SELIGMAN
-----------
High-Yield
Bond Series
[GRAPHIC OMITTED]
Annual Report
December 31, 1999
[GRAPHIC OMITTED]
SEEKING TO
MAXIMIZE
CURRENT INCOME BY
INVESTING IN A
DIVERSIFIED
PORTFOLIO OF
HIGH-YIELDING
CORPORATE BONDS
[LOGO OMITTED}
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.
TIMES CHANGE...
Established in 1864, Seligman has a history of providing financial services
marked not by fanfare, but rather by a quiet and firm adherence to financial
prudence. While the world has changed dramatically in the 136 years since
Seligman first opened its doors, the firm has continued to offer its clients
high-quality investment solutions through changing times.
In the late 19th century, as the country grew, Seligman helped finance the
westward expansion of the railroads, the construction of the Panama Canal, and
the launching of urban transit systems. In the first part of the 20th century,
as America became an industrial power, the firm helped fund the growing capital
needs of the nascent automobile and steel industries.
With the formation of Tri-Continental Corporation in 1929 -- today, the nation's
largest diversified publicly-traded closed-end investment company -- Seligman
began shifting its emphasis from investment banking to investment management.
Despite the stock market crash and ensuing depression, Seligman was convinced of
the importance that investment companies could have in building wealth for
individual investors and began managing its first mutual fund in 1930.
In the decades that followed, Seligman has continued to offer forward-looking
investment solutions, including equity funds that specialize in small companies,
technology, or international securities, and bond funds that focus on high-yield
issuers, US government bonds, or municipal securities.
[PHOTO OMITTED]
JAMES, JESSE, AND JOSEPH SELIGMAN, 1870
...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 in the new millennium.
TABLE OF CONTENTS
To the Shareholders .................................. 1
Interview With Your Portfolio Manager ................ 2
Performance Overview ................................. 4
Portfolio Overview ................................... 6
Portfolio of Investments ............................. 8
Statement of Assets and Liabilities .................. 13
Statement of Operations .............................. 14
Statements of Changes in Net Assets .................. 15
Notes to Financial Statements ........................ 16
Financial Highlights ................................. 19
Report of Independent Auditors ....................... 21
Trustees ............................................. 22
Executive Officers AND For More Information .......... 23
Glossary of Financial Terms .......................... 24
<PAGE>
TO THE SHAREHOLDERS
For the fiscal year ended December 31, 1999, Seligman High-Yield Bond Series
posted a disappointing total return of 0.09% based on the net asset value of
Class A shares. At the same time, the DLJ High Yield Market Index returned
3.60%, the Merrill Lynch High Yield Master Index returned 1.57%, and the Lipper
High Current Yield Average returned 4.50%. The Fund's underperformance relative
to its benchmarks was primarily the result of some underperforming securities,
notably in health care and telecommunications, which posted poor operating
results during the first half of 1999. In addition, the Fund has avoided
defaulted and distressed securities, and emerging market bonds, all of which
outperformed during the fiscal year.
The past fiscal year was one of the most difficult ever for fixed-income
securities. During this time, the Federal Reserve Board increased the federal
funds rate three times in an attempt to slow the US economy. These increases
reversed all the Federal Reserve Board's 1998 actions. In 1998, the Federal
Reserve Board eased monetary policy in response to the worldwide economic
crisis, which many feared could disrupt US economic growth, possibly even
pulling the US into a recession. Not only did the US economy avoid recession, it
continued to expand at a remarkable pace, surprising most economic commentators.
By the beginning of 1999, the world was recovering strongly and the US entered
its ninth year of uninterrupted expansion. This positive international and
domestic economic environment caused the Federal Reserve Board to quickly resume
its vigilance regarding inflation. As early as May 1999, the Federal Reserve
Board announced its bias toward a more restrictive monetary policy, and in June
it voted to raise the federal funds rate 25 basis points -- the first of three
identical hikes which would leave this key rate 75 basis points higher by year
end. The 30-year Treasury bond yield also moved significantly higher from 5.08%
on December 31, 1998, to 6.48% on December 31, 1999. Once so far in 2000, the
Federal Reserve Board has increased the federal funds rate by an additional 25
basis points.
While the rising-rate environment was the single most important factor behind
the Fund's lackluster returns, the high-yield market did not respond to
increasing yields as negatively as many other types of bonds. Nevertheless, the
high-yield market continued to suffer from reduced liquidity. Even after the
global financial crisis subsided, the lack of liquidity in the high-yield market
persisted. In addition, the supply of high-yield bonds was well in excess of
demand for these securities, causing prices to fall as a result.
We believe that yields are likely to stabilize in 2000 which may allow bonds to
post positive total returns. While the Federal Reserve Board is likely to remain
diligent on attacking any inflationary tendencies, markets have already priced
in some future rate increases by the Federal Reserve Board, and it now appears
that long-term bond yields are thus unlikely to move significantly higher. In
addition, the steadily improving international economy and the continued
strength of the US economy bodes well for the improving financial situations of
high-yield issuers.
Thank you for your continued support of Seligman High-Yield Bond Series. A
discussion with your Fund's Portfolio Manager, as well as a performance overview
and financial statements, including a portfolio of investments, follows this
letter. We look forward to serving your investment needs for many years to come.
By order of the Trustees,
/s/ William C. Morris
- ---------------------
William C. Morris
Chairman
/s/Brian T. Zino
----------------
Brian T. Zino
President
February 11, 2000
1
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGER,
DANIEL J. CHARLESTON
Q: HOW DID SELIGMAN HIGH-YIELD BOND SERIES PERFORM IN 1999?
A: Seligman High-Yield Bond Series posted a total return of 0.09%, based on the
net asset value of Class A shares, for the year ended December 31, 1999.
During the same period, the Lipper High Current Yield Average posted a total
return of 4.50%, the DLJ High Yield Market Index posted a total return of
3.60%, and the Merrill Lynch High Yield Master Index posted a total return
of 1.57%.
During the period under review, some of the Fund's holdings, notably in the
health care and telecom sectors, posted poor results during the first half
of 1999, placing a drag on performance. In addition, the Fund's relatively
modest returns can be attributed to areas of omission. We have applied a
consistent investment philosophy over the past decade; that is, we prefer
US-based, non-cyclical bond issuers. Further, we avoid defaulted and
distressed securities. During 1999, however, emerging market bonds, deep
cyclical issuers and distressed securities significantly outperformed our
core US-based, non-cyclicals. Going forward, we will stick to our philosophy
since it has produced above-average returns over the past 10 years.
Q: WHAT ECONOMIC FACTORS IMPACTED FUND PERFORMANCE?
A: All fixed-income securities, including those held by Seligman High-Yield
Bond Series, faced the formidable headwind of rising interest rates during
the past fiscal year. This difficult operating environment was the single
biggest factor affecting Fund performance during this time.
Throughout 1999, the Federal Reserve Board tightened monetary policy in an
effort to slow the economy. This, combined with a rapidly recovering world
economy, pushed interest rates steadily higher across the yield curve and
across credit qualities. The 30-year US Treasury bond yield rose by nearly
140 basis points over the course of the year.
As yields moved higher, bond prices fell accordingly. The past fiscal year
was thus one of the most difficult ever for the bond markets. However,
high-yield bonds weathered the overall price weakness better than most
fixed-income assets because of the sector's lower sensitivity to
interest-rate fluctuations and higher current coupons.
[PHOTO OMITTED]
HIGH-YIELD TEAM: (STANDING FROM LEFT) JAMES DIDDEN, JEANNE CRUZ, TIMOTHY FINN,
DEBORAH JOSEPH (ADMINISTRATIVE ASSISTANT), (SEATED) DANIEL CHARLESTON (PORTFOLIO
MANAGER), BRIAN HESSEL
- --------------------------------------------------------------------------------
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>
INTERVIEW WITH YOUR PORTFOLIO MANAGER,
DANIEL J. CHARLESTON
Q: WHAT MARKET FACTORS IMPACTED PERFORMANCE?
A: The high-yield market, while withstanding interest rate increases better
than many other fixed-income securities, experienced some adverse market
conditions unique to high-yield bonds. Since the 1998 global financial
crisis, the high-yield market has suffered from reduced liquidity. This has
widened the yield spread between high-yield bonds and Treasuries with
similar maturities. In addition, during 1999, new supply of high-yield bonds
outpaced demand significantly. This imbalance drove prices for existing
high-yield issues lower.
Q: WHAT WAS YOUR INVESTMENT STRATEGY DURING THE ONE-YEAR PERIOD UNDER REVIEW?
A: Throughout fiscal year 1999, we began to seek more opportunities in
high-growth areas of technology such as wireless communications and
telecommunications infrastructure companies. In particular, we have been
optimistic about communications tower companies, fiber optic cable
companies, Internet companies, and European telecom companies.
Within the next three years, the growth rate for fiber cable deployment and
bandwidth demand is expected to grow by 30% per year. This increase in
demand is being driven by the growing use of the Internet. Your Fund is
currently well positioned to capitalize on the increasing demand for data,
video, and telephony services.
We reduced the Fund's exposure to health care, since this sector continues
to struggle because of changes in Medicare reimbursement programs. We also
reduced the Fund's exposure to economically sensitive sectors since these
areas are more at risk if interest rates head higher.
Overall, the Fund remains committed to a disciplined investment process
which emphasizes examining company fundamentals to assess which companies
are capable of undertaking leverage. The Fund's portfolio management team
seeks to identify companies whose underlying operations and cashflows have
the potential to improve over time.
Q: WHAT IS YOUR OUTLOOK?
A: We believe that the outlook for the high-yield market and for the Fund is
positive. The interest-rate environment during 1999 was extraordinarily
unfavorable for fixed-income securities, and we do not believe that this
will continue in 2000. The markets are already anticipating further Federal
Reserve Board rate increases. Indeed, the Federal Reserve Board has already
increased rates once so far in 2000, for an additional 25 basis points. As
interest rates stabilize and global economies continue to expand, we believe
that the prices for high-yield bonds in general will begin to move higher.
We are particularly optimistic regarding the prospects for the securities in
the Fund's portfolio. Throughout 2000, we expect to continue to seek
opportunities in the high-growth areas of wireless communications
telecommunications infrastructure, Internet, cable, and media-related
sectors.
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,
1999, to a $10,000 investment made in the DLJHigh Yield Market Index, the Lipper
High Current Yield Average, 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 assume that all distributions within the
period are invested in additional shares. The performances of Seligman
High-Yield Bond Series Class B, Class C, 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 DLJ High Yield Market Index, the Lipper High Current Yield
Average, and the Merrill High Yield Master Index exclude the effect of fees
and/or sales charges.
Seligman High-Yield Bond Series (the "Fund") will no longer be compared to
the Merrill Lynch High Yield Master Index, which reflects the performance of
funds that invest in corporate high-yield bonds, after December 31, 1999.
Instead, the Fund will be compared to the DLJ High Yield Market Index, which
reflects the performance of funds that invest in similar bonds. The Manager,
however, believes that the latter is a better representation of the Fund's
portfolio. Therefore, the Fund will continue to be compared to the DLJ High
Yield Market Index and the Lipper High Current Yield Average.
[Figures below represents chart in its printed form]
Date With Load Without Load Lipper ML Hy DLJ Hy
12/31/89 9524 10000 10000 10000 10000
9169 9628 9617 9792 9742
9485 9959 10029 10214 10301
9079 9533 9326 9594 9370
12/31/90 8831 9272 9020 9565 9362
9910 10406 10311 10869 11095
10454 10977 11024 11539 11918
11124 11681 11765 12217 12830
12/31/91 11542 12119 12362 12873 13458
12598 13228 13387 13845 14560
12964 13612 13813 14345 14917
13674 14357 14382 14999 15456
12/31/92 13859 14552 14542 15212 15700
14829 15571 15527 16157 16638
15454 16227 16247 16801 17491
15727 16513 16551 17228 17885
12/31/93 16518 17344 17306 17826 18524
16419 17240 17144 17496 18192
16403 17223 16924 17293 18139
16477 17301 16889 17528 18217
12/31/94 16648 17480 16659 17618 18147
17514 18389 17402 18680 19215
18597 19527 18329 19864 20360
19457 20429 18911 20444 21013
12/31/95 20096 21101 19476 21123 21720
20900 21945 20030 21431 22190
21365 22433 20428 21725 22603
22300 23415 21395 22572 23629
12/31/96 23075 24229 22176 23459 24547
23310 24044 22342 23706 24759
24322 25538 23533 24832 25904
25813 27104 24788 25803 27083
12/31/97 26365 27684 25136 26469 27547
27556 28934 26216 27207 28514
27855 29248 26318 27664 28694
25969 27268 24388 26674 26889
12/31/98 26713 28049 25088 27439 27701
27103 28458 25799 27736 28309
26880 28224 25974 27922 28574
26129 27436 25572 27573 28099
12/31/99 26736 28073 26217 27870 28698
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, Class C, and Class 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, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-------------------------------------------------------
CLASS C CLASS B CLASS D
SINCE SINCE SINCE
SIX INCEPTION ONE FIVE 10 INCEPTION INCEPTION
**MONTHS* 5/27/99* YEAR YEARS YEARS 4/22/96 9/21/93
--------- ------------ ----- ------ ------ ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge (5.23)% n/a (4.71)% 8.86% 10.33% n/a n/a
Without Sales Charge (0.53) n/a 0.09 9.94 10.87 n/a n/a
CLASS B**
With CDSC+ (5.64) n/a (5.20) n/a n/a 5.24% n/a
Without CDSC (0.94) n/a (0.69) n/a n/a 5.86 n/a
CLASS C**
With Sales Charge and CDSC (2.75) (3.63)% n/a n/a n/a n/a n/a
Without Sales Charge and CDSC (0.78) (1.71) n/a n/a n/a n/a n/a
CLASS D**
With 1% CDSC (1.72) n/a (1.44) n/a n/a n/a n/a
Without CDSC (0.78) n/a (0.54) 9.12 n/a n/a 7.90%
DLJ HIGH YIELD MARKET INDEX*** 0.43 0.52(0) 3.60 9.60 11.12 7.08++ 7.86+++
LIPPER HIGH CURRENT YIELD AVERAGE*** 0.94 0.94(0) 4.50 9.49 10.12 7.35++ 7.63+++
MERRILL HIGH YIELD MASTER INDEX*** (0.18) (0.37)(0) 1.57 9.61 10.79 7.42++ 8.00+++
NET ASSET VALUE
<CAPTION>
DECEMBER 31, 1999 JUNE 30, 1999 DECEMBER 31, 1998 RATINGS#
------------------- ------------- ------------------ DECEMBER 31, 1999
<S> <C> <C> <C> <C> <C> <C>
CLASS A $6.26 $6.65 $6.95 MOODY'S S&P
CLASS B 6.26 6.65 6.95 --------- -----
CLASS C 6.27 6.65 n/a BA/BB 2.2% 4.2%
CLASS D 6.27 6.65 6.95 B/B 79.1 77.8
DIVIDEND, YIELD, AND CAPITAL LOSS INFORMATION Caa/CCC 14.8 14.9
FOR THE PERIOD ENDED DECEMBER 31, 1999 Ca/CC -- 1.0
Non-rated 3.9 2.1
<CAPTION>
CAPITAL
DIVIDENDS(00) YIELD(000) LOSS
------------- ---------- --------
<S> <C> <C> <C> <C> <C>
CLASS A $0.6968 10.89% REALIZED $(0.390) WEIGHTED AVERAGE
CLASS B 0.6450 10.66 UNREALIZED (0.651)ss. MATURITY 7.76 years
CLASS C 0.3852 10.53
CLASS D 0.6450 10.65
</TABLE>
The rates of return will vary and the principal value of an investment will
fluctuate. Shares, if redeemed, may be worth more or less than their original
cost. Past performance is not indicative of future investment results.
- ---------------
* Returns for periods of less than one year are not annualized.
** Return figures reflect any change in price per share and assume the
investment of dividend and capital gain distributions. Returns for Class A
shares are calculated with and without the effect of the initial 4.75%
maximum sales charge. Returns for Class B shares are calculated with and
without the effect of the maximum 5% contingent deferred sales charge
("CDSC"), charged on redemptions made within one year of the date of
purchase, declining to 1% in the sixth year and 0% thereafter. Returns for
Class C shares are calculated with and without the effect of the initial 1%
maximum sales charge and the 1% CDSC that is charged on redemptions made
within 18 months of the date of purchase. Returns for Class D shares are
calculated with and without the effect of the 1% CDSC, charged on
redemptions made within one year of the date of purchase.
*** The DLJ High Yield Market Index, Merrill High Yield Master Index and the
Lipper High Current Yield Average 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 Average 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.
0 From May 31, 1999.
00 Represents per share amount paid or declared during the year ended December
31, 1999 (during the period May 27, 1999, to December 31, 1999 for Class C
shares).
000 Current yield, representing the annualized yield for the 30-day period
ended December 31, 1999, has been computed in accordance with SEC
regulations and will vary.
# Percentages based on current market values of long-term holdings.
ss Represents the per share amount of net unrealized depreciation of portfolio
securities as of December 31, 1999.
5
<PAGE>
PORTFOLIO OVERVIEW
DIVERSIFICATION OF NET ASSETS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
PERCENT OF NET ASSETS
DECEMBER 31,
---------------------
ISSUES COST VALUE 1999 1998
-------- ------------- ------------- --------- -------
<S> <C> <C> <C> <C> <C>
LONG-TERM HOLDINGS:
Advertising ......................................... 1 $ 8,729,719 $ 8,673,500 0.3 0.4
Aerospace ........................................... 1 4,350,000 3,289,688 0.1 --
Automotive and Related .............................. 1 15,202,788 10,751,250 0.4 0.2
Broadcasting ........................................ 7 81,257,904 103,398,612 3.8 4.0
Business Services ................................... 5 54,746,325 45,769,625 1.7 1.3
Cable Systems and Satellite Video ................... 13 190,971,536 189,578,198 7.0 10.6
Cellular ............................................ 2 29,174,462 30,583,328 1.1 0.6
Chemicals ........................................... 4 83,792,703 78,039,500 2.9 1.6
Communications Infrastructure ....................... 4 89,451,909 84,238,637 3.2 2.1
Computer and Related Services ....................... -- -- -- -- 1.8
Consumer Products ................................... 5 69,683,819 55,246,000 2.0 3.9
Containers .......................................... 2 24,584,906 23,123,450 0.9 1.3
Contract Manufacturing and Circuit Boards ........... 4 81,055,629 51,058,165 1.9 2.9
Energy .............................................. 3 13,241,179 8,955,368 0.3 0.5
Environmental Services .............................. 1 36,591,359 33,502,500 1.2 --
Equipment ........................................... 3 60,903,556 56,062,500 2.1 1.8
Financial Services .................................. 4 70,258,960 53,836,500 2.0 1.9
Food ................................................ 4 50,235,419 46,790,625 1.7 4.0
Gaming/Hotel ........................................ 7 163,512,047 143,613,813 5.3 7.5
Health Care/Medical Products ........................ 7 151,070,162 116,192,760 4.3 6.3
Industrial/Manufacturing ............................ 7 108,807,758 96,547,433 3.6 3.2
Internet and Related ................................ 12 155,899,787 158,195,272 5.9 2.8
Leisure ............................................. 1 27,221,931 25,212,000 0.9 1.8
Metals .............................................. 2 36,833,590 14,496,000 0.5 1.0
Mobile Satellite Services ........................... 4 85,221,353 68,951,875 2.6 1.1
Paging .............................................. 4 167,204,040 81,921,875 3.0 5.3
Paper and Packaging ................................. 1 15,673,340 9,701,625 0.4 0.6
Printing and Publishing ............................. 13 291,928,319 273,204,075 10.1 6.1
Retailing ........................................... 5 54,073,789 48,065,675 1.8 2.5
Semiconductors ...................................... 5 125,616,007 125,039,749 4.6 1.6
Supermarkets ........................................ -- -- -- -- 2.0
Telecommunications .................................. 22 363,971,322 361,963,379 13.3 6.1
Textiles ............................................ 1 6,834,924 6,891,375 0.2 0.4
Theaters ............................................ -- -- -- -- 0.6
Transportation ...................................... 1 26,221,750 26,035,000 1.0 0.8
Utilities ........................................... 1 14,080,913 14,191,879 0.5 0.4
Wireless Telephony .................................. 8 169,064,482 192,908,237 7.2 5.4
--- ------------- -------------- ----- -----
165 2,927,467,687 2,646,029,468 97.8 94.4
SHORT-TERM HOLDINGS AND
OTHER ASSETS LESS LIABILITIES ....................... 1 59,817,469 59,817,469 2.2 5.6
--- -------------- -------------- ----- -----
NET ASSETS ............................................. 166 $2,987,285,156 $2,705,846,937 100.0 100.0
=== ============== ============== ===== =====
</TABLE>
LARGEST INDUSTRIES
DECEMBER 31, 1999
[BAR CHART OMITTED]
Telecommunications $361,963,379
Printing and Publishing $273,204,075
Wireless Telephony $192,908,237
Cable Systems and Satellite Video $189,578,198
Internet and Related $158,195,272
6
<PAGE>
PORTFOLIO OVERVIEW
LARGEST PORTFOLIO CHANGES
DURING PAST SIX MONTHS
PRINCIPAL AMOUNT
-----------------------------
HOLDINGS
ADDITIONS INCREASE 12/31/99
- ------------- ------------ ------------
CORPORATE BONDS:
Allied Waste North America
10%, 8/1/2009 ....................... $ 37,225,000 $ 37,225,000
Global Crossing Holding
9.50%, 11/15/2009 ................... 26,750,000 26,750,000
GlobeNet Communication
Group 13%, 7/15/2007 ................ 18,500,000 18,500,000
Metromedia Fiber Network
10%, 12/15/2009 ..................... 8,500,000 8,500,000
Nextel Communications
9.375%, 11/15/2009 .................. 8,700,000 8,700,000
NextLink Communications
10.50%, 12/1/2009 ................... 7,600,000 7,600,000
PSINet 10.50%, 12/1/2006 ............... 12,000,000 12,000,000
PSINet 11%, 8/1/2009 ................... 20,000,000 20,000,000
TDL Infomedia Holdings 0%
(15.50%), 10/15/2010 ................ 55,350,000 55,350,000
Worldwide Fiber 12%,
8/1/2009 ............................ 32,750,000 32,750,000
PRINCIPAL AMOUNT
-----------------------------
HOLDINGS
REDUCTIONS DECREASE 12/31/99
- ------------- ------------ ------------
CORPORATE BONDS:
Alliance Imaging 9.625%,
12/15/2005 .......................... $ 14,850,000 --
AmeriServe Food Distributors
10.125%, 7/15/2007 .................. 30,225,000 --
Echostar DBS 9.375%,
2/1/2009 ............................ 12,500,000 --
Intermedia Capital
Partners IV 11.25%,
8/1/2006 ............................ 26,975,000 --
Mobile Telecommunication
Technologies 13.50%,
12/15/2002 .......................... 23,075,000 --
Premier Parks 9.25%,
4/1/2006 ............................ 12,475,000 --
SFX Broadcasting 10.75%,
5/15/2006 ........................... 11,225,000 --
Unisys 11.75%,
10/15/2004 .......................... 18,550,000 --
Viasystems 9.75%,
6/1/2007 ............................ 20,390,000 $ 34,250,000
COMMON STOCKS:
Price Communications 603,215 shs. 1,150,000 shs.(1)
Largest portfolio changes from the previous period to the current period are
based on cost of purchases and proceeds from sales of securities.
- ----------
(1) Includes 83,486 shares received as a result of a 5% stock dividend.
LARGEST PORTFOLIO HOLDINGS
DECEMBER 31, 1999
SECURITY VALUE
- ----------- ------------
Trump Atlantic City Funding
11.25%, 5/1/2006 ........................................... $ 52,628,625
Advanced Micro Devices 11%,
8/1/2003 ................................................... 49,999,687
NEXTLINK Communications
12.50%, 4/15/2006 .......................................... 42,217,500
Price Communications Wireless
11.75%, 7/15/2007 .......................................... 42,031,575
Pinnacle Holdings 0% (10%),
3/15/2008 .................................................. 41,151,000
Amkor Technology 10.50%,
5/1/2009 ................................................... 37,250,000
Williams Scotsman 9.875%,
6/1/2007 ................................................... 35,454,100
Worldwide Fiber 12%,
8/1/2009 ................................................... 33,896,250
Allied Waste North America
10%, 8/1/2009 .............................................. 33,502,500
Golden Sky Systems 12.375%,
8/1/2006 ................................................... 33,357,250
7
<PAGE>
Portfolio of Investments
DECEMBER 31, 1999
PRINCIPAL
AMOUNT VALUE
------------ ------------
CORPORATE BONDS 86.1%
ADVERTISING 0.3%
Adams Outdoor Advertising
10.75%, due 3/15/2006 $ 8,300,000 $ 8,673,500
------------
AEROSPACE 0.1%
Condor Systems 11.875%,
due 5/1/2009* 4,350,000 3,289,688
------------
AUTOMOTIVE AND
RELATED 0.4%
Diamond Triumph Automotive
9.25%, due 4/1/2008* 15,250,000 10,751,250
------------
BROADCASTING 1.5%
AMFM Operating 12.625%,
due 10/31/2006 4,678,900 5,310,552
Capstar Broadcasting 0%
(12.75%+), due 2/1/2009 25,250,000 22,598,750
Cumulus Media 10.375%,
due 7/1/2008 11,125,000 11,625,625
------------
39,534,927
------------
BUSINESS SERVICES 1.7%
AKI 10.50%, due 7/1/2008 6,150,000 5,504,250
Iron Age 9.875%,
due 5/1/2008 21,850,000 16,278,250
Iron Age Holding 0%
(12.125%+), due 5/1/2009 6,550,000 1,670,250
Muzak 9.875%,
due 3/15/2009 15,125,000 14,595,625
Pierce Leahy 11.125%,
due 7/15/2006 7,250,000 7,721,250
------------
45,769,625
------------
CABLE SYSTEMS AND
SATELLITE VIDEO 6.0%
Avalon Cable Holdings 0%
(11.875%+), due 12/1/2008 14,200,000 9,336,500
Charter Communications
Southeast Holdings 0%
(9.92%+), due 4/1/2011 43,500,000 25,719,375
GCI 9.75%, due 8/1/2007 21,250,000 19,868,750
Golden Sky Systems 12.375%,
due 8/1/2006 31,175,000 33,357,250
Northland Cable Television
10.25%, due 11/15/2007 14,825,000 14,936,188
Pegasus Communications
9.75%, due 12/1/2006 8,275,000 8,399,125
Pegasus Communications
12.50%, due 8/1/2007* 19,250,000 21,078,750
Rogers Cablesystems 11%,
due 12/1/2015 15,000,000 16,575,000
United Pan-Europe
Communications
(Netherlands)
10.875%, due 11/1/2007* 6,000,000 6,120,000
United Pan-Europe
Communications
(Netherlands)
11.25%, due 11/1/2009* 7,500,000 7,734,375
------------
163,125,313
------------
CHEMICALS 2.9%
Koppers Industry 9.875%,
due 12/1/2007 20,875,000 19,100,625
Lyondell Chemical (Series B)
9.875%, due 5/1/2007 10,000,000 10,250,000
Lyondell Chemical 10.875%,
due 5/1/2009 18,825,000 19,483,875
Texas Petrochemicals
11.125%, due 7/1/2006 33,000,000 29,205,000
------------
78,039,500
------------
COMMUNICATIONS
INFRASTRUCTURE 2.4%
Crown Castle International
0% (10.625%+),
due 11/15/2007 12,500,000 9,453,125
Pinnacle Holdings 0%
(10%+), due 3/15/2008 62,350,000 41,151,000
SpectraSite Holdings 0%
(11.25%+), due 4/15/2009 25,000,000 13,437,500
------------
64,041,625
------------
CONSUMER PRODUCTS 2.0%
Anchor Advanced Products
11.75%, due 4/1/2004 20,875,000 17,221,875
Diamond Brand Operating
10.125%, due 4/15/2008 16,700,000 12,942,500
French Fragrances (Series B)
10.375%, due 5/15/2007 11,250,000 11,081,250
Moll Industries 10.50%, due
7/1/2008 7,950,000 3,219,750
United Industries 9.875%,
due 4/1/2009 11,750,000 10,780,625
------------
55,246,000
------------
CONTAINERS 0.9%
BPC Holding 13.25%,
due 6/15/2006 16,580,000 15,999,700
US Can 10.125%,
due 10/15/2006 6,950,000 7,123,750
------------
23,123,450
------------
8
<PAGE>
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999 PRINCIPAL
AMOUNT VALUE
------------ ------------
CONTRACT MANUFACTURING
AND CIRCUIT BOARDS 1.7%
Hadco 9.50%, due 6/15/2008 $ 16,750,000 $ 16,289,375
MCMS 9.75%, due 3/1/2008++ 21,300,000 10,756,500
Viasystems 9.75%, due 6/1/2007 34,250,000 18,323,750
------------
45,369,625
------------
ENERGY 0.3%
Abraxas Petroleum 11.50%,
due 11/1/2004 8,925,000 8,166,375
------------
ENVIRONMENTAL
SERVICES 1.2%
Allied Waste North America
10%, due 8/1/2009* 37,225,000 33,502,500
------------
EQUIPMENT 2.1%
Neff 10.25%, due 6/1/2008 14,010,000 13,519,650
Universal Compression
Holdings 0% (11.375%+),
due 2/15/2009 13,250,000 7,088,750
Williams Scotsman 9.875%,
due 6/1/2007 36,740,000 35,454,100
------------
56,062,500
------------
FINANCIAL SERVICES 2.0%
AMRESCO 10%,
due 3/15/2004 17,000,000 10,795,000
Dollar Financial Group
10.875%, due 11/15/2006 22,750,000 22,863,750
Ocwen Capital Trust I
10.875%, due 8/1/2027 16,700,000 10,771,500
Veritas Capital Trust 10%,
due 1/1/2028 12,500,000 9,406,250
------------
53,836,500
------------
FOOD 1.7%
AFC Enterprises 10.25%,
due 5/15/2007 14,200,000 14,359,750
AmeriKing 10.75%,
due 12/1/2006 13,750,000 12,718,750
Carrols 9.50%, due 12/1/2008 8,975,000 8,212,125
Packaged Ice 9.75%,
due 2/1/2005 12,500,000 11,500,000
------------
46,790,625
------------
GAMING/HOTEL 5.3%
Alliance Gaming 10%,
due 8/1/2007 8,500,000 4,972,500
Ameristar Casinos 10.50%,
due 8/1/2004 26,125,000 26,647,500
Casino Magic of Louisiana
13%, due 8/15/2003 6,100,000 6,915,875
Hollywood Casino
11.25%, due 5/1/2007 16,250,000 17,062,500
Hollywood Casino
13%, due 8/1/2006* 2,185,000 2,348,875
Trump Atlantic City Funding
11.25%, due 5/1/2006 64,575,000 52,628,625
Trump Hotels & Casino
Resorts Funding 15.50%,
due 6/15/2005 39,925,000 33,037,938
------------
143,613,813
------------
HEALTH CARE/
MEDICAL PRODUCTS 4.0%
ALARIS Medical 9.75%,
due 12/1/2006 27,100,000 23,577,000
ALARIS Medical 0%
(11.125%+), due 8/1/2008 21,300,000 8,866,125
Dade International 11.125%,
due 5/1/2006 27,300,000 26,754,000
Everest Healthcare Services
9.75%, due 5/1/2008 17,400,000 16,443,000
Global Health Sciences 11%,
due 5/1/2008 34,275,000 21,421,875
Paracelsus Healthcare 10%,
due 8/15/2006 21,000,000 11,655,000
------------
108,717,000
------------
INDUSTRIAL/
MANUFACTURING 3.3%
Airxcel 11%, due 11/15/2007 23,775,000 21,873,000
Alliance Laundry System
9.625%, due 5/1/2008 17,825,000 15,240,375
Coyne International Enterprises
11.25%, due 6/1/2008 13,800,000 12,420,000
Day International Group
9.50%, due 3/15/2008++ 17,750,000 14,910,000
Great Lakes Acquisition 0%
(13.125%+), due 5/15/2009 6,350,000 3,460,750
Great Lakes Carbon 10.25%,
due 5/15/2008 22,000,000 21,010,000
------------
88,914,125
------------
INTERNET AND RELATED 5.7%
Exodus Communications
11.25%, due 7/1/2008 25,695,000 26,658,562
Exodus Communications
10.75%, due 12/15/2009* 5,425,000 5,547,062
PSINet 10%, due 2/15/2005 20,000,000 19,875,000
PSINet 10.50%,
due 12/1/2006* 12,000,000 12,150,000
PSINet 11.50%,
due 11/1/2008 8,500,000 8,925,000
PSINet 11%, due 8/1/2009 20,000,000 20,700,000
9
<PAGE>
Portfolio of Investments
DECEMBER 31, 1999
PRINCIPAL
AMOUNT VALUE
------------ ------------
INTERNET AND RELATED (CONTINUED)
Splitrock Services 11.75%,
due 7/15/2008 $ 8,250,000 $ 7,755,000
Verio 13.50%, due 6/15/2004 23,650,000 26,074,125
Verio 10.375%, due 4/1/2005 10,000,000 10,250,000
Verio 11.25%, due 12/1/2008 12,500,000 13,187,500
Verio 10.625%,
due 11/15/2009* 2,700,000 2,781,000
------------
153,903,249
------------
LEISURE 0.9%
Affinity Group Holding 11%,
due 4/1/2007 26,400,000 25,212,000
------------
METALS 0.5%
Renco Metals 11.50%,
due 7/1/2003 16,050,000 13,562,250
Royal Oak Mines 12.75%,
due 8/15/20060 20,750,000 933,750
------------
14,496,000
------------
MOBILE SATELLITE
SERVICES 2.6%
GlobalStar 11.25%,
due 6/15/2004 41,525,000 28,652,250
GlobalStar 10.75%,
due 11/1/2004 22,025,000 14,866,875
Loral Space &
Communications 9.50%,
due 1/15/2006 8,175,000 7,398,375
ORBCOMM Global 14%,
due 8/15/2004 24,875,000 18,034,375
------------
68,951,875
------------
PAGING 3.0%
Metrocall 9.75%,
due 11/1/2007 32,000,000 19,040,000
Metrocall 11%,
due 9/15/2008 39,925,000 24,154,625
Paging Network 10%,
due 10/15/2008 75,550,000 22,287,250
ProNet 11.875%,
due 6/15/2005 24,000,000 16,440,000
------------
81,921,875
------------
PAPER AND PACKAGING 0.4%
Crown Paper 11%,
due 9/1/2005 15,775,000 9,701,625
------------
PRINTING AND
PUBLISHING 9.2%
Advanstar Communications
9.25%, due 5/1/2008 19,600,000 18,546,500
American Lawyer Media
9.75%, due 12/15/2007 16,600,000 16,185,000
American Media Operations
10.25%, due 5/1/2009 28,000,000 28,210,000
Liberty Group Operating
9.375%, due 2/1/2008 27,700,000 24,791,500
Liberty Group Publishing
0% (11.625%+),
due 2/1/2009 55,350,000 31,134,375
NBC Acquisition 0%
(10.75%+), due 2/15/2009 42,775,000 23,098,500
Nebraska Book 8.75%,
due 2/15/2008 3,615,000 3,199,275
Perry-Judd 10.625%,
due 12/15/2007 17,125,000 15,498,125
Regional Independent
Media Group 10.50%,
due 7/1/2008 23,600,000 24,042,500
TDL Infomedia Holdings 0%
(15.50%+), due 10/15/2010* 55,350,000 29,889,000
TransWestern Holdings 0%
(11.875%+), due 11/15/2008 28,900,000 21,024,750
Von Hoffman Press 10.875%,
due 5/15/2007* 12,500,000 12,343,750
------------
247,963,275
------------
RETAILING 1.8%
Central Tractor 10.625%,
due 4/1/2007 15,700,000 14,522,500
Cole National Group 9.875%,
due 12/31/2006 2,675,000 2,006,250
Frank's Nursery & Crafts
10.25%, due 3/1/2008 9,250,000 6,706,250
Musicland Group 9.875%,
due 3/15/2008 15,285,000 14,215,050
TM Group Holdings 11%,
due 5/15/2008 10,750,000 10,615,625
------------
48,065,675
------------
SEMICONDUCTORS 4.6%
Advanced Micro Devices
11%, due 8/1/2003 49,875,000 49,999,687
Amkor Technology 10.50%,
due 5/1/2009* 37,250,000 37,250,000
Asat Finance 12.50%,
due 11/1/2006* 5,575,000 6,021,000
Fairchild Semiconductor
10.375%, due 10/1/2007 12,525,000 12,932,062
Therma-Wave 10.625%,
due 5/15/2004 18,200,000 18,837,000
------------
125,039,749
------------
10
<PAGE>
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
PRINCIPAL
AMOUNT VALUE
------------ ------------
TELECOMMUNICATIONS 10.9%
BTI Telcom 10.50%,
due 9/15/2007 $ 22,750,000 $ 21,271,250
CapRock Communications
12%, due 7/15/2008 26,250,000 27,300,000
CapRock Communications
11.50%, due 5/1/2009 7,275,000 7,465,969
Global Crossing Holding
9.50%, due 11/15/2009* 26,750,000 26,348,750
GlobeNet Communication
Group 13%, due 7/15/2007* 18,500,000 18,939,375
ICG Holdings 0% (11.625%+),
due 3/15/2007 24,000,000 15,720,000
Metromedia Fiber Network
10%, due 12/15/2009 8,500,000 8,755,000
NEXTLINK Communications
12.50%, due 4/15/2006 39,000,000 42,217,500
NEXTLINK Communications
10.75%, due 6/1/2009 10,500,000 10,841,250
NEXTLINK Communications
10.50%, due 12/1/2009* 7,600,000 7,752,000
Talton Holdings 11%,
due 6/30/2007 19,725,000 18,837,375
Viatel 11.25%, due 4/15/2008 12,400,000 12,369,000
Viatel 11.50%, due 3/15/2009 16,325,000 16,610,687
Williams Communications
10.875%, due 10/1/2009 3,775,000 3,963,750
World Access 13.25%,
due 1/15/2008 26,175,000 23,688,375
Worldwide Fiber 12%,
due 8/1/2009* 32,750,000 33,896,250
------------
295,976,531
------------
TEXTILE 0.2%
Supreme International 12.25%,
due 4/1/2006 6,900,000 6,891,375
------------
TRANSPORTATION 1.0%
Atlas Air 10.75%,
due 8/1/2005 25,400,000 26,035,000
------------
UTILITIES 0.5%
Midland Cogeneration Venture
11.75%, due 7/23/2005 13,000,000 14,191,879
------------
WIRELESS TELEPHONY 5.0%
American Cellular 10.50%,
due 5/15/2008 20,000,000 22,250,000
Centennial Cellular 10.75%,
due 12/15/2008 30,000,000 32,250,000
Nextel Communications 0%
(10.65%+), due 9/15/2007 9,000,000 6,750,000
Nextel Communications
9.375%, due 11/15/2009* 8,700,000 8,569,500
Powertel 11.125%,
due 6/1/2007 21,325,000 22,391,250
Price Communications Wireless
11.75%, due 7/15/2007 38,385,000 42,031,575
------------
134,242,325
------------
TOTAL CORPORATE BONDS
(Cost $2,635,136,786) 2,329,160,374
------------
PREFERRED STOCKS 8.7%
BROADCASTING 1.1%
Capstar Broadcasting
Partnership 12% 94,513 shs. 10,703,597
Cumulus Media 13.75% 6,215 6,976,338
Sinclair Capital 11.625% 145,000 14,101,250
------------
31,781,185
------------
CABLE SYSTEMS AND
SATELLITE VIDEO 1.0%
Pegasus Communications
(Series A) 12.75%++ 21,374 22,496,135
Pegasus Communications
(units) 12.75%++ 3,500 3,902,500
------------
26,398,635
------------
CELLULAR 1.1%
Dobson Communications 13%++ 7,458 8,147,865
Rural Cellular 11.375%++ 21,835 22,435,463
------------
30,583,328
------------
COMMUNICATIONS
INFRASTRUCTURE 0.8%
Crown Castle International
12.75%++ 19,467 20,197,012
------------
CONTRACT MANUFACTURING
AND CIRCUIT BOARDS 0.2%
MCMS 12.50% 134,640 5,688,540
------------
HEALTH CARE/
MEDICAL PRODUCTS 0.3%
River Holding 11.50% 124,079 7,475,760
------------
INDUSTRIAL/
MANUFACTURING 0.3%
Day International Group 12.25% 9,802 7,633,308
------------
PRINTING AND
PUBLISHING 0.9%
Liberty Group Publishing
14.75% 1,134,418 25,240,800
------------
11
<PAGE>
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
PRINCIPAL
AMOUNT VALUE
------------ ------------
TELECOMMUNICATIONS 2.0%
Global Crossing
Holding 10.50% 276,825 shs. $ 27,890,119
IXC Communications 12.50%++ 16,389 18,068,872
NEXTLINK Communi-
cations 14%++ 175,432 9,429,470
--------------
55,388,461
--------------
WIRELESS TELEPHONY 1.0%
Nextel Communications
11.125%++ 26,615 26,681,537
--------------
TOTAL PREFERRED STOCKS
(Cost $251,014,707) 237,068,566
--------------
CONVERTIBLE PREFERRED STOCKS 0.5%
INTERNET AND RELATED 0.2%
Verio 6.75%* 75,965 4,292,023
--------------
TELECOMMUNICATIONS 0.3%
Global Crossing 7%* 30,300 8,529,450
------------
TOTAL CONVERTIBLE
PREFERRED STOCKS
(Cost $11,373,250) 12,821,473
------------
COMMON STOCKS/
WARRANTS/RIGHTS 2.5%
BROADCASTING 1.2%
AMFM0 410,000 32,082,500
--------------
CABLE SYSTEMS AND
SATELLITE VIDEO
Pegasus Communications
(Warrants expiring 1/1/2007) 875 wts. 54,250
--------------
ENERGY
Abraxas Petroleum 760,134 shs. 712,626
Abraxas Petroleum (Rights)0 760,134 rts. 76,367
--------------
788,993
--------------
TELECOMMUNICATIONS 0.1%
Splitrock Services 24,000 shs. 472,500
World Access 82,000 1,596,437
--------------
2,068,937
--------------
WIRELESS TELEPHONY 1.2%
Price Communications 1,150,000 31,984,375
--------------
TOTAL COMMON STOCKS/
WARRANTS/RIGHTS
(Cost $29,942,944) 66,979,055
--------------
SHORT-TERM HOLDINGS 0.6%
(Cost $16,100,000) 16,100,000
--------------
TOTAL INVESTMENTS 98.4%
(Cost $2,943,567,687) 2,662,129,468
OTHER ASSETS
LESS LIABILITIES 1.6% 43,717,469
--------------
NET ASSETS 100.0% $2,705,846,937
==============
- ----------
* Rule 144A security.
0 Non-income producing security.
+ Deferred-interest debentures pay no interest for a stipulated number of
years, after which they pay the indicated coupon rate.
++ Represents a pay-in-kind security which may pay interest/dividends in
additional face/shares.
See Notes to Financial Statements.
12
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
ASSETS:
Investments, at value:
Long-term holdings (cost $2,927,467,687) ... $2,646,029,468
Short-term holdings (cost $16,100,000) ..... 16,100,000 $ 2,662,129,468
---------------
Cash ...................................................... 237,272
Receivable for interest and dividends ..................... 63,446,344
Receivable for Shares of Beneficial Interest sold ......... 9,736,349
Receivable for securities sold ............................ 1,036,719
Expenses prepaid to shareholder service agent ............. 432,711
Other ..................................................... 71,682
---------------
TOTAL ASSETS .............................................. 2,737,090,545
---------------
LIABILITIES:
Payable for Shares of Beneficial Interest repurchased ..... 17,673,333
Dividend payable .......................................... 9,457,013
Accrued expenses and other ................................ 4,113,262
---------------
TOTAL LIABILITIES ......................................... 31,243,608
---------------
NET ASSETS ................................................ $ 2,705,846,937
===============
COMPOSITION OF NET ASSETS:
Shares of Beneficial Interest, at par
(unlimited shares authorized; $0.001 par
value; 432,021,066 shares outstanding):
Class A ................................................. $ 147,468
Class B ................................................. 171,481
Class C ................................................. 8,270
Class D ................................................. 104,802
Additional paid-in capital ................................ 3,158,927,712
Dividends in excess of net investment income .............. (687,163)
Accumulated net realized loss ............................. (171,387,414)
Net unrealized depreciation of investments ................ (281,438,219)
---------------
NET ASSETS ................................................ $ 2,705,846,937
===============
NET ASSET VALUE PER SHARE:
CLASS A ($923,394,713 / 147,467,741 shares) ............... $6.26
=====
CLASS B ($1,073,910,062 / 171,481,474 shares) ............. $6.26
=====
CLASS C ($51,815,108 / 8,270,055 shares) .................. $6.27
=====
CLASS D ($656,727,054 / 104,801,796 shares) ............... $6.27
=====
- ----------
See Notes to Financial Statements.
13
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME:
Interest ................................... $305,189,459
Dividends .................................. 30,796,335
------------
TOTAL INVESTMENT INCOME .................................... $335,985,794
EXPENSES:
Distribution and service fees ............... 21,785,242
Management fee .............................. 17,240,330
Shareholder account services ................ 5,872,522
Custody and related services ................ 489,476
Shareholder reports and communications ...... 323,104
Registration ................................ 218,957
Auditing and legal fees ..................... 83,080
Trustees' fees and expenses ................. 54,107
Miscellaneous ............................... 102,504
------------
TOTAL EXPENSES ............................................. 46,169,322
------------
NET INVESTMENT INCOME ...................................... 289,816,472
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments .......... (168,599,260)
Net change in unrealized depreciation
of investments .......................... (137,020,341)
------------
NET LOSS ON INVESTMENTS .................................... (305,619,601)
------------
DECREASE IN NET ASSETS FROM OPERATIONS ..................... $(15,803,129)
============
- ----------
See Notes to Financial Statements.
14
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
----------------------------------
1999 1998
--------------- ---------------
OPERATIONS:
Net investment income ................... $289,816,472 $218,868,384
Net realized loss on investments ........ (168,599,260) (1,259,258)
Net change in unrealized appreciation
(depreciation) of investments ......... (137,020,341) (214,244,874)
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS ....................... (15,803,129) 3,364,252
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A .............................. (108,458,438) (87,074,109)
Class B .............................. (109,865,463) (71,515,694)
Class C .............................. (1,608,302) --
Class D .............................. (75,357,544) (57,845,902)
Net realized gain on investments:
Class A .............................. -- (2,685,568)
Class B .............................. -- (2,340,978)
Class D .............................. -- (1,929,912)
--------------- ---------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS (295,289,747) (223,392,163)
--------------- ---------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sales of shares ....... 912,493,144 1,553,522,257
Investment of dividends ................. 148,137,763 116,307,811
Exchanged from associated Funds ......... 601,914,346 559,311,795
Value of shares issued in payment
of gain distributions ................. -- 4,984,811
--------------- ---------------
Total ................................... 1,662,545,253 2,234,126,674
--------------- ---------------
Cost of shares repurchased .............. (744,239,176) (398,760,907)
Exchanged into associated Funds ......... (759,527,949) (623,869,737)
--------------- ---------------
Total ................................... (1,503,767,125) (1,022,630,644)
--------------- ---------------
INCREASE IN NET ASSETS FROM
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST .................. 158,778,128 1,211,496,030
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS ....... (152,314,748) 991,468,119
NET ASSETS:
Beginning of year ....................... 2,858,161,685 1,866,693,566
--------------- ---------------
END OF YEAR (including (dividends
in excess of)/undistributed net
investment income of $(687,163)
and $4,786,112, respectively) ......... $2,705,846,937 $2,858,161,685
=============== ===============
- ----------
See Notes to Financial Statements.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. MULTIPLE CLASSES OF SHARES -- Seligman High-Yield Bond Series (the "Fund"), a
series of Seligman High Income Fund Series, offers four classes of shares. Class
A shares are sold with an initial sales charge of up to 4.75% and a continuing
service fee of up to 0.25% on an annual basis. Class A shares purchased in an
amount of $1,000,000 or more are sold without an initial sales charge but are
subject to a contingent deferred sales charge ("CDSC") of 1% on redemptions
within 18 months of purchase. Class B shares are sold without an initial sales
charge but are subject to a distribution fee of 0.75% and a service fee of up to
0.25% on an annual basis, and a CDSC, if applicable, of 5% on redemptions in the
first year of purchase, declining to 1% in the sixth year and 0% thereafter.
Class B shares will automatically convert to Class A shares on the last day of
the month that precedes the eighth anniversary of their date of purchase. The
Fund began offering Class C shares on May 27, 1999. Class C shares are sold with
an initial sales charge of up to 1% and are subject to a distribution fee of up
to 0.75% and a service fee of up to 0.25% on an annual basis, and a CDSC, if
applicable, of 1% imposed on redemptions made within 18 months of purchase.
Class D shares are sold without an initial sales charge but are subject to a
distribution fee of up to 0.75% and a service fee of up to 0.25% on an annual
basis, and a CDSC, if applicable, of 1% imposed on redemptions made within one
year of purchase. The four classes of shares represent interests in the same
portfolio of investments, have the same rights and are generally identical in
all respects except that each class bears its separate distribution and certain
other class-specific expenses, and has exclusive voting rights with respect to
any matter on which a separate vote of any class is required.
2. SIGNIFICANT ACCOUNTING POLICIES -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Fund:
a. SECURITY VALUATION -- Investments in bonds, stocks and convertible securities
are valued at current market values or, in their absence, at fair values
determined in accordance with procedures approved by the Trustees. Securities
traded on national exchanges are valued at last sales prices or, in their
absence and in the case of over-the-counter securities, at the mean of bid
and asked prices. Short-term holdings maturing in 60 days or less are valued
at amortized cost.
b. FEDERAL TAXES -- There is no provision for federal income tax. The Fund has
elected to be taxed as a regulated investment company and intends to
distribute substantially all taxable net income and net gain realized.
c. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Investment
transactions are recorded on trade dates. Identified cost of investments sold
is used for both financial statement and federal income tax purposes.
Dividends receivable and payable are recorded on ex-dividend dates. Interest
income is recorded on an accrual basis. The Fund accretes discounts but does
not amortize premiums on purchases of portfolio securities.
d. MULTIPLE CLASS ALLOCATIONS -- All income, expenses (other than class-specific
expenses), and realized and unrealized gains or losses are allocated daily to
each class of shares based upon the relative value of shares of each class.
Class-specific expenses, which include distribution and service fees and any
other items that are specifically attributable to a particular class, are
charged directly to such class. For the year ended December 31, 1999,
distribution and service fees were the only class-specific expenses.
e. DISTRIBUTIONS TO SHAREHOLDERS -- Dividends are declared daily and paid
monthly. Other distributions paid by the Fund are recorded on ex-dividend
dates. The treatment for financial statement purposes of distributions made
to shareholders during the year from net investment income or net realized
gains may differ from their ultimate treatment for federal income tax
purposes. These differences are caused primarily by differences in the timing
of the recognition of certain components of income, expense, or realized
capital gain for federal income tax purposes. Where such differences are
permanent in nature, they are reclassified in the components of net assets
based on their ultimate characterization for federal income tax purposes. Any
such reclassification will have no effect on net assets, results of
operations, or net asset value per share of the Fund.
3. PURCHASES AND SALES OF SECURITIES -- Purchases and sales of portfolio
securities, excluding US Government obligations and short-term investments, for
the year ended December 31, 1999, amounted to $1,339,662,618 and $1,124,903,100,
respectively.
At December 31, 1999, the cost of investments for federal income tax purposes
was $2,946,377,988, and the tax basis gross unrealized appreciation and
depreciation of portfolio securities amounted to $71,798,848 and $356,047,368,
respectively.
4. SHORT-TERM INVESTMENTS -- At December 31, 1999, the Fund owned short-term
investments which matured in less than seven days.
16
<PAGE>
Notes to Financial Statements
5. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST -- The Fund has authorized
unlimited shares of $0.001 par value Shares of Beneficial Interest. Transactions
in Shares of Beneficial Interest were as follows:
CLASS A
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1999 1998
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ -------------
Net proceeds from
sales of shares 50,153,544 $335,990,323 80,413,014 $ 594,288,030
Investment of
dividends 8,778,384 58,331,830 6,694,630 48,928,569
Exchanged from
associated Funds 74,639,832 499,812,699 61,852,001 452,271,367
Shares issued in
payment of gain
distributions -- -- 258,290 1,968,170
------------ ------------ ------------ -------------
Total 133,571,760 894,134,852 149,217,935 1,097,456,136
------------ ------------ ------------ -------------
Cost of shares
repurchased (55,541,424) (366,003,239) (30,909,303) (226,531,287)
Exchanged into
associated Funds (81,745,500) (547,422,145) (66,540,471) (488,820,731)
------------ ------------ ------------ -------------
Total (137,286,924) (913,425,384) (97,449,774) (715,352,018)
------------ ------------ ------------ -------------
Increase (Decrease) (3,715,164) $(19,290,532) 51,768,161 $ 382,104,118
============ ============ ============ =============
CLASS B
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1999 1998
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ -------------
Net proceeds from
sales of shares .... 49,076,811 $330,860,360 78,733,227 $579,656,818
Investment of
dividends .......... 7,606,606 50,278,741 4,467,385 32,568,827
----------- ------------ ----------- ------------
Exchanged from
associated Funds ... 8,130,469 53,992,478 6,769,539 48,425,027
Shares issued in
payment of gain
distributions ...... -- -- 201,710 1,537,030
----------- ------------ ----------- ------------
Total ................ 64,813,886 435,131,579 90,171,861 662,187,702
----------- ------------ ----------- ------------
Cost of shares
repurchased ........ (23,700,317) (155,156,303) (8,616,802) (62,888,247)
Exchanged into
associated Funds ... (19,067,869) (124,043,448) (9,097,294) (65,245,307)
----------- ------------ ----------- ------------
Total ................ (42,768,186) (279,199,751) (17,714,096) (128,133,554)
----------- ------------ ----------- ------------
Increase ............. 22,045,700 $155,931,828 72,457,765 $534,054,148
=========== ============ =========== ============
CLASS C
--------------------------------
MAY 27, 1999*
TO DECEMBER 31, 1999*
--------------------------------
SHARES AMOUNT
---------- ------------
Net proceeds from
sales of shares 8,305,894 $ 53,565,859
Investment of
dividends 118,156 746,539
Exchanged from
associated funds 298,550 1,884,484
---------- ------------
Total 8,722,600 56,196,882
---------- ------------
Cost of shares
repurchased (187,742) (1,178,245)
Exchanged into
associated funds (264,803) (1,677,554)
---------- ------------
Total (452,545) (2,855,799)
---------- ------------
Increase 8,270,055 $ 53,341,083
========== ============
* Commencement of offering of shares.
CLASS D
---------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1999 1998
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
Net proceeds from
sales of shares 28,300,660 $ 192,076,602 51,489,047 $ 379,577,409
Investment of
dividends 5,808,183 38,780,653 4,758,316 34,810,415
Exchanged from
associated Funds 6,897,740 46,224,685 8,049,511 58,615,401
Shares issued in
payment of gain
distributions -- -- 194,174 1,479,611
----------- ------------- ----------- -------------
Total 41,006,583 277,081,940 64,491,048 474,482,836
----------- ------------- ----------- -------------
Cost of shares
repurchased (33,807,587) (221,901,389) (14,976,376) (109,341,373)
Exchanged into
associated Funds (13,165,759) (86,384,802) (9,593,313) (69,803,699)
----------- ------------- ----------- -------------
Total (46,973,346) (308,286,191) (24,569,689) (179,145,072)
----------- ------------- ----------- -------------
Increase (Decrease) (5,966,763) $ (31,204,251) 39,921,359 $ 295,337,764
=========== ============= =========== =============
6. MANAGEMENT FEE, DISTRIBUTION SERVICES, AND OTHER TRANSACTIONS -- J. & W.
Seligman & Co. Incor-porated (the "Manager") manages the affairs of the Fund and
provides the necessary personnel and facilities. Compensation of all officers of
the Fund, all trustees of the Fund who are employees or consultants of the
Manager, and all personnel of the Fund and the Manager is paid by the Manager.
The Manager receives a fee, calculated daily and payable monthly, equal to 0.65%
per annum of the first $1 billion of the Fund's average daily net assets and
0.55% per annum of the Fund's average daily net assets in excess of $1 billion.
The management fee reflected in the Statement of Operations represents 0.58% per
annum of the Fund's average daily net assets.
Seligman Advisors, Inc. (the "Distributor"), agent for the distribution of
the Fund's shares, and an affiliate of the Manager, received concessions of
$573,376 from sales of Class A shares. Commissions of $4,357,095 and $440,592
were paid to dealers from sales of Class A and Class C shares, respectively.
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distribution of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive a continuing fee of up to 0.25% on an annual basis,
payable quarterly, of the average daily net assets of the Class A shares
attributable to the particular service organizations for providing personal
services and/or the maintenance of shareholder accounts. The Distributor charges
such fees to the Fund pursuant to the Plan. For the year ended December 31,
1999, fees incurred under the Plan aggregated $2,574,351 or 0.25% per annum of
the average daily net assets of Class A shares.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Under the Plan, with respect to Class B shares, Class C shares, and Class D
shares, service organizations can enter into agreements with the Distributor and
receive a continuing fee for providing personal services and/or the maintenance
of shareholder accounts of up to 0.25% on an annual basis of the average daily
net assets of the Class B, Class C, and Class D shares for which the
organizations are responsible; and, for Class C and Class D shares, fees for
providing other distribution assistance of up to 0.75% on an annual basis of
such average daily net assets. Such fees are paid monthly by the Fund to the
Distributor pursuant to the Plan.
With respect to Class B shares, a distribution fee of 0.75% on an annual
basis of average daily net assets is payable monthly by the Fund to the
Distributor; however, the Distributor has sold its rights to this fee to a third
party (the "Purchaser"), which provides funding to the Distributor to enable it
to pay commissions to dealers at the time of the sale of the related Class B
shares.
For the year ended December 31, 1999, fees incurred under the Plan,
equivalent to 1% per annum of the average daily net assets of Class B, Class C,
and Class D shares, amounted to $11,292,753, $160,308 and $7,757,830,
respectively.
The Distributor is entitled to retain any CDSC imposed on certain redemptions
of Class A and Class C shares occurring within 18 months of purchase and on
redemptions of Class D shares occurring within one year of purchase. For the
year ended December 31, 1999, such charges amounted to $536,070.
The Distributor has sold its rights to collect any CDSC imposed on
redemptions of Class B shares to the Purchaser. In connection with the sale of
its rights to collect any CDSC and the distribution fees with respect to Class B
shares described above, the Distributor receives payments from the Purchaser
based on the value of Class Bshares sold. The aggregate of such payments
retained by the Distributor, for the year ended December 31, 1999, amounted to
$329,927.
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, 1999, Seligman Services, Inc. received commissions of $39,644 from
the sales of shares of the Fund. Seligman Services, Inc. also received
distribution and service fees of $61,641, pursuant to the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged the Fund at cost $5,872,522 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, 1999, of $44,966
is included in other liabilities. Deferred fees and related accrued earnings are
not deductible for federal income tax purposes until such amounts are paid.
7. CAPITAL LOSS CARRYFORWARD -- At December 31, 1999, the Fund had a net capital
loss carryforward for federal income tax purposes of $133,975,086, which is
available for offset against future taxable net capital gains, expiring in
various amounts through 2007. Accordingly, no capital gain distributions are
expected to be paid to shareholders until net capital gains have been realized
in excess of the available capital loss carryforwards.
8. COMMITTED LINE OF CREDIT -- The Fund is a participant in a joint $750 million
committed line of credit that is shared by substantially all funds in the
Seligman Group of Investment Companies. The Fund's borrowings are limited to 10%
of its net assets. Borrowings pursuant to the credit facility are subject to
interest at a rate equal to the overnight federal funds rate plus 0.50%. The
Fund incurs a commitment fee of 0.08% per annum on its share of the unused
portion of the credit facility. The credit facility may be drawn upon only for
temporary purposes and is subject to certain other customary restrictions. The
credit facility commitment expires in June 2000, but is renewable annually with
the consent of the participating banks. For the year ended December 31, 1999,
the Fund did not borrow from the credit facility.
18
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below are intended to help you understand each Class's financial
performance for the past five 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,
--------------------------------------------------------
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR $6.95 $7.55 $7.25 $6.96 $6.35
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.69 0.70 0.70 0.69 0.65
Net realized and unrealized gain
(loss) on investments (0.68) (0.59) 0.28 0.29 0.61
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 0.01 0.11 0.98 0.98 1.26
----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income (0.70) (0.69) (0.68) (0.69) (0.65)
Distributions from net realized capital gains -- (0.02) -- -- --
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS (0.70) (0.71) (0.68) (0.69) (0.65)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR $6.26 $6.95 $7.55 $7.25 $6.96
===== ===== ===== ===== =====
TOTAL RETURN: 0.09% 1.32% 14.26% 14.82% 20.72%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000s omitted) $923,395 $1,050,340 $750,461 $408,303 $182,129
Ratio of expenses to average net assets 1.08% 1.10% 1.14% 1.16% 1.09%
Ratio of net income to average net assets 10.30% 9.46% 9.42% 9.80% 9.73%
Portfolio turnover rate 40.60% 35.34% 61.78% 119.33% 173.39%
</TABLE>
- ----------
See footnotes on page 20.
19
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------------------------------------
YEAR ENDED DECEMBER 31, 4/22/96* 5/27/99*
------------------------------- TO TO
1999 1998 1997 12/31/96 12/31/99
----- ----- ----- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD .............................. $6.95 $7.55 $7.26 $7.06 $6.75
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................................ 0.64 0.64 0.64 0.45 0.32
Net realized and unrealized gain (loss) on investments ........... (0.68) (0.59) 0.28 0.20 (0.41)
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ................................. (0.04) 0.05 0.92 0.65 (0.09)
----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income ............................. (0.65) (0.63) (0.63) (0.45) (0.39)
Distributions from net realized capital gains .................... -- (0.02) -- -- --
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS .............................................. (0.65) (0.65) (0.63) (0.45) (0.39)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ................................... $6.26 $6.95 $7.55 $7.26 $6.27
===== ===== ===== ===== =====
TOTAL RETURN: .................................................... (0.69)% 0.57% 13.24% 9.11% (1.71)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) ......................... $1,073,910 $1,037,994 $581,235 $147,970 $51,815
Ratio of expenses to average net assets .......................... 1.83% 1.85% 1.90% 1.90%+ 1.81%+
Ratio of net income to average net assets ........................ 9.55% 8.71% 8.66% 9.11%+ 9.78%+
Portfolio turnover rate .......................................... 40.60% 35.34% 61.78% 119.33%++ 40.60%**
<CAPTION>
CLASS D
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1999 1998 1997 1996 1995
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR ............................... $6.95 $7.55 $7.26 $6.96 $6.35
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............................................ 0.64 0.64 0.64 0.64 0.60
Net realized and unrealized gain (loss) on investments ........... (0.67) (0.59) 0.28 0.30 0.61
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ................................. (0.03) 0.05 0.92 0.94 1.21
----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income ............................. (0.65) (0.63) (0.63) (0.64) (0.60)
Distributions from net realized capital gains .................... -- (0.02) -- -- --
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS .............................................. (0.65) (0.65) (0.63) (0.64) (0.60)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR ..................................... $6.27 $6.95 $7.55 $7.26 $6.96
===== ===== ===== ===== =====
TOTAL RETURN: .................................................... (0.54)% 0.57% 13.24% 14.10% 19.67%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000s omitted) ........................... $656,727 $769,828 $534,998 $265,528 $90,153
Ratio of expenses to average net assets .......................... 1.83% 1.85% 1.90% 1.92% 1.91%
Ratio of net income to average net assets ........................ 9.55% 8.71% 8.66% 9.02% 8.86%
Portfolio turnover rate .......................................... 40.60% 35.34% 61.78% 119.33% 173.39%
</TABLE>
- ----------
+ Annualized.
++ For the year ended December 31, 1996.
* Commencement of offering of shares.
** For the year ended December 31, 1999.
See Notes to Financial Statements.
20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE TRUSTEES AND SHAREHOLDERS,
SELIGMAN HIGH-YIELD BOND SERIES:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman High-Yield Bond Series as of December
31, 1999, 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, 1999, 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 referred to
above present fairly, in all material respects, the financial position of
Seligman High-Yield Bond Series as of December 31, 1999, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New York, New York
February 11, 2000
21
<PAGE>
TRUSTEES
JOHN R. GALVIN 2, 4
DEAN, Fletcher School of Law and Diplomacy
at Tufts University
DIRECTOR, Raytheon Company
ALICE S. ILCHMAN 3, 4
TRUSTEE, Committee for Economic Development
CHAIRMAN, The Rockefeller Foundation
FRANK A. MCPHERSON 2, 4
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
DIRECTOR, Conoco Inc.
JOHN E. MEROW 2, 4
RETIRED CHAIRMAN AND SENIOR PARTNER,
Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Industries, Inc.
DIRECTOR, New York Presbyterian Hospital
BETSY S. MICHEL 2, 4
TRUSTEE, The Geraldine R. Dodge Foundation
WILLIAM C. MORRIS 1
CHAIRMAN
CHAIRMAN OF THE BOARD,
J. & W. Seligman & Co. Incorporated
CHAIRMAN, Carbo Ceramics Inc.
DIRECTOR, Kerr-McGee Corporation
JAMES C. PITNEY 3, 4
RETIRED PARTNER, Pitney, Hardin, Kipp & Szuch, Law Firm
JAMES Q. RIORDAN 3, 4
DIRECTOR, KeySpan Energy Corporation
TRUSTEE, Committee for Economic Development
DIRECTOR, Public Broadcasting Service
RICHARD R. SCHMALTZ 1
MANAGING DIRECTOR, DIRECTOR OF INVESTMENTS,
J. & W. Seligman & Co. Incorporated
TRUSTEE EMERITUS, Colby College
ROBERT L. SHAFER 3, 4
RETIRED VICE PRESIDENT, Pfizer Inc.
JAMES N. WHITSON 2, 4
DIRECTOR AND CONSULTANT, Sammons Enterprises, Inc.
DIRECTOR, C-SPAN
DIRECTOR, CommScope, Inc.
BRIAN T. ZINO 1
PRESIDENT
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.
DIRECTOR, ICIMutual Insurance Company
MEMBER OF THE BOARD OF GOVERNORS,
Investment Company Institute
TRUSTEE EMERITUS
FRED E. BROWN
DIRECTOR AND CONSULTANT,
J. & W. Seligman & Co. Incorporated
- ----------
Member: 1 Executive Committee
2 Audit Committee
3 Trustee Nominating Committee
4 Board Operations Committee
22
<PAGE>
EXECUTIVE OFFICERS
WILLIAM C. MORRIS DANIEL J. CHARLESTON THOMAS G. ROSE
CHAIRMAN VICE PRESIDENT TREASURER
BRIAN T. ZINO LAWRENCE P. VOGEL FRANK J. NASTA
PRESIDENT VICE PRESIDENT SECRETARY
FOR MORE INFORMATION
MANAGER
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
GENERAL COUNSEL
Sullivan & Cromwell
INDEPENDENT AUDITORS
Deloitte & Touche LLP
GENERAL DISTRIBUTOR
Seligman Advisors, Inc.
100 Park Avenue
New York, NY 10017
SHAREHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
IMPORTANT TELEPHONE NUMBERS
(800) 221-2450 Shareholder Services
(800) 445-1777 Retirement Plan Services
(212) 682-7600 Outside the United States
(800) 622-4597 24-Hour Automated Telephone Access Service
23
<PAGE>
GLOSSARY OF FINANCIAL TERMS
CAPITAL GAIN DISTRIBUTION -- A payment to mutual fund shareholders of profits
realized on the sale of securities in a fund's portfolio.
CAPITAL APPRECIATION/DEPRECIATION -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.
COMPOUNDING -- The change in the value of an investment as shareholders receive
earnings on their investment's earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will not be based on the
original $1,000, but on the $1,070, which includes the first year's earnings.
CONTINGENT DEFERRED SALES CHARGE (CDSC) -- Depending on the class of shares
owned, a fee charged by a mutual fund when shares are sold back to the fund. The
CDSC expires after a fixed time period.
DIVIDEND -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
DIVIDEND YIELD -- A measurement of a fund's dividend as a percentage of the
maximum offering price or net asset value.
EXPENSE RATIO -- The cost of doing business for a mutual fund, expressed as a
percent of the fund's net assets.
INVESTMENT OBJECTIVE -- The shared investment goal of a fund and its
shareholders.
MANAGEMENT FEE -- The amount paid by a mutual fund to its investment advisor(s).
MULTIPLE CLASSES OF SHARES -- Although an individual mutual fund invests in only
one portfolio of securities, it may offer investors several purchase options
which are "classes" of shares. Multiple classes permit shareholders to choose
the fee structure that best meets their needs and goals. Generally, each class
will differ in terms of how and when sales charges and certain fees are
assessed.
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (NASD) -- A self-regulatory
body with authority over firms that distribute mutual funds.
NET ASSET VALUE (NAV) PER SHARE -- The market worth of one fund share, obtained
by adding a mutual fund's total assets (securities, cash, and any accrued
earnings), subtracting liabilities, and dividing the resulting net assets by the
number of shares outstanding.
OFFERING PRICE -- The price at which a mutual fund's share can be purchased. The
offering price per share is the current net asset value plus any sales charge.
PORTFOLIO TURNOVER -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
PROSPECTUS -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission (SEC), such as a fund's investment objective and policies, services,
investment restrictions, how shares are bought and sold, fund fees and other
charges, and the fund's financial highlights.
SEC YIELD -- SEC Yield refers to the net income earned by a fund during a recent
30-day period. This income is annualized and then divided by the maximum
offering price per share on the last day of the 30-day period. The SEC Yield
formula reflects semiannual compounding.
SECURITIES AND EXCHANGE COMMISSION -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
STATEMENT OF ADDITIONAL INFORMATION -- A document that contains more detailed
information about an investment company and that supplements the prospectus. It
is available at no charge upon request.
TOTAL RETURN -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The AVERAGE ANNUAL TOTAL
RETURN represents the average annual compounded rate of return for the periods
presented.
YIELD ON SECURITIES -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.
- ----------
Adapted from the Investment Company Institute's 1999 MUTUAL FUND FACT BOOK.
24
<PAGE>
THIS REPORT IS INTENDED ONLY FOR THE INFORMATION OF
SHAREHOLDERS OR THOSE WHO HAVE RECEIVED THE OFFERING
PROSPECTUS COVERING SHARES OF BENEFICIAL INTEREST OF
SELIGMAN HIGH-YIELD BOND SERIES, WHICH CONTAINS INFORMATION ABOUT THE
SALES CHARGES, MANAGEMENT FEE, AND OTHER COSTS. PLEASE READ
THE PROSPECTUS CAREFULLY BEFORE INVESTING OR SENDING MONEY.
[LOGO OMITTED}
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK NY 10017
