File No. 2-86008
811-3828
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. __ |_|
Post-Effective Amendment No. 34 |X|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 33 |X|
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SELIGMAN MUNICIPAL FUND SERIES, INC.
(Exact name of registrant as specified in charter)
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100 PARK AVENUE, NEW YORK, NEW YORK 10017
(Address of principal executive offices)
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Registrant's Telephone Number: 212-850-1864 or
Toll-Free 800-221-2450
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THOMAS G. ROSE, Treasurer
100 Park Avenue
New York, New York 10017
(Name and address of agent for service)
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It is proposed that this filing will become effective (check the
appropriate box).
|_| immediately upon filing pursuant to paragraph (b) of rule 485
|X| on January 31, 1999 pursuant to paragraph (b) of rule 485
|_| 60 days after filing pursuant to paragraph (a)(1) of rule 485
|_| on ____(date)______ pursuant to paragraph (a)(1) of rule 485
|_| 75 days after filing pursuant to paragraph (a)(2) of rule 485
|_| on ____(date)______ pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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SELIGMAN
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MUNICIPAL FUNDS
SELIGMAN MUNICIPAL FUND
SERIES, INC.
SELIGMAN MUNICIPAL
SERIES TRUST [GRAPHIC]
SELIGMAN NEW JERSEY
MUNICIPAL FUND, INC.
SELIGMAN PENNSYLVANIA
MUNICIPAL FUND SERIES
The Securities and Exchange PROSPECTUS
Commission has neither FEBRUARY 1, 1999
approved nor disapproved these
Funds, and it has not Seeking
determined the prospectus to
be accurate or adequate. Any Income
representation to the contrary
is a criminal offense. Exempt From
Regular
An investment in these Funds or any Income Tax
other fund cannot provide a
complete investment program. The
suitability of an investment in a
Fund should be evaluated based on
the investment objective,
strategies and risks described
herein, considered in light of all
of the other investments in your
portfolio, as well as your risk
tolerance, financial goals, and
time horizons. We recommend that
you consult your financial advisor
to determine if one or more of
these Funds is suitable for you.
managed by
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
MUNI-1 2/99
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Table of Contents
The Funds Shareholder Information
A discussion of the investment Deciding Which Class of Shares
strategies, risks, performance and to Buy 44
expenses of the Funds.
Pricing of Fund Shares 45
Overview of the Funds 1
Opening Your Account 46
National Fund 4
How to Buy Additional Shares 46
California High-Yield Fund 6
How to Exchange Shares Between
California Quality Fund 8 the Seligman Mutual Funds 47
Colorado Fund 10 How to Sell Shares 48
Florida Fund 12 Important Policies That May Affect
Your Account 49
Georgia Fund 14
Dividends and Capital Gain
Louisiana Fund 16 Distributions 50
Maryland Fund 18 Taxes 50
Massachusetts Fund 20 Financial Highlights 51
Michigan Fund 22 How to Contact Us 61
Minnesota Fund 24 For More Information back cover
Missouri Fund 26
New Jersey Fund 28
New York Fund 30
North Carolina Fund 32
Ohio Fund 34
Oregon Fund 36
Pennsylvania Fund 38
South Carolina Fund 40
Management of the Funds 42
Year 2000 43
TIMES CHANGE ... VALUES ENDURE
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The Funds
OVERVIEW OF THE FUNDS
This Prospectus contains information about four separate funds, which together
offer 19 investment options: Seligman Municipal Fund Series offers the following
13 series:
National Fund Massachusetts Fund New York Fund
Colorado Fund Michigan Fund Ohio Fund
Georgia Fund Minnesota Fund Oregon Fund
Louisiana Fund Missouri Fund South Carolina Fund
Maryland Fund
Seligman Municipal Series Trust offers the following four series:
California High-Yield Fund Florida Fund
California Quality Fund North Carolina Fund
Seligman New Jersey Municipal Fund, Inc. (New Jersey Fund)
Seligman Pennsylvania Municipal Fund Series (Pennsylvania Fund)
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
Each Fund has its own objectives, strategies and risks. You should read the
discussion of a particular Fund, in addition to the information below, before
making an investment decision about that Fund.
The Seligman Municipal Funds seek to provide income exempt from regular federal
income taxes and, as applicable, regular state and local personal income taxes.
The Funds are managed for total return, which means, in addition to income
considerations, the Funds (except the Pennsylvania Fund) look to enhance
portfolio returns by pursuing opportunities for capital appreciation. The
Pennsylvania Fund does not pursue capital appreciation as one of its objectives.
At all times, safety of principal is a primary concern of all of the Funds.
However, there is no assurance that the Funds will meet their objectives. Each
Fund normally invests at least 80% of its net assets in municipal securities
that pay interest that is exempt from regular federal income taxes and (except
the National Fund) regular personal income taxes in its respective state. Income
may be subject to the federal alternative minimum tax and, where applicable,
state alternative minimum tax.
Municipal securities are issued by state and local governments, their agencies
and authorities, as well as territories and possessions of the United States,
and the District of Columbia. Municipal bonds are issued to obtain funds to
finance various public or private projects, to meet general expenses, and to
refinance outstanding debt.
The Funds use a top-down method of selecting securities to purchase. This means
the investment manager analyzes the current interest rate environment and trends
in the municipal market to formulate investment strategy before selecting
individual securities for each Fund. The investment manager determines the
appropriate cash positions, quality parameters, market sectors, and bond
duration and then uses in-depth credit analysis to evaluate individual
securities considered for purchase.
Portfolio holdings are continually monitored to identify securities which should
be sold as a result of a deterioration in credit quality. A Fund may also sell a
security when there is a better investment opportunity available in the market.
The Funds (except the California High-Yield Fund) will purchase only investment
grade municipal securities, defined as those issues rated in the four highest
rating categories by independent rating agencies at the time of purchase. The
Funds may also purchase non-rated securities if, based on credit analysis, the
investment manager believes that they are of comparable quality to investment
grade securities.
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Alternative Minimum Tax (AMT):
A tax imposed on certain types of income to ensure that all taxpayers pay at
least a minimum amount of taxes.
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Under normal market conditions, the Funds will invest in longer maturity bonds
(typically, bonds with maturities in excess of ten years). However, a Fund may
shorten or lengthen maturities to achieve its objective.
As a defensive measure, a Fund may invest a considerable amount of its portfolio
in cash or in securities that are subject to regular federal income tax or, if
applicable, the regular income tax of its designated state. A Fund would take
such a defensive position only temporarily in seeking to minimize extreme
volatility caused by adverse market, economic or other conditions or in
anticipating significant withdrawals from the Fund. However, such a position is
inconsistent with the Funds' principal strategies and could prevent a Fund from
achieving its investment objective.
PRINCIPAL RISKS
The value of your investment in a Fund will fluctuate with fluctuations in the
value of the Fund's investment portfolio. The principal factors that may affect
the value of a Fund's portfolio are changes in interest rates and the credit
worthiness of the Fund's portfolio holdings.
Interest rate risk. Changes in market interest rates will affect the value of a
Fund's investment portfolio. In general, the market value of a municipal bond
moves in the opposite direction of interest rates: the market value decreases
when interest rates rise and increases when interest rates decline. A Fund's net
asset value per share moves in the same direction as the market value of the
municipal securities held in its portfolio. Therefore, if interest rates rise,
you should expect a Fund's net asset value per share to fall, and if interest
rates decline, the Fund's net asset value per share should rise.
Additionally, longer maturity bonds (like those held by the Funds) are generally
more sensitive to changes in interest rates. Each Fund's strategy of investing
in longer maturity bonds could subject its portfolio holdings to a greater
degree of market price volatility.
Declining interest rates increase the risk that portfolio holdings which contain
call features could be redeemed by the issuer. Proceeds of called bonds may be
reinvested at lower yields, which could affect the level of income a Fund
generates.
Credit risk. A municipal bond issue could deteriorate in quality to the extent
that its rating is downgraded or its market value declines relative to
comparable municipal securities. Credit risk also includes the risk that an
issuer of a municipal bond would be unable to make interest and principal
payments.
The investment manager seeks to minimize the credit risk inherent in municipal
securities by performing its own in-depth credit analysis on every municipal
security before purchase and by continuing to monitor all securities while they
remain in the portfolio. Each Fund may purchase municipal bonds that are insured
as to the payment of principal and interest. However, the Funds view insurance
as an enhancement of quality, not as a substitute for it. A Fund and will not
purchase a bond unless the investment manager approves the underlying credit.
The Funds are also subject to the following risks:
Concentration risk. Each Fund (except the National Fund) invests in municipal
securities issued by a single state and its municipalities. Specific events or
factors affecting a particular state may have an impact on the municipal
securities of that state without affecting the municipal market in general. The
Funds seek to minimize this risk by diversifying investments within the state.
In addition, each Fund is subject to certain investment restrictions limiting
the amount of its assets that can be invested in the securities of a single
issuer.
Market risk. At times, market conditions could result in a lack of liquidity.
The municipal market is an over-the-counter market, which means that the Funds
purchase and sell portfolio holdings through municipal bond dealers. A Fund's
ability to sell securities held in its portfolio is dependent on the willingness
and ability of market participants to provide bids that reflect current market
levels. Adverse market conditions could result in a lack of liquidity by
reducing the number of ready buyers. Lower-rated securities may be less liquid
than higher-rated securities.
An investment in any of the Funds is not a deposit in a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
2
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PAST PERFORMANCE
Each Fund offers two Classes of shares. The performance information presented
for each Fund provides some indication of the risks of investing in the Fund by
showing how the performance of Class A shares has varied year to year, as well
as how each Class's performance compares to the Lehman Brothers Municipal Bond
Index, a widely-used measure of municipal bond performance. Although each Fund's
fiscal year ends on September 30, the performance information is provided on a
calendar year basis to assist you in comparing the returns of the Funds with the
returns of other mutual funds. How a Fund has performed in the past, however, is
not necessarily an indication of how the Fund will perform in the future. Total
returns will vary between each Fund's Class A and Class D shares due to their
different fees and expenses.
FEES AND EXPENSES
The fee and expense table provided for each Fund summarizes the fees and
expenses that you may pay as a shareholder of a Fund. Each Class of shares has
its own sales charge schedule and is subject to different ongoing fees.
Shareholder fees are charged directly to you. Annual fund operating expenses are
deducted from a Fund's assets and are therefore paid indirectly by you and other
Fund shareholders.
Accompanying each Fund's fee and expense table is an example intended to help
you compare the expenses of investing in that Fund with the expenses of
investing in other mutual funds.
Discussions of each Fund begin on page 4.
3
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National Fund
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The National Fund seeks to maximize income exempt from regular federal income
taxes to the extent consistent with preservation of capital and with
consideration given to opportunities for capital gain.
The National Fund uses the following strategies to pursue its objective:
The National Fund invests at least 80% of its net assets in municipal securities
of states, territories, and possessions of the United States, and the District
of Columbia, and their political subdivisions, agencies, and instrumentalities
that are rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The National Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
4
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National Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 9.82%
1990 5.82%
1991 11.47%
1992 7.88%
1993 14.10%
1994 -9.95%
1995 20.10%
1996 3.33%
1997 10.38%
1998 5.67%
Best calendar quarter return: 8.25% - quarter ended 3/31/95
Worst calendar quarter return: -8.20% - quarter ended 3/31/94
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Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.61% 4.41% 7.07% --
Class D 3.60 n/a n/a 4.27%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
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FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) ......... 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) .......... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ................................ .50% .50%
Distribution and/or
Service (12b-1) Fees ......................... .09% 1.00%
Other Expenses ................................. .21% .21%
--- ---
Total Annual Fund Operating Expenses ........... .80% 1.71%
=== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 274 539 928 2,019
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 174 539 928 2,019
5
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California High-Yield Fund
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The California High-Yield Fund seeks the maximum income exempt from regular
federal income taxes and from the personal income taxes of California consistent
with preservation of capital and with consideration given to capital gain.
The California High-Yield Fund uses the following strategies to pursue its
objective:
The California High-Yield Fund invests at least 80% of its net assets in
California municipal securities that are within any rating category, including
securities rated below investment grade or securities that are not rated.
In selecting securities to purchase, the investment manager may consider the
current market conditions, the availability of lower-rated securities, and
whether lower-rated securities offer yields high enough relative to yields on
investment grade securities to justify their higher risk.
The Fund generally invests in long-term municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The California High-Yield Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o Lower-rated municipal bonds are subject to a greater degree of credit risk
than higher-rated bonds. They generally involve greater price volatility and
risk of loss of principal and income than higher-rated bonds.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of California issuers,
its performance may be affected by local, state, and regional factors. These
may include state or local legislation or policy changes, economics, natural
disasters, and the possibility of credit problems, such as the 1994
bankruptcy of Orange County.
6
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California High-Yield Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 9.28%
1990 6.00%
1991 10.48%
1992 9.53%
1993 9.91%
1994 -2.79%
1995 14.55%
1996 5.52%
1997 8.72%
1998 6.8%
Best calendar quarter return: 6.48% - quarter ended 3/31/95
Worst calendar quarter return: -2.30% - quarter ended 3/31/94
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Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 1.16% 5.26% 7.13% --
Class D 4.21 n/a n/a 5.22%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
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FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) ............ 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............. none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ................................... .50% .50%
Distribution and/or
Service (12b-1) Fees ............................ .09% 1.00%
Other Expenses .................................... .23% .23%
--- ----
Total Annual Fund Operating Expenses .............. .82% 1.73%
=== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
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Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $555 $724 $908 $1,440
Class D 276 545 939 2,041
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $555 $724 $908 $1,440
Class D 176 545 939 2,041
7
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California Quality Fund
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The California Quality Fund seeks high income exempt from regular federal income
taxes and from the personal income taxes of California consistent with
preservation of capital and with consideration given to capital gain.
The California Quality Fund uses the following strategies to pursue its
objective:
The California Quality Fund invests at least 80% of its net assets in California
municipal securities that are within the three highest ratings of Moody's (Aaa,
Aa, or A) or S&P (AAA, AA, or A) on the date of purchase.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The California Quality Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of California issuers,
its performance may be affected by local, state, and regional factors. These
may include state or local legislation or policy changes, economics, natural
disasters, and the possibility of credit problems, such as the 1994
bankruptcy of Orange County.
8
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California Quality Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 9.77%
1990 6.57%
1991 11.22%
1992 8.49%
1993 12.6%
1994 -8.30%
1995 19.79%
1996 3.91%
1997 8.80%
1998 6.26%
Best calendar quarter return: 8.97% - quarter ended 3/31/95
Worst calendar quarter return: -6.63% - quarter ended 3/31/94
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Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 1.23% 4.69% 7.16% --
Class D 4.33 n/a n/a 4.54%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
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FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- -------------------------
(as a percentage of average net assets)
Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .18% .18%
---- ----
Total Annual Fund Operating Expenses ................ .77% 1.68%
==== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $550 $709 $883 $1,384
Class D 271 530 913 1,987
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $550 $709 $883 $1,384
Class D 171 530 913 1,987
9
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Colorado Fund
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Colorado Fund seeks to maximize income exempt from regular federal income
taxes and from Colorado personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain.
The Colorado Fund uses the following strategies to pursue its objective:
The Colorado Fund invests at least 80% of its net assets in Colorado municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Colorado Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of Colorado issuers, its
performance may be affected by local, state, and regional factors. These may
include state or local legislation or policy changes, economics, natural
disasters, and the possibility of credit problems. Colorado's largest trading
partner is Japan, and the State is sensitive to national and international
business cycles. Turmoil in the world economy, especially in Asia, has the
potential to dramatically affect Colorado's economy.
10
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Colorado Fund
Past Performance
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 10.04%
1990 5.05%
1991 9.40%
1992 7.67%
1993 11.11%
1994 -5.13%
1995 13.96%
1996 3.39%
1997 7.52%
1998 5.80%
Best calendar quarter return: 6.34% - quarter ended 3/31/95
Worst calendar quarter return: -4.87% - quarter ended 3/31/94
- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.83% 3.91% 6.24% --
Class D 3.83 n/a n/a 3.71%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .10% 1.00%
Other Expenses ...................................... .30% .30%
---- ----
Total Annual Fund Operating Expenses ................ .90% 1.80%
==== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $562 $748 $950 $1,530
Class D 283 566 975 2,116
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $562 $748 $950 $1,530
Class D 183 566 975 2,116
- --------------------------------------------------------------------------------
11
<PAGE>
- --------------------------------------------------------------------------------
Florida Fund
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The Florida Fund seeks high income exempt from regular federal income taxes
consistent with preservation of capital and with consideration given to capital
gain.
The Florida Fund uses the following strategies to pursue its objective:
The Florida Fund invests at least 80% of its net assets in Florida municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Florida Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of Florida issuers, its
performance may be affected by local, state, and regional factors. These may
include state or local legislation or policy changes, economics, natural
disasters, and the possibility of credit problems. The lack of an income tax
in Florida exposes total tax collections to more volatility than would
otherwise be the case and, in the event of an economic downturn, could affect
the State's ability to pay principal and interest in a timely manner.
Florida's economy may be affected by foreign trade, crop failures, and severe
weather conditions and is sensitive to trends in the tourism and construction
industries.
12
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Florida Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 11.35%
1990 6.46%
1991 10.62%
1992 9.07%
1993 13.52%
1994 -5.52%
1995 16.67%
1996 2.76%
1997 9.33%
1998 5.67%
Best calendar quarter return: 7.49% - quarter ended 6/30/89
Worst calendar quarter return: -5.99% - quarter ended 3/31/94
- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.69% 4.51% 7.31% --
Class D 3.85 n/a n/a 4.59%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .23% 1.00%
Other Expenses ...................................... .27% .27%
---- ----
Total Annual Fund Operating Expenses ................ 1.00% 1.77%
==== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $572 $778 $1,001 $1,641
Class D 280 557 959 2,084
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $572 $778 $1,001 $1,641
Class D 180 557 959 2,084
13
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Georgia Fund
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Georgia Fund seeks to maximize income exempt from regular federal income
taxes and from Georgia personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain.
The Georgia Fund uses the following strategies to pursue its objective:
The Georgia Fund invests at least 80% of its net assets in Georgia municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Georgia Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of Georgia issuers, its
performance may be affected by local, state, and regional factors. These may
include state or local policy changes, economics, natural disasters, and the
possibility of credit problems. Georgia's economy will be affected by trends
in the services, wholesale and retail trade, manufacturing, and
transportation industries, as these industries, along with government,
comprise the largest sources of employment within the State.
14
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Georgia Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 9.87%
1990 7.01%
1991 10.97%
1992 9.00%
1993 12.21%
1994 -7.64%
1995 19.16%
1996 3.86%
1997 9.02%
1998 5.94%
Best calendar quarter return: 7.71% - quarter ended 3/31/95
Worst calendar quarter return: -6.83% - quarter ended 3/31/94
- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.90% 4.70% 7.21% --
Class D 3.99 n/a n/a 4.67%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .30% .30%
---- ----
Total Annual Fund Operating Expenses ................ .89% 1.80%
==== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
<PAGE>
- --------------------------------------------------------------------------------
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 283 566 $975 2,116
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 183 566 975 2,116
15
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Louisiana Fund
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Louisiana Fund seeks to maximize income exempt from regular federal income
taxes and from Louisiana personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain.
The Louisiana Fund uses the following strategies to pursue its objective:
The Louisiana Fund invests at least 80% of its net assets in Louisiana municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Louisiana Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of Louisiana issuers,
its performance may be affected by local, state, and regional factors. These
may include state or local legislation or policy changes, economics, natural
disasters, and the possibility of credit problems. Louisiana's economy is
affected by trends in the oil and gas, tourism, and gaming industries within
the State.
16
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Louisiana Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 10.14%
1990 6.86%
1991 11.38%
1992 7.83%
1993 11.45%
1994 -5.89%
1995 17.10%
1996 3.49%
1997 8.45%
1998 5.93%
Best calendar quarter return: 6.57% - quarter ended 3/31/95
Worst calendar quarter return: -5.38% - quarter ended 3/31/94
- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.87% 4.54% 6.99% --
Class D 3.86 n/a n/a 4.43%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .10% 1.00%
Other Expenses ...................................... .28% .28%
---- ----
Total Annual Fund Operating Expenses ................ .88% 1.78%
==== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $561 $742 $939 $1,508
Class D 281 560 964 2,095
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $561 $742 $939 $1,508
Class D 181 560 964 2,095
17
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Maryland Fund
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Maryland Fund seeks to maximize income exempt from regular federal income
taxes and from Maryland personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain.
The Maryland Fund uses the following strategies to pursue its objective:
The Maryland Fund invests at least 80% of its net assets in Maryland municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Maryland Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of Maryland issuers, its
performance may be affected by local, state, and regional factors. These may
include state or local legislation or policy changes, economics, natural
disasters, and the possibility of credit problems. Because the Fund favors
investing in revenue bonds, its performance may also be affected by economic
developments impacting a specific facility or type of facility. The
performance of general obligation bonds of the State of Maryland may be
affected by efforts to limit or reduce state or local taxes.
18
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Maryland Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 10.49%
1990 6.15%
1991 10.47%
1992 8.24%
1993 11.93%
1994 -5.48%
1995 16.84%
1996 3.66%
1997 8.09%
1998 5.85%
Best calendar quarter return: 6.96% - quarter ended 3/31/95
Worst calendar quarter return: -5.29% - quarter ended 3/31/94
- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.80% 4.52% 6.95% --
Class D 3.89 n/a n/a 4.42%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .30% .30%
---- ----
Total Annual Fund Operating Expenses ................ .89% 1.80%
==== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 283 566 975 2,116
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 183 566 975 2,116
19
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Massachusetts Fund
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Massachusetts Fund seeks to maximize income exempt from regular federal
income taxes and from Massachusetts personal income taxes to the extent
consistent with preservation of capital and with consideration given to
opportunities for capital gain.
The Massachusetts Fund uses the following strategies to pursue its objective:
The Massachusetts Fund invests at least 80% of its net assets in Massachusetts
municipal securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Massachusetts Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of Massachusetts
issuers, its performance may be affected by local, state, and regional
factors. These may include state or local legislation or policy changes,
economics, natural disasters, and the possibility of credit problems.
Massachusetts and certain of its cities, towns, counties, and other
political subdivisions have at certain times in the past experienced
serious financial difficulties which have adversely affected their credit
standing. The recurrence of these financial difficulties could adversely
affect the market value and marketability of, or result in default payments
on, outstanding obligations issued by Massachusetts or its public
authorities or municipalities.
20
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Massachusetts Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 8.67%
1990 5.42%
1991 12.97%
1992 9.08%
1993 11.52%
1994 -4.43%
1995 15.20%
1996 4.14%
1997 8.68%
1998 6.55%
Best calendar quarter return: 6.16% - quarter ended 3/31/95
Worst calendar quarter return: -4.69% - quarter ended 3/31/94
- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 1.49% 4.81% 7.13% --
Class D 4.59 n/a n/a 4.69%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .21% .21%
---- ----
Total Annual Fund Operating Expenses ................ .80% 1.71%
==== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 274 539 928 2,019
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 174 539 928 2,019
21
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Michigan Fund
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Michigan Fund seeks to maximize income exempt from regular federal income
taxes and from Michigan personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain
The Michigan Fund uses the following strategies to pursue its objective:
The Michigan Fund invests at least 80% of its net assets in Michigan municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Michigan Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of Michigan issuers,
its performance may be affected by local, state, and regional factors.
These may include state or local legislation or policy changes, economics,
natural disasters, and the possibility of credit problems. The principal
sectors of Michigan's economy are manufacturing of durable goods (including
automobiles and components and office equipment), tourism, and agriculture.
The cyclical nature of these industries can adversely affect the revenue
stream of the State and its political subdivisions because it may adversely
impact tax sources, particularly sales taxes, income taxes and single
business taxes.
22
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Michigan Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 10.71%
1990 5.85%
1991 12.01%
1992 9.31%
1993 11.48%
1994 -4.84%
1995 15.78%
1996 3.74%
1997 8.73%
1998 6.12%
Best calendar quarter return: 6.57% - quarter ended 3/31/95
Worst calendar quarter return: -4.63% - quarter ended 3/31/94
- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 1.09% 4.66% 7.23% --
Class D 4.06 n/a n/a 4.51%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .20% .20%
---- ----
Total Annual Fund Operating Expenses ................ .79% 1.70%
==== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $552 $715 $898 $1,406
Class D 273 536 923 2,009
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $552 $715 $893 $1,406
Class D 173 536 923 2,009
23
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Minnesota Fund
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Minnesota Fund seeks to maximize income exempt from regular federal income
taxes and from regular Minnesota personal income taxes to the extent consistent
with preservation of capital and with consideration given to opportunities for
capital gain.
The Minnesota Fund uses the following strategies to pursue its objective:
The Minnesota Fund invests at least 80% of its net assets in Minnesota municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Minnesota Fund is subject to the following principal risks
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of Minnesota issuers,
its performance may be affected by local, state, and regional factors.
These may include state or local legislation or policy changes, economics,
natural disasters, and the possibility of credit problems. Pursuant to
Minnesota legislation enacted in 1995, dividends that would otherwise be
exempt from Minnesota personal income tax in the case of individuals,
estates, and trusts, could become subject to the Minnesota personal income
tax if it were judicially determined that exempting such dividends would
discriminate against interstate commerce.
24
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Minnesota Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 9.89%
1990 6.52%
1991 7.53%
1992 7.67%
1993 13.49%
1994 -2.54%
1995 11.41%
1996 3.39%
1997 7.02%
1998 6.43%
Best calendar quarter return: 6.01% - quarter ended 6/30/89
Worst calendar quarter return: -3.23% - quarter ended 3/31/94
- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 1.18% 3.79% 6.45% --
Class D 4.26 n/a n/a 3.89%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .22% .22%
---- ----
Total Annual Fund Operating Expenses ................ .81% 1.72%
==== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $554 $721 $903 $1,429
Class D 275 542 933 2,030
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $554 $721 $903 $1,429
Class D 175 542 933 2,030
25
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Missouri Fund
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Missouri Fund seeks to maximize income exempt from regular federal income
taxes and from Missouri personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain.
The Missouri Fund uses the following strategies to pursue its objective
The Missouri Fund invests at least 80% of its net assets in Missouri municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Missouri Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of Missouri issuers,
its performance may be affected by local, state, and regional factors.
These may include state or local legislation or policy changes, economics,
natural disasters, and the possibility of credit problems. The national
economic recession of the early 1980s had a disproportionately adverse
impact on Missouri's economy, and its unemployment levels. A return to a
pattern of high unemployment could adversely affect the Missouri debt
obligations acquired by the Fund. Defense related business plays an
important role in Missouri's economy. Negative trends in this industry or
relocations of major employers could have a negative impact on the economy
of the State and particularly on the economy of the St. Louis metropolitan
area.
26
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Missouri Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 9.44%
1990 6.93%
1991 11.37%
1992 7.25%
1993 11.40%
1994 -6.32%
1995 16.95%
1996 3.71%
1997 8.08%
1998 5.77%
Best calendar quarter return: 7.31% - quarter ended 3/31/95
Worst calendar quarter return: -6.11% - quarter ended 3/31/94
- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.76% 4.34% 6.78% --
Class D 3.83 n/a n/a 4.20%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .10% 1.00%
Other Expenses ...................................... .29% .29%
---- ----
Total Annual Fund Operating Expenses ................ .89% 1.79%
==== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 282 563 970 2,105
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 182 563 970 2,105
27
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
New Jersey Fund
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The New Jersey Fund seeks to maximize income exempt from regular federal income
tax and New Jersey gross income tax consistent with preservation of capital and
with consideration given to opportunities for capital gain.
The New Jersey Fund uses the following strategies to pursue its objective:
The New Jersey Fund invests at least 80% of its net assets in New Jersey
municipal securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective
PRINCIPAL RISKS
The New Jersey Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of New Jersey issuers,
its performance may be affected by local, state, and regional factors.
These may include state or local legislation or policy changes, economics,
natural disasters, and the possibility of credit problems. New Jersey's
economic base is diversified, consisting of a variety of manufacturing,
construction, and service industries, supplemented by rural areas with
selective commercial agriculture. New Jersey's economy will be affected by
trends in these sectors.
28
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
New Jersey Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 10.56%
1990 6.78%
1991 11.04%
1992 8.99%
1993 12.37%
1994 -6.15%
1995 15.57%
1996 3.40%
1997 8.93%
1998 6.00%
Best calendar quarter return: 6.78% - quarter ended 3/31/95
Worst calendar quarter return: -5.63% - quarter ended 3/31/94
- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.96% 4.29% 7.07% --
Class D 4.03 n/a n/a 4.52%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .30% 1.00%
Other Expenses ...................................... .30% .30%
---- ----
Total Annual Fund Operating Expenses ................ 1.02% 1.80%
==== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $574 $784 $1,011 $1,664
Class D 283 566 975 2,116
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $574 $784 $1,011 $1,664
Class D 183 566 975 2,116
29
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
New York Fund
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The New York Fund seeks to maximize income exempt from regular federal income
taxes and from New York personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain
The New York Fund uses the following strategies to pursue its objective:
The New York Fund invests at least 80% of its net assets in New York municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The New York Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of New York issuers,
its performance may be affected by local, state, and regional factors.
These may include state or local legislation or policy changes, economics,
natural disasters, and the possibility of credit problems. New York City
and certain localities outside New York City have experienced financial
problems. These problems may affect the fiscal health of the State.
30
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
New York Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 9.39%
1990 4.18%
1991 13.53%
1992 9.31%
1993 13.26%
1994 -7.93%
1995 19.31%
1996 3.83%
1997 10.04%
1998 6.86%
Best calendar quarter return: 8.13% - quarter ended 3/31/95
Worst calendar quarter return: -6.61% - quarter ended 3/31/94
- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 1.73% 5.03% 7.42% --
Class D 4.90 n/a n/a 4.93%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .22% .22%
---- ----
Total Annual Fund Operating Expenses ................ .81% 1.72%
==== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $554 $721 $903 $1,429
Class D 275 542 933 2,030
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $554 $721 $903 $1,429
Class D 175 542 933 2,030
31
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
North Carolina Fund
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The North Carolina Fund seeks high income exempt from regular federal income
taxes and North Carolina personal income taxes consistent with preservation of
capital and with consideration given to capital gain.
The North Carolina Fund uses the following strategies to pursue its objective:
The North Carolina Fund invests at least 80% of its net assets in North Carolina
municipal securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than
20% of its assets in taxable investment-grade fixed-income securities. Under
these circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The North Carolina Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of North Carolina
issuers, its performance may be affected by local, state, and regional
factors. These may include state or local legislation or policy changes,
economics, natural disasters, and the possibility of credit problems. North
Carolina's total expenditures for each fiscal period covered by the budget
must not exceed total receipts during the period and the surplus in the
State Treasury at the beginning of the period. During the State's 1990-1991
fiscal year, it began facing a substantial budget shortfall resulting from
the failure of revenues received by the State to meet projected levels.
While the State was successful in dealing with the problem, pressure on
state revenues may be an ongoing problem.
32
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
North Carolina Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1990* 2.80%
1991 10.63%
1992 8.15%
1993 12.98%
1994 -7.35%
1995 19.56%
1996 2.71%
1997 8.75%
1998 5.81%
Best calendar quarter return: 8.72% - quarter ended 3/31/95
Worst calendar quarter return: -6.73% - quarter ended 3/31/94
- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.85% 4.53% 6.80% --
Class D 4.14 n/a n/a 4.57%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.24(1) 6.09(2)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance
(1) From 8/31/90.
(2) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .23% 1.00%
Other Expenses ...................................... .32% .32%
---- ----
Total Annual Fund Operating Expenses ................ 1.05% 1.82%
==== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $577 $793 $1,027 $1,697
Class D 285 573 985 2,137
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $577 $793 $1,027 $1,697
Class D 185 573 985 2,137
33
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Ohio Fund
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Ohio Fund seeks to maximize income exempt from regular federal income taxes
and from Ohio personal income taxes to the extent consistent with preservation
of capital and with consideration given to opportunities for capital gain.
The Ohio Fund uses the following strategies to pursue its objective:
The Ohio Fund invests at least 80% of its net assets in Ohio municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Ohio Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of Ohio issuers, its
performance may be affected by local, state, and regional factors. These
may include state or local legislation or policy changes, economics,
natural disasters, and the possibility of credit problems. Ohio's economy
relies in part on durable goods manufacturing largely concentrated in motor
vehicles and equipment, steel, rubber products and household appliances. As
a result, general economic activity, as in many other industrially
developed states, tends to be more cyclical than in other states and in the
nation as a whole.
34
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Ohio Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 9.94%
1990 6.58%
1991 11.31%
1992 8.43%
1993 11.64%
1994 -4.91%
1995 15.23%
1996 3.77%
1997 8.39%
1998 5.89%
Best calendar quarter return: 6.47% - quarter ended 3/31/95
Worst calendar quarter return: -4.89% - quarter ended 3/31/94
- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.85% 4.44% 6.97% --
Class D 3.94 n/a n/a 4.41%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .19% .19%
---- ----
Total Annual Fund Operating Expenses ................ .78% 1.69%
==== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $551 $712 $888 $1,395
Class D 272 533 918 1,998
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $551 $712 $888 $1,395
Class D 172 533 918 1,998
35
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Oregon Fund
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Oregon Fund seeks to maximize income exempt from regular federal income
taxes and from Oregon personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain.
The Oregon Fund uses the following strategies to pursue its objective:
The Oregon Fund invests at least 80% of its net assets in Oregon municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
Principal Risks
The Oregon Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of Oregon issuers, its
performance may be affected by local, state, and regional factors. These
may include state or local legislation or policy changes, economics,
natural disasters, and the possibility of credit problems. Oregon's economy
has been affected by the high technology manufacturing, forest products,
and agriculture industries, which have all been slowed by declining exports
to Asia.
36
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Oregon Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 10.44%
1990 6.50%
1991 10.82%
1992 7.78%
1993 10.90%
1994 -4.56%
1995 14.55%
1996 3.81%
1997 9.05%
1998 6.09%
Best calendar quarter return: 6.49% - quarter ended 6/30/89
Worst calendar quarter return: -4.48% - quarter ended 3/31/94
- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 1.09% 4.57% 6.89% --
Class D 4.13 n/a n/a 4.53%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .29% .29%
---- ----
Total Annual Fund Operating Expenses ................ .88% 1.79%
==== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $561 $742 $939 $1,508
Class D 282 563 970 2,105
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $561 $742 $939 $1,508
Class D 182 563 970 2,105
37
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Pennsylvania Fund
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The Pennsylvania Fund seeks high income exempt from regular federal income tax
and Pennsylvania income taxes consistent with preservation of capital.
The Pennsylvania Fund uses the following strategies to pursue its objective:
The Pennsylvania Fund invests at least 80% of its net assets in Pennsylvania
municipal securities rated investment grade when purchased. The Fund will
ordinarily hold securities with maturities in excess of one year.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than
20% of its assets in taxable investment-grade fixed-income securities. Under
these circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Pennsylvania Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of Pennsylvania
issuers, its performance may be affected by local, state, and regional
factors. These may include state or local legislation or policy changes,
economics, natural disasters, and the possibility of credit problems. From
time to time, Pennsylvania and various of its political subdivisions
(including particularly the City of Philadelphia and the City of Scranton)
have encountered financial difficulty due to slowdowns in the pace of
economic activity and to other factors.
38
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Pennsylvania Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 10.24%
1990 5.35%
1991 11.29%
1992 9.32%
1993 12.91%
1994 -7.03%
1995 18.01%
1996 3.44%
1997 8.70%
1998 6.14%
Best calendar quarter return: 7.59% - quarter ended 3/31/95
Worst calendar quarter return: -6.40% - quarter ended 3/31/94
- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 1.10% 4.53% 7.12% --
Class D 4.32 n/a n/a 4.49%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .22% 1.00%
Other Expenses ...................................... .47% .47%
---- ----
Total Annual Fund Operating Expenses ................ 1.19% 1.97%
==== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $591 $835 $1,098 $1,850
Class D 300 618 1,062 2,296
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $591 $835 $1,098 $1,850
Class D 200 618 1,062 2,296
39
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
South Carolina Fund
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The South Carolina Fund seeks to maximize income exempt from regular federal
income taxes and from South Carolina personal income taxes to the extent
consistent with preservation of capital and with consideration given to
opportunities for capital gain.
The South Carolina Fund uses the following strategies to pursue its objective:
The South Carolina Fund invests at least 80% of its net assets in South Carolina
municipal securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
Principal Risks
The South Carolina Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.
o Because the Fund invests primarily in the securities of South Carolina
issuers, its performance may be affected by local, state, and regional
factors. These may include state or local legislation or policy changes,
economics, natural disasters, and the possibility of credit problems. While
South Carolina has not defaulted on its bonded debt since 1879, the State
did experience certain budgeting difficulties over several recent years
through June 30, 1993. Such difficulties have not to date impacted the
State's ability to pay its indebtedness but did result in S&P lowering its
rating on South Carolina general obligation bonds in 1993. The rating was
restored to AAA in 1996.
40
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
South Carolina Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Class A Annual Total Returns
Calendar Years
1989 10.61%
1990 6.01%
1991 11.52%
1992 8.69%
1993 11.71%
1994 -6.70%
1995 17.65%
1996 3.93%
1997 8.72%
1998 5.73%
Best calendar quarter return: 7.23% - quarter ended 3/31/95
Worst calendar quarter return: -6.18% - quarter ended 3/31/94
- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.70% 4.54% 7.06% --
Class D 3.78 n/a n/a 4.46%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .21% .21%
---- ----
Total Annual Fund Operating Expenses ................ .80% 1.71%
==== ====
(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 274 539 928 2,019
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 174 539 928 2,019
41
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
A Board of Directors or Board of Trustees (as applicable) provides broad
supervision over the affairs of each Fund.
Each Fund's manager is J. & W. Seligman & Co. Incorporated (Seligman), 100 Park
Avenue, New York, New York 10017. Seligman manages the investment of each Fund's
assets, including making purchases and sales of portfolio securities consistent
with each Fund's investment objective and strategies, and administers each
Fund's business and other affairs.
Established in 1864, Seligman currently serves as manager to 18 US registered
investment companies, which offer more than 50 investment portfolios with
approximately $21.5 billion in assets as of December 31, 1998. Seligman also
provides investment management or advice to institutional or other accounts
having an aggregate value at December 31, 1998, of approximately $9.4 billion.
Each Fund pays Seligman a fee for its management services. The fee for each Fund
is equal to an annual rate of .50% of the Fund's average daily net assets.
Portfolio Management
The Funds are managed by the Seligman Municipals Team, headed by Thomas G.
Moles. Mr. Moles, a Managing Director of Seligman, has been Vice President and
Portfolio Manager of each Fund since its inception. Mr. Moles is also President
and Portfolio Manager of Seligman Quality Municipal Fund, Inc. and Seligman
Select Municipal Fund, Inc., two closed-end investment companies.
- --------------------------------------------
Affilates of Seligman
Seligman Advisors, Inc. (Seligman Advisors):
Each Fund's general distributor; responsible
for accepting orders for purchases and sales
of Fund shares.
Seliman Services, Inc.:
A limited purpose broker/dealer; acts as the
broker/dealer of record for shareholder
accounts that do not have a designated
financial advisor.
Seligman Data Corp. (SDC):
Each Fund's shareholder service agent
provides shareholder account services to the
Fund at cost.
- --------------------------------------------
42
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<PAGE>
- --------------------------------------------------------------------------------
YEAR 2000
As the millennium approaches, mutual funds, financial and business
organizations, and individuals could be adversely affected if their computer
systems do not properly process and calculate date-related information and data
on and after January 1, 2000. Like other mutual funds, the Funds rely upon
service providers and their computer systems for its day-to-day operations. Many
of the Funds' service providers in turn depend upon computer systems of their
vendors. Seligman and SDC, have established a year 2000 project team. The team's
purpose is to assess the state of readiness of Seligman and SDC and the Funds'
other service providers and vendors. The team is comprised of several
information technology and business professionals, as well as outside
consultants. The Project Manager of the team reports directly to the
Administrative Committee of Seligman. The Project Manager and other members of
the team also report to each Fund's Board and its Audit Committee.
The team has identified the service providers and vendors who furnish critical
services or software systems to the Funds, including securities firms that
execute portfolio transactions for the Funds and firms responsible for
shareholder account recordkeeping. The team is working with these critical
service providers and vendors to evaluate the impact year 2000 issues may have
on their ability to provide uninterrupted services to the Funds. The team will
assess the feasibility of their year 2000 plans. The team has made progress on
its year 2000 contingency plans -- recovery efforts the team will employ in the
event that year 2000 issues adversely affect the Funds. The team anticipates
finalizing these plans in the near future.
The Funds anticipate the team will have implemented all significant components
of the team's year 2000 plans by mid-1999, including appropriate testing of
critical systems and receipt of satisfactory assurances from critical service
providers and vendors regarding their year 2000 compliance. The Funds believe
that the critical systems on which they rely will function properly on and after
the year 2000, but this is not guaranteed. If these systems do not function
properly, or the Funds' critical service providers are not successful in
implementing their year 2000 plans, the Funds' operations may be adversely
affected, including pricing, securities trading and settlement, and the
provision of shareholder services.
In addition, the Funds hold securities issued by governmental or
quasi-governmental issuers, which, like other organizations, may be susceptible
to year 2000 concerns. Year 2000 issues may affect an issuer's operations,
creditworthiness, and ability to make timely payment on any indebtedness and
could have an adverse impact on the value of its securities. If a Fund holds
these securities, its performance could be negatively affected. Seligman seeks
to identify an issuer's state of year 2000 readiness as part of the research it
employs. However, the perception of an issuer's year 2000 preparedness is only
one of the many factors considered in determining whether to buy, sell, or
continue to hold a security. Information provided by issuers concerning their
state of readiness may or may not be accurate or readily available. Further, the
Funds may be adversely affected if the exchanges, markets, depositories,
clearing agencies, or government or third parties responsible for infrastructure
needs do not address their year 2000 issues in a satisfactory manner.
SDC has informed the Funds that it does not expect the cost of its services to
increase materially as a result of the modifications to its computer systems
necessary to prepare for the year 2000. The Funds will not pay to remediate the
systems of Seligman or bear directly the costs to remediate the systems of any
other service providers or vendors, other than SDC. Affiliates of Seligman:
43
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<PAGE>
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Shareholder Information
DECIDING WHICH CLASS OF SHARES TO BUY
Each Fund's Class A and Class D shares represent an interest in the same
portfolio of investments. However, each Class has its own sales charge schedule
and is subject to different ongoing 12b-1 fees. When deciding which Class of
shares to buy, you should consider, among other things:
o The amount you plan to invest.
o How long you intend to remain invested in the Fund, or another
Seligman mutual fund.
o If you would prefer to pay an initial sales charge and lower ongoing
12b-1 fees, or be subject to a CDSC and pay higher ongoing 12b-1 fees.
o Whether you may be eligible for reduced or no sales charges when you
buy or sell shares.
Your financial advisor will be able to help you decide which Class of shares
best meets your needs.
Class A
o Initial sales charge on Fund purchases, as set forth below:
<TABLE>
<CAPTION>
Sales Charge Regular Dealer
Sales Charge as a % Discount
as a % of Net as a % of
Amount of your Investment of Offering Price(1) Amount Invested Offering Price
-------------------------- -------------------- --------------- --------------
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.25%
$50,000 - $ 99,999 4.00 4.17 3.50
$100,000 - $249,999 3.50 3.63 3.00
$250,000 - $499,999 2.50 2.56 2.25
$500,000 - $999,999 2.00 2.04 1.75
$1,000,000 and over(2) 0.00 0.00 0.00
</TABLE>
(1) "Offering Price" is the amount that you actually pay for Fund
shares; it includes the initial sales charge.
(2) You will not pay a sales charge on purchases of $1 million or
more, but you will be subject to a 1% CDSC if you sell your
shares within 18 months.
o Annual 12b-1 fee (for shareholder services) of up to 0.25%.
o No sales charge on reinvested dividends or capital gain distributions.
Class D
o No initial sales charge on purchases.
o A 1% CDSC on shares sold within one year of purchase.
o Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
o No CDSC on redemptions of shares purchased with reinvested dividends
or capital gain distributions.
Each Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of
1940. The plan allows each Class to pay distribution and/or service fees for the
sale and distribution of its shares and/or for providing services to
shareholders.
Because 12b-1 fees are paid out of each Class's assets on an ongoing basis, over
time these fees will increase your investment expenses and may cost you more
than other types of sales charges.
44
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<PAGE>
- --------------------------------------------------------------------------------
The Board of Directors or Trustees, as applicable, believes that no conflict of
interest currently exists between a Fund's Class A and Class D shares. On an
ongoing basis, the Directors or Trustees, in the exercise of their fiduciary
duties under the Investment Company Act of 1940 and applicable state law, will
seek to ensure that no such conflict arises.
How CDSCs Are Calculated
To minimize the amount of CDSC you may pay when you sell your shares, each Fund
assumes that shares acquired through reinvested dividends and capital gain
distributions (which are not subject to a CDSC) are sold first. Shares that have
been in your account long enough so they are not subject to a CDSC are sold
next. After these shares are exhausted, shares will be sold in the order they
were purchased (oldest to youngest). The amount of any CDSC that you pay will be
based on the shares' original purchase price or current net asset value,
whichever is less.
You will not pay a CDSC when you exchange shares of any Fund to buy shares of
the same class of any other Seligman mutual fund. For the purpose of calculating
the CDSC when you sell shares that you acquired by exchanging shares of a Fund,
it will be assumed that you held the shares since the date you purchased the
shares of that Fund.
PRICING OF FUND SHARES
- ----------------------------------------
NAV:
Computed separately for each Class of a
Fund by dividing that Class's share of
the value of the net assets of the Fund
(i.e., its assets less liabilities) by
the total number of outstanding shares
of the Class.
- ----------------------------------------
When you buy or sell shares, you do so at the Class's net asset value (NAV) next
calculated after Seligman Advisors accepts your request. Any applicable sales
charge will be included in the purchase price for Class A shares. Purchase or
sale orders received by an authorized dealer or financial advisor by the close
of regular trading on the New York Stock Exchange (NYSE) (normally 4:00 p.m.
Eastern time) and accepted by Seligman Advisors before the close of business
(5:00 p.m. Eastern time) on the same day will be executed at the Class's NAV
calculated as of the close of regular trading on the NYSE on that day. Your
broker/dealer or financial advisor is responsible for forwarding your order to
Seligman Advisors before the close of business.
If your buy or sell order is received by your broker/dealer or financial advisor
after the close of regular trading on the NYSE, or is accepted by Seligman
Advisors after the close of business, the order will be executed at the Class's
NAV calculated as of the close of regular trading on the next NYSE trading day.
When you sell shares, you receive the Class's per share NAV, less any applicable
CDSC.
The NAV of a Fund's shares is determined each day, Monday through Friday, on
days that the NYSE is open for trading. Because of their higher 12b-1 fees, the
NAV of Class D shares will generally be lower than the NAV of Class A shares.
Securities owned by a Fund are valued at current market prices. If reliable
market prices are unavailable, securities are valued in accordance with
procedures approved by the Board of Directors or Trustees, as applicable.
45
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<PAGE>
- --------------------------------------------------------------------------------
OPENING YOUR ACCOUNT
The Funds' shares are sold through authorized broker/dealers or financial
advisors who have sales agreements with Seligman Advisors. There are several
programs under which you may be eligible for reduced sales charges. Ask your
financial advisor if any of these programs apply to you.
To make your initial investment in a Fund, contact your financial advisor or
complete an account application and send it with your check directly to SDC at
the address provided on the account application. If you do not choose a Class,
your investment will automatically be made in Class A shares.
The required minimum initial investments are:
o Regular (non-retirement) accounts: $1,000
o For accounts opened concurrently with Invest-A-Check(R):
$100 to open if you will be making monthly investments
$250 to open if you will be making quarterly investments
If you buy shares by check and subsequently sell the shares, SDC will not send
your proceeds until your check clears, which could take up to 15 calendar days
from the date of your purchase.
You will be sent a statement confirming your purchase, and any subsequent
transactions in your account. You will also be sent at least annually, a
statement detailing all your transactions in the Fund and all other Seligman
funds you own. Duplicate account statements will be sent to you free of charge
for the current year and most recent prior year. Copies of year-end statements
for prior years are available for a fee of $10 per year, per account, with a
maximum charge of $150 per account request. Send your request and a check for
the fee to SDC.
If you want to be able to buy, sell, or exchange shares by telephone, you
should complete an application when you open your account. This will
prevent you from having to complete a supplemental election form
(which may require a signature guarantee) at a later date.
HOW TO BUY ADDITIONAL SHARES
After you have made your initial investment, there are many options available to
make additional purchases of Fund shares. Shares may be purchased through your
authorized broker/dealer or financial advisor, or you may send a check directly
to SDC. Please provide either an investment slip or a note that provides your
name(s), Fund name, and account number. Your investment will be made in the
Class you already own.
Send investment checks to:
Seligman Data Corp.
P.O. Box 9766
Providence, RI 02940-5051
Your check must be in US dollars and be drawn on a US bank. You may not use
third party or credit card convenience checks for investment.
46
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<PAGE>
- --------------------------------------------------------------------------------
You may also use the following account services to make additional investments:
Invest-a-Check(R). You may buy Fund shares electronically from a savings or
checking account of an Automated Clearing House (ACH) member bank. If your bank
is not a member of ACH, the Fund will debit your checking account by
preauthorized checks. You may buy Fund shares at regular monthly intervals in
fixed amounts of $100 or more, or regular quarterly intervals in fixed amounts
of $250 or more. If you use Invest-A-Check(R), you must continue to make
automatic investments until the Fund's minimum initial investment of $1,000 is
met or your account may be closed.
Automatic Dollar-Cost-Averaging. If you have at least $5,000 in Seligman Cash
Management Fund, you may exchange uncertificated shares of that fund to buy
shares of the same class of any Seligman mutual fund at regular monthly
intervals in fixed amounts of $100 or more or regular quarterly intervals in
fixed amounts of $250 or more. If you exchange Class A shares, you may pay an
initial sales charge to buy shares.
Automatic CD Transfer. You may instruct your bank to invest the proceeds of a
maturing bank certificate of deposit (CD) in shares of the Fund. If you wish to
use this service, contact SDC or your financial advisor to obtain the necessary
forms. Because your bank may charge you a penalty, it is not normally advisable
to withdraw CD assets before maturity.
Dividends From Other Investments. You may have your dividends from other
companies paid to the Fund. (Dividend checks must include your name, account
number, Fund name and Class of shares.) Direct Deposit. You may buy Fund shares
electronically with funds from your employer, the IRS or any other institution
that provides direct deposit. Call SDC for more information.
Seligman Time Horizon Matrix(SM). (Requires an initial total investment of
$10,000.) This is a needs-based investment process, designed to help you and
your financial advisor plan to seek your long-term financial goals. It considers
your financial needs, and helps frame a personalized asset allocation strategy
around the cost of your future commitments and the time you have to meet them.
Contact your financial advisor for more information.
Seligman Harvester. If you are a retiree or nearing retirement, this program is
designed to help you establish an investment strategy that seeks to meet your
income needs throughout your retirement. The strategy is customized to your
personal financial situation by allocating your assets to seek to address your
income requirements, and prioritizing your expenses and establishing a prudent
withdrawal schedule.
HOW TO EXCHANGE SHARES BETWEEN THE SELIGMAN MUTUAL FUNDS
You may sell Fund shares to buy shares of the same Class of another Seligman
mutual fund, or you may sell shares of another Seligman mutual fund to buy Fund
shares. Exchanges will be made at each fund's respective NAV. You will not pay
an initial sales charge when you exchange, unless you exchange Class A shares of
Seligman Cash Management Fund to buy shares of a Fund or another Seligman mutual
fund.
Only your dividend and capital gain distribution options and telephone services
will be automatically carried over to any new fund account. If you wish to carry
over any other account options (for example, Invest-a-Check(R) or Systematic
Withdrawals) to the new fund, you must specifically request so at the time of
your exchange.
If you exchange into a new fund, you must exchange enough to meet the new fund's
required minimum initial investment.
Before making an exchange, contact your financial advisor or SDC to obtain the
applicable fund prospectus(es), which you should read and understand before
investing.
47
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<PAGE>
- --------------------------------------------------------------------------------
HOW TO SELL SHARES
The easiest way to sell Fund shares is by phone. If you have telephone services,
you may be able use this service to sell Fund shares. Restrictions apply to
certain types of accounts. Please see "Important Policies That May Affect Your
Account."
When you sell Fund shares by phone, a check for the proceeds is sent to your
address of record. If you have current ACH bank information on file, you may
have the proceeds of the sale of your Fund shares directly deposited into your
bank account (typically, 3-4 business days after your shares are sold).
You may always send a written request to sell shares of any Fund. It may take
longer to get your money if you send your request by mail.
You may need to provide additional documents to sell shares if you are:
o a corporation; o an executor or administrator;
o a trustee or custodian; or
o in a retirement plan.
If your Fund shares are represented by certificates, you will need to surrender
the certificates to SDC before you sell your shares.
Contact your financial advisor or SDC's Shareholder Services Department for
information on selling your shares under any of the above circumstances.
You will need to guarantee your signature(s) if the proceeds are:
(1) $50,000 or more;
(2) to be paid to someone other than all account owners, or
(3) mailed to other than your address of record.
- ----------------------------------------
Signature Guarantee:
Protects you and the Funds from fraud.
It guarantees that a signature is
genuine. A guarantee must be obtained
from an eligible financial institution.
Notarization by a notary public is not
an acceptable guarantee.
- ----------------------------------------
You may also use the following account services to sell shares:
Systematic Withdrawal Plan. If you have at least $5,000 in a Fund, you may
withdraw (sell) a fixed amount (minimum of $50) of uncertificated shares at
regular intervals. A check will be sent to you at your address of record or, if
you have current ACH bank information on file, you may have your payments
directly deposited to your predesignated bank account in 3-4 business days after
your shares are sold. If you bought $1,000,000 or more of Class A shares without
an initial sales charge, your withdrawals may be subject to a 1% CDSC if they
occur within 18 months of purchase. If you own Class D shares and reinvest your
dividends and capital gain distributions, you may withdraw 10% of the value of
your Fund account (at the time of election) annually without a CDSC.
Check Redemption Service. If you have at least $25,000 in a Fund, you may use
this service to draw checks against your Fund account in amounts of $500 or
more. If you have shares represented by certificates, those shares will not be
available to draw checks against. If you bought $1,000,000 or more of Class A
shares without an initial sales charge, you may be subject to a 1% CDSC if you
draw checks against the shares within 18 months of purchase. If you own Class D
shares, you may only draw checks against shares that have been held for one year
or more. If you did not elect this service on your account application, you must
complete a supplemental election form to add this service to your account.
Contact SDC for more information.
48
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<PAGE>
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IMPORTANT POLICIES THAT MAY AFFECT YOUR ACCOUNT
To protect you and other shareholders, each Fund reserves the right to:
o Refuse an exchange request if:
1. you have exchanged twice from the same fund in any three-month
period.
2. the amount you wish to exchange equals the lesser of $1,000,000
or 1% of a Fund's net assets, or
3. you or your financial advisor have been advised that previous
patterns of purchases and sales or exchanges have been considered
excessive.
o Refuse any request to buy Fund shares.
o Reject any request received by telephone.
o Suspend or terminate telephone services.
o Reject a signature guarantee that SDC believes may be fraudulent.
o Close your fund account if its value falls below $500.
o Close your account if it does not have a certified taxpayer
identification number.
Telephone Services
You and your broker/dealer or financial advisor representative or financial
advisor will be able to place the following requests by telephone, unless you
indicate on your account application that you do not want telephone services:
o Sell uncertificated shares (up to $50,000 per day, payable to account
owner(s) and mailed to address of record)
o Exchange shares between funds o Change dividend and/or capital gain
distribution options
o Change your address
o Establish systematic withdrawals to address of record
If you do not complete an account application when you open your account,
telephone services must be elected on a supplemental election form.
Restrictions apply to certain types of accounts:
o Trust accounts on which the current trustee is not listed may not sell
Fund shares by phone.
o Corporations may not sell Fund shares by phone.
o IRAs may only exchange Fund shares or request address changes by
phone.
o Group retirement plans may not sell Fund shares by phone; plans that
allow participants to exchange by phone must provide a letter of
authorization signed by the plan custodian or trustee and provide a
supplemental election form signed by all plan participants.
Unless you have current ACH bank information on file, you will not be able to
sell Fund shares by phone within thirty days following an address change. Your
request must be communicated to an SDC representative.
You may not request any phone transactions via the automated access line.
You may cancel telephone services at any time by sending a written request to
SDC. Each account owner, by accepting or adding telephone services, authorizes
each of the other owners to make requests by phone. Your broker/dealer or
financial advisor representative or financial advisor may not establish
telephone services without your written authorization. SDC will send written
confirmation to the address of record when telephone services are added or
terminated.
During times of heavy call volume, you may not be able to get through to SDC by
phone to request a sale or exchange of shares. In this case, you may need to
write, and it may take longer for your request to be processed. A Fund's NAV may
fluctuate during this time.
The Funds and SDC will not be liable for processing requests received by phone
as long as it was reasonable to believe that the request was genuine.
Reinstatement Privilege
If you sell Fund shares, you may, within 120 calendar days, use part or all of
the proceeds to buy shares of the same Fund or any other Seligman mutual fund
(reinstate your investment) without paying an initial sales charge or, if you
paid a CDSC when you sold your shares, receiving a credit for the applicable
CDSC paid. This privilege is available only once each calendar year. Contact
your financial advisor for more information. You should consult your tax advisor
concerning possible tax consequences of exercising this privilege.
49
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<PAGE>
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DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Each Fund generally declares any dividends from net investment income daily and
pays dividends on the 17th of each month. If the 17th day of a month falls on a
weekend or on a NYSE holiday, the dividend will be distributed on the previous
business day. The Funds distribute net capital gains realized on investments
annually. It is expected that the Funds' distributions will be primarily income
dividends.
- ----------------------------------------
Dividend:
A payment by a mutual fund, usually
derived from the fund's net investment
income (dividends and interest earned on
portfolio securities less expenses).
Capital Gain Distribution:
A payment to mutual fund shareholders
which represents profits realized on the
sale of securities in a Fund's
portfolio.
Ex-dividend Date:
The day on which any declared
distributions (dividends or capital
gains) are deducted from the Fund's
assets before it calculates its NAV.
- ----------------------------------------
You may elect to:
(1) reinvest both dividends and capital gain distributions;
(2) receive dividends in cash and reinvest capital gain distributions; or
(3) receive both dividends and capital gain distributions in cash.
Your dividends and capital gain distributions will be reinvested if you do not
instruct otherwise.
If you want to change your election, you may write SDC at the address listed on
the back cover of this prospectus, or, if you have telephone services, you or
your financial advisor may call SDC. Your request must be received by SDC before
the record date to be effective for that dividend or capital gain distribution.
Cash dividends or capital gain distributions will be sent by check to your
address of record or, if you have current ACH bank information on file, directly
deposited into your predesignated bank account within 3-4 business days from the
payable date.
Dividends and capital gain distributions are reinvested to buy additional shares
on the payable date using the NAV of the payable date.
Dividends on Class D shares will be lower than the dividends on Class A shares
as a result of their higher 12b-1 fees. Capital gain distributions, if any, will
be paid in the same amount for each Class.
TAXES
The Funds intend to pay dividends that are exempt from regular income tax. A
Fund may invest a portion of its assets in securities that generate income that
is not exempt from federal or state income tax. Income exempt from federal tax
may be subject to state and local tax. If you wish more specific information on
the possible tax consequences of investing in a particular Fund, you should read
that Fund's Statement of Additional Information.
Any capital gains distributed by a Fund may be taxable, whether you take them in
cash or reinvest them to buy additional Fund shares. Capital gains may be taxed
at different rates depending on the length of time the Fund holds its assets.
When you sell Fund shares, any gain or loss you realize will generally be
treated as a long-term capital gain or loss if you held your shares for more
than one year, or as a short-term capital gain or loss if you held your shares
for one year or less. However, if you sell Fund shares on which a long-term
capital gain distribution has been received and you held the shares for six
months or less, any loss you realize will be treated as a long-term capital loss
to the extent that it offsets the long-term capital gain distribution.
An exchange of Fund shares is a sale and
may result in a gain or loss for federal income tax purposes.
Each January, you will be sent information on the tax status of any
distributions made during the previous calendar year. Because each shareholder's
situation is unique, you should always consult your tax advisor concerning the
effect income taxes may have on your individual investment.
50
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<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
The tables below are intended to help you understand the financial performance
of each Fund's Classes for the past five years or, if less than five years, the
period of the Class's operations. Certain information reflects financial results
for a single share of a Class that was held throughout the periods shown. "Total
return" shows the rate that you would have earned (or lost) on an investment in
the Fund, assuming you reinvested all your dividends and capital gain
distributions. Total returns do not reflect any sales charges. Deloitte & Touche
LLP, independent auditors, have audited this information for each Fund. Their
report, along with the financial statements, is included in each Fund's annual
report, which is available upon request.
NATIONAL FUND
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- --------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- --------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $8.01 $7.70 $7.58 $7.18 $8.72 $8.02 $7.70 $7.57 $7.18 $8.20
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ .39 0.39 0.40 0.40 0.41 0.32 0.32 0.33 0.32 0.22
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net gains or losses on securities
(both realized and unrealized).. .31 0.31 0.12 0.40 (1.04) 0.29 0.32 0.13 0.39 (1.02)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.70 0.70 0.52 0.80 (0.63) 0.61 0.64 0.46 0.71 (0.80)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.39) (0.39) (0.40) (0.40) (0.41) (0.32) (0.32) (0.33) (0.32) (0.22)
Distributions (from capital gains) -- -- -- -- (0.50) -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.39) (0.39) (0.40) (0.40) (0.91) (0.32) (0.32) (0.33) (0.32) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.32 $8.01 $7.70 $7.58 $7.18 $8.31 $8.02 $7.70 $7.57 $7.18
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 9.00% 9.40% 6.97% 11.48% (7.83)% 7.76% 8.56% 6.13% 10.17% (9.96)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $101,909 $97,481 $98,767 $104,184 $111,374 $7,392 $2,279 $4,826 $1,215 $446
Ratio of expenses to average
net assets ....................... 0.80% 0.84% 0.80% 0.86% 0.85% 1.71% 1.75% 1.67% 1.95% 1.76%(3)
Ratio of net income to
average net assets ............... 4.82% 5.05% 5.19% 5.46% 5.30% 3.91% 4.15% 4.27% 4.40% 4.37%(3)
Portfolio turnover rate ............ 18.00% 20.63% 33.99% 24.91% 24.86% 18.00% 20.63% 33.99% 24.91% 24.86%(4)
</TABLE>
- ----------
See footnotes on page 60.
51
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CALIFORNIA HIGH-YIELD FUND
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- --------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- --------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $6.61 $6.50 $6.47 $6.30 $6.73 $6.61 $6.51 $6.48 $6.31 $6.67
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.32 0.34 0.36 0.37 0.37 0.26 0.28 0.30 0.31 0.21
Net gains or losses on securities
(both realized and unrealized).. 0.22 0.20 0.05 0.17 (0.34) 0.22 0.19 0.05 0.17 (0.36)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.54 0.54 0.41 0.54 0.03 0.48 0.47 0.35 0.48 (0.15)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.32) (0.34) (0.36) (0.37) (0.37) (0.26) (0.28) (0.30) (0.31) (0.21)
Distributions (from capital gains) (0.03) (0.09) (0.02) -- (0.09) (0.03) (0.09) (0.02) -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.35) (0.43) (0.38) (0.37) (0.46) (0.29) (0.37) (0.32) (0.31) (0.21)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $6.80 $6.61 $6.50 $6.47 $6.30 $6.80 $6.61 $6.51 $6.48 $6.31
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.45% 8.74% 6.49% 8.85% 0.41% 7.47% 7.60% 5.53% 7.78% (2.47)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $58,374 $52,883 $50,264 $51,504 $48,007 $6,393 $3,320 $1,919 $1,277 $650
Ratio of expenses to average
net assets ....................... 0.82% 0.87% 0.84% 0.90% 0.85% 1.73% 1.77% 1.74% 1.91% 1.74%(3)
Ratio of net income to
average net assets ............... 4.81% 5.26% 5.49% 5.84% 5.74% 3.90% 4.36% 4.59% 4.84% 4.73%(3)
Portfolio turnover rate ............ 10.75% 22.42% 34.75% 17.64% 8.36% 10.75% 22.42% 34.75% 17.64% 8.36%(4)
CALIFORNIA QUALITY FUND
Per Share Data:*
Net asset value, beginning
of period ........................ $6.99 $6.75 $6.65 $6.39 $7.28 $6.97 $6.74 $6.63 $6.38 $7.13
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.33 0.34 0.35 0.34 0.35 0.27 0.28 0.28 0.28 0.19
Net gains or losses on securities
(both realized and unrealized) . 0.25 0.24 0.11 0.32 (0.73) 0.25 0.23 0.12 0.31 (0.75)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.58 0.58 0.46 0.66 (0.38) 0.52 0.51 0.40 0.59 (0.56)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.33) (0.34) (0.35) (0.34) (0.35) (0.27) (0.28) (0.28) (0.28) (0.19)
Distributions (from capital gains) (0.03) -- (0.01) (0.06) (0.16) (0.03) -- (0.01) (0.06) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.36) (0.34) (0.36) (0.40) (0.51) (0.30) (0.28) (0.29) (0.34) (0.19)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $7.21 $6.99 $6.75 $6.65 $6.39 $7.19 $6.97 $6.74 $6.63 $6.38
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.67% 8.87% 7.00% 10.85% (5.46)% 7.71% 7.75% 6.20% 9.61% (8.01)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $87,522 $86,992 $95,560 $94,947 $99,020 $2,302 $1,677 $1,645 $863 $812
Ratio of expenses to average
net assets ....................... 0.77% 0.82% 0.79% 0.89% 0.81% 1.68% 1.72% 1.69% 1.88% 1.77%(3)
Ratio of net income to
average net assets ............... 4.75% 4.99% 5.11% 5.34% 5.20% 3.84% 4.09% 4.21% 4.36% 4.39%(3)
Portfolio turnover rate ............ 30.82% 12.16% 12.84% 11.24% 22.16% 30.82% 12.16% 12.84% 11.24% 22.16%(4)
</TABLE>
- ----------
See footnotes on page 60.
52
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
COLORADO FUND
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- -------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ----- ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $7.42 $7.27 $7.30 $7.09 $7.76 $7.42 $7.27 $7.29 $7.09 $7.72
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.36 0.37 0.37 0.38 0.37 0.29 0.30 0.31 0.30 0.20
Net gains or losses on securities
(both realized and unrealized).. 0.22 0.15 (0.03) 0.21 (0.59) 0.21 0.15 (0.02) 0.20 (0.63)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.58 0.52 0.34 0.59 (0.22) 0.50 0.45 0.29 0.50 (0.43)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.36) (0.37) (0.37) (0.38) (0.37) (0.29) (0.30) (0.31) (0.30) (0.20)
Distributions (from capital gains) -- -- -- -- (0.08) -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.36) (0.37) (0.37) (0.38) (0.45) (0.29) (0.30) (0.31) (0.30) (0.20)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $7.64 $7.42 $7.27 $7.30 $7.09 $7.63 $7.42 $7.27 $7.29 $7.09
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.03% 7.30% 4.76% 8.56% (2.92)% 6.90% 6.34% 3.95% 7.26% (5.73)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $45,583 $49,780 $52,295 $54,858 $58,197 $344 $238 $255 $193 $96
Ratio of expenses to average
net assets ....................... 0.90% 0.90% 0.85% 0.93% 0.86% 1.80% 1.81% 1.75% 2.02% 1.78%(3)
Ratio of net income to
average net assets ............... 4.80% 5.01% 5.07% 5.31% 5.06% 3.90% 4.10% 4.17% 4.23% 4.05%(3)
Portfolio turnover rate ............ 28.66% 3.99% 12.39% 14.70% 10.07% 28.66% 3.99% 12.39% 14.70% 10.07%(4)
FLORIDA FUND
Per Share Data:*
Net asset value, beginning
of period ........................ $7.80 $7.67 $7.71 $7.34 $8.20 $7.81 $7.68 $7.72 $7.34 $8.10
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income**........... 0.35 0.36 0.38 0.40 0.42 0.29 0.30 0.32 0.34 0.24
Net gains or losses on securities
(both realized and unrealized).. 0.34 0.23 0.04 0.37 (0.74) 0.34 0.23 0.04 0.38 (0.76)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.69 0.59 0.42 0.77 (0.32) 0.63 0.53 0.36 0.72 (0.52)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.35) (0.36) (0.38) (0.40) (0.42) (0.29) (0.30) (0.32) (0.34) (0.24)
Distributions (from capital gains) (0.07) (0.10) (0.08) -- (0.12) (0.07) (0.10) (0.08) -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.42) (0.46) (0.46) (0.40) (0.54) (0.36) (0.40) (0.40) (0.34) (0.24)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.07 $7.80 $7.67 $7.71 $7.34 $8.08 $7.81 $7.68 $7.72 $7.34
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 9.16% 8.01% 5.54% 10.87% (3.99)% 8.32% 7.18% 4.74% 10.07% (6.64)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $42,464 $42,024 $45,200 $49,030 $49,897 $1,940 $1,678 $1,277 $603 $244
Ratio of expenses to average
net assets**...................... 1.00% 1.04% 0.97% 0.72% 0.42% 1.77% 1.81% 1.73% 1.66% 1.29%(3)
Ratio of net income to average
net assets**...................... 4.45% 4.70% 4.90% 5.38% 5.49% 3.68% 3.93% 4.14% 4.53% 4.61%(3)
Portfolio turnover rate ............ 6.73% 33.68% 18.53% 11.82% 6.17% 6.73% 33.68% 18.53% 11.82% 6.17%(4)
</TABLE>
- ----------
See footnotes on page 60.
53
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
GEORGIA FUND
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- -------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ----- ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $8.12 $7.87 $7.81 $7.48 $8.43 $8.13 $7.88 $7.82 $7.49 $8.33
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income**........... 0.38 0.38 0.39 0.39 0.41 0.30 0.31 0.32 0.32 0.22
Net gains or losses on securities
(both realized and unrealized).. 0.29 0.28 0.11 0.43 (0.86) 0.30 0.28 0.11 0.43 (0.84)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.67 0.66 0.50 0.82 (0.45) 0.60 0.59 0.43 0.75 (0.62)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.38) (0.38) (0.39) (0.39) (0.41) (0.30) (0.31) (0.32) (0.32) (0.22)
Distributions (from capital gains) (0.03) (0.03) (0.05) (0.10) (0.09) (0.03) (0.03) (0.05) (0.10) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.41) (0.41) (0.44) (0.49) (0.50) (0.33) (0.34) (0.37) (0.42) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.38 $8.12 $7.87 $7.81 $7.48 $8.40 $8.13 $7.88 $7.82 $7.49
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.44% 8.65% 6.56% 11.66% (5.52)% 7.59% 7.67% 5.60% 10.58% (7.57)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $48,424 $50,614 $50,995 $57,678 $61,466 $2,809 $2,640 $2,327 $2,079 $849
Ratio of expenses to average
net assets**...................... 0.89% 0.89% 0.83% 0.91% 0.73% 1.80% 1.79% 1.73% 1.90% 1.76%(3)
Ratio of net income to
average net assets**.............. 4.57% 4.82% 4.94% 5.26% 5.21% 3.66% 3.92% 4.03% 4.28% 4.28%(3)
Portfolio turnover rate ............ 2.92% 12.28% 16.24% 3.36% 19.34% 2.92% 12.28% 16.24% 3.36% 19.34%(4)
LOUISIANA FUND
Per Share Data:*
Net asset value, beginning
of period ........................ $8.28 $8.16 $8.14 $7.94 $8.79 $8.27 $8.16 $8.14 $7.94 $8.73
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.41 0.41 0.42 0.43 0.44 0.33 0.34 0.35 0.35 0.24
Net gains or losses on securities
(both realized and unrealized).. 0.24 0.23 0.08 0.34 (0.77) 0.24 0.22 0.08 0.34 (0.79)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.65 0.64 0.50 0.77 (0.33) 0.57 0.56 0.43 0.69 (0.55)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.41) (0.41) (0.42) (0.43) (0.44) (0.33) (0.34) (0.35) (0.35) (0.24)
Distributions (from capital gains) (0.01) (0.11) (0.06) (0.14) (0.08) (0.01) (0.11) (0.06) (0.14) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.42) (0.52) (0.48) (0.57) (0.52) (0.34) (0.45) (0.41) (0.49) (0.24)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.51 $8.28 $8.16 $8.14 $7.94 $8.50 $8.27 $8.16 $8.14 $7.94
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.08% 8.17% 6.32% 10.30% (3.83)% 7.11% 7.07% 5.37% 9.17% (6.45)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $56,308 $56,199 $57,264 $61,988 $61,441 $837 $509 $389 $465 $704
Ratio of expenses to average
net assets ....................... 0.88% 0.86% 0.82% 0.89% 0.87% 1.78% 1.76% 1.72% 1.91% 1.78%(3)
Ratio of net income to
average net assets ............... 4.86% 5.08% 5.15% 5.44% 5.31% 3.96% 4.18% 4.25% 4.41% 4.33%(3)
Portfolio turnover rate ............ 15.72% 16.08% 10.08% 4.82% 17.16% 15.72% 16.08% 10.08% 4.82% 17.16%(4)
</TABLE>
- ----------
See footnotes on page 60.
54
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
MARYLAND FUND
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- -------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ----- ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $8.14 $7.99 $7.96 $7.71 $8.64 $8.15 $7.99 $7.97 $7.72 $8.46
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.40 0.40 0.40 0.41 0.42 0.32 0.33 0.33 0.33 0.23
Net gains or losses on securities
(both realized and unrealized).. 0.23 0.19 0.06 0.38 (0.76) 0.23 0.20 0.05 0.38 (0.74)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.63 0.59 0.46 0.79 (0.34) 0.55 0.53 0.38 0.71 (0.51)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.40) (0.40) (0.40) (0.41) (0.42) (0.32) (0.33) (0.33) (0.33) (0.23)
Distributions (from capital gains) (0.05) (0.04) (0.03) (0.13) (0.17) (0.05) (0.04) (0.03) (0.13) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.45) (0.44) (0.43) (0.54) (0.59) (0.37) (0.37) (0.36) (0.46) (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.32 $8.14 $7.99 $7.96 $7.71 $8.33 $8.15 $7.99 $7.97 $7.72
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 7.89% 7.64% 6.00% 10.90% (4.08)% 6.91% 6.80% 4.91% 9.75% (6.21)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $54,891 $52,549 $54,041 $56,290 $57,263 $3,128 $2,063 $2,047 $630 $424
Ratio of expenses to average
net assets ....................... 0.89% 0.90% 0.84% 0.96% 0.92% 1.80% 1.81% 1.72% 2.02% 1.80%(3)
Ratio of net income to
average net assets ............... 4.82% 4.99% 5.05% 5.31% 5.17% 3.91% 4.08% 4.14% 4.27% 4.26%(3)
Portfolio turnover rate ............ 7.59% 14.79% 5.56% 3.63% 17.68% 7.59% 14.79% 5.56% 3.63% 17.68%(4)
MASSACHUSETTS FUND
Per Share Data:*
Net asset value, beginning
of period ........................ $7.99 $7.85 $7.91 $7.66 $8.54 $7.99 $7.84 $7.90 $7.66 $8.33
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.38 0.40 0.41 0.42 0.44 0.31 0.33 0.34 0.34 0.24
Net gains or losses on securities
(both realized and unrealized).. 0.37 0.22 0.05 0.28 (0.67) 0.36 0.23 0.05 0.27 (0.67)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.75 0.62 0.46 0.70 (0.23) 0.67 0.56 0.39 0.61 (0.43)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.38) (0.40) (0.41) (0.42) (0.44) (0.31) (0.33) (0.34) (0.34) (0.24)
Distributions (from capital gains) (0.09) (0.08) (0.11) (0.03) (0.21) (0.09) (0.08) (0.11) (0.03) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.47) (0.48) (0.52) (0.45) (0.65) (0.40) (0.41) (0.45) (0.37) (0.24)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.27 $7.99 $7.85 $7.91 $7.66 $8.26 $7.99 $7.84 $7.90 $7.66
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 9.80% 8.11% 5.97% 9.58% (2.94)% 8.68% 7.29% 5.01% 8.33% (5.34)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $109,328 $110,011 $109,872 $115,711 $120,149 $1,468 $1,245 $1,405 $809 $1,099
Ratio of expenses to average
net assets ....................... 0.80% 0.84% 0.80% 0.86% 0.85% 1.71% 1.74% 1.70% 1.95% 1.78%(3)
Ratio of net income to
average net assets ............... 4.72% 5.06% 5.24% 5.51% 5.46% 3.81% 4.16% 4.32% 4.47% 4.52%(3)
Portfolio turnover rate ............ 13.41% 29.26% 26.30% 16.68% 12.44% 13.41% 29.26% 26.30% 16.68% 12.44%(4)
</TABLE>
- ----------
See footnotes on page 60.
55
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
MICHIGAN FUND
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- -------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ----- ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $8.60 $8.46 $8.54 $8.28 $9.08 $8.59 $8.45 $8.54 $8.28 $9.01
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.41 0.43 0.45 0.46 0.46 0.33 0.36 0.37 0.37 0.25
Net gains or losses on securities
(both realized and unrealized) 0.30 0.23 0.06 0.30 (0.71) 0.30 0.23 0.05 0.30 (0.73)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.71 0.66 0.51 0.76 (0.25) 0.63 0.59 0.42 0.67 (0.48)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.41) (0.43) (0.45) (0.46) (0.46) (0.33) (0.36) (0.37) (0.37) (0.25)
Distributions (from capital gains) (0.07) (0.09) (0.14) (0.04) (0.09) (0.07) (0.09) (0.14) (0.04) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.48) (0.52) (0.59) (0.50) (0.55) (0.40) (0.45) (0.51) (0.41) (0.25)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.83 $8.60 $8.46 $8.54 $8.28 $8.82 $8.59 $8.45 $8.54 $8.28
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.63% 8.16% 6.16% 9.56% (2.90)% 7.66% 7.19% 5.09% 8.36% (5.47)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $144,161 $143,370 $148,178 $151,589 $151,095 $1,841 $1,845 $1,486 $1,172 $671
Ratio of expenses to average
net assets ....................... 0.79% 0.81% 0.78% 0.87% 0.84% 1.70% 1.71% 1.68% 2.01% 1.75%(3)
Ratio of net income to
average net assets ............... 4.78% 5.13% 5.29% 5.50% 5.32% 3.87% 4.23% 4.39% 4.40% 4.40%(3)
Portfolio turnover rate ............ 23.60% 10.98% 19.62% 20.48% 10.06% 23.60% 10.98% 19.62% 20.48% 10.06%(4)
MINNESOTA FUND
Per Share Data:*
Net asset value, beginning
of period ........................ $7.79 $7.68 $7.82 $7.72 $8.28 $7.79 $7.68 $7.82 $7.73 $8.22
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.38 0.40 0.42 0.45 0.45 0.31 0.33 0.35 0.38 0.25
Net gains or losses on securities
(both realized and unrealized) . 0.20 0.11 (0.12) 0.11 (0.44) 0.20 0.11 (0.12) 0.10 (0.49)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.58 0.51 0.30 0.56 0.01 0.51 0.44 0.23 0.48 (0.24)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.38) (0.40) (0.42) (0.45) (0.45) (0.31) (0.33) (0.35) (0.38) (0.25)
Distributions (from capital gains) (0.01) -- (0.02) (0.01) (0.12) (0.01) -- (0.02) (0.01) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.39) (0.40) (0.44) (0.46) (0.57) (0.32) (0.33) (0.37) (0.39) (0.25)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $7.98 $7.79 $7.68 $7.82 $7.72 $7.98 $7.79 $7.68 $7.82 $7.73
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 7.68% 6.85% 3.99% 7.61% 0.12% 6.71% 5.89% 3.06% 6.45% (3.08)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $121,374 $121,674 $126,173 $132,716 $134,990 $2,103 $1,799 $2,036 $2,237 $1,649
Ratio of expenses to average
net assets ....................... 0.81% 0.85% 0.81% 0.87% 0.85% 1.72% 1.75% 1.71% 1.85% 1.74%(3)
Ratio of net income to
average net assets ............... 4.87% 5.21% 5.47% 5.89% 5.70% 3.96% 4.31% 4.57% 4.92% 4.68%(3)
Portfolio turnover rate ............ 21.86% 6.88% 26.89% 5.57% 3.30% 21.86% 6.88% 26.89% 5.57% 3.30%(4)
</TABLE>
- ----------
See footnotes on page 60.
56
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
MISSOURI FUND
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- -------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ----- ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $7.82 $7.71 $7.70 $7.41 $8.31 $7.82 $7.72 $7.70 $7.41 $8.20
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income**........... 0.36 0.38 0.39 0.40 0.40 0.29 0.31 0.32 0.32 0.22
Net gains or losses on securities
(both realized and unrealized) . 0.28 0.19 0.08 0.36 (0.79) 0.28 0.18 0.09 0.36 (0.79)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Total from investment operations ... 0.64 0.57 0.47 0.76 (0.39) 0.57 0.49 0.41 0.68 (0.57)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Less distributions:
Dividends (from net
investment income) ............. (0.36) (0.38) (0.39) (0.40) (0.40) (0.29) (0.31) (0.32) (0.32) (0.22)
Distributions (from capital gains) (0.07) (0.08) (0.07) (0.07) (0.11) (0.07) (0.08) (0.07) (0.07) --
----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.43) (0.46) (0.46) (0.47) (0.51) (0.36) (0.39) (0.39) (0.39) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.03 $7.82 $7.71 $7.70 $7.41 $8.03 $7.82 $7.72 $7.70 $7.41
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.41% 7.70% 6.27% 10.67% (4.85)% 7.45% 6.60% 5.46% 9.49% (7.16)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $49,949 $52,766 $49,941 $51,169 $52,621 $418 $474 $565 $515 $350
Ratio of expenses to average
net assets**...................... 0.89% 0.89% 0.86% 0.88% 0.74% 1.79% 1.80% 1.76% 1.98% 1.70%(3)
Ratio of net income to
average net assets**.............. 4.59% 4.93% 5.03% 5.31% 5.18% 3.69% 4.02% 4.13% 4.23% 4.27%(3)
Portfolio turnover rate ............ 21.26% 6.47% 8.04% 3.88% 14.33% 21.26% 6.47% 8.04% 3.88% 14.33%(4)
NEW JERSEY FUND
Per Share Data:*
Net asset value, beginning
of period ........................ $7.56 $7.60 $7.59 $7.40 $8.24 $7.64 $7.68 $7.67 $7.48 $8.14
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income**........... 0.35 0.36 0.39 0.39 0.41 0.29 0.31 0.33 0.33 0.23
Net gains or losses on securities
(both realized and unrealized) . 0.30 0.21 0.01 0.29 (0.74) 0.30 0.21 0.01 0.29 (0.66)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Total from investment operations ... 0.65 0.57 0.40 0.68 (0.33) 0.59 0.52 0.34 0.62 (0.43)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Less distributions:
Dividends (from net
investment income) ............. (0.35) (0.36) (0.39) (0.39) (0.41) (0.29) (0.31) (0.33) (0.33) (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Distributions (from capital gains) (0.08) (0.25) -- (0.10) (0.10) (0.08) (0.25) -- (0.10) --
----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.43) (0.61) (0.39) (0.49) (0.51) (0.37) (0.56) (0.33) (0.43) (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $7.78 $7.56 $7.60 $7.59 $7.40 $7.86 $7.64 $7.68 $7.67 $7.48
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.87% 7.96% 5.37% 9.77% (4.25)% 7.97% 7.10% 4.56% 8.79% (5.47)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $61,739 $62,597 $66,293 $73,561 $73,942 $1,582 $1,282 $1,152 $1,190 $986
Ratio of expenses to average
net assets**...................... 1.02% 1.06% 1.02% 1.01% 0.90% 1.80% 1.83% 1.79% 1.89% 1.75%(3)
Ratio of net income to
average net assets**.............. 4.54% 4.90% 5.06% 5.29% 5.24% 3.76% 4.13% 4.29% 4.45% 4.37%(3)
Portfolio turnover rate ............ 23.37% 20.22% 25.65% 4.66% 12.13% 23.37% 20.22% 25.65% 4.66% 12.13%(4)
</TABLE>
- ----------
See footnotes on page 60.
57
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
NEW YORK FUND
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- -------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ----- ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $8.28 $7.98 $7.86 $7.67 $8.75 $8.29 $7.98 $7.87 $7.67 $8.55
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.40 0.41 0.42 0.42 0.43 0.32 0.34 0.34 0.34 0.23
Net gains or losses on securities
(both realized and unrealized).. 0.40 0.32 0.12 0.36 (0.88) 0.39 0.33 0.11 0.37 (0.88)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Total from investment operations ... 0.80 0.73 0.54 0.78 (0.45) 0.71 0.67 0.45 0.71 (0.65)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Less distributions:
Dividends (from net
investment income) ............. (0.40) (0.41) (0.42) (0.42) (0.43) (0.32) (0.34) (0.34) (0.34) (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Distributions (from capital gains) (0.08) (0.02) -- (0.17) (0.20) (0.08) (0.02) -- (0.17) --
----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.48) (0.43) (0.42) (0.59) (0.63) (0.40) (0.36) (0.34) (0.51) (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.60 $8.28 $7.98 $7.86 $7.67 $8.60 $8.29 $7.98 $7.87 $7.67
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 10.02% 9.45% 6.97% 10.93% (5.37)% 8.88% 8.60% 5.86% 9.87% (7.73)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $84,822 $83,528 $82,719 $83,980 $90,914 $2,182 $1,572 $1,152 $885 $476
Ratio of expenses to average
net assets ....................... 0.81% 0.82% 0.77% 0.88% 0.87% 1.72% 1.73% 1.68% 1.96% 1.81%(3)
Ratio of net income to
average net assets ............... 4.74% 5.09% 5.24% 5.52% 5.31% 3.83% 4.18% 4.33% 4.42% 4.39%(3)
Portfolio turnover rate ............ 39.85% 23.83% 25.88% 34.05% 28.19% 39.85% 23.83% 25.88% 34.05% 28.19%(4)
NORTH CAROLINA FUND
Per Share Data:*
Net asset value, beginning
of period ........................ $8.05 $7.84 $7.74 $7.30 $8.22 $8.05 $7.83 $7.74 $7.29 $8.17
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income**........... 0.36 0.37 0.37 0.39 0.41 0.30 0.31 0.31 0.33 0.23
Net gains or losses on securities
(both realized and unrealized).. 0.31 0.24 0.11 0.45 (0.87) 0.31 0.25 0.10 0.46 (0.88)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Total from investment operations ... 0.67 0.61 0.48 0.84 (0.46) 0.61 0.56 0.41 0.79 (0.65)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Less distributions:
Dividends (from net
investment income) ............. (0.36) (0.37) (0.37) (0.39) (0.41) (0.30) (0.31) (0.31) (0.33) (0.23)
Distributions (from capital gains) (0.06) (0.03) (0.01) (0.01) (0.05) (0.06) (0.03) (0.01) (0.01) --
----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.42) (0.40) (0.38) (0.40) (0.46) (0.36) (0.34) (0.32) (0.34) (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.30 $8.05 $7.84 $7.74 $7.30 $8.30 $8.05 $7.83 $7.74 $7.29
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.60% 8.01% 6.39% 11.92% (5.80)% 7.77% 7.33% 5.45% 11.19% (8.15)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $32,358 $32,684 $35,934 $37,446 $38,920 $1,456 $1,217 $1,232 $1,257 $1,282
Ratio of expenses to average
net assets**...................... 1.05% 1.09% 1.05% 0.82% 0.44% 1.82% 1.85% 1.81% 1.64% 1.27%(3)
Ratio of net income to
average net assets**.............. 4.41% 4.66% 4.75% 5.21% 5.29% 3.64% 3.90% 3.99% 4.42% 4.49%(3)
Portfolio turnover rate ............ 20.37% 13.04% 15.12% 4.38% 15.61% 20.37% 13.04% 15.12% 4.38% 15.61%(4)
</TABLE>
- ----------
See footnotes on page 60.
58
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<PAGE>
- --------------------------------------------------------------------------------
OHIO FUND
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- -------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- --------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $8.19 $8.09 $8.11 $7.90 $8.77 $8.23 $8.13 $8.15 $7.92 $8.61
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.40 0.42 0.43 0.44 0.44 0.33 0.35 0.36 0.36 0.24
Net gains or losses on securities
(both realized and unrealized) . 0.29 0.17 0.02 0.28 (0.70) 0.29 0.17 0.02 0.30 (0.69)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Total from investment operations ... 0.69 0.59 0.45 0.72 (0.26) 0.62 0.52 0.38 0.66 (0.45)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Less distributions:
Dividends (from net
investment income) ............. (0.40) (0.42) (0.43) (0.44) (0.44) (0.33) (0.35) (0.36) (0.36) (0.24)
Distributions (from capital gains) (0.11) (0.07) (0.04) (0.07) (0.17) (0.11) (0.07) (0.04) (0.07) --
----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.51) (0.49) (0.47) (0.51) (0.61) (0.44) (0.42) (0.40) (0.43) (0.24)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.37 $8.19 $8.09 $8.11 $7.90 $8.41 $8.23 $8.13 $8.15 $7.92
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.77% 7.54% 5.68% 9.59% (3.08)% 7.78% 6.57% 4.74% 8.67% (5.36)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $153,126 $154,419 $162,243 $170,191 $171,469 $1,103 $1,160 $1,011 $660 $324
Ratio of expenses to average
net assets ....................... 0.78% 0.81% 0.77% 0.84% 0.84% 1.69% 1.71% 1.67% 1.93% 1.78%(3)
Ratio of net income to
average net assets ............... 4.92% 5.19% 5.32% 5.56% 5.34% 4.01% 4.29% 4.42% 4.48% 4.41%(3)
Portfolio turnover rate ............ 24.74% 11.76% 12.90% 2.96% 9.37% 24.74% 11.76% 12.90% 2.96% 9.37%(4)
OREGON FUND
Per Share Data:*
Net asset value, beginning
of period ........................ $7.87 $7.65 $7.66 $7.43 $8.08 $7.87 $7.64 $7.65 $7.43 $8.02
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income**........... 0.36 0.38 0.40 0.40 0.40 0.29 0.31 0.33 0.33 0.22
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net gains or losses on securities
(both realized and unrealized) . 0.28 0.26 -- 0.25 (0.59) 0.27 0.27 -- 0.24 (0.59)
---- ---- ---- ----- ---- ---- ---- -----
Total from investment operations ... 0.64 0.64 0.40 0.65 (0.19) 0.56 0.58 0.33 0.57 (0.37)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Less distributions:
Dividends (from net
investment income) ............. (0.36) (0.38) (0.40) (0.40) (0.40) (0.29) (0.31) (0.33) (0.33) (0.22)
Distributions (from capital gains) (0.10) (0.04) (0.01) (0.02) (0.06) (0.10) (0.04) (0.01) (0.02) --
----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.46) (0.42) (0.41) (0.42) (0.46) (0.39) (0.35) (0.34) (0.35) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.05 $7.87 $7.65 $7.66 $7.43 $8.04 $7.87 $7.64 $7.65 $7.43
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.48% 8.60% 5.27% 9.05% (2.38)% 7.37% 7.77% 4.33% 7.86% (4.76)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $57,601 $55,239 $57,345 $59,549 $59,884 $2,650 $1,678 $1,540 $1,495 $843
Ratio of expenses to average
net assets**...................... 0.88% 0.90% 0.86% 0.86% 0.78% 1.79% 1.80% 1.76% 1.83% 1.72%(3)
Ratio of net income to
average net assets**.............. 4.60% 4.88% 5.18% 5.40% 5.20% 3.69% 3.98% 4.28% 4.41% 4.32%(3)
Portfolio turnover rate ............ 12.62% 19.46% 28.65% 2.47% 9.43% 12.62% 19.46% 28.65% 2.47% 9.43%(4)
</TABLE>
- ----------
See footnotes on page 60.
59
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<PAGE>
- --------------------------------------------------------------------------------
PENNSYLVANIA FUND
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- -------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- --------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- -------- ------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $7.96 $7.82 $7.79 $7.55 $8.61 $7.95 $7.81 $7.78 $7.54 $8.37
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.35 0.36 0.38 0.38 0.39 0.29 0.30 0.32 0.31 0.22
Net gains or losses on securities
(both realized and unrealized) . 0.36 0.24 0.12 0.37 (0.80) 0.36 0.24 0.12 0.37 (0.83)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Total from investment operations ... 0.71 0.60 0.50 0.75 (0.41) 0.65 0.54 0.44 0.68 (0.61)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Less distributions:
Dividends (from net
investment income) ............. (0.35) (0.36) (0.38) (0.38) (0.39) (0.29) (0.30) (0.32) (0.31) (0.22)
Distributions (from capital gains) (0.08) (0.10) (0.09) (0.13) (0.26) (0.08) (0.10) (0.09) (0.13) --
----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.43) (0.46) (0.47) (0.51) (0.65) (0.37) (0.40) (0.41) (0.44) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.24 $7.96 $7.82 $7.79 $7.55 $8.23 $7.95 $7.81 $7.78 $7.54
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 9.20% 7.89% 6.57% 10.55% (5.00)% 8.36% 7.07% 5.76% 9.53% (7.50)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $29,582 $30,092 $31,139 $33,251 $34,943 $607 $816 $876 $426 $43
Ratio of expenses to average
net assets ....................... 1.19% 1.19% 1.11% 1.21% 1.16% 1.97% 1.96% 1.88% 2.23% 2.00%(3)
Ratio of net income to
average net assets ............... 4.34% 4.60% 4.82% 5.05% 4.91% 3.56% 3.83% 4.05% 4.10% 4.20%(3)
Portfolio turnover rate ............ 13.05% 32.99% 4.56% 11.78% 7.71% 13.05% 32.99% 4.56% 11.78% 7.71%(4)
SOUTH CAROLINA FUND
Per Share Data:*
Net asset value, beginning
of period ........................ $8.16 $8.07 $7.97 $7.61 $8.52 $8.16 $8.06 $7.97 $7.61 $8.42
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.39 0.40 0.41 0.41 0.41 0.31 0.33 0.34 0.34 0.22
Net gains or losses on securities
(both realized and unrealized) . 0.29 0.22 0.12 0.37 (0.79) 0.29 0.23 0.11 0.37 (0.81)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Total from investment operations ... 0.68 0.62 0.53 0.78 (0.38) 0.60 0.56 0.45 0.71 (0.59)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Less distributions:
Dividends (from net
investment income) ............. (0.39) (0.40) (0.41) (0.41) (0.41) (0.31) (0.33) (0.34) (0.34) (0.22)
Distributions (from capital gains) (0.07) (0.13) (0.02) (0.01) (0.12) (0.07) (0.13) (0.02) (0.01) --
----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.46) (0.53) (0.43) (0.42) (0.53) (0.38) (0.46) (0.36) (0.35) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.38 $8.16 $8.07 $7.97 $7.61 $8.38 $8.16 $8.06 $7.97 $7.61
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.66% 7.99% 6.82% 10.69% (4.61)% 7.68% 7.15% 5.73% 9.63% (7.14)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $106,328 $101,018 $108,163 $112,421 $115,133 $5,594 $3,663 $2,714 $1,704 $1,478
Ratio of expenses to average
net assets ....................... 0.80% 0.84% 0.80% 0.88% 0.83% 1.71% 1.75% 1.70% 1.85% 1.74%(3)
Ratio of net income to
average net assets ............... 4.74% 5.04% 5.15% 5.38% 5.12% 3.83% 4.13% 4.25% 4.40% 4.29%(3)
Portfolio turnover rate ............ 16.63% -- 20.66% 4.13% 1.81% 16.63% -- 20.66% 4.13% 1.81%(4)
</TABLE>
- ----------
* Per share amounts are based on average shares outstanding.
** For periods prior to 1996 (1997 for the Florida and the North Carolina
Fund), Seligman voluntarily waived a portion of its management fee. These
amounts reflect the effect of the waivers.
(1) Commencement of offering of Class D shares.
(2) Not annualized.
(3) Annualized.
(4) For the year ended September 30, 1994.
60
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<PAGE>
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How to Contact Us
The Fund Write: Corporate Communications/
Investor Relations Department
J. & W. Seligman & Co. Incorporated
100 Park Avenue, New York, NY 10017
Phone: Toll-Free (800) 221-7844 in the US or
(212) 850-1864 outside the US
Website : http://www.seligman.com
Your Regular
(Non-Retirement)
Account Write: Shareholder Services Department
Seligman Data Corp.
100 Park Avenue, New York, NY 10017
Phone: Toll-Free (800) 221-2450 in the US or
(212) 682-7600 outside the US
Website : http://www.seligman.com
--------------------------------------------------
24-hour telephone access is available by
dialing (800) 622-4597 on a touchtone
telephone. You will have instant access
to price, yield, account balance, most
recent transaction, and other information.
--------------------------------------------------
61
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
For More Information
-----------------------------------------------------------
The following information is available without charge upon
request: Call toll-free (800) 221-2450 in the US or (212)
682-7600 outside the US.
Statement of Additional Information (SAI) contains
additional information about the Fund. It is on file with
the Securities and Exchange Commission (SEC) and is
incorporated by reference into (is legally part of) this
prospectus.
Annual/Semi-Annual Reports contain additional information
about the Fund's investments. In the Fund's annual report,
you will find a discussion of the market conditions
-----------------------------------------------------------
SELIGMAN ADVISORS, INC.
an affiliate of
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York 10017
Information about the Fund, including the SAI, can be viewed and copied at the
SEC's Public Reference Room in Washington, DC. For information about the
operation of the Public Reference Room, call (800) SEC-0330. The SAI,
Annual/Semi-Annual reports and other information about the Fund are also
available on the SEC's Internet site: http://www.sec.gov.
Copies of this information may be obtained, upon payment of a duplicating fee,
by writing: Public Reference Section of the SEC, Washington, DC 20549-6009.
SEC FILE NUMBERS: Seligman Municipal Fund Series, Inc.: 811-3828
Seligman Municipal Series Trust: 811-4250
Seligman New Jersey Municipal Fund, Inc.: 811-5126
Seligman Pennsylvania Municipal Fund Series: 811-4666
- --------------------------------------------------------------------------------
<PAGE>
SELIGMAN MUNICIPAL FUND SERIES, INC.
National Fund, Colorado Fund, Georgia Fund, Louisiana Fund, Maryland Fund,
Massachusetts Fund, Michigan Fund, Minnesota Fund, Missouri Fund, New York Fund,
Ohio Fund, Oregon Fund, South Carolina Fund
Statement of Additional Information
February 1, 1999
100 Park Avenue
New York, New York 10017
(212) 850-1864
Toll Free Telephone: (800) 221-2450
This Statement of Additional Information (SAI) expands upon and supplements the
information contained in the current Prospectus of the Seligman Municipal Funds,
dated February 1, 1999. This SAI, although not in itself a prospectus, is
incorporated by reference into the Prospectus in its entirety. It should be read
in conjunction with the Prospectus, which may be obtained by writing or calling
the Funds at the above address or telephone numbers.
The financial statements and notes included in the Funds' Annual Report, and the
Independent Auditors' Report thereon, are incorporated herein by reference. The
Annual Report will be furnished to you without charge if you request a copy of
this SAI.
Table of Contents
Fund History ......................................................... 2
Description of the Funds and Their Investments and Risks ............. 2
Management of the Funds .............................................. 8
Control Persons and Principal Holders of Securities................... 13
Investment Advisory and Other Services ............................... 13
Brokerage Allocation and Other Practices ............................. 21
Capital Stock and Other Securities ................................... 22
Purchase, Redemption, and Pricing of Shares .......................... 22
Taxation of the Funds ................................................ 27
Underwriters.......................................................... 35
Calculation of Performance Data ...................................... 38
Financial Statements.................................................. 45
General Information................................................... 45
Appendix A ........................................................... 46
Appendix B............................................................ 49
Appendix C............................................................ 87
TEA1A
<PAGE>
Fund History
Seligman Municipal Fund Series, Inc. was incorporated in Maryland on August 8,
1983.
Description of the Funds and Their Investments and Risks
Classification
Seligman Municipal Fund Series, Inc. is a non-diversified, open-end management
investment company, or mutual fund. It consists of thirteen separate series:
National Municipal Series (National Fund)
Colorado Municipal Series (Colorado Fund)
Georgia Municipal Series (Georgia Fund)
Louisiana Municipal Series (Louisiana Fund)
Maryland Municipal Series (Maryland Fund)
Massachusetts Municipal Series (Massachusetts Fund)
Michigan Municipal Series (Michigan Fund)
Minnesota Municipal Series (Minnesota Fund)
Missouri Municipal Series (Missouri Fund)
New York Municipal Series (New York Fund)
Ohio Municipal Series (Ohio Fund)
Oregon Municipal Series (Oregon Fund)
South Carolina Municipal Series (South Carolina Fund)
Investment Strategies and Risks
The following information regarding the Funds' investments and risks supplements
the information contained in the Prospectus.
The Funds seek to provide income exempt from regular federal income taxes and,
as applicable, regular state and local income taxes, to the extent consistent
with the preservation of capital and with consideration given to opportunities
for capital gain.
Each Fund is expected to invest principally, without percentage limitations, in
municipal securities which on the date of purchase are rated within the four
highest rating categories of Moody's Investors Service (Moody's) or Standard &
Poor's Corporation (S&P). Municipal Securities rated in these categories are
commonly referred to as investment grade. Each Fund may invest in municipal
securities that are not rated, or which do not fall into the credit ratings
noted above if, based upon credit analysis, it is believed that such securities
are of comparable quality. In determining suitability of investment in a lower
rated or unrated security, a Fund will take into consideration asset and debt
service coverage, the purpose of the financing, history of the issuer, existence
of other rated securities of the issuer and other considerations as may be
relevant, including comparability to other issuers.
Although securities rated in the fourth rating category are commonly referred to
as investment grade, investment in such securities could involve risks not
usually associated with bonds rated in the first three categories. Bonds rated
BBB by S&P are more likely as a result of adverse economic conditions or
changing circumstance to exhibit a weakened capacity to pay interest and re-pay
principal than bonds in higher rating categories and bonds rated Baa by Moody's
lack outstanding investment characteristics and in fact have speculative
characteristics according to Moody's. Municipal securities in the fourth rating
category of S&P or Moody's will generally provide a higher yield than do higher
rated municipal securities of similar maturities; however, they are subject to a
greater degree of fluctuation in value as a result of changing interest rates
and economic conditions. The market value of the municipal securities will also
be affected by the degree of interest of dealers to bid for them, and in certain
markets dealers may be more unwilling to trade municipal securities rated in the
fourth rating categories than in the higher rating categories.
2
<PAGE>
A description of the credit rating categories is contained in Appendix A to this
SAI.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities and for providing state and local governments
with federal credit assistance. Reevaluation of a Fund's investment objectives
and structure might be necessary in the future due to market conditions that may
result from future changes in the tax laws.
Municipal Securities. Municipal securities include short-term notes, commercial
paper, and intermediate and long-term bonds issued by or on behalf of states,
territories, and possessions of the United States and the District of Columbia,
and their political subdivisions, agencies, and instrumentalities, the interest
on which is exempt from regular federal income taxes and in certain instances,
applicable state or local income taxes. Municipal securities are traded
primarily in the over-the-counter market. A Fund may invest, without percentage
limitations, in certain private activity bonds, the interest on which is treated
as a preference item for purposes of the alternative minimum tax.
Under the Investment Company Act of 1940 (1940 Act), the identification of the
issuer of municipal bonds or notes depends on the terms and conditions of the
obligation. If the assets and revenues of an agency, authority, instrumentality
or other political subdivision are separate from those of the government
creating the subdivision and the obligation is backed only by the assets and
revenues of the subdivision, such subdivision is regarded as the sole issuer.
Similarly, in the case of an industrial development revenue bond or pollution
control revenue bond, if only the assets and revenues of the non-governmental
user back the bond, the non-governmental user is regarded as the sole issuer. If
in either case the creating government or another entity guarantees an
obligation, the security is treated as an issue of such guarantor to the extent
of the value of the guarantee.
The Funds invest principally in long-term municipal bonds. Municipal bonds are
issued to obtain funds for various public purposes, including the construction
of a wide range of public facilities such as airports, bridges, highways,
housing, hospitals, mass transportation, schools, streets, water and sewer
works, and gas and electric utilities. Municipal bonds also may be issued in
connection with the refunding of outstanding obligations, obtaining funds to
lend to other public institutions, and for general operating expenses.
Industrial development bonds are issued by or on behalf of public authorities to
obtain funds to provide various privately-operated facilities for business and
manufacturing, housing, sports, pollution control, and for airport, mass
transit, port and parking facilities.
The two principal classifications of municipal bonds are "general obligation"
and "revenue." General obligation bonds are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source. Although industrial
development bonds (IDBs) are issued by municipal authorities, they are generally
secured by the revenues derived from payments of the industrial user. The
payment of principal and interest on IDBs is dependent solely on the ability of
the user of the facilities financed by the bonds to meet its financial
obligations and the pledge, if any, of real and personal property so financed as
security for such payment.
Each Fund, with respect to 75% of its assets, will not purchase any revenue
bonds if as a result of such purchase more than 5% of such Fund's assets would
be invested in the revenue bonds of a single issuer.
The Funds may also invest in municipal notes. Municipal notes generally are used
to provide for short-term capital needs and generally have maturities of five
years or less. Municipal Notes include:
1. Tax Anticipation Notes and Revenue Anticipation Notes. Tax anticipation
notes and revenue anticipation notes are issued to finance short-term working
capital needs of political subdivisions. Generally, tax anticipation notes are
issued in anticipation of various tax revenues, such as income, sales and real
property taxes, and are payable from these specific future taxes. Revenue
anticipation notes are issued in expectation of receipt of other kinds of
revenue, such as grant or project revenues. Usually
3
<PAGE>
political subdivisions issue notes combining the qualities of both tax and
revenue anticipation notes.
2. Bond Anticipation Notes. Bond anticipation notes are issued to provide
interim financing until long-term financing can be arranged. In most cases, the
long-term bonds then provide the money for the repayment of the notes.
Issues of municipal Commercial Paper typically represent short-term, unsecured,
negotiable promissory notes. In most cases, municipal commercial paper is backed
by letters of credit, lending agreements, note repurchase agreements or other
credit facility agreements offered by banks or other institutions.
Variable and Floating Rate Securities. A Fund may purchase floating or variable
rate securities, including participation interests therein. Investments in
floating or variable rate securities provide that the rate of interest is either
pegged to money market rates or set as a specific percentage of a designated
base rate, such as rates on Treasury Bonds or Treasury Bills or the prime rate
of a major commercial bank. A floating rate or variable rate security generally
provides that a Fund can demand payment of the obligation on short notice (daily
or weekly, depending on the terms of the obligation) at an amount equal to par
(face value) plus accrued interest. In unusual circumstances, the amount
received may be more or less than the amount the Fund paid for the securities.
Variable rate securities provide for a specified periodic adjustment in the
interest rate, while floating rate securities have an interest rate which
changes whenever there is a change in the designated base interest rate.
Frequently such securities are secured by letters of credit or other credit
support arrangements provided by banks. The quality of the underlying creditor
or of the bank or insurer, as the case may be, must be equivalent to the
standards set forth with respect to taxable investments below.
The maturity of variable or floating rate obligations (including participation
interests therein) is deemed to be the longer of (1) the notice period required
before a Fund is entitled to receive payment of the obligation upon demand, or
(2) the period remaining until the obligation's next interest rate adjustment.
If the Fund does not redeem the obligation through the demand feature, the
obligation will mature on a specific date, which may range up to thirty years
from the date of its issuance.
Participation Interests. From time to time, a Fund may purchase from banks,
participation interests in all or part of specific holdings of municipal
securities. A participation interest gives the Fund an undivided interest in the
municipal security in the proportion that the Fund's participation interest
bears to the total principal amount of the municipal security and provides the
demand repurchase feature described above. Participations are frequently backed
by an irrevocable letter of credit or guarantee of a bank that the Fund has
determined meets its prescribed quality standards. A Fund has the right to sell
the instrument back to the bank and draw on the letter of credit on demand, on
short notice, for all or any part of the Fund's participation interest in the
municipal security, plus accrued interest. Each Fund intends to exercise the
demand under the letter of credit only (1) upon a default under the terms of the
documents of the municipal security, (2) as needed to provide liquidity in order
to meet redemptions, or (3) to maintain a high quality investment portfolio.
Banks will retain a service and letter of credit fee and a fee for issuing
repurchase commitments in an amount equal to the excess of the interest paid on
the municipal securities over the negotiated yield at which the instruments are
purchased by a Fund. Participation interests will be purchased only if, in the
opinion of counsel, interest income on such interests will be tax-exempt when
distributed as dividends to shareholders of the Fund. The Funds currently do not
purchase participation interests and have no current intention of doing so.
When-Issued Securities. Each Fund may purchase municipal securities on a
"when-issued" basis, which means that delivery of and payment for securities
normally take place in less than 45 days after the date of the buyer's purchase
commitment. The payment obligation and the interest rate on when-issued
securities are each fixed at the time the purchase commitment is made, although
no interest accrues to a purchaser prior to the settlement of the purchase of
the securities. As a result, the yields obtained and the market value of such
securities may be higher or lower on the date the securities are actually
delivered to the buyer. A Fund will generally purchase a municipal security sold
on a when-issued basis with the intention of actually acquiring the securities
on the settlement date. A separate account consisting of cash or high-grade
liquid debt securities equal to the amount of
4
<PAGE>
outstanding purchase commitments is established with the Fund's custodian in
connection with any purchase of when-issued securities. The account is marked to
market daily, with additional cash or liquid high-grade debt securities added
when necessary. A Fund meets in respective obligation to purchase when-issued
securities from outstanding cash balances, sale of other securities or, although
it would not normally expect to do so, form the sale of the when-issued
securities themselves (which may have a market value greater or lesser than the
Fund's payment obligations).
Municipal securities purchased on a when-issued basis and the other securities
held in each Fund are subject to changes in market value based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates (which will generally result in
similar changes in value, i.e., both experiencing appreciation when interest
rates decline and depreciation when interest rates rise). Therefore, to the
extent a Fund remains substantially fully invested at the same time that it has
purchased securities on a when-issued basis, there will be a greater possibility
that the market value of the Fund's assets will vary. Purchasing a municipal
security on a when-issued basis can involve a risk that the yields available in
the market when the delivery takes place may be higher than those obtained on
the security purchased on a when-issued basis.
Illiquid Securities. The Fund may invest up to 15% of its net assets in illiquid
securities, including restricted securities (i.e., securities not readily
marketable without registration under the Securities Act of 1933 (the "1933
Act")) and other securities that are not readily marketable. The Fund may
purchase restricted securities that can be offered and sold to "qualified
institutional buyers" under Rule 144A of the 1933 Act, and the Fund's Board of
Directors, may determine, when appropriate, that specific Rule 144A securities
are liquid and not subject to the 15% limitation on illiquid securities. Should
the Board of Directors make this determination, it will carefully monitor the
security (focusing on such factors, among others, as trading activity and
availability of information) to determine that the Rule 144A security continues
to be liquid. It is not possible to predict with assurance exactly how the
market for Rule 144A securities will further evolve. This investment practice
could have the effect of increasing the level of illiquidity in the Fund, if and
to the extent that qualified institutional buyers become for a time uninterested
in purchasing Rule 144A securities.
Borrowing. Each Fund may borrow money only from banks and only for temporary or
emergency purposes (but not for the purchase of portfolio securities) in an
amount not in excess of 10% of the value of its total assets at the time the
borrowing is made (not including the amount borrowed). Permitted borrowings may
be secured or unsecured. The Fund will not purchase additional portfolio
securities if the Fund has outstanding borrowings in excess of 5% of the value
of its total assets.
Taxable Investments. Under normal market conditions, each Fund will attempt to
invest 100% and as a matter of fundamental policy will invest at least 80% of
the value of its net assets in securities the interest on which is exempt from
regular federal income tax and (except for the National Fund) regular, personal
income tax of its designated state. Such interest, however, may be subject to
the federal alternative minimum tax and any applicable state alternative minimum
tax.
Under normal market conditions, temporary investments in taxable securities will
be limited as a matter of fundamental policy to 20% of the value of a Fund's net
assets.
Except as otherwise specifically noted above, the Fund's investment strategies
are not fundamental and a Fund, with the approval of the Board of Directors, may
change such strategies without the vote of shareholders.
Fund Policies
Each Fund is subject to fundamental policies that place restrictions on certain
types of investments. These policies cannot be changed except by vote of a
majority of the outstanding voting securities of a Fund.
5
<PAGE>
Under these policies, a Fund may not:
- - Borrow money, except from banks for temporary purposes (such as meeting
redemption requests or for extraordinary or emergency purposes) in an
amount not to exceed 10% of the value of its total assets at the time the
borrowing is made (not including the amount borrowed). A Fund will not
purchase additional portfolio securities if such Series has outstanding
borrowings in excess of 5% of the value of its total assets;
- - Mortgage or pledge any of its assets, except to secure permitted borrowings
noted above;
- - Invest more than 25% of total assets at market value in any one industry;
except that municipal securities and securities of the US Government, its
agencies and instrumentalities are not considered an industry for purposes
of this limitation;
- - As to 50% of the value of its total assets, purchase securities of any
issuer if immediately thereafter more than 5% of total assets at market
value would be invested in the securities of any issuer (except that this
limitation does not apply to obligations issued or guaranteed by the US
Government or its agencies or instrumentalities);
- - Invest in securities issued by other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization or
for the purpose of hedging the Fund's obligations under the Deferred
Compensation Plan for Directors;
- - Purchase or hold any real estate, including limited partnership interests
on real property, except that the Fund may invest in securities secured by
real estate or interests therein or issued by persons (other than real
estate investment trusts) which deal in real estate or interests therein;
- - Purchase or hold the securities of any issuer, if to its knowledge,
directors or officers of the Fund individually owning beneficially more
than 0.5% of the securities of that issuer own in the aggregate more than
5% of such securities;
- - Write or purchase put, call, straddle or spread options; purchase
securities on margin or sell "short"; or underwrite the securities of other
issuers;
- - Purchase or sell commodities or commodity contracts; or
- - Make loans except to the extent that the purchase of notes, bonds or other
evidences of indebtedness or the entry into repurchase agreements or
deposits with banks may be considered loans. No Fund has a present
intention of entering into repurchase agreements.
A Fund also may not change its investment objective without shareholder
approval.
Under the 1940 Act, a "vote of a majority of the outstanding voting securities"
of a Fund means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund or (2) 67% or more of the shares of the Fund
present at a shareholders' meeting if more than 50% of the outstanding shares of
the Fund are represented at the meeting in person or by proxy.
Temporary Defensive Position
In abnormal market conditions, if, in the judgment of a Fund, municipal
securities satisfying a Fund's investment objectives may not be purchased, a
Fund may, for defensive purposes, temporarily invest in instruments the interest
on which is exempt from regular federal income taxes, but not regular state
personal income taxes. Such securities would include those described under
"Municipal Securities" above that would otherwise meet the Fund's objectives.
6
<PAGE>
Also, in abnormal market conditions, a Fund may invest on a temporary basis in
fixed-income securities, the interest on which is subject to federal, state, or
local income taxes, pending the investment or reinvestment in municipal
securities of the proceeds of sales of shares or sales of portfolio securities,
in order to avoid the necessity of liquidating portfolio investments to meet
redemptions of shares by investors or where market conditions due to rising
interest rates or other adverse factors warrant temporary investing for
defensive purposes. Investments in taxable securities will be substantially in
securities issued or guaranteed by the United States Government (such as bills,
notes and bonds), its agencies, instrumentalities or authorities; highly-rated
corporate debt securities (rated Aa3 or better by Moody's or AA- or better by
S&P); prime commercial paper (rated P-1 by Moody's or A-1+/A-1 by S&P); and
certificates of deposit of the 100 largest domestic banks in terms of assets
which are subject to regulatory supervision by the US Government or state
governments and the 50 largest foreign banks in terms of assets with branches or
agencies in the United States. Investments in certificates of deposit of foreign
banks and foreign branches of US banks may involve certain risks, including
different regulation, use of different accounting procedures, political or other
economic developments, exchange controls, or possible seizure or nationalization
of foreign deposits.
Portfolio Turnover
Portfolio transactions will be undertaken principally to accomplish a Fund's
objective in relation to anticipated movements in the general level of interest
rates but a Fund may also engage in short-term trading consistent with its
objective. Securities may be sold in anticipation of a market decline (a rise in
interest rates) or purchased in anticipation of a market rise (a decline in
interest rates) and later sold. In addition, a security may be sold and another
purchased at approximately the same time to take advantage of what the
investment manager believes to be a temporary disparity in the normal yield
relationship between the two securities.
A Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned during the year.
Securities whose maturity or expiration date at the time of acquisition were one
year or less are excluded from the calculation. The portfolio turnover rates for
each Fund for the fiscal years ended September 30, 1998 and 1997 were: National
- - 18.00% and 20.63%; Colorado - 28.66% and 3.99%; Georgia - 2.92% and 12.28%;
Louisiana - 15.72%and 16.08%; Maryland - 7.59% and 14.79%, Massachusetts -
13.41% and 29.26%, Michigan - 23.60% and 10.98%; Minnesota - 21.86% and 6.88%;
Missouri - 21.26% and 6.47%; New York - 39.85% and 23.83%; Ohio - 24.74% and
11.76%; Oregon - 12.62% and 19.46%; and South Carolina - 16.63% and 0.00%. The
fluctuation in portfolio turnover rates of certain Funds in fiscal years 1998
and 1997 resulted from conditions in the specific state and/or the market in
general. A Fund's portfolio turnover rate will not be a limiting factor when a
Fund deems it desirable to sell or purchase securities.
7
<PAGE>
Management of the Funds
Board of Directors
The Board of Directors provides broad supervision over the affairs of the Funds.
Management Information
Directors and officers of the Funds, together with information as to their
principal business occupations during the past five years, are shown below. Each
Director who is an "interested person" of the Funds, as defined in the 1940 Act,
is indicated by an asterisk. Unless otherwise indicated, their addresses are 100
Park Avenue, New York, NY 10017.
<TABLE>
<CAPTION>
Name, Principal
(Age) and Positions(s) Held Occupation(s) During
Address with Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
William C. Morris* Director, Chairman of the Chairman, J. & W. Seligman & Co. Incorporated, Chairman and
(60) Board, Chief Executive Chief Executive Officer, the Seligman Group of investment
Officer and Chairman of the companies; Chairman, Seligman Advisors, Inc, Seligman
Executive Committee Services, Inc., and Carbo Ceramics Inc., ceramic proppants
for oil and gas industry; Director, Seligman Data Corp.,
Kerr-McGee Corporation, diversified energy company; and
Sarah Lawrence College; and a Member of the Board of
Governors of the Investment Company Institute. Formerly,
Director, Daniel Industries Inc., manufacturer of oil and
gas metering equipment.
Brian T. Zino* Director, President and Director and President, J. & W. Seligman & Co. Incorporated;
(46) Member of the Executive President (with the exception of Seligman Quality Municipal
Committee Fund, Inc. and Seligman Select Municipal Fund, Inc.) and
Director or Trustee, the Seligman Group of investment
companies; Director, ICI Mutual Insurance Company; Chairman,
Seligman Data Corp.; and Director, Seligman Advisors, Inc.
and Seligman Services, Inc.
Richard R. Schmaltz* Director and Member of the Director and Managing Director, Director of Investments, J.
(58) Executive Committee & W. Seligman & Co. Incorporated; Director or Trustee, the
Seligman Group of investment companies; Director, Seligman
Henderson Co., and Trustee Emeritus of Colby College.
Formerly, Director, Investment Research at Neuberger &
Berman from May 1993 to September 1996.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Positions(s) Held Occupation(s) During
Address with Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
John R. Galvin Director Dean, Fletcher School of Law and Diplomacy at Tufts
(69) University; Director or Trustee, the Seligman Group of
Tufts University investment companies; Chairman, American Council on Germany;
Packard Avenue, a Governor of the Center for Creative Leadership; Director;
Medford, MA 02155 Raytheon Co., electronics; National Defense University; and
the Institute for Defense Analysis. Formerly, Director,
USLIFE Corporation; Ambassador, U.S. State Department for
negotiations in Bosnia; Distinguished Policy Analyst at Ohio
State University and Olin Distinguished Professor of
National Security Studies at the United States Military
Academy. From June 1987 to June 1992, he was the Supreme
Allied Commander, Europe and the Commander-in-Chief, United
States European Command.
Alice S. Ilchman Director Retired President, Sarah Lawrence College; Director or
(63) Trustee, the Seligman Group of investment companies;
18 Highland Circle Director, the Committee for Economic Development; and
Bronxville, NY 10708 Chairman, The Rockefeller Foundation, charitable foundation.
Formerly, Trustee, The Markle Foundation, philanthropic
organization; and Director, NYNEX, telephone company; and
International Research and Exchange Board, intellectual
exchanges.
Frank A. McPherson Director Retired Chairman and Chief Executive Officer of Kerr-McGee
(65) Corporation; Director or Trustee, the Seligman Group of
2601 Northwest Expressway, investment companies; Director, Kimberly-Clark Corporation,
Suite 805E consumer products; Bank of Oklahoma Holding Company; Baptist
Oklahoma City, OK 73112 Medical Center; Oklahoma Chapter of the Nature Conservancy;
Oklahoma Medical Research Foundation; and National Boys and
Girls Clubs of America; and Member of the Business
Roundtable and National Petroleum Council. Formerly,
Chairman, Oklahoma City Public Schools Foundation; and
Director, Federal Reserve System's Kansas City Reserve Bank
and the Oklahoma City Chamber of Commerce.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Positions(s) Held Occupation(s) During
Address with Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
John E. Merow Director Retired Chairman and Senior Partner, Sullivan & Cromwell,
(69) law firm; Director or Trustee, the Seligman Group of
125 Broad Street, investment companies; Director, Commonwealth Industries,
New York, NY 10004 Inc., manufacturers of aluminum sheet products; the Foreign
Policy Association; Municipal Art Society of New York; the
U.S. Council for International Business; and New York
Presbyterian Hospital; Chairman, American Australian
Association; and New York Presbyterian Healthcare Network,
Inc.; Vice-Chairman, the U.S.-New Zealand Council; and
Member of the American Law Institute and Council on Foreign
Relations.
Betsy S. Michel Director Attorney; Director or Trustee, the Seligman Group of
(56) investment companies; Trustee, the Geraldine R. Dodge
P.O. Box 449 Foundation, charitable foundation; and Chairman of the Board
Gladstone, NJ 07934 of Trustees of St. George's School (Newport, RI). Formerly,
Director, the National Association of Independent Schools
(Washington, DC).
James C. Pitney Director Retired Partner, Pitney, Hardin, Kipp & Szuch, law firm;
(72) Director or Trustee, the Seligman Group of investment
Park Avenue at Morris County, companies. Formerly, Director, Public Service Enterprise
P.O. Box 1945, Morristown, NJ Group, public utility.
07962
James Q. Riordan Director Director or Trustee, the Seligman Group of investment
(71) companies; Director, The Houston Exploration Company; The
675 Third Avenue, Brooklyn Museum, KeySpan Energy Corporation; and Public
Suite 3004 Broadcasting Service; and Trustee, the Committee for
New York, NY 10017 Economic Development. Formerly, Co-Chairman of the Policy
Council of the Tax Foundation; Director, Tesoro Petroleum
Companies, Inc. and Dow Jones & Company, Inc.; Director and
President, Bekaert Corporation; and Co-Chairman, Mobil
Corporation.
Robert L. Shafer Director Retired Vice President, Pfizer Inc.; Director or Trustee,
(66) the Seligman Group of investment companies. Formerly,
96 Evergreen Avenue, Director, USLIFE Corporation.
Rye, NY 10580
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Positions(s) Held Occupation(s) During
Address with Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
James N. Whitson Director Director and Consultant, Sammons Enterprises, Inc.; Director
(63) or Trustee, the Seligman Group of investment companies;
6606 Forestshire Drive C-SPAN; and CommScope, Inc. manufacturer of coaxial cables.
Dallas, TX 75230 Formerly, Executive Vice President, Chief Operating Officer,
Sammons Enterprises, Inc.; and Director, Red Man Pipe and
Supply Company, piping and other materials.
Thomas G. Moles Vice President and Senior Director and Managing Director, J. & W. Seligman & Co.
(56) Portfolio Manager Incorporated; Vice President and Senior Portfolio Manager,
three other open-end investment companies in the Seligman
Group; President and Senior Portfolio Manager, Seligman
Quality Municipal Fund, Inc. and Seligman Select Municipal
Fund, Inc., closed-end investment companies; and Director,
Seligman Advisors, Inc. and Seligman Services, Inc.
Lawrence P. Vogel Vice President Senior Vice President, Finance, J. & W. Seligman & Co.
(42) Incorporated, Seligman Advisors, Inc., and Seligman Data
Corp.; Vice President, the Seligman Group of investment
companies, and Seligman Services, Inc.; and Treasurer,
Seligman Henderson Co.
Frank J. Nasta Secretary General Counsel, Senior Vice President, Law and Regulation
(34) and Corporate Secretary, J. & W. Seligman & Co.
Incorporated; Secretary, the Seligman Group of investment
companies, Seligman Advisors, Inc., Seligman Henderson Co.,
Seligman Services, Inc., and Seligman Data Corp.
Thomas G. Rose Treasurer Treasurer, the Seligman Group of investment companies and
(41) Seligman Data Corp.
</TABLE>
The Executive Committee of the Board acts on behalf of the Board between
meetings to determine the value of securities and assets owned by the Funds for
which no market valuation is available, and to elect or appoint officers of the
Funds to serve until the next meeting of the Board.
Directors and officers of the Funds are also directors and officers of some or
all of the other investment companies in the Seligman Group.
11
<PAGE>
Compensation
<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits from Funds and
Name and Compensation Accrued as Part of Fund Complex Paid
Position with Funds from Funds (1) Fund Expenses to Directors (1)(2)
------------------- -------------- ------------- -------------------
<S> <C> <C> <C>
William C. Morris, Director and Chairman N/A N/A N/A
Brian T. Zino, Director and President N/A N/A N/A
Richard R. Schmaltz, Director N/A N/A N/A
John R. Galvin, Director $8,728 N/A $77,000
Alice S. Ilchman, Director 7,793 N/A 70,000
Frank A. McPherson, Director 8,451 N/A 75,000
John E. Merow, Director 8,324 N/A 74,000
Betsy S. Michel, Director 8,728 N/A 77,000
James C. Pitney, Director 8,059 N/A 72,000
James Q. Riordan, Director 8,059 N/A 72,000
Robert L. Shafer, Director 8,059 N/A 72,000
James N. Whitson, Director 8,728(d) N/A 77,000(d)
</TABLE>
(1) For the Funds' fiscal year ended September 30, 1998. Effective January 16,
1998, the per meeting fee for Directors was increased by $1,000, which is
allocated among all funds in the Fund Complex.
(2) The Seligman Group of investment companies consists of eighteen investment
companies.
(d) Deferred.
Seligman Municipal Fund Series, Inc. has a compensation arrangement under which
outside directors may elect to defer receiving their fees. Seligman Municipal
Fund Series, Inc. has adopted a Deferred Compensation Plan under which a
director who has elected deferral of his or her fees may choose a rate of return
equal to either (1) the interest rate on short-term Treasury bills, or (2) the
rate of return on the shares of any of the investment companies advised by J. &
W. Seligman & Co. Incorporated, as designated by the director. The cost of such
fees and earnings is included in directors' fees and expenses, and the
accumulated balance thereof is included in other liabilities in the Funds'
financial statements. The total amount of deferred compensation (including
earnings) payable in respect of the Funds to Mr. Whitson as of September 30,
1998 was $35,007. Messrs. Merow and Pitney no longer defer current compensation;
however, they have accrued deferred compensation in the amounts of $70,305 and
$51,035, respectively, as of September 30, 1998.
Each Fund may, but is not obligated to, purchase shares of Seligman Group
investment companies to hedge its obligations in connection with the Deferred
Compensation Plan.
Sales Charges
Class A shares of each Fund may be issued without a sales charge to present and
retired directors, trustees, officers, employees (and their family members) of
the Funds, the other investment companies in the Seligman Group, and J. & W.
Seligman & Co. Incorporated and its affiliates. Family members are defined to
include lineal descendents and lineal ancestors, siblings (and their spouses and
children) and any company or organization controlled by any of the foregoing.
Such sales also may be made to employee benefit plans for such persons and to
any investment advisory, custodial, trust or other fiduciary account managed or
advised by J. & W. Seligman & Co. Incorporated or any affiliate. These sales may
be made for investment purposes only, and shares may be resold only to a Fund.
Class A shares may be sold at net asset value to these persons since such sales
require less sales effort and lower sales related expenses as compared with
sales to the general public.
12
<PAGE>
Control Persons and Principal Holders of Securities
Control Persons
As of January 12, 1999, there was no person or persons who controlled any of the
Funds, either through significant ownership of Fund shares or any other means of
control.
Principal Holders
As of January 12, 1999, MLPF&S for the Sole Benefit of Its Customers, Attn Fund
Administration, 4800 Deer Lake Drive East, 3rd Floor, Jacksonville, FL 32246
owned of record more than 5% of the outstanding shares of a class of the
following Funds:
Percentage of Total
Outstanding Shares of
Fund Class the Class of the Fund
---- ----- ---------------------
Colorado A 6.67%
Georgia A 21.29
Louisiana A 23.57
Maryland A 10.30
Michigan A 7.24
Missouri A 15.52
South Carolina A 13.55
Management Ownership
Directors and officers of the Funds as a group owned less than 1% of the Class A
capital stock of the National Fund as of January 12, 1999. Directors and
officers of the Funds as a group owned 2.12% of the Class A capital stock of the
New York Fund as of January 12, 1999. As of the same date, no Directors or
officers of the Funds owned shares of the Class A capital stock of any other
Fund or shares of the Class D capital stock of any Fund.
Investment Advisory and Other Services
Investment Manager
J. & W. Seligman & Co. Incorporated (Seligman) manages the Funds. Seligman is a
successor firm to an investment banking business founded in 1864 which has
thereafter provided investment services to individuals, families, institutions,
and corporations. On December 29, 1988, a majority of the outstanding voting
securities of Seligman was purchased by Mr. William C. Morris and a simultaneous
recapitalization of Seligman occurred. See Appendix C for further history of
Seligman.
All of the officers of the Funds listed above are officers or employees of
Seligman. Their affiliations with the Funds and with Seligman are provided under
their principal business occupations.
The Funds pay Seligman a management fee for its services, calculated daily and
payable monthly. The management fee is equal to .50% per annum of each Fund's
average daily net assets. The following chart indicates the management fees paid
by each Fund as well as the percentage such fees represents of each Fund's
average daily net assets for the fiscal years ended September 30, 1998, 1997,
and 1996.
13
<PAGE>
Percentage of
Fiscal Year Management Average Daily
Fund Ended Fee Paid( $) Net Assets (%)
---- ----- ------------ --------------
National 9/30/98 $522,358 .50
9/30/97 506,520 .50
9/30/96 523,545 .50
Colorado 9/30/98 $236,819 .50
9/30/97 254,781 .50
9/30/96 267,392 .50
Georgia 9/30/98 $253,187 .50
9/30/97 261,126 .50
9/30/96 285,693 .50
Louisiana 9/30/98 $283,699 .50
9/30/97 283,702 .50
9/30/96 301,833 .50
Maryland 9/30/98 $276,179 .50
9/30/97 275,393 .50
9/30/96 283,435 .50
Massachusetts 9/30/98 $545,891 .50
9/30/97 551,726 .50
9/30/96 571,658 .50
Michigan 9/30/98 $726,553 .50
9/30/97 731,198 .50
9/30/96 759,311 .50
Minnesota 9/30/98 $614,405 .50
9/30/97 629,693 .50
9/30/96 659,120 .50
Missouri 9/30/98 $260,574 .50
9/30/97 262,926 .50
9/30/96 254,770 .50
New York 9/30/98 $426,872 .50
9/30/97 416,749 .50
9/30/96 423,159 .50
Ohio 9/30/98 $768,368 .50
9/30/97 787,121 .50
9/30/96 839,336 .50
Oregon 9/30/98 $287,757 .50
9/30/97 285,086 .50
9/30/96 301,447 .50
South Carolina 9/30/98 $539,515 .50
9/30/97 535,390 .50
9/30/96 567,668 .50
The Funds pay all of their expenses other than those assumed by Seligman,
including brokerage
14
<PAGE>
commissions, if any, shareholder services and distribution fees, fees and
expenses of independent attorneys and auditors, taxes and governmental fees,
including fees and expenses of qualifying the Funds and their shares under
federal and state securities laws, cost of stock certificates and expenses of
repurchase or redemption of shares, expenses of printing and distributing
reports, notices and proxy materials to shareholders, expenses of printing and
filing reports and other documents with governmental agencies, expenses of
shareholders' meetings, expenses of corporate data processing and related
services, shareholder record keeping and shareholder account services, fees and
disbursements of transfer agents and custodians, expenses of disbursing
dividends and distributions, fees and expenses of directors of the Funds not
employed by or serving as a director of Seligman or its affiliates, insurance
premiums and extraordinary expenses such as litigation expenses. These expenses
are allocated between the Funds in a manner determined by the Board of Directors
to be fair and equitable.
The Management Agreement also provides that Seligman will not be liable to the
Funds for any error of judgment or mistake of law, or for any loss arising out
of any investment, or for any act or omission in performing its duties under the
Management Agreement, except for willful misfeasance, bad faith, gross
negligence, or reckless disregard of its obligations and duties under the
Management Agreement.
The Management Agreement was unanimously adopted by the Board of Directors at a
Meeting held on October 11, 1988 and was approved by the shareholders at a
meeting held on December 16, 1988. The Management Agreement with respect to a
Fund will continue in effect until December 29 of each year if (1) such
continuance is approved in the manner required by the 1940 Act (i.e., by a vote
of a majority of the Board of Directors or of the outstanding voting securities
of the Fund and by a vote of a majority of the Directors who are not parties to
the Management Agreement or interested persons of any such party) and (2)
Seligman shall not have notified a Fund at least 60 days prior to December 29 of
any year that it does not desire such continuance. The Management Agreement may
be terminated by a Fund, without penalty, on 60 days' written notice to Seligman
and will terminate automatically in the event of its assignment. Seligman
Municipal Fund Series, Inc. has agreed to change its name upon termination of
the Management Agreement if continued use of the name would cause confusion in
the context of Seligman's business.
Officers, directors and employees of Seligman are permitted to engage in
personal securities transactions, subject to Seligman's Code of Ethics. The Code
of Ethics proscribes certain practices with regard to personal securities
transactions and personal dealings, provides a framework for the reporting and
monitoring of personal securities transactions by Seligman's Compliance Officer,
and sets forth a procedure of identifying, for disciplinary action, those
individuals who violate the Code of Ethics. The Code of Ethics prohibits each of
the officers, directors and employees (including all portfolio managers) of
Seligman from purchasing or selling any security that the officer, director, or
employee knows or believes (1) was recommended by Seligman for purchase or sale
by any client, including the Fund, within the preceding two weeks, (2) has been
reviewed by Seligman for possible purchase or sale within the preceding two
weeks, (3) is being purchased or sold by any client, (4) is being considered by
a research analyst, (5) is being acquired in a private placement, unless prior
approval has been obtained from Seligman's Compliance Officer, or (6) is being
acquired during an initial or secondary public offering. The Code of Ethics also
imposes a strict standard of confidentiality and requires portfolio managers to
disclose any interest they may have in the securities or issuers that they
recommend for purchase by any client.
The Code of Ethics also prohibits (1) each portfolio manager or member of an
investment team from purchasing or selling any security within seven calendar
days of the purchase or sale of the security by a client's account (including
investment company accounts) for which the portfolio manager or investment team
manages; and (2) each employee from engaging in short-term trading (a purchase
and sale or vice-versa within 60 days). Any profit realized pursuant to either
of these prohibitions must be disgorged.
Officers, directors, and employees are required, except under very limited
circumstances, to engage in personal securities transactions through Seligman's
order desk. The order desk maintains a list of securities that may not be
purchased due to a possible conflict with clients. All officers, directors and
employees are also required to disclose all securities beneficially owned by
them on December 31 of each year.
15
<PAGE>
Principal Underwriter
Seligman Advisors, Inc., (Seligman Advisors) an affiliate of Seligman, 100 Park
Avenue, New York, New York 10017, acts as general distributor of the shares of
each Fund and of the other mutual funds in the Seligman Group. Seligman Advisors
is an "affiliated person" (as defined in the 1940 Act) of Seligman, which is
itself an affiliated person of the Funds. Those individuals identified above
under "Management Information" as directors or officers of both the Funds and
Seligman Advisors are affiliated persons of both entities.
Services Provided by the Investment Manager
Under the Management Agreement, dated December 29, 1988, subject to the control
of the Board of Directors, Seligman manages the investment of the assets of each
Fund, including making purchases and sales of portfolio securities consistent
with each Fund's investment objectives and policies, and administers their
business and other affairs. Seligman provides the Funds with such office space,
administrative and other services and executive and other personnel as are
necessary for Fund operations. Seligman pays all of the compensation of
directors of the Funds who are employees or consultants of Seligman and of the
officers and employees of the Funds. Seligman also provides senior management
for Seligman Data Corp., the Funds' shareholder service agent.
Service Agreements
There are no other management-related service contracts under which services are
provided to any of the Funds.
Other Investment Advice
No person or persons, other than directors, officers, or employees of Seligman,
regularly advise any Fund with respect to its investments.
Dealer Reallowances
Dealers and financial advisors receive a percentage of the initial sales charge
on sales of Class A shares of each Fund, as set forth below:
<TABLE>
<CAPTION>
Regular Dealer
Sales Charge Sales Charge Reallowance
as a % of as a % of Net As a % of
Amount of Purchase Offering Price(1) Amount Invested Offering Price
- ------------------ ----------------- --------------- --------------
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.25%
$50,000 - $ 99,999 4.00 4.17 3.50
$100,000 - $249,999 3.50 3.63 3.00
$250,000 - $499,999 2.50 2.56 2.25
$500,000 - $999,999 2.00 2.04 1.75
$1,000,000 and over(2) 0 0 0
</TABLE>
(1) "Offering Price" is the amount that you actually pay for Fund shares; it
includes the initial sales charge.
(2) You will not pay a sales charge on purchases of $1 million or more, but you
will be subject to a 1% CDSC if you sell your shares within 18 months.
Seligman Services, Inc. (Seligman Services), an affiliate of Seligman, is a
limited purpose broker/dealer. Seligman Services is eligible to receive
commissions from certain sales of Fund shares. For the Funds'
16
<PAGE>
fiscal years ended September 30, 1998, 1997, and 1996, Seligman Services
received commissions in the following amounts:
Fund Commissions Paid to SSI
---- -----------------------
1998 1997 1996
---- ---- ----
National $ 192 $ 456 $ 1,736
Colorado 2,216 4,678 4,437
Georgia 1,654 283 525
Louisiana 117 21 0
Maryland 366 523 1,251
Massachusetts 718 1,865 689
Michigan 219 515 1,315
Minnesota 1,344 594 1,717
Missouri 405 1,220 1,754
New York 3,453 2,889 2,144
Ohio 4,159 1,485 2,276
Oregon 45 24 763
South Carolina 19,615 2,582 2,229
Rule 12b-1 Plan
Seligman Municipal Fund Series, Inc. has adopted an Administration, Shareholder
Services and Distribution Plan (12b-1 Plan) in accordance with Section 12(b) of
the 1940 Act and Rule 12b-1 thereunder.
Under the 12b-1 Plan, each Fund may pay to Seligman Advisors an administration,
shareholder services and distribution fee in respect of the Fund's Class A and
Class D shares. Payments under the 12b-1 Plan may include, but are not limited
to: (1) compensation to securities dealers and other organizations (Service
Organizations) for providing distribution assistance with respect to assets
invested in the Fund; (2) compensation to Service Organizations for providing
administration, accounting and other shareholder services with respect to Fund
shareholders; and (3) otherwise promoting the sale of shares of the Fund,
including paying for the preparation of advertising and sales literature and the
printing and distribution of such promotional materials and prospectuses to
prospective investors and defraying Seligman Advisors' costs incurred in
connection with its marketing efforts with respect to shares of the Fund.
Seligman, in its sole discretion, may also make similar payments to Seligman
Advisors from its own resources, which may include the management fee that
Seligman receives from each Fund. Payments made by each Fund under its Rule
12b-1 Plan are intended to be used to encourage sales of such Fund, as well as
to discourage redemptions.
Fees paid by each Fund under its 12b-1 Plan with respect to any class of shares
may not be used to pay expenses incurred solely in respect of any other class or
any other Seligman fund. Expenses attributable to more than one class of a Fund
will be allocated between the classes in accordance with a methodology approved
by the Funds' Board of Directors. Each Fund may participate in joint
distribution activities with other Seligman funds, and the expenses of such
activities will be allocated among the applicable funds based on relative sales,
in accordance with a methodology approved by the Board.
Class A
Under the 12b-1 Plan, each Fund, with respect to Class A shares, is permitted to
pay quarterly to Seligman Advisors a service fee at an annual rate of up to .25%
of the average daily net asset value of the Class A shares. These fees are used
by Seligman Advisors exclusively to make payments to Service Organizations which
have entered into agreements with Seligman Advisors. Such Service Organizations
currently receive from Seligman Advisors a continuing service fee of up to .10%
on an annual basis, payable quarterly, of the average daily net assets of Class
A shares attributable to the particular Service Organization for providing
personal service and/or maintenance of shareholder accounts. The fee payable to
Service Organizations from time to time shall, within such limits, be determined
by the Directors and may not be increased from .10% without approval of the
Directors. The Funds are not obligated
17
<PAGE>
to pay Seligman Advisors for any such costs it incurs in excess of the fee
described above. No expenses incurred in one fiscal year by Seligman Advisors
with respect to Class A shares of a Fund may be paid from Class A 12b-1 fees
received from that Fund in any other fiscal year. If the 12-b1 Plan is
terminated in respect of Class A shares of any Fund, no amounts (other than
amounts accrued but not yet paid) would be owed by that Fund to Seligman
Advisors with respect to Class A shares. The total amount paid by each Fund to
Seligman Advisors in respect of Class A shares for the fiscal year ended
September 30, 1998 was as follows:
Total % of Average
Fund Fees Paid Net Assets
---- --------- ----------
National $87,412 .09%
Colorado 45,621 .10
Georgia 44,562 .09
Louisiana 54,359 .10
Maryland 47,718 .09
Massachusetts 102,371 .09
Michigan 135,906 .09
Minnesota 115,933 .09
Missouri 52,242 .10
New York 74,294 .09
Ohio 140,954 .09
Oregon 51,836 .09
South Carolina 98,768 .09
Class D
Under the 12b-1 Plan, each Fund, with respect to Class D shares, pays monthly to
Seligman Advisors a 12b-1 fee at an annual rate of up to 1% of the average daily
net asset value of Class D shares. This fee is used by Seligman Advisors, as
follows: During the first year following the sale of Class D shares, a
distribution fee of .75% of the average daily net assets attributable to Class D
shares is used, along with any CDSC proceeds, to (1) reimburse Seligman Advisors
for its payment at the time of sale of Class D shares of a .75% sales commission
to Service Organizations, and (2) pay for other distribution expenses, including
paying for the preparation of advertising and sales literature and the printing
and distribution of such promotional materials and prospectuses to prospective
investors and other marketing costs of Seligman Advisors. In addition, during
the first year following the sale of Class D shares, a service fee of up to .25%
of the average daily net assets attributable to such Class D shares is used to
reimburse Seligman Advisors for its prepayment to Service Organizations at the
time of sale of Class D shares of a service fee of up to .25% of the net asset
value of the Class D share sold (for shareholder services to be provided to
Class D shareholders over the course of the one year immediately following the
sale). The payment to Seligman Advisors is limited to amounts Seligman Advisors
actually paid to Service Organizations at the time of sale as service fees.
After the initial one-year period following a sale of Class D shares, the entire
12b-1 fee attributable to such Class D shares is paid to Service Organizations
for providing continuing shareholder services and distribution assistance in
respect of assets invested in each Fund. The total amount paid by each Fund in
respect of Class D shares for the fiscal year ended September 30, 1998 was equal
to 1% per annum of the average daily net assets of Class D shares as follows:
Total
Fund Fees Paid
---- ---------
National $ 56,655
Colorado 2,667
Georgia 27,815
Louisiana 5,826
Maryland 25,679
Massachusetts 13,706
Michigan 17,325
18
<PAGE>
Total
Fund Fees Paid
---- ---------
Minnesota $18,896
Missouri 3,940
New York 17,902
Ohio 11,760
Oregon 19,824
South Carolina 44,114
The amounts expended by Seligman Advisors in any one year with respect to Class
D shares of a Fund may exceed the 12b-1 fees paid by the Fund in that year. The
Fund's 12b-1 Plan permits expenses incurred by Seligman Advisors in respect of
Class D shares in one fiscal year to be paid from Class D 12b-1 fees received
from that Fund in any other fiscal year; however, in any fiscal year the Funds
are not obligated to pay any 12b-1 fees in excess of the fees described above.
As of September 30, 1998, Seligman Advisors has incurred the following amounts
of unreimbursed expenses in respect of each Fund's Class D shares :
Amount of Unreimbursed
Expenses Incurred % of the Net Assets
With Respect of Class D at
Fund to Class D Shares September 30, 1998
---- ----------------- ------------------
National $ 0 ---%
Colorado 1,873 .54
Georgia 8,301 .30
Louisiana 5,680 .68
Maryland 12,681 .41
Massachusetts 11,762 .80
Michigan 4,436 .24
Minnesota 12,380 .59
Missouri 1,811 .43
New York 1,819 .08
Ohio 1,905 .17
Oregon 11,496 .43
South Carolina 17,616 .31
If the 12b-1 Plan is terminated in respect of Class D shares of a Fund, no
amounts (other than amounts accrued but not yet paid) would be owed by that Fund
to Seligman Advisors with respect to Class D shares.
19
<PAGE>
Payments made by the Funds under the 12b-1 Plan for fiscal year ended September
30, 1998, were spent on the following activities in the following amounts:
Compensation to Compensation to
Fund/Class Underwriters Broker/Dealers
- ---------- ------------ --------------
National/A $ 87,412
National/D $ 7,602 49,053
Colorado/A 45,621
Colorado/D 632 2,035
Georgia/A 44,562
Georgia/D 9,911 17,904
Louisiana/A 54,359
Louisiana/D 1,674 4,152
Maryland/A 47,718
Maryland/D 8,180 17,499
Massachusetts/A 102,371
Massachusetts/D 2,964 10,742
Michigan/A 135,906
Michigan/D 5,825 11,500
Minnesota/A 115,933
Minnesota/D 2,554 16,342
Missouri/A 52,242
Missouri/D 583 3,357
New York/A 74,294
New York/D 4,716 13,186
Ohio/A 140,954
Ohio/D 2,925 8,835
Oregon/A 51,836
Oregon/D 6,629 13,195
South Carolina/A 98,768
South Carolina/D 15,564 28,550
20
<PAGE>
The 12b-1 Plan was approved on July 16, 1992 by the Directors, including a
majority of the Directors who are not "interested persons" (as defined in the
1940 Act) of the Funds and who have no direct or indirect financial interest in
the operation of the 12b-1 Plan or in any agreement related to the 12b-1 Plan
(the "Qualified Directors") and was approved by shareholders of the Funds on
November 23, 1992. The 12b-1 Plan became effective on January 1, 1993.
Amendments to the 12b-1 Plan were approved in respect of the Class D shares on
November 18, 1993 by the Directors, including a majority of the Qualified
Directors, and became effective with respect to the Class D shares on February
1, 1994. The 12b-1 Plan will continue in effect until December 31 of each year
so long as such continuance is approved annually by a majority vote of both the
Directors and the Qualified Directors, cast in person at a meeting called for
the purpose of voting on such approval. The 12b-1 Plan may not be amended to
increase materially the amounts payable under the terms of the 12b-1 Plan
without the approval of a majority of the outstanding voting securities of each
Fund and no material amendment to the 12b-1 Plan may be made except with the
approval of a majority of both the Directors and the Qualified Directors in
accordance with the applicable provisions of the 1940 Act and the rules
thereunder.
The 12b-1 Plan requires that the Treasurer of the Funds shall provide to the
Directors, and the Directors shall review at least quarterly, a written report
of the amounts expended (and purposes therefor) made under the 12b-1 Plan. Rule
12b-1 also requires that the selection and nomination of Directors who are not
"interested persons" of the Funds be made by such disinterested Directors.
Seligman Services acts as a broker/dealer of record for shareholder accounts
that do not have a designated financial advisor and receives compensation from
the Funds pursuant to the 12b-1 Plan for providing personal services and account
maintenance to such accounts and other distribution services. For the fiscal
years ended September 30, 1998, 1997, and 1996, Seligman Services received
distribution and service fees from the Funds pursuant to the 12b-1 Plan as
follows:
Distribution and Service Fees Paid to
Seligman Services
-----------------
Fund 1998 1997 1996
---- ---- ---- ----
National $7,528 $6,388 $ 6,257
Colorado 2,599 2,918 2,997
Georgia 918 988 667
Louisiana 1,112 685 647
Maryland 1,572 1,425 1,399
Massachusetts 2,105 2,080 2,555
Michigan 2,822 2,537 2,656
Minnesota 2,335 2,087 2,122
Missouri 3,410 3,261 3,149
New York 13,359 12,398 8,922
Ohio 3,900 3,132 2,929
Oregon 1,682 1,417 797
South Carolina 4,498 1,576 1,484
21
<PAGE>
Brokerage Allocation and Other Practices
Brokerage Transactions
For the fiscal years ended September 30, 1998, 1997, and 1996, no brokerage
commissions were paid by any Fund. When two or more of the investment companies
in the Seligman Group or other investment advisory clients of Seligman desire to
buy or sell the same security at the same time, the securities purchased or sold
are allocated by Seligman in a manner believed to be equitable to each. There
may be possible advantages or disadvantages of such transactions with respect to
price or the size of positions readily obtainable or saleable.
In over-the-counter markets, the Funds deal with responsible primary market
makers unless a more favorable execution or price is believed to be obtainable.
Each Fund may buy securities from or sell securities to dealers acting as
principal, except dealers with which its directors and/or officers are
affiliated.
Commissions
For the fiscal years ended September 30, 1998, 1997, and 1996, the Funds did not
execute any portfolio transactions with, and therefore did not pay any
commissions to, any broker affiliated with either the Funds, Seligman, or
Seligman Advisors.
Regular Broker-Dealers
During the Funds' fiscal year ended September 30, 1998, none of the Funds
acquired securities of its regular brokers or dealers (as defined in Rule 10b-1
under the 1940 Act) or of their parents.
Capital Stock and Other Securities
Capital Stock
Seligman Municipal Fund Series, Inc. is authorized to issue 1,300,000,000 shares
of capital stock, each with a par value of $.001 each, divided into thirteen
different series (which represent each of the Funds). Each Fund has two classes,
designated Class A and Class D shares. Each share of a Fund's Class A and Class
D capital stock is equal as to earnings, assets, and voting privileges, except
that each class bears its
22
<PAGE>
own separate distribution and, potentially, certain other class expenses and has
exclusive voting rights with respect to any matter to which a separate vote of
any class is required by the 1940 Act or Maryland law. Seligman Municipal Fund
Series has adopted a multiclass plan pursuant to Rule 18f-3 under the 1940 Act
permitting the issuance and sale of multiple classes. In accordance with the
Articles of Incorporation, the Board of Directors may authorize the creation of
additional classes of common stock with such characteristics as are permitted by
the multiclass plan and Rule 18f-3. The 1940 Act requires that where more than
one class exists, each class must be preferred over all other classes in respect
of assets specifically allocated to such class. All shares have noncumulative
voting rights for the election of directors. Each outstanding share is fully
paid and non-assessable, and each is freely transferable. There are no
liquidation, conversion, or preemptive rights.
Other Securities
Seligman Municipal Fund Series, Inc. has no authorized securities other than
capital stock.
Purchase, Redemption, and Pricing of Shares
Purchase of Shares
Class A
Class A shares may be purchased at a price equal to the next determined net
asset value per share, plus an initial sales charge.
Purchases of Class A shares by a "single person" (as defined below) may be
eligible for the following reductions in initial sales charges:
Volume Discounts are provided if the total amount being invested in Class A
shares of a Fund alone, or in any combination of shares of the other mutual
funds in the Seligman Group which are sold with an initial sales charge, reaches
levels indicated in the sales charge schedule set forth in the Prospectus.
The Right of Accumulation allows an investor to combine the amount being
invested in Class A shares of a Fund and shares of the other Seligman mutual
funds sold with an initial sales charge with the total net asset value of shares
of those mutual funds already owned that were sold with an initial sales charge
and the total net asset value of shares of Seligman Cash Management Fund which
were acquired through an exchange of shares of another Seligman mutual fund on
which there was an initial sales charge at the time of purchase to determine
reduced sales charges in accordance with the schedule in the prospectus. The
value of the shares owned, including the value of shares of Seligman Cash
Management Fund acquired in an exchange of shares of another Seligman mutual
fund on which there was an initial sales charge at the time of purchase will be
taken into account in orders placed through a dealer, however, only if Seligman
Advisors is notified by an investor or a dealer of the amount owned by the
investor at the time the purchase is made and is furnished sufficient
information to permit confirmation.
A Letter of Intent allows an investor to purchase Class A shares over a 13-month
period at reduced initial sales charges in accordance with the schedule in the
Prospectus, based on the total amount of Class A shares of the Fund that the
letter states the investor intends to purchase plus the total net asset value of
shares that were sold with an initial sales charge of the other Seligman mutual
funds already owned and the total net asset value of shares of Seligman Cash
Management Fund which were acquired through an exchange of shares of another
Seligman mutual fund on which there was an initial sales charge at the time of
purchase. Reduced sales charges also may apply to purchases made within a
13-month period starting up to 90 days before the date of execution of a letter
of intent.
CDSC Applicable to Class A Shares. Class A shares purchased without an initial
sales charge in accordance with the sales charge schedule in the Funds'
Prospectus, or pursuant to a Volume Discount, Right of Accumulation, or Letter
of Intent are subject to a CDSC of 1% on redemptions of such shares within
eighteen months of purchase. Employee benefit plans eligible for net asset value
sales (as
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described below) may be subject to a CDSC of 1% for terminations at the plan
level only, on redemptions of shares purchased within eighteen months prior to
plan termination. The 1% CDSC will be waived on shares that were purchased
through Morgan Stanley Dean Witter & Co. by certain Chilean institutional
investors (i.e. pension plans, insurance companies, and mutual funds). Upon
redemption of such shares within an eighteen-month period, Morgan Stanley Dean
Witter will reimburse Seligman Advisors a pro rata portion of the fee it
received from Seligman Advisors at the time of sale of such shares.
See "CDSC Waivers" below for other waivers which may be applicable to Class A
shares.
Persons Entitled To Reductions. Reductions in initial sales charges apply to
purchases of Class A shares by a "single person," including an individual;
members of a family unit comprising husband, wife and minor children; or a
trustee or other fiduciary purchasing for a single fiduciary account. Employee
benefit plans qualified under Section 401 of the Internal Revenue Code of 1986,
as amended, organizations tax exempt under Section 501(c)(3) or (13) of the
Internal Revenue Code, and non-qualified employee benefit plans that satisfy
uniform criteria are considered "single persons" for this purpose. The uniform
criteria are as follows:
1. Employees must authorize the employer, if requested by a Fund, to
receive in bulk and to distribute to each participant on a timely basis the Fund
Prospectus, reports, and other shareholder communications.
2. Employees participating in a plan will be expected to make regular
periodic investments (at least annually). A participant who fails to make such
investments may be dropped from the plan by the employer or the Fund 12 months
and 30 days after the last regular investment in his account. In such event, the
dropped participant would lose the discount on share purchases to which the plan
might then be entitled.
3. The employer must solicit its employees for participation in such an
employee benefit plan or authorize and assist an investment dealer in making
enrollment solicitations.
Eligible Employee Benefit Plans. The table of sales charges in the Prospectus
applies to sales to "eligible employee benefit plans," except that the Fund may
sell shares at net asset value to "eligible employee benefit plans" which have
at least (1) $500,000 invested in the Seligman Group of mutual funds or (2) 50
eligible employees to whom such plan is made available. Such sales must be made
in connection with a payroll deduction system of plan funding or other systems
acceptable to Seligman Data Corp., the Funds' shareholder service agent.
"Eligible employee benefit plan" means any plan or arrangement, whether or not
tax qualified, which provides for the purchase of Fund shares. Sales of shares
to such plans must be made in connection with a payroll deduction system of plan
funding or other system acceptable to Seligman Data Corp.
Such sales are believed to require limited sales effort and sales-related
expenses and therefore are made at net asset value. Contributions or account
information for plan participation also should be transmitted to Seligman Data
Corp. by methods which it accepts. Additional information about "eligible
employee benefit plans" is available from financial advisors or Seligman
Advisors.
Further Types of Reductions. Class A shares may also be issued without an
initial sales charge to any registered unit investment trust which is the issuer
of periodic payment plan certificates, the net proceeds of which are invested in
Fund shares; to separate accounts established and maintained by an insurance
company which are exempt from registration under Section 3(c)(11) of the 1940
Act; to registered representatives and employees (and their spouses and minor
children) of any dealer that has a sales agreement with Seligman Advisors; to
financial institution trust departments; to registered investment advisers
exercising discretionary investment authority with respect to the purchase of
Fund shares; to accounts of financial institutions or broker/dealers that charge
account management fees, provided Seligman or one of its affiliates has entered
into an agreement with respect to such accounts; pursuant to sponsored
arrangements with organizations which make recommendations to, or permit group
solicitations of, its employees, members or participants in connection with the
purchase of shares of a Fund; to other
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investment companies in the Seligman Group in connection with a deferred fee
arrangement for outside directors; and to "eligible employee benefit plans"
which have at least (1) $500,000 invested in the Seligman mutual funds or (2) 50
eligible employees to whom such plan is made available.
Class D
Class D shares may be purchased at a price equal to the next determined net
asset value, without an initial sales charge. However, Class D shares are
subject to a CDSC of 1% if the shares are redeemed within one year of purchase,
charged as a percentage of the current net asset value or the original purchase
price, whichever is less.
Systematic Withdrawals. Class D shareholders who reinvest both their dividends
and capital gain distributions to purchase additional shares of a Fund, may use
the Funds' Systematic Withdrawal Plan to withdraw up to 10 of the value of their
accounts per year without the imposition of a CDSC. Account value is determined
as of the date the systematic withdrawals begin.
CDSC Waivers. The CDSC on Class D shares (and certain Class A shares, as
discussed above) will be waived or reduced in the following instances:
(1) on redemptions following the death or disability (as defined in Section
72(m)(7) of the Internal Revenue Code) of a shareholder or beneficial
owner;
(2) in connection with (1) distributions from retirement plans qualified under
Section 401(a) of the Internal Revenue Code when such redemptions are
necessary to make distributions to plan participants (such payments
include, but are not limited to, death, disability, retirement, or
separation of service), (2) distributions from a custodial account under
Section 403(b)(7) of the Internal Revenue Code or an IRA due to death,
disability, minimum distribution requirements after attainment of age 70
1/2 or, for accounts established prior to January 1, 1998, attainment of
age 59 1/2, and (3) a tax-free return of an excess contribution to an IRA;
(3) in whole or in part, in connection with shares sold to current and retired
Directors of the Funds;
(4) in whole or in part, in connection with shares sold to any state, county,
or city or any instrumentality, department, authority, or agency thereof,
which is prohibited by applicable investment laws from paying a sales load
or commission in connection with the purchase of any registered investment
management company;
(5) in whole or in part, in connection with systematic withdrawals;
(6) in connection with participation in the Merrill Lynch Small Market 401(k)
Program.
If, with respect to a redemption of any Class A or Class D shares sold by a
dealer, the CDSC is waived because the redemption qualifies for a waiver as set
forth above, the dealer shall remit to Seligman Advisors promptly upon notice,
an amount equal to the payment or a portion of the payment made by Seligman
Advisors at the time of sale of such shares.
Fund Reorganizations
Class A shares may be issued without an initial sales charge in connection with
the acquisition of cash and securities owned by other investment companies. Any
CDSC will be waived in connection with the redemption of shares of a Fund if the
Fund is combined with another Seligman mutual fund, or in connection with a
similar reorganization transaction.
Payment in Securities. In addition to cash, the Funds may accept securities in
payment for Fund shares sold at the applicable public offering price (net asset
value and, if applicable, any sales charge), although the Funds do not presently
intend to accept securities in payment for Fund shares. Generally, a Fund will
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<PAGE>
only consider accepting securities (l) to increase its holdings in a portfolio
security, or (2) if Seligman determines that the offered securities are a
suitable investment for the Fund and in a sufficient amount for efficient
management. Although no minimum has been established, it is expected that a Fund
would not accept securities with a value of less than $100,000 per issue in
payment for shares. A Fund may reject in whole or in part offers to pay for Fund
shares with securities, may require partial payment in cash for applicable sales
charges, and may discontinue accepting securities as payment for Fund shares at
any time without notice. The Funds will not accept restricted securities in
payment for shares. The Funds will value accepted securities in the manner
provided for valuing portfolio securities.
Offering Price
When you buy or sell Fund shares, you do so at the Class's net asset value (NAV)
next calculated after Seligman Advisors accepts your request. Any applicable
sales charge will be added to the purchase price for Class A shares.
NAV per share of each class of a Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time), on
each day that the NYSE is open for business. The NYSE is currently closed on New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. A Fund
will also determine NAV for each class on each day in which there is a
sufficient degree of trading in the Fund's portfolio securities that the NAV of
Fund shares might be materially affected. NAV per share for a class is computed
by dividing such class's share of the value of the net assets of the Fund (i.e.,
the value of its assets less liabilities) by the total number of outstanding
shares of such class. All expenses of the Fund, including the management fee,
are accrued daily and taken into account for the purpose of determining NAV. The
NAV of Class D shares will generally be lower than the NAV of Class A shares as
a result of the higher 12b-1 fees with respect to such shares. It is expected,
however, that the net asset value per share of the two classes will tend to
converge immediately after the recording of dividends, which will differ by
approximately the amount of the distribution and other class expenses accrual
differential between the classes.
The securities in which the Funds invest are traded primarily in the
over-the-counter market. Municipal securities and other short-term holdings
maturing in more than 60 days are valued on the basis of quotations provided by
an independent pricing service, approved by the Directors, which uses
information with respect to transactions in bonds, quotations from bond dealers,
market transactions in comparable securities and various relationships between
securities in determining value. In the absence of such quotations, fair value
will be determined in accordance with procedures approved by the Directors.
Short-term holdings having remaining maturities of 60 days or less are generally
valued at amortized cost.
Generally, trading in certain securities such as municipal securities, corporate
bonds, US Government securities, and money market instruments is substantially
completed each day at various times prior to the close of the NYSE. The values
of such securities used in determining the net asset value of a Fund's shares
are computed as of such times.
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Specimen Price Make-Up
Under the current distribution arrangements between the Funds and Seligman
Advisors, Class A shares are sold with a maximum initial sales charge of 4.75%
and Class D shares are sold at NAV(1). Using each Class's NAV at September 30,
1998, the maximum offering price of the Funds' shares is as follows:
Class A
NAV + Maximum Sales Charge = Offering Price
Fund Per Share (4.75% of Offering Price) to Public
- ---- --------- ------------------------- ---------
National $8.32 $.41 $8.73
Colorado 7.64 .38 8.02
Georgia 8.38 .42 8.80
Louisiana 8.51 .42 8.93
Maryland 8.32 .41 8.73
Massachusetts 8.27 .41 8.68
Michigan 8.83 .44 9.27
Minnesota 7.98 .40 8.38
Missouri 8.03 .40 8.43
New York 8.60 .43 9.03
Ohio 8.37 .42 8.79
Oregon 8.05 .40 8.45
South Carolina 8.38 .42 8.80
Class D
NAV and Offering
Fund Price Per Share(1)
- ---- ----------------
National $8.31
Colorado 7.63
Georgia 8.40
Louisiana 8.50
Maryland 8.33
Massachusetts 8.26
Michigan 8.82
Minnesota 7.98
Missouri 8.03
New York 8.60
Ohio 8.41
Oregon 8.04
South Carolina 8.38
- ------------------------------
(1) Class D shares are subject to a CDSC of 1% on redemptions within one year
of purchase.
Redemption in Kind
The procedures for selling Fund shares under ordinary circumstances are set
forth in the Prospectus. In unusual circumstances, payment may be postponed, or
the right of redemption postponed for more than seven days, if the orderly
liquidation of portfolio securities is prevented by the closing of, or
restricted trading on, the NYSE during periods of emergency, or such other
periods as ordered by the Securities and Exchange Commission. Under these
circumstances, redemption proceeds may be made in securities. If payment is made
in securities, a shareholder may incur brokerage expenses in converting these
securities to cash.
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Taxation of the Funds
Each of the Funds is treated as a separate corporation for federal income tax
purposes. As a result, determinations of net investment income, exempt-interest
dividends and net long-term and short-term capital gain and loss will be made
separately for each Fund.
Each of the Funds is qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code. For each
year so qualified, a Fund will not be subject to federal income taxes on its net
investment income and capital gains, if any, realized during any taxable year,
which it distributes to its shareholders, provided that at least 90% of its net
investment income and net short-term capital gains are distributed to
shareholders each year.
Qualification as a regulated investment company under the Internal Revenue Code
requires among other things, that (1) at least 90% of the annual gross income of
a Fund be derived from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of stocks, securities or
currencies, or other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to its business of investing
in such stocks, securities or currencies; (2) and a Fund diversify its holdings
so that, at the end of each quarter of the taxable year, (i) at least 50% of the
market value of the Fund's assets is represented by cash, US Government
securities and other securities limited in respect of any one issuer to an
amount not greater than 5% of the Fund's assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than US Government
securities).
Federal Income Taxes
If, at the end of each quarter of its taxable year, at least 50% of a Fund's
total assets is invested in obligations exempt from regular federal income tax,
the Fund will be eligible to pay dividends that are excludable by shareholders
from gross income for regular federal income tax purposes. The total amount of
such exempt interest dividends paid by a Fund cannot exceed the amount of
federally tax-exempt interest received by the Fund during the year less any
expenses allocable to the Fund.
Distributions of net capital gains (i.e., the excess of net long-term capital
gains over any net short-term losses) are taxable as long-term capital gain,
whether received in cash or invested in additional shares, regardless of how
long the shares have been held by a shareholder, except that the portion of net
capital gains representing accrued market discount on tax-exempt obligations
acquired after April 30, 1993 will be taxable as ordinary income. Individual
shareholders will be subject to federal tax on distributions of net capital
gains at a maximum rate of 20% if designated as derived from the Fund's capital
gains from property held for more than one year. Net Capital gain of a corporate
shareholder is taxed at the same rate as ordinary income. Distributions from a
Fund's other investment income (other than exempt interest dividends) or from
net realized short-term gain will taxable to shareholders as ordinary income,
whether received in cash or invested in additional shares. Distributions
generally will not be eligible for the dividends received deduction allowed to
corporate shareholders. Shareholders receiving distributions in the form of
additional shares issued by a Fund will be treated for federal income tax
purposes as having received a distribution in an amount equal to the fair market
value on the date of distribution of the shares received.
Interest on indebtedness incurred or continued to purchase or carry shares of
any Fund will not be deductible for federal income tax purposes to the extent
that the Fund's distributions are exempt from federal income tax.
Any gain or loss realized upon a sale or redemption of shares in a Fund by a
shareholder who is not a dealer in securities will generally be treated as a
long-term capital gain or loss if the shares have been held for more than one
year and otherwise as a short-term capital gain or loss. Individual shareholders
will be subject to federal income tax on net capital gains at a maximum rate of
20% in respect of shares held for more than one year. Net capital gain of a
corporate shareholder is taxed at the same rate as ordinary income. However, if
shares on which a long-term capital gain distribution has been received are
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<PAGE>
subsequently sold or redeemed and such shares have been held for six months or
less, any loss realized will be treated as long-term capital loss to the extent
that it offsets the long-term capital gain distribution. In addition, no loss
will be allowed on the sale or other disposition of shares of a Fund if, within
a period beginning 30 days before the date of such sale or disposition and
ending 30 days after such date, the holder acquires (including shares acquired
through dividend reinvestment) securities that are substantially identical to
the shares of the Fund.
In determining gain or loss on shares of a Fund that are sold or exchanged
within 90 days after acquisition, a shareholder generally will not be permitted
to include in the tax basis attributable to such shares the sales charge
incurred in acquiring such shares to the extent of any subsequent reduction of
the sales charge by reason of the Exchange or Reinstatement Privilege offered by
the Fund. Any sales charge not taken into account in determining the tax basis
of shares sold or exchanged within 90 days after acquisition will be added to
the shareholder's tax basis in the shares acquired pursuant to the Exchange or
Reinstatement Privilege.
Shareholders are urged to consult their tax advisors concerning the effect of
federal income taxes in their individual circumstances. In particular, persons
who may be "substantial users" (or "related person" of substantial users) of
facilities financed by industrial development bonds or private activity bonds
should consult the tax advisors before purchasing shares of any Fund.
Colorado Taxes
In the opinion of Ireland Stapleton Pryor Pascoe, P.C., Colorado tax counsel to
the Colorado Fund, individuals, trusts, estates and corporations who are holders
of the Colorado Fund and who are subject to the Colorado income tax will not be
subject to Colorado income tax or the Colorado alternative minimum tax on
Colorado Fund dividends to the extent that such dividends qualify as
exempt-interest dividends of a regulated investment company under Section
852(b)(5) of the Internal Revenue Code, which are derived from interest income
received by the Colorado Fund on (a) obligations of the State of Colorado or its
political subdivisions which are issued on or after May 1,1980, or if issued
before May 1,1980, to the extent such interest is specifically exempt from
income taxation under the laws of the State of Colorado authorizing the issuance
of such obligations; (b) obligations of the United States or its possessions to
the extent included in federal taxable income; or (c) obligations of territories
or possessions of the United States to the extent federal law exempts interest
on such obligations from taxation by the states (collectively, "Colorado
Obligations"). To the extent that Colorado Fund distributions are attributable
to sources not described in the preceding sentence, such as long or short-term
capital gains, such distributions will not be exempt from Colorado income tax
and may be subject to Colorado's alternative minimum tax. There are no municipal
income taxes in Colorado. As intangibles, shares in the Colorado Fund are exempt
from Colorado property taxes.
The Colorado Fund will notify its shareholders within 60 days after the close of
the year as to the interest derived from Colorado Obligations and exempt from
the Colorado income tax.
Georgia Taxes
In the opinion of King & Spaulding, Georgia tax counsel to the Georgia Fund,
under existing Georgia law, shareholders of the Georgia Fund will not be subject
to Georgia income taxes on dividends with respect to shares of the Georgia Fund
to the extent that such distributions represent exempt-interest dividends for
federal income tax purposes that are attributable to interest-bearing
obligations issued by or on behalf of the State of Georgia or its political
subdivisions, or by the governments of Puerto Rico, the Virgin Islands, or Guam
(collectively, "Georgia Obligations"), which are held by the Georgia Fund.
Dividends, if any, derived from capital gains or other sources generally will be
taxable to shareholders of the Georgia Fund for Georgia income tax purposes.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Georgia Fund, at least 80% of the value of the net assets of
the Georgia Fund will be maintained in debt obligations which are exempt from
regular federal income tax and Georgia income taxes.
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<PAGE>
The Georgia Fund will notify its shareholders within 60 days after the close of
the year as to the interest derived from Georgia Obligations and exempt from
Georgia income taxes.
Louisiana Taxes
In the opinion of Liskow & Lewis, Louisiana tax counsel to the Louisiana Fund,
based upon a private ruling obtained from the Louisiana Department of Revenue,
and subject to the current policies of the Louisiana Department of Revenue,
shareholders of the Louisiana Fund who are corporations; individuals, and
residents of the State of Louisiana; and, for taxable periods beginning after
December 31, 1996, trusts or estates; all of whom are otherwise subject to
Louisiana income tax, will not be subject to Louisiana income tax on Louisiana
Fund dividends to the extent that such dividends are attributable to interest on
tax-exempt obligations of the State of Louisiana or its political or
governmental subdivisions, or its governmental agencies, or instrumentalities.
To the extent that distributions on the Louisiana Fund are attributable to
sources other than those described in the preceding sentence, such
distributions, including but not limited to, long-term or short-term capital
gains, will not be exempt from Louisiana income tax.
Non-resident individuals maintaining their domicile other than in the State of
Louisiana will not be subject to Louisiana income tax on their Louisiana Fund
dividends.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Louisiana Fund, the Municipal Fund will maintain at least 80%
of the value of the net assets of the Louisiana Fund in debt obligations which
are exempt from federal income tax and exempt from Louisiana income tax.
The Louisiana Fund will notify its shareholders within 60 days after the close
of the year as to the interest derived from Louisiana obligations and exempt
from Louisiana income tax.
Maryland Taxes
In the opinion of Venable, Baetjer and Howard, LLP, Maryland tax counsel to the
Maryland Fund, as long as dividends paid by the Maryland Fund qualify as
interest excludable under Section 103 of the Internal Revenue Code and the
Maryland Fund qualifies as a regulated investment company under the Internal
Revenue Code, the portion of exempt-interest dividends that represents interest
received by the Maryland Fund on obligations (a) of Maryland or its political
subdivisions and authorities; or (b) of the United States or an authority,
commission, instrumentality, possession, or territory of the United States, will
be exempt from Maryland state and local income taxes when allocated or
distributed to shareholder of the Maryland Fund.
Gain realized by the Maryland Fund from the sale or exchange of a bond issued by
Maryland or a political subdivision of Maryland, or of the United States or an
authority, commission, or instrumentality of the United States will not be
subject to Maryland state and local income taxes.
To the extent that distributions of the Maryland Fund are attributable to
sources other than those described in the preceding sentences, such as interest
received by the Maryland Fund on obligations issued by states other than
Maryland, income earned on repurchase contracts, or gains realized by a
shareholder upon a redemption or exchange of Maryland Fund shares, such
distributions will be subject to Maryland state and local income taxes. Interest
on indebtedness incurred or continued (directly or indirectly) by a shareholder
of the Maryland Fund to purchase or carry shares of the Maryland Fund will not
be deductible for Maryland state and local income tax purposes to the extent
such interest is allocable to exempt-interest dividends.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Maryland Fund, at least 80% of the value of the net assets of
the Maryland Fund will be maintained in debt obligations which are exempt from
regular federal income tax and are exempt from Maryland state and local income
taxes.
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<PAGE>
The Maryland Fund will notify its shareholders within 60 days after the close of
the year as to the interest derived from Maryland obligations and exempt from
Maryland state and local income taxes.
Massachusetts Taxes
In the opinion of Palmer & Dodge, Massachusetts tax counsel to the Massachusetts
Fund, assuming that the Municipal Fund gives the notices described at the end of
this section, holders of the Massachusetts Fund who are subject to the
Massachusetts personal income tax will not be subject to tax on distributions
from the Massachusetts Fund to the extent that these distributions qualify as
exempt-interest dividends of a regulated investment company under Section
852(b)(5) of the Internal Revenue Code which are directly attributable to
interest on obligations issued by the Commonwealth of Massachusetts, its
instrumentalities or its political subdivisions or by the government of Puerto
Rico or by its authority, by the government of Guam or by its authority, or by
the government of the Virgin Islands or its authority (collectively,
"Massachusetts Obligations"). Except to the extent excluded as capital gain,
distributions of income to Massachusetts holders of the Massachusetts Fund that
are attributable to sources other than those described in the preceding sentence
will be includable in the Massachusetts income of the holders of the
Massachusetts Fund. Distributions will not be subject to tax to the extent that
they qualify as capital gain dividends which are attributable to obligations
issued by the Commonwealth of Massachusetts, its instrumentalities, or political
subdivisions under any provision of law which exempts capital gain on the
obligation from Massachusetts income taxation. Distributions which qualify as
capital gain dividends under Section 852(b)(3)(C) of the Internal Revenue Code
and which are includable in Federal gross income will be includable in the
Massachusetts income of a holder of the Massachusetts Fund as capital gain.
Massachusetts Fund dividends are not excluded in determining the Massachusetts
excise tax on corporations. Except during temporary defensive periods or when
acceptable investments are unavailable to the Massachusetts Fund, the Municipal
Fund will maintain at least 80% of the value of the net assets of the
Massachusetts Fund in debt obligations which are exempt from regular federal
income tax and Massachusetts personal income tax.
The Massachusetts Fund will notify its shareholders within 60 days after the
close of the year as to the interest and capital gains derived from
Massachusetts Obligations and exempt from Massachusetts personal income tax.
Michigan Taxes
In the opinion of Dickinson Wright PLLC, Michigan tax counsel to the Municipal
Fund, holders of the Michigan Series who are subject to the Michigan income tax
or single business tax will not be subject to the Michigan income tax or single
business tax on Michigan Series dividends to the extent that such distributions
qualify as exempt-interest dividends of a regulated investment company under
Section 852(b)(5) of the Code which are attributable to interest on tax-exempt
obligations of the State of Michigan, or its political or governmental
subdivisions, its governmental agencies or instrumentalities (as well as certain
other federally tax-exempt obligations, the interest on which is exempt from
Michigan tax, such as, for example, certain obligations of Puerto
Rico)(collectively, "Michigan Obligations"). To the extent that distributions on
the Michigan Series are attributable to sources other than those described in
the preceding sentence, such distributions, including, but not limited to, long
or short-term capital gains, will not be exempt from Michigan income tax or
single business tax. To the extent that distributions on the Michigan Series are
not subject to Michigan income tax, they are not subject to the uniform city
income tax imposed by certain Michigan cities.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Michigan Series, at least 80% of the value of the net assets
of the Michigan Series will be maintained in debt obligations which are exempt
from regular federal income tax and Michigan income and single business taxes.
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The Michigan Series will notify its shareholders within 60 days after the close
of the year as to the interest derived from Michigan Obligations and exempt from
Michigan income tax.
Minnesota Taxes
In the opinion of Faegre & Benson LLP, Minnesota tax counsel to the Minnesota
Fund, provided that the Minnesota Fund qualifies as a regulated investment
company under the Internal Revenue Code, and subject to the discussion in the
paragraph below, shareholders of the Minnesota Fund who are individuals,
estates, or trusts and who are subject to the regular Minnesota personal income
tax will not be subject to such regular Minnesota tax on Minnesota Fund
dividends to the extent that such distributions qualify as exempt-interest
dividends of a regulated investment company under Section 852(b)(5) of the
Internal Revenue Code which are derived from interest income on tax-exempt
obligations of the State of Minnesota, or its political or governmental
subdivisions, municipalities, governmental agencies, or instrumentalities
("Minnesota Sources"). The foregoing will apply, however, only if the portion of
the exempt-interest dividends from such Minnesota Sources that is paid to all
shareholders represents 95% or more of the exempt-interest dividends that are
paid by the Minnesota Fund. If the 95% test is not met, all exempt-interest
dividends that are paid by the Minnesota Fund generally will be subject to the
regular Minnesota personal income tax. Even if the 95% test is met, to the
extent that exempt-interest dividends that are paid by the Minnesota Fund are
not derived from the Minnesota Sources described in the first sentence of this
paragraph, such dividends generally will be subject to the regular Minnesota
personal income tax. Other distributions of the Minnesota Fund, including
distributions from net short-term and long-term capital gains, are generally not
exempt from the regular Minnesota personal income tax.
Legislation enacted in 1995 provides that it is the intent of the Minnesota
legislature that interest income on obligations of Minnesota governmental units,
including obligations of the Minnesota Sources described above, and
exempt-interest dividends that are derived from interest income on such
obligations, be included in the net income of individuals, estates, and trusts
for Minnesota income tax purposes if it is judicially determined that the
exemption by Minnesota of such interest or such exempt-interest dividends
unlawfully discriminates against interstate commerce because interest income on
obligations of governmental issuers located in other states, or exempt-interest
dividends derived from such obligations, is so included. This provision applies
to taxable years that begin during or after the calendar year in which such
judicial decision becomes final, regardless of the date on which the obligations
were issued, and other remedies apply for previous taxable years. The United
States Supreme Court in 1995 denied certiorari in a case in which an Ohio state
court upheld an exemption for interest income on obligations of Ohio
governmental issuers, even though interest income on obligations of non-Ohio
governmental issuers, was subject to tax. In 1997, the United States Supreme
Court denied certiorari in a subsequent case from Ohio, involving the same
taxpayer and the same issue, in which the Ohio Supreme Court refused to
reconsider the merits of the case on the ground that the previous final state
court judgment barred any claim arising out of the transaction that was the
subject of the previous action. It cannot be predicted whether a similar case
will be brought in Minnesota or elsewhere, or what the outcome of such case
would be.
Minnesota presently imposes an alternative minimum tax on individuals, estates,
and trusts that is based, in part, on such taxpayers' federal alternative
minimum taxable income, which includes federal tax preference items. The
Internal Revenue Code provides that interest on specified private activity bonds
is a federal tax preference item, and that an exempt-interest dividend of a
regulated investment company constitutes a federal tax preference item to the
extent of its proportionate share of the interest on such private activity
bonds. Accordingly, exempt-interest dividends that are attributable to such
private activity bond interest, even though they are derived from the Minnesota
Sources described above, will be included in the base upon which such Minnesota
alternative minimum tax is computed. In addition, the entire portion of
exempt-interest dividends that is received by such shareholders and that is
derived from sources other than the Minnesota Sources described above generally
is also subject to the Minnesota alternative minimum tax. Further, should the
95% test that is described above fail to be met, all of the exempt-interest
dividends that are paid by the Minnesota Fund, including all of those that are
derived from the Minnesota Sources described above, generally will be subject to
the Minnesota alternative minimum tax, in the case of shareholders of the
Minnesota Fund who are individuals, estates or trusts.
32
<PAGE>
Subject to certain limitations that are set forth in the Minnesota rules,
Minnesota Fund dividends, if any, that are derived from interest on certain
United States obligations are not subject to the regular Minnesota personal
income tax or the Minnesota alternative minimum tax, in the case of shareholders
of the Minnesota Fund who are individuals, estates, or trusts.
Minnesota Fund distributions, including exempt-interest dividends, are not
excluded in determining the Minnesota franchise tax on corporations that is
measured by taxable income and alternative minimum taxable income. Minnesota
Fund distributions may also be taken into account in certain cases in
determining the minimum fee that is imposed on corporations, S corporations, and
partnerships.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Minnesota Fund, at least 80% of the value of the net assets
of the Minnesota Fund will be maintained in debt obligations which are exempt
from the regular federal income tax. Such debt obligations may, however, be
subject to the federal alternative minimum tax. A similar percentage will
generally also apply with respect to the regular Minnesota personal income tax,
and such debt obligations may likewise be subject to the Minnesota alternative
minimum tax, in each case subject to the entire discussion above. The Minnesota
Fund will invest so that the 95% test described above is met.
The Minnesota Fund will notify its shareholders within 30 days after the close
of the year as to the interest derived from Minnesota obligations and exempt
from the Minnesota personal income tax, subject to the discussion above.
Missouri Taxes
In the opinion of Bryon Cave LLP, Missouri tax counsel to the Missouri Fund,
dividends distributed to individual shareholders of the Missouri Fund will be
exempt from the Missouri personal income tax imposed by Chapter 143 of the
Missouri Revised Statutes to the extent that such dividends qualify as exempt
interest dividends of a regulated investment company under Section 852(b)(5) of
the Internal Revenue Code and are derived from interest on obligations of the
State of Missouri or any of its political subdivisions or authorities, or
obligations issued by the government of Puerto Rico or its authority
(collectively, "Missouri Obligations"). Capital gain dividends, as defined in
Section 852(b)(3) of the Internal Revenue Code, distributable by the Missouri
Fund to individual resident shareholders of the Missouri Fund, to the extent
includable in federal adjusted gross income, will be subject to Missouri income
taxation. Shares in the Missouri Fund are not subject to Missouri personal
property taxes.
Dividends paid by the Missouri Fund, if any, that do not qualify as tax exempt
dividends under Section 852 (b)(5) of the Internal Revenue Code, will be exempt
from Missouri income tax only to the extent that such dividends are derived from
interest on certain U.S. obligations that the State of Missouri is expressly
prohibited from taxing under the laws of the United States. The portion of such
dividends that is not subject to taxation by the State of Missouri may be
reduced by interest, or other expenses, in excess of $500 paid or incurred by a
shareholder in any taxable year to purchase or carry shares of the Missouri Fund
of the Municipal Fund or other investments producing income that is includable
in federal gross income, but exempt from Missouri income tax.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Missouri Fund, at least 80% of the value of the net assets of
the Missouri Fund will be maintained in debt obligations which are exempt from
regular federal income tax and Missouri personal income tax.
The Missouri Fund will notify its shareholders within 60 days after the close of
the year as to the interest derived from Missouri Obligations and exempt from
the Missouri personal income tax.
New York State and City Taxes
In the opinion of Sullivan & Cromwell, counsel to the Funds, holders of shares
of the New York Fund who are subject to New York State and City tax on dividends
will not be subject to New York State and City personal income taxes on New York
Fund dividends to the extent that such distributions qualify as
33
<PAGE>
exempt-interest dividends under Section 852(b)(5) of the Internal Revenue Code
and represent interest income attributable to federally tax-exempt obligations
of the State of New York and its political subdivisions (as well as certain
other federally tax-exempt obligations the interest on which is exempt from New
York State and City personal income taxes such as, for example, certain
obligations of Puerto Rico) (collectively, "New York Obligations"). To the
extent that distributions on the New York Fund are derived from other income,
including long or short-term capital gains, such distributions will not be
exempt from State or City personal income taxes.
Dividends on the New York Fund are not excluded in determining New York State or
City franchise taxes on corporations and financial institutions.
Except during temporary defensive periods or when acceptable investments are
unavailable to the New York Fund, the Municipal Fund will maintain at least 80%
of the value of the net assets of the New York Fund in debt obligations which
are exempt from regular federal income tax and New York State and City personal
income taxes.
The Fund will notify its shareholders within 45 days after the close of the year
as to the interest derived from New York Obligations and exempt from New York
State and City personal income taxes.
Ohio Taxes
In the opinion of Squire, Sanders & Dempsey L.L.P., Ohio tax counsel to the Ohio
Fund, holders of the Ohio Fund who are subject to the Ohio personal income tax,
the net income base of the Ohio corporation franchise tax, or municipal income
or school district taxes in Ohio will not be subject to such taxes on dividend
distributions with respect to shares of the Ohio Fund ("Distributions") to the
extent that such distributions are properly attributable to interest (including
accrued original issue discount) on obligations issued by or on behalf of the
State of Ohio, political subdivisions thereof, or agencies or instrumentalities
thereof ("Ohio Obligations"), provided that the Ohio Fund qualifies as a
regulated investment company for federal income tax purposes and that at all
times at least 50% of the value of the total assets of the Ohio Fund consists of
Ohio Obligations or similar obligations of other states or their subdivisions.
It is assumed for purposes of this discussion of Ohio taxes that these
requirements are satisfied. Shares of the Ohio Fund will be included in a
corporation's tax base for purposes of computing the Ohio corporation franchise
tax on the net worth basis.
Distributions that are properly attributable to gain from the sale, exchange or
other disposition of Ohio Obligations held by the Ohio Fund are not subject to
the Ohio personal income tax, the net income base of the Ohio corporation
franchise tax, or municipal income or school district taxes in Ohio.
Distributions properly attributable to interest on obligations of Puerto Rico,
the Virgin Islands or Guam, the interest on which is exempt from state income
taxes under the laws of the United States are exempt from the Ohio personal
income tax and municipal income and school district taxes in Ohio, and, provided
such interest is excluded from gross income for Federal income tax purposes, are
excluded from the net income base of the Ohio Corporation franchise tax.
The Ohio Fund is not subject to the Ohio personal income tax or municipal income
or school district taxes in Ohio. The Ohio Fund is not subject to corporation
franchise tax or the Ohio dealers in intangibles tax, provided that, if the Ohio
Fund has a significant nexus to the State of Ohio to be subject to Ohio
taxation, then such entity shall be exempt from taxes only if it complies with
certain reporting requirements.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Ohio Fund, the Municipal Fund will maintain at least 80% of
the value of the net assets of the Ohio Fund in debt obligations which are
exempt from regular federal income tax and the Ohio personal income tax and the
net income base of the Ohio corporation franchise tax.
The Ohio Fund will notify its shareholders within 60 days after the close of the
year as to the status for Ohio tax purposes of distributions with respect to
shares of the Ohio Fund.
34
<PAGE>
Oregon Taxes
In the opinion of Schwabe Williamson & Wyatt P.C., Oregon tax counsel to the
Oregon Fund, under present law, individual shareholders of the Oregon Fund will
not be subject to Oregon personal income taxes on distributions received from
the Oregon Fund to the extent that such distributions (1) qualify as
exempt-interest dividends under Section 852 (b)(5) of the Internal Revenue Code;
and (2) are derived from interest on obligations of the State of Oregon or any
of its political subdivisions or authorities or from interest on obligations of
the governments of Puerto Rico, Guam, the Virgin Islands or the Northern Mariana
Islands (collectively, "Oregon Obligations"). Other distributions, including any
long-term and short-term capital gains, will generally not be exempt from
personal income taxes in Oregon.
No portion of distributions from the Oregon Fund is exempt from Oregon excise
tax on corporations. However, shares of the Oregon Fund are not subject to
Oregon property tax.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Oregon Fund, at least 80% of the value of the net assets of
the Oregon Fund will be maintained in debt obligations, the interest payments of
which are exempt from regular federal income tax and Oregon personal income
taxes.
The Oregon Fund will notify its shareholders within 60 days after the close of
the year as to the interest derived from Oregon Obligations and exempt from
Oregon personal income taxes.
South Carolina Taxes
In the opinion of Sinkler & Boyd, P.A., South Carolina tax counsel to the South
Carolina Fund, shareholders of the South Carolina Fund who are subject to South
Carolina individual or corporate income taxes will not be subject to such taxes
on South Carolina Fund dividends to the extent that such dividends qualify as
either (1) exempt-interest dividends of a regulated investment company under
Section 852(b)(5) of the Internal Revenue Code, which are derived from interest
on tax-exempt obligations of the State of South Carolina or any of its political
subdivisions or on obligations of the Government of Puerto Rico that are exempt
from federal income tax; or (2) dividends derived from interest on obligations
of the United States and its possessions or on obligations of any authority or
commission of the United States, the interest from which is exempt from state
income taxes under the laws of the United States (collectively, "South Carolina
Obligations"). To the extent that South Carolina Fund distributions are
attributable to other sources, such as long or short-term capital gains, such
distributions will not be exempt from South Carolina taxes.
Except during temporary defensive periods or when acceptable investments are
unavailable to the South Carolina Fund, at least 80% of the value of the net
assets of the South Carolina Fund will be maintained in debt obligations which
are exempt from regular federal income tax and South Carolina income tax.
The South Carolina Fund will notify its shareholders within 60-days after the
close of the year as to the interest derived from South Carolina Obligations and
exempt from South Carolina income taxes.
Other State and Local Taxes
The exemption of interest on municipal securities for federal income tax
purposes does not necessarily result in exemption under the income tax laws of
any state or city. Except as noted above with respect to a particular state,
distributions from a Fund may be taxable to investors under state and local law
even though all or a part of such distributions may be derived from federally
tax-exempt sources or from obligations which, if received directly, would be
exempt from such income tax. In some states, shareholders of the National Fund
may be afforded tax-exempt treatment on distributions to the extent they are
derived from municipal securities issued by that state or its localities.
Prospective investors should be aware that an investment in a certain Fund may
not be suitable for persons who are not residents of the designated state or who
do not receive income subject to income taxes in that state. Shareholders should
consult their own tax advisors.
35
<PAGE>
Unless a shareholder includes a certified taxpayer identification number (social
security number for individuals) on the account application and certifies that
the shareholder is not subject to backup withholding, the Funds are required to
withhold and remit to the US Treasury a portion of distributions and other
reportable payments to the shareholder. The rate of backup withholding is 31%.
Shareholders should be aware that, under regulations promulgated by the Internal
Revenue Service, a Fund may be fined $50 annually for each account for which a
certified taxpayer identification number is not provided. In the event that such
a fine is imposed, the Fund may charge a service fee of up to $50 that may be
deducted from the shareholder's account and offset against any undistributed
dividends and capital gain distributions. The Funds also reserve the right to
close any account which does not have a certified taxpayer identification
number.
Underwriters
Distribution of Securities
Seligman Municipal Fund Series, Inc. and Seligman Advisors are parties to a
Distributing Agreement dated January 1, 1993 under which Seligman Advisors acts
as the exclusive agent for distribution of shares of the Funds. Seligman
Advisors accepts orders for the purchase of Fund shares, which are offered
continuously. As general distributor of the Funds' capital stock, Seligman
Advisors allows reallowances to all dealers on sales of Class A shares, as set
forth above under "Dealer Reallowances." Seligman Advisors retains the balance
of sales charges and any CDSCs paid by investors.
Total sales charges paid by shareholders of Class A shares of the Funds for the
fiscal years ended September 30, 1998, 1997, and 1996 are shown below. Also
shown are the amounts of Class A sales charges that were retained by Seligman
Advisors:
1998
----
Total Sales Charges Paid Amount of Class A Sales
by Shareholders Charges Retained by
Fund on Class A Shares Seligman Advisors
- ---- ----------------- -----------------
National $86,018 $10,617
Colorado 43,452 5,093
Georgia 59,294 6,978
Louisiana 57,466 6,743
Maryland 91,833 10,969
Massachusetts 74,981 9,068
Michigan 176,876 21,176
Minnesota 133,181 16,223
Missouri 60,625 7,654
New York 65,655 7,561
Ohio 142,209 17,244
Oregon 136,965 15,346
South Carolina 195,034 23,670
36
<PAGE>
1997
----
Total Sales Charges Paid Amount of Class A Sales
by Shareholders Charges Retained by
Fund on Class A Shares Seligman Advisors
- ---- ----------------- -----------------
National $ 69,538 $ 8,749
Colorado 41,233 4,828
Georgia 64,812 7,820
Louisiana 56,078 6,792
Maryland 60,270 7,366
Massachusetts 84,784 10,093
Michigan 159,889 18,739
Minnesota 85,887 9,979
Missouri 40,582 4,557
New York 95,889 11,532
Ohio 141,687 16,992
Oregon 84,700 9,740
South Carolina 151,171 17,715
1996
----
Total Sales Charges Paid Amount of Class A Sales
by Shareholders Charges Retained by
Fund on Class A Shares Seligman Advisors
- ---- ----------------- -----------------
National $135,664 $15,618
Colorado 57,503 6,810
Georgia 93,430 10,864
Louisiana 96,977 11,649
Maryland 83,829 10,368
Massachusetts 107,245 13,360
Michigan 183,950 21,956
Minnesota 191,620 22,738
Missouri 69,466 7,979
New York 97,996 11,497
Ohio 170,880 20,073
Oregon 114,025 13,323
South Carolina 270,513 32,649
Compensation
Seligman Advisors, which is an affiliated person of Seligman, which is an
affiliated person of the Funds, received the following commissions and other
compensation from the Funds during it's the fiscal year ended September 30,
1998:
<TABLE>
<CAPTION>
Compensation on
Net Underwriting Redemptions and
Discounts and Repurchases
Commissions (CDSC on Class A
(Class A Sales and Class D Brokerage Other
Fund Charge Retained) Retained) Commissions Compensation
---- ---------------- --------- ----------- ------------
<S> <C> <C> <C> <C>
National $10,617 $ 3,560 $0 $0
Colorado 5,093 219 0 0
Georgia 6,978 26,175 0 0
Louisiana 6,743 0 0 0
Maryland 10,969 445 0 0
Massachusetts 9,068 267 0 0
Michigan $21,176 $ 397 $0 $0
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Compensation on
Net Underwriting Redemptions and
Discounts and Repurchases
Commissions (CDSC on Class A
(Class A Sales and Class D Brokerage Other
Fund Charge Retained) Retained) Commissions Compensation
---- ---------------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Minnesota 16,223 47 0 0
Missouri 7,654 35 0 0
New York 7,561 1,310 0 0
Ohio 17,244 1,259 0 0
Oregon 15,346 40 0 0
South Carolina 23,670 2,648 0 0
</TABLE>
Other Payments
Seligman Advisors shall pay broker/dealers, from its own resources, a fee on
purchases of Class A shares of $1,000,000 or more (NAV sales), calculated as
follows: 1.00% of NAV sales up to but not including $2 million; .80% of NAV
sales from $2 million up to but not including $3 million; .50% of NAV sales from
$3 million up to but not including $5 million; and .25% of NAV sales from $5
million and above. The calculation of the fee will be based on assets held by a
"single person," including an individual, members of a family unit comprising
husband, wife and minor children purchasing securities for their own account, or
a trustee or other fiduciary purchasing for a single fiduciary account or single
trust. Purchases made by a trustee or other fiduciary for a fiduciary account
may not be aggregated purchases made on behalf of any other fiduciary or
individual account.
Seligman Advisors shall also pay broker/dealers, from its own resources, a fee
on assets of certain investments in Class A shares of the Seligman mutual funds
participating in an "eligible employee benefit plan" that are attributable to
the particular broker/dealer. The shares eligible for the fee are those on which
an initial sales charge was not paid because either the participating eligible
employee benefit plan has at least (1) $500,000 invested in the Seligman mutual
funds or (2) 50 eligible employees to whom such plan is made available. Class A
shares representing only an initial purchase of Seligman Cash Management Fund
are not eligible for the fee. Such shares will become eligible for the fee once
they are exchanged for shares of another Seligman mutual fund. The payment is
based on cumulative sales for each Plan during a single calendar year, or
portion thereof. The payment schedule, for each calendar year, is as follows:
1.00% of sales up to but not including $2 million; .80% of sales from $2 million
up to but not including $3 million; .50% of sales from $3 million up to but not
including $5 million; and .25% of sales from $5 million and above.
Seligman Advisors may from time to time assist dealers by, among other things,
providing sales literature to, and holding informational programs for the
benefit of, dealers' registered representatives. Dealers may limit the
participation of registered representatives in such informational programs by
means of sales incentive programs which may require the sale of minimum dollar
amounts of shares of Seligman mutual funds. Seligman Advisors may from time to
time pay a bonus or other incentive to dealers that sell shares of the Seligman
mutual funds. In some instances, these bonuses or incentives may be offered only
to certain dealers which employ registered representatives who have sold or may
sell a significant amount of shares of the Fund and/or certain other mutual
funds managed by Seligman during a specified period of time. Such bonus or other
incentive may take the form of payment for travel expenses, including lodging,
incurred in connection with trips taken by qualifying registered representatives
and members of their families to places within or outside the United States. The
cost to Seligman Advisors of such promotional activities and payments shall be
consistent with the rules of the National Association of Securities Dealers,
Inc., as then in effect.
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<PAGE>
Calculation of Performance Data
Class A
The annualized yield for the 30-day period ended September 30, 1998 for each
Fund's Class A shares was as follows: National - 3.86%, Colorado - 3.80%,
Georgia - 3.69%, Louisiana - 3.82%, Maryland - 3.86%, Massachusetts - 3.72%,
Michigan - 3.76%, Minnesota - 4.01%, Missouri - 3.74%, New York - 3.91%, Ohio -
3.83%, Oregon - 3.73%, and South Carolina - 3.82%. The annualized yield was
computed by dividing a Fund's net investment income per share earned during this
30-day period by the maximum offering price per share (i.e., the net asset value
plus the maximum sales load of 4.75% of the net amount invested) on September
30, 1998, which was the last day of this period. The average number of Class A
shares per Fund was: National - 12,345,093, Colorado - 5,976,398, Georgia -
5,776,456, Louisiana - 6,616,889, Maryland - 6,600,859, Massachusetts
- -13,276,652, Michigan - 16,362,624, Minnesota - 15,225,703, Missouri -
6,226,343, New York - 9,889,969, Ohio - 18,322,861, Oregon - 7,159,525, and
South Carolina - 12,644,590, which was the average daily number of shares
outstanding during the 30-day period that were eligible to receive dividends.
Income was computed by totaling the interest earned on all debt obligations
during the 30-day period and subtracting from that amount the total of all
recurring expenses incurred during the period. The 30-day yield was then
annualized on a bond-equivalent basis assuming semi-annual reinvestment and
compounding of net investment income.
The tax equivalent annualized yield for the 30-day period ended September 30,
1998 for each Fund's Class A shares was as follows: National - 6.39%, Colorado -
6.62%, Georgia - 6.50%, Louisiana 6.73%, Maryland 6.72%, Massachusetts 7.00%,
Michigan - 6.51%, Minnesota 7.26%, Missouri 6.59%, New York - 6.95%, Ohio -
6.80%, Oregon 6.79%, and South Carolina - 6.80%. The tax equivalent annualized
yield was computed by first computing the annualized yield as discussed above.
Then the portion of the yield attributable to securities the income of which was
exempt for federal and state income tax purposes was determined. This portion of
the yield was then divided by one minus the following percentages: National -
39.60%, Colorado - 42.62%, Georgia - 43.22%, Louisiana - 43.22%, Maryland -
42.5%4, Massachusetts - 46.85%, Michigan - 42.26%, Minnesota - 44.73%, Missouri
- - 43.22%, New York - 43.74%, Ohio - 43.71%, Oregon - 45.04%, and South Carolina
- - 43.83%, (which percentages assume the maximum combined federal and state
income tax rate for individual taxpayers that are subject to such state's
personal income taxes). Then the small portion of the yield (for all the Funds
except the National Fund) attributable to securities the income of which was
exempt only for federal income tax purposes was determined. This portion of the
yield was then divided by one minus 39.6% (39.6% being the assumed maximum
federal income tax rate for individual taxpayers). These two calculations were
then added to the portion of the Class A shares' yield, if any, that was
attributable to securities the income of which was not tax- exempt.
The average annual total return for the one-year period ended September 30, 1998
for each Fund's Class A shares was as follows: National - 3.81%, Colorado -
2.89%, Georgia - 3.35%, Louisiana - 2.98%, Maryland - 2.72%, Massachusetts -
4.56%, Michigan - 3.45%, Minnesota - 2.54%, Missouri - 3.26%, New York - 4.83%,
Ohio - 3.59%, Oregon - 3.36%, and South Carolina - 3.46%. The average annual
total return for the five-year period ended September 30, 1998 for each Fund's
Class A shares was as follows: National - 4.55%, Colorado - 4.03%, Georgia -
4.76%, Louisiana - 4.66%, Maryland - 4.52%, Massachusetts - 4.96%, Michigan -
4.80%, Minnesota - 4.19%, Missouri - 4.48%, New York - 5.18%, Ohio - 4.57%,
Oregon - 4.70%, and South Carolina - 4.75%. The average annual total return for
the ten-year period ended September 30, 1998 for each Fund's Class A shares was
as follows: National - 7.37%, Colorado - 6.52%, Georgia - 7.55%, Louisiana -
7.17%, Maryland - 7.15%, Massachusetts - 7.35%, Michigan - 7.47%, Minnesota -
6.64%, Missouri - 7.13%, New York - 7.73%, Ohio - 7.22%, Oregon - 7.17%, and
South Carolina - 7.36%. These returns were computed by assuming a hypothetical
initial payment of $1,000 in Class A shares of each Fund. From this $1,000, the
maximum sales load of $47.50 (4.75% of public offering price) was deducted. It
was then assumed that all of the dividends and distributions by each Fund's
Class A shares over the relevant time period were reinvested. It was then
assumed that at the end of the one-year period, the five-year period, and the
ten-year period of each Fund, the entire amount was redeemed. The average annual
total return was then calculated by
39
<PAGE>
determining the annual rate required for the initial payment to grow to the
amount which would have been received upon redemption (i.e., the average annual
compound rate of return).
Class D
The annualized yield for the 30-day period ended September 30, 1998 for each
Series' Class D shares was as follows: National - 3.16%, Colorado - 3.09%,
Georgia - 2.99%, Louisiana - 3.11%, Maryland - 3.15%, Massachusetts - 3.02%,
Michigan - 3.06%, Minnesota - 3.33%, Missouri - 3.04%, New York - 3.23%, Ohio -
3.14%, Oregon - 3.02%, and South Carolina - 3.12%. The annualized yield was
computed as for Class A shares by dividing a Fund's net investment income per
share earned during this 30-day period by the maximum offering price per share
(i.e., the net asset value) on September 30, 1998 which was the last day of this
period. The average number of Class D shares were: National - 879,234, Colorado
- - 45,005, Georgia - 333,545, Louisiana - 98,330, Maryland - 374,876,
Massachusetts - 172,695, Michigan - 202,890, Minnesota - 274,979, Missouri -
51,945, New York - 244,975, Ohio - 129,309, Oregon - 321,651, and South Carolina
- - 625,506, which was the average daily number of shares outstanding during the
30-day period that were eligible to receive dividends. Income was computed by
totaling the interest earned on all debt obligations during the 30-day period
and subtracting from that amount the total of all recurring expenses incurred
during the period. The 30-day yield was then annualized on a bond-equivalent
basis assuming semi-annual reinvestment and compounding of net investment
income.
The tax equivalent annualized yield for the 30-day period ended September 30,
1998 for each Fund's Class D shares was as follows: National - 5.23%, Colorado -
5.39%, Georgia - 5.27%, Louisiana - 5.48%, Maryland - 5.48%, Massachusetts -
5.68%, Michigan - 5.30%, Minnesota - 6.02%, Missouri - 5.35%, New York - 5.74%,
Ohio - 5.58%, Oregon - 5.49%, and South Carolina - 5.55%. The tax equivalent
annualized yield was computed as discussed above for Class A shares.
The average annual total return for the one-year period ended September 30, 1998
for each Fund's Class D shares was as follows: National - 6.76%, Colorado -
5.90%, Georgia - 6.59%, Louisiana - 6.11%, Maryland - 5.91%, Massachusetts -
7.68%, Michigan - 6.66%, Minnesota - 5.71%, Missouri - 6.45%, New York - 7.88%,
Ohio - 6.78%, Oregon - 6.37%, and South Carolina - 6.68%. The average annual
total return for the period since inception through September 30, 1998 for each
Fund's Class D shares was as follows: National - 4.57%, Colorado - 3.89%,
Georgia - 4.90%, Louisiana - 4.61%, Maryland - 4.59%, Massachusetts - 5.00%,
Michigan - 4.76 %, Minnesota - 4.01%, Missouri - 4.50%, New York - 5.24%, Ohio -
4.67%, Oregon - 4.72%, and South Carolina - 4.76%. These returns were computed
by assuming a hypothetical initial payment of $1,000 in Class D shares of each
Fund and that all of the dividends and distributions by each Fund's Class D
shares over the relevant time period were reinvested. It was then assumed that
at the end of the one-year period and the period since inception of each Fund,
the entire amount was redeemed, subtracting the 1% CDSC, if applicable.
The tables below illustrate the total returns on a $1,000 investment in each of
the Fund's Class A and Class D shares for the ten years ended September 30, 1998
or from a Class's inception through September 30, 1998, assuming investment of
all dividends and capital gain distributions. The results shown below should not
be considered a representation of the dividend income or gain or loss in capital
value which may be realized from an investment made in a class of shares of a
Fund today.
40
<PAGE>
Class A
<TABLE>
<CAPTION>
Fund/ Value of Value of Total Value
Year Initial Capital Gain Value of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
-------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
National
9/30/89 $ 964 $ 3 $68 $1,035
9/30/90 927 15 135 1,077
9/30/91 985 27 218 1,230
9/30/92 1,006 32 301 1,339
9/30/93 1,088 58 408 1,554
9/30/94 896 127 409 1,432
9/30/95 945 134 517 1,596
9/30/96 960 137 611 1,708
9/30/97 999 142 727 1,868
9/30/98 1,037 148 851 2,036 103.63%
Colorado
9/30/89 $ 979 $--- $66 $1,045
9/30/90 958 --- 133 1,091
9/30/91 1,002 --- 211 1,213
9/30/92 1,019 --- 288 1,307
9/30/93 1,076 14 380 1,470
9/30/94 983 27 417 1,427
9/30/95 1,013 28 509 1,550
9/30/96 1,008 28 587 1,623
9/30/97 1,030 28 684 1,742
9/30/98 1,059 29 793 1,881 88.14%
Georgia
9/30/89 $ 982 $ 1 $67 $1,050
9/30/90 965 3 136 1,104
9/30/91 1,025 5 221 1,251
9/30/92 1,056 10 306 1,372
9/30/93 1,133 19 411 1,563
9/30/94 1,005 32 440 1,477
9/30/95 1,050 56 543 1,649
9/30/96 1,058 68 631 1,757
9/30/97 1,091 77 741 1,909
9/30/98 1,126 87 857 2,070 107.02%
Louisiana
9/30/89 $ 963 $ 7 $68 $1,038
9/30/90 941 15 136 1,092
9/30/91 1,000 19 221 1,240
9/30/92 1,025 25 303 1,353
9/30/93 1,075 44 398 1,517
9/30/94 971 53 435 1,459
9/30/95 996 83 530 1,609
9/30/96 997 96 617 1,710
9/30/97 1,012 120 718 1,850
9/30/98 1,041 127 832 2,000 99.95%
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
Fund/ Value of Value of Total Value
Year Initial Capital Gain Value of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
-------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Maryland
9/30/89 $ 978 $ --- $64 $1,042
9/30/90 960 --- 129 1,089
9/30/91 1,023 --- 210 1,233
9/30/92 1,050 5 291 1,346
9/30/93 1,113 24 387 1,524
9/30/94 994 50 418 1,462
9/30/95 1,026 80 515 1,621
9/30/96 1,029 87 602 1,718
9/30/97 1,049 98 703 1,850
9/30/98 1,072 111 812 1,995 99.55%
Massachusetts
9/30/89 $ 955 $ 7 $68 $1,030
9/30/90 907 17 132 1,056
9/30/91 982 21 220 1,223
9/30/92 1,008 28 307 1,343
9/30/93 1,068 43 409 1,520
9/30/94 957 73 445 1,475
9/30/95 988 82 546 1,616
9/30/96 982 103 628 1,713
9/30/97 999 122 731 1,852
9/30/98 1,034 149 850 2,033 103.28%
Michigan
9/30/89 $ 976 $3 $67 $1,046
9/30/90 946 15 133 1,094
9/30/91 1,005 18 217 1,240
9/30/92 1,041 26 304 1,371
9/30/93 1,089 60 400 1,549
9/30/94 993 69 442 1,504
9/30/95 1,024 80 543 1,647
9/30/96 1,014 107 628 1,749
9/30/97 1,031 128 733 1,892
9/30/98 1,059 148 848 2,055 105.48%
Minnesota
9/30/89 $ 962 $3 $66 $1,031
9/30/90 948 11 132 1,091
9/30/91 989 12 211 1,212
9/30/92 998 14 293 1,305
9/30/93 1,048 36 392 1,476
9/30/94 977 54 447 1,478
9/30/95 990 57 543 1,590
9/30/96 972 60 621 1,653
9/30/97 986 61 719 1,766
9/30/98 1,010 65 827 1,902 90.22%
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Fund/ Value of Value of Total Value
Year Initial Capital Gain Value of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
-------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Missouri
9/30/89 $ 977 $--- $65 $1,042
9/30/90 969 --- 130 1,099
9/30/91 1,037 --- 212 1,249
9/30/92 1,047 11 289 1,347
9/30/93 1,115 22 387 1,524
9/30/94 994 38 418 1,450
9/30/95 1,033 55 517 1,605
9/30/96 1,036 70 600 1,706
9/30/97 1,050 90 697 1,837
9/30/98 1,078 109 805 1,992 99.15%
New York
9/30/89 $ 970 $ 3 $68 $1,041
9/30/90 930 10 134 1,074
9/30/91 999 10 222 1,231
9/30/92 1,023 22 307 1,352
9/30/93 1,101 45 412 1,558
9/30/94 965 72 437 1,474
9/30/95 989 111 535 1,635
9/30/96 1,004 113 632 1,749
9/30/97 1,042 122 751 1,915
9/30/98 1,082 147 877 2,106 110.61%
Ohio
9/30/89 $964 $ 2 $69 $1,035
9/30/90 942 15 137 1,094
9/30/91 996 18 222 1,236
9/30/92 1,023 25 307 1,355
9/30/93 1,084 38 407 1,529
9/30/94 977 62 443 1,482
9/30/95 1,003 79 542 1,624
9/30/96 1,000 87 629 1,716
9/30/97 1,012 103 730 1,845
9/30/98 1,034 131 842 2,007 100.73%
Oregon
9/30/89 $ 983 $--- $64 $1,047
9/30/90 971 --- 129 1,100
9/30/91 1,034 --- 211 1,245
9/30/92 1,060 --- 289 1,349
9/30/93 1,127 --- 387 1,514
9/30/94 1,036 11 431 1,478
9/30/95 1,068 16 528 1,612
9/30/96 1,067 17 613 1,697
9/30/97 1,098 27 718 1,843
9/30/98 1,123 52 824 1,999 99.91%
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
Fund/ Value of Value of Total Value
Year Initial Capital Gain Value of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
-------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
South Carolina
9/30/89 $ 975 $ 1 $66 $1,042
9/30/90 956 1 132 1,089
9/30/91 1,019 7 215 1,241
9/30/92 1,057 10 299 1,366
9/30/93 1,126 14 397 1,537
9/30/94 1,006 33 427 1,466
9/30/95 1,052 38 532 1,622
9/30/96 1,066 42 625 1,733
9/30/97 1,078 69 724 1,871
9/30/98 1,107 89 837 2,033 103.34%
</TABLE>
Class D
<TABLE>
<CAPTION>
Fund/ Value of Value of Total Value
Year Initial Capital Gain Value of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
-------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
National
9/30/94 $ 875 $--- $ 25 $ 900
9/30/95 923 --- 69 992
9/30/96 939 --- 114 1,053
9/30/97 978 --- 165 1,143
9/30/98 1,013 --- 218 1,231 23.15%
Colorado
9/30/94 $ 919 $--- $24 $ 943
9/30/95 944 --- 67 1,011
9/30/96 942 --- 109 1,051
9/30/97 961 --- 157 1,118
9/30/98 988 --- 207 1,195 19.49%
Georgia
9/30/94 $ 899 $--- $25 $ 924
9/30/95 938 15 69 1,022
9/30/96 945 22 112 1,079
9/30/97 976 26 160 1,162
9/30/98 1,008 32 210 1,250 25.01%
Louisiana
9/30/94 $909 $--- $26 $ 935
9/30/95 933 18 70 1,021
9/30/96 935 30 111 1,076
9/30/97 947 45 160 1,152
9/30/98 974 48 212 1,234 23.41%
Maryland
9/30/94 $913 $--- $25 $ 938
9/30/95 942 18 69 1,029
9/30/96 944 23 113 1,080
9/30/97 963 29 161 1,153
9/30/98 984 37 212 1,233 23.30%
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Fund/ Value of Value of Total Value
Year Initial Capital Gain Value of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
-------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Massachusetts
9/30/94 $920 $--- $27 $ 947
9/30/95 948 4 73 1,025
9/30/96 942 18 117 1,077
9/30/97 959 29 167 1,155
9/30/98 991 45 219 1,255 25.55%
Michigan
9/30/94 $919 $--- $26 $ 945
9/30/95 947 9 68 1,024
9/30/96 937 26 113 1,076
9/30/97 954 38 162 1,154
9/30/98 979 49 214 1,242 24.23%
Minnesota
9/30/94 $940 $--- $29 $ 969
9/30/95 952 2 78 1,032
9/30/96 934 4 125 1,063
9/30/97 948 4 174 1,126
9/30/98 970 6 225 1,201 20.15%
Missouri
9/30/94 $903 $--- $25 $ 928
9/30/95 939 10 68 1,017
9/30/96 941 20 111 1,072
9/30/97 954 32 157 1,143
9/30/98 980 42 206 1,228 22.78%
New York
9/30/94 $897 $--- $26 $ 923
9/30/95 921 23 70 1,014
9/30/96 933 24 116 1,073
9/30/97 970 28 168 1,166
9/30/98 1,006 41 222 1,269 26.91%
Ohio
9/30/94 $920 $--- $26 $ 946
9/30/95 946 10 72 1,028
9/30/96 944 15 118 1,077
9/30/97 956 24 168 1,148
9/30/98 977 40 220 1,237 23.73%
Oregon
9/30/94 $926 $--- $26 $ 952
9/30/95 953 3 71 1,027
9/30/96 952 4 116 1,072
9/30/97 981 10 164 1,155
9/30/98 1,002 25 213 1,240 24.02%
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Fund/ Value of Value of Total Value
Year Initial Capital Gain Value of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
-------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
South Carolina
9/30/94 $904 $--- $25 $ 929
9/30/95 946 2 70 1,018
9/30/96 957 4 115 1,076
9/30/97 969 21 163 1,153
9/30/98 995 33 214 1,242 24.20%
</TABLE>
(1) For the ten-year period ended September 30, 1998 for Class A shares; and
from commencement of operations for Class D shares on February 1, 1994.
(2) The "Value of Initial Investment" as of the date indicated reflects the
effect of the maximum sales charge and CDSC, if applicable, assumes that
all dividends and capital gain distributions were taken in cash, and
reflects changes in the net asset value of the shares purchased with the
hypothetical initial investment. "Total Value of Investment" reflects the
effect of the CDSC, if applicable, and assumes investment of all dividends
and capital gain distributions.
(3) Total return for each Class of a Fund is calculated by assuming a
hypothetical initial investment of $1,000 at the beginning of the period
specified, subtracting the maximum sales load or CDSC, if applicable;
determining total value of all dividends and distributions that would have
been paid during the period on such shares assuming that each dividend or
distribution was invested in additional shares at net asset value;
calculating the total value of the investment at the end of the period; and
finally, by dividing the difference between the amount of the hypothetical
initial investment at the beginning of the period and its value at the end
of the period by the amount of the hypothetical initial investment.
Seligman waived its fees and reimbursed certain expenses during some of the
periods above, which positively affected the performance results presented.
A Fund's total returns and average annual total returns for Class A shares
quoted above do not reflect the deduction of 12b-1 fees for periods prior to
January 1, 1993, because the 12b-1 Plan was implemented on that date. If these
fees were reflected, the performance results presented would have been lower.
Financial Statements
The Annual Report to Shareholders for the fiscal year ended September 30, 1998
contains a schedule of the investments of each Fund as of September 30, 1998, as
well as certain other financial information as of that date. The financial
statements and notes included in the Annual Report, and the Independent
Auditors' Report thereon, are incorporated herein by reference. The Annual
Report will be furnished, without charge, to investors who request copies of
this SAI.
General Information
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
by the provisions of the 1940 Act or applicable state law, or otherwise, to be
submitted to the holders of the outstanding voting securities of an investment
company such as Seligman Municipal Fund Series shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each class or series affected by such matter. Rule 18f-2
further provides that a class or series shall be deemed to be affected by a
matter unless it is clear that the interests of each class or Series in the
matter are substantially identical or that the matter does not affect any
interest of such class or Series. However, the Rule exempts the selection of
independent public accountants, the approval of principal distributing contracts
and the election of directors from the separate voting requirements of the Rule.
Custodian. Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City,
Missouri 64105, serves as custodian for the Funds. It also maintains, under the
general supervision of Seligman, the accounting records and determines the net
asset value for the Funds.
Auditors. Deloitte & Touche LLP, independent auditors, have been selected as
auditors of the Funds. Their address is Two World Financial Center, New York, NY
10281.
46
<PAGE>
Appendix A
Moody's Investors Service, Inc. ("Moody's")
Municipal Bonds
Aaa: Municipal bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk. Interest payments
are protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa: Municipal bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than Aaa bonds because margins
of protection may not be as large or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A: Municipal bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Municipal bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be characteristically lacking or may be
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact may have speculative characteristics as well.
Ba: Municipal bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate, and thereby
not well safeguarded during other good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Municipal bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Municipal bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest.
Ca: Municipal bonds which are rated Ca represent obligations which are
speculative in high degree. Such issues are often in default or have other
marked shortcomings.
C: Municipal bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers (1, 2 and 3) in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; modifier 2 indicates a mid-range ranking; and modifier 3
indicates that the issuer ranks in the lower end of its generic rating category.
Municipal Notes
Moody's ratings for municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG). This distinction is in recognition of
the differences between short-term and long-term credit risk. Loans bearing the
designation MIG 1 are of the best quality, enjoying strong protection by
established cash flows of funds for their servicing or by established and
broad-based access to the market
47
<PAGE>
for refinancing. Loans bearing the designation MIG 2 are of high quality, with
margins of protection ample although not so large as in the preceding group.
Loans bearing the designation MIG 3 are of favorable quality, with all security
elements accounted for but lacking the undeniable strength of the preceding
grades. Market access for refinancing in particular, is likely to be less well
established. Notes bearing the designation MIG 4 are judged to be of adequate
quality, carrying specific risk but having protection commonly regarded as
required of an investment security and not distinctly or predominantly
speculative.
Commercial Paper
Moody's Commercial Paper Ratings are opinions of the ability of issuers to
repay punctually promissory senior debt obligations not having an original
maturity in excess of one year. Issuers rated "Prime-1" or "P-1" indicates the
highest quality repayment capacity of the rated issue.
The designation "Prime-2" or "P-2" indicates that the issuer has a strong
capacity for repayment of senior short-term promissory obligations. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.
The designation "Prime-3" or "P-3" indicates that the issuer has an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
Issues rated "Not Prime" do not fall within any of the Prime rating
categories.
Standard & Poor's Corporation ("S&P")
Municipal Bonds
AAA: Municipal bonds rated AAA are the highest grade obligations. Capacity
to pay interest and repay principal is extremely strong.
AA: Municipal bonds rated AA have a very high degree of safety and very
strong capacity to pay interest and repay principal and differ from the highest
rated issues only in small degree.
A: Municipal bonds rated A are regarded as upper medium grade. They have a
strong degree of safety and capacity to pay interest and repay principal
although they are somewhat more susceptible in the long term to the adverse
effects of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB: Municipal bonds rated BBB are regarded as having a satisfactory degree
of safety and capacity to pay interest and re-pay principal. Whereas they
normally exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and re-pay principal for bonds in this category than for bonds in
higher rated categories.
BB, B, CCC, CC: Municipal bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and pre-pay principal in accordance with the terms of the bond. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposure to adverse
conditions.
C: The rating C is reserved for income bonds on which no interest is being
paid.
D: Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to
48
<PAGE>
base a rating or that S&P does not rate a particular type of bond as a matter of
policy.
Municipal Notes
SP-1: Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
Commercial Paper
S&P Commercial Paper ratings are current assessments of the likelihood of
timely payment of debts having an original maturity of no more than 365 days.
A-1: The A-1 designation indicates that the degree of safety regarding
timely payment is very strong.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B: Issues rated "B" are regarded as having only a speculative capacity for
timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful
capacity of payment.
D: Debt rated "D" is in payment default.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of bond as a matter of policy.
The ratings assigned by S&P may be modified by the addition of a plus (+)
or minus (-) sign to show relative standing within its major rating categories.
49
<PAGE>
Appendix B
RISK FACTORS AFFECTING THE FUNDS
Risk Factors Affecting the Colorado Fund
Because of limitations contained in the state constitution, the State of
Colorado issues no general obligation bonds secured by the full faith and credit
of the state. Several state agencies and other instrumentalities of the state
are authorized by statute to issue bonds secured by revenues from specific
projects and activities. Additionally, the state is authorized to issue
short-term revenue anticipation notes.
The state constitution does allow local governments and other subdivisions
of the state to issue general obligation debt, subject to certain requirements
in the constitution as well as debt limits imposed by statute. As of 1995,
Colorado contained more than 1,900 units of local government, including
counties, statutory cities and towns, home-rule cities and counties, charter
cities, school districts and a variety of water, irrigation and other special
improvement districts, all with various constitutional and statutory authority
to incur indebtedness and levy taxes. Also as of 1995, public debt in Colorado
totaled approximately $16.9 billion, up 33% from 1990. Of that total, local
government debt accounted for $14.1 billion. (Report of the State Auditor:
Government Debt in Colorado, Special Study Fiscal Years 1994 through 1995.)
The major sources of revenue for repayment of public indebtedness are the
ad valorem property tax, sales tax and use and consumption fees. The ad valorem
property tax is presently imposed and collected solely at the local level,
although the state also has authority to do so. Total revenue from property
taxes in Colorado in 1997 was $3.03 billion, an increase from $2.78 billion in
1996. The total assessed value of all taxable property, real and personal, in
the state in 1997 was $38.54 billion, an increase of 14.7% over 1996.
(Department of Local Affairs, 27th Annual Report to the Governor and the General
Assembly) With two exceptions, property in Colorado is assessed at 29% of its
actual value. Residential real property was assessed at 9.74% of actual value in
1997, although this rate varies according to a formula specified in the
constitution. Producing mines and oil and gas properties are assessed at 87.5%
of primary recovery and 75% of secondary recovery. The state constitution
imposes limits on the mill levy of taxes for state purposes.
Colorado has two other, especially significant constitutional provisions
affecting government finance. One is a balanced-budget requirement. The second
is known as Amendment 1 or as the Taxpayer's Bill of Rights ("TABOR"), adopted
by Colorado voters in 1992. TABOR imposes strict limitations on government
revenue, debt, and spending. TABOR requires voter approval in advance for nearly
all new taxes, tax rate increases, mill levies above that for the prior year,
valuation for assessment ratio increases, extensions of expiring taxes, and tax
policy changes directly causing a net tax revenue gain. TABOR provides that,
without voter approval, state and local government revenue may grow only to
account for inflation and increases in population. TABOR also requires voter
approval prior to the creation of any multiple-fiscal year debt or financial
obligations without present cash reserves pledged irrevocably and held for
payments in all future fiscal years. Its provisions generally apply to the state
and any local government but not to "enterprises". An enterprise is a
government-owned business authorized to issue its own revenue bonds and
receiving under 10% of its annual revenue in grants from all Colorado state and
local governments combined.
State revenues exceeded the TABOR limit for the first time in fiscal year
1996-97. The revenue limit was $6.509 billion. Excess revenue totaled $139
million, which TABOR requires to be refunded to taxpayers. The state legislature
voted to refund the excess by way of a credit against income taxes due for 1997.
For fiscal year 1997-98, the revenue limit grew (because of population growth
and inflation) to $6.872 billion, but state revenues again exceeded the TABOR
limit, this time by $563 million. (Report of the State Auditor: Schedule of
TABOR Revenue September 1998) Taxpayers will receive the refund by way of a
credit against income taxes due for 1998. In the November 1998 general election,
Colorado voters rejected a ballot proposal that would have allowed the state to
retain $200 million of excess
50
<PAGE>
revenue in fiscal year 1997-98 and in each of the next four fiscal years to be
used for transportation and school construction.
Both the Colorado Legislative Council (Focus Colorado: Economic & Revenue
Forecast 1998-2004, September 1998) and the Office of State Planning and
Budgeting (Colorado Economic Perspective, December 20, 1998) predict state
revenues will exceed the TABOR limits into the foreseeable future. Both
organizations predict that population growth and inflation will cause the limit
on state revenues to grow by more than 4% in each of the next six fiscal years
but that actual state revenues will continue to exceed the limit by hundreds of
millions of dollars each year. The Office of State Planning and Budgeting
predicts excess revenue of $655.3 million in fiscal year 1998-99, with gradual
decreases in excess revenue each year through 2003. That office predicts a total
of $2.96 billion in excess revenue from fiscal year 1998-99 through 2003-04. The
Colorado Legislative Council predicts revenue will exceed the TABOR limit by
$533.2 million in fiscal year 1998-99, with excess revenue greater than $500
million each fiscal year through 2003-04. The Council predicts that state
revenue will exceed the spending limit by a total of $3.3 billion from fiscal
year 1998-99 through 2003-04. Unless voters approve retention of any such funds,
all such funds would have to be refunded to taxpayers.
In addition to normal sources of revenue, the state government expects to
receive $2.69 billion over the next 25 years from the settlement of a lawsuit
against several tobacco companies. An initial payment of $32.9 million is
anticipated in 1999 or 2000. (Press Release by Attorney General's office,
11/17/98) There is disagreement whether these funds will be subject to the TABOR
revenue limits.
The factors outlined below are generally indicative of the current economic
status of Colorado. Statistics and forecasts cited here are compiled from the
following economic reports prepared by government and private sector economists
and other reports as noted: Office of State Budget and Planning, Colorado
Economic Perspective, June 20 and December 20, 1998 ("Colorado Economic
Perspective"); Colorado Legislative Council, Focus Colorado: Economic & Revenue
Forecast, 1998-2004, September 1998 ("Focus Colorado"); Dr. Tucker Hart Adams,
US Bank 1999 Economic Forecast ("US Bank"); Colorado Business Economic Outlook
Forum 1999 ("Colorado Outlook"). There can be no assurance that additional
factors or economic difficulties and their impact on state and local government
finances will not adversely affect the market value of obligations of the
Colorado Fund or the ability of the respective obligors to pay the debt service
on such obligations.
Colorado's population topped 4 million in 1998. Colorado economists
forecast the rate of population growth will remain consistent through 1999 at
between 1.8-2.2% per year, fueled by economists predictions that net migration
into Colorado will continue through 1999 at the rate of approximately
45,000-55,000 people per year.
Economists expect growth in non-agricultural employment to slow in
Colorado. Job growth in 1997 was 4.0%. Estimates for 1998 range from 3.5-3.9%,
and forecasts for 1999 predict job growth of between 2.3-2.8%. According to
Colorado Outlook, the construction and services sectors will have the highest
growth rate in 1999, with all job sectors except oil, gas and mining showing
some growth. The unemployment rate for 1998 was estimated between 3.1-3.5%. That
rate is expected to increase in 1999, with predictions of 3.7-3.8%. US Bank
forecasts that the labor shortage faced by many Colorado companies will continue
into 1999.
An increase for personal income in 1998 is estimated by Colorado economists
in the range of 6.7-7.6%. The forecast for 1999 is for an increase in personal
income in the range of 6.0-7.4%. In 1998, the Denver-Boulder metropolitan area's
inflation rate, projected to be 2.5-3.0% again outpaced nationwide inflation of
1.6-1.7%. Colorado economists forecast the Denver-Boulder metropolitan area's
inflation rate for 1999 at between 2.9-3.3%, as compared to an inflation rate
forecast of between 2.4-2.6% for the nation. Retail sales in Colorado rose
between 6.0-7.5% in 1998, according to estimates, as compared to an increase of
5.6-6.8% in 1997. Projections by Colorado economists are for retail sales growth
in 1999 of between 5.8-6.4%.
Colorado's construction industry showed strong growth in the early 1990's,
but that growth has slowed and, according to US Bank, may experience a "modest
recession" in 1999. Growth in housing
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permits slowed to 1.0-1.2% in 1997. Residential construction showed strong
growth in 1998 of 8.6-13.8%, according to estimates. For 1999, all but one of
the reports reviewed predict a significant decrease in the number of housing
permits, dropping 9.6-10.6% from 1998 numbers. Non-residential construction may
also be slowing from the boom of the mid-1990's. Growth in this sector has been
slowing since 1996, when local economists say the value of non-residential
building contracts rose over the previous year by as much as 34%. For 1998,
Colorado economists agree that non-residential construction fell, with estimates
of the decline varying from 11.5-35.6%. The outlook for 1999 is mixed, with
predictions ranging from a continued slide of 12.0% to strong growth of up to
12.0%. The Focus Colorado report states that the non-residential construction
sector is the only weakness in the state's economy. In contrast, Colorado
Outlook predicts that residential construction will maintain approximately the
same level of activity in 1999 as in 1998 and that non-residential construction
should grow by 12.0% in 1999. This report states that large projects, such as
the Pepsi Center sports facility and school construction will fuel the growth.
Another large project slated to get underway in 1999 is the construction of a
new football stadium for the Denver Broncos financed by the team and by a sales
tax.
Colorado economists concur that the state's economic expansion of the early
1990's is decelerating and that approaching the turn of the century, the state
will experience much more modest growth. Additionally, the economists point out
that the troubles in the world economy, especially Asia, have the potential to
dramatically affect Colorado's economy. According to the Colorado Economic
Perspective report, Colorado exports totaled $5.6 billion in 1997, up 5% over
1996. That report also notes that Japan is Colorado's largest trading partner,
exports to which dropped by 6% in 1997. Colorado is sensitive to the national
and international business cycles, and the state's economy may be far less
healthy than forecast to the extent it is affected by those external pressures.
Risk Factors Affecting the Georgia Fund
Since 1973 the long-term debt obligations of the State of Georgia have been
issued in the form of general obligation debt. Prior to 1973 all of the State's
long-term obligations were issued by ten separate State authorities and secured
by lease rental agreements between the authorities and various State departments
and agencies. Currently, Moody's rates Georgia general obligation bonds Aaa; S&P
rates such bonds AAA and Fitch rates such bonds AAA. There can be no assurance
that the economic and political conditions on which these ratings are based will
continue or that particular obligation issues may not be adversely affected by
changes in economic, political or other conditions that do not affect the above
ratings.
In addition to general obligation debt, the Georgia Constitution permits
the issuance by the State of certain guaranteed revenue debt. The State may
incur guaranteed revenue debt by guaranteeing the payment of certain revenue
obligations issued by an instrumentality of the State. The Georgia Constitution
prohibits the incurring of any general obligation debt or guaranteed revenue
debt if the highest aggregate annual debt service requirement for the then
current year or any subsequent fiscal year for outstanding general obligation
debt and guaranteed revenue debt, including the proposed debt, and the highest
aggregate annual payments for the then current year or any subsequent fiscal
year of the State under all contracts then in force to which the provisions of
the second paragraph of Article IX, Section VI, Paragraph I(a) of the Georgia
Constitution of 1976 (supplanted by the Constitution of 1983) are applicable,
exceed 10% of the total revenue receipts, less refunds, of the State treasury in
the fiscal year immediately preceding the year in which any such debt is to be
incurred. As of August 1997, the State's highest total annual commitment in any
current or subsequent fiscal year equaled 5.05% of fiscal year 1998 estimated
receipts.
The Georgia Constitution also permits the State to incur public debt to
supply a temporary deficit in the state treasury in any fiscal year created by a
delay in collecting the taxes of that year. Such debt must not exceed, in the
aggregate, 5% of the total revenue receipts, less refunds, of the state treasury
in the fiscal year immediately preceding the year in which such debt is
incurred. The debt incurred must be repaid on or before the last day of the
fiscal year in which it is to be incurred out of the taxes levied for that
fiscal year. No such debt may be incurred in any fiscal year if there is then
outstanding unpaid debt from any previous fiscal year which was incurred to
supply a temporary deficit in the state treasury. No such short-term debt has
been incurred under this provision since the inception of the constitutional
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authority referred to in this paragraph.
The obligations held from time-to-time in the Georgia Fund will, under
present law, have a very high likelihood of having been validated and confirmed
in a judicial proceeding prior to issuance. The legal effect of a validation in
Georgia is to render incontestable the validity of the pertinent obligations and
the security therefor. Certain obligations of certain governmental entities in
the State are not required to be validated and confirmed; however, the
percentage of such non-validated obligations would be very low in relation to
all outstanding municipal obligations issued within the State.
The State operates on a fiscal year beginning July 1 and ending June 30.
For example, "fiscal 1998" refers to the year ended June 30, 1998.
Based on data issued by the State of Georgia for the fiscal year 1998,
income tax receipts and sales tax receipts of the State for fiscal year 1998
comprised approximately 48.9% and 32.1%, respectively of the State tax receipts.
Further, such data shows that total State Treasury Receipts for fiscal 1998
($12,478,602,944) increased by approximately 4.8% over such State Treasury
Receipts in fiscal 1997. As of December 1998, the State estimates Tax Receipts
for 1999 at $12,671,603,880.
The average annual unemployment rate of the civilian labor force in the
State for June 1998 was 4% according to preliminary data provided by the Georgia
Department of Labor. The Metropolitan Atlanta area, which is the largest
employment center in the area comprised of Georgia and its five bordering states
and which accounts for approximately 42% of the State's population, has for some
time enjoyed a lower rate of unemployment than the State considered as a whole.
In descending order, services, wholesale and retail trade, manufacturing,
government and transportation comprise the largest sources of employment within
the State.
Many factors affect and could have an adverse impact on the financial
condition of the State and other issuers of long-term debt obligations which may
be held in the Georgia Fund, including national, social, environmental, economic
and political policies and conditions, many of which are not within the control
of the State or such issuers. It is not possible to predict whether or to what
extent those factors may affect the State and other issuers of long-term debt
obligations which may be held in the portfolio of the Georgia Fund and the
impact thereof on the ability of such issuers to meet payment obligations.
The sources of the information are the official statements of issuers
located in Georgia, other publicly available documents and oral statements from
various Federal and State agencies.
Risk Factors Affecting the Louisiana Fund
Under Louisiana law, certain bonds and obligations constitute general
obligations of the State of Louisiana or are backed by the full faith and credit
of the State of Louisiana, and certain bonds and obligations do not or are not.
The Louisiana Fund invests in both types of obligations.
The Bond Security and Redemption Fund of the State of Louisiana secures all
general obligation bonds of the State of Louisiana issued pursuant to Article
VII, Sections 6(A) and 6(B) of the constitution of Louisiana and those bonds
issued by State agencies or instrumentalities which are backed by the State's
full faith and credit, pari passu. With certain exceptions, all money deposited
in the State Treasury is credited to the Bond Security and Redemption Fund. In
each fiscal year, an amount sufficient to pay all of the State's current
obligations which are secured by its full faith and credit is allocated from the
Bond Security and Redemption Fund. After such allocation, with certain
exceptions, any money remaining in the Bond Security and Redemption Fund is
credited to the State General Fund.
Any bonds issued by the State of Louisiana other than general obligation
bonds, or any bonds issued by the State of Louisiana or any other issuer that
are not backed by the full faith and credit of the State of Louisiana are not
entitled to the benefits of the Bond Security and Redemption Fund.
The legislature has limited its ability to authorize certain debt and the
State Bond Commission's ability to issue certain bonds. The legislature may not
authorize general obligation bonds or other general
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obligations secured by the full faith and credit of the State if the amount of
authorized but unissued debt plus the amount of outstanding debt exceeds twice
the average annual revenues of the Bond Security and Redemption Fund for the
last three fiscal years completed prior to such authorization. This debt
limitation is not applicable to or shall not include the authorization of
refunding bonds secured by the full faith and credit of the State, to authorized
or outstanding bond anticipation notes, or to the issuance of revenue
anticipation notes. Bond anticipation notes are issued in anticipation of the
sale of duly authorized bonds or to fund capital improvements. The State Bond
Commission may not issue general obligation bonds or other general obligations
secured by the full faith and credit of the State at any time when the highest
annual debt service requirement for the current or any subsequent fiscal years
for such debt, including the debt service on such bonds or other obligations
then proposed to be sold by the State Bond Commission, exceeds 10% of the
average annual revenues of the Bond Security and Redemption Fund for the last
three fiscal years completed prior to such issuance. This debt limitation is not
applicable to the issuance or sale by the State Bond Commission of refunding
bonds secured by the full faith and credit of the State of Louisiana or to bond
anticipation notes.
A new limitation on State borrowing has been established as a result of a
constitutional amendment passed by the voters of Louisiana in October 1993. As a
result of the amendment, the State Bond Commission may not approve the issuance
of general obligation bonds secured by the full faith and credit of the State,
or bonds secured by self-support revenues which in the first instance may not be
sufficient to pay debt service and will then draw on the full faith and credit
of the State, if the debt service requirement exceeds a specified percent of the
estimate of money to be received by the State general fund and dedicated funds
for each respective fiscal year as contained in the official forecast adopted by
the Revenue Estimating Conference at its first meeting at the beginning of each
fiscal year. The percentages are set on a graduated scale, beginning with 13.1%
for the 1993-1994 fiscal year and descending to 6.0% for the 2003-2004 fiscal
year and thereafter. The intent of the amendment is to reduce State borrowing
over time so that there is some limit put on the debt service portion of the
State budget.
The State Bond Commission may also issue and sell revenue anticipation
notes to avoid temporary cash flow deficits. These notes are payable from
anticipated cash, as reflected in the most recent official forecast of the
Revenue Estimating Conference. Unless issued in accordance with the provisions
of Article VIII, Section 6(A) of the State Constitution, the notes do not
constitute a full faith and credit obligation of the State.
The foregoing limitations on indebtedness imposed upon the legislature and
the State Bond Commission do not apply to obligations that are not general
obligations of the State of Louisiana or that are not backed by the full faith
and credit of the State of Louisiana.
Although the manner in which the Bond Security and Redemption Fund operates
is intended to adequately fund all obligations that are general obligations of
the State, or that are secured by the full faith and credit of the State, there
can be no assurance that particular bond issues will not be adversely affected
by expected budget gaps.
Since 1993, the State of Louisiana has experienced recurring budget
surpluses which have been applied to the reduction of outstanding debts. These
surplus funds, under current laws, are used to retire existing debt. The
Louisiana Commissioner of Administration has announced a small surplus for the
1997-98 fiscal year. This would be the sixth consecutive year of budget surplus.
A statewide referendum on the legality of video poker, riverboat gambling,
and land based gaming resulted in a continuation of all three forms of gaming as
well as three Indian casinos and off track racehorse betting parlors near the
major urban areas of Louisiana (Shreveport, Lake Charles, Baton Rouge, Lafayette
and New Orleans). The Harrah's Casino in New Orleans has emerged from Chapter 11
bankruptcy. It is now current on the required $100 million tax payment to the
State of Louisiana, lease obligations to the City of New Orleans and has
restarted construction of the New Orleans gaming facility. The casino is
expected to be open for operation by November of 1999 with an annual $100
billion tax obligation to the State of Louisiana.
The continuation of general fund surpluses does not assure the revenues for
bonds not entitled to the
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full faith and credit of the State and that, therefore, are not secured by the
Bond Security and Redemption Fund. Examples of these bonds include general
obligation parish bond issues, revenue bonds issued by the State of Louisiana or
a parish or other political subdivision or agency, and industrial development
bonds. Revenue bonds are payable only from revenues derived from a specific
facility or revenue source. Industrial development bonds are generally secured
solely by the revenues served from payments made by the industrial users. With
respect to bonds issued by local political subdivisions or agencies, because the
64 parishes within the State of Louisiana are subject to their own revenue and
expenditure problems, current and long-term adverse developments affecting their
revenue sources and their general economy may have a detrimental impact on such
bonds. Similarly, adverse developments affecting Louisiana's state and local
economy could have a detrimental impact on revenue bonds and industrial
development bonds.
Louisiana gained 21,000 jobs from October 1997 to October 1998. The 1.13%
rate of job growth caused a decrease in the statewide unemployment rate to 5.0%
from 5.7% in October 1997. The continued growth of the Louisiana economy, as
well as the growth of tax collections due to offshore oil exploration and gaming
revenues, allowed the state, effective July 1, 1997, to repeal one penny of the
four penny temporary sales taxes originally enacted in 1986, however this tax
can be reinstated by a vote of the legislature. The recent reductions in oil
prices have begun to cause administrative job reductions in integrated oil
production firms. These layoffs have not yet spread to production and
construction firms in the oil services industry, however a continuation of oil
prices below $14 per barrel could result in further job reductions.
As of December 1998 there are still shortages of skilled labor for the
petrochemical services, shipbuilding, oil rig construction and boat repair yard
industries throughout South Louisiana. Layoffs by garment makers and employment
downsizing caused by acquisitions of major firms headquartered in Louisiana are
offsetting some of the job gains caused by the petrochemical industry expansion.
Labor has been drawn to Louisiana from other states and internationally during
1998 but this trend of increased net immigration could change during 1999.
Risk Factors Affecting the Maryland Fund
Some of the significant financial considerations relating to the
investments of the Maryland Fund are summarized below. This information is
derived principally from official statements released on or before July 8, 1998,
relating to issues of State of Maryland general obligations and does not purport
to be a complete description.
The State's total expenditures for the fiscal years ending June 30, 1995,
June 30, 1996 and June 30, 1997 were $13.528 billion, $14.169 billion, and
$14.787 billion, respectively. As of July 8, 1998, it was estimated that total
expenditures for fiscal year 1998 would be $15.221 billion. The State's General
Fund, the fund from which all general costs of state government are paid and to
which taxes and other revenues not specifically directed by law to be deposited
in separate funds are recorded and which represents approximately 50%-55% of
each year's total budget, had an unreserved surplus on a budgetary basis of an
unreserved surplus of $133 million in fiscal year 1995, an unreserved surplus of
$13.1 million in fiscal year 1996 and an unreserved surplus of $207.2 million in
fiscal year 1997. As of July 8, 1998, the unreserved surplus in fiscal year 1998
was estimated to be $317.2 million. The State Constitution mandates a balanced
budget.
In April 1998, the General Assembly approved the $16.612 billion 1999
fiscal year budget (the "1999 Budget"). The 1999 Budget includes $3.3 billion in
aid to local governments (reflecting a $169 million increase over fiscal 1998)
and incorporates the first full year of five-year phase-in of a 10% reduction in
personal income taxes estimated to reduce revenues by $300 million in fiscal
year 1999. Based on the 1999 Budget, as of July 1998, the State estimated that
the general fund surplus on a budgetary basis at June 30, 1999 will be
approximately $14.5 million. The State also maintains a Revenue Stabilization
Account in its Reserve Fund to retain State revenues for future needs and to
reduce the need for future tax increases. As of July 1998, the State estimated
that the balance in the Revenue Stabilization Account would be approximately
$634 million at June 30, 1999.
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The public indebtedness of Maryland and its instrumentalities is divided
into three basic types. The State issues general obligation bonds for capital
improvements and for various State-sponsored projects. The Department of
Transportation of Maryland issues limited, special obligation bonds for
transportation purposes payable primarily from specific, fixed-rate excise taxes
and other revenues related mainly to highway use. Certain authorities issue
obligations payable solely from specific non-tax enterprise fund revenues and
for which the State has no liability and has given no moral obligation
assurance.
According to recent available ratings, general obligation bonds of the
State of Maryland are rated "Aaa" by Moody's and "AAA" by S&P, as are those of
the largest county of the State, i.e., Montgomery County in the suburbs of
Washington, D.C. General obligation bonds of Baltimore County, a separate
political entity surrounding Baltimore City and the third largest county in the
State, are also rated "Aaa" by Moody's and "AAA" by S&P. General obligation
bonds of Prince George's County, the second largest county, which is also in the
suburbs of Washington, D.C., are rated "Aa3" by Moody's and "AA-" by S&P. The
general obligation bonds of those other counties of the State with populations
in excess of 100,000 that are rated by Moody's carry an "A" rating or better.
Baltimore City's general obligation bonds are rated "A1" by Moody's. The
Washington Suburban Sanitary District, a bi-county agency providing water and
sewage services in Montgomery and Prince George's Counties, issues general
obligation bonds rated "Aa1" by Moody's and "AA" by S&P.
While the ratings and other factors mentioned above indicate that Maryland
and its principal subdivisions and agencies, overall, are in satisfactory
economic health, there can, of course, be no assurance that this will continue
or that particular bond issues may not be adversely affected by changes in state
or local economic or political conditions.
Risk Factors Affecting the Massachusetts Fund
The Commonwealth of Massachusetts and certain of its cities, towns,
counties and other political subdivisions have at certain times in the past
experienced serious financial difficulties which have adversely affected their
credit standing. The recurrence of such financial difficulties could adversely
affect the market values and marketability of, or result in default in payment
on, outstanding obligations issued by the Commonwealth or its public authorities
or municipalities. In addition, recent developments regarding the Massachusetts
statutes which limit the taxing authority of certain Massachusetts governmental
entities may impair the ability of the issuers of some Massachusetts Municipal
Obligations to maintain debt service on their obligations.
Total expenditures and other uses by the Commonwealth for fiscal 1994
totaled approximately $15.952 billion and total revenues and other sources
totaled approximately $15.979 billion, resulting in an excess of revenues and
other sources over expenditures and other uses of $27 million and in positive
fund balances of approximately $589 million. Total expenditures and other uses
for fiscal 1995 totaled approximately $16.794 billion and total revenues and
other sources totaled approximately $16.931 billion. Overall, the budgeted
operating funds ended fiscal 1995 with an excess of revenues and other sources
over expenditures and other uses of $137 million, and with positive fund
balances of approximately $726 million. Total expenditures and other uses for
fiscal 1996 totaled approximately $17.925 billion and total revenues and other
sources totaled approximately $18.371 billion. Overall, the budgeted operating
funds ended fiscal 1996 with an excess of revenues and other sources over
expenditures and other uses of $446 million, and with positive fund balances of
approximately $1.172 billion. Total expenditures and other uses for fiscal 1997
totaled approximately $19.002 billion and total revenues and other sources
totaled approximately $19.223 billion. The budgeted operating funds ended fiscal
1997 with an excess of revenues and other sources over expenditures and other
uses of $221 million, and with positive fund balances of approximately $1.394
billion. Total expenditures and other uses for fiscal 1998 totaled approximately
$20.607 billion and total revenues and other sources totaled approximately
$21.405 billion. The budgeted operating funds ended fiscal 1998 with an excess
of revenues and other sources over expenditures and other uses of $798 million,
and with positive fund balances of approximately $2.192 billion.
The fiscal 1999 budget is based on estimated total revenues and other
sources of approximately $20.580 billion. Total expenditures and other uses for
fiscal 1999 are currently estimated at
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approximately $19.904 billion. The fiscal 1999 budget proposes that the $676
million difference between estimated revenues and other sources and expenditures
and other uses be provided for by application of the beginning fund balances for
fiscal 1999, to produce estimated ending fund balances for fiscal 1999 of
approximately $1.517 billion. The fiscal 1999 budget is based upon numerous
spending and revenue estimates, the achievement of which cannot be assured.
In Massachusetts, the tax on personal property and real estate is the
principal source of tax revenues available to cities and towns to meet local
costs. "Proposition 2 1/2", an initiative petition adopted by the voters of the
Commonwealth of Massachusetts on November 4, 1980, limits the power of
Massachusetts cities and towns and certain tax-supported districts and public
agencies to raise revenue from property taxes to support their operations,
including the payment of debt service. Proposition 2 1/2 required those cities
and towns with property tax levies in excess of 2 1/2% of the full and fair cash
value of their taxable real estate and personal property to reduce their levies
to the 2 1/2% level. It also limited each year's increase in the tax levy for
all cities and towns to 2 1/2% of the prior year's maximum levy, with an
exception for certain property added to the tax rolls and for certain
substantial valuation increases other than as part of a general reevaluation.
The reductions in local revenues and anticipated reductions in local
personnel and services resulting from Proposition 2 1/2 created strong demand
for substantial increases in state funded local aid, which increased
significantly in fiscal years 1982 through 1989. The effect of this increase in
local aid was to shift a major part of the impact of Proposition 2 1/2 to the
Commonwealth. Because of decreased Commonwealth revenues, local aid declined
significantly in fiscal 1990, 1991 and 1992. Local aid increased somewhat in
each fiscal year form 1993 through 1998 and is expected to increase again in
fiscal 1999.
Limitations on state tax revenues have been established by legislation
approved by the Governor on October 23, 1986 and by an initiative petition
approved by the voters on November 4, 1986. The two measures are inconsistent in
several respects, including the methods of calculating the limits and the
exclusions from the limits. The initiative petition, unlike its legislative
counterpart, contains no exclusion for debt service on Commonwealth bonds and
notes. Under both measures, excess revenues are returned to taxpayers in the
form of lower taxes. It is not yet clear how differences between the two
measures will be resolved. State tax revenues in fiscal 1987 did exceed the tax
limit imposed by the initiative petition by an estimated $29.2 million. This
amount was returned to the taxpayers in the form of a tax credit against
calendar year 1987 personal income tax liability pursuant to the provisions of
the initiative petition. State tax revenues since fiscal 1988, have not exceeded
the limit imposed by either the initiative petition or the legislative
enactment.
The Commonwealth maintains financial information on a budgetary basis.
Since fiscal year 1986, the Comptroller also has prepared annual financial
statements in accordance with generally accepted accounting principles (GAAP) as
defined by the Government Accounting Standards Board. GAAP basis financial
statements indicate that the Commonwealth ended fiscal 1993 and 1994 with fund
deficits of approximately $184.1 million and $72 million, respectively. GAAP
basis financial statements for fiscal 1995 indicate that the Commonwealth ended
such year with a fund equity of $287.4 million. GAAP basis financial statements
for fiscal 1996 indicate that the Commonwealth ended such year with a fund
equity of $709.2 million. GAAP basis financial statements for fiscal 1997
indicate that the Commonwealth ended such year with a fund equity of $1.096
billion.
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Risk Factors Affecting the Michigan Fund
The principal sectors of Michigan's diversified economy are manufacturing
of durable goods (including automobiles and components and office equipment),
tourism and agriculture. As reflected in historical employment figures, the
State's economy has lessened its dependence upon durable goods manufacturing,
however, such manufacturing continues to be an important part of the State's
economy. These particular industries are highly cyclical and in the period
1996-97 operated at somewhat less than full capacity but at higher levels than
in the immediate prior years. The cyclical nature of these industries and the
Michigan economy can adversely affect the revenue streams of the State and its
political subdivisions because it may adversely impact tax sources, particularly
sales taxes, income taxes and single business taxes.
The Michigan State General Fund balances for the 1989-90 and 1990-91 fiscal
years were negative $130 million and $169.4 million, respectively. This negative
balance had been eliminated as of the end of fiscal year 1991-92, which ended
September 30, 1992. General Fund surplus at the end of fiscal years 1992-93
through 1996-97 was transferred, as required by statute, to the Counter-Cyclical
Budget and Economic Stabilization Fund ("BSF"), which reflected a positive
balance of $1.152 billion at September 30, 1997. The State's Annual Financial
report for fiscal years ending September 30 is generally available at the end of
March of the following year.
Beginning in 1993, the Michigan Legislature enacted several statutes which
significantly affect Michigan property taxes and the financing of primary and
secondary school operations. The property tax and scholl finance reform measures
included a ballot proposal ("Proposal A") and constitutional amendment which was
approved by voters on March 15, 1994. Under Proposal A as approved, the State
sales and use tax rates were increased from 4% to 6%, the State income tax and
cigarette tax were increased, the Single Business Tax imposed on business
activity within the state was decreased and, beginning in 1994, a State property
tax of 6 mills is now imposed on all real and personal property currently
subject to the general property tax. Proposal A contains additional provisions
regarding the ability of local school districts to levy supplemental property
taxes for operating purposes as well as a limit on assessment increases for each
parcel of property, beginning in 1995 to the lesser of 5% or the rate of
inflation.
Under Proposal A, much of the additional revenue generated by the new taxes
will be dedicated to the State School Aid Fund. Proposal A shifts significant
portions of the cost of local school operations from local schools districts to
the State and raises additional State revenues to fund these additional State
expenses. These additional revenues will be included within the State's
constitutional revenue limitations and may impact the State's ability to raise
additional revenues in the future.
In July, 1997, the Michigan Supreme Court issued a decision in cases filed
by many of Michigan's local school districts against the State regarding the
manner in which the State disburses funds to school districts for special
education and special education transportation, bilingual education, driver
education and school lunch programs, including a case captioned Donald Durant,
et al v State of Michigan. The court held that monetary damages were owed to the
84 school districts involved in Durant and over 400 other Michigan school
districts and legislation has been enacted to pay such damages from the BSF over
a 15 year period. Similar constitutional challenges to the funding of special
education services and transportation have been filed by over 100 school
districts in a new matter (Durant II) that was remanded to the Michigan Court of
Appeals in September 1998. The ultimate resolution of those claims is not
presently determinable.
Currently, the State's general obligation bonds are rated Aa1 by Moody's
and AA+ by Standard & Poor's, following rating increases announced earlier in
1998. To the extent that the portfolio of Michigan obligations is comprised of
revenue or general obligations of local governments or authorities, rather than
general obligations of the State of Michigan, ratings on such Michigan
obligations will be different from those given to the State of Michigan and
their value may be independently affected by economic matters not directly
impacting the State.
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Risk Factors Affecting the Minnesota Fund
The information set forth below is derived from official statements
prepared in connection with the issuance of obligations of the State of
Minnesota and other sources that are generally available to investors. The
information is provided as general information intended to give a recent
historical description and is not intended to indicate further or continuing
trends in the financial or other positions of the State of Minnesota. Such
information constitutes only a brief summary, relates primarily to the State of
Minnesota, does not purport to include details relating to all potential issuers
within the State of Minnesota whose securities may be purchased by the Minnesota
Fund, and does not purport to be a complete description.
The State of Minnesota has experienced certain budgeting and financial
problems since 1980. However, in recent years, Accounting General Fund Balances
have been positive.
In February 1992 the Commissioner of Finance estimated the Accounting
General Fund balance at June 30, 1993, at negative $569 million. The balance at
June 30, 1995, was projected at negative $1.75 billion.
The 1992 Legislature reduced expenditures by $262 million for the biennium
ending June 30, 1993, enacted revenue measures expected to increase revenue by
$149 million, and reduced the budget reserve by $160 million to $240 million.
After the Legislature adjourned in April 1992, the Commissioner of Finance
estimated the Accounting General Fund balance at June 30, 1993, at $2.4 million,
and projected the balance at June 30, 1995, at negative $837 million. A November
1992 forecast estimated the balance at June 30, 1993, at positive $217 million
and projected the balance at June 30, 1995, at negative $769 million.
A March 1993 forecast projected an Accounting General Fund balance at June
30, 1995, at negative $163 million out of a budget for the biennium of
approximately $16.7 billion, and estimated a balance at June 30, 1997, at
negative $1.6 billion out of a budget of approximately $18.7 billion.
The 1993 Legislature authorized $16.519 billion in spending for the
1993-1995 biennium, an increase of 13.0% from 1991-1993 expenditures. Resources
for the 1993-1995 biennium were projected to be $16.895 billion, including $657
million carried forward from the previous biennium. The $16.238 billion in
projected non-dedicated and dedicated revenues was 10.3% greater than in the
previous biennium and included $175 million from revenue measures enacted by the
1993 Legislature. The Legislature increased the health care provider tax to
raise $79 million, transferred $39 million into the Accounting General Fund and
improved collection of accounts receivable to generate $41 million.
After the Legislature adjourned in May 1993, the Commissioner of Finance
estimated that at June 30, 1995, the Accounting General Fund balance would be
$16 million and the budget reserve, as approved by the 1993 Legislature, would
be $360 million. The Accounting General Fund balance at June 30, 1993 was $463
million.
The Commissioner of Finance, in a November 1993 forecast, estimated the
Accounting General Fund balance at June 30, 1995, at $430 million, due to
projected increases in revenues and reductions in expenditures, and the balance
at June 30, 1997, at $389 million. The Commissioner recommended that the budget
reserve be increased to $500 million. He estimated that if current laws and
policies continued unchanged, revenue would grow 7.7% and expenditures 6.0% in
the 1995-1997 biennium.
A March 1994 forecast projected an Accounting General Fund balance at June
30, 1995, at $623 million, principally due to a projected $235 million increase
in revenues to $16.6 billion for the biennium. The balance at June 30, 1997, was
estimated to be $247 million.
The 1994 Legislature provided for a $500 million budget reserve;
appropriated to school districts $172 million to allow the districts, for
purposes of state aid calculations, to reduce the portion of property tax
collections that the school districts must recognize in the fiscal year during
which they receive the
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property taxes; increased expenditures $184 million; and increased expected
revenues $4 million.
Of the $184 million in increased expenditures, criminal justice initiatives
totaled $45 million, elementary and higher education $31 million, environment
and flood relief $18 million, property tax relief $55 million, and transit $11
million. A six-year strategic capital budget plan was adopted with $450 million
in projects financed by bonds supported by the Accounting General Fund.
Other expenditure increases totaled $16.5 million.
Included in the expected revenue increase of $4 million were conformity
with federal tax changes to increase revenues $27.5 million, a sales tax
phasedown on replacement capital equipment and miscellaneous sales tax
exemptions decreasing revenues $17.3 million, and other measures decreasing
revenues $6.2 million.
After the Legislature adjourned in May 1994, the Commissioner of Finance
estimated the Accounting General Fund balance at June 30, 1995, at $130 million.
The Commissioner of Finance, in a November 1994 forecast, estimated the
Accounting General Fund balance at June 30, 1995, at $268 million, due to
projected increases in revenues and decreases in expenditures, and the balance
at June 30, 1997, at $190 million.
A February 1995 forecast projected an Accounting General Fund balance at
June 30, 1995, at $383 million, due to a $93.5 million increase in projected
revenues and a $21.0 million decrease in expenditures. The balance at June 30,
1997, was projected at $250 million.
The 1995 Legislature authorized $18.220 billion in spending for the
1995-1997 biennium, an increase of $1.395 billion, or 8.3%, from 1993-1995
expenditures. Resources for the 1995-1997 biennium were projected to be $18.774
billion, including $921 million carried forward from the previous biennium.
The Legislature authorized 7.1 percent more spending for elementary and
secondary education in the 1995-1997 biennium than in 1993-1995, 0.9% more in
local government aids, 14.2% more for health and human services, 2.3% more for
higher education, and 25.1% more for corrections. The Legislature set the budget
reserve at $350 million and established a supplementary reserve of $204 million
in view of predicted federal cutbacks.
After the Legislature adjourned in May 1995, the Commissioner of Finance
estimated that at June 30, 1997, the Accounting General Fund balance would be
zero. The Accounting General Fund Balance at June 30, 1995, was $481 million.
The Commissioner of Finance, in a November 1995 forecast, estimated the
Accounting General Fund balance at June 30, 1997, at $824 million, due to a $490
million increase in revenues from those projected in May 1995, a $199 million
reduction in projected expenditures, and a $135 million increase in the amount
carried forward from the 1993-1995 biennium. An improved national economic
outlook increased projected net sales tax revenue $257 million and reduced
projected human services expenditures $231 million. The Commissioner estimated
the Accounting General Fund balance at June 30, 1999, at negative $28 million.
Only $15 million of the $824 million projected 1995-1997 surplus was
available for spending. The statutes require that an additional $15 million be
placed in the supplementary budget reserve, and an additional $794 million must
be appropriated to school districts to allow the districts, for purposes of
state aid calculations, to eliminate the 48% of property tax collections that
the school districts must recognize in the fiscal year during which they receive
the property taxes.
A February 1996 forecast projected an Accounting General Fund balance at
June 30, 1997, at $873 million, due to a $104 million increase in projected
revenues, a $19 million increase in expenditures, and a $36 million reduction in
the June 30, 1995, ending balance. The amount available for spending increased
from $15 million to $64 million.
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In February 1996, the Commissioner of Finance estimated the Accounting
General Fund balance at June 30, 1999, at $54 million.
The 1996 Legislature reduced the State of Minnesota's commitment to
eliminate the so-called school recognition shift. The 1995 Legislature had voted
to allow school districts, for purposes of state aid calculations, to eliminate
the 48% of property tax collections that the school districts must recognize in
the fiscal year during which they receive the property taxes. The 1996
Legislature raised the percentage for the 1995-1997 biennium from 0% to 7%,
saving the State $116 million.
The 1996 Legislature increased expenditures $130 million, including $37
million for elementary education and youth development; $14 million for higher
education; $17 million for health systems and human services reforms; $16
million for public safety and criminal justice; and $36 million for
transportation, environment and technology. The Legislature also approved $614
million in capital projects to be funded by general obligation bonds and
appropriations and increased expected revenues $5 million.
After the Legislature adjourned in April 1996, the Commissioner of Finance
estimated the Accounting General Fund balance at June 30, 1997, at $1 million.
The Accounting General Fund balance at June 30, 1996, was $445 million.
The Commissioner of Finance, in a November 1996 forecast, estimated the
Accounting General Fund balance at June 30, 1997, at $793 million, due to a $646
million increase in revenues from those projected in April 1996, a $209 million
reduction in expenditures, and $63 million in other changes. The longest period
of national economic growth since World War II, through mid-1999, was forecast.
Individual income taxes were forecast to be $427 million more than projected in
April 1996, and sales taxes $81 million more. Of the $209 million reduction in
forecast expenditures, $199 million were health and human services expenditures.
Existing statutes require the first $114 million of the forecast balance to
be dedicated to a new education aid reserve for use in the 1997-1999 biennium.
Another $157 million must be used to increase from 85% to 90% the portion of
state aid to school districts that is paid in the fiscal year during which the
districts become entitled to the aid.
In November 1996, the Commissioner of Finance estimated the Accounting
General Fund balance at June 30, 1999, at $1.4 billion.
A February 1997 forecast projected an Accounting General Fund balance at
June 30, 1997 at $866 million (after taking into account the $114 million and
$157 million items referred to above), due to a $236 million increase in
projected revenues and a $108 million decrease in expenditures. The balance at
June 30, 1999 was projected at $1.7 billion.
The 1997 Legislature, in a regular session and June and August special
sessions, authorized $20.924 billion in spending for the 1997-1999 biennium, an
increase of $2.231 billion, or 11.8%, from 1995-1997 expenditures. Resources for
the 1997-1999 biennium were projected to be $21.946 billion, including $1.630
billion carried forward from the previous biennium.
The Legislature authorized 14.8% more spending for elementary and secondary
education spending in the 1997-1999 biennium than in 1995-1997, 17.6% more for
health and human services, 12.5% more in local government aids, 10.7% more for
higher education, and 0.3% more for all other expenditures. The Legislature set
the General Fund budget reserve at $522 million. The cash flow account was set
at $350 million, and a property tax reform reserve account of $46 million was
created for future restructuring of the property tax system. Other reserves
totaled $72 million.
After the Legislature adjourned its second special session in August 1997,
the Commissioner of Finance estimated that at June 30, 1999, the Accounting
General Fund balance would be positive $32 million. The Accounting General Fund
balance at June 30, 1997 was an estimated $861 million.
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The Commissioner of Finance, in a November 1997 forecast, estimated the
Accounting General Fund balance at June 30, 1999, at $1.360 billion, $1.328
billion more than estimated after the 1997 legislature adjourned, due to a $729
million increase in projected revenues, a $256 million reduction in projected
expenditures, $21 million increase in dedicated reserves, and a $364 million
increase in the projected amount carried forward from the 1995-1997 biennium.
Higher than anticipated individual income tax payments were the major source of
$272 million in additional revenues in the first half of 1997, and human
services savings were the principal source of $92 million in reduced
expenditures. The Commissioner estimated the Accounting General Fund balance at
June 30, 2001 at $1.284 billion.
Only $453 million of the $1.360 billion projected 1997-1999 surplus was
available for spending. The statutes allocate the first $81 million of the
forecast balance to fund K-12 education tax credits and deductions enacted in
1997. Sixty percent of the remainder plus interest, $826 million, is added to a
property tax reform account.
A February 1998 forecast projected an Accounting General Fund balance at
June 30, 1999, at $1.045 billion, due to a $507 million increase in projected
revenues, a $90 million decrease in expenditures, and a $5 million increase in
dedicated reserves. The balance at June 30, 2001 was projected at $2.137
billion.
The 1998 Legislature increased spending $125 million for K-12 education
aids, $90 million to reduce the school property tax recognition shift percentage
to zero, $73 million for higher education, and $148 million for all other
operations. The Legislature also approved $999 million in capital improvements,
to be funded by $509 million in bonds and $502 million in appropriations.
After the Legislature adjourned in April 1998, the Commissioner of Finance
estimated the Accounting General Fund balance at June 30, 1999, at $35 million.
The Commissioner of Finance, in a November 1998 forecast, estimated the
Accounting General Fund balance at June 30, 1999, at $953 million, due to an
$803 million increase in non-tobacco revenues, the receipt of $461 million in
tobacco settlement revenues, and a $262 million reduction in expenditures. A
total of $609 million of the $1.562 billion of estimated available revenues is
statutorily dedicated to reserves, tax reduction, and to replace bonding.
The Commissioner of Finance in November 1998 estimated the structural
balance at June 30, 2001, at $821 million.
The State of Minnesota has no obligation to pay any bonds of its political
or governmental subdivisions, municipalities, governmental agencies, or
instrumentalities. The creditworthiness of local general obligation bonds is
dependent upon the financial condition of the local government issuer, and the
creditworthiness of revenue bonds is dependent upon the availability of
particular designated revenue sources or the financial conditions of the
underlying obligors. Although most of the bonds owned by the Minnesota Fund are
expected to be obligations other than general obligations of the State of
Minnesota itself, there can be no assurance that the same factors that adversely
affect the economy of the State generally will not also affect adversely the
market value or marketability of such other obligations, or the ability of the
obligors to pay the principal of or interest on such obligations.
At the local level, the property tax base has recovered after its growth
was slowed in many communities in the early 1990's by over capacity in certain
segments of the commercial real estate market. Local finances are also affected
by the amount of state aid that is made available. Further, various of the
issuers within the State of Minnesota, as well as the State of Minnesota itself,
whose securities may be purchased by the Minnesota Fund, may now or in the
future be subject to lawsuits involving material amounts. It is impossible to
predict the outcome of these lawsuits. Any losses with respect to these lawsuits
may have an adverse impact on the ability of these issuers to meet their
obligations.
Legislation enacted in 1995 provides that it is the intent of the Minnesota
legislature that interest income on obligations of Minnesota governmental units,
and exempt-interest dividends that are derived from interest income on such
obligations, be included in the net income of individuals, estates, and trusts
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for Minnesota income tax purposes if it is judicially determined that the
exemption by Minnesota of such interest or such exempt interest dividends
unlawfully discriminates against interstate commerce because interest income on
obligations of governmental issuers located in other states, or exempt-interest
dividends derived from such obligations, is so included. This provision applies
to taxable years that begin during or after the calendar year in which such
judicial decision becomes final, regardless of the date on which the obligations
were issued, and other remedies apply for previous taxable years. The United
States Supreme Court in 1995 denied certiorari in a case in which an Ohio state
court upheld an exemption for interest income on obligations of Ohio
governmental issuers, even though interest income on obligations of non-Ohio
governmental issuers was subject to tax. In 1997, the United States Supreme
Court denied certiorari in a subsequent case from Ohio, involving the same
taxpayer and the same issue, in which the Ohio Supreme Court refused to
reconsider the merits of the case on the ground that the previous final state
court judgment barred any claim arising out of the transaction that was the
subject of the previous action. It cannot be predicted whether a similar case
will be brought in Minnesota or elsewhere, or what the outcome of such case
would be. Should an adverse decision be rendered, the value of the securities
purchased by the Minnesota Fund might be adversely affected, and the value of
the shares of the Minnesota Fund might also be adversely affected.
The Department of Finance acknowledged in 1995 that the State of
Minnesota's accounting system was not Year 2000 (Y2K) compliant and that the
systems vendor would deliver a compliant version upgrade in the future. In
mid-1997, State of Minnesota technical staff, along with the systems vendor,
began a $6.5 million project to install the new compliant version of the
accounting software. According to the most recent Official Statement, the State
of Minnesota and the systems vendor were finishing up the remediation and
testing stages of the project, and expected to implement the new software
version on November 30, 1998. There can, however, be no assurance that such
implementation will be done in a timely manner. Further, even if the State of
Minnesota successfully addresses its Year 2000 compliance there can be no
assurance that any other organization or governmental agency with which the
State of Minnesota electronically interacts, including vendors and the federal
government, will be Year 2000 compliant. In the event of any such occurrences,
the State of Minnesota may face material adverse consequences with respect to
its revenues and operations. Local issuers in the State of Minnesota may face
similar problems.
The State's bond ratings in October 1998 were Aaa by Moody's and AAA by
S&P. Economic difficulties and the resultant impact on State and local
government finances may adversely affect the market value of obligations in the
portfolio of the Minnesota Fund or the ability of respective obligors to make
timely payment of the principal and interest on such obligations.
Risk Factors Affecting the Missouri Fund
Industry and Employment. While Missouri has a diverse economy with a
distribution of earnings and employment among manufacturing, trade and service
sectors closely approximating the average national distribution, the national
economic recession of the early 1980's had a disproportionately adverse impact
on the economy of Missouri. During the 1970's, Missouri characteristically had a
pattern of unemployment levels well below the national averages. However, since
the 1980 to 1983 recession periods Missouri unemployment levels generally
approximated or slightly exceeded the national average. A return to a pattern of
high unemployment could adversely affect the Missouri debt obligations acquired
by the Fund and, consequently, the value of the shares in the Fund.
The Missouri portions of the St. Louis and Kansas City metropolitan areas
contain approximately 1,949,956 and 1,039,241 residents, respectively,
constituting over fifty percent of Missouri's 1997 population census of
approximately 5,387,753. St. Louis is an important site for banking and
manufacturing activity, as well as a distribution and transportation center,
with eight Fortune 500 industrial companies (as well as other major educational,
financial, insurance, retail, wholesale and transportation companies and
institutions) headquartered there. Kansas City is a major agribusiness center
and an important center for finance and industry. Economic reversals in either
of these two areas would have a major impact on the overall economic condition
of the State of Missouri. Additionally, the State of Missouri has a significant
agricultural sector which is experiencing farm-related problems comparable to
those which are occurring in other states. To the extent that these problems
were to intensify, there could possibly be an adverse impact on the overall
economic condition of the State of Missouri.
Defense related business plays an important role in Missouri's economy.
There are a large number of civilians employed at the various military
installations and training bases in the State and recent action of the Defense
Base Closure and Realignment Commission will result in the loss of a substantial
number of civilian jobs in the St. Louis Metropolitan area. Further, aircraft
and related businesses in Missouri are the recipients of substantial annual
dollar volumes of defense contract awards. The contractor receiving the second
largest dollar volume of defense contracts in the United States in 1995 was
McDonnell Douglas Corporation. McDonnell Douglas Corporation, which was acquired
by the Boeing Company on August 1, 1997, is the State's largest employer,
currently employing approximately 20,900 employees in Missouri. Recent changes
in the levels of military appropriations and the cancellation of the A-12
program have affected such company in Missouri and over the last five years it
has reduced its Missouri work force by approximately 30%. There can be no
assurances there will not be further
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changes in the levels of military appropriations, and, to the extent that
further changes in military appropriations are enacted by the United States
Congress, Missouri could be disproportionately affected. It is impossible to
determine what effect, if any, the acquisition of McDonnell Douglas Corporation
by Boeing will have on the operations conducted by the former McDonnell Douglas
Corporation in Missouri. On December 1, 1998, The Boeing Company announced it
would reduce its overall workforce 20% by the end of 2000. While it is expected
that most of the reduction will occur in the commercial aircraft division which
is located outside of Missouri any shift or loss of production operations now
conducted in Missouri would have a negative impact on the economy of the state
and particularly on the economy of the St. Louis metropolitan area.
Desegregation lawsuits in St. Louis and Kansas City continue to require
significant levels of state funding and are sources of uncertainty; litigation
continues on many issues, court orders are unpredictable, and school district
spending patterns have proven difficult to predict. A recent Supreme Court
decision favorable to the State may decrease the level of State funding required
in the future, but the impact of this decision is uncertain. The State paid $282
million for desegregation costs in fiscal 1994, $315 million for fiscal 1995 and
$274 million in fiscal 1996. This expense accounts for close to 7% of total
state General Revenue Fund spending in fiscal 1994 and 1995 and close to 5% in
fiscal 1996.
Revenue and Limitations Thereon. Article X, Sections 16-24 of the
Constitution of Missouri (the "Hancock Amendment"), imposes limitations on the
amount of State taxes which may be imposed by the General Assembly of Missouri
(the "General Assembly") as well as on the amount of local taxes, licenses and
fees (including taxes, licenses and fees used to meet debt service commitments
on debt obligations) which may be imposed by local governmental units (such as
cities, countries, school districts, fire protection districts and other similar
bodies) in the State of Missouri in any fiscal year.
The State limit on taxes is tied to total State revenues for fiscal year
1980-81, as defined in the Hancock Amendment, adjusted annually in accordance
with the formula set forth in the amendment, which adjusts the limit based on
increases in the average personal income of Missouri for certain designated
periods. The details of the amendment are complex and clarification from
subsequent legislation and further judicial decisions may be necessary.
Generally, if the total State revenues exceed the State revenue limit imposed by
Section 18 of Article X by more than 1%, the State is required to refund the
excess. The State revenue limitation imposed by the Hancock Amendment does not
apply to taxes imposed for the payment of principal and interest on bonds,
approved by the voters and authorized by the Missouri Constitution. The revenue
limit also can be exceeded by a constitutional amendment authorizing new or
increased taxes or revenues adopted by the voters of the State of Missouri.
The Hancock Amendment also limits new taxes, licenses and fees and
increases in taxes, licenses and fees by local governmental units in Missouri.
It prohibits counties and other political subdivisions (essentially all local
governmental units) from levying new taxes, licenses and fees or increasing the
current levy of an existing tax, license or fee without the approval of the
required majority of the qualified voters of that county or other political
subdivision voting thereon.
When a local governmental unit's tax base with respect to certain fees or
taxes is broadened, the Hancock Amendment requires the tax levy or fees to be
reduced to yield the same estimated gross revenue as on the prior base. It also
effectively limits any percentage increase in property tax revenues to the
percentage increase in the general price level (plus the value of new
construction and improvements), even if the assessed valuation of property in
the local governmental unit, excluding the value of new construction and
improvements, increases at a rate exceeding the increase in the general price
level.
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Risk Factors Affecting the New York Fund
The following information is a summary of special factors affecting the New
York Fund. Such information is derived from public official documents relating
to securities offerings of New York issuers which are generally available to
investors. The Fund has no reason to believe that any of the statements in such
public official documents are untrue but has not independently verified such
statements. The following information constitutes only a brief summary of the
information in such public official documents and does not purport to be a
complete description of all considerations regarding investment in New York
municipal securities.
Economic Outlook
New York (the "State") is the third most populous state in the nation and
has a relatively high level of personal wealth. The State's economy is diverse
with a comparatively large share of the nation's finance, insurance,
transportation, communications and services employment, and a very small share
of the nation's farming and mining activity. The State's location, air transport
facilities and natural harbors have made it an important link in international
commerce. Travel and tourism constitute an important part of the economy. Like
the rest of the nation, New York has a declining proportion of its workforce
engaged in manufacturing and an increasing proportion engaged in service
industries.
The economic and financial condition of the State may be affected by
various financial, social, economic and political factors. Those factors can be
very complex, may vary from fiscal year to fiscal year, and are frequently the
result of actions taken not only by the State and its agencies and
instrumentalities, but also by entities, such as the federal government, that
are not under the control of the State. The state financial plan is based upon
forecasts of national and State economic activity. Economic forecasts have at
times failed to predict accurately the timing and magnitude of changes in the
national and the State economies. Many uncertainties exist in forecasts of both
the national and State economies particularly in light of the recent volatility
in the international economy and domestic financial markets. Consumer attitudes
toward spending, the extent of corporate and governmental restructuring, federal
fiscal and monetary policies, the level of interest rates, and the condition of
the world economy, could have an adverse effect on the State. The timing and
impact of changes in economic conditions are difficult to estimate with a high
degree of accuracy. Unforeseeable events may occur. The actual rate of change of
the concepts forecasted may differ from the outlook described herein. There can
be no assurance that the State economy will not experience results in the
current fiscal year that are worse than predicted, with corresponding material
and adverse effects on the State's projections of receipts and disbursements.
Continued growth is projected in 1998 and 1999 for employment, wages, and
personal income, although, for 1999, a significant slowdown in the growth rates
of personal income and wages are expected. The growth of personal income is
projected to rise from 4.7% in 1997 to 5.0% in 1998, but then drop to 3.4% in
1999, in part because growth in bonus payments is expected to moderate
significantly, a distinct shift from the unusually high increases of the last
few years. Overall employment growth is expected to be 2.0% in 1998, the
strongest in a decade, but is expected to drop to 1.0% in 1999, reflecting the
slowing growth of the national economy, continued spending restraint in
government, less robust profitability in the financial sector and continued
restructuring in the manufacturing, health care, and banking sectors.
The national economy has maintained a robust rate of growth during the past
six quarters as the expansion, which is well into its eighth year, continues.
Since early 1992, approximately 16 1/2 million jobs have been added nationally.
The State economy has also continued to expand, but growth remains somewhat
slower than in the nation. Although the State has added over 400,000 jobs since
late 1992, unemployment growth in the State has been hindered during recent
years by significant cutbacks in the computer and instrument manufacturing,
utility, defense, and banking industries. Government downsizing has also
moderated these job gains.
For 1999, the annual national growth rate is anticipated to be
significantly lower than had been predicted. Economic growth during both 1998
and 1999 is expected to be slower than it was during
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1997. The financial and economic turmoil which started in Asia and has spread to
other parts of the world is expected to continue to negatively affect U.S. trade
balances throughout most of 1999. In addition, growth in domestic consumption,
which has been a major driving force behind the nation's strong economic
performance in recent years, is expected to slow in 1999 as consumer confidence
retreats from historic highs and the stock market ceases to provide large
amounts of extra discretionary income. However, the lower short-term interest
rates which are expected to be in force during 1999 should help prevent a
recession. The revised forecast projects real GDP growth of 3.4% in 1998,
moderately below the 1997 growth rate. In 1999, real GDP growth is expected to
fall further, to 1.6%. The growth of nominal GDP is projected to decline from
5.9% in 1997 to 4.6% in 1998 and 3.7% in 1999. The inflation rate is expected to
drop to 1.7% in 1998 before rising to 2.7% in 1999. The annual rate of job
growth is expected to be 2.5% in 1998, almost equaling the strong growth rate
experienced in 1997. In 1999, however, employment growth is forecast to slow
markedly, to 1.9%. Growth in personal income and wages is expected to slow in
1998 and again in 1999.
Current Fiscal Year
Overview
The State's current fiscal year commenced on April 1, 1998, and ends on
March 31, 1999, and is referred to herein as the State's 1998-99 fiscal year.
The Legislature adopted the debt service component of the State budget for the
1998-99 fiscal year on March 30, 1998 and the remainder of the budget on April
18, 1998. In the period prior to adoption of the budget for the current fiscal
year, the Legislature also enacted appropriations to permit the State to
continue its operations and provide for other purposes. On April 25, 1998, the
Governor vetoed certain items that the Legislature added to the Executive
Budget. The Legislature had not overridden any of the Governor's vetoes as of
the start of the legislative recess on June 19, 1998.
General Fund disbursements in 1998-99 are now projected to grow by $2.43
billion over 1997-98 levels, or $690 million more than proposed in the
Governor's Executive Budget, as amended. The change in General Fund
disbursements from the Executive Budget to the enacted budget reflects
legislative additions (net of the value of the Governor's vetoes), actions taken
at the end of the regular legislative session, as well as spending that was
originally anticipated to occur in 1997-98 but is now expected to occur in
1998-99. The State projects that the 1998-99 State Financial Plan is balanced on
a cash basis, with an estimated reserve for future needs of $761 million.
The State's enacted budget includes several new multi-year tax reduction
initiatives, including acceleration of State-funded property and local income
tax relief for senior citizens under the School Tax Relief Program (STAR),
expansion of the child care income-tax credit for middle-income families, a
phased-in reduction of the general business tax, and reduction of several other
taxes and fees, including an accelerated phase-out of assessments on medical
providers. The enacted budget also provides for significant increases in
spending for public schools, special education programs, and for the State and
City university systems. It also allocates $50 million for a new Debt Reduction
Reserve Fund (DRRF) that may eventually be used to pay debt service costs on or
to prepay outstanding State-supported bonds.
The 1998-99 State Financial Plan projects a closing balance in the General
Fund of $1.7 billion that is comprised of a reserve of $1.04 billion available
for future needs, a balance of $400 million in the Tax Stabilization Reserve
Fund (TSRF), a balance of $158 million in the Community Projects Fund (CPF), and
a balance of $100 million in the Contingency Reserve Fund (CRF). The TSRF can be
used in the event of an unanticipated General Fund cash operating deficit, as
provided under the State Constitution and State Financial Law. The CPF is used
to finance various legislative and executive initiatives. The CRF provides
resources to help finance any extraordinary litigation costs during the fiscal
year.
The four governmental fund types that comprise the State Financial Plan are
the General Fund, the Special Revenue Funds, the Capital Projects Funds, and the
Debt Service Funds. This fund structure adheres to accounting standards of the
Governmental Accounting Standards Board. The General Fund is the principal
operating fund of the State and is used to account for all financial
transactions, except those required to be accounted for in another fund. It is
the State's largest fund and receives almost all State
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taxes and other resources not dedicated to particular purposes. In the State's
1998-99 fiscal year, the General Fund is expected to account for approximately
47.6% of all Governmental Funds disbursements and 70.1% of total State Funds
disbursements. General Fund moneys are also transferred to other funds,
primarily to support certain capital projects and debt service payments in other
fund types.
General Fund Receipts
Total General Fund receipts and transfers from other funds in the 1998-99
fiscal year are projected to reach $37.84 billion, an increase of over $3
billion from the 1997-98 fiscal year. This total includes $34.50 billion in tax
receipts, and $1.47 billion in miscellaneous receipts, and $1.86 billion in
transfers from other funds. The transfer of a portion of the surplus recorded in
1997-98 to 1998-99 exaggerates the "real" growth in State receipts from year to
year by depressing reported 1997-98 figures and inflating 1998-99 projections.
Conversely, the incremental cost of tax reductions newly effective in 1998-99
and the impact of statutes earmarking certain tax receipts to other funds work
to depress apparent growth below the underlying growth in receipts attributable
to expansion of the State's economy. On an adjusted basis, State tax revenues in
the 1998-99 fiscal year are projected to grow at approximately 7.5%, following
an adjusted growth of roughly 9% in the 1997-98 fiscal year.
The Personal Income Tax is imposed on the income of individuals, estates
and trusts and is based with certain modifications on federal definitions of
income and deductions. This tax continues to account for over half of the
State's General Fund receipts base. Net personal income tax collections are
projected to reach $21.44 billion, nearly $3.7 billion above the reported
1997-98 collection total. Since 1997 represented the completion of the 20%
income tax reduction program enacted in 1995, growth from 1997 to 1998 will be
unaffected by major income tax reductions. Adding to the projected annual growth
is the net impact of the transfer of the surplus from 1997-98 to the current
year which affects reported collections by over $2.4 billion on a year-over-year
basis, as partially offset by the diversion of slightly over $700 million in
income tax receipts to the STAR fund to finance the initial year of the school
tax reduction program.
User taxes and fees are comprised of three-quarters of the State 4% sales
and use tax (the balance, one percent, flows to support the Local Government
Assistance Corporation (LGAC) debt service requirements), cigarette, alcoholic
beverage, container, and auto rental taxes, and a portion of the motor fuel
excise levies. Also included in this category are receipts from the motor
vehicle registration fees and alcoholic beverage license fees.
Receipts from user taxes and fees in 1998-99 are projected at $7.21
billion, an increase of $170 million in the prior year. The sales tax component
of this category accounts for all of the 1998-99 growth, as receipts for all
other sources declined by $100 million. The growth in yield of the sales tax in
1998-99, after adjusting for tax law and other changes, is projected at 4.7%.
The yields of most of the excise taxes in this category show a long-term
declining trend, particularly cigarette and alcoholic beverage taxes. These
General Fund declines are exacerbated in 1998-99 by revenue losses from
scheduled and newly enacted tax reductions, and by an increase in earmarking of
motor vehicle registration fees to the Dedicated Highway and Bridge Trust Fund.
Business taxes include franchise taxes based generally on net income of
general business, bank and insurance corporations, as well as
gross-receipts-based taxes on utilities and gallonage-based petroleum business
taxes. Beginning in 1994, a 15% surcharge on these levies began to be phased out
and, for most taxpayers, there is no surcharge liability for taxable periods
ending in 1997 and thereafter.
Total business tax collections in 1998-99 are projected at $4.79 billion,
$257 million less than received in the prior fiscal year. The year-over-year
decline in projected receipts in this category is a function of both statutory
changes between the two years. These include the first year of utility-tax rate
cuts and the Power for Jobs tax reduction program for energy providers, and the
scheduled additional diversion of General Fund petroleum business and utility
tax receipts to other funds. In addition, profit growth is also expected to slow
in 1998.
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Other taxes include estate, gift and real estate transfer taxes, a tax on
gains from the sale or transfer of certain real estate (this tax was repealed in
1996), a pari-mutuel tax and other minor levies. They are now projected to total
$1.02 billion -- $75 million below last year's amount. Two factors account for a
significant part of the expected decline in collections from this category.
First, the effects of the elimination of the real property gains tax
collections; second, a decline in estate tax receipts, following the explosive
growth recorded in 1997-98, when receipts expanded by over 16 percent.
Miscellaneous receipts include investment income, abandoned property
receipts, medical provider assessments, minor federal grants, receipts from
public authorities, and certain other license and fee revenues. Total
miscellaneous receipts are projected to reach $147 billion, down almost $200
million from the prior year. Transfers from other funds to the General Fund
consist primarily of tax revenues in excess of debt service requirements,
particularly the one percent sales tax used to support payments to LGAC.
Miscellaneous receipts and transfers from other funds are projected to reach
$3.33 billion for the fiscal year.
General Fund Disbursements
General Fund disbursements and transfers to capital, debt service and other
funds are projected at $36.78 billion, an increase of $2.43 billion (7.1%) from
1997-98. Nearly one-half of the growth is for educational purposes, reflecting
increased support for public schools, special education programs and the State
and City university systems. The remaining increase is primarily for Medicaid,
mental hygiene, and other health and social welfare programs, including children
and family services. The 1998-99 Financial Plan also includes funds for the
current negotiated salary increases for State employees, as well as increased
transfers for debt service.
Grants to Local Governments is the largest category of General Fund
disbursements and includes financial assistance to local governments and
not-for-profit corporations, as well as entitlement benefits to individuals. The
1998-99 Financial Plan projects spending of $25.14 billion in this category, an
increase of $1.88 billion or 8.1% over the prior year. The largest annual
increases are for educational programs, Medicaid, other health and social
welfare programs and community projects grants.
The 1998-99 budget provides $9.7 billion in support of public schools. The
year-to-year increase of $769 million is comprised of partial funding for a
1998-99 school year increase of $847 million as well as the remainder of the
1997-98 school year increase that occurs in State fiscal year 1998-99. Spending
for all other educational programs, which includes the State and City university
systems, the Tuition Assistance Program, and handicapped programs, is estimated
at $3.00 billion, an increase of $270 million over 1997-98 levels.
Medicaid costs are estimated at $5.60 billion, an increase of $144 million
from the prior year. After adjusting 1997-98 for the $116 million prepayment of
an additional Medicaid cycle, Medicaid spending is projected to increase $260
million or 4.9%. Disbursements for all other health and social welfare programs
are projected to total $3.63 billion, an increase of $131 million from 1997-98.
This includes an increase in support for children and families and local public
health programs, offset by a decline in welfare spending of $75 million that
reflects continuing State and local efforts to reduce welfare fraud, declining
caseloads, and the impact of State and federal welfare reform legislation.
Remaining disbursements primarily support community based mental hygiene
programs, community and public health programs, local transportation programs,
and revenue sharing payments to local governments. Revenue sharing and other
general purpose aid is projected at $837 million, an increase of approximately
$37 million from 1996-97.
State operations spending reflects the administrative costs of operating
the State's agencies, including the prison system, mental hygiene institutions,
the State University system (SUNY), the Legislature, and the court system.
Personal service costs account for approximately 73% of this category.
Disbursements for State operations are projected at $6.7 billion, an increase of
$511 million or 8.3% over 1997-98 fiscal year. This year-to-year growth reflects
the continuing phase-in of wage increases under existing
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collective bargaining agreements, the impact of binding arbitration settlements
and the costs of funding and additional payroll cycle in 1998-99.
General State charges account primarily for the costs of providing fringe
benefits for State employees, including contributions to pension systems, the
employer's share of social security contributions, employer contributions toward
the cost of health insurance, and the costs of providing worker's compensation
and unemployment insurance benefits. This category also reflects certain fixed
costs such as payments in lieu of taxes, and payments of judgments against the
State or its public officers.
Disbursements in this category are estimated at $2.22 billion, a decrease
of $50 million from the prior year. This annual decline reflects projected
decreases in pension costs and Court of Claims payments, offset by modest
projected increases for health insurance contributions, social security costs,
and the loss of reimbursements due to a reduction in the fringe benefit rate
charged to positions financed by non-General Fund sources.
Debt service paid from the General Fund reflects debt service on short-term
obligations of the State and includes only the interest cost of the State's
commercial paper program. The 1998-99 debt service estimate is $11 million
reflecting relative stability in short-term interest rates. The State's annual
tax and revenue anticipation note (TRAN) borrowing has been eliminated.
Transfers to other funds from the General Fund are made primarily to
finance certain portions of State capital project spending and debt service on
long-term bonds, where these costs are not funded from other sources. Transfers
in support of debt service are projected at $2.14 billion in 1998-99, an
increase of $111 million from 1997-98. The increase reflects the impact of
certain prior year bond sales (net of refunding savings), and certain bond sales
planned to occur during the 1998-99 fiscal year. The State Financial Plan also
establishes a transfer of $50 million to the new Debt Reduction Reserve Fund.
The Fund may be used, subject to enactment of new appropriations, to pay the
debt service costs on or to prepay State-supported bonds. Transfers in support
of capital projects provide General Fund support for projects not otherwise
financed through bond proceeds, dedicated taxes and other revenues, or federal
grants. These transfers are projected at $200 million for 1998-99, comparable to
last year. Remaining transfers from the General Fund to other funds are
estimated to decline $59 million in 1998-99 to $327 million. This decline is
primarily the net impact of one-time transfers in 1997-98 to the State
University Tuition Stabilization Fund and to the Lottery Fund to support school
aid, offset by a 1998-99 increase in the State subsidy to the Roswell Park
Cancer Research Institute.
General Fund Balance
The Financial Plan projects a closing balance in the General Fund of $1.7
billion. The balance is comprised of the $1.04 billion reserve for future needs,
$400 million in the Tax Stabilization Reserve Fund, $100 million in the
Contingency Reserve Fund (after a planned deposit of $32 million in 1998-99),
and $158 million in the Community Projects Fund.
Special Revenue Funds
Special Revenue Funds are used to account for the proceeds of specific
revenue sources such as federal grants that are legally restricted, either by
the Legislature or outside parties, to expenditures for specified purposes.
Although activity in this fund type is expected to comprise approximately 41% of
total government funds receipts in the 1998-99 fiscal year, three-quarters of
that activity relates to federally-funded programs. Projected disbursements in
this fund type total $29.98 billion, an increase of $2.33 billion (8.4%) over
1997-98 levels. Disbursements from federal funds, primarily the federal share of
Medicaid and other social services programs, are projected to total $21.78
billion in the 1998-99 fiscal year. Remaining growth in federal funds is
primarily due to the new Child Health Plus program, estimated at $197 million.
This program will expand health insurance coverage to children of indigent
families. State special revenue spending is projected to be $8.19 billion, an
increase of $1.20 billion from last year's levels.
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Capital Project Funds
Capital Projects Funds account for the financial resources used for the
acquisition, construction, or rehabilitation of major State capital facilities
and for capital assistance grants to certain local governments or public
authorities. This fund type consists of the Capital Projects Fund, which is
supported by tax receipts transferred from the General Fund, and various other
capital funds established to distinguish specific capital construction purposes
supported by other revenues. In the 1998-99 fiscal year, activity in these funds
is expected to comprise 5.5% of total governmental receipts.
Capital Projects Funds spending in fiscal year 1998-99 is projected at
$4.14 billion, an increase of $575 million or 16.1% from last year. The major
components of this expected growth are transportation and environmental
programs, including continued increased spending for 1996 Clean Water/Clean Air
Bond Act projects and higher projected disbursements from the Environmental
Protection Fund (EPF). Another significant component of this projected increase
is in the area of public protection, primarily for facility rehabilitation and
construction of additional prison capacity.
Debt Service Funds
Debt Service Funds are used to account for the payment of principal of, and
interest on long-term debt of the State and to meet commitments under
lease-purchase and other contractual-obligation financing arrangements. This
fund type is expected to comprise 3.8% of total governmental fund receipts in
the 1998-99 fiscal year. Receipts in these funds in excess of debt service
requirements may be transferred to the General Fund and Special Revenue Funds,
pursuant to law.
Total disbursements from the Debt Service Fund type are estimated at $3.36
billion in 1998-99, an increase of $275 million or 8.9% from 1997-98 levels. Of
the increase, $102 million is for transportation purposes, including debt
service on bonds issued for State and local highway and bridge programs financed
through the New York State Thruway Authority and supported by the Dedicated
Highway and Bridge Trust Fund. Another $45 million is for education purposes,
including State and City University programs financed through the Dormitory
Authority of the State of New York (DASNY). The remainder is for a variety of
programs in such areas as mental health and corrections, and for general
obligation financings.
Out-Year Projections of Receipts and Disbursements
State law requires the Governor to propose a balanced budget each year. In
recent years, the State has closed projected budget gaps of $5.0 billion
(1995-97), $2.3 billion (1997-98), and less than $1 billion (1998-99). The
State, as part of the 1998-99 Executive Budget projections submitted to the
Legislature in February 1998, projected a 1999-00 General Fund budget gap of
approximately $1.7 billion and a 2000-01 gap of $3.7 billion. As a result of
changes made in the 1998-99 enacted budget, the 1999-00 gap is now expected to
be roughly $1.3 billion, or about $400 million less than previously projected,
after application of reserves created as part of the 1998-99 budget process.
Such reserves would not be available against subsequent year imbalances.
Sustained growth in the State's economy could contribute to closing
projected budget gaps over the next several years, both in terms of
higher-than-projected tax receipts and in lower-than-expected entitlement
spending. However, the State's projections in 1999-00 currently assume actions
to achieve $600 million in lower disbursements and $250 million in additional
receipts from the settlement of State claims against the tobacco industry.
Consistent with past practice, the projections do not include any costs
associated with new collective bargaining agreements after the expiration of the
current round of contracts at the end of 1998-99 fiscal year. The State expects
that the 1999-00 Financial Plan will achieve savings from initiatives by State
agencies to deliver services more efficiently, workforce management efforts
maximization of federal and non-general Fund spending offsets, and other actions
necessary to bring projected disbursements and receipts into balance.
The State will formally update its outyear projections of receipts and
disbursements for the 2000-01 and 2001-02 fiscal years as a part of the 1999-00
Executive Budget process, as required by law. The revised
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expectations for years 2000-01 and 2001-02 will reflect the cumulative impact of
tax reductions and spending commitments enacted over the last several years as
well as new 1999-00 Executive Budget recommendations. The STAR program, which
dedicates a portion of personal income tax receipts to fund school tax
reductions, has a significant impact on General Fund receipts. STAR is projected
to reduce personal income tax revenues available to the General Fund by an
estimated $1.3 billion in 2000-01. Measured from the 1998-99 base, scheduled
reductions to estate and gift, sales and other taxes, reflecting tax cuts
enacted in 1997-98 and 1998-99, will lower General Fund taxes and fees by an
estimated $1.8 billion in 2000-01. Disbursement projections for the outyears
currently assume additional outlays for school aid, Medicaid, welfare reform,
mental health community reinvestment, and other multi-year spending commitments
in law.
Prior Fiscal Years
New York State's financial operations have improved during recent fiscal years.
During the period 1989-90 through 1991-92, the State incurred General Fund
operating deficits that were closed with receipts from the issuance of TRANs. A
national recession, followed by the lingering economic slowdown in the New York
and the regional economy, resulted in repeated shortfalls in receipts and three
budget deficits during those years. During its last six fiscal years, the State
has recorded balanced budgets on a cash basis, with positive fund balances as
described below.
1997-98 Fiscal Year
The State ended its 1997-98 fiscal year in balance on a cash basis, with a
General Fund operating surplus of $1.56 billion. As a result, the State reported
an accumulated surplus of $567 million in the General Fund for the first time
since it began reporting its operations on a generally accepted accounting
principals (GAAP) basis. The 1997-98 fiscal year operating surplus resulted in
part from higher-than-anticipated personal income tax receipts, an increase in
taxes receivable of $681 million, an increase in other assets of $195 million
and a decrease in pension liabilities of $144 million. These gains were
partially offset by an increase in payables to local governments of $270 million
and tax refunds payable of $147 million.
The General Fund had a closing balance of $638 million, an increase of $205
million from the prior fiscal year. The balance is held in three accounts within
the General Fund: the Tax Stabilization Reserve Fund (TSRF), the Contingency
Reserve Fund (CRF) and the Community Projects Fund (CPF). The TSRF closing
balance was $400 million, following a required deposit of $15 million (repaying
a transfer made in 1991-92) and an extraordinary deposit of $68 million made
from the 1997-98 surplus. The CRF closing balance was $68 million, following a
$27 million deposit from the surplus. The CPF, which finances legislative
initiatives, closed the fiscal year with a balance of $170 million, an increase
of $95 million. The General Fund closing balance did not include $2.39 billion
in the tax refund reserve account, of which $521 million was made available as a
result of the Local Government Assistance Corporation (LGAC) financing program
and was required to be on deposit on March 31, 1998.
General Fund receipts and transfers from other funds for the 1997-98 fiscal year
(including net tax refund reserve account activity) totaled $34.55 billion, an
annual increase of $1.51 billion, or 4.57% over 1996-97. General Fund
disbursements and transfers to other funds were $34.35 billion, an annual
increase of $1.45 billion or 4.41%.
1996-97 Fiscal Year
The State ended its 1996-97 fiscal year on March 31, 1997 in balance on a cash
basis, with a General Fund cash surplus as reported by DOB of approximately
$1.42 billion. The cash surplus was derived primarily from higher-than-expected
receipts and lower-than-expected spending for social services programs.
The General Fund closing balance was $433 million, an increase of $146 million
from the 1995-96 fiscal year. The balance included $317 million in the TSRF,
after a required deposit of $15 million and an additional deposit of $65 million
in 1996-97. In addition, $41 million remained on deposit in the CRF.
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The remaining $75 million reflected amounts then on deposit in the Community
Projects Fund. The General Fund closing balance did not include $1.86 billion in
the tax refund reserve account, of which $521 million was made available as a
result of the LGAC financing program and was required to be on deposit as of
March 31, 1997.
General Fund receipts and transfers from other funds for the 1996-97 fiscal year
totaled $33.04 billion, an increase of 0.7% from the previous fiscal year
(including net tax refund reserve account activity). General Fund disbursements
and transfers to other funds totaled $32.90 billion for the 1996-97 fiscal year,
an increase of 0.7 percent from the 1995-96 fiscal year.
1995-96 Fiscal Year
The State ended its 1995-96 fiscal year on March 31, 1996 with a General Fund
cash surplus, as reported by DOB, of $445 million. The cash surplus was derived
from higher-than-expected receipts, savings generated through agency cost
controls, and lower-than-expected welfare spending. The General Fund closing
fund balance was $287 million, an increase of $129 million from 1994-95 levels.
The $129 million change in fund balance is attributable to a $65 million
voluntary deposit to the TSRF, a $15 million required deposit to the TSRF, a $40
million deposit to the CRF, and a $9 million deposit to the Revenue Accumulation
Fund. The closing fund balance included $237 million on deposit in the TSRF. In
addition, $41 million was on deposit in the CRF. The remaining $9 million
reflected amounts then on deposit in the Revenue Accumulation Fund. The General
Fund closing balance did not include $678 million in the tax refund reserve
account of which $521 million was made available as a result of the LGAC
financing program and was required to be on deposit as of March 31, 1996.
General Fund receipts and transfers from other funds (including net refund
reserve account activity) totaled $32.81 billion, a decrease of 1.1% from
1994-95 levels. General Fund disbursements and transfers to other funds totaled
$32.68 billion for the 1995-96 fiscal year, a decrease of 2.2% from 1994-95
levels.
Year 2000 Compliance
New York State is currently addressing "Year 2000" data processing compliance
issues. The Year 2000 compliance issue ("Y2K") arises because most computer
software programs allocate two digits to the data field for "year" on the
assumption that the first two digits will be "19". Such programs will thus
interpret the year 2000 as the year 1900 absent reprogramming. Y2K could impact
both the ability to enter data into computer programs and the ability of such
programs to correctly process data.
In 1996, the State created the Office for Technology (OFT) to help address
statewide technology issues, including the Year 2000 issue. OFT has estimated
that investments of at least $140 million will be required to bring
approximately 350 State mission-critical and high-priority computer systems not
otherwise scheduled for replacement into Year 2000 compliance, and the State is
planning to spend $100 million in the 1998-99 fiscal year for this purpose.
Mission-critical computer applications are those which impact the health, safety
and welfare of the State and its citizens, and for which failure to be in Y2K
compliance could have a material and adverse impact upon State operations.
High-priority computer applications are those that are critical for a State
agency to fulfill its mission and delivery services, but for which there are
manual alternatives. Work has been completed on roughly 20% of these systems.
All remaining unfinished mission-critical and high-priority systems that at
least 40% or more of the work completed. Contingency planning is underway for
those systems which may be non-compliant prior to failure dates. The enacted
budget also continues funding for major systems scheduled for replacement,
including the State payroll, civil service, tax and finance and welfare
management systems, for which Year 2000 compliance is included as a part of the
Project.
OTF is monitoring compliance on a quarterly basis and is providing assistance
and assigning resources to accelerate compliance for mission-critical systems,
with most compliance testing expected to be completed by mid-1999. There can be
no guarantee, however, that all of the State's mission-critical and
high-priority computer systems will be Year 2000 complaint and that there will
not be an adverse impact upon State operations or State Finances as a result.
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Certain Litigation
The legal proceedings noted below involve State finances and programs and
miscellaneous civil rights, real property, contract and other tort claims in
which the State is a defendant and the potential monetary claims sought against
the State are substantial, generally in excess of $100 million. These
proceedings could adversely affect the financial condition of the State in the
1998-99 fiscal year or thereafter. Among the more significant of these cases are
those that involve: (i) the validity of agreements and treaties by which various
Indian tribes transferred to New York title to certain land in New York; (ii)
certain aspects of New York's Medicaid rates and regulations, including
reimbursements to providers of mandatory and optional Medicaid services, and the
eligibility for and nature of home care services; (iii) challenges to provisions
of Section 2807-d of the Public Health Law, which impose a tax on the gross
receipts hospitals and residential health care facilities receive from all
patient care services; (iv) alleged responsibility of New York officials to
assist in remedying racial segregation in the City of Yonkers; (v) challenges to
the regulations promulgated by the Superintendent of Insurance that established
excess medical malpractice premium rates; (vi) a case challenging the shelter
allowance granted to recipients of public assistance as insufficient for proper
housing; (vii) an action against the Governor of the State of New York
challenging the Governor's application of his constitutional line item veto
authority to certain portions of budget bills; and (viii) a case calling for the
enforcement of the provisions of Articles 12-A, 20 and 28 as applicable to
taxation on motor fuel and tobacco products sold to non-Indian consumers on
Indian reservations. In addition, aspects of petroleum business taxes are the
subject of administrative claims and litigation.
The City of New York
The fiscal health of the State may be affected by the fiscal health of New York
City ("the City"), which continues to receive significant financial assistance
from the State. The City depends on State aid both to enable the City to balance
its budget and to meet its cash requirements. The State may also be affected by
the ability of the City and certain entities issuing debt for the benefit of the
City to market their securities successfully in the public credit markets.
The City has achieved balanced operating results for each of its fiscal years
since 1981 as measured by the GAAP standards in force at that time. The City
prepares a four-year financial plan ("Financial Plan") annually and updates it
periodically, and prepares a comprehensive annual financial report describing
its most recent fiscal year each October. For current information on the City's
Financial Plan and its most recent financial disclosure, contact the Office of
the Comptroller, Municipal Building, Room 517, One Centre Street, New York, NY
10007, Attention: Deputy Comptroller for Public Finance.
In response to the City's fiscal crisis in 1975, the State took action to assist
the City in returning to fiscal stability. Among those actions, the State
established NYC MAC to provide financing assistance to the City; the New York
State Financial Control Board (the "Control Board") to oversee the City's
financial affairs; and the Office of the State Deputy Comptroller for the City
of New York ("OSDC") to assist the Control Board in exercising its powers and
responsibilities. A "control period" existed from 1975 to 1986 during which the
City was subject to certain statutorily-prescribed fiscal controls. Although the
Control Board terminated the Control Period in 1986 when certain statutory
conditions were met and suspended certain Control Board powers, upon the
occurrence or "substantial likelihood and imminence" of the occurrence of
certain events, including (but not limited to) a City operating budget deficit
of more than $100 million or impaired access to the public credit markets, the
Control Board is required by law to reimpose a Control Period.
Currently, the City and its Covered Organizations (i.e., those organizations
which receive or may receive moneys from the City directly, indirectly or
contingently) operate under the Financial Plan. The City's Financial Plan
summarizes its capital, revenue and expense projections and outlines proposed
gap-closing programs for years with projected budget gaps. The City's
projections set forth in the Financial Plan are based on various assumptions and
contingencies, some of which are uncertain and may not materialize. Unforeseen
developments and changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and to meet its
annual cash flow and financing requirements.
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Implementation of the Financial Plan is also dependent upon the ability of the
City and certain Covered Organizations to market their securities successfully.
The City issues securities to finance, refinance and rehabilitate infrastructure
and other capital needs, as well as for seasonal financing needs. In 1997, the
State created the New York City Transitional Finance Authority (TFA) to finance
a portion of the City's capital program because the City was approaching its
State Constitutional general debt limit. Without the additional financing
capacity of the TFA, projected contracts for City capital projects would have
exceeded the City's debt limit during City fiscal year 1997-98. Despite this
additional financing mechanism, the City currently projects that, if no further
action is taken, it will reach its debt limit in City fiscal year 1999-2000. On
June 2, 1997, an action was commenced seeking a declaratory judgment declaring
the legislation establishing the TFA to be unconstitutional. On November 25,
1997 the State Supreme Court found the legislation establishing the TFA to be
constitutional and granted the defendants' motion for summary judgment. The
plaintiffs have appealed the decision. Future developments concerning the City
or entities issuing debt for the benefit of the City, and public discussion of
such developments, as well as prevailing market conditions and securities credit
ratings, may affect the ability or cost to sell securities issued by the City or
such entities and may also affect the market for their outstanding securities.
Other Localities
Certain localities outside New York City have experienced financial problems and
have requested and received additional State assistance during the last several
State fiscal years. The cities of Yonkers and Troy continue to operate under
State-ordered control agencies. The potential impact on the State of any future
requests by localities for additional oversight or financial assistance is not
included in the projections of the State's receipts and disbursements for the
State's 1998-99 fiscal year.
Eighteen municipalities received extraordinary assistance during the 1996
legislative session through $50 million in special appropriations targeted for
distressed cities and 28 municipalities received more than $32 million in
targeted unrestricted aid in the 1997-98 budget. Both of these emergency aid
packages were largely continued through the 1998-99 budget. The State also
dispersed an additional $21 million among all cities, towns and villages after
enacting a 3.9% increase in General Purpose State Aid in 1997-98 and continued
this increase in 1998-99.
The 1998-99 budget includes an additional $29.4 million in unrestricted aid
targeted to 57 municipalities across the State. Other assistance for
municipalities with special needs totals more than $25.6 million. Twelve upstate
cities will receive $24.2 million in one-time assistance from a cash flow
acceleration of State aid.
The appropriation and allocation of general purpose local government aid among
localities, including New York City, is currently the subject of investigation
by a State commission. While the distribution of general purpose local
government aid was originally based on a statutory formula, in recent years both
the total amount appropriated and the amounts appropriated to localities have
been determined by the Legislature. A State commission was established to study
the distribution and amounts of general purpose local government aid and
recommend a new formula by June 30, 1999, which may change the way aid is
allocated.
Municipalities and school districts have engaged in substantial short-term and
long-term borrowings. In 1996, the total indebtedness of all localities in the
State other than New York City was approximately $20.0 billion. A small portion
(approximately $77.2 million) of that indebtedness represented borrowing to
finance budgetary deficits and was issued pursuant to State enabling
legislation. State law requires the Comptroller to review and make
recommendations concerning the budgets of those local government units other
than New York City authorized by State law to issue debt to finance deficits
during the period that such deficit financing is outstanding. Twenty-one
localities had outstanding indebtedness for deficit financing at the close of
their fiscal year ending in 1996.
Like the State, local governments must respond to changing political, economic
and financial influences over which they have little or no control. Such changes
may adversely affect the financial condition of certain local governments. For
example, the federal government may reduce (or in some cases
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eliminate) federal funding of some local programs which, in turn, may require
local governments to fund these expenditures from their own resources. It is
also possible that the State, New York City, or any of their respective public
authorities may suffer serious financial difficulties that could jeopardize
local access to the public credit markets, which may adversely affect the
marketability of notes and bonds issued by localities within the State.
Localities may also face unanticipated problems resulting from certain pending
litigation, judicial decisions and long-range economic trends. Other large-scale
potential problems, such as declining urban populations, increasing
expenditures, and the loss of skilled manufacturing jobs, may also adversely
affect localities and necessitate State assistance.
Authorities
The fiscal stability of the State is related in part to the fiscal stability of
its public authorities. Public authorities are not subject to the constitutional
restrictions on the incurrence of debt which apply to the State itself and may
issue bonds and notes within the amounts and restrictions set forth in
legislative authorization. The State's access to the public credit markets could
be impaired and the market price of its outstanding debt may be materially and
adversely affected if any of its public authorities were to default on their
respective obligations, particularly those using the financing techniques
referred to as State-supported or State-related debt. As of December 31, 1997,
there were 17 public authorities that had outstanding debt of $100 million or
more, and the aggregate outstanding debt, including refunding bonds, of all
State Public Authorities was $84 billion, only a portion of which constitutes
State-supported or State-related debt.
Beginning in 1998, the Long Island Power Authority (LIPA) assumed responsibility
for the provision of electric utility services previously provided by Long
Island Lighting Company for Nassau, Suffolk and a portion of Queen Counties, as
part of an estimated $7 billion financing plan. As of the date of this AIS, LIPA
has issued over $5 billion in bonds secured solely by ratepayer charges.
LIPA's debt is not considered either State-supported or State-related debt.
The Metropolitan Transit Authority (the "MTA") oversees the operation of subway
and bus lines in New York City by its affiliates, the New York City Transit
Authority and Manhattan and Bronx Surface Transit Operating Authority
(collectively, the "TA"). The MTA operates certain commuter rail and bus
services in the New York Metropolitan area through MTA's subsidiaries, the Long
Island Rail Road Company, the Metro-North Commuter Railroad Company, and the
Metropolitan Suburban Bus Authority. In addition, the Staten Island Rapid
Transit Operating Authority, an MTA subsidiary, operates a rapid transit line on
Staten Island. Through its affiliated agency, the Triborough Bridge and Tunnel
Authority (the "TBTA"), the MTA operates certain intrastate toll bridges and
tunnels. Because fare revenues are not sufficient to finance the mass transit
portion of these operations, the MTA has depended on, and will continue to
depend on, operating support from the State, local governments and TBTA,
including loans, grants and subsidies. If current revenue projections are not
realized and/or operating expenses exceed current projections, the TA or
commuter railroads may be required to seek additional State assistance, raise
fares or take other actions.
Since 1980, the State has enacted several taxes -- including a surcharge on
the profits of banks, insurance corporations and general business corporations
doing business in the 12-county Metropolitan Transportation Region served by the
MTA and a special one-quarter of 1 percent regional sales and use tax -- that
provide revenue for mass transit purposes, including assistance to the MTA.
Since 1987 State law has required that the proceeds of a one-quarter of 1%
mortgage recording tax paid on certain mortgages in the Metropolitan
Transportation Region be deposited in a special MTA fund for operating or
capital expenses. In 1993, the State dedicated a portion of certain additional
State petroleum business tax receipts to fund operating or capital assistance to
the MTA. For the 1998-99 State fiscal year, total State assistance to the MTA is
projected to total approximately $1.3 billion, an increase of $133 million over
the 1997-98 fiscal year.
State legislation accompanying the 1996-97 adopted State budget authorized
the MTA, TBTA and TA to issue an aggregate of $6.5 billion in bonds to finance a
portion of a new $12.17 billion MTA capital plan for the 1995 through 1999
calendar years (the "1995-99 Capital Program"). In July 1997, the Capital
Program Review Board ("CPRB") approved the 1995-99 Capital Program (subsequently
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amended in August 1997), which supercedes the overlapping portion of the MTA's
1992-96 Capital Program. This is the fourth capital plan since the Legislature
authorized procedures for the adoption, approval and amendment of MTA capital
programs and is designed to upgrade the performance of the MTA's transportation
systems by investing in new rolling stock, maintaining replacement schedules for
existing assets and bringing the MTA system into a state of good repair. The
1995-99 Capital Program assumes the issuance of an estimated $5.2 billion in
bonds under this $6.5 billion aggregate bonding authority. The remainder of the
plan is projected to be financed through assistance from the State, the federal
government, and the City of New York, and from various other revenues generated
from actions taken by the MTA.
There can be no assurance that all the necessary governmental actions for
future capital programs will be taken, that funding sources currently identified
will not be decreased or eliminated, or that the 1995-99 Capital Program, or
parts thereof, will not be delayed or reduced. Should funding levels fall below
current projections, the MTA would have to revise its 1995-99 Capital Program
accordingly. If the 1995-99 Capital Program is delayed or reduced ridership and
fare revenues may decline, which could, among other things, impair the MTA's
ability to meet its operating expenses without additional assistance.
Risk Factors Affecting the Ohio Fund
As described above under "Ohio Taxes" and except to the extent investments
are in temporary investments, the Ohio Fund will invest most of its net assets
in securities issued by or on behalf of (or in certificates of participation in
lease-purchase obligations of) the State of Ohio, political subdivisions of the
State, or agencies or instrumentalities of the State or its political
subdivisions (Ohio Obligations). The Ohio Fund is therefore susceptible to
general or particular economic, political or regulatory factors that may affect
issuers of Ohio Obligations. The following information constitutes only a brief
summary of some of the many complex factors that may have an effect. The
information does not apply to "conduit" obligations on which the public issuer
itself has no financial responsibility. This information is derived from
official statements of certain Ohio issuers published in connection with their
issuance of securities and from other publicly available information, and is
believed to be accurate. No independent verification has been made of any of the
following information.
Generally, the creditworthiness of Ohio Obligations of local issuers is
unrelated to that of obligations of the State itself, and the State has no
responsibility to make payments on those local obligations.
There may be specific factors that at particular times apply in connection
with investment in particular Ohio Obligations or in those obligations of
particular Ohio issuers. It is possible that the investment may be in particular
Ohio Obligations, or in those of particular issuers, as to which those factors
apply. However, the information below is intended only as a general summary, and
is not intended as a discussion of any specific factors that may affect any
particular obligation or issuer.
General. Ohio is the seventh most populous state. The 1990 Census count of
10,847,000 indicated a 0.5% population increase from 1980. The Census estimate
for 1996 is 11,173,000.
While diversifying more into the service and other non-manufacturing areas,
the Ohio economy continues to rely in part on durable goods manufacturing
largely concentrated in motor vehicles and equipment, steel, rubber products and
household appliances. As a result, general economic activity, as in many other
industrially-developed states, tends to be more cyclical than in some other
states and in the nation as a whole. Agriculture is an important segment of the
economy, with over half the State's area devoted to farming and approximately
16% of total employment in agribusiness.
In prior years, the State's overall unemployment rate was commonly somewhat
higher than the national figure. For example, the reported 1990 average monthly
State rate was 5.7%, compared to the 5.5% national figure. However, for the last
seven years the State rates were below the national rates (4.6% versus 4.9% in
1997). The unemployment rate and its effects vary among geographic areas of the
State.
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There can be no assurance that future national, regional or state-wide
economic difficulties, and the resulting impact on State or local government
finances generally, will not adversely affect the market value of Ohio
Obligations held in the Ohio Fund or the ability of particular obligors to make
timely payments of debt service on (or lease payments relating to) those
Obligations.
State Finances. The State operates on the basis of a fiscal biennium for its
appropriations and expenditures, and is precluded by law from ending its July 1
to June 30 fiscal year (FY) or fiscal biennium in a deficit position. Most State
operations are financed through the General Revenue Fund (GRF), for which the
personal income and sales-use taxes are the major sources. Growth and depletion
of GRF ending fund balances show a consistent pattern related to national
economic conditions, with the ending FY balance reduced during less favorable
and increased during more favorable economic periods. The State has
well-established procedures for, and has timely taken, necessary actions to
ensure resource/expenditure balances during less favorable economic periods.
Those procedures included general and selected reductions in appropriations
spending.
The 1992-93 biennium presented significant challenges to state finances,
successfully addressed. To allow time to resolve certain budget differences, an
interim appropriations act was enacted effective July 1, 1991; it included GRF
debt service and lease rental appropriations for the entire biennium, while
continuing most other appropriations for a month. Pursuant to the general
appropriations act for the entire biennium passed on July 11, 1991, $200 million
was transferred from the Budget Stabilization Fund (BSF, a cash and budgetary
management fund) to the GRF in FY 1992.
Based on updated results and forecasts in the course of that FY, both in
light of a continuing uncertain nationwide economic situation, there was
projected and then timely addressed, an FY 1992 imbalance in GRF resources and
expenditures. In response, the Governor ordered most State agencies to reduce
GRF spending in the last six months of FY 1992 by a total of approximately $184
million; the $100.4 million BSF balance, and additional amounts from certain
other funds, were transferred late in the FY to the GRF; and adjustments were
made in the timing of certain tax payments.
A significant GRF shortfall (approximately $520 million) was then projected
for FY 1993. It was addressed by appropriate legislative and administrative
actions, including the Governor's ordering $300 million in selected GRF spending
reductions and subsequent executive and legislative action (a combination of tax
revisions and additional spending reductions). The June 30, 1993 ending GRF fund
balance was approximately $111 million, of which, as a first step to
replenishment, $21 million was deposited in the BSF.
None of the spending reductions were applied to appropriations needed for
debt service or lease rentals relating to any State obligations.
The 1994-95 biennium presented a more affirmative financial picture. Based
on June 30, 1994 balances, an additional $260 million was deposited in the BSF.
The biennium ended June 30, 1995 with a GRF ending fund balance of $928 million,
of which $535.2 million was transferred into the BSF. The significant GRF fund
balance, after leaving in the GRF an unreserved and undesignated balance of $70
million, was transferred to the BSF and other funds including school assistance
funds and, in anticipation of possible federal program changes, a human services
stabilization fund.
From a higher than forecast 1996-97 mid-biennium GRF fund balance, $100
million was transferred for elementary and secondary school computer network
purposes and $30 million to a new State transportation infrastructure fund.
Approximately $400.8 million served as a basis for temporary 1996 personal
income tax reductions aggregating that amount. The 1996-97 biennium-ending GRF
fund balance was $834.9 million. Of that, $250 million went to school building
construction and renovation, $94 million to the school computer network, $44.2
million for school textbooks and instructional materials and a distance learning
program, and $34 million to the BSF and, the $263 million balance to a State
income tax reduction fund.
The GRF Appropriations Act for the 1998-99 biennium was passed on June 25,
1997 and signed (after selective vetoes) by the Governor. All necessary GRF
appropriations for State debt service and
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lease rental payments then projected for the biennium were included in that act.
Subsequent legislation increased the fiscal 1999 GRF appropriation level for
elementary and secondary education, with the increase to be funded in part by
mandated small percentage reductions in State appropriations for various State
agencies and institutions. Expressly exempt from those reductions are all
appropriations for debt service, including lease rental payments.
The BSF had a December 2, 1998 balance of over $906 million.
Debt. The State's incurrence or assumption of debt without a vote of the
people is, with limited exceptions, prohibited by current State constitutional
provisions. The State may incur debt, limited in amount to $750,000, to cover
casual deficits or failures in revenues or to meet expenses not otherwise
provided for. The Constitution expressly precludes the State from assuming the
debts of any local government or corporation. (An exception is made in both
cases for any debt incurred to repel invasion, suppress insurrection or defend
the State in war.)
By 14 constitutional amendments, approved from 1921 to date (the latest
adopted in 1995) Ohio voters authorized the incurrence of State debt and the
pledge of taxes or excises to its payment. At December 2, 1998, $1.12 billion
(excluding certain highway bonds payable primarily from highway use receipts) of
this debt was outstanding. The only such State debt at that date still
authorized to be incurred were portions of the highway bonds, and the following:
(a) up to $100 million of obligations for coal research and development may be
outstanding at any one time ($26.7 million outstanding); (b) $240 million of
obligations previously authorized for local infrastructure improvements, no more
than $120 million of which may be issued in any calendar year (over $1 billion
outstanding) and (c) up to $200 million in general obligation bonds for parks,
recreation and natural resources purposes which may be outstanding at any one
time ($85.1 million outstanding, with no more than $50 million to be issued in
any one year.
The electors in 1995 approved a constitutional amendment extending the
local infrastructure bond program (authorizing an additional $1.2 billion of
State full faith and credit obligations to be issued over 10 years for the
purpose), and authorizing additional highway bonds (expected to be payable
primarily from highway use receipts). The latter supersedes the prior $500
million outstanding authorization, and authorizes not more than $1.2 billion to
be outstanding at any time and not more than $220 million to be issued in a
fiscal year.
The Constitution also authorizes the issuance of State obligations for
certain purposes, the owners of which do not have the right to have excises or
taxes levied to pay debt service. Those special obligations include obligations
issued by the Ohio Public Facilities Commission and the Ohio Building Authority,
and certain obligations issued by the State Treasurer, over $5.2 billion of
which were outstanding or awaiting delivery at December 2, 1998.
The State estimates that aggregate FY 1998 rental payments under various
capital lease and lease purchase agreements were approximately $9.1 million. In
recent years, State agencies have also participated in transportation and office
building projects that may have some local as well as State use and benefit, in
connection with which the State enters into lease purchase agreements with terms
ranging from 7 to 20 years. Certificates of participation, or special obligation
bonds of the State or local agency, are issued that represent fractionalized
interests in or are payable from the State's anticipated payments. The State
estimates highest future FY payments under those agreements (as of December 2,
1998) to be approximately $27.3 million (of which $23.6 million is payable from
sources other than the GRF, such as federal highway money distributions). State
payments under all those agreements are subject to biennial appropriations, with
the lease terms being two years subject to renewal if appropriations are made.
A 1990 constitutional amendment authorizes greater State and political
subdivision participation (including financing) in the provision of housing. The
General Assembly may for that purpose authorize the issuance of State
obligations secured by a pledge of all or such portion as it authorizes of State
revenues or receipts (but not by a pledge of the State's full faith and credit).
A 1994 constitutional amendment pledges the full faith and credit and
taxing power of the State to
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meeting certain guarantees under the State's tuition credit program which
provides for purchase of tuition credits, for the benefit of State residents,
guaranteed to cover a specified amount when applied to the cost of higher
education tuition. (A 1965 constitutional provision that authorized student loan
guarantees payable from available State moneys has never been implemented, apart
from a "guarantee fund" approach funded essentially from program revenues).
State and local agencies issue obligations that are payable from revenues
from or relating to certain facilities (but not from taxes). By judicial
interpretation, these obligations are not "debt" within constitutional
provisions. In general, payment obligations under lease-purchase agreements of
Ohio public agencies (in which certificates of participation may be issued) are
limited in duration to the agency's fiscal period, and are renewable only upon
appropriations being made available for the subsequent fiscal period.
Debt Rating. State tax-supported bonds are currently rated (uninsured) "Aa1
by Moody's, "AAA" (highway obligations) and "AA+" by S&P, and "AA+" by Fitch,
and outstanding uninsured State bonds issued by the Ohio Public Facilities
Commission and Ohio Building Authority (and the lease-rental bonds issued by the
Treasurer) are rated "Aa3" by Moody's and "AA-" by S&P and Fitch.
Schools and Municipalities. Local school districts in Ohio receive a major
portion (state-wide aggregate approximately 44% in recent years) of their
operating moneys from State subsidies, but are dependent on local property
taxes, and in approximately 119 districts as of December 2, 1998 from
voter-authorized income taxes, for significant portions of their budgets.
Litigation, similar to that in other states, has been pending questioning the
constitutionality of Ohio's system of school funding. The Ohio Supreme Court has
concluded that aspects of the system (including basic operating assistance and
the loan program referred to below) are unconstitutional, and ordered the State
to provide for and fund a system complying with the Ohio Constitution, staying
its order to permit time for responsive corrective actions. The parties await
eventual trial court decision on the adequacy of steps taken to date by the
State to enhance school funding consistent with the Supreme Court taken to date
by the State to enhance school funding consistent with the Supreme Court
decision. A small number of the State's 612 local school districts have in any
year required special assistance to avoid year-end deficits. A program has
provided for school district cash need borrowing directly from commercial
lenders, with diversion of State subsidy distributions to repayment if needed.
Recent borrowings under this program totaled FY $71.1 million for 29 districts
in FY 1995 (including $29.5 million for one), $87.2 million for 20 districts in
FY 1996 (including $42.1 million for one), $113 million for 12 districts in
FY1997 (including $90 million to one for restructuring its prior loans), and
$23.4 million for 10 districts in FY 1998
Ohio's 943 incorporated cities and villages rely primarily on property and
municipal income taxes for their operations. With other subdivisions, they also
receive local government support and property tax relief moneys distributed by
the State.
For those few municipalities and school districts that on occasion have
faced significant financial problems, there are statutory procedures for a joint
State/local commission to monitor the fiscal affairs and for development of a
financial plan to eliminate deficits and cure any defaults. (Similar procedures
have recently been extended to counties and townships.) Since inception for
municipalities in 1979, these "fiscal emergency" procedures have been applied to
26 cities and villages; for 19 of them the fiscal situation was resolved and the
procedures terminated (two cities are in preliminary "fiscal watch" status). As
of December 2, 1998, a 1996 school district "fiscal emergency" provision was
applied to 6 districts, and 10 were on preliminary "fiscal watch" status.
Property Taxes. At present the State itself does not levy ad valorem taxes
on real or tangible personal property. Those taxes are levied by political
subdivisions and other local taxing districts. The Constitution has since 1934
limited to 1% of true value in money the amount of the aggregate levy (including
a levy for unvoted general obligations) of property taxes by all overlapping
subdivisions, without a vote of the electors or a municipal charter provision,
and statutes limit the amount of that aggregate levy to 10 mills per $1 of
assessed valuation (commonly referred to as the "ten-mill limitation"). Voted
general obligations of subdivisions are payable from property taxes that are
unlimited as to amount or rate.
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Litigation. According to recent State official statements, the State is a
party to various legal proceedings seeking damages or injunctive or other relief
and generally incidental to its operations. The ultimate disposition of those
proceedings is not determinable.
Risk Factors Effecting the Oregon Fund
The following information is a summary of special factors affecting the
Oregon Fund. It does not purport to be a complete description and is based in
part on (i) the December 1998 Oregon Economic and Revenue Forecast prepared by
the Oregon Department of Administrative Services, and (ii) a June 4, 1998
Official Statement prepared by the Oregon State Department of Administrative
Services for the issue of Certificates of Participation, 1998 Series A.
Economic Review and Forecast
Summary of Recent Trends. Oregon's economy grew very little in the third
quarter. The state's job growth was below the national average for the second
consecutive quarter. Employment growth was the slowest in Oregon since the
1990-91 recession. The state economy is clearly feeling the effects of the Asian
recessions. High technology manufacturing, forest products, and agriculture have
all been slowed by declining exports to Asia.
The preliminary estimate for third quarter Oregon job growth is 0.2%. This
compares with 2.0% for the U.S. as a whole. Oregon's personal income is
estimated to have grown 4.1% in the third quarter, slightly above the rate of
inflation. These numbers do not indicate that Oregon's economy is in recession.
However, they do show that the state economy came to a virtual standstill in the
third quarter.
The state's economy has grown over the past year. Nonfarm payroll jobs
increased by 39,600 between August 1997 and August 1998. This is a growth rate
of 2.6%. U.S. job growth over the same period is 2.7%. Oregon ranks number 16
among the states in job growth over the past year. Washington and California are
now growing faster than Oregon. Based on the August data, Washington ranks 6th
in job growth and California 8th.
Job growth has slowed among Oregon's major metropolitan areas over the past
year. The exception is Medford. The Medford metropolitan area (Jackson County)
added 2,400 jobs between August 1997 and August 1998. This is a growth rate of
3.6%. Medford's job growth rate ranked 42nd among the nation's 286 metropolitan
areas. The Portland metropolitan area recorded a 2.7% job increase. Portland's
ranking among the metropolitan areas fell from 37th in August 1997 to 84th in
August 1998. The Salem and Eugene metropolitan areas both had an employment
increase of 2,300 jobs between August of 1997 and August 1998. Since the size of
these labor markets is almost identical, this resulted in a 1.7% increase for
both metropolitan areas. These figures are distorted upward because of the UPS
strike in the base period.
For 1998 as a whole, Oregon's job growth rate is estimated at 2.6%. This is
about even with the U.S. estimate of 2.5%. This compares with a 3.4% increase in
1997. Personal income growth is estimated at 5.1% in 1998. After adjustment for
inflation, income growth is estimated to be 4.2%. Inflation adjusted income rose
4.5% in 1997. Oregon's economic slowdown is rooted in the Asian financial
crisis. Oregon's largest economic base industries all have strong ties to Asian
markets. High technology, forest products and agriculture account for 85% of
Oregon produced goods that are exported. Total merchandise Oregon exports to
Asia declined 14.3% in the first six months of 1998. This is roughly equal to
the 15.3% decline in U.S. exports to Asia. The difference is that Asian exports
are far more important to Oregon's economy than they are for the U.S. as a
whole. This is the key reason why Oregon's growth rate has dropped below the
U.S. average over the past six months.
Oregon's weak third quarter job performance was anticipated in the
September forecast. The preliminary estimate for job growth is 0.2 percent
annualized rate. This is only slightly below the 0.9% September projection.
Manufacturing declined at a 5.3% rate, considerably more than the 1.8%
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projection. All non-manufacturing jobs increased at a 1.3% rate. This compares
with a forecast of 1.4% growth.
Oregon's leading high technology manufacturing industry declined in the
third quarter. Hurt by weak Asian markets and general excess capacity, Oregon's
electronics industry reduced employment at a 7.3% annual rate in the third
quarter. This is the first quarterly job loss in this industry since the first
quarter of 1991. High technology jobs overall, fell at a 7.6% rate in the third
quarter.
The timber industry also posted losses in the third quarter. Lumber and
wood products employment declined at a 9.0% rate. Employment in Oregon's paper
products industry decreased at a 9.1% rate. U.S. softwood lumber exports during
the first six months of the year were 41% below a year ago. Lumber prices have
declined. The Random Lengths composite lumber price index stood at $326 per
thousand feet in September. This compares with $393 in September of 1997.
Overall manufacturing declined at a 5.3% annual rate in the third quarter.
This is the worst quarterly job loss for Oregon manufacturers since the second
quarter of 1991. Job reductions went well beyond timber and high technology to
include nearly all of the state's manufacturing industries. The one notable
exception is transportation equipment. Employment in that industry rose at a
17.1% annual rate in the third quarter.
The impact of the Asian financial crisis and declining commodity prices on
agriculture shows only indirectly in the job data. The biggest effect is on
farmer's income. OEA estimates that farm proprietor's net income will fall 7.9%
in 1998.
Double digit employment gains of the mid-1990's are clearly over. However,
construction employment increased at a 3.3% seasonally adjusted rate in the
third quarter. A key reason for stability in the construction sector is the
housing market. Low mortgage rates and high affordability have sustained
Oregon's long housing expansion. Housing starts are estimated to total 25,200
for 1998.
Oregon's service-producing sectors managed a small net job gain in the
third quarter. For the service sector as a whole, employment increased at a 1.2%
rate. The largest percentage increase occurred in health services, state
government and financial services. The state's large service sector, exclusive
of health, added jobs at a 2.7% annual rate.
Overall trade employment fell slightly. Wholesale trade jobs inched up 0.2%
while retail trade jobs slipped 0.4%. Third quarter job losses were recorded in
transportation services, communications and utilities, and local government.
Overview of Short Term Outlook. Oregon's Office of Economic Analysis ("OEA")
expects Oregon's economy to remain weak through 1999. A decline in overall
economic activity is not expected unless the U.S. goes into recession. Further
job losses are anticipated in the state's export dependent sectors. These losses
will work through the state's economy slowing income growth and job gains in the
service-producing sectors.
OEA expects the state's 1999 measures of general economic activity to be
the weakest since 1991. Employment growth is projected to be 1.3% for the year.
Personal income is forecast to rise 4.0%. U.S. jobs and income are expected to
rise 2.0% and 4.2%, respectively. If this forecast is realized it would mark the
first year since 1985 that Oregon's economy has grown slower than the U.S. as a
whole.
The December forecast assumes further declines in Oregon exports to Asia.
Asian economic recoveries are not expected until the end of 1999. Canada
replaced Japan as the state's largest export market in the second quarter.
However, the Canadian economy is also expected to soften in response to weak
Asian markets and lower natural resource prices.
Oregon's high technology sector is in its first downturn since its massive
expansion in the mid-1990's. OEA defines high technology to include electronics,
non-electrical machinery and instruments. This industry grouping is expected to
reduce employment by 3.3% in 1999. The largest industry in this
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group is electronics. The electronics industry added 16,600 jobs between 1992
and 1997. It is expected to reduce employment by 1,600 in 1999. This is a 4.6
percent decline.
Weak foreign markets and intense foreign competition cloud the short-term
outlook for Oregon's timber industry. Lumber and wood products jobs are expected
to decline 4.3% in 1999. This follows an estimated loss of 3.0% in 1998. A $3.83
billion board foot statewide timber harvest is anticipated in 1999. This
compares with an estimated 1998 harvest of $3.89 billion board feet.
Oregon's construction sector is expected to decline in 1999. This follows a
five-year period of extraordinary growth in construction activity. Construction
jobs are projected to fall 2.2% in 1999. Housing starts are expected to total
23,100 in 1999. This is a decline of 8.3% from the 1998 estimate.
Forecast Changes. The OEA December forecast calls for slightly less
employment and income growth in Oregon. Projected 1999 employment is 0.2% less
than the previous forecast. Nominal personal income growth is slightly less than
the previous forecast. The level of personal income is considerably less. This
is due to a new definition used by the U.S. Department of Commerce. The new
definition excludes capital gains distributions from mutual funds.
The high technology employment forecast is down significantly from the
September forecast. The sharper than expected decline in the third quarter is
the primary reason behind the lower forecast. The high technology employment
forecast for 1999 is revised down 2,600 or 3.8%.
OEA has also revised the housing start forecast significantly. The December
forecast still calls for a decline in housing activity in 1999. However, the
forecast assumes a higher sustainable level of housing starts. This change is
due to the factors pushing up housing starts at the national level. These
factors are discussed in the national section. They are high affordability and
low interest rates, the tendency toward second homes and favorable income tax
law changes. Potential Oregon homeowners will clearly benefit from low interest
rates. However, affordability in Oregon is less than the national average. The
reason is the rapid run-up in home prices throughout the decade.
Personal Income Components. Oregon wages will get a boost from the third
and final step of the minimum wage increase passed by voters in 1996. The
minimum wage in Oregon will be $6.50 on January l, 1999. Despite the increase,
average wage growth is expected to equal its 1998 pace of 3.7%.
Manufacturing wage growth slowed in 1998. Wage growth dropped from 6.8% in
1997 to an estimated 6.3% in 1998. Manufacturing wages are expected to slow
significantly in 1999. They are projected to increase 4.0%. A key reason behind
the slowdown is a reduction in worker bonuses. Bonuses in the high technology
sector have boosted Oregon's wage growth in recent years. However, lower profits
among the state's major high tech employers mean smaller bonuses in 1999.
Service wage growth is slowing despite the effects of the minimum wage
increase. Wage growth in the service-producing sectors slowed from 5.0% in 1997
to an estimated 3.3% in 1998. The overall slowdown in the state economy is a
factor reducing wage growth. Another factor is the group of industries used for
this calculation. It includes construction. Construction wages tend to be high.
Rapid growth in this sector has pushed up this wage measure in recent years.
Construction employment flattened in 1998. This will tend to reduce the growth
in this definition of service wages.
Total wage and salary income is expected to increase 5.0% in 1999. This
compares with estimated growth of 6.4% in 1998.
Nonfarm proprietor's income should grow at a slower rate due to generally
weaker economic conditions in the state. It is forecast to increase 3.5% in
1999. This compares with an estimated increase of 6.4% in 1998. Farm
proprietor's income is expected to rise from depressed 1998 levels. This is
based on the assumption that commodity prices will firm and begin rising next
year.
Lower short-term interest rates mean less growth for dividend, rent and
interest income. The net effect of lower interest rates is positive for the
state economy. However, lower rates reduce income
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growth from savings. Retirees are most affected by the income side of changing
interest rates. Dividend interest and rent income is forecast to rise only 0.9%
in 1999. This follows estimated growth of 2.4% in 1998.
The slower economy should modestly boost transfer income growth. Transfer
payments are projected to increase 5.5% in 1999. This is up from 3.9% growth in
1998.
Goods-Producing Sectors. Pulled down by declines in high technology and
forest products, Oregon's manufacturing sector is likely to contract in 1999.
The December forecast projects a loss of 4,400 jobs. This is a decline of 1.8%.
Outside of high-technology and forest products, employment losses are
anticipated in the metals and food processing industries. Job gains are forecast
for transportation equipment and instruments. OEA expects mining employment to
hold steady at 1,800.
Service-Producing Sector. All of Oregon job growth in 1999 will likely take
place in the state's service-producing sectors. These sectors will respond to
slower but continued growth in consumer spending.
Payroll employment in the state's trade sector is expected to rise modestly
in 1999. Retail trade jobs are projected to increase 2.0%. Wholesale trade
employment growth is pegged at 1.9%.
Growth in business services should fuel an increase in the state's service
sector. Service sector employment, exclusive of health, is forecast to increase
3.0% in 1999. Health service employment is expected to grow 2.4%. A decline in
housing activity should slow job growth in the financial service sector.
Financial service employers are expected to increase payrolls by 1.9% in 1999.
This is down from an estimated 2.4% increase in 1998.
The state's transportation, communication and utilities sector is expected
to continue a pattern of very modest growth. Jobs are projected to rise 0.4% in
1999. This follows growth of 1.5% in 1998.
OEA anticipates overall government job growth of 2.0% in 1999. Federal jobs
are expected to decline 1.7%. This would mark the seventh consecutive year of
declining federal government jobs in Oregon. State government is expected to
expand payrolls by 2.0%. Local government employment is forecast to rise 2.6%.
The most rapidly growing component of local government is tribal employment.
Forecast Risks. The primary risk to the Oregon economy is a national
recession. Oregon would be especially hard hit if the national recession were
caused by further deterioration of the Asian economies. A recession would
trigger further employment losses across Oregon's manufacturing industries. This
would likely cause a contraction in overall employment in the state.
Oregon's economy is also vulnerable to a sharper than expected decline in
net in-migration. Both Washington and California are now growing faster than
Oregon. If the gap increases, net-migration into Oregon could drop
significantly. This would slow growth further in the state's construction and
service-producing sectors.
Extended Outlook. OEA believes Oregon's economic growth rate will move back
above the national average in 2000. It is expected to remain a relatively high
growth state through 2005. The key factors expected to fuel stronger growth in
2000 are:
1. Export rebound. Asia's economies are expected to begin recovering in
2000. Higher growth rates should return in the 2000 to 2005 period. Oregon
exporters will also benefit from the trend toward a lower valued dollar.
2. Recovery in the semiconductor industry. Excess capacity in the industry
should begin to ease by late 1999. A resumption of growth in Oregon's high
technology manufacturing sector is expected to follow. Announced long-term
investment plans by major companies are expected to be carried out during
the 2000 to 2005 period. New investment from suppliers to the industry is
also anticipated.
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3. Rising commodity prices. The slump in agriculture and natural resource
prices is expected to be turning around by 2000. This will spur higher
income and job growth for Oregon's large agriculture and natural resource
sectors.
With the exception of the 1980's, Oregon has been a high growth state
throughout most of the post World War II period. The state has now returned to
roughly the same proportion of the U.S. economy it was in 1979. OEA believes
that Oregon's share of the U.S. economy will grow over the long-term. The
state's advantageous location, large high technology industry presence and
skilled labor force are the primary factors leading to this conclusion.
Oregon has not made up the per capita income ground lost relative to the
national average in the 1980's. The state hovered near the national average
until the 1980's. It then fell about 10 % below. It regained roughly half of the
lost ground between 1990 and 1997. Following a slight retrenchment in 1998 and
1999, the forecast calls for slow progress toward the national average.
Litigation
The following summary of litigation relates to matters as to which the
State of Oregon is a party and as to which the State of Oregon has indicated
that the individual claims against the State exceed $5 million. Other litigation
may exist with respect to individual municipal issuers as to which the State of
Oregon is not a party, but which, if decided adversely, could have a materially
adverse effect on the financial condition of the individual municipal issuer.
Alsea Veneer, Inc., et al. v. State of Oregon, et al. and BC Roofing Co.,
Inc., et al. v. State of Oregon, et al. Two companion class actions were filed
in September 1988 by Workers' Compensation policyholders insured by the State
Accident Insurance Fund Corporation ("SAIF"). The plaintiffs sought damages
based on the Oregon Legislative Assembly's 1983 transfer of $81 million in
surplus reserves from the Industrial Accident Fund to the State General Fund
under Oregon Laws 1982 (Special Session 3), chapter 2. Because both cases were
brought on behalf of the same class of employer-policyholders, the combined
maximum claims in both cases could not exceed $81 million, plus interest and
attorney fees.
On November 19, 1993, the Oregon Supreme Court issued an opinion ruling
against the State and holding that the State must return to the Industrial
Accident Fund the $81 million that the legislature transferred to the General
Fund. The Supreme Court remanded the case to the trial court to fashion a decree
based on evidence of what SAIF would have done with the money if the money had
been available to SAIF. On remand, the trial court ordered the State to return
the $81 million to SAIF, with interest at the rate Industrial Accident Fund
investments have earned since July 1, 1982. Initial estimates indicated that the
amount of principal and interest owing under the court's ruling would be
approximately $280 million.
The parties drafted a proposed settlement agreement which the court approved
on February 26, 1996. Under the agreement, the State is obligated to pay a total
of $225 million. Of that amount, $145 million has been paid. $80 million must be
paid at the end of the 1999 legislative session. If the State fails to
appropriate the required amounts, the State will be in breach of the agreement
and subject to additional court action from the plaintiffs.
Taxation of Federal Retiree Pension Benefits. Several cases have been filed
in the Oregon Tax Court and the State Circuit Courts challenging whether a 1991
increase in Public Employees Retirement System ("PERS") benefits to offset State
taxation of the PERS benefits violates a holding by the United States Supreme
Court in Davis v. Michigan Dept. of Treasury. The Davis case holds that State
statutes may not provide disparate tax treatment of state and federal pension
benefits. At this time there is no estimate of the potential impact of liability
under this case to the State General Fund. However, the Oregon Supreme Court
upheld a ruling by the Oregon Tax Court in one of the cases, Ragsdale v. Dept.
of Revenue, that the increase in PERS benefits did not violate the Davis holding
and is constitutional. Plaintiffs filed a petition for review with the U.S.
Supreme Court of the Oregon Supreme Court's decision. The U.S. Supreme Court
denied review in the Ragsdale case and in a related case Atkins v.
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Department of Revenue.
A recent Oregon Supreme Court opinion in Vogl v. Department of Revenue held
that the provisions of Oregon Laws 1995, Chapter 569 (an enactment of the 1995
Legislative Assembly which provided a remedy in the form of increased benefit
payments to affected PERS members) extends a tax rebate to PERS retirees that,
under the principle of intergovernmental tax immunity, discriminates against
federal retirees. The opinion in Vogl distinguished its opinion in Ragsdale
based on the different statutory amendments made by the Legislative Assembly in
1991 and 1995. The opinion also did not order any particular legislative remedy
for the discrimination held by it to exist. It held only that the 1995
legislative "fix" was impermissible. There is no estimate at this time of the
potential liability of the State to federal retirees based on the Vogl opinion.
Bibeau v. Pacific NW Research. This is a federal court class action suit
that has been brought on behalf of inmates and their families for injuries the
inmates sustained in radiation experiments to which the inmates were subjected
in the 1960s and 1970s. The former head of medical services for the Oregon State
Police is named as one of the defendants in the suit. The plaintiffs seek $250
million in damages; although it is unlikely that they will recover the full
amount sought, it is too early to provide an accurate measure of the damages
which plaintiffs may reasonably recover at this stage of the case. The State has
tendered its defense to the insurance company that provided coverage to the
State in the relevant time frame. Defenses based on statutes of limitation and
ultimate repose were asserted on behalf of the State. The court granted the
State's motion for summary judgment and dismissed the case based on the statute
of limitations. The plaintiffs have appealed the trial court's decision to the
Ninth Circuit Court of Appeals.
Kinross Copper Corp. v. State. An inverse condemnation case has been filed
against the State which involves the denial of a permit by the State's
Environmental Quality Commission ("EQC"). The Kinross Copper Corporation
acquired land for the purpose of mining copper. As part of the mining
operations, the company intended to dig a huge pit for which a waste water
discharge permit is required. The EQC denied the company's request for a permit
based upon an administrative rule that prohibits the issuance of a waste water
discharge permit in the area where the copper mine would be located because of
the area's proximity to a river that supplies drinking water for the City of
Salem, Oregon and other communities. The company alleges a "taking" by the State
of the company's property and damages of $32 million as the amount of money it
would have earned if the company had been granted a permit and allowed to
operate a mine. The State asserts that because the administrative rule
prohibiting the issuance of a permit in the relevant area was in effect at the
time the company purchased its property, there can be no "taking." The trial
court ruled in favor of the State's motion for summary judgment. However, the
plaintiff has appealed that decision to the Oregon Court of Appeals. The State
believes that it will prevail and will not receive any damages based upon the
EQC's denial of the permit.
Young v. State. A class action complaint has been filed against the State
on behalf of a class of 3,000 State managerial employees for unpaid overtime or
compensation time. It is too early in the case to know the exact amount of
potential liability. Initial estimates were that the liability would probably
exceed $1 million but be less than $5 million. Revised estimates are that the
liability could be as high as $11 million. Plaintiffs' claims are based on a
legislative change that occurred in the 1995 Oregon legislative session. The
Legislative Assembly amended the statutes relating to the payment of overtime or
allowing compensation time to require that all persons who work over 40 hours
per week receive overtime or compensation time. There were a number of
exceptions to this requirement drafted for professionals. However, State
managerial employees were not included in the express statutory exceptions. The
Legislative Assembly enacted an exemption that would cover State employees in
its 1997 session. Therefore, liability may only be imposed for the period
between 1995 and 1997. The state circuit court for Marion County ruled in favor
of the State on its motion for summary judgment. The plaintiffs have appealed
the decision to the Oregon Court of Appeals.
Pancorp Counterclaim. The State filed an action against its financial
advisors related to a guaranty by the Oregon Public Employees Retirement Fund
(the "Fund") of $50 million in bonds issued by the Port of Portland for the
construction of an aircraft maintenance facility at the Portland airport. When
the operation of the facility failed, the Fund paid under the guaranty and took
possession of the facility. The
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State seeks to recover for the losses suffered by the Fund from the financial
advisors. The defendant advisors have filed a third party complaint against the
Oregon State Treasury, Department of Justice and Oregon Investment Council
seeking recovery of any damages that the defendants may have to pay to the Fund.
If the defendant prevails, liability would probably be imposed against the State
general fund. Recent newspaper reports indicate that this litigation has been
concluded by a settlement pursuant to which little or no damages were imposed on
the State. There are also several pro se cases on the docket in which plaintiffs
representing themselves are suing the State for many millions of dollars. The
possibility of having to pay anything in any of these cases is negligible. The
Department of Administrative Services is not at this time a party to any
litigation which would have a material adverse effect on the ability of the
State to appropriate Available Funds under the Loan Agreement to pay the 1998
Series A Certificates.
Pro Se Cases. There are also several pro se cases on the docket in which
plaintiffs representing themselves are suing the State for many millions of
dollars. The possibility of having to pay anything in any of these cases is
negligible.
Taxation on Timber Harvest. Two cases have been filed in the Oregon Tax
Court challenging the constitutionality of the state's privilege tax on the
harvesting of timber. The state imposes a harvest tax at one rate for timber cut
east of the Cascade mountains and imposes a higher rate for timber cut west of
the Cascade mountains. Plaintiff contend (i) that the difference between the
eastern and western tax rates is unconstitutionally discriminatory and (ii) that
the harvest privilege tax is in reality a form of property tax that should be
subject to constitutional limits placed on the amount of property taxes. If the
plaintiffs prevail, the State would be required to refund the unconstitutional
amount of tax paid from the year in which the complaint was filed to the date of
the decision declaring the tax unconstitutional. The State estimates that it
would take approximately three years for both cases to be decided by the Oregon
Tax Court and the Oregon Supreme Court. Therefore, in the event of an adverse
ruling, the State would be potentially liable for three years of refund. If the
required refund amount were for the entire amount of the tax, initial estimates
are that the refund amount would range between $34 to $37 million per year. The
State believes it is unlikely that the entire amount of the tax would be
required to be refunded. If the court declares only the part of the western tax
that exceeds the eastern tax to be unconstitutional, initial estimates are that
the refund liability would range between $14 to $15 million per year. If the
court declares the tax subject to the constitutional property tax limitations,
initial estimates are that the refund liability would range between $19 and $21
million per year. The plaintiffs are expected to file an amended complaint in
the near future, at which time the State will file an answer in support of the
constitutionality of the tax.
Risk Factors Affecting the South Carolina Fund
The State of South Carolina has the power to issue general obligation bonds
based on the full faith and credit of the State. Political subdivisions are also
empowered to issue general obligation bonds, which are backed only by the full
faith and credit of that political subdivision, and not by the resources of the
State of South Carolina or any other political subdivision. Political
subdivisions are empowered to levy ad valorem property taxes on real property
and certain personal property to raise funds for the payment of general
obligation bonds. General obligation debt may be incurred only for a public
purpose which is also a corporate purpose of the applicable political
subdivision.
Under Article X of the Constitution of the State of South Carolina, the
State may issue general obligation debt without either a referendum or a
supermajority of the General Assembly, within limits defined by reference to
anticipated sources of revenue for bonds issued for particular purposes. A
referendum or supermajority of the General Assembly may authorize additional
general obligation debt. Article X further requires the levy and collection of
an ad valorem tax if debt service payments on general obligation debt are not
made. Under Article X of the Constitution of the State of South Carolina,
political subdivisions are empowered to issue aggregate general obligation
indebtedness up to 8% of the assessed value of taxable property within the
political subdivision (exclusive of debt incurred before the effective date of
Article X with respect to such subdivisions) without a referendum. A referendum
may authorize additional general obligation debt. The ordinance or resolution
authorizing bonded debt of a political subdivision also directs the levy and
collection of ad valorem taxes to pay the debt. In addition,
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Article X of the South Carolina Constitution provides for withholding by the
State Treasurer of any state appropriations to a political subdivision which has
failed to make punctual payment of general obligation bonds. Such withheld
appropriations, to the extent available, may be applied to the bonded debt. A
statutory enactment provides for prospective application of state appropriations
for school district debt, if a failure of timely payment appears likely.
Political subdivisions are not generally authorized to assess income taxes, or
to pledge any form of tax other than ad valorem property taxes, for the payment
of general obligation bonds. Certain political subdivisions have been authorized
to impose a limited-duration 1% sales tax to defray the debt service on general
obligation bonds or to defray directly the cost of certain improvements.
Industrial development bonds and other forms of revenue bonds issued by the
State or a political subdivision are not secured by the full faith and credit of
the State or the issuing entity. Such bonds are payable only from revenues
derived from a specific facility or revenue source.
The State of South Carolina has not defaulted on its bonded debt since
1879. The State did, however, experience certain budgeting difficulties over
several recent fiscal years through June 30, 1993, resulting in mid-year
cutbacks in funding of state agencies in those years. The State has had budget
surpluses at each fiscal year end since June 30, 1994. Such difficulties have
not to date impacted on the State's ability to pay its indebtedness but did
result in S&P lowering its rating on South Carolina general obligation bonds
from AAA to AA+ on January 29, 1993. S&P restored the AAA rating on South
Carolina's general obligation bonds on July 9, 1996. South Carolina's general
obligation bonds are rated Aaa by Moody's. Such ratings apply only to the
general obligation bonded indebtedness of the State, and do not apply to bonds
issued by political subdivisions or to revenue bonds not backed by the full
faith and credit of the State.
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Appendix C
HISTORY OF J. & W. SELIGMAN & CO. INCORPORATED
Seligman's beginnings date back to 1837, when Joseph Seligman, the oldest
of eight brothers, arrived in the United States from Germany. He earned his
living as a pack peddler in Pennsylvania, and began sending for his brothers.
The Seligmans became successful merchants, establishing businesses in the South
and East.
Backed by nearly thirty years of business success - culminating in the sale
of government securities to help finance the Civil War - Joseph Seligman, with
his brothers, established the international banking and investment firm of J. &
W. Seligman & Co. In the years that followed, the Seligman Complex played a
major role in the geographical expansion and industrial development of the
United States.
The Seligman Complex:
...Prior to 1900
o Helps finance America's fledgling railroads through underwritings.
o Is admitted to the New York Stock Exchange in 1869. Seligman remained a
member of the NYSE until 1993, when the evolution of its business made it
unnecessary.
o Becomes a prominent underwriter of corporate securities, including New York
Mutual Gas Light Company, later part of Consolidated Edison.
o Provides financial assistance to Mary Todd Lincoln and urges the Senate to
award her a pension.
o Is appointed U.S. Navy fiscal agent by President Grant.
o Becomes a leader in raising capital for America's industrial and urban
development.
...1900-1910
o Helps Congress finance the building of the Panama Canal.
...1910s
o Participates in raising billions for Great Britain, France and Italy,
helping to finance World War I.
...1920s
o Participates in hundreds of successful underwritings including those for
some of the Country's largest companies: Briggs Manufacturing, Dodge
Brothers, General Motors, Minneapolis-Honeywell Regulatory Company, Maytag
Company, United Artists Theater Circuit and Victor Talking Machine Company.
o Forms Tri-Continental Corporation in 1929, today the nation's largest,
diversified closed-end equity investment company, with over $2 billion in
assets and one of its oldest.
...1930s
o Assumes management of Broad Street Investing Co. Inc., its first mutual
fund, today known as Seligman Common Stock Fund, Inc.
o Establishes Investment Advisory Service.
...1940s
o Helps shape the Investment Company Act of 1940.
o Leads in the purchase and subsequent sale to the public of Newport News
Shipbuilding and Dry Dock Company, a prototype transaction for the
investment banking industry.
o Assumes management of National Investors Corporation, today Seligman Growth
Fund, Inc.
o Establishes Whitehall Fund, Inc., today Seligman Income Fund, Inc.
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...1950-1989
o Develops new open-end investment companies. Today, manages more than 40
mutual fund portfolios.
o Helps pioneer state-specific, municipal bond funds, today managing a
national and 18 state-specific municipal funds.
o Establishes J. & W. Seligman Trust Company and J. & W. Seligman Valuations
Corporation.
o Establishes Seligman Portfolios, Inc., an investment vehicle offered
through variable annuity products.
...1990s
o Introduces Seligman Select Municipal Fund, Inc. and Seligman Quality
Municipal Fund, Inc. two closed-end funds that invest in high quality
municipal bonds.
o In 1991 establishes a joint venture with Henderson plc, of London, known as
Seligman Henderson Co., to offer global investment products.
o Introduces to the public Seligman Frontier Fund, Inc., a small
capitalization mutual fund.
o Launches Seligman Henderson Global Fund Series, Inc., which today offers
five separate series: Seligman Henderson International Fund, Seligman
Henderson Global Smaller Companies Fund, Seligman Henderson Global
Technology Fund, Seligman Henderson Global Growth Opportunities Fund and
Seligman Henderson Emerging Markets Growth Fund.
o Launches Seligman Value Fund Series, Inc., which currently offers two
separate series: Seligman Large-Cap Value Fund and Seligman Small-Cap Value
Fund.
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SELIGMAN
--------------
MUNICIPAL FUND [GRAPHIC OMITTED]
SERIES. INC.
ANNUAL REPORT
SEPTEMBER 30, 1998
---------
PROVIDING
INCOME EXEMPT
FROM REGULAR
INCOME
TAX
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
<PAGE>
SELIGMAN--TIMES CHANGE...VALUES ENDURE
J. & W. SELIGMAN & CO. INCORPORATED IS A FIRM WITH A LONG TRADITION OF
INVESTMENT EXPERTISE, OFFERING A BROAD ARRAY OF INVESTMENT CHOICES TO HELP
TODAY'S INVESTORS SEEK THEIR LONG-TERM FINANCIAL GOALS.
TIMES CHANGE...
Established in 1864, Seligman's history of providing financial services has been
marked not by fanfare, but rather by a quiet and firm adherence to financial
prudence. While the world has changed dramatically in the 134 years since
Seligman first opened its doors, the firm has continued to offer its clients
high-quality investment solutions through changing times.
In the late 19th century, as the country grew, Seligman helped finance the
westward expansion of the railroads, the construction of the Panama Canal, and
the launching of urban transit systems. In the first part of the 20th century,
as America became an industrial power, the firm helped fund the growing capital
needs of the nascent automobile and steel industries.
With the formation of Tri-Continental Corporation in 1929 -- today, the nation's
largest diversified publicly-traded closed-end investment company -- Seligman
began shifting its emphasis from investment banking to investment management.
Despite the stock market crash and ensuing depression, Seligman was convinced of
the importance that investment companies could have in building wealth for
individual investors and launched its first mutual fund in 1930.
In the decades that followed, Seligman has continued to offer forward-looking
investment solutions, including funds that focus on technology stocks, municipal
bonds, and international securities.
...VALUES ENDURE
Seligman is proud of its distinctive past and of the traditional values that
continue to shape the firm's business decisions and investment judgment. While
much has changed over the years, the firm's commitment to providing prudent
investment management that seeks to build wealth for clients over time is an
enduring value that will guide Seligman into the new millennium.
TABLE OF CONTENTS
To the Shareholders .................................... 1
Interview With Your Portfolio Manager .................. 2
Performance Overview and
Portfolio Summary .................................... 4
Portfolios of Investments .............................. 18
Statements of Assets and Liabilities ................... 38
Statements of Operations ............................... 40
Statements of Changes in Net Assets .................... 42
Notes to Financial Statements .......................... 46
Financial Highlights ................................... 51
Report of Independent Auditors ......................... 64
Board of Directors ..................................... 65
Executive Officers AND For More Information ............ 66
Glossary of Financial Terms ............................ 67
<PAGE>
TO THE SHAREHOLDERS
Seligman Municipal Fund Series posted strong results for its fiscal year ended
September 30, 1998. Although the growth of the US economy slowed from its record
pace, the expansion continued. Inflation and interest rates reached their lowest
levels in a quarter century, and unemployment was at its lowest level since
1970.
Despite ongoing strength in the US, economic turmoil spread throughout the rest
of the world. The Asian financial crisis worsened, Japan failed to resolve its
banking problems, Russia's economy became chaotic, and economic crises loomed
throughout much of Latin America, particularly in Brazil. Fears of risk in
nearly all types of financial assets drove investors out of the equity markets
and into the relative safety and quality of investments such as US Treasury
bonds, often a haven from a turbulent stock market. This "flight to quality"
helped create a more attractive environment for municipal bonds.
Major factors influencing the market for municipal bonds over the year were the
prolonged Treasury bond rally and heavy issuance of municipal securities.
Municipal bond holders fared well as interest rates generally declined over this
time period. Nonetheless, the performance of the municipal market lagged that of
the Treasury bond market, as investors focused on quality because of concerns
about financial instability. Treasury bond prices rose sharply over the 12-month
period, sending yields significantly lower. At one point in the period, selected
municipal obligations traded at the same yield as Treasuries, even though
municipals offered more favorable tax treatment. Currently, long-term municipal
bonds have not been this attractive, relative to long-term Treasuries, since
1986, when proposed legislation threatened the tax-exempt status of municipal
securities.
Looking ahead, we see the favorable climate for municipal bonds continuing. Low
inflation and a growing economy should serve to protect the value of municipal
investments. Fewer new issues may be entering the market, which could tighten
the supply/demand balance. This could improve overall total rate-of-return
prospects. Also, although the US economy continues to grow, this growth is
slowing, and the global situation is forcing the Federal Reserve into a more
benign strategy on interest rates. The Fed has already cut short-term rates
twice, and we expect more cuts until a semblance of international stability
emerges. Finally, the municipal market's record of safety and stability offers
further appeal to investors in these more troubled times, especially as equity
market volatility continues.
All in all, we feel the investment attractiveness of municipals remains
compelling. In this period of global economic uncertainty and low interest
rates, municipals are an appropriate alternative for those investors with
suitable investment requirements.
As you may know, companies are modifying their computer systems to recognize
dates of January 1, 2000, and beyond. This is often referred to as the "Y2K"
problem. Unless systems are updated, many applications may interpret the last
two digits of the year to mean 1900 instead of 2000. J. & W. Seligman & Co.
Incorporated, the Seligman Investment Companies, and Seligman Data Corp., your
shareholder service agent, have jointly established a team to ensure that your
investment and shareholder services are not disrupted. This team is supported by
consulting firms specializing in Y2K solutions. Substantial work has been
performed to date, and we are confident that when our plans are finalized and
all systems are tested, there will be no disruption in the services provided by
your Fund.
Thank you for your continued support of Seligman Municipal Fund Series. We look
forward to serving your investment needs in the many years to come. A discussion
with your Portfolio Manager, performance overviews, portfolio holdings, and
financial statements follow this letter.
By order of the Board of Directors,
/s/ William C. Morris
- ---------------------
William C. Morris
Chairman
/s/ Brian T. Zino
-----------------------
Brian T. Zino
President
October 30, 1998
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INTERVIEW WITH YOUR PORTFOLIO MANAGER
Q. WHAT ECONOMIC FACTORS INFLUENCED SELIGMAN MUNICIPAL FUND SERIES IN THE LAST
12 MONTHS?
A. The continuing combination of low inflation, low unemployment, and steady
economic growth throughout the past 12 months sustained what became one of
the nation's longest peacetime economic expansions. This contributed to the
overall improvement of the financial condition of America's states, cities,
and municipalities. Over the past year, credit rating upgrades significantly
outnumbered rating downgrades. These upgrades enhanced the overall
creditworthiness of the municipal marketplace.
But, by the end of the fiscal year, there was widespread expectation that
the US may be unable to avoid the economic slowdown that has already gripped
much of the world. While many economists were calling a recession unlikely,
the fact that they were including its potential in their forecasts implied
that the ongoing domestic economic expansion would not continue. In the
final months of the fiscal year, turmoil in world markets began to
contribute to a modest slowdown in the pace of US economic growth, and
prevented an acceleration in the rate of inflation. In September, the
Federal Reserve Board lowered the federal funds rate by one-quarter of one
percent. With a warning that growing fear among investors and lenders was
threatening the nation's economic expansion, the Fed unexpectedly cut
interest rates again in October, the first time in four and a half years
that the central bank had changed interest-rate policy outside one of its
normally scheduled meetings. This unusual timing suggested that the Fed
believed that the domestic economy is beginning to deteriorate as the
worldwide financial crisis gains momentum, and that a credit shortage may be
developing that could further curb growth. Fed officials have hinted that
more interest-rate reductions will ensue if the global financial turmoil
escalates. Declining US equity markets reflected these fears, as investors
sold stocks in favor of the relative safety and quality of US Treasury
bonds, which are often considered a haven from a volatile stock market.
Q. WHAT MARKET FACTORS INFLUENCED SELIGMAN MUNICIPAL FUND SERIES IN THE LAST 12
MONTHS?
A. Overall, Seligman Municipal Fund Series ended its fiscal year on a positive
note. During the period, long-term municipal yields fluctuated within a
narrow range, decreasing by almost one-half of a point. The declining
interest-rate environment led to rising prices for the majority of holdings
and competitive performance results for each Series' net asset value.
[GRAPHIC OMITTED]
SELIGMAN MUNICIPAL TEAMS: (FROM LEFT) AUDREY KUCHTYAK, THERESA BARION, DEBRA
McGUINNESS, (SEATED) EILEEN COMERFORD, THOMAS G. MOLES (PORTFOLIO MANAGER)
A TEAM APPROACH SELIGMAN MUNICIPAL FUND SERIES IS MANAGED BY THE SELIGMAN
MUNICIPALS TEAM, HEADED BY THOMAS G. MOLES. MR. MOLES IS ASSISTED IN THE
MANAGEMENT OF THE FUND BY A GROUP OF SEASONED PROFESSIONALS WHO ARE RESPONSIBLE
FOR RESEARCH AND TRADING CONSISTENT WITH THE SERIES' INVESTMENT OBJECTIVE.
2
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGER
THOMAS G. MOLES
However, the municipal market underperformed the US Treasury market during
the 12-month period. The ongoing strength in the economy over the year
caused the supply of Treasury bonds to shrink, as the federal government
needed to borrow less after running its first budget surplus in 29 years.
But, the solid economy and low interest rates caused the supply of municipal
bonds to grow. The net reduction in Treasury financing and the increasing
municipal bond issuance was compounded by the increased investor demand for
Treasuries. These factors caused the decline in Treasury yields to
significantly outpace the drop in municipal yields. Because of these
factors, long-term municipal bonds have not been as attractive, relative to
long-term Treasuries, since 1986, when proposed tax legislation threatened
the tax-exempt status of municipal securities.
Q. WHAT WAS YOUR INVESTMENT STRATEGY?
A. Throughout the 12-month period, the long-term interest rate outlook was
positive, and Seligman Municipal Fund Series was positioned to benefit from
the declining interest-rate environment. The Seligman Municipals Team
engaged in duration-extension trades, selling shorter-term holdings and
replacing them with long-term, current-coupon bonds. Current-coupon bonds
have coupon rates that are at or near current market rates. Generally, when
long-term bond yields decline, the prices appreciate more than those of
shorter-term bonds.
During the past 12 months, we also improved the call protection of the
portfolios. As the bonds within the portfolio mature, older holdings
approach their optional call dates (a callable bond can be redeemed by the
issuer, prior to maturity, on specified dates and at predetermined prices).
Declining interest rates increase the risk that these bonds will be called
by the issuer. The lower interest-rate environment over the 12-month period
prompted many municipal issuers to retire outstanding, higher-coupon debt.
Additionally, as a direct result of the significant increase in refunding
volume, many of the portfolio's holdings were advance-refunded, which had a
positive impact on performance. In general, when a municipal bond is
refunded, total return performance is improved, and the bond's rating is
often upgraded.
Q. WHAT IS YOUR OUTLOOK?
A. Long-term municipal yields have fallen to levels not seen in many years.
Municipal securities continue to offer a significant yield advantage
compared to the after-tax returns of other fixed-income investments.
Further, as the yield spread between municipal and Treasury bonds
normalizes, municipal market performance should improve, relative to the
Treasury market. Finally, the municipal market's record of safety and
stability may become more appealing as volatility persists in the US equity
markets. Consequently, we remain optimistic about the long-term prospects
for the municipal bond market, and for Seligman Municipal Fund Series.
3
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
The following charts compare a $10,000 hypothetical investment made in each
Series of Seligman Municipal Fund Series Class A shares, with and without the
initial 4.75% maximum sales charge, for the 10-year period ended September 30,
1998, to a $10,000 hypothetical investment made in the Lehman Brothers Municipal
Bond Index (Lehman Index) for the same period. The performance of each Series of
Seligman Municipal Fund Series Class D shares is not shown in the charts but is
included in the table below each chart. It is important to keep in mind that the
Lehman Index does not include any fees or sales charges, and does not reflect
state-specific bond market performance. The table below each chart also includes
relevant portfolio characteristics for each Series.
SELIGMAN NATIONAL MUNICIPAL SERIES
[GRAPHIC OMITTED]
[Table below reflect plotting points for line chart]
DATE With Load Without Load Lehman**
9/30/88 9,526 10,000 10,000
9,794 10,281 10,185
9,885 10,377 10,252
10,476 10,998 10,859
9/30/89 10,347 10,862 10,867
10,756 11,291 11,284
10,684 11,216 11,335
10,964 11,510 11,600
9/30/90 10,771 11,307 11,607
11,382 11,948 12,107
11,578 12,154 12,381
11,824 12,412 12,645
9/30/91 12,305 12,917 13,136
12,688 13,319 13,578
12,657 13,286 13,619
13,162 13,816 14,136
9/30/92 13,393 14,059 14,511
13,688 14,369 14,775
14,381 15,096 15,323
14,944 15,688 15,824
9/30/93 15,536 16,309 16,359
15,617 16,394 16,588
14,336 15,049 15,677
14,423 15,141 15,851
9/30/94 14,320 15,033 15,959
14,064 14,763 15,729
15,224 15,981 16,841
15,613 16,390 17,247
9/30/95 15,964 16,758 17,744
16,891 17,731 18,475
16,524 17,346 18,251
16,636 17,464 18,392
9/30/96 17,077 17,926 18,815
17,453 18,322 19,295
17,355 18,218 19,250
18,016 18,912 19,914
9/30/97 18,682 19,611 20,516
19,264 20,223 21,072
19,493 20,463 21,314
19,781 20,765 21,638
9/30/98 20,363 21,376 22,302
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------------------------------------
CLASS D
SIX ONE FIVE 10 SINCE INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge (0.54)% 3.81% 4.55% 7.37% n/a
Without Sales Charge 4.46 9.00 5.56 7.89 n/a
CLASS D**
With 1% CDSC 2.87 6.76 n/a n/a n/a
Without CDSC 3.87 7.76 n/a n/a 4.57%
LEHMAN INDEX*** 4.64 8.71 6.40 8.35 6.29++
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1998
</TABLE>
<TABLE>
<CAPTION>
9/30/98 3/31/98 9/30/97 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
------- ------- ------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A $8.32 $8.16 $8.01 Class A $0.394 -- 3.86%
Class D 8.31 8.16 8.02 Class D 0.319 -- 3.16
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
Revenue Bonds 81% Aaa/AAA 38% A/A 21%
General Obligation Bonds 19 Aa/AA 29 Baa/BBB 12
</TABLE>
WEIGHTED AVERAGE MATURITY 24.7 years
- ----------
See footnotes on page 16.
4
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN COLORADO MUNICIPAL SERIES
[GRAPHIC OMITTED]
[Table below reflect plotting points for line chart]
DATE With Load Without Load Lehman**
9/30/88 9,528 10,000 10,000
9,813.95 10,299.64 10,185
9,917.61 10,408.43 10,252
10,474.22 10,992.58 10,859
9/30/89 10,452.21 10,969.48 10,867
10,799.09 11,333.52 11,284
10,734.07 11,265.29 11,335
10,984.95 11,528.58 11,600
9/30/90 10,909.81 11,449.72 11,607
11,344.18 11,905.6 12,107
11,533.33 12,104.1 12,381
11,743.36 12,324.51 12,645
9/30/91 12,126.35 12,726.46 13,136
12,410.18 13,024.34 13,578
12,382.81 12,995.61 13,619
12,793.04 13,426.14 14,136
9/30/92 13,065.18 13,711.74 14,511
13,361.95 14,023.2 14,775
13,805.63 14,488.84 15,323
14,248.54 14,953.67 15,824
9/30/93 14,703.19 15,430.82 16,359
14,846.95 15,581.7 16,588
14,123.24 14,822.16 15,677
14,249.19 14,954.35 15,851
9/30/94 14,273.9 14,980.28 15,959
14,085.74 14,782.8 15,729
14,979.21 15,720.49 16,841
15,236.82 15,990.85 17,247
9/30/95 15,495.22 16,262.03 17,744
16,052.56 16,846.95 18,475
15,862.52 16,647.51 18,251
16,025.26 16,818.31 18,392
9/30/96 16,232.1 17,035.38 18,815
16,596.37 17,417.68 19,295
16,574.53 17,394.77 19,250
17,015.93 17,858.01 19,914
9/30/97 17,416.77 18,278.7 20,516
17,844.68 18,727.78 21,072
18,034.86 18,927.37 21,314
18,300.18 19,205.82 21,638
9/30/98 18,814 19,745 22,302
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
---------------------------------------------------------
CLASS D
SIX ONE FIVE 10 SINCE INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge (0.58)% 2.89% 4.03% 6.52% n/a
Without Sales Charge 4.32 8.03 5.05 7.04 n/a
CLASS D**
With 1% CDSC 2.70 5.90 n/a n/a n/a
Without CDSC 3.70 6.90 n/a n/a 3.89%
LEHMAN INDEX*** 4.64 8.71 6.40 8.35 6.29++
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1998
</TABLE>
<TABLE>
<CAPTION>
9/30/98 3/31/98 9/30/97 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
------- ------- ------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $7.64 $7.50 $7.42 CLASS A $0.360 -- 3.80%
CLASS D 7.63 7.50 7.42 CLASS D 0.291 -- 3.09
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C>
REVENUE BONDS 81% AAA/AAA 49%
GENERAL OBLIGATION BONDS 19 AA/AA 25
A/A 12
WEIGHTED AVERAGE MATURITY 21.3 years Baa/BBB 14
</TABLE>
- ------------
See footnotes on page 16.
5
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN GEORGIA MUNICIPAL SERIES
[GRAPHIC OMITTED]
[Table below reflect plotting points for line chart]
DATE With Load Without Load Lehman**
9/30/88 9,530 1,0000 10,000
9,858.8 1,0345.47 10,185
9,951 1,0442.11 10,252
10,539.97 11,060.27 10,859
9/30/89 10,496.44 11,014.6 10,867
10,832.01 11,366.73 11,284
10,832.01 11,366.73 11,335
11,072.38 11,618.96 11,600
9/30/90 11,040.95 11,585.98 11,607
11,591.31 12,163.51 12,107
11,803.42 12,386.08 12,381
12,040.7 12,635.07 12,645
9/30/91 12,509.22 13,126.72 13,136
12,863.3 13,498.27 13,578
12,854.83 13,489.38 13,619
13,378.28 14,039 14,136
9/30/92 13,716 14,392.82 14,511
14,021.03 14,713.13 14,775
14,427.52 15,139.68 15,323
14,915.7 15,651.95 15,824
9/30/93 15,630.27 16,401.79 16,359
15,732.53 16,509.1 16,588
14,658.86 15,382.44 15,677
14,748.93 15,476.96 15,851
9/30/94 14,768 15,496.62 15,959
14,530.75 15,248 15,729
15,650.32 16,422.82 16,841
16,120.93 16,916.67 17,247
9/30/95 16,489.52 17,303.45 17,744
17,314.63 18,169.3 18,475
16,958.21 17,795.28 18,251
17,109.44 17,953.99 18,392
9/30/96 17,571.95 18,439.32 18,815
17,983.71 18,871.42 19,295
17,833.25 18,713.54 19,250
18,519.79 19,433.96 19,914
9/30/97 19,091.39 20,033.77 20,516
19,605.21 20,572.95 21,072
19,826.96 20,805.64 21,314
20,153.91 21,148.73 21,638
9/30/98 20,702 21,724 22,302
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------------------------------------
CLASS D
SIX ONE FIVE 10 SINCE INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge (0.55)% 3.35% 4.76% 7.55% n/a
Without Sales Charge 4.41 8.44 5.78 8.07 n/a
CLASS D**
With 1% CDSC 2.94 6.59 n/a n/a n/a
Without CDSC 3.94 7.59 n/a n/a 4.90%
LEHMAN INDEX*** 4.64 8.71 6.40 8.35 6.29++
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1998
</TABLE>
<TABLE>
<CAPTION>
9/30/98 3/31/98 9/30/97 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
------- ------- ------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $8.38 $8.21 $8.12 CLASS A $0.375 $0.032 3.69%
CLASS D 8.40 8.23 8.13 CLASS D 0.301 0.032 2.99
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C>
Revenue Bonds 66% Aaa/AAA 43%
General Obligation Bonds 34 Aa/AA 36
A/A 18
WEIGHTED AVERAGE MATURITY 18.6 years Baa/BBB 3
</TABLE>
- --------
See footnotes on page 16.
6
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN LOUISIANA MUNICIPAL SERIES
[GRAPHIC OMITTED]
[Table below reflect plotting points for line chart]
DATE With Load Without Load Lehman**
9/30/88 9,523 10,000 10,000
9,732.81 10,220.08 10,185
9,848.63 10,341.7 10,252
10,380.93 10,900.65 10,859
9/30/89 10,383.79 10,903.65 10,867
10,719.31 11,255.97 11,284
10,721.19 11,257.94 11,335
10,984.21 11,534.15 11,600
9/30/90 10,923.82 11,470.73 11,607
11,455.08 12,028.59 12,107
11,695.72 12,281.27 12,381
11,939.1 12,536.84 12,645
9/30/91 12,397.93 13,018.63 13,136
12,758.92 13,397.71 13,578
12,744.2 13,382.26 13,619
13,268.39 13,932.7 14,136
9/30/92 13,529.88 14,207.28 14,511
13,758.47 14,447.31 14,775
14,282.07 14,997.13 15,323
14,713.74 15,450.41 15,824
9/30/93 15,166.51 15,925.85 16,359
15,333.5 16,101.2 16,588
14,507.95 15,234.31 15,677
14,569.92 15,299.39 15,851
9/30/94 14,585.03 15,315.25 15,959
14,431.18 15,153.69 15,729
15,379.62 16,149.62 16,841
15,681.87 16,467.01 17,247
9/30/95 16,086.5 16,891.9 17,744
16,898.5 17,744.61 18,475
16,624.27 17,456.58 18,251
16,677.94 17,512.94 18,392
9/30/96 17,103.45 17,959.75 18,815
17,488 18,363.56 19,295
17,469.59 18,344.23 19,250
18,049.78 18,953.45 19,914
9/30/97 18,500.82 19,427.08 20,516
18,966.3 19,915.86 21,072
19,171.91 20,131.77 21,314
19,408.04 20,379.72 21,638
9/30/98 19,996 20,997 22,302
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------------------------------------------
CLASS D
SIX ONE FIVE 10 SINCE INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge (0.69)% 2.98% 4.66% 7.17% n/a
Without Sales Charge 4.30 8.08 5.68 7.70 n/a
Class D**
With 1% CDSC 2.82 6.11 n/a n/a n/a
Without CDSC 3.82 7.11 n/a n/a 4.61%
LEHMAN INDEX*** 4.64 8.71 6.40 8.35 6.29++
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1998
</TABLE>
<TABLE>
<CAPTION>
9/30/98 3/31/98 9/30/97 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
------- ------- ------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $8.51 $8.36 $8.28 CLASS A $0.407 $0.014 3.82%
CLASS D 8.50 8.35 8.27 CLASS D 0.331 0.014 3.11
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C>
Revenue Bonds 85% Aaa/AAA 78%
General Obligation Bonds 15 Aa/AA 14
Baa/BBB 8
WEIGHTED AVERAGE MATURITY 20.0 years
</TABLE>
- ----------
See footnotes on page 16.
7
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN MARYLAND MUNICIPAL SERIES
[GRAPHIC OMITTED]
[Table below reflect plotting points for line chart]
DATE With Load Without Load Lehman**
9/30/88 9,523 10,000 10,000
9,755 10,243 10,185
9,871 10,365 10,252
10,448 10,971 10,859
9/30/89 10,421 10,943 10,867
10,779 11,318 11,284
10,752 11,290 11,335
10,977 11,527 11,600
9/30/90 10,887 11,432 11,607
11,442 12,015 12,107
11,630 12,212 12,381
11,841 12,434 12,645
9/30/91 12,331 12,948 13,136
12,640 13,272 13,578
12,681 13,316 13,619
13,140 13,798 14,136
9/30/92 13,459 14,133 14,511
13,681 14,366 14,775
14,188 14,898 15,323
14,677 15,412 15,824
9/30/93 15,239 16,002 16,359
15,313 16,080 16,588
14,503 15,229 15,677
14,593 15,323 15,851
9/30/94 14,617 15,349 15,959
14,475 15,200 15,729
15,482 16,257 16,841
15,825 16,617 17,247
9/30/95 16,210 17,022 17,744
16,912 17,759 18,475
16,620 17,453 18,251
16,815 17,657 18,392
9/30/96 17,183 18,043 18,815
17,532 18,410 19,295
17,417 18,289 19,250
17,976 18,876 19,914
9/30/97 18,495 19,421 20,516
18,949 19,898 21,072
19,179 20,139 21,314
19,438 20,411 21,638
9/30/98 19,954 20,954 22,302
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
---------------------------------------------------------
CLASS D
SIX ONE FIVE 10 SINCE INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge (0.92)% 2.72% 4.52% 7.15% n/a
Without Sales Charge 4.04 7.89 5.54 7.68 n/a
Class D**
With 1% CDSC 2.69 5.91 n/a n/a n/a
Without CDSC 3.69 6.91 n/a n/a 4.59%
LEHMAN INDEX*** 4.64 8.71 6.40 8.35 6.29++
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1998
</TABLE>
<TABLE>
<CAPTION>
9/30/98 3/31/98 9/30/97 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
------- ------- ------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $8.32 $8.19 $8.14 CLASS A $0.395 $0.048 3.86%
CLASS D 8.33 8.19 8.15 CLASS D 0.321 0.048 3.15
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C>
Revenue Bonds 77% Aaa/AAA 43%
General Obligation Bonds 23 Aa/AA 38
A/A 17
WEIGHTED AVERAGE MATURITY 21.8 years Baa/BBB 2
</TABLE>
- ---------
See footnotes on page 16.
8
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN MASSACHUSETTS MUNICIPAL SERIES
[GRAPHIC OMITTED]
[Table below reflect plotting points for line chart]
DATE With Load Without Load Lehman**
9/30/88 9,525 10,000 10,000
9,716.55 10,201 10,185
9,765.6 10,252.61 10,252
10,343.83 10,859.68 10,859
9/30/89 10,304.4 10,818.29 10,867
10,558.88 11,085.44 11,284
10,556 11,082.46 11,335
10,775 11,312.65 11,600
9/30/90 10,560 11,086.62 11,607
11,130.86 11,685.94 12,107
11,463.16 12,034.83 12,381
11,730.29 12,315.27 12,645
9/30/91 12,232.45 12,842.47 13,136
12,574.71 13,201.8 13,578
12,645.32 13,275.93 13,619
13,123.25 13,777.69 14,136
9/30/92 13,425.45 14,094.96 14,511
13,716.21 14,400 14,775
14,210 14,918.62 15,323
14,723.31 15,457.53 15,824
9/30/93 15,194.58 15,952.32 16,359
15,296.89 16,059.74 16,588
14,579.3 15,306.38 15,677
14,698.91 15,431.93 15,851
9/30/94 147,47.79 15,483.25 15,959
146,18.99 15,348.02 15,729
15,520 16,294.06 16,841
15,810.25 16,598.68 17,247
9/30/95 16,160.94 16,966.86 17,744
16,840.83 17,680.65 18,475
16,549.23 17,374.51 18,251
16,726.63 17,560.75 18,392
9/30/96 17,125.04 17,979.03 18,815
17,537.45 18,412 19,295
17,399.28 18,266.93 19,250
17,989.8 18,886.9 19,914
9/30/97 18,514.12 19,437.36 20,516
19,059.03 20,009.44 21,072
19,313.65 20,276.76 21,314
19,612.26 20,590.27 21,638
9/30/98 20,328 21,342 22,302
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------------------------------------------
CLASS D
SIX ONE FIVE 10 SINCE INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge 0.26% 4.56% 4.96% 7.35% n/a
Without Sales Charge 5.25 9.80 5.99 7.88 n/a
CLASS D**
With 1% CDSC 3.78 7.68 n/a n/a n/a
Without CDSC 4.78 8.68 n/a n/a 5.00%
LEHMAN INDEX*** 4.64 8.71 6.40 8.35 6.29++
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1998
</TABLE>
<TABLE>
<CAPTION>
9/30/98 3/31/98 9/30/97 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
------- ------- ------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $8.27 $8.04 $7.99 CLASS A $0.380 $0.094 3.72%
CLASS D 8.26 8.03 7.99 CLASS D 0.307 0.094 3.02
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C> <C> <C>
Revenue Bonds 88% Aaa/AAA 60% Baa/BBB 5%
General Obligation Bonds 12 Aa/AA 28 Non-Rated 2
A/A 5
WEIGHTED AVERAGE MATURITY 22.5 years
</TABLE>
- ---------
See footnotes on page 16.
9
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN MICHIGAN MUNICIPAL SERIES
[GRAPHIC OMITTED]
[Table below reflect plotting points for line chart]
DATE With Load Without Load Lehman**
9/30/88 9,520 10,000 10,000
9,762 10,253 10,185
9,862 10,359 10,252
10,483 11,011 10,859
9/30/89 10,463 10,991 10,867
10,807 11,351 11,284
10,799 11,343 11,335
11,055 11,612 11,600
9/30/90 10,941 11,492 11,607
11,439 12,015 12,107
11,676 12,265 12,381
11,933 12,534 12,645
9/30/91 12,400 13,025 13,136
12,813 13,458 13,578
12,837 13,484 13,619
13,356 14,029 14,136
9/30/92 13,709 14,399 14,511
14,006 14,712 14,775
14,481 15,210 15,323
15,012 15,769 15,824
9/30/93 15,487 16,267 16,359
15,614 16,401 16,588
14,892 15,642 15,677
14,977 15,731 15,851
9/30/94 15,038 15,795 15,959
14,859 15,607 15,729
15,836 16,634 16,841
16,109 16,920 17,247
9/30/95 16,475 17,304 17,744
17,204 18,071 18,475
16,925 17,778 18,251
17,053 17,912 18,392
9/30/96 17,490 18,371 18,815
17,846 18,745 19,295
17,777 18,673 19,250
18,399 19,326 19,914
9/30/97 18,916 19,869 20,516
19,404 20,382 21,072
19,634 20,623 21,314
19,940 20,944 21,638
9/30/98 20,548 21,583 22,302
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
---------------------------------------------------------
CLASS D
SIX ONE FIVE 10 SINCE INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge (0.31)% 3.45% 4.80% 7.47% n/a
Without Sales Charge 4.66 8.63 5.82 8.00 n/a
Class D**
With 1% CDSC 3.19 6.66 n/a n/a n/a
Without CDSC 4.19 7.66 n/a n/a 4.76%
Lehman Index*** 4.64 8.71 6.40 8.35 6.29++
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1998
</TABLE>
<TABLE>
<CAPTION>
9/30/98 3/31/98 9/30/97 DIVIDENDS+ capital gain+ SEC YIELD++
------- ------- ------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $8.83 $8.64 $8.60 CLASS A $0.413 $0.074 3.76%
CLASS D 8.82 8.63 8.59 CLASS D 0.334 0.074 3.06
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C>
Revenue Bonds 78% Aaa/AAA 56%
General Obligation Bonds 22 Aa/AA 34
A/A 10
WEIGHTED AVERAGE MATURITY 21.7 years
</TABLE>
- ---------
See footnotes on page 16.
10
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN MINNESOTA MUNICIPAL SERIES
[GRAPHIC OMITTED]
[Table below reflect plotting points for line chart]
DATE With Load Without Load Lehman**
9/30/88 9,519 10,000 10,000
9,753.87 10,246.75 10,185
9,797.9 10,293.04 10,252
10,387.15 10,912.03 10,859
9/30/89 10,312.42 10,833.52 10,867
10,718.59 11,260.21 11,284
10,722 11,263.82 11,335
10,965.59 11,519.69 11,600
9/30/90 10,909.45 11,460.73 11,607
11,417.72 11,994.69 12,107
11,565.86 12,150.3 12,381
11,779.82 12,375.06 12,645
9/30/91 12,120 12,732.44 13,136
12,277.28 12,897.67 13,578
12,407.49 13,034.46 13,619
12,785.26 13,431.33 14,136
9/30/92 13,054.27 13,713.92 14,511
13,219.38 13,887.39 14775
13,762.71 14,458.16 15,323
14,282.38 15,004.09 15,824
9/30/93 14,759.49 15,505.32 16,359
15,002.26 15,760.36 16,588
14,517.49 15,251.1 15,677
14,620.72 15,359.54 15,851
9/30/94 14,776.66 15,523.36 15,959
14,621.5 15,360.38 15,729
15,352.49 16,128.29 16,841
15,637.43 16,427.63 17,247
9/30/95 15,900.95 16,704.47 17,744
16,289.3 17,112.44 18,475
16,095.31 16,908.65 18,251
16,228.13 17,048.18 18,392
9/30/96 16,535.26 17,370.82 18,815
16,841.41 17,692.45 19,295
16,836.9 17,687.71 19,250
17,239.31 18,110.45 19,914
9/30/97 17,667 18,559.75 20,516
18,023.44 18,934.2 21,072
18,194.93 19,114.35 21,314
18,445.64 19,377.72 21,638
9/30/98 19,023 19,984 22,302
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------------------------------------------
CLASS D
SIX ONE FIVE 10 SINCE INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge (0.41)% 2.54% 4.19% 6.64% n/a
Without Sales Charge 4.55 7.68 5.21 7.17 n/a
CLASS D**
With 1% CDSC 3.07 5.71 n/a n/a n/a
Without CDSC 4.07 6.71 n/a n/a 4.01%
LEHMAN INDEX*** 4.64 8.71 6.40 8.35 6.29++
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1998
</TABLE>
<TABLE>
<CAPTION>
9/30/98 3/31/98 9/30/97 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
------- ------- ------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $7.98 $7.82 $7.79 CLASS A $0.381 $0.009 4.01%
CLASS D 7.98 7.82 7.79 CLASS D 0.310 0.009 3.33
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C>
Revenue Bonds 49% Aaa/AAA 36%
General Obligation Bonds 51 Aa/AA 44
A/A 20
WEIGHTED AVERAGE MATURITY 19.1 years Caa/CCC --
</TABLE>
- -----------
See footnotes on page 16.
11
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN MISSOURI MUNICIPAL SERIES
[GRAPHIC OMITTED]
[Table below reflect plotting points for line chart]
DATE With Load Without Load Lehman**
9/30/88 9,530 10,000 10,000
9,840 10,325 10,185
9,888 10,376 10,252
10,457 10,973 10,859
9/30/89 10,420 10,933 10,867
10,769 11,300 11,284
10,763 11,293 11,335
11,047 11,592 11,600
9/30/90 10,989 11,531 11,607
11,515 12,083 12,107
11,738 12,317 12,381
12,012 12,605 12,645
9/30/91 12,485 13,100 13,136
12,824 13,456 13,578
12,827 13,459 13,619
13,304 13,960 14,136
9/30/92 13,468 14,131 14,511
13,754 14,432 14,775
14,222 14,923 15,323
14,717 15,442 15,824
9/30/93 15,242 15,993 16,359
15,322 16,077 16,588
14,386 15,096 15,677
14,468 15,182 15,851
9/30/94 14,503 15,218 15,959
14,354 15,062 15,729
15,403 16,162 16,841
15,684 16,458 17,247
9/30/95 16,051 16,842 17,744
16,787 17,615 18,475
16,457 17,269 18,251
16,648 17,468 18,392
9/30/96 17,056 17,897 18,815
17,410 18,269 19,295
17,279 18,131 19,250
17,844 18,724 19,914
9/30/97 18,370 19,275 20,516
18,817 19,745 21,072
18,983 19,918 21,314
19,326 20,279 21,638
9/30/98 19,915 20,897 22,302
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------------------------------------
CLASS D
SIX ONE FIVE 10 SINCE INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C> >
CLASS A**
With Sales Charge (0.06)% 3.26% 4.48% 7.13% n/a
Without Sales Charge 4.91 8.41 5.49 7.65 n/a
CLASS D**
With 1% CDSC 3.44 6.45 n/a n/a n/a
Without CDSC 4.44 7.45 n/a n/a 4.50%
Lehman Index*** 4.64 8.71 6.40 8.35 6.29++
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1998
</TABLE>
<TABLE>
<CAPTION>
9/30/98 3/31/98 9/30/97 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
------- ------- ------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $8.03 $7.83 $7.82 CLASS A $0.361 $0.065 3.74%
CLASS D 8.03 7.83 7.82 CLASS D 0.290 0.065 3.04
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C>
Revenue Bonds 83% Aaa/AAA 37%
General Obligation Bonds 17 Aa/AA 42
A/A 19
WEIGHTED AVERAGE MATURITY 20.7 years Baa/BBB 2
</TABLE>
- ----------
See footnotes on page 16.
12
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN NEW YORK MUNICIPAL SERIES
[GRAPHIC OMITTED]
[Table below reflect plotting points for line chart]
DATE With Load Without Load Lehman**
9/30/88 9,522 10,000 10,000
9,795.85 10,287.58 10,185
9,831.7 10,325.23 10,252
10,464.69 10,990 10,859
9/30/89 10,412.17 10,934.85 10,867
10,715.78 11,253.7 11,284
10,601.73 11,133.91 11,335
10,907.95 11,455.51 11,600
9/30/90 10,744.36 11,283.71 11,607
11,163 11,723.47 12,107
11,422.33 11,995.71 12,381
11,717.99 12,306.3 12,645
9/30/91 12,308.64 12,926.51 13,136
12,673.09 13,309.25 13,578
12,691.1 13,328.17 13,619
13,278.24 13,944.8 14,136
9/30/92 13,514.89 14,193.3 14,511
13,852.61 14,547.99 14,775
14,494.16 15,221.74 15,323
15,040.21 15,795.1 15,824
9/30/93 15,576.56 16,358.47 16,359
15,689.78 16,477.38 16,588
14,652.19 15,387.71 15,677
14,751.42 15,491.92 15,851
9/30/94 14,740.09 15,480 15,959
14,445.54 15,170.66 15,729
15,619.57 16,403.62 16,841
15,953.87 16,754.7 17,247
9/30/95 16,351.81 17,172.61 17,744
17,234.58 18,099.7 18,475
16,900.48 17,748.83 18,251
17,042.67 17,898.17 18,392
9/30/96 17,491.31 18,369.32 18,815
17,895.13 18,793.4 19,295
17,759.91 18,651.42 19,250
18,404.4 19,328.24 19,914
9/30/97 19,144.53 20,105.53 20,516
19,692.39 20,680.88 21,072
19,950.06 20,951.49 21,314
20,287.34 21,305.71 21,638
9/30/98 21,061 22,119 22,302
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------------------------------------------
CLASS D
SIX ONE FIVE 10 SINCE INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge 0.51% 4.83% 5.18% 7.73% n/a
Without Sales Charge 5.57 10.02 6.22 8.26 n/a
CLASS D**
With 1% CDSC 4.09 7.88 n/a n/a n/a
Without CDSC 5.09 8.88 n/a n/a 5.24%
Lehman Index*** 4.64 8.71 6.40 8.35 6.29++
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1998
</TABLE>
<TABLE>
<CAPTION>
9/30/98 3/31/98 9/30/97 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
------- ------- ------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $8.60 $8.34 $8.28 CLASS A $0.396 $0.083 3.91%
CLASS D 8.60 8.34 8.29 CLASS D 0.320 0.083 3.23
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C>
Revenue Bonds 82% Aaa/AAA 63%
General Obligation Bonds 18 Aa/AA 7
A/A 22
WEIGHTED AVERAGE MATURITY 23.4 YEARS BAA/BBB 8
</TABLE>
- -----------
See footnotes on page 16.
13
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN OHIO MUNICIPAL SERIES
[GRAPHIC OMITTED]
[Table below reflect plotting points for line chart]
DATE With Load Without Load Lehman**
9/30/88 9,530 10,000 10,000
9,754.2 10,234.95 10,185
9,872.56 10,359.14 10,252
10,383.6 10,895 10,859
9/30/89 10,349.39 10,859 10,867
10,723.38 11,251.89 11,284
10,752.44 11,282.38 11,335
10,973.43 11,514.26 11,600
9/30/90 10,939.46 11,478.62 11,607
11,429.34 11,992.63 12,107
11,642.71 12,216.52 12,381
11,891.53 12,477.62 12,645
9/30/91 12,356.91 12,965.93 13,136
12,722.51 13,349.54 13,578
12,758.09 13,386.87 13,619
13,258.92 13,912 14,136
9/30/92 13,552.56 14,220.49 14,511
13,795 14,475 14,775
14,288.48 14,992.66 15,323
14,794 15,523.5 15,824
9/30/93 15,289 16,042.54 16,359
15,400.9 16,159.93 16,588
14,647.76 15,369.67 15,677
14,800.84 15,530.2 15,851
9/30/94 14,817.82 15,548 15,959
14,645.21 15,366.99 15,729
15,592.5 16,360.98 16,841
15,903.56 16,687.38 17,247
9/30/95 16,238.7 17,039.04 17,744
16,875.69 17,707.43 18,475
16,603.51 17,420.83 18,251
16,787 17,614 18,392
9/30/96 17,160.31 18,006 18,815
17,512.51 18,375.63 19,295
17,432.84 18,292 19,250
17,952.56 18,837 19,914
9/30/97 18,454.49 19,364 20,516
18,981.86 19,917 21,072
19,142.67 20,086 21,314
19,428.69 20,386 21,638
9/30/98 20,074 21,063 22,302
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------------------------------------
CLASS D
SIX ONE FIVE 10 SINCE INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
---------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge (0.14)% 3.59% 4.57% 7.22% n/a
Without Sales Charge 4.86 8.77 5.60 7.73 n/a
CLASS D**
With 1% CDSC 3.38 6.78 n/a n/a n/a
Without CDSC 4.38 7.78 n/a n/a 4.67%
LEHMAN INDEX*** 4.64 8.71 6.40 8.35 6.29++
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1998
</TABLE>
<TABLE>
<CAPTION>
9/30/98 3/31/98 9/30/97 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
------- ------- ------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $8.37 $8.18 $8.19 CLASS A $0.403 $0.108 3.83%
CLASS D 8.41 8.22 8.23 CLASS D 0.331 0.108 3.14
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C> <C> <C>
Revenue Bonds 70% Aaa/AAA 77% Baa/BBB 3%
General Obligation Bonds 30 Aa/AA 14 Non-Rated 3
A/A 3
</TABLE>
WEIGHTED AVERAGE MATURITY 19.8 YEARS
- -----------
See footnotes on page 16.
14
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN OREGON MUNICIPAL SERIES
[GRAPHIC OMITTED]
[Table below reflect plotting points for line chart]
DATE With Load Without Load Lehman**
9/30/88 9,526 10,000 10,000
9,808.05 10,296 10,185
9,877.56 10,369 10,252
10,518.28 11,042 10,859
9/30/89 10,473.59 10,995 10,867
10,832.08 11,371 11,284
10,789.62 11,326.7 11,335
11,079.6 11,631 11,600
9/30/90 10,996.06 11,543 11,607
11,535.49 12,109.7 12,107
11,774.38 12,360.5 12,381
12,021.8 12,620 12,645
9/30/91 12,453.6 13,073.5 13,136
12,783.8 13,420 13,578
12,824.3 13,462.7 13,619
13,218.59 13,876.6 14,136
9/30/92 13,493.56 14,165 14,511
13,777.93 14,463.79 14,775
14,199 14,905.8 15,323
14,666.42 15,396.5 15,824
9/30/93 15,141.12 15,894.8 16,359
15,280 16,040.6 16,588
14,595.89 15,322 15,677
14,722.65 15,455.5 15,851
9/30/94 14,781.1 15,516.9 15,959
14,582.5 15,309 15,729
15,478.6 16,249 16,841
15,786.8 16,573 17,247
9/30/95 16,118.9 16,921 17,744
16,703.7 17,535 18,475
16,444.8 17,263 18,251
16,619 17,446.7 18,392
9/30/96 16,968.8 17,813.5 18,815
17,339.6 18,202.8 19,295
17,298.4 18,159.6 19,250
17,837.7 18,725.7 19,914
9/30/97 18,427.3 19,344.7 20,516
18,908 19,849.7 21,072
19,126 20,078 21,314
19,424.5 20,391 21,638
9/30/98 19,990 20,986 22,302
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------------------------------------
CLASS D
SIX ONE FIVE 10 SINCE INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge (0.41)% 3.36% 4.70% 7.17% n/a
Without Sales Charge 4.52 8.48 5.71 7.69 n/a
CLASS D**
With 1% CDSC 3.04 6.37 n/a n/a n/a
Without CDSC 4.04 7.37 n/a n/a 4.72%
LEHMAN INDEX*** 4.64 8.71 6.40 8.35 6.29++
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1998
</TABLE>
<TABLE>
<CAPTION>
9/30/98 3/31/98 9/30/97 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
------- ------- ------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $8.05 $7.88 $7.87 CLASS A $0.363 $0.100 3.73%
CLASS D 8.04 7.87 7.87 CLASS D 0.291 0.100 3.02
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C>
Revenue Bonds 61% Aaa/AAA 44%
General Obligation Bonds 39 Aa/AA 29
A/A 22
WEIGHTED AVERAGE MATURITY 18.0 years Baa/BBB 5
</TABLE>
- --------
See footnotes on page 16.
15
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN SOUTH CAROLINA MUNICIPAL SERIES
DATE With Load Without Load Lehman**
9/30/88 9,524 10,000 10,000
9,805.9 10,295.5 10,185
9,858 10,350 10,252
10,492 11,016 10,859
9/30/89 10,420.6 10,940.9 10,867
10,845.8 11,387 11,284
10,804 11,343.77 11,335
11,066 11,619 11,600
9/30/90 10,887 11,430.78 11,607
11,498 12,071.9 12,107
11,722 12,306.9 12,381
11,968 12,565.5 12,645
9/30/91 12,406 13,025 13,136
12,822 13,462 13,578
12,880 13,523 13,619
13,369 14,036.7 14,136
9/30/92 13,655.9 14,337.8 14,511
13,898 14,592 14,775
14,361.8 15,078.9 15,323
14,851.7 15,593 15,824
9/30/93 15,366 16,133 16,359
15,525 16,300 16,588
14,566 15,293 15,677
14,653 15,384.7 15,851
9/30/94 14,656 15,388 15,959
14,484.7 15,207.97 15,729
15,531.8 16,307 16,841
15,854.8 16,646.5 17,247
9/30/95 16,223 17,033 17,744
17,041.7 17,892.6 18,475
16,714.8 17,549 18,251
16,894 17,738 18,392
9/30/96 17,329.8 18,195 18,815
17,711.5 18,595.86 19,295
17,577.66 18,455 19,250
18,189 19,097 19,914
9/30/97 18,714 19,648 20,516
19,255 20,216.8 21,072
19,455.8 20,427 21,314
19,738 20,723.8 21,638
9/30/98 20,334 21,349 22,302
[GRAPHIC OMITTED]
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------------------------------------------
CLASS D
SIX ONE FIVE 10 SINCE INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- ------ ------- ------- -------------------
CLASS A**
<S> <C> <C> <C> <C>
With Sales Charge (0.46)% 3.46% 4.75% 7.36% n/a
Without Sales Charge 4.51 8.66 5.76 7.88 n/a
CLASS D**
With 1% CDSC 3.04 6.68 n/a n/a n/a
Without CDSC 4.04 7.68 n/a n/a 4.76%
LEHMAN INDEX*** 4.64 8.71 6.40 8.35 6.29++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1998
9/30/98 3/31/98 9/30/97 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
------- ------- ------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $8.38 $8.21 $8.16 CLASS A $0.390 $0.074 3.82%
CLASS D 8.38 8.21 8.16 CLASS D 0.315 0.074 3.12
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
Revenue Bonds 94% Aaa/AAA 65%
General Obligation Bonds 6 Aa/AA 12
A/A 19
WEIGHTED AVERAGE MATURITY 20.7 YEARS BAA/BBB 4
</TABLE>
- --------------------
* Returns for periods of less than one year are not annualized.
** Return figures reflect any change in price and assume all distributions
within the period are invested in additional shares. Returns for Class A
shares are calculated with and without the effect of the initial 4.75%
maximum sales charge. Returns for Class D shares are calculated with and
without the effect of the 1% contingent deferred sales charge ("CDSC"),
charged on redemptions made within one year of the date after purchase. No
adjustment was made to the performance of Class A shares for periods prior
to January 1, 1993, the commencement date for the annual Administration,
Shareholder Services and Distribution Plan fee of up to 0.25% of average
daily net assets. 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. A portion of each Series' income may be
subject to applicable state and local taxes, and any amount may be subject
to the federal alternative minimum tax. Past performance is not indicative
of future investment results.
*** The Lehman Index is an unmanaged index that does not include any fees or
sales charges, and does not reflect state-specific bond market performance.
Investors cannot invest directly in an index.
++ From 1/31/94.
+ Represents per share amount paid or declared for the year ended September
30, 1998.
++ Current yield, representing the annualized yield for the 30-day period
ended September 30, 1998, has been computed in accordance with SEC
regulations and will vary.
0 Percentages based on current market values of long-term holdings at
September 30, 1998.
16
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK.
17
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
NATIONAL SERIES
FACE RATINGS+ MARKET
STATE AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ----------- ---------------------- --------------- -------------
<S> <C> <C> <C>
ALASKA-- 1.4% $1,500,000 Alaska Housing Finance Corporation Mortgage Rev.,
5 3/4% due 6/1/2024* ................................ Aaa/AAA $ 1,570,410
CALIFORNIA -- 2.6% 2,500,000 San Joaquin Hills Transportation Corridor Agency Rev.
(Orange County Senior Lien Toll Road),
6 3/4% due 1/1/2032 ................................. Aaa/AAA 2,852,875
FLORIDA-- 4.6% 5,000,000 Jacksonville Electric Authority (Electric System Rev.),
5.10% due 10/1/2032 ................................. Aa2/AA 5,042,900
ILLINOIS-- 6.6% 3,000,000 Chicago Water Rev., 5 1/2% due 11/1/2022 ............... Aaa/AAA 3,194,730
1,250,000 Illinois Health Facilities Authority Rev.
(Edward Hospital Project), 6% due 2/15/2019 ......... A2/A+ 1,325,438
2,500,000 Illinois Health Facilities Authority Rev. (Northwestern
Memorial Hospital), 6% due 8/15/2024 ................ Aa2/AA 2,720,575
KENTUCKY-- 1.9% 1,880,000 Trimble County Pollution Control Rev. (Louisville
Gas & Electric Co. Project), 7 5/8% due 11/1/2020* .. Aa2/A+ 2,043,992
MICHIGAN-- 2.2% 2,250,000 Michigan State Strategic Fund Pollution Control Rev.
(General Motors Corp.), 6.20% due 9/1/2020 .......... A2/A 2,454,075
MISSOURI-- 4.7% 4,750,000 St. Louis Industrial Development Authority
Pollution Control Rev. (Anheuser-Busch Companies,
Inc. Project), 5 7/8% due 11/1/2026* ................ A1/A+ 5,086,110
NEVADA-- 4.7% 5,000,000 Clark County Industrial Development Rev. (Nevada
Power Company Project), 5.90% due 11/1/2032* ........ NR/BBB- 5,120,150
NEW YORK-- 6.9% 2,500,000 Long Island Power Authority Electric System General Rev.,
5 1/2% due 12/1/2029 ................................ Baa1/A- 2,590,150
3,495,000 New York City GOs, 7 1/4% due 8/15/2024 ................ Aaa/A- 3,836,741
5,000 New York City GOs, 7 1/4% due 8/15/2024 ................ A3/A- 5,425
1,000,000 Trust for Cultural Resources of the City of
New York Rev. (American Museum of Natural History),
5.65% due 4/1/2027 .................................. Aaa/AAA 1,077,800
SOUTH 2,000,000 Oconee County Pollution Control Rev. (Duke Power Company
CAROLINA-- 1.9% Project), 7 1/2% due 2/1/2017 ....................... Aa2/AA- 2,082,840
SOUTH 6,000,000 South Dakota Housing Development Authority Rev.
DAKOTA-- 5.8% (Homeownership Mortgage), 6.15% due 5/1/2026* ....... Aa1/AAA 6,286,860
TEXAS-- 18.7% 3,700,000 Harris County Health Facilities Development Corp.
Hospital Rev. (St. Luke's Episcopal Hospital
Project), 6 3/4% due 2/15/2021 ...................... Aa3/AAA 4,013,094
2,000,000 Harris County Health Facilities Development Corp.
SCH Health Care System Rev. (Sisters of Charity
of the Incarnate Word), 7.10% due 7/1/2021 .......... Aa3/AA 2,213,880
2,000,000 Harris County Health Facilities Development Corp.
SCH Health Care System Rev. (Sisters of Charity
of the Incarnate Word), 5 3/4% due 7/1/2027 ......... Aa3/AA 2,168,480
4,750,000 Potter County Industrial Development Corp. Pollution
Control Rev. (Southwestern Public Service Company
Project), 5 3/4% due 9/1/2016 ....................... Aaa/AAA 5,215,168
2,500,000 San Antonio Electric &Gas Rev., 5 1/2% due 2/1/2020 .... Aa1/AA 2,623,425
- --------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
18
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
NATIONAL SERIES (CONTINUED)
FACE RATINGS+ MARKET
STATE AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ----------- ---------------------- --------------- -------------
<S> <C> <C> <C>
TEXAS (CONTINUED) $2,495,000 Texas Veterans' Housing Assistance GOs,
6.80% due 12/1/2023* ................................ Aa2/AA $ 2,700,139
1,340,000 Travis County Housing Finance Corporation
(Single Family Mortgage Rev.),
6.95% due 10/1/2027 ................................. NR/AAA 1,455,655
UTAH-- 3.7% 4,000,000 Intermountain Power AgencyPower Supply Rev.,
5% due 7/1/2020 ..................................... Aaa/AAA 3,999,680
Virginia-- 9.6% 5,000,000 Fairfax County Industrial Development Authority
Health Care Rev. (Inova Health System Project),
6% due 8/15/2026 .................................... Aa2/AA 5,524,150
5,000,000 Pocahontas Parkway Association TollRoad Bonds
(Route 895 Connector), 5 1/2% due 8/15/2028 ......... Baa3/BBB- 5,025,650
Washington-- 12.8% 4,325,000 King County Sewer GOs, 6 1/8% due 1/1/2033 ............. Aaa/AAA 4,798,544
3,000,000 Port Seattle Rev., 5 1/2% due 9/1/2021 ................. Aaa/AAA 3,173,100
5,520,000 Seattle Water System Rev., 5 5/8% due 8/1/2026 ......... Aaa/AAA 5,983,459
WISCONSIN -- 6.2% 6,000,000 LaCrosse Resource Recovery Rev. (Northern States Power
Company Project), 6% due 11/1/2021* ................. A1/AA- 6,798,120
WYOMING-- 3.9% 4,000,000 Sweetwater County Pollution Control Rev. (Idaho Power
Company Project), 6.05% due 7/15/2026 ............... A3/A 4,315,280
------------
TOTAL MUNICIPAL BONDS (Cost $99,547,792)-- 98.2% ............................................................. 107,298,895
VARIABLE RATE DEMAND NOTES (Cost $700,000)-- 0.6% ............................................................ 700,000
OTHER ASSETS LESS LIABILITIES-- 1.2% ......................................................................... 1,302,468
------------
NET ASSETS-- 100.0% .......................................................................................... $109,301,363
============
</TABLE>
<TABLE>
<CAPTION>
COLORADO SERIES
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$3,000,000 Adams County, CO Pollution Control Rev. (Public Service Co. of
Colorado Project), 5 7/8% due 4/1/2014 ...................................... Aaa/AAA $ 3,247,050
1,000,000 Boulder, Larimer and Weld Counties,CO(Vrain Valley School District),
5% due 12/15/2022 ........................................................... Aaa/AAA 1,003,890
3,000,000 Colorado Health Facilities Authority Rev. (North Colorado Medical Center),
6% due 5/15/2020 ............................................................ Aaa/AAA 3,275,520
2,250,000 Colorado Health Facilities Authority Rev. (Sisters of Charity of
Leavenworth Health Services Corporation), 5% due 12/1/2025 .................. Aaa/AAA 2,243,205
2,000,000 Colorado Health Facilities Authority Rev. (Catholic Health
Initiatives), 5% due 12/1/2028 .............................................. Aa2/AA 1,978,340
2,350,000 Colorado Springs, CO Utilities Rev., 53/8% due 11/15/2026 ...................... Aa2/AA 2,450,533
105,000 Colorado Water Resources & Power Development Authority (Clean Water
Bonds Rev.), 6 7/8% due 9/1/2011 ............................................ Aa1/AAA 114,520
2,000,000 Colorado Water Resources & Power Development Authority (Clean Water
Bonds Rev.), 6% due 9/1/2014 ................................................ Aa1/AAA 2,160,820
- --------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
19
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
COLORADO SERIES
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$1,000,000 Colorado Water Resources & Power Development Authority (Clean Water
Bonds Rev.), 6.30% due 9/1/2014 ............................................ Aa1/AAA $ 1,099,760
2,000,000 Denver, CO City & County (St. Anthony Hospital Systems Rev.), 7 3/4%
due 5/1/2014 ................................................................ Aaa/AAA 2,070,860
2,000,000 Denver, CO City &County Department of Aviation Airport System Rev.,
5 1/2% due 11/15/2025 ....................................................... Aaa/AAA 2,127,520
2,000,000 Denver, CO Health and Hospital Authority Healthcare Rev.,
5 3/8% due 12/1/2028 ........................................................ Baa2/BBB 2,008,180
1,985,000 Fort Collins, CO GOs Water Bonds, 6 3/8% due 12/1/2012 ......................... Aa1/AA 2,185,922
2,500,000 Fort Collins Pollution Control Rev. (Anheuser-Busch Project),
6% due 9/1/2031 ............................................................. A1/A+ 2,745,700
1,000,000 Fountain Valley Authority, CO Water Treatment Rev., 6.80% due 12/1/2019 ........ Aa/AA 1,079,580
1,895,000 Northglenn, CO Joint Water & Wastewater Utility, 6.80% due 12/1/2008 ........... Aaa/NR 2,150,086
2,500,000 Platte River Power Authority, CO Power Rev., 6 1/8% due 6/1/2014 ............... Aa3/A+ 2,695,075
1,655,000 Pueblo County, CO Single Family Mortgage Rev., 7.05% due 11/1/2027 ............. NR/AAA 1,795,510
2,000,000 Puerto Rico Highway &Transportation Authority Rev., 5 1/2% due 7/1/2036 ........ Baa1/A 2,180,920
2,000,000 University of Colorado Hospital Authority Rev., 5 1/4% due 11/15/2022 .......... Aaa/NR 2,043,860
2,000,000 Virgin Islands Public Finance Authority Rev., 5 1/2% due 10/1/2022 ............. NR/BBB- 2,065,900
2,000,000 Westminster, CO (Adams & Jefferson Counties) Sales & Use Tax Rev.,
7% due 12/1/2008 ........................................................... Aaa/AAA 2,151,320
-----------
TOTAL MUNICIPAL BONDS (Cost $41,613,242)-- 97.7% ................................................................. 44,874,071
VARIABLE RATE DEMAND NOTES (Cost $300,000)-- 0.7% ................................................................ 300,000
OTHER ASSETS LESS LIABILITIES-- 1.6% ............................................................................. 753,088
-----------
NET ASSETS-- 100.0% .............................................................................................. $45,927,159
===========
- --------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
GEORGIA SERIES
<TABLE>
<CAPTION>
GEORGIA SERIES
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$2,500,000 Atlanta, GA Water & Sewer Rev., 5 1/4% due 1/1/2027 ............................ Aaa/AAA $ 2,573,725
1,000,000 Cartersville, GA Development Authority Rev. Water & Wastewater Facilities
(Anheuser-Busch), 7.40% due 11/1/2010* ...................................... A1/A+ 1,265,020
2,000,000 Cartersville, GA Development Authority Rev. Water & Wastewater Facilities
(Anheuser-Busch), 6 3/4% Due 2/1/2012* ...................................... A1/A+ 2,196,880
3,000,000 Chatham County, GA School District GOs, 5 1/2% due 8/1/2020 .................... Aaa/AAA 3,140,520
2,000,000 Columbia County, GA School District GOs, 6 1/4% due 4/1/2013 ................... Aaa/AAA 2,240,860
1,000,000 DeKalb County, GA GOs, 5 1/4% due 1/1/2020 ..................................... Aa1/AA+ 1,025,980
1,000,000 DeKalb County, GA Water & Sewerage Rev., 7% due 10/1/2014 ...................... Aaa/AA 1,083,650
2,000,000 DeKalb County, GA Water & Sewerage Rev., 5 1/4% due 10/1/2023 .................. Aa/AA 2,045,820
700,000 DeKalb Private Hospital Authority, GA Rev. (Emory University Project),
6 3/4% due 4/1/2017 ......................................................... Aa1/AA 764,246
300,000 DeKalb Private Hospital Authority, GA Rev. (Emory University Project),
7% due 4/1/2021 ............................................................. Aa1/AA 329,235
1,000,000 Fayette County, GA School District GOs, 6 1/8% due 3/1/2015 .................... Aa/A+ 1,107,340
1,000,000 Fulco Hospital Authority HealthSystem Rev. (Catholic Health East),
5% due 11/15/2028 ........................................................... Aaa/AAA 996,850
- --------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
20
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
GEORGIA SERIES (CONTINUED)
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$3,000,000 Fulton County, GA School District GOs, 5 5/8% due 1/1/2021 ..................... Aa2/AA $ 3,293,940
2,250,000 Georgia Housing & Finance Authority Rev. (Single Family Mortgage),
5 1/4% due 12/1/2020 ........................................................ Aa2/AAA 2,287,440
2,500,000 Georgia Municipal Gas Authority Rev. (Southern Storage Gas Project),
6.40% due 7/1/2014 .......................................................... NR/A- 2,732,200
1,000,000 Georgia State GOs, 5 3/4% due 2/1/2011 ......................................... Aaa/AAA 1,062,310
1,750,000 Glynn-Brunswick Memorial Hospital Authority Rev. (Southeast Georgia Health
Systems Project), 6% due 8/1/2016 ........................................... Aaa/AAA 1,927,958
1,000,000 Gwinnett County, GA School District GOs, 6.40% due 2/1/2012 .................... Aa1/AA+ 1,201,200
1,500,000 Henry County School District, GA GOs, 6.45% due 8/1/2011 ....................... A1/A+ 1,789,710
500,000 Metropolitan Atlanta Rapid Transit Authority, GA Sales Tax Rev.,
6 1/4% due 7/1/2018 ......................................................... A1/A+ 586,585
2,000,000 Monroe County, GA Development Authority Pollution Control Rev. (Georgia Power
Company Plant-- Scherer Project), 6% due 7/1/2025 ........................... Aaa/AAA 2,110,880
2,500,000 Peachtree City, GA Water &Sewerage Authority Sewer System Rev.,
5.60% due 3/1/2027 .......................................................... Aa3/AA 2,707,150
2,000,000 Private Colleges & Universities Authority, GA (Spelman College Project),
6.20% due 6/1/2014 .......................................................... Aaa/AAA 2,241,120
1,500,000 Private Colleges & Universities Authority, GA (Mercer University Project),
6 1/2% due 11/1/2015 ........................................................ Aaa/AAA 1,832,625
3,000,000 Private Colleges & Universities Authority, GA (Agnes Scott College Project),
5 5/8% due 6/1/2023 ......................................................... Aa3/AA- 3,184,020
1,500,000 Puerto Rico Highway & Transportation Authority Rev., 5 1/2% due 7/1/2026 ....... Baa1/A 1,580,895
2,000,000 Savannah, GA Airport Rev., 6 1/4% due 1/1/2015* ................................ Aaa/AAA 2,167,800
-----------
TOTAL MUNICIPAL BONDS (Cost $44,875,862)-- 96.6% .............................................................. 49,475,959
VARIABLE RATE DEMAND NOTES (Cost $1,000,000)-- 1.9% ........................................................... 1,000,000
OTHER ASSETS LESS LIABILITIES-- 1.5% .......................................................................... 757,327
-----------
NET ASSETS-- 100.0% ........................................................................................... $51,233,286
===========
- --------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
21
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
LOUISIANA SERIES
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$3,000,000 Bastrop, LA Industrial Development Board Pollution Control Rev.
(International Paper Company Project), 6.90% due 3/1/2007 ................... A3/BBB+ $ 3,299,850
2,500,000 Calcasieu Parish, LA Industrial Development Board (Conoco Inc. Project),
5 3/4% due 12/1/2026* ....................................................... Aa3/AA- 2,679,225
2,120,000 East Baton Rouge Parish, LA Mortgage Finance Authority (Single
Family Mortgage Rev.), 5.40% due 10/1/2025 .................................. Aaa/NR 2,154,556
3,000,000 East Baton Rouge Parish, LA Public Improvement Sales & Use Tax Rev.,
5.90% due 2/1/2018 .......................................................... Aaa/AAA 3,245,070
2,000,000 Houma, LA Utilities Rev., 6 1/4% due 1/1/2012 .................................. Aaa/AAA 2,170,360
2,000,000 Jefferson Parish, LA Home Mortgage Authority (Single Family Mortgage Rev.),
6% due 12/1/2024* ........................................................... Aa/NR 2,078,800
2,500,000 Lafayette, LA Public Improvement Sales Tax, 5% due 5/1/2021 .................... Aaa/AAA 2,507,700
2,495,000 Louisiana Housing Finance Agency Mortgage Rev. (Single Family),
6.45% due 6/1/2027* ......................................................... Aaa/AAA 2,663,612
2,500,000 Louisiana Public Facilities Authority Hospital Rev. (Franciscan
Missionaries of Our Lady HealthSystem Project), 5% due 7/1/2025 ............. Aaa/AAA 2,488,850
2,500,000 Louisiana Public Facilities Authority Rev. (Loyola University Project),
5 5/8% due 10/1/2016 ........................................................ Aaa/AAA 2,723,825
2,500,000 Louisiana Public Facilities Authority Rev. (Sisters of Mercy Health
System, St. Louis, Inc.), 7 3/8% due 6/1/2019 ............................... Aaa/AA+ 2,615,450
3,000,000 Louisiana Public Facilities Authority Rev. (Tulane University),
5 3/4% due 2/15/2021 ........................................................ Aaa/AAA 3,204,300
1,500,000 Louisiana State GOs, 5% due 4/15/2018 .......................................... Aaa/AAA 1,514,385
2,000,000 Louisiana State University & Agricultural & Mechanical College
Auxiliary Rev., 5 3/4% Due 7/1/2014 ......................................... AAA/AAA 2,164,780
2,500,000 Ouachita Parish, LA Hospital Service District Rev. (Glenwood
Regional Medical Center), 5 3/4% due 5/15/2021 .............................. Aaa/AAA 2,718,875
190,000 Ouachita Parish, LA Industrial Development Rev. (International
Paper Company), 6 1/2% due 4/1/2006 ......................................... NR/NR 190,215
2,500,000 Saint Bernard Parish, LA Exempt Facility Rev. (Mobil Oil
Corporation Project), 5.90% due 11/1/2026* .................................. Aa2/AA 2,742,975
1,250,000 Saint Charles Parish, LA Environmental Improvement Rev. (Louisiana
Power and Light Company Project), 6.20% due 5/1/2023* ....................... Baa2/BBB 1,316,563
2,960,000 Saint Charles Parish, LA Waterworks & Wastewater District Utility Rev.,
7.15% due 7/1/2016 .......................................................... Aaa/AAA 3,257,687
2,500,000 Shreveport, LA Airport System Rev., 5 3/8% due 1/1/2024* ....................... Aaa/AAA 2,562,425
1,555,000 Shreveport, LA GOs, 7 1/2% due 4/1/2006 ........................................ Aaa/AAA 1,704,949
- --------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
22
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
LOUISIANA SERIES (CONTINUED)
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$2,050,000 Sulphur, LA Housing & Mortgage Finance Trust (Residential Mortgage Rev.),
7 1/4% due 12/1/2010 ........................................................ Aaa/AAA $ 2,454,034
2,500,000 Tangipahoa Parish, LA Hospital Service District No. 1 Rev.
(Northoaks Medical Center), 6 1/4% due 2/1/2024 ............................. Aaa/AAA 2,774,975
-----------
TOTAL MUNICIPAL BONDS (Cost $50,964,493)-- 96.7% ............................................................. 55,233,461
VARIABLE RATE DEMAND NOTES (Cost $800,000)-- 1.4% ............................................................ 800,000
OTHER ASSETS LESS LIABILITIES-- 1.9% ......................................................................... 1,111,191
-----------
NET ASSETS-- 100.0% .......................................................................................... $57,144,652
===========
</TABLE>
<TABLE>
<CAPTION>
MARYLAND SERIES
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$1,340,000 Anne Arundel County, MD GOs, 5 1/8% due 2/1/2026 ............................... Aa2/AA+ $ 1,369,641
1,340,000 Anne Arundel County, MDGOs, 5 1/8% due 2/1/2027 ................................ Aa2/AA+ 1,369,641
3,000,000 Anne Arundel County, MD Pollution Control Rev. (Baltimore Gas and Electric
Company Project), 6% due 4/1/2024 ........................................... A2/A 3,245,820
2,000,000 Baltimore, MD Consolidated Public Improvement GOs, 6 3/8% due 10/15/2006 ....... Aaa/AAA 2,326,840
2,500,000 Baltimore, MD Port Facilities Rev. (Consolidated Coal Sales Co. Project),
6 1/2% due 10/1/2011 ........................................................ Aa3/AA- 2,753,775
2,000,000 Baltimore, MD Project and Refunding Rev. (Water Projects), 5 1/2% due 7/1/2026 . Aaa/AAA 2,123,440
2,000,000 Howard County, MD Metropolitan District Project GOs, 5 1/2% due 8/15/2022 ...... Aaa/AAA 2,083,420
2,000,000 Maryland Community Development Administration Dept. of Housing & Community
Development (Multi-Family Housing), 7.70% due 5/15/2020* .................... Aa/NR 2,132,080
2,465,000 Maryland Community Development Administration Dept. of Housing & Community
Development (Single Family Program), 6.80% due 4/1/2024* .................... Aa2/NR 2,649,333
2,500,000 Maryland Community Development Administration Dept. of Housing & Community
Development (Residential Rev.), 5 7/8% due 9/1/2025* ........................ Aa2/NR 2,628,150
2,500,000 Maryland Community Development Administration Dept. of Housing & Community
Development (Multi-Family Housing), 6.70% due 5/15/2027 ..................... Aa/NR 2,683,525
2,710,000 Maryland Health & Higher Educational Facilities Authority Rev.
(Good Samaritan Hospital), 5 3/4% due 7/1/2019 .............................. A1/A 2,881,543
2,000,000 Maryland Health & Higher Educational Facilities Authority Rev.
(Suburban Hospital), 5 1/8% due 7/1/2021 .................................... A1/A+ 2,007,200
2,750,000 Maryland Health & Higher Educational Facilities Authority Rev.
(Ann Arundel Medical Center), 5% due 7/1/2023 ............................... Aaa/AAA 2,751,347
2,500,000 Maryland Health & Higher Educational Facilities Authority Rev.
(Francis Scott Key Medical Center), 5% due 7/1/2023 ......................... Aaa/AAA 2,501,225
2,000,000 Maryland Health &Higher Educational Facilities Authority Rev.
(Mercy Medical Center), 5 3/4% due 7/1/2026 ................................. Aaa/AAA 2,164,220
- --------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
23
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
MARYLAND SERIES (CONTINUED)
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$1,500,000 Maryland Health &Higher Education Facilities Authority Rev.
(Anne Arundel Medical Center), 5 1/8% due 7/1/2028 .......................... Aaa/AAA $ 1,516,395
1,000,000 Maryland National Capital Park & Planning Commission GOs (Prince
George's County), 6.90% due 7/1/2010 ........................................ Aa2/AA 1,074,350
2,000,000 Maryland Transportation Authority Rev. (Baltimore/Washington International
Airport Project), 6 1/4% due 7/1/2014* ...................................... Aaa/AAA 2,212,920
2,000,000 Maryland Transportation Authority Rev. Transportation Facilities Projects,
5 3/4% due 7/1/2015 ......................................................... A1/A+ 2,093,720
1,000,000 Maryland Water Quality Financing Administration Revolving Loan Fund Rev.,
6.70% due 9/1/2013 .......................................................... Aaa/AAA 1,102,080
1,000,000 Maryland Water Quality Financing Administration Revolving Loan Fund Rev.,
7.10% due 9/1/2013 .......................................................... Aaa/AAA 1,112,650
440,000 Montgomery County, MD Housing Opportunities Commission (Single Family
Mortgage Rev.), 7 3/8% due 7/1/2017 ......................................... Aa2/NR 455,140
1,500,000 Montgomery County, MD Housing Opportunities Commission Rev.,
6.20% due 7/1/2026* ......................................................... Aa2/NR 1,605,180
2,000,000 Northeast Maryland Waste Disposal Authority Solid Waste Rev.
(Montgomery County Resource Recovery Project),
6.30% due 7/1/2016* ......................................................... A2/NR 2,162,320
1,000,000 Puerto Rico Highway &Transportation Authority Rev., 5 1/2% due 7/1/2036 ........ Baa1/A 1,090,460
35,000 Puerto Rico Housing Finance Corporation (Single Family Mortgage Rev.
Portfolio 1), 7.80% due 10/15/2021 .......................................... Aaa/AAA 35,724
630,000 Puerto RicoHousing Finance Corporation (Single Family Mortgage Rev.
Portfolio 1-C), 6.85% due 10/15/2023 ........................................ Aaa/AAA 674,900
2,000,000 Washington Suburban Sanitary District, MD, 6 1/2% due 1/1/2016 ................. Aa1/AA 2,185,460
-----------
TOTAL MUNICIPAL BONDS (Cost $50,569,450)-- 94.8% .............................................................. 54,992,499
VARIABLE RATE DEMAND NOTES (Cost $2,200,000)-- 3.8% ........................................................... 2,200,000
OTHER ASSETS LESS LIABILITIES-- 1.4% .......................................................................... 826,114
-----------
NET ASSETS-- 100.0% ........................................................................................... $58,018,613
===========
</TABLE>
<TABLE>
<CAPTION>
MASSACHUSETTS SERIES
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$5,000,000 Boston, MA Water & Sewer Commission General Rev., 5 1/4% due 11/1/2019 ......... A1/A+ $ 5,300,250
3,000,000 Boston, MA Water & Sewer Commission General Rev., 7.10% due 11/1/2019 .......... Aaa/AAA 3,175,950
5,000,000 Massachusetts Bay Transportation Authority General Transportation System Rev.,
5 5/8% due 3/1/2026 ......................................................... Aa3/AA- 5,557,650
1,155,000 Massachusetts Education Loan Authority Education Loan Rev., 8% due 6/1/2002 .... NR/AAA 1,168,848
3,000,000 Massachusetts Health & Educational Facilities Authority Rev. (Daughters of Charity
National Health Systems-- Carney Hospital), 6% due 7/1/2009 ................. Aa2/AA+ 3,320,460
2,500,000 Massachusetts Health & Educational Facilities Authority Rev. (Daughters of Charity
National Health Systems-- Carney Hospital), 6.10% due 7/1/2014 .............. Aa2/AA+ 2,741,925
- --------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
MASSACHUSETTS SERIES (CONTINUED)
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$5,000,000 Massachusetts Health & Educational Facilities Authority Rev.
(Newton-Wellesley Hospital), 6% due 7/1/2018 ................................ Aaa/AAA $ 5,509,300
3,500,000 Massachusetts Health & Educational Facilities Authority Rev.
(Williams College), 5 3/4% due 7/1/2019 ..................................... Aa1/AA+ 3,798,620
2,500,000 Massachusetts Health & Educational Facilities Authority Rev.
(Suffolk University), 8 1/8% due 7/1/2020 ................................... NR/NR 2,721,025
5,100,000 Massachusetts Health & Educational Facilities Authority Rev.
(SmithCollege), 5 3/4% due 7/1/2024 ......................................... Aa2/AA- 5,455,521
5,000,000 Massachusetts Health & Educational Facilities Authority Rev.
(Partners Healthcare System), 5 3/8% due 7/1/2024 ........................... Aaa/AAA 5,187,800
7,500,000 Massachusetts Health & Educational Facilities Authority Rev.
(Harvard University), 5 5/8% Due 11/1/2028 ............................... AAA/AAA 8,135,250
5,000,000 Massachusetts Health & Educational Facilities Authority Rev.
(Catholic Health East Health System), 5% due 11/15/2028 ..................... Aaa/AAA 4,984,250
5,250,000 Massachusetts Housing Finance Agency Rev. (Single Family Housing),
5 1/2% due 12/1/2030* ....................................................... Aaa/AAA 5,459,790
2,000,000 Massachusetts Industrial Finance Agency Electric Utility Rev.
(Nantucket Electric Company Project), 5 7/8% due 7/1/2017* .................. Aaa/AAA 2,187,160
3,500,000 Massachusetts Industrial Finance Agency Rev. (Phillips Academy),
5 3/8% due 9/1/2023 ......................................................... Aa1/AA+ 3,687,425
3,000,000 Massachusetts Industrial Finance Agency Rev. (College of the Holy Cross),
5 5/8% due 3/1/2026 ......................................................... Aaa/AAA 3,225,660
3,000,000 Massachusetts Industrial Finance Agency Rev. (Suffolk University),
5 1/4% due 7/1/2027 ......................................................... Aaa/AAA 3,091,770
3,000,000 Massachusetts Port Authority Special Facilities Rev. (BOSFUELProject),
5 3/4% due 7/1/2039* ........................................................ Aaa/AAA 3,205,740
1,500,000 Massachusetts Special Obligation Rev. (Highway Improvement Loan),
5.80% due 6/1/2014 .......................................................... Aa3/AA 1,656,480
5,000,000 Massachusetts State Consolidated Loan GOs, 5 1/8% due 11/1/2013 ................ Aaa/AAA 5,221,600
2,400,000 Massachusetts State Port Authority Rev., 5% due 7/1/2023 ....................... Aa3/AA- 2,405,760
2,000,000 Massachusetts State Port Authority Rev., 5% due 7/1/2028* ...................... Aa3/AA- 1,978,460
5,000,000 Massachusetts Water Pollution Abatement Trust Pool Loan Program,
5 5/8% due 2/1/2016 ......................................................... Aaa/AAA 5,414,300
5,500,000 Massachusetts Water Resources Authority General Rev.,
5.60% due 11/1/2026 ......................................................... Aaa/AAA 5,894,185
730,000 Puerto Rico Electric Power Authority Power Rev.,
7 1/8% due 7/1/2014 ......................................................... Baa1/BBB+ 760,441
4,000,000 Puerto Rico Highway & Transportation Authority Rev.,
5 1/2% due 7/1/2036 ......................................................... Baa1/A 4,361,840
2,750,000 Puerto Rico Port Authority Rev., 6% due 7/1/2021* .............................. Aaa/AAA 2,886,703
------------
TOTAL MUNICIPAL BONDS (Cost $99,244,542)-- 97.9% ............................................................... 108,494,163
VARIABLE RATE DEMAND NOTES (Cost $900,000)-- 0.8% .............................................................. 900,000
OTHER ASSETS LESS LIABILITIES-- 1.3% ........................................................................... 1,401,953
------------
NET ASSETS-- 100.0% ............................................................................................ $110,796,116
============
- --------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
25
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
MICHIGAN SERIES
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$5,000,000 Capital Region Airport Authority, MI Airport Rev., 6.70% due 7/1/2021* ......... Aaa/AAA $ 5,503,950
5,000,000 Detroit, MI GOs, 5 1/2% due 4/1/2016 ........................................... Aaa/AAA 5,315,550
6,000,000 Detroit, MI Water Supply System Rev., 6 1/4% due 7/1/2012 ...................... Aaa/AAA 6,602,280
3,000,000 Grand Haven, MI Electric System Rev., 5 1/4% due 7/1/2013 ...................... Aaa/AAA 3,122,460
5,000,000 Grand Rapids, MI Water Supply System Rev., 5 3/4% due 1/1/2018 ................. Aaa/AAA 5,120,250
1,000,000 Grand Traverse County, MI Hospital Finance Authority (Munson Healthcare
Obligated Group), 6 1/4% due 7/1/2012 ....................................... Aaa/AAA 1,090,080
1,500,000 Grand Traverse County, MI Hospital Finance Authority (Munson Healthcare
Obligated Group), 6 1/4% due 7/1/2022 ....................................... Aaa/AAA 1,636,215
2,000,000 Grand Traverse County, MI Hospital Finance Authority (Munson Healthcare
Obligated Group), 5% due 7/1/2028 ........................................... Aaa/NR 1,984,540
2,500,000 Kalamazoo, MI Hospital Finance Authority Rev. (Bronson Methodist
Hospital), 5 1/2% due 5/15/2028 ............................................. Aaa/NR 2,635,450
5,000,000 Kent County, MI Airport Rev., 6.10% due 1/1/2025* .............................. Aa/AAA 5,521,550
1,850,000 Kent County, MI Airport Rev., 5% due 1/1/2028* ................................. Aaa/AAA 1,830,224
2,775,000 Kentwood, MI Public Schools Building & Site GOs, 6.40% due 5/1/2015 ............ Aa2/A+ 3,068,068
3,000,000 Lansing, MI Building Authority Rev., 5.60% due 6/1/2019 ........................ Aa3/AA+ 3,187,230
3,250,000 Marquette, MI Hospital Finance Authority Rev. (Marquette General Hospital),
6.10% due 4/1/2019 .......................................................... Aaa/AAA 3,628,982
3,000,000 Michigan Public Power Agency Rev. (Belle River Project), 5 1/4% due 1/1/2018 ... A1/AA- 3,054,120
3,000,000 Michigan State Building Authority Rev., 6 1/4% due 10/1/2020 ................... Aa2/AA 3,229,170
6,000,000 Michigan State GOs (Environmental Protection Program), 5.40% due 11/1/2019 ..... Aa1/AA+ 6,304,260
5,000,000 Michigan State Hospital Finance Authority Rev. (Henry Ford Health System),
5 1/4% due 11/15/2020 ....................................................... Aa3/AA 5,086,650
5,000,000 Michigan State Hospital Finance Authority Rev. (Oakwood Obligated Group),
5 1/8% due 8/15/2025 ........................................................ Aaa/AAA 5,015,150
4,500,000 Michigan State Hospital Finance Authority Rev. (St. John Hospital),
5 1/4% due 5/15/2026 ........................................................ Aaa/AAA 4,584,870
5,000,000 Michigan State Hospital Finance Authority Rev. (Mercy Health Services
Obligated Group), 5 3/4% due 8/15/2026 ..................................... Aa3/AA- 5,410,200
5,000,000 Michigan State Hospital Finance Authority Rev. (Sparrow Obligated Group),
6% due 11/15/2036 ........................................................... Aaa/AAA 5,524,500
2,500,000 Michigan State Housing Development Authority Rev. (Single Family Mortgage),
6.80% due 12/1/2016 ......................................................... NR/AA+ 2,706,675
4,055,000 Michigan State Housing Development Authority Rev. (Rental Housing),
6.65% due 4/1/2023 .......................................................... NR/AA- 4,369,222
4,000,000 Michigan State Housing Development Authority Rev. (Single Family Mortgage),
6.05% due 12/1/2027 ......................................................... NR/AA+ 4,246,120
- --------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
26
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
MICHIGAN SERIES (CONTINUED)
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$3,000,000 Michigan State Strategic Fund Pollution Control Rev.
(Detroit Edison Company), 6 1/2% due 2/15/2016 .............................. Aaa/AAA $ 3,265,980
6,000,000 Michigan State Strategic Fund Pollution Control Rev.
(General Motors Corp.), 6.20% due 9/1/2020 .................................. A2/A 6,544,200
2,500,000 Michigan State Trunk Line Rev., 5.80% due 11/15/2024 ........................... Aaa/AAA 2,800,300
5,000,000 Michigan State Trunk Line Rev., 5% due 11/1/2026 ............................... Aaa/AAA 5,004,300
2,000,000 Midland, MI Water Supply System Rev., 7.20% due 4/1/2010 ....................... A/A 2,129,840
6,300,000 Oxford, MI Area Community Schools GOs, 5 1/2% due 5/1/2021 ..................... Aaa/AAA 6,666,660
5,000,000 Royal Oak, MI Hospital Finance Authority Rev. (William
Beaumont Hospital), 5 1/4% due 1/1/2020 ..................................... Aa3/AA 5,087,600
4,000,000 University of Michigan Hospital Rev., 6 3/8% due 12/1/2024 ..................... Aa2/AA 4,226,160
5,000,000 Western Michigan State University Rev., 5 1/8% due 11/15/2022 .................. Aaa/AAA 5,045,050
3,000,000 Wyandotte, MI Electric Rev., 6 1/4% due 10/1/2017 .............................. Aaa/AAA 3,297,420
------------
TOTAL MUNICIPAL BONDS (COST $132,968,484)-- 98.5% ............................................................ 143,845,276
VARIABLE RATE DEMAND NOTES (COST $100,000)-- 0.1% ............................................................ 100,000
OTHER ASSETS LESS LIABILITIES-- 1.4% ......................................................................... 2,057,041
------------
NET ASSETS-- 100.0% .......................................................................................... $146,002,317
============
</TABLE>
<TABLE>
<CAPTION>
MINNESOTA SERIES
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$6,250,000 Becker, MN Pollution Control Rev. (Northern States Power Company),
6.80% due 4/1/2007 ......................................................... A1/A+ $ 6,465,250
1,500,000 Buffalo, MN Independent School District GOs, 6.15% due 2/1/2022................. Aaa/AAA 1,612,605
2,250,000 Burnsville - Eagan - Savage, MN Independent School
District GOs, 5 1/8% due 2/1/2016 .......................................... Aa1/NR 2,320,245
2,350,000 Burnsville - Eagan - Savage, MN Independent School District GOs,
5 1/8% due 2/1/2017 ........................................................ Aa1/NR 2,418,009
1,500,000 Cloquet, MN Pollution Control Rev. (Potlatch Corporation
Projects), 5.90% due 10/1/2026 ............................................. NR/A- 1,600,380
5,000,000 Edina, MN Housing Development Rev. (Edina Park Plaza Project),
7.70% due 12/1/2028 ........................................................ Aa/NR 5,193,150
3,545,000 Fridley, MN Independent School District GOs, 5.35% due 2/1/2021 ................ Aaa/AAA 3,644,331
1,500,000 Minneapolis, MN GOs, 6% due 3/1/2016 ........................................... Aaa/AAA 1,608,900
4,725,000 Minneapolis, MN Rev. (University Gateway Project),
5 1/4% due 12/1/2024 ....................................................... Aa2/AA 4,856,166
4,300,000 Minneapolis, MN Special School District GOs, 5% due 2/1/2014 ................... Aa1/AA+ 4,400,448
1,400,000 Minneapolis - St. Paul Metropolitan Area (Metropolitan Council of
the Twin Cities), MN, 5 1/2% due 12/1/2012 ................................. Aaa/AAA 1,496,432
5,000,000 Minneapolis-St. Paul, MN Housing & Redevelopment Authority Health Care Rev.
(Children's Health Care), 5 1/2% due 8/15/2025 .............................. Aaa/AAA 5,246,550
- --------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
27
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
MINNESOTA SERIES (CONTINUED)
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$4,000,000 Minneapolis - St. Paul, MN Metropolitan Airport Commission Rev.,
5% due 1/1/2030 ............................................................. Aaa/AAA $ 4,009,960
2,250,000 Minnesota Agricultural & Economic Development Board Rev.
(Evangelical Lutheran Good Samaritan Society Project),
5.15% due 12/1/2022 ......................................................... Aaa/AAA 2,274,615
2,775,000 Minnesota Higher Education Facilities Authority Rev.
(University of St. Thomas), 5.40% due 4/1/2022 .............................. A2/NR 2,882,282
1,000,000 Minnesota Higher Education Facilities Authority Rev. (St. John's
University), 5.40% due 10/1/2022 ............................................ A3/NR 1,040,480
1,775,000 Minnesota Higher Education Facilities Authority Rev. (University
of St. Thomas), 5.40% due 4/1/2023 .......................................... A2/NR 1,837,356
2,500,000 Minnesota Higher Education Facilities Authority Rev. (St. Olaf College),
5 1/4% due 4/1/2029 ......................................................... A3/NR 2,535,800
810,000 Minnesota Housing Finance Agency (Housing Development),
6 1/4% due 2/1/2020 ......................................................... Aa2/AA 822,409
800,000 Minnesota Housing Finance Agency (Single Family Mortgage),
5.65% due 7/1/2022* ......................................................... Aa2/AA+ 815,640
5,000,000 Minnesota Housing Finance Agency (Single Family Mortgage),
6.85% due 1/1/2024* ......................................................... Aa2/AA+ 5,322,900
1,500,000 Minnesota Public Facilities Authority Water Pollution Control Rev.,
7.10% due 3/1/2012 .......................................................... Aaa/AAA 1,600,845
4,000,000 Minnesota Public Facilities Authority Water Pollution Control Rev.,
6 1/4% due 3/1/2015 ......................................................... Aaa/AAA 4,524,280
5,000,000 Minnesota State GOs, 5.70% due 5/1/2016 ........................................ Aaa/AAA 5,421,900
5,000,000 North Saint Paul - Maplewood, MNIndependent School District GOs,
5 1/8% due 2/1/2025 ......................................................... Aa1/AA+ 5,062,250
2,500,000 Northfield, MN Independent School District GOs, 5 1/4% due 2/1/2017 ............ Aa1/NR 2,560,675
2,000,000 Ramsey & Washington Counties, MN Resource Recovery Rev. (Northern
States Power Company Project), 6 3/4% due 12/1/2006 ......................... A1/AA 2,058,660
4,000,000 Rochester, MN Health Care Facilities Rev. (Mayo Foundation/Mayo
Medical Center), 7.45% due 11/15/2006 ....................................... NR/AA+ 4,306,560
4,500,000 Rochester, MN Health Care Facilities Rev. (Mayo Foundation/Mayo
Medical Center), 6 1/4% due 11/15/2014 ...................................... NR/AA+ 4,946,850
1,000,000 Rochester, MN Health Care Facilities Rev. (Mayo Foundation/Mayo
Medical Center), 6 1/4% due 11/15/2021 ...................................... NR/AA+ 1,091,300
2,575,000 Rochester, MN Independent School District GOs, 5 5/8% due 2/1/2016 ............. Aaa/AA+ 2,752,469
2,715,000 Rochester, MN Independent School District GOs, 5 5/8% due 2/1/2017 ............. Aaa/AA+ 2,903,855
45,000 Saint Paul Port Authority, MN Industrial Development Rev. Series E,
9 1/8% due 10/1/2000 ....................................................... NR/CCC 45,775
5,000 Saint Paul Port Authority, MN Industrial Development Rev. Series H,
9 1/8% due 12/1/2000 ....................................................... NR/CCC 5,092
55,000 Saint Paul Port Authority, MN Industrial Development Rev. Series I,
9 1/8% due 12/1/2000 ....................................................... NR/CCC 56,009
50,000 Saint Paul Port Authority, MN Industrial Development Rev. Series E,
9 1/8% due 10/1/2001 ....................................................... NR/CCC 51,176
10,000 Saint Paul Port Authority, MN Industrial Development Rev. Series H,
9 1/8% due 12/1/2001 ....................................................... NR/CCC 10,208
55,000 Saint Paul Port Authority, MN Industrial Development Rev. Series I,
9 1/8% due 12/1/2001 ....................................................... NR/CCC 56,145
5,000 Saint Paul Port Authority, MN Industrial Development Rev. Series L,
9 3/4% due 12/1/2001 ....................................................... NR/CCC 5,109
- --------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
28
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
MINNESOTA SERIES (CONTINUED)
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$ 50,000 Saint Paul Port Authority, MN Industrial Development Rev. Series E,
9 1/8% due 10/1/2002 ....................................................... NR/CCC $ 51,165
10,000 Saint Paul Port Authority, MN Industrial Development Rev. Series H,
9 1/8% due 12/1/2002 ....................................................... NR/CCC 10,207
60,000 Saint Paul Port Authority, MN Industrial Development Rev. Series I,
9 1/8% due 12/1/2002 ....................................................... NR/CCC 61,244
10,000 Saint Paul Port Authority, MNIndustrial Development Rev. Series L,
9 3/4% due 12/1/2002 ....................................................... NR/CCC 10,217
1,500,000 Southern Minnesota Municipal Power Agency -- Power Supply System Rev.,
5 3/4% due 1/1/2018 ........................................................ A2/A+ 1,577,715
750,000 Southern Minnesota Municipal Power Agency-- Power Supply System Rev.,
5 3/4% due 1/1/2018 ........................................................ Aaa/AAA 815,947
1,500,000 Southern Minnesota Municipal Power Agency-- Power Supply System Rev.,
4 3/4% due 1/1/2016 ........................................................ A2/A+ 1,465,350
3,500,000 Washington County, MN GOs, 5.90% due 2/1/2010 .................................. Aa2/AA- 3,705,555
3,090,000 Western Minnesota Municipal Power Agency-- Power Supply Rev.,
5 1/2% due 1/1/2015 ........................................................ A1/A 3,092,039
9,305,000 Western Minnesota Municipal Power Agency-- Power Supply Rev.,
6 3/8% due 1/1/2016 ........................................................ Aaa/AAA 10,680,372
------------
TOTAL MUNICIPAL BONDS (Cost $113,546,777)-- 98.3% ............................................................. 121,332,877
VARIABLE RATE DEMAND NOTES (Cost $400,000)-- 0.3% ............................................................. 400,000
OTHER ASSETS LESS LIABILITIES-- 1.4% .......................................................................... 1,743,633
------------
NET ASSETS-- 100.0% ........................................................................................... $123,476,510
============
</TABLE>
<TABLE>
<CAPTION>
MISSOURI SERIES
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$2,000,000 Columbia, MO Water and Electric System Improvement Rev., 6 1/8% due 10/1/2012 .. A1/AA $ 2,209,900
2,500,000 Curators of the University of Missouri Health Facilities Rev.
(University of Missouri Health System), 5.60% due 11/1/2026 ................. Aaa/AAA 2,660,375
1,500,000 Hannibal, MO Industrial Development Authority Health Facilities Rev.
(Hannibal Regional Hospital), 5 3/4% due 3/1/2022 ........................... Aaa/AAA 1,619,865
1,000,000 Joplin, MO Industrial Development Authority Rev. (Catholic Health
Initiatives), 5 1/8% due 12/1/2015 .......................................... Aa2/AA 1,015,670
1,500,000 Joplin, MO Industrial Development Authority Rev. (Catholic Health
Initiatives), 5% due 12/1/2028 .............................................. Aa2/AA 1,490,640
565,000 Missouri School Boards Pooled Financing Program Certificates of
Participation, 7 3/8% due 3/1/2006 .......................................... Aaa/AAA 579,594
740,000 Missouri School Boards Pooled Financing Program Certificates of
Participation, 7% due 3/1/2006 .............................................. Aaa/AAA 757,967
1,000,000 Missouri State Environmental Improvement & Energy Resources Authority Rev.
(State Revolving Fund Program), 6.55% due 7/1/2014 .......................... Aa1/NR 1,098,200
2,500,000 Missouri State Environmental Improvement & Energy Resources Authority Rev.
(Union Electric Company Project), 5.45% due 10/1/2028* ...................... A1/AA- 2,619,725
- --------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
29
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
MISSOURI SERIES (CONTINUED)
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$2,500,000 Missouri State Environmental Improvement & Energy Resources
Authority -- Water Pollution Control Rev. (State Revolving
Fund Program), 5.40% due 7/1/2015 ........................................... Aa1/NR $ 2,616,250
2,000,000 Missouri State GOs, 5 5/8% due 4/1/2017 ........................................ Aaa/AAA 2,159,120
2,500,000 Missouri State Health & Educational Facilities Authority Rev.
(Lester E. Cox Medical Centers Project), 5 1/4% due 6/1/2015 ................ Aaa/AAA 2,663,500
1,500,000 Missouri State Health & Educational Facilities Authority Rev.
(Sisters of Mercy Health System, St. Louis, Inc.), 6 1/4% due 6/1/2015 ...... Aa1/AA+ 1,628,145
1,000,000 Missouri State Health & Educational Facilities Authority Rev.
(Sisters of Mercy Health System, St. Louis, Inc.), 7 1/4% due 6/1/2019 ...... Aaa/AA+ 1,045,330
1,000,000 Missouri State Health & Educational Facilities Authority Rev.
(Sisters of Mercy Health System, St. Louis, Inc.), 5% due 6/1/2019 .......... Aa1/AA+ 1,000,490
2,500,000 Missouri State Health & Educational Facilities Authority Rev. (Barnes-Jewish,
Inc./Christian Health Services), 5 1/4% due 5/15/2021 ....................... Aa2/AA 2,538,950
2,500,000 Missouri State Health & Educational Facilities Authority Rev.
(SSM Health Care), 5% due 6/1/2022 .......................................... Aaa/AAA 2,489,525
2,500,000 Missouri State Health & Educational Facilities Authority Rev. (The
Washington University), 5% due 11/15/2037 ................................... Aa1/AA+ 2,502,100
860,000 Missouri State Housing Development Commission Housing Development Bonds
(Federally Insured Mortgage Loans), 6% due 10/15/2019 ....................... Aa2/AA+ 873,674
2,415,000 Missouri State Housing Development Commission Single Family Mortgage Rev.
(Homeownership Loan Program), 5.90% due 9/1/2028* ........................... NR/AAA 2,535,847
1,000,000 Puerto Rico Highway &Transportation Authority Rev., 5 1/2% due 7/1/2026 ........ Baa1/A 1,053,930
1,500,000 St. Louis, MO Industrial Development Authority Pollution Control Rev.
(Anheuser-Busch Companies, Inc. Project), 6.65% due 5/1/2016 ................ A1/A+ 1,835,100
1,500,000 St. Louis, MO Municipal Finance Corporation City Justice Center
Leasehold Improvement Rev., 5.95% due 2/15/2016 ............................. Aaa/AAA 1,659,735
2,400,000 Southeast Missouri Correctional Facility Lease Rev. (Missouri State
Project), 5 3/4% due 10/15/2016 ............................................. Aa/AA 2,536,008
2,500,000 Springfield, MO Waterworks Rev., 5.60% due 5/1/2023 ............................ Aa/A+ 2,738,600
2,750,000 University of Missouri Systems Facilities Rev., 5 1/2% due 11/1/2023 ........... Aa2/AA+ 2,863,767
-----------
TOTAL MUNICIPAL BONDS (Cost $45,286,528)-- 96.9% .............................................................. 48,792,007
VARIABLE RATE DEMAND NOTES (Cost $800,000)-- 1.6% ............................................................. 800,000
OTHER ASSETS LESS LIABILITIES-- 1.5% .......................................................................... 775,406
-----------
NET ASSETS-- 100.0% ........................................................................................... $50,367,413
===========
- --------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
30
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
NEW YORK SERIES
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$2,490,000 Buffalo Municipal Water Finance Authority, NY Water System Rev.,
5% due 7/1/2026 ............................................................ Aaa/AAA $ 2,496,399
2,500,000 Long Island Power Authority, NY Electric Systems General Rev.,
5 1/2% due 12/1/2029 ....................................................... Baa1/A- 2,590,150
4,000,000 Metropolitan Transportation Authority, NY (Dedicated Tax Fund),
5% due 4/1/2023 ............................................................ Aaa/AAA 4,010,400
4,000,000 Metropolitan Transportation Authority, NY (Transit Facilities Rev.),
4 3/4% due 7/1/2026 ........................................................ Aaa/AAA 3,921,120
4,000,000 New York City Municipal Water Finance Authority Water & Sewer System Rev.,
6 1/4% due 6/15/2020 ........................................................ Aaa/AAA 4,644,240
1,340,000 New York City, NY GOs, 7 1/4% due 8/15/2024 .................................... Aaa/A- 1,471,025
5,000 New York City, NY GOs, 7 1/4% due 8/15/2024 .................................... A3/A- 5,425
1,380,000 New York City, NY GOs, 6% due 8/1/2026 ......................................... A3/A- 1,511,707
2,450,000 New York City, NY Industrial Development Agency Civic Facility Rev.
(The Nightingale - Bamford School Project), 5.85% due 1/15/2020 ............. A3/A 2,591,414
2,500,000 New York City, NY Transitional Finance Authority (Future Tax
Secured Bonds), 5% due 5/1/2026 ............................................. Aa3/AA 2,506,425
4,000,000 New York City, NY Trust for Cultural Resources Rev. (American Museum of
Natural History), 5.65% due 4/1/2027 ........................................ Aaa/AAA 4,311,200
4,000,000 New York State Dormitory Authority Rev. (Fordham University),
5 3/4% due 7/1/2015 ......................................................... Aaa/AAA 4,316,800
4,000,000 New York State Dormitory Authority Rev. (Rochester Institute of Technology),
5 1/2% due 7/1/2018 ......................................................... Aaa/AAA 4,280,561
3,500,000 New York State Dormitory Authority Rev. (Mental Health Services Facilities
Improvement), 5 3/4% due 8/15/2022 .......................................... A3/A- 3,754,205
3,000,000 New York State Dormitory Authority Rev. (Skidmore College),
5 3/8% due 7/1/2023 ......................................................... Aaa/AAA 3,096,510
1,500,000 New York State Dormitory Authority Rev. (Vassar Brothers Hospital),
5 3/8% due 7/1/2025 ......................................................... Aaa/AAA 1,562,265
2,000,000 New YorkState Dormitory Authority Rev. (Hospital for Special Surgery),
5% due 2/1/2028 ............................................................. Aaa/AAA 1,993,760
2,000,000 New YorkState Dormitory Authority Rev. (Rockefeller University),
5% due 7/1/2028 ............................................................. Aaa/AAA 2,010,460
4,000,000 New York State Energy Research &Development Authority Gas Facilities Rev.
(Brooklyn Union Gas), 5 1/2% due 1/1/2021 ................................... Aaa/AAA 4,243,720
3,000,000 New York State Environmental Facilities Corporation Pollution Control Rev.
(State Water-- Revolving Fund), 6.90% due 11/15/2015 ........................ Aaa/AAA 3,495,750
3,000,000 New York State Housing Finance Agency Rev. (Phillips Village Project),
7 3/4% due 8/15/2017* ....................................................... A2/NR 3,359,670
3,000,000 New York State Local Government Assistance Corp., 6% due 4/1/2024 .............. A3/A+ 3,267,750
2,000,000 New York State Mortgage Agency Rev. (Homeowner Mortgage),
7 1/2% due 4/1/2016 ......................................................... Aa2/NR 2,080,160
1,000,000 New York State Mortgage Agency Rev. (Homeowner Mortgage),
5 1/2% due 10/1/2028* ....................................................... Aa2/NR 1,025,540
- -----------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
31
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
NEW YORK SERIES (CONTINUED)
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$3,000,000 New York State Thruway Authority General Rev., 6% due 1/1/2025 ................. Aaa/AAA $ 3,400,680
2,000,000 New York State Thruway Authority (Highway and Bridge Trust Fund),
5% due 4/1/2018 ............................................................. A3/A- 2,001,740
4,000,000 New York State Thruway Authority Service Contract Rev.,
6 1/4% due 4/1/2014 ......................................................... Baa1/BBB+ 4,582,640
4,000,000 Onondaga County, NY Industrial Development Agency Sewer Facilities Rev.
(Bristol-Myers Squibb Co. Project), 5 3/4% due 3/1/2024* .................... Aaa/AAA 4,516,200
2,250,000 Port Authority of New York and New Jersey Consolidated Rev.,
6 1/8% due 6/1/2094 ......................................................... A1/AA- 2,698,380
-----------
TOTAL MUNICIPAL BONDS (Cost $78,726,229)-- 98.6% ............................................................. 85,746,296
OTHER ASSETS LESS LIABILITIES-- 1.4% ......................................................................... 1,257,287
-----------
NET ASSETS-- 100.0% .......................................................................................... $87,003,583
===========
</TABLE>
<TABLE>
<CAPTION>
OHIO SERIES
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$2,250,000 Beavercreek Local School District, OH GOs (School Improvement Bonds),
5.70% due 12/1/2020 ......................................................... Aaa/AAA $ 2,443,860
3,450,000 Big Walnut Local School District, OH School Building Construction
& Improvement GOs, 7.20% due 6/1/2007 ....................................... Aaa/AAA 3,821,427
4,000,000 Butler County, OH Transportation Improvement District Highway Improvement
Rev., 5 1/8% due 4/1/2017 ................................................... Aaa/AAA 4,140,000
4,000,000 Cleveland, OH Airport System Rev., 5 1/8% due 1/1/2027* ........................ Aaa/AAA 4,004,760
2,395,000 Cleveland, OH Airport System Rev., 5 1/8% due 1/1/2027 ......................... Aaa/AAA 2,426,518
5,000,000 Cleveland, OH Public Power System Rev., 5% due 11/15/2024 ...................... Aaa/AAA 5,011,550
4,915,000 Cleveland, OH Waterworks Improvement First Mortgage Rev.,
5 3/4% due 1/1/2021 ......................................................... Aaa/AAA 5,538,566
85,000 Cleveland, OH Waterworks Improvement First Mortgage Rev.,
5 3/4% due 1/1/2021 ......................................................... Aaa/AAA 93,026
4,500,000 Columbus, OH Municipal Airport Authority Rev. (Port Columbus
International Airport Project), 6% due 1/1/2020* ............................ Aaa/AAA 4,874,715
1,000,000 Columbus, OH Municipal Airport Authority Rev. (Port Columbus
International Airport Project), 5% due 1/1/2028 ............................. Aaa/AAA 1,000,780
3,000,000 Dayton, OH Water System Mortgage Rev., 6 3/4% due 12/1/2010 .................... Aaa/AAA 3,067,530
7,000,000 Franklin County, OH GOs, 5 3/8% due 12/1/2020 .................................. Aaa/AAA 7,440,300
7,500,000 Franklin County, OH Hospital Rev. (Riverside United Methodist
Hospital), 5 3/4% due 5/15/2020 ............................................. Aa3/NR 7,882,425
2,500,000 Hamilton County, OH Sewer System Rev., 5 1/2% due 12/1/2017 .................... Aaa/AAA 2,643,750
5,000,000 Hamilton, OH Electric System Mortgage Rev., 6% due 10/15/2023 .................. Aaa/AAA 5,452,900
4,000,000 Hudson Local School District, OH GOs, 7.10% due 12/15/2013 ..................... A1/NR 4,367,480
1,095,000 Lake County, OH Hospital Improvement Rev. (Lake Hospital
System Inc.), 8% due 1/1/2013 ............................................... Aaa/AAA 1,115,279
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
32
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
OHIO SERIES (CONTINUED)
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$6,425,000 Mahoning County, OHHospital Rev. (Forum Health Obligated Group),
5% due 11/15/2025 ........................................................... Aaa/AAA $ 6,430,076
2,000,000 Montgomery County, OHCatholic Health Initiatives Rev.,
5 1/8% due 12/1/2017 ........................................................ Aa2/AA 2,029,620
4,650,000 Mount Vernon, OH Hospital Rev. (Knox Community Hospital),
7 7/8% due 6/1/2012 ......................................................... NR/NR 4,755,276
2,000,000 Ohio Air Quality Development Authority Rev. (Cincinnati Gas & Electric
Company Project), 5.45% due 1/1/2024 ........................................ Aaa/AAA 2,082,400
6,500,000 Ohio Air Quality Development Authority Rev. (JMG Project),
6 3/8% due 1/1/2029* ........................................................ Aaa/AAA 7,270,900
4,415,000 Ohio Housing Finance Agency Residential Mortgage Rev. (Mortgage-Backed
Securities Program), 6.10% due 9/1/2028* .................................... NR/AAA 4,720,342
3,000,000 Ohio State Higher Educational Facilities Commission Rev.
(Oberlin College Project), 5 3/8% due 10/1/2015 ............................. NR/AA 3,137,850
4,000,000 Ohio State Higher Educational Facilities Commission Rev.
(University of Dayton Project), 5.40% due 12/1/2022 ......................... Aaa/AAA 4,194,320
2,000,000 Ohio State Liquor Profits Rev., 6.85% due 3/1/2000 ............................. Aaa/AAA 2,089,420
4,000,000 Ohio State Public Facilities Commission Rev. (Higher Education
Capital Facilities), 6.30% due 5/1/2006 .................................... Aaa/AAA 4,334,120
2,330,000 Ohio State Water Development Authority Rev. (Safe Water),
9 3/8% due 12/1/2010 ........................................................ Aaa/AAA 2,968,047
7,500,000 Ohio State Water Development Authority Rev. (Fresh Water),
5 1/8% due 12/1/2023 ........................................................ Aaa/AAA 7,601,475
5,000,000 Ohio State Water Development Authority Rev. (Community Assistance),
5 3/8% due 12/1/2024 ........................................................ Aaa/AAA 5,259,250
5,000,000 Ohio State Water Development Authority Rev. (Dayton Power &
Light Co. Project), 6.40% due 8/15/2027 ..................................... Aa3/AA- 5,418,200
2,500,000 Ohio State Water Development Authority Solid Waste Disposal Rev.
(North Star BHP Steel, L.L.C. Project-- Cargill, Incorporated,
Guarantor), 6.30% due 9/1/2020* ............................................. Aa3/AA- 2,768,525
3,000,000 Ohio Turnpike Commission, OH Turnpike Rev., 5.70% due 2/15/2017 ................ Aaa/AAA 3,375,810
2,955,000 Pickerington Local School District, OH School Building Construction
GOs, 8% due 12/1/2005 ....................................................... Aaa/AAA 3,499,843
4,000,000 Puerto Rico Highway &Transportation Authority Rev., 5 1/2% due 7/1/2036 ........ Baa1/A 4,361,840
775,000 Toledo, OH Sewer System Rev., 7 3/4% due 11/15/2017 ............................ Aaa/AAA 794,445
560,000 Toledo, OH Waterworks Rev., 7 3/4% due 11/15/2017 .............................. Aaa/AAA 574,050
2,500,000 Twinsburg City School District, OH School Improvement GOs,
5.90% due 12/1/2021 ......................................................... Aaa/AAA 2,770,175
3,000,000 University of Toledo, OH General Receipts Bonds, 7.10% due 6/1/2010 ............ Aaa/AAA 3,225,840
2,000,000 Worthington City School District, OH School Building Construction
& Improvement GOs, 8 3/4% due 12/1/2002 ..................................... Aaa/AAA 2,156,100
------------
TOTAL MUNICIPAL BONDS (Cost $139,947,906)-- 98.0% ............................................................ 151,142,790
VARIABLE RATE DEMAND NOTES (Cost $800,000)-- 0.5% ............................................................ 800,000
OTHER ASSETS LESS LIABILITIES-- 1.5% ......................................................................... 2,286,703
------------
NET ASSETS-- 100.0% .......................................................................................... $154,229,493
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
33
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
OREGON SERIES
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$2,000,000 Benton County, OR Hospital Facilities Authority Rev. (Samaritan Health
Services Project), 5 1/8% due 10/1/2028 ..................................... NR/A $ 1,998,480
2,000,000 Chemeketa, OR Community College District GOs, 5.95% due 6/1/2016 ............... Aaa/AAA 2,263,740
1,000,000 Clackamas & Washington Counties, OR GOs (West Linn-Wilsonville School
District), 5% due 6/1/2017 .................................................. Aaa/AAA 1,021,100
2,000,000 Eugene, OR Electric Utility Rev., 5.80% due 8/1/2022 ........................... Aaa/AAA 2,219,120
1,500,000 Eugene, OR Trojan Nuclear Project Rev., 5.90% due 9/1/2009 ..................... Aa1/AA- 1,502,445
1,250,000 Multnomah County, OR Education Facility Rev. (University of Portland),
5% due 4/1/2018 ............................................................. Aaa/AAA 1,273,538
1,250,000 Multnomah County School District, OR GOs, 6.80% due 12/15/2004 ................. Aa/A+ 1,258,438
1,750,000 Multnomah County School District, OR GOs, 5 1/2% due 6/1/2015 .................. A1/A+ 1,867,005
2,000,000 North Clackamas Parks & Recreation District -- Clackamas County, OR Rev.
(Recreational Facilities), 5.70% due 4/1/2013 ............................... NR/A- 2,113,240
2,000,000 North Wasco County People's Utility District-- Wasco County, OR Rev.
(Bonneville Power Administration), 5.20% due 12/1/2024 ...................... Aa1/AA- 2,026,120
750,000 Ontario, OR Hospital Facility Authority Health Facilities Rev.
Catholic Health Corporation (Dominican Sisters of Ontario Inc.,
d.b.a. Holy Rosary Medical Center Project), 6.10% due 11/15/2017 ............ Aa2/AA 808,927
2,500,000 Oregon Department of Administrative Services Certificates of
Participation, 5.80% due 5/1/2024 ............................................ Aaa/AAA 2,722,250
1,000,000 Oregon Department of Transportation Regional Light Rail Extension Rev.,
6.20% due 6/1/2008 ........................................................... Aaa/AAA 1,123,260
2,500,000 Oregon Health, Housing, Educational & Cultural Facilities Authority Rev.
(Reed College Project), 5 3/8% due 7/1/2025 .................................. NR/A+ 2,606,750
1,250,000 Oregon Health Sciences University Rev., 5 1/4% due 7/1/2028 ..................... Aaa/AAA 1,274,750
2,000,000 Oregon Housing & Community Services Department Housing & Finance Rev.
(Assisted or Insured Multi-Unit Program), 5 3/4% due 7/1/2012 ................ Aa2/A+ 2,079,080
900,000 Oregon Housing & Community Services Department Mortgage Rev. (Single Family
Mortgage Program), 5.65% due 7/1/2019* ....................................... Aa2/NR 923,643
310,000 Oregon Housing & Community Services Department Mortgage Rev. (Single Family
Mortgage Program), 7% due 7/1/2022* .......................................... Aa2/NR 314,101
500,000 Oregon Housing & Community Services Department Mortgage Rev. (Single Family
Mortgage Program), 5.30% due 7/1/2024* ....................................... Aa2/NR 506,510
1,000,000 Oregon Housing & Community Services Department Mortgage Rev. (Single Family
Mortgage Program), 6% due 7/1/2027* .......................................... Aa2/NR 1,058,150
- ----------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
34
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
OREGON SERIES (CONTINUED)
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$ 500,000 Oregon State GOs (Veterans' Welfare), 9% due 10/1/2006 ......................... Aa2/AA $ 671,400
1,375,000 Oregon State GOs (Veterans' Welfare), 5 7/8% due 10/1/2018 ..................... Aa2/AA 1,450,144
500,000 Oregon State GOs (Alternate Energy Project), 8.40% due 1/1/2008 ................. Aa2/AA 518,545
250,000 Oregon State GOs (Elderly & Disabled Housing), 7.20% due 8/1/2021 ............... Aa2/AA 270,192
1,000,000 Oregon State GOs (Elderly & Disabled Housing), 6.60% due 8/1/2022* .............. Aa2/AA 1,109,860
950,000 Port of Portland, OR International Airport Rev., 7.10% due 7/1/2021* ............ Aaa/AAA 1,190,331
50,000 Port of Portland, OR International Airport Rev., 7.10% due 7/1/2021* ............ Aaa/AAA 54,133
500,000 Port of Portland, OR International Airport Rev., 5 3/4% due 7/1/2025* ........... Aaa/AAA 530,710
1,500,000 Port of Portland, OR International Airport Rev., 5 5/8% due 7/1/2026* ........... Aaa/AAA 1,590,555
2,000,000 Portland, OR GOs, 5.60% due 6/1/2014 ............................................ Aa2/NR 2,156,820
1,250,000 Portland, OR Hospital Facilities Authority Rev. (Legacy Health System),
6 5/8% due 5/1/2011 .......................................................... Aaa/AAA 1,352,050
2,500,000 Portland, OR Sewer System Rev., 5% due 6/1/2015 ................................. Aaa/AAA 2,568,875
1,000,000 Puerto Rico Highway & Transportation Authority Rev., 5 1/2% due 7/1/2026 ........ Baa1/A 1,053,930
630,000 Puerto Rico Housing Finance Corp. (Single Family Mortgage Rev.),
6.85% due 10/15/2023 ......................................................... Aaa/AAA 674,900
1,000,000 Puerto Rico Ports Authority Rev., 7% due 7/1/2014* .............................. Aaa/AAA 1,089,000
1,000,000 Puerto Rico Telephone Authority Rev., 5 1/2% due 1/1/2013 ....................... A/A+ 1,052,240
2,600,000 Salem, OR Pedestrian Safety Improvements GOs, 5 3/4% due 5/1/2011 .............. Aaa/AAA 2,861,170
1,000,000 Tri-County Metropolitan Transportation District of Oregon GOs
(Light Rail Extension), 6% due 7/1/2012 ...................................... Aa/AA+ 1,077,960
1,110,000 Tualatin Development Commission, OR (Urban Renewal & Redevelopment),
7 3/8% due 1/1/2007 .......................................................... Baa1/NR 1,119,424
500,000 Virgin Islands Public Finance Authority Rev., 5 1/2% due 10/1/2022 .............. NR/BBB- 516,475
2,500,000 Washington and Multnomah Counties, OR (Beaverton School District),
5% due 8/1/2017 ............................................................. Aa2/AA- 2,554,425
1,500,000 Washington County, OR Unified Sewerage Agency Rev.,
5 3/4% due 10/1/2011 ........................................................ Aaa/AAA 1,708,485
-----------
TOTAL MUNICIPAL BONDS (COST $53,777,463)-- 96.5% .............................................. 58,132,271
-----------
VARIABLE RATE DEMAND NOTES
-------------------------------
300,000 Floyd County, GA Development Authority Environmental Improvement
Rev. (Georgia Kraft Co. Project) due 12/1/2015 .............................. P-1/NR 300,000
200,000 New York City Municipal Water Finance Authority, NY Water & Sewer System Rev.
due 6/15/2022 ............................................................... VMIG-1/A-1+ 200,000
900,000 New York State Energy Research & Development Authority Pollution Control Rev.
(Niagara Mohawk) due 12/1/2023 .............................................. NR/A-1+ 900,000
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
35
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
OREGON SERIES (CONTINUED)
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$1,100,000 New York State Energy Research & Development Authority Pollution Control Rev.
(Niagara Mohawk) due 7/1/2027* .............................................. NR/A-1+ $ 1,100,000
600,000 Sweetwater County, WY Pollution Control Rev. (Pacificorp) due 12/1/2014 ........ P-1/A-1+ 600,000
-----------
TOTAL VARIABLE RATE DEMAND NOTES (Cost $3,100,000)-- 5.1% .................................................... 3,100,000
-----------
other assets less liabilities-- (1.6)% ....................................................................... (980,745)
-----------
NET ASSETS-- 100.0% .......................................................................................... $60,251,526
===========
</TABLE>
<TABLE>
<CAPTION>
SOUTH CAROLINA SERIES
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$2,500,000 Anderson County, SC Hospital Rev. (Anderson Memorial Hospital),
5 1/4% due 2/1/2012 ......................................................... Aaa/AAA $ 2,589,675
3,800,000 Berkeley County, SC Water & Sewer Rev., 5.55% due 6/1/2016 ..................... Aaa/AAA 4,011,318
745,000 Charleston County, SC Public Facilities Corp. Certificates of
Participation, 7.15% due 2/1/2004 ........................................... A1/A 789,991
770,000 Charleston County, SC Public Facilities Corp. Certificates of
Participation, 7.15% due 8/1/2004 ........................................... A1/A 816,500
800,000 Charleston County, SC Public Facilities Corp. Certificates of
Participation, 7.20% due 2/1/2005 ........................................... A1/A 848,280
2,500,000 Charleston, SC Waterworks & Sewer System Rev., 6% due 1/1/2012 ................. A1/AA- 2,684,525
6,000,000 Darlington County, SC Industrial Development Rev. (Nucor Corporation
Project), 5 3/4% due 8/1/2023* .............................................. A1/AA- 6,310,560
2,000,000 Darlington County, SC Industrial Development Rev. (Sonoco Products
Company Project), 6% Due 4/1/2026* .......................................... A2/A 2,169,820
2,500,000 Fairfield County, SC Pollution Control Rev. (South Carolina Electric &
Gas Company), 6 1/2% due 9/1/2014 ........................................... A1/A+ 2,758,850
1,000,000 Georgetown County, SC Pollution Control Facilities Rev.
(International Paper Company), 7 3/8% due 6/15/2005 ......................... A3/BBB+ 1,030,410
3,000,000 Greenville Hospital System, SC Hospital Facilities Rev.,
5 1/2% due 5/1/2016 ......................................................... NR/AA 3,113,820
2,000,000 Greenville Hospital System, SC Hospital Facilities Rev.,
5 1/4% due 5/1/2023 ......................................................... Aa3/AA 2,039,140
3,000,000 Greenwood County, SC Hospital Facilities Rev. (Self Memorial Hospital),
5 7/8% due 10/1/2017 ........................................................ Aaa/AAA 3,208,650
2,600,000 Lancaster County, SC School District GOs, 6.60% due 7/1/2012 ................... Aaa/AAA 2,906,098
2,000,000 Lancaster County, SC Waterworks & Sewer System Rev., 5 1/4% due 5/1/2021 ....... Aaa/AAA 2,046,360
2,720,000 Laurens County, SC Combined Utility System Rev., 5% due 1/1/2018 ............... Aaa/AAA 2,736,021
5,000,000 Lexington County,SC Hospital Rev. (Health Services District, Inc.),
5 1/8% due 11/1/2026 ........................................................ Aaa/AAA 5,019,900
1,000,000 Lexington County School District, SC Certificates of Participation
(Red Bank/White Knoll Elementary Project), 7.10% due 9/1/2011 ............... Aaa/AAA 1,100,640
1,000,000 Medical University South Carolina Hospital Facilities Rev.,
5.60% due 7/1/2011 .......................................................... Aaa/AAA 1,121,290
3,000,000 Mount Pleasant, SC Water & Sewer Rev., 6% due 12/1/2020 ........................ Aaa/AAA 3,277,770
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
36
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
SOUTH CAROLINA SERIES (CONTINUED)
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- ------------------- -------------- -------------
<S> <C> <C> <C>
$2,000,000 Myrtle Beach, SC Waterworks & Sewer System Rev., 5 1/4% due 3/1/2020 ........... Aaa/AAA $ 2,040,280
1,500,000 North Charleston Sewer District, SC Rev., 6 3/8% due 7/1/2012 .................. Aaa/AAA 1,801,395
5,000,000 Oconee County, SC Pollution Control Rev. (Duke Power Co. Project),
5.80% due 4/1/2014 .......................................................... Aa2/AA- 5,326,800
1,250,000 Piedmont Municipal Power Agency, SC Electric Rev., 6 1/4% due 1/1/2021 ......... Aaa/AAA 1,499,937
3,000,000 Piedmont Municipal Power Agency, SC Electric Rev., 6.30% due 1/1/2022 .......... Aaa/AAA 3,344,130
1,000,000 Puerto Rico Highway &Transportation Authority Rev., 5 1/2% due 7/1/2036 ........ Baa1/A 1,090,460
2,000,000 Puerto Rico Highway &Transportation Authority Rev., 5% due 7/1/2038 ............ Baa1/A 1,982,760
2,500,000 Puerto Rico Industrial, Tourist, Educational, Medical & Environmental
Control Facilities Financing Authority Higher Education Rev.
(Inter-American University of Puerto Rico Project), 5% due 10/1/2022 ........ Aaa/AAA 2,517,975
1,000,000 Puerto Rico Telephone Authority Rev., 5 1/2% due 1/1/2022 ...................... A/A+ 1,038,440
2,000,000 Richland County, SC Solid Waste Disposal Facilities Rev. (Union
Camp Corp. Project), 7.45% due 4/1/2021* .................................... A1/A- 2,185,440
1,000,000 Richland County, SC Solid Waste Disposal Facilities Rev. (Union Camp
Corp. Project), 7 1/8% due 9/1/2021* ........................................ A2/A- 1,088,950
5,000,000 Rock Hill, SC Combined Utilities System Rev., 5% due 1/1/2020 .................. Aaa/AAA 5,003,400
2,000,000 South Carolina Jobs--Economic Development Authority Hospital Rev.
(Georgetown Memorial Hospital), 5% due 11/1/2029 ............................ Aaa/NR 1,978,120
6,000,000 South Carolina Public Service Authority Rev., 5 7/8% due 1/1/2023 .............. Aaa/AAA 6,592,920
1,740,000 South Carolina State Housing Authority (Single Family Mortgage Purchase),
6.70% due 7/1/2010 .......................................................... Aaa/AAA 1,760,062
500,000 South Carolina State Housing Finance & Development Authority
(Homeownership Mortgage), 7.55% due 7/1/2011 ................................ Aa2/AA 522,015
2,140,000 South Carolina State Housing Finance & Development Authority
Rental Housing Rev. (North Bluff Project), 5.60% due 7/1/2016 ............... NR/AA 2,186,802
1,000,000 South Carolina State Housing Finance & Development Authority
(Multi-Family Development Rev.), 6 7/8% due 11/15/2023 ...................... Aaa/NR 1,065,060
5,000,000 South Carolina State Ports Authority Rev., 5.30% due 7/1/2026* ................. Aaa/AAA 5,100,500
5,000,000 Spartanburg, SC Water System Rev., 5% due 6/1/2027 ............................. Aaa/AAA 5,003,750
3,000,000 University of South Carolina Rev., 5 3/4% due 6/1/2026 ......................... Aaa/AAA 3,266,550
2,000,000 Western Carolina Regional Sewer Authority, SC Sewer System Rev.,
5 1/2% due 3/1/2010 ........................................................ Aaa/AAA 2,135,420
------------
TOTAL MUNICIPAL BONDS (Cost $100,589,439)-- 97.5% ........................................................... 109,110,784
VARIABLE RATE DEMAND NOTES (Cost $800,000)-- 0.7% ........................................................... 800,000
OTHER ASSETS LESS LIABILITIES-- 1.8% ........................................................................ 2,011,237
------------
NET ASSETS-- 100.0% ......................................................................................... $111,922,021
============
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See Notes to Financial Statement.
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITES
SEPTEMBER 30, 1998
NATIONAL COLORADO GEORGIA LOUISIANA MARYLAND
SERIES SERIES SERIES SERIES SERIES
--------------- -------------- -------------- -------------- --------------
ASSETS:
Investments, at value (see Portfolios of Investments):
<S> <C> <C> <C> <C> <C>
Long-term holdings ............................ $107,298,895 $44,874,071 $49,475,959 $55,233,461 $54,992,499
Short-term holdings ........................... 700,000 300,000 1,000,000 800,000 2,200,000
------------ ----------- ----------- ----------- -----------
107,998,895 45,174,071 50,475,959 56,033,461 57,192,499
Cash ............................................ 123,926 77,738 122,737 105,448 93,416
Interest receivable ............................. 1,562,261 835,793 785,873 943,112 912,213
Receivable for Capital Stock sold ............... 116,365 -- 783 6,718 26,190
Expenses prepaid to shareholder
service agent ................................. 13,754 6,287 6,680 6,680 7,466
Receivable for securities sold .................. -- -- -- 265,000 --
Other ........................................... 1,449 630 682 767 750
------------ ----------- ----------- ----------- -----------
TOTAL ASSETS .................................... 109,816,650 46,094,519 51,392,714 57,361,186 58,232,534
------------ ----------- ----------- ----------- -----------
Liabilities:
Payable for Capital Stock repurchased ........... 202,840 17,872 170 31,977 34,989
Dividends payable ............................... 181,880 75,001 80,571 96,299 94,112
Payable for securities purchased ................ -- -- -- -- --
Accrued expenses, taxes, and other .............. 130,567 74,487 78,687 88,258 84,820
------------ ----------- ----------- ----------- -----------
TOTAL LIABILITIES ............................... 515,287 167,360 159,428 216,534 213,921
------------ ----------- ----------- ----------- -----------
NET ASSETS ...................................... $109,301,363 $45,927,159 $51,233,286 $57,144,652 $58,018,613
============ =========== =========== =========== ===========
COMPOSITION OF NET ASSETS:
Capital Stock, at par:
Class A ....................................... $ 12,255 $ 5,968 $ 5,777 $ 6,619 $ 6,598
Class D ....................................... 889 45 334 99 375
Additional paid-in capital ...................... 103,096,331 42,776,160 46,360,182 52,120,753 53,403,553
Undistributed/accumulated net realized
gain (loss) ................................... (1,559,215) (115,843) 266,896 748,213 185,038
Net unrealized appreciation of investments ...... 7,751,103 3,260,829 4,600,097 4,268,968 4,423,049
------------ ----------- ----------- ----------- -----------
NET ASSETS ...................................... $109,301,363 $45,927,159 $51,233,286 $57,144,652 $58,018,613
============ =========== =========== =========== ===========
NET ASSETS:
Class A ....................................... $101,908,896 $45,583,092 $48,423,993 $56,307,378 $54,891,172
Class D ....................................... $ 7,392,467 $ 344,067 $ 2,809,293 $ 837,274 $ 3,127,441
SHARES OF CAPITAL STOCK OUTSTANDING
($.001 PAR VALUE):
Class A ....................................... 12,255,165 5,968,019 5,776,921 6,619,224 6,597,655
Class D ....................................... 889,145 45,080 334,454 98,467 375,599
NET ASSET VALUE PER SHARE:
CLASS A ....................................... $8.32 $7.64 $8.38 $8.51 $8.32
CLASS D ....................................... $8.31 $7.63 $8.40 $8.50 $8.33
- ----------------------
See Notes to Financial Statements.
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
MASSACHUSETTS MICHIGAN MINNESOTA MISSOURI
SERIES SERIES SERIES SERIES
---------------- --------------- ---------------- -------------
ASSETS:
Investments, at value (see Portfolios of Investments):
<S> <C> <C> <C> <C>
Long-term holdings ........................................... $108,494,163 $143,845,276 $121,332,877 $48,792,007
Short-term holdings .......................................... 900,000 100,000 400,000 800,000
------------ ------------ ------------ -----------
............................................................... 109,394,163 143,945,276 121,732,877 49,592,007
Cash ........................................................... 69,480 72,871 129,277 10,05
Interest receivable ............................................ 1,627,916 2,500,978 1,981,575 935,202
Receivable for Capital Stock sold .............................. 14,168 30,957 14,281 27,504
Expenses prepaid to shareholder
service agent ................................................ 14,147 18,470 16,898 6,680
Receivable for securities sold ................................. -- -- -- --
Other .......................................................... 1,480 1,970 1,659 689
------------ ------------ ------------ -----------
TOTAL ASSETS ................................................... 111,121,354 146,570,522 123,876,567 50,572,133
------------ ------------ ------------ -----------
Liabilities:
Payable for Capital Stock repurchased .......................... 20,610 177,957 53,965 46,024
Dividends payable .............................................. 174,746 236,774 203,842 77,772
Payable for securities purchased -- -- -- --
Accrued expenses, taxes, and other ............................. 129,882 153,474 142,250 80,924
------------ ------------ ------------ -----------
TOTAL LIABILITIES .............................................. 325,238 568,205 400,057 204,720
------------ ------------ ------------ -----------
NET ASSETS ..................................................... $110,796,116 $146,002,317 $123,476,510 $50,367,413
============ ============ ============ ===========
COMPOSITION OF NET ASSETS:
Capital Stock, at par:
Class A ...................................................... $ 13,227 $ 16,333 $ 15,217 $ 6,223
Class D 178 209 263 52
Additional paid-in capital ..................................... 101,176,263 132,640,548 114,171,159 46,119,176
Undistributed/accumulated net realized
gain (loss) .................................................. 356,827 2,468,435 1,503,771 736,483
Net unrealized appreciation of investments ..................... 9,249,621 10,876,792 7,786,100 3,505,479
------------ ------------ ------------ -----------
NET ASSETS ..................................................... $110,796,116 $146,002,317 $123,476,510 $50,367,413
============ ============ ============ ===========
NET ASSETS:
Class A ...................................................... $109,327,849 $144,160,667 $121,373,756 $49,949,695
Class D ...................................................... 1,468,267 1,841,650 2,102,754 417,718
SHARES OF CAPITAL STOCK OUTSTANDING
($.001 PAR VALUE):
Class A ...................................................... 13,227,527 16,332,742 15,216,589 6,222,997
Class D ...................................................... 177,650 208,879 263,568 52,037
NET ASSET VALUE PER SHARE:
CLASS A ...................................................... $8.27 $8.83 $7.98 $8.03
CLASS D ...................................................... $8.26 $8.82 $7.98 $8.03
- ----------------------
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
NEW YORK OHIO OREGON SOUTH CAROLINA
SERIES SERIES SERIES SERIES
-------------- --------------- -------------- ----------------
ASSETS:
Investments, at value (see Portfolios of Investments):
<S> <C> <C> <C> <C>
Long-term holdings ...................................... $85,746,296 $151,142,790 $58,132,271 $109,110,784
Short-term holdings ..................................... -- 800,000 3,100,000 800,000
----------- ------------ ----------- ------------
.......................................................... 85,746,296 151,942,790 61,232,271 109,910,784
Cash ...................................................... 113,225 160,645 110,843 97,468
Interest receivable ....................................... 1,406,077 2,653,997 1,032,032 1,785,326
Receivable for Capital Stock sold ......................... 51,273 19,510 37,382 424,137
Expenses prepaid to shareholder
service agent ........................................... 11,003 20,041 7,859 14,147
Receivable for securities sold ............................ -- -- 171,403 --
Other ..................................................... 1,155 2,067 786 1,498
----------- ------------ ----------- ------------
TOTAL ASSETS .............................................. 87,329,029 154,799,050 62,592,576 112,233,360
----------- ------------ ----------- ------------
Liabilities:
Payable for Capital Stock repurchased ..................... 82,754 144,002 192,678 4,023
Dividends payable ......................................... 137,336 259,015 92,028 177,701
Payable for securities purchased .......................... -- -- 1,967,373 --
Accrued expenses, taxes, and other ........................ 105,356 166,540 88,971 129,615
----------- ------------ ----------- ------------
TOTAL LIABILITIES ......................................... 325,446 569,557 2,341,050 311,339
----------- ------------ ----------- ------------
NET ASSETS ................................................ $87,003,583 $154,229,493 $60,251,526 $111,922,021
=========== ============ =========== ============
COMPOSITION OF NET ASSETS:
Capital Stock, at par:
Class A ................................................. $ 9,867 $ 18,304 $ 7,159 $ 12,682
Class D 253 131 329 668
Additional paid-in capital ................................ 77,894,645 140,608,940 55,517,834 102,662,939
Undistributed/accumulated net realized
gain (loss) ............................................. 2,078,751 2,407,234 371,396 724,387
Net unrealized appreciation of investments ................ 7,020,067 11,194,884 4,354,808 8,521,345
----------- ------------ ----------- ------------
NET ASSETS ................................................ $87,003,583 $154,229,493 $60,251,526 $111,922,021
=========== ============ =========== ============
NET ASSETS:
Class A ................................................. $84,821,960 $153,126,162 $57,601,297 $106,328,118
Class D ................................................. 2,181,623 1,103,331 2,650,229 5,593,903
SHARES OF CAPITAL STOCK OUTSTANDING
($.001 PAR VALUE):
Class A ................................................. 9,866,681 18,303,910 7,158,690 12,681,944
Class D ................................................. 253,558 131,260 329,620 667,830
NET ASSET VALUE PER SHARE:
CLASS A ................................................. $8.60 $8.37 $8.05 $8.38
CLASS D ................................................. $8.60 $8.41 $8.04 $8.38
- ----------------------
See Notes to Financial Statements.
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1998
NATIONAL COLORADO GEORGIA LOUISIANA MARYLAND
SERIES SERIES SERIES SERIES SERIES
------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest .......................................... $5,890,123 $2,702,213 $2,764,172 $3,256,299 $3,151,030
---------- ---------- ---------- ---------- ----------
EXPENSES:
Management fees ................................... 522,358 236,819 253,187 283,699 276,179
Distribution and service fees ..................... 144,067 48,288 72,377 60,185 73,397
Shareholder account services ...................... 128,464 63,960 70,106 68,976 76,286
Auditing and legal fees ........................... 35,088 38,029 36,590 38,371 37,938
Registration ...................................... 28,590 11,929 14,206 15,673 16,143
Shareholder reports and communications ............ 14,047 10,951 13,278 13,652 15,704
Custody and related services ...................... 10,266 9,828 8,947 11,739 7,135
Directors' fees and expenses ...................... 5,244 4,873 4,957 4,928 4,884
Miscellaneous ..................................... 5,414 3,353 3,354 3,477 3,524
---------- ---------- ---------- ---------- ----------
TOTAL EXPENSES .................................... 893,538 428,030 477,002 500,700 511,190
---------- ---------- ---------- ---------- ----------
NET INVESTMENT INCOME ............................. 4,996,585 2,274,183 2,287,170 2,755,599 2,639,840
---------- ---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments .................. 1,375,240 1,217,468 355,347 750,930 183,975
Net change in unrealized appreciation
of investments .................................. 2,557,155 133,704 1,483,755 904,770 1,341,557
---------- ---------- ---------- ---------- ----------
NET GAIN ON INVESTMENTS ........................... 3,932,395 1,351,172 1,839,102 1,655,700 1,525,532
---------- ---------- ---------- ---------- ----------
INCREASE IN NET ASSETS FROM OPERATIONS ............ $8,928,980 $3,625,355 $4,126,272 $4,411,299 $4,165,372
========== ========== ========== ========== ==========
</TABLE>
- -----------------------------
See Notes to Financial Statements.
40
<PAGE>
<TABLE>
<CAPTION>
MASSACHUSETTS MICHIGAN MINNESOTA MISSOURI NEW YORK OHIO OREGON SOUTH CAROLINA
SERIES SERIES SERIES SERIES SERIES SERIES SERIES SERIES
- ----------------------------- ------------ ------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 6,041,059 $ 8,081,223 $6,978,847 $2,860,843 $4,741,309 $ 8,760,743 $3,153,675 $5,980,487
- ----------- ----------- ---------- ---------- ---------- ----------- ---------- ----------
545,891 726,553 614,405 260,574 426,872 768,368 287,757 539,515
116,077 153,231 134,829 56,182 92,196 152,714 71,660 142,882
133,887 183,757 170,425 71,916 98,764 192,969 76,751 137,733
39,566 35,761 38,824 35,841 35,086 36,526 40,474 36,487
15,581 17,776 11,713 12,948 14,886 15,797 12,974 14,238
16,168 19,074 16,241 13,147 14,985 18,565 13,780 9,381
11,006 11,378 13,669 10,240 11,193 10,040 12,912 14,206
5,578 6,214 5,808 4,942 5,157 6,336 5,021 5,863
5,755 7,210 6,539 3,406 4,640 7,653 3,617 5,584
- ----------- ----------- ---------- ---------- ---------- ----------- ---------- ----------
889,509 1,160,954 1,012,453 469,196 703,779 1,208,968 524,946 905,889
- ----------- ----------- ---------- ---------- ---------- ----------- ---------- ----------
5,151,550 6,920,269 5,966,394 2,391,647 4,037,530 7,551,775 2,628,729 5,074,598
- ----------- ----------- ---------- ---------- ---------- ----------- ---------- ----------
360,413 2,466,720 2,326,890 792,748 2,733,067 3,398,423 375,535 1,214,196
4,686,395 2,641,464 714,989 984,919 1,350,015 1,953,712 1,637,046 2,638,545
- ----------- ----------- ---------- ---------- ---------- ----------- ---------- ----------
5,046,808 5,108,184 3,041,879 1,777,667 4,083,082 5,352,135 2,012,581 3,852,741
- ----------- ----------- ---------- ---------- ---------- ----------- ---------- ----------
$10,198,358 $12,028,453 $9,008,273 $4,169,314 $8,120,612 $12,903,910 $4,641,310 $8,927,339
=========== =========== ========== ========== ========== =========== ========== ==========
</TABLE>
41
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NATIONAL SERIES COLORADO SERIES GEORGIA SERIES
----------------------------- ------------------------------- -------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
----------------------------- ------------------------------- -------------------------------
1998 1997 1998 1997 1998 1997
-------------- ------------- -------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........ $ 4,996,585 $ 5,074,538 $ 2,274,183 $ 2,552,660 $ 2,287,170 $ 2,496,948
Net realized gain (loss)
on investments ............. 1,375,240 278,366 1,217,468 (1,295,378) 355,347 117,571
Net change in unrealized
appreciation of
investments ................ 2,557,155 3,753,003 133,704 2,352,484 1,483,755 1,648,469
------------- ------------- ------------- ------------- ------------- -------------
INCREASE IN NET ASSETS
FROM OPERATIONS............. 8,928,980 9,105,907 3,625,355 3,609,766 4,126,272 4,262,988
------------- ------------- ------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ................... (4,774,389) (4,906,738) (2,263,810) (2,542,330) (2,185,497) (2,406,265)
Class D ................... (222,196) (167,800) (10,373) (10,330) (101,673) (90,683)
Net realized gain on
investments:
Class A ................... -- -- -- -- (187,062) (180,236)
Class D ................... -- -- -- -- (10,787) (6,873)
------------- ------------- ------------- ------------- ------------- -------------
Decrease in Net Assets from
Distributions ............. (4,996,585) (5,074,538) (2,274,183) (2,552,660) (2,485,019) (2,684,057)
------------- ------------- ------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale
of shares:
Class A ................... 7,098,841 3,114,125 1,287,016 1,076,262 2,038,654 4,134,682
Class D ................... 929,650 475,323 143,429 32,754 918,990 1,056,744
Net asset value of shares
issued in payment
of dividends:
Class A ................... 2,620,048 2,676,250 1,265,360 1,383,913 1,422,482 1,593,994
Class D ................... 171,356 108,599 7,311 6,306 87,282 74,720
Exchanged from
associated Funds:
Class A ................... 7,059,979 5,221,126 2,208,315 2,519,749 260,904 220,471
Class D ................... 16,952,120 35,760,206 40,000 13,676 53,323 46,374
Net asset value of shares
issued in payment of
gain distributions:
Class A ................... -- -- -- -- 145,261 140,329
Class D ................... -- -- -- -- 9,588 6,295
------------- ------------- ------------- ------------- ------------- -------------
Total ........................ 34,831,994 47,355,629 4,951,431 5,032,660 4,936,484 7,273,609
------------- ------------- ------------- ------------- ------------- -------------
Cost of shares repurchased:
Class A ................... (9,998,684) (10,801,204) (7,569,275) (6,020,226) (6,905,867) (6,985,116)
Class D ................... (631,664) (585,245) (78,801) (45,914) (608,241) (749,883)
Exchanged into
associated Funds:
Class A ................... (6,101,457) (5,287,181) (2,730,725) (2,526,522) (703,073) (984,750)
Class D ................... (12,491,491) (38,546,451) (14,735) (29,141) (381,284) (201,142)
------------- ------------- ------------- ------------- ------------- -------------
Total ........................ (29,223,296) (55,220,081) (10,393,536) (8,621,803) (8,598,465) (8,920,891)
------------- ------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE)
IN NET ASSETS
FROM CAPITAL SHARE
TRANSACTIONS ............... 5,608,698 (7,864,452) (5,442,105) (3,589,143) (3,661,981) (1,647,282)
------------- ------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE)
IN NET ASSETS .............. 9,541,093 (3,833,083) (4,090,933) (2,532,037) (2,020,728) (68,351)
NET ASSETS:
Beginning of year ............ 99,760,270 103,593,353 50,018,092 52,550,129 53,254,014 53,322,365
------------- ------------- ------------- ------------- ------------- -------------
END OF YEAR .................. $ 109,301,363 $ 99,760,270 $ 45,927,159 $ 50,018,092 $ 51,233,286 $ 53,254,014
============= ============= ============= ============= ============= =============
</TABLE>
- -------------
See Notes to Financial Statements.
42
<PAGE>
<TABLE>
<CAPTION>
LOUISIANA SERIES MARYLAND SERIES MASSACHUSETTS SERIES
------------------------------ -------------------------------- -------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
------------------------------ -------------------------------- -------------------------------
1998 1997 1998 1997 1998 1997
------------- ------------- ------------- ------------- ------------- -------------
<S> <S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income ........ $ 2,755,599 $ 2,882,172 $ 2,639,840 $ 2,728,689 $ 5,151,550 $ 5,574,868
Net realized gain (loss)
on investments ............. 750,930 96,176 183,975 383,873 360,413 1,304,763
Net change in unrealized
appreciation of
investments ................ 904,770 1,423,177 1,341,557 952,592 4,686,395 1,867,804
------------- ------------- ------------- ------------- ------------- -------------
INCREASE IN NET ASSETS
FROM OPERATIONS............. 4,411,299 4,401,525 4,165,372 4,065,154 10,198,358 8,747,435
------------- ------------- ------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ................... (2,732,585) (2,865,407) (2,539,788) (2,647,830) (5,099,272) (5,516,992)
Class D ................... (23,014) (16,765) (100,052) (80,859) (52,278) (57,876)
Net realized gain on
investments:
Class A ................... (95,055) (753,044) (307,098) (281,130) (1,288,484) (1,068,791)
Class D ................... (862) (5,217) (11,949) (11,087) (14,760) (14,031)
------------- ------------- ------------- ------------- ------------- -------------
Decrease in Net Assets from
Distributions ............. (2,851,516) (3,640,433) (2,958,887) (3,020,906) (6,454,794) (6,657,690)
------------- ------------- ------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale
of shares:
Class A ................... 1,593,079 1,489,134 3,716,423 1,434,072 2,426,260 2,431,716
Class D ................... 275,183 135,107 1,423,657 510,347 392,038 288,117
Net asset value of shares
issued in payment
of dividends:
Class A ................... 1,366,881 1,461,539 1,496,930 1,543,240 3,066,637 3,307,753
Class D ................... 16,878 9,122 78,222 69,209 22,770 31,220
Exchanged from
associated Funds:
Class A ................... 29,131 21,008 294,333 613,677 10,859,223 11,842,999
Class D ................... 45,621 -- 16,794 -- 116,384 8,924
Net asset value of shares
issued in payment of
gain distributions:
Class A ................... 64,975 518,498 225,691 205,081 951,011 774,630
Class D ................... 692 3,466 10,991 10,110 7,293 9,688
------------- ------------- ------------- ------------- ------------- -------------
Total ........................ 7,273,609 3,392,440 3,637,874 7,263,041 4,385,736 17,841,616
------------- ------------- ------------- ------------- ------------- -------------
Cost of shares repurchased:
Class A ................... (4,220,025) (5,240,608) (4,254,611) (5,400,781) (9,987,117) (11,114,300)
Class D ................... (28,622) (34,626) (521,910) (509,633) (361,116) (510,040)
Exchanged into
associated Funds:
Class A ................... (266,535) (69,802) (282,486) (896,334) (11,696,486) (9,172,465)
Class D ................... -- -- (3,461) (99,960) -- (8,905)
------------- ------------- ------------- ------------- ------------- -------------
Total ........................ (4,515,182) (5,345,036) (5,062,468) (6,906,708) (22,044,719) (20,805,710)
------------- ------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE)
IN NET ASSETS
FROM CAPITAL SHARE
TRANSACTIONS ............... (1,122,742) (1,707,162) 2,200,573 (2,520,972) (4,203,103) (2,110,663)
------------- ------------- ------------- ------------- ------------- -------------
INCREASE (DECREASE)
IN NET ASSETS .............. 437,041 (946,070) 3,407,058 (1,476,724) (459,539) (20,918)
NET ASSETS:
Beginning of year ............ 56,707,611 57,653,681 54,611,555 56,088,279 111,255,655 111,276,573
------------- ------------- ------------- ------------- ------------- -------------
END OF YEAR .................. $ 57,144,652 $ 56,707,611 $ 58,018,613 $ 54,611,555 $ 110,796,116 $ 111,255,655
============= ============= ============= ============= ============= =============
</TABLE>
- -------------
See Notes to Financial Statements.
<PAGE>
MICHIGAN SERIES
------------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------
1998 1997
------------- -------------
OPERATIONS:
Net investment income ........ $ 6,920,269 $ 7,494,605
Net realized gain (loss)
on investments ............. 2,466,720 1,259,022
Net change in unrealized
appreciation of
investments ................ 2,641,464 2,653,074
------------- -------------
INCREASE IN NET ASSETS
FROM OPERATIONS............. 12,028,453 11,406,701
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ................... (6,853,272) (7,427,374)
Class D ................... (66,997) (67,231)
Net realized gain on
investments:
Class A ................... (1,235,329) (1,581,301)
Class D ................... (15,651) (17,780)
------------- -------------
Decrease in Net Assets from
Distributions ............. (8,171,249) (9,093,686)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale
of shares:
Class A ................... 4,780,685 5,064,050
Class D ................... 325,385 706,948
Net asset value of shares
issued in payment
of dividends:
Class A ................... 4,190,240 4,475,470
Class D ................... 50,303 47,279
Exchanged from
associated Funds:
Class A ................... 2,928,969 9,115,725
Class D ................... 106,164 258,662
Net asset value of shares
issued in payment of
gain distributions:
Class A ................... 911,174 1,180,119
Class D ................... 14,084 13,960
------------- -------------
Total ........................ 13,307,004 13,307,004
------------- -------------
Cost of shares repurchased:
Class A ................... (12,531,450) (15,967,293)
Class D ................... (479,641) (552,079)
Exchanged into
associated Funds:
Class A ................... (3,299,610) (10,959,291)
Class D ................... (66,539) (145,528)
------------- -------------
Total ........................ (16,377,240) (27,624,191)
------------- -------------
INCREASE (DECREASE)
IN NET ASSETS
FROM CAPITAL SHARE
TRANSACTIONS ............... (3,070,236) (6,761,978)
------------- -------------
INCREASE (DECREASE)
IN NET ASSETS .............. 786,968 (4,448,963)
NET ASSETS:
Beginning of year ............ 145,215,349 149,664,312
------------- -------------
END OF YEAR .................. $146,002,317 $ 145,215,349
============= =============
- -------------
See Notes to Financial Statements.
43
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MINNESOTA SERIES MISSOURI SERIES NEW YORK SERIES
----------------------------- ---------------------------- -----------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
----------------------------- ---------------------------- -----------------------------
1998 1997 1998 1997 1998 1997
--------------- ------------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income ................. $ 5,966,394 $ 6,538,641 $ 2,391,647 $ 2,583,310 $ 4,037,530 $ 4,228,630
Net realized gain on investments ...... 2,326,890 757,947 792,748 389,565 2,733,067 200,181
Net change in unrealized
appreciation of investments ......... 714,989 978,768 984,919 900,350 1,350,015 3,171,620
------------ ------------ ----------- ----------- ----------- -----------
INCREASE IN NET ASSETS
FROM OPERATIONS ..................... 9,008,273 8,275,356 4,169,314 3,873,225 8,120,612 7,600,431
------------ ------------ ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ............................ (5,891,605) (6,456,679) (2,377,089) (2,563,601) (3,969,021) (4,176,066)
Class D ............................ (74,789) (81,962) (14,558) (19,709) (68,509) (52,564)
Net realized gain on investments:
Class A ............................ (139,563) -- (437,159) (542,355) (837,486) (213,515)
Class D ............................ (2,075) -- (3,680) (5,999) (15,723) (3,062)
------------ ------------ ----------- ----------- ----------- -----------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS ...................... (6,108,032) (6,538,641) (2,832,486) (3,131,664) (4,890,739) (4,445,207)
------------ ------------ ----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares:
Class A ............................ 3,759,777 5,444,733 1,518,510 5,524,679 3,404,935 3,917,958
Class D ............................ 583,305 135,740 79,605 39,028 541,566 431,628
Net asset value of shares issued in
payment of dividends:
Class A ............................ 3,934,003 4,394,871 1,135,261 1,240,533 2,342,732 2,427,328
Class D ............................ 42,082 55,878 12,480 15,171 49,242 36,517
Exchanged from associated Funds:
Class A ............................ 373,852 356,606 223,404 243,591 3,247,626 4,314,919
Class D ............................ 132,637 90,000 -- 100 109,289 12,295
Net asset value of shares issued in
payment of gain distributions:
Class A ............................ 112,803 -- 281,752 354,701 666,270 166,872
Class D ............................ 1,581 -- 2,904 5,296 12,694 2,545
------------ ------------ ----------- ----------- ----------- -----------
Total ................................. 8,940,040 10,477,828 3,253,916 7,423,099 10,374,354 11,310,062
------------ ------------ ----------- ----------- ----------- -----------
Cost of shares repurchased:
Class A ............................ (10,246,157) (14,412,829) (6,778,544) (4,255,392) (8,149,245) (9,574,807)
Class D ............................ (199,128) (503,408) (162,241) (114,612) (152,914) (68,104)
Exchanged into associated Funds:
Class A ............................ (1,084,969) (1,994,727) (522,272) (1,021,172) (3,375,173) (3,551,797)
Class D ............................ (306,816) (39,298) -- (40,189) (22,942) (42,506)
------------ ------------ ----------- ----------- ----------- -----------
Total ................................. (11,837,070) (16,950,262) (7,463,057) (5,431,365) (11,700,274) (13,237,214)
------------ ------------ ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL SHARE TRANSACTIONS ..... (2,897,030) (6,472,434) (4,209,141) 1,991,734 (1,325,920) (1,927,152)
------------ ------------ ----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS 3,211 (4,735,719) (2,872,313) 2,733,295 1,903,953 1,228,072
NET ASSETS:
Beginning of year ..................... 123,473,299 128,209,018 53,239,726 50,506,431 85,099,630 83,871,558
------------ ------------ ----------- ----------- ----------- -----------
END OF YEAR ........................... $123,476,510 $123,473,299 $50,367,413 $53,239,726 $87,003,583 $85,099,630
============= ============ =========== =========== =========== ===========
- ------------------
See Notes to Financial Statements.
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
OHIO SERIES OREGON SERIES SOUTH CAROLINA SERIES
----------------------------- ---------------------------- ------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
----------------------------- ---------------------------- ------------------------------
1998 1997 1998 1997 1998 1997
---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income ................. $ 7,551,775 $ 8,161,050 $ 2,628,729 $ 2,771,624 $ 5,074,598 $ 5,370,795
Net realized gain on investments ...... 3,398,423 1,052,154 375,535 747,838 1,214,196 452,558
Net change in unrealized
appreciation of investments ......... 1,953,712 2,121,935 1,637,046 1,208,172 2,638,545 2,381,666
------------ ------------ ----------- ----------- ------------ ------------
INCREASE IN NET ASSETS
FROM OPERATIONS ..................... 12,903,910 11,335,139 4,641,310 4,727,634 8,927,339 8,205,019
------------ ------------ ----------- ----------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ............................ (7,504,421) (8,118,451) (2,555,801) (2,712,769) (4,905,709) (5,239,991)
Class D ............................ (47,354) (42,599) (72,928) (58,855) (168,889) (130,804)
Net realized gain on investments:
Class A ............................ (2,017,799) (1,382,343) (700,268) (304,704) (905,320) (1,667,625)
Class D ............................ (15,589) (8,277) (21,792) (8,165) (34,538) (42,381)
------------ ------------ ----------- ----------- ------------ ------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS ...................... (9,585,163) (9,551,670) (3,350,789) (3,084,493) (6,014,456) (7,080,801)
------------ ------------ ----------- ----------- ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares:
Class A ............................ 3,716,543 3,568,969 4,579,085 2,019,494 10,736,862 4,596,375
Class D ............................ 208,265 352,330 912,518 513,511 2,250,161 1,258,114
Net asset value of shares issued in
payment of dividends:
Class A ............................ 4,618,664 5,063,815 1,588,261 1,713,320 2,804,800 3,057,472
Class D ............................ 40,700 38,045 56,847 43,464 133,057 111,193
Exchanged from associated Funds:
Class A ............................ 404,291 858,387 120,904 59,994 452,032 385,497
Class D ............................ 70,396 15,368 47,138 105,958 52,119 29,567
Net asset value of shares issued in
payment of gain distributions:
Class A ............................ 1,532,501 1,060,708 536,993 232,602 698,627 1,298,064
Class D ............................ 13,962 7,582 18,047 6,239 31,538 40,550
------------ ------------ ----------- ----------- ------------ ------------
Total ................................. 10,605,322 10,965,204 7,859,793 4,694,582 17,159,196 10,776,832
------------ ------------ ----------- ----------- ------------ ------------
Cost of shares repurchased:
Class A ............................ (13,102,427) (18,663,417) (5,263,365) (6,926,397) (10,837,647) (16,191,089)
Class D ............................ (395,804) (216,985) (103,120) (525,899) (605,605) (432,224)
Exchanged into associated Funds:
Class A ............................ (1,758,230) (1,482,349) (437,002) (801,759) (1,330,837) (1,366,846)
Class D ............................ (17,309) (60,245) (12,598) (51,638) (57,130) (106,657)
------------ ------------ ----------- ----------- ------------ ------------
Total ................................. (15,273,770) (20,422,996) (5,816,085) (8,305,693) (12,831,219) (18,096,816)
------------ ------------ ----------- ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL SHARE TRANSACTIONS ..... (4,668,448) (9,457,792) 2,043,708 (3,611,111) 4,327,977 (7,319,984)
------------ ------------ ----------- ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS (1,349,701) (7,674,323) 3,334,229 (1,967,970) 7,240,860 (6,195,766)
NET ASSETS:
Beginning of year ..................... 155,579,194 163,253,517 56,917,297 58,885,267 104,681,161 110,876,927
------------ ------------ ----------- ----------- ------------ ------------
END OF YEAR ........................... $154,229,493 $155,579,194 $60,251,526 $56,917,297 $111,922,021 $104,681,161
============ ============ =========== =========== ============ ============
- ------------------
See Notes to Financial Statements.
</TABLE>
45
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. MULTIPLE CLASSES OF SHARES -- Seligman Municipal Fund Series, Inc. (the
"Fund") consists of 13 separate series: the "National Series," the "Colorado
Series," the "Georgia Series," the "Louisiana Series," the "Maryland Series,"
the "Massachusetts Series," the "Michigan Series," the "Minnesota Series," the
"Missouri Series," the "New York Series," the "Ohio Series," the "Oregon
Series," and the "South Carolina Series." Each Series of the Fund offers two
classes of shares. Class A shares are sold with an initial sales charge of up to
4.75% and a continuing service fee of up to 0.25% on an annual basis. Class A
shares purchased in an amount of $1,000,000 or more are sold without an initial
sales charge but are subject to a contingent deferred sales charge ("CDSC") of
1% on redemptions within 18 months of purchase. Class 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 of 1% imposed on
redemptions made within one year of purchase. The two classes of shares for each
Series represent interests in the same portfolio of investments, have the same
rights and are generally identical in all respects except that each class bears
its separate distribution and certain other class expenses, and has exclusive
voting rights with respect to any matter on which a separate vote of any class
is required.
2. SIGNIFICANT ACCOUNTING POLICIES -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Fund:
A. SECURITY VALUATION -- All municipal securities and other short-term holdings
maturing in more than 60 days are valued based upon quotations provided by an
independent pricing service or, in their absence, at fair value determined in
accordance with procedures approved by the Board of Directors. Short-term
holdings maturing in 60 days or less are generally valued at amortized cost.
B. FEDERAL TAXES -- There is no provision for federal income tax. Each Series
has elected to be taxed as a regulated investment company and intends to
distribute substantially all taxable net income and net gain realized.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Investment
transactions are recorded on trade dates. Identified cost of investments sold
is used for both financial statement and federal income tax purposes.
Interest income is recorded on the accrual basis. The Fund amortizes original
issue discounts and premiums paid on purchases of portfolio securities.
Discounts other than original issue discounts are not amortized.
D. MULTIPLE CLASS ALLOCATIONS -- All income, expenses (other than class-specific
expenses), and realized and unrealized gains or losses are allocated daily to
each class of shares based upon the relative value of the shares of each
class. Class-specific expenses, which include distribution and service fees
and any other items that are specifically attributable to a particular class,
are charged directly to such class. For the year ended September 30, 1998,
distribution and service fees were the only class-specific expenses.
E. DISTRIBUTIONS TO SHAREHOLDERS -- Dividends are declared daily and paid
monthly. Other distributions paid by the Fund are recorded on the ex-dividend
date. The treatment for financial statement purposes of distributions made to
shareholders during the year from net investment income or net realized gains
may differ from their ultimate treatment for federal income tax purposes.
These differences are caused primarily by differences in the timing of the
recognition of certain components of income, expense, or realized capital
gain for federal income tax purposes. Where such differences are permanent in
nature, they are reclassified in the components of net assets based on their
ultimate characterization for federal income tax purposes. Any such
reclassification will have no effect on net assets, results of operations, or
net asset value per share of the Fund.
3. PURCHASES AND SALES OF SECURITIES -- Purchases and sales of portfolio
securities, excluding short-term investments, for the year ended September 30,
1998, were as follows:
SERIES PURCHASES SALES
- -------------- ------------- --------------
National $23,762,460 $18,323,615
Colorado 13,277,678 18,619,022
Georgia 1,442,325 5,205,437
Louisiana 8,789,265 10,259,954
Maryland 4,075,165 4,145,015
Massachusetts 14,246,324 18,932,828
Michigan 33,205,383 36,554,371
Minnesota 25,897,686 27,603,543
Missouri 10,775,390 14,822,167
New York 33,532,285 34,942,327
Ohio 37,247,043 44,155,347
Oregon 7,559,695 7,064,965
South Carolina 20,757,120 17,566,580
46
<PAGE>
NOTES TO FINANCIAL STATEMENTS
At September 30, 1998, the cost of investments for federal income tax
purposes was substantially the same as the cost for financial reporting
purposes, and the tax basis gross unrealized appreciation of portfolio
securities was as follows:
TOTAL
UNREALIZED
SERIES APPRECIATION
- ------------- ---------------
National $ 7,751,103
Colorado 3,260,829
Georgia 4,600,097
Louisiana 4,268,968
Maryland 4,423,049
Massachusetts 9,249,621
Michigan 10,876,792
Minnesota 7,786,100
Missouri 3,505,479
New York 7,020,067
Ohio 11,194,884
Oregon 4,354,808
South Carolina 8,521,345
4. MANAGEMENT FEE, DISTRIBUTION SERVICES, AND OTHER TRANSACTIONS -- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the Fund and
provides the necessary personnel and facilities. Compensation of all officers of
the Fund, all directors of the Fund who are employees or consultants of the
Manager, and all personnel of the Fund and the Manager is paid by the Manager.
The Manager's fee, calculated daily and payable monthly, is equal to 0.50% per
annum of each Series' average daily net assets.
Seligman Advisors, Inc. (the "Distributor") (formerly Seligman Financial
Services, Inc.), agent for the distribution of each Series' shares and an
affiliate of the Manager, received the following concessions after commissions
were paid to dealers for sales of Class A shares:
DISTRIBUTOR DEALER
SERIES CONCESSIONS COMMISSIONS
- -------------- -------------- --------------
National $10,617 $ 75,401
Colorado 5,093 38,359
Georgia 6,978 52,316
Louisiana 6,743 50,723
Maryland 10,969 80,864
Massachusetts 9,068 65,913
Michigan 21,176 155,700
Minnesota 16,223 116,958
Missouri 7,654 52,971
New York 7,561 58,094
Ohio 17,244 124,965
Oregon 15,346 121,619
South Carolina 23,670 171,364
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 continuing fees of up to 0.25% on an annual basis,
payable quarterly, of the average daily net assets of the Class A shares
attributable to the particular service organizations for providing personal
services and/or the maintenance of shareholder accounts. For the year ended
September 30, 1998, the Distributor charged such fees to the Fund pursuant to
the Plan as follows:
TOTAL FEES % OF AVERAGE
SERIES PAID NET ASSETS
- -------------- ------------- ---------------
National $ 87,412 .09%
Colorado 45,621 .10
Georgia 44,562 .09
Louisiana 54,359 .10
Maryland 47,718 .09
Massachusetts 102,371 .09
Michigan 135,906 .09
Minnesota 115,933 .09
Missouri 52,242 .10
New York 74,294 .09
Ohio 140,954 .09
Oregon 51,836 .09
South Carolina 98,768 .09
Under the Plan, with respect to Class D shares, service organizations can
enter into agreements with the Distributor and receive continuing fees 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 D
shares for which the organizations are responsible, and fees for providing other
distribution assistance of up to 0.75% on an annual basis of such average daily
net assets. Such fees are paid monthly by the Fund to the Distributor pursuant
to the Plan. For the year ended September 30, 1998, fees incurred under the Plan
equivalent to 1% per annum of the average daily net assets of Class D shares
were as follows:
SERIES SERIES
- -------------- -------------
National $56,655 Minnesota $18,896
Colorado 2,667 Missouri 3,940
Georgia 27,815 New York 17,902
Louisiana 5,826 Ohio 11,760
Maryland 25,679 Oregon 19,824
Massachusetts 13,706 South Carolina 44,114
Michigan 17,325
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The Distributor is entitled to retain any CDSC imposed on redemptions of Class D
shares occurring within one year after purchase and on certain redemptions of
Class A shares occurring within 18 months of purchase. For the year ended
September 30, 1998, such charges were as follows:
SERIES SERIES
- ------------- -------------
National $ 3,560 Minnesota $ 47
Colorado 219 Missouri 35
Georgia 26,175 New York 1,310
Maryland 445 Ohio 1,259
Massachusetts 267 Oregon 40
Michigan 397 South Carolina 2,648
Seligman Services, Inc., an affiliate of the Manager, is eligible to receive
commissions from certain sales of shares of the Fund, as well as distribution
and service fees pursuant to the Plan. For the year ended September 30, 1998,
Seligman Services, Inc. received commissions from the sale of shares of each
Series and distribution and service fees pursuant to the Plan, as follows:
DISTRIBUTION AND
SERIES COMMISSIONS SERVICE FEES
- -------------- --------------- -------------------
National $ 192 $7,528
Colorado 2,216 2,599
Georgia 1,654 918
Louisiana 117 1,112
Maryland 366 1,572
Massachusetts 718 2,105
Michigan 219 2,822
Minnesota 1,344 2,335
Missouri 405 3,410
New York 3,453 13,359
Ohio 4,159 3,900
Oregon 45 1,682
South Carolina 19,615 4,498
Seligman Data Corp., which is owned by certain associated investment
companies, charged at cost for shareholder account services the following
amounts:
SERIES SERIES
- ------------- ------------
National $128,464 Minnesota $170,425
Colorado 63,960 Missouri 71,916
Georgia 70,106 New York 98,764
Louisiana 68,976 Ohio 192,969
Maryland 76,286 Oregon 76,751
Massachusetts 133,887 South Carolina 137,733
Michigan 183,757
Certain officers and directors of the Fund are officers or directors of the
Manager, the Distributor, Seligman Services, Inc., and/or Seligman Data Corp.
The Fund has a compensation agreement under which directors who receive fees
may elect to defer receiving such fees. Directors 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. Deferred fees
and related accrued earnings are not deductible for federal income tax purposes
until such amounts are paid. The cost of such fees and earnings accrued thereon
is included in directors' fees and expenses, and the accumulated balances
thereof at September 30, 1998, are included in other liabilities as follows:
SERIES SERIES
- ------------ -------------
National $16,068 Minnesota $13,782
Colorado 10,193 Missouri 10,201
Georgia 9,587 New York 13,693
Louisiana 11,049 Ohio 13,851
Maryland 11,045 Oregon 10,045
Massachusetts 13,748 South Carolina 9,707
Michigan 13,378
5. COMMITTED LINE OF CREDIT -- Effective July 1, 1998, the Fund entered into a
joint $800 million committed line of credit that is shared by substantially all
funds in the Seligman Group of Investment Companies. Each Series' borrowings are
limited to 10% of its net assets. Borrowings pursuant to the credit facility are
subject to interest at a rate equal to the overnight federal funds rate plus
0.50% on an overnight basis. Each Series incurs a commitment fee of 0.08% per
annum on its share of the unused portion of the credit facility. The credit
facility may be drawn upon only for temporary purposes and is subject to certain
other customary restrictions. The credit facility commitment expires one year
from the date of the agreement but is renewable with the consent of the
participating banks. To date, the Fund has not borrowed from the credit
facility.
6. LOSS CARRYFORWARD -- In accordance with current federal income tax law, each
of the Series' net realized capital gains and losses are considered separately
for purposes of determining taxable capital gains on an annual basis. At
September 30, 1998, the net loss carryforwards for the National and Colorado
Series amounted to $1,559,215 and $115,843, respectively, which are available
for offset against future taxable net gains, expiring in various amounts through
2005. Accordingly, no capital gain distributions are expected to be paid to
shareholders of the National and Colorado Series until net capital gains have
been realized in excess of the available capital loss carryforwards.
48
<PAGE>
NOTES TO FINANCIAL STATEMENTS
7. CAPITAL STOCK TRANSACTIONS -- The Fund has 1,300,000,000 shares of Capital
Stock authorized. At September 30, 1998, 100,000,000 shares were authorized for
each Series of the Fund. Transactions in shares of Capital Stock were as
follows:
<TABLE>
<CAPTION>
NATIONAL SERIES COLORADO SERIES GEORGIA SERIES LOUISIANA SERIES
------------------------ ------------------------ ------------------------ -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------ ------------------------ -------------------------
1998 1997 1998 1997 1998 1997 1998 1997
------------ ----------- ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales of shares:
Class A ..................... 873,287 401,292 171,756 146,785 248,416 513,632 191,119 181,700
Class D ..................... 114,176 61,208 19,107 4,493 111,889 133,099 32,909 16,439
Shares issued in payment
of dividends:
Class A ..................... 321,523 343,369 168,624 188,633 173,232 200,681 163,549 179,244
Class D ..................... 21,003 13,912 974 860 10,608 9,380 2,019 1,120
Exchanged from associated Funds:
Class A ..................... 865,763 672,956 294,638 345,869 31,751 28,040 3,509 2,599
Class D ..................... 2,093,008 4,606,174 5,319 1,897 6,394 5,782 5,444 --
Shares issued in payment of
gain distributions:
Class A ..................... -- -- -- -- 17,956 17,674 7,857 63,776
Class D ..................... -- -- -- -- 1,182 792 84 426
--------- --------- --------- -------- --------- --------- -------- ---------
Total ......................... 4,288,760 6,098,911 660,418 688,537 601,428 909,080 406,490 445,304
--------- --------- --------- -------- --------- --------- -------- ---------
Shares repurchased:
Class A ..................... (1,226,722) (1,389,619) (1,009,933) (821,576) (844,100) (881,743) (505,091) (642,677)
Class D ..................... (77,574) (75,516) (10,459) (6,235) (73,925) (94,407) (3,426) (4,237)
Exchanged into associated Funds:
Class A ..................... (747,805) (679,856) (363,810) (345,924) (86,018) (123,961) (31,881) (8,595)
Class D ..................... (1,545,820) (4,948,529) (1,959) (4,012) (46,291) (25,271) -- --
--------- --------- --------- -------- --------- --------- -------- ---------
Total ......................... (3,597,921) (7,093,520) (1,386,161) (1,177,747) (1,050,334) (1,125,382) (540,398) (655,509)
--------- --------- --------- -------- --------- --------- -------- ---------
Increase (decrease) in shares . 690,839 (994,609) (725,743) (489,210) (448,906) (216,302) (133,908) (210,205)
========= ========= ========= ======== ========= ========= ======== =========
MARYLAND SERIES MASSACHUSETTS SERIES MICHIGAN SERIES MINNESOTA SERIES
------------------------ ------------------------ ------------------------ -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------ ------------------------ -------------------------
1998 1997 1998 1997 1998 1997 1998 1997
------------ ----------- ------------ ----------- ------------ ----------- ------------ -----------
Sales of shares:
Class A ..................... 452,967 178,081 301,803 308,839 552,545 596,810 480,210 706,910
Class D ..................... 173,585 63,517 48,564 36,578 37,739 83,579 74,514 17,609
Shares issued in payment
of dividends:
Class A ..................... 182,716 192,610 381,287 420,799 484,322 529,332 502,233 569,754
Class D ..................... 9,536 8,633 2,830 3,981 5,822 5,592 5,371 7,244
Exchanged from associated Funds:
Class A ..................... 35,858 77,084 1,354,117 1,523,024 339,541 1,080,365 47,797 46,568
Class D ..................... 2,043 -- 14,321 1,134 12,157 30,637 16,965 11,509
Shares issued in payment of
gain distributions:
Class A ..................... 27,829 25,571 120,229 98,428 106,820 139,825 14,480 --
Class D ..................... 1,354 1,259 923 1,232 1,653 1,654 203 --
--------- --------- --------- -------- --------- --------- -------- ---------
Total ......................... 885,888 546,755 2,224,074 2,394,015 1,540,599 2,467,794 1,141,773 1,359,594
--------- --------- --------- -------- --------- --------- -------- ---------
Shares repurchased:
Class A ..................... (519,240) (674,114) (1,241,182) (1,413,634) (1,447,886) (1,886,059) (1,308,615)(1,868,498)
Class D ..................... (63,527) (63,960) (44,816) (65,121) (55,636) (65,355) (25,476) (65,288)
Exchanged into associated Funds:
Class A ..................... (34,518) (112,466) (1,454,254) (1,175,580) (382,652) (1,297,651) (138,742) (258,689)
Class D ..................... (423) (12,507) -- (1,133) (7,657) (17,125) (38,924) (5,099)
--------- --------- --------- -------- --------- --------- -------- ---------
Total ......................... (617,708) (863,047) (2,740,252) (2,655,468) (1,893,831) (3,266,190) (1,511,757)(2,197,574)
--------- --------- --------- -------- --------- --------- -------- ---------
Increase (decrease) in shares . 268,180 (316,292) (516,178) (261,453) (353,232) (798,396) (369,984) (837,980)
========= ========= ========= ======== ========= ========= ======== =========
</TABLE>
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
MISSOURI SERIES NEW YORK SERIES OHIO SERIES OREGON SERIES
----------------------- ------------------------- ------------------------ ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
----------------------- ------------------------- ------------------------ -------------------------
1998 1997 1998 1997 1998 1997 1998 1997
------------ ----------- ------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales of shares:
Class A ...................... 192,882 722,053 409,090 486,564 453,643 441,039 578,820 262,547
Class D ...................... 10,178 5,024 64,754 52,683 25,288 43,216 115,620 66,778
Shares issued in payment
of dividends:
Class A ...................... 144,574 161,292 280,689 300,867 563,375 626,911 201,391 222,418
Class D ...................... 1,589 1,973 5,891 4,524 4,941 4,687 7,211 5,646
Exchanged from associated Funds:
Class A ...................... 28,380 31,545 389,085 540,465 49,472 106,616 15,314 7,803
Class D ...................... -- 13 12,843 1,501 8,543 1,906 5,944 13,881
Shares issued in payment of
gain distributions:
Class A ...................... 36,308 46,125 81,252 20,729 189,198 131,276 69,111 30,287
Class D ...................... 374 688 1,546 316 1,715 934 2,326 813
--------- --------- --------- -------- --------- --------- -------- ---------
Total .......................... 414,285 968,713 1,245,150 1,407,649 1,296,175 1,356,585 995,737 610,173
--------- --------- --------- -------- --------- --------- -------- ---------
Shares repurchased:
Class A ...................... (861,837) (553,544) (974,859) (1,191,908) (1,599,143) (2,310,439) (666,927) (900,692)
Class D ...................... (20,769) (15,067) (18,301) (8,476) (48,136) (26,589) (13,128) (68,686)
Exchanged into associated Funds:
Class A ...................... (66,519) (131,979) (404,227) (442,854) (214,380) (184,026) (55,368) (104,744)
Class D ...................... -- (5,250) (2,738) (5,338) (2,092) (7,441) (1,600) (6,685)
--------- --------- --------- -------- --------- --------- -------- ---------
Total .......................... (949,125) (705,840) (1,400,125) (1,648,576) (1,863,751) (2,528,495) (737,023)(1,080,807)
--------- --------- --------- -------- --------- --------- -------- ---------
Increase (decrease) in shares .. (534,840) 262,873 (154,975) (240,927) (567,576) (1,171,910) 258,714 (470,634)
========= ========= ========= ========= ========= ========= ======== =========
</TABLE>
SOUTH CAROLINA
-------------------------
YEAR ENDED
SEPTEMBER 30,
-------------------------
1998 1997
------------ -----------
Sales of shares:
Class A ...................... 1,307,029 572,615
Class D ...................... 273,163 156,977
Shares issued in payment
of dividends:
Class A ...................... 341,280 380,701
Class D ...................... 16,202 13,850
Exchanged from associated Funds:
Class A ...................... 54,738 47,863
Class D ...................... 6,370 3,643
Shares issued in payment of
gain distributions:
Class A ...................... 86,250 161,652
Class D ...................... 3,898 5,056
--------- ---------
Total .......................... 2,088,930 1,342,357
--------- ---------
Shares repurchased:
Class A ...................... (1,319,559) (2,018,325)
Class D ...................... (73,888) (53,697)
Exchanged into associated Funds:
Class A ...................... (162,725) (170,000)
Class D ...................... (6,993) (13,276)
--------- ---------
Total .......................... (1,563,165) (2,255,298)
--------- ---------
Increase (decrease) in shares .. 525,765 (912,941)
========= =========
50
<PAGE>
FINANCIAL HIGHLIGHTS
The Fund's financial highlights are presented below. "Per share operating
performance" data is designed to allow investors to trace the operating
performance of each Class, on a per share basis, from the beginning net asset
value to the ending net asset value, so that investors can understand what
effect the individual items have on their investment, assuming it was held
throughout the period. Generally, per share amounts are derived by converting
the actual dollar amounts incurred for each item, as disclosed in the financial
statements, to their equivalent per share amounts, based on average shares
outstanding.
"Total return based on net asset value" measures each Class's performance
assuming that investors purchased shares at net asset value as of the beginning
of the period, invested dividends and capital gains paid at net asset value, and
then sold their shares at the net asset value on the last day of the period. The
total return computations do not reflect any sales charges investors may incur
in purchasing or selling shares of each Series. Total returns for periods of
less than one year are not annualized.
NATIONAL SERIES
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------
YEAR ENDED SEPTEMBER 30,
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ............................... $8.01 $7.70 $7.58 $7.18 $8.72
----- ----- ----- ----- -----
Net investment income ............................................ 0.39 0.39 0.40 0.40 0.41
Net realized and unrealized
investment gain (loss) ......................................... 0.31 0.31 0.12 0.40 (1.04)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS .......................................... 0.70 0.70 0.52 0.80 (0.63)
Dividends paid or declared ....................................... (0.39) (0.39) (0.40) (0.40) (0.41)
Distributions from net gain realized ............................. -- -- -- -- (0.50)
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ....................... 0.31 0.31 0.12 0.40 (1.54)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR ..................................... $8.32 $8.01 $7.70 $7.58 $7.18
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ........................... 9.00% 9.40% 6.97% 11.48% (7.83)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................... 0.80% 0.84% 0.80% 0.86% 0.85%
Net investment income to average net assets ...................... 4.82% 5.05% 5.19% 5.46% 5.30%
Portfolio turnover ............................................... 18.00% 20.63% 33.99% 24.91% 24.86%
NET ASSETS, END OF YEAR
(000s omitted) ................................................... $101,909 $97,481 $98,767 $104,184 $111,374
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94**
----------------------------------------- TO
1998 1997 1996 1995 9/30/94
----- ----- ----- ----- ------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $8.02 $7.70 $7.57 $7.18 $8.20
----- ----- ----- ----- -----
Net investment income ............................................ 0.32 0.32 0.33 0.32 0.22
Net realized and unrealized
investment gain (loss) ......................................... 0.29 0.32 0.13 0.39 (1.02)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS .......................................... 0.61 0.64 0.46 0.71 (0.80)
Dividends paid or declared ....................................... (0.32) (0.32) (0.33) (0.32) (0.22)
Distributions from net gain realized ............................. -- -- -- -- --
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ....................... 0.29 0.32 0.13 0.39 (1.02)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ................................... $8.31 $8.02 $7.70 $7.57 $7.18
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ........................... 7.76% 8.56% 6.13% 10.17% (9.96)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................... 1.71% 1.75% 1.67% 1.95% 1.76%+
Net investment income to average net assets ...................... 3.91% 4.15% 4.27% 4.40% 4.37%+
Portfolio turnover ............................................... 18.00% 20.63% 33.99% 24.91% 24.86%++
NET ASSETS, END OF PERIOD
(000s omitted) ................................................... $7,392 $2,279 $4,826 $1,215 $446
</TABLE>
- ---------------------
See footnotes on page 63.
51
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
COLORADO SERIES
CLASS A
---------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ............................... $7.42 $7.27 $7.30 $7.09 $7.76
----- ----- ----- ----- -----
Net investment income ............................................ 0.36 0.37 0.37 0.38 0.37
Net realized and unrealized
investment gain (loss) ......................................... 0.22 0.15 (0.03) 0.21 (0.59)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ..................................................... 0.58 0.52 0.34 0.59 (0.22)
Dividends paid or declared ....................................... (0.36) (0.37) (0.37) (0.38) (0.37)
Distributions from net gain realized ............................. -- -- -- -- (0.08)
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ....................... 0.22 0.15 (0.03) 0.21 (0.67)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR ..................................... $7.64 $7.42 $7.27 $7.30 $7.09
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ........................... 8.03% 7.30% 4.76% 8.56% (2.92)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................... 0.90% 0.90% 0.85% 0.93% 0.86%
Net investment income to average net assets ...................... 4.80% 5.01% 5.07% 5.31% 5.06%
Portfolio turnover ............................................... 28.66% 3.99% 12.39% 14.70% 10.07%
NET ASSETS, END OF YEAR
(000s omitted) ................................................... $45,583 $49,780 $52,295 $54,858 $58,197
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94**
----------------------------------------- TO
1998 1997 1996 1995 9/30/94
----- ----- ----- ----- -------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $7.42 $7.27 $7.29 $7.09 $7.72
----- ----- ----- ----- -----
Net investment income ............................................ 0.29 0.30 0.31 0.30 0.20
Net realized and unrealized
investment gain (loss) ......................................... 0.21 0.15 (0.02) 0.20 (0.63)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ..................................................... 0.50 0.45 0.29 0.50 (0.43)
Dividends paid or declared ....................................... (0.29) (0.30) (0.31) (0.30) (0.20)
Distributions from net gain realized ............................. -- -- -- -- --
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ....................... 0.21 0.15 (0.02) 0.20 (0.63)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ................................... $7.63 $7.42 $7.27 $7.29 $7.09
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ........................... 6.90% 6.34% 3.95% 7.26% (5.73)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................... 1.80% 1.81% 1.75% 2.02% 1.78%+
Net investment income to average net assets ...................... 3.90% 4.10% 4.17% 4.23% 4.05%+
Portfolio turnover ............................................... 28.66% 3.99% 12.39% 14.70% 10.07%++
NET ASSETS, END OF PERIOD
(000s omitted) ................................................... $344 $238 $255 $193 $96
- ------------
See footnotes on page 63.
</TABLE>
52
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
GEORGIA SERIES
CLASS A
---------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ............................... $8.12 $7.87 $7.81 $7.48 $8.43
----- ----- ----- ----- -----
Net investment income ............................................ 0.38 0.38 0.39 0.39 0.41
Net realized and unrealized investment
gain (loss) .................................................... 0.29 0.28 0.11 0.43 (0.86)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ..................................................... 0.67 0.66 0.50 0.82 (0.45)
Dividends paid or declared ....................................... (0.38) (0.38) (0.39) (0.39) (0.41)
Distributions from net gain realized ............................. (0.03) (0.03) (0.05) (0.10) (0.09)
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ....................... 0.26 0.25 0.06 0.33 (0.95)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR ..................................... $8.38 $8.12 $7.87 $7.81 $7.48
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ........................... 8.44% 8.65% 6.56% 11.66% (5.52)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................... 0.89% 0.89% 0.83% 0.91% 0.73%
Net investment income to average net assets ...................... 4.57% 4.82% 4.94% 5.26% 5.21%
Portfolio turnover ............................................... 2.92% 12.28% 16.24% 3.36% 19.34%
NET ASSETS, END OF YEAR
(000s omitted) ................................................... $48,424 $50,614 $50,995 $57,678 $61,466
Without management fee waiver:*
Net investment income per share ................................ $0.39 $0.40
Ratios:
Expenses to average net assets ................................. 0.96% 0.93%
Net investment income to average net assets .................... 5.21% 5.01%
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94**
----------------------------------------- TO
1998 1997 1996 1995 9/30/94
----- ----- ----- ----- -------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $8.13 $7.88 $7.82 $7.49 $8.33
----- ----- ----- ----- -----
Net investment income ............................................ 0.30 0.31 0.32 0.32 0.22
Net realized and unrealized
investment gain (loss) ......................................... 0.30 0.28 0.11 0.43 (0.84)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ..................................................... 0.60 0.59 0.43 0.75 (0.62)
Dividends paid or declared ....................................... (0.30) (0.31) (0.32) (0.32) (0.22)
Distributions from net gain realized ............................. (0.03) (0.03) (0.05) (0.10) --
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ....................... 0.27 0.25 0.06 0.33 (0.84)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ................................... $8.40 $8.13 $7.88 $7.82 $7.49
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ........................... 7.59% 7.67% 5.60% 10.58% (7.57)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................... 1.80% 1.79% 1.73% 1.90% 1.76%+
Net investment income to average net assets ...................... 3.66% 3.92% 4.03% 4.28% 4.28%+
Portfolio turnover ............................................... 2.92% 12.28% 16.24% 3.36% 19.34%++
NET ASSETS, END OF PERIOD
(000s omitted) ................................................... $2,809 $2,640 $2,327 $2,079 $849
Without management fee waiver:*
Net investment income per share ................................ $0.31 $0.21
Ratios:
Expenses to average net assets ................................. 1.95% 1.90%+
Net investment income to average net assets .................... 4.23% 4.15%+
</TABLE>
- ----------
See footnotes on page 63.
53
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
LOUISIANA SERIES
CLASS A
---------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ............................... $8.28 $8.16 $8.14 $7.94 $8.79
----- ----- ----- ----- -----
Net investment income ............................................ 0.41 0.41 0.42 0.43 0.44
Net realized and unrealized
investment gain (loss) ......................................... 0.24 0.23 0.08 0.34 (0.77)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ..................................................... 0.65 0.64 0.50 0.77 (0.33)
Dividends paid or declared ....................................... (0.41) (0.41) (0.42) (0.43) (0.44)
Distributions from net gain realized ............................. (0.01) (0.11) (0.06) (0.14) (0.08)
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ....................... 0.23 0.12 0.02 0.20 (0.85)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR ..................................... $8.51 $8.28 $8.16 $8.14 $7.94
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ........................... 8.08% 8.17% 6.32% 10.30% (3.83)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................... 0.88% 0.86% 0.82% 0.89% 0.87%
Net investment income to average net assets ...................... 4.86% 5.08% 5.15% 5.44% 5.31%
Portfolio turnover ............................................... 15.72% 16.08% 10.08% 4.82% 17.16%
NET ASSETS, END OF YEAR
(000s omitted) ................................................... $56,308 $56,199 $57,264 $61,988 $61,441
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94**
----------------------------------------- TO
1998 1997 1996 1995 9/30/94
----- ----- ----- ----- -------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $8.27 $8.16 $8.14 $7.94 $8.73
----- ----- ----- ----- -----
Net investment income ............................................ 0.33 0.34 0.35 0.35 0.24
Net realized and unrealized
investment gain (loss) ......................................... 0.24 0.22 0.08 0.34 (0.79)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ..................................................... 0.57 0.56 0.43 0.69 (0.55)
Dividends paid or declared ....................................... (0.33) (0.34) (0.35) (0.35) (0.24)
Distributions from net gain realized ............................. (0.01) (0.11) (0.06) (0.14) --
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ....................... 0.23 0.11 0.02 0.20 (0.79)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ................................... $8.50 $8.27 $8.16 $8.14 $7.94
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ........................... 7.11% 7.07% 5.37% 9.17% (6.45)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................... 1.78% 1.76% 1.72% 1.91% 1.78%+
Net investment income to average net assets ...................... 3.96% 4.18% 4.25% 4.41% 4.33%+
Portfolio turnover ............................................... 15.72% 16.08% 10.08% 4.82% 17.16%++
NET ASSETS, END OF PERIOD
(000s omitted) ................................................... $837 $509 $389 $465 $704
</TABLE>
- ----------
See footnotes on page 63.
54
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MARYLAND SERIES
CLASS A
---------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ............................... $8.14 $7.99 $7.96 $7.71 $8.64
----- ----- ----- ----- -----
Net investment income ............................................ 0.40 0.40 0.40 0.41 0.42
Net realized and unrealized
investment gain (loss) ......................................... 0.23 0.19 0.06 0.38 (0.76)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ..................................................... 0.63 0.59 0.46 0.79 (0.34)
Dividends paid or declared ....................................... (0.40) (0.40) (0.40) (0.41) (0.42)
Distributions from net gain realized ............................. (0.05) (0.04) (0.03) (0.13) (0.17)
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ....................... 0.18 0.15 0.03 0.25 (0.93)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR ..................................... $8.32 $8.14 $7.99 $7.96 $7.71
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ........................... 7.89% 7.64% 6.00% 10.90% (4.08)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................... 0.89% 0.90% 0.84% 0.96% 0.92%
Net investment income to average net assets ...................... 4.82% 4.99% 5.05% 5.31% 5.17%
Portfolio turnover ............................................... 7.59% 14.79% 5.56% 3.63% 17.68%
NET ASSETS, END OF YEAR
(000s omitted) ................................................... $54,891 $52,549 $54,041 $56,290 $57,263
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94**
----------------------------------------- TO
1998 1997 1996 1995 9/30/94
----- ----- ----- ----- -------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $8.15 $7.99 $7.97 $7.72 $8.46
----- ----- ----- ----- -----
Net investment income ............................................ 0.32 0.33 0.33 0.33 0.23
Net realized and unrealized
investment gain (loss) ......................................... 0.23 0.20 0.05 0.38 (0.74)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ..................................................... 0.55 0.53 0.38 0.71 (0.51)
Dividends paid or declared ....................................... (0.32) (0.33) (0.33) (0.33) (0.23)
Distributions from net gain realized ............................. (0.05) (0.04) (0.03) (0.13) --
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ....................... 0.18 0.16 0.02 0.25 (0.74)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ................................... $8.33 $8.15 $7.99 $7.97 $7.72
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ........................... 6.91% 6.80% 4.91% 9.75% (6.21)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................... 1.80% 1.81% 1.72% 2.02% 1.80%+
Net investment income to average net assets ...................... 3.91% 4.08% 4.14% 4.27% 4.26%+
Portfolio turnover ............................................... 7.59% 14.79% 5.56% 3.63% 17.68%++
NET ASSETS, END OF PERIOD
(000s omitted) ................................................... $3,128 $2,063 $2,047 $630 $424
</TABLE>
- ----------
See footnotes on page 63.
55
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MASSACHUSETTS SERIES
CLASS A
---------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ............................... $7.99 $7.85 $7.91 $7.66 $8.54
----- ----- ----- ----- -----
Net investment income ............................................ 0.38 0.40 0.41 0.42 0.44
Net realized and unrealized
investment gain (loss) ......................................... 0.37 0.22 0.05 0.28 (0.67)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ..................................................... 0.75 0.62 0.46 0.70 (0.23)
Dividends paid or declared ....................................... (0.38) (0.40) (0.41) (0.42) (0.44)
Distributions from net gain realized ............................. (0.09) (0.08) (0.11) (0.03) (0.21)
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ....................... 0.28 0.14 (0.06) 0.25 (0.88)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR ..................................... $8.27 $7.99 $7.85 $7.91 $7.66
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ........................... 9.80% 8.11% 5.97% 9.58% (2.94)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................... 0.80% 0.84% 0.80% 0.86% 0.85%
Net investment income to average net assets ...................... 4.72% 5.06% 5.24% 5.51% 5.46%
Portfolio turnover ............................................... 13.41% 29.26% 26.30% 16.68% 12.44%
NET ASSETS, END OF YEAR
(000s omitted) ................................................... $109,328 $110,011 $109,872 $115,711 $120,149
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94**
----------------------------------------- TO
1998 1997 1996 1995 9/30/94
----- ----- ----- ----- -------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $7.99 $7.84 $7.90 $7.66 $8.33
----- ----- ----- ----- -----
Net investment income ............................................ 0.31 0.33 0.34 0.34 0.24
Net realized and unrealized
investment gain (loss) ......................................... 0.36 0.23 0.05 0.27 (0.67)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ..................................................... 0.67 0.56 0.39 0.61 (0.43)
Dividends paid or declared ....................................... (0.31) (0.33) (0.34) (0.34) (0.24)
Distributions from net gain realized ............................. (0.09) (0.08) (0.11) (0.03) --
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ....................... 0.27 0.15 (0.06) 0.24 (0.67)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ................................... $8.26 $7.99 $7.84 $7.90 $7.66
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ........................... 8.68% 7.29% 5.01% 8.33% (5.34)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................... 1.71% 1.74% 1.70% 1.95% 1.78%+
Net investment income to average net assets ...................... 3.81% 4.16% 4.32% 4.47% 4.52%+
Portfolio turnover ............................................... 13.41% 29.26% 26.30% 16.68% 12.44%++
NET ASSETS, END OF PERIOD
(000s omitted) ................................................... $1,468 $1,245 $1,405 $809 $1,099
</TABLE>
- ----------
See footnotes on page 63.
56
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MICHIGAN SERIES
CLASS A
---------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ............................... $8.60 $8.46 $8.54 $8.28 $9.08
----- ----- ----- ----- -----
Net investment income ............................................ 0.41 0.43 0.45 0.46 0.46
Net realized and unrealized
investment gain (loss) ......................................... 0.30 0.23 0.06 0.30 (0.71)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ..................................................... 0.71 0.66 0.51 0.76 (0.25)
Dividends paid or declared ....................................... (0.41) (0.43) (0.45) (0.46) (0.46)
Distributions from net gain realized ............................. (0.07) (0.09) (0.14) (0.04) (0.09)
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ....................... 0.23 0.14 (0.08) 0.26 (0.80)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR ..................................... $8.83 $8.60 $8.46 $8.54 $8.28
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ........................... 8.63% 8.16% 6.16% 9.56% (2.90)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................... 0.79% 0.81% 0.78% 0.87% 0.84%
Net investment income to average net assets ...................... 4.78% 5.13% 5.29% 5.50% 5.32%
Portfolio turnover ............................................... 23.60% 10.98% 19.62% 20.48% 10.06%
NET ASSETS, END OF YEAR
(000s omitted) ................................................... $144,161 $143,370 $148,178 $151,589 $151,095
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94**
----------------------------------------- TO
1998 1997 1996 1995 9/30/94
----- ----- ----- ----- -------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $8.59 $8.45 $8.54 $8.28 $9.01
----- ----- ----- ----- -----
Net investment income ............................................ 0.33 0.36 0.37 0.37 0.25
Net realized and unrealized
investment gain (loss) ......................................... 0.30 0.23 0.05 0.30 (0.73)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ..................................................... 0.63 0.59 0.42 0.67 (0.48)
Dividends paid or declared ....................................... (0.33) (0.36) (0.37) (0.37) (0.25)
Distributions from net gain realized ............................. (0.07) (0.09) (0.14) (0.04) --
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ....................... 0.23 0.14 (0.09) 0.26 (0.73)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ................................... $8.82 $8.59 $8.45 $8.54 $8.28
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ........................... 7.66% 7.19% 5.09% 8.36% (5.47)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................... 1.70% 1.71% 1.68% 2.01% 1.75%+
Net investment income to average net assets ...................... 3.87% 4.23% 4.39% 4.40% 4.40%+
Portfolio turnover ............................................... 23.60% 10.98% 19.62% 20.48% 10.06%++
NET ASSETS, END OF PERIOD
(000s omitted) ................................................... $1,841 $1,845 $1,486 $1,172 $671
</TABLE>
- ----------
See footnotes on page 63.
57
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MINNESOTA SERIES
CLASS A
---------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ............................... $7.79 $7.68 $7.82 $7.72 $8.28
----- ----- ----- ----- -----
Net investment income ............................................ 0.38 0.40 0.42 0.45 0.45
Net realized and unrealized
investment gain (loss) ......................................... 0.20 0.11 (0.12) 0.11 (0.44)
----- ----- ----- ----- -----
INCREASE FROM INVESTMENT
OPERATIONS ..................................................... 0.58 0.51 0.30 0.56 0.01
Dividends paid or declared ....................................... (0.38) (0.40) (0.42) (0.45) (0.45)
Distributions from net gain realized ............................. (0.01) -- (0.02) (0.01) (0.12)
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ....................... 0.19 0.11 (0.14) 0.10 (0.56)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR ..................................... $7.98 $7.79 $7.68 $7.82 $7.72
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ........................... 7.68% 6.85% 3.99% 7.61% 0.12%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................... 0.81% 0.85% 0.81% 0.87% 0.85%
Net investment income to average net assets ...................... 4.87% 5.21% 5.47% 5.89% 5.70%
Portfolio turnover ............................................... 21.86% 6.88% 26.89% 5.57% 3.30%
NET ASSETS, END OF YEAR
(000s omitted) ................................................... $121,374 $121,674 $126,173 $132,716 $134,990
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94**
----------------------------------------- TO
1998 1997 1996 1995 9/30/94
----- ----- ----- ----- -------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ............................. $7.79 $7.68 $7.82 $7.73 $8.22
----- ----- ----- ----- -----
Net investment income ............................................ 0.31 0.33 0.35 0.38 0.25
Net realized and unrealized
investment gain (loss) ......................................... 0.20 0.11 (0.12) 0.10 (0.49)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ..................................................... 0.51 0.44 0.23 0.48 (0.24)
Dividends paid or declared ....................................... (0.31) (0.33) (0.35) (0.38) (0.25)
Distributions from net gain realized ............................. (0.01) -- (0.02) (0.01) --
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ....................... 0.19 0.11 (0.14) 0.09 (0.49)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ................................... $7.98 $7.79 $7.68 $7.82 $7.73
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ........................... 6.71% 5.89% 3.06% 6.45% (3.08)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................... 1.72% 1.75% 1.71% 1.85% 1.74%+
Net investment income to average net assets ...................... 3.96% 4.31% 4.57% 4.92% 4.68%+
Portfolio turnover ............................................... 21.86% 6.88% 26.89% 5.57% 3.30%++
NET ASSETS, END OF PERIOD
(000s omitted) ................................................... $2,103 $1,799 $2,036 $2,237 $1,649
</TABLE>
- ----------
See footnotes on page 63.
58
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MISSOURI SERIES
CLASS A
---------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ............................. $7.82 $7.71 $7.70 $7.41 $8.31
----- ----- ----- ----- -----
Net investment income .......................................... 0.36 0.38 0.39 0.40 0.40
Net realized and unrealized
investment gain (loss) ....................................... 0.28 0.19 0.08 0.36 (0.79)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ................................................... 0.64 0.57 0.47 0.76 (0.39)
Dividends paid or declared ..................................... (0.36) (0.38) (0.39) (0.40) (0.40)
Distributions from net gain realized ........................... (0.07) (0.08) (0.07) (0.07) (0.11)
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ..................... 0.21 0.11 0.01 0.29 (0.90)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR ................................... $8.03 $7.82 $7.71 $7.70 $7.41
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ......................... 8.41% 7.70% 6.27% 10.67% (4.85)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................. 0.89% 0.89% 0.86% 0.88% 0.74%
Net investment income to average net assets .................... 4.59% 4.93% 5.03% 5.31% 5.18%
Portfolio turnover ............................................. 21.26% 6.47% 8.04% 3.88% 14.33%
NET ASSETS, END OF YEAR
(000s omitted) ................................................. $49,949 $52,766 $49,941 $51,169 $52,621
Without management fee waiver:*
Net investment income per share .............................. $0.39 $0.39
Ratios:
Expenses to average net assets ............................... 0.93% 0.88%
Net investment income to average net assets .................. 5.26% 5.04%
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94**
----------------------------------------- TO
1998 1997 1996 1995 9/30/94
----- ----- ----- ----- -------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ........................... $7.82 $7.72 $7.70 $7.41 $8.20
----- ----- ----- ----- -----
Net investment income .......................................... 0.29 0.31 0.32 0.32 0.22
Net realized and unrealized
investment gain (loss) ....................................... 0.28 0.18 0.09 0.36 (0.79)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ................................................... 0.57 0.49 0.41 0.68 (0.57)
Dividends paid or declared ..................................... (0.29) (0.31) (0.32) (0.32) (0.22)
Distributions from net gain realized ........................... (0.07) (0.08) (0.07) (0.07) --
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ..................... 0.21 0.10 0.02 0.29 (0.79)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ................................. $8.03 $7.82 $7.72 $7.70 $7.41
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ......................... 7.45% 6.60% 5.46% 9.49% (7.16)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................. 1.79% 1.80% 1.76% 1.98% 1.70%+
Net investment income to average net assets .................... 3.69% 4.02% 4.13% 4.23% 4.27%+
Portfolio turnover ............................................. 21.26% 6.47% 8.04% 3.88% 14.33%++
NET ASSETS, END OF PERIOD
(000s omitted) ................................................. $418 $474 $565 $515 $350
Without management fee waiver:*
Net investment income per share .............................. $0.32 $0.22
Ratios:
Expenses to average net assets ............................... 2.03% 1.80%+
Net investment income to average net assets .................. 4.18% 4.17%+
</TABLE>
- ----------
See footnotes on page 63.
59
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
NEW YORK SERIES
CLASS A
---------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ............................. $8.28 $7.98 $7.86 $7.67 $8.75
----- ----- ----- ----- -----
Net investment income .......................................... 0.40 0.41 0.42 0.42 0.43
Net realized and unrealized
investment gain (loss) ....................................... 0.40 0.32 0.12 0.36 (0.88)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ................................................... 0.80 0.73 0.54 0.78 (0.45)
Dividends paid or declared ..................................... (0.40) (0.41) (0.42) (0.42) (0.43)
Distributions from net gain realized ........................... (0.08) (0.02) -- (0.17) (0.20)
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ..................... 0.32 0.30 0.12 0.19 (1.08)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR ................................... $8.60 $8.28 $7.98 $7.86 $7.67
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ......................... 10.02% 9.45% 6.97% 10.93% (5.37)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................. 0.81% 0.82% 0.77% 0.88% 0.87%
Net investment income to average net assets .................... 4.74% 5.09% 5.24% 5.52% 5.31%
Portfolio turnover ............................................. 39.85% 23.83% 25.88% 34.05% 28.19%
NET ASSETS, END OF YEAR
(000s omitted) ................................................. $84,822 $83,528 $82,719 $83,980 $90,914
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94**
----------------------------------------- TO
1998 1997 1996 1995 9/30/94
----- ----- ----- ----- -------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ........................... $8.29 $7.98 $7.87 $7.67 $8.55
----- ----- ----- ----- -----
Net investment income .......................................... 0.32 0.34 0.34 0.34 0.23
Net realized and unrealized
investment gain (loss) ....................................... 0.39 0.33 0.11 0.37 (0.88)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ................................................... 0.71 0.67 0.45 0.71 (0.65)
Dividends paid or declared ..................................... (0.32) (0.34) (0.34) (0.34) (0.23)
Distributions from net gain realized ........................... (0.08) (0.02) -- (0.17) --
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ..................... 0.31 0.31 0.11 0.20 (0.88)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ................................. $8.60 $8.29 $7.98 $7.87 $7.67
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ......................... 8.88% 8.60% 5.86% 9.87% (7.73)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................. 1.72% 1.73% 1.68% 1.96% 1.81%+
Net investment income to average net assets .................... 3.83% 4.18% 4.33% 4.42% 4.39%+
Portfolio turnover ............................................. 39.85% 23.83% 25.88% 34.05% 28.19%++
NET ASSETS, END OF PERIOD
(000s omitted) ................................................. $2,182 $1,572 $1,152 $885 $476
</TABLE>
60
- ----------
See footnotes on page 63.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
OHIO SERIES
CLASS A
---------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ............................. $8.19 $8.09 $8.11 $7.90 $8.77
----- ----- ----- ----- -----
Net investment income .......................................... 0.40 0.42 0.43 0.44 0.44
Net realized and unrealized
investment gain (loss) ....................................... 0.29 0.17 0.02 0.28 (0.70)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ................................................... 0.69 0.59 0.45 0.72 (0.26)
Dividends paid or declared ..................................... (0.40) (0.42) (0.43) (0.44) (0.44)
Distributions from net gain realized ........................... (0.11) (0.07) (0.04) (0.07) (0.17)
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ..................... 0.18 0.10 (0.02) 0.21 (0.87)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR ................................... $8.37 $8.19 $8.09 $8.11 $7.90
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ......................... 8.77% 7.54% 5.68% 9.59% (3.08)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................. 0.78% 0.81% 0.77% 0.84% 0.84%
Net investment income to average net assets .................... 4.92% 5.19% 5.32% 5.56% 5.34%
Portfolio turnover ............................................. 24.74% 11.76% 12.90% 2.96% 9.37%
NET ASSETS, END OF YEAR
(000s omitted) ................................................. $153,126 $154,419 $162,243 $170,191 $171,469
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94**
----------------------------------------- TO
1998 1997 1996 1995 9/30/94
----- ----- ----- ----- -------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ........................... $8.23 $8.13 $8.15 $7.92 $8.61
----- ----- ----- ----- -----
Net investment income .......................................... 0.33 0.35 0.36 0.36 0.24
Net realized and unrealized
investment gain (loss) ....................................... 0.29 0.17 0.02 0.30 (0.69)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ................................................... 0.62 0.52 0.38 0.66 (0.45)
Dividends paid or declared ..................................... (0.33) (0.35) (0.36) (0.36) (0.24)
Distributions from net gain realized ........................... (0.11) (0.07) (0.04) (0.07) --
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ..................... 0.18 0.10 (0.02) 0.23 (0.69)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ................................. $8.41 $8.23 $8.13 $8.15 $7.92
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ......................... 7.78% 6.57% 4.74% 8.67% (5.36)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................. 1.69% 1.71% 1.67% 1.93% 1.78%+
Net investment income to average net assets .................... 4.01% 4.29% 4.42% 4.48% 4.41%+
Portfolio turnover ............................................. 24.74% 11.76% 12.90% 2.96% 9.37%++
NET ASSETS, END OF PERIOD
(000s omitted) ................................................. $1,103 $1,160 $1,011 $660 $324
</TABLE>
61
- ----------
See footnotes on page 63.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
OREGON SERIES
CLASS A
---------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ............................. $7.87 $7.65 $7.66 $7.43 $8.08
----- ----- ----- ----- -----
Net investment income .......................................... 0.36 0.38 0.40 0.40 0.40
Net realized and unrealized
investment gain (loss) ....................................... 0.28 0.26 -- 0.25 (0.59)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ................................................... 0.64 0.64 0.40 0.65 (0.19)
Dividends paid or declared ..................................... (0.36) (0.38) (0.40) (0.40) (0.40)
Distributions from net gain realized ........................... (0.10) (0.04) (0.01) (0.02) (0.06)
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ..................... 0.18 0.22 (0.01) 0.23 (0.65)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR ................................... $8.05 $7.87 $7.65 $7.66 $7.43
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ......................... 8.48% 8.60% 5.27% 9.05% (2.38)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................. 0.88% 0.90% 0.86% 0.86% 0.78%
Net investment income to average net assets .................... 4.60% 4.88% 5.18% 5.40% 5.20%
Portfolio turnover ............................................. 12.62% 19.46% 28.65% 2.47% 9.43%
NET ASSETS, END OF YEAR
(000s omitted) ................................................. $57,601 $55,239 $57,345 $59,549 $59,884
Without management fee waiver:*
Net investment income per share $0.40 $0.39
Ratios:
Expenses to average net assets 0.91% 0.89%
Net investment income to average net assets 5.35% 5.09%
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94**
----------------------------------------- TO
1998 1997 1996 1995 9/30/94
----- ----- ----- ----- -------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ........................... $7.87 $7.64 $7.65 $7.43 $8.02
----- ----- ----- ----- -----
Net investment income .......................................... 0.29 0.31 0.33 0.33 0.22
Net realized and unrealized
investment gain (loss) ....................................... 0.27 0.27 -- 0.24 (0.59)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ................................................... 0.56 0.58 0.33 0.57 (0.37)
Dividends paid or declared ..................................... (0.29) (0.31) (0.33) (0.33) (0.22)
Distributions from net gain realized ........................... (0.10) (0.04) (0.01) (0.02) --
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ..................... 0.17 0.23 (0.01) 0.22 (0.59)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ................................. $8.04 $7.87 $7.64 $7.65 $7.43
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ......................... 7.37% 7.77% 4.33% 7.86% (4.76)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................. 1.79% 1.80% 1.76% 1.83% 1.72%+
Net investment income to average net assets .................... 3.69% 3.98% 4.28% 4.41% 4.32%+
Portfolio turnover ............................................. 12.62% 19.46% 28.65% 2.47% 9.43%++
NET ASSETS, END OF PERIOD
(000s omitted) ................................................. $2,650 $1,678 $1,540 $1,495 $843
Without management fee waiver:*
Net investment income per share $0.33 $0.22
Ratios:
Expenses to average net assets 1.88% 1.82%+
Net investment income to average net assets 4.36% 4.22%+
</TABLE>
62
- ----------
See footnotes on page 63.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SOUTH CAROLINA SERIES
CLASS A
---------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ............................. $8.16 $8.07 $7.97 $7.61 $8.52
----- ----- ----- ----- -----
Net investment income .......................................... 0.39 0.40 0.41 0.41 0.41
Net realized and unrealized
investment gain (loss) ....................................... 0.29 0.22 0.12 0.37 (0.79)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ................................................... 0.68 0.62 0.53 0.78 (0.38)
Dividends paid or declared ..................................... (0.39) (0.40) (0.41) (0.41) (0.41)
Distributions from net gain realized ........................... (0.07) (0.13) (0.02) (0.01) (0.12)
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ..................... 0.22 0.09 0.10 0.36 (0.91)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR ................................... $8.38 $8.16 $8.07 $7.97 $7.61
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ......................... 8.66% 7.99% 6.82% 10.69% (4.61)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................. 0.80% 0.84% 0.80% 0.88% 0.83%
Net investment income to average net assets .................... 4.74% 5.04% 5.15% 5.38% 5.12%
Portfolio turnover ............................................. 16.63% -- 20.66% 4.13% 1.81%
NET ASSETS, END OF YEAR
(000s omitted) ................................................. $106,328 $101,018 $108,163 $112,421 $115,133
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94**
----------------------------------------- TO
1998 1997 1996 1995 9/30/94
----- ----- ----- ----- -------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ........................... $8.16 $8.06 $7.97 $7.61 $8.42
----- ----- ----- ----- -----
Net investment income .......................................... 0.31 0.33 0.34 0.34 0.22
Net realized and unrealized
investment gain (loss) ....................................... 0.29 0.23 0.11 0.37 (0.81)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ................................................... 0.60 0.56 0.45 0.71 (0.59)
Dividends paid or declared ..................................... (0.31) (0.33) (0.34) (0.34) (0.22)
Distributions from net gain realized ........................... (0.07) (0.13) (0.02) (0.01) --
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE ..................... 0.22 0.10 0.09 0.36 (0.81)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ................................. $8.38 $8.16 $8.06 $7.97 $7.61
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: ......................... 7.68% 7.15% 5.73% 9.63% (7.14)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................. 1.71% 1.75% 1.70% 1.85% 1.74%+
Net investment income to average net assets .................... 3.83% 4.13% 4.25% 4.40% 4.29%+
Portfolio turnover ............................................. 16.63% -- 20.66% 4.13% 1.81%++
NET ASSETS, END OF PERIOD
(000s omitted) ................................................. $5,594 $3,663 $2,714 $1,704 $1,478
</TABLE>
- ----------
* During the periods stated, the Manager, at its discretion, waived portions of
its fees for the Georgia, Missouri, and Oregon Series.
** Commencement of offering of Class D shares.
+ Annualized.
++ For the year ended September 30, 1994.
See Notes to Financial Statements.
63
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS,
SELIGMAN MUNICIPAL FUND SERIES, INC.:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of the National, Colorado, Georgia, Louisiana,
Maryland, Massachusetts, Michigan, Minnesota, Missouri, New York, Ohio, Oregon,
and South Carolina Series of Seligman Municipal Fund Series, Inc. as of
September 30, 1998, the related statements of operations for the year then ended
and of changes in net assets for each of the years in the two-year period then
ended, and the financial highlights for each of the periods presented. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1998 by correspondence with the Fund's custodian and brokers;
where replies were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each Series of
Seligman Municipal Fund Series, Inc. as of September 30, 1998, the results of
their operations, the changes in their net assets, and the financial highlights
for the respective stated periods, in conformity with generally accepted
accounting principles.
/S/ DELOITTE & TOUCHE LLP
New York, New York
October 30, 1998
64
<PAGE>
JOHN R. GALVIN 2, 4
DEAN, Fletcher School of Law and Diplomacy
at Tufts University
DIRECTOR, Raytheon Corporation
ALICE S. ILCHMAN 3, 4
TRUSTEE, Committee for Economic Development
CHAIRMAN, The Rockefeller Foundation
FRANK A. MCPHERSON 2, 4
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
JOHN E. MEROW 2, 4
RETIRED CHAIRMAN AND SENIOR PARTNER,
Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Industries, Inc.
DIRECTOR, New York Presbyterian Hospital
BETSY S. MICHEL 2, 4
TRUSTEE, The Geraldine R. Dodge Foundation
CHAIRMAN OF THE BOARD OF TRUSTEES, St. George's School
WILLIAM C. MORRIS 1
CHAIRMAN
CHAIRMAN OF THE BOARD, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Carbo Ceramics Inc.
DIRECTOR, Kerr-McGee Corporation
JAMES C. PITNEY 3, 4
RETIRED PARTNER, Pitney, Hardin, Kipp & Szuch,
Law Firm
JAMES Q. RIORDAN 3, 4
DIRECTOR, KeySpan Energy Corporation
TRUSTEE, Committee for Economic Development
DIRECTOR, Public Broadcasting Service
RICHARD R. SCHMALTZ 1
MANAGING DIRECTOR, DIRECTOR OF INVESTMENTS,
J. & W. Seligman & Co. Incorporated
TRUSTEE EMERITUS, Colby College
ROBERT L. SHAFER 3, 4
RETIRED VICE PRESIDENT, Pfizer Inc.
JAMES N. WHITSON 2, 4
DIRECTOR AND CONSULTANT, Sammons Enterprises, Inc.
DIRECTOR, CommScope, Inc.
DIRECTOR, C-SPAN
BRIAN T. ZINO 1
PRESIDENT
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.
DIRECTOR, ICIMutual Insurance Company
DIRECTOR EMERITUS
FRED E. BROWN
DIRECTOR AND CONSULTANT, J. & W. Seligman & Co. Incorporated
- ----------
Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
4 Board Operations Committee
65
<PAGE>
EXECUTIVE OFFICERS
WILLIAM MORRIS
CHAIRMAN
BRIAN T. ZINO
PRESIDENT
THOMAS G. MOLES
VICE PRESIDENT
LAWRENCE P. VOGEL
VICE PRESIDENT
THOMAS G. ROSE
TREASURER
FRANK J. NASTA
SECRETARY
MANAGER
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
GENERAL COUNSEL
Sullivan & Cromwell
INDEPENDENT AUDITORS
Deloitte & Touche LLP
GENERAL DISTRIBUTOR
Seligman Advisors, Inc.
100 Park Avenue
New York, NY 10017
SHAREHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
IMPORTANT TELEPHONE NUMBERS
(800) 221-2450 Shareholder
Services
(212) 682-7600 Outside the
United States
(800) 622-4597 24-Hour Automated
Telephone Access
Service
66
<PAGE>
GLOSSARY OF FINANCIAL TERMS
CAPITAL GAIN DISTRIBUTION -- A payment to mutual fund shareholders of profits
realized on the sale of securities in a fund's portfolio. For tax purposes,
these profits may be taxed at different rates, primarily depending upon the
length of time the securities were owned by the fund.
CAPITAL APPRECIATION/DEPRECIATION -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.
COMPOUNDING -- The change in the value of an investment as shareholders receive
earnings on their investment's earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will not be based on the
original $1,000, but on the $1,070, which includes the first year's earnings.
CONTINGENT DEFERRED SALES CHARGE (CDSC) -- Depending on the class of shares
owned, a fee charged by a mutual fund when shares are sold back to the fund (the
CDSC expires after a fixed time period).
DIVIDEND -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
DIVIDEND YIELD -- A measurement of a fund's dividend as a percentage of the
maximum offering price.
EXPENSE RATIO -- The cost of doing business for a mutual fund, expressed as a
percent of the fund's net assets.
INVESTMENT OBJECTIVE -- The shared investment goal of a fund and its
shareholders.
MANAGEMENT FEE -- The amount paid by a mutual fund to its investment advisor(s).
MULTIPLE CLASSES OF SHARES -- Although an individual mutual fund invests in only
one portfolio of securities, it may offer investors several purchase options
which are "classes" of shares. Multiple classes permit shareholders to choose
the fee structure that best meets their needs and goals. Generally, each class
will differ in terms of how and when sales charges and certain fees are
assessed.
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (NASD) -- A self-regulatory
body with authority over firms that distribute mutual funds.
NET ASSET VALUE (NAV) PER SHARE -- The market worth of one fund share, obtained
by adding a mutual fund's total assets (securities, cash, and any accrued
earnings), subtracting liabilities, and dividing the resulting net assets by the
number of shares outstanding.
OFFERING PRICE (OP) -- The price at which a mutual fund's share can be
purchased. The offering price per share is the current net asset value plus any
sales charge.
PORTFOLIO TURNOVER -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
PROSPECTUS -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission (SEC), such as a fund's investment objective and policies, services,
investment restrictions, officers and directors, how shares are bought and
redeemed, fund fees and other charges, and the fund's financial statements.
SEC YIELD -- SEC Yield refers to the net income earned by a fund during a recent
30-day period. This income is annualized and then divided by the maximum
offering price per share on the last day of the 30-day period. The SEC Yield
formula reflects semiannual compounding.
SECURITIES AND EXCHANGE COMMISSION -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
STATEMENT OF ADDITIONAL INFORMATION -- A document that contains updated or more
detailed information about an investment company and that supplements the
prospectus. It is available at no charge upon request.
TOTAL RETURN -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The Average Annual Total
Return represents the average annual compounded rate of return for the periods
presented.
YIELD ON SECURITIES -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.
- ----------
Adapted from the Investment Company Institute's 1998 Mutual Fund Fact Book.
67
<PAGE>
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 MUNICIPAL FUND SERIES, INC., WHICH CONTAINS INFORMATION ABOUT THE
SALES CHARGES, MANAGEMENT FEE, AND OTHER COSTS. PLEASE READ THE PROSPECTUS
CAREFULLY BEFORE INVESTING OR SENDING MONEY.
SELIGMAN ADVISORS, INC.
AN AFFILIATE OF
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1865
100 PARK AVENUE, NEW YORK, NY 10017
TEA2 9/98 [LOGO] PRINTED ON RECYCLED PAPER
<PAGE>
File No. 2-86008
811-3828
PART C. OTHER INFORMATION
Item 23. Exhibits
All Exhibits have been previously filed and are incorporated herein
by reference, except Exhibits marked with an asterisk (*) which are filed
herewith.
(a) Amended and Restated Articles of Incorporation of Registrant.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 30 filed on January 29, 1997.)
(b) Amended and Restated By-Laws of the Registrant. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 30 filed on
January 29, 1997.)
(c) Copy of Specimen certificate of Capital Stock for Class D Shares.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 31 filed on January 27, 1998.)
(d) Management Agreement between the Registrant and J. & W. Seligman &
Co. Incorporated. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 30 filed on January 29, 1997.)
(e) Distributing Agreement between Registrant and Seligman Advisors,
Inc. (formerly,Seligman Financial Services, Inc.) (Incorporated by
reference to Registrant's Post-Effective Amendment No. 30 filed on
January 29, 1997.)
(e)(1) Sales Agreement between Dealers and Seligman Advisors, Inc.
(formerly, Seligman Financial Services, Inc.) (Incorporated by
reference to Registrant's Post-Effective Amendment No. 30 filed on
January 29, 1997.)
(f) Matched Accumulation Plan of J. & W. Seligman & Co. Incorporated.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 30 filed on January 29, 1997.)
(f)(1) *Deferred Compensation Plan for Directors of Seligman Municipal Fund
Series, Inc.
(g) Custodian Agreement between Registrant and Investors Fiduciary Trust
Company. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 30 filed on January 29, 1997.)
(h) Not applicable.
(i) Opinion and Consent of Counsel. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 30 filed on January 29,
1997.)
(j) *Consent of Independent Auditors.
(j)(1) *Consent of Colorado Counsel.
(j)(2) *Consent of Georgia Counsel.
(j)(3) *Opinion and Consent of Louisiana Counsel.
(j)(4) *Consent of Maryland Counsel.
(j)(5) *Consent of Massachusetts Counsel.
(j)(6) *Consent of Michigan Counsel.
(j)(7) *Opinion and Consent of Minnesota Counsel.
(j)(8) *Consent of Missouri Counsel.
(j)(9) *Opinion and Consent of New York Counsel.
<PAGE>
File No. 2-86008
811-3828
PART C. OTHER INFORMATION (continued)
(j)(10) *Consent of Ohio Counsel.
(j)(11) *Opinion and Consent of Oregon Counsel.
(j)(12) *Opinion and Consent of South Carolina Counsel.
(k) Not applicable.
(l) Purchase Agreement for Initial Capital for Class D shares.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 30 filed on January 29, 1997.)
(m) Amended Administration, Shareholder Services and Distribution Plan
and form of Agreement of the Registrant. (Incorporated by reference
to Registrant's Post-Effective Amendment No. 30 filed on January 29,
1997.)
(n) *Financial Data Schedules meeting the requirements of Rule 483 under
the Securities Act of 1933.
(o) Copy of Multiclass Plan entered into by Registrant pursuant to Rule
18f-3 under the Investment Company Act of 1940. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 30 filed on
January 29, 1997.)
Other Exhibits: Powers of Attorney. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 31 filed on January 27, 1998.)
Item 24. Persons Controlled by or Under Common Control with Registrant -
None.
Item 25. Indemnification
Reference is made to the provisions of Articles Twelfth and
Thirteenth of Registrant's Amended and Restated Articles of
Incorporation filed as Exhibit 24(b)(1) and Article IV of
Registrant's Amended and Restated By-Laws filed as Exhibit 24(b)(2)
to Registrant's Post-Effective Amendment No. 30 to the Registration
Statement.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised by the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act as is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser - J. & W.
Seligman & Co. Incorporated, a Delaware corporation ("Manager"), is
the Registrant's investment manager. The Manager also serves as
investment manager to seventeen associated investment companies.
They are Seligman Capital Fund, Inc., Seligman Cash Management Fund,
Inc., Seligman Common Stock Fund, Inc., Seligman Communications and
Information Fund, Inc., Seligman Frontier Fund, Inc., Seligman
Growth Fund, Inc., Seligman Henderson Global Fund Series, Inc.,
Seligman High Income Fund Series, Seligman Income Fund, Inc.,
Seligman Municipal Series Trust, Seligman New Jersey Municipal Fund,
Inc., Seligman Pennsylvania Municipal Fund Series, Seligman
Portfolios, Inc., Seligman Quality Municipal Fund, Inc., Seligman
Select Municipal Fund, Inc., Seligman Value Fund Series, Inc. and
Tri-Continental Corporation.
The Manager has an investment advisory service division which
provides investment management or advice to private clients. The
list required by this Item 28 of officers and directors of the
Manager, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged
in by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D or Form ADV, filed by
the Manager pursuant to the Investment Advisers Act of 1940 (SEC
File No. 801-15798) on March 25, 1998.
<PAGE>
File No. 2-86008
811-3828
PART C. OTHER INFORMATION (continued)
Item 27. Principal Underwriters
(a) The names of each investment company (other than the Registrant)
for which each principal underwriter currently distributing
securities of the Registrant also acts as a principal underwriter,
depositor or investment adviser are:
Seligman Capital Fund, Inc.
Seligman Cash Management Fund, Inc.
Seligman Common Stock Fund, Inc.
Seligman Communications and Information Fund, Inc.
Seligman Frontier Fund, Inc.
Seligman Growth Fund, Inc.
Seligman Henderson Global Fund Series, Inc.
Seligman High Income Fund, Inc.
Seligman Income Fund, Inc.
Seligman Municipal Series Trust
Seligman New Jersey Municipal Fund, Inc.
Seligman Pennsylvania Municipal Fund Series
Seligman Portfolios, Inc.
Seligman Value Fund Series, Inc.
(b) Name of each director, officer or partner of each principal
underwriter named in response to Item 21.
Seligman Advisors, Inc.
As of December 31, 1998
-----------------------
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
William C. Morris* Director Chairman of the Board
and Chief Executive
Officer
Brian T. Zino* Director President and Director
Ronald T. Schroeder* Director None
Fred E. Brown* Director Director Emeritus
William H. Hazen* Director None
Thomas G. Moles* Director None
David F. Stein* Director None
Stephen J. Hodgdon* President and Director None
Charles W. Kadlec* Chief Investment Strategist None
Lawrence P. Vogel* Senior Vice President, Finance Vice President
Edward F. Lynch* Senior Vice President, National None
Sales Director
James R. Besher Senior Vice President, Divisional None
14000 Margaux Lane Sales Director
Town & Country, MO 63017
Gerald I. Cetrulo, III Senior Vice President, Sales None
140 West Parkway
Pompton Plains, NJ 07444
Jonathan G. Evans Senior Vice President, Sales None
222 Fairmont Way
Ft. Lauderdale, FL 33326
T. Wayne Knowles Senior Vice President, None
104 Morninghills Court Divisional Sales Director
Cary, NC 27511
</TABLE>
<PAGE>
File No. 2-86008
811-3828
PART C. OTHER INFORMATION (continued)
Seligman Advisors, Inc.
As of December 31, 1998
-----------------------
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Joseph Lam Senior Vice President, Regional None
Seligman International Inc. Director, Asia
Suite 1133, Central Building
One Pedder Street
Central Hong Kong
Bradley W. Larson Senior Vice President, Sales None
367 Bryan Drive
Alamo, CA 94526
Richard M. Potocki Senior Vice President, Regional None
Seligman International UK Limited Director, Europe and the Middle East
Berkeley Square House 2nd Floor
Berkeley Square
London, United Kingdom W1X 6EA
Bruce M. Tuckey Senior Vice President, Sales None
41644 Chathman Drive
Novi, MI 48375
Andrew S. Veasey Senior Vice President, Sales None
14 Woodside
Rumson, NJ 07760
J. Brereton Young* Senior Vice President, National None
Accounts Manager
Peter J. Campagna Vice President, Regional Retirement None
1130 Green Meadow Court Plans Manager
Acworth, GA 30102
Matthew A. Digan* Senior Vice President, Director of None
Mutual Fund Marketing
Mason S. Flinn Vice President, Regional Retirement None
159 Varennes Plans Manager
San Francisco, CA 94133
Robert T. Hausler* Senior Vice President, Senior None
Portfolio Specialist
Marsha E. Jacoby* Vice President, Offshore Business None
Manager
William W. Johnson* Vice President, Order Desk None
Michelle L. McCann (Rappa)* Senior Vice President, Director of None
Retirement Plans
Scott H. Novak* Senior Vice President, Insurance None
Ronald W. Pond* Vice President, Portfolio Advisor None
Tracy A. Salomon* Vice President, Retirement Marketing None
Michael R. Sanders* Vice President, Product Manager None
Managed Money Services
Helen Simon* Vice President, Sales None
Administration Manager
Gary A. Terpening* Vice President, Director of Business None
Development
</TABLE>
<PAGE>
File No. 2-86008
811-3828
PART C. OTHER INFORMATION (continued)
Seligman Advisors, Inc.
As of December 31, 1998
-----------------------
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Charles L. von Breitenbach, II* Senior Vice President, Director of None
Managed Money Services
Joan M. O'Connell Vice President, Regional Retirement None
3707 5th Avenue #136 Plans Manager
San Diego, CA 92103
Charles E. Wenzel Vice President, Regional Retirement None
703 Greenwood Road Plans Manager
Wilmington, DE 19807
Jeffery C. Pleet* Vice President, Regional Retirement None
Plans Manager
Richard B. Callaghan Regional Vice President None
7821 Dakota Lane
Orland Park, IL 60462
Bradford C. Davis Regional Vice President None
255 4th Avenue, #2
Kirkland, WA 98033
Christopher J. Derry Regional Vice President None
2380 Mt. Lebanon Church Road
Alvaton, KY 42122
Kenneth Dougherty Regional Vice President None
8640 Finlarig Drive
Dublin, OH 43017
Edward S. Finocchiaro Regional Vice President None
120 Screenhouse Lane
Duxbury, MA 02332
Michael C. Forgea Regional Vice President None
32 W. Anapamu Street # 186
Santa Barbara, CA 93101
David L. Gardner Regional Vice President None
2504 Clublake Trail
McKinney, TX 75070
Carla A. Goehring Regional Vice President None
11426 Long Pine
Houston, TX 77077
Michael K. Lewallen Regional Vice President None
908 Tulip Poplar Lane
Birmingham, AL 35244
Judith L. Lyon Regional Vice President None
163 Haynes Bridge Road, Ste 205
Alpharetta, CA 30201
Stephen A. Mikez Regional Vice President None
11786 E. Charter Oak
Scottsdale, AZ 85259
Tim O'Connell Regional Vice President None
14872 Summerbreeze Way
San Diego, CA 92128
</TABLE>
<PAGE>
File No. 2-86008
811-3828
PART C. OTHER INFORMATION (continued)
Seligman Advisors, Inc.
As of December 31, 1998
-----------------------
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Thomas Parnell Regional Vice President None
5250 Greystone Drive #107
Inver Grove Heights, MN 55077
David K. Petzke Regional Vice President None
2714 Winding Trail Place
Boulder, CO 80304
Nicholas Roberts Regional Vice President None
200 Broad Street, Apt. 2225
Stamford, CT 06901
Diane H. Snowden Regional Vice President None
11 Thackery Lane
Cherry Hill, NJ 08003
Craig Prichard Regional Vice President None
300 Spyglass Drive
Fairlawn, OH 44333
Steve Wilson Regional Vice President None
83 Kaydeross Park Road
Saratoga Springs, NY 12866
Eugene P. Sullivan Regional Vice President None
8 Charles Street, Apt. 603
Baltimore, MD 21201
Kelli A. Wirth Dumser Regional Vice President None
8618 Hornwood Court
Charlotte, NC 28215
Frank J. Nasta* Secretary Secretary
Aurelia Lacsamana* Treasurer None
Jeffrey S. Dean* Vice President, Business
Analyst None
Sandra G. Floris* Assistant Vice President, Order Desk None
Keith Landry* Assistant Vice President, Order Desk None
Gail S. Cushing* Assistant Vice President, National None
Accounts Manager
Albert A. Pisano* Assistant Vice President and None
Compliance Officer
Jack Talvy* Assistant Vice President, Internal None
Marketing Services Manager
Joyce Peress* Assistant Secretary Assistant Secretary
</TABLE>
* The principal business address of each of these directors and/or officers is
100 Park Avenue, New York, NY 10017.
(c) Not Applicable.
<PAGE>
File No. 2-86008
811-3828
PART C. OTHER INFORMATION (continued)
Item 28. Location of Accounts and Records
Custodian: Investors Fiduciary Trust Company
801 Pennsylvania
Kansas City, MO 64105 and
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, NY 10017
Item 29. Management Services - Not Applicable.
Item 30. Undertakings - The Registrant undertakes: (1) if requested to do
so by the holders of at least ten percent of its outstanding shares,
to call a meeting of shareholders for the purpose of voting upon the
removal of a director or directors and to assist in communications
with other shareholders as required by Section 16(c) of the
Investment Company Act of 1940; and (2) to furnish to each person to
whom a prospectus is delivered, a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
<PAGE>
File No. 2-86008
811-3828
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 34 to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 28th day of January, 1999.
SELIGMAN MUNICIPAL FUND SERIES, INC.
By:/s/ William C. Morris
---------------------------------
William C. Morris, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 34 has been signed below by the following persons
in the capacities indicated on January 28, 1999.
Signature Title
--------- -----
/s/ William C. Morris
- ---------------------------- Chairman of the Board (Principal
William C. Morris* executive officer) and Director
/s/ Brian T. Zino President and Director
- ----------------------------
Brian T. Zino
/s/ Thomas G. Rose
- ---------------------------- Treasurer (Principal financial and
Thomas G. Rose accounting officer)
John R. Galvin, Director )
Alice S. Ilchman, Director )
Frank A. McPherson, Director ) /s/ Brian T. Zino
John E. Merow, Director ) ------------------------------------
Betsy S. Michel, Director ) *Brian T. Zino, Attorney-in-fact
James C. Pitney, Director )
James Q. Riordan, Director )
Richard R. Schmaltz, Director )
Robert L. Shafer, Director )
James N. Whitson, Director )
<PAGE>
File No. 2-86008
811-3828
SELIGMAN MUNICIPAL FUND SERIES, INC.
Post-Effective Amendment No. 34 to the
Registration Statement on Form N-1A
EXHIBIT INDEX
Form N-1A Item No. Description
- ------------------ -----------
23(f)(1) Deferred Compensation Plan for Directors
23(j) Consent of Independent Auditors
23(j)(1) Consent of Colorado Counsel
23(j)(2) Consent of Georgia Counsel
23(j)(3) Opinion and Consent of Louisiana Counsel
23(j)(4) Consent of Maryland Counsel
23(j)(5) Consent of Massachusetts Counsel
23(j)(6) Consent of Michigan Counsel
23(j)(7) Opinion and Consent of Minnesota Counsel
23(j)(8) Consent of Missouri Counsel
23(j)(9) Opinion and Consent of New York Counsel
23(j)(10) Consent of Ohio Counsel
23(j)(11) Opinion and Consent of Oregon Counsel
23(j)(12) Opinion and Consent of South Carolina Counsel
23(n) Financial Data Schedules
DEFERRED COMPENSATION PLAN FOR DIRECTORS
OF
SELIGMAN MUNICIPAL FUND SERIES, INC.
("FUND")
1. Election to Defer Payments. Any member of the Board of Directors (herein, a
"Director") of the Fund may elect to have payment of that Director's annual
retainer or meeting fees or both for Board service deferred as provided in this
Plan. The election shall be made in writing prior to, and to take effect from,
the beginning of a calendar year. For any Director in the year in which this
Plan is adopted or for a person elected a director in other than the last
calendar month of a year, the election shall be made within 30 days after that
event and prior to, and to take effect from, the beginning of the calendar
quarter next ensuing after that event. Elections shall continue in effect until
terminated in writing, any such termination to take effect on the first day of
the calendar year beginning after receipt of the notice of termination. An
election shall be irrevocable as to payments deferred in conformity with that
election.
2. Deferred Payment Account. Each deferred retainer or fee shall be credited at
the time when it otherwise would have been payable to an account to be
established in the name of the Director on the books of the Fund (the "Deferred
Payment Account") adjusted for notional investment experience as hereinafter
described.
3. Return on Deferred Payment Account Balance. (a) For purposes of measuring the
investment return on his Deferred Payment Account, the Director may elect to
have the aggregate amount of his deferred compensation (or a specified portion
thereof) receive a return (i) at a rate equal to the return earned on
three-month U.S. Treasury Bills at the beginning of each calendar quarter (the
"Treasury Bill Rate") and such interest shall be credited to the account
quarterly at the end of each calendar quarter, or (ii) at a rate of return
(positive or negative) equal to the rate of return on the shares of any of the
registered investment companies managed by J. & W. Seligman & Co. Incorporated
("Seligman") or any other entity controlling, controlled by, or under common
control with (as such terms are defined in the Investment Company Act of 1940)
Seligman (each, a "Notional Fund"), assuming reinvestment of dividends and
distributions from the Notional Funds. (b) A Director may amend his designation
of investment return as of the end of each calendar quarter by giving written
notice to the President of the Fund at least 30 days prior to the end of such
calendar quarter. A timely change to a Director's designation of investment
return shall become effective on the first day of the calendar quarter following
receipt by the President of the Fund (the "President").
4. Notional Investment Experience. Amounts credited to a Deferred Payment
Account shall be periodically adjusted for notional investment experience. In
each case such notional investment experience shall be determined by treating
the Deferred
<PAGE>
Payment Account as though an equivalent dollar amount had been invested and
reinvested in one or more of the Notional Funds. The Notional Funds used as a
basis for determining notional investment experience with respect to any
Director's Deferred Payment Account shall be designated by the Director in
writing by instrument of election substantially in the form attached hereto as
Exhibit C and may be changed prospectively by similar written election effective
as of the first day of any calendar quarter. The President may from time to time
limit the Notional Funds available for purposes of such election. If at any time
any Notional Fund that has previously been designated by a Director as a
notional investment shall cease to exist or shall be unavailable for any reason,
or if the Director fails to designate one or more Notional Funds pursuant to
this Section 4, the President may, at his discretion and upon notice to the
Director, treat any amounts notionally invested in such Notional Fund (whether
representing past amounts credited to a Director's Deferred Payment Account or
subsequent fee deferrals or both) as having been invested at the Treasury Bill
Rate, only until such time as the Director shall have made another investment
election in accordance with the foregoing procedures. Deferred Payment Accounts
shall continue to be adjusted for notional investment experience until
distributed in full in accordance with the distribution method elected by the
Director pursuant to Section 5 hereof.
5. Payment of Deferred Amounts. All amounts credited to an account pursuant to
any election by the Director made as provided in Section 1 hereof shall be paid
to the Director
(a) in, or beginning in, the calendar year following the calendar year
in which the Director ceases to be a Director of the Fund, or
(b) in, or beginning in, the calendar year following the earlier of the
calendar year in which the Director ceases to be a Director of the
Fund or attains age 70,
and shall be paid
(c) in a lump sum payable on the first day of the calendar year in which
payment is to be made, or
(d) in 10 or fewer installments, payable on the first day of each year
commencing with the calendar year in which payment is to begin, all
as the Director shall specify in making the election. If the payment
is to be made in installments, the amount of each installment shall
be equal to a fraction of the total of the amounts in the account at
the date of the payment the numerator of which shall be one and the
denominator of which shall be the then remaining number of unpaid
installments (including the installment then to be paid). If the
Director dies at any time before all amounts in the account have been
paid, such amounts shall be paid at that time in a lump sum to the
beneficiary or beneficiaries designated by the Director in writing to
receive such payments or in the absence of such a designation to the
estate of the Director.
<PAGE>
The Board of Directors may, in the case of an unforseeable emergency, at its
sole discretion accelerate the payment of any unpaid amount for any or all
Directors. For purposes of this paragraph, an unforseeable emergency is severe
financial hardship to the Director resulting from a sudden and unexpected
illness or accident of the Director or of a dependent (as defined in section
152(a) of the Internal Revenue Code) of the Director, loss of the Director's
property due to casualty, or other similar extraordinary and unforseeable
circumstances arising as a result of events beyond the control of the Director.
Payment due to an unforseeable emergency may not be made to the extent that such
hardship is or may be relieved (i) through reimbursement or compensation by
insurance or otherwise; (ii) by liquidation of the Director's assets, to the
extent the liquidation of such assets would not itself cause severe financial
hardship, or (iii) by cessation of deferrals under the Plan. Examples of what
are not considered to be unforseeable emergencies include the need to send a
Director's child to college or the desire to purchase a home. Withdrawals of
amounts because of an unforseeable emergency are only permitted to the extent
reasonably necessary to satisfy the emergency need.
6. Assignment. No deferred amount or unpaid portion thereof may be assigned or
transferred by the Director except by will or the laws of descent and
distribution.
7. Withholding Taxes. The Fund shall deduct from all payments any federal, state
or local taxes and other charges required by law to be withheld with respect to
such payments.
8. Nature of Rights; Nonalienation. A Director's rights to deferred payment
under the Plan shall be solely those of an unsecured general creditor of the
Fund, and any payments by the Fund pursuant to the Plan will be made solely from
the Fund's general assets and property. The Fund will be under no obligation to
purchase, hold or dispose of any investment for the specific benefit of any
Director but, if the Fund should choose to purchase shares of any Notional Fund
in order to cover all or a portion of its obligations under the Plan, then such
investments will continue to be a part of the general assets and property of the
Fund. A Director's rights under the Plan may not be transferred, assigned,
pledged or otherwise alienated, and any attempt by the Director to do so shall
be null and void.
9. Status of Director. Nothing in the Plan nor any election hereunder shall be
construed as conferring on any Director the right to remain a Director of the
Fund or to receive fees at any particular rate.
10. Amendment and Acceleration. The Board of Directors may at any time at its
sole discretion amend or terminate this Plan, provided that no such amendment or
termination shall adversely affect the right of Directors to receive deferred
amounts credited to their account.
11. Administration. The Plan shall be administered by the President or by such
person or persons as the President may designate to carry out administrative
functions hereunder. The President shall have complete discretion to interpret
and administer the Plan in accordance with its terms, and his determinations
shall be binding on all persons.
Amended as of March 19, 1998
CONSENT OF INDEPENDENT AUDITORS
Seligman Municipal Fund Series, Inc.:
We consent to the use in Post-Effective Amendment No. 34 to Registration
Statement No. 2-86008 of our report dated October 30, 1998, appearing in the
Annual Report to Shareholders for the year ended September 30, 1998,
incorporated by reference in the Statement of Additional Information, and to the
reference to us under the caption "Financial Highlights" in the Prospectus,
which is also part of such Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
January 25, 1999
William E. Tanis
303-628-3634 (direct)
303-628-3723 (fax)
[email protected]
IRELAND
STAPLETON
January 4, 1999
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
With respect to Post-Effective Amendment No. 34 to the Registration
Statement on Form N-1A under the Securities Act of 1933, as amended, of Seligman
Municipal Fund Series, Inc., we have reviewed the material relative to Colorado
Taxes in the Registration Statement. Subject to such review, our opinion as
delivered to you and as filed with the Securities and Exchange Commission
remains unchanged.
We consent to the filing of this consent as an exhibit to the Registration
Statement and to the reference to us under the heading "Colorado Taxes." In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended.
Ireland, Stapleton, Pryor & Pascoe, P.C.
By: /s/ William E. Tanis, Vice President
------------------------------------
Willaim E. Tanis, Vice President
KING & SPALDING
191 Peachtree Street
Atlanta, Georgia 30303-1763
Telephone: 404/572-4600
Facsimile: 404/572-5100
January 20, 1999
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, NY 10017
Ladies and Gentlemen:
With respect to Post-Effective Amendment No. 34 to the Registration
Statement on Form N-1A under the Securities Act of 1933, as amended, of Seligman
Municipal Fund Series, Inc., we have reviewed the material relative to Georgia
taxes in the Registration Statement. Based upon such review, our opinion
concerning Georgia taxes as filed with the Securities and Exchange Commission
remains unchanged.
We consent to the filing of this letter as an exhibit to the Registration
Statement and to the reference to us under the heading "Georgia Taxes." In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended.
Very truly yours,
/s/ KING & SPAULDING
KING & SPAULDING
LISKOW & LEWIS
A PROFESSIONAL LAW CORPORATION
ATTORNEYS AT LAW
ONE SHELL SQUARE
701 POYDRAS STREET, SUITE 5000
NEW ORLEANS, LA 70139-5099
Writer's Direct Dial No. (504) 556-4112
New Orleans, Louisiana
December 23, 1998
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
You have requested our updated opinion with respect to certain Louisiana income
tax consequences of an investment in the Louisiana Municipal Series of shares of
the Seligman Municipal Fund Series, Inc. (the "Fund").
In rendering the opinion contained herein, we have relied upon the accuracy of
the facts and representations previously provided to us as follows:
The Fund is a diversified open-ended investment company incorporated in Maryland
on August 8, 1983, which is, and will maintain its status during all relevant
periods as a regulated investment company for federal income tax purposes as
defined in Section 851 of the Internal Revenue Code of 1986, as amended, (the
"Code").
The Fund consists of several series, one of which is the Louisiana Municipal
Series ("Louisiana Series"). Under normal conditions, the Louisiana Series
attempts to invest 100%, and as a matter of fundamental policy, invests at least
80% of the value of its net assets in debt securities the interest on which is
exempt from regular federal income tax and Louisiana income tax. Such interest
may, however, be subject to the federal alternative minimum tax. In unusual
circumstances, the Fund may invest up to 20% of the value of its net assets on a
temporary basis in fixed income securities, the interest on which is subject to
both federal and Louisiana income tax, pending the investment or reinvestment of
those assets in tax-exempt securities or in order to avoid the necessity of
liquidating portfolio investments to meet redemptions of shares by investors or
where market conditions due to rising interest rates or other adverse factors
warrant temporary investing for defensive purposes.
The Fund's net investment income is declared daily and paid to shareholders
monthly. The Fund distributes substantially all of any taxable net long and
short-term gains realized on investments to shareholders early in the year
following the year in which such gains are realized. The
<PAGE>
December 23, 1998 LISKOW & LEWIS
Page 2
Louisiana Series notifies its shareholders within sixty (60) days after the
close of the year as to the interest derived from securities which are exempt
from Louisiana income taxes.
By Act 242 of the 1991 Regular Session of the Louisiana Legislature, Louisiana
Revised Statute 47:293(6) was amended by the addition of subparagraph (d) which
reads:
(d) For the purposes of this Paragraph, income distributed by a trust,
partnership, or mutual fund to an individual taxpayer shall retain the
same character in his hands as it had in the hands of such distributor to
the extent such income similarly retains it character for federal income
tax purposes.
For purposes of confirming the interpretation of this provision of law by the
Louisiana Department of Revenue (the "Department"), we have obtained an updated
ruling (the "Ruling") which acknowledges that to the extent distributions from a
fund such as the Fund, to resident individual-shareholders are attributable to
interest from obligations whose interest is exempt from Louisiana income tax
pursuant to Louisiana law or the income from which Louisiana is prohibited from
taxing by the Constitution or laws of the United States, fund dividends will be
considered Louisiana tax-exempt interest income when received by the resident
individual-shareholder.
With respect to corporations, the amendment to La. R.S. 47:293 is not clear, and
for that reason, we also sought in the Ruling to obtain from the Department its
position as to the appropriate tax treatment of corporations receiving
distributions from a fund such as the Fund. Concerning corporations, the
Department has concluded that to the extent, for federal income tax purposes,
distributions from a fund such as the Fund retain the same character in the
hands of the recipient corporation as they had in the hands of the fund, they
will similarly retain their character for Louisiana income tax purposes.
We have further sought and obtained from the Department as part of the Ruling
the Department's position with respect to the income tax treatment of income
from a fund such as the Fund received by a trust or an estate. For taxable
periods beginning before January 1, 1997, the Department has concluded that the
law is not clear, although the Department is "inclined" to accept similar
treatment by trusts or estates of distributions from a fund such as the Fund as
would be afforded a trust or an estate under federal law. The Department
specifically reserved the right to consider and apply a different interpretation
at any time in the future.
For taxable periods beginning after December 31, 1996, the Department has
concluded that to the extent, for federal income tax purposes, distributions
from a fund such as the Fund retain the same character in the hands of the
recipient trust or estate as they had in the hands of the fund, they will
similarly retain their character for Louisiana income tax purposes. This change
in the Department's conclusion is the result of specific legislation, Act 41 of
the 1996 Regular Session of the Louisiana Legislature, that conformed the
Louisiana income tax applicable to trusts and estates to the corresponding
provisions of the Code. Act 41 is effective for taxable periods beginning after
December 31, 1996.
With regard to each type of possible shareholder in the Fund considered by the
Department, i.e., individual, corporation, trust, or estate, the Department also
stated that the change in fundamental investment policy made by the Fund
allowing it to invest in debt securities the interest from which could be
subject to the federal alternative minimum tax would not affect the Department's
<PAGE>
December 23, 1998 LISKOW & LEWIS
Page 3
opinion concerning the taxability of the Fund dividends in Louisiana. Louisiana
does not tax interest in a "specified private activity bond," as defined in Code
section 57(a)(5)(C), issued by the State of Louisiana or its political or
governmental subdivisions, its governmental agencies, or instrumentalities
authorized under the laws of the State of Louisiana to issue tax-exempt
obligations.
We understand that the Department has not issued a written policy setting forth
the right of a taxpayer to rely on a private ruling; nor has the Department
issued a formal written policy stating the conditions under which the Department
may revoke or attempt to revoke a private ruling, and whether such revocation
would be retroactively or prospectively applied. Accordingly, there can be no
assurance that the Department will not issue a formal written policy in the
future which is contrary to its current practices with respect to its adherence
to its private rulings.
Subject to the foregoing and based on the Ruling, it is our opinion that to the
extent distributions from the Fund to its Louisiana resident individual
shareholders and corporate shareholders, and for tax periods beginning after
December 31, 1996, to trust or estate shareholders, are attributable to exempt
interest generated from tax-exempt obligations of the State of Louisiana or its
political or governmental subdivisions, its governmental agencies, or
instrumentalities authorized under the laws of the State of Louisiana to issue
tax-exempt obligations ("Louisiana Tax-Exempt Obligations"), such exempt
interest will not be included in an individual's adjusted gross income within
the definition of La. R.S. 47:293, or a corporation's gross income, or a trust's
or estate's gross income, nor will it constitute taxable income of a
corporation, a trust, an estate, or a resident individual within the definition
of La. R.S. 47:293. As a result of the application of the relevant Louisiana
statutes, distributions received from the Fund by a corporation, a resident
individual, a trust, or an estate (for trusts and estates, for taxable periods
beginning after December 31, 1996) will not be subject to Louisiana income tax
to the extent such distributions are attributable to the interest earned on
Louisiana Tax-Exempt Obligations. To the extent that the distributions under the
Louisiana Series are derived from sources other than interest on Louisiana
Tax-Exempt Obligations, including long term or short term capital gains, such
distributions will be subject to Louisiana income tax except to the extent
Louisiana is prohibited from taxing such distributions by the Constitution or
laws of the United States.
Because of the uncertainty in the law and the unwillingness of the Department to
commit itself to a binding position, we render no opinion with respect to the
Louisiana tax treatment of distributions from the Fund received by a trust or an
estate for taxable periods beginning before January 1, 1997.
Non-resident individuals, corporations, and trusts and estates maintaining their
legal domicile other than in the State of Louisiana will not be subject to
Louisiana income tax on their Louisiana Series dividends.
No opinion is expressed herein with respect to the legality or the
enforceability of any future policies or changes in policies of the Department
in connection with the binding effect of its private letter rulings.
You have not requested and accordingly, we are not rendering any opinion with
respect to Louisiana franchise, ad valorem, excise, sales, use, or other taxes
other than Louisiana state
<PAGE>
December 23, 1998 LISKOW & LEWIS
Page 4
income taxes applicable to dividend distributions from Louisiana Tax-Exempt
Obligations to shareholders who are individuals, corporations, trusts, and
estates.
This opinion is rendered as of the date hereof, and we make no undertakings to
supplement our opinion with facts or circumstances which come to our attention
or changes in the law, rules, regulations or administrative policies which may
affect such opinions.
We hereby consent to the filing of this opinion as an exhibit to Post-Effective
Amendment No. 33 to the Fund Registration Statement filed with the Securities
and Exchange Commission by or on behalf of the Fund in connection with the
Louisiana Series and to the reference to our firm name therein. In giving this
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/S/ LISKOW & LEWIS
LISKOW & LEWIS
VENABLE, BAETJER AND HOWARD, LLP
Including professional corporations
Two Hopkins Plaza, Suite 1800
Baltimore, Maryland 21201-2978
(410)244-7400, Fax (410) 244-7742
www.venable.com
VENABLE
ATTORNEY AT LAW
December 16, 1998
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
With respect to Post-Effective Amendment No. 34 to the Registration
Statement on Form N-1A under the Securities Act of 1933, as amended, of Seligman
Municipal Fund Series, Inc., we have reviewed the material relative to Maryland
Taxes in the Registration Statement. Subject to such review, our opinion as
delivered to you and as filed with the Securities and Exchange Commission
remains unchanged.
We consent to the filing of this consent as an exhibit to the
Registration Statement and to the reference to us under the heading "Maryland
Taxes." In giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended.
Very truly yours,
/s/ Venable Baetjer and Howard, LLP
Venable Baetjer and Howard, LLP
PALMER & DODGE LLP
ONE BEACON STREET, BOSTON, MA 02108-3190
TELEPHONE: (617) 573-0100 FACSIMILE: (617) 227-4420
January 22, 1999
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
With respect to Post-Effective Amendment 34 to the Registration Statement
on Form N-1A under the Securities Act of 1933, as amended, of Seligman Municipal
Fund Series, Inc., we have reviewed the material relative to Massachusetts Taxes
in the Registration Statement. Subject to such review, our opinion as delivered
to you and as filed with the Securities and Exchange Commission remains
unchanged.
We consent to the filing of this consent as an exhibit to the Registration
Statement and to the reference to us under the heading "Massachusetts Taxes." In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended.
Very truly yours,
/s/ PALMER & DODGE LLP
PALMER & DODGE LLP
Dickinson
Wright PLLC
January 25, 1999
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, NY 10017
Ladies and Gentlemen:
With respect to Post-Effective Amendment No. 34 to the Registration
Statement on Form N-1A under the Securities Act of 1933, as amended, of Seligman
Municipal Fund Series, Inc., we have reviewed the material relative to Michigan
Taxes in the Registration Statement. Subject to such review, our opinion as
delivered to you and as filed with the Securities and Exchange Commission
remains unchanged.
We consent to the filing of this consent as an exhibit to the Registration
Statement and to the reference to us under the heading "Michigan Taxes." In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended.
Very truly yours,
/s/ Dickinson Wright PLLC
Dickinson Wright PLLC
FAEGRE & BENSON LLP
January 20, 1999
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, New York 10017
Dear Sir or Madam:
We are Minnesota tax counsel to Seligman Municipal Fund Series, Inc., a
Maryland corporation ("Seligman"). We have been informed that Seligman qualifies
as a regulated investment company as that term is defined and limited in section
851 of the Internal Revenue Code of 1986, as amended (the "Code"), and that it
has taken all other action to ensure that Seligman may pay exempt-interest
dividends as that term is defined in section 852(b)(5)(A) of the Code. We
understand that Seligman has sold separate series of classes of shares, each
generally to residents of specified states, for the purpose of enabling such
residents to receive exempt-interest dividends that are exempt from the regular
federal income tax as well as from the regular income tax imposed by the state
of residence of the recipient shareholder.
You have asked for our opinion as to the Minnesota income tax consequences
of the receipt by a shareholder of the Minnesota Municipal Class of
exempt-interest dividends that are payable with respect to shares of the
Minnesota Municipal Class. In responding to your inquiry, we have reviewed the
Articles of Incorporation of Seligman, as amended and supplemented, and certain
other materials that you have supplied to us. In addition, we have reviewed
certain of the laws of the State of Minnesota, and certain provisions of the
Code.
You have told us that each of the classes of Seligman, including the
Minnesota Municipal Class, is, and intends to continue to qualify as, a "fund"
of Seligman within the meaning of section 851(g) of the Code. As such, you have
informed us that each of the classes of Seligman, including the Minnesota
Municipal Class, is, and intends to continue to qualify as, a separate regulated
investment company, and that Seligman has taken, and will take, all other action
so as to enable the Minnesota Municipal Class to pay exempt-interest dividends
within the meaning of the Code. We have also been told that Seligman has in the
past and will in the future attempt to invest the bulk of the assets belonging
to the Minnesota Municipal Class in any combination of tax-exempt obligations of
the State of Minnesota or
<PAGE>
Seligman Municipal Fund Series, Inc.
January 20, 1999
Page 2
its political or governmental subdivisions, municipalities, governmental
agencies or instrumentalities, so as to generate as large a percentage of
tax-exempt income as is possible. In addition, we have been informed that,
during all material times, Seligman has invested the assets belonging to the
Minnesota Municipal Class, and has made payments to the shareholders of the
Minnesota Municipal Class, so as to meet the 95% test that is set forth below,
whether based on a fiscal or a calendar year basis. We have relied, for purposes
of this opinion, upon the statements in the documents that we have reviewed and
upon all of the representations that have been made to us, but have made no
independent investigation thereof, and express no opinion with respect thereto.
Minn. Stat. ss.290.01, subd. 19, provides that the starting point for the
computation of Minnesota taxable income is federal taxable income, to which
various additions, subtractions, and modifications are then made. Minn. Stat.
ss.290.01, subd. 19(a), provides for certain additions in the case of
individuals, estates, and trusts, one of which is the following:
(1)(ii) exempt-interest dividends as defined in section 852(b)(5) of the
Internal Revenue Code, except the portion of the exempt- interest
dividends derived from interest income on obligations of the state of
Minnesota or its political or governmental subdivisions, municipalities,
governmental agencies or instrumentalities, but only if the portion of the
exempt-interest dividends from such Minnesota sources paid to all
shareholders represents 95 percent or more of the exempt-interest
dividends that are paid by the regulated investment company as defined in
section 851(a) of the Internal Revenue Code, or the fund of the regulated
investment company as defined in section 851(g) of the Internal Revenue
Code, making the payment;
In addition, Minn. Stat. ss.289A.50, subd. 10, which was enacted by Laws
of Minnesota for 1995, Chapter 264, article 1, section 1, provides as follows:
LIMITATION ON REFUND. If an addition to federal taxable income under
section 290.01, subdivision 19a, clause (1), is judicially determined to
discriminate against interstate commerce, the legislature intends that the
discrimination be remedied by adding interest on obligations of Minnesota
governmental units and Indian tribes to federal taxable income. This
subdivision applies beginning with the taxable years that begin during the
calendar year in which the court's decision is final. Other remedies apply
for previous taxable years.
<PAGE>
Seligman Municipal Fund Series, Inc.
January 20, 1999
Page 3
Accordingly, subject to Minn. Stat. ss.289A.50, subd. 10, to the extent that (1)
the exempt-interest dividends that are paid by the Minnesota Municipal Class are
derived from interest income on obligations of the State of Minnesota or its
political or governmental subdivisions, municipalities, governmental agencies or
instrumentalities (the "specified obligations"), and (2) the 95% test that is
set forth above is met, such exempt-interest dividends (to the extent that they
are not includable in federal taxable income) will likewise be exempt from the
regular Minnesota personal income tax, and only those exempt-interest dividends
that are derived from other sources will be subject to such tax, in the case of
individuals, estates, and trusts.(1)
As noted above, Minn. Stat. 289A.50, subd. 10, provides that it is the
intent of Minnesota Legislature that interest income on obligations of Minnesota
governmental units, which obligations include the specified obligations, and
exempt-interest dividends that are derived from interest income on such
obligations, be included in the net income of individuals, estates, and trusts
for Minnesota income tax purposes if it is judicially determined that the
exemption by Minnesota of such interest or such exempt-interest dividends
unlawfully discriminates against interstate commerce because interest income on
obligations of governmental units located in other states, or exempt-interest
dividends derived from such obligations, is so included. This provision applies
to taxable years that begin during or after the calendar year in which such
judicial decision becomes final, regardless of the date on which the obligations
were issued, and other remedies apply for previous taxable years. The United
States Supreme Court in 1995 denied certiorari in a case in which an Ohio court
upheld an exemption for interest income on obligations of Ohio governmental
issuers, even though interest income on obligations of non-Ohio governmental
issuers was subject to tax. In 1997, the United States Supreme Court denied
certiorari in a subsequent case from Ohio, involving the same taxpayer and the
same issue, in which the Ohio Supreme Court refused to reconsider the merits of
the case on the ground that the previous final state court judgment barred any
claim arising out of the transaction that was the subject of the previous
action. It cannot be predicted whether a similar case will be brought in
Minnesota or elsewhere, or what the outcome of such case would be.
- ----------
(1) It should be noted that interest income that is derived from obligations
held through repurchase agreements, even though derived from the specified
obligations the interest income from which would be exempt, will not
qualify under these rules, and any dividends that are attributable to such
interest will be subject to the regular Minnesota personal income tax.
<PAGE>
Seligman Municipal Fund Series, Inc.
January 20, 1999
Page 4
Returning to the requirements of Minn. Stat. ss.290.01, subd. 19(a)(ii),
should the 95% test not be met, all exempt-interest dividends paid by the
Minnesota Tax-Exempt Class generally will be subject to the regular Minnesota
personal income tax, even if derived from the specified obligations. Finally,
even if the 95% test is met, to the extent that distributions do not represent
exempt-interest dividends that are derived from interest income on the specified
obligations, such distributions, including, but not limited to, long-term
capital gains, generally will be subject to the regular Minnesota personal
income tax.
In addition to imposing a regular personal income tax, Minnesota imposes
an alternative minimum tax (see Minn. Stat. ss.290.091) on individuals, estates,
and trusts that is based, in part, on such taxpayers' federal alternative
minimum taxable income, which includes federal tax preference items. The Code
provides that interest on specified private activity bonds is a federal tax
preference item, and that an exempt-interest dividend of a regulated investment
company constitutes a federal tax preference item to the extent of its
proportionate share of the interest on such private activity bonds. Accordingly,
exempt-interest dividends that are attributable to such private activity bond
interest, even though they are also attributable to the specified obligations
described in this letter, will be included in the base upon which such Minnesota
alternative minimum tax is computed. In addition, the entire portion of
exempt-interest dividends that is attributable to interest other than interest
on the specified obligations generally is subject to the Minnesota alternative
minimum tax. Finally, should the 95% test that is described above fail to be
met, all of the exempt-interest dividends that are received by the shareholders
of the Minnesota Municipal Class who are individuals, estates, or trusts,
including all of those that are attributable to the specified obligations,
generally will be subject to the Minnesota alternative minimum tax.
Subject to certain limitations that are set forth in the Minnesota rules,
Minnesota Municipal Class dividends, if any, that are derived from interest on
certain United States obligations are not subject to the regular Minnesota
personal income tax or the Minnesota alternative minimum tax, in the case of
shareholders of the Minnesota Municipal Class who are individuals, estates, or
trusts.
The above discussion has related, in general, to individuals, estates, and
trusts. Distributions, including exempt-interest dividends, that are paid to
shareholders of the Minnesota Municipal Class are not excluded in determining
the Minnesota franchise tax on corporations that is measured by taxable income
and alternative minimum taxable income. Minnesota Municipal Class distributions
may also be taken into account in certain cases in determining the minimum fee
that is imposed on corporations, S corporations, and partnerships.
<PAGE>
Seligman Municipal Fund Series, Inc.
January 20, 1999
Page 5
The opinions expressed herein represent our judgment regarding the proper
Minnesota tax treatment of the specified shareholders of the Minnesota Municipal
Class who are subject to Minnesota taxation. Our conclusions are based on our
analysis of the Minnesota statutes, tax regulations and case law which exist as
of the date of this opinion, all of which may be subject to prospective or
retroactive change. Our opinion represents our best judgment regarding the
issues presented and is not binding upon the Minnesota Department of Revenue
("Department") or any court. Moreover, our opinion does not provide any
assurance that a position taken in reliance on such opinion will not be
challenged by the Department or rejected by a court.
We hereby consent to the filing of this opinion as an exhibit to the
registration statement to be filed on or about January 20, 1999, with the
Securities and Exchange Commission, and to the reference to us under the heading
"Minnesota Taxes." In giving such consent, we do not thereby admit that we are
in the category of persons whose consent is required under section 7 of the
Securities Act of 1933, as amended.
Very truly yours,
/S/FAEGRE & BENSON LLP
FAEGRE & BENSON LLP
BAA:dac
BRYAN CAVE LLP
3500 ONE KANSAS CITY PLACE
1200 MAIN STREET
KANSAS CITY, MISSOURI 64105-2100
January 4, 1999
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, NY 10017
Ladies and Gentlemen:
With respect to Post-Effective Amendment No. 34 to the Registration
Statement on Form N-1A under the Securities Act of 1933, as amended, of Seligman
Municipal Fund Series, Inc., we have reviewed the material relative to Missouri
Taxes in the Registration Statement. Subject to such review, our opinion as
delivered to you and as filed with the Securities and Exchange Commission
remains unchanged.
We consent to the filing of this consent as an exhibit to the Registration
Statement and to the reference to us under the heading "Missouri Taxes." In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended.
Very truly yours,
/s/ Bryan Cave LLP
Bryan Cave LLP
SULLIVAN & CROMWELL
January 25, 1999
Seligman Municipal Fund Series, Inc.,
100 Park Avenue, 8th Floor,
New York, New York 10017.
Ladies and Gentlemen:
We have acted as counsel to Seligman Municipal Fund Series, Inc.
(the "Fund"), and you have requested our opinion regarding the New York State
and City personal income tax consequences to holders of shares of the New York
Municipal Series of the Fund (the "New York Series").
The Fund, a Maryland corporation, is an open-end non-diversified
management investment company authorized by its Articles of Incorporation,
Articles of Amendment and Articles Supplementary to such Articles of Amendment
(collectively, the "Articles") to issue shares representing separate investment
series of the Fund, one of which is the New York Series. The Articles provide
that all consideration received by the Fund for the issue or sale of shares of a
particular series, all assets in which such consideration is invested and all
income and proceeds from such assets shall irrevocably belong to that series
only, subject only to the rights of creditors. Dividends on shares of a
particular series may be paid only from the assets belonging to the series. The
income of the New York Series will consist primarily of interest on obligations
of New York State and its municipalities and public authorities which is
excluded
<PAGE>
Seligman Municipal Fund Series, Inc. -2-
from gross income for Federal income tax purposes by Section 103(a) of
the Internal Revenue Code of 1986, as amended (the "Code") and certain other
interest which is excluded from gross income for Federal income tax purposes,
such as interest on bonds issued by the Government of Puerto Rico and exempt
pursuant to Section 745 of Title 48 of the United States Code.
In connection with this opinion, we have assumed with your consent
that the New York Series of the Fund is a regulated investment company taxable
under Subchapter M of the Code and that dividends paid by the New York Series
will constitute in whole or in part "exempt-interest dividends" within the
meaning of Section 852(b)(5) of the Code.
Adjusted gross income for New York State and City personal income
tax purposes is defined as adjusted gross income for Federal income tax purposes
with certain statutory modifications. One modification is that interest received
by a taxpayer on obligations of any state other than New York or a political
subdivision of any such state generally must be added to Federal adjusted gross
income. Regulations promulgated by the New York State Tax Commission provide
that "exempt-interest dividends" attributable to interest on obligations of any
state other than New York or a political subdivision of any such state must be
added to Federal adjusted gross income in calculating adjusted gross income for
New York State and City personal income tax purposes.
On the basis of the foregoing and our consideration of such matters
as we have considered necessary, we advise you that, in our opinion, for New
York State and City personal income tax purposes, owners of shares in the New
York Series will be entitled to exclude from their adjusted gross income for New
York State and City tax purposes any
<PAGE>
Seligman Municipal Fund Series, Inc. -3-
dividends paid by the New York Series which qualify as "exempt-interest
dividends" under Section 852(b)(5) of the Code and are not derived from interest
on obligations of a state other than New York or a political subdivision of any
such state. Such dividends would include, for example, dividends derived from
qualifying interest on obligations issued by the Government of Puerto Rico.
In this regard, we have reviewed the Notices of the New York State
Income Tax Bureau, dated February 18, 1977 and March 7, 1977, expressing the
view that not only "exempt-interest dividends" derived from obligations of other
states and their political subdivisions but all "exempt-interest dividends"
which are attributable to interest on obligations of any issuer other than New
York State or one of its political subdivisions (such as obligations issued by
the Government of Puerto Rico) must be added to Federal adjusted gross income.
Insofar as these Notices conflict with the regulations, which were adopted after
the issuance of the Notices and which more closely follow the statutory
language, we regard the regulations as the controlling authority. We note that
the New York State Tax Commission has issued an advisory opinion, TSB-A-82-(5)-I
(Sept. 22, 1982), in which it concluded that "exempt-interest dividends"
attributable to interest on obligations issued by the Governments of Puerto
Rico, the Virgin Islands and Guam, are exempt from New York State and City
personal income tax.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement for the Fund and to the reference to us under the heading
"New York State and City Taxes." In giving such consent, we do not thereby admit
that we are in the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended.
Seligman Municipal Fund Series, Inc.
Very truly yours,
/s/Sullivan & Cromwell
Sullivan & Cromwell
Squire, Sanders & Dempsey
L.L.P.
January 20, 1999
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, New York 10017
Re: Seligman Municipal Fund Series, Inc. -- Post-Effective
Amendment No. 34
Ladies and Gentlemen:
We have acted as Ohio tax counsel with respect to Post-Effective Amendment
No. 34 to the Registration Statement (the "Registration Statement") on Form N-1A
for Seligman Municipal Fund Series, Inc. (the "Fund"). We have reviewed the
material under the heading "Taxation of the Funds - Ohio Taxes" in the Statement
of Additional Information that is a part of the Registration Statement. Subject
to such review, our opinion as delivered to you and as filed with the Securities
and Exchange Commission remains unchanged.
We hereby consent to the filing of this letter as an exhibit to such
Registration Statement and to the reference to our firm under the caption
"Taxation of the Funds - Ohio Taxes" in the Statement of Additional Information
that is a part of the Registration Statement. In giving such consent, we do not
thereby acknowledge that we are within the category of persons whose consent is
required by Section 7 of the Securities Act of 1933, as amended, and the rules
and regulations thereunder.
Very truly yours,
/s/ Squire, Sanders & Dempsey L.L.P.
Squire, Sanders & Dempsey L.L.P.
[LETTERHEAD OF SCHWABE WILLIAMSON & WYATT P.C.]
January 25, 1999
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, NY 10017
Re: Oregon Municipal Series
Ladies and Gentlemen:
We have acted as Oregon counsel to Seligman Municipal Fund, Inc. (the
"Fund"), and you have requested our opinion regarding the State of Oregon
personal income tax consequences to holders of the Oregon Tax-Exempt Class of
the Common Stock of the Fund (the "Oregon Series").
The Fund, a Maryland corporation, is a nondiversified, open-end management
investment company authorized by its Articles of Incorporation and articles
supplementary thereto to issue multiple classes of Common Stock, one of which is
the Oregon Municipal Series. The Articles provide that all consideration
received by the Fund for the issue or sale of shares of a particular class, all
assets in which such consideration is invested and all income and proceeds from
such assets shall belong to that class only, subject only to the rights of
creditors. Dividends on shares of a particular class may be paid only from the
assets belonging to the class.
The income of the Oregon Municipal Series will consist primarily of
interest on obligations of the State of Oregon and its municipalities and public
authorities, which is excluded from gross income for Federal income tax purposes
by Section 103(a) of the Internal Revenue Code of 1986, as amended (the "Code").
The income of the Oregon Series may also include certain other interest which is
excluded from gross income for Federal income tax purposes, such as interest on
certain bonds issued by the Government of Puerto Rico (excluded pursuant to 48
USC Section 745), the Government of Guam (excluded pursuant to 48 USC Section
1423a) or the Government of the Virgin Islands (excluded pursuant to 48 USC
Section 1574).
In connection with this opinion, we have assumed with your consent that
the Oregon Series is a regulated investment company taxable under Subchapter M
of the Code and that dividends paid by the Fund will constitute in whole or in
part "exempt interest dividends" within the meaning of Section 852(b)(5) of the
Code.
<PAGE>
Seligman Municipal Fund Series, Inc.
January 22, 1999
Page 2
For purposes of State of Oregon personal income tax, taxable income is
defined as taxable income for federal income tax purposes with certain statutory
modifications. One modification is that interest or dividends on obligations or
securities of any state other than Oregon, or of any political subdivision or
authority of a state other than Oregon, generally must be added to federal
adjusted gross income. Another modification is that interest or dividends on
obligations of any authority, commission, instrumentality or territorial
possession of the United States which by the laws of the United States is exempt
from federal income tax but not from state income taxes also generally must be
added to federal adjusted gross income.
On the basis of the foregoing, and our consideration of such matters as we
have considered necessary, we advise you that, in our opinion, under present law
for State of Oregon personal income tax purposes, owners of the Oregon Municipal
Series will be entitled to exclude from State of Oregon adjusted gross income
dividends paid by the Oregon Series which:
1. qualify as "exempt-interest dividends" under section 852(b)(5) of the
Code; and
2. are derived from:
a) interest or dividends on obligations or securities of the State of
Oregon or of a political subdivision or authority of the State of
Oregon; or
b) interest or dividends on obligations of any authority, commission,
instrumentality or territoriality of the United States which, by the
laws of the United States, are exempt from state income taxes (such
as interest on certain bonds issued by Puerto Rico, Guam or the
Virgin Islands).
In our opinion, under present law, shares of the Oregon Series will not be
subject to Oregon personal property tax.
We express no opinion as to taxation under the Oregon Corporate Excise Tax
or the Oregon Corporate Income Tax of dividends paid by the Oregon Municipal
Series.
We hereby consent to the filing of this opinion as an exhibit to your
Post-Effective Amendment No. 34 to the Registration Statement under the
Securities Act of 1933, as amended, of Seligman Municipal Fund Series, Inc., and
to the reference to us under the heading "Oregon Taxes." In giving such consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
SCHWABE, WILLIAMSON & WYATT, P.C.
By:/s/Roy D. Lambert
------------------------------
Roy D. Lambert
Sinkler & Boyd, P.A.
Attorney at Law
1426 Main Street, Suite 1200
Columbia, South Carolina 29201-2834
December 16, 1998
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
With respect to Post-Effective Amendment No. 34 to the Registration
Statement on Form N-1A under the Securities Act of 1933, as amended, of Seligman
Municipal Fund Series, Inc., we have reviewed the material relative to South
Carolina Taxes in the Registration Statement. Based on such review, we offer the
following updated opinion.
Shareholders of the South Carolina Fund who are subject to South Carolina
individual or corporate income taxes will not be subject to such taxes on South
Carolina Fund dividends to the extent that such dividends qualify as either (1)
exempt-interest dividends of a regulated investment company under Section
852(b)(5) of the Internal Revenue Code, which are derived from interest on
tax-exempt obligations of the State of South Carolina or any of its political
subdivisions or on obligations of the Government of Puerto Rico that are exempt
from federal income taxes, or (2) dividends derived from interest on obligations
of the United States and its possessions or on obligations of any authority or
commission of the United States, the interest from which is exempt from state
income taxes under the laws of the United States.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to reference to us under the heading "South Carolina Taxes." In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended.
Very truly yours,
/s/ Sinkler & Boyd, P.A.
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<ARTICLE> 6
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<NAME> SELIGMAN MUNICIPAL FUND SERIES-NATIONAL CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 100248
<INVESTMENTS-AT-VALUE> 107999
<RECEIVABLES> 1693
<ASSETS-OTHER> 124
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 109817
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 516
<TOTAL-LIABILITIES> 516
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103109
<SHARES-COMMON-STOCK> 12255<F1>
<SHARES-COMMON-PRIOR> 12169<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1559)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7751
<NET-ASSETS> 101909<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5571<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (797)<F1>
<NET-INVESTMENT-INCOME> 4774<F1>
<REALIZED-GAINS-CURRENT> 1376
<APPREC-INCREASE-CURRENT> 2557
<NET-CHANGE-FROM-OPS> 8929
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4774)<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1739<F1>
<NUMBER-OF-SHARES-REDEEMED> (1975)<F1>
<SHARES-REINVESTED> 322<F1>
<NET-CHANGE-IN-ASSETS> 9541
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2935)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 494<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 797<F1>
<AVERAGE-NET-ASSETS> 98854<F1>
<PER-SHARE-NAV-BEGIN> 8.01<F1>
<PER-SHARE-NII> .39<F1>
<PER-SHARE-GAIN-APPREC> .31<F1>
<PER-SHARE-DIVIDEND> (.39)<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.32<F1>
<EXPENSE-RATIO> .80<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>014
<NAME> SELIGMAN MUNICIPAL FUND SERIES-NATIONAL CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 100248
<INVESTMENTS-AT-VALUE> 107999
<RECEIVABLES> 1693
<ASSETS-OTHER> 124
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 109817
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 516
<TOTAL-LIABILITIES> 516
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103109
<SHARES-COMMON-STOCK> 889<F1>
<SHARES-COMMON-PRIOR> 284<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1559)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7751
<NET-ASSETS> 7392<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 319<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (97)<F1>
<NET-INVESTMENT-INCOME> 222<F1>
<REALIZED-GAINS-CURRENT> 1376
<APPREC-INCREASE-CURRENT> 2557
<NET-CHANGE-FROM-OPS> 8929
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (222)<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2207<F1>
<NUMBER-OF-SHARES-REDEEMED> (1623)<F1>
<SHARES-REINVESTED> 21<F1>
<NET-CHANGE-IN-ASSETS> 9541
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2935)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 28<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 97<F1>
<AVERAGE-NET-ASSETS> 5680<F1>
<PER-SHARE-NAV-BEGIN> 8.02<F1>
<PER-SHARE-NII> .32<F1>
<PER-SHARE-GAIN-APPREC> .29<F1>
<PER-SHARE-DIVIDEND> (.32)<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.31<F1>
<EXPENSE-RATIO> 1.71<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>091
<NAME> SELIGMAN MUNICIPAL FUND SERIES - COLORADO CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 41913
<INVESTMENTS-AT-VALUE> 45174
<RECEIVABLES> 842
<ASSETS-OTHER> 78
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 46095
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 168
<TOTAL-LIABILITIES> 168
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42782
<SHARES-COMMON-STOCK> 5968<F1>
<SHARES-COMMON-PRIOR> 6707<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (116)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3261
<NET-ASSETS> 45583<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2687<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (423)<F1>
<NET-INVESTMENT-INCOME> 2264<F1>
<REALIZED-GAINS-CURRENT> 1217
<APPREC-INCREASE-CURRENT> (134)
<NET-CHANGE-FROM-OPS> 3625
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2264)<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 466<F1>
<NUMBER-OF-SHARES-REDEEMED> (1374)<F1>
<SHARES-REINVESTED> 169<F1>
<NET-CHANGE-IN-ASSETS> (4091)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1333)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 236<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 423<F1>
<AVERAGE-NET-ASSETS> 47111<F1>
<PER-SHARE-NAV-BEGIN> 7.42<F1>
<PER-SHARE-NII> .36<F1>
<PER-SHARE-GAIN-APPREC> .22<F1>
<PER-SHARE-DIVIDEND> (.36)<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.64<F1>
<EXPENSE-RATIO> .90<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>094
<NAME> SELIGMAN MUNICIPAL FUND SERIES - COLORADO CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 41913
<INVESTMENTS-AT-VALUE> 45174
<RECEIVABLES> 842
<ASSETS-OTHER> 78
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 46095
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 168
<TOTAL-LIABILITIES> 168
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42782
<SHARES-COMMON-STOCK> 45<F1>
<SHARES-COMMON-PRIOR> 32<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (116)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3261
<NET-ASSETS> 344<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 15<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (5)<F1>
<NET-INVESTMENT-INCOME> 10<F1>
<REALIZED-GAINS-CURRENT> 1217
<APPREC-INCREASE-CURRENT> (134)
<NET-CHANGE-FROM-OPS> 3625
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (10)<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 24<F1>
<NUMBER-OF-SHARES-REDEEMED> (12)<F1>
<SHARES-REINVESTED> 1<F1>
<NET-CHANGE-IN-ASSETS> (4091)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1333)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5<F1>
<AVERAGE-NET-ASSETS> 266<F1>
<PER-SHARE-NAV-BEGIN> 7.42<F1>
<PER-SHARE-NII> .29<F1>
<PER-SHARE-GAIN-APPREC> .21<F1>
<PER-SHARE-DIVIDEND> (.29)<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.63<F1>
<EXPENSE-RATIO> 1.80<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 131
<NAME> SELIGMAN MUNICIPAL FUND SERIES-GEORGIA CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 45876
<INVESTMENTS-AT-VALUE> 50476
<RECEIVABLES> 793
<ASSETS-OTHER> 123
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 51393
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 160
<TOTAL-LIABILITIES> 160
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46366
<SHARES-COMMON-STOCK> 5777<F1>
<SHARES-COMMON-PRIOR> 6236<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 267
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4600
<NET-ASSETS> 48424<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2612<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (427)<F1>
<NET-INVESTMENT-INCOME> 2185<F1>
<REALIZED-GAINS-CURRENT> 356
<APPREC-INCREASE-CURRENT> 1483
<NET-CHANGE-FROM-OPS> 4126
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2185)<F1>
<DISTRIBUTIONS-OF-GAINS> (187)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 280<F1>
<NUMBER-OF-SHARES-REDEEMED> (930)<F1>
<SHARES-REINVESTED> 191<F1>
<NET-CHANGE-IN-ASSETS> (2021)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 109
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 239<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 427<F1>
<AVERAGE-NET-ASSETS> 47868<F1>
<PER-SHARE-NAV-BEGIN> 8.12<F1>
<PER-SHARE-NII> .38<F1>
<PER-SHARE-GAIN-APPREC> .29<F1>
<PER-SHARE-DIVIDEND> (.38)<F1>
<PER-SHARE-DISTRIBUTIONS> (.03)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.38<F1>
<EXPENSE-RATIO> .89<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 134
<NAME> SELIGMAN MUNICIPAL FUND SERIES-GEORGIA CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 45876
<INVESTMENTS-AT-VALUE> 50476
<RECEIVABLES> 793
<ASSETS-OTHER> 123
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 51393
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 160
<TOTAL-LIABILITIES> 160
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46366
<SHARES-COMMON-STOCK> 334<F1>
<SHARES-COMMON-PRIOR> 324<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 267
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4600
<NET-ASSETS> 2809<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 152<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (50)<F1>
<NET-INVESTMENT-INCOME> 102<F1>
<REALIZED-GAINS-CURRENT> 356
<APPREC-INCREASE-CURRENT> 1483
<NET-CHANGE-FROM-OPS> 4126
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (102)<F1>
<DISTRIBUTIONS-OF-GAINS> (11)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 118<F1>
<NUMBER-OF-SHARES-REDEEMED> (120)<F1>
<SHARES-REINVESTED> 12<F1>
<NET-CHANGE-IN-ASSETS> (2021)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 109
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 14<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 50<F1>
<AVERAGE-NET-ASSETS> 2781<F1>
<PER-SHARE-NAV-BEGIN> 8.13<F1>
<PER-SHARE-NII> .30<F1>
<PER-SHARE-GAIN-APPREC> .30<F1>
<PER-SHARE-DIVIDEND> (.30)<F1>
<PER-SHARE-DISTRIBUTIONS> (.03)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.40<F1>
<EXPENSE-RATIO> 1.80<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>071
<NAME> SELIGMAN MUNICIPAL FUND SERIES-LOUISIANA CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 51764
<INVESTMENTS-AT-VALUE> 56033
<RECEIVABLES> 1222
<ASSETS-OTHER> 105
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 57361
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 216
<TOTAL-LIABILITIES> 216
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 52128
<SHARES-COMMON-STOCK> 6619<F1>
<SHARES-COMMON-PRIOR> 6790<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 748
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4269
<NET-ASSETS> 56308<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3223<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (491)<F1>
<NET-INVESTMENT-INCOME> 2732<F1>
<REALIZED-GAINS-CURRENT> 751
<APPREC-INCREASE-CURRENT> 905
<NET-CHANGE-FROM-OPS> 4411
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2732)<F1>
<DISTRIBUTIONS-OF-GAINS> (95)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 195<F1>
<NUMBER-OF-SHARES-REDEEMED> (537)<F1>
<SHARES-REINVESTED> 171<F1>
<NET-CHANGE-IN-ASSETS> 437
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 93
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 281<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 491<F1>
<AVERAGE-NET-ASSETS> 56175<F1>
<PER-SHARE-NAV-BEGIN> 8.28<F1>
<PER-SHARE-NII> .41<F1>
<PER-SHARE-GAIN-APPREC> .24<F1>
<PER-SHARE-DIVIDEND> (.41)<F1>
<PER-SHARE-DISTRIBUTIONS> (.01)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.51<F1>
<EXPENSE-RATIO> .88<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>074
<NAME> SELIGMAN MUNICIPAL FUND SERIES-LOUISIANA CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 51764
<INVESTMENTS-AT-VALUE> 56033
<RECEIVABLES> 1222
<ASSETS-OTHER> 105
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 57361
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 216
<TOTAL-LIABILITIES> 216
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 52128
<SHARES-COMMON-STOCK> 99<F1>
<SHARES-COMMON-PRIOR> 61<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 748
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4269
<NET-ASSETS> 837<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 33<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (10)<F1>
<NET-INVESTMENT-INCOME> 23<F1>
<REALIZED-GAINS-CURRENT> 751
<APPREC-INCREASE-CURRENT> 905
<NET-CHANGE-FROM-OPS> 4411
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (23)<F1>
<DISTRIBUTIONS-OF-GAINS> (1)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 39<F1>
<NUMBER-OF-SHARES-REDEEMED> (3)<F1>
<SHARES-REINVESTED> 2<F1>
<NET-CHANGE-IN-ASSETS> 437
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 93
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10<F1>
<AVERAGE-NET-ASSETS> 581<F1>
<PER-SHARE-NAV-BEGIN> 8.27<F1>
<PER-SHARE-NII> .33<F1>
<PER-SHARE-GAIN-APPREC> .24<F1>
<PER-SHARE-DIVIDEND> (.33)<F1>
<PER-SHARE-DISTRIBUTIONS> (.01)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.50<F1>
<EXPENSE-RATIO> 1.78<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>081
<NAME> SELIGMAN MUNICIPAL FUND SERIES-MARYLAND CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 52769
<INVESTMENTS-AT-VALUE> 57192
<RECEIVABLES> 946
<ASSETS-OTHER> 94
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 58233
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 214
<TOTAL-LIABILITIES> 214
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53411
<SHARES-COMMON-STOCK> 6598<F1>
<SHARES-COMMON-PRIOR> 6452<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 185
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4423
<NET-ASSETS> 54891<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3005<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (465)<F1>
<NET-INVESTMENT-INCOME> 2540<F1>
<REALIZED-GAINS-CURRENT> 184
<APPREC-INCREASE-CURRENT> 1341
<NET-CHANGE-FROM-OPS> 4165
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2540)<F1>
<DISTRIBUTIONS-OF-GAINS> (307)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 489<F1>
<NUMBER-OF-SHARES-REDEEMED> (554)<F1>
<SHARES-REINVESTED> 211<F1>
<NET-CHANGE-IN-ASSETS> 3407
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 320
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 263<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 465<F1>
<AVERAGE-NET-ASSETS> 52620<F1>
<PER-SHARE-NAV-BEGIN> 8.14<F1>
<PER-SHARE-NII> .40<F1>
<PER-SHARE-GAIN-APPREC> .23<F1>
<PER-SHARE-DIVIDEND> (.40)<F1>
<PER-SHARE-DISTRIBUTIONS> (.05)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.32<F1>
<EXPENSE-RATIO> .89<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>084
<NAME> SELIGMAN MUNICIPAL FUND SERIES-MARYLAND CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 52769
<INVESTMENTS-AT-VALUE> 57192
<RECEIVABLES> 946
<ASSETS-OTHER> 94
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 58233
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 214
<TOTAL-LIABILITIES> 214
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53411
<SHARES-COMMON-STOCK> 375<F1>
<SHARES-COMMON-PRIOR> 253<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 185
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4423
<NET-ASSETS> 3128<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 146<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (46)<F1>
<NET-INVESTMENT-INCOME> 100<F1>
<REALIZED-GAINS-CURRENT> 184
<APPREC-INCREASE-CURRENT> 1341
<NET-CHANGE-FROM-OPS> 4165
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (100)<F1>
<DISTRIBUTIONS-OF-GAINS> (12)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 175<F1>
<NUMBER-OF-SHARES-REDEEMED> (64)<F1>
<SHARES-REINVESTED> 11<F1>
<NET-CHANGE-IN-ASSETS> 3407
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 320
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 46<F1>
<AVERAGE-NET-ASSETS> 2558<F1>
<PER-SHARE-NAV-BEGIN> 8.15<F1>
<PER-SHARE-NII> .32<F1>
<PER-SHARE-GAIN-APPREC> .23<F1>
<PER-SHARE-DIVIDEND> (.32)<F1>
<PER-SHARE-DISTRIBUTIONS> (.05)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.33<F1>
<EXPENSE-RATIO> 1.80<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>021
<NAME> SELIGMAN MUNICIPAL FUND SERIES-MASSACHUSETTS CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 100144
<INVESTMENTS-AT-VALUE> 109394
<RECEIVABLES> 1656
<ASSETS-OTHER> 69
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 111121
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 325
<TOTAL-LIABILITIES> 325
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 101189
<SHARES-COMMON-STOCK> 13227<F1>
<SHARES-COMMON-PRIOR> 13766<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 357
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9250
<NET-ASSETS> 109328<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5965<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (866)<F1>
<NET-INVESTMENT-INCOME> 5099<F1>
<REALIZED-GAINS-CURRENT> 361
<APPREC-INCREASE-CURRENT> 4686
<NET-CHANGE-FROM-OPS> 10199
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5099)<F1>
<DISTRIBUTIONS-OF-GAINS> (1288)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1656<F1>
<NUMBER-OF-SHARES-REDEEMED> (2696)<F1>
<SHARES-REINVESTED> 501<F1>
<NET-CHANGE-IN-ASSETS> (460)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1300
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 539<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 866<F1>
<AVERAGE-NET-ASSETS> 107960<F1>
<PER-SHARE-NAV-BEGIN> 7.99<F1>
<PER-SHARE-NII> .38<F1>
<PER-SHARE-GAIN-APPREC> .37<F1>
<PER-SHARE-DIVIDEND> (.38)<F1>
<PER-SHARE-DISTRIBUTIONS> (.09)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.27<F1>
<EXPENSE-RATIO> .80<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>024
<NAME> SELIGMAN MUNICIPAL FUND SERIES-MASSACHUSETTS CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 100144
<INVESTMENTS-AT-VALUE> 109394
<RECEIVABLES> 1656
<ASSETS-OTHER> 69
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 111121
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 325
<TOTAL-LIABILITIES> 325
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 101189
<SHARES-COMMON-STOCK> 178<F1>
<SHARES-COMMON-PRIOR> 156<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 357
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9250
<NET-ASSETS> 1468<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 76<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (23)<F1>
<NET-INVESTMENT-INCOME> 53<F1>
<REALIZED-GAINS-CURRENT> 361
<APPREC-INCREASE-CURRENT> 4686
<NET-CHANGE-FROM-OPS> 10199
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (53)<F1>
<DISTRIBUTIONS-OF-GAINS> (15)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 63<F1>
<NUMBER-OF-SHARES-REDEEMED> (45)<F1>
<SHARES-REINVESTED> 4<F1>
<NET-CHANGE-IN-ASSETS> (460)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1300
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23<F1>
<AVERAGE-NET-ASSETS> 1369<F1>
<PER-SHARE-NAV-BEGIN> 7.99<F1>
<PER-SHARE-NII> .31<F1>
<PER-SHARE-GAIN-APPREC> .36<F1>
<PER-SHARE-DIVIDEND> (.31)<F1>
<PER-SHARE-DISTRIBUTIONS> (.09)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.26<F1>
<EXPENSE-RATIO> 1.71<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>031
<NAME> SELIGMAN MUNICIPAL FUND SERIES-MICHIGAN CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 133068
<INVESTMENTS-AT-VALUE> 143945
<RECEIVABLES> 2550
<ASSETS-OTHER> 73
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 146570
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 568
<TOTAL-LIABILITIES> 568
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 132657
<SHARES-COMMON-STOCK> 16333<F1>
<SHARES-COMMON-PRIOR> 16680<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2468
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10877
<NET-ASSETS> 144161<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 7985<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (1132)<F1>
<NET-INVESTMENT-INCOME> 6853<F1>
<REALIZED-GAINS-CURRENT> 2466
<APPREC-INCREASE-CURRENT> 2642
<NET-CHANGE-FROM-OPS> 12028
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6853)<F1>
<DISTRIBUTIONS-OF-GAINS> (1235)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 892<F1>
<NUMBER-OF-SHARES-REDEEMED> (1830)<F1>
<SHARES-REINVESTED> 591<F1>
<NET-CHANGE-IN-ASSETS> 787
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1253
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 718<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1132<F1>
<AVERAGE-NET-ASSETS> 143575<F1>
<PER-SHARE-NAV-BEGIN> 8.60<F1>
<PER-SHARE-NII> .41<F1>
<PER-SHARE-GAIN-APPREC> .30<F1>
<PER-SHARE-DIVIDEND> (.41)<F1>
<PER-SHARE-DISTRIBUTIONS> (.07)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.83<F1>
<EXPENSE-RATIO> .79<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>034
<NAME> SELIGMAN MUNICIPAL FUND SERIES-MICHIGAN CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 133068
<INVESTMENTS-AT-VALUE> 143945
<RECEIVABLES> 2550
<ASSETS-OTHER> 73
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 146570
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 568
<TOTAL-LIABILITIES> 568
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 132657
<SHARES-COMMON-STOCK> 209<F1>
<SHARES-COMMON-PRIOR> 215<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2468
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10877
<NET-ASSETS> 1841<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 96<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (29)<F1>
<NET-INVESTMENT-INCOME> 67<F1>
<REALIZED-GAINS-CURRENT> 2466
<APPREC-INCREASE-CURRENT> 2642
<NET-CHANGE-FROM-OPS> 12028
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (67)<F1>
<DISTRIBUTIONS-OF-GAINS> (16)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 50<F1>
<NUMBER-OF-SHARES-REDEEMED> (63)<F1>
<SHARES-REINVESTED> 7<F1>
<NET-CHANGE-IN-ASSETS> 787
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1253
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 29<F1>
<AVERAGE-NET-ASSETS> 1730<F1>
<PER-SHARE-NAV-BEGIN> 8.59<F1>
<PER-SHARE-NII> .33<F1>
<PER-SHARE-GAIN-APPREC> .30<F1>
<PER-SHARE-DIVIDEND> (.33)<F1>
<PER-SHARE-DISTRIBUTIONS> (.07)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.82<F1>
<EXPENSE-RATIO> 1.70<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>041
<NAME> SELIGMAN MUNICIPAL FUND SERIES-MINNESOTA SERIES CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 113947
<INVESTMENTS-AT-VALUE> 121733
<RECEIVABLES> 2013
<ASSETS-OTHER> 129
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 123877
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 400
<TOTAL-LIABILITIES> 400
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 114187
<SHARES-COMMON-STOCK> 15217<F1>
<SHARES-COMMON-PRIOR> 15619<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1504
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7786
<NET-ASSETS> 121374<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6872<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (980)<F1>
<NET-INVESTMENT-INCOME> 5892<F1>
<REALIZED-GAINS-CURRENT> 2327
<APPREC-INCREASE-CURRENT> 715
<NET-CHANGE-FROM-OPS> 9008
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5892)<F1>
<DISTRIBUTIONS-OF-GAINS> (140)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 528<F1>
<NUMBER-OF-SHARES-REDEEMED> (1447)<F1>
<SHARES-REINVESTED> 517<F1>
<NET-CHANGE-IN-ASSETS> 3
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (681)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 605<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 980<F1>
<AVERAGE-NET-ASSETS> 120928<F1>
<PER-SHARE-NAV-BEGIN> 7.79<F1>
<PER-SHARE-NII> .38<F1>
<PER-SHARE-GAIN-APPREC> .20<F1>
<PER-SHARE-DIVIDEND> (.38)<F1>
<PER-SHARE-DISTRIBUTIONS> (.01)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.98<F1>
<EXPENSE-RATIO> .81<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>044
<NAME> SELIGMAN MUNICIPAL FUND SERIES-MINNESOTA SERIES CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 113947
<INVESTMENTS-AT-VALUE> 121733
<RECEIVABLES> 2013
<ASSETS-OTHER> 129
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 123877
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 400
<TOTAL-LIABILITIES> 400
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 114187
<SHARES-COMMON-STOCK> 263<F1>
<SHARES-COMMON-PRIOR> 231<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1504
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7786
<NET-ASSETS> 2103<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 107<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (33)<F1>
<NET-INVESTMENT-INCOME> 74<F1>
<REALIZED-GAINS-CURRENT> 2327
<APPREC-INCREASE-CURRENT> 715
<NET-CHANGE-FROM-OPS> 9008
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (74)<F1>
<DISTRIBUTIONS-OF-GAINS> (2)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 91<F1>
<NUMBER-OF-SHARES-REDEEMED> (65)<F1>
<SHARES-REINVESTED> 6<F1>
<NET-CHANGE-IN-ASSETS> 3
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (681)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 33<F1>
<AVERAGE-NET-ASSETS> 1889<F1>
<PER-SHARE-NAV-BEGIN> 7.79<F1>
<PER-SHARE-NII> .31<F1>
<PER-SHARE-GAIN-APPREC> .20<F1>
<PER-SHARE-DIVIDEND> (.31)<F1>
<PER-SHARE-DISTRIBUTIONS> (.01)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.98<F1>
<EXPENSE-RATIO> 1.72<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>101
<NAME> SELIGMAN MUNICIPAL FUND SERIES-MISSOURI CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 46087
<INVESTMENTS-AT-VALUE> 49592
<RECEIVABLES> 969
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 50572
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 205
<TOTAL-LIABILITIES> 205
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46126
<SHARES-COMMON-STOCK> 6223<F1>
<SHARES-COMMON-PRIOR> 6749<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 736
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3505
<NET-ASSETS> 49949<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2839<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (462)<F1>
<NET-INVESTMENT-INCOME> 2377<F1>
<REALIZED-GAINS-CURRENT> 792
<APPREC-INCREASE-CURRENT> 985
<NET-CHANGE-FROM-OPS> 4169
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2377)<F1>
<DISTRIBUTIONS-OF-GAINS> (437)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 221<F1>
<NUMBER-OF-SHARES-REDEEMED> (928)<F1>
<SHARES-REINVESTED> 181<F1>
<NET-CHANGE-IN-ASSETS> (2873)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 385
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 259<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 462<F1>
<AVERAGE-NET-ASSETS> 51754<F1>
<PER-SHARE-NAV-BEGIN> 7.82<F1>
<PER-SHARE-NII> .36<F1>
<PER-SHARE-GAIN-APPREC> .28<F1>
<PER-SHARE-DIVIDEND> (.36)<F1>
<PER-SHARE-DISTRIBUTIONS> (.07)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.03<F1>
<EXPENSE-RATIO> .89<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>104
<NAME> SELIGMAN MUNICIPAL FUND SERIES-MISSOURI CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 46087
<INVESTMENTS-AT-VALUE> 49592
<RECEIVABLES> 969
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 50572
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 205
<TOTAL-LIABILITIES> 205
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46126
<SHARES-COMMON-STOCK> 52<F1>
<SHARES-COMMON-PRIOR> 61<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 736
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3505
<NET-ASSETS> 418<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 22<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (7)<F1>
<NET-INVESTMENT-INCOME> 15<F1>
<REALIZED-GAINS-CURRENT> 792
<APPREC-INCREASE-CURRENT> 985
<NET-CHANGE-FROM-OPS> 4169
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (15)<F1>
<DISTRIBUTIONS-OF-GAINS> (4)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10<F1>
<NUMBER-OF-SHARES-REDEEMED> (21)<F1>
<SHARES-REINVESTED> 2<F1>
<NET-CHANGE-IN-ASSETS> (2873)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 385
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7<F1>
<AVERAGE-NET-ASSETS> 394<F1>
<PER-SHARE-NAV-BEGIN> 7.82<F1>
<PER-SHARE-NII> .29<F1>
<PER-SHARE-GAIN-APPREC> .28<F1>
<PER-SHARE-DIVIDEND> (.29)<F1>
<PER-SHARE-DISTRIBUTIONS> (.07)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.03<F1>
<EXPENSE-RATIO> 1.79<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>051
<NAME> SELIGMAN MUNICIPAL FUND SERIES-NEW YORK CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 78726
<INVESTMENTS-AT-VALUE> 85746
<RECEIVABLES> 1468
<ASSETS-OTHER> 113
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 87329
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 325
<TOTAL-LIABILITIES> 325
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77905
<SHARES-COMMON-STOCK> 9867<F1>
<SHARES-COMMON-PRIOR> 10086<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2079
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7020
<NET-ASSETS> 84822<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4642<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (673)<F1>
<NET-INVESTMENT-INCOME> 3969<F1>
<REALIZED-GAINS-CURRENT> 2733
<APPREC-INCREASE-CURRENT> 1350
<NET-CHANGE-FROM-OPS> 8121
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3969)<F1>
<DISTRIBUTIONS-OF-GAINS> (837)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 798<F1>
<NUMBER-OF-SHARES-REDEEMED> (1379)<F1>
<SHARES-REINVESTED> 362<F1>
<NET-CHANGE-IN-ASSETS> 1904
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 199
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 418<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 673<F1>
<AVERAGE-NET-ASSETS> 83602<F1>
<PER-SHARE-NAV-BEGIN> 8.28<F1>
<PER-SHARE-NII> .40<F1>
<PER-SHARE-GAIN-APPREC> .40<F1>
<PER-SHARE-DIVIDEND> (.40)<F1>
<PER-SHARE-DISTRIBUTIONS> (.08)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.60<F1>
<EXPENSE-RATIO> .81<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>054
<NAME> SELIGMAN MUNICIPAL FUND SERIES-NEW YORK CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 78726
<INVESTMENTS-AT-VALUE> 85746
<RECEIVABLES> 1468
<ASSETS-OTHER> 113
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 87329
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 325
<TOTAL-LIABILITIES> 325
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 77905
<SHARES-COMMON-STOCK> 253<F1>
<SHARES-COMMON-PRIOR> 190<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2079
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7020
<NET-ASSETS> 2182<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 99<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (30)<F1>
<NET-INVESTMENT-INCOME> 69<F1>
<REALIZED-GAINS-CURRENT> 2733
<APPREC-INCREASE-CURRENT> 1350
<NET-CHANGE-FROM-OPS> 8121
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (69)<F1>
<DISTRIBUTIONS-OF-GAINS> (16)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 77<F1>
<NUMBER-OF-SHARES-REDEEMED> (21)<F1>
<SHARES-REINVESTED> 7<F1>
<NET-CHANGE-IN-ASSETS> 1904
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 199
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 30<F1>
<AVERAGE-NET-ASSETS> 1788<F1>
<PER-SHARE-NAV-BEGIN> 8.29<F1>
<PER-SHARE-NII> .32<F1>
<PER-SHARE-GAIN-APPREC> .39<F1>
<PER-SHARE-DIVIDEND> (.32)<F1>
<PER-SHARE-DISTRIBUTIONS> (.08)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.60<F1>
<EXPENSE-RATIO> 1.72<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>061
<NAME> SELIGMAN MUNICIPAL FUND SERIES-OHIO CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 140748
<INVESTMENTS-AT-VALUE> 151943
<RECEIVABLES> 2693
<ASSETS-OTHER> 161
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 154799
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 570
<TOTAL-LIABILITIES> 570
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 140627
<SHARES-COMMON-STOCK> 18304<F1>
<SHARES-COMMON-PRIOR> 18862<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2407
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11195
<NET-ASSETS> 153126<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8694<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (1189)<F1>
<NET-INVESTMENT-INCOME> 7505<F1>
<REALIZED-GAINS-CURRENT> 3398
<APPREC-INCREASE-CURRENT> 1954
<NET-CHANGE-FROM-OPS> 12904
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7505)<F1>
<DISTRIBUTIONS-OF-GAINS> (2018)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 503<F1>
<NUMBER-OF-SHARES-REDEEMED> (1814)<F1>
<SHARES-REINVESTED> 753<F1>
<NET-CHANGE-IN-ASSETS> (1350)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1042
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 762<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1189<F1>
<AVERAGE-NET-ASSETS> 152535<F1>
<PER-SHARE-NAV-BEGIN> 8.19<F1>
<PER-SHARE-NII> .40<F1>
<PER-SHARE-GAIN-APPREC> .29<F1>
<PER-SHARE-DIVIDEND> (.40)<F1>
<PER-SHARE-DISTRIBUTIONS> (.11)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.37<F1>
<EXPENSE-RATIO> .78<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>064
<NAME> SELIGMAN MUNICIPAL FUND SERIES-OHIO CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 140748
<INVESTMENTS-AT-VALUE> 151943
<RECEIVABLES> 2693
<ASSETS-OTHER> 161
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 154799
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 570
<TOTAL-LIABILITIES> 570
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 140627
<SHARES-COMMON-STOCK> 131<F1>
<SHARES-COMMON-PRIOR> 141<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2407
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11195
<NET-ASSETS> 1103<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 67<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (20)<F1>
<NET-INVESTMENT-INCOME> 47<F1>
<REALIZED-GAINS-CURRENT> 3398
<APPREC-INCREASE-CURRENT> 1954
<NET-CHANGE-FROM-OPS> 12904
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (47)<F1>
<DISTRIBUTIONS-OF-GAINS> (15)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 34<F1>
<NUMBER-OF-SHARES-REDEEMED> (50)<F1>
<SHARES-REINVESTED> 6<F1>
<NET-CHANGE-IN-ASSETS> (1350)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1042
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 20<F1>
<AVERAGE-NET-ASSETS> 1180<F1>
<PER-SHARE-NAV-BEGIN> 8.23<F1>
<PER-SHARE-NII> .33<F1>
<PER-SHARE-GAIN-APPREC> .29<F1>
<PER-SHARE-DIVIDEND> (.33)<F1>
<PER-SHARE-DISTRIBUTIONS> (.11)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.41<F1>
<EXPENSE-RATIO> 1.69<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>111
<NAME> SELIGMAN MUNICIPAL FUND SERIES-OREGON CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 56877
<INVESTMENTS-AT-VALUE> 61232
<RECEIVABLES> 1250
<ASSETS-OTHER> 111
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 62593
<PAYABLE-FOR-SECURITIES> 1967
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 374
<TOTAL-LIABILITIES> 2341
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 55525
<SHARES-COMMON-STOCK> 7159<F1>
<SHARES-COMMON-PRIOR> 7016<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 371
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4355
<NET-ASSETS> 57602<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3045<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (489)<F1>
<NET-INVESTMENT-INCOME> 2556<F1>
<REALIZED-GAINS-CURRENT> 375
<APPREC-INCREASE-CURRENT> 1637
<NET-CHANGE-FROM-OPS> 4641
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2556)<F1>
<DISTRIBUTIONS-OF-GAINS> (700)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 594<F1>
<NUMBER-OF-SHARES-REDEEMED> (722)<F1>
<SHARES-REINVESTED> 271<F1>
<NET-CHANGE-IN-ASSETS> 3334
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 718
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 278<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 489<F1>
<AVERAGE-NET-ASSETS> 55525<F1>
<PER-SHARE-NAV-BEGIN> 7.87<F1>
<PER-SHARE-NII> .36<F1>
<PER-SHARE-GAIN-APPREC> .28<F1>
<PER-SHARE-DIVIDEND> (.36)<F1>
<PER-SHARE-DISTRIBUTIONS> (.10)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.05<F1>
<EXPENSE-RATIO> .88<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>114
<NAME> SELIGMAN MUNICIPAL FUND SERIES-OREGON CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 56877
<INVESTMENTS-AT-VALUE> 61232
<RECEIVABLES> 1249
<ASSETS-OTHER> 111
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 62593
<PAYABLE-FOR-SECURITIES> 1967
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 374
<TOTAL-LIABILITIES> 2341
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 55525
<SHARES-COMMON-STOCK> 329<F1>
<SHARES-COMMON-PRIOR> 213<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 371
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4355
<NET-ASSETS> 2650<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 109<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (36)<F1>
<NET-INVESTMENT-INCOME> 73<F1>
<REALIZED-GAINS-CURRENT> 375
<APPREC-INCREASE-CURRENT> 1637
<NET-CHANGE-FROM-OPS> 4641
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (73)<F1>
<DISTRIBUTIONS-OF-GAINS> (22)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 122<F1>
<NUMBER-OF-SHARES-REDEEMED> (15)<F1>
<SHARES-REINVESTED> 9<F1>
<NET-CHANGE-IN-ASSETS> 3334
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 718
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 36<F1>
<AVERAGE-NET-ASSETS> 1975<F1>
<PER-SHARE-NAV-BEGIN> 7.87<F1>
<PER-SHARE-NII> .29<F1>
<PER-SHARE-GAIN-APPREC> .27<F1>
<PER-SHARE-DIVIDEND> (.29)<F1>
<PER-SHARE-DISTRIBUTIONS> (.10)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.04<F1>
<EXPENSE-RATIO> 1.79<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>151
<NAME> SELIGMAN MUNICIPAL FUND SERIES-SOUTH CAROLINA CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 101390
<INVESTMENTS-AT-VALUE> 109911
<RECEIVABLES> 2223
<ASSETS-OTHER> 97
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 112233
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 311
<TOTAL-LIABILITIES> 311
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 102677
<SHARES-COMMON-STOCK> 12682<F1>
<SHARES-COMMON-PRIOR> 12375<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 724
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8521
<NET-ASSETS> 106328<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5737<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (831)<F1>
<NET-INVESTMENT-INCOME> 4906<F1>
<REALIZED-GAINS-CURRENT> 1214
<APPREC-INCREASE-CURRENT> 2638
<NET-CHANGE-FROM-OPS> 8927
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4906)<F1>
<DISTRIBUTIONS-OF-GAINS> (905)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1362<F1>
<NUMBER-OF-SHARES-REDEEMED> (1482)<F1>
<SHARES-REINVESTED> 427<F1>
<NET-CHANGE-IN-ASSETS> 7241
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 450
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 518<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 831<F1>
<AVERAGE-NET-ASSETS> 103494<F1>
<PER-SHARE-NAV-BEGIN> 8.16<F1>
<PER-SHARE-NII> .39<F1>
<PER-SHARE-GAIN-APPREC> .29<F1>
<PER-SHARE-DIVIDEND> (.39)<F1>
<PER-SHARE-DISTRIBUTIONS> (.07)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.38<F1>
<EXPENSE-RATIO> .80<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>154
<NAME> SELIGMAN MUNICIPAL FUND SERIES-SOUTH CAROLINA CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 101390
<INVESTMENTS-AT-VALUE> 109911
<RECEIVABLES> 2223
<ASSETS-OTHER> 97
<OTHER-ITEMS-ASSETS> 2
<TOTAL-ASSETS> 112233
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 311
<TOTAL-LIABILITIES> 311
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 102677
<SHARES-COMMON-STOCK> 668<F1>
<SHARES-COMMON-PRIOR> 449<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 724
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8521
<NET-ASSETS> 5594<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 244<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (75)<F1>
<NET-INVESTMENT-INCOME> 169<F1>
<REALIZED-GAINS-CURRENT> 1214
<APPREC-INCREASE-CURRENT> 2638
<NET-CHANGE-FROM-OPS> 8927
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (169)<F1>
<DISTRIBUTIONS-OF-GAINS> (35)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 280<F1>
<NUMBER-OF-SHARES-REDEEMED> (81)<F1>
<SHARES-REINVESTED> 20<F1>
<NET-CHANGE-IN-ASSETS> 7241
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 450
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 22<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 75<F1>
<AVERAGE-NET-ASSETS> 4406<F1>
<PER-SHARE-NAV-BEGIN> 8.16<F1>
<PER-SHARE-NII> .31<F1>
<PER-SHARE-GAIN-APPREC> .29<F1>
<PER-SHARE-DIVIDEND> (.31)<F1>
<PER-SHARE-DISTRIBUTIONS> (.07)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.38<F1>
<EXPENSE-RATIO> 1.71<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
