See footnotes on page 33.
See footnotes on page 33.
See footnotes on page 33.
See footnotes on page 33.
See Notes to Financial Statements.
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Seligman High-Yield Fund (formerly Seligman High-Yield Bond Series), one of the funds constituting Seligman High Income Fund Series (the “Fund”) as of December 31, 2005, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with 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 December 31, 2005, 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 December 31, 2005, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the respective stated periods, in conformity with accounting principles generally accepted in the United States of America.
Shareholders of Seligman High-Yield Fund (the “Fund”) voted on the following proposals at the special shareholders meeting on October 24, 2005. The description of each proposal and number of shares voted are as follows:
To elect a Board of Trustees (shareholders of the Fund and Seligman U.S. Government Securities Fund voted together for each nominee):
| | In Favor of Election | Withhold Authority to Vote |
| Robert B. Catell | 83,446,111.879 | 3,465,663.748 |
| John R. Galvin | 84,124,533.879 | 2,787,241.748 |
| Alice S. Ilchman | 84,144,318.471 | 2,767,457.156 |
| Frank A. McPherson | 84,132,951.404 | 2,778,824.223 |
| Betsy S. Michel | 84,136,932.156 | 2,774,843.471 |
| William C. Morris | 84,159,525.955 | 2,752,249.672 |
| Leroy C. Richie | 84,168,530.962 | 2,743,244.665 |
| Robert L. Shafer | 84,103,036.171 | 2,808,739.456 |
| James N. Whitson | 84,164,572.235 | 2,747,203.392 |
| Brian T. Zino | 84,162,185.207 | 2,749,590.420 |
Proposal 2
To ratify the selection of Deloitte & Touche LLP as independent auditors for the Fund for 2005 (shareholders of the Fund and Seligman U.S. Government Securities Fund voted together):
For Ratification | Against Ratification | Abstain | |
| 83,543,740.567 | 986,008.184 | 2,382,026.876 | |
Proposal 5(a)
To amend the Fund’s investment objective:
For Approval | Against Approval | Abstain | Broker Non-Votes |
| 56,995,059.779 | 2,247,805.647 | 2,812,437.976 | 18,343,378.000 |
Proposal 5(b)
To eliminate the Fund’s fundamental policy regarding investment in bonds:
For Approval | Against Approval | Abstain | Broker Non-Votes |
| 55,610,719.638 | 3,468,687.913 | 2,975,895.851 | 18,343,378.000 |
Proposal 6(a)
To amend the Fund’s fundamental restriction regarding investments in commodities:
For Approval | Against Approval | Abstain | Broker Non-Votes |
| 54,948,003.859 | 4,230,568.769 | 2,876,730.774 | 18,343,378.000 |
Proposal 6(b)
To amend the Fund’s fundamental restriction regarding the purchase of securities on margin:
For Approval | Against Approval | Abstain | Broker Non-Votes |
| 54,472,260.573 | 4,674,870.589 | 2,908,172.240 | 18,343,378.000 |
Proxy Results (continued)
Proposal 6(c)
To amend the Fund’s fundamental restriction regarding borrowing:
For Approval | Against Approval | Abstain | Broker Non-Votes |
| 54,638,099.430 | 4,475,800.907 | 2,941,403.065 | 18,343,378.000 |
Proposal 6(d)
To amend the Fund’s fundamental restriction regarding lending:
For Approval | Against Approval | Abstain | Broker Non-Votes |
| 54,962,469.720 | 4,049,132.006 | 3,043,701.676 | 18,343,378.000 |
Proposal 6(e)
To amend the Fund’s fundamental restriction regarding underwriting:
For Approval | Against Approval | Abstain | Broker Non-Votes |
| 55,342,425.139 | 3,648,997.317 | 3,063,880.946 | 18,343,378.000 |
Proposal 6(f )
To amend the Fund’s fundamental restriction regarding the purchase or sales of real estate:
For Approval | Against Approval | Abstain | Broker Non-Votes |
| 55,923,130.991 | 3,321,136.567 | 2,811,035.844 | 18,343,378.000 |
Proposal 6(g)
To amend the Fund’s fundamental restriction regarding diversification:
For Approval | Against Approval | Abstain | Broker Non-Votes |
| 56,010,603.736 | 3,276,031.791 | 2,768,667.875 | 18,343,378.000 |
Proposal 6(h)
To amend the Fund’s fundamental restriction regarding industry concentration:
For Approval | Against Approval | Abstain | Broker Non-Votes |
| 55,780,823.861 | 3,399,640.498 | 2,874,839.043 | 18,343,378.000 |
Proposal 6(i)
To eliminate the Fund’s fundamental restriction regarding short sales:
For Approval | Against Approval | Abstain | Broker Non-Votes |
| 54,736,038.907 | 4,411,296.374 | 2,907,968.121 | 18,343,378.000 |
Proposal 6(j)
To eliminate the Fund’s fundamental restriction regarding control or management of any company:
For Approval | Against Approval | Abstain | Broker Non-Votes |
| 55,082,250.989 | 4,037,861.921 | 2,935,190.492 | 18,343,378.000 |
Proposal 6(k)
To eliminate the Fund’s fundamental restriction regarding transactions in options:
For Approval | Against Approval | Abstain | Broker Non-Votes |
| 54,775,842.098 | 4,448,505.324 | 2,830,955.980 | 18,343,378.000 |
Proxy Results (continued)
Proposal 6(l)
To eliminate the Fund’s fundamental restriction regarding investments in other investment companies:
For Approval | Against Approval | Abstain | Broker Non-Votes |
| 55,573,792.464 | 3,608,598.449 | 2,872,912.489 | 18,343,378.000 |
Proposal 6(m)
To eliminate the Fund’s fundamental restriction regarding unseasoned companies:
For Approval | Against Approval | Abstain | Broker Non-Votes |
| 54,646,819.733 | 4,458,516.500 | 2,949,967.169 | 18,343,378.000 |
Proposal 6(n)
To eliminate the Fund’s fundamental restriction regarding mortgages and pledges:
For Approval | Against Approval | Abstain | Broker Non-Votes |
| 55,164,810.172 | 4,083,162.579 | 2,807,330.651 | 18,343,378.000 |
Note: Proposals 3 and 4 related solely to Seligman U.S. Government Securities Fund.
Matters Relating to the Trustees’
Consideration of the Continuance of the Management Agreement
The trustees of Seligman High Income Fund Series (the “Series”), of which the Fund is a separate series, unanimously approved the continuance of the Management Agreement with the Manager in respect of the Fund at a meeting held on November 17, 2005.
In preparation for the meeting, experienced counsel who are independent of the Manager had discussed with the Manager the continuance and nature of materials to be provided to the trustees, the trustees had requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by Lipper Inc. (“Lipper”). Prior to voting, the trustees reviewed the proposed continuance of the Management Agreement with the Manager and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed continuance. The independent trustees also discussed the proposed continuance in a private session with counsel at which no representatives of the Manager were present.
In reaching their determination with respect to the continuance of the Management Agreement, the trustees considered their knowledge of the nature and quality of the services provided by the Manager to the Fund gained from their experience as directors/and or trustees of the Seligman Group of Funds, their overall confidence in the Manager’s integrity and competence they have gained from that experience, the Manager’s initiative in identifying and raising potential issues with the trustees and its responsiveness, frankness and attention to concerns raised by the trustees in the past, including the Manager’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the Seligman Group of Funds. The trustees noted that the Board has six regular meetings each year, at each of which they receive presentations from the Manager on the investment results of the Fund and review extensive materials and information presented by the Manager.
The trustees also considered all other factors they believed relevant, including the following:
| 1. | information comparing the performance of the Fund to other investment companies with similar investment objectives and to an index; |
| | |
| 2. | the nature, extent and quality of investment and administrative services rendered by the Manager; |
| | |
| 3. | payments received by the Manager from all sources in respect of the Fund and all investment companies in the Seligman Group of Funds; |
| | |
| 4. | the costs borne by, and profitability of, the Manager and its affiliates in providing services to the Fund and to all investment companies in the Seligman Group of Funds; |
| | |
| 5. | comparative fee and expense data for the Fund and other investment companies with similar investment objectives; |
| | |
| 6. | the extent to which economies of scale would be realized as the Fund grows and whether the fee level reflects these economies of scale for the benefit of investors; |
| | |
| 7. | the Manager’s practices regarding allocation of portfolio transactions of the Fund; |
| | |
| 8. | information about “revenue sharing” arrangements that the Manager enters into in respect of the Fund; |
| | |
| 9. | portfolio turnover rates of the Fund compared to other investment companies with similar investment objectives; |
| | |
| 10. | fall-out benefits which the Manager and its affiliates receive from their relationship to the Fund; |
| | |
| 11. | information about fees charged by the Manager to another client with similar investment objectives; |
| | |
| 12. | the professional experience and qualifications of the Fund’s portfolio management team and other senior personnel of the Manager; and |
| | |
| 13. | the terms of the Management Agreement. |
Matters Relating to the Trustees’
Consideration of the Continuance of the Management Agreement
In their deliberations, the trustees did not identify any particular information that was all-important or controlling, and trustees attributed different weights to the various factors.
The trustees determined that the overall arrangements between the Fund and the Manager, as provided in the Management Agreement, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the trustees considered relevant in the exercise of their reasonable judgment.
The material factors and conclusions that formed the basis for the trustees’ reaching their determination to approve the continuance of the Management Agreement (including their determinations that the Manager should continue to be the investment adviser for the Fund, and that the fees payable to the Manager pursuant to the Management Agreement are appropriate) were separately discussed by the trustees.
Nature, Extent and Quality of Services Provided by the Manager
The trustees noted that, under the Management Agreement, the Manager, subject to the control of the trustees, administers the Fund’s business and other affairs. The Manager manages the investment of the assets of the Fund, including making purchases and sales of portfolio securities consistent with the Fund’s investment objective and policies. The Manager also provides the Fund with such office space, administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by the Fund) and executive and other personnel as are necessary for the Fund’s operations. The Manager pays all of the compensation of trustees of the Series who are employees or consultants of the Manager and of the officers and employees of the Series, including the Fund’s chief compliance officer. The Manager also provides senior management for Seligman Data Corp. (“SDC”), a company owned by certain of the investment companies in the Seligman Group of Funds that provides shareholder services to the Fund and other investment companies in the Seligman Group of Funds at cost.
The trustees considered the scope and quality of services provided by the Manager under the Management Agreement and noted that the scope of services provided had expanded over time as a result of regulatory and other developments. The trustees noted that, for example, the Manager is responsible for maintaining and monitoring its own and the Fund’s compliance programs, and these compliance programs have recently been refined and enhanced in light of recently adopted regulatory requirements. The trustees considered the quality of the investment research capabilities of the Manager and the other resources they have dedicated to performing services for the Fund. At prior meetings the trustees had also considered the Manager’s practices with respect to the selection of brokers and dealers to effect portfolio transactions, including their duty to seek best execution. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Fund’s other service providers, also were considered. The trustees concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Fund under the Management Agreement.
On an ongoing basis, the Manager reports to the trustees on the status of various matters relating to market timing activity affecting certain funds in the Seligman Group of Funds. In connection with the continuance review, the Manager and its counsel and the trustees' special counsel also addressed, among other matters: the action brought by the Manager and its president against the Attorney General of the State of New York seeking an order enjoining the Attorney General from, among other things, investigating the fees paid by the funds in the Seligman Group of Funds to the Manager; the ex parte application filed by the Attorney General to seek further discovery and appoint a special referee to supervise the Attorney General’s investigation relating to market timing; and the indication by the Staff of the New York Office of the Securities and Exchange Commission (“SEC”) that it was considering recommending that the SEC institute a formal action against the Manager and Seligman Advisors Inc. relating to market timing. After a detailed presentation by the Manager and further discussion with the Manager, the Manager’s counsel, the trustees’ special
Matters Relating to the Trustees’
Consideration of the Continuance of the Management Agreement
counsel and other experienced counsel independent of the Manager, the independent trustees concluded that they retained confidence in the integrity of the Manager and its ability to provide management services to the Fund.
Costs of Services Provided and Profitability to the Manager
At the request of the trustees, the Manager provided information concerning profitability of the Manager’s investment advisory and investment company activities and its financial condition based on historical information for 2004 and 2005 (through September 30) and estimates for full-year 2005. The information considered by the trustees included operating profit margin information for the Manager’s investment company business alone (i.e., excluding results of its other businesses) and on a consolidated basis. The trustees also reviewed the Manager’s profitability data and estimated profitability data for the Fund. The trustees reviewed with the Manager’s chief financial officer the assumptions and methods of allocation used by the Manager in preparing the profitability data. The Manager stated its belief that the methods of allocation used were reasonable, but it noted that there are limitations inherent in allocating costs to multiple individual advisory products served by an organization such as the Manager where each of the advisory products draws on, and benefits from, the research and other resources of the organization.
The trustees recognized that it is difficult to make comparisons of profitability from fund management contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure and cost of capital. In considering profitability information, the trustees considered the effect of fall-out benefits on the Manager’s expenses, as well as the “revenue sharing” arrangements the Manager has entered into with certain entities that distribute shares of the Seligman Group of Funds. The trustees focused on profitability of the Manager’s relationships with the Fund before taxes and distribution expenses. The trustees recognized that the Manager should, in the abstract, be entitled to earn a reasonable level of profits for the services it provides to the Fund and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with the Fund was not excessive.
Fall-Out Benefits
The trustees also considered that a broker-dealer affiliate of the Manager receives 12b-1 fees from the Fund in respect of shares held in accounts for which there is no other broker of record, and that the Fund’s distributor (another affiliate of the Manager) retains a portion of the 12b-1 fees from the Fund and receives a portion of the sales charges on sales or redemptions of certain classes of shares.
The trustees recognized that the Manager’s profitability would be somewhat lower if its affiliates did not receive the benefit described above. The trustees noted that the Manager derives reputational and other benefits from its association with the Fund.
Investment Results
In addition to the information received by the trustees for the meeting, the trustees receive detailed performance information for the Fund at each regular Board meeting during the year. The trustees reviewed information showing performance of the Fund compared to other funds in the Lipper High-Yield Funds Average over the one-, three-, five- and ten-year periods ended September 30, 2005, and for each calendar year in the 2000-to-2004 period and for the first nine months of 2005, and compared to the Citigroup High-Yield Market Index and a group of 13 competitor funds selected by the Manager over annualized rolling three- and five-year periods ended September 30, 2005, for each calendar year in the 2000-to-2004 period,
Matters Relating to the Trustees’
Consideration of the Continuance of the Management Agreement
and for the first nine months of 2005. The comparative information showed that the Fund’s investment results were below the Lipper average, the index and the competitor average in all periods, but showed substantial improvement in the first nine months of 2005, when the Fund’s results lagged each benchmark by only small amounts. The trustees also noted that the Fund’s Lipper ranking had improved significantly in the one-year period and was only slightly below median. The Manager noted that a new portfolio manager had been hired early in 2005. The Manager further explained that long-term results had been adversely affected by an industry weighting decision by a former portfolio manager for the Fund in the period from 2000-2001, as previously discussed with the Board. The Manager added that the Fund may historically have been disadvantaged in its Lipper category by the fact that its principal objective was maximum current income, whereas he believed that many of the funds in the category sought capital appreciation as well as income. The Manager noted that the trustees had approved new principal investment strategies for the Fund in August 2005, that shareholders had subsequently approved a change to the Fund’s investment objective to allow the portfolio manager to consider the potential for capital appreciation, and that these changes had taken effect in October 2005. The Board considered the steps that the Manager had taken in recent times to address the Fund’s investment performance and concluded that they were satisfied that the Manager was addressing their concerns and retained confidence in the Manager’s capabilities to manage the Fund.
Managements Fees and Other Expenses
The trustees considered the management fee rate paid by the Fund to the Manager. The trustees recognized that it is difficult to make comparisons of management fees because there are variations in the services that are included in the fees paid by other funds.
The Fund’s peer group consisted of 37 funds in the Lipper High Current Yield Fund category having between $250 million and $3 billion of average net assets attributable to Class A shares in their most recent fiscal year. The information showed that the Fund’s current effective management fee rate of 0.65% was comparable to, though slightly higher than, the average and the median for the funds in the peer group.
The trustees also considered the fees the Manager charges another client with investment objectives similar to the Fund. One of the Manager’s other clients is an unregistered investment company whose shares are sold primarily outside the United States. The fee rates charged to that company are higher than those charged to the Fund.
The trustees also considered the total expense ratio of the Fund in comparison to the fees and expenses of funds within its peer group. The trustees recognized that the expense ratio information for the Fund potentially reflected on the Manager’s provision of services, as the Manager is responsible for coordinating services provided to the Fund by others.
In considering the expense ratio of the Fund, the trustees noted the Fund has elected to have shareholder services provided at cost by SDC and that the Manager provides senior management of SDC as part of the services covered by its management fees. SDC provides services exclusively to the Seligman Group of Funds, and the trustees noted that the arrangement with SDC has provided the Fund and its shareholders with a consistently high level of service.
The trustees also noted that the Fund’s expense ratio was considerably higher than the median and the average for its peer group, although it was not the highest in the peer group. The Manager explained that the Fund’s relatively high expenses were attributable in part to costs of services provided by SDC and that the Fund was small relative to the funds in its peer group and that this adversely affected its expense ratio. The trustees concluded that the Fund’s expense ratio was acceptable in the Fund’s particular circumstances.
Matters Relating to the Trustees’
Consideration of the Continuance of the Management Agreement
Economies of Scale
The trustees noted that the management fee schedule for the Fund does contain breakpoints that reduce the fee rate on assets above specified levels although, at the Fund’s current asset levels, it was unlikely to benefit from them in the next year. The trustees recognized that there is no direct relationship between the economies of scale realized by funds and those realized by the Manager as assets increase, largely because economies of scale are realized (if at all) by the Manager across a variety of products and services, and not only in respect of a single fund. The trustees do not believe there is a uniform methodology for establishing breakpoints that give effect to fund-specific services provided by the Manager and to the economies of scale that the Manager may realize in its overall mutual fund business or those components of it which directly or indirectly affect a fund's operations. The trustees observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age and size of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the breakpoints that may have been adopted by comparable funds. The trustees also noted that the advisory agreements for many competitor funds do not have breakpoints at all and that, in any event, the Fund has not benefited from significant net sales in recent times. Having taken these factors into account, the trustees concluded that the Fund’s breakpoint arrangements were acceptable under the Fund’s circumstances.
Trustees and Officers
Information pertaining to the Trustees and Officers of Seligman High-Yield Fund is set forth below.
Independent Trustees
Name, (Age), Position(s) held with Fundø | Principal Occupation(s) During Past Five Years, Directorships and Other Information |
| | |
John R. Galvin (76)1,3 • Trustee: 1995 to Date • Oversees 58 Portfolios in Fund Complex | Dean Emeritus, Fletcher School of Law and Diplomacy at Tufts University; Director or Trustee of each of the investment companies of the Seligman Group of Funds†; and Chairman Emeritus, American Council on Germany. Formerly, Governor of the Center for Creative Leadership; Director, Raytheon Co. (defense and commercial electronics) and USLIFE Corporation (life insurance); and Trustee, Institute for Defense Analyses. From June 1987 to June 1992, Mr. Galvin was the Supreme Allied Commander, NATO, and the Commander-in-Chief, United States European Command. |
| | |
Alice S. Ilchman (70)2,3 • Trustee: 1991 to Date • Oversees 58 Portfolios in Fund Complex | President Emerita, Sarah Lawrence College; Director or Trustee of each of the investment companies of the Seligman Group of Funds†; Director, Jeannette K. Watson Fellowship (internships for college students); Trustee, Committee for Economic Development; Governor, Court of Governors, London School of Economics; and Director, Public Broadcasting Service (PBS). Formerly, Trustee, Save the Children (nonprofit child assistance organization). From January 1996 until December 2000, Chairman, The Rockefeller Foundation (charitable foundation). From September 1987 until September 1997, Director, New York Telephone Company. |
| | |
Frank A. McPherson (72)2,3 • Trustee: 1995 to Date • Oversees 58 Portfolios in Fund Complex | Retired Chairman of the Board and Chief Executive Officer of Kerr-McGee Corporation (diversified energy and chemical company); Director or Trustee of each of the investment companies of the Seligman Group of Funds†; and Director, DCP Midstream GP, LLP (natural gas processing), Integris Health (owner of various hospitals), Oklahoma Chapter of the Nature Conservancy, Oklahoma Medical Research Foundation, Boys and Girls Clubs of Oklahoma, Oklahoma City Public Schools Foundation, and Oklahoma Foundation for Excellence in Education. Formerly, Director, ConocoPhillips (integrated international oil corporation), Kimberly-Clark Corporation (consumer products), BOK Financial (bank holding company), and the Federal Reserve System’s Kansas City Reserve Bank. |
| | |
Betsy S. Michel (63)1,3 • Trustee: 1984 to Date • Oversees 58 Portfolios in Fund Complex | Attorney; Director or Trustee of each of the investment companies of the Seligman Group of Funds†; and Trustee, The Geraldine R. Dodge Foundation (charitable foundation). Formerly, Chairman of the Board of Trustees of St. George’s School (Newport, RI); and Trustee, World Learning, Inc. (international educational training), and Council of New Jersey Grantmakers. |
____________________
See footnotes on page 46.
Trustees and Officers
Independent Trustees (continued)
Name, (Age), Position(s) held with Fundø | Principal Occupation(s) During Past Five Years, Directorships and Other Information |
| | |
Leroy C. Richie (64)1,3 • Trustee: 2000 to Date • Oversees 57 Portfolios in Fund Complex | Counsel, Lewis & Munday, P.C. (law firm); Chairman and Chief Executive Officer, Q Standards Worldwide, Inc. (library of technical standards); Director or Trustee of each of the investment companies of the Seligman Group of Funds† (with the exception of Seligman Cash Management Fund, Inc.); Director, Kerr-McGee Corporation (diversified energy and chemical company), Infinity, Inc. (oil and gas services and exploration), and Vibration Control Technologies, LLC (auto vibration technology); Lead Outside Director, Digital Ally Inc. (digital imaging); Director and Chairman, Highland Park Michigan Economic Development Corp.; and Chairman, Detroit Public Schools Foundation. Formerly, Trustee, New York University Law Center Foundation; and Vice Chairman, Detroit Medical Center and Detroit Economic Growth Corp. From 1990 until 1997, Vice President and General Counsel, Automotive Legal Affairs, Chrysler Corporation. |
| | |
Robert L. Shafer (73)2,3 • Trustee: 1984 to Date • Oversees 58 Portfolios in Fund Complex | Ambassador and Permanent Observer of the Sovereign Military Order of Malta to the United Nations; and Director or Trustee of each of the investment companies of the Seligman Group of Funds†. Formerly, Director, USLIFE Corporation (life insurance); and Vice President, Pfizer Inc. (pharmaceuticals). |
| | |
James N. Whitson (70)1,3 • Trustee: 1993 to Date • Oversees 58 Portfolios in Fund Complex | Retired Executive Vice President and Chief Operating Officer, Sammons Enterprises, Inc. (a diversified holding company). Director or Trustee of each of the investment companies of the Seligman Group of Funds†; and Director, CommScope, Inc. (manufacturer of coaxial cable). Formerly, Director and Consultant, Sammons Enterprises, Inc.; and Director, C-SPAN (cable television network). |
____________________
See footnotes on page 46.Trustees and Officers
Interested Trustees and Principal Officers
Name, (Age), Position(s) held with Fundø | Principal Occupation(s) During Past Five Years, Directorships and Other Information |
| | |
William C. Morris (67)* • Trustee and Chairman of the Board: 1999 to Date • Oversees 58 Portfolios in Fund Complex | Chairman, J. & W. Seligman & Co. Incorporated; Chairman of the Board and Director or Trustee of each of the investment companies of the Seligman Group of Funds†; Chairman, Seligman Advisors, Inc., Seligman Services, Inc. and Carbo Ceramics Inc. (manufacturer of ceramic proppants for oil and gas industry); Director, Seligman Data Corp.; and President and Chief Executive Officer of The Metropolitan Opera Association. Formerly, Director, Kerr-McGee Corporation (diversified energy and chemical company) and Chief Executive Officer of each of the investment companies of the Seligman Group of Funds. |
| | |
Brian T. Zino (53)* • Trustee: 1993 to Date • President: 1995 to Date • Chief Executive Officer: 2002 to Date • Oversees 57 Portfolios in Fund Complex | Director and President, J. & W. Seligman & Co. Incorporated; President and Chief Executive Officer of each of the investment companies of the Seligman Group of Funds†; Director or Trustee of each of the investment companies of the Seligman Group of Funds (with the exception of Seligman Cash Management Fund, Inc.); Director, Seligman Advisors, Inc. and Seligman Services, Inc.; Chairman, Seligman Data Corp.; Member of the Board of Governors of the Investment Company Institute; and Director (formerly Chairman), ICI Mutual Insurance Company. |
| | |
Eleanor T. M. Hoagland (54) • Vice President and Chief Compliance Officer: 2004 to Date | Managing Director, J. & W. Seligman & Co. Incorporated; and Vice President and Chief Compliance Officer of each of the investment companies of the Seligman Group of Funds†. Formerly, Managing Director, Partner and Chief Portfolio Strategist, AMT Capital Management. |
| | |
J. Eric Misenheimer (48) • Vice President and Portfolio Manager: April 2005 to Date | Managing Director, J. & W. Seligman & Co. Incorporated and Co-Portfolio Manager of Seligman Income and Growth Fund, Inc. Formerly, Senior Vice President, Director of Taxable High Yield Fixed Income Investing, Northern Trust Global Investments. |
| | |
Thomas G. Rose (48) • Vice President: 2000 to Date | Managing Director, Chief Financial Officer and Treasurer, J. & W. Seligman & Co. Incorporated; Senior Vice President, Finance, Seligman Advisors, Inc. and Seligman Data Corp.; and Vice President of each of the investment companies of the Seligman Group of Funds†, Seligman Services, Inc. and Seligman International, Inc. |
__________
See footnotes on page 46.
Trustees and Officers
Interested Trustees and Principal Officers (continued)
Name, (Age), Position(s) held with Fundø | Principal Occupation(s) During Past Five Years, Directorships and Other Information |
| | |
Lawrence P. Vogel (49) • Vice President: 1992 to Date • Treasurer: 2000 to Date | Senior Vice President and Treasurer, Investment Companies, J. & W. Seligman & Co. Incorporated; Vice President and Treasurer of each of the investment companies of the Seligman Group of Funds†; and Treasurer of Seligman Data Corp. |
| | |
Frank J. Nasta (41) • Secretary: 1994 to Date | Director, Managing Director, General Counsel and Corporate Secretary, J. & W. Seligman & Co. Incorporated; Secretary of each of the investment companies of the Seligman Group of Funds†; and Corporate Secretary, Seligman Advisors, Inc., Seligman Services, Inc., Seligman International, Inc., and Seligman Data Corp. |
The Fund’s Statement of Additional Information (SAI) includes additional information about Fund trustees and is available, without charge, upon request. You may call toll-free (800) 221-2450 in the US or collect (212) 682-7600 outside the US to request a copy of the SAI, to request other information about the Fund, or to make shareholder inquiries.
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| ø | The address for each of the trustees and officers is 100 Park Avenue, 8th floor, New York, NY 10017. Each Trustee serves for an indefinite term, until the election and qualification of a successor or until his or her earlier death, resignation or removal. Each officer is elected annually by the Trustees. |
| † | The Seligman Group of Funds consists of 24 registered investment companies. |
| * | Mr. Morris and Mr. Zino are considered “interested persons” of the Fund, as defined in the Investment Company Act of 1940, as amended, by virtue of their positions with J. & W. Seligman & Co. Incorporated and its affiliates. |
| Member: | 1 Audit Committee |
| | 2 Trustee Nominating Committee |
| | 3 Board Operations Committee |
Required Federal Income Tax
Information (unaudited)
Dividends paid for the year ended December 31, 2005 are subject to federal income tax as “ordinary income.” In order to claim the dividends received deduction for these distributions, corporate shareholders must have held their shares for 46 days or more during the 90-day period beginning 45 days before each ex-dividend date. Under the Internal Revenue Code, the dividends paid to corporate shareholders that qualify for the dividends received deduction were as follows:
| | Dividends Received Deduction Percent |
| Class A | 0.64 |
| Class B | 0.68 |
| Class C | 0.69 |
| Class D | 0.69 |
| Class I | 0.58 |
| Class R | 0.66 |
For the year ended December 31, 2005, the Fund designates the following as qualified dividends to individual shareholders:
| | Qualified Dividends Percent |
| Class A | 0.64 |
| Class B | 0.68 |
| Class C | 0.69 |
| Class D | 0.69 |
| Class I | 0.58 |
| Class R | 0.66 |
In order for an individual to claim dividends received as qualified dividends, individual shareholders must have held their shares for more than 60 days during the 121-day period beginning 60 days before each ex-dividend date
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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.
This report is intended only for the information of shareholders or those who have received the offering prospectus covering shares of Capital Stock 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. The prospectus, which contains information about these factors, should be read carefully before investing or sending money.
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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. |
END OF ANNUAL REPORT
TXHY2 12/05
