UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-4103
Seligman High Income Fund Series
(Exact name of Registrant as specified in charter)
100 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip code)
Lawrence P. Vogel
100 Park Avenue
New York, New York 10017
(Name and address of agent for service)
Registrant’s telephone number, including area code: | (212) 850-1864 | ||
Date of fiscal year end: | 12/31 | ||
Date of reporting period: | 6/30/07 |
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS.
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Mid-Year Report
J. & W. SELIGMAN & CO.
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Experience Seligman has been in business for more than 140 years, at times playing a central role in the financial development of the country and its markets. Over that time, the firm has managed clients’ wealth through dramatic market changes and has remained a consistent, reliable presence on Wall Street. Today, Seligman is drawing on its long history and long-term perspective as we focus on the future and on developing investment solutions that help clients arrive at their goals. Insight Asset management is driven by insight — into the direction of the economy, how companies will perform, how markets will behave, and how investors will respond. Portfolio managers at the firm have been in the investment business, on average, for more than 20 years. Over that time, they have refined their ability to assess a company’s prospects, management, and products, while also weighing the impact of economic and market cycles, new trends, and developing technologies. Solutions Seligman’s commitment to the development of innovative investment products — including the nation’s first growth mutual fund, pioneering single-state municipal funds, and one of the country’s premier technology funds — defines our past and informs our future. Our ongoing research into the nature of investment risk — begun in the early 1990s — has resulted in the Seligman Time Horizon Matrix® asset allocation strategy that redefines the relationship between risk and reward over time. The strategy offers investors a variety of investment solutions for goals ranging from college savings to retirement planning. Whether you select Seligman for one investment product, or as a comprehensive asset manager, we believe we can help you reach your goals. | Table of Contents | |||||
To The Shareholders | 1 | |||||
Performance Overview | 2 | |||||
Portfolio Overview | 5 | |||||
Understanding and | ||||||
Comparing Your | ||||||
Fund’s Expenses | 7 | |||||
Portfolio of Investments | 8 | |||||
Statement of | ||||||
Assets and Liabilities | 18 | |||||
Statement of | ||||||
Operations | 19 | |||||
Statement of | ||||||
Changes in Net Assets | 20 | |||||
Notes to Financial | ||||||
Statements | 21 | |||||
Financial Highlights | 28 | |||||
Report of Independent | ||||||
Registered Public | ||||||
Accounting Firm | 34 | |||||
Trustees and Executive | ||||||
Officers | 35 | |||||
Additional Fund | ||||||
Information | 36 | |||||
To The Shareholders |
Your mid-year report for Seligman High-Yield Fund follows this letter. The report contains the Fund’s investment results, portfolio of investments, and financial statements as of June 30, 2007.
For the six months ended June 30, 2007, Seligman High-Yield Fund delivered a total return, based on the net asset value of Class A shares (excluding sales charges), of 3.0%. During the same period, the Fund’s benchmarks, the Lehman Brothers U.S. Corporate High Yield 2% Issuer Capped Index and the Citigroup US High-Yield Market Index, returned 2.9% and 2.7%, respectively. The Fund’s peers, as measured by the Lipper High Current Yield Funds Average, returned 2.9%.
We are pleased to report that Seligman High-Yield Fund has consecutively increased its dividend payment each month, beginning with April’s distribution, through the date of this letter.
Thank you for your continued support of Seligman High-Yield Fund. We look forward to providing you with the investment experience, insight, and solutions you need to seek your financial goals for many years to come.
By order of the Board of Trustees,
William C. Morris Chairman | Brian T. Zino President |
Manager | Shareholder Service Agent | Important Telephone Numbers | ||
J. & W. Seligman & Co. | Seligman Data Corp. | (800) 221-2450 | Shareholder Services | |
Incorporated | 100 Park Avenue | (800) 445-1777 | Retirement Plan | |
100 Park Avenue | New York, NY 10017 | Services | ||
New York, NY 10017 | (212) 682-7600 | Outside the | ||
Mail Inquiries To: | United States | |||
General Distributor | P.O. Box 9759 | (800) 622-4597 | 24-Hour Automated | |
Seligman Advisors, Inc. | Providence, RI 02940-9759 | Telephone Access | ||
100 Park Avenue | Service | |||
New York, NY 10017 | Independent Registered | |||
Public Accounting Firm | ||||
General Counsel | Deloitte & Touche LLP | |||
Sullivan & Cromwell LLP |
1
Performance Overview
This section of the report is intended to help you understand the performance of Seligman High-Yield Fund and to provide a summary of the Fund’s portfolio characteristics.
Performance data quoted in this report represents past performance and does not guarantee or indicate future investment results. 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. Current performance may be lower or higher than the performance data quoted. Total returns of the Fund as of the most recent month-end will be available at www.seligman.com1 by the seventh business day following that month-end. Calculations assume reinvestment of distributions, if any. Performance data quoted does not reflect the deduction of taxes that an investor may pay on distributions or the redemption of shares.
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 purchase, declining to 1% in the sixth year and 0% thereafter. The ten-year return for Class B shares reflects automatic conversion to Class A shares approximately eight years after their date of purchase. Returns for Class C, Class D and Class R shares are calculated with and without the effect of the 1% CDSC, charged on redemptions made within one year of purchase. Class I shares have no sales charges, and returns are calculated accordingly.
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.
1 The website reference is an inactive textual reference and information contained in or otherwise accessible through the website does not form a part of this report or the Fund’s prospectuses or statement of additional information.
2
Performance Overview
Investment Results
For Periods Ended June 30, 2007
Average Annual | |||||||||||||||||||||
Class C | Class I | Class R | |||||||||||||||||||
Since | Since | Since | |||||||||||||||||||
Six | One | Five | Ten | Inception | Inception | Inception | |||||||||||||||
Months* | Year | Years | Years | 5/27/99 | 11/30/01 | 4/30/03 | |||||||||||||||
Class A | |||||||||||||||||||||
With Sales Charge | (1.89 | )% | 5.83 | % | 7.78 | % | 1.19 | % | n/a | n/a | n/a | ||||||||||
Without Sales Charge | 3.03 | 11.04 | 8.82 | 1.67 | n/a | n/a | n/a | ||||||||||||||
Class B | |||||||||||||||||||||
With CDSC† | (2.33 | ) | 4.90 | 7.66 | n/a | n/a | n/a | n/a | |||||||||||||
Without CDSC | 2.66 | 9.90 | 7.96 | 1.07 | †† | n/a | n/a | n/a | |||||||||||||
Class C | |||||||||||||||||||||
With 1% CDSC | 1.66 | 9.21 | n/a | n/a | n/a | n/a | n/a | ||||||||||||||
Without CDSC | 2.65 | 10.21 | 8.01 | n/a | (0.01 | )% | n/a | n/a | |||||||||||||
Class D | |||||||||||||||||||||
With 1% CDSC | 1.66 | 9.21 | n/a | n/a | n/a | n/a | n/a | ||||||||||||||
Without CDSC | 2.65 | 10.21 | 8.01 | 0.91 | n/a | n/a | n/a | ||||||||||||||
Class I | 2.92 | 11.17 | 9.21 | n/a | n/a | 6.62 | % | n/a | |||||||||||||
Class R | |||||||||||||||||||||
With 1% CDSC | 1.90 | 9.77 | n/a | n/a | n/a | n/a | n/a | ||||||||||||||
Without CDSC | 2.90 | 10.77 | n/a | n/a | n/a | n/a | 7.51 | % | |||||||||||||
Benchmarks** | |||||||||||||||||||||
Citigroup US High-Yield | |||||||||||||||||||||
Market Index | 2.66 | 11.61 | 12.34 | 6.46 | 6.22 | # | 9.49 | 9.67 | |||||||||||||
Lehman Brothers U.S. Corporate | |||||||||||||||||||||
High-Yield 2% Issuer Capped Index | 2.87 | 11.55 | 11.91 | 6.29 | 6.42 | ## | 9.54 | 9.97 | |||||||||||||
Lipper High Current Yield | |||||||||||||||||||||
Funds Average | 2.90 | 10.52 | 10.39 | 4.95 | 5.19 | 8.45 | 9.11 |
See footnotes on page 4.
3
Performance Overview
Investment Results
Net Asset Value Per Share | Dividend Per Share and Yield Information | |||||||||||
6/30/07 | 12/31/06 | 6/30/06 | For Periods Ended June 30, 2007 | |||||||||
Dividends ø | SEC 30-Day Yieldsøø | |||||||||||
Class A | $3.38 | $3.39 | $3.25 | $0.1136 | 6.61 | % | ||||||
Class B | 3.38 | 3.39 | 3.26 | 0.1012 | 6.06 | |||||||
Class C | 3.39 | 3.40 | 3.26 | 0.1012 | 6.13 | |||||||
Class D | 3.39 | 3.40 | 3.26 | 0.1012 | 6.16 | |||||||
Class I | 3.37 | 3.39 | 3.25 | 0.1203 | 7.18 | |||||||
Class R | 3.38 | 3.39 | 3.25 | 0.1096 | 6.77 |
* | Returns for periods of less than one year are not annualized. |
** | The Citigroup US High-Yield Market Index (“Citigroup Index”), the Lehman Brothers U.S. Corporate High-Yield 2% Issuer Capped Index (“Lehman Index”) and the Lipper High Current Yield Funds Average (“Lipper Average”) are unmanaged benchmarks that assume reinvestment of all distributions and exclude the effect of taxes and sales charges, and the Citigroup Index also excludes the effect of fees. The Lipper Average is an average of funds that aim at high (relative) current yield from fixed income securities, have no quality or maturity restrictions, and tend to invest in lower-grade debt instruments. The Citigroup Index and the Lehman Index each cover the US corporate bond market of high-yield bonds denominated in US dollars, and are included for comparison with Fund performance. The Citigroup Index is not limited in the amount of exposure to a single issuer. Unlike the Citigroup Index, the Lehman Index is constrained from having greater than 2% of the securities of a single issuer. Although the Fund may hold greater than 2% of the securities of a single issuer, the Fund has no current intention of owning greater than 5% of the securities of a single issuer. Investors cannot invest directly in an average or an index. |
ø | Represents per share amount paid or declared for the period ended June 30, 2007. |
øø | Current yield, representing the annualized yield for the 30-day period ended June 30, 2007, has been computed in accordance with SEC regulations and will vary. |
† | The CDSC is 5% if you sell your shares within one year of purchase and 2% for the five-year period. |
†† | Ten-year return of Class B shares reflects automatic conversion to Class A shares approximately eight years after their date of purchase. |
# | From May 31, 1999. |
## | From May 28, 1999. |
4
Portfolio Overview
June 30, 2007
Largest Portfolio Changes | ||
During Six Months Ended June 30, 2007 | ||
Largest Purchases | Largest Sales | |
Charter Communications Holding I 13.5%, 1/15/2014* | General Motors Acceptance 8%, 11/1/2031 | |
Lyondell Chemical 10.5%, 6/1/2013* | Edison Mission Energy 7.73%, 6/15/2009** | |
Playtex 8%, 3/1/2011* | General Motors 8.375%, 7/15/2033 | |
Del Monte 8.625%, 12/15/2012* | El Paso 7.875%, 6/15/2012** | |
West 11%, 10/15/2016* | Coventry Health Care 8.125%, 2/15/2012** | |
Chesapeake Energy 6.5%, 8/15/2017 | Reliant Energy 9.5%, 7/15/2013** | |
Idearc 8%, 11/15/2016* | Charter Communications Holdings II 10.25%, 9/15/2010 | |
Forest Oil 7.25%, 6/15/2019* | Rural Cellular 9.75%, 1/15/2010** | |
Seagate Technology 6.375%, 10/1/2011* | Terra Capital 11.50%, 6/1/2010** | |
El Paso 7%, 6/15/2017* | El Paso 6.95%, 6/1/2028** |
Largest portfolio changes from the previous period to the current period are based on cost of purchases and proceeds from sales of securities, listed in descending order.
* Position added during the period.
** Position eliminated during the period.
5
Portfolio Overview
Top Ten Companies† | |||||
June 30, 2007 | |||||
Percent | |||||
of Net | |||||
Security | Value | Assets | |||
Charter Communications | $ 6,022,094 | 2.1 | |||
AES | 5,151,141 | 1.8 | |||
Qwest | 4,853,788 | 1.7 | |||
Echostar DBS | 4,780,125 | 1.6 | |||
HCA | 4,297,750 | 1.5 | |||
SPDR Trust Series 1 | 4,210,536 | 1.4 | |||
iShares Russell 2000 Index Fund | 3,954,703 | 1.3 | |||
Reddy Ice Holdings | 3,591,000 | 1.2 | |||
Dynegy Holdings | 3,342,563 | 1.1 | |||
Service Corporation | 3,303,375 | 1.1 |
The amounts shown for the top ten companies represent the aggregate value of the Fund’s investments in securities issued by the companies or their affiliates.
There can be no assurance that the securities presented have remained or will remain in the Fund’s portfolio. Information regarding the Fund’s portfolio holdings should not be construed as a recommendation to buy or sell any security or as an indication that any security is suitable for a particular investor.
Ratings§ | Duration* | ||||||
June 30, 2007 | June 30, 2007 | 4.0 years | |||||
Moody’s | |||||||
Baa | 2.0 | % | |||||
Ba | 33.1 | ||||||
B | 47.6 | ||||||
Caa | 16.9 | ||||||
Ca | 0.4 |
† | Excludes short-term holdings. |
§ | Credit ratings are those issued by Moody’s Investors Services, Inc. Percentages are based on the market values of long-term corporate bond holdings. |
* | Duration is the average amount of time that it takes to receive the interest and principal of a bond or portfolio of bonds. The duration formula is based on a formula that calculates the weighted average of the cash flows (interest and principal payments) of the bond, discounted to present time. |
6
Understanding and Comparing
Your Fund’s Expenses
As a shareholder of the Fund, you incur ongoing expenses, such as management fees, distribution and/or service (12b-1) fees (as applicable), and other Fund expenses. The information below is intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to compare them with the ongoing expenses of investing in other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing expenses only and do not reflect any transactional costs, such as sales charges (also known as loads) on certain purchases or redemptions. Therefore, the table is useful in comparing ongoing expenses only, and will not help you to determine the relative total expenses of owning different funds. In addition, if transactional costs were included, your total expenses would have been higher.
The table is based on an investment of $1,000 invested at the beginning of January 1, 2007 and held for the entire six-month period ended June 30, 2007.
Actual Expenses
The table below provides information about actual expenses and actual account values. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value at the beginning of the period by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During Period” for the Fund’s share class that you own to estimate the expenses that you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The table below also provides information about hypothetical expenses and hypothetical account values based on the actual expense ratio of each class and an assumed rate of return of 5% per year before expenses, which is not the actual return of any class of the Fund. The hypothetical expenses and account values may not be used to estimate the ending account value or the actual expenses you paid for the period. You may use this information to compare the ongoing expenses of investing in the Fund and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds.
Actual | Hypothetical | |||||||||||||||||||
Beginning | Ending | Ending | ||||||||||||||||||
Account | Annualized | Account | Expenses Paid | Account | Expenses Paid | |||||||||||||||
Value | Expense | Value | During Period** | Value | During Period** | |||||||||||||||
1/1/07 | Ratio* | 6/30/07 | 1/1/07 to 6/30/07 | 6/30/07 | 1/1/07 to 6/30/07 | |||||||||||||||
Class A | $ | 1,000.00 | 1.37 | % | $ | 1,030.30 | $6.88 | $ | 1,018.02 | $6.84 | ||||||||||
Class B | 1,000.00 | 2.12 | 1,026.60 | 10.65 | 1,014.28 | 10.59 | ||||||||||||||
Class C | 1,000.00 | 2.12 | 1,026.50 | 10.65 | 1,014.28 | 10.59 | ||||||||||||||
Class D | 1,000.00 | 2.12 | 1,026.50 | 10.65 | 1,014.28 | 10.59 | ||||||||||||||
Class I | 1,000.00 | 1.03 | 1,029.20 | 5.16 | 1,019.71 | 5.14 | ||||||||||||||
Class R | 1,000.00 | 1.62 | 1,029.00 | 8.16 | 1,016.75 | 8.11 |
* | Expenses of Class B, Class C, Class D, Class I and Class R shares differ from the expenses of Class A shares due to the differences in 12b-1 fees and other class-specific expenses paid by each share class. See the Fund’s prospectuses for a description of each share class and its fees, expenses and sales charges. |
** | Expenses are equal to the annualized expense ratio based on actual expenses for the period January 1, 2007 to June 30, 2007, multiplied by the average account value over the period, multiplied by 181/365 (number of days in the period). |
7
Portfolio of Investments
June 30, 2007
Principal | ||||||
Amount | Value | |||||
Corporate Bonds 80.5% | ||||||
Aerospace 1.7% | ||||||
Hawker Beechcraft: | ||||||
8.5%, 4/1/2015* | $450,000 | $465,750 | ||||
8.875%, 4/1/2015* | 450,000 | 464,625 | ||||
9.75%, 4/1/2017* | 225,000 | 235,687 | ||||
L3 Communications: | ||||||
6.125%, 7/15/2013 | 900,000 | 855,000 | ||||
5.875%, 1/15/2015 | 1,940,000 | 1,809,050 | ||||
Sequa 9%, 8/1/2009 | 1,250,000 | 1,296,875 | ||||
5,126,987 | ||||||
Airlines 0.7% | ||||||
Continental Airlines 8.75%, 12/1/2011 | 2,000,000 | 1,970,000 | ||||
Automobiles 1.6% | ||||||
Ford Motor 7.45%, 7/16/2031 | 2,000,000 | 1,607,500 | ||||
Ford Motor Credit 8.625%, 11/1/2010 | 925,000 | 940,179 | ||||
General Motors 8.375%, 7/15/2033 | 1,800,000 | 1,651,500 | ||||
Goodyear Tire and Rubber 9%, 7/1/2015 | 13,668 | 14,730 | ||||
Westinghouse Air Brake Technologies 6.875%, 7/31/2013 | 500,000 | 495,000 | ||||
4,708,909 | ||||||
Broadband and Fiber Optics 0.5% | ||||||
Level 3 Financing: | ||||||
9.25%, 11/1/2014 | 1,000,000 | 1,015,000 | ||||
9.15%, 2/15/2015*# | 500,000 | 502,500 | ||||
1,517,500 | ||||||
Broadcasting 0.0% | ||||||
Sinclair Broadcast Group 8%, 3/15/2012 | 8,798 | 9,062 | ||||
Building Products 0.6% | ||||||
Ply Gem Industries 9%, 2/15/2012 | 950,000 | 858,562 | ||||
Texas Industries 7.25%, 7/15/2013 | 1,050,000 | 1,057,875 | ||||
1,916,437 | ||||||
Cable 3.0% | ||||||
Charter Communications Holding I: | ||||||
13.5%, 1/15/2014 | 2,575,000 | 2,655,469 | ||||
11%, 10/1/2015 | 1,900,000 | 1,992,625 | ||||
Charter Communications Holdings II 10.25%, 9/15/2010 | 1,000,000 | 1,050,000 | ||||
CSC Holdings 6.75%, 4/15/2012 | 1,000,000 | 955,000 | ||||
Liberty Media 8.5%, 7/15/2029 | 1,000,000 | 1,003,670 | ||||
Mediacom Broadband 8.5%, 10/15/2015* | 1,000,000 | 1,010,000 | ||||
8,666,764 |
See footnotes on page 17.
8
Portfolio of Investments
June 30, 2007
Principal | ||||||
Amount | Value | |||||
Capital Goods 2.1% | ||||||
Clarke American: | ||||||
10.106%, 5/15/2015*# | $950,000 | $919,125 | ||||
9.5%, 5/15/2015* | 1,950,000 | 1,876,875 | ||||
Norcross Safety Products 9.875%, 8/15/2011 | 3,100,000 | 3,270,500 | ||||
6,066,500 | ||||||
Chemicals 2.9% | ||||||
Equistar Chemicals 10.125%, 9/1/2008 | 12,642 | 13,211 | ||||
KI Holdings 0% (9.875%†), 11/15/2014 | 2,700,000 | 2,322,000 | ||||
Lyondell Chemical: | ||||||
10.5%, 6/1/2013 | 1,950,000 | 2,115,750 | ||||
8%, 9/15/2014 | 1,000,000 | 1,032,500 | ||||
MacDermid 9.5%, 4/15/2017* | 975,000 | 984,750 | ||||
Mosaic 7.625% 12/1/2016* | 950,000 | 976,125 | ||||
Nova Chemicals 8.484%, 11/15/2013# | 1,000,000 | 1,005,000 | ||||
8,449,336 | ||||||
Consumer Products 4.0% | ||||||
ACCO Brands 7.625%, 8/15/2015 | 2,400,000 | 2,370,000 | ||||
Jarden 7.5%, 5/1/2017 | 950,000 | 942,875 | ||||
Jostens 0% (10.25%†), 12/1/2013 | 3,525,000 | 3,251,813 | ||||
Playtex 8%, 3/1/2011 | 1,950,000 | 2,018,250 | ||||
Reynolds American 7.625%, 6/1/2016 | 3,000,000 | 3,191,373 | ||||
11,774,311 | ||||||
Containers and Packaging 2.1% | ||||||
AEP Industries 7.875%, 3/15/2013 | 1,375,000 | 1,381,875 | ||||
Berry Plastics: | ||||||
8.875%, 9/15/2014* | 800,000 | 814,000 | ||||
9.235%, 9/15/2014*# | 500,000 | 507,500 | ||||
Crown Cork & Seal 8%, 4/15/2023 | 975,000 | 945,750 | ||||
Owens-Brockway Glass Container 8.25%, 5/15/2013 | 1,900,000 | 1,976,000 | ||||
Silgan Holdings 6.75%, 11/15/2013 | 500,000 | 491,250 | ||||
6,116,375 | ||||||
Diversified Telecommunication 2.8% | ||||||
Citizens Communications 9.25%, 5/15/2011 | 1,185,000 | 1,285,725 | ||||
Nordic 8.875%, 5/1/2016* | 1,500,000 | 1,597,500 | ||||
Qwest: | ||||||
7.5%, 10/1/2014 | 2,450,000 | 2,523,500 | ||||
6.875%, 9/15/2033 | 500,000 | 471,250 | ||||
Qwest Communications: | ||||||
8.86%, 2/15/2009# | 667,000 | 677,005 | ||||
6.5%, 6/1/2017* | 800,000 | 766,000 | ||||
Syniverse Technologies 7.75%, 8/15/2013 | 950,000 | 912,000 | ||||
8,232,980 |
See footnotes on page 17.
9
Portfolio of Investments
June 30, 2007
Principal | |||||
Amount | Value | ||||
Electric 4.0% | |||||
Aquila 14.875%, 7/1/2012 | $1,800,000 | $2,304,000 | |||
CMS Energy 7.5%, 1/15/2009 | 2,700,000 | 2,782,242 | |||
Midwest Generation 8.3%, 7/2/2009 | 1,643,438 | 1,677,334 | |||
MSW Energy Holdings 8.5%, 9/1/2010 | 2,475,000 | 2,592,563 | |||
Sierra Pacific Resources 8.625%, 3/15/2014 | 609,000 | 656,692 | |||
TXU 5.55%, 11/15/2014 | 2,000,000 | 1,707,854 | |||
11,720,685 | |||||
Energy 1.7% | |||||
Atlas Pipeline Partners 8.125%, 12/15/2015 | 950,000 | 952,375 | |||
Calfrac Well Services 7.75%, 2/15/2015* | 950,000 | 914,375 | |||
Complete Production Services 8%, 12/15/2016* | 500,000 | 507,500 | |||
El Paso 7%, 6/15/2017 | 2,000,000 | 1,988,088 | |||
Energy Partners 9.75%, 4/15/2014* | 470,000 | 468,825 | |||
Opti Canada 8.25%, 12/15/2014* | 250,000 | 255,000 | |||
5,086,163 | |||||
Environmental 0.5% | |||||
Browning-Ferris Industries 7.4%, 9/15/2035 | 1,500,000 | 1,417,500 | |||
Finance 2.8% | |||||
E*TRADE Financial 7.375%, 9/15/2013 | 1,425,000 | 1,453,500 | |||
General Motors Acceptance 8%, 11/1/2031 | 2,025,000 | 2,076,324 | |||
Kar Holdings: | |||||
8.75%, 5/1/2014* | 475,000 | 467,875 | |||
10%, 5/1/2015* | 475,000 | 465,500 | |||
Merisant Worldwide 0% (12.25%†), 5/15/2014 | 1,425,000 | 847,875 | |||
Neff 10%, 6/1/2015* | 1,000,000 | 1,002,500 | |||
SGS International 12%, 12/15/2013 | 950,000 | 1,040,250 | |||
USI Holdings: | |||||
9.23%, 11/15/2014*# | 225,000 | 225,000 | |||
9.75%, 5/15/2015* | 225,000 | 225,000 | |||
Ventas Realty 6.75%, 6/1/2010 | 500,000 | 507,500 | |||
8,311,324 | |||||
Food and Beverage 3.9% | |||||
Chiquita Brands International 8.875%, 12/1/2015 | 1,000,000 | 948,750 | |||
Dean Foods 7%, 6/1/2016 | 1,000,000 | 960,000 | |||
Del Monte: | |||||
8.625%, 12/15/2012 | 1,950,000 | 2,023,125 | |||
6.75%, 2/15/2015 | 675,000 | 646,312 | |||
Pilgrims Pride 8.375%, 5/1/2017 | 1,700,000 | 1,691,500 | |||
Reddy Ice Holdings 0% (10.5%†), 11/1/2012 | 3,800,000 | 3,591,000 | |||
Smithfield Foods: | |||||
7%, 8/1/2011 | 500,000 | 500,000 | |||
7.75%, 7/1/2017 | 1,000,000 | 1,005,000 | |||
11,365,687 |
See footnotes on page 17.
10
Portfolio of Investments
June 30, 2007
Principal | ||||||
Amount | Value | |||||
Food and Staples Retailing 1.4% | ||||||
Duane Reade 9.75%, 8/1/2011 | $1,150,000 | $1,129,875 | ||||
Rite Aid: | ||||||
8.625%, 3/1/2015 | 975,000 | 916,500 | ||||
7.5%, 3/1/2017 | 975,000 | 945,750 | ||||
Stater Brothers Holdings 8.125%, 6/15/2012 | 500,000 | 506,250 | ||||
Susser Holdings 10.625%, 12/15/2013 | 670,000 | 730,300 | ||||
4,228,675 | ||||||
Gaming 2.2% | ||||||
Inn Of The Mountain Gods 12%, 11/15/2010 | 1,175,000 | 1,266,062 | ||||
Mandalay Resort Group 9.375%, due 2/15/2010 | 2,750,000 | 2,915,000 | ||||
San Pasqual 8%, 9/15/2013* | 950,000 | 964,250 | ||||
Station Casinos 6.875%, 3/1/2016 | 1,350,000 | 1,198,125 | ||||
6,343,437 | ||||||
Healthcare Facilities and Supplies 5.0% | ||||||
Advanced Medical Optics 7.5%, 5/1/2017* | 475,000 | 451,250 | ||||
Cardinal Health 409 9.5%, 4/15/2015* | 850,000 | 839,375 | ||||
Centene 7.25%, 4/1/2014* | 1,000,000 | 990,000 | ||||
DaVita 7.25%, 3/15/2015 | 1,500,000 | 1,488,750 | ||||
Fresenius Medical Care Capital Trust 7.875%, 6/15/2011 | 1,940,000 | 2,017,600 | ||||
HCA: | ||||||
9.125%, 11/15/2014* | 500,000 | 526,875 | ||||
6.5%, 2/15/2016 | 1,900,000 | 1,617,375 | ||||
9.25%, 11/15/2016* | 500,000 | 533,750 | ||||
7.5%, 11/6/2033 | 1,900,000 | 1,619,750 | ||||
HealthSouth: | ||||||
11.409%, 6/15/2014*# | 1,000,000 | 1,085,000 | ||||
10.75%, 6/15/2016* | 1,000,000 | 1,090,000 | ||||
Invacare 9.75%, 2/15/2015* | 500,000 | 506,250 | ||||
Omega Healthcare Investors 7%, 1/15/2016 | 1,950,000 | 1,950,000 | ||||
Triad Hospitals 7%, 11/15/2013 | 20,000 | 21,074 | ||||
14,737,049 | ||||||
Home Builders 1.3% | ||||||
K. Hovnanian Enterprises: | ||||||
8.875%, 4/1/2012 | 1,000,000 | 925,000 | ||||
6.5%, 1/15/2014 | 500,000 | 445,000 | ||||
KB Home: | ||||||
7.75%, 2/1/2010 | 500,000 | 500,000 | ||||
6.25%, 6/15/2015 | 500,000 | 442,500 | ||||
Standard PAC 9.25%, 4/15/2012 | 500,000 | 475,000 | ||||
WCI Communities 9.125%, 5/1/2012 | 1,000,000 | 970,000 | ||||
3,757,500 | ||||||
Leisure 0.7% | ||||||
HRP Myrtle Beach Operations 10.07%, 4/1/2012*# | 1,000,000 | 1,005,000 | ||||
Universal City Florida Holding 10.106%, 5/1/2010# | 1,000,000 | 1,025,000 | ||||
2,030,000 |
See footnotes on page 17.
11
Portfolio of Investments
June 30, 2007
Principal | ||||||
Amount | Value | |||||
Lodging 2.3% | ||||||
Felcor Lodging 8.5%, 6/1/2011 | $2,625,000 | $2,772,656 | ||||
Hilton Hotels 7.625%, 12/1/2012 | 1,940,000 | 2,015,175 | ||||
Host Marriott 6.75%, 6/1/2016 | 1,925,000 | 1,896,125 | ||||
6,683,956 | ||||||
Metals and Mining 3.5% | ||||||
Aleris 10%, 12/15/2016* | 1,000,000 | 997,500 | ||||
FMG Finance 10%, 9/1/2013* | 2,000,000 | 2,240,000 | ||||
Gerdau Ameristeel 10.375%, 7/15/2011 | 1,750,000 | 1,855,000 | ||||
Massey Energy 6.875%, 12/15/2013 | 500,000 | 460,625 | ||||
Peabody Energy 6.875%, 3/15/2013 | 500,000 | 500,000 | ||||
PNA Group 10.75%, 9/1/2016* | 1,000,000 | 1,095,000 | ||||
Ryerson Tull 8.25%, 12/15/2011 | 1,050,000 | 1,060,500 | ||||
UCAR Finance 10.25%, 2/15/2012 | 1,995,000 | 2,099,738 | ||||
10,308,363 | ||||||
Miscellaneous 0.6% | ||||||
TRAINS HY-1-2006 7.548%, 5/1/2016* | 1,700,000 | 1,673,288 | ||||
Oil, Gas and Consumable Fuels 2.4% | ||||||
Chesapeake Energy 6.5%, 8/15/2017 | 2,925,000 | 2,786,062 | ||||
Forest Oil 7.25%, 6/15/2019* | 2,000,000 | 1,950,000 | ||||
Mariner Energy 8%, 5/15/2017 | 950,000 | 947,625 | ||||
Petrohawk Energy 9.125%, 7/15/2013 | 1,000,000 | 1,062,500 | ||||
W & T Offshore 8.25%, 6/15/2014* | 500,000 | 496,250 | ||||
7,242,437 | ||||||
Paper and Forest Products 2.5% | ||||||
Bowater 6.5%, 6/15/2013 | 1,250,000 | 1,092,187 | ||||
Domtar 7.875%,10/15/2011 | 950,000 | 977,312 | ||||
Georgia-Pacific 8.875%, 5/15/2031 | 3,000,000 | 3,007,500 | ||||
Jefferson Smurfit 8.25%, 10/1/2012 | 1,200,000 | 1,197,000 | ||||
Verso Paper Holdings 9.125%, 8/1/2014* | 1,000,000 | 1,037,500 | ||||
7,311,499 | ||||||
Publishing 3.1% | ||||||
Dex Media 0% (9%†), 11/15/2013 | 3,225,000 | 3,051,656 | ||||
Idearc 8%, 11/15/2016* | 2,000,000 | 2,030,000 | ||||
R H Donnelley 8.875%, 1/15/2016 | 2,975,000 | 3,108,875 | ||||
Readers Digest 9%, 2/15/2017* | 1,000,000 | 940,000 | ||||
9,130,531 | ||||||
Road and Rail 0.7% | ||||||
American Railcar Industries 7.5%, 3/1/2014 | 1,000,000 | 1,000,000 | ||||
Bristow Group 7.5%, 9/15/2017* | 1,000,000 | 1,007,500 | ||||
2,007,500 |
See footnotes on page 17.
12
Portfolio of Investments
June 30, 2007
Principal | ||||
Amount | Value | |||
Satellite 2.2% | ||||
Echostar DBS: | ||||
7%, 10/1/2013 | $2,000,000 | $1,980,000 | ||
7.125%, 2/1/2016 | 2,850,000 | 2,800,125 | ||
Sirius Satellite Radio 9.625%, 8/1/2013 | 1,000,000 | 985,000 | ||
XM Satellite Radio 9.856%, 5/1/2013# | 800,000 | 776,000 | ||
6,541,125 | ||||
Services 4.0% | ||||
Ashtead 9%, 8/15/2016* | 1,000,000 | 1,052,500 | ||
Avis Budget Car Rental 7.86%, 5/15/2014*# | 1,250,000 | 1,275,000 | ||
Hertz 8.875%, 1/1/2014 | 1,900,000 | 1,990,250 | ||
Rental Service 9.5%, 12/1/2014* | 1,000,000 | 1,025,000 | ||
Service Corporation 7%, 6/15/2017 | 3,450,000 | 3,303,375 | ||
West 11%, 10/15/2016* | 2,000,000 | 2,100,000 | ||
Williams Scotsman 8.5%, 10/1/2015 | 950,000 | 985,625 | ||
11,731,750 | ||||
Stores 0.9% | ||||
Asbury Automotive Group 7.625%, 3/15/2017* | 500,000 | 495,000 | ||
Michaels Stores 11.375%, 11/1/2016* | 1,000,000 | 1,050,000 | ||
Neiman Marcus 9%, 10/15/2015 | 950,000 | 1,021,250 | ||
2,566,250 | ||||
Technology 6.3% | ||||
Amkor Technology 9.25%, 6/1/2016 | 1,000,000 | 1,035,000 | ||
Freescale Semiconductor 10.125%, 12/15/2016* | 2,300,000 | 2,173,500 | ||
Ikon Office Solutions 7.75%, 9/15/2015 | 2,850,000 | 2,914,735 | ||
Nortel Networks 10.75%, 7/15/2016* | 1,000,000 | 1,110,000 | ||
Seagate Technology 6.375%, 10/1/2011 | 1,950,000 | 1,911,000 | ||
Serena Software 10.375%, 3/15/2016 | 950,000 | 1,028,375 | ||
STATS Chip Pac 7.5%, 7/19/2010 | 2,700,000 | 2,781,000 | ||
Sunguard Data System 9.125%, 8/15/2013 | 1,500,000 | 1,543,125 | ||
Viasystems 10.5%, 1/15/2011 | 1,175,000 | 1,204,375 | ||
Xerox 9.75%, 1/15/2009 | 2,625,000 | 2,777,782 | ||
18,478,892 | ||||
Textile, Apparel and Shoes 0.7% | ||||
Quiksilver 6.875%, 4/15/2015 | 2,125,000 | 2,008,125 | ||
Utilities 4.4% | ||||
AES 9.375%, 9/15/2010 | 4,500,000 | 4,809,375 | ||
Allegheny Energy Supply 7.8%, 3/15/2011 | 2,000,000 | 2,085,000 | ||
Dynegy Holdings: | ||||
8.75%, 2/15/2012 | 975,000 | 1,009,125 | ||
8.375%, 5/1/2016 | 2,375,000 | 2,333,438 | ||
Edison Mission Energy 7%, 5/15/2017* | 900,000 | 852,750 | ||
NRG Energy 7.375%, 2/1/2016 | 1,900,000 | 1,909,500 | ||
12,999,188 |
See footnotes on page 17.
13
Portfolio of Investments
June 30, 2007
Principal | |||||
Amount or | |||||
Shares | Value | ||||
Wireless Telecommunication Services 1.4% | |||||
Dobson Communications 9.606%, 10/15/2012# | $1,000,000 | $1,025,000 | |||
MetroPCS Wireless 9.25%, 11/1/2014* | 1,000,000 | 1,037,500 | |||
Rogers Wireless 7.25%, 12/15/2012 | 1,940,000 | 2,050,665 | |||
4,113,165 | |||||
Total Corporate Bonds (Cost $236,280,300) | 236,349,250 | ||||
Common Stocks 9.4% | |||||
Aerospace and Defense 0.5% | |||||
BE Aerospace** | 13,485 | shs. | 556,930 | ||
DRS Technologies | 5,190 | 297,231 | |||
Hexcel** | 24,000 | 505,680 | |||
1,359,841 | |||||
Airlines 0.0% | |||||
Continental Airlines** | 3,000 | 101,600 | |||
Automobiles 0.3% | |||||
Honda Motor (ADR) | 11,710 | 424,956 | |||
Toyota Motor (ADR) | 3,500 | 440,580 | |||
865,536 | |||||
Beverages 0.1% | |||||
Constellation Brands (Class A)** | 10,370 | 251,784 | |||
Capital Markets 0.1% | |||||
E*TRADE Financial** | 18,320 | 404,689 | |||
Commercial Services and Supplies 0.4% | |||||
Allied Waste Industries** | 23,900 | 321,694 | |||
Corrections Corporation of America** | 8,775 | 553,790 | |||
Mobile Mini** | 13,155 | 384,126 | |||
1,259,610 | |||||
Communications Equipment 0.1% | |||||
Corning** | 11,080 | 283,094 | |||
Computers and Peripherals 0.3% | |||||
Apple** | 3,570 | 435,683 | |||
Seagate Technology | 18,440 | 401,439 | |||
837,122 | |||||
Containers and Packaging 0.7% | |||||
Ball | 8,300 | 441,311 | |||
Crown Holdings** | 18,320 | 457,450 | |||
Owens-Illinois** | 14,950 | 523,250 | |||
Silgan Holdings | 8,870 | 490,334 | |||
1,912,345 | |||||
Diversified Telecommunication 0.3% | |||||
Citizens Communications | 24,700 | 377,169 | |||
Qwest Communications** | 42,890 | 416,033 | |||
793,202 |
See footnotes on page 17.
14
Portfolio of Investments
June 30, 2007
Shares | Value | |||
Electric Utilities 0.3% | ||||
Allegheny Energy** | 6,540 | $338,380 | ||
Sierra Pacific Resources** | 21,300 | 374,028 | ||
712,408 | ||||
Electronic Equipment and Instruments 0.1% | ||||
Flextronics International** | 29,840 | 322,271 | ||
Food Products 0.2% | ||||
Pilgrim’s Pride | 13,940 | 532,090 | ||
Health Care Facilities and Supplies 0.1% | ||||
Advanced Medical Optics** | 10,900 | 380,192 | ||
Hotels, Restaurants and Leisure 0.3% | ||||
Boyd Gaming | 4,870 | 239,555 | ||
Domino’s Pizza** | 16,350 | 298,715 | ||
Isle of Capri Casinos** | 8,250 | 197,670 | ||
Las Vegas Sands** | 3,220 | 245,976 | ||
981,916 | ||||
Household Durables 0.3% | ||||
D.R. Horton | 11,550 | 230,192 | ||
Lennar | 5,770 | 210,951 | ||
Standard Pacific | 9,780 | 171,443 | ||
Toll Brothers** | 12,250 | 306,005 | ||
918,591 | ||||
Independent Power Producers and Energy Traders 0.1% | ||||
AES** | 15,620 | 341,766 | ||
Index Derivatives 2.8% | ||||
iShares Russell 2000 Index Fund | 47,670 | 3,954,703 | ||
SPDR Trust Series 1 | 27,990 | 4,210,536 | ||
8,165,239 | ||||
Internet Software and Services 0.1% | ||||
Yahoo!** | 11,528 | 312,755 | ||
Media 0.1% | ||||
Charter Communications** | 80,000 | 324,000 | ||
Metals and Mining 0.4% | ||||
Alcan | 2,090 | 169,917 | ||
Companhia Vale do Rio Doce “CVRD” (ADR) | 11,790 | 525,245 | ||
Freeport-McMoRan Copper & Gold (Class B) | 4,835 | 400,435 | ||
Reliance Steel and Aluminum | 3,010 | 169,343 | ||
1,264,940 | ||||
Multi-Utilities 0.2% | ||||
Aquila** | 49,010 | 200,452 | ||
TECO Energy | 21,060 | 361,811 | ||
562,263 |
See footnotes on page 17.
15
Portfolio of Investments
June 30, 2007
Shares or | |||||||||
Principal | Value | ||||||||
Amount | |||||||||
Oil, Gas and Consumable Fuels 0.6% | |||||||||
Chesapeake Energy | 12,510 | shs. | $432,846 | ||||||
El Paso | 26,780 | 461,420 | |||||||
Peabody Energy | 7,795 | 377,122 | |||||||
Williams Companies | 13,590 | 429,716 | |||||||
1,701,104 | |||||||||
Paper and Forest Products 0.1% | |||||||||
Domtar** | 22,760 | 254,002 | |||||||
Real Estate Investment Trusts 0.2% | |||||||||
Omega Healthcare Investors | 19,430 | 307,577 | |||||||
Senior Housing Properties Trust | 14,840 | 301,995 | |||||||
609,572 | |||||||||
Road and Rail 0.1% | |||||||||
Burlington Northern Santa Fe | 4,880 | 415,484 | |||||||
Semiconductors and Semiconductor Equipment 0.2% | |||||||||
Applied Materials | 21,780 | 432,770 | |||||||
Thrifts and Mortgage Finance 0.1% | |||||||||
Countrywide Financial | 6,100 | 221,735 | |||||||
Tobacco 0.1% | |||||||||
Reynolds American | 5,130 | 334,477 | |||||||
Trading Companies and Distributors 0.1% | |||||||||
Williams Scotsman International** | 13,720 | 326,674 | |||||||
Wireless Telecommunication Services 0.1% | |||||||||
MetroPCS Communications** | 9,000 | 297,360 | |||||||
Total Common Stocks (Cost $25,772,352) | 27,480,432 | ||||||||
Short-Term Holdings 7.9% | |||||||||
Equity-Linked Notes †† 5.4% | |||||||||
Deutsche Bank: | |||||||||
34.9%, 8/23/2007 (1) (a) | $1,000,000 | 907,491 | |||||||
30.1%, 9/5/2007 (1) (b) | 1,000,000 | 967,968 | |||||||
Goldman Sachs Group: | |||||||||
33%, 8/6/2007 (1) (c) | 1,000,000 | 932,588 | |||||||
34.8%, 8/9/2007 (1) (d) | 1,000,000 | 959,141 | |||||||
30.8%, 9/4/2007 (1) (e) | 1,000,000 | 1,001,183 | |||||||
20%, 10/10/2007 (3) (m) | 4,000,000 | 3,674,236 | |||||||
Lehman Brothers 39.7%, 12/20/2007 (2) (i) | 3,000,000 | 2,941,082 | |||||||
Merrill Lynch 30%, 10/3/2007 (1) (f) | 500,000 | 445,975 | |||||||
Morgan Stanley: | |||||||||
31.9%, 8/23/2007 (2) (j) | 1,000,000 | 956,811 | |||||||
30%, 8/31/2007 (1) (g) | 1,000,000 | 986,680 | |||||||
30.35%, 9/6/2007 (2) (k) | 1,000,000 | 846,578 | |||||||
35.3%, 9/6/2007 (2) (l) | 1,000,000 | 849,689 | |||||||
30%, 10/19/2007 (1) (h) | 500,000 | 512,440 | |||||||
Total Equity-Linked Notes (Cost $17,000,000) | 15,981,862 |
See footnotes on page 17.
16
Portfolio of Investments
June 30, 2007
Principal | ||||
Amount | Value | |||
Time Deposit 2.5% | ||||
Citibank, Nassau, 5.19%, 7/2/2007 (Cost $7,255,000) | $7,255,000 | $7,255,000 | ||
Total Short-Term Investments (Cost $24,255,000) | 23,236,862 | |||
Total Investments (Cost $286,307,652) 97.8% | 287,066,544 | |||
Other Assets Less Liabilities 2.2% | 6,344,220 | |||
Net Assets 100.0% | $293,410,764 |
* | The security may be offered and sold only to “qualified institutional buyers” under Rule 144A of the Security Act of 1933. | ||
** | Non-income producing security. | ||
# | Floating rate security, the interest rate is reset periodically. The interest rate disclosed reflects the rate in effect at June 30, 2007. | ||
† | Deferred-interest debentures pay no interest for a stipulated number of years, after which they pay the indicated coupon rate. | ||
†† | The security may be offered and sold only to a “qualified institutional buyer” under Rule 144A of the Securities Act of 1933. These notes are exchangeable at maturity, based on the terms of the respective notes, for shares of common stock of a company or cash at a maturity value which is generally determined as follows: | ||
(1) | The principal amount of the notes plus or minus the lesser of A) the lowest return of the company’s or companies’ respective stock price(s) determined at maturity from the date of purchase of the notes, or B) the percent limit indicated below in parentheses: | ||
(a) | Amdocs, Boston Scientific and Palm (+10%) | ||
(b) | Alcatel-Lucent, BEA Systems and Best Buy (+5%) | ||
(c) | Motorola, SanDisk and Yahoo! (+10%) | ||
(d) | KLA-Tencor, Peabody Energy and Urban Outfitters (+10%) | ||
(e) | BEA Systems, Sprint Nextel and Weatherford International (+10%) | ||
(f) | Archer-Daniels-Midland, Countrywide Financial and Foot Locker (+10%) | ||
(g) | Coldwater Creek, Comverse Technology and Halliburton (+10%) | ||
(h) | Adams Respiratory Therapeutics, Alcatel-Lucent and UTI Worldwide (+9%) | ||
(2) | A) If the stock price of any of the companies falls by the percentage indicated below in parentheses at any time during the period from the date of purchase of the notes to maturity, the lesser of i) the principal amount of the notes, or ii) the principal amount of the notes plus or minus the lowest return of the companies’ respective stock prices determined at maturity from the date of purchase of the notes; or otherwise B) the principal amount of the notes: | ||
(i) | Advanced Micro Devices, Foot Locker and Massey Energy (more than 20%) | ||
(j) | Advanced Micro Devices, Alcoa and Bristol-Myers Squibb (20% or more) | ||
(k) | Corning, Las Vegas Sands and Smurfit-Stone Container (20% or more) | ||
(l) | Broadcom, Herbalife and Rite Aid (20% or more) | ||
(3) | A) If all of the companies’ final stock prices determined at maturity equal or exceed their respective initial stock prices on the date of purchase of the notes, the principal amount of the notes plus the lesser of i) the lowest return of the companies’ respective stock prices determined at maturity, or ii) the percent limit indicated below in parentheses; or otherwise B) i) if the stock price of any of the companies falls more than 30% at any time during the period from thedate of purchase of the notes to maturity, the principal amount of the notes minus the lowest return of the companies’ respective stock prices determined at maturity, or ii) the principal amount of the notes: | ||
(m) | AMR, Continental Airlines and UAL (+11%) | ||
ADR — American Depositary Receipts. | |||
Industry classifications have not been audited by Deloitte & Touche. | |||
See Notes to Financial Statements. |
17
Statement of Assets and Liabilities
June 30, 2007
Assets: | |||
Investments, at value: | |||
Corporate bonds (cost $236,280,300) | $236,349,250 | ||
Common stocks (cost $25,772,352) | 27,480,432 | ||
Equity-linked notes (cost $17,000,000) | 15,981,862 | ||
Time deposit (cost $7,255,000) | 7,255,000 | ||
Total investments (cost $286,307,652) | 287,066,544 | ||
Cash (includes restricted cash of $4,000) | 11,460 | ||
Dividends and interest receivable | 5,725,841 | ||
Receivable for securities sold | 3,525,633 | ||
Receivable for shares of Beneficial Interest sold | 516,622 | ||
Expenses prepaid to shareholder service agent | 21,973 | ||
Other | 35,564 | ||
Total Assets: | 296,903,637 | ||
Liabilities: | |||
Payable for shares of Beneficial Interest repurchased | 1,912,563 | ||
Dividends payable | 779,217 | ||
Payable for securities purchased | 391,423 | ||
Management fee payable | 162,463 | ||
Distribution and service (12b-1) fees payable | 130,992 | ||
Accrued expenses and other | 116,215 | ||
Total Liabilities | 3,492,873 | ||
Net Assets | $293,410,764 | ||
Composition of Net Assets: | |||
Shares of Beneficial Interest, at par (unlimited shares authorized; | |||
$0.001 par value; 86,834,079 shares outstanding): | |||
Class A | $51,829 | ||
Class B | 9,993 | ||
Class C | 6,447 | ||
Class D | 15,701 | ||
Class I | 2,210 | ||
Class R | 654 | ||
Additional paid-in capital | 1,733,370,300 | ||
Undistributed net investment income (Note 6) | 1,425,206 | ||
Accumulated net realized loss (Note 6) | (1,442,230,468 | ) | |
Net unrealized appreciation of investments | 758,892 | ||
Net Assets | $293,410,764 | ||
Net Asset Value Per Share: | |||
Class A ($174,963,023 ÷ 51,828,932 shares) | $3.38 | ||
Class B ($33,756,404 ÷ 9,993,144 shares) | $3.38 | ||
Class C ($21,835,873 ÷ 6,446,487 shares) | $3.39 | ||
Class D ($53,186,914 ÷ 15,701,489 shares) | $3.39 | ||
Class I ($7,459,920 ÷ 2,210,351 shares) | $3.37 | ||
Class R ($2,208,630 ÷ 653,676 shares) | $3.38 |
See Notes to Financial Statements.
18
Statement of Operations
For the Six Months Ended June 30, 2007
Investment Income: | |||
Interest | $12,641,297 | ||
Dividends (net of foreign taxes withheld of $424) | 314,752 | ||
Other income | 668,586 | ||
Total Investment Income | 13,624,635 | ||
Expenses: | |||
Management fee | 1,030,120 | ||
Distribution and service (12b-1) fees | 858,773 | ||
Shareholder account services | 504,904 | ||
Registration | 59,506 | ||
Custody and related services | 53,904 | ||
Auditing and legal fees | 38,977 | ||
Shareholder reports and communications | 32,282 | ||
Directors’ fees and expenses | 7,615 | ||
Miscellaneous | 22,415 | ||
Total Expenses | 2,608,496 | ||
Net Investment Income | 11,016,139 | ||
Net Realized And Unrealized Gain (Loss) on Investments: | |||
Net realized gain on investments | 7,312,611 | ||
Net change in unrealized appreciation of investments | (8,918,389 | ) | |
Net Loss on Investments | (1,605,778 | ) | |
Increase in Net Assets from Operations | $9,410,361 |
See Notes to Financial Statements.
19
Statements of Changes In Net Assets
Six Months Ended | Year Ended | |||||
June 30, 2007 | December 31, 2006 | |||||
Operations: | ||||||
Net investment income | $11,016,139 | $22,874,572 | ||||
Net realized gain on investments | 7,312,611 | 5,367,908 | ||||
Net change in unrealized appreciation of investments | (8,918,389 | ) | 3,831,562 | |||
Increase in Net Assets from Operations | 9,410,361 | 32,074,042 | ||||
Distributions to Shareholders: | ||||||
Dividends from net investment income: | ||||||
Class A | (6,049,610 | ) | (11,689,382 | ) | ||
Class B | (1,317,257 | ) | (5,115,297 | ) | ||
Class C | (740,589 | ) | (1,770,851 | ) | ||
Class D | (1,658,557 | ) | (3,700,331 | ) | ||
Class I | (255,860 | ) | (531,659 | ) | ||
Class R | (59,871 | ) | (67,052 | ) | ||
Total | (10,081,744 | ) | (22,874,572 | ) | ||
Dividends in excess of net investment income: | ||||||
Class A | — | (1,006,930 | ) | |||
Class B | — | (440,635 | ) | |||
Class C | — | (152,543 | ) | |||
Class D | — | (318,748 | ) | |||
Class I | — | (45,797 | ) | |||
Class R | — | (5,776 | ) | |||
Total | — | (1,970,429 | ) | |||
Decrease in Net Assets from Distributions | (10,081,744 | ) | (24,845,001 | ) | ||
Transactions in Shares of Beneficial Interest: | ||||||
Net proceeds from sales of shares | 10,256,924 | 19,127,082 | ||||
Investment of dividends | 5,591,335 | 13,270,708 | ||||
Exchanged from associated funds | 2,871,098 | 9,205,665 | ||||
Total | 18,719,357 | 41,603,455 | ||||
Cost of shares repurchased | (52,498,698 | ) | (123,031,462 | ) | ||
Exchanged into associated funds | (5,685,150 | ) | (13,397,308 | ) | ||
Total | (58,183,848 | ) | (136,428,770 | ) | ||
Decrease in Net Assets from Transactions in Shares | ||||||
of Beneficial Interest | (39,464,491 | ) | (94,825,315 | ) | ||
Decrease in Net Assets | (40,135,874 | ) | (87,596,274 | ) | ||
Net Assets: | ||||||
Beginning of period | 333,546,638 | 421,142,912 | ||||
End of Period (includes undistributed (dividends in excess of) | ||||||
net investment income of $1,425,206 and $(204,231), respectively) | $293,410,764 | $333,546,638 |
See Notes to Financial Statements.
20
Notes to Financial Statements
1. | Organization and Multiple Classes of Shares — Seligman High-Yield Fund (the “Fund”) is a series of Seligman High Income Fund Series (the “Series”) which is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end diversified management investment company. The Fund offers the following six 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. Eligible employee benefit plans that have at least $500,000 invested in the Seligman Group of mutual funds or 50 eligible employees may purchase Class A shares at net asset value, but in the event of a plan termination, will be subject to a CDSC of 1% on redemption of shares purchased within 18 months prior to plan termination. | ||
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 approximately eight years after their date of purchase. If Class B shares of the Fund are exchanged for Class B shares of another Seligman mutual fund, the holding period of the shares exchanged will be added to the holding period of the shares acquired, both for determining the applicable CDSC and the conversion of Class B shares to Class A shares. | ||
Class C and 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. | ||
Prior to June 4, 2007, Class C shares were sold primarily with an initial sales charge of up to 1%, and a CDSC, if applicable, of 1% imposed on redemptions made within 18 months of purchase; and shares purchased through certain financial intermediaries were bought without an initial sales charge and with a 1% CDSC on redemptions made within 12 months of purchase. | ||
Class I shares are offered to certain institutional clients and other investors, as described in the Fund’s Class I shares prospectus. Class I shares are sold without any sales charges and are not subject to distribution or service fees. | ||
Class R shares are offered to certain employee benefit plans and are not available to all investors. They are sold without an initial sales charge, but are subject to a distribution fee of up to 0.25% and a service fee of up to 0.25% on an annual basis, and a CDSC, if applicable, of 1% on redemptions made within one year of a plan’s initial purchase of Class R shares. | ||
All 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 own 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 accounting principles generally accepted in the United States of America which require management to make certain estimates and assumptions at the date of the financial statements. Actual results may differ from these estimates. These interim financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. All such adjustments are of a normal recurring nature. The following summarizes the significant accounting policies of the Fund: | |
a. | Security Valuation — Securities traded on an exchange are valued at the last sales price on the primary exchange or market on which they are traded. Fixed income securities not listed on an exchange or security market are valued by independent pricing services based on bid prices, which consider such factors as coupons, maturities, credit ratings, liquidity, specific terms and features, and the US Treasury yield curve, or are valued by J. & W. Seligman & Co. Incorporated (the “Manager”) based on quotations provided by primary market makers in such securities. Equity securities not listed |
21
Notes to Financial Statements
on an exchange or security market, or equity securities for which there is no last sales price, are valued at the mean of the most recent bid and asked prices or valued by the Manager based on quotations provided by primary market makers in such securities. Securities for which market quotations are not readily available (or are otherwise no longer valid or reliable) are valued at fair value determined in accordance with procedures approved by the Trustees. This can occur in the event of, among other things, natural disasters, acts of terrorism, market disruptions, intra-day trading halts, and extreme market volatility in the US markets. The determination of fair value involves subjective judgments. As a result, using fair value to price a security may result in a price materially different from the prices used by other mutual funds to determine net asset value or the price that may be realized upon the actual sale of the security. Short-term holdings that mature in more than 60 days are valued at current market quotations. Short-term holdings maturing in 60 days or less are valued at current market quotations or amortized cost if the Manager believes it approximates fair value. | ||
b. | 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. | |
On January 1, 2007, the Fund adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109.” FIN 48 requires the Fund to recognize in its financial statements the impact of a tax position taken (or expected to be taken) on an income tax return if such position will more likely than not be sustained upon examination based on the technical merits of the position. The Fund has determined that FIN 48 did not have a material impact on the Fund’s financial statements for the six months ended June 30, 2007. | ||
c. | Security Transactions and Related Investment Income — Investment transactions are recorded on trade dates. Identified cost of investments sold is used for both financial reporting and federal income tax purposes. Dividends receivable are recorded on ex-dividend dates. Interest income is recorded on an accrual basis. The Fund amortizes discount and premium on portfolio securities for financial reporting purposes. | |
d. | Repurchase Agreements — The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund’s custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price, plus accrued interest, at all times. On a daily basis, the market value of securities held as collateral for repurchase agreements is monitored 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 (12b-1) fees and any other items that are specifically attributable to a particular class, are charged directly to such class. For the six months ended June 30, 2007, distribution and service (12b-1) fees, shareholder account services and registration expenses were class-specific expenses. | |
f. | Distributions to Shareholders — Dividends are declared daily and paid monthly. Other distributions paid by the Fund are recorded on ex-dividend dates. | |
g. | Restricted Cash — Restricted cash represents deposits that are being held by banks as collateral for letters of credit issued in connection with the Fund’s insurance policies. | |
h. | Equity-Linked Notes — The Fund may purchase notes created by a counterparty, typically an investment bank. The notes bear interest at a fixed or floating rate. At maturity, the notes must be exchanged for an amount based on the value of one or more equity securities (“Underlying Stocks”) of third party issuers. The exchange value may be limited to an amount less than the actual value of the Underlying Stocks at the maturity date. Any difference between the exchange amount and the original cost of the notes will be a gain or loss. |
22
Notes to Financial Statements
3. | 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 Series who are employees 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 0.65% per annum of the Fund’s average daily net assets. |
For the six months ended June 30, 2007, Seligman Advisors, Inc. (the “Distributor”), agent for the distribution of the Fund’s shares and an affiliate of the Manager, received commissions and concessions of $2,031 from sales of Class A and (prior to June 4, 2007) Class C shares. Commissions of $14,934 and $2,340 were also paid to dealers for 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 monthly, of the average daily net assets of the Class A shares attributable to the particular service organizations for providing personal services and/or the maintenance of shareholder accounts. The Distributor charges such fees to the Fund pursuant to the Plan. For the six months ended June 30, 2007, fees incurred under the Plan aggregated $224,120 or 0.25% per annum of the average daily net assets of Class A shares. | |
Under the Plan, with respect to Class B shares, Class C shares, Class D shares, and Class R 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, Class D, and Class R shares for which the organizations are responsible; and, for Class C, Class D, and Class R shares, fees for providing other distribution assistance of up to 0.75% (0.25%, in the case of Class R shares) 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. | |
For the six months ended June 30, 2007, 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, and 0.50% per annum of average daily net assets of Class R shares, amounted to $224,266, $125,386, $280,387, and $4,614, respectively. | |
The Distributor and Seligman Services, Inc., also an affiliate of the Manager, are eligible to receive distribution and service (12b-1) fees pursuant to the Plan. For the six months ended June 30, 2007, the Distributor and Seligman Services, Inc. received distribution and service (12b-1) fees of $9,251. | |
The Distributor is entitled to retain any CDSC imposed on certain redemptions of Class A , Class C, Class D and Class R shares. For the six months ended June 30, 2007, such charges amounted to $15,432. The Distributor has sold its rights to third parties to collect any CDSC imposed on redemptions of Class B shares. | |
For the six months ended June 30, 2007, Seligman Data Corp., which is owned by certain associated investment companies, charged the Fund at cost $504,904 for shareholder account services in accordance with a methodology approved by the Fund’s trustees. Class I shares receive more limited shareholder services than the Fund’s other classes of shares (the “Retail Classes”). Seligman Data Corp. does not allocate to Class I the costs of any of its departments that do not provide services to the Class I shareholders. | |
Costs of Seligman Data Corp. directly attributable to the Retail Classes of the Fund were charged to those classes in proportion to their relative net asset values. Costs directly attributable to Class I shares were charged to Class I. The remaining charges were allocated to the Retail Classes and Class I by Seligman Data Corp. pursuant to a formula based on their net assets, shareholder transaction volumes and number of shareholder accounts. | |
The Series and certain other associated investment companies (together, the “Guarantors”) have severally but not jointly guaranteed the performance and observance of all the terms and conditions of two leases entered into by Seligman Data Corp., including the payment of rent by Seligman Data Corp. (the “Guaranties”). The |
23
Notes to Financial Statements
leases and the related Guaranties expire in September 2008 and January 2019, respectively. The obligation of the Series to pay any amount due under the Guaranties is limited to a specified percentage of the full amount, which generally is based on the Series’ percentage of the expenses billed by Seligman Data Corp. to all Guarantors in the most recent calendar quarter. As of June 30, 2007, the Series’ potential obligation under the Guaranties is $632,000. As of June 30, 2007, no event has occurred which would result in the Series becoming liable to make any payment under the Guaranties. The Fund would bear a portion of any payments made by the Series under the Guaranties. A portion of the rent paid by Seligman Data Corp. is charged to the Fund as part of Seligman Data Corp.’s shareholder account services cost. | |
Certain officers and trustees of the Series are officers or directors of the Manager, the Distributor, Seligman Services, Inc., and/or Seligman Data Corp. | |
The Series 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/losses accrued thereon is included in directors’ fees and expenses, and the accumulated balance thereof at June 30, 2007, of $810 is included in accrued expenses and other liabilities. Deferred fees and related accrued earnings are not deductible by the Fund for federal income tax purposes until such amounts are paid. | |
4. | Committed Line of Credit — The Fund is a participant in a joint $375 million committed line of credit that is shared by substantially all open-end funds in the Seligman Group of Investment Companies. The trustees have currently limited the Fund’s borrowings 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 0.10% 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 2008, but is renewable annually with the consent of the participating banks. For the six months ended June 30, 2007, the Fund did not borrow from the credit facility. |
5. | Purchases and Sales of Securities — Purchases and sales of portfolio securities, excluding short-term investments, for the six months ended June 30, 2007, amounted to $136,577,017 and $187,418,006, respectively. |
6. | Federal Tax Information — Certain components of income, expense and realized capital gain and loss are recognized at different times or have a different character for federal income tax purposes and for financial reporting purposes. Where such differences are permanent in nature, they are reclassified in the components of net assets based on their characterization for federal income tax purposes. Any such reclassifications will have no effect on net assets, results of operations or net asset value per share of the Fund. As a result of the differences described above, the treatment for financial reporting purposes of distributions made during the year from net investment income or net realized gains may differ from their treatment for federal income tax purposes. Further, the cost of investments also can differ for federal income tax purposes. |
The tax basis information presented is based on operating results for the six months ended June 30, 2007, and will vary from the final tax information as of the Fund’s year end. | |
At June 30, 2007, the cost of investments for federal income tax purposes was $286,983,118. The tax basis cost was greater than the cost for financial reporting purposes due to the tax deferral of losses on wash sales in the amount of $246,590 and the amortization of premium for financial reporting purposes of $428,876. | |
At June 30, 2007, the tax basis components of accumulated losses were as follows: |
Gross unrealized appreciation of portfolio securities | $6,443,187 | |
Gross unrealized depreciation of portfolio securities | (6,359,761 | ) |
Net unrealized appreciation of portfolio securities | 83,426 | |
Undistributed ordinary income | 1,854,083 | |
Capital loss carryforwards | (1,448,746,474 | ) |
Current period net realized gain | 6,750,395 | |
Total accumulated losses | $(1,440,058,570 | ) |
24
Notes to Financial Statements
At December 31, 2006, the Fund had net capital loss carryforwards for federal income tax purposes of $1,448,746,474, which are available for offset against future taxable net capital gains, with $78,635,967 expiring in 2007, $255,659,981 expiring in 2008, $668,622,539 expiring in 2009, $444,283,739 expiring in 2010, and $1,544,248 expiring in 2012. The amount was determined after adjustments for certain differences between financial reporting and tax purposes, such as wash sale losses. 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. There can be no assurance that the Fund will be able to utilize all of these capital loss carryforwards before they expire. | |
For the six months ended June 30, 2007 and the year ended December 31, 2006, all of the distributions to shareholders were from ordinary income. | |
7. | 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: |
Six Months Ended June 30, 2007 | Year Ended December 31, 2006 | |||||||||||
Class A | Shares | Amount | Shares | Amount | ||||||||
Net proceeds from sales of shares | 1,504,049 | $5,130,723 | 2,908,239 | $9,662,478 | ||||||||
Investment of dividends | 920,741 | 3,152,690 | 1,960,526 | 6,488,284 | ||||||||
Exchanged from associated funds | 509,606 | 1,738,948 | 1,285,834 | 4,238,336 | ||||||||
Converted from Class B* | 4,314,596 | 14,756,378 | 11,062,126 | 36,659,286 | ||||||||
Total | 7,248,992 | 24,778,739 | 17,216,725 | 57,048,384 | ||||||||
Cost of shares repurchased | (8,227,918 | ) | (28,124,012 | ) | (16,984,499 | ) | (56,221,784 | ) | ||||
Exchanged into associated funds | (1,232,758 | ) | (4,181,866 | ) | (2,422,750 | ) | (7,992,346 | ) | ||||
Total | (9,460,676 | ) | (32,305,878 | ) | (19,407,249 | ) | (64,214,130 | ) | ||||
Decrease | (2,211,684 | ) | (7,527,139 | ) | (2,190,524 | ) | $(7,165,746 | ) | ||||
Class B | Shares | Amount | Shares | Amount | ||||||||
Net proceeds from sales of shares | 89,764 | $307,443 | 269,156 | $891,124 | ||||||||
Investment of dividends | 181,278 | 620,978 | 750,904 | 2,487,189 | ||||||||
Exchanged from associated funds | 80,320 | 274,343 | 586,193 | 1,929,107 | ||||||||
Total | 351,362 | 1,202,764 | 1,606,253 | 5,307,420 | ||||||||
Cost of shares repurchased | (2,674,698 | ) | (9,142,702 | ) | (9,757,814 | ) | (32,399,540 | ) | ||||
Exchanged into associated funds | (89,698 | ) | (305,534 | ) | (878,870 | ) | (2,927,765 | ) | ||||
Converted to Class A* | (4,302,286 | ) | (14,738,382 | ) | (11,026,267 | ) | (36,600,603 | ) | ||||
Total | (7,066,682 | ) | (24,186,618 | ) | (21,662,951 | ) | (71,927,908 | ) | ||||
Decrease | (6,715,320 | ) | $(22,983,854 | ) | (20,056,698 | ) | (66,620,488 | ) | ||||
Class C | Shares | Amount | Shares | Amount | ||||||||
Net proceeds from sales of shares | 263,925 | $902,702 | 649,658 | $2,157,609 | ||||||||
Investment of dividends | 123,655 | 424,691 | 320,982 | 1,065,596 | ||||||||
Exchanged from associated funds | 35,027 | 120,470 | 193,389 | 637,996 | ||||||||
Total | 422,607 | 1,447,863 | 1,164,029 | 3,861,201 | ||||||||
Cost of shares repurchased | (1,768,594 | ) | (6,088,439 | ) | (3,157,046 | ) | (10,519,029 | ) | ||||
Exchanged into associated funds | (75,465 | ) | (257,588 | ) | (313,103 | ) | (1,040,730 | ) | ||||
Total | (1,844,059 | ) | (6,346,027 | ) | (3,470,149 | ) | (11,559,759 | ) | ||||
Decrease | (1,421,452 | ) | $(4,898,164 | ) | (2,306,120 | ) | $(7,698,558 | ) |
* | Automatic conversion of Class B shares to Class A shares approximately eight years after the initial purchase date. The amount of dividends accrued on Class B shares between the last dividend payment date and the conversion date is invested in Class A shares and is included in the conversion from Class B amount. |
25
Notes to Financial Statements
Six Months Ended June 30, 2007 | Year Ended December 31, 2006 | |||||||||||
Class D | Shares | Amount | Shares | Amount | ||||||||
Net proceeds from sales of shares | 649,495 | $2,227,371 | 1,166,374 | $3,874,379 | ||||||||
Investment of dividends | 315,613 | 1,083,833 | 781,158 | 2,593,432 | ||||||||
Exchanged from associated funds | 214,982 | 734,373 | 726,552 | 2,398,442 | ||||||||
Total | 1,180,090 | 4,045,577 | 2,674,084 | 8,866,253 | ||||||||
Cost of shares repurchased | (2,488,365 | ) | (8,530,478 | ) | (6,294,756 | ) | (20,937,851 | ) | ||||
Exchanged into associated funds | (275,646 | ) | (940,046 | ) | (432,391 | ) | (1,434,587 | ) | ||||
Total | (2,764,011 | ) | (9,470,524 | ) | (6,727,147 | ) | (22,372,438 | ) | ||||
Decrease | (1,583,921 | ) | $(5,424,947 | ) | (4,053,063 | ) | $(13,506,185 | ) | ||||
Class I | Shares | Amount | Shares | Amount | ||||||||
Net proceeds from sales of shares | 250,627 | $859,739 | 485,525 | $1,611,054 | ||||||||
Investment of dividends | 73,552 | 251,850 | 170,905 | 565,105 | ||||||||
Total | 324,179 | 1,111,589 | 656,430 | 2,176,159 | ||||||||
Cost of shares repurchased | (145,190 | ) | (495,623 | ) | (827,485 | ) | (2,758,631 | ) | ||||
Increase (decrease) | 178,989 | $615,966 | (171,055 | ) | $(582,472 | ) | ||||||
Class R | Shares | Amount | Shares | Amount | ||||||||
Net proceeds from sales of shares | 237,400 | $810,950 | 262,814 | $871,755 | ||||||||
Investment of dividends | 16,720 | 57,293 | 21,468 | 71,102 | ||||||||
Exchanged from associated funds | 874 | 2,964 | 534 | 1,784 | ||||||||
Total | 254,994 | 871,207 | 284,816 | 944,641 | ||||||||
Cost of shares repurchased | (34,295 | ) | (117,444 | ) | (59,083 | ) | (194,627 | ) | ||||
Exchanged into associated funds | (34 | ) | (116 | ) | (571 | ) | (1,880 | ) | ||||
Total | (34,329 | ) | (117,560 | ) | (59,654 | ) | (196,507 | ) | ||||
Increase | 220,665 | $753,647 | 225,162 | $748,134 |
8. | Other Matters — In late 2003, the Manager conducted an extensive internal review in response to public announcements concerning frequent trading in shares of open-end mutual funds. As of September 2003, the Manager had one arrangement that permitted frequent trading in the Seligman registered investment companies (the “Seligman Funds”). This arrangement was in the process of being closed down by the Manager before the first proceedings relating to trading practices within the mutual fund industry were publicly announced. Based on a review of the Manager’s records for 2001 through 2003, the Manager identified three other arrangements that had permitted frequent trading in the Seligman Funds. All three had already been terminated prior to the end of September 2002. |
The results of the Manager’s internal review were presented to the Independent Directors of all Seligman Funds. In order to resolve matters with the Independent Directors relating to the four arrangements that permitted frequent trading, the Manager, in May 2004, made payments to three mutual funds and agreed to waive a portion of its management fee with respect to another mutual fund (none of which was Seligman High-Yield Fund). | |
Beginning in February 2004, the Manager was in discussions with the New York staff of the Securities and Exchange Commission (“SEC”) and the Office of the New York Attorney General (“Attorney General”) in connection with their review of frequent trading in certain of the Seligman Funds. No late trading is involved. This review was apparently stimulated by the Manager’s voluntary public disclosure of the foregoing arrangements in January 2004. In March 2005, negotiations to settle the matter were initiated by the New York staff of the SEC. After several months of negotiations, tentative agreement was reached, both with the New York staff of the SEC and the Attorney General, on the financial terms of a settlement. However, settlement discussions with the Attorney General ended when the Attorney General sought to impose operating conditions on the Manager that were unacceptable to the Manager, would have applied in perpetuity and were not requested or required by the SEC. Subsequently, the New York staff of the SEC |
26
Notes to Financial Statements
indicated that, in lieu of moving forward under the terms of the tentative financial settlement, the staff was considering recommending to the Commissioners of the SEC the instituting of a formal action against the Manager, the Distributor, and Seligman Data Corp. (together, “Seligman”). | |
Seligman believes that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. | |
Immediately after settlement discussions with the Attorney General ended, the Attorney General issued subpoenas to certain of the Seligman Funds and their directors. The subpoenas sought various Board materials and information relating to the deliberations of the Independent Directors as to the advisory fees paid by the Seligman Funds to the Manager. The Manager objected to the Attorney General’s seeking of such information and, on September 6, 2005, filed suit in federal district court seeking to enjoin the Attorney General from pursuing a fee inquiry. Seligman believes that the Attorney General’s inquiry is improper because Congress has vested exclusive regulatory oversight of investment company advisory fees in the SEC. | |
At the end of September 2005, the Attorney General indicated that it intended to file an action at some time in the future alleging, in substance, that the Manager permitted other persons to engage in frequent trading other than the arrangements described above and, as a result, the prospectus disclosure of the Seligman Funds is and has been misleading. | |
On September 26, 2006, the Attorney General commenced a civil action in New York State Supreme Court against J. & W. Seligman & Co. Incorporated, Seligman Advisors, Inc., Seligman Data Corp. and Brian T. Zino (President of the Manager and the Seligman Funds), reiterating, in substance, the foregoing claims and various other related matters. The Attorney General also claims that the fees charged by Seligman are excessive. The Attorney General is seeking damages and restitution, disgorgement, penalties and costs (collectively, “Damages”), including Damages of at least $80 million relating to alleged timing occurring in the Seligman Funds and disgorgement of profits and management fees, and injunctive relief. Seligman and Mr. Zino believe that the claims are without merit and intend to defend themselves vigorously. | |
Any resolution of these matters with regulatory authorities may include, but not be limited to, sanctions, penalties, injunctions regarding Seligman, restitution to mutual fund shareholders or changes in procedures. Any Damages will be paid by Seligman and not by the Seligman Funds. If Seligman is unsuccessful in its defense of these proceedings, it and its affiliates could be barred from providing services to the Seligman Funds, including serving as an investment adviser for the Seligman Funds and principal underwriter for the open-end Seligman Funds. If these results occur, Seligman will seek exemptive relief from the SEC to permit it and its affiliates to continue to provide services to the Seligman Funds. There is no assurance that such exemptive relief will be granted. | |
Seligman does not believe that the foregoing legal action or other possible actions should have a material adverse impact on Seligman or the Seligman Funds; however, there can be no assurance of this, or that these matters and any related publicity will not result in reduced demand for shares of the Seligman Funds or other adverse consequences. | |
9. | Recently Issued Accounting Pronouncement — In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 (“SFAS No. 157”), “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value of assets and liabilities and expands disclosure about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The Fund is currently evaluating the impact of the adoption of SFAS No. 157 but believes the impact will be limited to expanded disclosures in the Fund’s financial statements. |
27
Financial Highlights
The tables below are intended to help you understand each Class’s financial performance for the periods presented. 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 during the period. 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, if any. Total returns do not reflect any taxes or sales charges and are not annualized for periods of less than one year.
Six Months | ||||||||||||||||||||||||
Ended | Year Ended December 31, | |||||||||||||||||||||||
Class A | 6/30/07 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||
Per Share Data: | ||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $3.39 | $3.31 | $3.51 | $3.55 | $3.16 | $3.69 | ||||||||||||||||||
Income (Loss) from Investment Operations: | ||||||||||||||||||||||||
Net investment income | 0.12 | 0.21 | 0.24 | 0.27 | 0.26 | 0.28 | ||||||||||||||||||
Net realized and unrealized gain (loss) | ||||||||||||||||||||||||
on investments | (0.02 | ) | 0.10 | (0.19 | ) | (0.04 | ) | 0.40 | (0.47 | ) | ||||||||||||||
Total from Investment Operations | 0.10 | 0.31 | 0.05 | 0.23 | 0.66 | (0.19 | ) | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.21 | ) | (0.24 | ) | (0.27 | ) | (0.26 | ) | (0.28 | ) | ||||||||||||
Dividends in excess of net investment income | — | (0.02 | ) | (0.01 | ) | —ø | (0.01 | ) | — | |||||||||||||||
Return of capital | — | — | — | — | — | (0.06 | ) | |||||||||||||||||
Total Distributions | (0.11 | ) | (0.23 | ) | (0.25 | ) | (0.27 | ) | (0.27 | ) | (0.34 | ) | ||||||||||||
Net Asset Value, End of Period | $3.38 | $ 3.39 | $3.31 | $3.51 | $3.55 | $3.16 | ||||||||||||||||||
Total Return | 3.03 | % | 9.74 | % | 1.57 | % | 7.03 | % | 21.84 | % | (5.35 | )% | ||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||
Net assets, end of period (000s omitted) | $174,963 | $183,042 | $186,311 | $222,827 | $248,869 | $254,191 | ||||||||||||||||||
Ratio of expenses to average net assets | 1.37 | %† | 1.34 | % | 1.36 | % | 1.28 | % | 1.30 | % | 1.31 | % | ||||||||||||
Ratio of net investment income to average | ||||||||||||||||||||||||
net assets | 7.31 | %† | 6.42 | % | 7.05 | % | 7.78 | % | 7.88 | % | 8.53 | % | ||||||||||||
Portfolio turnover rate | 46.03 | % | 99.04 | % | 79.90 | % | 53.38 | % | 141.00 | % | 117.82 | % |
See footnotes on page 33.
28
Financial Highlights
Six Months | ||||||||||||||||||||||||
Ended | Year Ended December 31, | |||||||||||||||||||||||
Class B | 6/30/07 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||
Per Share Data: | ||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $3.39 | $3.32 | $3.52 | $3.55 | $3.17 | $3.70 | ||||||||||||||||||
Income (Loss) from Investment Operations: | ||||||||||||||||||||||||
Net investment income | 0.11 | 0.19 | 0.21 | 0.24 | 0.24 | 0.26 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.02 | ) | 0.09 | (0.18 | ) | (0.02 | ) | 0.39 | (0.48 | ) | ||||||||||||||
Total from Investment Operations | 0.09 | 0.28 | 0.03 | 0.22 | 0.63 | (0.22 | ) | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.10 | ) | (0.19 | ) | (0.21 | ) | (0.24 | ) | (0.24 | ) | (0.25 | ) | ||||||||||||
Dividends in excess of net investment income | — | (0.02 | ) | (0.02 | ) | (0.01 | ) | (0.01 | ) | — | ||||||||||||||
Return of capital | — | — | — | — | — | (0.06 | ) | |||||||||||||||||
Total Distributions | (0.10 | ) | (0.21 | ) | (0.23 | ) | (0.25 | ) | (0.25 | ) | (0.31 | ) | ||||||||||||
Net Asset Value, End of Period | $3.38 | $3.39 | $3.32 | $3.52 | $3.55 | $3.17 | ||||||||||||||||||
Total Return | 2.66 | % | 8.62 | % | 0.84 | % | 6.53 | % | 20.64 | % | (6.07 | )% | ||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||
Net assets, end of period (000s omitted) | $33,756 | $56,664 | $122,052 | $228,229 | $319,267 | $326,688 | ||||||||||||||||||
Ratio of expenses to average net assets | 2.12 | %† | 2.09 | % | 2.11 | % | 2.03 | % | 2.05 | % | 2.06 | % | ||||||||||||
Ratio of net investment income to average net assets | 6.56 | %† | 5.67 | % | 6.30 | % | 7.03 | % | 7.13 | % | 7.78 | % | ||||||||||||
Portfolio turnover rate | 46.03 | % | 99.04 | % | 79.90 | % | 53.38 | % | 141.00 | % | 117.82 | % |
See footnotes on page 33.
29
Financial Highlights
Six Months | ||||||||||||||||||
Ended | Year Ended December 31, | |||||||||||||||||
Class C | 6/30/07 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||
Per Share Data: | ||||||||||||||||||
Net Asset Value, Beginning of Period | $3.40 | $3.33 | $3.52 | $3.56 | $3.17 | $3.70 | ||||||||||||
Income (Loss) from Investment Operations: | ||||||||||||||||||
Net investment income | 0.11 | 0.19 | 0.21 | 0.24 | 0.24 | 0.26 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (0.02 | ) | 0.09 | (0.17 | ) | (0.03 | ) | 0.40 | (0.48 | ) | ||||||||
Total from Investment Operations | 0.09 | 0.28 | 0.04 | 0.21 | 0.64 | (0.22 | ) | |||||||||||
Less Distributions: | ||||||||||||||||||
Dividends from net investment income | (0.10 | ) | (0.19 | ) | (0.21 | ) | (0.24 | ) | (0.24 | ) | (0.25 | ) | ||||||
Dividends in excess of net investment income | — | (0.02 | ) | (0.02 | ) | (0.01 | ) | (0.01 | ) | — | ||||||||
Return of capital | — | — | — | — | — | (0.06 | ) | |||||||||||
Total Distributions | (0.10 | ) | (0.21 | ) | (0.23 | ) | (0.25 | ) | (0.25 | ) | (0.31 | ) | ||||||
Net Asset Value, End of Period | $3.39 | $3.40 | $3.33 | $3.52 | $3.56 | $3.17 | ||||||||||||
Total Return | 2.65 | % | 8.60 | % | 1.13 | % | 6.22 | % | 20.98 | % | (6.08 | )% | ||||||
Ratios/Supplemental Data: | ||||||||||||||||||
Net assets, end of period (000s omitted) | $21,836 | $26,742 | $33,833 | $48,012 | $59,892 | $52,709 | ||||||||||||
Ratio of expenses to average net assets | 2.12 | %† | 2.09 | % | 2.11 | % | 2.03 | % | 2.05 | % | 2.06 | % | ||||||
Ratio of net investment income to average net assets | 6.56 | %† | 5.67 | % | 6.30 | % | 7.03 | % | 7.13 | % | 7.78 | % | ||||||
Portfolio turnover rate | 46.03 | % | 99.04 | % | 79.90 | % | 53.38 | % | 141.00 | % | 117.82 | % |
See footnotes on page 33.
30
Financial Highlights
Six Months | ||||||||||||||||||||||||
Ended | Year Ended December 31, | |||||||||||||||||||||||
Class D | 6/30/07 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||
Per Share Data: | ||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $3.40 | $3.33 | $3.52 | $3.56 | $3.17 | $3.70 | ||||||||||||||||||
Income (Loss) from Investment Operations: | ||||||||||||||||||||||||
Net investment income | 0.11 | 0.19 | 0.21 | 0.24 | 0.24 | 0.26 | ||||||||||||||||||
Net realized and unrealized gain (loss) | ||||||||||||||||||||||||
on investments | (0.02 | ) | 0.09 | (0.17 | ) | (0.03 | ) | 0.40 | (0.48 | ) | ||||||||||||||
Total from Investment Operations | 0.09 | 0.28 | 0.04 | 0.21 | 0.64 | (0.22 | ) | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.10 | ) | (0.19 | ) | (0.21 | ) | (0.24 | ) | (0.24 | ) | (0.25 | ) | ||||||||||||
Dividends in excess of net investment income | — | (0.02 | ) | (0.02 | ) | (0.01 | ) | (0.01 | ) | — | ||||||||||||||
Return of capital | — | — | — | — | — | (0.06 | ) | |||||||||||||||||
Total Distributions | (0.10 | ) | (0.21 | ) | (0.23 | ) | (0.25 | ) | (0.25 | ) | (0.31 | ) | ||||||||||||
Net Asset Value, End of Period | $3.39 | $3.40 | $3.33 | $3.52 | $3.56 | $3.17 | ||||||||||||||||||
Total Return | 2.65 | % | 8.60 | % | 1.13 | % | 6.22 | % | 20.98 | % | (6.08 | )% | ||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||
Net assets, end of period (000s omitted) | $53,187 | $58,752 | $70,959 | $100,125 | $128,582 | $135,595 | ||||||||||||||||||
Ratio of expenses to average net assets | 2.12 | %† | 2.10 | % | 2.11 | % | 2.03 | % | 2.05 | % | 2.06 | % | ||||||||||||
Ratio of net investment income to average | ||||||||||||||||||||||||
net assets | 6.56 | %† | 5.67 | % | 6.30 | % | 7.03 | % | 7.13 | % | 7.78 | % | ||||||||||||
Portfolio turnover rate | 46.03 | % | 99.04 | % | 79.90 | % | 53.38 | % | 141.00 | % | 117.82 | % |
See footnotes on page 33.
31
Financial Highlights
Six Months | ||||||||||||||||||||||||
Ended | Year Ended December 31, | |||||||||||||||||||||||
Class I | 6/30/07 | 2006 | 2005 | 2004 | 2003 | 2002 | ||||||||||||||||||
Per Share Data: | ||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $3.39 | $3.31 | $3.51 | $3.55 | $3.16 | $3.69 | ||||||||||||||||||
Income (Loss) from Investment Operations: | ||||||||||||||||||||||||
Net investment income | 0.13 | 0.23 | 0.25 | 0.29 | 0.28 | 0.29 | ||||||||||||||||||
Net realized and unrealized gain (loss) | ||||||||||||||||||||||||
on investments | (0.03 | ) | 0.10 | (0.18 | ) | (0.04 | ) | 0.40 | (0.47 | ) | ||||||||||||||
Total from Investment Operations | 0.10 | 0.33 | 0.07 | 0.25 | 0.68 | (0.18 | ) | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||||
Dividends from net investment income | (0.12 | ) | (0.23 | ) | (0.25 | ) | (0.29 | ) | (0.28 | ) | (0.29 | ) | ||||||||||||
Dividends in excess of net investment income | — | (0.02 | ) | (0.02 | ) | —ø | (0.01 | ) | — | |||||||||||||||
Return of capital | — | — | — | — | — | (0.06 | ) | |||||||||||||||||
Total Distributions | (0.12 | ) | (0.25 | ) | (0.27 | ) | (0.29 | ) | (0.29 | ) | (0.35 | ) | ||||||||||||
Net Asset Value, End of Period | $3.37 | $3.39 | $3.31 | $3.51 | $3.55 | $3.16 | ||||||||||||||||||
Total Return | 2.92 | % | 10.23 | % | 2.01 | % | 7.46 | % | 22.38 | % | (5.02 | )% | ||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||
Net assets, end of period (000s omitted) | $7,460 | $6,879 | $7,299 | $6,500 | $5,472 | $3,085 | ||||||||||||||||||
Ratio of expenses to average net assets | 1.03 | %† | 0.85 | % | 0.91 | % | 0.85 | % | 0.95 | % | 0.93 | % | ||||||||||||
Ratio of net investment income to average | ||||||||||||||||||||||||
net assets | 7.65 | %† | 6.92 | % | 7.50 | % | 8.21 | % | 8.23 | % | 8.91 | % | ||||||||||||
Portfolio turnover rate | 46.03 | % | 99.04 | % | 79.90 | % | 53.38 | % | 141.00 | % | 117.82 | % | ||||||||||||
Without expense reimbursement:‡‡ | ||||||||||||||||||||||||
Ratio of expenses to average net assets | 0.98 | % | ||||||||||||||||||||||
Ratio of net investment income to average | ||||||||||||||||||||||||
net assets | 8.86 | % |
See footnotes on page 33.
32
Six Months | 4/30/03 * | |||||||||||||||||||
Ended | Year Ended December 31, | to | ||||||||||||||||||
Class R | 6/30/07 | 2006 | 2005 | 2004 | 12/31/03 | |||||||||||||||
Per Share Data: | ||||||||||||||||||||
Net Asset Value, Beginning of Period | $3.39 | $3.31 | $3.51 | $3.55 | $3.37 | |||||||||||||||
Income (Loss) from Investment Operations: | ||||||||||||||||||||
Net investment income | 0.12 | 0.20 | 0.23 | 0.25 | 0.17 | |||||||||||||||
Net realized and unrealized gain (loss) | ||||||||||||||||||||
on investments | (0.02 | ) | 0.10 | (0.19 | ) | (0.02 | ) | 0.19 | ||||||||||||
Total from Investment Operations | 0.10 | 0.30 | 0.04 | 0.23 | 0.36 | |||||||||||||||
Less Distributions: | ||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.20 | ) | (0.23 | ) | (0.25 | ) | (0.17 | ) | ||||||||||
Dividends in excess of net investment income | — | (0.02 | ) | (0.01 | ) | (0.02 | ) | (0.01 | ) | |||||||||||
Total Distributions | (0.11 | ) | (0.22 | ) | (0.24 | ) | (0.27 | ) | (0.18 | ) | ||||||||||
Net Asset Value, End of Period | $3.38 | $3.39 | $3.31 | $3.51 | $3.55 | |||||||||||||||
Total Return | 2.90 | % | 9.48 | % | 1.32 | % | 6.76 | % | 10.99 | % | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (000s omitted) | $2,209 | $1,468 | $689 | $720 | $2 | |||||||||||||||
Ratio of expenses to average net assets | 1.62 | %† | 1.59 | % | 1.61 | % | 1.53 | % | 1.56 | %† | ||||||||||
Ratio of net investment income to average | ||||||||||||||||||||
net assets | 7.06 | %† | 6.17 | % | 6.80 | % | 7.53 | % | 7.64 | %† | ||||||||||
Portfolio turnover rate | 46.03 | % | 99.04 | % | 79.90 | % | 53.38 | % | 141.00 | %‡ |
† Annualized.
* Commencement of offering of shares.
‡ Computed at the Fund level for the year ended December 31, 2003.
‡‡ The Manager, at its discretion, reimbursed certain expenses of Class I shares.
ø Less than + or – $0.01.
See Notes to Financial Statements.
33
Report of Independent Registered
Public Accounting Firm
The Trustees and Shareholders,
Seligman High-Yield Fund of
Seligman High Income Fund Series:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Seligman High-Yield Fund, one of the funds constituting Seligman High Income Fund Series (the “Fund”) as of June 30, 2007, and the related statement of operations for the six months then ended, the statements of changes in net assets for the six months then ended and for the year ended December 31, 2006, 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 the standards of the Public Company Accounting Oversight Board (United States). 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of June 30, 2007, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Seligman High-Yield Fund of Seligman High Income Fund Series as of June 30, 2007, the results of its operations for the six months then ended, the changes in its net assets for the six months then ended and for the year ended December 31, 2006, and the financial highlights for the respective stated periods, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
New York, New York
August 24, 2007
34
Trustees
Maureen Fonseca 3 | William C. Morris | ||
• Head of School, The Masters School | • Chairman and Director, J. & W. Seligman & Co. | ||
• Trustee, Newark Academy, New York State | Incorporated, Seligman Advisors, Inc., Seligman | ||
Association of Independent Schools, and | Services, Inc., and Carbo Ceramics Inc. | ||
Greens Farms Academy | • Director, Seligman Data Corp. | ||
• Commissioner, Middle States Association | • President and Chief Executive Officer, The | ||
Metropolitan Opera Association | |||
John R. Galvin 1, 3 | |||
• Dean Emeritus, Fletcher School of Law and | Leroy C. Richie 1, 3 | ||
Diplomacy at Tufts University | • Counsel, Lewis & Munday, P.C. | ||
• Chairman Emeritus, American Council on | • Director, Vibration Control Technologies, LLC | ||
Germany | • Lead Outside Director, Digital Ally Inc. and | ||
Infinity, Inc. | |||
John F. Maher 1, 3 | • Director and Chairman, Highland Park Michigan | ||
• Retired President and Chief Executive Officer of | Economic Development Corp. | ||
Great Western Financial Corporation and its | • Chairman, Detroit Public Schools Foundation | ||
principal subsidiary, Great Western Bank | |||
Robert L. Shafer 2, 3 | |||
Frank A. McPherson 2, 3 | • Ambassador and Permanent Observer of the | ||
• Retired Chairman of the Board and Chief | Sovereign Military Order of Malta to the United | ||
Executive Officer of Kerr-McGee Corporation | Nations | ||
• Director, DCP Midstream GP, LLP, Integris | |||
Health, Oklahoma Medical Research | James N. Whitson 1, 3 | ||
Foundation, Oklahoma Foundation for | • Retired Executive Vice President and Chief | ||
Excellence in Education, National Cowboy and | Operating Officer, Sammons Enterprises, Inc. | ||
Western Heritage Museum, and Oklahoma City | • Director, CommScope, Inc. | ||
Museum of Art | |||
Brian T. Zino | |||
Betsy S. Michel 2, 3 | • Director and President, | ||
• Attorney | J. & W. Seligman & Co. Incorporated | ||
• Trustee, The Geraldine R. Dodge Foundation | • Director, Seligman Advisors, Inc. and Seligman | ||
Services, Inc. | |||
• Chairman, Seligman Data Corp. | |||
Member: | 1 Audit Committee | ||
2 Trustee Nominating Committee | |||
3 Board Operations Committee |
Executive Officers
William C. Morris | Paul A. Langlois | Thomas G. Rose | ||
Chairman | Vice President | Vice President | ||
Brian T. Zino | J. Eric Misenheimer | Lawrence P. Vogel | ||
President and Chief Executive | Vice President | Vice President and Treasurer | ||
Officer | ||||
Henry P. Rose | Frank J. Nasta | |||
Eleanor T.M. Hoagland | Vice President | Secretary | ||
Vice President and Chief | ||||
Compliance Officer |
35
Additional Fund Information
Quarterly Schedule of Investments
A complete schedule of portfolio holdings owned by the Fund will be filed with the SEC for the first and third quarter of each fiscal year on Form N-Q, and will be available to shareholders (i) without charge, upon request, by calling toll-free (800) 221-2450 in the US or collect (212) 682-7600 outside the US or (ii) on the SEC’s website at www.sec.gov.1 In addition, the Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. Certain of the information contained in the Fund’s Form N-Q is also made available to shareholders on Seligman’s website at www.seligman.com.1
Proxy Voting
A description of the policies and procedures used by the Fund to determine how to vote proxies relating to portfolio securities as well as information regarding how the Fund voted proxies relating to portfolio securities during the 12-month period ended June 30 of each year will be available (i) without charge, upon request, by calling toll-free (800) 221-2450 in the US or collect (212) 682-7600 outside the US and (ii) on the SEC’s website at www.sec.gov.1 Information for each new 12-month period ending June 30 will be available no later than August 31 of that year.
1 These website references are inactive textual references and information contained in or otherwise accessible through these websites does not form a part of this report or the Fund’s prospectuses or statement of additional information.
36
[This Page Intentionally Left Blank]
Go paperless — sign up for E-Delivery at www.seligman.com | ||
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 Fund, which contains information about the investment objectives, risks, charges, and expenses of the Fund, each of which should be considered carefully before investing or sending money. | ||
TXHY3 6/07
To The Shareholders | 1 | |||||
Performance and Portfolio Overview | 2 | |||||
Understanding and Comparing Your Fund’s Expenses | 5 | |||||
Portfolio of Investments | 6 | |||||
Statement of Assets and Liabilities | 8 | |||||
Statement of Operations | 9 | |||||
Statements of Changes in Net Assets | 10 | |||||
Notes to Financial Statements | 11 | |||||
Financial Highlights | 19 | |||||
Trustees and Executive Officers | 24 | |||||
Additional Fund Information | 25 |
William C. Morris Chairman | Brian T. Zino President |
Manager J. & W. Seligman & Co. Incorporated 100 Park Avenue New York, NY 10017 General Distributor Seligman Advisors, Inc. 100 Park Avenue New York, NY 10017 General Counsel Sullivan & Cromwell LLP | Shareholder Service Agent Seligman Data Corp. 100 Park Avenue New York, NY 10017 Mail Inquiries To: P.O. Box 9759 Providence, RI 02940-9759 | 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 |
| |
1 | The website reference is an inactive textual reference and information contained in or otherwise accessible through the website does not form a part of this report or the Fund’s prospectus or statement of additional information. |
Average Annual | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Six Months* | | One Year | | Five Years | | Ten Years | | Class C Since Inception 5/27/99 | | Class R Since Inception 4/30/03 | ||||||||||||||||
Class A | |||||||||||||||||||||||||||
With Sales Charge | (4.34 | )% | (0.60 | )% | 1.24 | % | 3.80 | % | n/a | n/a | |||||||||||||||||
Without Sales Charge | 0.44 | 4.32 | 2.22 | 4.31 | n/a | n/a | |||||||||||||||||||||
Class B | |||||||||||||||||||||||||||
With CDSC† | (4.85 | ) | (1.30 | ) | 1.11 | n/a | n/a | n/a | |||||||||||||||||||
Without CDSC | 0.07 | 3.71 | 1.46 | 3.69 | ‡ | n/a | n/a | ||||||||||||||||||||
Class C | |||||||||||||||||||||||||||
With 1% CDSC | (1.06 | ) | 2.67 | n/a | n/a | n/a | n/a | ||||||||||||||||||||
Without CDSC | (0.08 | ) | 3.67 | 1.48 | n/a | 3.10 | % | n/a | |||||||||||||||||||
Class D | |||||||||||||||||||||||||||
With 1% CDSC | (1.06 | ) | 2.53 | n/a | n/a | n/a | n/a | ||||||||||||||||||||
Without CDSC | (0.08 | ) | 3.53 | 1.45 | 3.52 | n/a | n/a | ||||||||||||||||||||
Class R | |||||||||||||||||||||||||||
With 1% CDSC | (0.69 | ) | 3.19 | n/a | n/a | n/a | n/a | ||||||||||||||||||||
Without CDSC | 0.29 | 4.19 | n/a | n/a | n/a | 0.72 | % | ||||||||||||||||||||
Benchmarks** | |||||||||||||||||||||||||||
Lehman Brothers Government Bond Index | 1.10 | 5.56 | 4.09 | 5.85 | 5.47 | 2.76 | |||||||||||||||||||||
Blended Index | 1.01 | 5.91 | 4.11 | 5.85 | 5.54 | 3.20 | |||||||||||||||||||||
Lipper General US Government Funds Average | 0.21 | 4.73 | 3.21 | 4.99 | 4.52 | 2.03 |
See footnotes on page 4.
| 6/30/07 | | 12/31/06 | | 6/30/06 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Class A | $ | 6.70 | $ | 6.80 | $ | 6.67 | ||||||||
Class B | 6.72 | 6.82 | 6.68 | |||||||||||
Class C | 6.71 | 6.82 | 6.68 | |||||||||||
Class D | 6.71 | 6.82 | 6.68 | |||||||||||
Class R | 6.71 | 6.81 | 6.67 |
Durationøøø | 4.59 years |
June 30, 2007 |
|
Dividends Paidø | SEC 30-Day Yieldsøø | ||||||
---|---|---|---|---|---|---|---|
Class A | $0.132 | 3.57 | % | ||||
Class B | 0.107 | 2.99 | |||||
Class C | 0.107 | 3.00 | |||||
Class D | 0.107 | 3.00 | |||||
Class R | 0.123 | 3.48 |
* | Returns for periods of less than one year are not annualized. |
** | The Lehman Brothers Government Bond Index (the “Lehman Index”), the Blended Index, and the Lipper General US Government Funds Average (the “Lipper Average”) are unmanaged benchmarks that assume reinvestment of dividends and exclude the effect of taxes and sales charges. The Lehman Index and the Blended Index also exclude the effect of fees. The Lipper Average includes funds that invest at least 65% of their assets in US government and government agency issues. The Lehman Index is a benchmark index made up of the Treasury Bond Index and the Agency Bond Index as well as the 1-3 Year Government Index and 20+ Year Treasury Index. The Blended Index is an index created by J. & W. Seligman & Co. Incorporated, the Fund’s manager (the “Manager”). The Blended Index consists of a fifty percent equal weighting in the Lehman Index and the Lehman Brothers Fixed-Rate Mortgage Backed Securities Index (the “Lehman MBS Index”), which covers the fixed-rate agency mortgage-backed pass-through securities of the Government National Mortgage Association (Ginnie Mae), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). In the Manager’s view, the Blended Index better represents the securities in which the Fund expects to invest since Fund shareholders approved amendments to the Fund’s principal investment strategies in October 2005. The Fund’s holdings, however, may not be evenly weighted among the securities covered by the Lehman Index and Lehman MBS Index, and the weighting of the Fund’s holdings may vary significantly among such securities. The Fund is actively managed and its holdings are subject to change. Investors cannot invest directly in an average or an index. |
† | The CDSC is 5% if you sell your shares within one year of purchase, and 2% for the five-year period. | |
‡ | The ten-year return for Class B shares reflect automatic conversion to Class A shares approximately eight years after their date of purchase. | |
ø | Represents per share amount paid or declared for the period ended June 30, 2007. | |
øø | Current yield, representing the annualized yield for the 30-day period ended June 30, 2007, has been computed in accordance with SEC regulations and will vary. | |
øøø | Duration is the average amount of time that it takes to receive the interest and principal of a bond or portfolio of bonds. The duration formula is based on a formula that calculates the weighted average of the cash flows (interest and principal payments) of the bond, discounted to present time. |
Percent of Net Assets | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
| 6/30/07 | | 12/31/06* | ||||||||
US Treasury Securities | 13.5 | 21.4 | |||||||||
Other US Full Faith and Credit Obligations | 3.2 | 8.5 | |||||||||
US Government Agency Obligations | 13.5 | 34.3 | |||||||||
Mortgage-Backed Securities | 66.3 | 31.4 | |||||||||
Short-Term Holdings and Other Assets Less Liabilities | 3.5 | 4.4 | |||||||||
Total | 100.0 | 100.0 |
* | Reclassified to conform to current period’s presentation. |
Your Fund’s Expenses
Actual | Hypothetical | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Beginning Account Value 1/1/07 | | Annualized Expense Ratio* | | Ending Account Value 6/30/07 | | Expenses Paid During Period** 1/1/07 to 6/30/07 | | Ending Account Value 6/30/07 | | Expenses Paid During Period** 1/1/07 to 6/30/07 | ||||||||||||||||
Class A | $ | 1,000.00 | 1.50 | % | $ | 1,004.40 | $7.45 | $ | 1,017.36 | $7.50 | |||||||||||||||||
Class B | 1,000.00 | 2.25 | 1,000.70 | 11.16 | 1,013.64 | 11.23 | |||||||||||||||||||||
Class C | 1,000.00 | 2.25 | 999.20 | 11.15 | 1,013.64 | 11.23 | |||||||||||||||||||||
Class D | 1,000.00 | 2.25 | 999.20 | 11.15 | 1,013.64 | 11.23 | |||||||||||||||||||||
Class R | 1,000.00 | 1.75 | 1,002.90 | 8.69 | 1,016.12 | 8.75 |
* | Expenses of Class B, Class C, Class D and Class R shares differ from the expenses of Class A shares due to the differences in 12b-1 fees paid by each share class. See the Fund’s prospectus for a description of each share class and its expenses and sales charges. |
** | Expenses are equal to the annualized expense ratio based on actual expenses for the period January 1, 2007 to June 30, 2007, multiplied by the average account value over the period, multiplied by 181/365 (number of days in the period). |
June 30, 2007
Principal Amount | Value | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
US Full Faith and Credit Obligations 16.7% | ||||||||||
US Treasury Notes: | ||||||||||
4.625%, 12/31/2011 | $ | 1,000,000 | $ | 987,892 | ||||||
4.875%, 6/30/2012 | 1,000,000 | 997,579 | ||||||||
4.625%, 11/15/2016 | 500,000 | 484,727 | ||||||||
4.625%, 2/15/2017 | 150,000 | 145,313 | ||||||||
4.5%, 5/15/2017 | 850,000 | 815,204 | ||||||||
US Treasury Inflation-Protected Securities: | ||||||||||
2%, 1/15/2016 | 270,694 | 257,096 | ||||||||
2.375%, 1/15/2017 | 512,340 | 500,372 | ||||||||
US Treasury Bonds: | ||||||||||
8.875%, 2/15/2019 | 850,000 | 1,124,391 | ||||||||
8.125%, 8/15/2021 | 1,255,000 | 1,617,872 | ||||||||
5.375%, 2/15/2031 | 730,000 | 749,847 | ||||||||
Ginnie Mae: | ||||||||||
5%, 5/20/2029 | 500,000 | 491,991 | ||||||||
US Trade Funding 4.26%, 11/15/2014 | 1,382,092 | 1,348,190 | ||||||||
Total US Full Faith and Credit Obligations (Cost $9,652,640) | 9,520,474 | |||||||||
US Government Agency Obligationsø 13.5% | ||||||||||
Fannie Mae: | ||||||||||
5%, 7/9/2018 | 500,000 | 471,052 | ||||||||
5%, 6/25/2025 | 2,000,000 | 1,836,466 | ||||||||
Freddie Mac: | ||||||||||
5.5%, 8/20/2012 | 610,000 | 616,210 | ||||||||
4.5%, 7/15/2013 | 455,000 | 435,602 | ||||||||
5.25%, 7/24/2018 | 1,495,000 | 1,430,583 | ||||||||
5.963%, 4/1/2037# | 2,878,805 | 2,879,275 | ||||||||
Total US Government Agency Obligations (Cost $7,738,474) | 7,669,188 | |||||||||
Mortgage-Backed Securitiesøø 66.3% | ||||||||||
Ginnie Mae: | ||||||||||
4%, 12/16/2028 | 700,748 | 692,707 | ||||||||
5.5%, 10/15/2035 | 1,922,265 | 1,868,046 | ||||||||
Small Business Administration 5.199%, 8/1/2012 | 880,348 | 874,447 | ||||||||
Fannie Maeo: | ||||||||||
5.5%, 10/15/2011 | 1,910,000 | 1,892,256 | ||||||||
5.5%, 5/25/2014 | 835,527 | 830,691 | ||||||||
5.5%, 11/1/2020 | 1,130,175 | 1,114,452 | ||||||||
4.5%, 12/1/2020 | 1,239,192 | 1,179,381 | ||||||||
5%, 2/1/2035 | 4,215,049 | 3,966,734 |
June 30, 2007
Principal Amount | Value | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Fannie Mae: (continued) | ||||||||||
5.45%, 8/25/2035 | $ | 959,389 | $ | 946,393 | ||||||
5.5%, 10/1/2035 | 237,688 | 229,865 | ||||||||
5.5%, 10/1/2035 | 1,211,602 | 1,171,726 | ||||||||
5.384%, 2/1/2036 | 2,582,831 | 2,497,825 | ||||||||
5.352%, 4/1/2036# | 966,621 | 958,816 | ||||||||
6.080%, 4/1/2036# | 1,440,459 | 1,455,664 | ||||||||
6%, 6/1/2036 | 3,145,021 | 3,113,615 | ||||||||
6.133%, 7/1/2036# | 2,097,382 | 2,115,462 | ||||||||
5.995%, 8/1/2036# | 886,197 | 890,905 | ||||||||
6.122%, 8/1/2036# | 898,513 | 905,252 | ||||||||
6%, 9/1/2036 | 1,453,045 | 1,438,535 | ||||||||
5.5%, TBA 8/2007 | 1,520,000 | 1,496,963 | ||||||||
Freddie Macø: | ||||||||||
6%, 11/1/2010 | 105,225 | 106,688 | ||||||||
5.5%, 10/1/2018 | 1,631,803 | 1,612,915 | ||||||||
6.182%, 8/1/2036# | 999,966 | 1,008,734 | ||||||||
5.5%, 9/1/2036 | 1,548,125 | 1,494,136 | ||||||||
6.132%, 12/1/2036# | 1,864,640 | 1,879,010 | ||||||||
Freddie Mac Gold 6%, TBA 7/2007ø | 2,000,000 | 1,981,562 | ||||||||
Total Mortgage-Backed Securities (Cost $38,172,856) | 37,722,780 | |||||||||
Short-Term Holdings 10.9% | ||||||||||
US Government Agency Obligations 7.5% | ||||||||||
Fannie Mae 4.843%, 7/16/2007 | 4,300,000 | † | 4,290,744 | |||||||
Repurchase Agreement 3.4% | ||||||||||
State Street Bank 4.65%, dated 6/29/2007 maturing 7/2/2007 in the amount of $1,949,755 collateralized by $2,035,000 Federal Home 8/11/2010, with a fair market value of $2,009,033 | 1,949,000 | 1,949,000 | ||||||||
Total Short-Term Holdings (Cost $6,239,744) | 6,239,744 | |||||||||
Total Investments (Cost $61,803,714) 107.4% | 61,152,186 | |||||||||
Other Assets Less Liabilities (7.4)% | (4,209,329 | ) | ||||||||
Net Assets 100.0% | $ | 56,942,857 |
ø | Securities issued by these agencies are neither guaranteed nor issued by the United States Government. | |
øø | 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 investments. | |
# | Floating rate security, the interest rate is reset periodically. The interest rate disclosed reflects the rate in effect at June 30, 2007. | |
† | At June 30, 2007, this security with a value of $4,290,744 was held as collateral for the TBA securities. | |
TBA | To be announced. |
June 30, 2007
Assets: | ||||||
Investments, at value: | ||||||
US Full Faith and Credit Obligations (cost $9,652,640) | $ | 9,520,474 | ||||
US Government Agency Obligations (cost $7,738,474) | 7,669,188 | |||||
Mortgage-Backed Securities (cost $38,172,856) | 37,722,780 | |||||
Short-Term Holdings (cost $6,239,744) | 6,239,744 | |||||
Total investments (cost $61,803,714) | 61,152,186 | |||||
Cash (including restricted cash of $10,000) | 10,765 | |||||
Receivable for securities sold | 2,567,482 | |||||
Interest receivable | 481,155 | |||||
Receivable for shares of Beneficial Interest sold | 137,736 | |||||
Expenses prepaid to shareholder service agent | 4,309 | |||||
Other | 21,803 | |||||
Total Assets | 64,375,436 | |||||
Liabilities: | ||||||
Payable for securities purchased | 7,067,048 | |||||
Payable for shares of Beneficial Interest repurchased | 207,620 | |||||
Dividends payable | 69,379 | |||||
Distribution and service (12b-1) fees payable | 24,656 | |||||
Management fee payable | 23,590 | |||||
Accrued expenses and other | 40,286 | |||||
Total Liabilities | 7,432,579 | |||||
Net Assets | $ | 56,942,857 | ||||
Composition of Net Assets: | ||||||
Shares of Beneficial Interest, at par ($0.001 par value; unlimited shares authorized; 8,490,106 shares outstanding): | ||||||
Class A | $ | 5,299 | ||||
Class B | 870 | |||||
Class C | 573 | |||||
Class D | 1,532 | |||||
Class R | 216 | |||||
Additional paid-in capital | 67,483,373 | |||||
Dividends in excess of net investment income (Note 6) | (8,947 | ) | ||||
Accumulated net realized loss (Note 6) | (9,888,531 | ) | ||||
Net unrealized depreciation of investments | (651,528 | ) | ||||
Net Assets | $ | 56,942,857 | ||||
Net Asset Value Per Share: | ||||||
Class A ($35,514,436 ÷ 5,298,730 shares) | $6.70 | |||||
Class B ($5,844,184 ÷ 870,006 shares) | $6.72 | |||||
Class C ($3,846,244 ÷ 572,808 shares) | $6.71 | |||||
Class D ($10,285,225 ÷ 1,531,916 shares) | $6.71 | |||||
Class R ($1,452,768 ÷ 216,646 shares) | $6.71 |
For the Six Months Ended June 30, 2007
Investment Income: | ||||||
Interest | $ | 1,614,847 | ||||
Expenses: | ||||||
Distribution and service (12b-1) fees | 154,142 | |||||
Management fee | 148,537 | |||||
Shareholder account services | 135,625 | |||||
Registration | 39,770 | |||||
Auditing and legal fees | 15,471 | |||||
Shareholder reports and communications | 14,232 | |||||
Custody and related services | 12,546 | |||||
Trustees’ fees and expenses | 3,654 | |||||
Miscellaneous | 4,642 | |||||
Total Expenses | 528,619 | |||||
Net Investment Income | 1,086,228 | |||||
Net Realized and Unrealized Loss on Investments: | ||||||
Net realized loss on investments | (248,859 | ) | ||||
Net change in unrealized depreciation of investments | (644,505 | ) | ||||
Net Loss on Investments | (893,364 | ) | ||||
Increase in Net Assets from Operations | $ | 192,864 |
See Notes to Financial Statements.
(unaudited)
| Six Months Ended June 30, 2007 | | Year Ended December 31, 2006 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Operations: | ||||||||||
Net investment income | $ | 1,086,228 | $ | 2,222,338 | ||||||
Net realized loss on investments | (248,859 | ) | (1,724,726 | ) | ||||||
Net change in unrealized depreciation of investments | (644,505 | ) | 739,246 | |||||||
Increase in Net Assets from Operations | 192,864 | 1,236,858 | ||||||||
Distribution to Shareholders: | ||||||||||
Net investment income: | ||||||||||
Class A | (721,529 | ) | (1,457,958 | ) | ||||||
Class B | (105,479 | ) | (280,300 | ) | ||||||
Class C | (64,433 | ) | (144,245 | ) | ||||||
Class D | (168,066 | ) | (307,511 | ) | ||||||
Class R | (23,011 | ) | (27,892 | ) | ||||||
Decrease in Net Assets from Distributions | (1,082,518 | ) | (2,217,906 | ) | ||||||
Transactions in Shares of Beneficial Interest: | ||||||||||
Net proceeds from sales of shares | 3,380,469 | 8,537,742 | ||||||||
Investment of dividends | 931,772 | 1,810,099 | ||||||||
Exchanged from associated funds | 3,294,530 | 4,577,838 | ||||||||
Total | 7,606,771 | 14,925,679 | ||||||||
Cost of shares repurchased | (9,002,986 | ) | (23,507,778 | ) | ||||||
Exchanged into associated funds | (4,343,533 | ) | (2,931,358 | ) | ||||||
Total | (13,346,519 | ) | (26,439,136 | ) | ||||||
Decrease in Net Assets from Transactions in Shares of Beneficial Interest | (5,739,748 | ) | (11,513,457 | ) | ||||||
Decrease in Net Assets | (6,629,402 | ) | (12,494,505 | ) | ||||||
Net Assets: | ||||||||||
Beginning of period | 63,572,259 | 76,066,764 | ||||||||
End of Period (net of dividends in excess of net investment income of $8,947 and $12,657, respectively) | $ | 56,942,857 | $ | 63,572,259 |
See Notes to Financial Statements.
1. | Organization and Multiple Classes of Shares — Seligman U.S. Government Securities Fund (the “Fund”) is a series of Seligman High Income Fund Series (the “Series”), which is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end diversified management investment company. The Fund offers the following five classes of shares: |
2. | Significant Accounting Policies — The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which require management to make certain estimates and assumptions at the date of the financial statements. Actual results may differ from these estimates. These unaudited interim financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. All such adjustments are of a normal recurring nature. The following summarizes the significant accounting policies of the Fund: |
a. | Security Valuation — Investments in US Government and Government agency obligations 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 an exchange 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. The |
determination of fair value involves subjective judgments. As a result, using fair value to price a security may result in a price materially different from the prices used by other mutual funds to determine net asset value or the price that may be realized upon the actual sale of the security. Short-term holdings that mature in more than 60 days are valued at current market quotations. Short-term holdings maturing in 60 days or less are valued at current market quotations or amortized cost if the Fund’s investment manager believes it approximates fair value. |
b. | 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 realized gain. |
On January 1, 2007, the Fund adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.” FIN 48 requires the Fund to recognize in its financial statements the impact of a tax position taken (or expected to be taken) on an income tax return if such position will more likely than not be sustained upon examination based on the technical merits of the position. The Fund has determined that FIN 48 did not have a material impact on the Fund’s financial statements for the six months ended June 30, 2007. |
c. | Security Transactions and Related Investment Income — Investment transactions are recorded on trade dates. Identified cost of investments sold is used for both financial reporting and federal income tax purposes. Interest income is recorded on an accrual basis. The Fund amortizes premiums and discounts on purchases of portfolio securities for financial reporting purposes. |
d. | Repurchase Agreements — The Fund may enter into repurchase agreements. Generally, 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. On a daily basis, the market value of securities held as collateral for repurchase agreements is monitored to ensure the existence of the proper level of collateral. |
e. | Securities Purchased and Sold on a TBA Basis — The Fund may purchase or sell securities (typically mortgage-backed securities) on a to-be-announced (TBA) basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Unsettled TBA commitments are valued at fair value in accordance with the procedures for security valuation described above. The Fund segregates securities as collateral for its obligations to purchase TBA mortgage securities. |
f. | Mortgage Dollar Rolls — The Fund may enter into mortgage dollar roll transactions using TBAs in which the Fund sells a mortgage-backed security to a counterparty and simultaneously enters into an agreement with the same counterparty to buy back a similar security on a specific future date at a predetermined price. Each mortgage dollar roll is treated as a sale and purchase transaction, with any gain or loss recognized at the time of each sale. The Fund may be exposed to market or credit risk if the price of the security changes unfavorably or the counterparty fails to perform under the terms of the agreement. |
g. | 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 (12b-1) fees and any other items that are specifically attributable to a particular class, are charged directly to such class. For the six months ended June 30, 2007, distribution and service (12b-1) fees were the only class-specific expenses. |
h. | Distributions to Shareholders — Dividends and other distributions to shareholders are recorded on ex-dividend dates. |
i. | Restricted Cash — Restricted cash represents deposits that are being held by banks as collateral for letters of credit issued in connection with the Fund’s insurance policies. |
3. | 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 directors of the Fund who are employees 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. |
4. | Committed Line of Credit — The Fund is a participant in a joint $375 million committed line of credit that is shared by substantially all open-end funds in the Seligman Group of Investment Companies. The trustees have currently limited the Fund’s borrowings 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 0.10% 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 2008, but is renewable annually with the consent of the participating banks. For the six months ended June 30, 2007, the Fund did not borrow from the credit facility. |
5. | Purchases and Sales of Securities — Purchases and sales of portfolio securities, excluding short-term investments, for the six months ended June 30, 2007, amounted to $71,739,893 and $77,428,319, respectively. |
6. |
Gross unrealized appreciation of portfolio securities | $ | 70,568 | ||||
Gross unrealized depreciation of portfolio securities | (825,513 | ) | ||||
Net unrealized depreciation of portfolio securities | (754,945 | ) | ||||
Capital loss carryforwards | (9,511,328 | ) | ||||
Current period net realized losses | (289,189 | ) | ||||
Total accumulated losses | $ | (10,555,462 | ) |
7. | 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: |
Six Months Ended June 30, 2007 | | Year Ended December 31, 2006 | | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Class A | | Shares | | Amount | | Shares | | Amount | |||||||||||
Net proceeds from sales of shares | 184,916 | $ | 1,255,526 | 829,205 | $ | 5,626,573 | |||||||||||||
Investment of dividends | 87,899 | 596,680 | 173,438 | 1,173,460 | |||||||||||||||
Exchanged from associated funds | 195,363 | 1,333,890 | 317,767 | 2,159,661 | |||||||||||||||
Converted from Class B* | 116,416 | 791,037 | 346,675 | 2,344,995 | |||||||||||||||
Total | 584,594 | 3,977,133 | 1,667,085 | 11,304,689 | |||||||||||||||
Cost of shares repurchased | (737,147 | ) | (5,010,428 | ) | (1,912,212 | ) | (12,955,116 | ) | |||||||||||
Exchanged into associated funds | (526,312 | ) | (3,586,868 | ) | (224,586 | ) | (1,524,151 | ) | |||||||||||
Total | (1,263,459 | ) | (8,597,296 | ) | (2,136,798 | ) | (14,479,267 | ) | |||||||||||
Decrease | (678,865 | ) | $ | (4,620,163 | ) | (469,713 | ) | $ | (3,174,578 | ) |
Six Months Ended June 30, 2007 | | Year Ended December 31, 2006 | | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Class B | | Shares | | Amount | | Shares | | Amount | |||||||||||
Net proceeds from sales of shares | 10,670 | $ | 72,743 | 46,485 | $ | 315,866 | |||||||||||||
Investment of dividends | 12,718 | 86,519 | 31,043 | 210,405 | |||||||||||||||
Exchanged from associated funds | 81,177 | 556,716 | 174,836 | 1,185,809 | |||||||||||||||
Total | 104,565 | 715,978 | 252,364 | 1,712,080 | |||||||||||||||
Cost of shares repurchased | (218,508 | ) | (1,490,147 | ) | (740,034 | ) | (5,023,745 | ) | |||||||||||
Exchanged into associated funds | (17,077 | ) | (116,282 | ) | (75,849 | ) | (514,462 | ) | |||||||||||
Converted to Class A* | (116,130 | ) | (790,596 | ) | (345,743 | ) | (2,343,737 | ) | |||||||||||
Total | (351,715 | ) | (2,397,025 | ) | (1,161,626 | ) | (7,881,944 | ) | |||||||||||
Decrease | (247,150 | ) | $ | (1,681,047 | ) | (909,262 | ) | $ | (6,169,864 | ) | |||||||||
Class C | | Shares | | Amount | | Shares | | Amount | |||||||||||
Net proceeds from sales of shares | 8,726 | $ | 59,416 | 29,074 | $ | 197,032 | |||||||||||||
Investment of dividends | 7,428 | 50,582 | 16,801 | 113,857 | |||||||||||||||
Exchanged from associated funds | 31,469 | 215,524 | 22,594 | 153,314 | |||||||||||||||
Total | 47,623 | 325,522 | 68,469 | 464,203 | |||||||||||||||
Cost of shares repurchased | (55,044 | ) | (374,729 | ) | (303,663 | ) | (2,064,426 | ) | |||||||||||
Exchanged into associated funds | (33,544 | ) | (227,963 | ) | (22,852 | ) | (156,295 | ) | |||||||||||
Total | (88,588 | ) | (602,692 | ) | (326,515 | ) | (2,220,721 | ) | |||||||||||
Decrease | (40,965 | ) | $ | (277,170 | ) | (258,046 | ) | $ | (1,756,518 | ) | |||||||||
Class D | | Shares | | Amount | | Shares | | Amount | |||||||||||
Net proceeds from sales of shares | 203,546 | $ | 1,386,950 | 286,887 | $ | 1,948,945 | |||||||||||||
Investment of dividends | 24,807 | 168,623 | 42,074 | 285,013 | |||||||||||||||
Exchanged from associated funds | 171,870 | 1,177,628 | 156,212 | 1,070,839 | |||||||||||||||
Total | 400,223 | 2,733,201 | 485,173 | 3,304,797 | |||||||||||||||
Cost of shares repurchased | (288,264 | ) | (1,954,735 | ) | (489,538 | ) | (3,321,339 | ) | |||||||||||
Exchanged into associated funds | (60,338 | ) | (412,420 | ) | (108,395 | ) | (734,924 | ) | |||||||||||
Total | (348,602 | ) | (2,367,155 | ) | (597,933 | ) | (4,056,263 | ) | |||||||||||
Increase (decrease) | 51,621 | $ | 366,046 | (112,760 | ) | $ | (751,466 | ) | |||||||||||
Class R | | Shares | | Amount | | Shares | | Amount | |||||||||||
Net proceeds from sales of shares | 88,957 | $ | 605,393 | 66,071 | $ | 448,068 | |||||||||||||
Investment of dividends | 4,326 | 29,368 | 4,044 | 27,364 | |||||||||||||||
Exchanged from associated funds | 1,577 | 10,772 | 1,191 | 8,215 | |||||||||||||||
Total | 94,860 | 645,533 | 71,306 | 483,647 | |||||||||||||||
Cost of shares repurchased | (25,420 | ) | (172,947 | ) | (21,263 | ) | (143,152 | ) | |||||||||||
Exchanged into associated funds | — | — | (224 | ) | (1,526 | ) | |||||||||||||
Total | (25,420 | ) | (172,947 | ) | (21,487 | ) | (144,678 | ) | |||||||||||
Increase | 69,440 | $ | 472,586 | 49,819 | $ | 338,969 |
* | Automatic conversion of Class B shares to Class A shares approximately eight years after the initial purchase date. The amount of dividends accrued on Class B shares between the last dividend payment date and the conversion date is invested in Class A shares and is included in the conversion from Class B amount. |
8. | Other Matters — In late 2003, the Manager conducted an extensive internal review in response to public announcements concerning frequent trading in shares of open-end mutual funds. As of September 2003, the Manager had one arrangement that permitted frequent trading in the Seligman registered investment companies (the “Seligman Funds”). This arrangement was in the process of being closed down by the Manager before the first proceedings relating to trading practices within the mutual fund industry were publicly announced. Based on a review of the Manager’s records for 2001 through 2003, the Manager identified three other arrangements that had permitted frequent trading in the Seligman Funds. All three had already been terminated prior to the end of September 2002. |
the Seligman Funds and disgorgement of profits and management fees, and injunctive relief. Seligman and Mr. Zino believe that the claims are without merit and intend to defend themselves vigorously.
9. | Recently Issued Accounting Pronouncement — In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 (“SFAS No. 157”), “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value of assets and liabilities and expands disclosure about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The Fund is currently evaluating the impact of the adoption of SFAS No. 157 but believes the impact will be limited to expanded disclosures in the Fund’s financial statements. |
CLASS A | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year Ended December 31, | | |||||||||||||||||||||||||||
| Six Months Ended 6/30/07 | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |||||||||||||||||
Per Share Data: | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 6.80 | $ | 6.89 | $ | 7.10 | $ | 7.23 | $ | 7.39 | $ | 6.97 | ||||||||||||||||
Income (Loss) from Investment Operations: | ||||||||||||||||||||||||||||
Net investment income | 0.13 | 0.24 | 0.20 | 0.19 | 0.18 | 0.26 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.10 | ) | (0.09 | ) | (0.20 | ) | (0.11 | ) | (0.14 | ) | 0.45 | |||||||||||||||||
Total from Investment Operations | 0.03 | 0.15 | — | 0.08 | 0.04 | 0.71 | ||||||||||||||||||||||
Less Distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.13 | ) | (0.24 | ) | (0.20 | ) | (0.19 | ) | (0.18 | ) | (0.26 | ) | ||||||||||||||||
Dividends in excess of net investment income | — | — | (0.01 | ) | (0.02 | ) | (0.02 | ) | (0.03 | ) | ||||||||||||||||||
Total Distributions | (0.13 | ) | (0.24 | ) | (0.21 | ) | (0.21 | ) | (0.20 | ) | (0.29 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 6.70 | $ | 6.80 | $ | 6.89 | $ | 7.10 | $ | 7.23 | $ | 7.39 | ||||||||||||||||
Total Return | 0.44 | % | 2.33 | % | —% | 1.09 | % | 0.55 | % | 10.45 | % | |||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000s omitted) | $ | 35,514 | $ | 40,676 | $ | 44,402 | $ | 47,553 | $ | 59,660 | $ | 80,556 | ||||||||||||||||
Ratio of expenses to average net assets | 1.50 | %† | 1.42 | % | 1.50 | % | 1.31 | % | 1.27 | % | 1.24 | % | ||||||||||||||||
Ratio of net investment income to average net assets | 3.93 | %† | 3.55 | % | 2.90 | % | 2.66 | % | 2.38 | % | 3.68 | % | ||||||||||||||||
Portfolio turnover rate | 118.78 | % | 347.09 | % | 286.60 | % | 133.02 | % | 250.49 | % | 184.24 | % |
See footnotes on page 23.
CLASS B | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year Ended December 31, | | |||||||||||||||||||||||||||
| Six Months Ended 6/30/07 | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |||||||||||||||||
Per Share Data: | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 6.82 | $ | 6.90 | $ | 7.12 | $ | 7.25 | $ | 7.40 | $ | 6.98 | ||||||||||||||||
Income (Loss) from Investment Operations: | ||||||||||||||||||||||||||||
Net investment income | 0.11 | 0.19 | 0.15 | 0.14 | 0.12 | 0.21 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.10 | ) | (0.08 | ) | (0.21 | ) | (0.11 | ) | (0.13 | ) | 0.45 | |||||||||||||||||
Total from Investment Operations | 0.01 | 0.11 | (0.06 | ) | 0.03 | (0.01 | ) | 0.66 | ||||||||||||||||||||
Less Distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.19 | ) | (0.15 | ) | (0.14 | ) | (0.12 | ) | (0.21 | ) | ||||||||||||||||
Dividends in excess of net investment income | — | — | (0.01 | ) | (0.02 | ) | (0.02 | ) | (0.03 | ) | ||||||||||||||||||
Total Distributions | (0.11 | ) | (0.19 | ) | (0.16 | ) | (0.16 | ) | (0.14 | ) | (0.24 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 6.72 | $ | 6.82 | $ | 6.90 | $ | 7.12 | $ | 7.25 | $ | 7.40 | ||||||||||||||||
Total Return | 0.07 | % | 1.73 | % | (0.88 | )% | 0.34 | % | (0.08 | )% | 9.63 | % | ||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000s omitted) | $ | 5,844 | $ | 7,619 | $ | 13,986 | $ | 24,045 | $ | 40,659 | $ | 66,563 | ||||||||||||||||
Ratio of expenses to average net assets | 2.25 | %† | 2.17 | % | 2.26 | % | 2.06 | % | 2.03 | % | 1.99 | % | ||||||||||||||||
Ratio of net investment income to average net assets | 3.18 | %† | 2.80 | % | 2.14 | % | 1.91 | % | 1.62 | % | 2.93 | % | ||||||||||||||||
Portfolio turnover rate | 118.78 | % | 347.09 | % | 286.60 | % | 133.02 | % | 250.49 | % | 184.24 | % |
See footnotes on page 23.
CLASS C | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year Ended December 31, | | |||||||||||||||||||||||||||
| Six Months Ended 6/30/07 | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |||||||||||||||||
Per Share Data: | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 6.82 | $ | 6.90 | $ | 7.11 | $ | 7.25 | $ | 7.40 | $ | 6.98 | ||||||||||||||||
Income (Loss) from Investment Operations: | ||||||||||||||||||||||||||||
Net investment income | 0.11 | 0.19 | 0.15 | 0.14 | 0.12 | 0.21 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.11 | ) | (0.08 | ) | (0.20 | ) | (0.12 | ) | (0.13 | ) | 0.45 | |||||||||||||||||
Total from Investment Operations | — | 0.11 | (0.05 | ) | 0.02 | (0.01 | ) | 0.66 | ||||||||||||||||||||
Less Distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.19 | ) | (0.15 | ) | (0.14 | ) | (0.12 | ) | (0.21 | ) | ||||||||||||||||
Dividends in excess of net investment income | — | — | (0.01 | ) | (0.02 | ) | (0.02 | ) | (0.03 | ) | ||||||||||||||||||
Total Distributions | (0.11 | ) | (0.19 | ) | (0.16 | ) | (0.16 | ) | (0.14 | ) | (0.24 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 6.71 | $ | 6.82 | $ | 6.90 | $ | 7.11 | $ | 7.25 | $ | 7.40 | ||||||||||||||||
Total Return | (0.08 | )% | 1.84 | % | (0.74 | )% | 0.20 | % | (0.08 | )% | 9.63 | % | ||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000s omitted) | $ | 3,846 | $ | 4,185 | $ | 6,016 | $ | 9,764 | $ | 18,739 | $ | 25,488 | ||||||||||||||||
Ratio of expenses to average net assets | 2.25 | %† | 2.17 | % | 2.26 | % | 2.06 | % | 2.03 | % | 1.99 | % | ||||||||||||||||
Ratio of net investment income to average net assets | 3.18 | %† | 2.80 | % | 2.14 | % | 1.91 | % | 1.62 | % | 2.93 | % | ||||||||||||||||
Portfolio turnover rate | 118.78 | % | 347.09 | % | 286.60 | % | 133.02 | % | 250.49 | % | 184.24 | % |
See footnotes on page 23.
CLASS D | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year Ended December 31, | | |||||||||||||||||||||||||||
| Six Months Ended 6/30/07 | | 2006 | | 2005 | | 2004 | | 2003 | | 2002 | |||||||||||||||||
Per Share Data: | ||||||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 6.82 | $ | 6.90 | $ | 7.11 | $ | 7.24 | $ | 7.40 | $ | 6.98 | ||||||||||||||||
Income (Loss) from Investment Operations: | ||||||||||||||||||||||||||||
Net investment income | 0.11 | 0.19 | 0.15 | 0.14 | 0.12 | 0.21 | ||||||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.11 | ) | (0.08 | ) | (0.20 | ) | (0.11 | ) | (0.14 | ) | 0.45 | |||||||||||||||||
Total from Investment Operations | — | 0.11 | (0.05 | ) | 0.03 | (0.02 | ) | 0.66 | ||||||||||||||||||||
Less Distributions: | ||||||||||||||||||||||||||||
Dividends from net investment income | (0.11 | ) | (0.19 | ) | (0.15 | ) | (0.14 | ) | (0.12 | ) | (0.21 | ) | ||||||||||||||||
Dividends in excess of net investment income | — | — | (0.01 | ) | (0.02 | ) | (0.02 | ) | (0.03 | ) | ||||||||||||||||||
Total Distributions | (0.11 | ) | (0.19 | ) | (0.16 | ) | (0.16 | ) | (0.14 | ) | (0.24 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 6.71 | $ | 6.82 | $ | 6.90 | $ | 7.11 | $ | 7.24 | $ | 7.40 | ||||||||||||||||
Total Return | (0.08 | )% | 1.70 | % | (0.74 | )% | 0.34 | % | (0.22 | )% | 9.63 | % | ||||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||||||
Net assets, end of period (000s omitted) | $ | 10,285 | $ | 10,091 | $ | 10,992 | $ | 11,556 | $ | 14,789 | $ | 23,768 | ||||||||||||||||
Ratio of expenses to average net assets | 2.25 | %† | 2.17 | % | 2.26 | % | 2.06 | % | 2.03 | % | 1.99 | % | ||||||||||||||||
Ratio of net investment income to average net assets | 3.18 | %† | 2.80 | % | 2.14 | % | 1.91 | % | 1.62 | % | 2.93 | % | ||||||||||||||||
Portfolio turnover rate | 118.78 | % | 347.09 | % | 286.60 | % | 133.02 | % | 250.49 | % | 184.24 | % |
See footnotes on page 23.
CLASS R | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Year Ended December 31, | | |||||||||||||||||||||||
| Six Months Ended 6/30/07 | | 2006 | | 2005 | | 2004 | | 4/30/03* to 12/31/03 | |||||||||||||||
Per Share Data: | ||||||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 6.81 | $ | 6.89 | $ | 7.10 | $ | 7.23 | $ | 7.36 | ||||||||||||||
Income (Loss) from Investment Operations: | ||||||||||||||||||||||||
Net investment income | 0.12 | 0.22 | 0.18 | 0.17 | 0.10 | |||||||||||||||||||
Net realized and unrealized loss on investments | (0.10 | ) | (0.08 | ) | (0.20 | ) | (0.11 | ) | (0.10 | ) | ||||||||||||||
Total from Investment Operations | 0.02 | 0.14 | (0.02 | ) | 0.06 | — | ||||||||||||||||||
Less Distributions | ||||||||||||||||||||||||
Dividends from net investment income | (0.12 | ) | (0.22 | ) | (0.18 | ) | (0.17 | ) | (0.10 | ) | ||||||||||||||
Dividends in excess of net investment income | — | — | (0.01 | ) | (0.02 | ) | (0.03 | ) | ||||||||||||||||
Total Distributions | (0.12 | ) | (0.22 | ) | (0.19 | ) | (0.19 | ) | (0.13 | ) | ||||||||||||||
Net Asset Value, End of Period | $ | 6.71 | $ | 6.81 | $ | 6.89 | $ | 7.10 | $ | 7.23 | ||||||||||||||
Total Return | 0.29 | % | 2.21 | % | (0.25 | )% | 0.82 | % | (0.05 | )% | ||||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||
Net assets, end of period (000s omitted) | $ | 1,453 | $ | 1,002 | $ | 671 | $ | 440 | $ | 2 | ||||||||||||||
Ratio of expenses to average net assets | 1.75 | %† | 1.67 | % | 1.76 | % | 1.56 | % | 1.57 | %† | ||||||||||||||
Ratio of net investment income to average net assets | 3.68 | %† | 3.30 | % | 2.64 | % | 2.41 | % | 2.01 | %† | ||||||||||||||
Portfolio turnover rate | 118.78 | % | 347.09 | % | 286.60 | % | 133.02 | % | 250.49 | %†† |
* | Commencement of offering of shares. | |
† | Annualized. | |
†† | Computed at the Fund level for the year ended December 31, 2003. |
1 | These website references are inactive textual references and information contained in or otherwise accessible through these websites does not form a part of this report or the Fund’s prospectus or statement of additional information. |
ITEM 2. | CODE OF ETHICS. | |
Not applicable. | ||
ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. | |
Not applicable. | ||
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. | |
Not applicable. | ||
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. | |
Not applicable. | ||
ITEM 6. | SCHEDULE OF INVESTMENTS. | |
Included in Item 1 above. | ||
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END | |
MANAGEMENT INVESTMENT COMPANIES. | ||
Not applicable. | ||
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT | |
COMPANIES. | ||
Not applicable. | ||
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT | |
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. | ||
Not applicable. | ||
ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. | |
Not applicable. | ||
ITEM 11. | CONTROLS AND PROCEDURES. | |
(a) The registrant's principal executive officer and principal financial officer have concluded, based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures provide reasonable assurance that material information required to be disclosed by the registrant in the report it files or submits on Form N-CSR is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms and that such material information is accumulated and communicated to the registrant's management, including its principal executive officer and principal financial officer, as appropriate, in order to allow timely decisions regarding required disclosure. | ||
(b) The registrant’s principal executive officer and principal financial officer are aware of no changes in the registrant’s internal control over financial reporting that occurred during the | ||
second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. | |||
ITEM 12. EXHIBITS. | |||
(a) (1) | Not applicable. | ||
(a) (2) | Certifications of principal executive officer and principal financial officer as required | ||
by Rule 30a-2(a) under the Investment Company Act of 1940. | |||
(a)(3) | Not applicable. | ||
(b) | Certifications of chief executive officer and chief financial officer as required by Rule | ||
30a-2(b) under the Investment Company Act of 1940. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SELIGMAN HIGH INCOME FUND SERIES
By: | /S/ BRIAN T. ZINO | |
Brian T. Zino | ||
President and Chief Executive Officer | ||
Date: | August 29, 2007 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /S/ BRIAN T. ZINO | |
Brian T. Zino | ||
President and Chief Executive Officer | ||
Date: | August 29, 2007 | |
By: | /S/ LAWRENCE P. VOGEL | |
Lawrence P. Vogel | ||
Vice President, Treasurer and Chief Financial Officer | ||
Date: | August 29, 2007 |
SELIGMAN HIGH INCOME FUND SERIES
EXHIBIT INDEX | ||
(a)(2) | Certifications of principal executive officer and principal financial officer as required by | |
Rule 30a-2(a) under the Investment Company Act of 1940. | ||
(b) | Certification of chief executive officer and chief financial officer as required by Rule | |
30a-2(b) of the Investment Company Act of 1940. |