Change your address;
o Establish systematic withdrawals to address of record.
If you do not complete an account application when you open your account,
telephone services must be elected on a supplemental election form (which may
require a signature guarantee).
Restrictions apply to certain types of accounts:
o Trust accounts on which the current trustee is not listed may not sell
Fund shares by phone.
o Corporations may not sell Fund shares by phone.
o IRAs may only exchange Fund shares or request address changes by
phone.
o Group retirement plans may not sell Fund shares by phone; plans that
allow participants to exchange by phone must provide a letter of
authorization signed by the plan custodian or trustee and provide a
supplemental election form signed by all plan participants.
Unless you have current ACH bank information on file, you will not be able to
sell Fund shares by phone within thirty days following an address change.
Your request must be communicated to an SDC representative. You may not request
any phone transactions via the automated access line.
You may cancel telephone services at any time by sending a written request to
SDC. Each account owner, by accepting or adding telephone services, authorizes
each of the other owners to make requests by phone. Your broker/dealer or
financial advisor representative may not establish telephone services without
your written authorization. SDC will send written confirmation to the address of
record when telephone services are added or terminated.
During times of heavy call volume, you may not be able to get through to SDC by
phone to request a sale or exchange of Fund shares. In this case, you may need
to write, and it may take longer for your request to be processed. The Fund's
NAV may fluctuate during this time. The Fund and SDC will not be liable for
processing requests received by phone as long as it was reasonable to believe
that the request was genuine.
Reinstatement Privilege
If you sell Fund shares, you may, within 120 calendar days, use part or all of
the proceeds to buy shares of the Fund or any other Seligman mutual fund
(reinstate your investment) without paying an initial sales charge or, if you
paid a CDSC when you sold your shares, receiving a credit for the applicable
CDSC paid. This privilege is available only once each calendar year. Contact
your financial advisor for more information. You should consult your tax advisor
concerning possible tax consequences of exercising this privilege.
12
<PAGE>
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Fund generally pays dividends from its net investment income monthly and
distributes any net capital gains realized on investments annually.
You may elect to:
(1) reinvest both dividends and capital gain distributions;
(2) receive dividends in cash and reinvest capital gain distributions; or
(3) receive both dividends and capital gain distributions in cash.
Your dividends and capital gain distributions will be reinvested if you do not
instruct otherwise or if you own Fund shares in a Seligman tax-deferred
retirement plan.
If you want to change your election, you may write SDC at the address listed on
the back cover of this prospectus or, if you have telephone services, you or
your financial advisor may call SDC. Your request must be received by SDC before
the record date to be effective for that dividend or capital gain distribution.
Cash dividends or capital gain distributions will be sent by check to your
address of record or, if you have current ACH bank information on file, directly
deposited into your predesignated bank account within 3-4 business days from the
payable date.
Dividends and capital gain distributions are reinvested to buy additional Fund
shares on the payable date using the NAV of the ex-dividend date.
Dividends on Class B, Class C, and Class D shares will be lower than the
dividends on Class A shares as a result of their higher 12b-1 fees. Capital gain
distributions will be paid in the same amount for each Class.
- --------------------------------------------------------------------------------
Dividend:
A payment by a mutual fund, usually derived from the fund's net investment
income (dividends and interest earned on portfolio securities less expenses).
Capital Gain Distribution:
A payment to mutual fund shareholders which represents profits realized on the
sale of securities in a fund's portfolio.
Ex-dividend Date:
The day on which any declared distributions (dividends or capital gains) are
deducted from a fund's assets before it calculates its NAV.
- --------------------------------------------------------------------------------
Taxes
The tax treatment of dividends and capital gain distributions is the same
whether you take them in cash or reinvest them to buy additional Fund shares.
Tax-deferred retirement plans are not taxed currently on dividends or capital
gain distributions or on exchanges.
Dividends paid by the Fund are taxable to you as ordinary income. You may be
taxed at different rates on capital gains distributed by the Fund depending on
the length of time the Fund holds its assets.
When you sell Fund shares, any gain or loss you realize will generally be
treated as a long-term capital gain or loss if you held your shares for more
than one year, or as a short-term capital gain or loss if you held your shares
for one year or less. However, if you sell Fund shares on which a long-term
capital gain distribution has been received and you held the shares for six
months or less, any loss you realize will be treated as a long-term capital loss
to the extent that it offsets the long-term capital gain distribution.
An exchange of Fund shares is a sale and may result in a gain or loss for
federal income tax purposes.
Each January, you will be sent information on the tax status of any
distributions made during the previous calendar year. Because each shareholder's
situation is unique, you should always consult your tax advisor concerning the
effect income taxes may have on your individual investment.
13
<PAGE>
THE SELIGMAN MUTUAL FUNDS
EQUITY
SPECIALTY
- --------------------------------------------------------------------------------
Seligman Communications and Information Fund
Seeks capital appreciation by investing in companies operating in all aspects of
the communications, information, and related industries.
Seligman Henderson Global Technology Fund
Seeks long-term capital appreciation by investing primarily in global securities
(US and non-US) of companies in the technology and technology-related
industries.
Seligman Henderson Emerging Markets Growth Fund
Seeks long-term capital appreciation by investing primarily in equity securities
of companies in emerging markets.
SMALL COMPANY
- --------------------------------------------------------------------------------
Seligman Frontier Fund
Seeks growth of capital by investing primarily in small company growth stocks.
Seligman Small-Cap Value Fund
Seeks long-term capital appreciation by investing in equities of small
companies, deemed to be "value" companies by the investment manager.
Seligman Henderson Global Smaller Companies Fund
Seeks long-term capital appreciation by investing in securities of smaller
companies around the world, including the US.
MEDIUM COMPANY
- --------------------------------------------------------------------------------
Seligman Capital Fund
Seeks capital appreciation by investing in the common stocks of companies with
significant potential for growth.
LARGE COMPANY
- --------------------------------------------------------------------------------
Seligman Growth Fund
Seeks long-term growth of capital value and an increase in future income.
Seligman Henderson Global Growth Opportunities Fund
Seeks capital appreciation by investing primarily in equity securities of
companies that have the potential to benefit from global economic or social
trends.
Seligman Large-Cap Value Fund
Seeks long-term capital appreciation by investing in equities of large
companies, deemed to be "value" companies by the investment manager.
Seligman Common Stock Fund
Seeks favorable, but not the highest, current income and long-term growth of
both income and capital, without exposing capital to undue risk.
Seligman Henderson International Fund
Seeks long-term capital appreciation by investing in securities of medium- to
large-sized companies, primarily in the developed markets outside the US.
BALANCED
- --------------------------------------------------------------------------------
Seligman Income Fund
Seeks high current income and improvement in capital value over the long term,
consistent with prudent risk of capital.
FIXED-INCOME
INCOME
- --------------------------------------------------------------------------------
Seligman High-Yield Bond Fund
Seeks to maximize current income by investing in a diversified portfolio of
high-yielding, high-risk corporate bonds, commonly referred to as "junk bonds."
Seligman U.S. Government Securities Fund
Seeks high current income primarily by investing in a diversified portfolio of
securities guaranteed by the US government, its agencies, or instrumentalities,
which have maturities greater than one year.
MUNICIPAL
- --------------------------------------------------------------------------------
Seligman Municipal Funds:
National Fund
Seeks maximum income, exempt from regular federal income taxes.
State-specific funds:*
Seek to maximize income exempt from regular federal income taxes and from
regular income taxes in the designated state.
California Louisiana New Jersey
o High-Yield Maryland New York
o Quality Massachusetts North Carolina
Colorado Michigan Ohio
Florida Minnesota Oregon
Georgia Missouri Pennsylvania
South Carolina
* A small portion of income may be subject to state taxes.
MONEY MARKET
- --------------------------------------------------------------------------------
Seligman Cash Management Fund
Seeks to preserve capital and to maximize liquidity and current income, by
investing only in high-quality money market securities having a maturity of 90
days or less. The fund seeks to maintain a constant net asset value of $1.00 per
share.
14
<PAGE>
Financial Highlights
The tables below are intended to help you understand the financial performance
of the Fund's Classes for the past five years or, if less than five years, the
period of the Class's operations. Class C is a new Class, effective June 1,
1999, so financial highlights are not available. Certain information reflects
financial results for a single share of a Class that was held throughout the
periods shown. "Total return" shows the rate that you would have earned (or
lost) on an investment in the Fund, assuming you reinvested all your dividends
and capital gain distributions. Total returns do not reflect any sales charges.
Deloitte & Touche LLP, independent auditors, have audited this information.
Their report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request.
CLASS A
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period ........... $6.88 $6.71 $7.15 $6.47 $7.18
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income ........................ 0.36 0.38 0.41 0.46 0.44
Net gains or losses on securities
(both realized and unrealized) ............ 0.21 0.17 (0.44) 0.68 (0.71)
---------- ---------- ---------- ---------- ----------
Total from investment operations ............... 0.57 0.55 (0.03) 1.14 (0.27)
---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends (from net investment income) ....... (0.36) (0.38) (0.41) (0.46) (0.44)
---------- ---------- ---------- ---------- ----------
Total distributions ............................ (0.36) (0.38) (0.41) (0.46) (0.44)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period ................. $7.09 $6.88 $6.71 $7.15 $6.47
========== ========== ========== ========== ==========
Total Return: .................................. 8.46% 8.53% (0.29)% 18.15% (3.88)%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) ....... $55,503 $45,426 $46,889 $55,061 $54,714
Ratio of expenses to average net assets ........ 1.05% 1.23% 1.14% 1.14% 1.10%
Ratio of net income to average net assets ...... 5.11% 5.68% 6.05% 6.71% 6.49%
Portfolio turnover rate ........................ 99.43% 193.90% 175.25% 213.06% 445.18%
</TABLE>
- ----------
* Per share amounts are calculated based on average shares outstanding.
15
<PAGE>
CLASS B
Year ended 1/1/97**
December 31, to
1998 12/31/97
------------ ----------
Per Share Data:*
Net asset value, beginning of period .......... $6.89 $6.73
---------- ----------
Income from investment operations:
Net investment income ....................... 0.30 0.33
Net gains or losses on securities
(both realized and unrealized) ........... 0.22 0.16
---------- ----------
Total from investment operations .............. 0.52 0.49
---------- ----------
Less Distributions:
Dividends (from net investment income) ...... (0.30) (0.33)
---------- ----------
Total distributions ........................... (0.30) (0.33)
---------- ----------
Net asset value, end of period ................ $7.11 $6.89
========== ==========
Total Return: ................................. 7.78% 7.32%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) ...... $27,924 $3,219
Ratio of expenses to average net assets ....... 1.83% 2.01%
Ratio of net income to average net assets ..... 4.33% 4.90%
Portfolio turnover rate ....................... 99.43% 193.90%
CLASS D
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period ........... $6.89 $6.73 $7.16 $6.48 $7.20
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income ........................ 0.30 0.33 0.36 0.40 0.37
Net gains or losses on securities
(both realized and unrealized) .............. 0.22 0.16 (0.43) 0.68 (0.72)
---------- ---------- ---------- ---------- ----------
Total from investment operations ............... 0.52 0.49 (0.07) 1.08 (0.35)
---------- ---------- ---------- ---------- ----------
Less distributions:
Dividends (from net investment income) ....... (0.30) (0.33) (0.36) (0.40) (0.37)
---------- ---------- ---------- ---------- ----------
Total distributions ............................ (0.30) (0.33) (0.36) (0.40) (0.37)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period ................. $7.11 $6.89 $6.73 $7.16 $6.48
========== ========== ========== ========== ==========
Total Return: .................................. 7.78% 7.53% (0.92)% 17.10% (5.05)%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) ....... $26,614 $12,350 $9,283 $8,181 $6,062
Ratio of expenses to average net assets ........ 1.83% 2.01% 1.92% 2.01% 2.22%
Ratio of net income to average net assets ...... 4.33% 4.90% 5.27% 5.84% 5.40%
Portfolio turnover rate ........................ 99.43% 193.90% 175.25% 213.06% 445.18%
</TABLE>
- ----------
* Per share amounts are calculated based on average shares outstanding.
** Commencement of offering of shares.
16
<PAGE>
How to Contact Us
The Fund Write: Corporate Communications/
Investor Relations Department
J. & W. Seligman & Co. Incorporated
100 Park Avenue, New York, NY 10017
Phone: Toll-Free (800) 221-7844 in the US or
(212) 850-1864 outside the US
Website: http://www.seligman.com
Your Regular
(Non-Retirement)
Account Write: Shareholder Services Department
Seligman Data Corp.
100 Park Avenue, New York, NY 10017
Phone: Toll-Free (800) 221-2450 in the US or
(212) 682-7600 outside the US
Website: http://www.seligman.com
Your Retirement Account Write: Retirement Plan Services
Seligman Data Corp.
100 Park Avenue, New York, NY 10017
Phone: Toll-Free (800) 445-1777
- --------------------------------------------------------------------------------
24-hour telephone access is available by dialing (800) 622-4597 on a touchtone
telephone. You will have instant access to price, yield, account balance, most
recent transaction, and other information.
- --------------------------------------------------------------------------------
17
<PAGE>
================================================================================
For More Information
-----------------------------------------------------------
The following information is available without charge upon
request: Call toll-free (800) 221-2450 in the US or (212)
682-7600 outside the US.
Statement of Additional Information (SAI) contains
additional information about the Fund. It is on file with
the Securities and Exchange Commission (SEC) and is
incorporated by reference into (is legally part of) this
prospectus.
Annual/Semi-Annual Reports contain additional information
about the Fund's investments. In the Fund's annual report,
you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's
performance during its last fiscal year.
-----------------------------------------------------------
SELIGMAN ADVISORS, INC.
an affiliate of
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
Information about the Fund, including the SAI, can be viewed and copied at the
SEC's Public Reference Room in Washington, DC. For information about the
operation of the Public Reference Room, call (800) SEC-0330. The SAI,
Annual/Semi-Annual reports and other information about the Fund are also
available on the SEC's Internet site: http://www.sec.gov.
Copies of this information may be obtained, upon payment of a duplicating fee,
by writing: Public Reference Section of the SEC, Washington, DC 20549-6009.
SEC FILE NUMBER: 811-4103
<PAGE>
SELIGMAN HIGH INCOME FUND SERIES
Seligman U.S. Government Securities Series
Seligman High-Yield Bond Series
Statement of Additional Information
June 1, 1999
100 Park Avenue
New York, New York 10017
(212) 850-1864
Toll Free Telephone: (800) 221-2450
For Retirement Plan Information - Toll-Free Telephone: (800) 445-1777
This Statement of Additional Information (SAI) expands upon and supplements the
information contained in the current Prospectuses, dated June 1, 1999, for each
of the Seligman High-Yield Bond Series and the Seligman U.S. Government
Securities Series (individually, a "Series"), each a separate series of Seligman
High-Income Fund Series (the "Fund"). This SAI, although not in itself a
prospectus, is incorporated by reference into each Series' Prospectus in its
entirety. It should be read in conjunction with each Series' Prospectus, which
you may obtain by writing or calling the Fund at the above address or telephone
numbers.
The financial statements and notes included in each Series' Annual Report, and
the Independent Auditors' Reports thereon, are incorporated herein by reference.
An Annual Report will be furnished to you without charge if you request a copy
of this SAI.
Table of Contents
Fund History.......................................................... 2
Description of the Fund and its Investments and Risks................. 2
Management of the Fund................................................ 7
Control Persons and Principal Holders of Securities................... 12
Investment Advisory and Other Services................................ 12
Portfolio Transactions and Other Practices............................ 19
Shares of Beneficial Interest and Other Securities ................... 20
Purchase, Redemption, and Pricing of Shares........................... 20
Taxation of each Series............................................... 26
Underwriters.......................................................... 27
Calculation of Performance Data ...................................... 29
Financial Statements.................................................. 32
General Information................................................... 32
Appendix A............................................................ 35
Appendix B............................................................ 38
<PAGE>
Fund History
The Fund was organized as a business trust under the laws of the state of
Massachusetts on July 27, 1984.
Description of the Fund and its Investments and Risks
Classification
The Fund is a diversified open-end management investment company, or mutual
fund. It consists of two separate and distinct series: the Seligman U.S.
Government Securities Series and the Seligman High-Yield Bond Series.
Investment Strategies and Risks
The following information regarding each Series' investments and risks
supplements the information contained in each Series' Prospectus.
US Government Securities. The U.S. Government Securities Series intends to
invest in US Government securities. These 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 US 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 US Government.
Foreign Securities. 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 US company, and foreign companies may not be subject to
reporting standards and requirements comparable to those applicable to US
companies. Foreign debt securities and their markets may not be as liquid as US
securities and their markets. Securities of foreign companies may involve
greater market risk than securities of US 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 High-Yield Bond 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
(1933 Act)) and other securities that are not readily marketable, such as
repurchase agreements of more than one week's duration. The Series may purchase
restricted securities that may be offered and sold only to "qualified
institutional buyers" under Rule 144A of the 1933 Act, and the investment
manager, acting pursuant to procedures approved by the Fund's Board of Trustees,
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 investment 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.
2
<PAGE>
Mortgage-Related Securities.
Mortgage Pass-Through Securities. The U.S. Government Securities Series may
invest in mortgage pass-through securities. Mortgage pass-through securities
include securities that represent interests in pools of mortgage loans made by
lenders such as savings and loan institutions, mortgage bankers, and commercial
banks. Such securities provide a "pass-through" of monthly payments of interest
and principal made by the borrowers on their residential mortgage loans (net of
any fees paid to the issuer or guarantor of such securities). Although the
residential mortgages underlying a pool may have maturities of up to 30 years, a
pool's effective maturity may be reduced 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 mortgages. High interest rate
mortgages are more likely to be prepaid than lower-rate mortgages; consequently,
the effective maturities of mortgage-related obligations that pass-through
payments of higher-rate mortgages are likely to be shorter than those of
obligations that pass-through payments of lower-rate mortgages. If such
prepayment of mortgage-related securities in which the Portfolio invests occurs,
the Portfolio may have to invest the proceeds in securities with lower yields.
The Government National Mortgage Association (GNMA) is a US Government
corporation within the Department of Housing and Urban Development, authorized
to guarantee, with the full faith and credit of the US Government, the timely
payment of principal and interest on securities issued by institutions approved
by GNMA (such as savings and loan institutions, commercial banks and mortgage
bankers) and backed by pools of Federal Housing Administration insured or
Veterans Administration guaranteed residential mortgages. These securities
entitle the holder to receive all interest and principal payments owed on the
mortgages in the pool, net of certain fees, regardless of whether or not the
mortgagors actually make the payments. Other government-related issuers of
mortgage-related securities include the Federal National Mortgage Association
(FNMA), a government-sponsored corporation subject to general regulation by the
Secretary of Housing and Urban Development but owned entirely by private
stockholders, and the Federal Home Loan Mortgage Corporation (FHLMC), a
corporate instrumentality of the US Government created for the purpose of
increasing the availability of mortgage credit for residential housing that is
owned by the twelve Federal Home Loan Banks. FHLMC issues Participation
Certificates (PCs), which represent interests in mortgages from FHLMC's national
portfolio. FHLMC guarantees the timely payment of interest and ultimate
collection of principal, but PCs are not backed by the full faith and credit of
the US Government. Pass-through securities issued by FNMA are backed by
residential mortgages purchased from a list of approved seller/servicers and are
guaranteed as to timely payment of principal and interest by FNMA, but are not
backed by the full faith and credit of the US Government.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through securities based on pools of conventional residential mortgage
loans. Securities created by such non-governmental issuers may offer a higher
rate of interest than government-related securities; however, timely payment of
interest and principal may or may not be supported by insurance or guarantee
arrangements, and there can be no assurance that the private issuers can meet
their obligations.
Collateralized Mortgage Obligations. The U.S. Government Securities Series may
also invest in Collateralized Mortgage Obligations (CMOs), including certain
CMOs that have elected to be treated as Real Estate Mortgage Investment Conduits
(REMICs). CMOs are fixed-income securities collateralized by pooled mortgages
and separated into short-, medium-, and long-term positions (called tranches).
Tranches pay different rates of interest depending upon their maturity. CMOs may
be collateralized by (a) pass through securities issued or guaranteed by GNMA,
FNMA or FHLMC, (b) unsecuritized mortgage loans insured by the Federal Housing
Administration or guaranteed by the Department of Veteran's Affairs, (c)
unsecuritized conventional Mortgages, (d) other mortgage related securities or
(e) any combination thereof.
Each tranche of a CMO is issued at a specific coupon rate and has a stated
maturity. As the payments on the underlying mortgage loans are collected, the
CMO issuer generally pays the coupon rate of interest to the holders of each
tranche. In a common structure referred to as a "Pay" CMO, all scheduled and
3
<PAGE>
unscheduled principal payments generated by the collateral, as loans are repaid
or prepaid, go initially to investors in the first tranches. Investors in later
tranches do not start receiving principal payments until the prior tranches are
paid in full. Sometimes, CMOs are structured so that the prepayment and/or
market risks are transferred from one tranche to another.
Most CMOs are issued by Federal agencies. However, the only CMOs backed by the
full faith and credit of the US Government are CMOs collateralized by pass
through securities guaranteed by GNMA. All CMOs are subject to reinvestment
risk; that is, as prepayments on the underlying pool of mortgages increase, the
maturity of the tranches in the CMO will decrease. As a result, the Series may
have to invest the proceeds that were invested in such CMOs in securities with
lower yields. Factors affecting reinvestment risk include the level of interest
rates, general economic and social conditions and the location and age of the
mortgages.
Preferred Stock. The High-Yield Bond 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 investment manager will try
to minimize this greater risk potential through its investment process. However,
there can be no assurance that losses will not occur.
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 a Series acquires
a money market instrument, generally a US 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 U.S. Government Securities Series may enter into
repurchase agreements with respect to any money market instruments qualified for
purchase, such agreements generally involve only US Government securities and
will only involve securities issued or guaranteed by the US Government. As a
matter of fundamental policy, each 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 and Forward Commitment Securities. Each Series may purchase
securities on a when-issued or forward commitment 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 or
forward commitment 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 or forward commitment 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 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 or forward commitment 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 or forward
commitment 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 or forward commitment
obligations will be established with Investors Fiduciary Trust Company, the
Fund's portfolio securities custodian, and marked to market daily, with
4
<PAGE>
additional cash or liquid high grade debt securities added when necessary. When
the time comes to pay for when-issued or forward commitment 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 or forward commitment 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.
Borrowing. Each 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. Each Series of the Fund may lend portfolio
securities to brokers or dealers, banks, or other institutional borrowers of
securities. Loaned securities may not be returned by a borrower; however, a
borrower must maintain with a 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 a
Series any income accruing on the loaned securities and a Series may invest the
cash collateral and earn additional income or may receive an agreed upon amount
of interest income from the borrower. Loans will generally be short-term. Loans
are subject to termination at the option of a 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. 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 a Series might be delayed; and 3) the borrower might refuse to
repay the borrowed securities. Each Series may lend portfolio securities to the
extent that the investment manager deems appropriate in seeking to achieve a
Series' investment objective and with only a prudent degree of risk.
Except as otherwise specifically noted above and below, each Series' investment
policies are not fundamental and the Board of Trustees of the Fund may change
such policies without the vote of a majority of each Series' outstanding voting
securities.
Fund Policies
Each Series is subject to fundamental policies that place restrictions on
certain types of investments. These policies cannot be changed except by vote of
a majority of each Series' outstanding voting securities. Under these policies,
each 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
5
<PAGE>
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 US Government, its agencies or instrumentalities;
buy more than 10% of the voting securities of any one issuer, other than US
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;
- - Invest in securities issued by other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization or
for the purpose of hedging the Fund's obligations under the Deferred
Compensation Plan for Trustees;
- - 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.
Each Series may not change its investment objective without shareholder
approval.
Under the Investment Company Act of 1940, as amended (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 present at a shareholders' 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.
Temporary Defensive Position
In an attempt to respond to adverse market, economic, political, or other
conditions, the High-Yield Bond Series may invest up to 100% of its assets in
cash or cash equivalents, including, but not limited to, prime commercial paper,
bank certificates of deposit, bankers' acceptances, or repurchase agreements for
6
<PAGE>
such securities, and securities of the US Government and its agencies and
instrumentalities, as well as cash and cash equivalents denominated in foreign
currencies. The High-Yield Bond Series' investments in foreign cash equivalents
will be limited to those that, in the opinion of the investment manager, equate
generally to the standards established for US cash equivalents. Investments in
bank obligations will be limited at the time of investment to the obligations of
the 100 largest domestic banks in terms of assets which are subject to
regulatory supervision by the US Government or state governments, and the
obligations of the 100 largest foreign banks in terms of assets with branches or
agencies in the United States. The High-Yield Bond Series may also invest in
high-yield, medium and lower quality corporate notes.
Portfolio Turnover
Each Series' portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the year by the monthly average
of the value of the portfolio securities owned during the year. Securities whose
maturity or expiration date at the time of acquisition were one year or less are
excluded from the calculation. The portfolio turnover rate for the U.S.
Government Securities Series for the years ended December 31, 1998 and 1997 were
99.43% and 193.90%, respectively. The portfolio turnover rate for the High-Yield
Bond Series for the years ended December 31, 1998 and 1997 were 35.34% and
61.78%, respectively.
Management of the Fund
Board of Trustees
The Board of Trustees provides broad supervision over the affairs of each
Series.
Management Information
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.
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address With Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
William C. Morris* Trustee, Chairman of the Chairman, J. & W. Seligman & Co. Incorporated,
(61) Board, Chief Executive Chairman and Chief Executive Officer, the Seligman
Officer and Chairman of the Group of investment companies; Chairman, Seligman
Executive Committee Advisors, Inc., Seligman Services, Inc., and Carbo
Ceramics Inc., ceramic proppants for oil and gas
industry; and Director, Seligman Data Corp.,
Kerr-McGee Corporation, diversified energy company.
Formerly, Director, Daniel Industries Inc.,
manufacturer of oil and gas metering equipment.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address With Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
Brian T. Zino* Trustee, President and Member Director and President, J. & W. Seligman & Co.
(46) of the Executive Committee Incorporated; President (with the exception of
Seligman Quality Municipal Fund, Inc. and Seligman
Select Municipal Fund, Inc.) and Director or Trustee,
the Seligman Group of investment companies; Chairman,
Seligman Data Corp.; Member of the Board of Governors
of the Investment Company Institute; and Director,
ICI Mutual Insurance Company, Seligman Advisors,
Inc., and Seligman Services, Inc.
Richard R. Schmaltz* Trustee and Member of the Director and Managing Director, Director of
(58) Executive Committee Investments, J. & W. Seligman & Co. Incorporated;
Director or Trustee, the Seligman Group of investment
companies (except Seligman Cash Management Fund,
Inc.); Director, Seligman Henderson Co., and Trustee
Emeritus of Colby College. Formerly, Director,
Investment Research at Neuberger & Berman from May
1993 to September 1996.
John R. Galvin Trustee Dean, Fletcher School of Law and Diplomacy at Tufts
(69) University; Director or Trustee, the Seligman Group
Tufts University of investment companies; Chairman Emeritus, American
Packard Avenue, Council on Germany; Governor of the Center for
Medford, MA 02155 Creative Leadership; Director; Raytheon Co.,
electronics; National Defense University; and the
Institute for Defense Analyses. 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.
Alice S. Ilchman Trustee Retired President, Sarah Lawrence College; Director
(64) or Trustee, the Seligman Group of investment
18 Highland Circle, companies; Trustee, the Committee for Economic
Bronxville, NY 10708 Development; and Chairman, The Rockefeller
Foundation, charitable foundation. Formerly,
Trustee, The Markle Foundation, philanthropic
organization; and Director, New York Telephone
Company; and International Research and Exchange
Board, intellectual exchanges.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address With Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
Frank A. McPherson Trustee Retired Chairman and Chief Executive Officer of
(66) Kerr-McGee Corporation; Director or Trustee, the
2601 Northwest Expressway, Suite Seligman Group of investment companies; Director,
805E Kimberly-Clark Corporation, consumer products; Bank
Oklahoma City, OK 73112 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, Oklahoma City Public Schools Foundation;
and Director, Federal Reserve System's Kansas City
Reserve Bank and the Oklahoma City Chamber of
Commerce.
John E. Merow Trustee Retired Chairman and Senior Partner, Sullivan &
(69) Cromwell, law firm; Director or Trustee, the Seligman
125 Broad Street, Group of investment companies; Director, Commonwealth
New York, NY 10004 Industries, Inc., manufacturers of aluminum sheet
products; the Foreign Policy Association; Municipal
Art Society of New York; the U.S. Council for
International Business; and New York Presbyterian
Hospital; Chairman, American Australian Association;
and New York Presbyterian Healthcare Network, Inc.;
Vice-Chairman, the U.S.-New Zealand Council; and
Member of the American Law Institute and Council on
Foreign Relations.
Betsy S. Michel Trustee Attorney; Director or Trustee, the Seligman Group of
(56) investment companies; Trustee, The Geraldine R. Dodge
P.O. Box 449, Foundation, charitable foundation; and Chairman of
Gladstone, NJ 07934 the Board of Trustees of St. George's School
(Newport, RI). Formerly, Director, the National
Association of Independent Schools (Washington, DC).
James C. Pitney Trustee Retired Partner, Pitney, Hardin, Kipp & Szuch, law
(72) firm; Director or Trustee, the Seligman Group of
Park Avenue at Morris County, investment companies. Formerly, Director, Public
P.O. Box 1945, Morristown, NJ Service Enterprise Group, public utility.
07962
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address With Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
James Q. Riordan Trustee Director or Trustee, the Seligman Group of investment
(71) companies; Director, The Houston Exploration Company;
675 Third Avenue, The Brooklyn Museum, KeySpan Energy Corporation; and
Suite 3004 Public Broadcasting Service; and Trustee, the
New York, NY 10017 Committee for Economic Development. Formerly,
Co-Chairman of the Policy Council of the Tax
Foundation; Director, Tesoro Petroleum Companies,
Inc. and Dow Jones & Company, Inc.; Director and
President, Bekaert Corporation; and Co-Chairman,
Mobil Corporation.
Robert L. Shafer Trustee Retired Vice President, Pfizer Inc.; Director or
(66) Trustee, the Seligman Group of investment companies.
96 Evergreen Avenue, Formerly, Director, USLIFE Corporation.
Rye, NY 10580
James N. Whitson Trustee Director and Consultant, Sammons Enterprises, Inc.;
(64) Director or Trustee, the Seligman Group of investment
6606 Forestshire Drive, companies; Director, C-SPAN and CommScope, Inc.,
Dallas, TX 75230 manufacturer of coaxial cables. Formerly, Executive
Vice President, Chief Operating Officer, Sammons
Enterprises, Inc.; and Director, Red Man Pipe and
Supply Company, piping and other materials.
Daniel J. Charleston Vice President and Portfolio Managing Director, J. & W. Seligman & Co.
(39) Manager Incorporated; Vice President and Portfolio Manager,
one other open-end investment company in the Seligman
Group of investment companies.
Gary S. Zeltzer Vice President and Portfolio Senior Vice President, J. & W. Seligman & Co.
(47) Manager Incorporated; Vice President and Portfolio Manager,
two other open-end investment companies in the
Seligman Group of investment companies.
Lawrence P. Vogel Vice President Senior Vice President, Finance, J. & W. Seligman &
(42) Co. Incorporated, Seligman Advisors, Inc., and
Seligman Data Corp.; Vice President, the Seligman
Group of investment companies, and Seligman Services,
Inc.; Vice President and Treasurer, Seligman
International, Inc.; and Treasurer, Seligman
Henderson Co.
Frank J. Nasta Secretary General Counsel, Senior Vice President, Law and
(34) Regulation and Corporate Secretary, J. & W. Seligman
& Co. Incorporated; Secretary, the Seligman Group of
investment companies, Seligman Advisors, Inc.,
Seligman Henderson Co., Seligman Services, Inc.,
Seligman International, Inc. and Seligman Data Corp.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address With Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
Thomas G. Rose Treasurer Treasurer, the Seligman Group of investment companies
(41) and Seligman Data Corp.
</TABLE>
The Executive Committee of the Board acts on behalf of the Board 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 Board.
Trustees and officers of the Fund are also directors and officers of some or all
of the other investment companies in the Seligman Group.
Compensation
<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits from Fund and
Name and Compensation Accrued as Part of Fund Complex Paid
Position with Fund from Fund (1) Fund Expenses to Trustees (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
John R. Galvin, Trustee $3,992.79 N/A $79,000
Alice S. Ilchman, Trustee 3,870.33 N/A 73,000
Frank A. McPherson, Trustee 3,992.79 N/A 79,000
John E. Merow, Trustee 3,951.97 N/A 77,000
Betsy S. Michel, Trustee 3,992.79 N/A 79,000
James C. Pitney, Trustee 3,911.15 N/A 75,000
James Q. Riordan, Trustee 3,911.15 N/A 75,000
Robert L. Shafer, Trustee 3,911.15 N/A 75,000
James N. Whitson, Trustee 3,992.79(d) N/A 79,000(d)
</TABLE>
- ----------
(1) For the Fund's year ended December 31, 1998. Effective January 16, 1998,
the per meeting fee for Trustees was increased by $1,000, which is
allocated among all Funds in the Fund Complex.
(2) The Seligman Group of investment companies consists of eighteen investment
companies.
(d) Deferred.
The Fund has a compensation arrangement under which outside trustees may elect
to defer receiving their fees. The Fund has adopted a Deferred Compensation Plan
under which a trustee who has elected deferral of his or her fees may choose a
rate of return equal to either (1) the interest rate on short-term Treasury
Bills, or (2) the rate of return on the shares of any of the investment
companies advised by J. & W. Seligman & Co. Incorporated, as designated by the
trustee. The cost of such fees and earnings is included in trustees' fees and
expenses, and the accumulated balance thereof is included in other liabilities
in the Fund's financial statements. The total amount of deferred compensation
(including earnings) payable in respect of the Fund to Mr. Whitson as of
December 31, 1998 was $19,613.
Messrs. Merow and Pitney no longer defer current compensation; however, they
have accrued deferred compensation (including earnings) in the amounts of
$35,406 and $21,767, respectively, as of December 31, 1998.
The Fund may, but is not obligated to, purchase shares of the Seligman Group of
investment companies to hedge its obligations in connection with the Fund's
Deferred Compensation Plan.
11
<PAGE>
Sales Charges
Class A shares of each Series of the Fund may be issued without a sales charge
to present and retired directors, trustees, officers, employees (and their
family members) of the Fund, the other investment companies in the Seligman
Group, and J. & W. Seligman & Co. Incorporated and its affiliates. 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 may also be made to employee benefit plans and
thrift plans for such persons and to any investment advisory, custodial, trust
or other fiduciary account managed or advised by J. & W. Seligman & Co.
Incorporated or any affiliate. The sales may be made for investment purposes
only, and shares may be resold only to each Series of the Fund, respectively.
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.
Control Persons and Principal Holders of Securities
Control Persons
As of May 14, 1999, there was no person or persons who controlled either the
U.S. Government Securities Series or the High-Yield Bond Series, either through
a significant ownership of shares or any other means of control.
Principal Holders
As of May 14, 1999, 16.15% of the U.S. Government Securities Series' Class A
common stock then outstanding, 59.26% of the U.S. Government Securities Series'
Class B common stock then outstanding and 43.84% of the U.S. Government
Securities Series' Class D common stock then outstanding, were owned of record
by MLPF&S for the Sole Benefit of Its Customers, Attn Fund Administrator, 4800
Deer Lake Drive East, 3rd Floor, Jacksonville, FL 32246.
As of May 14, 1999, 16.39% of the High-Yield Bond Series' Class A common stock
then outstanding, 32.51% of the High-Yield Bond Series' Class B common stock
then outstanding and 38.02% of the High-Yield Bond Series' Class D common stock
then outstanding, were owned of record by MLPF&S for the Sole Benefit of Its
Customers, Attn Fund Administrator, 4800 Deer Lake Drive East, 3rd Floor,
Jacksonville, FL 32246.
Management Ownership
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 common
stock as of May 14, 1999. As of the same date, no Trustees or officers owned
shares of either Series' Class B or Class D common stock.
Investment Advisory and Other Services
Investment Manager
J. & W. Seligman & Co. Incorporated (Seligman) manages each Series of the Fund.
Seligman 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 Seligman was purchased by Mr. William C. Morris
and a simultaneous recapitalization of Seligman occurred. See Appendix B for
further history of Seligman.
All of the officers of the Fund listed above are officers or employees of
Seligman. Their affiliations with the Fund and with Seligman are provided under
their principal business occupations.
12
<PAGE>
Seligman 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% per annum of the Series'
average daily net assets 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% per annum of the Series' average
daily net assets in excess of $1 billion. The management fees paid by the U.S.
Government Securities Series for years ended December 31, 1998, 1997 and 1996
equaled .50%, .50% and .50%, respectively, of the average daily net assets of
such Series, or $382,195, $271,995 and $290,879, respectively. The management
fees paid by the High-Yield Bond Series for years ended December 31, 1998, 1997
and 1996 equaled .59%, .62% and .65%, respectively, of the average daily net
assets of such Series or $14,375,619, $8,248,354 and $3,107,117, respectively.
Each Series of the Fund pays all of its expenses other than those assumed by
Seligman, including brokerage commissions, administration, shareholder services
and distribution fees, 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 to shareholders,
expenses of printing and filing reports and other documents with governmental
agencies, expenses of shareholders' meetings, expenses of corporate data
processing and related services, shareholder record keeping and shareholder
account services, fees and disbursements of transfer agents and custodians,
expenses of disbursing dividends and distributions, fees and expenses of
trustees of the Fund not employed by or serving as a Director of Seligman 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 provides that Seligman will not be liable to a
Series for any error of judgment or mistake of law, or for any loss arising out
of any investment, or for any act or omission in performing its duties under the
Agreement, except for willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations and duties under the Agreement.
Each Series' Management Agreement was initially approved by the Board of
Trustees at a Meeting held 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 in effect until December 31 of each year if
(1) such continuance is approved in the manner required by the 1940 Act (i.e.,
by a vote of a majority of the Board of 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) Seligman 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 Seligman and will terminate automatically
in the event of its assignment. Each Series has agreed to change its name upon
termination of the Management Agreement if continued use of the name would cause
confusion in the context of Seligman's business.
Officers, directors, and employees of Seligman are permitted to engage in
personal securities transactions, subject to Seligman's Code of Ethics. The Code
of Ethics 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 Seligman's Compliance Officer,
and sets forth a procedure of identifying, for disciplinary action, those
individuals who violate the Code of Ethics. The Code of Ethics prohibits each of
the officers, directors and employees (including all portfolio managers) of
Seligman from purchasing or selling any security that the officer, director, or
employee knows or believes (1) was recommended by Seligman for purchase or sale
by any client, including the Fund, within the preceding two weeks, (2) has been
reviewed by Seligman for possible purchase or sale within the preceding two
weeks, (3) is being purchased or sold by any client, (4) is being considered by
a research analyst, (5) is being acquired in a private placement, unless prior
approval has been obtained from Seligman's Compliance Officer, or (6) is being
acquired during an initial or secondary public
13
<PAGE>
offering. The Code of Ethics 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 Code of Ethics also prohibits (1) 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 (2) 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 Seligman'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.
Principal Underwriter
Seligman Advisors, Inc. (Seligman Advisors), an affiliate of Seligman, 100 Park
Avenue, New York, New York 10017, acts as general distributor of the shares of
each Series of the Fund and of the other mutual funds in the Seligman Group.
Seligman Advisors is an "affiliated person" (as defined in the 1940 Act) of
Seligman, which is itself an affiliated person of the Fund. Those individuals
identified above under "Management Information" as trustees or officers of both
the Fund and Seligman Advisors (in which case directors) are affiliated persons
of both entities.
Services Provided by the Investment Manager
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 Board of Trustees,
Seligman 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. Seligman provides the Fund with such office space,
administrative and other services and executive and other personnel as are
necessary for Fund operations. Seligman pays all of the compensation of trustees
of the Fund who are employees or consultants of Seligman and of the officers and
employees of the Fund. Seligman also provides senior management for Seligman
Data Corp., the Fund's shareholder service agent.
Service Agreements
There are no other management-related service contracts under which services are
provided to either Series of the Fund.
Other Investment Advice
No person or persons, other than directors, officers, or employees of Seligman,
regularly advise either Series of the Fund with respect to its investments.
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<PAGE>
Dealer Reallowances
Dealers and financial advisors receive a percentage of the initial sales charge
on sales of Class A shares and Class C shares of each Series of the Fund, as set
forth below:
<TABLE>
<CAPTION>
Regular Dealer
Sales Charge Sales Charge Reallowance
As a % of as a % of Net As a % of
Amount of Purchase Offering Price(1) Amount Invested Offering Price
- ------------------ ----------------- --------------- --------------
<S> <C> <C> <C>
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 and over(2) 0 0 0
</TABLE>
(1) "Offering Price" is the amount that you actually pay for each Series'
shares; it includes the initial sales charge.
(2) You will not pay a sales charge on purchases of $1 million or more, but you
will be subject to a 1% CDSC if you sell your shares within 18 months.
Class C shares:
<TABLE>
<CAPTION>
Regular Dealer
Sales Charge Sales Charge Reallowance
As a % of as a % of Net As a % of
Amount of Purchase Offering Price(1) Amount Invested Offering Price
- ------------------ ----------------- --------------- --------------
<S> <C> <C> <C>
Less than $100,000 1.00% 1.01% 1.00%
$100,000 - $249,999 0.50 0.50 0.50
$250,000 - $1,000,000(2) 0 0 0
</TABLE>
(1) "Offering Price" is the amount that you actually pay for Fund shares; it
includes the initial sales charge.
(2) Your purchase of Class C shares must be for less than $1,000,000 because if
you invest $1,000,000 or more, you will pay less in fees and charges if you
buy Class A shares.
Seligman Services, Inc., an affiliate of Seligman, is a limited purpose
broker/dealer. Seligman Services is eligible to receive commissions from certain
sales of each Series' shares. For years ended December 31, 1998, 1997 and 1996,
Seligman Services received commissions from certain sales of the U.S. Government
Securities Series' shares in the amounts of $888, $954 and $3,172, respectively.
For years ended December 31, 1998, 1997 and 1996, Seligman Services received
commissions from certain sales of the High-Yield Bond Series' shares in the
amounts of $83,013, $47,851 and $29,500, respectively.
Rule 12b-1 Plan
Each Series of the Fund has adopted an Administration, Shareholder Services and
Distribution Plan (12b-1 Plan) in accordance with Section 12(b) of the 1940 Act
and Rule 12b-1 thereunder.
Under its 12b-1 Plan, each Series may pay to Seligman Advisors an
administration, shareholder services and distribution fee in respect of the
Series' Class A, Class B, Class C, and Class D shares, respectively. Payments by
a Series under the 12b-1 Plan may include, but are not limited to: (1)
compensation to securities dealers and other organizations (Service
Organizations) for providing distribution assistance with respect to assets
invested in the Series; (2) compensation to Service Organizations for providing
administration, accounting and other shareholder services with respect to the
Series' shareholders; and (3) 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 Seligman Advisors' costs incurred in
connection with its marketing efforts with respect to shares of the Series.
Seligman, in its sole discretion, may also make
15
<PAGE>
similar payments to Seligman Advisors from its own resources, which may include
the management fee that Seligman receives from each Series, respectively.
Payments made by a Series under its 12b-1 Plan are intended to be used to
encourage sales of the Series, as well as to discourage redemptions.
Fees paid by a Series under its 12b-1 Plan with respect to any class of shares
of the Series may not be used to pay expenses incurred solely in respect of any
other class of the Series or any other Seligman fund. Expenses attributable to
more than one class of a Series are allocated between the classes of the Series
in accordance with a methodology approved by the Fund's Board of Trustees.
Expenses of distribution activities that benefit both a Series and other
Seligman funds are allocated among the applicable Series and funds based on
relative gross sales during the quarter in which such expenses are incurred, in
accordance with a methodology approved by the Board.
Class A
Under the 12b-1 Plan, each Series, with respect to its Class A shares, pays
quarterly to Seligman Advisors a service fee at an annual rate of up to .25% of
the average daily net asset value of the Series' Class A shares. These fees are
used by Seligman Advisors exclusively to make payments to Service Organizations,
which have entered into agreements with Seligman Advisors. Such Service
Organizations receive from Seligman Advisors 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 maintenance of shareholder accounts for each Series,
respectively. The fee payable to Service Organizations from time to time shall,
within such limits, be determined by the Trustees of the Fund. A Series of the
Fund is not obligated to pay Seligman Advisors for any such costs it incurs in
excess of the fee described above. No expense incurred in one year by Seligman
Advisors with respect to Class A shares of a Series may be paid from Class A
12b-1 fees received from the Series in any other year. If a Series' 12b-1 Plan
is terminated in respect of its Class A shares, no amounts (other than amounts
accrued but not yet paid) would be owed by the Series to Seligman Advisors with
respect to its Class A shares. The total amount of service fees paid to Seligman
Advisors in respect of Class A shares of the U.S. Government Securities Series
and the High-Yield Bond Series for the year ended December 31, 1998 was $107,529
and $2,302,261, respectively, equivalent to .22% per annum and .25% per annum,
respectively, of the average daily net assets of each Series' Class A shares.
Class B
Under the 12b-1 Plan, each Series, with respect to its Class B shares, pays
monthly a 12b-1 fee at an annual rate of up to 1% of the average daily net asset
value of the Series' Class B shares. The fee is comprised of (1) a distribution
fee equal to .75% per annum, which is paid directly to a third party, FEP
Capital, L.P., to compensate it for having funded, at the time of sale of a
Series' Class B shares (i) a 4% sales commission to Service Organizations and
(ii) a payment of up to .25% of sales to Seligman Advisors to help defray its
costs of distributing Class B shares; and (2) a service fee of up to .25% per
annum which is paid to Seligman Advisors. The service fee is used by Seligman
Advisors exclusively to make payments to Service Organizations which have
entered into agreements with Seligman Advisors. Such Service Organizations
receive from Seligman Advisors a continuing service fee of up to .25% on an
annual basis, payable quarterly, of the average daily net assets of Class B
shares of a Series attributable to the particular Service Organization for
providing personal service and/or maintenance of shareholder accounts for the
Series. The amounts expended by Seligman Advisors or FEP Capital, L.P. in any
one year upon the initial purchase of Class B shares of a Series may exceed the
12b-1 fees paid by the Series in that year. Each Series' 12b-1 Plan permits
expenses incurred in respect of Class B shares in one year to be paid from Class
B 12b-1 fees received from the Series in any other year; however, in any year a
Series is not obligated to pay any 12b-1 fees in excess of the fees described
above. Seligman Advisors and FEP Capital, L.P. are not reimbursed for expenses
that exceed such fees. If a Series' 12b-1 Plan is terminated in respect of Class
B shares, no amounts (other than amounts accrued but not yet paid) would be owed
by the Series to Seligman Advisors or FEP Capital, L.P. with respect to its
Class B shares. The total amount of distribution and service fees paid to
Seligman Advisors in respect of Class B shares of the U.S. Government Securities
Series and the High-Yield Bond Series for the year ended December 31,
16
<PAGE>
1998 was $99,487 and $8,288,106, respectively, or 1% per annum of the average
daily net assets of each Series' Class B shares.
Class C
Under the 12b-1 Plan, the Fund, with respect to Class C shares, pays monthly to
Seligman Advisors a 12b-1 fee at an annual rate of up to 1% of the average daily
net asset value of the Class C shares. The fee is used by Seligman Advisors as
follows: During the first year following the sale of Class C shares, a
distribution fee of .75% of the average daily net assets attributable to Class C
shares is used, along with any CDSC proceeds during the first eighteen months,
to (1) reimburse Seligman Advisors for its payment at the time of sale of Class
C shares of a 1.25% sales commission to Service Organizations, and (2) pay for
other distribution expenses, 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 other marketing costs of
Seligman Advisors. In addition, during the first year following the sale of
Class C shares, a service fee of up to .25% of the average daily net assets
attributable to such Class C shares is used to reimburse Seligman Advisors for
its prepayment to Service Organizations at the time of sale of Class C shares of
a service fee of .25% of the net asset value of the Class C share sold (for
shareholder services to be provided to Class C shareholders over the course of
the one year immediately following the sale). The payment of service fees to
Seligman Advisors is limited to amounts Seligman Advisors actually paid to
Service Organizations at the time of sale as service fees. After the initial
one-year period following a sale of Class C shares, the entire 12b-1 fee
attributable to such Class C shares is paid to Service Organizations for
providing continuing shareholder services and distribution assistance in respect
of the Fund. The Fund did not pay any 12b-1 fees in respect of Class C shares
for the fiscal year ended September 30, 1998 because no Class C shares were
issued or outstanding during such period.
Class D
Under the 12b-1 Plan, each Series, with respect to its Class D shares, pays
monthly to Seligman Advisors a 12b-1 fee at an annual rate of up to 1% of the
average daily net asset value of the Series' Class D shares. The fee is used by
Seligman Advisors as follows: During the first year following the sale of Class
D shares, a distribution fee of .75% of the average daily net assets
attributable to such Class D shares is used, along with any CDSC proceeds, to
(1) reimburse Seligman Advisors for its payment at the time of sale of Class D
shares of a .75% sales commission to Service Organizations, and (2) pay for
other distribution expenses, 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 other marketing costs of
Seligman Advisors. In addition, during the first year following the sale of
Class D shares of a Series, a service fee of up to .25% of the average daily net
assets attributable to such Class D shares is used to reimburse Seligman
Advisors for its prepayment to Service Organizations at the time of sale of
Class D shares of the Series of a service fee of .25% of the net asset value of
the Class D shares sold (for shareholder services to be provided to Class D
shareholders of the Series over the course of the one year immediately following
the sale). The payment of service fees to Seligman Advisors is limited to
amounts Seligman Advisors actually paid to Service Organizations at the time of
sale as service fees. After the initial one-year period following a sale of
Class D shares of a Series, the entire 12b-1 fee attributable to such Class D
shares of the Series is paid to Service Organizations for providing continuing
shareholder services and distribution assistance in respect of assets invested
in the Series. The total amount of distribution and service fees paid to
Seligman Advisors in respect of Class D shares of the U.S. Government Securities
Series and the High-Yield Bond Series for the year ended December 31, 1998 was
$168,086 and $6,717,751, or 1% per annum of the average daily net assets of each
Series' Class D shares.
The amounts expended by Seligman Advisors in any one year with respect to Class
D shares of a Series may exceed the 12b-1 fees paid by the Series in that year.
Each Series' 12b-1 Plan permits expenses incurred by Seligman Advisors in
respect of Class D shares in one year to be paid from Class D 12b-1 fees in any
other year; however, in any year a Series is not obligated to pay any 12b-1 fees
in excess of the fees described above.
17
<PAGE>
As of December 31, 1998, Seligman Advisors has incurred $94,853 and $2,277,610
of unreimbursed expenses in respect of the U.S. Government Securities Series'
and the High-Yield Bond Series' Class D shares, respectively, equal to 0.36% and
0.30%, respectively, of each Series' net assets at that date.
If the 12b-1 Plan is terminated in respect of Class D shares of a Series, no
amounts (other than amounts accrued but not yet paid) would be owed by the
Series to Seligman Advisors with respect to its Class D shares.
Payments made by the U.S. Government Securities Series under its 12b-1 Plan for
the year ended December 31, 1998, were spent on the following activities in the
following amounts (no Class C shares were outstanding during such fiscal year):
Class A Class B Class D
------- ------- -------
Compensation to underwriters -- -- $ 39,600
Compensation to broker/dealers $107,529 $ 24,971 $128,486
Other* -- $ 74,516 --
* Payment is made to FEP Capital, L.P. to compensate it for having funded at
the time of sale, payments to broker/dealers and underwriters.
Payments made by the High-Yield Bond Series under its 12b-1 Plan for the year
ended December 31, 1998, were spent on the following activities in the following
amounts (no Class C shares were outstanding during such fiscal year):
Class A lass B Class D
------- ------ -------
Compensation to underwriters -- -- $3,014,318
Compensation to broker/dealers $2,302,261 $2,090,300 $3,703,433
Other* -- $6,197,806 --
* Payment is made to FEP Capital, L. P. to compensate it for having funded at
the time of sale, payments to broker/dealers and underwriters.
The 12b-1 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 12b-1
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 12b-1 Plan was approved in respect of the Class C
shares of each Series on May 20, 1999 by the Trustees, including a majority of
the Qualified Trustees, and became effective in respect of the Class C shares on
June 1, 1999. 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
18
<PAGE>
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 (1) permit holders
of Class B shares to vote as a separate class on the proposed increase or (2)
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.
The 12b-1 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) 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. The 12b-1 Plan is
reviewed by the Trustees annually.
Seligman Services acts as the broker/dealer of record for shareholder accounts
of each Series that do not have a designated financial advisor and receives
compensation from each Series pursuant to its 12b-1 Plan for providing personal
services and account maintenance to such accounts and other distribution
services. For years ended December 31, 1998, 1997 and 1996, Seligman Services
received distribution and service fees from the U.S. Government Securities
Series' 12-b-1 Plan in the amounts of $16,822, $13,630 and $12,113,
respectively. For the years ended December 31, 1998, 1997 and 1996, Seligman
Services received distribution and service fees from the High-Yield Bond Series'
12b-1 Plan in the amounts of $55,399, $35,679 and $20,797, respectively.
Portfolio Transactions and Other Practices
Portfolio Transactions
Seligman will seek the most favorable price and execution in the purchase and
sale of portfolio securities for each Series of the Fund. When two or more of
the investment companies in the Seligman Group or other investment advisory
clients of Seligman desire to buy or sell the same security at the same time,
the securities purchased or sold are allocated by Seligman 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.
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, Seligman 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 Seligman for its use in
connection with its services to the Fund as well as to other clients.
Dealer Selection
Consistent with seeking the most favorable price and execution when buying or
selling portfolio securities, Seligman may give consideration to the research,
statistical, and other services furnished by dealers to Seligman for its use, as
well as the general attitude toward and support of investment companies
demonstrated by such dealers. Such services include supplemental investment
research, analysis, and reports concerning issuers, industries, and securities
deemed by Seligman to be beneficial to a Series. In addition, Seligman is
authorized to place orders with dealers who provide supplemental investment and
market research and security and economic analysis although the use of such
dealers may result in a Series paying a higher spread, than the use of dealers
selected solely on the basis of seeking the most favorable price and execution.
19
<PAGE>
Directed Brokerage
During the year ended December 31,1998, neither Series of the Fund nor Seligman
directed any of the Fund's portfolio transactions to a dealer because of
research services provided.
Regular Broker-Dealers
During the year ended December 31, 1998, neither Series of the Fund acquired
securities of its regular brokers or dealers (as defined in Rule 10b-1 under the
1940 Act) or of their parents.
Shares of Beneficial Interest and Other Securities
Shares of Beneficial Interest
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. At present, shares of
beneficial interest of two series have been authorized, which shares of
beneficial interest constitute interests in the U.S. Government Securities
Series and the High-Yield Bond Series. Shares of beneficial interest of each
Seriesare divided into four classes, designated Class A, Class B, Class C, and
Class D shares of beneficial interest. Each share of beneficial interest of the
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 1940 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 of
each Series entitle their holders to one vote per share. Each Series' 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.
Other Securities
The Fund has no authorized securities other than the above-mentioned shares.
Purchase, Redemption, and Pricing of Shares
Purchase of Shares
Class A
Class A shares of each Series of the Fund may be purchased at a price equal to
the next determined net asset value per share, plus an initial sales charge.
Purchases of Class A shares by a "single person" (as defined below under
"Persons Entitled to Reductions") may be eligible for the following reductions
in initial sales charges:
20
<PAGE>
Volume Discounts are provided if the total amount being invested in Class A
shares of a Series alone, or in any combination of shares of the other mutual
funds in the Seligman Group which are sold with an initial sales charge, reaches
levels indicated in the sales charge 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 a Series and shares of the other Seligman mutual
funds sold with an initial sales charge with the total net asset value of shares
of those mutual funds already owned that were sold with an initial sales charge
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 charge at the time of purchase to determine
reduced sales charges 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 was an initial sales charge at the time of
purchase will be taken into account in orders placed through a dealer, however,
only if Seligman Advisors 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 over a 13-month
period at reduced initial sales charges in accordance with the 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 charge 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 charge at
the time of purchase. Reduced sales charges 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.
Persons Entitled To Reductions. Reductions in initial sales charges apply to
purchases of Class A shares of 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, organizations tax exempt under Section 501(c)(3) or (13) of the
Internal Revenue Code, and non-qualified employee benefit plans that satisfy
uniform criteria are considered "single persons" for this purpose. The uniform
criteria are as follows:
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
prospectus, 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 charges 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 (1) $500,000 invested in the Seligman Group of mutual funds
or (2) 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. "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. Section 403(b)
plans sponsored by public educational
21
<PAGE>
institutions are not eligible for net asset value purchases based on the
aggregate investment made by the plan or number of eligible employees.
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 financial advisors or Seligman
Advisors.
Further Types of Reductions. Class A shares may also be issued without an
initial sales charge in the following instances:
(1) 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;
(2) to separate accounts established and maintained by an insurance company
which are exempt from registration under Section 3(c)(11) of the 1940 Act;
(3) to registered representatives and employees (and their spouses and minor
children) of any dealer that has a sales agreement with Seligman Advisors;
(4) to financial institution trust departments;
(5) to registered investment advisers exercising discretionary investment
authority with respect to the purchase of Fund shares;
(6) to accounts of financial institutions or broker/dealers that charge account
management fees, provided Seligman or one of its affiliates has entered
into an agreement with respect to such accounts;
(7) 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;
(8) to other investment companies in the Seligman Group in connection with a
deferred fee arrangement for outside trustees;
(9) to certain "eligible employee benefit plans" as discussed above;
(10) to those partners and employees of outside counsel to the Fund or its
directors or trustees who regularly provide advice and services to the
Fund, to other funds managed by Seligman, or to their directors or
trustees; and
(11) in connection with sales pursuant to a 401(k) alliance program which has an
agreement with Seligman Advisors.
CDSC Applicable to Class A Shares. Class A shares purchased without an initial
sales charge due to a purchase of $1,000,000 or more either alone or through a
Volume Discount, Right of Accumulation, or Letter of Intent are subject to a
CDSC of 1% on redemptions of such shares within eighteen months of purchase.
Employee benefit plans eligible for net asset value sales may be subject to a
CDSC of 1% for terminations at the plan level only, on redemptions of shares
purchased within eighteen months prior to plan termination. The 1% CDSC will be
waived on shares of each Series that were purchased through Morgan Stanley Dean
Witter & Co. 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 Dean Witter will reimburse Seligman
Advisors a pro rata portion of the fee it received from Seligman Advisors at the
time of sale of such shares.
See "CDSC Waivers" below for other waivers which may be applicable to Class A
shares.
22
<PAGE>
Class B
Class B shares of each Series of the Fund may be purchased at a price equal to
the next determined net asset value, without an initial sales charge. However,
Class B shares of each Series are subject to a CDSC 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 CDSC
- -------------------- ----
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%
Approximately eight years after purchase, Class B shares will convert
automatically to Class A shares. 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 a 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 a Series exercising the exchange privilege
will continue to be subject to the Series' CDSC schedule if such schedule is
higher or longer than the CDSC 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' CDSC schedule if such schedule is higher or longer than the CDSC
schedule relating to the Class B shares of the Seligman mutual fund from which
the exchange has been made.
Class C
Class C shares may be purchased at a price equal to the next determined net
asset value, plus an initial sales charge. Purchases of Class C shares by a
"single person" may be eligible for the reductions in initial sales charges
described above for Class A shares. Class C shares are subject to a CDSC of 1%
if the shares are redeemed within eighteen months of purchase, charged as a
percentage of the current net asset value or the original purchase price,
whichever is less.
Class D
Class D shares of each Series of the Fund may be purchased at a price equal to
the next determined net asset value, without an initial sales charge. However,
Class D shares of each Series are subject to a CDSC of 1% if the shares are
redeemed within one year of purchase, charged as a percentage of the current net
asset value or the original purchase price, whichever is less. Unlike Class B
shares, Class D shares do not automatically convert to Class A shares after
eight years.
Systematic Withdrawals. Class B, Class C and Class D shareholders of each Series
who reinvest both their dividends and capital gain distributions to purchase
additional shares of each Series, respectively, may use the Series' Systematic
Withdrawal Plan to withdraw up to 12%, 10% and 10%, respectively, of the value
of their accounts per year without the imposition of a CDSC. Account value is
determined as of the date the systematic withdrawals begin.
23
<PAGE>
CDSC Waivers. The CDSC on Class B, Class C and Class D shares of each Series
(and certain Class A shares, as discussed above) will be waived or reduced in
the following instances:
(1) on redemptions following the death or disability (as defined in Section
72(m)(7) of the Internal Revenue Code) of a shareholder or beneficial
owner;
(2) in connection with (1) distributions from retirement plans qualified under
Section 401(a) of the Internal Revenue 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), (2) distributions from a custodial account under
Section 403(b)(7) of the Internal Revenue Code or 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 (3) a tax-free return of an excess contribution to an IRA;
(3) in whole or in part, in connection with shares sold to current and retired
Trustees of the Fund;
(4) 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 any registered investment
management company;
(5) in whole or in part, in connection with systematic withdrawals;
(6) in connection with participation in the Merrill Lynch Small Market 401(k)
Program.
If, with respect to a redemption of any Class A, Class B, or Class D shares of a
Series sold by a dealer, the CDSC is waived because the redemption qualifies for
a waiver as set forth above, the dealer shall remit to Seligman Advisors
promptly upon notice, an amount equal to the payment or a portion of the payment
made by Seligman Advisors at the time of sale of such 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 and, if applicable, any sales charge), although the Fund does not
presently intend to accept securities in payment for either 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 Seligman 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 charges, 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 that is readily ascertainable.
Fund Reorganizations
Class A shares and Class C shares of each Series may be issued without an
initial sales charge in connection with the acquisition of cash and securities
owned by other investment companies. Any CDSC will be waived in connection with
the redemption of a Series' shares if the Series is combined with another
Seligman mutual fund, or in connection with a similar reorganization
transaction.
24
<PAGE>
Offering Price
When you buy or sell shares of a Series of the Fund, you do so at the Class's
net asset value (NAV) next calculated after Seligman Advisors accepts your
request. Any applicable sales charge will be added to the purchase price for
Class A shares and Class C shares.
NAV per share of each class of a Series is determined as of the close of regular
trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time), on
each day that the NYSE is open for business. 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 NAV 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 NAV of
Series shares might be materially affected. NAV per share for a class of a
Series is computed by dividing such class's 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 management fee, are accrued daily and taken into account for the purpose of
determining NAV. The NAV of Class B, Class C and Class D shares will generally
be lower than the NAV of Class A shares as a result of the higher 12b-1 fees
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. Securities traded on
a 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.
Any securities or other assets for which recent market quotations are not
readily available are valued at fair value as determined in accordance with
procedures approved by the Board of Trustees. Short-term obligations with less
than 60 days remaining to maturity are generally valued at amortized cost.
Short-term obligations with more than 60 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. Expenses and fees, including
the investment management fee, are accrued daily and taken into account for the
purpose of determining the net asset value of Series shares.
Generally, trading in foreign securities, as well as US Government securities,
money market instruments and repurchase agreements, is substantially completed
each day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the shares of a Series are
determined as of such times. Foreign currency exchange rates are also generally
determined prior to the close of the NYSE.
For purposes of determining the net asset value per share of a Series of the
Fund, all assets and liabilities initially expressed in foreign currencies will
be converted into US dollars at the mean between the bid and offer prices of
such currencies against US dollars quoted by a major bank that is a regular
participant in the foreign exchange market or on the basis of a pricing service
that takes into account the quotes provided by a number of such major banks.
25
<PAGE>
Specimen Price Make-Up
Under the current distribution arrangements between the Fund and Seligman
Advisors, Class A shares and Class C shares of each Series are sold with a
maximum initial sales charge of 4.75% and 1.00%(1), respectively, and Class B
and Class D shares of each Series are sold at NAV(2). Using each Class's NAV at
December 31, 1998, (except Class C shares, which commences operations effective
June 1, 1999), the maximum offering price of each Series' shares is as follows:
<TABLE>
<CAPTION>
U.S. Government High-Yield
Securities Series Bond Series
----------------- -----------
<S> <C> <C>
Class A
Net asset value per share $7.09 $6.95
----- -----
Maximum sales charge (4.75% of offering price) .35 .35
----- -----
Offering price to public $7.44 $7.30
===== =====
Class B
Net asset value and offering price per share(2) $7.11 $6.95
===== =====
Class D
Net asset value and offering price per share(2) $7.11 $6.95
===== =====
</TABLE>
(1) In addition to the front-end sales charge of 1.00%, Class C shares are also
subjet to a 1% CDSC if you redeem your shares within eighteen months of
purchase.
(2) Class B shares are subject to a CDSC declining from 5% in the first year
after purchase to 0% after six years. Class D shares are also subject to a
1% CDSC if you redeem your shares within one year of purchase.
Redemption in Kind
The procedures for selling a Series' 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. Under these
circumstances, redemption proceeds may be made in securities. If payment is made
in securities, a shareholder may incur brokerage expenses in converting these
securities to cash.
Taxation of each Series
Each Series is qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code. For each
year so qualified, each 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
the Series' 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. To the extent designated as derived
from a Series' dividend income that would be eligible for the dividends received
deduction if the Series were not a regulated investment company, they are
eligible, subject to certain restrictions, for the 70% dividends received
deduction for corporations.
Distributions of net capital gains (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 the 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
a Series will be treated for federal income tax purposes as
26
<PAGE>
having received a distribution in an amount equal to the fair market value on
the date of distribution of the shares received. Individual shareholders
generally will be subject to federal tax on distributions of net capital gains
at a maximum rate of 20% if designated as derived from a Series capital gains
from property held for more than one year.
Any gain or loss realized upon a sale or redemption of shares in a 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 gains at a maximum rate of
20% in respect of shares held for more than one year. 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 a 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 (including shares
acquired through dividend reinvestment) securities that are substantially
identical to the shares of the Series.
In determining gain or loss on shares of a 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 charge
incurred in acquiring such shares to the extent of any subsequent reduction of
the sales charge by reason of the Exchange or Reinstatement Privilege offered by
the Series. Any sales charge 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.
Each Series of the Fund 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 the basis such that such income or gain is not
taxable to shareholders in the calendar year in which it was earned by the
Series. 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 each Series and
received by each shareholder in December. Under this rule, therefore,
shareholders may be taxed in one year on dividends or 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 US 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 of its
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.
Underwriters
Distribution of Securities
The Fund and Seligman Advisors are parties to a Distributing Agreement dated
January 1, 1993 under which Seligman Advisors acts as the exclusive agent for
distribution of shares of each Series of the Fund. Seligman Advisors accepts
orders for the purchase of Series' shares, which are offered continuously. As
general distributor of each Series' shares, Seligman Advisors allows
reallowances to all dealers on sales
27
<PAGE>
of Class A shares, as set forth above under "Dealer Reallowances." Seligman
Advisors retains the balance of sales charges and any CDSCs paid by investors.
Total initial sales charges paid by shareholders of Class A shares of the U.S.
Government Securities Series for the years ended December 31, 1998, 1997 and
1996, amounted to $61,590, $41,143 and $87,346, respectively, of which $6,123,
$4,683 and $9,862, respectively, was retained by Seligman Advisors. Total
initial sales charges paid by shareholders of Class A shares of the High-Yield
Bond Series for the years ended December 31, 1998, 1997 and 1996, amounted to
$9,774,182, $9,142,834 and $6,175,936, respectively, of which $1,128,663,
$1,047,484 and $709,561, respectively, was retained by Seligman Advisors. No
Class C shares of the Fund were issued or outstanding during such fiscal years.
Compensation
Seligman Advisors, which is an affiliated person of Seligman, which is an
affiliated person of the Fund, received the following commissions and other
compensation from each Series during its year ended December 31, 1998:
<TABLE>
<CAPTION>
Compensation on
Net Underwriting Redemptions and
Discounts and Repurchases
Commissions (CDSC on Class A
(Class A Sales and Class D Brokerage Other
Fund Charge Retained) Retained) Commissions Compensation(1)
- ---- ---------------- --------- ----------- ---------------
<S> <C> <C> <C> <C>
U.S. Government
Securities Series $6,123 $11,570 $0 $5,872
High-Yield Bond Series $1,128,663 $452,723 $0 $578,678
</TABLE>
(1) Seligman Advisors has sold its rights to collect the distribution fees paid
by the Fund in respect of Class B shares and any CDSC imposed on
redemptions of Class B shares to FEP Capital, L.P., in connection with an
arrangement with FEP Capital, L.P. as discussed above under "12b-1 Plan."
In connection with this arrangement, Seligman Advisors receives payments
from FEP Capital, L.P. based on the value of Class B shares sold. Such
payments received for the year ended December 31, 1998 are reflected in the
table.
Other Payments
Seligman Advisors shall pay broker/dealers, from its own resources, a fee on
purchases of Class A shares of each Series of $1,000,000 or more (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," 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 purchases made on behalf of any other
fiduciary or individual account.
Seligman Advisors 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" that are attributable to
the particular broker/dealer. The shares eligible for the fee are those on which
an initial sales charge was not paid because either the participating eligible
employee benefit plan has at least (1) $500,000 invested in the Seligman mutual
funds or (2) 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
28
<PAGE>
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.
Seligman Advisors 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. Seligman Advisors may from time
to time pay a bonus or other incentive to dealers that sell shares of the
Seligman mutual funds. 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 Seligman
Advisors of such promotional activities and payments shall be consistent with
the rules of the National Association of Securities Dealers, Inc., as then in
effect.
Calculation of Performance Data
The annualized yield for the 30-day period ended December 31, 1998 for the Class
A shares of the U.S. Government Securities Series and the High-Yield Bond Series
was 4.40% and 9.25%, 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 charge of 4.75% of the net amount invested) on December 31, 1998, 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 7,953,669
and 150,661,452, 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, 1998 for the Class
B shares of the U.S. Government Securities Series and the High-Yield Bond Series
was 3.70% and 8.94%, 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) on December 31,
1998, 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
3,495,121 and 146,652,623, 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, 1998
for the Class D shares of the U.S. Government Securities Series and the
High-Yield Bond Series was 3.70% and 8.95%, 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) on December 31, 1998, 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 3,765,640 and 109,493,120, 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 for the one-, five-, and ten-year periods ended on December
31, 1998 were 3.35%, 4.88% and 6.70%, respectively. The average annual total
returns for the Class A shares of the High Yield Bond Series for the one-,
five-, and ten-year periods ended on December 31, 1998 were (3.54)%, 9.01% and
10.74%, respectively. These returns were computed by subtracting the maximum
sales charge of 4.75% of public offering price and assuming that all of the
dividends and capital 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 that 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 one year period and for
the period January 1, 1997 (commencement of operations) through December 31,
1998 was 2.78% and 5.68%, respectively. The average annual total returns for the
Class B shares of the High-Yield Bond Series for the one-year period and for the
period April 22, 1996 (commencement of operations) through December 31, 1998
were (4.03)% and 7.44%, respectively. These returns were computed assuming that
all of the
29
<PAGE>
dividends and capital gain distributions paid by each Series' 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
CDSC. The average annual total returns for the Class D shares of the U.S.
Government Securities Series for the one- and five-year periods and for the
period September 21, 1993 (commencement of operations) through December 31, 1998
were 6.78%, 5.01% and 4.61%, respectively. The average annual total returns for
the Class D shares of the High-Yield Bond Series for the one- and five-year
periods and for the period September 21, 1993 (commencement of operations)
through December 31, 1998 were (0.35)%, 9.17% and 9.58%, 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% CDSC, if applicable.
Class C shares are a new class, effective June 1, 1999, so no performance data
is presented.
Table A below illustrates the total return (income and capital) on Class A
shares of each Series of the Fund with dividends invested and capital 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 charge, made on December 31, 1988 had a value of $1,913 on December
31, 1998, resulting in an aggregate total return of 91.32%; and a $1,000
investment in Class A shares of the High-Yield Bond Series, assuming payment of
the 4.75% sales charge, made on December 31, 1988 had a value of $2,774 on
December 31, 1998, resulting in an aggregate total return of 177.42%. 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 capital 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 $1,117 on December 31, 1998, after payment of the 4% CDSC, resulting in
an aggregate total return of 11.66%; 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 $1,213 on December 31, 1998, after payment of
the 3% CDSC, resulting in an aggregate total return of 21.31%. 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 capital 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 $1,268 on December 31, 1998, resulting in an aggregate total return of
26.85% 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 $1,621 on December 31, 1998, resulting in an aggregate total return of
62.08%. 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 either Series today.
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)
- -------- --------------------- ------------- --------- -------------- -----------
U.S. Government
Securities Series
- -----------------
<S> <C> <C> <C> <C> <C>
12/31/89 $950 $ -- $ 91 $1,041
12/31/90 930 -- 177 1,107
12/31/91 985 -- 278 1,263
12/31/92 970 -- 366 1,336
12/31/93 969 -- 466 1,435
12/31/94 873 -- 507 1,380
12/31/95 965 -- 665 1,630
12/31/96 906 -- 719 1,625
12/31/97 928 -- 836 1,764
12/31/98 957 -- 956 1,913 91.32%
</TABLE>
30
<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)
- -------- --------------------- ------------- --------- -------------- -----------
High-Yield
Bond Series
- -----------
<S> <C> <C> <C> <C> <C>
12/31/89 $ 868 $ -- $ 121 $ 989
12/31/90 707 -- 210 917
12/31/91 809 -- 390 1,199
12/31/92 871 -- 568 1,439
12/31/93 941 -- 774 1,715
12/31/94 862 -- 867 1,729
12/31/95 944 -- 1,143 2,087
12/31/96 984 -- 1,412 2,396
12/31/97 1,024 -- 1,714 2,738
12/31/98 943 7 1,824 2,774 177.42%
</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)
- ----------- --------------------- ------------- --------- -------------- -----------
U.S. Government
Securities Series
- -----------------
<S> <C> <C> <C> <C> <C>
12/31/97 $1,024 $ -- $ 49 $1,073
12/31/98 1,016 -- 101 1,117 11.66%
High-Yield
Bond Series
- -----------
12/31/96 $1,028 $ -- $ 63 $1,091
12/31/97 1,070 -- 166 1,236
12/31/98 955 3 255 1,213 21.31%
</TABLE>
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)
- ----------- --------------------- ------------- --------- -------------- -----------
U.S. Government
Securities Series
- -----------------
<S> <C> <C> <C> <C> <C>
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
12/31/98 970 -- 298 1,268 26.85%
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
12/31/98 1,031 4 586 1,621 62.08%
</TABLE>
31
<PAGE>
(1) For the ten years ended December 31, 1998 for Class A shares; from
commencement of offering of Class B shares of the U.S. Government Securities
Series on January 1, 1997, commencement of offering of Class B shares of the
High-Yield Bond Series on April 22, 1996, and 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 charge or CDSC, 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 CDSC, 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 charge 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 CDSC
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.
A Series of the Fund may from time to time, make reference in advertising or
promotional material to performance information, including mutual fund rankings,
prepared by Lipper Analytical Services, Inc., an independent reporting service
which monitors the performance of mutual funds. In calculating the total return
of a Series' Class A, Class B, Class C and Class D shares, respectively, the
Lipper analysis assumes investment of all dividends and distributions paid but
does not take into account applicable sales charges. A Series may also refer in
advertisements 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/WIESENBERGER 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, THE WALL STREET JOURNAL, USA TODAY, U.S.
NEWS AND WORLD REPORT, WORTH MAGAZINE, WASHINGTON POST AND YOUR MONEY.
A Series' advertising or promotional material may make reference to the Series'
"Beta," "Standard Deviation," or "Alpha." Beta measures the volatility of a
Series, as compared to that of the overall market. Standard deviation measures
how widely a Series' performance has varied from its average performance, and is
an indicator of a Series' potential for volatility. Alpha measures the
difference between the returns of a Series and the returns of the market,
adjusted for volatility.
Financial Statements
The Annual Reports to shareholders for the year ended December 31, 1998 contains
schedules of the investments of each of the Fund's Series as of December 31,
1998 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 Auditors' 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.
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.
32
<PAGE>
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) 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 one percent 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.
33
<PAGE>
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.
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 each Series of 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.
34
<PAGE>
Appendix A
MOODY'S INVESTORS SERVICE, INC. (MOODY'S)
DEBT SECURITIES
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than Aaa bonds because margins of protection may not
be as large or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds 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 characteristically lacking or may be unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact may have speculative characteristics as well.
Ba: Bonds 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 thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the 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 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 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 which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers (1, 2 and 3) in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; modifier 2 indicates a mid-range ranking; and modifier 3
indicates that the issuer ranks in the lower end of its generic rating category.
35
<PAGE>
COMMERCIAL PAPER
Moody's Commercial Paper Ratings are opinions of the ability of issuers to repay
punctually promissory senior debt obligations not having an original maturity in
excess of one year. Issuers rated "Prime-1" or "P-1" indicates the highest
quality repayment ability of the rated issue.
The designation "Prime-2" or "P-2" indicates that the issuer has a strong
ability for repayment of senior short-term promissory obligations. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.
The designation "Prime-3" or "P-3" indicates that the issuer has an acceptable
capacity for repayment of short-term promissory obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high Financial leverage.
Adequate alternate liquidity is maintained.
Issues rated "Not Prime" do not fall within any of the Prime rating categories.
STANDARD & POOR'S RATING SERVICE (S&P)
DEBT SECURITIES
AAA: Debt issues rated AAA are highest grade obligations. Capacity to pay
interest and repay principal is extremely strong.
AA: Debt issues rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A: Debt issues rated A are regarded as upper medium grade. They have a strong
capacity to pay interest and repay principal although it is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB: Debt issues rated BBB are regarded as having an adequate capacity to pay
interest and re-pay 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 re-pay principal for
bonds in this category than for bonds in higher rated categories.
BB, B, CCC, CC: Debt issues rated BB, B, CCC and CC are regarded on balance, as
predominantly speculative with respect to capacity to pay interest and pre-pay
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 exposure to adverse conditions.
C: The rating C is reserved for income bonds on which no interest is being paid.
D: Debt issues 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.
36
<PAGE>
COMMERCIAL PAPER
S&P Commercial Paper ratings are current assessments of the likelihood of timely
payment of debts having an original maturity of no more than 365 days.
A-1: The A-1 designation indicates that the degree of safety regarding timely
payment is very strong.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-3: Issues carrying this designation have adequate capacity for timely payment.
They are, however more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B: Issues rated "B" are regarded as having only a speculative capacity for
timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful
capacity of payment.
D: Debt rated "D" is in payment default.
The ratings assigned by S&P may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within its major rating categories.
37
<PAGE>
Appendix B
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.
o 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 successful 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 $2 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.
38
<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 50
mutual fund portfolios.
o Helps pioneer state-specific municipal bond funds, today managing a
national and 18 state-specific municipal funds.
o Establishes J. & W. Seligman Trust Company and J. & W. Seligman Valuations
Corporation.
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 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.
39
<PAGE>
SELIGMAN
--------------
HIGH-YIELD
BOND SERIES
[GRAPHIC]
ANNUAL REPORT
DECEMBER 31, 1998
----------
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.
[PHOTOGRAPH]
James, Jesse, and Joseph Seligman, 1870
TIMES CHANGE...
Established in 1864, Seligman's history of providing financial services has been
marked not by fanfare, but rather by a quiet and firm adherence to financial
prudence. While the world has changed dramatically in the 134 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 funds that focus on technology stocks, municipal
bonds, and international 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
Federal Tax Status of 1998 Dividend and
Gain Distributions for Taxable Accounts ................................ 22
Trustees .................................................................. 23
Executive Officers and For More Information ............................... 24
Glossary of Financial Terms ............................................... 25
<PAGE>
TO THE SHAREHOLDERS
In an extremely difficult market environment, Seligman High-Yield Bond Series
posted a total return of 1.32% based on the net asset value of Class A shares
for the year ended December 31, 1998. This return outpaced the -0.44% total
return of the Fund's peers, as measured by the Lipper High Current Yield
average. The Fund's return lagged the 3.66% total return of the Merrill Lynch
High Yield Master Index. A discussion with your Portfolio Manager regarding the
Fund's results begins on page 2. The past year was one of continued growth for
the US economy, with real domestic growth of 3.9%, marking the eighth year of
economic expansion. The widely watched stock market measure, the S&P 500, rose
28.58% in 1998, the first time in history that the S&P 500 registered more than
20% gains four years in a row. But, despite the strong year-end numbers, 1998
gave investors quite a ride. In fact, the past year was the most volatile for
both stock and bond markets since 1987.
A number of factors led to the markets' volatility in 1998 -- some domestic,
many international. The international economic background in 1998 was one of
steadily deteriorating conditions as the financial crisis, originally limited to
a few Asian countries, spread throughout other regions. Worldwide concern grew
in August of 1998 when Russia defaulted on its debt and devalued its currency.
Fear then spread to Latin America as Brazil struggled in vain to protect its
currency, the real.
The uncertain international economic environment led investors everywhere to
seek high-quality investments, particularly US Treasury securities. This "flight
to quality," combined with the first Federal budget surplus in three decades,
drove US Treasury bond yields to 30-year lows. (Bonds prices, which move in the
opposite direction of their yields, headed higher.) The 30-year US Treasury bond
yield closed the year at 5.09%, down from 5.92% on December 31, 1997. The yield
had fallen as low as 4.70% before ending the year above the 5% level.
Although Seligman High-Yield Bond Series does not invest in emerging market
debt, the performance of Seligman High-Yield Bond Series, along with the entire
high-yield market, was hurt by the "flight to quality" that took place as
investors worried about overseas events. These concerns caused high-yield bond
funds with significant emerging market exposure to face redemptions from worried
investors. These fund managers were forced to sell their domestic issues to meet
these redemptions, causing an excess of supply in the high-yield market and a
downward repricing of these issues.
The high-yield market rebounded in the fourth quarter as investors perceived
that there was opportunity in high-yield bonds, which appeared to have been
oversold. In addition, the high-yield market gained support from three rate cuts
by the Federal Reserve Board. These actions strengthened investor confidence
because they confirmed the Fed's resolve to protect the US economy from the
global financial crisis. As we begin 1999, the US economy -- which continues to
enjoy subdued inflation, low interest rates, and the first Federal budget
surplus in three decades -- should provide a supportive backdrop for high-yield
issuers, allowing defaults to remain modest.
Seligman continues to work to ensure that all of its operations are prepared for
the challenges posed by the Year 2000 (Y2K) computer problem. We are confident
that there will be no disruption in the investment and shareholder services
provided by your Fund as a result of Y2K. In addition, your portfolio management
team considers the potential ramifications of Y2K when making decisions on which
securities should be held by the Fund.
Thank you for your continued support of Seligman High-Yield Bond Series in 1998.
We look forward to serving your investment needs in 1999.
By order of the Trustees,
/s/ William Morris
William C. Morris
Chairman
\s\ Brian T. Zino
Brian T. Zino
President
January 29, 1999
1
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGER,
DANIEL J. CHARLESTON
Q. How did the Fund perform in 1998?
A. The Fund performed relatively well last year, outperforming most high-yield
mutual funds, while underperforming relative to the Merrill Lynch High
Yield Master Index, which has significantly more BB-rated bonds than the
Fund. The first, second, and fourth quarters were quite strong for the
Fund, but the events of the third quarter offset most of that gain.
Overall, the Fund was up 1.32% based on the net asset value of Class A
shares, the Merrill Lynch High Yield Master Index was up 3.66%, and the
Lipper High Current Yield average returned -0.44%.
Q. How was performance affected in the third quarter?
A. A highly unusual series of events combined to force a liquidity squeeze on
the high-yield market. These adverse events included a collapse in equity
markets, the Asian and Russian financial crises, and the bailout of
Long-Term Capital Management (LTCM). Any one of these events taken
individually would have been shrugged off by the market; however, because
they all hit at once, the market became illiquid.
Q. Why did events in emerging markets affect the Fund if the Fund does not
invest in those markets?
A. As far as emerging market debt is concerned, Russia and a number of Asian
countries had issued a considerable amount of high-yield bonds over the
past few years. When default rumors started, the mutual funds that had
direct emerging market exposure faced significant redemptions. In order to
meet their redemptions, those funds sold their most stable assets -- their
domestic high-yield issues. While Seligman High-Yield Bond Fund has made it
a policy not to have direct emerging market exposure, the selling pressure
that was created by those funds with emerging market exposure led to
downward repricing of domestic high-yield issues, which hurt your Fund's
performance.
Q. What about the equity markets' impact on the high-yield market?
A. A strong equity market is positive for high-yield issuers, because it
represents another potential source of financing. When stock prices started
to decline in the third quarter, the initial and secondary markets for
stocks dried up. Therefore, many high-yield issuers lost this potential
source of financing and, thus, some financial flexibility.
Q. How did the bailout of LTCM affect the high-yield market?
A. When the bailout of LTCM was announced, downward pricing pressure occurred
because LTCM had significant high-yield investments. Unfortunately, because
LTCM was so secretive about its holdings, investors could not predict what
bonds would be impacted most, so the entire market repriced downward.
Q. Why did the high-yield market snap back in the fourth quarter?
A. The market rebounded in the fourth quarter for a number of reasons, the
most compelling being that
[PHOTO]
High-yield Team: (standing from left) Deborah Joseph (Administrative Assistant),
TimFinn, Jeanne Cruz, James Didden, (seated) Brian Hessel, Daniel J. Charleston
(Portfolio Manager)
- --------------------------------------------------------------------------------
A TEAM APPROACH
Seligman High-Yield Bond Series is managed by the Seligman High-Yield Team,
headed by Daniel J. Charleston. He is assisted by seasoned research
professionals who are responsible for evaluating companies in specific industry
groups. Mr. Charleston draws on his team to select companies whose bonds have
the potential for high yields at acceptable levels of investment risk consistent
with the Fund's objective.
- --------------------------------------------------------------------------------
2
<PAGE>
investors stepped up to buy in an oversold market. Mutual fund investors,
pension funds, and insurance companies poured billions of dollars into
high-yield bonds in the fourth quarter. Other important factors included
Federal Reserve Chairman Alan Greenspan's positive statements, the Federal
Reserve's rate cuts, and the recovery of the equity markets.
Q. Which sectors of the high-yield market performed well for the year?
A. Defensive sectors such as cable, publishing, and gaming all did well in
1998. Cable got a boost from AT&T's purchase of TCI and Paul Allen's
purchases of Marcus and Charter Communications. Everybody seems to be
endorsing cable as the next generation carrier of video, telephone, and
Internet access. In publishing, we increased the Fund's exposure to Liberty
Group Publishing and Regional Independent Media, which are both regional
newspaper chains. In gaming, we like the prospects for Atlantic City, but
feel that the Las Vegas Strip may be slightly overexpanded.
Q. Which sectors underperformed?
A. The high-yield bonds that suffered the most were those issued by companies
that require additional funding to meet their respective business plans.
Fortunately, the Fund's exposure to those issues was minimal. An area
particularly hit hard was nursing homes. The prospective payment system
recently put in place has created some short-term challenges in this area,
but we think that there are long-term opportunities in nursing home
providers. In our opinion, this sector was oversold in 1998.
Q. Which sectors did you add to in 1998?
A. The most significant additions were in health care, paging, publishing, and
rural cellular providers.
Q. Have there been any changes to your team this year?
A. Yes. James Didden joined as an Investment Associate. James has both
investment and legal experience with his most recent work as a tax
specialist. James has already made a significant contribution to the team.
Q. What is your outlook?
A. The US economy is sound -- modest GDP growth, low interest rates, and the
first Federal budget surplus in three decades. Defaults in the high-yield
market should remain modest. Technicals are positive. All these factors
point to a good environment for issuers with well-grounded credit
fundamentals.
In this environment, our investment strategy remains unchanged. We prefer
domestic issuers with predictable cash flows, dominant market shares, high
cash flow margins which are indicative of pricing power, and strong
management teams. We have no emerging market exposure, and we avoid
purchasing defaulted and distressed bonds.
3
<PAGE>
PERFORMANCE OVERVIEW
This chart compares a $10,000 hypothetical investment made in Seligman
High-Yield Bond Series Class A shares for the 10-year period ended December 31,
1998, to a $10,000 investment made in the Lipper High Current Yield and the
Merrill Lynch High Yield Master Index (Merrill High Yield Master Index) for the
same period. The results for Seligman High-Yield Bond Series Class A shares were
determined with and without the initial 4.75% maximum sales charge, and assumes
that all distributions within the period are invested in additional shares. The
performances of Seligman High-Yield Bond Series Class B and Class D shares are
not shown in this chart but are included in the table on page 5. It is important
to keep in mind that the Lipper High Current Yield and the Merrill High Yield
Master Index exclude the effect of fees and/or sales charges.
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Seligman High-Yield Bond
Series Class A Merrill
------------------------- Lipper High Yield
Without With High Current Master
Sales Load Sales load Yield Index
---------- ---------- ----- -----
12/31/88 $10,000 $9,525 $10,000 $10,000
3/31/89 $10,190 $9,706 $10,175 $10,209
6/30/89 $10,581 $10,079 $10,485 $10,576
9/30/89 $10,586 $10,083 $10,337 $10,577
12/31/89 $10,384 $9,891 $9,906 $10,423
3/31/90 $9,998 $9,523 $9,529 $10,206
6/30/90 $10,341 $9,850 $9,936 $10,646
9/30/90 $9,899 $9,429 $9,237 $10,000
12/31/90 $9,629 $9,171 $8,939 $9,970
3/31/91 $10,805 $10,292 $10,215 $11,329
6/30/91 $11,398 $10,857 $10,914 $12,027
9/30/91 $12,129 $11,553 $11,644 $12,734
12/31/91 $12,585 $11,987 $12,232 $13,418
3/31/92 $13,736 $13,084 $13,238 $14,431
6/30/92 $14,134 $13,463 $13,658 $14,952
9/30/92 $14,909 $14,201 $14,218 $15,634
12/31/92 $15,111 $14,393 $14,375 $15,856
3/31/93 $16,168 $15,401 $15,346 $16,840
6/30/93 $16,850 $16,050 $16,052 $17,512
9/30/93 $17,147 $16,333 $16,349 $17,957
12/31/93 $18,010 $17,155 $17,094 $18,580
3/31/94 $17,902 $17,052 $16,930 $18,236
6/30/94 $17,885 $17,035 $16,713 $18,025
9/30/94 $17,965 $17,112 $16,680 $18,270
12/31/94 $18,151 $17,289 $16,455 $18,363
3/31/95 $19,096 $18,189 $17,185 $19,470
6/30/95 $20,277 $19,314 $18,099 $20,705
9/30/95 $21,214 $20,206 $18,672 $21,309
12/31/95 $21,911 $20,871 $19,226 $22,017
3/31/96 $22,788 $21,706 $19,774 $22,338
6/30/96 $23,295 $22,188 $20,168 $22,644
9/30/96 $24,314 $23,159 $21,122 $23,528
12/31/96 $25,159 $23,964 $21,891 $24,452
3/31/97 $24,968 $23,782 $22,044 $24,709
6/30/97 $26,519 $25,259 $23,219 $25,883
9/30/97 $28,145 $26,808 $24,458 $26,895
12/31/97 $28,747 $27,382 $24,790 $27,589
3/31/98 $30,045 $28,618 $25,856 $28,359
6/30/98 $30,371 $28,929 $25,949 $28,835
9/30/98 $28,315 $26,970 $24,053 $27,803
12/31/98 $29,126 $27,743 $24,716 $28,601
The securities in which the Fund invests are subject to greater risk of
loss of principal and interest than are higher-rated investment-grade bonds.
Investors should carefully assess the risks associated with an investment in
this Fund.
The performances of Class B and D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
4
<PAGE>
PERFORMANCE OVERVIEW
Investment Results Per Share
TOTAL RETURNS
For Periods Ended December 31, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-----------------------------------------------------------------------
CLASS B CLASS D
SINCE SINCE
SIX ONE FIVE 10 INCEPTION INCEPTION
*MONTHS* YEAR YEARS YEARS 4/22/96 9/21/93
-------- ---- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Class A**
With Sales Charge (8.66)% (3.54)% 9.01% 10.74% n/a n/a
Without Sales Charge (4.10) 1.32 10.09 11.28 n/a n/a
Class B**
With CDSC+ (9.03) (4.03) n/a n/a 7.44% n/a
Without CDSC (4.46) 0.57 n/a n/a 8.40 n/a
Class D**
With 1% CDSC (5.50) (0.35) n/a n/a n/a n/a
Without CDSC (4.59) 0.57 9.17 n/a n/a 9.58%
Lipper High Current Yield*** (4.75) (0.44) 7.65 9.47 8.35++ 8.18+++
Merrill Lynch High Yield
Master Index*** (0.81) 3.66 9.01 11.08 9.69++ 9.27+++
NET ASSET VALUE
<CAPTION>
DECEMBER 31, 1998 JUNE 30, 1998 DECEMBER 31, 1997
------------------ -------------- --------------------
<S> <C> <C> <C>
Class A $6.95 $7.61 $7.55
Class B 6.95 7.61 7.55
Class D 6.95 7.62 7.55
DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
For the Year Ended December 31, 1998
<CAPTION>
CAPITAL
DIVIDENDS@ YIELD@@ GAIN (LOSS)
----------- ------ ------------
<S> <C> <C> <C> <C> <C>
Class A $0.6879 9.79% Paid $0.021## WEIGHTED AVERAGE
Class B 0.6333 9.51 Realized (0.003) Maturity 7.82 years
Class D 0.6333 9.52 Unrealized (0.351)ss.
</TABLE>
RATINGS#
December 31, 1998
MOODY'S S&P
---------- --------
Baa/BBB -- 0.6%
Ba/BB 3.7% 5.3
B/B 77.1 71.5
Caa/CCC 14.9 17.5
C/C -- 0.4
Non-rated 4.3 4.7
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 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 Lipper High Current Yield and the Merrill Lynch High Yield Master Index
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.
@ Represents per share amount paid or declared during the year ended December
31, 1998.
@@ Current yield, representing the annualized yield for the 30-day period
ended December 31, 1998, has been computed in accordance with SEC
regulations and will vary.
# Percentages based on current market values of long-term holdings.
## Represents realized gains from 1997, which were paid on June 17, 1998.
ss. Represents the per share amount of net unrealized depreciation of portfolio
securities as of December 31, 1998.
5
<PAGE>
PORTFOLIO OVERVIEW
Diversification of Net Assets
December 31, 1998
<TABLE>
<CAPTION>
PERCENT OF NET ASSETS
DECEMBER 31,
---------------------
ISSUES COST VALUE 1998 1997
------ -------------- -------------- ----- -----
<S> <C> <C> <C> <C> <C>
CORPORATE BONDS, CONVERTIBLE ISSUES,
AND PREFERRED STOCKS:
Advertising .............................. 1 $ 10,726,125 $ 11,070,000 0.4 0.6
Agriculture .............................. -- -- -- -- 0.4
Automotive and Related ................... 1 5,114,062 5,000,000 0.2 --
Broadcasting ............................. 10 101,187,342 115,278,574 4.0 5.3
Cable Systems and Satellite Video ........ 15 262,994,848 256,432,155 9.0 13.1
Cellular ................................. 5 109,228,500 107,887,068 3.8 2.7
Chemicals ................................ 2 46,485,953 44,475,000 1.6 1.0
Computer and Related Services ............ 4 65,992,935 51,753,250 1.8 4.1
Consumer Products ........................ 13 161,464,555 140,256,500 4.9 3.8
Containers ............................... 1 20,858,194 20,600,000 0.7 1.1
Energy ................................... 3 29,223,705 24,695,875 0.9 0.6
Equipment ................................ 3 43,548,276 43,915,600 1.5 1.1
Financial Services ....................... 4 64,879,838 54,138,750 1.9 2.3
Food ..................................... 8 130,911,926 114,489,773 4.0 3.8
Gaming/Hotel ............................. 10 219,803,895 213,176,500 7.5 11.1
Health Care/Medical Products ............. 10 188,493,798 180,099,550 6.3 4.9
Industrial/Manufacturing ................. 8 108,410,986 106,442,795 3.8 1.8
Leisure .................................. 4 56,565,584 52,331,937 1.8 2.3
Metals ................................... 2 37,419,592 27,711,500 1.0 1.7
Paging ................................... 5 154,081,648 152,589,000 5.3 5.1
Paper and Packaging ...................... 1 21,556,651 18,430,125 0.6 1.1
Printing and Publishing .................. 11 179,335,267 174,776,569 6.1 2.3
Record Storage ........................... 1 8,250,625 8,325,000 0.3 0.5
Retailing ................................ 5 71,097,616 70,490,000 2.5 1.4
Supermarkets ............................. 3 56,256,468 57,517,500 2.0 2.0
Technology ............................... 6 139,758,970 127,306,578 4.4 3.4
Telecommunications ....................... 34 481,541,954 455,798,492 15.9 14.2
Textiles ................................. 1 11,703,163 12,161,250 0.4 --
Theaters ................................. 1 23,039,060 16,706,250 0.6 1.2
Transportation ........................... 1 23,240,568 23,737,500 0.8 0.7
Utilities ................................ 1 10,914,913 12,076,048 0.4 0.6
--- -------------- -------------- ----- -----
174 2,844,087,017 2,699,669,139 94.4 94.2
SHORT-TERM HOLDINGS AND
OTHER ASSETS LESS LIABILITIES ............ 2 158,492,546 158,492,546 5.6 5.8
--- -------------- -------------- ----- -----
NET ASSETS .................................. 176 $3,002,579,563 $2,858,161,685 100.0 100.0
=== ============== ============== ===== =====
</TABLE>
Largest Industries
December 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Percent of
Net Assets AMOUNT
--------- ------
TELECOMMUNICATIONS 15.90% $455,798,492
CABLE SYSTEMS AND SATELLITE VIDEO 9.00% 256,432,155
GAMING/HOTEL 7.50% 213,176,500
HEALTH CARE/MEDICAL PRODUCTS 6.30% 180,099,550
PRINTING AND PUBLISHING 6.10% 174,776,569
6
<PAGE>
PORTFOLIO OVERVIEW
Largest Portfolio Changes
During Past Six Months
PRINCIPAL AMOUNT OR SHARES
-------------------------------
HOLDINGS
ADDITIONS INCREASE 12/31/98
- --------- ----------- -----------
CORPORATE BONDS:
ALARIS Medical
0% (11 1/8%), 8/1/2008 ............. $26,000,000 $26,000,000
Centennial Cellular
10 3/4%, 12/15/2008 ................ 20,000,000 20,000,000
Golden Sky Systems
12 3/8%, 8/1/2006 .................. 30,000,000 30,000,000
Metrocall
11%, 9/15/2008 ..................... 22,650,000 22,650,000
Price Communications
Cellular Holdings
11 1/4%, 8/15/2008 ................. 18,400,000 18,400,000
Sun Healthcare Group
9 1/2%, 7/1/2007 ................... 15,200,000 26,700,000
Texas Petrochemicals
11 1/8%, 7/1/2006 .................. 12,000,000 30,000,000
Trump Atlantic City Funding
11 1/4%, 5/1/2006 .................. 12,500,000 52,500,000
Verio 11 1/4%, 12/1/2008 ............... 13,200,000 13,200,000
PREFERRED STOCKS:
Crown Castle International
12 3/4% ............................ 15,255 shs. 15,255 shs.
PRINCIPAL AMOUNT
-------------------------------
HOLDINGS
REDUCTIONS DECREASE 12/31/98
- ---------- ----------- -----------
CORPORATE BONDS:
Centennial Cellular
10 1/8%, 5/15/2008 ................. $ 9,500,000 --
Clearview Cinema Group
10 7/8%, 6/1/2008 .................. 10,000,000 --
Diamond Triumph Automotive
9 1/4%, 4/1/2008 ................... 8,675,000 $ 5,000,000
ITCDeltaCom
11%, 6/1/2007 ...................... 7,500,000 --
MJD Communications
9 1/2%, 5/1/2008 ................... 5,805,000 --
Premier Parks
12%, 8/15/2003 ..................... 7,250,000 --
Premier Parks
0% (10%), 4/1/2008 ................. 15,000,000 --
Ryder TRS 10%, 12/1/2006 ............... 15,000,000 --
Sprint Spectrum
11%, 8/15/2006 ..................... 15,000,000 --
Unisys 12%, 4/15/2003 .................. 5,000,000 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
December 31, 1998
SECURITY VALUE
- ------- -----------
Paging Network 10%,
10/15/2008 .......................................... $55,728,750
Trump Atlantic City Funding
11 1/4%, 5/1/2006 ................................... 46,462,500
Casino America
12 1/2%, 8/1/2003 ................................... 41,663,125
Intermedia Capital Partners IV
11 1/4%, 8/1/2006 ................................... 40,115,000
EchoStar DBS
12 1/2%, 7/1/2002 ................................... 38,692,500
Advanced Micro Devices 11%,
8/1/2003 ............................................ 37,450,000
Price Communications Wireless
11 3/4%, 7/15/2007 .................................. 37,100,000
NEXTLINK Communications
12 1/2%, 4/15/2006 .................................. 36,890,000
Viasystems 9 3/4%,
6/1/2007 ............................................ 35,250,000
Pinnacle Holdings
0% (10%), 3/15/2008 ................................. 33,076,250
- --------------------------------------------------------------------------------
7
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1998
PRINCIPAL
AMOUNT
OR WARRANTS VALUE
----------- ---------------
CORPORATE BONDS 86.6%
ADVERTISING 0.4%
Adams Outdoor Advertising
10 3/4%, due 3/15/2006 $10,250,000 $ 11,070,000
--------------
AUTOMOTIVE AND
RELATED 0.2%
Diamond Triumph Automotive
9 1/4%, due 4/1/2008* 5,000,000 5,000,000
--------------
BROADCASTING 1.9%
Capstar Broadcassting
10 3/4%, due 5/15/2006 11,000,000 12,100,000
Capstar Broadcasting Partners
0% (12 3/4%+), due 2/1/2009 22,550,000 18,378,250
Cumulus Media 10 3/8%,
due 7/1/2008 11,000,000 11,715,000
Paxson Communications
11 5/8%, due 10/1/2002 11,375,000 11,716,250
--------------
53,909,500
--------------
CABLE SYSTEMS AND
SATELLITE VIDEO 8.3%
Avalon Cable Holdings 0%
(11 7/8%+), due 12/1/2008* 16,780,000 9,417,775
Avalon Cable of Michigan
Holdings 9 3/8%,
due 12/1/2008* 4,530,000 4,654,575
Charter Communications
Southeast Holdings
11 1/4%, due 3/15/2006 21,500,000 24,295,000
Charter Communications
Southeast Holdings
0% (14%+), due 3/15/2007 26,750,000 23,941,250
CSC Holdings 10 1/2%,
due 5/15/2016 13,675,000 16,136,500
Digital Television Services
12 1/2%, due 8/1/2007 17,500,000 19,162,500
EchoStar DBS 12 1/2%,
due 7/1/2002 33,500,000 38,692,500
Intermedia Capital Partners IV
11 1/4%, due 8/1/2006 35,500,000 40,115,000
Northland Cable Television
10 1/4%, due 11/15/2007 13,500,000 14,276,250
Pegasus Communications
9 3/4%, due 12/1/2006* 6,020,000 6,065,150
Pegasus Communications
(warrants expiring 1/1/2007)@ 875 wts. 15,313
Rogers Cablesystems 11%,
due 12/1/2015 $22,250,000 26,143,750
TCI Satellite Entertainment
10 7/8%, due 2/15/2007 39,500,000 13,232,500
--------------
236,148,063
--------------
PRINCIPAL
AMOUNT VALUE
----------- ---------------
CELLULAR 3.2%
American Cellular 101/2%,
due 5/15/2008* $17,500,000 $ 16,975,000
Centennial Cellular 103/4%,
due 12/15/2008* 20,000,000 20,000,000
Price Communications
Cellular Holdings
11 1/4%, due 8/15/2008 18,400,000 17,480,000
Price Communications Wireless
11 3/4%, due 7/15/2007 35,000,000 37,100,000
--------------
91,555,000
--------------
CHEMICALS 1.6%
Koppers Industry 9 7/8%,
due 12/1/2007 15,000,000 14,775,000
Texas Petrochemicals 11 1/8%,
due 7/1/2006 30,000,000 29,700,000
--------------
44,475,000
--------------
COMPUTER AND RELATED
SERVICES 1.8%
DecisionOne 9 3/4%,
due 8/1/2007 22,250,000 10,346,250
DecisionOne Holdings 0%
(11 1/2%+), due 8/1/2008 10,200,000 2,397,000
Unisys 12%, due 4/15/2003 15,000,000 16,875,000
Unisys 11 3/4%, due 10/15/2004 19,000,000 22,135,000
--------------
51,753,250
--------------
CONSUMER PRODUCTS 4.9%
AKI 10 1/2%, due 7/1/2008* 7,875,000 7,520,625
AKI Holding 0% (13 1/2%+),
due 7/1/2009 6,690,000 2,642,550
Albecca 10 3/4%,
due 8/15/2008* 4,455,000 4,388,175
Amscan Holdings 9 7/8%,
due 12/15/2007 15,750,000 14,568,750
Anchor Advanced Products
11 3/4%, due 4/1/2004 19,500,000 21,255,000
Diamond Brands 0%
(12 7/8%+), due 4/15/2009 15,875,000 5,635,625
Diamond Brands Operating
10 1/8%, due 4/15/2008 15,650,000 14,163,250
French Fragrances 10 3/8%,
due 5/15/2007 15,460,000 15,305,400
Global Health Sciences 11%,
due 5/1/2008 29,250,000 19,451,250
Iron Age 9 7/8%, due 5/1/2008 20,375,000 17,420,625
Iron Age Holding 0%
(12 1/8%+), due 5/1/2009 6,550,000 2,980,250
Moll Industries 10 1/2%,
due 7/1/2008 10,500,000 10,342,500
Windmere-Durable Holdings
10%, due 7/31/2008 4,875,000 4,582,500
--------------
140,256,500
--------------
- ----------
See footnotes on page 12.
8
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1998
PRINCIPAL
AMOUNT VALUE
----------- ---------------
CONTAINERS 0.7%
U.S. Can 10 1/8%, due
10/15/2006 $20,000,000 $ 20,600,000
--------------
ENERGY 0.9%
Abraxas Petroleum 11 1/2%,
due 11/1/2004 12,750,000 9,690,000
Universal Compression 0%
(9 7/8%+), due 2/15/2008 10,175,000 6,155,875
Universal Compression
Holdings 0% (11 3/8%+),
due 2/15/2009 14,750,000 8,850,000
--------------
24,695,875
--------------
EQUIPMENT 1.5%
Neff 10 1/4%, due 6/1/2008 8,675,000 8,544,875
Neff 10 1/4%, due 6/1/2008* 6,035,000 5,944,475
Williams Scotsman 9 7/8%,
due 6/1/2007 28,500,000 29,426,250
--------------
43,915,600
--------------
FINANCIAL SERVICES 1.9%
AMRESCO 10%,
due 3/15/2004 17,500,000 12,468,750
Dollar Financial Group 10 7/8%,
due 11/15/2006 17,250,000 17,508,750
Ocwen Capital Trust I 10 7/8%,
due 8/1/2027 16,000,000 12,880,000
Veritas Capital Trust 10%,
due 1/1/2028 12,500,000 11,281,250
--------------
54,138,750
--------------
FOOD 3.6%
AFC Enterprises 10 1/4%,
due 5/15/2007 16,545,000 17,289,525
Agrilink Foods 11 7/8%,
due 11/1/2008* 4,500,000 4,601,250
AmeriKing 10 3/4%,
due 12/1/2006 14,000,000 14,665,000
AmeriServe Food Distributors
10 1/8%, due 7/15/2007 33,625,000 29,253,750
B&G Foods 9 5/8%,
due 8/1/2007 11,500,000 11,270,000
Carrols 9 1/2%, due 12/1/2008* 5,710,000 5,838,475
Packaged Ice 9 3/4%,
due 2/1/2005 19,750,000 19,848,750
--------------
102,766,750
--------------
GAMING/HOTEL 7.5%
Alliance Gaming 10%,
due 8/1/2007 10,000,000 9,050,000
Ameristar Casinos 10 1/2%,
due 8/1/2004 23,850,000 21,822,750
PRINCIPAL
AMOUNT VALUE
----------- ---------------
GAMING/HOTEL (continued)
Aztar 13 3/4%,
due 10/1/2004 $ 8,500,000 $ 9,456,250
Casino America 12 1/2%,
due 8/1/2003 37,450,000 41,663,125
Casino Magic of Louisiana
13%, due 8/15/2003 12,875,000 14,613,125
Coast Hotels & Casinos 13%,
due 12/15/2002 19,750,000 22,218,750
Fitzgeralds Gaming 12 1/4%,
due 12/15/2004 12,500,000 6,937,500
Showboat Marina Casino
Partnership 13 1/2%,
due 3/15/2003 14,500,000 16,457,500
Trump Atlantic City Funding
11 1/4%, due 5/1/2006 52,500,000 46,462,500
Trump Hotels & Casino
Resorts Funding 15 1/2%,
due 6/15/2005 23,000,000 24,495,000
--------------
213,176,500
--------------
HEALTH CARE/MEDICAL
PRODUCTS 6.0%
Alaris Medical 9 3/4%,
due 12/1/2006 24,000,000 24,600,000
Alaris Medical 0% (11 1/8%+),
due 8/1/2008* 26,000,000 14,300,000
Alliance Imaging 9 5/8%,
due 12/15/2005 12,150,000 12,089,250
Dade International 11 1/8%,
due 5/1/2006 24,650,000 27,484,750
Everest Healthcare Services
9 3/4%, due 5/1/2008 20,000,000 19,900,000
Graphic Controls 12%,
due 9/15/2005 12,500,000 14,437,500
Paracelsus Healthcare 10%,
due 8/15/2006 22,175,000 20,068,375
Sun Healthcare Group
9 1/2%, due 7/1/2007 26,700,000 21,760,500
Vencor 9 7/8%,
due 5/1/2005 20,000,000 17,300,000
--------------
171,940,375
--------------
INDUSTRIAL/
MANUFACTURING 3.5%
Airxcel 11%, due 11/15/2007 20,350,000 20,553,500
Alliance Laundry System
9 5/8%, due 5/1/2008* 13,950,000 13,461,750
BPC Holding 12 1/2%,
due 6/15/2006 15,650,000 16,354,250
Coyne International Enterprises
11 1/4%, due 6/1/2008 12,000,000 11,820,000
Day International Group
9 1/2%, due 3/15/2008 12,500,000 12,281,250
- ----------
See footnotes on page 12.
9
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1998
PRINCIPAL
AMOUNT VALUE
----------- ---------------
INDUSTRIAL/
MANUFACTURING(continued)
Great Lakes Acquisition
0% (13 1/8%+), due
5/15/2009 $ 6,500,000 $ 3,347,500
Great Lakes Carbon
10 1/4%, due 5/15/2008 20,575,000 20,832,187
--------------
98,650,437
--------------
LEISURE 1.8%
Affinity Group Holding
11%, due 4/1/2007 25,000,000 26,000,000
AMF Bowling Worldwide
0% (12 1/4%+),
due 3/15/2006 15,250,000 8,768,750
AMF Group 10 7/8%,
due 3/15/2006 4,025,000 3,280,375
Premier Parks 9 1/4%,
due 4/1/2006 13,750,000 14,282,812
--------------
52,331,937
--------------
METALS 1.0%
Renco Metals 11 1/2%,
due 7/1/2003 16,650,000 17,232,750
Royal Oak Mines 12 3/4%,
due 8/15/2006 20,750,000 10,478,750
--------------
27,711,500
--------------
PAGING 5.3%
Metrocall 9 3/4%,
due 11/1/2007 26,000,000 24,960,000
Metrocall 11%,
due 9/15/2008* 22,650,000 22,876,500
Mobile Telecommunication
Technologies 13 1/2%,
due 12/15/2002 22,500,000 25,593,750
Paging Network 10%,
due 10/15/2008 57,750,000 55,728,750
ProNet 11 7/8%,
due 6/15/2005 22,000,000 23,430,000
--------------
152,589,000
--------------
PAPER AND
PACKAGING 0.6%
Crown Paper 11%,
due 9/1/2005 20,825,000 18,430,125
--------------
PRINTING
AND PUBLISHING 5.3%
Advanstar Communications
9 1/4%, due 5/1/2008 19,525,000 19,720,250
PRINCIPAL
AMOUNT VALUE
----------- ---------------
PRINTING AND
PUBLISHING (continued)
American Lawyer Media
9 3/4%, due 12/15/2007 $15,525,000 $ 16,029,562
American Lawyer Media
Holdings 0% (12 1/4%+),
due 12/15/2008 5,750,000 3,565,000
Liberty Group Publishing
9 3/8%, due 2/1/2008 15,000,000 14,775,000
Liberty Group Publishing
0% (11 5/8%+), due 2/1/2009 26,500,000 14,707,500
NBC Acquisition 0% (10 3/4%+),
due 2/15/2009 35,750,000 20,735,000
Perry-Judd 10 5/8%,
due 12/15/2007 14,225,000 15,007,375
Regional Independent
Media Group 10 1/2%,
due 7/1/2008 20,625,000 20,934,375
TransWestern Holdings 0%
(11 7/8%+), due 11/15/2008 21,400,000 14,231,000
Von Hoffman Press 10 7/8%,
due 5/15/2007* 10,750,000 11,126,250
--------------
150,831,312
--------------
RECORD STORAGE 0.3%
Pierce Leahy 11 1/8%,
due 7/15/2006 7,500,000 8,325,000
--------------
RETAILING 2.5%
Central Tractor 10 5/8%,
due 4/1/2007 16,000,000 16,480,000
Cole National Group 9 7/8%,
due 12/31/2006 10,250,000 10,660,000
Frank's Nursery & Crafts
10 1/4%, due 3/1/2008 9,000,000 8,910,000
Musicland Group 9 7/8%,
due 3/15/2008 17,800,000 17,355,000
TM Group Holdings 11%,
due 5/15/2008* 17,000,000 17,085,000
--------------
70,490,000
--------------
SUPERMARKETS 2.0%
Jitney-Jungle Stores of
America 12%,
due 3/1/2006 15,000,000 16,800,000
Jitney-Jungle Stores of
America 10 3/8%,
due 9/15/2007 18,375,000 18,926,250
Pathmark Stores 11 5/8%,
due 6/15/2002 22,350,000 21,791,250
--------------
57,517,500
--------------
- ----------
See footnotes on page 12.
10
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1998
PRINCIPAL
AMOUNT
OR WARRANTS VALUE
----------- ---------------
TECHNOLOGY 4.1%
Advanced Micro Devices 11%,
due 8/1/2003 $35,000,000 $ 37,450,000
Hadco 91/2%, due 6/15/2008 21,250,000 21,143,750
MCMS 93/4%, due 3/1/2008 20,225,000 17,191,250
Therma-Wave 10 5/8%,
due 5/15/2004 15,000,000 7,575,000
Viasystems 9 3/4%,
due 6/1/2007 37,500,000 35,250,000
--------------
118,610,000
--------------
TELECOMMUNICATIONS 13.6%
BTI Telecom 10 1/2%,
due 9/15/2007 22,750,000 16,721,250
CapRock Communications
12%, due 7/15/2008 10,000,000 9,300,000
Crown Castle International
0% (10 5/8%+), due 11/15/2007 17,750,000 12,513,750
Exodus Communications
11 1/4%, due 7/1/2008 4,720,000 4,743,600
Facilicom International
10 1/2%, due 1/15/2008 26,500,000 21,332,500
GCI 9 3/4%, due 8/1/2007 15,000,000 14,925,000
GlobalStar 11 1/4%,
due 6/15/2004 25,125,000 19,095,000
GlobalStar 10 3/4%,
due 11/1/2004 6,400,000 4,608,000
Golden Sky Systems 12 3/8%,
due 8/1/2006* 30,000,000 31,200,000
ICG Holdings 0% (11 5/8%+),
due 3/15/2007 16,500,000 10,725,000
Intermedia Communications
(warrants expiring 6/1/2000)*@ 4,000 wts. 165,132
IXC Communications 9%,
due 4/15/2008 $ 8,500,000 8,563,750
Nextel Communications
0% (10.65%+),
due 9/15/2007 25,000,000 16,062,500
NEXTLINK Communications
12 1/2%, due 4/15/2006 34,000,000 36,890,000
Orbcomm Global 14%,
due 8/15/2004 7,470,000 7,731,450
Pinnacle Holdings 0%
(10%+), due 3/15/2008 56,300,000 33,076,250
Powertel 11 1/8%, due 6/1/2007 22,500,000 22,500,000
PSINet 10%, due 2/15/2005 17,750,000 17,661,250
RCN 10%, due 10/15/2007 15,275,000 14,664,000
Splitrock Services 11 3/4%,
due 7/15/2008 4,340,000 3,775,800
Splitrock Services (warrants
expiring 7/15/2008)@ 4,340 wts. 47,740
PRINCIPAL
AMOUNT,
SHARES OR
OR WARRANTS VALUE
----------- ---------------
TELECOMMUNICATIONS (continued)
Talton Holdings 11%,
due 6/30/2007 $18,000,000 $ 17,190,000
Verio 13 1/2%,
due 6/15/2004 21,125,000 22,920,625
Verio (warrants expiring
6/15/2004)@ 90,000 wts. 3,150,000
Verio 10 3/8%, due 4/1/2005 $16,000,000 15,760,000
Verio 11 1/4%, due 12/1/2008* 13,200,000 13,332,000
Viatel 11 1/4%,
due 4/15/2008 9,625,000 9,889,688
--------------
388,544,285
--------------
TEXTILE 0.4%
Tropical Sportswear Int'l.
11%, due 6/15/2008 11,500,000 12,161,250
--------------
THEATERS 0.6%
Hollywood Theaters 10 5/8%,
due 8/1/2007 22,500,000 16,706,250
--------------
TRANSPORTATION 0.8%
Atlas Air 10 3/4%,
due 8/1/2005 22,500,000 23,737,500
--------------
UTILITIES 0.4%
Midland Cogeneration
Venture 11 3/4%, 7/23/2005 10,250,000 12,076,048
--------------
TOTAL CORPORATE BONDS
Cost ($2,605,510,192) 2,474,113,307
--------------
PREFERRED STOCKS 6.9%
BROADCASTING 1.3%
Capstar Broadcasting
Partners 12% 93,212 shs. 10,649,471
Capstar Communications 12 5/8% 50,000 6,050,000
Cumulus Media 13 3/4% 6,611 7,123,353
Sinclair Capital 11 5/8% 130,000 14,202,500
--------------
38,025,324
--------------
CABLE SYSTEMS AND
SATELLITE VIDEO 0.7%
Pegasus Communications
12 3/4% (Series A) 15,897 16,731,592
Pegasus Communications
12 3/4% (units) 3,500 3,552,500
--------------
20,284,092
--------------
CELLULAR 0.6%
Rural Cellular 11 3/8% 17,514 16,332,068
--------------
FOOD 0.4%
Nebco Evans Holding 11 1/4% 233,294 11,723,023
--------------
11
<PAGE>
PORTFOLIO OF INVESTMENTS
December 31, 1998
SHARES VALUE
----------- ---------------
HEALTH CARE/
MEDICAL PRODUCTS 0.3%
River Holding 11 1/2% 135,422 $ 8,159,175
--------------
INDUSTRIAL/
MANUFACTURING 0.3%
Day International Group 12 1/4% 8,447 7,792,358
--------------
PRINTING AND
PUBLISHING 0.8%
Liberty Group Publishing
14 3/4% 948,327 23,945,257
--------------
TECHNOLOGY 0.3%
MCMS 12 1/2% 109,048 8,696,578
--------------
TELECOMMUNICATIONS 2.2%
Crown Castle International
12 3/4%* 15,255 15,388,481
Global Crossing Holding 10 1/2% 68,550 6,735,038
IXC Communications 12 1/2% 10,568 10,832,477
Nextel Communications 11 1/8% 25,444 22,963,210
NEXTLINK
Communications 14% 150,157 7,995,860
--------------
63,915,066
--------------
TOTAL PREFERRED STOCKS
(Cost $218,347,563) 198,872,941
--------------
CONVERTIBLE PREFERRED
STOCKS 0.9%
BROADCASTING 0.8%
Chancellor Media $3 150,000 14,006,250
Chancellor Media $3* 100,000 9,337,500
--------------
23,343,750
--------------
SHARES VALUE
----------- ---------------
TELECOMMUNICATIONS 0.1%
IXC Communications 6 3/4%* 90,655 $ 3,002,947
Viatel 10% 3,049 336,194
--------------
3,339,141
--------------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(Cost $20,229,262) 26,682,891
--------------
SHORT-TERM HOLDINGS 3.7%
(Cost $103,900,000) 103,900,000
--------------
TOTAL INVESTMENTS 98.1%
(Cost $2,947,987,017) 2,803,569,139
OTHER ASSETS LESS
LIABILITIES 1.9% 54,592,546
--------------
NET ASSETS 100.0% $2,858,161,685
==============
- ----------
* Rule 144A security.
@ 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
December 31, 1998
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C>
Investments, at value:
Long-term holdings (cost $2,844,087,017) ..................................... $2,699,669,139
Short-term holdings (cost $103,900,000) ...................................... 103,900,000 $2,803,569,139
--------------
Cash ............................................................................................. 322,389
Receivable for interest and dividends ............................................................ 67,426,482
Receivable for Shares of Beneficial Interest sold ................................................ 14,922,368
Receivable for securities sold ................................................................... 493,816
Expenses prepaid to shareholder service agent .................................................... 462,497
Other ............................................................................................ 65,075
................................................................................................. --------------
Total Assets ..................................................................................... 2,887,261,766
--------------
LIABILITIES:
Payable for Shares of Beneficial Interest repurchased ............................................ 14,206,839
Dividend payable ................................................................................. 10,398,898
Accrued expenses, taxes, and other ............................................................... 4,494,344
--------------
Total Liabilities ................................................................................ 29,100,081
--------------
Net Assets ....................................................................................... $2,858,161,685
==============
COMPOSITION OF NET ASSETS:
Shares of Beneficial Interest, at par (unlimited shares authorized; $0.001 par
value; 411,387,238 shares outstanding):
Class A ........................................................................................ $151,183
Class B ........................................................................................ 149,436
Class D ........................................................................................ 110,768
Additional paid-in capital ....................................................................... 3,000,170,218
Undistributed net investment income .............................................................. 4,786,112
Accumulated net realized loss .................................................................... (2,788,154)
Net unrealized depreciation of investments ....................................................... (144,417,878)
--------------
Net Assets ....................................................................................... $2,858,161,685
==============
NET ASSET VALUE PER SHARE:
Class A ($1,050,340,166 / 151,182,905 shares) .................................................... $6.95
=====
Class B ($1,037,993,680 / 149,435,774 shares) .................................................... $6.95
=====
Class D ($769,827,839 / 110,768,559 shares) ...................................................... $6.95
=====
</TABLE>
- ----------
See Notes to Financial Statements.
13
<PAGE>
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Interest ............................................ $ 238,943,441
Dividends ........................................... 17,901,982
-------------
Total Investment Income .............................................. $ 256,845,423
EXPENSES:
Distribution and service fees ....................... 17,308,118
Management fee ...................................... 14,375,619
Shareholder account services ........................ 4,612,741
Registration ........................................ 625,957
Shareholder reports and communications .............. 293,673
Custody and related services ........................ 284,791
Auditing and legal fees ............................. 89,088
Trustees' fees and expenses ......................... 39,778
Miscellaneous ....................................... 347,274
-------------
Total Expenses ....................................................... 37,977,039
-------------
Net Investment Income ................................................ 218,868,384
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments ................... (1,259,258)
Net change in unrealized appreciation of investments (214,244,874)
-------------
Net Loss on Investments .............................................. (215,504,132)
-------------
Increase in Net Assets from Operations ............................... $ 3,364,252
=============
</TABLE>
- ----------
See Notes to Financial Statements.
14
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1998 1997
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income ....................................................................... $ 218,868,384 $ 118,769,147
Net realized gain (loss) on investments ..................................................... (1,259,258) 8,663,643
Net change in unrealized appreciation of investments ........................................ (214,244,874) 47,951,783
------------- -------------
Increase in Net Assets from Operations ...................................................... 3,364,252 175,384,573
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A .................................................................................. (87,074,109) (52,770,232)
Class B .................................................................................. (71,515,694) (29,874,994)
Class D .................................................................................. (57,845,902) (33,770,488)
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 ................................................... (223,392,163) (116,415,714)
------------- -------------
<CAPTION>
SHARES
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
1998 1997
---------- ----------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
<S> <C> <C> <C> <C>
Net proceeds from sale of shares:
Class A .............................................. 80,413,014 50,672,448 594,288,030 373,051,522
Class B .............................................. 78,733,227 57,673,666 579,656,818 424,606,561
Class D .............................................. 51,489,047 37,881,266 379,577,409 278,799,066
Investment of dividends:
Class A .............................................. 6,694,630 3,776,320 48,928,569 27,853,774
Class B .............................................. 4,467,385 1,826,561 32,568,827 13,519,667
Class D .............................................. 4,758,316 2,805,300 34,810,415 20,704,607
Exchanged from associated Funds:
Class A .............................................. 61,852,001 17,851,841 452,271,367 131,875,215
Class B .............................................. 6,769,539 3,688,065 48,425,027 27,115,290
Class D .............................................. 8,049,511 6,529,814 58,615,401 47,980,993
Shares issued in payment of gain distributions:
Class A .............................................. 258,290 -- 1,968,170 --
Class B .............................................. 201,710 -- 1,537,030 --
Class D .............................................. 194,174 -- 1,479,611 --
--------------- --------------- --------------- ---------------
Total ................................................... 303,880,844 182,705,281 2,234,126,674 1,345,506,695
--------------- --------------- --------------- ---------------
Cost of shares repurchased:
Class A .............................................. (30,909,303) (13,770,227) (226,531,287) (101,399,738)
Class B .............................................. (8,616,802) (2,704,575) (62,888,247) (20,021,448)
Class D .............................................. (14,976,376) (7,327,368) (109,341,373) (53,826,777)
Exchanged into associated Funds:
Class A .............................................. (66,540,471) (15,408,040) (488,820,731) (114,001,958)
Class B .............................................. (9,097,294) (3,899,595) (65,245,307) (28,866,957)
Class D .............................................. (9,593,313) (5,638,449) (69,803,699) (41,466,552)
--------------- --------------- --------------- ---------------
Total ................................................... (139,733,559) (48,748,254) (1,022,630,644) (359,583,430)
--------------- --------------- --------------- ---------------
Increase in Net Assets from
Transactions in Shares of
Beneficial Interest .................................. 164,147,285 133,957,027 1,211,496,030 985,923,265
=============== =============== --------------- ---------------
Increase in Net Assets ...................................................................... 991,468,119 1,044,892,124
NET ASSETS:
Beginning of year ........................................................................... 1,866,693,566 821,801,442
--------------- ---------------
End of Year (including undistributed net investment
income of $4,786,112 and $2,353,433, respectively) ....................................... $ 2,858,161,685 $ 1,866,693,566
=============== ===============
</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 three 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%, 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. 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 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
Trustees. Secu-rities 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. 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, 1998, 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 year ended December 31, 1998, amounted to $1,950,431,577 and $817,349,941,
respectively.
At December 31, 1998, 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 $62,066,129 and $208,077,206, respectively.
4. Short-Term Investments -- At December 31, 1998, the Fund owned short-term
investments which matured in less than seven days.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
5. Management Fee, Distribution 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 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 0.59% per annum of the Fund's average daily
net assets.
Seligman Advisors, Inc. (the "Distributor") (formerly Seligman Financial
Services, Inc.), agent for the distribution of the Fund's shares, and an
affiliate of the Manager, received concessions of $1,128,663 from sales of Class
A shares after commissions of $8,645,519 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,
1998, fees incurred under the Plan aggregated $2,302,261, or 0.25% 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 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, 1998, 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 $8,288,106 and $6,717,751, respectively.
The Distributor is entitled to retain any CDSC 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, 1998, such charges amounted to $452,723.
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 amount of such payments
retained by the Distributor for the year ended December 31, 1998, amounted to
$578,678.
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, 1998, Seligman Services, Inc. received commissions of
$83,013 from the sale of Fund shares. Seligman Services, Inc. also received
distribution and service fees of $55,399, pursuant to the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged the Fund at cost $4,612,741 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 December 31, 1998, of $37,449
is included in other liabilities. Deferred fees and related accrued earnings are
not deductible for federal income tax purposes until such amounts are paid.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
6. Committed Line of Credit -- Effective July 1, 1998, the Fund terminated its
$110 million committed line of credit and entered into a joint $800 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.
7. Loss Carryforward -- At December 31, 1998, the Fund had a net 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.
18
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below are intended to help you understand each Class's financial
performance for the past five years or from its inception, if less than five
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
-------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net Asset Value, Beginning of Year ................... $7.55 $7.25 $6.96 $6.35 $6.94
----- ----- ----- ----- -----
Income from Investment Operations:
Net investment income ................................ 0.70 0.70 0.69 0.65 0.65
Net realized and unrealized gain (loss) on investments (0.59) 0.28 0.29 0.61 (0.59)
----- ----- ----- ----- -----
Total from Investment Operations ..................... 0.11 0.98 0.98 1.26 0.06
----- ----- ----- ----- -----
Less Distributions:
Dividends from net investment income ................. (0.69) (0.68) (0.69) (0.65) (0.65)
Distributions from net realized capital gains ........ (0.02) -- -- -- --
----- ----- ----- ----- -----
Total Distributions .................................. (0.71) (0.68) (0.69) (0.65) (0.65)
----- ----- ----- ----- -----
Net Asset Value, End of Year ......................... $6.95 $7.55 $7.25 $6.96 $6.35
===== ===== ===== ===== =====
TOTAL RETURN: ........................................ 1.32% 14.26% 14.82% 20.72% 0.78%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000s omitted) ............... $1,050,340 $750,461 $408,303 $182,129 $59,033
Ratio of expenses to average net assets .............. 1.10% 1.14% 1.16% 1.09% 1.13%
Ratio of net income to average net assets ............ 9.46% 9.42% 9.80% 9.73% 9.73%
Portfolio turnover rate .............................. 35.34% 61.78% 119.33% 173.39% 184.75%
</TABLE>
19
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------
YEAR ENDED
DECEMBER 31, 4/22/96*
------------------------------- TO
1998 1997 12/31/96
------------- -------- --------
Per Share Data:
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ................. $7.55 $7.26 $7.06
------------- -------- --------
Income from Investment Operations:
Net investment income ................................ 0.64 0.64 0.45
Net realized and unrealized gain (loss) on investments (0.59) 0.28 0.20
------------- -------- --------
Total from Investment Operations ..................... 0.05 0.92 0.65
------------- -------- --------
Less Distributions:
Dividends from net investment income ................. (0.63) (0.63) (0.45)
Distributions from net realized capital gains ........ (0.02) -- --
------------- -------- --------
Total Distributions .................................. (0.65) (0.63) (0.45)
------------- -------- --------
Net Asset Value, End of Period ....................... $6.95 $7.55 $7.26
============= ======== ========
Total Return: ........................................ 0.57% 13.24% 9.11%
Ratios/Supplemental Data:
Net assets, end of period (000s omitted) ............. $1,037,994 $581,235 $147,970
Ratio of expenses to average net assets .............. 1.85% 1.90% 1.90%+
Ratio of net income to average net assets ............ 8.71% 8.66% 9.11%+
Portfolio turnover rate .............................. 35.34% 61.78% 119.33%++
<CAPTION>
CLASS D
---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------- ------------- -------- --------
Per Share Data:
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year ................... $7.55 $7.26 $6.96 $6.35 $6.94
------------- ------------- ------------- -------- --------
Income from Investment Operations:
Net investment income ................................ 0.64 0.64 0.64 0.60 0.57
Net realized and unrealized gain (loss) on investments (0.59) 0.28 0.30 0.61 (0.59)
------------- ------------- ------------- -------- --------
Total from Investment Operations ..................... 0.05 0.92 0.94 1.21 (0.02)
------------- ------------- ------------- -------- --------
Less Distributions:
Dividends from net investment income ................. (0.63) (0.63) (0.64) (0.60) (0.57)
Distributions from net realized capital gains ........ (0.02) -- -- -- --
------------- ------------- ------------- -------- --------
Total Distributions .................................. (0.65) (0.63) (0.64) (0.60) (0.57)
------------- ------------- ------------- -------- --------
Net Asset Value, End of Year ......................... $6.95 $7.55 $7.26 $6.96 $6.35
============= ============= ============= ======== ========
Total Return: ........................................ 0.57% 13.24% 14.10% 19.67% (0.30)%
Ratios/Supplemental Data:
Net assets, end of year (000s omitted) ............... $769,828 $534,998 $265,528 $90,153 $9,249
Ratio of expenses to average net assets .............. 1.85% 1.90% 1.92% 1.91% 2.19%
Ratio of net income to average net assets ............ 8.71% 8.66% 9.02% 8.86% 8.68%
Portfolio turnover rate .............................. 35.34% 61.78% 119.33% 173.39% 184.75%
</TABLE>
- ----------
* Commencement of offering of shares.
+ Annualized.
++ For the year ended December 31, 1996.
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 December
31, 1998, 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, 1998, 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 High-Yield
Bond Series as of December 31, 1998, the results of its operations, the changes
in its net assets, and the financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
January 29, 1999
- --------------------------------------------------------------------------------
21
<PAGE>
FEDERAL TAX STATUS OF 1998 DIVIDEND AND GAIN
DISTRIBUTIONS FOR TAXABLE ACCOUNTS
- --------------------------------------------------------------------------------
The monthly dividends paid to Class A, B, and D shareholders in 1998 are taxable
as ordinary income for federal tax purposes regardless of whether they were
received in cash or in shares. Under the Internal Revenue Code, 6.97% of the
dividends paid to Class A, B, and D shareholders has been designated as
qualifying for the dividends received deduction available to cor-porate
shareholders. In order to claim the dividends received deduction for these
distributions, corporate shareholders must have held the Fund's shares for 46
days or more during the 90-day period beginning 45 days before each ex-dividend
date.
A long-term capital gain distribution of $0.021 per share from 1997
undistributed net realized gain was paid June 17, 1998 to Class A, B, and D
shareholders. In 1997, Congress revised the capital gains provisions so that,
depending on how long a security was owned when it was sold, investors may have
been faced with a 28% capital gains rate, a 20% rate, or both. In October 1998,
Congress simplified the capital gains provisions so that, generally, all gains
on securities held more than one year are to be taxed at a maximum 20% rate. The
distribution from net long-term gain is designated as a "capital gain dividend"
for federal income tax purposes and is taxable to shareholders in 1998 as a
long-term gain from the sale of capital assets, no matter how long shares have
been owned or whether the distribution was paid in additional shares or cash.
However, if shares on which a long-term capital gain distribution was received
are subsequently sold, and such shares were held for six months or less, any
loss on the sale would be treated as long-term to the extent it offsets the
long-term capital gain distribution.
If the gain distribution was paid in shares, the per share cost basis for
federal income tax purposes is $7.62 for Class A, Class B, and Class D shares.
A 1998 year-end statement of account activity and a 1998 tax package, which may
include a Form 1099-DIV, a Form 1099-B, and/or a Cost Basis Statement, have been
mailed to each shareholder. Form 1099-DIV shows the distributions paid to the
shareholder during the year. Form 1099-B shows the proceeds of any redemptions
paid to the shareholder during the year. Cost Basis Statements report all sales
or exchanges from a shareholder's account which may have resulted in a capital
gain or loss in 1998. The information shown on Forms 1099-DIV and 1099-B is
reported to the Internal Revenue Service as required by federal regulations.
- --------------------------------------------------------------------------------
22
<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
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
Chairman of the Board of Trustees, St. George's School
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, ICIMutual Insurance Company
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
- --------------------------------------------------------------------------------
23
<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
24
<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.
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 (OP) -- 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 updated or 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 1998 Mutual Fund Fact Book.
25
<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
TXHY2 12/98 Printed on Recycled Paper
<PAGE>
SELIGMAN ADVISORS, INC.
an affiliate of
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
This report is intended only for the information of shareholders or those who
have received the offering prospectus covering shares of Beneficial Interest of
Seligman U.S. Government Securities Series, which contains information about the
sales charges, management fee, and other costs. Please read the prospectus
carefully before investing or sending money.
TXUSG2 12/98
SELIGMAN
---------------------
U.S. Government
Securities Series
Annual Report
December 31, 1998
Seeking High Current Income by
Investing in US Government Securities
<PAGE>
To the Shareholders
Seligman U.S. Government Securities Series had a solid year in 1998, posting a
total return of 8.46% based on the net asset value of Class A shares. This
performance outpaced the 8.08% total return of the Fund's peers, as measured by
the Lipper General US Government Bond Funds Average. The Lehman Brothers
Government Bond Index, which measures the performance of government bonds, had a
total return of 9.85%.
The past year was one of continued growth for the US economy, with real domestic
growth of 3.9%, marking the eighth year of economic expansion in the US.
Throughout the year, unemployment was down and consumer spending up, all in a
low-inflation environment. However, financial uncertainty throughout the world
placed a drag on US economic growth. In response, the Federal Reserve Board cut
the federal-funds rate three times. These actions confirmed the Fed's resolve to
protect the US economy from the global financial crisis and markets responded
favorably throughout November and December.
As investors everywhere became increasingly concerned about a global financial
meltdown, money poured into the world's highest credit quality securities -- US
Treasury bonds. This "flight to quality" helped to push US Treasury yields to
30-year lows. The 30-year US Treasury bond yield began the year at 5.92%, fell
as low as 4.70%, and ended the year at 5.09%. At the same time, the federal
budget surplus caused a decrease in the overall supply of bonds, as the
government needed less paper to finance spending. These factors all proved
positive for Seligman U.S. Government Securities Series.
We believe that many of the factors that benefited the Fund in 1998 should
continue in 1999. In addition, the Fund will continue to seek opportunities in
non-Treasury agency securities, which are backed by the full faith and credit of
the US government, to enhance yield and total return.
Seligman continues to work to ensure that all of its operations are prepared for
the challenges posed by the Year 2000 (Y2K) computer problem. We are confident
that there will be no disruption in the investment and shareholder services
provided by your Fund as a result of Y2K. In addition, your portfolio management
team considers the potential ramifications of Y2K when making decisions on which
securities should be held by the Fund.
Thank you for your continued support of Seligman U.S. Government Securities in
1998. We look forward to serving your investment needs in 1999.
By order of the Trustees,
/s/ William C. Morris
William C. Morris
Chairman
/s/ Brian T. Zino
Brian T. Zino
President
January 29, 1999
1
<PAGE>
Interview With Your Portfolio Manager, Gary S. Zeltzer
Q. How did Seligman U.S. Government Securities Series perform in 1998?
A. Seligman U.S. Government Securities Series performed well in 1998. The Fund
posted a total return of 8.46% based on the net asset value of Class A
shares. At the same time, the Lipper General US Government Bond Funds
Average, which measures the performance of the Fund's peer group, returned
8.08%. The Lehman Brothers Government Bond Index, which measures the
performance of government bonds in the market, returned 9.85%.
Q. How did economic and market factors influence the Fund's results in 1998?
A. The US economic expansion has continued for eight consecutive years, and
while concerns have surfaced that the pace of growth has been slowing, the
economy remains strong. Throughout the past year, unemployment was down
and consumer spending was up, all in a low-inflation environment.
A Team Approach
Seligman U.S. Government Securities Series is managed by the Seligman Taxable
Fixed Income Team. Gary S. Zeltzer, Portfolio Manager, is assisted by seasoned
research professionals who identify securities that are backed by the full faith
and credit of the US government. The Team seeks to position the Fund so as to
minimize the negative effects of any sharp rise in interest rates while
maximizing current income.
[PHOTO]
Taxable Fixed Income Team: (standing, from left)
Deborah Joseph (Administrative Assistant), Nicholas Walsh, Brian Turner,
(seated) Susan Egan, Gary Zeltzer (Portfolio Manager)
Global events affected the US economy and markets as the year progressed.
The Asian economic crisis, which began in a few countries in late 1997,
spread throughout the world's emerging markets. Worldwide concern grew in
August of 1998 when Russia defaulted on its debt and devalued its
currency. Fear then spread to Latin America as Brazil struggled in vain to
protect its currency, the real. In the midst of the turmoil, a single US
hedge fund, with a number of bad currency investments, almost caused a
global financial meltdown.
The global financial uncertainty contributed to a slowing of the pace of
US economic growth, while the rate of inflation remained muted. In
response, the Federal Reserve Board lowered the federal-funds rate--in
September, in October, and again in November. The final move was
unexpected and underscored the potential threat to the US economy from
overseas financial problems. As investors around the world feared
2
<PAGE>
Interview With Your Portfolio Manager, Gary S. Zeltzer
the worst, they poured money into the largest and most liquid US stocks as
well as into US Treasury bonds, which carry the highest credit quality in
the world.
The global "flight to quality" helped drive US stock prices to new highs and
US Treasury yields to 30-year lows. The 30-year US Treasury Bond yield
closed the year at 5.09%, down from 5.92% at December 31, 1997. In fact, the
30-year US Treasury Bond yield fell as low as 4.70% before moving up by
year-end. At the same time, the federal budget surplus caused a decrease in
the overall supply of bonds, as the government needed less paper to finance
spending. Falling yields and a supply shortage caused bond prices to rise,
which was positive for Seligman U.S. Government Securities Series.
Q. What was your investment strategy?
A. While we looked to take advantage of attractive fundamentals, we remained
more concerned with finding long-term trends than short-term technical
situations. As the spreads between Treasury and agency securities widened,
we increased our exposure to agencies to add yield to the Portfolio. We
made some adjustments to the portfolio's exposure to mortgage-backed
securities as the year progressed, selling higher-coupon securities as
concerns over prepayments in a falling interest-rate environment made
other areas more attractive. Although the Fund had only modest exposure to
mortgage-backed securities, the fact that the Fund held any at all was a
slight negative on performance in the third quarter as the flight to
Treasuries hurt all other types of bonds.
Q. What is your outlook?
A. Moderate unemployment, ongoing consumer strength, and weak commodity
prices all bode well for the economy. If growth is seen as too strong, the
Fed may raise rates. Going forward, we may shorten the Fund's duration as
the rewards of a longer duration become less compelling. The Fund's
duration is currently about 4.9 years, which is slightly shorter than that
of our benchmark, the Lehman Brothers Government Bond Index.
Ongoing global problems should benefit the US Treasury market, and
therefore the Fund. We will continue to seek opportunities in non-Treasury
securities to enhance yield and total return. And finally, the continuing
erosion of the budget deficit should keep supply low and demand high. All
these factors are positive for Seligman U.S. Government Securities Series.
3
<PAGE>
Performance Overview
This chart compares a $10,000 hypothetical investment made in Seligman U.S.
Government Securities Series Class A shares, with and without the initial 4.75%
maximum sales charge, and assumes that all distributions within the period are
invested in additional shares, for the 10-year period ended December 31, 1998,
to a $10,000 investment made in the Lehman Brothers Government Bond Index
(Lehman Bond Index) and the Lipper General US Government Bond Funds Average
(Lipper Average) for the same period. The performances of Seligman U.S.
Government Securities Series Class B and Class D shares are not shown in this
chart, but are included in the table on page 5. It is important to keep in mind
that the Lehman Bond Index and the Lipper Average exclude the effect of fees
and/or sales charges.
Seligman U.S. Government Securities Series Class A
With Without Lehman Lipper
Sales Sales Bond Average
Charge Charge Index
12/31/88 $ 9,528 $10,000 $10,000 $10,000
3/31/89 $ 9,540 $10,013 $10,106 $10,088
6/30/89 $10,046 $10,545 $10,919 $10,779
9/30/89 $10,110 $10,611 $11,009 $10,857
12/31/89 $10,409 $10,925 $11,423 $11,232
3/31/90 $10,154 $10,658 $11,281 $11,112
6/30/90 $10,446 $10,963 $11,676 $11,471
9/30/90 $10,505 $11,026 $11,773 $11,540
12/31/90 $11,073 $11,622 $12,420 $12,157
3/31/91 $11,249 $11,807 $12,689 $12,419
6/30/91 $11,411 $11,977 $12,860 $12,563
9/30/91 $12,036 $12,633 $13,359 $13,275
12/31/91 $12,628 $13,254 $14,322 $13,956
3/31/92 $12,359 $12,972 $14,071 $13,682
6/30/92 $12,838 $13,474 $14,629 $14,198
9/30/92 $13,363 $14,025 $15,351 $14,801
12/31/92 $13,358 $14,021 $15,357 $14,846
3/31/93 $13,743 $14,424 $16,052 $15,439
6/30/93 $14,063 $14,761 $16,515 $15,857
9/30/93 $14,401 $15,115 $17,052 $16,297
12/31/93 $14,354 $15,066 $16,994 $16,236
3/31/94 $14,059 $14,756 $16,483 $15,702
6/30/94 $13,834 $14,519 $16,295 $15,432
9/30/94 $13,870 $14,557 $16,363 $15,443
12/31/94 $13,797 $14,481 $16,420 $15,484
3/31/95 $14,299 $15,008 $17,194 $16,206
6/30/95 $15,208 $15,962 $18,260 $17,163
9/30/95 $15,443 $16,208 $18,583 $17,477
12/31/95 $16,302 $17,110 $19,432 $18,266
3/31/96 $15,734 $16,514 $18,993 $17,771
6/30/96 $15,672 $16,449 $19,084 $17,780
9/30/96 $15,871 $16,658 $19,405 $18,053
12/31/96 $16,254 $17,059 $19,972 $18,574
3/31/97 $16,094 $16,892 $19,810 $18,387
6/30/97 $16,602 $17,425 $20,497 $19,038
9/30/97 $17,017 $17,861 $21,184 $19,658
12/31/97 $17,640 $18,514 $21,887 $20,251
3/31/98 $17,800 $18,682 $22,218 $20,514
6/30/98 $18,276 $19,182 $22,804 $20,994
9/30/98 $19,143 $20,092 $24,065 $21,956
12/31/98 $19,132 $20,081 $24,046 $21,887
Although the payment of principal and interest with respect to certain
long-term securities held in Seligman U.S. Government Securities Series are
guaranteed by the US government or its agencies, the rate of return will vary
and the principal value of an investment in the Fund will fluctuate. Shares, if
redeemed, may be worth more or less than their original cost. Past performance
is not indicative of future investment results.
4
<PAGE>
Performance Overview
Investment Results Per Share
<TABLE>
<CAPTION>
TOTAL RETURNS
For Periods Ended December 31, 1998 AVERAGE ANNUAL
----------------------------------------------------------
CLASS B CLASS D
SINCE SINCE
ONE FIVE 10 INCEPTION INCEPTION
SIX MONTHS* YEAR YEARS YEARS 1/1/97 9/21/93
------------- ------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Class A**
With Sales Charge (0.34)% 3.35% 4.88% 6.70% n/a n/a
Without Sales Charge 4.68 8.46 5.91 7.22 n/a n/a
Class B**
With CDSC+ (0.72) 2.78 n/a n/a 5.68% n/a
Without CDSC 4.28 7.78 n/a n/a 7.56 n/a
Class D**
With 1% CDSC 3.28 6.78 n/a n/a n/a n/a
Without CDSC 4.28 7.78 5.01 n/a n/a 4.61%
Lehman Brothers Government
Bond Index++ 5.44 9.85 7.19 9.17 9.72 6.76+++
Lipper General US Government
Bond Funds Average++ 4.26 8.08 6.16 8.15 8.55 5.77+++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND AND YIELD INFORMATION
For the Year Ended December 31, 1998
DECEMBER 31, JUNE 30, DECEMBER 31,
1998 1998 1997 DIVIDENDS0 YIELD00
---------------- ---------- ---------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Class A $7.09 $6.94 $6.88 Class A $0.3563 4.40%
Class B 7.11 6.96 6.89 Class B 0.3030 3.70
Class D 7.11 6.96 6.89 Class D 0.3030 3.70
WEIGHTED AVERAGE MATURITY 11.75 years
<FN>
- ------------------
* 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 dividends 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 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 CDSC is 5% for periods of one year or less, and 4% since inception.
++ The Lehman Brothers Government Bond Index and the Lipper General US
Government Bond Funds Average are unmanaged benchmarks that assume
investment of dividends. The Lehman Brothers Government Bond Index and the
Lipper General US Government Bond Funds Average exclude the effect of fees
and/or sales charges. The monthly performances of the Lipper General US
Government Bond Funds Average are used for the Performance Overview.
Investors cannot invest directly in an average or an index.
+++ From September 30, 1993.
0 Represents per share amount paid or declared for the year ended December 31,
1998.
00 Current yield, representing the annualized yield for the 30-day period ended
December 31, 1998, has been computed in accordance with SEC regulations and
will vary.
</FN>
</TABLE>
5
<PAGE>
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------- ---------------
<S> <C> <C>
US TREASURY SECURITIES 44.8%
US Treasury Bonds:
8-3/4%, due 5/15/2020.......................................................... $6,000,000 $ 8,538,750
6-1/4%, due 8/15/2023 ......................................................... 3,000,000 3,357,189
6-5/8%, due 2/15/2027.......................................................... 2,500,000 2,957,812
5-1/4%, due 11/15/2028......................................................... 2,200,000 2,255,689
US Treasury Notes:
5%, due 2/15/1999.............................................................. 4,000,000 4,002,500
5-3/8%, due 1/31/2000 ......................................................... 6,000,000 6,048,750
6-3/8%, due 9/30/2001 ......................................................... 5,000,000 5,218,750
6-1/4%, due 8/31/2002.......................................................... 7,500,000 7,884,375
6-5/8%, due 5/15/2007.......................................................... 8,000,000 9,000,000
-----------
TOTAL US TREASURY SECURITIES (Cost $47,236,046) .................................. 49,263,815
-----------
US GOVERNMENT AGENCY SECURITIES 44.8%
Aid-Israel, 0%, due 11/15/2010.................................................... 7,000,000 3,703,910
Federal Farm Credit Bank:
4.65%, due 8/3/1999............................................................ 1,500,000 1,499,409
5-5/8%, due 9/2/2003........................................................... 2,645,000 2,687,412
Federal Home Loan Bank:
6%, due 8/27/2002.............................................................. 2,000,000 2,000,086
5.89%, due 6/30/2008 .......................................................... 2,500,000 2,599,945
Federal Home Loan Mortgage ("Freddie Mac"):
5-3/4%, due 7/15/2003.......................................................... 2,500,000 2,572,045
5-1/8%, due 10/15/2008......................................................... 2,000,000 1,965,076
Federal National Mortgage Association ("Fannie Mae"):
5-3/4%, due 4/15/2003.......................................................... 3,500,000 3,598,427
5.91%, due 8/25/2003........................................................... 750,000 755,181
Government National Mortgage Association ("Ginnie Mae") Obligations,
Mortgage-backed Pass-through Certificates:*
6%, due 5/15/2013.............................................................. 4,845,190 4,880,018
6-1/2%, due 12/15/2028......................................................... 6,400,000 6,470,016
6%, due 12/20/2028............................................................. 5,400,000 5,352,750
Tennessee Valley Authority, 6-1/8%, due 7/15/2003................................. 2,500,000 2,543,378
US Government Title XI (Rowan Companies),
6.15%, due 7/1/2010 ........................................................... 2,395,000 2,448,940
US Government Title XI (American Heavy Lift),
7.18%, due 6/1/2017............................................................ 3,000,000 3,128,334
</TABLE>
- ------------------
See footnotes on page 7.
6
<PAGE>
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
-------------- ---------------
<S> <C> <C>
US GOVERNMENT AGENCY SECURITIES (continued)
US Government Title XI (Bay Transportation),
7.30%, due 6/1/2021......................................................... $2,860,000 $ 3,123,921
------------
TOTAL US GOVERNMENT AGENCY SECURITIES (Cost $48,974,296) ...................... 49,328,848
------------
REPURCHASE AGREEMENT 8.8% (Cost $9,712,000)
HSBC Securities Inc., 4.45%, maturing 1/4/1999, collateralized by:
$8,485,000 US Treasury Notes, 11-5/8%, due 8/15/2004, with a fair
market value of $9,907,621 ................................................. 9,712,000 9,712,000
------------
TOTAL INVESTMENTS 98.4% (Cost $105,922,342) .................................. 108,304,663
OTHER ASSETS LESS LIABILITIES 1.6% ........................................... 1,736,143
------------
NET ASSETS 100.0% ............................................................ $110,040,806
============
</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.
7
<PAGE>
Statement of Assets and Liabilities
December 31, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value:
Long-term holdings (Cost $96,210,342).................... $98,592,663
Short-term holdings (Cost $9,712,000).................... 9,712,000 $108,304,663
------------
Cash................................................................................. 510,567
Interest receivable.................................................................. 1,274,034
Receivable for shares of Beneficial Interest sold.................................... 642,077
Receivable for securities sold....................................................... 105,000
Expenses prepaid to shareholder service agent........................................ 12,296
Other................................................................................ 33,670
------------
Total Assets......................................................................... 110,882,307
------------
LIABILITIES:
Payable for shares of Beneficial Interest repurchased................................ 492,112
Dividends payable.................................................................... 181,563
Accrued expenses, taxes, and other................................................... 167,826
------------
Total Liabilities.................................................................... 841,501
------------
Net Assets........................................................................... $110,040,806
============
COMPOSITION OF NET ASSETS:
Shares of Beneficial Interest, at par ($0.001 par value; unlimited shares authorized;
15,501,558 shares outstanding):
Class A........................................................................... $ 7,828
Class B........................................................................... 3,929
Class D........................................................................... 3,745
Additional paid-in capital........................................................... 117,269,391
Accumulated net realized loss........................................................ (9,626,408)
Net unrealized appreciation of investments........................................... 2,382,321
------------
Net Assets........................................................................... $110,040,806
============
NET ASSET VALUE PER SHARE:
Class A ($55,503,080 / 7,828,006 shares)............................................. $7.09
=====
Class B ($27,923,644 / 3,928,932 shares)............................................. $7.11
=====
Class D ($26,614,082 / 3,744,620 shares)............................................. $7.11
=====
</TABLE>
- ------------------
See notes to financial statements.
8
<PAGE>
Statement of Operations
For the Year Ended December 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest..................................................................................... $4,657,795
EXPENSES:
Management fee.................................................... $ 382,195
Distribution and service fees..................................... 375,102
Shareholder account services...................................... 125,133
Registration...................................................... 68,008
Auditing and legal fees........................................... 15,240
Custody and related services...................................... 11,765
Shareholder reports and communications............................ 11,242
Trustees' fees and expenses....................................... 5,501
Miscellaneous..................................................... 7,381
----------
Total Expenses.............................................................................. 1,001,567
----------
Net Investment Income....................................................................... 3,656,228
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.................................. 1,895,993
Net change in unrealized appreciation of investments.............. 118,769
----------
Net Gain on Investments..................................................................... 2,014,762
----------
Increase in Net Assets from Operations...................................................... $5,670,990
==========
</TABLE>
- ------------------
See notes to financial statements.
9
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1998 1997
---------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income.............................................. $ 3,656,228 $ 3,013,241
Net realized gain (loss) on investments............................ 1,895,993 (611,943)
Net change in unrealized appreciation of investments............... 118,769 1,949,757
----------- ---------
Increase in Net Assets from Operations............................. 5,670,990 4,351,055
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A......................................................... (2,495,781) (2,522,929)
Class B......................................................... (431,493) (45,289)
Class D......................................................... (728,954) (445,023)
----------- -----------
Decrease in Net Assets from Distributions.......................... (3,656,228) (3,013,241)
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
----------------------------------------
YEAR ENDED DECEMBER 31,
TRANSACTIONS IN SHARES ----------------------------------------
OF BENEFICIAL INTEREST: 1998 1997
-------------- --------------
<S> <C> <C> <C> <C>
Net proceeds from sale of shares:
Class A................................ 2,363,194 829,234 16,457,004 5,624,748
Class B................................ 562,070 182,897 3,968,163 1,228,800
Class D................................ 499,654 198,244 3,525,890 1,326,662
Investment of dividends:
Class A................................ 202,386 202,913 1,412,846 1,359,967
Class B................................ 39,408 5,291 278,047 35,836
Class D................................ 71,043 42,659 500,118 286,730
Exchanged from associated Funds:
Class A................................ 5,226,303 1,572,537 36,731,913 10,660,240
Class B................................ 4,842,484 574,598 34,312,850 3,899,673
Class D................................ 6,629,069 1,591,469 46,721,951 10,742,800
----------- ---------- ---------- -----------
Total..................................... 20,435,611 5,199,842 43,908,782 35,165,456
----------- ---------- ---------- -----------
Cost of shares repurchased:
Class A................................ (1,430,402) (1,364,274) 10,025,783) (9,183,343)
Class B................................ (326,753) (14,942) (2,312,760) (101,411)
Class D................................ (849,272) (369,696) (5,973,934) (2,477,886)
Exchanged into associated Funds:
Class A................................ (5,139,464) (1,618,861) (35,957,745) (10,932,716)
Class B................................ (1,655,633) (280,488) (11,698,641) (1,910,778)
Class D................................ (4,398,523) (1,050,159) (30,908,764) (7,074,255)
----------- ---------- ------------ -----------
Total..................................... (13,800,047) (4,698,420) (96,877,627) (31,680,389)
----------- ---------- ------------ -----------
Increase in Net Assets from
Transactions in Shares of
Beneficial Interest.................... 6,635,564 501,422 47,031,155 3,485,067
=========== ========== ----------- -----------
Increase in Net Assets................................................................. 49,045,917 4,822,881
NET ASSETS:
Beginning of year...................................................................... 60,994,889 56,172,008
----------- -----------
End of Year............................................................................ $110,040,806 $60,994,889
============ ===========
</TABLE>
- ------------------
See notes to financial statements.
10
<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. 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. The Fund began offering Class B shares
on January 1, 1997. 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 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. 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 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 dis
tribute 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 agreements, 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
11
<PAGE>
Notes to Financial Statements
year ended December 31, 1998, 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 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,
1998, amounted to $110,032,619 and $70,894,043, respectively.
At December 31, 1998, 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 $2,605,345 and $223,024, respectively.
4. Management Fee, Distribution 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 Advisors, Inc. (the "Distributor") (formerly Seligman Financial
Services, Inc.), agent for the distribution of the Fund's shares, and an
affiliate of the Manager, received concessions of $6,123 from sales of Class A
shares after commissions of $55,467 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,
1998, fees incurred under the Plan aggregated $107,529 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 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.
12
<PAGE>
Notes to Financial Statements
For the year ended December 31, 1998, 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 $99,487 and $168,086, respectively.
The Distributor is entitled to retain any CDSC 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, 1998, such charges amounted to $11,570.
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 B shares sold. The aggregate amount of such payments
retained by the Distributor for the year ended December 31, 1998, amounted to
$5,872.
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, 1998, Seligman Services, Inc. received commissions of $888 from the
sale of Fund shares. Seligman Services, Inc. also received distribution and
service fees of $16,822, pursuant to the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged the Fund at cost $125,133 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 December 31, 1998, of $39,337
is included in other liabilities. Deferred fees and related accrued earnings are
not deductible for federal income tax purposes until such amounts are paid.
5. Loss Carryforward -- At December 31, 1998, the Fund had a net loss
carryforward for federal income tax purposes of $9,485,627, which is available
for offset against future taxable net 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.
6. Committed Line of Credit -- Effective July 1, 1998, the Fund entered into a
joint $800 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.
13
<PAGE>
Financial Highlights
The tables below are intended to help you understand each Class's financial
performance for the past five years or from its inception, if less than five
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. Total returns do not reflect
any sales charges and are not annualized for periods of less than one year.
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1998 1997 1996 1995 1994
---------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net Asset Value, Beginning of Year .................... $6.88 $6.71 $7.15 $6.47 $7.18
----- ----- ----- ----- -----
Income from Investment Operations:
Net investment income ................................. 0.36 0.38 0.41 0.46 0.44
Net realized and unrealized gain (loss)
on investments ...................................... 0.21 0.17 (0.44) 0.68 (0.71)
----- ----- ----- ----- -----
Total from Investment Operations ...................... 0.57 0.55 (0.03) 1.14 (0.27)
Less Distributions:
Dividends from net investment income .................. (0.36) (0.38) (0.41) (0.46) (0.44)
----- ----- ----- ----- -----
Total Distributions.................................... (0.36) (0.38) (0.41) (0.46) (0.44)
----- ----- ----- ----- -----
Net Asset Value, End of Year .......................... $7.09 $6.88 $6.71 $7.15 $6.47
===== ===== ===== ===== =====
TOTAL RETURN: 8.46% 8.53% (0.29)% 18.15% (3.88)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000s omitted)................. $55,503 $45,426 $46,889 $55,061 $54,714
Ratio of expenses to average net assets................ 1.05% 1.23% 1.14% 1.14% 1.10%
Ratio of net income to average net assets ............. 5.11% 5.68% 6.05% 6.71% 6.49%
Portfolio turnover rate ............................... 99.43% 193.90% 175.25% 213.06% 445.18%
</TABLE>
- ------------------
See footnotes on page 15.
14
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
CLASS B CLASS D
-----------------------------------------------------------------------------------
YEAR 1/1/97* YEAR ENDED DECEMBER 31,
ENDED TO ----------------------------------------------------
12/31/98 12/31/97 1998 1997 1996 1995 1994
----------------- --------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net Asset Value, Beginning of Year................. $6.89 $6.73 $6.89 $6.73 $7.16 $6.48 $7.20
----- ----- ----- ----- ----- ----- -----
Income from Investment Operations:
Net investment income ............................. 0.30 0.33 0.30 0.33 0.36 0.40 0.37
Net realized and unrealized gain
(loss) on investments ........................... 0.22 0.16 0.22 0.16 (0.43) 0.68 (0.72)
----- ----- ----- ----- ----- ----- -----
Total from Investment Operations .................. 0.52 0.49 0.52 0.49 (0.07) 1.08 (0.35)
Less Distributions:
Dividends from net investment income .............. (0.30) (0.33) (0.30) (0.33) (0.36) (0.40) (0.37)
----- ----- ----- ----- ----- ----- -----
Total Distributions................................ (0.30) (0.33) (0.30) (0.33) (0.36) (0.40) (0.37)
----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Year....................... $7.11 $6.89 $7.11 $6.89 $6.73 $7.16 $6.48
===== ===== ===== ===== ===== ===== =====
TOTAL RETURN: 7.78% 7.32% 7.78% 7.53% (0.92)% 17.10% (5.05)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000s omitted) ............ $27,924 $3,219 $26,614 $12,350 $9,283 $8,181 $6,062
Ratio of expenses to average net assets ........... 1.83% 2.01% 1.83% 2.01% 1.92% 2.01% 2.22%
Ratio of net income to average net assets ......... 4.33% 4.90% 4.33% 4.90% 5.27% 5.84% 5.40%
Portfolio turnover rate ........................... 99.43% 193.90% 99.43% 193.90% 175.25% 213.06% 445.18%
</TABLE>
- ------------------
* Commencement of offering of shares.
See notes to financial statements.
15
<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, 1998, 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, 1998, 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, 1998, 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 29, 1999
16
<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
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
Chairman of the Board of Trustees, St. George's School
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
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
17
<PAGE>
Executive Officers
William C. Morris
Chairman
Brian T. Zino
President
Lawrence P. Vogel
Vice President
Gary S. Zeltzer
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
18
<PAGE>
Glossary of Financial Terms
Capital Gain Distribution -- A payment to mutual fund shareholders of profits
realized on the sale of securities in the fund's portfolio.
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.
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 (OP) -- The price at which a mutual fund's share can be
purchased. The offering price is the current net asset value per share plus any
sales charge.
Portfolio Turnover -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
Prospectus -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission, such as the fund's investment objective and policies, services,
investment restrictions, 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 updated or 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 fund performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The Average Annual Total
Return represents the average annual compounded rate of return for the periods
presented.
Yield 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 maximum offering price of the stock.
- -------------
Adapted from the Investment Company Institute's 1998 Mutual Fund Fact Book.
19
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION
Item 23. Exhibits
All Exhibits have been previously filed, except Exhibits marked with an
asterisk (*) which are filed herewith.
(a) *Instrument of Establishment and Designation dated May 24, 1999.
(a)(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.)
(b) Form of Restatement of Bylaws. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 22, filed on December 31,
1996.)
(c) Specimen Stock Certificate for Class A Shares. (Incorporated by
Reference to Post-Effective Amendment No. 18 filed on April 29, 1994.)
(c)(1) Specimen Stock Certificate for Class B Shares. (Incorporated by
reference to Form SE filed on April 16, 1996).
(c)(2) Specimen Stock Certificate for Class D Shares. (Incorporated by
Reference to Post-Effective Amendment No. 17 filed on September 21,
1993.)
(d) 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.)
(d)(1) 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.)
(e) *Addendum to Sales/Bank Agreement. (Incorporated by reference to
Post-Effective Amendment No. 57 to the Registration Statement of
Seligman Capital Fund, Inc. (File #811-1886) filed on May 28, 1999.)
(e)(1) *Form of Bank Agreement between Seligman Advisors, Inc. and Banks.
(Incorporated by reference to Post-Effective Amendment No. 57 to the
Registration Statement of Seligman Capital Fund, Inc. (File #811-1886)
filed on May 28, 1999.)
(e)(2) Form of the new Distributing Agreement between Registrant and Seligman
Advisors, Inc. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 23, filed on April 29, 1997.)
(e)(3) Form of amended Sales Agreement between Seligman Advisors, Inc. and
Dealers. (Incorporated by Reference to Post-Effective Amendment No. 20
filed on April 19, 1996.)
(e)(4) Form of Sales Agreement between Seligman Advisors, Inc. and Morgan
Stanley Dean Witter & Co. (formerly, Dean Witter Reynolds, Inc.).
(Incorporated by reference to Exhibit 6b of Registration Statement No.
2-33566, to Registrant's Post-Effective Amendment No. 53, filed on
April 28, 1997.)
(e)(5) Form of Sales Agreement between Seligman Advisors, Inc. and Morgan
Stanley Dean Witter & Co. (formerly, Dean Witter Reynolds, Inc.) with
respect to certain Chilean institutional investors. (Incorporated by
reference to Exhibit 6c of Registration Statement No. 2-33566, to
Registrant's Post-Effective Amendment No. 53, filed on April 28,
1997.)
C-1
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION (continued)
(e)(6) Form of Dealer Agreement between Seligman Advisors, Inc. and Salomon
Smith Barney Inc (formerly, Smith Barney Inc.). (Incorporated by
reference to Exhibit 6d of Registration Statement No. 2-33566, to
Registrant's Post-Effective Amendment No. 53, filed on April 28,
1997.)
(f) Matched Accumulation Plan of J. & W. Seligman & Co. Incorporated.
(Incorporated by reference to Exhibit 7 of Registration Statement No.
2-92487, to Registrant's Post-Effective Amendment No. 21 filed on
January 29, 1997.)
(f)(1) Deferred Compensation Plan for Directors of Seligman High Income Fund,
Inc. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 25, filed on April 30, 1998.)
(g) Form of Custodian Agreement between Registrant and Investors Fiduciary
Trust Company. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 23, filed on April 29, 1997.)
(h) Not applicable.
(i) *Opinion and Consent of Counsel in respect of Class C shares.
(i)(1) Opinion and Consent of Counsel. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 23, filed on April 29,
1997.)
(j) *Consent of Independent Auditors.
(k) Not applicable.
(l) *Form of Purchase Agreement (Investment Letter) for Initial Capital
shares between Registrant & J. & W. Seligman & Co. Incorporated with
respect to Class C shares for the Seligman U.S. Government Securities
Series and Seligman High-Yield Bond Series.
(l)(1) Purchase Agreement (Investment Letter) 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.)
(l)(2) Purchase Agreement (Investment Letter) 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 Registrant's Post-Effective Amendment No. 20 filed on
April 19, 1996.)
(l)(32) Purchase Agreement (Investment Letter) for Initial Capital between
Registrant and J. & W. Seligman & Co. Incorporated with respect to
Registrant's Class D shares. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 17 filed on September 21,
1993.)
(m) *Amended Aministration, Shareholder Services and Distribution Plan of
Registrant-
(m)(1) *Amended Administration, Shareholder Services and Distribution
Agreement between Seligman Advisors, Inc. and Dealers. (Incorporated
by reference to Post-Effective Amendment No. 57 to the Registration
Statement of Seligman Capital Fund, Inc. (File #811-1886) filed on May
28, 1999.)
(n) Financial Data Schedules. (Incorporated by reference to Post-Effective
Amendment No. 26 filed on April 30, 1999.)
C-2
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION (continued)
(o) *Plan of Multiple Classes of Shares (four Classes) pursuant to Rule
18f-3 under the Investment Company Act of 1940. (Incorporated by
reference to Post-Effective Amendment No. 57 to the Registration
Statement of Seligman Capital Fund, Inc. (File #811-1886) filed on May
28, 1999.)
Other Exhibits: Power of Attorney for Richard R. Schmaltz. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 24
filed on April 29, 1998.)
Powers of Attorney. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 23 filed on April
29, 1997.)
Item 24. Persons Controlled by or Under Common Control with Registrant. None.
Item 25. 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.
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 26. 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 eighteen 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, 1999.
C-3
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION (continued)
Item 27. 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.
C-4
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION (continued)
(b) Name of each director, officer or partner of Registrant's
principal underwriter named in response to Item 20:
<TABLE>
<CAPTION>
Seligman Advisors, Inc.
-----------------------
As of April 30, 1999
--------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
William C. Morris* Director Chairman of the Board and Chief
Executive Officer
Brian T. Zino* Director President and Director
Ronald T. Schroeder* Director None
Fred E. Brown* Director Director Emeritus
William H. Hazen* Director None
Thomas G. Moles* Director None
David F. Stein* Director None
Stephen J. Hodgdon* President and Director None
Charles W. Kadlec* Chief Investment Strategist None
Lawrence P. Vogel* Senior Vice President, Finance Vice President
Edward F. Lynch* Senior Vice President, National None
Sales Director
James R. Besher Senior Vice President, Division None
14000 Margaux Lane Sales Director
Town & Country, MO 63017
Gerald I. Cetrulo, III Senior Vice President, Sales None
140 West Parkway
Pompton Plains, NJ 07444
Matthew A. Digan* Senior Vice President, None
Domestic Funds
Jonathan G. Evans Senior Vice President, Sales None
222 Fairmont Way
Ft. Lauderdale, FL 33326
Robert T. Hausler* Senior Vice President, International None
Funds
T. Wayne Knowles Senior Vice President, None
104 Morninghills Court Division Sales Director
Cary, NC 27511
Joseph Lam Senior Vice President, Regional None
Seligman International Inc. Director, Asia
Suite 1133, Central Building
One Pedder Street
Central Hong Kong
Bradley W. Larson Senior Vice President, Sales None
367 Bryan Drive
Alamo, CA 94526
Michelle L. McCann-Rappa* Senior Vice President, None
Retirement Plans
Scott H. Novak* Senior Vice President, Insurance None
Richard M. Potocki Senior Vice President, Regional None
Seligman International UK Limited Director, Europe and the Middle East
Berkeley Square House 2nd Floor
Berkeley Square
London, United Kingdom W1X 6EA
</TABLE>
C-5
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION (continued)
<TABLE>
<CAPTION>
Seligman Advisors, Inc.
-----------------------
As of April 30, 1999
--------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Bruce M. Tuckey Senior Vice President, Sales None
41644 Chathman Drive
Novi, MI 48375
Andrew S. Veasey Senior Vice President, Sales None
14 Woodside Drive
Rumson, NJ 07760
Charles L. von Breitenbach, II* Senior Vice President, None
Managed Money
J. Brereton Young* Senior Vice President, Director None
of Sales Development
Jeffrey S. Dean* Vice President, Business Analysis None
Mason S. Flinn Vice President, Regional Retirement None
159 Varennes Plans Manager
San Francisco, CA 94133
Marsha E. Jacoby* Vice President, Offshore Business None
Manager
William W. Johnson* Vice President, Order Desk None
Joan M. O'Connell Vice President, Regional Retirement None
3707 Fifth Avenue #136 Plans Manager
San Diego, CA 92103
Ronald W. Pond* Vice President, Portfolio Advisor None
Jeffery C. Pleet* Vice President, Regional Retirement None
Plans Manager
Tracy A. Salomon* Vice President, Retirement Marketing None
Helen Simon* Vice President, Sales Administration None
Gary A. Terpening* Vice President, Director of Business None
Development
Charles E. Wenzel Vice President, Regional Retirement None
703 Greenwood Road Plans Manager
Wilmington, DE 19807
Jeff Botwinick Regional Vice President None
11508 Foster Road
Overland Park, KS 66210
Kevin Casey Regional Vice President None
19 Bayview Avenue
Babylon, NY 11702
Richard B. Callaghan Regional Vice President None
7821 Dakota Lane
Orland Park, IL 60462
</TABLE>
C-6
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION (continued)
<TABLE>
<CAPTION>
Seligman Advisors, Inc.
-----------------------
As of April 30, 1999
--------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
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
Kelli A. Wirth Dumser Regional Vice President None
7121 Jardiniere Court
Charlotte, NC 28226
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
Carla A. Goehring Regional Vice President None
11426 Long Pine
Houston, TX 77077
Cathy Des Jardins Regional Vice President None
PMB 152
1705 14th Street
Boulder, CO 80302
Michael K. Lewallen Regional Vice President None
908 Tulip Poplar Lane
Birmingham, AL 35244
Judith L. Lyon Regional Vice President None
7105 Harbour Landing
Alpharetta, GA 30005
Tim O'Connell Regional Vice President None
11908 Acacia Glen Court
San Diego, CA 92128
George M. Palmer, Jr. Regional Vice President None
1805 Richardson Place
Tampa, FL 33606
Thomas Parnell Regional Vice President None
1575 Edgecomb Road
St. Paul, MN 55116
Craig Prichard Regional Vice President None
300 Spyglass Drive
Fairlawn, OH 44333
</TABLE>
C-7
<PAGE>
File No. 2-93076
811-4103
PART C. OTHER INFORMATION (continued)
<TABLE>
<CAPTION>
Seligman Advisors, Inc.
-----------------------
As of April 30, 1999
--------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
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
Eugene P. Sullivan Regional Vice President None
4858 Battery Lane Bethesda, MD 21814
James Taylor Regional Vice President None
1145 Kenilworth Circle
Naperville, IL 60540
Steve Wilson Regional Vice President None
83 Kaydeross Park Road
Saratoga Springs, NY 12866
Frank J. Nasta* Secretary Secretary
Aurelia Lacsamana* Treasurer None
Gail S. Cushing* Assistant Vice President, National None
Accounts Manager
Sandra G. Floris* Assistant Vice President, Order Desk None
Keith Landry* Assistant Vice President, Order Desk None
Albert A. Pisano* Assistant Vice President and None
Compliance Officer
Joyce Peress* Assistant Secretary Assistant Secretary
</TABLE>
* The principal business address of each of these directors and/or officers
is 100 Park Avenue, New York, NY 10017.
Item 28. Location of Accounts and Records.
Custodian: Investors Fiduciary Trust Company
801 Pennsylvania
Kansas City, Missouri 64105 and
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
Item 29. Management Services. Not applicable.
Item 30. 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 10% 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, as amended.
C-8
<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 Registration Statement under Rule 485(b)
under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 27 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 27th day of May, 1999.
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. 27 has been
signed below by the following persons in the capacities indicated on May 27,
1999.
Signature Title
--------- -----
/s/ Brian T.Zino 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. 27 to the
Registration Statement on Form N-1A
EXHIBIT INDEX
Form N-1A Item No. Description
- ------------------ -----------
Item 23(a) Instruments of Establishment and Designation
Item 23(i) Opinion and Consent of Counsel and Opinion and
Consent of Massachusetts Counsel
Item 23(j) Consent of Independent Auditors
Item 23(l) Form of Purchase Agreement for Initial Capital
Item 23(m) Amended Administration, Shareholder Services
And Distribution Plan
SELIGMAN HIGH INCOME FUND SERIES
INSTRUMENT OF ESTABLISHMENT
AND DESIGNATION
(Pursuant to Section 6.9(j) of the
Declaration of Trust)
May 24, 1999
The undersigned, being at least a majority of the Trustees of Seligman High
Income Fund Series (the "Trust"), established pursuant to a Declaration of Trust
dated July 25, 1984 and amended thereafter from time to time (the "Declaration")
do hereby establish an additional class of Shares of Beneficial Interest of each
of the Seligman High-Yield Bond Series of Shares of the Trust ("High-Yield Bond
Series") and the Seligman U.S. Government Securities Series of Shares of the
Trust ("U.S. Government Securities Series") as follows:
I. High-Yield Bond Class C Shares.
(a) The additional class of Shares of the High-Yield Bond Series is to be
designated "Class C Shares of the Seligman High-Yield Bond Series of
Shares" (for purposes of this instrument such shares being referred to
as the "High-Yield Bond Class C Shares").
(b) The High-Yield Bond Class C Shares are to enjoy all of the rights and
preferences of a Class of Shares of the Trust as are contemplated by
the Declaration, and otherwise to be entitled to all of the rights and
privileges of Shares of the High-Yield Bond Series.
(c) The authorized number of High-Yield Bond Class C Shares shall be
unlimited.
(d) All shares of the High-Yield Bond Series that are currently issued and
outstanding shall continue to be designated "Class A Shares of the
Seligman High-Yield Bond Series of Shares" (for purposes of this
instrument such Shares being referred to as the "High-Yield Bond Class
A Shares") or "Class B Shares of the Seligman High-Yield Bond Series
of Shares" (for purposes of this instrument such Shares being referred
to as the "High-Yield Bond Class B Shares") or "Class D Shares of the
Seligman High-Yield Bond Series of Shares" (for purposes of this
instrument such Shares being referred to as the "High-Yield Bond Class
D Shares").
(e) The assets belonging to each of the High-Yield Bond Class A Shares,
High-Yield Bond Class B Shares, High-Yield Bond Class C Shares and
High-Yield Bond Class D Shares shall be charged with the liabilities
of the High-Yield Bond Series in respect of such Class, and all
expenses, costs, charges, and reserves attributable to a Class. Any
general liabilities, expenses, costs, charges or reserves of
High-Yield Bond Series that are not readily identifiable as belonging
to any Class in particular shall be allocated and charged by the
Trustees to the Classes in such
<PAGE>
manner and on such basis as the Trustees in their sole discretion may
deem fair and equitable.
(f) Upon liquidation or termination of the High-Yield Bond Series,
Shareholders of a Class shall be entitled to a pro rata share of the
net assets of the High-Yield Bond Series attributable to such Class.
(g) At such time as shall be permitted under the Investment Company Act,
any applicable rules and regulations thereunder and the provisions of
any exemptive order applicable to the High-Yield Bond Series, as may
be determined by the Trustees and disclosed in the then current
prospectus of High-Yield Bond Series, shares of a particular Class may
be automatically converted into shares of another Class; provided,
however, that such conversion shall be subject to the continuing
availability of an opinion of counsel to the effect that such
conversion does not constitute a taxable event under federal income
tax law. The Trustees, in their sole discretion, may suspend any
conversion rights if such opinion is no longer available.
(h) High-Yield Bond Class C Shares shall vote together with all other
Shares of the High-Yield Bond Series from time to time outstanding,
except that the Trustees may provide that any Class of Shares shall
vote separately as a Class, or together with one or more other Class
of Shares including any future Class as to any matter when (i)
required by law, rule or exemptive order, (ii) they determine that
such matter affects only the interest of Shares of such Class or
Classes or affects the interests of Shares of such Class or Classes in
a manner different from that of the other Class or Classes or (iii)
they otherwise determine that to do so is necessary or desirable and
in the best interests of the Shareholders of such Class or Classes
under the circumstances.
(i) The net asset value of each Class of Shares of the High-Yield Bond
Series shall be determined on such days and at such time or times as
the Trustees shall determine. The method of determination of the net
asset value of a Class shall be determined by the Trustees and shall
be as set forth in the Prospectus.
(j) The Trustees may from time to time distribute ratably among the
shareholders of a Class of Shares of the High-Yield Bond Series such
proportionate share of the net profits, surplus (including paid-in
surplus), capital or assets held by the Trustees and attributable to
such Class as they may deem proper.
II. U.S. Government Securities Class C Shares.
(a) The additional class of Shares of the U.S. Government Securities
Series is to be designated "Class C Shares of the Seligman U.S.
Government Securities Series of Shares" (for purposes of this
instrument such shares being referred to as the "U.S. Government
Securities Class C Shares").
(b) The U.S. Government Securities Class C Shares are to enjoy all of the
rights and preferences of a Class of Shares of the Trust as are
contemplated by the
<PAGE>
Declaration, and otherwise to be entitled to all of the rights and
privileges of Shares of the U.S. Government Securities Series.
(c) The authorized number of U.S. Government Securities Class C Shares
shall be unlimited.
(d) All shares of the U.S. Government Securities Series that are currently
issued and outstanding shall continue to be designated "Class A Shares
of the Seligman U.S. Government Securities Series of Shares" (for
purposes of this instrument such Shares being referred to as the "U.S.
Government Securities Class A Shares") or "Class B Shares of the
Seligman U.S. Government Securities Series of Shares" (for purposes of
this instrument such Shares being referred to as the "U.S. Government
Securities Class B Shares") or "Class D Shares of the Seligman U.S.
Government Securities Series of Shares" (for purposes of this
instrument such Shares being referred to as the "U.S. Government
Securities Class D Shares").
(e) The assets belonging to each of the U.S. Government Securities Class A
Shares, U.S. Government Securities Class B Shares, U.S. Government
Securities Class C Shares and U.S. Government Securities Class D
Shares shall be charged with the liabilities of the U.S. Government
Securities Series in respect of such Class, and all expenses, costs,
charges, and reserves attributable to a Class. Any general
liabilities, expenses, costs, charges or reserves of U.S. Government
Securities Series that are not readily identifiable as belonging to
any Class in particular shall be allocated and charged by the Trustees
to the Classes in such manner and on such basis as the Trustees in
their sole discretion may deem fair and equitable.
(f) Upon liquidation or termination of the U.S. Government Securities
Series, Shareholders of a Class shall be entitled to a pro rata share
of the net assets of the U.S. Government Securities Series
attributable to such Class.
(g) At such time as shall be permitted under the Investment Company Act,
any applicable rules and regulations thereunder and the provisions of
any exemptive order applicable to the U.S. Government Securities
Series, as may be determined by the Trustees and disclosed in the then
current prospectus of U.S. Government Securities Series, shares of a
particular Class may be automatically converted into shares of another
Class; provided, however, that such conversion shall be subject to the
continuing availability of an opinion of counsel to the effect that
such conversion does not constitute a taxable event under federal
income tax law. The Trustees, in their sole discretion, may suspend
any conversion rights if such opinion is no longer available.
(h) U.S. Government Securities Class C Shares shall vote together with all
other Shares of the U.S. Government Securities Series from time to
time outstanding, except that the Trustees may provide that any Class
of Shares shall vote separately as a Class, or together with one or
more other Class of Shares including any future Class as to any matter
when (i) required by law, rule or exemptive order, (ii) they determine
that such matter affects only the interest of Shares of such Class or
Classes or affects the interests of Shares of such Class or Classes in
a manner
<PAGE>
different from that of the other Class or Classes or (iii) they
otherwise determine that to do so is necessary or desirable and in the
best interests of the Shareholders of such Class or Classes under the
circumstances.
(i) The net asset value of each Class of Shares of the U.S. Government
Securities Series shall be determined on such days and at such time or
times as the Trustees shall determine. The method of determination of
the net asset value of a Class shall be determined by the Trustees and
shall be as set forth in the Prospectus.
(j) The Trustees may from time to time distribute ratably among the
shareholders of a Class of Shares of the U.S. Government Securities
Series such proportionate share of the net profits, surplus (including
paid-in surplus), capital or assets held by the Trustees and
attributable to such Class as they may deem proper.
This instrument shall be effective upon its execution by the majority of
Trustees referred to above and shall have the status of, and shall be, an
amendment to the Declaration.
Capitalized terms not defined herein shall have the meanings attributed to
them in the Declaration.
IN WITNESS WHEREOF, each of the undersigned Trustees has set his signature
as of the date first above written.
____________________________________ ____________________________________
____________________________________ ____________________________________
____________________________________ ____________________________________
____________________________________ ____________________________________
____________________________________ ____________________________________
____________________________________ ____________________________________
SULLIVAN & CROMWELL
May 27, 1999
Seligman High Income Fund Series,
100 Park Avenue,
New York, N.Y. 10017.
Dear Sirs:
In connection with Post-Effective Amendment No.27 to the Registration
Statement on Form N-1A (File No. 2-93076) of Seligman High Income Fund Series, a
Massachusetts business trust (the "Fund"), which you expect to file under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to an
indefinite number of shares of beneficial interest, par value $0.001 per share,
of the class designated as Class C shares (the "Shares") of the series of the
Fund designated Seligman U.S. Government Securities Series and Seligman
High-Yield Bond Series (collectively, the "Series"), we, as your counsel, have
examined such trust records, certificates and other documents, and such
questions of law, as we have considered necessary or appropriate for the
purposes of this opinion.
Upon the basis of such examination, we advise you that, in our opinion, the
Fund is authorized to issue an unlimited number of Shares of each Series and,
when the Post-Effective Amendment referred to above has become effective under
the Securities Act and the Shares have been issued (a) for at least the par
value thereof in accordance with the Registration Statement referred to above,
and (b) in accordance with the authorization of the Board of Trustees, the
Shares will be duly and validly issued, fully paid and non-assessable.
The foregoing opinion is limited to the Federal laws of the United States
and the laws of the Commonwealth of Massachusetts, and we are expressing no
opinion as to the effect of the laws of any other jurisdiction. With respect to
all matters of Massachusetts law, we have relied upon the opinion, dated May 27,
1999 of Hale and Dorr LLP, and our opinion is subject to the same qualifications
and limitations with respect to such matters as are contained in such opinion of
Hale and Dorr LLP.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Post-Effective Amendment referred to above. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act.
Very truly yours,
SULLIVAN & CROMWELL
-2-
<PAGE>
Counsellors at Law
60 State Street, Boston, Massachusetts 02109
617-526-6000 o fax 617-526-5000
May 27, 1999
Seligman High Income Fund Series
One Bankers Trust Plaza
New York, New York 10006
Ladies and Gentlemen:
Seligman High Income Fund Series (the "Trust"), is a Massachusetts business
trust created under a Declaration of Trust dated, executed and delivered in
Boston, Massachusetts on July 25, 1984, as amended from time to time (as so
amended, the "Declaration of Trust"). The beneficial interests thereunder are
represented by transferable shares of beneficial interest, $.001 par value.
The Trustees have the powers set forth in the Declaration of Trust, subject
to the terms, provisions and conditions therein provided. Pursuant to Article
VI, Section 6.1 of the Declaration of Trust, the number of shares of beneficial
interest authorized to be issued under the Declaration of Trust is unlimited and
the Trustees are authorized to divide the shares into one or more series of
shares and one or more classes thereof as they deem necessary or desirable.
Pursuant to Article VI, Section 6.4 of the Declaration of Trust, the Trustees
are empowered in their discretion to issue shares of any series for such amount
and type of consideration, including cash or property, and on such terms as the
Trustees may deem best, all without action or approval of the shareholders.
Pursuant to Article VI, Section 6.9 of the Declaration of Trust, the
Trustees have established two separate series of shares designated "Seligman
High-Yield Bond Series" and "Seligman U.S. Government Securities Series"
(collectively, the "Series"). As of the date of this opinion the Trustees have
divided the shares of each Series into four classes designated Class A, Class B,
Class C and Class D.
The Trustees have voted to authorize the officers of the Trust to determine
the appropriate number of shares to be registered, to register with the
Securities and Exchange Commission, and to issue and sell to the public, such
shares.
Washington, DC Boston, MA London, UK*
HALE AND DORR LLP INCLUDES PROFESSIONAL CORPORATIONS
*BROBECK HALE AND DORR INTERNATIONAL (AN INDEPENDENT JOINT VENTURE LAW FIRM)
<PAGE>
We have examined the Declaration of Trust and By-Laws, each as amended from
time to time, of the Trust, resolutions of the Board of Trustees relating to the
authorization and issuance of shares of beneficial interest of the Trust, and
such other documents as we have deemed necessary or appropriate for the purposes
of this opinion, including, but not limited to, originals, or copies certified
or otherwise identified to our satisfaction, of such documents, Trust records
and other instruments. In our examination of the above documents, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals and the conformity to original documents of all
documents submitted to us as certified of photostatic copies.
For purposes of this opinion letter, we have not made an independent review
of the laws of any state or jurisdiction other than The Commonwealth of
Massachusetts and express no opinion with respect to the laws of any
jurisdiction other than the laws of The Commonwealth of Massachusetts. Further,
we express no opinion as to compliance with any state or federal securities
laws, including the securities laws of The Commonwealth of Massachusetts.
Our opinion below, as it relates to the non-assessability of the shares of
the Trust, is qualified to the extent that under Massachusetts law, shareholders
of a Massachusetts business trust may be held personally liable for the
obligations of the Trust. In this regard, however, please be advised that the
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Trust and requires notice of such disclaimer to be given in each contract or
instrument made or issued by the Trustees of the Trust. Also, the Declaration of
Trust provides for indemnification out of Trust property against all claims and
liabilities of any shareholder held personally liable for the obligations of the
Trust.
We are of the opinion that all necessary Trust action precedent to the
issuance of the shares of beneficial interest of the Trust has been duly taken,
and that all such shares may legally and validly be issued for among other
things, cash, and when sold will be, fully paid and non-assessable by the Trust
upon receipt by the Trust or its agent of consideration therefor in accordance
with terms described in the Trust's Declaration of Trust, subject to compliance
with the Securities Act of 1933, as amended, the Investment Company Act of 1940,
as amended, and the applicable state laws regulating the sale of securities.
We consent to your filing this opinion with the Securities and Exchange
Commission as an exhibit to any amendments to the Trust's registration
statement. Except as provided in this paragraph, this opinion may not be relied
upon by, or filed with, any other parties or for any other purpose.
Very truly yours,
/s/Hale and Dorr LLP
Hale and Dorr LLP
CONSENT OF INDEPENDENT AUDITORS
Seligman High Income Fund Series:
We consent to the use in Post-Effective Amendment No. 27 to Registration
Statement No. 2-93076 of our reports dated January 29, 1999, appearing in the
Annual Reports to Shareholders for the year ended December 31, 1998, which are
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 each of the Prospectuses and "General
Information" in the Statement of Additional Information, which are also included
in such Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
May 26, 1999
INVESTMENT LETTER
SELIGMAN HIGH INCOME FUND SERIES
Seligman High Income Fund Series (the "Trust"), an open-end diversified
management investment company, and the undersigned ("Purchaser"), intending to
be legally bound, hereby agree as follows:
1. The Trust hereby sells to Purchaser and Purchaser purchases 1 Class C share
of Beneficial Interest (par value $.001) of the Seligman High-Yield Bond
Series of the Trust (the "High-Yield Series") at a price equivalent to the
net asset value of one Class D share of the High-Yield Series as of the
close of business on May 27, 1999 and 1 Class C share of Beneficial
Interest (par value $.001) of the Seligman U.S. Government Securities
Series of the Trust (the "U.S. Government Securities Series") at a price
equivalent to the net asset value of one Class D share of the U.S.
Government Securities Series as of the close of business on May 27, 1999
(the "Shares"). The Trust hereby acknowledges receipt from the Purchaser of
funds in such amount in full payment for the Shares.
2. Purchaser represents and warrants to the Trust that the Shares are being
acquired for investment and not with a view to distribution thereof, and
that Purchaser has no present intention to redeem or dispose of the Shares.
IN WITNESS WHEREOF, the parties have executed this agreement as of the 28th
day of May, 1999 ("Purchase Date").
SELIGMAN HIGH INCOME FUND SERIES
By:______________________________
Name: Lawrence P. Vogel
Title: Vice President
J. & W. SELIGMAN & CO. INCORPORATED
By:______________________________
Name: Brian T. Zino
Title: President
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
As Amended and restated through June 1, 1999
Section 1. Seligman High-Yield Bond Series (the "Series"), a series of
Seligman High Income Fund Series (the "Trust") will pay fees to Seligman
Advisors, Inc., the principal underwriter of its shares (the "Distributor"), for
administration, shareholder services and distribution assistance for the Class
A, Class B, Class C and Class D shares of the Series. As a result, the Series is
adopting this Administration, Shareholder Services and Distribution Plan (the
"Plan") pursuant to Section 12(b) of the Investment Company Act of 1940, as
amended (the "Act") and Rule 12b-1 thereunder.
Section 2. Pursuant to this Plan, the Series may pay to the Distributor a
shareholder servicing fee of up to .25% on an annual basis of the average daily
net assets of the Series (payable quarterly with respect to Class A and monthly
with respect to Class B, Class C and Class D) and a distribution fee of .75% on
an annual basis, payable monthly, of the average daily net assets of the Series
attributable to Class B Shares and a distribution fee of up to .75% on an annual
basis, payable monthly, of the average daily net assets of the Series
attributable to Class C and Class D shares. Such fees will be used in their
entirety by the Distributor to make payments for administration, shareholder
services and distribution assistance, including, but not limited to (i)
compensation to securities dealers and other organizations (each, a "Service
Organization" and collectively, the "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 the 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 the Distributor's costs incurred in connection with its
marketing efforts with respect to shares of the Series. To the extent a Service
Organization provides administration, accounting and other shareholder services,
payment for which is not required to be made pursuant to a plan meeting the
requirements of Rule 12b-1, a portion of the fee paid by the Series shall be
deemed to include compensation for such services. The fees received from the
Series hereunder in respect of the Class A shares may not be used to pay any
interest expense, carrying charges or other financing costs, and fees received
hereunder may not be used to pay any allocation of overhead of the Distributor.
The fees of any particular class of the Series may not be used to subsidize the
sale of shares of any other class. The fees payable to Service Organizations
from time to time shall, within such limits, be determined by the Trustees of
the Trust.
Section 3. J. & W. Seligman & Co. Incorporated, investment manager to the
Series (the "Manager"), in its sole discretion, may make payments to the
Distributor for similar purposes. These payments will be made by the Manager
from its own resources, which may include the management fee that the Manager
receives from the Series.
Section 4. This Plan shall continue in effect through December 31 of each
year so long as such continuance is specifically approved at least annually by
vote of a majority of both
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(a) the Trustees of the Trust and (b) the Qualified Trustees, cast in person at
a meeting called for the purpose of voting on such approval.
Section 5. The Distributor shall provide to the Trust's Trustees, and the
Trustees shall review, at least quarterly, a written report of the amounts so
expended by the Series and the purposes for which such expenditures were made.
Section 6. This Plan may be terminated with respect to any class at any
time by vote of a majority of the Qualified Trustees, or by vote of a majority
of the outstanding voting securities of such class. If this Plan is terminated
in respect of a class, no amounts (other than amounts accrued but not yet paid)
would be owed by the Series to the Distributor with respect to such class.
Section 7. All agreements related to this Plan shall be in writing, and
shall be approved by vote of a majority of both (a) the Trustees of the Trust
and (b) the Qualified Trustees, cast in person at a meeting called for the
purpose of voting on such approval, provided, however, that the identity of a
particular Service Organization executing any such agreement may be ratified by
such a vote within 90 days of such execution. Any agreement related to this Plan
shall provide:
A. That such agreement may be terminated in respect of any class of the
Series at any time, without payment of any penalty, by vote of a
majority of the Qualified Trustees or by vote of a majority of the
outstanding voting securities of the class, on not more than 60 days'
written notice to any other party to the agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
Section 8. This Plan may not be amended to increase materially the amount
of fees permitted pursuant to Section 2 hereof without the approval of a
majority of the outstanding voting securities of the relevant class and no
material amendment to this Plan shall be approved other than by vote of a
majority of both (a) the Trustees of the Trust and (b) the Qualified Trustees,
cast in person at a meeting called for the purpose of voting on such approval.
This Plan shall not be amended to reduce the distribution fee payable to the
Distributor pursuant to Section 2 hereof in respect of Class B shares, unless
the shareholder servicing fee payable pursuant to Section 2 hereof for
compensation to Service Organizations for providing administration, accounting
and other shareholder services has been eliminated, provided, however that the
distribution fee in respect of Class B shares may be reduced without change to
the shareholder servicing fee, if and to the extent required in order to comply
with any applicable laws or regulations, including applicable rules of the
National Association of Securities Dealers, Inc. regulating maximum sales
charges.
Section 9. The Series is not obligated to pay any administration,
shareholder services or distribution expense in excess of the fee described in
Section 2 hereof, and, in the case of Class A shares, any expenses of
administration, shareholder services and distribution of Class A shares of the
Series accrued in one fiscal year of the Series may not be paid from
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<PAGE>
administration, shareholder services and distribution fees received from the
Series in respect of Class A shares in any other fiscal year.
Section 10. As used in this Plan, (a) the terms "assignment", "interested
person" and "vote of a majority of the outstanding voting securities" shall have
the respective meanings specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission and (b) the term "Qualified Trustees" shall mean the
Trustees of the Trust who are not "interested persons" of the Trust and have no
direct or indirect financial interest in the operation of this Plan or in any
agreement related to this Plan.
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ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
As Amended and restated through June 1, 1999
Section 1. Seligman U.S. Government Securities Series (the "Series"), a
series of Seligman High Income Fund Series (the "Trust") will pay fees to
Seligman Advisors, Inc., the principal underwriter of its shares (the
"Distributor"), for administration, shareholder services and distribution
assistance for the Class A, Class B, Class C and Class D shares of the Series.
As a result, the Series is adopting this Administration, Shareholder Services
and Distribution Plan (the "Plan pursuant to Section 12(b) of the Investment
Company Act of 1940, as amended (the "Act") and Rule 12b-1 thereunder.
Section 2. Pursuant to this Plan, the Series may pay to the Distributor a
shareholder servicing fee of up to .25% on an annual basis of the average daily
net assets of the Series (payable quarterly with respect to Class A and monthly
with respect to Class B, Class C and Class D) and a distribution fee of .75% on
an annual basis, payable monthly, of the average daily net assets of the Series
attributable to Class B Shares and a distribution fee of up to .75% on an annual
basis, payable monthly, of the average daily net assets of the Series
attributable to Class C and Class D shares. Such fees will be used in their
entirety by the Distributor to make payments for administration, shareholder
services and distribution assistance, including, but not limited to (i)
compensation to securities dealers and other organizations (each, a "Service
Organization" and collectively, the "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 the 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 the Distributor's costs incurred in connection with its
marketing efforts with respect to shares of the Series. To the extent a Service
Organization provides administration, accounting and other shareholder services,
payment for which is not required to be made pursuant to a plan meeting the
requirements of Rule 12b-1, a portion of the fee paid by the Series shall be
deemed to include compensation for such services. The fees received from the
Series hereunder in respect of the Class A shares may not be used to pay any
interest expense, carrying charges or other financing costs, and fees received
hereunder may not be used to pay any allocation of overhead of the Distributor.
The fees of any particular class of the Series may not be used to subsidize the
sale of shares of any other class. The fees payable to Service Organizations
from time to time shall, within such limits, be determined by the Trustees of
the Trust.
Section 3. J. & W. Seligman & Co. Incorporated, investment manager to the
Series (the "Manager"), in its sole discretion, may make payments to the
Distributor for similar purposes. These payments will be made by the Manager
from its own resources, which may include the management fee that the Manager
receives from the Series.
Section 4. This Plan shall continue in effect through December 31 of each
year so long as such continuance is specifically approved at least annually by
vote of a majority of both
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(a) the Trustees of the Trust and (b) the Qualified Trustees, cast in person at
a meeting called for the purpose of voting on such approval.
Section 5. The Distributor shall provide to the Trust's Trustees, and the
Trustees shall review, at least quarterly, a written report of the amounts so
expended by the Series and the purposes for which such expenditures were made.
Section 6. This Plan may be terminated with respect to any class at any
time by vote of a majority of the Qualified Trustees, or by vote of a majority
of the outstanding voting securities of such class. If this Plan is terminated
in respect of a class, no amounts (other than amounts accrued but not yet paid)
would be owed by the Series to the Distributor with respect to such class.
Section 7. All agreements related to this Plan shall be in writing, and
shall be approved by vote of a majority of both (a) the Trustees of the Trust
and (b) the Qualified Trustees, cast in person at a meeting called for the
purpose of voting on such approval, provided, however, that the identity of a
particular Service Organization executing any such agreement may be ratified by
such a vote within 90 days of such execution. Any agreement related to this Plan
shall provide:
A. That such agreement may be terminated in respect of any class of the
Series at any time, without payment of any penalty, by vote of a
majority of the Qualified Trustees or by vote of a majority of the
outstanding voting securities of the class, on not more than 60 days'
written notice to any other party to the agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
Section 8. This Plan may not be amended to increase materially the amount
of fees permitted pursuant to Section 2 hereof without the approval of a
majority of the outstanding voting securities of the relevant class of such
Series and no material amendment to this Plan shall be approved other than by
vote of a majority of both (a) the Trustees of the Trust and (b) the Qualified
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. This Plan shall not be amended to reduce the distribution fee payable
to the Distributor pursuant to Section 2 hereof in respect of Class B shares,
unless the shareholder servicing fee payable pursuant to Section 2 hereof for
compensation to Service Organizations for providing administration, accounting
and other shareholder services has been eliminated, provided, however that the
distribution fee in respect of Class B shares may be reduced without change to
the shareholder servicing fee, if and to the extent required in order to comply
with any applicable laws or regulations, including applicable rules of the
National Association of Securities Dealers, Inc. regulating maximum sales
charges.
Section 9. The Series is not obligated to pay any administration,
shareholder services or distribution expense in excess of the fee described in
Section 2 hereof, and, in the case of Class A shares, any expenses of
administration, shareholder services and distribution of Class A shares of the
Series accrued in one fiscal year of the Series may not be paid from
2
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administration, shareholder services and distribution fees received from the
Series in respect of Class A shares in any other fiscal year.
Section 10. As used in this Plan, (a) the terms "assignment", "interested
person" and "vote of a majority of the outstanding voting securities" shall have
the respective meanings specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission and (b) the term "Qualified Trustees" shall mean the
Trustees of the Trust who are not "interested persons" of the Trust and have no
direct or indirect financial interest in the operation of this Plan or in any
agreement related to this Plan.
3
