File No. 2-86008
811-3828
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. __ |_|
Post-Effective Amendment No. 36 |X|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 35 |X|
- --------------------------------------------------------------------------------
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)
- --------------------------------------------------------------------------------
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)
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective (check the
appropriate box).
<TABLE>
<S> <C>
|_| immediately upon filing pursuant to paragraph (b) |_| on (date) pursuant to paragraph (a)(1)
|X| on January 31, 2000 pursuant to paragraph (b) |_| 60 days after filing pursuant to paragraph (a)(1)
|_| 75 days after filing pursuant to paragraph (a)(2) |_| on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
</TABLE>
<PAGE>
S E L I G M A N
---------------
MUNICIPAL FUNDS
Seligman Municipal Fund
Series, Inc.
Seligman Municipal
Series Trust
Seligman New Jersey
Municipal Fund, Inc.
Seligman Pennsylvania
Municipal Fund Series
The Securities and Exchange Commission has neither approved nor disapproved
these Funds, and it has not determined the prospectus to be accurate or
adequate. Any representation to the contrary is a criminal offense.
An investment in these Funds or any 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 in
this Prospectus, 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.
MUNI-1 2/2000
[GRAPHIC]
PROSPECTUS
FEBRUARY 1, 2000
------------
Seeking
Income
Exempt From
Regular
Income Tax
managed by
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
<PAGE>
Table of Contents
The Funds
A discussion of the investment strategies, risks, performance and expenses of
the Funds.
Overview of the Funds 1
National Fund 4
California High-Yield Fund 6
California Quality Fund 8
Colorado Fund 10
Florida Fund 12
Georgia Fund 14
Louisiana Fund 16
Maryland Fund 18
Massachusetts Fund 20
Michigan Fund 22
Minnesota Fund 24
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 42
Shareholder Information
Deciding Which Class of Shares
to Buy 43
Pricing of Fund Shares 45
Opening Your Account 45
How to Buy Additional Shares 46
How to Exchange Shares Among
the Seligman Mutual Funds 46
How to Sell Shares 47
Important Policies That May Affect
Your Account 48
Dividends and Capital Gain
Distributions 49
Taxes 49
Financial Highlights 50
How to Contact Us 60
For More Information back cover
TIMES CHANGE ... VALUES ENDURE
<PAGE>
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:
<TABLE>
<S> <C> <C>
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
</TABLE>
Seligman Municipal Series Trust offers the following four series:
<TABLE>
<S> <C>
California High-Yield Fund Florida Fund
California Quality Fund North Carolina Fund
</TABLE>
Seligman New Jersey Municipal Fund, Inc. (New Jersey Fund)
Seligman Pennsylvania Municipal Fund Series (Pennsylvania Fund)
INVESTMENT OBJECTIVES
Each Fund has its own investment objective(s). 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
objective(s).
PRINCIPAL INVESTMENT STRATEGIES
Each Fund also has its own investment strategies and risks.
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.
Alternative
Minimum Municipal securities are issued by state and local
Tax (AMT): governments, their agencies and authorities, as well as
A tax imposed on territories and possessions of the United States, and
certain types of the District of Columbia. Municipal bonds are issued to
income to ensure obtain funds to finance various public or private
that all projects, to meet general expenses, and to refinance
taxpayers pay at outstanding debt.
least a minimum
amount of taxes.
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 strategies
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.
1
<PAGE>
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.
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.
A Fund may, from time to time, take temporary defensive positions that are
inconsistent with its principal strategies in seeking to minimize extreme
volatility caused by adverse market, economic, or other conditions. This could
prevent that Fund from achieving its objective(s).
PRINCIPAL RISKS
Below is a description of investment risks that apply to the Funds. More
specific risks that apply to individual Funds are included in the individual
Fund descriptions in the pages that follow.
The value of your investment in a Fund will fluctuate with fluctuations in the
value of the Fund's investment portfolio. You may experience a decline in the
value of your investment and you could lose money if you sell your shares at a
price lower than you paid for them.
The principal factors that may affect the value of a Fund's portfolio are
changes in interest rates and the credit worthiness of a Fund's portfolio
holdings, as described below:
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 that
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. Further, revenue bonds held by a Fund may be downgraded
or may default on payment if revenues from their underlying facilities
decline.
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 each Fund's 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 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.
2
<PAGE>
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.
Further, if certain securities or market sectors represented in a Fund's
portfolio do not perform as expected, that Fund's net asset value may
decline.
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.
PAST PERFORMANCE
Each Fund offers three Classes of shares. The performance information presented
for each Fund provides some indication of the risks of investing in that Fund
by showing how the performance of Class A shares has varied year to year, as
well as how the performance of each Class 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 among each Fund's
Classes of shares due to their different fees and expenses.
FEES AND EXPENSES
The fees and expenses 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 your account. 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
<PAGE>
National Fund
INVESTMENT OBJECTIVE
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.
PRINCIPAL INVESTMENT STRATEGIES
The National Fund uses the following investment strategies to pursue its
investment objective:
The National Fund invests at least 80% of its net assets in municipal
securities of states, territories, and possessions of the United States, 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.
SPECIFIC RISKS
In respect of the National Fund's risks, please refer to the "Principal Risks"
section on page 2 of this Prospectus.
4
<PAGE>
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 lower. 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.
Average Annual Total Returns
Periods Ended 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.76% 5.47% 5.50% -- --
Class C n/a n/a n/a -7.61% --
Class D -6.90 5.56 n/a -- 2.46%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 5.82%
91 11.47%
92 7.88%
93 14.10%
94 -9.95%
95 20.10%
96 3.33%
97 10.38%
98 5.67%
99 -5.26%
Best calendar quarter return: 8.25% - quarter ended 3/31/95.
Worst calendar quarter return: -8.20% - quarter ended 3/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .23% .23% .23%
----- ----- -----
Total Annual Fund Operating Expenses.............. .83% 1.73% 1.73%
===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $556 $727 $ 914 $1,452
Class C 374 639 1,029 2,121
Class D 276 545 939 2,041
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $556 $727 $ 914 $1,452
Class C 274 639 1,029 2,121
Class D 176 545 939 2,041
</TABLE>
5
<PAGE>
California High-Yield Fund
INVESTMENT OBJECTIVE
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.
PRINCIPAL INVESTMENT STRATEGIES
The California High-Yield Fund uses the following investment strategies to
pursue its investment 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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
California High-Yield Fund is subject to the following risks:
. 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, economic factors,
natural disasters, and the possibility of credit problems, such as the 1994
bankruptcy of Orange County.
6
<PAGE>
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 lower. 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.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.00
91 10.48
92 9.53
93 9.91
94 -2.79
95 14.55
96 5.52
97 8.72
98 6.18
99 -5.26
Best calendar quarter return: 6.48% - quarter ended 3/31/95.
Worst calendar quarter return: -2.34% - quarter ended 12/31/99.
Average Annual Total Returns
Periods Ended 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.70% 4.73% 5.60% -- --
Class C n/a n/a n/a -8.28% --
Class D -7.15 4.74 n/a -- 3.18%
Lehman Brothers
Municipal Bond
Index 2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .23% .24% .24%
----- ----- -----
Total Annual Fund Operating Expenses.............. .83% 1.74% 1.74%
===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $557 $730 $ 919 $1,463
Class C 375 643 1,034 2,131
Class D 277 548 944 2,052
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $557 $730 $ 919 $1,463
Class C 275 643 1,034 2,131
Class D 177 548 944 2,052
</TABLE>
7
<PAGE>
California Quality Fund
INVESTMENT OBJECTIVE
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.
PRINCIPAL INVESTMENT STRATEGIES
The California Quality Fund uses the following investment strategies to pursue
its investment 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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
California Quality Fund is subject to the following risk:
. 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, economic factors,
natural disasters, and the possibility of credit problems, such as the 1994
bankruptcy of Orange County.
8
<PAGE>
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 lower. 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.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.57
91 11.22
92 8.49
93 12.61
94 -8.30
95 19.79
96 3.91
97 8.80
98 6.26
99 -6.10
Best calendar quarter return: 8.97% - quarter ended 3/31/95.
Worst calendar quarter return: -6.63% - quarter ended 3/31/94.
Average Annual Total Returns
Periods Ended 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
------ ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -10.62% 5.19% 5.51% -- --
Class C n/a n/a n/a -8.26% --
Class D -7.87 5.21 n/a -- 2.49%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) ...................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .22% .22% .22%
----- ----- -----
Total Annual Fund Operating Expenses.............. .82% 1.72% 1.72%
===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $555 $724 $ 908 $1,440
Class C 373 636 1,024 2,110
Class D 275 542 933 2,030
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $555 $724 $ 908 $1,440
Class C 273 636 1,024 2,110
Class D 175 542 933 2,030
</TABLE>
9
<PAGE>
Colorado Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Colorado Fund uses the following investment strategies to pursue its
investment objectives:
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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Colorado Fund is subject to the following risks:
. 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, economic factors,
natural disasters, and the possibility of credit problems.
. The State is sensitive to national and international business cycles.
Changing demographics, resulting in possible labor shortages and an increase
in the cost of living and doing business in Colorado, could negatively
affect its economy. Turmoil in the world economy, especially in recent years
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 lower. 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.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 5.05
91 9.40
92 7.67
93 11.11
94 -5.13
95 13.96
96 3.39
97 7.52
98 5.80
99 -5.26
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.79% 3.89% 4.66% -- --
Class C n/a n/a n/a -8.14% --
Class D -6.89 3.92 n/a -- 2.01%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating Expenses for Fiscal 1999
----------------------------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .27% .27% .27%
----- ----- -----
Total Annual Fund Operating Expenses.............. .87% 1.77% 1.77%
===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $560 $739 $ 934 $1,497
Class C 378 652 1,050 2,163
Class D 280 557 959 2,084
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $560 $739 $ 934 $1,497
Class C 278 652 1,050 2,163
Class D 180 557 959 2,084
</TABLE>
11
<PAGE>
Florida Fund
INVESTMENT OBJECTIVE
The Florida Fund seeks high income exempt from regular federal income taxes
consistent with preservation of capital and with consideration given to capital
gain.
PRINCIPAL INVESTMENT STRATEGIES
The Florida Fund uses the following investment strategies to pursue its
investment 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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Florida Fund is subject to the following risks:
. 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 factors,
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 the 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 lower. 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.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.46
91 10.62
92 9.07
93 13.52
94 -5.52
95 16.67
96 2.76
97 9.33
98 5.67
99 -4.89
Best calendar quarter return: 7.00% - quarter ended 3/31/95.
Worst calendar quarter return: -5.99% - quarter ended 3/31/94.
Average Annual Total Returns
Periods Ended 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.35% 4.67% 5.64% -- --
Class C n/a n/a n/a -7.51% --
Class D -6.38 4.90 n/a -- 2.81%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating Expenses for Fiscal 1999
----------------------------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .25% 1.00% 1.00%
Other Expenses.................................... .28% .28% .28%
----- ----- -----
Total Annual Fund Operating Expenses.............. 1.03% 1.78% 1.78%
===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $575 $787 $1,017 $1,675
Class C 379 655 1,055 2,174
Class D 281 560 964 2,095
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $575 $787 $1,017 $1,675
Class C 279 655 1,055 2,174
Class D 181 560 964 2,095
</TABLE>
13
<PAGE>
Georgia Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Georgia Fund uses the following investment strategies to pursue its
investment objectives:
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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Georgia Fund is subject to the following risks:
. 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, economic factors, 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 lower. 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.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 7.01
91 10.97
92 9.00
93 12.21
94 -7.64
95 19.16
96 3.86
97 9.02
98 5.94
99 -5.04
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.53% 5.26% 5.66% -- --
Class C n/a n/a n/a -7.80% --
Class D -6.76 5.36 n/a -- 2.81%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating Expenses for Fiscal 1999
----------------------------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .27% .27% .27%
----- ----- -----
Total Annual Fund Operating Expenses.............. .87% 1.77% 1.77%
===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $560 $739 $ 934 $1,497
Class C 378 652 1,050 2,163
Class D 280 557 959 2,084
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $560 $739 $ 934 $1,497
Class C 278 652 1,050 2,163
Class D 180 557 959 2,084
</TABLE>
15
<PAGE>
Louisiana Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Louisiana Fund uses the following investment strategies to pursue its
investment objectives:
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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Louisiana Fund is subject to the following risks:
. 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, economic factors,
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 lower. 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.
Class A Annual Total
Returns Calendar Years
[GRAPH]
90 6.86
91 11.38
92 7.83
93 11.45
94 -5.89
95 17.10
96 3.49
97 8.45
98 5.93
99 -4.62
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.20% 4.81% 5.46% -- --
Class C n/a n/a n/a -7.18% --
Class D -6.27 4.89 n/a -- 2.70%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .24% .24% .24%
----- ----- -----
Total Annual Fund Operating Expenses.............. .84% 1.74% 1.74%
===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $557 $730 $ 919 $1,463
Class C 375 643 1,034 2,131
Class D 277 548 944 2,052
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $557 $730 $ 919 $1,463
Class C 275 643 1,034 2,131
Class D 177 548 944 2,052
</TABLE>
17
<PAGE>
Maryland Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Maryland Fund uses the following investment strategies to pursue its
investment objectives:
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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Maryland Fund is subject to the following risks:
. 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, economic factors,
natural disasters, and the possibility of credit problems.
. Because the Fund favors investing in revenue bonds, including revenue bonds
issued on behalf of health-care providers, 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 lower. 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.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.15
91 10.47
92 8.24
93 11.93
94 -5.48
95 16.84
96 3.66
97 8.09
98 5.85
99 -3.34
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -7.97% 4.99% 5.53% -- --
Class C n/a n/a n/a -6.26% --
Class D -4.79 5.11 n/a -- 2.97%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)..................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................. 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................. .50% .50% .50%
Distribution and/or
Service (12b-1) Fees........................... .10% 1.00% 1.00%
Other Expenses.................................. .27% .27% .27%
----- ----- -----
Total Annual Fund Operating Expenses............ .87% 1.77% 1.77%
===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $560 $739 $ 934 $1,497
Class C 378 652 1,050 2,163
Class D 280 557 959 2,084
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Year 5 Year 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $560 $739 $ 934 $1,497
Class C 278 652 1,050 2,163
Class D 180 557 959 2,084
</TABLE>
19
<PAGE>
Massachusetts Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Massachusetts Fund uses the following investment strategies to pursue its
investment objectives:
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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Massachusetts Fund is subject to the following risks:
. 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,
economic factors, 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 lower. 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.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 5.42
91 12.97
92 9.08
93 11.52
94 -4.43
95 15.20
96 4.14
97 8.68
98 6.55
99 -6.73
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
------ ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -11.11% 4.30% 5.50% -- --
Class C n/a n/a n/a -9.02% --
Class D -8.47 4.35 n/a -- 2.51%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .23% .23% .23%
----- ----- -----
Total Annual Fund Operating Expenses.............. .83% 1.73% 1.73%
===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $556 $727 $ 914 $1,452
Class C 374 639 1,029 2,121
Class D 276 545 939 2,041
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $556 $727 $ 914 $1,452
Class C 274 639 1,029 2,121
Class D 176 545 939 2,041
</TABLE>
21
<PAGE>
Michigan Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Michigan Fund uses the following investment strategies to pursue its
investment objectives:
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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Michigan Fund is subject to the following risks:
. 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, economic factors,
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 may 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 lower. 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.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 5.85
91 12.01
92 9.31
93 11.48
94 -4.84
95 15.78
96 3.74
97 8.73
98 6.12
99 -3.80
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -8.38% 4.89% 5.73% -- --
Class C n/a n/a n/a -6.50% --
Class D -5.59 4.91 n/a -- 2.90%
Lehman Brothers
Municipal Bond
Index -2.06 6.42 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) ...................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .22% .22% .22%
----- ----- -----
Total Annual Fund Operating Expenses.............. .82% 1.72% 1.72%
===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $555 $724 $ 908 $1,440
Class C 373 636 1,024 2,110
Class D 275 542 933 2,030
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $555 $724 $ 908 $1,440
Class C 273 636 1,024 2,110
Class D 175 542 933 2,030
</TABLE>
23
<PAGE>
Minnesota Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Minnesota Fund uses the following investment strategies to pursue its
investment objectives:
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, subject to
applicable requirements. Under these circumstances, the Fund may not achieve
its investment objective.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Minnesota Fund is subject to the following risks:
. 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, economic factors,
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 lower. 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.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.52
91 7.53
92 7.67
93 13.49
94 -2.54
95 11.41
96 3.39
97 7.02
98 6.43
99 -4.15
Best calendar quarter return: 5.00% - quarter ended 3/31/95.
Worst calendar quarter return: -3.23% - quarter ended 3/31/94.
Average Annual Total Returns
Periods Ended 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -8.69% 3.64% 5.02% -- --
Class C n/a n/a n/a -7.01% --
Class D -5.92 3.70 n/a -- 2.33%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .24% .24% .24%
----- ----- -----
Total Annual Fund Operating Expenses.............. .84% 1.74% 1.74%
===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $557 $730 $ 919 $1,463
Class C 375 643 1,034 2,131
Class D 277 548 944 2,052
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $557 $730 $ 919 $1,463
Class C 275 643 1,034 2,131
Class D 177 548 944 2,052
</TABLE>
25
<PAGE>
Missouri Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Missouri Fund uses the following investment strategies to pursue its
investment objectives:
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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Missouri Fund is subject to the following risks:
. 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, economic factors,
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, 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 lower. 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.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.93%
91 11.37%
92 7.25%
93 11.40%
94 -6.32%
95 16.95%
96 3.71%
97 8.08%
98 5.77%
99 -5.59%
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
------ ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -10.08% 4.50% 5.21% -- --
Class C n/a n/a n/a -8.10% --
Class D -7.35 4.55 n/a -- 2.32%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating Expenses for Fiscal 1999
----------------------------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .27% .27% .27%
----- ----- -----
Total Annual Fund Operating Expenses.............. .87% 1.77% 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.
</TABLE>
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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $560 $739 $ 934 $1,497
Class C 378 652 1,050 2,163
Class D 280 557 959 2,084
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $560 $739 $ 934 $1,497
Class C 278 652 1,050 2,163
Class D 180 557 959 2,084
</TABLE>
27
<PAGE>
New Jersey Fund
INVESTMENT OBJECTIVE
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.
PRINCIPAL INVESTMENT STRATEGIES
The New Jersey Fund uses the following investment strategies to pursue its
investment 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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the New
Jersey Fund is subject to the following risks:
. 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, economic factors,
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 lower. 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.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.78%
91 11.04%
92 8.99%
93 12.37%
94 -6.15%
95 15.57%
96 3.40%
97 8.93%
98 6.00%
99 -5.58%
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
------ ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -10.07% 4.42% 5.40% -- --
Class C n/a n/a n/a -8.19% --
Class D -7.08 4.64 n/a -- 2.62%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating Expenses for Fiscal 1999
----------------------------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .25% 1.00% 1.00%
Other Expenses.................................... .32% .32% .32%
----- ----- -----
Total Annual Fund Operating Expenses.............. 1.07% 1.82% 1.82%
===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $579 $799 $1,037 $1,719
Class C 383 667 1,075 2,216
Class D 285 573 985 2,137
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $579 $799 $1,037 $1,719
Class C 283 667 1,075 2,216
Class D 185 573 985 2,137
</TABLE>
29
<PAGE>
New York Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The New York Fund uses the following investment strategies to pursue its
investment objectives:
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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the New
York Fund is subject to the following risks:
. 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, economic factors,
natural disasters, and the possibility of credit problems.
. New York City and certain localities outside New York City have experienced
financial problems in the past. Recurrence of 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 lower. 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.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 4.18%
91 13.53%
92 9.31%
93 13.26%
94 -7.93%
95 19.31%
96 3.83%
97 10.04%
98 6.86%
99 -5.64%
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
------ ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -10.08% 5.54% 5.84% -- --
Class C n/a n/a n/a -8.10% --
Class D -7.50 5.57 n/a -- 2.88%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .21% .21% .21%
----- ----- -----
Total Annual Fund Operating Expenses.............. .81% 1.71% 1.71%
===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $554 $721 $ 903 $1,429
Class C 372 633 1,019 2,099
Class D 274 539 928 2,019
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $554 $721 $ 903 $1,429
Class C 272 633 1,019 2,099
Class D 174 539 928 2,019
</TABLE>
31
<PAGE>
North Carolina Fund
INVESTMENT OBJECTIVE
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.
PRINCIPAL INVESTMENT STRATEGIES
The North Carolina Fund uses the following investment strategies to pursue its
investment 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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
North Carolina Fund is subject to the following risks:
. 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,
economic factors, 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 this matter, pressure on
state revenues may be ongoing.
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 lower. 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.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 2.80%
91 10.63%
92 8.15%
93 12.98%
94 -7.35%
95 19.56%
96 2.71%
97 8.75%
98 5.81%
99 -5.02%
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 12/31/99
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
SINCE SINCE SINCE
ONE FIVE INCEPTION INCEPTION INCEPTION
YEAR YEARS 8/27/90 5/27/99 2/1/94
----- ----- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.48% 5.05% 5.47% -- --
Class C n/a n/a n/a -7.41% --
Class D -6.62 5.29 n/a -- 2.75%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 7.09(1) -2.59(2) 4.67(3)
</TABLE>
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 5/31/99.
(3) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .25% 1.00% 1.00%
Other Expenses.................................... .31% .31% .31%
----- ----- -----
Total Annual Fund Operating Expenses.............. 1.06% 1.81% 1.81%
===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $578 $796 $1,032 $1,708
Class C 382 664 1,070 2,205
Class D 284 569 980 2,127
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $578 $796 $1,032 $1,708
Class C 282 664 1,070 2,205
Class D 184 569 980 2,127
</TABLE>
33
<PAGE>
Ohio Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Ohio Fund uses the following investment strategies to pursue its
investment objectives:
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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Ohio Fund is subject to the following risks:
. 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, economic factors,
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 lower. 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.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.58%
91 11.31%
92 8.43%
93 11.64%
94 -4.91%
95 15.23%
96 3.77%
97 8.39%
98 5.89%
99 -4.65%
Best calendar quarter return: 6.47% - quarter ended 3/31/95.
Worst class quarter return; -4.89% - quarter ended. 3/31/94
Average Annual Total Returns
Periods Ended 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.22% 4.50% 5.47% -- --
Class C n/a n/a n/a -7.38% --
Class D -6.37 4.60 n/a -- 2.67%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating Expenses for Fiscal 1999
----------------------------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or Service (12b-1) Fees.......... .10% 1.00% 1.00%
Other Expenses.................................... .21% .21% .21%
----- ----- -----
Total Annual Fund Operating Expenses.............. .81% 1.71% 1.71%
===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $554 $721 $ 903 $1,429
Class C 372 633 1,019 2,099
Class D 274 539 928 2,019
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $554 $721 $ 903 $1,429
Class C 272 633 1,019 2,099
Class D 174 539 928 2,019
</TABLE>
35
<PAGE>
Oregon Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Oregon Fund uses the following strategies to pursue its objectives:
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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Oregon Fund is subject to the following risks:
. 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, economic factors,
natural disasters, and the possibility of credit problems.
. Oregon's economy continues to be affected by the technology manufacturing,
forest products, and agricultural industries, which have all declined in
recent years due to 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 lower. 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.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.50%
91 10.82%
92 7.78%
93 10.90%
94 -4.56%
95 14.55%
96 3.81%
97 9.05%
98 6.09%
99 -3.95%
Best calendar quarter return: 6.15% - quarter ended 3/31/95.
Worst calendar quarter return: -4.48% - quarter ended 3/31/94.
Average Annual Total Returns
Periods Ended 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -8.55% 4.71% 5.41% -- --
Class C n/a n/a n/a -6.97% --
Class D -5.86 4.74 n/a -- 2.87%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating Expenses for Fiscal 1999
----------------------------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or Service (12b-1) Fees.......... .10% 1.00% 1.00%
Other Expenses.................................... .26% .26% .26%
----- ----- -----
Total Annual Fund Operating Expenses.............. .86% 1.76% 1.76%
===== ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $559 $736 $ 929 $1,485
Class C 377 649 1,045 2,152
Class D 279 554 954 2,073
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $559 $736 $ 929 $1,485
Class C 277 649 1,045 2,152
Class D 179 554 954 2,073
</TABLE>
37
<PAGE>
Pennsylvania Fund
INVESTMENT OBJECTIVE
The Pennsylvania Fund seeks high income exempt from regular federal income tax
and Pennsylvania income taxes consistent with preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES
The Pennsylvania Fund uses the following investment strategies to pursue its
investment 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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Pennsylvania Fund is subject to the following risks:
. 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, economic factors,
natural disasters, and the possibility of credit problems.
. Pennsylvania and various of its political subdivisions, including the City of
Philadelphia and the City of Scranton, have in the past, encountered
financial difficulties due to slowdowns in the pace of economic activity and
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 lower. 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.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 5.35%
91 11.29%
92 9.32%
93 12.91%
94 -7.03%
95 18.01%
96 3.44%
97 8.70%
98 6.14%
99 -5.19%
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.70% 4.92% 5.52% -- --
Class C n/a n/a n/a -7.77% --
Class D -6.82 5.11 n/a -- 2.65%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- --------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load).................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a
% of offering price).......................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................ .50% .50% .50%
Distribution and/or
Service (12b-1) Fees.......................... .25% 1.00% 1.00%
Other Expenses................................. .46% .46% .46%
--------- ----- -----
Total Annual Fund Operating Expenses........... 1.21% 1.96% 1.96%
========= ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
- -------
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $592 $841 $1,108 $1,871
Class C 397 709 1,147 2,362
Class D 299 615 1,057 2,285
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $592 $841 $1,108 $1,871
Class C 297 709 1,147 2,362
Class D 199 615 1,057 2,285
</TABLE>
39
<PAGE>
South Carolina Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The South Carolina Fund uses the following investment strategies to pursue its
investment objectives:
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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
South Carolina Fund is subject to the following risks:
. 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,
economic factors, 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 in recent years through
June 30, 1993. These 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 lower. 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.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.01%
91 11.52%
92 8.39%
93 11.71%
94 -6.70%
95 17.65%
96 3.93%
97 8.72%
98 5.73%
99 -5.59%
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
------ ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -10.07% 4.79% 5.37% -- --
Class C n/a n/a n/a -8.06% --
Class D -7.22 4.89 n/a -- 2.55%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
- ---------------- --------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)..................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a
% of offering price)........................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
- ------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................. .50% .50% .50%
Distribution and/or
Service (12b-1) Fees........................... .10% 1.00% 1.00%
Other Expenses.................................. .23% .23% .23%
--------- ----- -----
Total Annual Fund Operating Expenses............ .83% 1.73% 1.73%
========= ===== =====
</TABLE>
(/1/) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.
Example
This example 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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $556 $727 $ 914 $1,452
Class C 374 639 1,029 2,121
Class D 276 545 939 2,041
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $556 $727 $ 914 $1,452
Class C 274 639 1,029 2,121
Class D 176 545 939 2,041
</TABLE>
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.
J. & W. Seligman & Co. Incorporated (Seligman), 100 Park Avenue, New York, New
York 10017, is the manager of each Fund. 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 20 US registered
investment companies, which offer more than 50 investment portfolios with
approximately $27.4 billion in assets as of December 31, 1999. Seligman also
provides investment management or advice to institutional or other accounts
having an aggregate value at December 31, 1999, of approximately $11.3 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.
Affiliates of Seligman:
Seligman Advisors, Inc.:
Each Fund's general
distributor; responsible
for accepting orders for
purchases and sales of Fund
shares.
Seligman Services, Inc.:
A limited purpose
broker/dealer; acts as the
broker/dealer of record for
shareholder accounts that
do not have a designated
financial advisor.
Seligman Data Corp. (SDC):
Each Fund's shareholder
service agent; provides
shareholder account
services to the Fund at
cost
Year 2000
January 1, 2000 has come and gone. Participants in the financial services
industry, including Seligman and SDC, have substantially completed programs
designed to ensure that their computer systems properly process
and calculate date-related information in the Year 2000 and beyond. To
date, the Funds have not experienced any Year 2000-related problems, and
the Funds believe that the systems on which they rely will continue to
function properly, but this is not guaranteed. The Funds, like
other investment companies, financial and business organizations and
individuals around the world, could be adversely affected if the computer
systems on which they rely (including the systems of their third-party
service providers) fail to interpret data properly because of Year 2000
issues, including any impact on the issuers of securities in which the
Funds invest. A Year 2000 problem yet to be identified or anticipated by
those issuers, or identified but not adequately addressed, could adversely
impact a Fund's performance.
Portfolio Management
The Funds are managed by the Seligman Municipals Team, headed by Mr. Thomas
G. Moles. Mr. Moles, a Managing Director of Seligman, has been Vice
President and Portfolio Manager of the Funds since their inception. He is
also President and Portfolio Manager of Seligman Quality Municipal Fund,
Inc. and Seligman Select Municipal Fund, Inc., two closed-end investment
companies.
42
<PAGE>
Shareholder Information
Deciding Which Class of Shares to Buy
Each of the Fund's Classes represents an interest in the same portfolio of
investments. However, each Class has its own sales charge schedule, and its
ongoing 12b-1 fees may differ from other Classes. When deciding which Class of
shares to buy, you should consider, among other things:
. The amount you plan to invest.
. How long you intend to remain invested in the Fund, or another Seligman
mutual fund.
. 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.
. 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
. Initial sales charge on Fund purchases, as set forth below:
<TABLE>
<CAPTION>
Sales Charge Regular Dealer
Sales Charge as a % Discount
Amount as a % of Net as a % of
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.
. Annual 12b-1 fee (for shareholder services) of up to 0.25%.
. No sales charge on reinvested dividends or capital gain distributions.
. Certain employer-sponsored defined contribution-type plans can purchase
shares with no initial sales charge.
Class C
. 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 $100,000 1.00% 1.01% 1.00%
$100,000 - $249,999 0.50 0.50 0.50
$250,000 -
$1,000,000(/2/) 0.00 0.00 0.00
</TABLE>
(/1/) "Offering Price" is the amount that you actually pay for Fund shares;
it includes the initial sales charge.
(/2/) Your purchase of Class C shares must be for less than $1,000,000
because if you invest $1,000,000 or more you will pay less in fees and
charges if you buy Class A shares.
. A 1% CDSC on shares sold within eighteen months of purchase.
. Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
. No automatic conversion to Class A shares, so you will be subject to
higher ongoing 12b-1 fees indefinitely.
. No sales charge on reinvested dividends or capital gain distributions.
. No CDSC when you sell shares purchased with reinvested dividends or
capital gain distributions.
43
<PAGE>
Class D*
. No initial sales charge on purchases.
. A 1% CDSC on shares sold within one year of purchase.
. Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
. No CDSC when you sell shares purchased with reinvested dividends or
capital gain distributions.
* Class D shares are not available to all investors. You may purchase
Class D shares only if (1) you already own Class D shares of the Fund
or another Seligman mutual fund, (2) if your financial advisor of
record maintains an omnibus account at SDC, or (3) pursuant to a 401(k)
or other retirement plan program for which Class D shares are already
available or for which the sponsor requests Class D shares because the
sales charge structure of Class D shares is comparable to the sales
charge structure of the other funds offered under the program.
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.
The Board of Directors or Trustees, as applicable, believes that no conflict of
interest currently exists between a Fund's Class A, Class C 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 the 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.
44
<PAGE>
Pricing of Fund Shares
When you buy or sell shares, you do so at the Class's net asset value (NAV)
next calculated after Seligman Advisors accepts your request. Any applicable
sales charge will be 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
NAV: broker/dealer or financial advisor after the close of
Computed regular trading on the NYSE, or is accepted by Seligman
separately for Advisors after the close of business, the order will be
each Class of a executed at the Class's NAV calculated as of the close
Fund by dividing of regular trading on the next NYSE trading day. When
that Class's you sell shares, you receive the Class's per share NAV,
share of the less any applicable CDSC.
value of the net
assets of the The NAV of a Fund's shares is determined each day,
Fund (i.e., its Monday through Friday, on days that the NYSE is open
assets less for trading. Because of their higher 12b-1 fees, the
liabilities) by NAV of Class C shares and Class D shares will generally
the total number be lower than the NAV of Class A shares of a Fund.
of outstanding
shares of the
Class.
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.
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 or lower
minimum investments. Ask your financial advisor if any of these programs apply
to you. Class D shares are not available to all investors. For more
information, see "Deciding Which Class of Shares to Buy-Class D."
To make your initial investment in 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:
.Regular (non-retirement) accounts: $1,000
.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 quarterly and annual
statements detailing your transactions in the Fund and the other Seligman funds
you own under the same account number. Duplicate account statements will be
sent to you free of charge for the current year and most recent prior year.
Copies of year-end statements for prior years are available for a fee of $10
per year, per account, with a maximum charge of $150 per account 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.
45
<PAGE>
How to Buy Additional Shares
After you have made your initial investment, there are many options available
to make additional purchases of Fund shares. Subsequent purchases must be for
$100 or more.
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 02940-9766
Your check must be in US dollars and be drawn on a US bank. You may not use
third party or credit card convenience checks for investment.
You may also use the following account services to make additional
investments:
Invest-A-Check.(R) You may buy Fund shares electronically from a savings or
checking account of an Automated Clearing House (ACH) member bank. If your
bank is not a member of ACH, the Fund will debit your checking account by
preauthorized checks. You may buy Fund shares at regular monthly intervals in
fixed amounts of $100 or more, or regular quarterly intervals in fixed amounts
of $250 or more. If you use Invest-A-Check(R), you must continue to make
automatic investments until the Fund's minimum initial investment of $1,000 is
met or your account may be closed.
Automatic Dollar-Cost-Averaging. If you have at least $5,000 in Seligman Cash
Management Fund, you may exchange uncertificated shares of that fund to buy
shares of the same class of 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, or Class C
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 a 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 MatrixSM. (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 HarvesterSM. 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 Among the Seligman Mutual Funds
You may sell Fund shares to buy
shares of the same Class of another
Seligman mutual fund, or you may
sell shares of another Seligman
mutual fund to buy Fund shares.
Exchanges will be made at each
fund's respective NAV. You will not
pay an initial sales charge when you
exchange, unless you exchange Class
A shares or Class C shares of
Seligman Cash Management Fund to buy
shares of the same class of 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). You should read and understand a fund's
prospectus before investing. Some funds may not offer all classes of shares.
46
<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 sell shares to the Fund through a broker/dealer or your financial
advisor. The Fund does not charge any fees or expenses, other than any
applicable CDSC, for this transaction; however, the dealer or financial
advisor may charge a service fee. Contact your financial advisor for more
information.
You may always send a written request to sell Fund shares; however, it may
take longer to get your money.
As an additional measure to protect you and the Fund, SDC may confirm written
redemption requests that are (1) for $25,000 or more, or (2) directed to be
paid to an alternate payee or sent to an address other than the address of
record, with you or your financial advisor by telephone before sending your
money. This will not affect the date on which your redemption request is
actually processed.
You will need to guarantee your signature(s) if the proceeds are:
(1) $50,000 or more;
(2) to be paid to someone other than the account owner; 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 need to provide additional documents to sell shares if you are:
.a corporation;
.an executor or administrator;
.a trustee or custodian; or
.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 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 dollar amount (minimum of $50) of uncertificated
shares at regular intervals. A check will be sent to you at your address of
record or, if you have current ACH bank information on file, you may have your
payments directly deposited to your predesignated bank account in 3-4 business
days after your shares are sold. If you bought $1,000,000 or more of Class A
shares without an initial sales charge, your withdrawals may be subject to a
1% CDSC if they occur within 18 months of purchase. If you own Class C shares
and Class D shares and reinvest your dividends and capital gain distributions,
you may annually withdraw 10%, respectively, of the value of your Fund account
(at the time of election) without a CDSC.
Check Redemption Service. If you have at least $25,000 in a Fund, you may ask
SDC to provide checks which may be drawn against your account in amounts of
$500 or more. You may elect this service on your initial application or
contact SDC for the appropriate forms to establish this service. If you own
Class A shares that were bought at NAV because of the size of your purchase,
or if you own Class B shares, check redemptions may be subject to a CDSC. If
you own Class D or Class C shares, you may use this service only with respect
to shares that you have held for at least one year or eighteen months,
respectively.
47
<PAGE>
Important Policies That May Affect Your Account
To protect you and other shareholders, each Fund reserves the right to:
. 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.
. Refuse any request to buy Fund shares;
. Reject any request received by telephone;
. Suspend or terminate telephone services;
. Reject a signature guarantee that SDC believes may be fraudulent;
. Close your fund account if its value falls below $500;
. Close your account if it does not have a certified taxpayer identification
number.
Telephone Services
You and your broker/dealer or financial representative or 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:
. Sell uncertificated shares (up to $50,000 per day, payable to account
owner(s) and mailed to address of record);
. Exchange shares between funds;
. Change dividend and/or capital gain distribution options;
. Change your address;
. Establish systematic withdrawals to address of record.
If you do not complete an account application when you open your account,
telephone services must be elected on a supplemental election form (which may
require a signature guarantee).
Restrictions apply to certain types of accounts:
. Trust accounts on which the current trustee is not listed may not sell
Fund shares by phone.
. Corporations may not sell Fund shares by phone.
. IRAs may only exchange Fund shares or request address changes by phone.
. 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 elec-
tion 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.
48
<PAGE>
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.
You may elect to:
(1) reinvest both dividends and capital gain
Dividend: distributions;
(2) receive dividends in cash and reinvest capital gain
A payment by a distributions; or
mutual fund,
usually derived
from the fund's
net investment
income
(dividends and
interest earned
on portfolio
securities less
expenses).
(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.
Capital Gain Cash dividends or capital gain distributions will be
Distribution: sent by check to your address of record or, if you have
A payment to current ACH bank information on file, directly
mutual fund deposited into your predesignated bank account within
shareholders 3-4 business days from the payable date.
which represents
profits realized
on the sale of
securities in a
Fund's
portfolio.
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 C shares and Class D shares will be
lower than the dividends on Class A shares as a result
of their higher 12b-1 fees. Capital gain distributions,
if any, will be paid in the same amount for each Class.
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.
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 would like more specific
information on the possible tax consequences of investing in a particular Fund,
you should read that Fund's Statement of Additional Information.
Dividends paid by the Funds are taxable to you as ordinary income. 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 a 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.
49
<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 a Fund, assuming you reinvested all of 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 reports, along with the financial statements, are included in each Fund's
Annual Report, which is available upon request.
NATIONAL FUND
<TABLE>
<CAPTION> CLASS A CLASS C
------------------------------------------------- -----------
Year ended September 30, 5/27/99(**)
------------------------------------------------- to
1999 1998 1997 1996 1995 9/30/99
------- -------- ------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning
of period.............. $8.32 $8.01 $7.70 $7.58 $7.18 $8.08
------- -------- ------- ------- -------- ------
Income from investment
operations:
Net investment income... 0.39 0.39 0.39 0.40 0.40 0.11
Net gains or losses on
securities (both
realized and
unrealized)............ (0.64) 0.31 0.31 0.12 0.40 (0.40)
------- -------- ------- ------- -------- ------
Total from investment
operations............. (0.25) 0.70 0.70 0.52 0.80 (0.29)
------- -------- ------- ------- -------- ------
Less distributions:
Dividends from net
investment income...... (0.39) (0.39) (0.39) (0.40) (0.40) (0.11)
Distributions from
capital gains.......... -- -- -- -- -- --
------- -------- ------- ------- -------- ------
Total distributions..... (0.39) (0.39) (0.39) (0.40) (0.40) (0.11)
------- -------- ------- ------- -------- ------
Net asset value, end of
period................. $7.68 $8.32 $8.01 $7.70 $7.58 $7.68
======= ======== ======= ======= ======== ======
Total Return: (3.11)% 9.00 % 9.40 % 6.97 % 11.48 % (3.38)%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands)......... $90,296 $101,909 $97,481 $98,767 $104,184 $115
Ratio of expenses to
average
net assets............. 0.83% 0.80% 0.84% 0.80% 0.86% 1.74%+
Ratio of net income to
average
net assets............. 4.83% 4.82% 5.05% 5.19% 5.46% 4.10%+
Portfolio turnover
rate................... 13.37% 18.00% 20.63% 33.99% 24.91% 13.37%++
<CAPTION>
CLASS D
--------------------------------------------
Year ended September 30,
--------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning
of period.............. $8.31 $8.02 $7.70 $7.57 $7.18
-------- -------- -------- -------- --------
Income from investment
operations:
Net investment income... 0.32 0.32 0.32 0.33 0.32
Net gains or losses on
securities (both
realized and
unrealized)............ (0.63) 0.29 0.32 0.13 0.39
-------- -------- -------- -------- --------
Total from investment
operations............. (0.31) 0.61 0.64 0.46 0.71
-------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income...... (0.32) (0.32) (0.32) (0.33) (0.32)
Distributions from
capital gains.......... -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions..... (0.32) (0.32) (0.32) (0.33) (0.32)
-------- -------- -------- -------- --------
Net asset value, end of
period................. $7.68 $8.31 $8.02 $7.70 $7.57
======== ======== ======== ======== ========
Total Return: (3.85)% 7.76 % 8.56 % 6.13 % 10.17 %
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands)......... $8,079 $7,392 $2,279 $4,826 $1,215
Ratio of expenses to
average
net assets............. 1.73% 1.71% 1.75% 1.67% 1.95%
Ratio of net income to
average
net assets............. 3.93% 3.91% 4.15% 4.27% 4.40%
Portfolio turnover
rate................... 13.37% 18.00% 20.63% 33.99% 24.91%
</TABLE>
- -------------
See footnotes on page 59.
50
<PAGE>
CALIFORNIA HIGH-YIELD FUND
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
-------------------------------------------- ----------- ---------------------------------------
Year ended September 30, 5/27/99(**) Year ended September 30,
-------------------------------------------- to ---------------------------------------
1999 1998 1997 1996 1995 9/30/99 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning
of period.............. $6.80 $6.61 $6.50 $6.47 $6.30 $6.62 $6.80 $6.61 $6.51 $6.48 $6.31
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income... 0.31 0.32 0.34 0.36 0.37 0.09 0.25 0.26 0.28 0.30 0.31
Net gains or losses on
securities (both
realized and
unrealized)............ (0.50) 0.22 0.20 0.05 0.17 (0.33) (0.49) 0.22 0.19 0.05 0.17
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.19) 0.54 0.54 0.41 0.54 (0.24) (0.24) 0.48 0.47 0.35 0.48
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.31) (0.32) (0.34) (0.36) (0.37) (0.09) (0.25) (0.26) (0.28) (0.30) (0.31)
Distributions from
capital gains.......... (0.02) (0.03) (0.09) (0.02) -- -- (0.02) (0.03) (0.09) (0.02) --
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.33) (0.35) (0.43) (0.38) (0.37) (0.09) (0.27) (0.29) (0.37) (0.32) (0.31)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $6.28 $6.80 $6.61 $6.50 $6.47 $6.29 $6.29 $6.80 $6.61 $6.51 $6.48
======= ======= ======= ======= ======= ====== ====== ====== ====== ====== ======
Total Return: (2.82)% 8.45% 8.74% 6.49% 8.85% (3.79)% (3.54)% 7.47% 7.60% 5.53% 7.78%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands)......... $57,807 $ 58,374 $52,883 $50,264 $51,504 $1,041 $7,658 $6,393 $3,320 $1,919 $1,277
Ratio of expenses to
average
net assets............. 0.84% 0.82% 0.87% 0.84% 0.90% 1.72%+ 1.74% 1.73% 1.77% 1.74% 1.91%
Ratio of net income to
average
net assets............. 4.71% 4.81% 5.26% 5.49% 5.84% 3.95%+ 3.81% 3.90% 4.36% 4.59% 4.84%
Portfolio turnover
rate................... 27.61% 10.75% 22.42% 34.75% 17.64% 27.61%++ 27.61% 10.75% 22.42% 34.75% 17.64%
CALIFORNIA QUALITY FUND
Per Share Data:*
Net asset value,
beginning
of period.............. $7.21 $6.99 $6.75 $6.65 $6.39 $6.75 $7.19 $6.97 $6.74 $6.63 $6.38
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income... 0.31 0.33 0.34 0.35 0.34 0.09 0.25 0.27 0.28 0.28 0.28
Net gains or losses on
securities (both
realized and
unrealized)............ (0.56) 0.25 0.24 0.11 0.32 (0.35) (0.56) 0.25 0.23 0.12 0.31
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.25) 0.58 0.58 0.46 0.66 (0.26) (0.31) 0.52 0.51 0.40 0.59
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.31) (0.33) (0.34) (0.35) (0.34) (0.09) (0.25) (0.27) (0.28) (0.28) (0.28)
Distributions from
capital gains.......... (0.23) (0.03) -- (0.01) (0.06) -- (0.23) (0.03) -- (0.01) (0.06)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.54) (0.36) (0.34) (0.36) (0.40) (0.09) (0.48) (0.30) (0.28) (0.29) (0.34)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $6.42 $7.21 $6.99 $6.75 $6.65 $6.40 $6.40 $7.19 $6.97 $6.74 $6.63
======= ======= ======= ======= ======= ====== ====== ====== ====== ====== ======
Total Return: (3.68)% 8.67% 8.87% 7.00% 10.85% (4.04)% (4.58)% 7.71% 7.75% 6.20% 9.61%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands)......... $74,793 $87,522 $86,992 $95,560 $94,947 $ 10 $4,286 $2,302 $1,677 $1,645 $ 863
Ratio of expenses to
average
net assets............. 0.82% 0.77% 0.82% 0.79% 0.89% 1.72%+ 1.72% 1.68% 1.72% 1.69% 1.88%
Ratio of net income to
average
net assets............. 4.56% 4.75% 4.99% 5.11% 5.34% 3.80%+ 3.66% 3.84% 4.09% 4.21% 4.36%
Portfolio turnover
rate................... 20.24% 30.82% 12.16% 12.84% 11.24% 20.24%++ 20.24% 30.82% 12.16% 12.84% 11.24%
</TABLE>
- -------------
See footnotes on page 59.
51
<PAGE>
COLORADO FUND
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
-------------------------------------------- ----------- ---------------------------------------
Year ended September 30, 5/27/99(**) Year ended September 30,
-------------------------------------------- to ---------------------------------------
1999 1998 1997 1996 1995 9/30/99 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning of period.... $7.64 $7.42 $7.27 $7.30 $7.09 $7.47 $7.63 $7.42 $7.27 $7.29 $7.09
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income... 0.34 0.36 0.37 0.37 0.38 0.10 0.28 0.29 0.30 0.31 0.30
Net gains or losses on
securities
(both realized and
unrealized)............ (0.54) 0.22 0.15 (0.03) 0.21 (0.38) (0.54) 0.21 0.15 (0.02) 0.20
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.20) 0.58 0.52 0.34 0.59 (0.28) (0.26) 0.50 0.45 0.29 0.50
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.34) (0.36) (0.37) (0.37) (0.38) (0.10) (0.28) (0.29) (0.30) (0.31) (0.30)
Distributions from
capital gains.......... -- -- -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.34) (0.34) (0.37) (0.37) (0.38) (0.10) (0.28) (0.29) (0.30) (0.31) (0.30)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $7.10 $7.64 $7.42 $7.27 $7.30 $7.09 $7.09 $7.63 $7.42 $7.27 $7.29
======= ======= ======= ======= ======= ====== ====== ====== ====== ====== ======
Total Return: (2.67)% 8.03% 7.30% 4.76% 8.56% (3.93)% (3.57)% 6.90% 6.34% 3.95% 7.26%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $44,649 $45,583 $49,780 $52,295 $54,858 $60 $917 $344 $238 $255 $193
Ratio of expenses to
average net assets..... 0.87% 0.90% 0.90% 0.85% 0.93% 1.73%+ 1.77% 1.80% 1.81% 1.75% 2.02%
Ratio of net income to
average net assets..... 4.60% 4.80% 5.01% 5.07% 5.31% 3.85%+ 3.70% 3.90% 4.10% 4.17% 4.23%
Portfolio turnover
rate................... 7.91% 28.66% 3.99% 12.39% 14.70% 7.91%++ 7.91% 28.66% 3.99% 12.39% 14.70%
FLORIDA FUND
Per Share Data:*
Net asset value,
beginning of period.... $8.07 $7.80 $7.67 $7.71 $7.34 $ 7.83 $8.08 $7.81 $7.68 $7.72 $7.34
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income***.............. 0.34 0.35 0.36 0.38 0.40 0.10 0.28 0.29 0.30 0.32 0.34
Net gains or losses on
securities
(both realized and
unrealized)............ (0.61) 0.34 0.23 0.04 0.37 (0.40) (0.60) 0.34 0.23 0.04 0.38
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.27) 0.69 0.59 0.42 0.77 (0.30) (0.32) 0.63 0.53 0.36 0.72
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.34) (0.35) (0.36) (0.38) (0.40) (0.10) (0.28) (0.29) (0.30) (0.32) (0.34)
Distributions from
capital gains.......... (0.05) (0.07) (0.10) (0.08) -- -- (0.05) (0.07) (0.10) (0.08) --
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.39) (0.42) (0.46) (0.46) (0.40) (0.10) (0.33) (0.36) (0.40) (0.40) (0.34)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $7.41 $8.07 $7.80 $7.67 $7.71 $7.43 $7.43 $8.08 $7.81 $7.68 $7.72
======= ======= ======= ======= ======= ====== ====== ====== ====== ====== ======
Total Return: (3.42)% 9.16% 8.01% 5.54% 10.87% (3.96)% (4.01)% 8.32% 7.18% 4.74% 10.07%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $37,606 $42,464 $42,024 $45,200 $49,030 $254 $1,843 $1,940 $1,678 $1,277 $603
Ratio of expenses to
average net assets***.. 1.03% 1.00% 1.04% 0.97% 0.72% 1.78%+ 1.78% 1.77% 1.81% 1.73% 1.66%
Ratio of net income to
average net assets***.. 4.38% 4.45% 4.70% 4.90% 5.38% 3.82%+ 3.63% 3.68% 3.93% 4.14% 4.53%
Portfolio turnover
rate................... 18.31% 6.73% 33.68% 18.53% 11.82% 18.31%++ 18.31% 6.73% 33.68% 18.53% 11.82%
</TABLE>
- -------------
See footnotes on page 59.
52
<PAGE>
GEORGIA FUND
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
-------------------------------------------- ----------- ---------------------------------------
Year ended September 30, 5/27/99(**) Year ended September 30,
-------------------------------------------- to ---------------------------------------
1999 1998 1997 1996 1995 9/30/99 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning of period.... $8.38 $8.12 $7.87 $7.81 $7.48 $8.17 $8.40 $8.13 $7.88 $7.82 $7.49
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income***.............. 0.37 0.38 0.38 0.39 0.39 0.11 0.30 0.30 0.31 0.32 0.32
Net gains or losses on
securities
(both realized and
unrealized)............ (0.58) 0.29 0.28 0.11 0.43 (0.41) (0.59) 0.30 0.28 0.11 0.43
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.21) 0.67 0.66 0.50 0.82 (0.30) (0.29) 0.60 0.59 0.43 0.75
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.37) (0.38) (0.38) (0.39) (0.39) (0.11) (0.30) (0.30) (0.31) (0.32) (0.32)
Distributions from
capital gains.......... (0.05) (0.03) (0.03) (0.05) (0.10) -- (0.05) (0.03) (0.03) (0.05) (0.10)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.42) (0.41) (0.41) (0.44) (0.49) (0.11) (0.35) (0.33) (0.34) (0.37) (0.42)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $7.75 $8.38 $8.12 $7.87 $7.81 $7.76 $7.76 $8.40 $8.13 $7.88 $7.82
======= ======= ======= ======= ======= ====== ====== ====== ====== ====== ======
Total Return: (2.63)% 8.44% 8.65% 6.56% 11.66% (3.84)% (3.61)% 7.59% 7.67% 5.60% 10.58%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $42,692 $48,424 $50,614 $50,995 $57,678 $176 $2,318 $2,809 $2,640 $2,327 $2,079
Ratio of expenses to
average net assets***.. 0.87% 0.89% 0.89% 0.83% 0.91% 1.74%+ 1.77% 1.80% 1.79% 1.73% 1.90%
Ratio of net income to
average net assets***.. 4.59% 4.57% 4.82% 4.94% 5.26% 3.89%+ 3.69% 3.66% 3.92% 4.03% 4.28%
Portfolio turnover
rate................... 23.93% 2.92% 12.28% 16.24% 3.36% 23.93%++ 23.93% 2.92% 12.28% 16.24% 3.36%
LOUISIANA FUND
Per Share Data:*
Net asset value,
beginning of period.... $8.51 $8.28 $8.16 $8.14 $7.94 $8.19 $8.50 8.27 $8.16 $8.14 $7.94
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income... 0.39 0.41 0.41 0.42 0.43 0.11 0.32 0.33 0.34 0.35 0.35
Net gains or losses on
securities
(both realized and
unrealized)............ (0.59) 0.24 0.23 0.08 0.34 (0.39) (0.59) 0.24 0.22 0.08 0.34
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.20) 0.65 0.64 0.50 0.77 (0.28) (0.27) 0.57 0.56 0.43 0.69
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.39) (0.41) (0.41) (0.42) (0.43) (0.11) (0.32) (0.33) (0.34) (0.35) (0.35)
Distributions from
capital gains.......... (0.11) (0.01) (0.11) (0.06) (0.14) -- (0.11) (0.01) (0.11) (0.06) (0.14)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.50) (0.42) (0.52) (0.48) (0.57) (0.11) (0.43) (0.34) (0.45) (0.41) (0.49)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $7.81 $8.51 $8.28 $8.16 $8.14 $7.80 $7.80 $8.50 $8.27 $8.16 $8.14
======= ======= ======= ======= ======= ====== ====== ====== ====== ====== ======
Total Return: (2.44)% 8.08% 8.17% 6.32% 10.30% (3.55)% (3.33)% 7.11% 7.07% 5.37% 9.17%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $51,543 $56,308 $56,199 $57,264 $61,988 $ -- $908 $837 $509 $389 $465
Ratio of expenses to
average net assets..... 0.84% 0.88% 0.86% 0.82% 0.89% 1.71%+ 1.74% 1.78% 1.76% 1.72% 1.91%
Ratio of net income to
average net assets..... 4.76% 4.86% 5.08% 5.15% 5.44% 4.00%+ 3.86% 3.96% 4.18% 4.25% 4.41%
Portfolio turnover
rate................... 8.67% 15.72% 16.08% 10.08% 4.82% 8.67%++ 8.67% 15.72% 16.08% 10.08% 4.82%
</TABLE>
- -------------
See footnotes on page 59.
53
<PAGE>
MARYLAND FUND
<TABLE>
<CAPTION>
CLASS A CLASS C
------------------------------------------------ -----------
Year ended September 30, 5/27/99(**)
------------------------------------------------ to
1999 1998 1997 1996 1995 9/30/99
------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period.. $8.32 $8.14 $7.99 $7.96 $7.71 $8.13
------- -------- -------- -------- -------- ------
Income from investment
operations:
Net investment income... 0.39 0.40 0.40 0.40 0.41 0.11
Net gains or losses on
securities
(both realized and
unrealized)............ (0.50) 0.23 0.19 0.06 0.38 (0.33)
------- -------- -------- -------- -------- ------
Total from investment
operations............. (0.11) 0.63 0.59 0.46 0.79 (0.22)
------- -------- -------- -------- -------- ------
Less distributions:
Dividends from net
investment income...... (0.39) (0.40) (0.40) (0.40) (0.41) (0.11)
Distributions from
capital gains.......... (0.03) (0.05) (0.04) (0.03) (0.13) --
------- -------- -------- -------- -------- ------
Total distributions..... (0.42) (0.45) (0.44) (0.43) (0.54) (0.11)
------- -------- -------- -------- -------- ------
Net asset value, end of
period................. $7.79 $8.32 $8.14 $7.99 $7.96 $7.80
======= ======== ======== ======== ======== ======
Total Return: (1.45)% 7.89% 7.64% 6.00% 10.90% (2.83)%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $49,523 $54,891 $52,549 $54,041 $56,290 $75
Ratio of expenses to
average net assets..... 0.87% 0.89% 0.90% 0.84% 0.96% 1.75%+
Ratio of net income to
average net assets..... 4.77% 4.82% 4.99% 5.05% 5.31% 4.04%+
Portfolio turnover
rate................... 1.80% 7.59% 14.79% 5.56% 3.63% 1.80%++
<CAPTION>
CLASS D
----------------------------------------
Year ended September 30,
----------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period.. $8.33 $8.15 $7.99 $7.97 $7.72
-------- ------- ------- ------- -------
Income from investment
operations:
Net investment income... 0.31 0.32 0.33 0.33 0.33
Net gains or losses on
securities
(both realized and
unrealized)............ (0.50) 0.23 0.20 0.05 0.38
-------- ------- ------- ------- -------
Total from investment
operations............. (0.19) 0.55 0.53 0.38 0.71
-------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income...... (0.31) (0.32) (0.33) (0.33) (0.33)
Distributions from
capital gains.......... (0.03) (0.05) (0.04) (0.03) (0.13)
-------- ------- ------- ------- -------
Total distributions..... (0.34) (0.37) (0.37) (0.36) (0.46)
-------- ------- ------- ------- -------
Net asset value, end of
period................. $7.80 $8.33 $8.15 $7.99 $7.97
======== ======= ======= ======= =======
Total Return: (2.00)% 6.91% 6.80% 4.91% 9.75%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $2,775 $3,128 $2,063 $2,047 $630
Ratio of expenses to
average net assets..... 1.77% 1.80% 1.81% 1.72% 2.02%
Ratio of net income to
average net assets..... 3.87% 3.91% 4.08% 4.14% 4.27%
Portfolio turnover
rate................... 1.80% 7.59% 14.79% 5.56% 3.63%
MASSACHUSETTS FUND
Per Share Data:*
Net asset value,
beginning of period.... $8.27 $7.99 $7.85 $7.91 $7.66 $7.96
------- -------- -------- -------- -------- ------
Income from investment
operations:
Net investment income... 0.36 0.38 0.40 0.41 0.42 0.10
Net gains or losses on
securities
(both realized and
unrealized)............ (0.75) 0.37 0.22 0.05 0.28 (0.49)
------- -------- -------- -------- -------- ------
Total from investment
operations............. (0.39) 0.75 0.62 0.46 0.70 (0.39)
------- -------- -------- -------- -------- ------
Less distributions:
Dividends from net
investment income...... (0.36) (0.38) (0.40) (0.41) (0.42) (0.10)
Distributions from
capital gains.......... (0.05) (0.09) (0.08) (0.11) (0.03) --
------- -------- -------- -------- -------- ------
Total distributions..... (0.41) (0.47) (0.48) (0.52) (0.45) (0.10)
------- -------- -------- -------- -------- ------
Net asset value, end of
period................. $7.47 $8.27 $7.99 $7.85 $7.91 $7.47
======= ======== ======== ======== ======== ======
Total Return: (4.85)% 9.80% 8.11% 5.97% 9.58% (5.02)%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $92,929 $109,328 $110,011 $109,872 $115,711 $228
Ratio of expenses to
average net assets..... 0.83% 0.80% 0.84% 0.80% 0.86% 1.73%+
Ratio of net income to
average net assets..... 4.56% 4.72% 5.06% 5.24% 5.51% 3.80%+
Portfolio turnover
rate................... 23.88% 13.41% 29.26% 26.30% 16.68% 23.88%++
Per Share Data:*
Net asset value,
beginning of period.... $8.26 $7.99 $7.84 $7.90 $7.66
-------- ------- ------- ------- -------
Income from investment
operations:
Net investment income... 0.29 0.31 0.33 0.34 0.34
Net gains or losses on
securities
(both realized and
unrealized)............ (0.74) 0.36 0.23 0.05 0.27
-------- ------- ------- ------- -------
Total from investment
operations............. (0.45) 0.67 0.56 0.39 0.61
-------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income...... (0.29) (0.31) (0.33) (0.34) (0.34)
Distributions from
capital gains.......... (0.05) (0.09) (0.08) (0.11) (0.03)
-------- ------- ------- ------- -------
Total distributions..... (0.34) (0.40) (0.41) (0.45) (0.37)
-------- ------- ------- ------- -------
Net asset value, end of
period................. $7.47 $8.26 $7.99 $7.84 $7.90
======== ======= ======= ======= =======
Total Return: (5.61)% 8.68% 7.29% 5.01% 8.33%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $2,934 $1,468 $1,245 $1,405 $809
Ratio of expenses to
average net assets..... 1.73% 1.71% 1.74% 1.70% 1.95%
Ratio of net income to
average net assets..... 3.66% 3.81% 4.16% 4.32% 4.47%
Portfolio turnover
rate................... 23.88% 13.41% 29.26% 26.30% 16.68%
</TABLE>
- -------------
See footnotes on page 59.
54
<PAGE>
MICHIGAN FUND
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
------------------------------------------------- ----------- ---------------------------------------
Year ended September 30, 5/27/99(**) Year ended September 30,
------------------------------------------------- to ---------------------------------------
1999 1998 1997 1996 1995 9/30/99 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- ----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning of period... $8.83 $8.60 $8.46 $8.54 $8.28 $8.43 $8.82 $8.59 $8.45 $8.54 $8.28
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income.. 0.40 0.41 0.43 0.45 0.46 0.11 0.32 0.33 0.36 0.37 0.37
Net gains or losses on
securities (both
realized and
unrealized)........... (0.63) 0.30 0.23 0.06 0.30 (0.40) (0.63) 0.30 0.23 0.05 0.30
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total from investment
operations............ (0.23) 0.71 0.66 0.51 0.76 (0.29) (0.31) 0.63 0.59 0.42 0.67
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income..... (0.40) (0.41) (0.43) (0.45) (0.46) (0.11) (0.32) (0.33) (0.36) (0.37) (0.37)
Distributions from
capital gains......... (0.16) (0.07) (0.09) (0.14) (0.04) -- (0.16) (0.07) (0.09) (0.14) (0.04)
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total distributions.... (0.56) (0.48) (0.52) (0.59) (0.50) (0.11) (0.48) (0.40) (0.45) (0.51) (0.41)
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................ $8.04 $8.83 $8.60 $8.46 $8.54 $8.03 $8.03 $8.82 $8.59 $8.45 $8.54
======== ======== ======== ======== ======== ====== ====== ====== ====== ====== ======
Total Return: (2.77)% 8.63% 8.16% 6.16% 9.56% (3.55)% (3.65)% 7.66% 7.19% 5.09% 8.36%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands)........ $125,560 $144,161 $143,370 $148,178 $151,589 $114 $2,074 $1,841 $1,845 $1,486 $1,172
Ratio of expenses to
average net assets.... 0.82% 0.79% 0.81% 0.78% 0.87% 1.73%+ 1.72% 1.70% 1.71% 1.68% 2.01%
Ratio of net income to
average net assets.... 4.73% 4.78% 5.13% 5.29% 5.50% 3.96%+ 3.83% 3.87% 4.23% 4.39% 4.40%
Portfolio turnover
rate.................. 3.73% 23.60% 10.98% 19.62% 20.48% 3.73%++ 3.73% 23.60% 10.98% 19.62% 20.48%
MINNESOTA FUND
Per Share Data:*
Net asset value,
beginning of period... $7.98 $7.79 $7.68 $7.82 $7.72 $7.72 $7.98 $7.79 $7.68 $7.82 $7.73
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income.. 0.36 0.38 0.40 0.42 0.45 0.10 0.30 0.31 0.33 0.35 0.38
Net gains or losses on
securities (both
realized and
unrealized)........... (0.52) 0.20 0.11 (0.12) 0.11 (0.36) (0.52) 0.20 0.11 (0.12) 0.10
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total from investment
operations............ (0.16) 0.58 0.51 0.30 0.56 (0.26) (0.22) 0.51 0.44 0.23 0.48
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income..... (0.36) (0.38) (0.40) (0.42) (0.45) (0.10) (0.30) (0.31) (0.33) (0.35) (0.38)
Distributions from
capital gains......... (0.10) (0.01) -- (0.02) (0.01) -- (0.10) (0.01) -- (0.02) (0.01)
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total distributions.... (0.46) (0.39) (0.40) (0.44) (0.46) (0.10) (0.40) (0.32) (0.33) (0.37) (0.39)
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................ $7.36 $7.98 $7.79 $7.68 $7.82 $7.36 $7.36 $7.98 $7.79 $7.68 $7.82
======== ======== ======== ======== ======== ====== ====== ====== ====== ====== ======
Total Return: (2.09)% 7.68% 6.85% 3.99% 7.61% (3.47)% (2.96)% 6.71% 5.89% 3.06% 6.45%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands)........ $109,165 $121,374 $121,674 $126,173 $132,716 $ -- $1,856 $2,103 $1,799 $2,036 $2,237
Ratio of expenses to
average net assets.... 0.84% 0.81% 0.85% 0.81% 0.87% 1.74%+ 1.74% 1.72% 1.75% 1.71% 1.85%
Ratio of net income to
average net assets.... 4.71% 4.87% 5.21% 5.47% 5.89% 3.94%+ 3.81% 3.96% 4.31% 4.57% 4.92%
Portfolio turnover
rate.................. 9.74% 21.86% 6.88% 26.89% 5.57% 9.74%++ 9.74% 21.86% 6.88% 26.89% 5.57%
</TABLE>
- -------------
See footnotes on page 59.
55
<PAGE>
MISSOURI FUND
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
-------------------------------------------- ----------- ---------------------------------------
Year ended September 30, 5/27/99(**) Year ended September 30,
-------------------------------------------- to ---------------------------------------
1999 1998 1997 1996 1995 9/30/99 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning of period.... $8.03 $7.82 $7.71 $7.70 $7.41 $7.68 $8.03 $7.82 $7.72 $7.70 $7.41
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income***.............. 0.35 0.36 0.38 0.39 0.40 0.10 0.28 0.29 0.31 0.32 0.32
Net gains or losses on
securities
(both realized and
unrealized)............ (0.62) 0.28 0.19 0.08 0.36 (0.39) (0.62) 0.28 0.18 0.09 0.36
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.27) 0.64 0.57 0.47 0.76 (0.29) (0.34) 0.57 0.49 0.41 0.68
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.35) (0.36) (0.38) (0.39) (0.40) (0.10) (0.28) (0.29) (0.31) (0.32) (0.32)
Distributions from
capital gains.......... (0.12) (0.07) (0.08) (0.07) (0.07) -- (0.12) (0.07) (0.08) (0.07) (0.07)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.47) (0.43) (0.46) (0.46) (0.47) (0.10) (0.40) (0.36) (0.39) (0.39) (0.39)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $7.29 $8.03 $7.82 $7.71 $7.70 $7.29 $7.29 $8.03 $7.82 $7.72 $7.70
======= ======= ======= ======= ======= ====== ====== ====== ====== ====== ======
Total Return: (3.58)% 8.41% 7.70% 6.27% 10.67% (3.95)% (4.46)% 7.45% 6.60% 5.46% 9.49%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $43,437 $49,949 $52,766 $49,941 $51,169 $21 $617 $418 $474 $565 $515
Ratio of expenses to
average net assets***.. 0.87% 0.89% 0.89% 0.86% 0.88% 1.74%+ 1.77% 1.79% 1.80% 1.76% 1.98%
Ratio of net income to
average net assets***.. 4.50% 4.59% 4.93% 5.03% 5.31% 3.75%+ 3.60% 3.69% 4.02% 4.13% 4.23%
Portfolio turnover
rate................... 10.43% 21.26% 6.47% 8.04% 3.88% 10.43%++ 10.43% 21.26% 6.47% 8.04% 3.88%
NEW JERSEY FUND
Per Share Data:*
Net asset value,
beginning of period.... $7.78 $7.56 $7.60 $7.59 $7.40 $7.58 $7.86 $7.64 $7.68 $7.67 $7.48
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income***.............. 0.33 0.35 0.36 0.39 0.39 0.09 0.27 0.29 0.31 0.33 0.33
Net gains or losses on
securities
(both realized and
unrealized)............ (0.55) 0.30 0.21 0.01 0.29 (0.36) (0.54) 0.30 0.21 0.01 0.29
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.22) 0.65 0.57 0.40 0.68 (0.27) (0.27) 0.59 0.52 0.34 0.62
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.33) (0.35) (0.36) (0.39) (0.39) (0.09) (0.27) (0.29) (0.31) (0.33) (0.33)
Distributions from
capital gains.......... (0.10) (0.08) (0.25) -- (0.10) -- (0.10) (0.08) (0.25) -- (0.10)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.43) (0.43) (0.61) (0.39) (0.49) (0.09) (0.37) (0.37) (0.56) (0.33) (0.43)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $7.13 $7.78 $7.56 $7.60 $7.59 $7.22 $7.22 $7.86 $7.64 $7.68 $7.67
======= ======= ======= ======= ======= ====== ====== ====== ====== ====== ======
Total Return: (3.05)% 8.87% 7.96% 5.37% 9.77% (3.33)% (3.57)% 7.97% 7.10% 4.56% 8.79%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $52,992 $61,739 $62,597 $66,293 $73,561 $127 $1,550 $1,582 $1,282 $1,152 $1,190
Ratio of expenses to
average net assets***.. 1.07% 1.02% 1.06% 1.02% 1.01% 1.82%+ 1.82% 1.80% 1.83% 1.79% 1.89%
Ratio of net income to
average net assets***.. 4.35% 4.54% 4.90% 5.06% 5.29% 3.71%+ 3.60% 3.76% 4.13% 4.29% 4.45%
Portfolio turnover
rate................... 5.55% 23.37% 20.22% 25.65% 4.66% 5.55%++ 5.55% 23.37% 20.22% 25.65% 4.66%
</TABLE>
- -------------
See footnotes on page 59.
56
<PAGE>
NEW YORK FUND
<TABLE>
<CAPTION>
CLASS A CLASS C
-------------------------------------------- -----------
Year ended September 30,
-------------------------------------------- 5/27/99(**)
1999 1998 1997 1996 1995 to 9/30/99
------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of
period....................... $8.60 $8.28 $7.98 $7.86 $7.67 $8.14
------- ------- ------- ------- ------- ------
Income from investment
operations:
Net investment income........ 0.38 0.40 0.41 0.42 0.42 0.11
Net gains or losses on
securities
(both realized and unrealized).. (0.69) 0.40 0.32 0.12 0.36 (0.44)
------- ------- ------- ------- ------- ------
Total from investment
operations................... (0.31) 0.80 0.73 0.54 0.78 (0.33)
------- ------- ------- ------- ------- ------
Less distributions:
Dividends from net
investment income........... (0.38) (0.40) (0.41) (0.42) (0.42) (0.11)
Distributions from capital
gains....................... (0.21) (0.08) (0.02) -- (0.17) --
------- ------- ------- ------- ------- ------
Total distributions........... (0.59) (0.48) (0.43) (0.42) (0.59) (0.11)
------- ------- ------- ------- ------- ------
Net asset value, end of
period....................... $7.70 $8.60 $8.28 $7.98 $7.86 $7.70
======= ======= ======= ======= ======= ======
Total Return: (3.86)% 10.02% 9.45% 6.97% 10.93% (4.22)%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands)............... $76,833 $76,833 $83,528 $82,719 $83,980 $189
Ratio of expenses to average
net assets................... 0.81% 0.81% 0.82% 0.77% 0.88% 1.69%+
Ratio of net income to average
net assets................... 4.63% 4.74% 5.09% 5.24% 5.52% 3.96%+
Portfolio turnover rate....... 11.85% 39.85% 23.83% 25.88% 34.05% 11.85%++
<CAPTION>
CLASS D
----------------------------------------
Year ended September 30,
----------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of
period....................... $8.60 $8.29 $7.98 $7.87 $7.67
-------- ------- ------- ------- -------
Income from investment
operations:
Net investment income........ 0.30 0.32 0.34 0.34 0.34
Net gains or losses on
securities
(both realized and unrealized).. (0.69) 0.39 0.33 0.11 0.37
-------- ------- ------- ------- -------
Total from investment
operations................... (0.39) 0.71 0.67 0.45 0.71
-------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income........... (0.30) (0.32) (0.34) (0.34) (0.34)
Distributions from capital
gains....................... (0.21) (0.08) (0.02) -- (0.17)
-------- ------- ------- ------- -------
Total distributions........... (0.51) (0.40) (0.36) (0.34) (0.51)
-------- ------- ------- ------- -------
Net asset value, end of
period....................... $7.70 $8.60 $8.29 $7.98 $7.87
======== ======= ======= ======= =======
Total Return: (4.73)% 8.88% 8.60% 5.86% 9.87%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands)............... $2,844 $2,182 $1,572 $1,152 $885
Ratio of expenses to average
net assets................... 1.71% 1.72% 1.73% 1.68% 1.96%
Ratio of net income to average
net assets................... 3.73% 3.83% 4.18% 4.33% 4.42%
Portfolio turnover rate....... 11.85% 39.85% 23.83% 25.88% 34.05%
NORTH CAROLINA FUND
Per Share Data:*
Net asset value, beginning of
period....................... $8.30 $8.05 $7.84 $7.74 $7.30 $7.97
------- ------- ------- ------- ------- ------
Income from investment
operations:
Net investment income***..... 0.35 0.36 0.37 0.37 0.39 0.10
Net gains or losses on
securities
(both realized and unrealized).. (0.59) 0.31 0.24 0.11 0.45 (0.38)
------- ------- ------- ------- ------- ------
Total from investment
operations................... (0.24) 0.67 0.61 0.48 0.84 (0.28)
------- ------- ------- ------- ------- ------
Less distributions:
Dividends from net
investment income........... (0.35) (0.36) (0.37) (0.37) (0.39) (0.10)
Distributions from capital
gains....................... (0.12) (0.06) (0.03) (0.01) (0.01) --
------- ------- ------- ------- ------- ------
Total distributions........... (0.47) (0.42) (0.40) (0.38) (0.40) (0.10)
------- ------- ------- ------- ------- ------
Net asset value, end of
period....................... $7.59 $8.30 $8.05 $7.84 $7.74 $7.59
======= ======= ======= ======= ======= ======
Total Return: (3.07)% 8.60% 8.01% 6.39% 11.92% (3.62)%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands)............... $27,224 $32,358 $32,684 $35,934 $37,446 $10
Ratio of expenses to average
net assets***................ 1.06% 1.05% 1.09% 1.05% 0.82% 1.80%+
Ratio of net income to average
net assets***................ 4.38% 4.41% 4.66% 4.75% 5.21% 3.77%+
Portfolio turnover rate....... 1.52% 20.37% 13.04% 15.12% 4.38% 1.52%++
Per Share Data:*
Net asset value, beginning of
period....................... $8.30 $8.05 $7.83 $7.74 $7.29
-------- ------- ------- ------- -------
Income from investment
operations:
Net investment income***..... 0.29 0.30 0.31 0.31 0.33
Net gains or losses on
securities
(both realized and unrealized).. (0.59) 0.31 0.25 0.10 0.46
-------- ------- ------- ------- -------
Total from investment
operations................... (0.30) 0.61 0.56 0.41 0.79
-------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income........... (0.29) (0.30) (0.31) (0.31) (0.33)
Distributions from capital
gains....................... (0.12) (0.06) (0.03) (0.01) (0.01)
-------- ------- ------- ------- -------
Total distributions........... (0.41) (0.36) (0.34) (0.32) (0.34)
-------- ------- ------- ------- -------
Net asset value, end of
period....................... $7.59 $8.30 $8.05 $7.83 $7.74
======== ======= ======= ======= =======
Total Return: (3.79)% 7.77% 7.33% 5.45% 11.19%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands)............... $1,682 $1,456 $1,217 $1,232 $1,257
Ratio of expenses to average
net assets***................ 1.81% 1.82% 1.85% 1.81% 1.64%
Ratio of net income to average
net assets***................ 3.63% 3.64% 3.90% 3.99% 4.42%
Portfolio turnover rate....... 1.52% 20.37% 13.04% 15.12% 4.38%
</TABLE>
- -------------
See footnotes on page 59.
57
<PAGE>
OHIO FUND
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
------------------------------------------------- ----------- ---------------------------------------
Year ended September 30, 5/27/99(**) Year ended September 30,
------------------------------------------------- to ---------------------------------------
1999 1998 1997 1996 1995 9/30/99 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- ----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning
of period............. $8.37 $8.19 $8.09 $8.11 $7.90 $8.06 $8.41 $8.23 $8.13 $8.15 $7.92
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income.. 0.38 0.40 0.42 0.43 0.44 0.11 0.31 0.33 0.35 0.36 0.36
Net gains or losses on
securities (both
realized and
unrealized)........... (0.60) 0.29 0.17 0.02 0.28 (0.38) (0.60) 0.29 0.17 0.02 0.30
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total from investment
operations............ (0.22) 0.69 0.59 0.45 0.72 (0.27) (0.29) 0.62 0.52 0.38 0.66
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income..... (0.38) (0.40) (0.42) (0.43) (0.44) (0.11) (0.31) (0.33) (0.35) (0.36) (0.36)
Distributions from
capital gains......... (0.13) (0.11) (0.07) (0.04) (0.07) -- (0.13) (0.11) (0.07) (0.04) (0.07)
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total distributions.... (0.51) (0.51) (0.49) (0.47) (0.51) (0.11) (0.44) (0.44) (0.42) (0.40) (0.43)
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................ $7.64 $8.37 $8.19 $8.09 $8.11 $7.68 $7.68 $8.41 $8.23 $8.13 $8.15
======== ======== ======== ======== ======== ====== ====== ====== ====== ====== ======
Total Return: (2.68)% 8.77% 7.54% 5.68% 9.59% (3.51)% (3.52)% 7.78% 6.57% 4.74% 8.67%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands)........ $135,034 $153,126 $154,419 $162,243 $170,191 $18 $1,327 $1,103 $1,160 $1,011 $660
Ratio of expenses to
average
net assets............ 0.81% 0.78% 0.81% 0.77% 0.84% 1.71%+ 1.71% 1.69% 1.71% 1.67% 1.93%
Ratio of net income to
average
net assets............ 4.78% 4.92% 5.19% 5.32% 5.56% 3.99%+ 3.88% 4.01% 4.29% 4.42% 4.48%
Portfolio turnover
rate.................. 6.07% 24.74% 11.76% 12.90% 2.96% 6.07%++ 6.07% 24.74% 11.76% 12.90% 2.96%
OREGON FUND
Per Share Data:*
Net asset value,
beginning of period... $8.05 $7.87 $7.65 $7.66 $7.43 $7.83 $8.04 $7.87 $7.64 $7.65 $7.43
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income***............. 0.35 0.36 0.38 0.40 0.40 0.10 0.28 0.29 0.31 0.33 0.33
Net gains or losses on
securities (both
realized and
unrealized)........... (0.52) 0.28 0.26 -- 0.25 (0.35) (0.51) 0.27 0.27 -- 0.24
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total from investment
operations............ (0.17) 0.64 0.64 0.40 0.65 (0.25) (0.23) 0.56 0.58 0.33 0.57
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income..... (0.35) (0.36) (0.38) (0.40) (0.40) (0.10) (0.28) (0.29) (0.31) (0.33) (0.33)
Distributions from
capital gains......... (0.05) (0.10) (0.04) (0.01) (0.02) -- (0.05) (0.10) (0.04) (0.01) (0.02)
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total distributions.... (0.40) (0.46) (0.42) (0.41) (0.42) (0.10) (0.33) (0.39) (0.35) (0.34) (0.35)
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................ $7.48 $8.05 $7.87 $7.65 $7.66 $7.48 $7.48 $8.04 $7.87 $7.64 $7.65
======== ======== ======== ======== ======== ====== ====== ====== ====== ====== ======
Total Return: (2.16)% 8.48% 8.60% 5.27% 9.05% (3.32)% (2.92)% 7.37% 7.77% 4.33% 7.86%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands)........ $54,473 $57,601 $55,239 $57,345 $59,549 $ -- $2,231 $2,650 $1,678 $1,540 $1,495
Ratio of expenses to
average
net assets*** ........ 0.86% 0.88% 0.90% 0.86% 0.86% 1.73% + 1.76% 1.79% 1.80% 1.76% 1.83%
Ratio of net income to
average
net assets*** ........ 4.52% 4.60% 4.88% 5.18% 5.40% 3.77% + 3.62% 3.69% 3.98% 4.28% 4.41%
Portfolio turnover
rate.................. 12.28% 12.62% 19.46% 28.65% 2.47% 12.28%++ 12.28% 12.62% 19.46% 28.65% 2.47%
</TABLE>
- -------------
See footnotes on page 59.
58
<PAGE>
PENNSYLVANIA FUND
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
------------------------------------------------ ----------- ---------------------------------------
Year ended September 30, Year ended September 30,
------------------------------------------------ 5/27/99(**) ---------------------------------------
1999 1998 1997 1996 1995 to 9/30/99 1999 1998 1997 1996 1995
------- -------- -------- -------- -------- ----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning of period.... $8.24 $7.96 $7.82 $7.79 $7.55 $7.88 $8.23 $7.95 $7.81 $7.78 $7.54
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income.. 0.34 0.35 0.36 0.38 0.38 0.10 0.28 0.29 0.30 0.32 0.31
Net gains or losses on
securities (both
realized and
unrealized)........... (0.60) 0.36 0.24 0.12 0.37 (0.39) (0.59) 0.36 0.24 0.12 0.37
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.26) 0.71 0.60 0.50 0.75 (0.29) (0.31) 0.65 0.54 0.44 0.68
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income..... (0.34) (0.35) (0.36) (0.38) (0.38) (0.10) (0.28) (0.29) (0.30) (0.32) (0.31)
Distributions from
capital gains......... (0.15) (0.08) (0.10) (0.09) (0.13) -- (0.15) (0.08) (0.10) (0.09) (0.13)
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.49) (0.43) (0.46) (0.47) (0.51) (0.10) (0.43) (0.37) (0.40) (0.41) (0.44)
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $7.49 $8.24 $7.96 $7.82 $7.79 $7.49 $7.49 $8.23 $7.95 $7.81 $7.78
======= ======== ======== ======== ======== ====== ====== ====== ====== ====== ======
Total Return: (3.38)% 9.20% 7.89% 6.57% 10.55% (3.84)% (3.99)% 8.36% 7.07% 5.76% 9.53%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands) ........ $25,142 $29,582 $30,092 $31,139 $33,251 $143 $856 $607 $816 $876 $426
Ratio of expenses to
average
net assets............. 1.21% 1.19% 1.19% 1.11% 1.21% 1.93%+ 1.96% 1.97% 1.96% 1.88% 2.23%
Ratio of net income to
average
net assets............. 4.25% 4.34% 4.60% 4.82% 5.05% 3.69%+ 3.50% 3.56% 3.83% 4.05% 4.10%
Portfolio turnover
rate................... 7.80% 13.05% 32.99% 4.56% 11.78% 7.80%++ 7.80% 13.05% 32.99% 4.56% 11.78%
SOUTH CAROLINA FUND
Per Share Data:*
Net asset value,
beginning of period.... $8.38 $8.16 $8.07 $7.97 $7.61 $8.08 $8.38 $8.16 $8.06 $7.97 $7.61
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income.. 0.38 0.39 0.40 0.41 0.41 0.11 0.30 0.31 0.33 0.34 0.34
Net gains or losses on
securities (both
realized and
unrealized)........... (0.64) 0.29 0.22 0.12 0.37 (0.42) (0.65) 0.29 0.23 0.11 0.37
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.26) 0.68 0.62 0.53 0.78 (0.31) (0.35) 0.60 0.56 0.45 0.71
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income..... (0.38) (0.39) (0.40) (0.41) (0.41) (0.11) (0.30) (0.31) (0.33) (0.34) (0.34)
Distributions from
capital gains......... (0.07) (0.07) (0.13) (0.02) (0.01) -- (0.07) (0.07) (0.13) (0.02) (0.01)
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.45) (0.46) (0.53) (0.43) (0.42) (0.11) (0.37) (0.38) (0.46) (0.36) (0.35)
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $7.67 $8.38 $8.16 $8.07 $7.97 $7.66 $7.66 $8.38 $8.16 $8.06 $7.97
======= ======== ======== ======== ======== ====== ====== ====== ====== ====== ======
Total Return: (3.32)% 8.66% 7.99% 6.82% 10.69% (4.01)% (4.32)% 7.68% 7.15% 5.73% 9.63%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands) ........ $92,793 $106,328 $101,018 $108,163 $112,421 $335 $5,936 $5,594 $3,663 $2,714 $1,704
Ratio of expenses to
average
net assets ............ 0.83% 0.80% 0.84% 0.80% 0.88% 1.72%+ 1.73% 1.71% 1.75% 1.70% 1.85%
Ratio of net income to
average
net assets............. 4.65% 4.74% 5.04% 5.15% 5.38% 3.96%+ 3.75% 3.83% 4.13% 4.25% 4.40%
Portfolio turnover
rate................... 18.06% 16.63% -- 20.66% 4.13% 18.06%++ 18.06% 16.63% -- 20.66% 4.13%
</TABLE>
- -------------
* Per share amounts are based on average shares outstanding.
** Commencement of offering of Class C shares.
*** For periods prior to 1996 (1997 for the Florida Fund and the North Carolina
Fund), Seligman voluntarily waived a portion of its management fees. These
amounts reflect the effect of the waivers.
+ Annualized.
++ For the year ended September 30, 1999.
59
<PAGE>
How to Contact Us
<TABLE>
<S> <C> <C>
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
</TABLE>
24-hour automated 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.
60
<PAGE>
For More Information
The following information is available without charge upon request: Call
toll-free (800) 221-2450 in the US or collect (212) 682-7600 outside the US. You
may also call these numbers to request other information about the Funds or to
make shareholder inquiries.
Statement of Additional Information (SAI) contains additional information about
the Fund. It is on file with the Securities and Exchange Commission, or SEC, and
is incorporated by reference into (is legally part of) this prospectus.
Annual/Semi-Annual Reports contain additional information about the Fund's
investments. In the Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.
SELIGMAN ADVISORS, INC.
an affiliate of
[LOGO]
J.& W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
Information about the Fund, including the SAI, can be viewed and copied at the
SEC's Public Reference Room in Washington, DC. For information about the
operation of the Public Reference Room, call (202) 942-8090. The SAI,
Annual/Semi-Annual Reports and other information about the Fund are also
available on the EDGAR Database on the SEC's Internet site: http://www.sec.gov.
Copies of this information may be obtained, upon payment of a duplicating fee,
by electronic request at the following E-mail address: [email protected], or by
writing: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-0102.
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, 2000
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 Seligman Municipal Funds,
dated February 1, 2000. 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 ..................................................... 7
Control Persons and Principal Holders of Securities.......................... 11
Investment Advisory and Other Services ...................................... 18
Brokerage Allocation and Other Practices .................................... 26
Capital Stock and Other Securities .......................................... 27
Purchase, Redemption, and Pricing of Shares ................................. 27
Taxation of the Funds ....................................................... 32
Underwriters................................................................. 40
Calculation of Performance Data ............................................. 43
Financial Statements......................................................... 52
General Information.......................................................... 52
Appendix A .................................................................. 53
Appendix B................................................................... 56
Appendix C................................................................... 93
<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:
<TABLE>
<S> <C>
National Municipal Series (National Fund) Minnesota Municipal Series (Minnesota Fund)
Colorado Municipal Series (Colorado Fund) Missouri Municipal Series (Missouri Fund)
Georgia Municipal Series (Georgia Fund) New York Municipal Series (New York Fund)
Louisiana Municipal Series (Louisiana Fund) Ohio Municipal Series (Ohio Fund)
Maryland Municipal Series (Maryland Fund) Oregon Municipal Series (Oregon Fund)
Massachusetts Municipal Series (Massachusetts Fund) South Carolina Municipal Series (South Carolina Fund)
Michigan Municipal Series (Michigan Fund)
</TABLE>
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.
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.
2
<PAGE>
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, as amended (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.
On September 16, 1999, the Board of Directors eliminated the non-fundamental
policy that prohibited each Fund, with respect to 75% of the value of its
assets, from purchasing any revenue bonds if, as a result of such purchase, more
than 5% of each Fund's assets would be invested in the revenue bonds of a single
issuer. However, each Fund remains subject to a fundamental policy which
prohibits each Fund, with respect to 50% of the value of its total assets, from
purchasing securities of any one issuer if, as a result of such purchase, more
than 5% of each Fund's total assets (at market value) would be invested in the
securities of a single issuer (except for obligations issued or guaranteed by
the US Government or its agencies or instrumentalities).
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 political subdivisions
issue notes combining the qualities of both tax and revenue
anticipation notes.
3
<PAGE>
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 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, from 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
4
<PAGE>
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 (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 Funds' 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. 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;
5
<PAGE>
- - 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 its 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 personal
state income taxes. Such securities would include those described under
"Municipal Securities" above that would otherwise meet the Fund's objectives.
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.
6
<PAGE>
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, 1999 and 1998 were: National
- - 13.37% and 18.00%; Colorado - 7.91% and 28.66%; Georgia - 23.93% and 2.92%;
Louisiana - 8.67% and 15.72%; Maryland - 1.80% and 7.59%; Massachusetts - 23.88%
and 13.41%; Michigan - 3.73% and 23.60%; Minnesota - 9.74% and 21.86%; Missouri
- - 10.43% and 21.26%; New York - 11.85% and 39.85%; Ohio - 6.07% and 24.74%;
Oregon - 12.28% and 12.62%; and South Carolina - 18.06% and 16.63%. The
fluctuation in portfolio turnover rates of certain Funds in fiscal years 1999
and 1998 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.
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 Position(s) Held Occupation(s) During
Address with Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
William C. Morris* Director, Chairman of Chairman, J. & W. Seligman & Co.
(61) the Board, Chief Incorporated, Chairman and Chief Executive
Executive Officer and Officer, the Seligman Group of investment
Chairman of the companies; Chairman, Seligman Advisors,
Executive Committee Inc, Seligman Services, Inc., and Carbo
Ceramics Inc., ceramic proppants for oil
and gas industry; and Director, Seligman
Data Corp., Kerr-McGee Corporation,
diversified energy company. Formerly,
Director, Daniel Industries Inc.,
manufacturer of oil and gas metering
equipment.
Brian T. Zino* Director, President Director and President, J. & W. Seligman &
(47) and Member of the Co. Incorporated; President (with the
Executive Committee exception of Seligman Quality Municipal
Fund, Inc. and Seligman Select Municipal
Fund, Inc.) and Director or Trustee, the
Seligman Group of investment companies;
Member of the Board of Governors of the
Investment Company Institute and Director,
ICI Mutual Insurance Company; Chairman,
Seligman Data Corp.; and Director, Seligman
Advisors, Inc. and Seligman Services, Inc.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address with Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
Richard R. Schmaltz* Director and Member Director and Managing Director, Director of
(59) of the Executive Investments, J. & W. Seligman & Co.
Committee Incorporated; Director or Trustee, the
Seligman Group of investment companies
(except Seligman Cash Management Fund,
Inc.); Director, Seligman Henderson Co.,
and Trustee Emeritus of Colby College.
Formerly, Director, Investment Research at
Neuberger & Berman from May 1993 to
September 1996.
John R. Galvin Director Dean, Fletcher School of Law and Diplomacy
(70) at Tufts University; Director or Trustee,
Tufts University the Seligman Group of investment companies;
Packard Avenue, Chairman Emeritus, American Council on
Medford, MA 02155 Germany; Governor of the Center for
Creative Leadership; Director; Raytheon
Co., electronics; National Defense
University; and the Institute for Defense
Analysis. Formerly, Director, USLIFE
Corporation, life insurance; Ambassador,
U.S. State Department for negotiations in
Bosnia; Distinguished Policy Analyst at
Ohio State University and Olin
Distinguished Professor of National
Security Studies at the United States
Military Academy. From June 1987 to June
1992, he was the Supreme Allied Commander,
Europe and the Commander-in-Chief, United
States European Command.
Alice S. Ilchman Director Retired President, Sarah Lawrence College;
(64) Director or Trustee, the Seligman Group of
18 Highland Circle investment companies; Trustee, the
Bronxville, NY 10708 Committee for Economic Development; and
Chairman, The Rockefeller Foundation,
charitable foundation. Formerly, Trustee,
The Markle Foundation, philanthropic
organization; and Director, New York
Telephone Company and International
Research and Exchange Board, intellectual
exchanges.
Frank A. McPherson Director Retired Chairman and Chief Executive
(66) Officer of Kerr-McGee Corporation; Director
2601 Northwest or Trustee, the Seligman Group of
Expressway, Suite 805E investment companies; Director,
Oklahoma City, OK 73112 Kimberly-Clark Corporation, consumer
products; Bank of Oklahoma Holding Company;
Baptist Medical Center; Oklahoma Chapter of
the Nature Conservancy; Oklahoma Medical
Research Foundation; and National Boys and
Girls Clubs of America; and Member of the
Business Roundtable and National Petroleum
Council. Formerly, Chairman, Oklahoma City
Public Schools Foundation; and Director,
Federal Reserve System's Kansas City
Reserve Bank and the Oklahoma City Chamber
of Commerce.
John E. Merow Director Retired Chairman and Senior Partner,
(70) Sullivan & Cromwell, law firm; Director or
125 Broad Street, Trustee, the Seligman Group of investment
New York, NY 10004 companies; Director, Commonwealth
Industries, Inc., manufacturers of aluminum
sheet products; the Foreign Policy
Association; Municipal Art Society of New
York; the U.S. Council for International
Business; and New York-Presbyterian
Hospital; Chairman, 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.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address with Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
Betsy S. Michel Director Attorney; Director or Trustee, the Seligman
(57) Group of investment companies; Trustee, The
P.O. Box 449 Geraldine R. Dodge Foundation, charitable
Gladstone, NJ 07934 foundation. Formerly, Chairman of the Board
of Trustees of St. George's School
(Newport, RI) and Director, the National
Association of Independent Schools
(Washington, DC).
James C. Pitney Director Retired Partner, Pitney, Hardin, Kipp &
(73) Szuch, law firm; Director or Trustee, the
Park Avenue at Morris Seligman Group of investment companies.
County, P.O. Box 1945, Formerly, Director, Public Service
Morristown, Enterprise Group, public utility.
NJ 07962
James Q. Riordan Director Director or Trustee, the Seligman Group of
(72) investment companies; Director, The Houston
675 Third Avenue, Exploration Company, oil exploration; The
Suite 3004 Brooklyn Museum, KeySpan Energy
New York, NY 10017 Corporation; and Public Broadcasting
Service; and Trustee, the Committee for
Economic Development. Formerly, Co-Chairman
of the Policy Council of the Tax
Foundation; Director, Tesoro Petroleum
Companies, Inc. and Dow Jones & Company,
Inc.; Director and President, Bekaert
Corporation; and Co-Chairman, Mobil
Corporation.
Robert L. Shafer Director Retired Vice President, Pfizer Inc.,
(67) pharmaceuticals; Director or Trustee, the
96 Evergreen Avenue, Seligman Group of investment companies.
Rye, NY 10580 Formerly, Director, USLIFE Corporation,
life insurer.
James N. Whitson Director Director and Consultant, Sammons
(64) Enterprises, Inc., a diversified holding
6606 Forestshire Drive company; Director or Trustee, the Seligman
Dallas, TX 75230 Group of investment companies; Director,
C-SPAN and CommScope, Inc., manufacturer of
coaxial cables. Formerly, Executive Vice
President, Chief Operating Officer, Sammons
Enterprises, Inc.; and Director, Red Man
Pipe and Supply Company, piping and other
materials.
Thomas G. Moles Vice President and Director and Managing Director, J. & W.
(57) Senior Portfolio Seligman & Co. Incorporated; Vice President
Manager and Senior Portfolio Manager, three other
open-end investment companies in the
Seligman Group of investment companies;
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.
(43) Seligman & Co. Incorporated, Seligman
Advisors, Inc., and Seligman Data Corp.;
Vice President, the Seligman Group of
investment companies, and Seligman
Services, Inc.; Vice President and
Treasurer, Seligman International, Inc.;
and Treasurer, Seligman Henderson Co.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address with Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
Frank J. Nasta Secretary General Counsel, Senior Vice President, Law
(35) and Regulation and Corporate Secretary, J.
& W. Seligman & Co. Incorporated;
Secretary, the Seligman Group of investment
companies, Seligman Advisors, Inc.,
Seligman Henderson Co., Seligman Services,
Inc., Seligman International, Inc. and
Seligman Data Corp.
Thomas G. Rose Treasurer Treasurer, the Seligman Group of investment
(42) companies and Seligman Data Corp.
</TABLE>
The Executive Committee of the Board acts on behalf of the Board between
meetings to determine the value of securities and assets owned by the 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.
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 $8,386 N/A $82,000
Alice S. Ilchman, Director 8,126 N/A 80,000
Frank A. McPherson, Director 8,386 N/A 80,000
John E. Merow, Director 8,386 N/A 80,000
Betsy S. Michel, Director 8,387 N/A 82,000
James C. Pitney, Director 7,867 N/A 74,000
James Q. Riordan, Director 8,127 N/A 80,000
Robert L. Shafer, Director 8,127 N/A 80,000
James N. Whitson, Director 8,127(3) N/A 80,000(3)
</TABLE>
- ----------
(1) For the Funds' fiscal year ended September 30, 1999.
(2) The Seligman Group of investment companies consists of twenty investment
companies.
(3) 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 certain of the investment companies advised by
J. & W. Seligman & Co. Incorporated (Seligman), 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, 1999 was $50,975.
Messrs. Merow and Pitney no longer defer current compensation; however, they
have accrued deferred compensation in the amounts of $87,761 and $40,022,
respectively, as of September 30, 1999.
10
<PAGE>
Each Fund may, but is not obligated to, purchase shares of the other funds in
the Seligman Group of 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 Seligman
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 Seligman 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.
Code of Ethics
Seligman, Seligman Advisors, Inc. (Seligman Advisors), their subsidiaries and
affiliates, and the Seligman Group of Investment Companies have adopted a Code
of Ethics that sets forth the circumstances under which officers, directors and
employees (collectively, Employees) are permitted to engage in personal
securities transactions. 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 Director of Compliance, and sets forth a procedure of identifying,
for disciplinary action, those individuals who violate the Code of Ethics. The
Code of Ethics prohibits Employees (including all investment team members) from
purchasing or selling any security or an equivalent security that is being
purchased or sold by any client, or where the Employee intends, knows of
another's intention, to purchase or sell the security on behalf of a client. The
Code also prohibits all Employees from acquiring securities in a private
placement or in an initial or secondary public offering unless an exemption has
been obtained from Seligman's Director of Compliance.
The Code of Ethics 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) that the portfolio manager or investment team
manages; (2) each Employee from engaging in short-term trading (a purchase and
sale or vice-versa within 60 days); and (3) each member of an investment team
from engaging in short sales of a security if, at that time, any client managed
by that team has a long position in that security. Any profit realized pursuant
to any of these prohibitions must be disgorged.
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 Employees are also required to disclose all
securities beneficially owned by them upon commencement of employment and at the
end of each calendar year.
A copy of the Code of Ethics is on public file with, and is available upon
request from, the Securities and Exchange Commission (SEC). You can access it
through the SEC's Internet site, http://www.sec.gov.
Control Persons and Principal Holders of Securities
Control Persons
As of January 7, 2000, 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.
11
<PAGE>
Principal Holders
As of January 7, 2000, the following entities owned of record more than 5% of
the then outstanding capital stock of a Class of shares of the following Funds:
Percentage of Total
Outstanding Fund
Name and Address Fund/Class Shares Held
- ---------------- ---------- -----------
Mildred B. Bristow and Steve D. National/C 7.67%
Smith & Sharon K. Wumer JTWROS,
4323 Grand Avenue, Des Moines, IA
50312
Salomon Smith Barney Inc, 333 West National/C 13.05%
34th Street, 3rd Fl, New York, NY
10001
Prudential Securities Inc. FBO National/C 6.04%
Kenneth and Barbara Gore JTTEN, 39
S. La Salle Street, Chicago, IL
60603-1705
PaineWebber for the Benefit of National/C 12.22%
Barry Baker, 17715 Windflower Way,
Dallas, TX 75252
Prudential Securities Inc. FBO Mr. National/C 5.21%
Gladys Bundschuh Trust, 3634 W.
70th Street, Chicago, IL 60629
Salomon Smith Barney Inc, 333 West National/C 11.85%
34th Street, 3rd Floor, New York,
NY 10001
Salomon Smith Barney Inc, 333 West National/C 13.26%
34th Street, 3rd Floor, New York,
NY 10001
Delbert Smith and Jackie National/C 24.48%
Brodnax-Smith JTTEN, PO Box 127,
Centerton, AR 72719
Alice Pauls TRUST, 9652 Meadow National/D 5.37%
Lane, Leawood, KS 66206-2259
PaineWebber for the Benefit of National/D 40.15%
Victor Warren Trust, 724 S.
Garfield, Hinsdale, IL 60521
MLPF&S for the Sole Benefit of National/D 25.22%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
MLPF&S for the Sole Benefit of Colorado/A 8.79%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
Raymond James & Associates Inc CSDN Colorado/C 22.85%
Eduardo Neyra IRA, 13252 Kerr
Trail, Dallas, TX 75244
Seligman Advisors, Inc., Aurelia P. Colorado/C 77.15%
Lacsamana, 100 Park Avenue, New
York, NY 10017
John and Betty Thompson JTTEN, 1447 Colorado/D 9.85%
S. Fairfax St., Denver, CO 80222
12
<PAGE>
MLPF&S for the Sole Benefit of Colorado/D 74.47%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
MLPF&S for the Sole Benefit of Georgia/A 19.81%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
Wachovia Securities Inc., FBO Georgia/C 82.08%
Accounts, PO Box 1220, Charlotte,
NC 28201-1220
Wachovia Securities Inc., FBO Georgia/C 17.92%
Accounts, PO Box 1220, Charlotte,
NC 28201-1220
Raymond James & Associates, Inc. Georgia/D 5.04%
for Elite Accounts, FAO Andre
Cotella & Micheline Hunt JTWROS,
102 Mitchell Ct, Warner Robins, GA
31093
Wachovia Securities Inc, FBO Georgia/D 13.32%
Accounts PO Box 1220, Charlotte, NC
28201-1220
MLPF&S for the Sole Benefit of Georgia/D 30.80%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
MLPF&S for the Sole Benefit of Louisiana/A 21.43%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
Legg Mason Wood Walker Inc, PO Box Louisiana/C 57.73%
1476, Baltimore, MD 21202
Carmen Mauer Erwin Family LP, 11051 Louisiana/C 28.03%
GS Pt Hundson, Zachary, LA 70791
PaineWebber for the Benefit of Louisiana/C 14.24%
Hastings Underwritings Limited, GCM
Building, Collymore Rock, St.
Michael, Barbados
Prudential Securities Inc, FBO Dr. Louisiana/D 12.63%
Avery Cook, 3405 Holly Hill Rd.,
Lake Charles, LA 70605-1318
Post & Co FBO Accounts, c/o Bank of Louisiana/D 11.19%
New York, Attn: Mutual Fund/Reorg
Dept., PO Box 1066 Wall St.
Station, New York, NY 10268
HIBFUND FBO Account, C/o Marshall Louisiana/D 8.96%
and Ilsley Trust Co, PO Box 2977,
Milwaukee, WI 5301
Dean Witter for the Benefit of Mr. Louisiana/D 11.66%
Ralph Balentine, PO Box 250 Church
Street Station, New York, NY
71111-6050
MLPF&S for the Sole Benefit of Louisiana/D 53.73%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
MLPF&S for the Sole Benefit of Maryland/A 8.76%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
13
<PAGE>
PaineWebber for the Benefit of Maryland/C 71.93%
Marjorie Anne Ryder Trust, 6735
Allview Drive, Columbia, MD 21046
PaineWebber for the Benefit of Maryland/C 15.92%
Josephine D. Stephens Revocable
Trust, 42 Kimball Court, Baltimore,
MD 21228
Salomon Smith Barney Inc, 333 West Maryland/C 9.97%
34th Street, 3rd Floor, New York,
NY 10001
Harry Headley REV TRUST, 21041 Maryland/D 20.46%
Goshen Road, Gaithersburg, MD
20882-4226
MLPF&S for the Sole Benefit of Maryland/D 15.74%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
Salomon Smith Barney Inc, 333 West Massachusetts/C 27.29%
34th Street, 3rd Fl, New York, NY
10001
PaineWebber for the Benefit Richard Massachusetts/C 10.67%
J. Grand, 220 Buckminster Road,
Brookline, MA 02445
Salomon Smith Barney Inc, 333 West Massachusetts/C 23.21%
34th Street, 3rd Fl, New York, NY
10001
PaineWebber for the Benefit of Guy Massachusetts/C 7.36%
J. Ciannavei, 134 North Street,
Walpole, MA 02081
PaineWebber for the Benefit of Massachusetts/C 12.90%
Corinna Pena Cust for Phylicia Pena
UMGTMA, 34 Grace Lane, Southbridge,
MA 01550
NFSC FEBO, Mark Kaplan and Susan Massachusetts/C 7.43%
Kaplan, 74 Dennison Avenue,
Swampscott, MA 01907
PaineWebber for the Benefit of Guy Massachusetts/C 7.46%
J. and Joanne C. Ciannavei JT TEN,
134 North Street, Walpole, MA 02081
Maurice Hurwitz REV TRUST, 7 Ellis Massachusetts/D 41.82%
Drive, Worcester, MA 01609-1438
NFSC FEBO Patrick R. and Mary A. Massachusetts/D 5.96%
Annese, 62 Fremont Street,
Somerville, MA 02145
NFSC FEBO Glen T. MacLeod, 21 Massachusetts/D 5.30%
Atlantic Avenue, Rockport, MA 01966
MLPF&S for the Sole Benefit of Massachusetts/D 21.43%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
MLPF&S for the Sole Benefit of Michigan/A 6.39%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
Prudential Securities Inc FBO Mr. Michigan/C 80.73%
Lillian E. Knoop, 4140 Kensinton
Ave, Detroit, MI 48224
14
<PAGE>
NFSC FEBO Clara Burrell, Jerri Michigan/C 17.68%
Leighton, 934 D. Grenoble Dr.,
Lansing, MI 48917
Mark and Lynn Olree JTTEN, 4330 E. Michigan/D 7.83%
Cleveland St., Coopersville, MI
49404
Mark and Robert Olree JTTEN, 4330 Michigan/D 7.61%
E. Cleveland St., Coopersville, MI
49404
MLPF&S For the Sole Benefit of Michigan/D 32.14%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
Katherin and Gary Wilaby JT TEN, Minnesota/C 16.38%
704 Lakeview, N Mankato, MN 56003
Prime Account/Donald Cole Family Minnesota/C 83.62%
Trust FBO Greg Cole, Mound, MN
55364
Hilmer and Ethel Nelson TTEES Minnesota/D 6.86%
Bradley Nelson, 4 North Mallard
Road, North Oaks, MN 55127
Alice Bisgaard TTEE Alice Bisgaard Minnesota/D 7.69%
REVTR c/o Carol Davis, 8707 Gaines
Avenue, Orangevale, CA 95662
NorWest Investment Services, Inc. Minnesota/D 8.28%
FBO Account, Northstar Building
East, 608 Second Avenue, South
Minneapolis, MN 55479-0162
MLPF&S for the Sole Benefit of Minnesota/D 29.46%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
MLPF&S for the Sole Benefit of Missouri/A 13.32%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
CIBC World Markets Corp., FBO Missouri/C 68.07%
Account, PO Box 3484, Church Street
Station, New York, NY 10008-3484
George E. and Henrietta M. Beck JT Missouri/C 31.93%
TEN, 5474 Hodiamont, Jennings, MO
63136
CIBC World Markets Corp., FBO Missouri/D 5.07%
Account, PO Box 3484, Church Street
Station, New York, NY 10008-3484
Lowell Edward Fletcher and Patricia Missouri/D 20.09%
K. Fletcher Ttees FBO Anthony
McPherson Trust, 5828 Huntersford
Road, Pacific, MO 63069-4019
FISERV Securities Inc. FAO, Attn Missouri/D 7.75%
Mutual Funds Dept., One Commerce
Square, 2005 Market Street, Suite
1200, Philadelphia, PA 19103
FISERV Securities Inc. FAO, Attn Missouri/D 7.72%
Mutual Funds Dept., One Commerce
Square, 2005 Market Street, Suite
1200, Philadelphia, PA 19103
NFSC FEBO ACCOUNTS, Thomas C Cella, Missouri/D 6.44%
6105 Southern, St. Louis, MO 63123
15
<PAGE>
NFSC FEBO ACCOUNTS, Scott and Missouri/D 9.18%
Christine Huchinson, 12843
Westledge Lane, St. Louis, MO 63131
MLPF&S for the Sole Benefit of Missouri/D 18.54%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
John and Sharon Churma JT TEN, 7 Missouri/D 5.89%
Briar Patch Drive, Defiance, MO
63341
PaineWebber for the Benefit of New York/C 11.13%
Kenneth Pixley, 7321 Cascade Dr.,
Bayonet Point, FL 34667
PaineWebber for the Benefit of Alan New York/C 19.58%
Tolsma, 55 Majestic Circle,
Amherst, NY 14226
PaineWebber for the Benefit of New York/C 10.74%
Doris Keough, 15 Slater Avenue,
Saranac Lake, NY 12983
PaineWebber for the Benefit of New York/C 8.97%
Elsie Willendrup Revocable Trust,
27 Country Fair Lane, Scotia, NY
12302
Gertrude Barylski, 130 Revere New York/C 12.65%
Drive, Sayville, NY 11782
Salomon Smith Barney Inc, 333 West New York/C 13.30%
34th Street, 3rd Fl, New York, NY
10001
PaineWebber for the Benefit of New York/C 5.37%
Joanne Kravetz, 826 Cypress Dr.,
Franklin Square, Ny 11010-4006
AnnFrances Stolz, 166-43 24th New York/C 7.26%
Avenue, Whitestone, NY 11357
Joseph Chiaramonte, 5614 Avenue T, New York/C 11.03%
Brooklyn, NY 11234
PaineWebber for Benefit of Diana New York/D 29.90%
Riklis, 1020 Park Avenue, New York,
NY 10028
MLPF&S for the Sole Benefit of New York/D 37.54%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
Seligman Advisors, Inc., Aurelia Ohio/C 100%
Lacsamana, 100 Park Avenue, New
York, NY 10017
Raymond James & Assoc Inc, For Ohio/D 15.46%
Daniel Gunn TTEE FBO, D.M. Gunn,
844 Hampton Ridge Drive, Akron, OH
44122
Richard Rice, 12700 Lake Avenue, Ohio/D 9.31%
Lakewood, OH 44107
Dean Witter for the Benefit of Ohio/D 18.50%
Margaret Cutter, PO Box 250 Church
Street Station, New York, NY
44116-1011
16
<PAGE>
Bruce Tomcik & Geraldine Linnevers Ohio/D 5.58%
JT TEN, PO Box 444, No Olmsted, OH
44070-0444
MLPF&S for the Sole Benefit of Ohio/D 11.28%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
Valerie Farkas, 25450 Twickenham Ohio/D 5.40%
Drive, Beachwood, OH 44122-1389
Seligman Advisors, Inc., Aurelia Oregon/C 100%
Lacsamana, 100 Park Avenue, New
York, NY 10017
PaineWebber for the Benefit of Oregon/D 5.97%
Gustave and Mary Schaefer Jt Ten,
673 Troost Street, Roseburg, OR
97470
MLPF&S for Sole Benefit of Oregon/D 25.09%
Customers Attn Fund Administration,
4800 Deer Lake Drive East,
Jacksonville, FL 32246
PaineWebber for the Benefit of Oregon/D 13.52%
Howard and Helen Wills Exemption
Trust, 137 Wiggo Lane, Glide, OR
97443
MLPF&S for the Sole Benefit of South Carolina/A 11.98%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
PaineWebber for the Benefit of South Carolina/C 35.38%
Sondra Burson, 11 Anglers Pond
Lane, Hilton Head, SC 29926
Wachovia Securities Inc, FBO South Carolina/C 16.05%
Accounts, PO Box 1220, Charlotte,
NC 28201-1220
Wachovia Securities Inc, FBO South Carolina/C 32.16%
Accounts, PO Box 1220, Charlotte,
NC 28201-1220
Mark and Sue Grace JTWROS, PO Box South Carolina/C 8.15%
425, Taylors, SC 29687
MLPF&S for the Sole Benefit of South Carolina/D 27.34%
Customers, Attn. Fund
Administration, 4800 Deer Lake
Drive East, Jacksonville, FL 32246
John Toal, 294 Chippewa Drive, South Carolina/C 6.19%
Columbia, SC 29210-6509
Management Ownership
As of January 7, 2000, Directors and officers of the Funds as a group owned less
than 1% of the then outstanding Class A, Class C and Class D shares of capital
stock of the Funds , with the exception of the New York Municipal Fund for which
Directors and officers as a group owned 6.04% of the then outstanding Class A
shares of capital stock of the Fund.
17
<PAGE>
Investment Advisory and Other Services
Investment Manager
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 for the fiscal years ended September 30, 1999, 1998 and 1997.
Fiscal Management
Year Fee
Fund Ended Paid ($)
---- ----- --------
National 9/30/99 $527,074
9/30/98 522,358
9/30/97 506,520
Colorado 9/30/99 $236,902
9/30/98 236,819
9/30/97 254,781
Georgia 9/30/99 $247,712
9/30/98 253,187
9/30/97 261,126
Louisiana 9/30/99 $276,780
9/30/98 283,699
9/30/97 283,702
Maryland 9/30/99 $280,990
9/30/98 276,179
9/30/97 275,393
Massachusetts 9/30/99 $527,272
9/30/98 545,891
9/30/97 551,726
Michigan 9/30/99 $696,613
9/30/98 726,553
9/30/97 731,198
Minnesota 9/30/99 $596,977
9/30/98 614,405
9/30/97 629,693
Missouri 9/30/99 $242,203
9/30/98 260,574
9/30/97 262,926
18
<PAGE>
Fiscal Management
Year Fee
Fund Ended Paid ($)
---- ----- --------
New York 9/30/99 $428,752
9/30/98 426,872
9/30/97 416,749
Ohio 9/30/99 $740,911
9/30/98 768,368
9/30/97 787,121
Oregon 9/30/99 $299,155
9/30/98 287,757
9/30/97 285,086
South Carolina 9/30/99 $542,489
9/30/98 539,515
9/30/97 535,390
The Funds pay all of their expenses other than those assumed by Seligman,
including brokerage 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.
Principal Underwriter
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.
19
<PAGE>
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 and Class C shares of each Fund, as set forth below:
Class A shares:
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
- ------------------ ----------------- --------------- --------------
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 0 0 0
(1) "Offering Price" is the amount that you actually pay for Fund shares; it
includes the initial sales charge.
Class C shares:
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
- ------------------ ----------------- --------------- --------------
Less than $100,000 1.00% 1.01% 1.00%
$100,000 - $249,999 0.50 0.50 0.50
$250,000 - $1,000,000 0 0 0
(1) "Offering Price" is the amount that you actually pay for Fund shares; it
includes the initial sales charge.
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 fiscal years ended
September 30, 1999, 1998 and 1997, Seligman Services received commissions in the
following amounts:
20
<PAGE>
Commissions Paid to
Fund Seligman Services
- ---- -----------------
1999 1998 1997
---- ---- ----
National $ 2,960 $ 192 $ 456
Colorado 660 2,216 4,678
Georgia 205 1,654 283
Louisiana 357 117 21
Maryland 3,964 366 523
Massachusetts 880 718 1,865
Michigan 1,929 219 515
Minnesota 730 1,344 594
Missouri -0- 405 1,220
New York 1,097 3,453 2,889
Ohio 174 4,159 1,485
Oregon 652 45 24
South Carolina 2,061 19,615 2,582
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,
Class C, 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
are 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. This fee is 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 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 12b-1 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
21
<PAGE>
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, 1999, equivalent to .10% per annum of the
Class A shares' average daily net assets, was as follows:
Total
Fund Fees Paid
---- ---------
National $102,335
Colorado 46,686
Georgia 47,988
Louisiana 53,706
Maryland 54,772
Massachusetts 104,516
Michigan 141,587
Minnesota 119,493
Missouri 46,594
New York 85,866
Ohio 147,925
Oregon 58,613
South Carolina 103,775
Class C
Under the 12b-1 Plan, each Fund, with respect to Class C shares, pays monthly to
Seligman Advisors a 12b-1 fee at an annual rate of up to 1% of the average daily
net asset value of the Class C shares. This fee is used by Seligman Advisors as
follows: During the first year following the sale of Class C shares, a
distribution fee of .75% of the average daily net assets attributable to Class C
shares is used, along with any CDSC proceeds during the first eighteen months,
to (1) reimburse Seligman Advisors for its payment at the time of sale of Class
C shares of a 1.25% sales commission to Service Organizations, and (2) pay for
other distribution expenses, including paying for the preparation of advertising
and sales literature and the printing and distribution of such promotional
materials and prospectuses to prospective investors and other marketing costs of
Seligman Advisors. In addition, during the first year following the sale of
Class C shares, a service fee of up to .25% of the average daily net assets
attributable to such Class C shares is used to reimburse Seligman Advisors for
its prepayment to Service Organizations at the time of sale of Class C shares of
a service fee of .25% of the net asset value of the Class C shares sold (for
shareholder services to be provided to Class C shareholders over the course of
the one year immediately following the sale). The payment of service fees to
Seligman Advisors is limited to amounts Seligman Advisors actually paid to
Service Organizations at the time of sale as service fees. After the initial
one-year period following a sale of Class C shares, the entire 12b-1 fee
attributable to such Class C shares is paid to Service Organizations for
providing continuing shareholder services and distribution assistance in respect
of the Funds. The total amount paid by each Fund to Seligman Advisors in respect
of Class C shares from May 27, 1999 (inception) to September 30, 1999,
equivalent to 1% per annum of the Class C shares' average daily net assets, was
as follows:
Total
Fund Fees Paid
---- ---------
National $238
Colorado 163
Georgia 481
Louisiana -0-
Maryland 121
Massachusetts 293
Michigan 169
Minnesota -0-
Missouri 64
New York 451
Ohio 29
Oregon -0-
South Carolina 892
---
22
<PAGE>
The amounts expended by Seligman Advisors in any one year with respect to Class
C shares of the Funds may exceed the 12b-1 fees paid by the Funds in that year.
The 12b-1 Plan permits expenses incurred by Seligman Advisors in respect to
Class C shares in one fiscal year to be paid from Class C 12b-1 fees 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, 1999, Seligman Advisors incurred unreimbursed expenses in
respect of each Fund's Class C shares at September 30, 1999.
Amount of Unreimbursed % of the Net Assets
Expenses Incurred With of Class C at
Fund Respect to Class C Shares September 30, 1999
- ---- ------------------------- ------------------
National $1,644 1.43%
Colorado 2,854 4.74
Georgia 2,390 1.36
Louisiana -0- -0-
Maryland 1,177 1.58
Massachusetts 3,468 1.52
Michigan 1,844 1.61
Minnesota -0- -0-
Missouri 271 1.28
New York 3,588 1.90
Ohio 273 1.57
Oregon -0- -0-
South Carolina 4,484 1.34
If the 12b-1 Plan is terminated in respect to Class C shares of the Funds, no
amounts (other than amounts accrued but not yet paid) would be owed by that Fund
to Seligman Advisors with respect to Class C shares.
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 such
Class D shares is used, along with any CDSC proceeds, to (1) reimburse Seligman
Advisors for its payment at the time of sale of Class D shares of a .75% sales
commission to Service Organizations, and (2) pay for other distribution
expenses, including paying for the preparation of advertising and sales
literature and the printing and distribution of such promotional materials and
prospectuses to prospective investors and other marketing costs of Seligman
Advisors. In addition, during the first year following the sale of Class D
shares, 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 .25% of the net asset value of the Class D shares sold (for shareholder
services to be provided to Class D shareholders over the course of the one year
immediately following the sale). The payment of service fees to Seligman
Advisors is limited to amounts Seligman Advisors actually paid to Service
Organizations at the time of sale as service fees. After the initial one-year
period following a sale of Class 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 each Fund. The
total amount paid by each Fund to Seligman Advisors in respect of Class D shares
for the fiscal year ended September 30, 1999, equivalent to 1% per annum of the
Class D shares' average daily net assets, was as follows:
23
<PAGE>
Total
Fund Fees Paid
---- ---------
National $65,093
Colorado 7,987
Georgia 26,991
Louisiana 8,307
Maryland 30,773
Massachusetts 24,617
Michigan 23,818
Minnesota 20,659
Missouri 5,445
New York 28,649
Ohio 14,143
Oregon 25,843
South Carolina 60,396
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, 1999, Seligman Advisors incurred the following amounts of
unreimbursed expenses in respect of each Fund's Class D shares:
Amount of Unreimbursed % of the Net Assets
Expenses Incurred With of Class D at
Fund Respect to Class D Shares September 30, 1999
- ---- ------------------------- ------------------
National $ -0- %-0-
Colorado 2,563 .28
Georgia 5,325 .23
Louisiana 5,838 .64
Maryland 6,021 .22
Massachusetts 14,183 .48
Michigan 5,754 .28
Minnesota 10,028 .54
Missouri 3,533 .57
New York 3,185 .11
Ohio 4,001 .30
Oregon 5,994 .27
South Carolina 12,979 .22
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.
Payments made by the Funds under the 12b-1 Plan in respect of Class A and Class
D shares for the fiscal year ended September 30, 1999, and in respect of Class C
shares from May 27, 1999 (inception) to September 30, 1999, were spent on the
following activities in the following amounts:
24
<PAGE>
Compensation Compensation
to to
Fund/Class Underwriters Broker/Dealers
- ---------- ------------ --------------
National/A $ -0- $102,335
National/C 238 -0-
National/D 13,403 51,690
Colorado/A -0- 46,686
Colorado/C 163 -0-
Colorado/D 3,805 4,182
Georgia/A -0- 47,988
Georgia/C 481 -0-
Georgia/D 6,920 20,071
Louisiana/A -0- 53,706
Louisiana/C -0- -0-
Louisiana/D 3,221 5,086
Maryland/A -0- 54,772
Maryland/C 121 -0-
Maryland/D 10,985 19,788
Massachusetts/A -0- 104,516
Massachusetts/C 293 -0-
Massachusetts/D 9,215 15,402
Michigan/A -0- 141,587
Michigan/C 169 -0-
Michigan/D 6,523 17,295
Minnesota/A -0- 119,493
Minnesota/C -0- -0-
Minnesota/D 5,157 15,502
Missouri/A -0- 46,594
Missouri/C 64 -0-
Missouri/D 2,111 3,334
New York/A -0- 85,866
New York/C 451 -0-
New York/D 7,023 21,626
Ohio/A -0- 147,925
Ohio/C 29 -0-
Ohio/D 4,674 9,469
Oregon/A -0- 58,613
Oregon/C -0- -0-
Oregon/D 7,319 18,524
South Carolina/A -0- 103,775
South Carolina/C 892 -0-
South Carolina/D 20,091 40,305
25
<PAGE>
The 12b-1 Plan was approved on July 16, 1992 by the Board of 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 (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 was approved in respect of Class C shares on
May 20, 1999 by the Directors, including a majority of the Qualified Directors,
and became effective in respect of the Class C shares on June 1, 1999. 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, 1999, 1998 and 1997, 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 1999 1998 1997
- ---- ---- ---- ----
National $8,433 $7,528 $6,388
Colorado 2,725 2,599 2,918
Georgia 938 918 988
Louisiana 956 1,112 685
Maryland 1,481 1,572 1,425
Massachusetts 2,251 2,105 2,080
Michigan 3,104 2,822 2,537
Minnesota 2,745 2,335 2,087
Missouri 3,144 3,410 3,261
New York 14,043 13,359 12,398
Ohio 4,351 3,900 3,132
Oregon 1,815 1,682 1,417
South Carolina 6,392 4,498 1,576
Brokerage Allocation and Other Practices
Brokerage Transactions
For the fiscal years ended September 30, 1999, 1998 and 1997, 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
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acting as principal, except dealers with which its directors and/or officers are
affiliated.
Commissions
For the fiscal years ended September 30, 1999, 1998 and 1997, 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, 1999, neither of the Funds
acquired securities of their 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 three
classes, designated Class A common stock, Class C common stock, and Class D
common stock. Each share of a Fund's Class A, Class C, and Class D common stock
is equal as to earnings, assets, and voting privileges, except that each class
bears its own separate distribution and, potentially, certain other class
expenses and has exclusive voting rights with respect to any matter to which a
separate vote of any class is required by the 1940 Act or Maryland law. Seligman
Municipal Fund Series, Inc. has adopted a multiclass plan pursuant to Rule 18f-3
Plan under the 1940 Act permitting the issuance and sale of multiple classes of
common stock. 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
Plan. 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
common 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 under
"Persons Entitled to Reductions") 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
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<PAGE>
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.
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. Section 403(b) Plans
sponsored by public educational institutions are not eligible for net asset
value purchases based on the aggregate investment made by the plan or member of
eligible employees.
Such sales are believed to require limited sales effort and sales-related
expenses and therefore are made at net asset value. Contributions or account
information for plan participation also should be transmitted to Seligman Data
Corp. by methods which it accepts. Additional information about "eligible
employee benefit plans" is available from financial advisors or Seligman
Advisors.
Further Types of Reductions. Class A shares may also be issued without an
initial sales charge in the following instances:
(1) to any registered unit investment trust which is the issuer of periodic
payment plan certificates, the net proceeds of which are invested in Fund
shares;
(2) to separate accounts established and maintained by an insurance company
which are exempt from registration under Section 3(c)(11) of the 1940 Act;
(3) to registered representatives and employees (and their spouses and minor
children) of any dealer that has a sales agreement with Seligman Advisors;
(4) to financial institution trust departments;
(5) to registered investment advisers exercising discretionary investment
authority with respect to the purchase of Fund shares;
(6) to accounts of financial institutions or broker/dealers that charge account
management fees, provided Seligman or one of its affiliates has entered
into an agreement with respect to such accounts;
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(7) pursuant to sponsored arrangements with organizations which make
recommendations to, or permit group solicitations of, its employees,
members or participants in connection with the purchase of shares of the
Fund;
(8) to other investment companies in the Seligman Group in connection with a
deferred fee arrangement for outside directors;
(9) to certain "eligible employee benefit plans" as discussed above;
(10) to those partners and employees of outside counsel to the Fund or its
directors or trustees who regularly provide advice and services to the
Fund, to other funds managed by Seligman, or to their directors or
trustees; and
(11) in connection with sales pursuant to a 401(k) alliance program which has an
agreement with Seligman Advisors.
CDSC Applicable to Class A Shares. Class A shares purchased without an initial
sales charge 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 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.
Class C
Class C shares may be purchased at a price equal to the next determined net
asset value, without an initial sales charge. Purchases of Class C shares by a
"single person" may be eligible for the reductions in initial sales charges
described above for Class A shares. Class C shares are subject to a CDSC of 1%
if the shares are redeemed within eighteen months of purchase, charged as a
percentage of the current net asset value or the original purchase price,
whichever is less.
Class D
Class D shares 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 C and 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% and 10%,
respectively, of the value of their accounts per year without the imposition of
a CDSC. Account value is determined as of the date the systematic withdrawals
begin.
CDSC Waivers. The CDSC on Class C shares and 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;
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<PAGE>
(4) in whole or in part, in connection with shares sold to any state, county,
or city or any instrumentality, department, authority, or agency thereof,
which is prohibited by applicable investment laws from paying a sales load
or commission in connection with the purchase of any registered investment
management company;
(5) in whole or in part, in connection with systematic withdrawals;
(6) in connection with participation in the Merrill Lynch Small Market 401(k)
Program.
If, with respect to a redemption of any Class A, Class C 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 and Class C 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
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 and Class C
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
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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 C shares and Class D shares will generally be
lower than the NAV of Class A shares as a result of the higher 12b-1 fees with
respect to such shares. 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.
Specimen Price Make-Up
Under the current distribution arrangements between the Funds and Seligman
Advisors, Class A shares and Class C shares are sold with a maximum initial
sales charge of 4.75% and 1.00%(1), respectively, and Class D shares are sold at
NAV(2). Using each Class's NAV at September 30, 1999, the maximum offering price
of the Funds' shares is as follows:
Class A shares
NAV + Maximum Sales Charge = Offering Price
Fund Per Share (4.75% of Offering Price) to Public
- ---- --------- ------------------------- ---------
National $7.68 $.38 $8.06
Colorado 7.10 .35 7.45
Georgia 7.75 .39 8.14
Louisiana 7.81 .39 8.20
Maryland 7.79 .39 8.18
Massachusetts 7.47 .37 7.84
Michigan 8.04 .40 8.44
Minnesota 7.36 .37 7.73
Missouri 7.29 .36 7.65
New York 7.70 .38 8.08
Ohio 7.64 .38 8.02
Oregon 7.48 .37 7.85
South Carolina 7.67 .38 8.05
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<PAGE>
Class C shares
<TABLE>
<CAPTION>
NAV + Maximum Sales Charge = Offering Price
Fund Per Share (1.00% of Offering Price(1)) to Public
- ---- --------- ---------------------------- ---------
<S> <C> <C> <C>
National $7.68 $.08 $7.76
Colorado 7.09 .07 7.16
Georgia 7.76 .08 7.84
Louisiana 7.80 .08 7.88
Maryland 7.80 .08 7.88
Massachusetts 7.47 .08 7.55
Michigan 8.03 .08 8.11
Minnesota 7.36 .07 7.43
Missouri 7.29 .07 7.36
New York 7.70 .08 7.78
Ohio 7.68 .08 7.76
Oregon 7.48 .08 7.56
South Carolina 7.66 .08 7.74
</TABLE>
Class D shares
NAV and Offering
Fund Price Per Share(2)
---- -----------------
National $7.68
Colorado 7.09
Georgia 7.76
Louisiana 7.80
Maryland 7.80
Massachusetts 7.47
Michigan 8.03
Minnesota 7.36
Missouri 7.29
New York 7.70
Ohio 7.68
Oregon 7.48
South Carolina 7.66
- ----------
(1) In addition to the 1.00% front-end sales charge, Class C shares are subject
to a 1% CDSC if you redeem your shares within 18 months of purchase.
(2) Class D shares are subject to a 1% CDSC if you redeem your shares 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 SEC. Under these circumstances, redemption proceeds
may be made in securities. If payment is made in securities, a shareholder may
incur brokerage expenses in converting these securities to cash.
Taxation of 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
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<PAGE>
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
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.
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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 & Spalding, 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.
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.
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<PAGE>
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.
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.
35
<PAGE>
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.
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 provides
that it applies to
36
<PAGE>
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 that 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.
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 Bryan 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.
37
<PAGE>
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 US 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 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 or
school district income 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 (collectively, 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 profit made on 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 or school district income taxes in Ohio.
38
<PAGE>
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 and school district income 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 or
school district income 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 sufficient nexus to the State of Ohio to be subject to
Ohio taxation, then such entity shall be exempt from such 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.
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
39
<PAGE>
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.
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 and Class
C shares, as set forth above under "Dealer Reallowances." Seligman Advisors
retains the balance of sales charges and any CDSCs paid by investors.
Total initial sales charges paid by shareholders of Class A and Class C shares
of the Funds for the fiscal year ended September 30, 1999, and of Class A shares
of the Funds for the fiscal years ended September 30, 1998 and 1997, are shown
below. No Class C shares of the Funds were issued or outstanding during the
fiscal years ended September 30, 1998 and 1997. Also shown are the amounts of
Class A and Class C sales charges that were retained by Seligman Advisors for
the same periods:
40
<PAGE>
1999
Total Sales Charges Amount of Class A
Paid by Shareholders and Class C Sales
on Class A and Charges Retained by
Fund Class C Shares Seligman Advisors
- ---- -------------- -----------------
National $ 89,247 $ 10,666
Colorado 55,258 6,661
Georgia 81,930 9,380
Louisiana 85,552 10,366
Maryland 76,812 8,989
Massachusetts 126,779 15,801
Michigan 133,528 15,721
Minnesota 128,490 16,002
Missouri 44,144 5,149
New York 101,214 11,345
Ohio 101,670 12,275
Oregon 141,864 16,867
South Carolina 158,114 18,815
1998
Total Sales Charges Amount of Class A
Paid by Shareholders Sales Charges Retained
Fund on Class A Shares by 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
1997
Total Sales Charges Amount of Class A
Paid by Shareholders Sales Charges Retained
Fund on Class A Shares by 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
41
<PAGE>
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 the fiscal year ended September 30, 1999:
<TABLE>
<CAPTION>
Net Underwriting Compensation on
Discounts and Redemptions and
Commissions Repurchases
(Class A and (CDSC on Class A,
Class C Sales Class C and Class Brokerage Other
Fund Charges Retained) D Shares Retained) Commissions Compensation
- ---- ----------------- ------------------ ----------- ------------
<S> <C> <C> <C> <C>
National $10,666 $2,363 $-0- $-0-
Colorado 6,661 592 -0- -0-
Georgia 9,380 1,741 -0- -0-
Louisiana 10,366 42 -0- -0-
Maryland 8,989 1,050 -0- -0-
Massachusetts 15,801 1,088 -0- -0-
Michigan 15,721 894 -0- -0-
Minnesota 16,002 456 -0- -0-
Missouri 5,149 21 -0- -0-
New York 11,345 1,233 -0- -0-
Ohio 12,275 452 -0- -0-
Oregon 16,867 3,106 -0- -0-
South Carolina 18,815 6,858 -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 the Manager during a specified period of time. Such bonus or
other incentive will be made in the form of cash or, if permitted, may take the
form of non-cash payments. The non-cash payments will include (i) business
seminars at Seligman's headquarters or other locations, (ii) travel expenses,
including meals, entertainment and lodging, incurred in connection with trips
taken by qualifying registered representatives and members of their families to
places within or outside the United States, or (iii) the receipt of certain
merchandise. The cash payments may include payment of various business expenses
of the dealer. 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.
42
<PAGE>
Calculation of Performance Data
Class A
The annualized yield for the 30-day period ended September 30, 1999 for each
Fund's Class A shares was as follows: National - 4.69%, Colorado - 4.48%,
Georgia - 4.53%, Louisiana - 4.61%, Maryland - 4.52%, Massachusetts - 4.60%,
Michigan - 4.49%, Minnesota - 4.62%, Missouri - 4.48%, New York - 4.68%, Ohio -
4.49%, Oregon - 4.45%, and South Carolina - 4.26%. 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, 1999, which was the last day of this period. The average number of Class A
shares per Fund was: National - 11,793,517, Colorado - 6,323,335, Georgia -
5,553,344, Louisiana - 6,614,744, Maryland - 6,405,219, Massachusetts -
12,522,439, Michigan - 15,834,976, Minnesota - 14,893,450, Missouri - 5,993,549,
New York - 10,012,959, Ohio - 17,743,841, Oregon - 7,311,145 and South Carolina
- - 12,258,488, 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,
1999 for each Fund's Class A shares was as follows: National - 7.76%, Colorado -
7.78%, Georgia - 7.98%, Louisiana - 8.11%, Maryland - 7.86%, Massachusetts -
8.64%, Michigan - 7.78%, Minnesota - 8.31%, Missouri - 7.89%, New York - 8.32%,
Ohio - 7.97%, Oregon - 8.10% and South Carolina - 7.58%. 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 - 42.47%, Georgia - 43.22%,
Louisiana - 43.22%, Maryland - 42.53%, Massachusetts - 46.85%, Michigan -
42.26%, Minnesota - 44.43%, 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, 1999
for each Fund's Class A shares was as follows: National - (7.66)%, Colorado -
(7.28)%, Georgia - (7.28)%, Louisiana - (7.03)%, Maryland - (6.08)%,
Massachusetts - (9.35)%, Michigan - (7.38)%, Minnesota - (6.76)%, Missouri -
(8.16)%, New York - (8.44)%, Ohio - (7.33)%, Oregon - (6.79)% and South Carolina
- - (7.94)%. The average annual total return for the five-year period ended
September 30, 1999 for each Fund's Class A shares was as follows: National -
5.58%, Colorado - 4.10%, Georgia - 5.40%, Louisiana - 4.95%, Maryland - 5.10%,
Massachusetts - 4.56%, Michigan - 4.83%, Minnesota - 3.74%, Missouri - 4.75%,
New York - 5.53%, Ohio - 4.67%, Oregon - 4.74% and South Carolina - 5.02%. The
average annual total return for the ten-year period ended September 30, 1999 for
each Fund's Class A shares was as follows: National - 6.14%, Colorado - 5.26%,
Georgia - 6.23%, Louisiana - 6.00%, Maryland - 6.04%, Massachusetts - 5.98%,
Michigan - 6.16%, Minnesota - 5.57%, Missouri - 5.79%, New York - 6.36%, Ohio -
6.04%, Oregon - 5.93% and South Carolina - 6.03%. 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 the 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 periods were
reinvested. It was then assumed that at the end of the one-, five-, and ten-year
periods of each
43
<PAGE>
Fund, the entire amount was redeemed. The average annual total return was then
calculated by 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 C
The annualized yield for the 30-day period ended September 30, 1999 for each
Fund's Class C shares was as follows: National - 3.98%, Colorado - 3.76%,
Georgia - 3.82%, Louisiana - 3.90%, Maryland - 3.81%, Massachusetts - 3.87%,
Michigan - 3.77%, Minnesota - 3.91%, Missouri - 3.75%, New York - 3.97%, Ohio -
3.76%, Oregon - 3.72% and South Carolina - 3.68%. The annualized yield was
computed as discussed above 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 plus the maximum sales load
of 1.00% of the net amount invested) on September 30, 1999, which was the last
day of this period. The average number of Class C shares per Fund was: National
- - 25,247, Colorado - 10,556, Georgia - 21,762, Louisiana - 1, Maryland - 9,573,
Massachusetts - 18,807, Michigan - 14,140, Minnesota - 1, Missouri - 2,908, New
York - 26,635, Ohio - 2,255, Oregon - 1 and South Carolina - 42,219, 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,
1999 for each Fund's Class C shares was as follows: National - 6.59%, Colorado -
6.54%, Georgia - 6.73%, Louisiana - 6.86%, Maryland - 6.63%, Massachusetts -
7.28%, Michigan - 6.53%, Minnesota - 7.03%, Missouri - 6.60%, New York - 7.06%,
Ohio - 6.68%, Oregon - 6.77% and South Carolina - 6.55%. The tax equivalent
annualized yield was computed by first computing the annualized yield as
discussed above for Class A shares. 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 - 42.47%, Georgia -
43.22%, Louisiana - 43.22%, Maryland - 42.53%, Massachusetts - 46.85%, Michigan
- - 42.26%, Minnesota - 44.43%, 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 C
shares' yield, if any, that was attributable to securities the income of which
was not tax- exempt.
The total return for the period from May 27, 1999 (inception) to September 30,
1999 for each Fund's Class C shares was as follows: National - (5.27)%, Colorado
- - (5.89)%, Georgia - (5.72)%, Louisiana - (5.43)%, Maryland - (4.72)%,
Massachusetts - (6.90)%, Michigan - (5.51)%, Minnesota - (5.40)%, Missouri -
(5.88)%, New York - (6.09)%, Ohio - (5.40)%, Oregon - (5.25)% and South Carolina
- - (5.89)%. This return was computed by assuming a hypothetical initial payment
of $1,000 in Class C shares of each Fund. From this $1,000, the maximum sales
load of $10.00 (1.00% of the public offering price) was deducted. It was then
assumed that all of the dividends and distributions by each Fund's Class C
shares over the period were reinvested. It was then assumed that at the end of
the period of each Fund, the entire amount was redeemed, subtracting the 1%
CDSC, if applicable.
Class D
The annualized yield for the 30-day period ended September 30, 1999 for each
Fund's Class D shares was as follows: National - 4.02%, Colorado - 3.80%,
Georgia - 3.86%, Louisiana - 3.94%, Maryland - 3.85%, Massachusetts - 3.91%,
Michigan - 3.81%, Minnesota - 3.95%, Missouri - 3.79%, New York - 4.01%, Ohio -
3.80%, Oregon - 3.80% and South Carolina - 3.99%. The annualized yield was
computed as discussed above for Class A shares by dividing a Fund's net
investment income per share earned during this 30-day period by the
44
<PAGE>
maximum offering price per share (i.e., the net asset value) on September 30,
1999, which was the last day of this period. The average number of Class D
shares were: National - 953,081, Colorado - 129,295, Georgia - 305,467,
Louisiana - 116,105, Maryland - 355,171, Massachusetts - 398,974, Michigan -
273,639, Minnesota - 251,918, Missouri - 84,541, New York - 373,309, Ohio -
179,971, Oregon - 308,695 and South Carolina - 780,814, 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,
1999 for each Fund's Class D shares was as follows: National - 6.66%, Colorado -
6.60%, Georgia - 6.80%, Louisiana - 6.93%, Maryland - 6.69%, Massachusetts -
7.34%, Michigan - 6.60%, Minnesota - 7.11%, Missouri - 6.67%, New York - 7.13%,
Ohio - 6.75%, Oregon - 6.81% and South Carolina - 7.10%. 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, 1999
for each Fund's Class D shares was as follows: National - (4.78)%, Colorado -
(4.50)%, Georgia - (4.53)%, Louisiana - (4.25)%, Maryland - (2.93)%,
Massachusetts - (6.51)%, Michigan - (4.56)%, Minnesota - (3.89)%, Missouri -
(5.37)%, New York - (5.62)%, Ohio - (4.44)%, Oregon - (3.85)% and South Carolina
- - (5.23)%. The average annual total return for the five-year period ended
September 30, 1999 for each Fund's Class D shares was as follows: National -
5.63%, Colorado - 4.10%, Georgia - 5.45%, Louisiana - 4.98%, Maryland - 5.20%,
Massachusetts - 4.60%, Michigan - 4.83%, Minnesota - 3.76%, Missouri - 4.79%,
New York - 5.55%, Ohio - 4.75%, Oregon - 4.80% and South Carolina - 5.06%. The
average annual total return for the period from February 1, 1994 (inception)
through September 30, 1999 for each Fund's Class D shares was as follows:
National - 3.03%, Colorado - 2.54%, Georgia - 3.35%, Louisiana - 3.17%, Maryland
- - 3.40%, Massachusetts - 3.04%, Michigan - 3.23%, Minnesota - 2.75%, Missouri -
2.86%, New York - 3.41%, Ohio - 3.18%, Oregon - 3.33% and South Carolina -
3.09%. 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 periods were
reinvested. It was then assumed that at the end of the one- and five-year
periods 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, Class C and Class D shares for the ten years ended September
30, 1999 or from a Class's inception through September 30, 1999, 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.
Class A
<TABLE>
<CAPTION>
Fund/ Value of Value of Value Total Value
Year Initial Capital Gain Of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
- -------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
National
9/30/90 $916 $12 $63 $ 991
9/30/91 972 23 137 1,132
9/30/92 994 27 211 1,232
9/30/93 1,073 51 305 1,429
9/30/94 885 115 318 1,318
9/30/95 934 121 414 1,469
9/30/96 948 123 500 1,571
9/30/97 987 128 604 1,719
9/30/98 1,025 133 716 1,874
9/30/99 945 123 747 1,815 81.53%
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Fund/ Value of Value of Value Total Value
Year Initial Capital Gain Of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
- -------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Colorado
9/30/90 $932 $ -0- $62 $994
9/30/91 974 -0- 131 1,105
9/30/92 991 -0- 200 1,191
9/30/93 1,047 13 280 1,340
9/30/94 956 25 320 1,301
9/30/95 986 25 402 1,413
9/30/96 982 25 473 1,480
9/30/97 1,001 26 561 1,588
9/30/98 1,031 26 658 1,715
9/30/99 958 25 686 1,669 66.92%
Georgia
9/30/90 $937 $2 $63 $1,002
9/30/91 996 3 137 1,136
9/30/92 1,024 8 213 1,245
9/30/93 1,101 15 303 1,419
9/30/94 977 27 337 1,341
9/30/95 1,019 50 428 1,497
9/30/96 1,027 60 508 1,595
9/30/97 1,060 68 605 1,733
9/30/98 1,094 78 708 1,880
9/30/99 1,012 81 737 1,830 83.02%
Louisiana
9/30/90 $931 $7 $64 $1,002
9/30/91 990 11 137 1,138
9/30/92 1,013 17 212 1,242
9/30/93 1,063 33 296 1,392
9/30/94 960 42 336 1,338
9/30/95 984 70 422 1,476
9/30/96 987 81 501 1,569
9/30/97 1,001 104 593 1,698
9/30/98 1,029 110 696 1,835
9/30/99 945 123 722 1,790 79.02%
Maryland
9/30/90 $935 $-0- $60 $995
9/30/91 996 -0- 131 1,127
9/30/92 1,022 5 203 1,230
9/30/93 1,084 22 287 1,393
9/30/94 967 46 323 1,336
9/30/95 998 73 410 1,481
9/30/96 1,002 80 488 1,570
9/30/97 1,022 89 579 1,690
9/30/98 1,044 102 678 1,824
9/30/99 977 101 719 1,797 79.70%
Massachusetts
9/30/90 $903 $10 $63 $976
9/30/91 979 13 139 1,131
9/30/92 1,003 20 218 1,241
9/30/93 1,064 33 308 1,405
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
Fund/ Value of Value of Value Total Value
Year Initial Capital Gain Of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
- -------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
9/30/94 953 61 349 1,363
9/30/95 985 69 440 1,494
9/30/96 977 89 517 1,583
9/30/97 996 106 610 1,712
9/30/98 1,030 131 718 1,879
9/30/99 930 129 730 1,789 78.83%
Michigan
9/30/90 $923 $11 $62 $996
9/30/91 979 14 135 1,128
9/30/92 1,015 21 211 1,247
9/30/93 1,062 52 295 1,409
9/30/94 968 60 340 1,368
9/30/95 999 70 430 1,499
9/30/96 989 94 508 1,591
9/30/97 1,006 113 602 1,721
9/30/98 1,033 132 705 1,870
9/30/99 941 151 726 1,818 81.78%
Minnesota
9/30/90 $939 $7 $62 $1,008
9/30/91 978 8 133 1,119
9/30/92 989 9 208 1,206
9/30/93 1,037 30 296 1,363
9/30/94 968 46 351 1,365
9/30/95 979 50 439 1,468
9/30/96 962 53 512 1,527
9/30/97 976 53 602 1,631
9/30/98 1,000 57 700 1,757
9/30/99 922 73 725 1,720 72.02%
Missouri
9/30/90 $945 $-0- $60 $1,005
9/30/91 1,011 -0- 131 1,142
9/30/92 1,021 10 201 1,232
9/30/93 1,088 20 286 1,394
9/30/94 969 35 322 1,326
9/30/95 1,008 50 410 1,468
9/30/96 1,010 64 486 1,560
9/30/97 1,023 83 574 1,680
9/30/98 1,051 99 671 1,821
9/30/99 954 115 687 1,756 75.59%
New York
9/30/90 $914 $6 $63 $983
9/30/91 982 6 139 1,127
9/30/92 1,004 17 216 1,237
9/30/93 1,082 37 307 1,426
9/30/94 948 63 338 1,349
9/30/95 972 99 426 1,497
9/30/96 987 100 514 1,601
9/30/97 1,023 108 621 1,752
9/30/98 1,063 131 734 1,928
9/30/99 952 161 741 1,854 85.33%
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
Fund/ Value of Value of Value Total Value
Year Initial Capital Gain Of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
- -------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Ohio
9/30/90 $931 $12 $64 $1,007
9/30/91 984 14 139 1,137
9/30/92 1,011 21 215 1,247
9/30/93 1,071 33 303 1,407
9/30/94 965 56 343 1,364
9/30/95 990 71 433 1,494
9/30/96 988 78 513 1,579
9/30/97 1,000 93 605 1,698
9/30/98 1,022 118 707 1,847
9/30/99 934 135 729 1,798 79.77%
Oregon
9/30/90 $940 $-0- $60 $1,000
9/30/91 1,003 -0- 130 1,133
9/30/92 1,027 -0- 200 1,227
9/30/93 1,092 -0- 285 1,377
9/30/94 1,005 10 330 1,345
9/30/95 1,035 14 417 1,466
9/30/96 1,034 16 494 1,544
9/30/97 1,063 25 588 1,676
9/30/98 1,088 47 683 1,818
9/30/99 1,010 55 714 1,779 77.91%
South Carolina
9/30/90 $933 $-0- $62 $995
9/30/91 995 5 134 1,134
9/30/92 1,032 8 208 1,248
9/30/93 1,099 12 293 1,404
9/30/94 982 29 328 1,339
9/30/95 1,028 33 421 1,482
9/30/96 1,041 37 505 1,583
9/30/97 1,053 62 595 1,710
9/30/98 1,081 80 697 1,858
9/30/99 989 87 720 1,796 79.64%
</TABLE>
Class C
<TABLE>
<CAPTION>
Fund/ Value of Value of Value Total Value
Period Initial Capital Gain Of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
- -------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
National
9/30/99 $931 $-0- $16 $947 (5.27)%
Colorado
9/30/99 $930 $-0- $11 $941 (5.89)%
Georgia
9/30/99 $931 $-0- $12 $943 (5.72)%
Louisiana
9/30/99 $934 $-0- $12 $946 (5.43)%
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Fund/ Value of Value of Value Total Value
Period Initial Capital Gain Of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
- -------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Maryland
9/30/99 $941 $-0- $12 $953 (4.72)%
Massachusetts
9/30/99 $920 $-0- $11 $931 (6.90)%
Michigan
9/30/99 $933 $-0- $12 $945 (5.51)%
Minnesota
9/30/99 $934 $-0- $12 $946 (5.40)%
Missouri
9/30/99 $930 $-0- $11 $941 (5.88)%
New York
9/30/99 $927 $-0- $12 $939 (6.09)%
Ohio
9/30/99 $934 $-0- $12 $946 (5.40)%
Oregon
9/30/99 $937 $-0- $11 $948 (5.25)%
South Carolina
9/30/99 $929 $-0- $12 $941 (5.89)%
</TABLE>
Class D
<TABLE>
<CAPTION>
Fund/ Value of Value of Value Total Value
Period Initial Capital Gain 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 $-0- $25 $900
9/30/95 923 -0- 69 992
9/30/96 939 -0- 114 1,053
9/30/97 978 -0- 165 1,143
9/30/98 1,013 -0- 218 1,231
9/30/99 937 -0- 247 1,184 18.41%
Colorado
9/30/94 $919 $-0- $24 $943
9/30/95 944 -0- 67 1,011
9/30/96 942 -0- 109 1,051
9/30/97 961 -0- 157 1,118
9/30/98 988 -0- 207 1,195
9/30/99 918 -0- 234 1,152 15.23%
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Fund/ Value of Value of Value Total Value
Period Initial Capital Gain Of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
- -------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Georgia
9/30/94 $899 $-0- $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
9/30/99 931 36 238 1,205 20.50%
Louisiana
9/30/94 $909 $-0- $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
9/30/99 893 60 240 1,193 19.30%
Maryland
9/30/94 $913 $-0- $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
9/30/99 922 38 248 1,208 20.84%
Massachusetts
9/30/94 $920 $-0- $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
9/30/99 897 47 241 1,185 18.51%
Michigan
9/30/94 $919 $-0- $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
9/30/99 891 66 240 1,197 19.69%
Minnesota
9/30/94 $940 $-0- $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
9/30/99 896 19 251 1,166 16.58%
Missouri
9/30/94 $903 $-0- $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
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Fund/ Value of Value of Value Total Value
Period Initial Capital Gain Of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
- -------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
9/30/99 889 55 229 1,173 17.30%
New York
9/30/94 $897 $-0- $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
9/30/99 901 65 243 1,209 20.91%
Ohio
9/30/94 $920 $-0- $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
9/30/99 892 55 247 1,194 19.37%
Oregon
9/30/94 $926 $-0- $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
9/30/99 932 31 241 1,204 20.40%
South Carolina
9/30/94 $904 $-0- $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
9/30/99 910 39 239 1,188 18.83%
</TABLE>
(1) For the ten-year period ended September 30, 1999 for Class A shares, from
commencement of operations for Class C shares on May 27, 1999 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 charge 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.
51
<PAGE>
Financial Statements
The Annual Report to Shareholders for the fiscal year ended September 30, 1999,
contains a schedule of the investments of the Funds as of September 30, 1999, as
well as certain other financial information. 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.
52
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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 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.
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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 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.
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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.
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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 1998 was $3.2 billion, an increase from $3.03 billion in
1997. The total assessed value of all taxable property, real and personal, in
the state in 1998 was $40.17 billion, an increase of 4.2% over 1997. (Department
of Local Affairs, 28th 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 is assessed at 9.74% of actual value in
1999-2000, 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 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 the state refundedby 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. Excess revenue totaled $563 million, which was refunded by way of a
credit against income taxes due for 1998. For fiscal year 1998-1999, the revenue
limit grew to $7.243 billion. State revenues exceeded this limit by $679.6
million, which is to be refunded by three mechanisms: (1) an earned income tax
credit, (2) a partial refund of personal property taxes paid, and (3) a credit
against income taxes due. (Reports of the State Auditor: Schedule of TABOR
Revenue September 1998 & 1999.) These refund mechanisms will continue in future
tax years with excess TABOR revenue.
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Anticipating the growth in excess TABOR revenues in future tax years, the state
legislature also provided for additional refunds in tax years with large amounts
of excess TABOR revenue through (1) an exclusion from income of up to $1,200 in
interest, dividends, and capital gains for individuals ($2,400 for joint filers)
and (2) an expansion of the exclusion from income for certain long term capital
gains. These refund mechanisms take effect for tax years beginning on January 1,
2000. Additionally, the state legislature lowered the state income tax rate from
5% to 4.75% beginning in 1999.
Both the Colorado Legislative Council (Focus Colorado: Economic & Revenue
Forecast 1999-2005, September 1999) and the Office of State Planning and
Budgeting (Colorado Economic Perspective, December 20, 1999) 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.
Both organizations also predict that, even taking into account significant tax
cuts enacted in 1999, 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 $711.2 million in fiscal year 1999-2000.
That office predicts that the amount of excess revenue will grow to $1.2 billion
in fiscal year 2004-2005, with a total of $5.78 billion in excess revenue from
fiscal years 1999-2000 through 2004-2005. The Colorado Legislative Council
predicts revenue will exceed the TABOR limit by $673.4 million in fiscal year
1999-2000. The Council predicts increases in excess revenue each year through
2005, with a total of $5.97 billion in excess revenue from fiscal years
1999-2000 through 2004-2005. Unless voters approve retention of any excess
funds, all such funds would have to be refunded to taxpayers.
In addition to normal sources of revenue, the state government expects to
receive $2.88 billion over the next 25 years from the settlement of a lawsuit
against several tobacco companies. The initial payment of $33.9 million was
expected in December 1999, followed by payments of $29.2 million in January 2000
and approximately $60 million in April 2000. (Press Release by Attorney
General's office, 11/17/98, 3/9/99, and 12/13/99.) 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, December 20, 1999 (Colorado Economic Perspective);
Colorado Legislative Council, Focus Colorado: Economic & Revenue Forecast,
1999-2005, September 1999 (Focus Colorado); Dr. Tucker Hart Adams, US Bank 2000
Economic Forecast (US Bank); Colorado Business Economic Outlook Forum 2000
(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 and is expected to exceed 4.1
million in 2000-2001. Colorado economists forecast the rate of population growth
will remain consistent through 2000 at between 1.8 - 2.0% per year, although
economists agree that net migration into Colorado has slowed and will gradually
decline. According to US Bank, Colorado's gross state product in 1997 was $126.1
billion, placing Colorado 22nd among states. Approximately two-thirds of the
Colorado gross state product is derived from services. According to US Bank,
three of the state's four largest employers are telecommunications companies.
Dramatic changes are occurring in this sector as AT&T has acquired TCI
(Telecommunications, Inc.) and is in the process of acquiring Media One, and US
West and Qwest agreed to merge. The federal government is another significant
component of the state's economy, annually pumping into the local economy $21
billion in salary, benefits, subsidies, and grants and $2.4 billion in
procurement contracts (according to US Bank).
Economists expect growth in non-agricultural employment to slow in Colorado. Job
growth in 1998 was 3.6%. Estimates for 1999 range from 3.3-3.5%, and forecasts
for 2000 predict job growth of between 2.8-2.9%. According to Colorado Outlook,
employment in all job sectors except manufacturing and oil, gas and mining grew
in 1999. The unemployment rate for 1999 was estimated between 3.0-3.1%. The
unemployment rate is expected to increase in 2000, with predictions of 3.1-3.6%,
but to remain below the national employment rate. All economic forecasts
reviewed predict that the labor shortage faced by many Colorado companies will
continue in 2000 and beyond. According to Focus Colorado, the state's labor
shortage is the most significant constraint on economic growth in Colorado.
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An increase for personal income in 1999 is estimated by Colorado economists in
the range of 7.0-7.8%. The forecast for 2000 is for an increase in personal
income in the range of 6.5-7.5%. In 1999, the Denver-Boulder metropolitan area's
inflation rate, estimated to be 2.9-3.0% again outpaced nationwide inflation of
2.2-2.3%. Colorado economists forecast the Denver-Boulder metropolitan area's
inflation rate for 2000 at between 3.2-3.4%, as compared to an inflation rate
forecast of between 2.3-2.5% for the nation. Retail sales in Colorado rose
between 6.4-7.8% in 1999, according to estimates, as compared to an increase of
6.0-7.0% in 1998. Projections by Colorado economists are for retail sales growth
in 2000 of between 6.0-7.0%.
Colorado's construction industry showed strong growth in the early 1990's, but
the decade ends, according to economists, with no clear trend. Residential
construction faltered in 1999, with the number of permits issued showing either
no growth or up to 5.9% decrease, according to estimates. For 2000, all reports
reviewed predict a decrease in the number of housing permits, dropping 0.3-8.2%
from 1999 numbers. In non-residential construction , the change in the value of
contracts varies widely from year to year. For 1998, Colorado economists agree
that non-residential construction declined, as the sector posted a 22.0-22.5%
decrease in the value of contracts as compared with 1997. Economists concur that
1999 was a rebound year, although the estimates of growth in non-residential
construction vary from 10.2-25.9%. The outlook for 2000 is for a decrease of
5.3-10.0%. According to Colorado Economic Perspective, $5 billion in public
works construction occurred in metropolitan Denver in the 1990's. Colorado
Outlook notes that in 2000-2001, some major public construction projects,
including the new professional football stadium, will be winding down, and that
several new, large public projects will not be starting until 2001-2002. Among
the major public projects scheduled for the first decade of the new century are
more than a billion dollars in transportation improvements approved by voters in
1999 (including a state-wide road building program and a new light rail line for
metropolitan Denver) and voter-approved bond issues for improvements to Denver's
convention center, zoo and art museum.
Colorado economists concur that the state's remarkable economic expansion of the
early 1990's is decelerating and that the state will experience slower growth
into the first years of the 21st century. According to Colorado Economic
Perspective, the state will realize continued but slower expansion, with three
factors limiting the Colorado economy: labor shortage, increase costs of living
and doing business in Colorado, and construction slow-down. Colorado Economic
Perspective also concludes that the primary risk for the Colorado economy is a
national recession, which is most likely to be caused by a weak international
economy, decline in the financial industry, or inflation. The economic reports
reviewed concur that troubles in the world economy have the potential to
dramatically affect Colorado's economy. According to US Bank and Colorado
Outlook, Colorado's exports rose approximately 2% to approximately $6 billion in
1998. Japan and Canada are Colorado's largest trading partners. 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 10 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,
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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 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
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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 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 debts. The Louisiana
Commissioner of Administration has announced a breakeven budget for the
1998-1999 fiscal year, with some possibility of a mid-year budget reduction to
preserve the balance for 1999-2000. The 1998-1999 year was proceeded by six
years of budget surpluses with moderate levels of net long-term debt not
exceeding $200 million per year in capital outlays.
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, off track racehorse betting parlors and a
statewide lottery. All gaming revenues are considered general fund revenues of
the State and are available to
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meet the financial requirements of the State. The Harrah's land based casino
opened in October of 1999 and is servicing their $100 million per year tax
payment to the State of Louisiana.
The continuation of general fund surpluses does not assure the revenues for
bonds not entitled to the 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 12,000 jobs from October 1998 to October 1999. The 0.5% rate of
job growth caused an increase in the statewide unemployment rate to 5.0% from
5.5% in October 1999. 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 tax originally enacted in 1986. However this on penny
reduction can be reinstated by a vote of the legislature. Recent restructuring
of the oil and gas exploration industry has caused administrative staff
reductions among the integrated international petrochemical firms. The slow
current rate of moderate employment growth is expected to continue throughout
the next year. Governor Mike Foster was re-elected in a campaign which stressed
greater attention to all levels of education and training in Louisiana.
Improving the quality of education in Louisiana has been identified in several
national studies of Louisiana as a key component in attracting future employment
growth. There was a record commitment of new manufacturing facilities within
Louisiana totaling $4.9 billion which should create 8,577 new jobs.
Risk Factors Affecting the Maryland Fund
Some of the significant financial and other 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 11,
1999, relating to issues of State of Maryland general obligations and does not
purport to be a complete description.
The State of Maryland has a population of approximately 5.1 million, with
employment based largely in services, trade, and government. Those sectors,
along with finance, insurance, and real estate, were the largest contributors to
the gross state product, according to the most recent Census. Population is
concentrated around the Baltimore and Washington, DC PMSAs. Proximity to
Washington, DC influences the above average percentage of employees in
government. Manufacturing, on the other hand, is a smaller proportion of
employment than for the nation as a whole. Annual unemployment rates have been
below those of the national average for each of the last 20 years except 1979,
1987 and 1998. The State's personal income per capita is the 5th highest in the
nation in 1998, according to the US Department of Commerce, Bureau of Economic
Analysis, at 113.3% of the national average.
The State's total expenditures as shown in summary financial statements for the
fiscal years ending June 30, 1996, June 30, 1997 and June 30, 1998 were $12.824
billion, $13.385 billion, and $13.566 billion, respectively. The State
Constitution mandates a balanced budget. The State enacts it's budget annually.
Revenues are derived largely from certain broad-based taxes, including statewide
income, sales, motor vehicle, and property taxes. Non-tax revenues are largely
from the federal government for transportation, health care, welfare and other
social programs. General fund revenues on a budgetary basis realized in the
State's fiscal year ended June 30, 1998, exceeded estimates by about $105.1
million, or 1.3%. The State ended fiscal 1998 with a $419.8 million general fund
balance on a budgetary basis of which $302.7 million was designated to fund
fiscal year 1999 operations; this balance reflects a $391.9 million increase
compared to the balance projected at the time the 1998 budget was enacted. In
addition, there was a balance in the Revenue Stabilization Account of $617.9
million. On a GAAP basis, the fiscal 1998 unreserved general fund balance was
$230.2 million, compared with $49.2 million at the
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end of fiscal 1997. The total GAAP fund balance for fiscal year 1998 was
$1,595.2 million compared with a total fund balance of $1,059.1 million for
fiscal year 1997.
The public indebtedness of Maryland and its instrumentalities is divided into
three basic types. The State and its political subdivisions issue general
obligation bonds for capital improvements and for various State or local
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, DC. 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, DC, 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.
There can, of course, be no assurance that the ratings and other factors
mentioned above will remain unchanged or that particular bond issues may not be
adversely affected by changes in the state or local economic or political
conditions. Because the Maryland Fund favors investing in revenue bonds, it's
performance may be affected by economic developments and local legislation and
policy changes impacting a specific facility or type of facility not described
above. The Maryland Fund invests in revenue bonds issued on behalf of non-profit
health care providers in Maryland. Changes in regulation at the federal and
state level and other economic developments will continue to have a significant
impact on this sector.
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 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. Total expenditures
and other uses for fiscal 1999 totaled approximately $21.647 billion and total
revenues and other sources totaled approximately $21.567 billion. The budgeted
operating funds ended fiscal 1999 with a deficit of revenues and other sources
as compared to expenditures and other uses of $79.7 million, and with positive
fund balances of approximately $2.112 billion.
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On November 16, 1999, the Governor approved the fiscal 2000 budget, but vetoed
approximately $250 million in appropriations. After accounting for the vetoes
and approximately $190 million of vetoes that were overridden by the
legislature, the fiscal 2000 budget is based on budgeted expenditures and other
uses of approximately $21.1 billion, a $855 million or 4.3% increase over fiscal
1999 budgeted expenditures and other uses. Fiscal 2000 tax revenues are
estimated at $14.850 billion, a $558 million or 3.9% increase over fiscal 1999
tax revenues. Prior to the enactment of the fiscal 1999 budget, the Commonwealth
operated under a series of five monthly interim budgets providing cumulatively
for spending through November 30, 1999. The fiscal 2000 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
from 1993 through 1999 and is expected to increase again in fiscal 2000.
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 indicated that the Commonwealth ended fiscal 1995, 1996, 1997 and
1998 with fund equities of approximately $287.4 million, $709.2 million, $1.096
billion and $1.841 billion, respectively.
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
1997-98 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.
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In 1977, the State enacted legislation which created the Counter-Cyclical Budget
and Economic Stabilization Fund (BSF). The BSF is designed to accumulate
balances during years of significant economic growth which may be utilized in
years when the State's economy experiences cyclical downturns or unforeseen
fiscal emergencies. General Fund surplus during 1992-98 was transferred, as
required by statute, to the BSF. Calculated on an accrual basis, the unreserved
ending accrued balances of the BSF were $987.9 million at September 30, 1995,
$614.5 million at September 30, 1996, $579.8 million at September 30, 1997, and
$100.5 million at September 30, 1998. The balance is net of a reserve for future
education spending of $529.1 million at September 30, 1996 and $572.6 million on
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 school 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 school 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.
The State has developed a risk management program to identify risks faced by the
State concerning year 2000 operability. The State has identified computer
applications, primarily within the executive branch, that are critical to
conducting the State's operations and that need to be year 2000 compliant. The
State's year 2000 remediation efforts have been aimed primarily at ensuring
unimpeded and uninterrupted operation, including tax collections, investment
activities, and timely payment of its obligations. As of March 31, 1999, the
State had validated and tested 97% of the critical computer applications. The
remaining 3% of the critical applications were in other stages of completion.
Because of the unprecedented nature of the year 2000 issue, its effect and the
success of the related remediation efforts cannot be fully determinable until
the year 2000 and thereafter.
Currently, the State's general obligation bonds are rated Aa1 by Moody's and AA+
by Standard & Poor's, following rating increases announced 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.
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
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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
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 phase down
on replacement capital equipment and miscellaneous sales tax
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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% 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.
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
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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.
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
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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. The
General Fund budget reserve was set at $622 million.
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 balance at June 30,
2001, at $3.324 billion.
A February 1999 forecast projected an Accounting General Fund balance at June
30, 1999, at $1.235 billion due to a $285 million increase in projected revenues
and a $3 million increase in expenditures. The balance at June 30, 2001, was
projected at $4.056 billion.
The 1999 Legislature authorized $23.384 billion in spending for the 1999-20001
biennium, an increase of $2.053 billion, or 9.6%, from 1997-1999 expenditures.
Resources for the 1999-2001 biennium were projected to be $24.620 billion.
Revenues, excluding the balance brought forward from the 1997-1999 biennium, are
expected to be $2.248 billion, or 10.8%, greater than the previous biennium.
The Legislature passed a $1.250 billion sales tax rebate. Individual income tax
rates were reduced in all three brackets, from 6.0% to 5.5$, from 8.0% to 7.25%,
and from 8.5% to 8.0%. In addition, the "marriage penalty" inherent in the
previous rate structure was eliminated. These changes reduced projected revenues
by $1.312 billion for the 1999-2001 biennium.
The Legislature authorized 15.7% more spending for elementary and secondary
education in the 1999-2001 biennium than in 1997-1999, 21.6% more for property
tax aid programs to local governments, 12.2% more for health and human services
and 7.0% more for higher education.
The Legislature also provided that if, based on a forecast of general fund
revenues and expenditures in November of an even-numbered year for February of
an odd-numbered year, the Commissioner of Finance projects a positive
unrestricted budgetary general fund balance at the close of the biennium that
exceeds one-half of one percent of total general fund biennial revenues, the
Commissioner shall designate the entire balance as available for rebate to
taxpayers. In making the determinations of general fund balance or biennial
revenue, the Commissioner is prohibited from including any balance or revenue
attributable to certain tobacco settlement payments received after July 1, 1998
and before July 1, 2001. If the Commissioner designates an amount for rebate,
the Governor must then present a plan to the Minnesota Legislature for rebating
that amount, with payments to begin no later than August 15 of the odd-numbered
year. The legislation provides that the Legislature shall either enact, modify
or reject the plan presented by the Governor.
After the Legislature adjourned in May 1999, the Commissioner of Finance
estimated that at June 30, 2001, the Accounting General Fund balance would be
positive $80 million. The Accounting General Fund balance at June 30, 1999, was
an estimated $1.518 billion.
The Commissioner of Finance, in a November 1999 forecast, estimated the
Accounting General Fund balance at June 30, 2001, at $1.584 billion, $1.504
billion more than estimated after the 1999 Legislature adjourned, due to a
$1.154 billion increase in projected revenues, a $453 million gain from the
1997-1999 biennium, and a $103 million decrease caused by spending increases and
other charges.
Only $571 million of the $1.584 billion projected 1999-2001 surplus was
available for spending. The statutes
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allocate $43 million to provide a $50 increase in per pupil elementary and
secondary school aids. Sixty percent of the remaining balance plus interest,
$1.013 billion, is deposited into the Property Tax Reform Account.
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
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 provides
that it 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. The
State of Minnesota implemented a new software version on November 30, 1998.
Testing of the new compliant version to date has been very positive. 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 August 1999 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.
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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. During the
period following the1980 to 1983 recession periods until the mid-1990's,
Missouri unemployment levels generally approximated or slightly exceeded the
national average; however, in the second half of the 1990's, Missouri
unemployment levels have returned to generally being equal to or lower than 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
collectively contain over 50% of Missouri's estimated 1998 population census of
approximately 5,438,559. 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. In addition, aircraft and related businesses in
Missouri are the recipients of substantial annual dollar volumes of defense
contract awards. There can be no assurances there will not be further changes in
the levels of military appropriations, and, to the extent that further changes
in military appropriations are enacted by the United States Congress or foreign
governments purchasing military equipment manufactured in the State, Missouri
could be disproportionately affected. It is impossible to determine what effect,
if any, continued consolidation in defense related industries will have on the
economy of the State. Any shift or loss of production operations now conducted
in Missouri could have a negative impact on the economy of the State.
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 $315
million for desegregation costs in fiscal 1995, $274 million in fiscal 1996,
$227 million in fiscal 1997, $280 million in fiscal 1998 and $285 million in
fiscal 1999. This expense accounts for approximately 6% of total state General
Revenue Fund spending in fiscal 1995, approximately 5% in fiscal 1996, and
approximately 6% for fiscal 1997, 1998, and 1999. The State has entered into a
settlement agreement with respect to the Kansas City desegregation lawsuit
pursuant to which the State made its final desegregation payment to the Kansas
City Missouri School District in fiscal 1999.
Revenue and Limitations Thereon. Article X, Sections 16-24 of the Constitution
of Missouri (Hancock Amendment), imposes limitations on the amount of State
taxes which may be imposed by the General Assembly of Missouri (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.
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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.
Risk Factors Affecting the New York Fund
The following information is a summary of special factors affecting the New York
Municipal Series. 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 forecast of the State's economy shows continued growth in 1999 and 2000 for
employment, wages, and personal income, although, for 2000, a slowdown in the
growth rate of employment is expected. The growth of personal income is
projected to decrease from 5.2% in 1998 to 4.8% in 1999, and then grow 4.9% in
2000. The growth in average wages is expected to outpace the inflation rate in
both 1999 and 2000. Overall employment growth is expected to be 2.0% in 1999,
almost the same as in 1998, but is expected to drop to 1.7% in 2000, reflecting
the slowing growth of the national economy, continued spending restraint in
government, constraints in labor supply, and continued restructuring in the
manufacturing, health care, and banking sectors.
At the national level, economic growth during both 1999 and 2000 is expected to
be slower than it was during 1998. 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 2000 as consumer confidence retreats from
historic highs and the stock market ceases to provide large amounts of extra
discretionary income. The forecast projects real Gross Domestic Product (GDP)
growth of 3.8% in 1999, slightly below the 1998 growth rate. In 2000 the rate of
growth in real GDP growth is expected to fall further, to 3.1%. The growth of
nominal GDP is projected to increase from 4.9% in 1998 to 5.2% in 1999 and fall
to 4.7% in 2000. The inflation rate as measured by the Consumer Price Index is
expected to increase to 2.3% in 1999 and rise to 2.8% in 2000. The annual rate
of job growth is expected to be 2.2% in 1999, lower than the strong growth rate
experienced in 1998. In 2000, employment growth is forecast to slow further, to
2.0%. Growth in personal income and wages is expected to remain fairly strong in
1999 and again in 2000.
Many uncertainties exist in any forecast of the national and State economies,
particularly in light of the recent volatility in the international economy and
domestic financial markets. The timing of an 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 in any, or all, of the
concepts that are forecasted may differ substantially and adversely from the
outlook described herein.
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1999-2000 Fiscal Year (Executive Budget Forecast). The State's current fiscal
year began on April 1, 1999 and ends on March 31, 2000. On March 31, 1999, the
State adopted the debt service portion of the State budget for the 1999-2000
fiscal year; four months later, on August 4, l999, it enacted the remainder of
the budget. The Governor approved the budget as passed by the Legislature. Prior
to passing the budget in its entirety for the current fiscal year, the State
enacted appropriations that permitted the State to continue its operations.
Following enactment of the budget, the State prepared a Financial Plan for the
1999-2000 fiscal year (the 1999-2000 Financial Plan) that sets forth projected
receipts and disbursements based on the actions taken by the Legislature. This
section provides a summary of the Financial Plan which was released on August
20, 1999. The State expects to update the Financial Plan quarterly. The Office
of the State Comptroller is conducting a review of the 1999-2000 enacted budget
and is expected to report on the enacted budget on or before September 17, 1999.
In 1999-2000, General Fund disbursements, including transfers to support capital
projects, debt service and other funds, are estimated at $37.35 billion, an
increase of $858 million or 2.4% over 1998-99. Projected spending under the
1999-2000 enacted budget is $215 million above the Governor's Executive Budget
recommendations, including 30-day amendments. This change is the net result of
spending actions that occurred during negotiations on the Budget. The increase
in General Fund spending is comprised of $1.1 billion in legislative additions
to the Executive Budget (primarily in education), offset by various actions,
including reestimates of required spending based on year-to-date results and the
identification of certain other resources that offset spending, such as $250
million from commencing the process of privatizing the Medical Malpractice
Insurance Association (MMIA), $250 million from the retention of the Debt
Reduction Reserve Fund within the General Fund and about $100 million in excess
fund balances. The MMIA was established in 1983 to provide excess liability
insurance to doctors and medical providers. Legislation enacted with the
1999-2000 budget initiates the process of MMIA privatization and transfers
excess fund balances to the State.
The 1999-2000 enacted budget provides for $831 million in new funding for public
schools, the largest year-to-year increase in State history. The budget also
enacts several new tax cuts valued at $375 million when fully phased in by
2003-04. None of the $1.82 billion cash surplus from 1998-99 is assumed to
support spending in 1999-2000, but instead is reserved to help offset the costs
of previously enacted tax cuts that take effect after 1999-2000.
The 1999-2000 Financial Plan projects a closing balance of $2.87 billion in the
General Fund. The balance is comprised of the $1.82 billion surplus from 1998-99
that has been set aside to finance already-enacted tax cuts, $473 million in the
Tax Stabilization Reserve Fund (TSRF), $250 million in the Debt Reduction
Reserve Fund (DRRF), $132 million in the Contingency Reserve Fund (CRF), and
$200 million in the Community Projects Fund (CPF), which finances legislative
initiatives. The State expects to close 1999-2000 with cash balances in these
funds at their highest level ever.
Many complex political, social and economic forces influence the State's economy
and finances, which may in turn affect the State Financial Plan. These forces
may affect the State unpredictably from fiscal year to fiscal year and are
influenced by governments, institutions, and organizations that are not subject
to the State's control. The State Financial Plan is also necessarily based upon
forecasts of national and State economic activity. Economic forecasts have
frequently failed to predict accurately the timing and magnitude of changes in
the national and State economies. The Division of Budget believes that its
projections of receipts and disbursements relating to the current State
Financial Plan, and the assumptions on which they are based, are reasonable.
Actual results, however, could differ materially and adversely from the
projections set forth here and those projections may be changed materially and
adversely from time to time.
The State Financial Plan is based upon forecasts of national and State economic
activity developed through both internal analysis and review of national and
State economic forecasts prepared by commercial forecasting services and other
public and private forecasters. Economic forecasts have frequently failed to
predict accurately the timing and magnitude of changes in the national and State
economies. Many uncertainties exist in forecasts of both the national and State
economies, including consumer attitudes toward spending, the extent of corporate
and governmental restructuring, the condition of the financial sector, federal
fiscal and monetary policies, the level of interest rates, and the condition of
the world economy, which could have an adverse effect on the State. There
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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.
Four governmental fund types comprise the State Financial Plan: the General
Fund, the Special Revenue Funds, the Capital Projects Funds, and the Debt
Service Funds. The State's fund structure adheres to the 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 taxes and other resources
not dedicated to particular purposes. General Fund moneys are also transferred
to other funds, primarily to support certain capital projects and debt service
payments in other fund types.
Projected General Fund Receipts. Total General Fund receipts in 1999-2000 and
transfers from other funds are projected to reach $39.32 billion, an increase of
$2.58 billion over the estimated 1998-99 level. The transfer of the $1.82
billion surplus recorded in 1998-99 to the 1999-2000 fiscal period has the
effect of exaggerating the growth in State receipts from year to year be
depressing reported 1998-99 figures and inflating 1999-2000 projections.
Net General Fund personal income tax collections for 1999-2000 are projected to
reach $23 billion, an increase of $2.9 billion over 1998-99. This increase is
due in part to refund reserve transactions which serve to increase reported
1999-2000 personal income tax receipts by $1.77 billion. While gross collections
of the personal income tax are expected to grow 8.7% from 1998-99, the
exceptional year-to-year change in the estimate of receipts from this source is
still significantly attributable to the movement into the current fiscal year of
the General Fund surplus available at the end of 1998-99 (through a tax refund
reserve transaction). The approximately $1.7 billion impact on the
year-over-year change that results from the movement of the surplus is only
partially offset by the planned diversion of almost $700 million in additional
receipts to the School Tax Relief (STAR) Fund in the current year. In its second
year, STAR now provides statewide school property tax relief to all homeowners
for their primary residence.
User tax and fees are projected at $7.35 billion in 1999-2000, an increase of
$105 million from 1998-99. The sales tax component of this category accounts for
virtually all of the 1999-2000 growth.
Business tax receipts are expected to total $4.60 billion in 1999-2000, $260
million below 1998-99 fiscal year results. The year-over-year decline in
projected receipts is largely due to statutory changes.
Receipts from other taxes, which are comprised primarily of receipts from estate
and gift taxes, real property gains tax and pari-mutuel taxes on wagering, are
projected to total $1 billion, $1.14 billion below last year's amount. The
primary factors accounting for most of the expected decline include: an adverse
tax tribunal decision, pari-mutuel tax reductions and reductions in estate and
gift taxes.
Miscellaneous receipts include license revenues, income from fees and fines,
abandoned property receipts, investment income, and a portion of the assessments
levied on medical providers. Miscellaneous receipts are expected to total $1.36
billion in 1999-2000, a decline of $142 million from 1998-99. This reflects the
loss of non-recurring receipts received in 1998-99 and the growing effects of
the phase-out of the medical provider assessments scheduled to be eliminated in
January 2000.
Transfers from other funds to the General Fund consist primarily of tax revenues
in excess of debt service requirements. Transfers to the General Fund are
expected to total $2.02 billion, or $99 million more than last year.
General Fund Disbursements. The 1999-2000 Financial Plan projects General Fund
disbursements and transfers to capital, debt service and other funds of $37.36
billion, an increase of $868 million or 2.38% over 1998-99. Following the
pattern of the last two fiscal years, education programs receive the largest
share of new funding contained in the 1999-2000 Financial Plan. School aid is
expected to grow by $831 million or 8.58% over 1998-99 levels (on a State fiscal
year basis). Outside of education, the largest growth in spending is for State
Operations ($207 million, including $100 million reserved for possible
collective bargaining costs); Debt Service ($183 million), and mental hygiene
programs, including funding for a cost of living increase for care providers
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($114 million). These increases were offset, in part, by spending reductions or
actions in health and social welfare ($280 million), and in general State
charges ($222 million).
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.
Grants to Local Governments are projected at $25.68 billion in 1999-2000, an
increase of $926 million over 1998-99.
General Fund spending for school aid is projected at $10.52 billion on a State
fiscal year basis, an increase of $831 million from 1998-99. The Executive
Budget provides additional funding for operating aid, building aid, and textbook
and computer aids. It also funds the remainder of aid payable for the 1998-99
school year. For all other educational programs, disbursements are projected to
grow by $78 million to $2.99 billion.
Medicaid costs are estimated at $5.53 billion in 1999-2000, essentially
unchanged from 1998-99. Spending on welfare is projected at $2.70 billion, a
decline of $252 million. Revenue sharing and other general purpose aid to local
governments in projected at $825 million.
State Operations spending reflects the costs of operating State agencies. The
State estimates that disbursements for State Operations in 1999-2000 will total
$6.85 billion. Compared to 1998-99, spending for State Operations is projected
to increase by $181 million. The year-to-year growth reflects $100 million
reserved to fund new collective bargaining agreements, including the recent
contract ratified by the United University Professionals. Costs for the State's
Year 2000 compliance programs and growth in the Legislative and Judiciary
budgets also contribute to the increase.
General State Charges spending in this category, which accounts primarily for
fringe benefits for State employees and retirees, is projected to total $2.04
billion in 1999-2000. Disbursements for General State Charges are projected to
decrease by $222 million from the prior year, with growth of $28 million in a
variety of areas offset by the use of $250 million in proceeds from the
privatization of the Medical Malpractice Insurance Association.
Short and long-term Debt Service is projected at $2.28 billion in 1999-2000, an
increase of $185 million over 1998-99. The growth reflects debt service costs
from bond sales in prior years and certain sales planned for 1999-2000.
Capital Projects and all other transfers spending is estimated at $553 million
in 1999-2000, a decrease of $212 million from 1998-99. The decline primarily
reflects the impact of certain non-recurring transfers.
General Fund Balance. The State is projected to close the 1999-2000 fiscal year
with a General Fund balance of $2.87 billion. The balance is comprised of the
$1.82 billion tax reduction reserve for future needs, $473 million in the Tax
Stabilization Reserve Fund, $250 million in the Debt Reduction Reserve Fund,
$132 million in the Contingency Reserve Fund and $200 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. For 1999-2000 projected disbursements in this fund type
total $30.94 billion, an increase of $1.29 billion (4.35%) over 1998-99 levels.
Disbursements from federal funds, primarily the federal share of Medicaid and
other social services programs, are projected to total $22.17 billion in the
1999-2000 fiscal year. Remaining growth in federal funds is primarily for the
Child Health Plus program ($117 million), offset by decreased spending in
certain social service programs. State special revenue spending is projected to
be $8.77 billion, an increase of $550 million from last year.
Capital Project Funds. Capital Projects Funds spending in 1999-2000 is projected
at $4.18 billion, an increase of $114 million or 2.80% from last year.
Transportation, environmental, education and mental hygiene programs are the
major sources of year-to-year spending growth in this category.
Debt Service Funds. Debt Service Funds spending are estimated at $3.64 billion
in 1999-2000, up $370 million or 11.31% from 1998-99. 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
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Dedicated Highway and Bridge Trust Fund, account for $124 million of the
year-to-year growth. Debt service for educational purposes, including State and
City University programs financed through the Dormitory Authority, will increase
by $80 million. The remaining growth is for a variety of programs in 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. Preliminary analysis by the
Division of the Budget (DOB) indicates that the State will have a 2000-01 budget
gap of approximately $1.9 billion, or about $300 million above the 1999-2000
Executive Budget estimate (after adjusting for the projected costs of collective
bargaining). This estimate includes an assumption for the projected costs of new
collective bargaining agreements, $500 million in assumed operating
efficiencies, as well as the planned application of approximately $615 million
of the $1.82 billion tax reduction reserve. In recent years, the State has
closed projected budget gaps which DOB estimates at $5.0 billion (1995-96), $3.9
billion (1996-97), $2.3 billion (1997-98), and less than $1 billion (1998-99).
DOB will formally update its projections of receipts and disbursements for
future years as part of the Governor's 2000-01 Executive Budget submission. The
revised expectations for these years will reflect the cumulative impact of tax
reductions and spending commitments enacted over the last several years as well
as new 2000-01 Executive Budget recommendations.
The State and the United University Professionals (UUP) union have reached a
tentative agreement on a new four-year labor contract. The State is continuing
negotiations with other unions representing State employees, the largest of
which is the Civil Service Employees Association (CSEA). CSEA previously failed
to ratify a tentative agreement on a new four-year contract earlier in 1999. The
1999-2000 Financial Plan has reserved $100 million for possible collective
bargaining agreements, and reserves are contained in the preliminary outyear
projection for 2000-01 to cover the recurring costs of any new agreements. To
the extent these reserves are inadequate to finance such agreements, the costs
of new labor contracts could increase the size of future budget gaps.
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. The State assumes
that the 2000-01 Financial Plan will achieve $500 million in 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 help bring projected disbursements and
receipts into balance. The projections do not assume any gap-closing benefit
from the potential settlement of State claims against the tobacco industry.
Prior Fiscal Years. New York State's financial operations have improved during
recent fiscal years. During its last seven fiscal years, the State has recorded
balanced budgets on a cash basis, with positive year-end fund balances.
1998-99 Fiscal Year. The State ended its 1998-99 fiscal year on March 31, 1999
in balance on a cash basis, with a General Fund cash surplus as reported by the
DOB of $1.82 billion. The cash surplus was derived primarily from
higher-than-projected tax collections as a result of continued economic growth,
particularly in the financial markets and the securities industries.
The State reported a General Fund closing cash balance of $892 million, an
increase of $254 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 (CRY) and the Community Projects Fund
(CPF). The TSRF closing balance was $473 million, following an additional
deposit of $73 million in 1998-99. The CRF closing balance was $107 million,
following a deposit of $39 million in 1998-99. The CPF, which finances
legislative initiatives, closed the fiscal year with a balance of $312 million.
The closing fund balance excludes $2.31 billion that the State deposited into
the tax refund reserve account at the close of 1998-99 to pay for tax refunds in
1999-2000 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 as of March 31, 1999. The tax refund reserve account transaction
has the effect of decreasing reported personal income tax receipts in 1998-99,
while increasing reported receipts in 1999-2000.
General Fund receipts and transfers from other funds (net of tax refund
reserve-account activity for the 1998-99 fiscal year totaled $36.74 billion, an
increase of 6.34% from 1997-98 levels. General Fund disbursements and
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transfers to other funds totaled $36.19 billion for the 1998-99 fiscal year, an
increase of 6.23% from 1997-98 levels.
1997-98 Fiscal Year. The State ended its 1997-98 fiscal year in balance on a
cash basis, with a General Fund cash surplus as reported by DOB of approximately
$2.04 billion. The cash surplus was derived primarily
from-higher-than-anticipated receipts and lower spending on welfare, Medicaid,
and other entitlement programs.
The General Fund had a closing balance of $638 million, an increase of $205
million from the prior fiscal year. The TSRF closing balance was $400 million,
following a required deposit of $15 million (repaying a transfer made in
1991-92) and an additional 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 closed the fiscal year with a balance of $170 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
LGAC financing program and was required to be on deposit on March 31, 1998.
General Fund receipts and transfers from other funds (net of tax refund reserve
account activity) for the 1997-98 fiscal year totaled $34.55 billion, an annual
increase of 4.57% over 1996-97. General Fund disbursements and transfers to
other funds were $34.35 billion, an annual increase of 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 (repaying a transfer made in 1991-92)
and an additional deposit of $65 million in 1996-97. In addition, $41 million
remained on deposit in the CRF. The remaining $75 million reflected amounts then
on deposit in the CPF. 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 (net of tax refund reserve
account activity) for the 1996-97 fiscal year totaled $33.04 billion, an
increase of 0.7% from the previous fiscal year. General Fund disbursements and
transfers to other funds totaled $32.90 billion for the 1996-97 fiscal year, an
increase of 0.7% from the 1995-96 fiscal year.
Debt and Other Financing Activities
1999-2000 Borrowing Plan. The State's 1999-2000 borrowing plan projects
issuances of $235 million in general obligation bonds (including $140 million
for purposes of redeeming outstanding Bond Anticipation Notes (BANs) and $113
million in general obligation BANs. The State expects to issue up to $366
million in Certificates of Participation to finance equipment purchases
(including costs of issuance, reserve funds, and other costs) during the
1999-2000 fiscal year. Of this amount, it is anticipated that approximately $138
million will be used to finance agency equipment acquisitions and to reimburse
State special revenue funds for prior year disbursements for Y2K compliance
services. Approximately $228 million is expected to finance the purchase of new
welfare computer systems designed to improve case management, fraud detection
and child support collection capabilities.
Borrowings by public authorities pursuant to lease-purchase and contractual-
obligation financings for capital programs of the State are projected to total
approximately $2.93 billion, including costs of issuance, reserve funds, and
other costs, net of anticipated refundings and other adjustments in 1999-2000.
Included therein are borrowings by: (i) the Dormitory Authority of the State of
New York (DASNY) for the State University of New York (SUNY); the City
University of New York (CUNY); other educational purposes; and mental health
facilities; (ii) the Thruway Authority for the Dedicated Highway and Bridge
Trust Fund and Consolidated Highway Improvement Program; (iii) the Urban
Development Corporation (UDC) (doing business as the Empire State Development
Corporation) for prisons, youth facilities and economic development purposes;
(iv) the Environmental Facilities Corporation (EFC) for environmental projects;
and (v) the Housing Finance Agency (HFA) for housing programs. These borrowings
include the Community Enhancement Facilities Assistance Program (CEFAP) for
economic development purposes. Four public authorities (Thruway Authority,
DASNY,
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UDC and HFA) are authorized to issue bonds under this program. The projections
of State borrowings for the 1999-2000 fiscal year are subject to change as
market conditions, interest rates and other facts vary throughout the fiscal
year.
Outstanding Debt of the State and Certain Authorities. For purposes of analyzing
the financial condition of the State, debt of the State and of certain public
authorities may be classified as State-supported debt, which includes general
obligation debt of the State and lease-purchase and contractual obligations of
public authorities (and municipalities) where debt service is paid from State
appropriations (including dedicated tax sources, and other revenues such as
patient charges and dormitory facilities rentals). In addition, a broader
classification, referred to as State-related debt, includes State-supported
debt, as well as certain types of contingent obligations, including moral
obligation financings, certain contingent contractual-obligation financing
arrangements, and State-guaranteed debt where debt service is expected to be
paid from other sources and State appropriations in that they may be made and
used only under certain circumstances.
State-Supported and State-Related Debt Outstanding. The first type of
State-supported debt, general obligation debt, is currently authorized for three
programmatic categories: transportation, environmental and housing. As of March
31, 1999, the total amount of outstanding general obligation debt was $4.8
billion, including $185 million in BANs.
The second type of State-supported debt, lease-purchase and
contractual-obligation financing arrangements with public authorities and
municipalities, has been used primarily by the State to finance the State's
highway and bridge program, SUNY and CUNY buildings, health and mental hygiene
facilities, prison construction and rehabilitation, and various other State
capital projects.
The State has utilized and expects to continue to utilize lease-purchase and
contractual-obligation financing arrangements to finance its capital programs,
in addition to authorized general obligation bonds. Total outstanding
State-supported debt as of March 31, 1999 was $35.8 million.
The category of State-related debt includes the State-supported debt described
above, moral obligation and certain other financings and State-guaranteed debt.
Total outstanding State-related debt as of March 31, 1999 was $37.7 million.
Year 2000 Compliance. New York State is currently addressing Year 2000 (Y2K)
data processing compliance issues. Since its inception, the computer industry
has used a two-digit date convention to represent the year. In the year 2000,
the date field will contain "00" and, as a result, many computer systems and
equipment may not be able to process dates properly or may fail since they may
not be able to distinguish between the years 1900 and 2000. The Year 2000 issue
not only affects computer programs, but also the hardware, software and networks
on which they operate. In addition, any system or equipment that is dependent on
an embedded chip, such as telecommunication equipment and security systems, may
also be adversely affected.
In April 1999 the State Comptroller released an audit on the State's Year 2000
compliance. The audit, which reviewed the State's Y2K compliance activities
through October 1998, found that the State had made progress in achieving Y2K
compliance, but needed to improve its activities in several areas, including
data interchanges and contingency planning.
The Office for Technology (OFT) will continue to monitor compliance progress for
the State's mission-critical and high-priority systems. OFT submitted a final
quarterly compliance progress report to the Governor's Office for the quarter
ending September 30,1999. Monthly exception reporting for the remainder of the
year will replace the quarterly reports. The 1999-2000 enacted budget allocates
$19 million for priority embedded systems and $20 million for unanticipated
expenses related to bringing technology into Y2K compliance. OFT reports that as
of September 1999, the State's mission-critical systems are 100% compliant; 93%
of the overall compliance effort on the high-priority systems has been completed
with 269 systems now Year 2000 compliant. The State also procured independent
validation and verification services (IV &V) from a qualified vendor to perform
an automated review of code for all mission-critical systems which was completed
in October 1999. Overall, the vendor noted that New York State agencies had
followed and implemented several best practices and therefore the vendor made
very few process recommendations and only a few significant code check issues
(.01% of the code)
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were remaining after agency reviews of the IV&V results. These results compare
very favorably with results from IV&V of major systems from other states that
the vendor has done.
The State is also addressing a number of issues related to Y2K compliance,
including: testing all data exchange interfaces with federal, state, local and
private data partners for critical systems (as of September 1999, 98% of data
exchanges are done); completing compliance work of priority equipment and
systems that may depend on embedded chips (as of September 1999, 82% of these
systems are compliant); and contacting critical vendors and supply partners to
obtain and monitor Year 2000 compliance status information and assurances. The
State is also preparing contingency plans. All agencies were required to
complete contingency plans for priority systems and business processes by the
first quarter of calendar year 1999. These plans have been completed and tested
as of June 1999 and are being integrated into the State Emergency Response Plan
under the direction of the State Emergency Management Office. As of September
1999, 46 agencies have filed their contingency plans with the State Emergency
Management Office. In addition, State agencies that regulate industries, such as
the Public Service Commission, the Banking Department and others are closely
monitoring the few regulated companies that are not yet compliant. The Public
Service Commission reports that as of September 1999, all State-regulated
utilities, with the exception of a few small water and cable companies, are
ready for the Year 2000, including the existence of comprehensive contingency
plans.
The State has also been working with local governments since December 1996 to
raise awareness, promote action and provide assistance with Year 2000
compliance. This has included assisting local governments in addressing their
local Y2K issues, guiding local governments in holding Citizen Forums to inform
citizens of compliance and contingency activities in their community, and
guiding citizens in their individual preparations for Year 2000. Presentations,
teleconferences, written guidance materials, videotapes, a comprehensive web
site and brochures have been made available and widely distributed.
While New York State is taking what it believes to be appropriate action to
address Year 2000 compliance, there can be no guarantee that all of the State's
systems and equipment will be Year 2000 compliant and that there will not be an
adverse impact upon State operations or finances as a result. Since Year 2000
compliance by outside parties is beyond the State's control to remediate, the
failure of outside parties to achieve Year 2000 compliance could have an adverse
impact on State operations or finances as well.
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 1999-2000 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) a challenge to the State's
reimbursement rates for dental care provided under Medicaid; (iii) challenges to
the constitutionality of certain sections 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)
a challenge to the funding for New York City public schools; (vi) a challenge to
the Governor of New York regarding the application of his constitutional line
item veto authority to certain portions of budget bills; and (vii) a case
calling for the enforcement of sales and excise taxes imposed on motor fuel and
tobacco products sold to non-Indian consumers on Indian reservations.
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 each October
describing its most recent fiscal year.
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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 the Municipal Assistance Corporation for the City of New York (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. The Control Board terminated the
control period in 1986 when certain statutory conditions were met. State law
requires the Control Board to reimpose a control period 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.
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. Unforseen
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.
To successfully implement its Financial Plan, the city and certain entities
issuing debt for the benefit of the City must 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. 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. To
continue its capital plan without interruption, the City is proposing an
amendment to the State Constitution to change the methodology used to calculate
the debt limit. Since an amendment to the Constitution to raise the debt limit
could not take effect until City fiscal year 2001-02 at the earliest, the City
has decided to securitize a portion of its share of the proceeds from the
settlement with the nation's tobacco companies. However, a number of potential
developments may affect both the availability and level of funding that the City
will receive from the tobacco settlement. City officials have indicated that,
should their efforts to securitize a portion of City tobacco settlement proceeds
fail or not be accomplished in a timely manner, the City will request that the
State increase the borrowing authority of the TFA.
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 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 1999-2000 fiscal year.
The State has provided extraordinary financial assistance to select
municipalities, primarily cities, since the 1996-97 fiscal year. Funding has
essentially been continued or increased in each subsequent fiscal year. Such
funding in 1999-2000 totals $113.9 million. In 1997-98, the State increased
General Purpose State Aid for local governments by $27 million to $550 million,
and has continued funding at this new level since that date.
The 1998-99 budget included 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.
While the distribution of General Purpose State Aid for local governments was
originally based on a statutory formula, in recent years both the total amount
appropriated and the shares appropriated to specific localities have been
determined by the Legislature. A State commission established to study the
distribution and amounts of general purpose local government aid failed to agree
on any recommendations for a new formula.
Counties, cities, towns, villages and school districts have engaged in
substantial short-term and long-term borrowings. In 1997, the total indebtedness
of all localities in the State other than New York City was approximately $21.0
billion. A small portion (approximately $80.2 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
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deficit financing is outstanding. Twenty-one localities had outstanding
indebtedness for deficit financing at the close of their fiscal year ending in
1997.
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 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 that 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 default on
their respective obligations, particularly those using the financing techniques
referred to as State-supported or State-related debt. As of December 31, 1998,
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 $94 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 August 1998,
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 (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, 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
(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% 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 1999-2000 State
fiscal year, total State assistance to the MTA is projected to total
approximately $1.4 billion, an increase of $55 million over the 1998-99 fiscal
year.
State legislation accompanying the 1996-97 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 and subsequently amended it in
August 1997 and March 1999.
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The MTA plan now totals $12.55 billion. 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.
The MTA is expected to submit a proposed capital plan for 2000 through 2004 by
October 1, 1999 for consideration by the CPRB. There can be no assurance that
the proposed capital plan will be approved by the CPRB without significant
modifications, that the plan as adopted will be adequate to finance the MTA's
capital needs over the plan period, or that funding sources identified in the
approved plan will not be reduced or eliminated.
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 and 2000-04 Capital
Programs, 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
and 2000-04 Capital Programs accordingly. If the 1995-99 and 2000-04 Capital
Programs are delayed or reduced ridership causes fare revenues to decline, the
MTA's ability to meet its operating expenses without additional assistance could
be impaired.
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 1998 is 11,209,000.
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.
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However, in recent years the annual State rates were below the national rates
(4.3% versus 4.5% in 1998). The unemployment rate and its effects vary among
geographic areas of the State.
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.
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The 1998-99 biennium ending GRF balances were $1.5 billion (cash) and $976
million (fund). Of that fund balance, $325.7 million has been transferred to
school building assistance, $46.3 million to the BSF, $90 million to supply
classroom computers and for interactive video distance learning, and the
remaining amount to the State income tax reduction fund. The BSF had a December
3, 1999 balance of over $953 million.
The GRF appropriations acts for the current 2000-01 biennium (one for all
education purposes, and one for general GRF purposes) were passed on June 24 and
June 28, 1999, respectively, and promptly signed (after selective vetoes) by the
Governor. Those acts provided for total GRF biennial expenditures of over $39.8
billion. Necessary GRF debt service and lease-rental appropriations for the
entire biennium were requested in the Governor's proposed budget and
incorporated in the appropriations bills as introduced, and were included in the
bills versions as passed by the House and the Senate and in the acts as passed
and signed.
Debt. The State's incurrence or assumption of debt without a vote of the people
is, with exceptions noted below, 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 16 constitutional amendments approved from 1921 to date (the latest adopted
in 1999) Ohio voters authorized the incurrence of State debt and the pledge of
taxes or excises to its payment. At December 3, 1999, over $1.2 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 ($22.3 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 $1.06
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 ($112.7 million outstanding, with no more than $50 million to be issued
in any one year). Legislation passed December 9, 1999 authorizing the issuance
of $300 million of general obligations pursuant to the 1999 constitutional
amendment discussed below.
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 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.
A constitutional amendment approved by the voters at the November 1999 general
election authorizes State general obligation debt to pay costs of facilities for
a system of common schools throughout the State and facilities for state
supported and assisted institutions of higher education. That, and other debt
represented by direct obligations of the State (including that authorized by the
Ohio Public Facilities Commission and Ohio Building Authority, and some
authorized by the Treasurer), may not be issued if future FY total debt service
on those direct obligations to be paid from the GRF or net lottery proceeds
exceeds 5% of total estimated revenues of the State for the GRF and from net
State lottery proceeds during the FY of issuance.
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 $5.5 billion of which
were outstanding at December 3, 1999.
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In recent years, State agencies have 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 a 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 3,
1999) to be approximately $31.9 million (of which $27 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 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 47% in recent years) of their
operating moneys from State subsidies, but are dependent on local property
taxes, and in 126 districts (as of November 3, 1999) on 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. After a further hearing, the trial court has
decided that steps taken to date by the State to enhance school funding have not
met the requirements of the Supreme Court decision. The State has appealed to
the Supreme Court, before which oral arguments were heard on November 16, 1999.
That Court has issued a stay, pending appeal, of the implementation of the trial
court's order. A small number of the State's 612 local school districts have in
any year required special assistance to avoid year-end deficits. A now
superseded program 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 $87.2 million
for 20 districts in FY 1996 (including $42.1 million for one), $113.2 million
for 12 districts in FY 1997 (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
27 cities and villages; for 21 of them the fiscal situation was resolved and the
procedures terminated (no municipality is currently in preliminary "fiscal
watch" status). As of December 3, 1999, a school district "fiscal emergency"
provision was applied to 10 districts, and nine 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
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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.
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 Affecting the Oregon Fund
The following information is a summary of special factors affecting the Oregon
Municipal Series. It does not purport to be a complete description and is based
in part on (i) the December 1999 Oregon Economic and Revenue Forecast prepared
by the Oregon Department of Administrative Services, and (ii) a October 28, 1999
Official Statement prepared by the Oregon State Housing and Community Services
Department for the issue of General Obligation Elderly and Disabled Housing
Bonds Series D, E and F.
Oregon Economic Review and Forecast
Summary of Recent Trends. Although the US economy rebounded in the third
quarter, the Oregon economy sat this dance out. Preliminary annualized job
growth was only 0.3% in the third quarter of 1999, matching an equally
lackluster second quarter. This growth is in stark contrast to first quarter
annualized job growth of 3.8%. The preliminary third quarter job growth may be
revised upward as firmer numbers become available. Still, the Oregon economy
will have had rather weak back-to-back quarters of growth.
On a year over year (Y/Y) basis, job growth in the third quarter was at 1.6%.
This is the lowest growth rate since 1991. A 1.6% job growth is low, but still a
healthy pace for the state. The Oregon economy averaged 3.0% annual employment
growth from 1973 to 1989. In the 1980s it averaged 1.4% while it has averaged
2.7% in the 1990s. The mid-1990s were an unusual high period of growth, not the
norm for Oregon or other states in the United States
The most recent Blue Chip Job Growth rankings place Oregon 22nd in the nation
for year over year job growth. Between August 1998 and 1999, jobs increased
26,300, a 1.7% increase. A year ago, Oregon ranked 39th. While job growth in
Oregon has recently slowed, many other states in the nation have also slowed.
Oregon is still growing slower than its neighbors to the north and south.
California ranks 7th and Washington ranks 15th in the nation for year over year
job growth. Idaho ranks just below Oregon at 26th.
The forecast of the Office of Economic Analysis of Oregon's Department of
Administrative Services (OEA) for third quarter annualized job growth was 1.8%,
much stronger than the reported 0.3%. The manufacturing sector continued to be
weaker than expected along with non-manufacturing, especially trade and
non-health services. Unless noted otherwise, all percentage rates discussed
below reflect annualized rates of change.
Asian economies are on the mend, but the speed of recovery is slow. As a result,
the manufacturing sector continues to show weakness. Job losses totaled 2,800
for the quarter, a 4.6% decline. Jobs are down 5,700 from the third quarter of
1998.
All major durable manufacturing sectors declined in the third quarter except for
electrical machinery and other durables. High technology declined by 100 jobs
for the quarter, or 0.1%. This compares to a second quarter decrease of 2.3%.
Electrical machinery, which includes semiconductors, grew 5.2%, which offset
losses in the other high tech industries.
Larger changes in durable manufacturing occurred in the lumber and wood products
and transportation equipment sectors. Lumber and wood products lost 1,300 jobs
over the quarter, a 10.1% decline. Transportation equipment once again grew
dramatically, adding 400 jobs, a 9.1% increase.
Non-durable manufacturing lost 1,900 jobs during the third quarter. This is a
decline of 11.3%. The main reason is declines in food processing. This was also
the main reason for declines during the second quarter. The Oregon
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Employment Department reports that within this sector, the largest drops were in
beverages and canned, frozen, and preserved fruits, vegetables, and food
specialties. The beverage area was hit by the closing of the Blitz Weinhard
brewery. The other sector was adversely impacted by the bankruptcy of Agripac.
Non-manufacturing added 3,800 jobs during the quarter, growing 1.1%. Both
transportation services and local governments had large job gains, adding 1,000
and 3,900 jobs, respectively. Trucking and warehousing job growth remain strong.
Local education accounts for most of the job gains in local government.
The largest decline occurred in the trade sector, which shed 1,900 jobs.
Wholesale trade lost jobs at a 4.6% rate while retail trade lost jobs at a 1.1%
rate. It is very unusual for both wholesale and retail trade to lose jobs in a
quarter. The last time this happened was the first quarter of 1991. The only
other occurrence was during the early 1980s. Wholesale trade job losses were
mainly in durable goods, especially machinery, equipment and supplies. Retail
trade saw losses in eating and drinking places. Wholesale job losses may be tied
to slow growth in agriculture and construction. Retail job losses may be tied to
the poor weather in the early part of the summer that adversely impacted the
coastal tourist season.
Construction added 100 jobs or 1.5% Y/Y in the third quarter. On an annual basis
it grew 0.5%. This is a far cry from the double-digit growth of 1995 and 1996.
Non-health services jobs managed to grow 0.5% in the third quarter, compared to
a 0.6% decline in the second quarter. However, even with these two slow
quarters, non-health services jobs are 3.55% higher than a year ago.
Government jobs grew 5.6%. All of the increase came from local government, which
grew 9.3%. Local government additions offset flat federal jobs and a 1.9%
decline in state employment.
Short-Term Outlook - Overview. OEA forecasts the Oregon economy to finish 1999
with annual job growth of 1.9%. This will be the second year in a row that
Oregon job growth will be below that of the United States. Oregon should once
again grow faster than the nation with job growth of 1.9% in 2000 and 2.1% in
2001. These are much milder growth rates compared to the rapid expansion of the
mid-1990s.
Manufacturing should turn the comer at the end of 1999 and grow very modestly
through 2001. Asian economies are slowly recovering but Japan is still lagging
behind the pack. Manufacturing is forecast to grow 0.8% in 2000 and 1.6% in
2001.
High technology jobs are projected to decline 4.2% in 1999. However, the
industry will start to add jobs during the fourth quarter of 1999. Jobs will
increase 2.2% in 2000. High technology employment should fully reach pre-Asia
employment levels by mid to late 2001.
Lumber and wood products will close out 1999 with a loss of 600 jobs. The
secular decline in this industry is expected with 1.1% job losses in 2000. A
small rebound is forecasted for 2001.
Transportation equipment should have another great year in 1999, increasing jobs
by 8.1%. This is on top of a 9.7% gain in 1998. This sector should continue to
perform well in the next few years, but at the slower pace of 4.4% in 2000 and
2.4% in 2001.
Construction is forecasted to grow 2.7% in 1999. The next two years should see
milder growth of 1.4% and 2.1%.
Trade sector job growth slowed to 1.1% in 1999. Growth will continue to be mild
at 1.5% in 2000 and 2.0% in 2001.
For all of 1999, service sector employment will increase by 3.6%. For recent
months, growth has slowed considerably. As a result, growth in 2000 will fall to
2.3%. Job growth should pick up again to 3.2% in 2001.
Oregon population will increase 1.2% in 1999, slowing from the 1.6% growth in
1998. Population growth will increase 1.3% in 2000 and 2001.
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Forecast Changes. In general, OEA's December 1999 Oregon economic forecast
reflects higher personal income forecasts and lower employment forecasts than
the September 1999 forecast. This anomaly is due to an upward revision in Oregon
personal income and slower than expected third quarter job growth.
In October 1999, the Bureau of Economic Analysis (BEA) released revised state
income data. The personal income revision added around $1.0 billion to the first
and second quarters of 1999. This level change carries through the later years.
This is the main reason for the higher forecasts for other measures of personal
income and wages as well.
The forecast for total nonfarm jobs has been lowered 0.2% for 1999 and 0.3% for
2000. This is the result of the general slowdown across most industrial sectors
in Oregon during the second and third quarters of 1999. Manufacturing is not
expected to be as strong, with only the high technology sector regaining
strength. The forecast for non-manufacturing has been lowered 0.1% for 1999 and
2000 then 0.2% for 2001. The lowering of growth in the non-manufacturing sector
is directly related to lower projection of population growth.
Overall, the changes for the next three years are quite small, with the largest
changes occurring in high technology, lumber and wood products, non-durable
manufacturers, and total government.
The high technology forecast is lowered 0.1% for 1999 to reflect the delayed
recovery in this sector. Strong demand in the semiconductor industry raises the
forecast for electronics by 0.5% in 2000 and 0.7% in 2001.
Lumber and wood products revived slightly in the first half of 1999. However,
the increases were wiped out in the third quarter. The lumber and wood products
forecast for 1999 has been lowered by 1.4%. The lower forecasts for 2000 and
2001 reflect a return to the declining trend.
The forecast of non-durable manufacturing employment is 2.0% lower for 1999 and
3.8% lower for 2000. The large job declines in food processing are not expected
to be replaced, causing a level adjustment across the later years.
Construction is forecast lower by 0.4% in 1999, reflecting lower housing starts
and delayed capital expenditures by high tech firms. Driven by the resurgence of
the high technology sector, the construction forecast is raised by 0.2% in 2000
and 2001.
Total government jobs are revised up by 0.4% for 1999 and 0.9% in 2000. Local
government hiring for educators has been stronger than expected. There is little
change in projected job growth at the federal and state levels.
Personal Income Components. Personal income is forecast to grow by 5.5% in 1999,
followed by similar growth of 5.5% in 2000 and 5.3% in 2001. Wage and salary
income will finish 1999 with growth of 6.6%. Wage and salary income growth will
slow to 6.2% in 2000 and 2001.
Non-farm proprietor's income will grow 7.7% in 1999. Growth in this income
component will slow to 5.3% in 2000 and 5.6% in 2001.
Per capita income in Oregon will stay at 94.5% of the US average in 1999, the
same level as in 1998. As Oregon starts to grow slightly faster than the United
States in 2000, this ratio will rise to 94.6% and gradually increase through
2005.
Goods-Producing Sectors. The high technology sector is slowly recovering. The
earthquake in Taiwan in September may both help and hurt the industry. Taiwan's
semiconductor industry produces around 15% of the world's computer memory and
represents 10% of all chip production (Oregonian, Oct. 4, 1999). Worries about
chip memory shortage have boosted chip prices and helped firms like Intel,
Fujitsu, LSI, and Hyundai. At the same time, firms like Hewlett-Packard may
experience part supply delays due to the earthquake.
Even without taking the earthquake into account, demand in the semiconductor
industry has been improving. Expanding interest in the Internet has increased
demand for PCs and the chips that run them. Beyond PCs, telecommunications and
hand-held electronic organizers have increased demand for chips from TriQuint
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Semiconductor, who has increased employment by 25% over the year to 500
employees. Suppliers to the semiconductor industry have also seen increased
demand for their products. Wacker Siltronic has added 200 employees to raise
their workforce to 1,430 and has plans to reach their previous peak employment
of 1,700 jobs.
While the semiconductor industry is in recovery, other sectors of high
technology may grow more slowly. In particular, Tektronix is in the process of
refocusing its business to concentrate on their test and measurement tools. The
sale of its video and networking division along with its printing division to
Xerox is not expected to result in job losses. But Tektronix was already in the
process of eliminating 1,650 jobs, having reduced 1,200 as of the end of
September.
With global economies recovering, the high technology sector will recover by mid
to late 2001, led by the semiconductor industries.
Transportation equipment will show job growth of 4.4% in 2000 and 2.4% in 2001.
This is slower than the blistering growth rates of 9.7 in 1998 and expected 8.1%
gains in 1999. One of the driving forces in this sector is Freightliner. If the
announced order (November 3, 1999) of 1,000 trucks from HomeGrocer.com holds,
growth could continue to beat forecasts.
Food processing has been hit by the bankruptcy of Agripac, the closing of
Weinhard Blitz brewery, and a depressed fishing industry. Oregon firms are also
facing stiffer competition from food processing plants opening and/or expanding
in other states, such as the Redi Foods and Heinz plants in Idaho. International
and national consolidations are creating real pressures on Oregon's small and
medium-sized processors.
The lumber and woods product sector has enjoyed increased demand and the
accompanied price rises. From August 1998 through July 1999, the Random Lengths
Composite Price (Random Lengths Publications, August 1999) for lumber rose from
$355 per thousand feet to $480 per thousand feet. But since July, the price has
fallen almost $100. This industry also faces mounting competition from Canadian
lumber. The outlook is for continued industry consolidation and declining
employment.
Service-Producing Sectors. Slowdown in population growth, coupled with higher
mortgage rates, has slowed the growth in housing starts. High tech firms put off
a number of expansions in late 1998 and 1999. Both of these factors will slow
construction jobs into 2000. As semiconductors dust off their expansion plans,
construction jobs should mildly increase in 2001.
Transportation services will continue to be strong into 2000, adding 2,400 jobs.
Growth is expected to moderate along with slower growth in wholesale and retail
trade. Communications and utilities jobs will grow 2.0% in 2000. Moderating
population growth and industry consolidations will soften the job outlook after
2001. Uncertain job retention with ScottishPower's merger with PacifiCorp and
the prospect of Enron selling Portland General Electric to Sierra Pacific
Resources of Nevada will cloud the forecast horizon.
Trade sector jobs cooled down in 1999. Slower economic growth in 2000 and lower
population projections keep job growth at 1.5% in 2000. As the economy revives
in 2001, job growth will increase to 2.0%.
The two interest rate hikes engineered by the Federal Reserve slowed the
finance, insurance and real estate sector in 1999. Job growth will come in at a
healthy 1.9% in 1999 but only because of the strong first quarter. Job growth in
this sector will slow in 2000 to 1.5% and increase to 2.2% in 2001.
The Asian financial crisis continues to ripple. through the economy. The service
sector felt its effect in the second and third quarters, slowing the sector
dramatically from a robust first quarter. Job growth in the non-health service
sector is projected at 3.6% in 2001. Job growth will continue to soften and hold
at half the growth rates of the mid-1990s through the forecast horizon.
Federal government jobs will temporarily bump up for the 2000 Census. Job growth
is forecasted to increase 5.9% in 2000 but correspondingly decline by 6.9% in
2001, continuing its secular downward trend. Education appears to be the driver
for state and local government job growth in 1999 and 2000. The K-12 age group
ramped up during the 1990s and is now leveling off as we enter the 2000-decade.
Young adults aged 18-24 are
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growing rapidly through the next 5 years, placing enrollment pressures on
community colleges and public universities.
Forecast Risks. The forecast is dependent on recovery in world markets, mainly
Asian, and continued strength of domestic demand. The Oregon economy faces some
of the same risks, as does the US economy.
o Consumer spending is a driving force of economic growth. A sharp stock
market correction, rising interest rates and inflation, or a loss of
consumer confidence would all slow spending.
o Asia is not out of the woods. Ill effects from financial reforms may hurt
the recoveries that are now under way. The European Central Bank (ECB) has
raised interest rates 50 basis points on November 4, 1999, possibly slowing
European economies. Global market growth is key to the health of high
technology, lumber and wood products, and agriculture.
o Y2K may be more than a simple programming problem. However, OEA considers
this a long-shot risk.
A lot of attention has been given to the Asian economic recoveries as a key
factor in reviving the manufacturing sector and thus renewed growth throughout
the Oregon economy. But the strength of domestic demand is just as important.
Japan is a perfect example of an economy that has been depressed for several
years while carrying a large trade surplus. Oregon manufacturers would benefit
from increased exports, but those gains could be more than wiped out by a drop
in domestic demand for their products.
Extended Outlook. Back in the 1980s, if job growth in Oregon was projected to
hover around 1.8 to 2.1%, this would be heralded as strong economic growth.
Oregon has grown faster than the US since 1985, except for the last two years.
During the mid-1990s, Oregon grew at nearly twice the US rate. As a result, as
we enter the new millennium, growth in the 1.8 to 2.1% range will be viewed as a
slowdown. Recent history influences our perceptions of the economy.
Even with job growth rates in the 1.8 to 2.1% range, Oregon will still be viewed
as a high growth state since the US economy is forecast to grow in the 0.8
tol.6% range.
Oregon per capita income is projected to move closer to the US average. When
measured as a percentage of the United States, per capita income increases from
94.5% in 1999 to 96.9% in 2005. In dollar terms, it will increase from $26,000
in 1999 to $33,100 in 2005. Note that the national recession in 1991 caused
Oregon to lose some ground to the US average. But the Asian financial crisis,
which impacted Oregon more than the nation, shows a much larger dip in our
income measures relative to the nation in 1998 and 1999.
The key factors that will fuel the state's growth long term are:
o Recovery in the semiconductor industry: Increasing demand for computers and
an increase in orders has eliminated the excess capacity in the industry.
The strength in the industry will allow previously announced investment
plans by major companies to be carried out in the 2000-2005 period.
o Export growth and rising commodity prices: Global recovery of economies
will increase demand for Oregon finished goods and commodities. Rising
commodity prices will benefit agricultural and timber producers in the
state.
o Continued strength in domestic markets: Continued economic growth in
California and other major domestic market will fuel demand for Oregon
products.
o Business Costs Advantages: Abundant and relatively inexpensive water and
electricity. Labor costs that reflect the worth of labor-an educated work
force that contributes to productivity.
o Quality of life: Oregon will continue to attract financially secure
retirees. Companies that place a high premium on quality of life will
desire to locate in Oregon.
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.
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Taxation of Federal Retiree Pension Benefits. On June 18, 1998, in Vogl v. Dept.
of Rev., 327 Or 193 (1998), the Oregon Supreme Court decided several cases on
appeals from cases filed in the Tax Court and Multnomah County Circuit Court.
The federal retiree plaintiffs in those consolidated cases claimed that the
benefits paid to State retirees under Oregon laws 1995, Chapter 569, were, in
effect, tax rebates and discriminatory in violation of the US Supreme Court's
ruling in Davis v. Michigan Dept. of Treasury under principles of
intergovernmental tax immunity.
In Vogl, the court held that Oregon Laws 1995, Chapter 569, provides a benefit
increase to PERS retirees that "generally replicates the effect of a tax rebate"
and that, under principles of intergovernmental tax immunity, the federal
retirees are entitled to an equivalent tax benefit. The Vogl court expressly
declined to overrule its earlier decision in Ragsdale v. Dept. of Rev., 321 Or
216, cert denied, 516 US 1011 (1995) (Ragsdale II), which denied a federal
retiree's tax refund claim based on payment of benefits to PERS recipients,
pursuant to Oregon Laws 1991, Chapter 796. The court distinguished the 1991 and
1995 benefit payments, concluding that the 1991 benefits were less closely
connected with the tax paid by the State retirees than were the 1995 benefits.
The Oregon Department of Revenue estimates that the amount of General Fund tax
money to be paid eventually to federal retirees pursuant to the court's decision
in Vogl, as reported to the State Economist in October 1998, could be as much as
$410 million. As of July 31, 1999, approximately $216 million of that amount had
been paid.
Bibeau v. Pacific NW Research Foundation. 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 the 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 appealed.
On August 19, 1999, the Ninth Circuit Court of Appeals ruled that the trial
court erred in granting summary judgment based on the statute of limitations. It
also ruled that the plaintiffs' federal law claims against the State could not
stand because the State was shielded by the doctrine of qualified immunity.
Consequently, the trial court must hear on remand the plaintiffs' federal and
state law claims against the private defendants as well as the plaintiffs' state
law claims against the State. However, the State expects the trial court to
dismiss the plaintiffs' state law claims against the State. The State's motion
to dismiss is pending.
Bibeau II. The same plaintiffs as in Bibeau v. Pacific NW Research Foundation
(see above) have filed a second case, this time in Multnomah County Circuit
Court. These former inmates seek to enforce a 1987 statute that they assert
entitles them to medical care at State expense. A preliminary estimate put the
potential State liability at between $1 million and $5 million. The State filed
a motion to dismiss the case, but it was denied in part. Plaintiffs have filed
an amended complaint seeking $100,000 per claim per plaintiff. The plaintiffs
were denied class status for their damage claim. Plaintiffs counsel asserts that
there are presently approximately 20 claimants who will seek damages. If the
plaintiffs are granted injunctive relief, the State will be required to provide
additional medical care through the Department of Corrections medical budget. It
is impossible at this time to estimate as to how much the medical budget would
be required to increase to provide additional care.
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 minimum operations, the
company intended to dig a huge pit for which a wastewater 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.
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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 the
property, there can be no "taking."
The trial court ruled in favor of the State's motion for summary judgment and
the plaintiff appealed. On May 19, 1999, the Oregon Court of Appeals affirmed
the trial court's ruling. On October 13, 1999, in response to plaintiff's
petition for reconsideration, the Oregon Court of Appeals ruled that plaintiff's
argument on reconsideration must be rejected because it was not raised in the
initial appeal. A petition for review was filed with the Oregon Supreme Court on
November 17, 1999.
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. The State's potential liability could exceed $10 million.
Plaintiffs' claims are based on a legislative change that occurred in the 1995
Oregon legislative session. The Legislative Assembly amended the status 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. However, on June 2, 1999, the Oregon Court of
Appeals reversed the trial court's ruling and remanded the case for entry of
judgment in favor of plaintiffs. The State has filed an appeal with the Oregon
Supreme Court. The Supreme Court denied review on October 26, 1999. The State
requested reconsideration on November 23, 1999. This request is presently
pending.
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. Plaintiffs 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. It
could take approximately three years for both cases to be decided by the Oregon
Tax Court and the Oregon Supreme Court. In the event of an adverse ruling, the
State could be potentially liable for three years of tax refunds, dating from
the year the complaints were filed. If the required refund were for the entire
amount of the tax, initial estimates are that it could 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 were to declare 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 to $21 million per year.
The plaintiffs filed an amended complaint and a motion for summary judgment. The
State filed a cross-motion for summary judgment. The Tax Court ruled in favor of
the State on all issues. The plaintiffs did not appeal the ruling. The time to
appeal has expired.
Goudy, et al. v. State of Oregon, et al. Over 735 plaintiffs have filed suit in
federal district court seeking damages against the State and the Oregon
Department of Corrections, based on the Department of Corrections' operation of
a dry-cleaning plant on the grounds of the Oregon State Penitentiary during
certain periods between 1950 and 1996. During the operation of the plant, the
state is alleged to have spilled or disposed of dry-cleaning chemicals including
tetrachlorethylene, trichlorethylene, vinyl chloride and other toxic substances
on the grounds of the state prison, thus contaminating the water in wells
serving the State Penitentiary and the air and ground water a one-mile radius of
the prison.
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<PAGE>
The plaintiffs seek certification as a class, and over $1 million per plaintiff
in damages. Although it is unlikely that they will recover the full amount
sought, at this state of the case it is too early to provide an accurate measure
of the damages the plaintiffs might reasonably recover.
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.
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, 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.
92
<PAGE>
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 US 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.
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...1940s
o Helps shape the Investment Company Act of 1940.
o Leads in the purchase and subsequent sale to the public of Newport News
Shipbuilding and Dry Dock Company, a prototype transaction for the
investment banking industry.
o Assumes management of National Investors Corporation, today Seligman Growth
Fund, Inc.
o Establishes Whitehall Fund, Inc., today Seligman Income Fund, Inc.
...1950-1989
o Develops new open-end investment companies. Today, manages more than 50
mutual fund portfolios.
o Helps pioneer state-specific, municipal bond funds, today managing a
national and 18 state-specific municipal funds.
o Establishes J. & W. Seligman Trust Company and J. & W. Seligman Valuations
Corporation.
o Establishes Seligman Portfolios, Inc., an investment vehicle offered
through variable annuity products.
...1990s
o Introduces Seligman Select Municipal Fund, Inc. and Seligman Quality
Municipal Fund, Inc. two closed-end funds that invest in high quality
municipal bonds.
o In 1991 establishes a joint venture with Henderson plc, of London, known as
Seligman Henderson Co., to offer global investment products.
o Introduces to the public Seligman Frontier Fund, Inc., a small
capitalization mutual fund.
o Launches Seligman Global Fund Series, Inc., which today offers five
separate series: Seligman Henderson International Growth Fund, Seligman
Global Smaller Companies Fund, Seligman Global Technology Fund, Seligman
Global Growth Fund and Seligman Emerging Markets 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.
o Launches innovative Seligman New Technologies Fund, Inc., a closed-end
"interval" fund seeking long-term capital appreciation by investing in
technology companies, including venture capital investing.
...2000
o Introduces Seligman Time Horizon/Harvester Series, Inc., an asset
allocation type mutual fund containing four funds: Seligman Time Horizon 30
Fund, Seligman Time Horizon 20 Fund, Seligman Time Horizon 10 Fund and
Seligman Harvester Fund.
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S E L I G M A N
--------------- [LOGO OMITTED]
MUNICIPAL FUND
SERIES, INC.
ANNUAL REPORT
SEPTEMBER 30, 1999
--------
PROVIDING
INCOME EXEMPT
FROM REGULAR
INCOME
TAX
[lOGO OMITTED]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
<PAGE>
SELIGMAN -- TIMES CHANGE...VALUES ENDURE
J. & W. SELIGMAN & CO. INCORPORATED IS A FIRM WITH A LONG TRADITION OF
INVESTMENT EXPERTISE, OFFERING A BROAD ARRAY OF INVESTMENT CHOICES TO HELP
TODAY'S INVESTORS SEEK THEIR LONG-TERM FINANCIAL GOALS.
TIMES CHANGE...
Established in 1864, Seligman has a history of providing
financial services marked not by fanfare, but rather by a quiet
[PICTURE and firm adherence to financial prudence. While the world has
OMITTED] changed dramatically in the 135 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.
JAMES, JESSE, AND
JOSEPH SELIGMAN, 1870
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 equity funds that specialize in small companies,
technology, or international securities, and bond funds that focus on high-yield
issuers, US government bonds, or municipal securities.
...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.................................... 56
Report of Independent Auditors.......................... 69
Board of Directors...................................... 70
Executive Officers and For More Information............. 71
Glossary of Financial Terms............................. 72
<PAGE>
TO THE SHAREHOLDERS
The fiscal year ended September 30, 1999, was a period of steadily rising
interest rates, creating a difficult environment for fixed-income securities and
for Seligman Municipal Fund Series.
At the end of the Fund's fiscal-year 1998, the Federal Reserve Board was easing
monetary policy in an effort to protect the US economy from the effects of the
global economic crisis. Central banks around the world also lowered key interest
rates in response to global turmoil. These easing actions were successful and
the world economy has rebounded. However, the global recovery, combined with
continued growth in the US, soon caused the US Fed to voice concerns about
inflation. In May, the Fed announced its bias toward a tighter policy and has
since followed through with two federal funds rate hikes, for a total of 50
additional basis points.
Throughout this fiscal year, continued robust growth in the US, the recovering
world economy, growing concerns regarding inflation, and tighter monetary
policy, sent market interest rates steadily higher. On September 30, 1998, the
30-year US Treasury bond was yielding 4.98%. One year later, the yield had moved
to 6.06%. Municipal bonds (as measured by the Bond Buyer 20-bond General
Obligation Index) fluctuated within a much narrower range, but still rose
significantly, from 4.94% on September 30, 1998, to 5.73% on September 30, 1999.
The additional stability in the municipal market was largely the result of an
imbalance in municipal supply and demand. Rising yields were attracting
investors, while municipal issuers were reluctant to offer new supply at higher
rates.
Looking ahead, we believe that the US economy will slow, as was intended by the
Fed's most recent actions, and that inflation fears will thus subside and reduce
bond market volatility. We anticipate that the municipal market will outperform
the Treasury market for the balance of calendar-year 1999, as a result of
improving municipal market fundamentals, the most significant of which is the
slowdown in municipal issuance, which is expected to continue into the new year.
As the millennium approaches, we have become concerned that the media's focus on
the Year 2000 (Y2K) computer issue, and the fears that this attention may spark,
will cause some investors to take actions that are not in their best long-term
interests. In our view, the primary danger to investors is losing sight of their
long-term financial goals and altering their portfolios and asset allocations in
an attempt to respond to the confusion surrounding this issue.
In the US, governments and businesses have committed substantial resources to
this issue and, while there may be scattered inconveniences, we believe that the
US will enter the year 2000 relatively seamlessly, and that much of the rest of
the developed world is also well positioned to deal with the new millennium.
For the past several years, J. & W. Seligman & Co. Incorporated (Seligman), your
Fund's manager, and Seligman Data Corp. (Seligman Data), your Fund's shareholder
service agent, have been working to ensure that shareholders do not experience
any Y2K-related inconveniences. We are pleased to report that the early start
has paid off. During the spring of this year, Seligman and Seligman Data
participated in Y2K testing conducted by the Securities Industry Association.
These tests were completed without any Y2K-related problems on the part of
Seligman or Seligman Data. Tests with key service providers were also conducted,
all of which were successfully completed in a Y2K environment.
We appreciate your confidence in Seligman Municipal Fund Series and look forward
to serving your investment needs for many years to come. A discussion with your
Portfolio Manager, as well as the Fund's portfolios of investments and financial
statements, follows 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
November 5, 1999
1
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGER,
THOMAS G. MOLES
Q: WHAT ECONOMIC AND MARKET FACTORS INFLUENCED SELIGMAN MUNICIPAL FUND SERIES
IN THE LAST 12 MONTHS?
A: The past 12 months have been challenging for the financial markets,
including the fixed-income markets. At this time last year, global equity
markets were struggling to recover from the Asian financial crisis, as well
as economic turmoil in Russia. In September 1998, the Federal Reserve Board
initiated a series of federal funds rate easings in an effort to restore
stability and liquidity to anxious world markets. At that time, market
participants generally expected that US economic growth would contract as a
result of world events, thereby preventing an acceleration in the rate of
inflation. Additionally, many experts predicted that, with the approach of
the new millennium, computer glitches would at best slow economic growth and
at worst cause major disruptions leading to worldwide recession. One year
later, the Fed has tightened to slow economic growth, world equity markets
have recovered, and most market watchers expect the transition to the year
2000 to be uneventful.
During the past year, the municipal market did not exhibit the degree of
volatility that characterized the US Treasury market. This was largely the
result of the powerful influences of supply and demand that served to
mitigate both upward and downward movements in municipal yields. Last year's
Treasury market rallies were caused by heavy demand for Treasury securities
during periods of equity market declines. Conversely, demand for municipal
bonds was not greatly affected, which lessened municipal market volatility.
Further, year-to-date municipal issuance is down 20% over the same period
last year. This lack of supply held municipal yields steady and was the
primary reason municipal bonds outperformed Treasury bonds for much of the
past 12 months.
While the municipal market was relatively stable overall, it was not immune
to the effects of shifting economic and inflation expectations. By June
1999, municipal yields began moving higher in response to increasing concern
regarding the pace of economic activity and continued to move higher through
fiscal year end. Accordingly, net asset values of the Fund's shares
deteriorated during the last quarter of the fiscal year and performance was
disappointing.
Q: WHAT WAS YOUR INVESTMENT STRATEGY?
A: Over the past year, long-term municipal yields rose to levels not seen in
several years. This presented an opportunity to enhance Fund yields by
purchasing
[PICTURE OMITTED]
SELIGMAN MUNICIPALS TEAM: (STANDING 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 Fund's investment objective.
2
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGER,
THOMAS G. MOLES
higher-yielding, longer-term bonds and by reducing positions in
shorter-term bonds. In general, the longer the maturity of a bond, the more
sensitive it is to changes in interest rates. During periods of declining
interest rates, longer-term bonds outperform shorter-term bonds. However,
during periods of rising interest rates, such as we have been experiencing,
longer-term bonds decline more in price than shorter-term bonds.
New purchases were concentrated in higher-rated bonds due primarily to a
continuation of narrow yield spreads between higher- and lower-quality
bonds. Additionally, a number of holdings received credit- rating upgrades,
further contributing to the overall improvement in the Fund's credit
quality.
The Fund is well diversified among all major sectors of the municipal
marketplace. Most sectors remain stable with the exception of health care,
which remains vulnerable to further credit-quality deterioration mainly as
a result of government cutbacks and the growth of managed care. Many health
care issuers that have been well managed and have maintained consistently
healthy finances are suddenly facing serious budget deficits. As a result of
this alarming trend, we have been particularly diligent in monitoring our
health care holdings. During the past year, portfolio activity in the sector
has been heavier than usual as we restructured our positions. Despite the
current situation, the health care sector continues to offer selective
opportunities. Through in-depth credit analysis, we endeavor to identify
strong health care credits for inclusion in the Fund's portfolio.
Q: WHAT IS YOUR OUTLOOK?
A: The long-awaited economic slowdown has yet to materialize, increasing the
risk that the rate of inflation will accelerate. In response, bond yields
have been rising steadily year to date. For the remainder of calendar year
1999, the bond markets will likely experience continued volatility until
solid signs that the economy is moderating emerge. Many market participants
expect the Fed to raise rates once more before year-end. This, together with
higher market rates, may ease inflationary pressures and spark a bond-market
rally.
As we head toward the new millennium, we believe that there is much to be
optimistic about. In the year 2000, the US economy will likely enter its
tenth year of expansion, an extraordinary achievement. The financial well
being of the nation's states, cities, and municipalities continues to
improve, with many reporting record budget surpluses. The jobless rate
remains below 5% nationally and consumer confidence remains high. Finally,
as one of the few remaining possible ways to shelter income, municipal bond
funds currently offer attractive yields compared to the after-tax yields of
many taxable bond investments.
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, and assume that all distributions within the
period are invested in additional shares for the 10-year period ended September
30, 1999, to a $10,000 hypothetical investment made in the Lehman Brothers
Municipal Bond Index (Lehman Index) for the same period. The performances of
each Series of Seligman Municipal Fund Series Class C and Class D shares are not
shown in the charts but are 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
SELIGMAN NATIONAL MUNICIPAL SERIES
[FIGURES BELOW REPRESENTS LINE CHART IN ITS PRINTED FORM]
"With Load" "Without Load" "Lehman"
09/30/89 9520 10000 10000
9896 10395 10384
9830 10326 10431
10088 10597 10675
09/30/90 9910 10410 10681
10472 11000 11142
10653 11190 11393
10879 11427 11636
09/30/91 11321 11892 12089
11673 12262 12495
11645 12232 12532
12109 12720 13009
09/30/92 12322 12944 13353
12593 13229 13596
13231 13899 14101
13750 14443 14562
09/30/93 14294 15015 15054
14369 15094 15265
13190 13856 14427
13270 13940 14587
09/30/94 13175 13840 14686
12939 13592 14475
14007 14713 15498
14365 15090 15871
09/30/95 14688 15429 16329
15540 16324 17001
15203 15970 16796
15306 16078 16925
09/30/96 15711 16504 17314
16058 16868 17756
15968 16773 17715
16575 17412 18326
09/30/97 17188 18056 18879
17724 18619 19391
17935 18840 19614
18199 19118 19912
09/30/98 18735 19680 20524
18728 19673 20647
18831 19781 20830
18525 19460 20462
09/30/99 18152 19068 20380
The performances of Class C and Class D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
---------------------------------------------------------------------------------------------
CLASS C CLASS D
SINCE INCEPTION SIX ONE FIVE 10 SINCE INCEPTION
5/27/99* MONTHS* YEAR YEARS YEARS 2/1/94
----------------- ---------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge n/a (8.21)% (7.66)% 5.58% 6.14% n/a
Without Sales Charge n/a (3.60) (3.11) 6.62 6.67 n/a
CLASS C**
With Sales Charge and CDSC (5.27)% n/a n/a n/a n/a n/a
Without Sales Charge and CDSC (3.38) n/a n/a n/a n/a n/a
CLASS D**
With 1% CDSC n/a (4.87) (4.78) n/a n/a n/a
Without CDSC n/a (3.92) (3.85) 5.63 n/a 3.03%
LEHMAN INDEX*** (1.83)++ (2.16) (0.70) 6.77 7.38 5.02++++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1999
9/30/99 3/31/99 9/30/98 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
--------- --------- --------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A $7.68 $8.17 $8.32 CLASS A $0.390 -- 4.69%
CLASS C 7.68 N/A N/A CLASS C 0.111 -- 3.98
CLASS D 7.68 8.16 8.31 CLASS D 0.318 -- 4.02
HOLDINGS BY MARKET SECTORO MOODY'S/S&P RATINGS0
Revenue Bonds 79% Aaa/AAA 38%
General Obligation Bonds00 21 Aa/AA 31
A/A 20
Baa/BBB 11
WEIGHTED AVERAGE MATURITY 25.0 years
</TABLE>
- -------------------
See footnotes on page 16.
4
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN COLORADO MUNICIPAL SERIES
[FIGURES BELOW REPRESENTS LINE CHART IN ITS PRINTED FORM]
"With Load" "Without Load" "Lehman"
09/30/89 9528 10000 10000
9844 10332 10384
9785 10270 10431
10013 10510 10675
09/30/90 9945 10438 10681
10341 10853 11142
10513 11034 11393
10705 11235 11636
09/30/91 11054 11602 12089
11312 11873 12495
11288 11847 12532
11661 12240 13009
09/30/92 11910 12500 13353
12180 12784 13596
12584 13208 14101
12988 13632 14562
09/30/93 13403 14067 15054
13534 14205 15265
12874 13512 14427
12989 13633 14587
09/30/94 13011 13656 14686
12840 13476 14475
13654 14331 15498
13889 14578 15871
09/30/95 14125 14825 16329
14633 15358 17001
14459 15176 16796
14608 15332 16925
09/30/96 14796 15530 17314
15128 15878 17756
15108 15857 17715
15511 16280 18326
09/30/97 15876 16663 18879
16266 17073 19391
16440 17255 19614
16681 17508 19912
09/30/98 17150 18000 20524
17209 18062 20647
17262 18118 20830
17045 17890 20462
09/30/99 16692 17519 20380
The performances of Class C and Class D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
---------------------------------------------------------------------------------------------
CLASS C CLASS D
SINCE INCEPTION SIX ONE FIVE 10 SINCE INCEPTION
5/27/99* *MONTHS* YEAR YEARS YEARS 2/1/94
--------------- -------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge n/a (7.96)% (7.28)% 4.10% 5.26% n/a
Without Sales Charge n/a (3.30) (2.67) 5.11 5.77 n/a
CLASS C**
With Sales Charge and CDSC (5.89)% n/a n/a n/a n/a n/a
Without Sales Charge and CDSC (3.93) n/a n/a n/a n/a n/a
CLASS D**
With 1% CDSC n/a (4.83) (4.50) n/a n/a n/a
Without CDSC n/a (3.88) (3.57) 4.10 n/a 2.54%
LEHMAN INDEX*** (1.83)++ (2.16) (0.70) 6.77 7.38 5.02++++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1999
9/30/99 3/31/99 9/30/98 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
--------- --------- --------- ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
<C>
CLASS A $7.10 $7.52 $7.64 CLASS A $0.343 -- 4.48%
CLASS C 7.09 N/A N/A CLASS C 0.096 -- 3.76
CLASS D 7.09 7.52 7.63 CLASS D 0.275 -- 3.80
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C>
Revenue Bonds 81% Aaa/AAA 55%
General Obligation Bonds00 19 Aa/AA 16
A/A 17
WEIGHTED AVERAGE MATURITY 20.65 years Baa/BBB 12
</TABLE>
- -------------------
See footnotes on page 16.
5
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN GEORGIA MUNICIPAL SERIES
[FIGURES BELOW REPRESENTS LINE CHART IN ITS PRINTED FORM]
"With Load" "Without Load" "Lehman"
09/30/89 9530 10000 10000
9835 10320 10384
9835 10320 10431
10053 10549 10675
09/30/90 10024 10519 10681
10524 11043 11142
10717 11245 11393
10932 11471 11636
09/30/91 11357 11918 12089
11679 12255 12495
11671 12247 12532
12146 12746 13009
09/30/92 12453 13067 13353
12730 13358 13596
13099 13745 14101
13542 14210 14562
09/30/93 14191 14891 15054
14284 14988 15265
13309 13966 14427
13391 14051 14587
09/30/94 13408 14069 14686
13193 13843 14475
14209 14910 15498
14637 15358 15871
09/30/95 14971 15710 16329
15720 16496 17001
15397 16156 16796
15534 16300 16925
09/30/96 15954 16741 17314
16328 17133 17756
16191 16990 17715
16815 17644 18326
09/30/97 17334 18188 18879
17800 18678 19391
18001 18889 19614
18298 19201 19912
09/30/98 18796 19723 20524
18857 19787 20647
18973 19908 20830
18612 19530 20462
09/30/99 18302 19204 20380
The performances of Class C and Class D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-----------------------------------------------------------------------------------------------
CLASS C CLASS D
SINCE INCEPTION SIX ONE FIVE 10 SINCE INCEPTION
5/27/99* *MONTHS* YEAR YEARS YEARS 2/1/94
----------------- ---------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge n/a (8.11)% (7.28)% 5.40% 6.23% n/a
Without Sales Charge n/a (3.54) (2.63) 6.42 6.74 n/a
CLASS C**
With Sales Charge and CDSC (5.72)% n/a n/a n/a n/a n/a
Without Sales Charge and CDSC (3.84) n/a n/a n/a n/a n/a
CLASS D**
With 1% CDSC n/a (5.03) (4.53) n/a n/a n/a
Without CDSC n/a (4.09) (3.61) 5.45 n/a 3.35%
LEHMAN INDEX*** (1.83)++ (2.16) (0.70) 6.77 7.38 5.02++++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1999
9/30/99 3/31/99 9/30/98 DIVIDENDS+ capital gain+ SEC YIELD++
--------- --------- --------- ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A $7.75 $8.23 $8.38 CLASS A $0.374 $0.045 4.53%
CLASS C 7.76 n/a n/a CLASS C 0.107 -- 3.82
CLASS D 7.76 8.25 8.40 CLASS D 0.301 0.045 3.86
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
Revenue Bonds 69% Aaa/AAA 50%
General Obligation Bonds00 31 Aa/AA 17
A/A 27
WEIGHTED AVERAGE MATURITY 20.68 years Baa/BBB 6
</TABLE>
- ----------------
See footnotes on page 16.
6
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN LOUISIANA MUNICIPAL SERIES
[FIGURES BELOW REPRESENTS LINE CHART IN ITS PRINTED FORM]
"With Load" "Without Load" "Lehman"
09/30/89 9528 10000 10000
9836 10323 10384
9838 10325 10431
10079 10578 10675
09/30/90 10024 10520 10681
10511 11032 11142
10732 11263 11393
10956 11498 11636
09/30/91 11377 11940 12089
11708 12287 12495
11694 12273 12532
12175 12778 13009
09/30/92 12415 13030 13353
12625 13250 13596
13106 13754 14101
13502 14170 14562
09/30/93 13917 14606 15054
14070 14767 15265
13313 13972 14427
13370 14031 14587
09/30/94 13384 14046 14686
13242 13898 14475
14113 14811 15498
14390 15102 15871
09/30/95 14761 15492 16329
15507 16274 17001
15255 16010 16796
15304 16062 16925
09/30/96 15695 16471 17314
16047 16842 17756
16030 16824 17715
16563 17383 18326
09/30/97 16977 17817 18879
17404 18265 19391
17593 18463 19614
17809 18691 19912
09/30/98 18348 19256 20524
18436 19349 20647
18515 19432 20830
18196 19096 20462
09/30/99 17901 18787 20380
The performances of Class C and Class D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
--------------------------------------------------------------------------------------------
CLASS C CLASS D
SINCE INCEPTION SIX ONE FIVE 10 SINCE INCEPTION
5/27/99* *MONTHS* YEAR YEARS YEARS 2/1/94
----------------- ---------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge n/a (7.88)% (7.03)% 4.95% 6.00% n/a
Without Sales Charge n/a (3.32) (2.44) 5.99 6.51 n/a
CLASS C**
With Sales Charge and CDSC (5.43)% n/a n/a n/a n/a n/a
Without Sales Charge and CDSC (3.55) n/a n/a n/a n/a n/a
CLASS D**
With 1% CDSC n/a (4.83) (4.25) n/a n/a n/a
Without CDSC n/a (3.89) (3.33) 4.98 n/a 3.17%
LEHMAN INDEX*** (1.83)++ (2.16) (0.70) 6.77 7.38 5.02++++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1999
9/30/99 3/31/99 9/30/98 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
--------- --------- --------- ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A $7.81 $8.28 $8.51 CLASS A $0.391 $0.112 4.61%
CLASS C 7.80 n/a n/a CLASS C 0.110 .-- 3.90
CLASS D 7.80 8.28 8.50 CLASS D 0.316 0.112 3.94
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
Revenue Bonds 84% Aaa/AAA 77%
General Obligation Bonds00 16 Aa/AA 14
Baa/BBB 9
WEIGHTED AVERAGE MATURITY 20.48 years
</TABLE>
- -------------------
See footnotes on page 16.
7
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN MARYLAND MUNICIPAL SERIES
[FIGURES BELOW REPRESENTS LINE CHART IN ITS PRINTED FORM]
"With Load" "Without Load" "Lehman"
09/30/89 9523 10000 10000
9850 10343 10384
9825 10317 10431
10031 10534 10675
09/30/90 9949 10447 10681
10456 10979 11142
10628 11160 11393
10821 11363 11636
09/30/91 11268 11832 12089
11550 12129 12495
11589 12169 12532
12007 12608 13009
09/30/92 12299 12915 13353
12502 13128 13596
12965 13614 14101
13412 14084 14562
09/30/93 13926 14623 15054
13994 14694 15265
13253 13917 14427
13335 14003 14587
09/30/94 13358 14026 14686
13227 13890 14475
14148 14856 15498
14461 15185 15871
09/30/95 14813 15555 16329
15455 16228 17001
15188 15948 16796
15366 16135 16925
09/30/96 15702 16488 17314
16021 16823 17756
15916 16712 17715
16427 17249 18326
09/30/97 16901 17747 18879
17316 18183 19391
17526 18404 19614
17763 18652 19912
09/30/98 18235 19148 20524
18329 19247 20647
18473 19398 20830
18221 19133 20462
09/30/99 17971 18870 20380
The performances of Class C and Class D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
Investment Results Per Share
Total Returns
For Periods Ended September 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------------------------------------------------------------------------
CLASS C CLASS D
SINCE INCEPTION SIX ONE FIVE 10 SINCE INCEPTION
5/27/99* MONTHS* YEAR YEARS YEARS 2/1/94
----------------- ---------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge n/a (7.35)% (6.08)% 5.10% 6.04% n/a
Without Sales Charge n/a (2.72) (1.45) 6.11 6.56 n/a
CLASS C**
With Sales Charge and CDSC (4.72)% n/a n/a n/a n/a n/a
Without Sales Charge and CDSC (2.83) n/a n/a n/a n/a n/a
CLASS D**
With 1% CDSC n/a (3.78) (2.93) n/a n/a n/a
Without CDSC n/a (2.83) (2.00) 5.20 n/a 3.40%
LEHMAN INDEX*** (1.83)++ (2.16) (0.70) 6.77 7.38 5.02++++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1999
9/30/99 3/31/99 9/30/98 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
--------- --------- --------- ------------ ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A $7.79 $8.21 $8.32 CLASS A $0.388 $0.028 4.52%
CLASS C 7.80 n/a n/a CLASS C 0.111 .-- 3.81
CLASS D 7.80 8.22 8.33 CLASS D 0.314 0.028 3.85
HOLDINGS BY MARKET SECTORO MOODY'S/S&P RATINGS0
Revenue Bonds 74% Aaa/AAA 43%
General Obligation Bonds00 26 Aa/AA 38
A/A 17
WEIGHTED AVERAGE MATURITY 21.32 years Baa/BBB 2
</TABLE>
- -------------------
See footnotes on page 16.
8
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN MASSACHUSETTS MUNICIPAL SERIES
[FIGURES BELOW REPRESENTS LINE CHART IN ITS PRINTED FORM]
"With Load" "Without Load" "Lehman"
09/30/89 9527 10000 10000
9762 10247 10384
9759 10244 10431
9962 10457 10675
09/30/90 9763 10248 10681
10291 10802 11142
10598 11125 11393
10845 11384 11636
09/30/91 11309 11871 12089
11626 12203 12495
11691 12272 12532
12133 12736 13009
09/30/92 12412 13029 13353
12681 13311 13596
13138 13790 14101
13612 14288 14562
09/30/93 14048 14746 15054
14142 14845 15265
13479 14149 14427
13590 14265 14587
09/30/94 13635 14312 14686
13516 14187 14475
14349 15062 15498
14617 15343 15871
09/30/95 14941 15684 16329
15570 16343 17001
15300 16060 16796
15464 16233 16925
09/30/96 15833 16619 17314
16214 17019 17756
16086 16885 17715
16632 17458 18326
09/30/97 17117 17967 18879
17621 18496 19391
17856 18743 19614
18132 19033 19912
09/30/98 18794 19728 20524
18774 19707 20647
18889 19828 20830
18398 19312 20462
09/30/99 17882 18771 20380
The performances of Class C and Class D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-----------------------------------------------------------------------------------------------
CLASS C CLASS D
SINCE INCEPTION SIX ONE FIVE 10 SINCE INCEPTION
5/27/99* MONTHS* YEAR YEARS YEARS 2/1/94
----------------- ---------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge n/a (9.79)% (9.35)% 4.56% 5.98% n/a
Without Sales Charge n/a (5.33) (4.85) 5.57 6.50 n/a
CLASS C**
With Sales Charge and CDSC (6.90)% n/a n/a n/a n/a n/a
Without Sales Charge and CDSC (5.02) n/a n/a n/a n/a n/a
CLASS D**
With 1% CDSC n/a (6.70) (6.51) n/a n/a n/a
Without CDSC n/a (5.78) (5.61) 4.60 n/a 3.04%
LEHMAN INDEX*** (1.83)++ (2.16) (0.70) 6.77 7.38 5.02++++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1999
9/30/99 3/31/99 9/30/98 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
--------- --------- --------- ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A $7.47 $8.08 $8.27 CLASS A $0.364 $0.050 4.60%
CLASS C 7.47 N/A N/A CLASS C 0.101 -- 3.87
CLASS D 7.47 8.08 8.26 CLASS D 0.291 0.050 3.91
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
Revenue Bonds 88% Aaa/AAA 51%
General Obligation Bonds00 12 Aa/AA 32
A/A 10
Baa/BBB 4
Non-Rated 3
WEIGHTED AVERAGE MATURITY 23.73 years
</TABLE>
- ----------------
See footnotes on page 16.
9
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN MICHIGAN MUNICIPAL SERIES
[FIGURES BELOW REPRESENTS LINE CHART IN ITS PRINTED FORM]
"With Load" "Without Load" "Lehman"
09/30/89 9520 10000 10000
9833 10328 10384
9826 10321 10431
10059 10565 10675
09/30/90 9955 10457 10681
10408 10932 11142
10624 11159 11393
10858 11404 11636
09/30/91 11283 11851 12089
11658 12245 12495
11680 12268 12532
12152 12765 13009
09/30/92 12473 13101 13353
12744 13386 13596
13176 13839 14101
13659 14347 14562
09/30/93 14091 14801 15054
14207 14922 15265
13549 14232 14427
13627 14313 14587
09/30/94 13683 14372 14686
13520 14201 14475
14409 15134 15498
14657 15395 15871
09/30/95 14990 15745 16329
15653 16442 17001
15400 16176 16796
15516 16297 16925
09/30/96 15914 16715 17314
16238 17056 17756
16175 16990 17715
16741 17584 18326
09/30/97 17211 18078 18879
17656 18545 19391
17864 18764 19614
18142 19056 19912
09/30/98 18696 19637 20524
18737 19680 20647
18865 19815 20830
18510 19442 20462
09/30/99 18179 19094 20380
The performances of Class C and Class D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
---------------------------------------------------------------------------------------------
CLASS C CLASS D
SINCE INCEPTION SIX ONE FIVE 10 SINCE INCEPTION
5/27/99* MONTHS* YEAR YEARS YEARS 2/1/94
----------------- --------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge n/a (8.25)% (7.38)% 4.83% 6.16% n/a
Without Sales Charge n/a (3.64) (2.77) 5.85 6.68 n/a
CLASS C**
With Sales Charge and CDSC (5.51)% n/a n/a n/a n/a n/a
Without Sales Charge and CDSC (3.55) n/a n/a n/a n/a n/a
CLASS D**
With 1% CDSC n/a (5.02) (4.56) n/a n/a n/a
Without CDSC n/a (4.08) (3.65) 4.83 n/a 3.23%
LEHMAN INDEX*** (1.83)++ (2.16) (0.70) 6.77 7.38 5.02++++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1999
9/30/99 3/31/99 9/30/98 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
--------- --------- --------- ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $8.04 $8.55 $8.83 CLASS A $0.400 $0.158 4.49%
CLASS C 8.03 n/a n/a CLASS C 0.112 .-- 3.77
CLASS D 8.03 8.54 8.82 CLASS D 0.324 0.158 3.81
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
Revenue Bonds 73% Aaa/AAA 59%
General Obligation Bonds00 27 Aa/AA 32
A/A 9
WEIGHTED AVERAGE MATURITY 20.77 years
</TABLE>
- -------------------
See footnotes on page 16.
10
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN MINNESOTA MUNICIPAL SERIES
"With Load" "Without Load" "Lehman"
09/30/89 9524 10000 10000
9899 10394 10384
9902 10397 10431
10127 10633 10675
09/30/90 10075 10579 10681
10545 11072 11142
10681 11215 11393
10879 11423 11636
09/30/91 11193 11753 12089
11338 11905 12495
11459 12032 12532
11808 12398 13009
09/30/92 12056 12659 13353
12208 12819 13596
12710 13346 14101
13190 13850 14562
09/30/93 13631 14312 15054
13855 14548 15265
13407 14078 14427
13503 14178 14587
09/30/94 13647 14329 14686
13503 14179 14475
14178 14887 15498
14442 15164 15871
09/30/95 14685 15419 16329
15044 15796 17001
14864 15608 16796
14987 15737 16925
09/30/96 15271 16034 17314
15553 16331 17756
15549 16327 17715
15921 16717 18326
09/30/97 16316 17132 18879
16645 17477 19391
16803 17644 19614
17035 17887 19912
09/30/98 17568 18447 20524
17680 18564 20647
17791 18681 20830
17496 18370 20462
09/30/99 17202 18062 20380
The performances of Class C and Class D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
- ---------------------------------------------------------
CLASS C
CLASS D
SINCE INCEPTION SIX ONE FIVE 10 SINCE
INCEPTION
5/27/99* *MONTHS* YEAR YEARS YEARS 2/1/94
----------------- --------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge n/a (7.92)% (6.76)% 3.74% 5.57% n/a
Without Sales Charge n/a (3.31) (2.09) 4.74 6.09 n/a
CLASS C**
With Sales Charge and CDSC (5.40)% n/a n/a n/a n/a n/a
Without Sales Charge and CDSC (3.47) n/a n/a n/a n/a n/a
CLASS D**
With 1% CDSC n/a (4.69) (3.89) n/a n/a n/a
Without CDSC n/a (3.75) (2.96) 3.76 n/a 2.75%
LEHMAN INDEX*** (1.83)++ (2.16) (0.70) 6.77 7.38 5.02++++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1999
9/30/99 3/31/99 9/30/98 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
--------- --------- --------- ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $7.36 $7.80 $7.98 CLASS A $0.364 $0.098 4.62%
Class C 7.36 n/a n/a CLASS C 0.102 .-- 3.91
Class D 7.36 7.80 7.98 CLASS D 0.295 0.098 3.95
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
Revenue Bonds 53% Aaa/AAA 43%
General Obligation Bonds00 47 Aa/AA 36
A/A 14
WEIGHTED AVERAGE MATURITY 19.85 years Baa/BBB 5
Non-Rated 2
</TABLE>
- ----------------
See footnotes on page 16.
11
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN MISSOURI MUNICIPAL SERIES
Missouri Series
"With Load" "Without Load" "Lehman"
09/30/89 9529 10000 10000
9848 10335 10384
9842 10329 10431
10102 10602 10675
09/30/90 10049 10546 10681
10531 11051 11142
10735 11265 11393
10985 11529 11636
09/30/91 11417 11982 12089
11727 12307 12495
11730 12310 12532
12167 12769 13009
09/30/92 12316 12925 13353
12578 13200 13596
13006 13649 14101
13458 14124 14562
09/30/93 13939 14628 15054
14012 14705 15265
13156 13807 14427
13231 13886 14587
09/30/94 13263 13919 14686
13127 13776 14475
14086 14783 15498
14344 15053 15871
09/30/95 14678 15404 16329
15352 16111 17001
15050 15794 16796
15224 15977 16925
09/30/96 15598 16369 17314
15922 16709 17756
15802 16583 17715
16319 17126 18326
09/30/97 16799 17630 18879
17208 18059 19391
17360 18218 19614
17674 18548 19912
09/30/98 18212 19113 20524
18201 19101 20647
18282 19186 20830
17944 18831 20462
09/30/99 17560 18428 20380
The performances of Class C and Class D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
---------------------------------------------------------------------------------------------
CLASS C CLASS D
SINCE INCEPTION SIX ONE FIVE 10 SINCE INCEPTION
5/27/99* *MONTHS* YEAR YEARS YEARS 2/1/94
----------------- --------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge n/a (8.54)% (8.16)% 4.75% 5.79% n/a
Without Sales Charge n/a (3.95) (3.58) 5.77 6.30 n/a
CLASS C**
With Sales Charge and CDSC (5.88)% n/a n/a n/a n/a n/a
Without Sales Charge and CDSC (3.95) n/a n/a n/a n/a n/a
CLASS D**
With 1% CDSC n/a (5.33) (5.37) n/a n/a n/a
Without CDSC n/a (4.39) (4.46) 4.79 n/a 2.86%
LEHMAN INDEX*** (1.83)++ (2.16) (0.70) 6.77 7.38 5.02++++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1999
9/30/99 3/31/99 9/30/98 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
--------- --------- --------- ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $7.29 $7.77 $8.03 CLASS A $0.347 $0.118 4.48%
Class C 7.29 n/a n/a CLASS C 0.097 .-- 3.75
Class D 7.29 7.77 8.03 CLASS D 0.277 0.118 3.79
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
Revenue Bonds 80% Aaa/AAA 43%
General Obligation Bonds00 20 Aa/AA 35
A/A 20
WEIGHTED AVERAGE MATURITY 21.03 years Baa/BBB 2
</TABLE>
- -------------------
See footnotes on page 16.
12
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN NEW YORK MUNICIPAL SERIES
[FIGURES BELOW REPRESENTS LINE CHART IN ITS PRINTED FORM]
"With Load" "Without Load" "Lehman"
09/30/89 9530 10000 10000
9808 10292 10384
9704 10182 10431
9984 10476 10675
09/30/90 9834 10319 10681
10218 10721 11142
10455 10970 11393
10726 11254 11636
09/30/91 11266 11821 12089
11600 12171 12495
11616 12189 12532
12154 12753 13009
09/30/92 12370 12980 13353
12679 13304 13596
13267 13920 14101
13766 14445 14562
09/30/93 14257 14960 15054
14361 15069 15265
13411 14072 14427
13502 14167 14587
09/30/94 13492 14157 14686
13222 13874 14475
14297 15001 15498
14603 15322 15871
09/30/95 14967 15704 16329
15775 16552 17001
15469 16231 16796
15599 16368 16925
09/30/96 16010 16799 17314
16379 17187 17756
16256 17057 17715
16846 17676 18326
09/30/97 17523 18387 18879
18024 18913 19391
18260 19160 19614
18569 19484 19912
09/30/98 19278 20228 20524
19260 20210 20647
19358 20312 20830
18896 19827 20462
09/30/99 18533 19447 20380
The performances of Class C and Class D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
Investment Results Per Share
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-----------------------------------------------------------------------------------------------
CLASS C CLASS D
SINCE INCEPTION SIX ONE FIVE 10 SINCE INCEPTION
5/27/99* MONTHS* YEAR YEARS YEARS 2/1/94
----------------- -------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge n/a (8.80)% (8.44)% 5.53% 6.36% n/a
Without Sales Charge n/a (4.26) (3.86) 6.56 6.88 n/a
CLASS C**
With Sales Charge and CDSC (6.09)% n/a n/a n/a n/a n/a
Without Sales Charge and CDSC (4.22) n/a n/a n/a n/a n/a
CLASS D**
With 1% CDSC n/a (5.75) (5.62) n/a n/a n/a
Without CDSC n/a (4.81) (4.73) 5.55 n/a 3.41%
LEHMAN INDEX*** (1.83)++ (2.16) (0.70) 6.77 7.38 5.02++++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1999
9/30/99 3/31/99 9/30/98 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
--------- --------- --------- ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $7.70 $8.24 $8.60 CLASS A $0.378 $0.207 4.68%
CLASS C 7.70 n/a n/a CLASS C 0.108 -- 3.97
CLASS D 7.70 8.25 8.60 CLASS D 0.304 0.207 4.01
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
Revenue Bonds 84% Aaa/AAA 56%
General Obligation Bonds00 16 Aa/AA 9
A/A 25
WEIGHTED AVERAGE MATURITY 23.35 years Baa/BBB 10
</TABLE>
- -----------------
See footnotes on page 16.
13
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN OHIO MUNICIPAL SERIES
[FIGURES BELOW REPRESENTS LINE CHART IN ITS PRINTED FORM]
"With Load" "Without Load" "Lehman"
09/30/89 9524 10000 10000
9868 10361 10384
9895 10389 10431
10098 10603 10675
09/30/90 10067 10570 10681
10518 11043 11142
10714 11250 11393
10943 11490 11636
09/30/91 11371 11940 12089
11708 12293 12495
11740 12327 12532
12201 12811 13009
09/30/92 12471 13095 13353
12695 13330 13596
13149 13806 14101
13614 14295 14562
09/30/93 14069 14773 15054
14172 14881 15265
13479 14153 14427
13620 14301 14587
09/30/94 13636 14318 14686
13477 14151 14475
14349 15066 15498
14635 15367 15871
09/30/95 14943 15691 16329
15530 16306 17001
15279 16043 16796
15448 16220 16925
09/30/96 15791 16581 17314
16116 16921 17756
16042 16844 17715
16520 17347 18326
09/30/97 16982 17831 18879
17468 18341 19391
17616 18496 19614
17879 18773 19912
09/30/98 18473 19396 20524
18496 19420 20647
18621 19552 20830
18308 19224 20462
09/30/99 17977 18876 20380
The performances of Class C and Class D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-------------------------------------------------------------------------------------------
CLASS C CLASS D
SINCE INCEPTION SIX ONE FIVE 10 SINCE INCEPTION
5/27/99* MONTHS* YEAR YEARS YEARS 2/1/94
----------------- ------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge n/a (7.99)% (7.33)% 4.67% 6.04% n/a
Without Sales Charge n/a (3.46) (2.68) 5.68 6.56 n/a
CLASS C**
With Sales Charge and CDSC (5.40)% n/a n/a n/a n/a n/a
Without Sales Charge and CDSC (3.51) n/a n/a n/a n/a n/a
CLASS D**
With 1% CDSC n/a (4.82) (4.44) n/a n/a n/a
Without CDSC n/a (3.87) (3.52) 4.75 n/a 3.18%
LEHMAN INDEX*** (1.83)++ (2.16) (0.70) 6.77 7.38 5.02++++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1999
9/30/99 3/31/99 9/30/98 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
--------- --------- --------- ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $7.64 $8.11 $8.37 CLASS A $0.384 $0.132 4.49%
CLASS C 7.68 n/a n/a CLASS C 0.108 -- 3.76
CLASS D 7.68 8.15 8.41 CLASS D 0.313 0.132 3.80
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
Revenue Bonds 68% Aaa/AAA 79%
General Obligation Bonds00 32 Aa/AA 13
A/A 5
Baa/BBB 3
WEIGHTED AVERAGE MATURITY 19.73 years
</TABLE>
- ----------------
See footnotes on page 16.
14
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN OREGON MUNICIPAL SERIES
[FIGURES BELOW REPRESENTS LINE CHART IN ITS PRINTED FORM]
"With Load" "Without Load" "Lehman"
09/30/89 9527 10000 10000
9853 10342 10384
9814 10302 10431
10078 10579 10675
09/30/90 10002 10499 10681
10493 11014 11142
10710 11242 11393
10935 11478 11636
09/30/91 11328 11891 12089
11628 12206 12495
11665 12244 12532
12024 12621 13009
09/30/92 12274 12883 13353
12533 13155 13596
12916 13557 14101
13341 14003 14562
09/30/93 13773 14457 15054
13899 14589 15265
13277 13936 14427
13392 14057 14587
09/30/94 13445 14113 14686
13265 13923 14475
14080 14779 15498
14360 15073 15871
09/30/95 14662 15390 16329
15194 15948 17001
14959 15701 16796
15117 15868 16925
09/30/96 15435 16202 17314
15773 16556 17756
15735 16516 17715
16226 17031 18326
09/30/97 16762 17594 18879
17200 18053 19391
17398 18261 19614
17669 18546 19912
09/30/98 18184 19086 20524
18247 19153 20647
18399 19312 20830
18071 18969 20462
09/30/99 17791 18674 20380
The performances of Class C and Class D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-----------------------------------------------------------------------------------------------
CLASS C CLASS D
SINCE INCEPTION SIX ONE FIVE 10 SINCE INCEPTION
5/27/99* *MONTHS* YEAR YEARS YEARS 2/1/94
----------------- --------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge n/a (7.84)% (6.79)% 4.74% 5.93% n/a
Without Sales Charge n/a (3.30) (2.16) 5.76 6.44 n/a
CLASS C**
With Sales Charge and CDSC (5.25)% n/a n/a n/a n/a n/a
Without Sales Charge and CDSC (3.32) n/a n/a n/a n/a n/a
CLASS D**
With 1% CDSC n/a (4.57) (3.85) n/a n/a n/a
Without CDSC n/a (3.62) (2.92) 4.80 n/a 3.33%
LEHMAN INDEX*** (1.83)++ (2.16) (0.70) 6.77 7.38 5.02++++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1999
9/30/99 3/31/99 9/30/98 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
--------- --------- --------- ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $7.48 $7.92 $8.05 CLASS A $0.354 $0.050 4.45%
CLASS C 7.48 N/A N/A CLASS C 0.100 -- 3.72
CLASS D 7.48 7.91 8.04 CLASS D 0.283 0.050 3.76
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
Revenue Bonds 66% Aaa/AAA 43%
General Obligation Bonds00 34 Aa/AA 35
A/A 14
WEIGHTED AVERAGE MATURITY 17.56 years Baa/BBB 8
</TABLE>
- --------------
See footnotes on page 16.
15
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN SOUTH CAROLINA MUNICIPAL SERIES
[FIGURES BELOW REPRESENTS LINE CHART IN ITS PRINTED FORM]
"With Load" "Without Load" "Lehman"
09/30/89 9523 10000 10000
9911 10408 10384
9873 10368 10431
10113 10620 10675
09/30/90 9949 10448 10681
10507 11034 11142
10712 11249 11393
10937 11485 11636
09/30/91 11337 11905 12089
11717 12305 12495
11770 12360 12532
12217 12830 13009
09/30/92 12479 13105 13353
12701 13337 13596
13124 13782 14101
13572 14252 14562
09/30/93 14042 14746 15054
14187 14899 15265
13311 13978 14427
13390 14062 14587
09/30/94 13393 14065 14686
13236 13900 14475
14193 14905 15498
14489 15215 15871
09/30/95 14825 15568 16329
15573 16354 17001
15274 16040 16796
15439 16213 16925
09/30/96 15836 16630 17314
16185 16997 17756
16063 16868 17715
16622 17455 18326
09/30/97 17101 17959 18879
17596 18478 19391
17779 18671 19614
18037 18942 19912
09/30/98 18582 19513 20524
18603 19536 20647
18698 19635 20830
18317 19236 20462
09/30/99 17965 18865 20380
The performances of Class C and Class D shares will be greater than or less than
the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
Investment Results Per Share Total Returns
For Periods Ended September 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-----------------------------------------------------------------------------------------------
CLASS C CLASS D
SINCE INCEPTION SIX ONE FIVE 10 SINCE INCEPTION
5/27/99* *MONTHS* YEAR YEARS YEARS 2/1/94
----------------- -------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge n/a (8.51)% (7.94)% 5.02% 6.03% n/a
Without Sales Charge n/a (3.92) (3.32) 6.05 6.55 n/a
CLASS C**
With Sales Charge and CDSC (5.89)% n/a n/a n/a n/a n/a
Without Sales Charge and CDSC (4.01) n/a n/a n/a n/a n/a
CLASS D**
With 1% CDSC n/a (5.43) (5.23) n/a n/a n/a
Without CDSC n/a (4.49) (4.32) 5.06 n/a 3.09%
LEHMAN INDEX*** (1.83)++ (2.16) (0.70) 6.77 7.38 5.02++++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
FOR PERIODS ENDED SEPTEMBER 30, 1999
9/30/99 3/31/99 9/30/98 DIVIDENDS+ CAPITAL GAIN+ SEC YIELD++
--------- --------- --------- ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $7.67 $8.18 $8.38 CLASS A $0.377 $0.066 4.26%
CLASS C 7.66 n/a n/a CLASS C 0.107 -- 3.68
CLASS D 7.66 8.18 8.38 CLASS D 0.304 0.066 3.99
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
Revenue Bonds 97% Aaa/AAA 60%
General Obligation Bonds00 3 Aa/AA 15
A/A 18
WEIGHTED AVERAGE MATURITY 21.62 years Baa/BBB 7
</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 C shares are calculated with and
without the effect of the initial 1% maximum sales charge and the 1%
contingent deferred sales charge ("CDSC") that is charged on redemptions
made within 18 months of the date of purchase. Returns for Class D shares
are calculated with and without the effect of the 1% CDSC, charged on
redemptions made within one year of the date 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. It is composed of approximately 60% revenue bonds and 40%
state government obligations. Investors cannot invest directly in an index.
++ From 5/31/99.
++++ From 1/31/94.
+ Represents per share amount paid or declared for the year ended September
30, 1999 (for Class C shares, for the period May 27, 1999 to September 30,
1999).
++ Current yield, representing the annualized yield for the 30-day period
ended September 30, 1999, 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, 1999.
00 Includes pre-refunded and escrowed-to-maturity securities.
16
<PAGE>
This page intentionally left blank.
17
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
NATIONAL SERIES
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
STATE AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---- -------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
ALABAMA -- 3.5% $4,000,000 Jefferson County Sewer Rev., 51/8% due 2/1/2039 ............ Aaa/AAA $3,473,880
ALASKA -- 1.5% 1,500,000 Alaska Housing Finance Corporation Mortgage Rev.,
53/4% due 6/1/2024* ...................................... Aaa/AAA 1,442,565
CALIFORNIA -- 2.6% 1,000,000 Foothill/Eastern Transportation Corridor Agency
Toll Road Rev., 53/4% due 1/15/2040 ...................... Baa3/BBB- 950,480
1,500,000 San Joaquin Hills Transportation Corridor Agency
Rev. (Orange County Senior Lien Toll Road),
63/4% due 1/1/20320 ...................................... Aaa/AAA 1,647,030
FLORIDA -- 3.6% 4,000,000 Jacksonville Electric Authority (Electric System Rev.),
5.10% due 10/1/2032 ...................................... Aa2/AA 3,526,720
ILLINOIS -- 2.5% 2,500,000 Illinois Health Facilities Authority Rev.
(Northwestern Memorial Hospital),
6% due 8/15/2024 ......................................... Aa2/AA 2,490,200
KENTUCKY -- 2.0% 1,880,000 Trimble County Pollution Control Rev.
(Louisville Gas & Electric Co. Project),
75/8% due 11/1/2020* ..................................... Aa2/A+ 1,967,213
MICHIGAN -- 2.3% 2,250,000 Michigan State Strategic Fund Pollution Control Rev.
(General Motors Corp.), 6.20% due 9/1/2020 ............... A2/A 2,307,083
MISSOURI -- 4.7% 4,750,000 St. Louis Industrial Development Authority Pollution
Control Rev. (Anheuser-Busch Companies, Inc. Project),
57/8% due 11/1/2026* .................................... A1/A+ 4,648,920
NEVADA -- 4.8% 5,000,000 Clark County Industrial Development Rev. (Nevada Power
Company Project), 5.90% due 11/1/2032* ................... NR/BBB 4,702,550
NEW YORK -- 4.7% 3,500,000 New York City GOs, 71/4% due 8/15/2024o Aaa/A- 3,696,980
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 983,550
OHIO -- 3.7% 4,000,000 Ohio Housing Finance Agency Mortgage Rev.
(Residential Mortgage), 5.40% due 9/1/2029* .............. NR/AAA 3,668,000
SOUTH 2,000,000 Oconee County Pollution Control Rev. (Duke Power
CAROLINA -- 2.1% Company Project), 71/2% due 2/1/2017 ....................... Aa2/AA- 2,064,980
SOUTH 6,000,000 South Dakota Housing Development Authority Rev.
DAKOTA -- 6.2% (Homeownership Mortgage), 6.15% due 5/1/2026* ............ Aa1/AAA 6,070,140
TENNESSEE -- 4.7% 5,000,000 Shelby County Health, Educational and Housing Facility
Board Rev. (St. Jude Children's Research Hospital),
53/8% due 7/1/2024 ....................................... NR/AA 4,653,950
TEXAS -- 19.0% 3,700,000 Harris County Health Facilities Development Corp.
Hospital Rev. (St. Luke's Episcopal Hospital
Project), 63/4% due 2/15/2021++ ............................ Aa3/AAA 3,895,952
2,000,000 Harris County Health Facilities Development Corp.
SCH Health Care System Rev. (Sisters of
Charity of the Incarnate Word), 7.10% due 7/1/2021o ..... Aa3/NR 2,134,380
2,000,000 Harris County Health Facilities Development Corp.
SCH Health Care System Rev. (Sisters of Charity
of the Incarnate Word), 53/4% due 7/1/2027++ ............ Aa3/AAA 2,001,280
</TABLE>
- -----------------
+ Ratings have not been audited by Deloitte & Touche LLP.
++ Escrowed-to-maturity security.
o Pre-refunded security.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
18
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
NATIONAL SERIES (CONTINUED)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
STATE AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---- -------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
TEXAS (CONTINUED) $4,750,000 Potter County Industrial Development Corp. Pollution
Control Rev. (Southwestern Public Service
Company Project), 53/4% due 9/1/2016 ..................... Aaa/AAA $4,779,355
2,375,000 San Antonio Electric & Gas Rev., 51/2% due 2/1/2020 ........ Aa1/AA 2,284,869
125,000 San Antonio Electric & Gas Rev., 51/2% due 2/1/2020o ....... Aa1/AA 130,994
1,975,000 Texas Veterans Housing Assistance GOs,
6.80% due 12/1/2023* .................................... Aa1/AA 2,065,593
1,340,000 Travis County Housing Finance Corporation (Single
Family Mortgage Rev.), 6.95% due 10/1/2027 ................. NR/AAA 1,396,306
VIRGINIA -- 9.7% 5,000,000 Fairfax County Industrial Development Authority
Health Care Rev. (Inova Health System Project),
6% due 8/15/2026 ........................................ Aa2/AA 5,054,400
5,000,000 Pocahontas Parkway Association Toll Road Bonds
(Route 895 Connector), 51/2% due 8/15/2028 ............. Baa3/BBB- 4,488,850
WASHINGTON -- 9.9% 4,325,000 King County Sewer GOs, 61/8% due 1/1/2033 .................. Aaa/AAA 4,460,632
5,520,000 Seattle Water System Rev., 55/8% due 8/1/2026 .............. Aaa/AAA 5,309,081
WISCONSIN -- 6.2% 6,000,000 LaCrosse Resource Recovery Rev. (Northern States Power
Company Project), 6% due 11/1/2021* .................... A1/AA- 6,050,940
WYOMING -- 4.1% 4,000,000 Sweetwater County Pollution Control Rev. (Idaho Power
Company Project), 6.05% due 7/15/2026 .................. A3/A 4,004,960
------------
TOTAL MUNICIPAL BONDS (COST $97,130,825)-- 97.8% ............................................................. 96,351,833
VARIABLE RATE DEMAND NOTES (COST $900,000)-- 0.9% ............................................................ 900,000
OTHER ASSETS LESS LIABILITIES-- 1.3% ......................................................................... 1,238,603
------------
NET ASSETS-- 100.0% .......................................................................................... $98,490,436
============
</TABLE>
COLORADO SERIES
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
$3,000,000 Adams County, CO Pollution Control Rev. (Public Service Co. of Colorado Project),
57/8% due 4/1/2014.............................................................. Aaa/AAA $3,041,940
1,000,000 Boulder, Larimer and Weld Counties, CO (Vrain Valley School District),
5% due 12/15/2022 .............................................................. Aaa/AAA 896,230
2,000,000 Colorado Health Facilities Authority Rev. (North Colorado Medical Center),
6% due 5/15/2020 ............................................................... Aaa/AAA 2,004,560
2,250,000 Colorado Health Facilities Authority Rev. (Sisters of Charity of Leavenworth
Health Services Corporation), 5% due 12/1/2025 ................................. Aaa/AAA 1,973,407
2,000,000 Colorado Health Facilities Authority Rev. (Catholic Health Initiatives),
5% due 12/1/2028 ............................................................... Aa2/AA 1,692,120
2,400,000 Colorado Springs, CO Sales & Use Tax Rev., 5% due 12/1/2015 ...................... A1/AA 2,255,232
2,350,000 Colorado Springs, CO Utilities Rev., 53/8% due 11/15/2026 ........................ Aa2/AA 2,198,942
</TABLE>
- ---------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
o Pre-refunded security.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
19
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
COLORADO SERIES (CONTINUED)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$ 105,000 Colorado Water Resources & Power Development Authority
(Clean Water Rev.), 67/8% due 9/1/2011 ......................................... Aaa/AAA $ 110,609
2,000,000 Colorado Water Resources & Power Development Authority
(Clean Water Rev.), 6% due 9/1/2014 ............................................ Aaa/AAA 2,079,200
1,000,000 Colorado Water Resources & Power Development Authority
(Clean Water Rev.), 6.30% due 9/1/2014 ......................................... Aaa/AAA 1,055,530
2,000,000 Denver, CO City & County Department of Aviation Airport System Rev.,
51/2% due 11/15/2025 ........................................................... Aaa/AAA 1,917,040
500,000 Denver, CO City & County School District GOs, 5% due 12/1/2019 ................... Aaa/AAA 451,660
2,200,000 Denver, CO City & County School District GOs, 5% due 12/1/2023 ................... Aaa/AAA 1,951,708
2,000,000 Denver, CO Health and Hospital Authority Healthcare Rev., 53/8% due 12/1/2028 .... Baa2/BBB 1,716,480
1,985,000 Fort Collins, CO GOs Water Bonds, 63/8% due 12/1/2012o ........................... Aa1/AA 2,122,541
2,500,000 Fort Collins Pollution Control Rev. (Anheuser-Busch Project), 6% due 9/1/2031 .... A1/A+ 2,512,350
1,000,000 Fountain Valley Authority, CO Water Treatment Rev., 6.80% due 12/1/2019o ......... Aa2/AA 1,042,410
2,250,000 Jefferson County, CO Open Space Sales Tax Rev., 5% due 11/1/2019 ................. Aaa/AAA 2,033,010
1,895,000 Northglenn, CO GOs Joint Water & Wastewater Utility, 6.80% due 12/1/2008++ ....... Aaa/NR 2,061,798
2,500,000 Platte River Power Authority, CO Power Rev., 61/8% due 6/1/2014 .................. Aa3/A+ 2,614,375
1,205,000 Pueblo County, CO Single Family Mortgage Rev., 7.05% due 11/1/2027 ............... NR/AAA 1,261,527
2,000,000 Puerto Rico Highway & Transportation Authority Rev., 51/2% due 7/1/2036 .......... Baa1/A 1,909,000
2,000,000 University of Colorado Hospital Authority Rev., 51/4% due 11/15/2022 ............. Aaa/NR 1,844,040
2,000,000 Virgin Islands Public Finance Authority Rev., 51/2% due 10/1/2022 ................ NR/BBB- 1,873,740
2,000,000 Westminster, CO (Adams & Jefferson Counties) Sales & Use Tax Rev.,
7% due 12/1/2008 ............................................................... Aaa/AAA 2,085,440
-----------
Total Municipal Bonds (Cost $45,364,376) -- 98.0% ......................................................... 44,704,889
Variable Rate Demand Notes (Cost $100,000) -- 0.2% ........................................................ 100,000
Other Assets Less Liabilities -- 1.8% ..................................................................... 821,549
-----------
NET ASSETS -- 100.0% ...................................................................................... $45,626,438
===========
</TABLE>
GEORGIA SERIES
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$ 2,500,000 Atlanta, GA Water & Wastewater Rev., 5% due 11/1/2038 ............................ Aaa/AAA $2,127,825
1,000,000 Cartersville, GA Development Authority Rev. Water & Wastewater Facilities
(Anheuser-Busch), 7.40% due 11/1/2010* ......................................... A1/A+ 1,129,600
2,000,000 Cartersville, GA Development Authority Rev. Water & Wastewater Facilities
(Anheuser-Busch), 63/4% due 2/1/2012* .......................................... A1/A+ 2,124,040
3,000,000 Chatham County, GA School District GOs, 51/2% due 8/1/2020 ....................... Aaa/AAA 2,937,870
2,000,000 Columbia County, GA School District GOs, 61/4% due 4/1/2013o ..................... Aaa/AAA 2,174,380
1,000,000 DeKalb County, GA GOs, 51/4% due 1/1/2020 ........................................ Aa1/AA+ 937,130
1,000,000 DeKalb County, GA Water & Sewerage Rev., 7% due 10/1/2014o ....................... Aaa/AA 1,050,760
2,000,000 DeKalb County, GA Water & Sewerage Rev., 5% due 10/1/2028 ........................ Aa2/AA 1,761,460
</TABLE>
- ---------------
+ Ratings have not been audited by Deloitte & Touche LLP.
++ Escrowed-to-maturity security.
o Pre-refunded security.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
20
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
GEORGIA SERIES (CONTINUED)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$ 700,000 DeKalb Private Hospital Authority, GA Rev. (Emory University Project),
63/4% due 4/1/2017o ............................................................ Aa1/AA $ 739,410
300,000 DeKalb Private Hospital Authority, GA Rev. (Emory University Project),
7% due 4/1/2021o ............................................................... Aa1/AA 317,973
1,000,000 Fulco Hospital Authority Health System Rev. (Catholic Health East),
5% due 11/15/2028 .............................................................. Aaa/AAA 864,280
1,820,000 Fulton County, GA Development Authority Special Facilities Rev.,
(Delta Airlines, Inc. Project), 51/2% due 5/1/2033* ............................ Baa3/BBB- 1,591,426
2,250,000 Georgia Housing & Finance Authority (Single Family Mortgage),
5.20% due 6/1/2029* ............................................................ NR/AAA 1,979,235
2,500,000 Georgia Municipal Gas Authority Rev. (Southern Storage Gas Project),
6.40% due 7/1 .................................................................. NR/A- 2,574,125
1,000,000 Georgia State GOs, 53/4% due 2/1/2011* ........................................... Aaa/AAA 1,037,730
1,000,000 Gwinnett County, GA School District GOs, 6.40% due 2/1/2012 ...................... Aa1/AA+ 1,102,410
2,250,000 Gwinnett County, GA Water & Sewerage Authority Rev., 5.30% due 8/1/2022 .......... Aaa/AAA 2,130,188
1,500,000 Henry County School District, GA GOs, 6.45% due 8/1/2011 ......................... A1/A+ 1,654,530
500,000 Metropolitan Atlanta Rapid Transit Authority, GA Sales Tax Rev.,
61/4% due 7/1/2018 ............................................................. A1/AA- 539,890
2,000,000 Monroe County, GA Development Authority Pollution Control Rev.
(Georgia Power Company Plant -- Scherer Project), 6% due 7/1/2025 .............. Aaa/AAA 2,040,360
2,500,000 Peachtree City, GA Water & Sewerage Authority Sewer System Rev.,
5.60% due 3/1/2027 ............................................................. Aa3/AA 2,479,100
2,000,000 Private Colleges & Universities Authority Rev., GA (Spelman College Project),
6.20% due 6/1/2014 ............................................................. Aaa/AAA 2,117,100
1,500,000 Private Colleges & Universities Authority Rev.,
GA (Mercer University Project), 61/2% due 11/1/2015++ .......................... Aaa/AAA 1,655,895
3,000,000 Private Colleges & Universities Authority Rev.,
GA (Agnes Scott College Project), 55/8% due 6/1/2023 ........................... A1/AA 2,940,150
1,000,000 Private Colleges & Universities Authority Rev.,
GA (Mercer University Project), 53/8% due 10/1/2029 ............................ A3/NR 903,270
1,500,000 Puerto Rico Highway & Transportation Authority Rev.,
51/2% due 7/1/2026 ............................................................. Baa1/A 1,435,155
2,000,000 Savannah, GA Airport Rev., 61/4% due 1/1/2015* ................................... Aaa/AAA 2,074,380
-----------
TOTAL MUNICIPAL BONDS (Cost $44,261,498)-- 98.3% ........................................................... 44,419,672
OTHER ASSETS LESS LIABILITIES--1.7% ........................................................................ 766,233
-----------
NET ASSETS-- 100.0% ........................................................................................ $45,185,905
===========
</TABLE>
- ---------------
+ Ratings have not been audited by Deloitte & Touche LLP.
++ Escrowed-to-maturity security.
o Pre-refunded security.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
21
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
LOUISIANA SERIES
<TABLE>
<CAPTION>
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+ $3,177,570
2,500,000 Calcasieu Parish, LA Industrial Development Board (Conoco Inc. Project),
53/4% due 12/1/2026* ........................................................... Aa3/AA- 2,423,000
1,675,000 East Baton Rouge Parish, LA Mortgage Finance Authority (Single Family
Mortgage Rev.), 5.40% due 10/1/2025............................................. Aaa/NR 1,562,239
3,000,000 East Baton Rouge Parish, LA Public Improvement Sales & Use Tax Rev.,
5.90% due 2/1/2018 ............................................................. Aaa/AAA 3,035,820
2,000,000 Houma, LA Utilities Rev., 61/4% due 1/1/2012 ..................................... Aaa/AAA 2,101,380
2,000,000 Jefferson Parish, LA Home Mortgage Authority (Single Family Mortgage Rev.),
6% due 12/1/2024* .............................................................. Aa/NR 2,000,820
2,000,000 Jefferson Parish, LA Hospital Service District Rev., 5% due
7/1/2028 ....................................................................... Aaa/AAA 1,720,100
2,500,000 Lafayette, LA Public Improvement Sales Tax, 5% due 5/1/2021 ...................... Aaa/AAA 2,224,425
2,495,000 Louisiana Housing Finance Agency Mortgage Rev. (Single Family),
6.45% due 6/1/2027* ............................................................ Aaa/AAA 2,542,454
2,500,000 Louisiana Public Facilities Authority Hospital Rev. (Franciscan Missionaries
of Our Lady Health System Project), 5% due 7/1/2025 ............................ Aaa/AAA 2,168,125
2,500,000 Louisiana Public Facilities Authority Rev. (Loyola University Project),
55/8% due 10/1/2016 ............................................................ Aaa/AAA 2,485,125
3,000,000 Louisiana Public Facilities Authority Rev. (Tulane University),
53/4% due 2/15/2021 ............................................................ Aaa/AAA 2,970,660
1,500,000 Louisiana State GOs, 5% due 4/15/2018 ............................................ Aaa/AAA 1,356,840
2,500,000 Ouachita Parish, LA Hospital Service District Rev. (Glenwood Regional Medical
Center), 53/4% due 5/15/2021 ................................................... Aaa/AAA 2,457,325
185,000 Ouachita Parish, LA Industrial Development Rev. (International Paper Company),
61/2% due 4/1/2006 ............................................................. NR/NR 185,216
2,500,000 Saint Bernard Parish, LA Exempt Facility Rev. (Mobil Oil Corporation Project),
5.90% due 11/1/2026* ........................................................... Aa2/AA 2,515,550
1,250,000 Saint Charles Parish, LA Environmental Improvement Rev. (Louisiana Power and
Light Company Project), 6.20% due 5/1/2023* .................................... Baa2/BBB 1,239,975
2,960,000 Saint Charles Parish, LA Waterworks & Wastewater District Utility Rev.,
7.15% due 7/1/2016 ............................................................. Aaa/AAA 3,146,569
2,500,000 Shreveport, LA Airport System Rev., 53/8% due 1/1/2024* .......................... Aaa/AAA 2,319,450
1,555,000 Shreveport, LA GOs, 71/2% due 4/1/2006++ ......................................... Aaa/AAA 1,774,115
2,750,000 Shreveport, LA GOs, 5% due 3/1/2019 .............................................. Aaa/AAA 2,483,663
2,050,000 Sulphur, LA Housing & Mortgage Finance Trust (Residential Mortgage Rev.),
71/4% due 12/1/2010++ .......................................................... Aaa/AAA 2,312,011
2,500,000 Tangipahoa Parish, LA Hospital Service District No. 1 Rev. (Northoaks Medical Center),
61/4% due 2/1/2024 ............................................................. Aaa/AAA 2,565,350
------------
TOTAL MUNICIPAL BONDS (Cost $50,753,313)-- 96.8% ........................................................... 50,767,782
VARIABLE RATE DEMAND NOTES (Cost $800,000)-- 1.5% .......................................................... 800,000
OTHER ASSETS LESS LIABILITIES-- 1.7% ....................................................................... 883,032
------------
NET ASSETS-- 100.0% ........................................................................................ $52,450,814
============
</TABLE>
- ---------------
+ Ratings have not been audited by Deloitte & Touche LLP.
++ Escrowed-to-maturity security.
o Pre-refunded security.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
22
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
MARYLAND SERIES
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$1,000,000 Anne Arundel County, MD GOs, 51/8% due 2/1/2026 .................................. Aa2/AA+ $ 909,480
1,340,000 Anne Arundel County, MD GOs, 51/8% due 2/1/2027 .................................. Aa2/AA+ 1,216,787
3,000,000 Anne Arundel County, MD Pollution Control Rev. (Baltimore Gas and Electric
Company Project), 6% due 4/1/2024 .............................................. A2/A 3,040,200
2,000,000 Baltimore, MD Consolidated Public Improvement GOs, 63/8% due 10/15/2006 .......... Aaa/AAA 2,193,160
2,500,000 Baltimore, MD Port Facilities Rev. (Consolidated Coal Sales Co. Project),
61/2% due 10/1/2011 ............................................................ Aa3/AA- 2,671,850
2,000,000 Baltimore, MD Project and Refunding Rev. (Water Projects), 51/2% due 7/1/2026 .... Aaa/AAA 1,955,980
2,000,000 Howard County, MD Metropolitan District Project GOs, 51/2% due 8/15/2022 ......... Aaa/AAA 1,960,840
2,000,000 Maryland Community Development Administration Dept. of Housing & Community
Development (Multi-Family Housing), 7.70% due 5/15/2020* ....................... Aa/NR 2,084,860
2,420,000 Maryland Community Development Administration Dept. of Housing & Community
Development (Single Family Program), 6.80% due 4/1/2024* ....................... Aa2/NR 2,508,451
2,500,000 Maryland Community Development Administration Dept. of Housing & Community
Development (Residential Rev.), 57/8% due 9/1/2025* ............................ Aa2/NR 2,481,775
2,500,000 Maryland Community Development Administration Dept. of Housing & Community
Development (Multi-Family Housing), 6.70% due 5/15/2027 ........................ Aa/NR 2,614,300
2,710,000 Maryland Health & Higher Educational Facilities Authority Rev. (Good Samaritan
Hospital), 53/4% due 7/1/2019++ ................................................ Aaa/AAA 2,749,431
2,000,000 Maryland Health & Higher Educational Facilities Authority Rev.
(Suburban Hospital), 51/8% due 7/1/2021 ........................................ A1/A+ 1,773,240
2,750,000 Maryland Health & Higher Educational Facilities Authority Rev.
(Anne Arundel Medical Center), 5% due 7/1/2023 ................................. Aaa/AAA 2,471,260
2,500,000 Maryland Health & Higher Educational Facilities Authority Rev. (Francis Scott
Key Medical Center), 5% due 7/1/2023 ........................................... Aaa/AAA 2,246,600
2,000,000 Maryland Health & Higher Educational Facilities Authority Rev. (Mercy Medical
Center), 53/4% due 7/1/2026 .................................................... Aaa/AAA 2,007,980
1,500,000 Maryland Health & Higher Educational Facilities Authority Rev. (Anne Arundel
Medical Center), 51/8% due 7/1/2028 ............................................ Aaa/AAA 1,353,225
1,000,000 Maryland Health & Higher Educational Facilities Authority Rev. (Charity Obligated
Group), 5% due 11/1/2029 ....................................................... Aa2/AA+ 881,570
2,000,000 Maryland Transportation Authority Rev. (Baltimore/Washington International
Airport Project), 61/4% due 7/1/2014* .......................................... Aaa/AAA 2,084,600
2,000,000 Maryland Transportation Authority Rev. Transportation Facilities Projects,
53/4% due 7/1/2015 ............................................................. A1/A+ 2,015,460
1,000,000 Maryland Water Quality Financing Administration Revolving Loan Fund Rev.,
6.70% due 9/1/2013o ............................................................ Aaa/AAA 1,065,600
1,000,000 Maryland Water Quality Financing Administration Revolving Loan Fund Rev.,
7.10% due 9/1/2013o ............................................................ Aaa/AAA 1,072,900
240,000 Montgomery County, MD Housing Opportunities Commission (Single
Family Mortgage Rev.), 73/8% due 7/1/2017 ..................................... Aa2/NR 246,993
</TABLE>
- ---------------
+ Ratings have not been audited by Deloitte & Touche LLP.
++ Escrowed-to-maturity security.
o Pre-refunded security.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
23
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
MARYLAND SERIES (CONTINUED)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$1,400,000 Montgomery County, MD Housing Opportunities Commission Rev., 6.20% due 7/1/2026*.. Aa2/NR $ 1,421,546
2,000,000 Northeast Maryland Waste Disposal Authority Solid Waste Rev. (Montgomery County
Resource Recovery Project), 6.30% due 7/1/2016* ................................. A2/NR 2,062,880
1,000,000 Puerto Rico Highway & Transportation Authority Rev., 51/2% due 7/1/2036 ........... Baa1/A 954,500
630,000 Puerto Rico Housing Finance Corporation (Single Family Mortgage Rev.
Portfolio 1-C), 6.85% due 10/15/2023 ............................................ Aaa/AAA 656,542
2,000,000 Washington Suburban Sanitary District, MD, 61/2% due 1/1/2016 ..................... Aa1/AA 2,109,740
------------
TOTAL MUNICIPAL BONDS (Cost $49,828,474)-- 97.0% ........................................................... 50,811,750
VARIABLE RATE DEMAND NOTES (Cost $700,000)-- 1.3% .......................................................... 700,000
OTHER ASSETS LESS LIABILITIES-- 1.7% ....................................................................... 860,796
------------
NET ASSETS-- 100.0% ........................................................................................ $52,372,546
============
</TABLE>
MASSACHUSETTS SERIES
<TABLE>
<CAPTION>
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., 51/4% due 11/1/2019 ............. A1/A+ $ 4,799,150
4,000,000 Massachusetts Bay Transportation Authority General Transportation System Rev.,
55/8% due 3/1/2026o ............................................................. Aa3/AA- 4,218,880
805,000 Massachusetts Education Loan Authority Education Loan Rev., 8% due 6/1/2002 ....... NR/AAA 810,563
3,000,000 Massachusetts Health & Educational Facilities Authority Rev. (Daughters of
Charity National Health Systems -- Carney Hospital), 6% due 7/1/2009 ............ Aa2/AA+ 3,155,820
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+ 2,565,000
5,000,000 Massachusetts Health & Educational Facilities Authority Rev. (Newton-Wellesley
Hospital), 6% due 7/1/2018 ...................................................... Aaa/AAA 5,030,200
3,500,000 Massachusetts Health & Educational Facilities Authority Rev. (Williams College),
53/4% due 7/1/2019 .............................................................. Aa1/AA+ 3,450,895
2,500,000 Massachusetts Health & Educational Facilities Authority Rev. (Suffolk University),
81/8% due 7/1/20200 ............................................................. NR/NR 2,615,700
5,100,000 Massachusetts Health & Educational Facilities Authority Rev. (Smith College),
53/4% due 7/1/2024 .............................................................. Aa2/AA- 4,987,545
5,000,000 Massachusetts Health & Educational Facilities Authority Rev. (Partners Healthcare
System), 53/8% due 7/1/2024 ..................................................... Aaa/AAA 4,647,800
6,500,000 Massachusetts Health & Educational Facilities Authority Rev. (Harvard University),
55/8% due 11/1/2028 ............................................................. Aaa/AAA 6,331,780
5,000,000 Massachusetts Health & Educational Facilities Authority Rev. (South Shore Hospital),
53/4% due 7/1/2029 .............................................................. A2/AA 4,663,550
5,000,000 Massachusetts Housing Finance (Rental Housing Mortgage Rev.), 51/2% due 7/1/2030*.. Aaa/AAA 4,643,850
</TABLE>
- ---------------
+ Ratings have not been audited by Deloitte & Touche LLP.
++ Escrowed-to-maturity security.
o Pre-refunded security.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
24
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
MASSACHUSETTS SERIES (CONTINUED)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$4,985,000 Massachusetts Housing Finance Agency Rev. (Single Family Housing),
51/2% due 12/1/2030* ............................................................. Aaa/AAA $4,589,041
2,000,000 Massachusetts Industrial Finance Agency Electric Utility Rev. (Nantucket
Electric Company Project), 57/8% due 7/1/2017* .................................. Aaa/AAA 2,001,820
3,500,000 Massachusetts Industrial Finance Agency Rev. (Phillips Academy), 53/8% due 9/1/2023 Aa1/AA+ 3,261,650
3,000,000 Massachusetts Industrial Finance Agency Rev. (College of the Holy Cross),
55/8% due 3/1/2026 ............................................................... Aaa/AAA 2,917,470
3,000,000 Massachusetts Industrial Finance Agency Rev. (Suffolk University),
51/4% due 7/1/2027 ............................................................... Aaa/AAA 2,746,470
2,400,000 Massachusetts Port Authority Rev., 5% due 7/1/2023 ................................. Aa3/AA- 2,109,000
2,000,000 Massachusetts Port Authority Rev., 5% due 7/1/2028* ................................ Aa3/AA- 1,705,640
3,000,000 Massachusetts Port Authority Special Facilities Rev. (BOSFUEL Project),
53/4% due 7/1/2039* .............................................................. Aaa/AAA 2,857,050
5,000,000 Massachusetts State Consolidated Loan GOs, 5% due 5/1/2019 ......................... Aa3/AA- 4,513,500
5,000,000 Massachusetts Water Pollution Abatement Trust Pool Program, 51/2% due 8/1/2029 .... Aaa/AAA 4,781,100
5,000,000 Plymouth County, MA Certificates of Participation (Plymouth County Correctional
Facility Project), 5% due 4/1/2022 ............................................... Aaa/AAA 4,403,800
4,000,000 Puerto Rico Highway & Transportation Authority Rev., 51/2% due 7/1/2036 ............ Baa1/A 3,818,000
2,750,000 Puerto Rico Port Authority Rev., 6% due 7/1/2021* .................................. Aaa/AAA 2,787,510
------------
TOTAL MUNICIPAL BONDS (Cost $95,851,443)-- 98.3% ........................................................... 94,412,784
------------
</TABLE>
<TABLE>
<CAPTION>
VARIABLE RATE DEMAND NOTES
--------------------------
<S> <C> <C> <C>
100,000 Floyd County, GA Development Authority Environmental Improvement Rev.
(Georgia Kraft Co. Project) due 12/1/2015 ........................................ P-1/NR 100,000
2,500,000 Martin County, FL Pollution Control Rev. (Florida Power & Light Co. Project)
due 9/1/2024 ..................................................................... P-1/NR 2,500,000
700,000 New York City GOs due 8/1/2022 ..................................................... VMIG-1/A-1+ 700,000
600,000 New York City Municipal Water Finance Authority, NY Water & Sewer System Rev.
due 10/1/2021 .................................................................... VMIG-1/A-1+ 600,000
300,000 New York City Municipal Water Finance Authority, NY Water & Sewer System Rev.
due 6/15/2025 .................................................................... VMIG-1/A-1+ 300,000
900,000 New York State Energy Research & Development Authority Pollution Control Rev.
(Niagara Mohawk) due 7/1/2015 .................................................... NR/A-1+ 900,000
------------
TOTAL VARIABLE RATE DEMAND NOTES (Cost $5,100,000) -- 5.3% ................................................. 5,100,000
------------
OTHER ASSETS LESS LIABILITIES-- (3.6)% ..................................................................... (3,422,220)
------------
NET ASSETS-- 100.0% ........................................................................................ $96,090,564
============
</TABLE>
- ---------------
+ 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 Statements.
25
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
MICHIGAN SERIES
<TABLE>
<CAPTION>
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 $5,302,850
5,000,000 Detroit, MI GOs, 51/2% due 4/1/2016 ............................................... Aaa/AAA 4,909,650
6,000,000 Detroit, MI Water Supply System Rev., 61/4% due 7/1/20120 ......................... Aaa/AAA 6,403,740
3,000,000 Grand Haven, MI Electric System Rev., 51/4% due 7/1/2013 .......................... Aaa/AAA 2,950,740
5,000,000 Grand Rapids, MI Water Supply System Rev., 53/4% due 1/1/2018 ..................... Aaa/AAA 5,001,900
2,000,000 Grand Traverse County, MI Hospital Finance Authority (Munson Healthcare
Obligated Group), 5% due 7/1/2028 ............................................... Aaa/NR 1,732,280
2,500,000 Kalamazoo, MI Hospital Finance Authority Rev. (Bronson Methodist Hospital),
51/2% due 5/15/2028 ............................................................. Aaa/NR 2,365,700
5,000,000 Kent County, MI Airport Rev., 6.10% due 1/1/2025*o ................................ Aa/AAA 5,417,450
1,850,000 Kent County, MI Airport Rev., 5% due 1/1/2028* .................................... Aaa/AAA 1,592,813
2,775,000 Kentwood, MI Public Schools Building & Site GOs, 6.40% due 5/1/20150 .............. Aa2/A+ 2,964,366
3,000,000 Lansing, MI Building Authority Rev., 5.60% due 6/1/2019 ........................... Aa3/AA+ 2,968,020
3,250,000 Marquette, MI Hospital Finance Authority Rev. (Marquette General Hospital),
6.10% due 4/1/2019 .............................................................. Aaa/AAA 3,277,853
3,000,000 Michigan Public Power Agency Rev. (Belle River Project), 51/4% due 1/1/2018 ....... A1/AA- 2,780,400
3,000,000 Michigan State Building Authority Rev., 61/4% due 10/1/2020 ....................... Aa2/AA 3,098,310
5,000,000 Michigan State GOs (Environmental Protection Program), 5.40% due 11/1/2019 ........ Aa1/AA+ 4,810,100
5,000,000 Michigan State Hospital Finance Authority Rev. (Oakwood Obligated Group),
51/8% due 8/15/2025 ............................................................. Aaa/AAA 4,446,400
4,500,000 Michigan State Hospital Finance Authority Rev. (St. John Hospital),
51/4% due 5/15/2026 ............................................................. Aaa/AAA 4,081,410
5,250,000 Michigan State Hospital Finance Authority Rev. (Mercy Health Services
Obligated Group), 53/4% due 8/15/2026 ........................................... Aa3/AA- 5,035,013
5,000,000 Michigan State Hospital Finance Authority Rev. (Charity Obligated Group),
51/8% due 11/1/2029 ............................................................. Aa2/AA+ 4,319,350
5,000,000 Michigan State Hospital Finance Authority Rev. (Sparrow Obligated Group),
6% due 11/15/2036 ............................................................... Aaa/AAA 4,984,800
1,285,000 Michigan State Housing Development Authority Rev. (Single Family Mortgage),
6.80% due 12/1/2016 ............................................................. NR/AA+ 1,322,907
3,925,000 Michigan State Housing Development Authority Rev. (Rental Housing),
6.65% due 4/1/2023 .............................................................. NR/AA- 4,142,994
4,000,000 Michigan State Housing Development Authority Rev. (Single Family Mortgage),
6.05% due 12/1/2027 ............................................................. NR/AA+ 4,029,080
3,000,000 Michigan State Strategic Fund Pollution Control Rev. (Detroit Edison Company),
61/2% due 2/15/2016 ............................................................. Aaa/AAA 3,156,210
6,000,000 Michigan State Strategic Fund Pollution Control Rev. (General Motors Corp.),
6.20% due 9/1/2020 .............................................................. A2/A 6,152,220
5,000,000 Michigan State Trunk Line Rev., 5% due 11/1/2026 .................................. Aaa/AAA 4,382,700
2,000,000 Midland, MI Water Supply System Rev., 7.20% due 4/1/2010 .......................... A3/A 2,069,220
6,300,000 Oxford, MI Area Community Schools GOs, 51/2% due 5/1/2021 ......................... Aaa/AAA 6,098,715
</TABLE>
- ---------------
+ Ratings have not been audited by Deloitte & Touche LLP.
o Pre-refunded security.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
26
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
MICHIGAN SERIES (CONTINUED)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$5,000,000 Royal Oak, MI Hospital Finance Authority Rev. (William Beaumont Hospital),
51/4% due 1/1/2020 ............................................................ Aa3/AA $ 4,514,500
3,000,000 University of Michigan Hospital Rev., 63/8% due 12/1/20240 ...................... Aa2/AA 3,084,090
5,000,000 Western Michigan State University Rev., 51/8% due 11/15/2022 .................... Aaa/AAA 4,544,500
3,000,000 Wyandotte, MI Electric Rev., 61/4% due 10/1/2017 ................................ Aaa/AAA 3,090,630
-------------
TOTAL MUNICIPAL BONDS (Cost $124,995,202)-- 97.9% ......................................................... 125,030,911
VARIABLE RATE DEMAND NOTES (Cost $1,500,000)-- 1.2% ....................................................... 1,500,000
OTHER ASSETS LESS LIABILITIES-- 0.9% ...................................................................... 1,217,419
-------------
NET ASSETS-- 100.0% ....................................................................................... $127,748,330
=============
</TABLE>
MINNESOTA SERIES
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$5,000,000 Becker, MN Pollution Control Rev. (Northern States Power Company),
6.80% due 4/1/2007 ............................................................. A1/A+ $5,107,750
1,500,000 Buffalo, MN Independent School District GOs, 6.15% due 2/1/20220 ................. Aaa/AAA 1,551,495
2,250,000 Burnsville - Eagan - Savage, MN Independent School District GOs,
51/8% due 2/1/2016 ............................................................. Aa1/NR 2,125,125
2,350,000 Burnsville - Eagan - Savage, MN Independent School District GOs,
51/8% due 2/1/2017 ............................................................. Aa1/NR 2,200,023
1,500,000 Cloquet, MN Pollution Control Rev. (Potlatch Corporation Projects),
5.90% due 10/1/2026 ............................................................ NR/BBB+ 1,435,140
2,000,000 Cuyana Range Hospital District, MN Health Facilities Rev., 6% due 6/1/2029 ....... NR/NR 1,806,200
5,000,000 Edina, MN Housing Development Rev. (Edina Park Plaza Project),
7.70% due 12/1/2028 ............................................................ Aa/NR 5,108,200
3,545,000 Fridley, MN Independent School District GOs, 5.35% due 2/1/2021 .................. Aaa/AAA 3,388,453
1,500,000 Minneapolis, MN GOs, 6% due 3/1/2016 ............................................. Aaa/AAA 1,551,315
4,725,000 Minneapolis, MN Rev. (University Gateway Project), 51/4% due 12/1/2024 ........... Aa2/AA 4,388,674
3,000,000 Minneapolis, MN Special School District GOs, 5% due 2/1/2014 ..................... Aa1/AA+ 2,855,190
5,000,000 Minneapolis - St. Paul, MN Housing & Redevelopment Authority Health Care Rev.
(Children's Health Care), 51/2% due 8/15/2025 .................................. Aaa/AAA 4,774,150
4,000,000 Minneapolis - St. Paul, MN Metropolitan Airport Commission Rev.,
5% due 1/1/2030 ................................................................ Aaa/AAA 3,494,520
2,250,000 Minnesota Agricultural & Economic Development Board Rev. (Evangelical
Lutheran Good Samaritan Society Project), 5.15% due 12/1/2022 .................. Aaa/AAA 2,039,738
1,250,000 Minnesota Agricultural & Economic Development Board Rev. (Evangelical
Lutheran Good Samaritan Society Project), 5% due 12/1/2023 ..................... Aaa/AAA 1,104,525
3,000,000 Minnesota Agricultural & Economic Development Board Health Care Facilities
Rev. (Benedictine Health System -- St. Mary's Duluth Clinic Health
System Obligated Group), 51/8% due 2/15/2029 .................................. Aaa/AAA 2,661,930
2,775,000 Minnesota Higher Education Facilities Authority Rev. (University of
St. Thomas), 5.40% due 4/1/2022 ................................................ A2/NR 2,646,517
</TABLE>
- ---------------
+ Ratings have not been audited by Deloitte & Touche LLP.
o Pre-refunded security.
See Notes to Financial Statements.
27
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
MINNESOTA SERIES (CONTINUED)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$2,000,000 Minnesota Higher Education Facilities Authority Rev. (St. John's University),
5.40% due 10/1/2022 ............................................................... A3/NR $1,863,120
1,775,000 Minnesota Higher Education Facilities Authority Rev. (University of St. Thomas),
5.40% due 4/1/2023 ................................................................ A2/NR 1,671,518
2,500,000 Minnesota Higher Education Facilities Authority Rev. (St. Olaf College),
51/4% due 4/1/2029 ................................................................ A3/NR 2,248,450
465,000 Minnesota Housing Finance Agency (Housing Development), 61/4% due 2/1/2020 .......... Aa2/AA 472,156
800,000 Minnesota Housing Finance Agency (Single Family Mortgage), 5.65% due 7/1/2022* ..... Aa2/AA+ 761,600
5,000,000 Minnesota Housing Finance Agency (Single Family Mortgage), 6.85% due 1/1/2024* ..... Aa2/AA+ 5,150,000
1,500,000 Minnesota Public Facilities Authority Water Pollution Control Rev.,
7.10% due 3/1/20120 ............................................................... Aaa/AAA 1,550,730
4,000,000 Minnesota Public Facilities Authority Water Pollution Control Rev.,
61/4% due 3/1/20150 ............................................................... Aaa/AAA 4,311,240
5,000,000 Minnesota State GOs, 5.70% due 5/1/2016 ............................................. Aaa/AAA 5,058,750
5,000,000 North Saint Paul - Maplewood, MN Independent School District GOs,
51/8% due 2/1/2025 ................................................................ Aa1/AA+ 4,523,700
2,500,000 Northfield, MN Independent School District GOs, 51/4% due 2/1/2017 .................. Aa1/NR 2,387,525
4,000,000 Rochester, MN Health Care Facilities Rev. (Mayo Foundation/Mayo Medical Center),
7.45% due 11/15/20060 ............................................................. NR/AA+ 4,155,920
4,500,000 Rochester, MN Health Care Facilities Rev. (Mayo Foundation/Mayo Medical Center),
61/4% due 11/15/2014 .............................................................. NR/AA+ 4,725,675
2,575,000 Rochester, MN Independent School District GOs, 55/8% due 2/1/20160 .................. Aaa/AA+ 2,682,558
2,715,000 Rochester, MN Independent School District GOs, 55/8% due 2/1/20170 .................. Aaa/AA+ 2,828,406
4,500,000 Saint Paul, MN Housing and Redevelopment Health Care Rev.,
(Regions Hospital Project), 5.30% due 5/15/2028 ................................... NR/BBB+ 3,879,855
45,000 Saint Paul Port Authority, MN Industrial Development Rev. Series E,
91/8% due 10/1/2000 ............................................................... NR/CCC 45,064
5,000 Saint Paul Port Authority, MN Industrial Development Rev. Series H,
91/8% due 12/1/2000 ............................................................... NR/CCC 5,004
55,000 Saint Paul Port Authority, MN Industrial Development Rev. Series I,
91/8% due 12/1/2000 ............................................................... NR/CCC 55,041
50,000 Saint Paul Port Authority, MN Industrial Development Rev. Series E,
91/8% due 10/1/2001 ............................................................... NR/CCC 50,103
10,000 Saint Paul Port Authority, MN Industrial Development Rev. Series H,
91/8% due 12/1/2001 ............................................................... NR/CCC 10,030
55,000 Saint Paul Port Authority, MN Industrial Development Rev. Series I,
91/8% due 12/1/2001 ............................................................... NR/CCC 55,167
5,000 Saint Paul Port Authority, MN Industrial Development Rev. Series L,
93/4% due 12/1/2001 ............................................................... NR/CCC 5,025
50,000 Saint Paul Port Authority, MN Industrial Development Rev. Series E,
91/8% due 10/1/2002 ............................................................... NR/CCC 50,039
</TABLE>
- ---------------
+ Ratings have not been audited by Deloitte & Touche LLP.
o Pre-refunded security.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
28
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
MINNESOTA SERIES (CONTINUED)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$ 10,000 Saint Paul Port Authority, MN Industrial Development Rev. Series H,
91/8% due 12/1/2002 ............................................................ NR/CCC $ 9,999
60,000 Saint Paul Port Authority, MN Industrial Development Rev. Series I,
91/8% due 12/1/2002 ............................................................ NR/CCC 59,993
10,000 Saint Paul Port Authority, MN Industrial Development Rev. Series L,
93/4% due 12/1/2002 ............................................................ NR/CCC 10,023
1,500,000 Southern Minnesota Municipal Power Agency-- Power Supply System Rev.,
53/4% due 1/1/2018 ............................................................. A2/A+ 1,504,560
9,010,000 Western Minnesota Municipal Power Agency-- Power Supply Rev.,
63/8% due 1/1/2016++ ........................................................... Aaa/AAA 9,801,168
-------------
TOTAL MUNICIPAL BONDS (Cost $108,901,233)-- 97.4% .......................................................... 108,171,364
VARIABLE RATE DEMAND NOTES (Cost $1,200,000)-- 1.1% ........................................................ 1,200,000
OTHER ASSETS LESS LIABILITIES-- 1.5% ....................................................................... 1,649,960
-------------
NET ASSETS-- 100.0% ........................................................................................ $111,021,324
=============
</TABLE>
MISSOURI SERIES
<TABLE>
<CAPTION>
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., 61/8% due 10/1/20120 ..... A1/AA $ 2,136,120
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 2,405,575
1,500,000 Hannibal, MO Industrial Development Authority Health Facilities Rev.
(Hannibal Regional Hospital), 53/4% due 3/1/2022 ................................ Aaa/AAA 1,483,155
1,000,000 Missouri Development Finance Board Solid Waste Disposal Rev. (The Procter
& Gamble Company Paper Products Project), 5.20% due 3/15/2029* .................. Aa2/AA 896,330
130,000 Missouri School Boards Pooled Financing Program Certificates of Participation,
73/8% due 3/1/2006 .............................................................. Aaa/AAA 131,355
305,000 Missouri School Boards Pooled Financing Program Certificates of Participation,
7% due 3/1/2006 ................................................................. Aaa/AAA 308,858
1,000,000 Missouri State Environmental Improvement & Energy Resources Authority Rev.
(State Revolving Fund Program), 6.55% due 7/1/2014 .............................. Aa1/NR 1,052,530
2,500,000 Missouri State Environmental Improvement & Energy Resources Authority Rev.
(Union Electric Company Project), 5.45% due 10/1/2028* .......................... A1/AA- 2,308,875
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 2,445,325
2,000,000 Missouri State GOs, 55/8% due 4/1/2017 ............................................ Aaa/AAA 2,016,420
2,500,000 Missouri State Health & Educational Facilities Authority Rev. (Lester E. Cox
Medical Centers Project), 51/4% due 6/1/2015 .................................... Aaa/AAA 2,411,825
1,500,000 Missouri State Health & Educational Facilities Authority Rev. (Sisters of
Mercy Health System, St. Louis, Inc.), 61/4% due 6/1/2015 ...................... Aa1/AA+ 1,565,955
</TABLE>
- ---------------
+ Ratings have not been audited by Deloitte & Touche LLP.
++ Escrowed-to-maturity security.
o Pre-refunded security.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
29
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
MISSOURI SERIES (CONTINUED)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$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+ $ 891,710
2,500,000 Missouri State Health & Educational Facilities Authority Rev. (SSM Health Care),
5% due 6/1/2022 .................................................................. Aaa/AAA 2,211,950
2,400,000 Missouri State Health & Educational Facilities Authority Rev.
(St. Louis University), 5.20% due 10/1/2026 ...................................... Aaa/AAA 2,210,856
2,500,000 Missouri State Health & Educational Facilities Authority Rev.
(The Washington University), 5% due 11/15/2037 ................................... Aa1/AA+ 2,140,050
820,000 Missouri State Housing Development Commission Housing Development Bonds
(Federally Insured Mortgage Loans), 6% due 10/15/2019 ............................ Aa2/AA+ 829,922
2,285,000 Missouri State Housing Development Commission Single Family Mortgage Rev.
(Homeownership Loan Program), 5.90% due 9/1/2028* ................................ NR/AAA 2,284,863
1,000,000 Puerto Rico Highway & Transportation Authority Rev., 51/2% due 7/1/2026 ............ Baa1/A 956,770
1,500,000 St. Charles County, MO Certificates of Participation (Public Water Supply),
5.10% due 12/1/2025 .............................................................. Aaa/NR 1,348,245
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+ 1,663,455
1,500,000 St. Louis, MO Municipal Finance Corporation City Justice Center Leasehold
Improvement Rev., 5.95% due 2/15/2016 ............................................ Aaa/AAA 1,532,790
2,400,000 Southeast Missouri Correctional Facility Lease Rev. (Missouri State Project),
53/4% due 10/15/2016++ ........................................................... Aa2/NR 2,453,352
2,000,000 Springfield, MO Waterworks Rev., 5.60% due 5/1/20230 ............................... Aa2/A+ 2,089,440
2,750,000 University of Missouri Systems Facilities Rev., 51/2% due 11/1/2023 ................ Aa2/AA+ 2,664,282
------------
TOTAL MUNICIPAL BONDS (Cost $42,856,546)-- 96.3% ........................................................... 42,440,008
VARIABLE RATE DEMAND NOTES (Cost $900,000)-- 2.0% .......................................................... 900,000
OTHER ASSETS LESS LIABILITIES-- 1.7% ....................................................................... 735,226
------------
NET ASSETS-- 100.0% ........................................................................................ $44,075,234
============
</TABLE>
NEW YORK SERIES
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$2,500,000 Long Island Power Authority, NY Electric Systems General Rev.,
51/2% due 12/1/2029 ............................................................... Baa1/A- $2,329,725
2,000,000 Metropolitan Transportation Authority, NY (Dedicated Tax Fund), 5% due 4/1/2023 .... Aaa/AAA 1,782,000
4,000,000 New York City Municipal Water Finance Authority, NY Water & Sewer
System Rev., 61/4% due 6/15/20200 ................................................. Aaa/AAA 4,384,560
4,000,000 New York City Municipal Water Finance Authority, NY Water & Sewer .
System Rev., 51/8% due 6/15/2030 .................................................. Aaa/AAA 3,568,520
1,340,000 New York City, NY GOs, 71/4% due 8/15/20240 ......................................... Aaa/A- 1,415,415
</TABLE>
- ---------------
+ Ratings have not been audited by Deloitte & Touche LLP.
++ Escrowed-to-maturity security.
o Pre-refunded security.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
30
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
NEW YORK SERIES (CONTINUED)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$ 5,000 New York City, NY GOs, 71/4% due 8/15/2024 .......................................... A3/A- $ 5,235
1,380,000 New York City, NY GOs, 6% due 8/1/2026 .............................................. A3/A- 1,387,383
2,400,000 New York City, NY Industrial Development Agency Civic Facility Rev.
(The Nightingale-Bamford School Project), 5.85% due 1/15/2020 ..................... A3/A 2,407,320
3,500,000 New York City, NY Transitional Finance Authority (Future Tax Secured Bonds),
5% due 5/1/2026 ................................................................... Aa3/AA 3,088,225
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 3,934,200
4,000,000 New York State Dormitory Authority Rev. (Fordham University), 53/4% due 7/1/2015 ... Aaa/AAA 4,032,960
4,000,000 New York State Dormitory Authority Rev. (Rochester Institute of Technology),
51/2% due 7/1/2018 ................................................................ Aaa/AAA 3,901,440
3,500,000 New York State Dormitory Authority Rev. (Mental Health Services Facilities
Improvement), 53/4% due 8/15/2022 ................................................. A3/A- 3,417,120
3,000,000 New York State Dormitory Authority Rev. (Skidmore College), 53/8% due 7/1/2023 ...... Aaa/AAA 2,843,820
1,500,000 New York State Dormitory Authority Rev. (Vassar Brothers Hospital),
53/8% due 7/1/2025 ................................................................ Aaa/AAA 1,411,335
2,000,000 New York State Dormitory Authority Rev. (Hospital for Special Surgery),
5% due 2/1/2028 ................................................................... Aaa/AAA 1,751,000
2,000,000 New York State Dormitory Authority Rev. (Rockefeller University), 5% due 7/1/2028 .. Aaa/AAA 1,769,640
4,000,000 New York State Energy Research & Development Authority Gas Facilities Rev.
(Brooklyn Union Gas), 51/2% due 1/1/2021 .......................................... Aaa/AAA 3,877,840
3,000,000 New York State Environmental Facilities Corporation Pollution Control Rev.
(State Water -- Revolving Fund), 6.90% due 11/15/2015 ............................. Aaa/AAA 3,322,830
3,000,000 New York State Housing Finance Agency Rev. (Phillips Village Project),
73/4% due 8/15/2017* .............................................................. A2/NR 3,238,410
3,000,000 New York State Local Government Assistance Corp., 6% due 4/1/2024 ................... A3/A+ 3,021,570
2,000,000 New York State Mortgage Agency Rev. (Homeowner Mortgage), 71/2% due 4/1/2016 ....... Aa2/NR 2,042,160
1,000,000 New York State Mortgage Agency Rev. (Homeowner Mortgage), 51/2% due 10/1/2028* ..... Aa2/NR 920,120
1,000,000 New York State Mortgage Agency Rev. (Homeowner Mortgage), 5.65% due 4/1/2030* ...... Aa2/NR 948,600
2,000,000 New York State Thruway Authority General Rev., 6% due 1/1/20250 ..................... Aaa/AAA 2,159,700
2,000,000 New York State Thruway Authority (Highway and Bridge Trust Fund), 5% due 4/1/2018 .. A3/A 1,778,300
3,000,000 New York State Thruway Authority Service Contract Rev., 61/4% due 4/1/20140 ......... Baa1/NR 3,274,230
4,000,000 Onondaga County, NY Industrial Development Agency Sewer Facilities Rev.
(Bristol-Myers Squibb Co. Project), 53/4% due 3/1/2024* ........................... Aaa/AAA 3,979,000
2,250,000 Port Authority of New York and New Jersey Consolidated Rev., 61/8% due 6/1/2094 ..... A1/AA- 2,369,452
</TABLE>
- ---------------
+ Ratings have not been audited by Deloitte & Touche LLP.
o Pre-refunded security.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
31
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
NEW YORK SERIES (CONTINUED)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$2,250,000 St. Lawrence County, NY Industrial Development Agency Civic Facility Rev.
(Clarkson University Project), 51/2% due 7/1/2029 ................................. Baa1/NR $ 2,105,190
1,800,000 Triborough Bridge & Tunnel Authority General Purpose Rev., 51/2% due 1/1/2030 ....... Aa3/A+ 1,713,402
------------
TOTAL MUNICIPAL BONDS (Cost $78,410,705)-- 97.9% ........................................................... 78,180,702
VARIABLE RATE DEMAND NOTES (Cost $500,000)-- 0.6% .......................................................... 500,000
OTHER ASSETS LESS LIABILITIES-- 1.5% ....................................................................... 1,184,894
------------
NET ASSETS-- 100.0% ........................................................................................ $79,865,596
============
</TABLE>
OHIO SERIES
<TABLE>
<CAPTION>
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 $2,252,993
3,450,000 Big Walnut Local School District, OH School Building Construction &
Improvement GOs, 7.20% due 6/1/2007o ........................................... Aaa/AAA 3,684,496
4,000,000 Butler County, OH Transportation Improvement District Highway
Improvement Rev., 51/8% due 4/1/2017 .......................................... Aaa/AAA 3,752,000
4,000,000 Cleveland, OH Airport System Rev., 51/8% due 1/1/2027* ........................... Aaa/AAA 3,532,760
2,395,000 Cleveland, OH Airport System Rev., 51/8% due 1/1/2027 ............................ Aaa/AAA 2,144,675
5,000,000 Cleveland, OH Public Power System Rev., 5% due 11/15/2024 ........................ Aaa/AAA 4,480,050
4,915,000 Cleveland, OH Waterworks Improvement First Mortgage Rev., 53/4% due 1/1/20210 .... Aaa/AAA 5,259,394
85,000 Cleveland, OH Waterworks Improvement First Mortgage Rev., 53/4% due 1/1/2021 ..... Aaa/AAA 85,212
4,500,000 Columbus, OH Municipal Airport Authority Rev. (Port Columbus International
Airport Project), 6% due 1/1/2020* ............................................. Aaa/AAA 4,557,915
1,000,000 Columbus, OH Municipal Airport Authority Rev. (Port Columbus International
Airport Project), 5% due 1/1/2028 .............................................. Aaa/AAA 881,850
7,000,000 Franklin County, OH GOs, 53/8% due 12/1/2020 ..................................... Aaa/AAA 6,763,470
1,250,000 Franklin County, OH Hospital Improvement Rev. (The Children's
Hospital Project), 5.20% due 5/1/2029 .......................................... Aa3/NR 1,121,762
7,500,000 Franklin County, OH Hospital Rev. (Riverside United Methodist Hospital),
53/4% due 5/15/2020 ............................................................ Aa3/NR 7,348,725
2,500,000 Hamilton County, OH Sewer System Rev., 51/2% due 12/1/2017 ....................... Aaa/AAA 2,477,125
5,000,000 Hamilton, OH Electric System Mortgage Rev., 6% due 10/15/2023 .................... Aaa/AAA 5,053,900
4,000,000 Hudson Local School District, OH GOs, 7.10% due 12/15/2013o ...................... A1/NR 4,227,840
1,095,000 Lake County, OH Hospital Improvement Rev. (Lake Hospital System Inc.),
8% due 1/1/2013 ................................................................ Aaa/AAA 1,109,290
6,425,000 Mahoning County, OH Hospital Rev. (Forum Health Obligated Group), 5% due 11/15/2025 Aaa/AAA 5,628,172
2,000,000 Ohio Air Quality Development Authority Rev. (Cincinnati Gas & Electric
Company Project), 5.45% due 1/1/2024 ......................................... Aaa/AAA 1,899,300
6,500,000 Ohio Air Quality Development Authority Rev. (JMG Project), 63/8% due 1/1/2029* ... Aaa/AAA 6,727,695
</TABLE>
- ---------------
+ Ratings have not been audited by Deloitte & Touche LLP.
o Pre-refunded security.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
32
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
OHIO SERIES (CONTINUED)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$4,415,000 Ohio Housing Finance Agency Residential Mortgage Rev. (Mortgage-Backed
Securities Program), 6.10% due 9/1/2028* NR/AAA $4,396,899
2,500,000 Ohio Housing Finance Agency Residential Mortgage Rev.,
5.40% due 9/1/2029* NR/AAA 2,292,500
1,640,000 Ohio State Higher Educational Facilities Commission Rev. (Oberlin College
Project), 53/8% due 10/1/20150 NR/AA 1,722,246
1,360,000 Ohio State Higher Educational Facilities Commission Rev. (Oberlin
College Project), 53/8% due 10/1/2015 NR/AA 1,330,746
4,000,000 Ohio State Higher Educational Facilities Commission Rev. (University of
Dayton Project), 5.40% due 12/1/2022 Aaa/AAA 3,841,400
2,000,000 Ohio State Liquor Profits Rev., 6.85% due 3/1/2000 Aaa/AAA 2,025,740
4,000,000 Ohio State Public Facilities Commission Rev. (Higher Education Capital Facilities),
6.30% due 5/1/20060 Aaa/AAA 4,208,000
2,190,000 Ohio State Water Development Authority Rev. (Safe Water), 93/8% due 12/1/2010++ Aaa/AAA 2,651,630
7,500,000 Ohio State Water Development Authority Rev. (Fresh Water), 51/8% due 12/1/2023 Aaa/AAA 6,827,625
5,000,000 Ohio State Water Development Authority Rev. (Community Assistance),
5 3/8% due 12/1/2024 Aaa/AAA 4,764,550
5,000,000 Ohio State Water Development Authority Rev. (Dayton Power & Light Co.
Project), 6.40% due 8/15/2027 Aa3/AA- 5,189,750
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* A1/A+ 2,538,700
3,000,000 Ohio Turnpike Commission, OH Turnpike Rev., 51/2% due 2/15/2026 Aaa/AAA 2,934,450
2,955,000 Pickerington Local School District, OH School Building Construction GOs,
8% due 12/1/2005++ Aaa/AAA 3,336,165
4,000,000 Puerto Rico Highway & Transportation Authority Rev., 5 1/2% due 7/1/2036 Baa1/A 3,818,000
1,000,000 Puerto Rico Telephone Authority Rev., 51/2% due 1/1/20220 A/AAA 1,055,930
2,500,000 Twinsburg City School District, OH School Improvement GOs,
5.90% due 12/1/2021 Aaa/AAA 2,533,300
3,000,000 University of Toledo, OH General Receipts Bonds, 7.10% due 6/1/20100 Aaa/AAA 3,125,730
2,000,000 Worthington City School District, OH School Building Construction &
Improvement GOs, 83/4% due 12/1/2002 Aaa/AAA 2,055,880
------------
TOTAL MUNICIPAL BONDS (Cost $133,630,999)-- 98.0% 133,637,865
VARIABLE RATE DEMAND NOTES (Cost $600,000)-- 0.4% 600,000
OTHER ASSETS LESS LIABILITIES-- 1.6% 2,140,861
------------
NET ASSETS-- 100.0% $136,378,726
============
</TABLE>
- ---------------
+ Ratings have not been audited by Deloitte & Touche LLP.
o Pre-refunded security.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
33
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
OREGON SERIES
<TABLE>
<CAPTION>
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), 51/8% due 10/1/2028 .......................................... NR/A $1,743,600
2,000,000 Chemeketa, OR Community College District GOs, 5.95% due 6/1/20160 ................. Aaa/AAA 2,138,020
1,500,000 Clackamas County, OR Hospital Facility Authority
Rev. (Legacy Health System), 5 1/4% due 2/15/2018 ............................... NR/AA 1,397,775
1,000,000 Clackamas & Washington Counties, OR GOs (West Linn -- Wilsonville
School District), 5% due 6/1/2017 ............................................... Aaa/AAA 928,920
1,395,000 Eugene, OR Trojan Nuclear Project Rev., 5.90% due 9/1/2009 Aa1/AA- 1,422,900
1,250,000 Multnomah County, OR Education Facility Rev. (University of Portland),
5% due 4/1/2018 ................................................................. Aaa/AAA 1,146,737
1,750,000 Multnomah County School District, OR GOs, 51/2% due 6/1/2015 A1/A+ 1,744,400
2,000,000 North Clackamas Parks & Recreation District -- Clackamas
County, OR Rev. (Recreational Facilities), 5.70% due 4/1/2013 ................... NR/A- 2,019,720
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- 1,832,120
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 767,115
2,500,000 Oregon Department of Administrative Services Certificates of Participation,
5.80% due 5/1/20240 ............................................................. Aaa/AAA 2,678,025
2,250,000 Oregon Department of Administrative Services Certificates of Participation,
5% due 5/1/2024 ................................................................. Aaa/AAA 2,007,540
1,000,000 Oregon Department of Transportation Regional Light Rail Extension Rev.,
6.20% due 6/1/2008 .............................................................. Aaa/AAA 1,077,210
2,000,000 Oregon Health, Housing, Educational & Cultural Facilities Authority Rev.
(Linfield College Project), 51/4% due 10/1/2023 ................................. Baa1/NR 1,808,140
2,500,000 Oregon Health, Housing, Educational & Cultural Facilities Authority Rev.
(Reed College Project), 53/8% due 7/1/2025 ...................................... NR/AA- 2,361,775
1,250,000 Oregon Health Sciences University Rev., 51/4% due 7/1/2028 ........................ Aaa/AAA 1,139,650
2,000,000 Oregon Housing & Community Services Department Housing & Finance Rev.
(Assisted or Insured Multi-Unit Program), 53/4% due 7/1/2012 .................... Aa2/A+ 2,024,180
840,000 Oregon Housing & Community Services Department Mortgage Rev.
(Single Family Mortgage Program), 5.65% due 7/1/2019* ........................... Aa2/NR 804,283
1,000,000 Oregon Housing & Community Services Department Mortgage Rev.
(Single Family Mortgage Program), 6% due 7/1/2027* .............................. Aa2/NR 1,003,260
500,000 Oregon Housing & Community Services Department Mortgage Rev.
(Single Family Mortgage Program), 53/4% due 7/1/2029* ........................... Aa2/NR 482,700
500,000 Oregon State GOs (Veterans' Welfare), 9% due 10/1/2006 ............................ Aa2/AA 625,000
</TABLE>
- ---------------
+ Ratings have not been audited by Deloitte & Touche LLP.
o Pre-refunded security.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
34
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
OREGON SERIES (CONTINUED)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$1,260,000 Oregon State GOs (Veterans' Welfare), 57/8% due 10/1/2018 ....................... Aa2/AA $1,266,779
250,000 Oregon State GOs (Elderly & Disabled Housing), 7.20% due 8/1/2021 ............... Aa2/AA 260,210
1,000,000 Oregon State GOs (Elderly & Disabled Housing), 6.60% due 8/1/2022* .............. Aa2/AA 1,055,580
950,000 Port of Portland, OR International Airport Rev., 7.10% due 7/1/2021*0 ........... Aaa/AAA 1,096,614
50,000 Port of Portland, OR International Airport Rev., 7.10% due 7/1/2021*0 ........... Aaa/AAA 52,912
500,000 Port of Portland, OR International Airport Rev., 53/4% due 7/1/2025* ............ Aaa/AAA 492,030
1,500,000 Port of Portland, OR International Airport Rev., 55/8% due 7/1/2026* ............ Aaa/AAA 1,452,525
2,000,000 Portland, OR GOs, 5.60% due 6/1/2014 ............................................ Aa2/NR 2,018,420
1,250,000 Portland, OR Hospital Facilities Authority Rev. (Legacy Health System),
6 5/8% due 5/1/2011 ........................................................... Aaa/AAA 1,313,462
2,500,000 Portland, OR Sewer System Rev., 5% due 6/1/2015 ................................. Aaa/AAA 2,354,625
1,000,000 Puerto Rico Highway & Transportation Authority Rev., 51/2% due
7/1/2026 ...................................................................... Baa1/A 956,770
630,000 Puerto Rico Housing Finance Corp. Single Family Mortgage Rev.),
6.85% due 10/15/2023 .......................................................... Aaa/AAA 656,542
1,000,000 Puerto Rico Ports Authority Rev., 7% due 7/1/2014* .............................. Aaa/AAA 1,057,040
2,000,000 Salem, OR Hospital Facility Authority Rev. (Salem Hospital), 5% due 8/15/2018 ... NR/AA- 1,800,800
2,600,000 Salem, OR Pedestrian Safety Improvements GOs, 53/4% due 5/1/20110 ............... Aaa/AAA 2,748,460
1,110,000 Tualatin Development Commission, OR (Urban Renewal & Redevelopment),
73/8% due 1/1/2007 ............................................................ Baa1/NR 1,118,203
500,000 Virgin Islands Public Finance Authority Rev., 51/2% due 10/1/2022 ............... NR/BBB- 468,435
2,500,000 Washington and Multnomah Counties, OR (Beaverton School District),
5% due 8/1/2017 ............................................................... Aa2/AA- 2,308,100
1,500,000 Washington County, OR Unified Sewerage Agency Rev., 53/4% due 10/1/2011 ......... Aaa/AAA 1,577,085
-----------
TOTAL MUNICIPAL BONDS (Cost $55,157,115)-- 97.4% ........................................................... 55,207,662
VARIABLE RATE DEMAND NOTES (Cost $500,000)-- 0.9% .......................................................... 500,000
OTHER ASSETS LESS LIABILITIES-- 1.7% ....................................................................... 996,119
-----------
NET ASSETS-- 100.0% ........................................................................................ $56,703,781
===========
</TABLE>
- ---------------
+ Ratings have not been audited by Deloitte & Touche LLP.
o Pre-refunded security.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
35
<PAGE>
PORTFOLIOS OF INVESTMENTS
SEPTEMBER 30, 1999
SOUTH CAROLINA SERIES
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$3,000,000 Berkeley County, SC Water & Sewer Rev., 5.55% due 6/1/2016 ..................... Aaa/AAA $2,958,060
745,000 Charleston County, SC Public Facilities Corp. Certificates of Participation,
7.15% due 2/1/2004 ........................................................... A1/A 767,223
770,000 Charleston County, SC Public Facilities Corp. Certificates of Participation,
7.15% due 8/1/2004 ........................................................... A1/A 792,969
800,000 Charleston County, SC Public Facilities Corp. Certificates of Participation,
7.20% due 2/1/2005 ........................................................... A1/A 823,856
2,500,000 Charleston, SC Waterworks & Sewer System Rev., 6% due 1/1/2012 ................. A1/AA- 2,580,000
5,000,000 Coastal Carolina University, SC Improvement Rev., 5.30% due 6/1/2026 ........... Aaa/NR 4,631,750
6,000,000 Darlington County, SC Industrial Development Rev. (Nucor Corporation Project),
5 3/4% due 8/1/2023* ......................................................... A1/AA- 5,915,280
3,500,000 Darlington County, SC Industrial Development Rev. (Sonoco Products
Company Project), 6% due 4/1/2026* ........................................... A2/A 3,502,310
2,500,000 Fairfield County, SC Pollution Control Rev. (South Carolina Electric & Gas
Company), 6 1/2% due 9/1/2014 ................................................ A1/A+ 2,672,575
1,000,000 Georgetown County, SC Pollution Control Facilities Rev. (International Paper
Company), 7 3/8% due 6/15/2005 ............................................... A3/BBB+ 1,011,540
3,000,000 Greenville Hospital System, SC Hospital Facilities Rev., 51/2% due 5/1/2016 .... NR/AA 2,889,330
2,000,000 Greenville Hospital System, SC Hospital Facilities Rev., 51/4% due 5/1/2023 .... Aa3/AA 1,779,620
3,000,000 Greenwood County, SC Hospital Facilities Rev. (Self Memorial Hospital),
5 7/8% due 10/1/2017 ......................................................... Aaa/AAA 3,008,250
1,600,000 Lancaster County, SC School District GOs, 6.60% due 7/1/20120 .................. Aaa/AAA 1,723,776
5,000,000 Lexington County, SC Hospital Rev. (Health Services District, Inc.),
5 1/8% due 11/1/2026 ......................................................... Aaa/AAA 4,417,600
1,000,000 Lexington County School District, SC Certificates of Participation
(Red Bank/White Knoll Elementary Project), 7.10% due 9/1/2011o ............... Aaa/AAA 1,072,130
1,000,000 Medical University South Carolina Hospital Facilities Rev., 5.60% due 7/1/2011 . Aaa/AAA 1,037,430
3,000,000 Mount Pleasant, SC Water & Sewer Rev., 6% due 12/1/2020 ........................ Aaa/AAA 3,032,850
1,500,000 North Charleston Sewer District, SC Rev., 63/8% due 7/1/2012 ................... Aaa/AAA 1,656,765
5,000,000 Oconee County, SC Pollution Control Rev. (Duke Power Co. Project),
5.80% due 4/1/2014 ........................................................... Aa2/AA- 5,042,100
1,250,000 Piedmont Municipal Power Agency, SC Electric Rev., 61/4% due 1/1/2021 .......... Aaa/AAA 1,335,550
1,000,000 Puerto Rico Highway & Transportation Authority Rev., 51/2% due 7/1/2036 ........ Baa1/A 954,500
2,000,000 Puerto Rico Highway & Transportation Authority Rev., 5% due 7/1/2038 ........... Baa1/A 1,732,180
</TABLE>
- ---------------
+ Ratings have not been audited by Deloitte & Touche LLP.
o Pre-refunded security.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
36
<PAGE>
SOUTH CAROLINA SERIES (CONTINUED)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
-------- --------------- ----------- ---------
<S> <C> <C> <C>
$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 $2,268,350
2,000,000 Richland County, SC Solid Waste Disposal Facilities Rev. (Union Camp
Corp. Project), 7.45% due 4/1/2021* .......................................... A3/BBB+ 2,114,200
1,000,000 Richland County, SC Solid Waste Disposal Facilities Rev. (Union Camp
Corp. Project), 7 1/8% due 9/1/2021* ......................................... A3/BBB+ 1,056,170
5,000,000 Rock Hill, SC Combined Utilities System Rev., 5% due 1/1/2020 .................. Aaa/AAA 4,510,000
3,000,000 South Carolina Job--Economic Development Authority Hospital Rev.
(Anderson Area Medical Center, Inc.), 5 1/4% due 2/1/2018 .................... NR/AA- 2,779,860
2,000,000 South Carolina Jobs--Economic Development Authority Hospital Rev.
(Georgetown Memorial Hospital), 5% due 11/1/2029 ............................. Aaa/NR 1,722,860
5,000,000 South Carolina Public Service Authority Rev., 57/8% due 1/1/2023 ............... Aaa/AAA 5,001,100
500,000 South Carolina State Housing Finance & Development Authority Rev.
(Homeownership Mortgage), 7.55% due 7/1/2011 ................................. Aa2/AA 510,610
2,055,000 South Carolina State Housing Finance & Development Authority Rental
Housing Rev. (North Bluff Project), 5.60% due 7/1/2016 ....................... NR/AA 2,011,126
1,000,000 South Carolina State Housing Finance & Development Authority
Rev. (Multi-Family Development), 6 7/8% due 11/15/2023 ....................... Aaa/NR 1,044,940
4,640,000 South Carolina State Housing Finance & Development Authority Mortgage Rev.,
5.40% due 7/1/2029* .......................................................... Aaa/NR 4,213,816
5,000,000 South Carolina State Ports Authority Rev., 5.30% due 7/1/2026* ................. Aaa/AAA 4,538,600
5,000,000 South Carolina Transportation Infrastructure Bank Rev., 53/8% due 10/1/2024 .... Aaa/NR 4,727,600
2,500,000 Spartanburg, SC Water System Rev., 5% due 6/1/2027 ............................. Aaa/AAA 2,197,825
3,000,000 University of South Carolina Rev., 53/4% due 6/1/2026 .......................... Aaa/AAA 2,951,490
-----------
TOTAL MUNICIPAL BONDS (Cost $98,132,261)-- 97.9% 96,986,191
VARIABLE RATE DEMAND NOTES (Cost $400,000)-- 0.4% 400,000
OTHER ASSETS LESS LIABILITIES-- 1.7% 1,678,094
-----------
NET ASSETS-- 100.0% $99,064,285
===========
</TABLE>
- ---------------
+ 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 Statements.
37
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
NATIONAL COLORADO GEORGIA LOUISIANA MARYLAND
SERIES SERIES SERIES SERIES SERIES
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at value (See
portfolios of investments):
Long-term holdings ........................ $ 96,351,833 $ 44,704,889 $ 44,419,672 $ 50,767,782 $ 50,811,750
Short-term holdings ....................... 900,000 100,000 -- 800,000 700,000
------------- ------------- ------------- ------------- -------------
97,251,833 44,804,889 44,419,672 51,567,782 51,511,750
Cash ........................................ 77,686 77,601 99,596 59,574 106,165
Interest receivable ......................... 1,480,103 872,566 835,308 890,119 904,060
Expenses prepaid to shareholder
service agent ............................. 16,018 6,048 5,670 7,034 7,182
Receivable for Capital Stock sold ........... 12,230 -- 5,607 57,517 --
Receivable for securities sold .............. -- -- -- 100,000 15,040
Other ....................................... 9,046 550 592 631 637
------------- ------------- ------------- ------------- -------------
TOTAL ASSETS ................................ 98,846,916 45,761,654 45,366,445 52,682,657 52,544,834
------------- ------------- ------------- ------------- -------------
LIABILITIES:
Dividends payable ........................... 148,680 66,918 65,854 79,075 78,425
Payable for Capital Stock
repurchased ............................... 83,420 6,633 46,648 82,325 17,123
Payable for securities purchased ............ -- -- -- -- --
Accrued expenses and other .................. 124,380 61,665 68,038 70,443 76,740
------------- ------------- ------------- ------------- -------------
TOTAL LIABILITIES ........................... 356,480 135,216 180,540 231,843 172,288
------------- ------------- ------------- ------------- -------------
NET ASSETS .................................. $ 98,490,436 $ 45,626,438 $ 45,185,905 $ 52,450,814 $ 52,372,546
============= ============= ============= ============= =============
COMPOSITION OF NET ASSETS:
Capital Stock, at par:
Class A ................................... $ 11,764 $ 6,292 $ 5,510 $ 6,603 $ 6,355
Class C ................................... 15 9 23 -- 9
Class D ................................... 1,052 129 298 116 356
Additional paid-in capital .................. 100,603,889 45,964,884 44,142,514 52,131,570 51,362,285
Undistributed/accumulated net
realized gain (loss) ...................... (1,347,292) 314,611 879,386 298,056 20,265
Net unrealized appreciation
(depreciation) of investments ............. (778,992) (659,487) 158,174 14,469 983,276
------------- ------------- ------------- ------------- -------------
Net Assets .................................. $ 98,490,436 $ 45,626,438 $ 45,185,905 $ 52,450,814 $ 52,372,546
============= ============= ============= ============= =============
NET ASSETS:
Class A ................................... $ 90,295,874 $ 44,649,010 $ 42,692,018 $ 51,543,103 $ 49,522,785
Class C ................................... $ 115,095 $ 60,163 $ 175,613 $ 8 $ 74,666
Class D ................................... $ 8,079,467 $ 917,265 $ 2,318,274 $ 907,703 $ 2,775,095
SHARES OF CAPITAL STOCK
OUTSTANDING ($.001 par value):
Class A ................................... 11,763,732 6,292,081 5,510,158 6,602,610 6,354,635
Class C ................................... 14,996 8,485 22,619 1 9,573
Class D ................................... 1,052,626 129,412 298,565 116,303 355,819
NET ASSET VALUE PER SHARE:
CLASS A ................................... $ 7.68 $ 7.10 $ 7.75 $ 7.81 $ 7.79
CLASS C ................................... $ 7.68 $ 7.09 $ 7.76 $ 7.80 $ 7.80
CLASS D ................................... $ 7.68 $ 7.09 $ 7.76 $ 7.80 $ 7.80
</TABLE>
- ----------
See Notes to Financial Statements.
38
<PAGE>
<TABLE>
<CAPTION>
MASSACHUSETTS MICHIGAN MINNESOTA MISSOURI
SERIES SERIES SERIES SERIES
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (See
portfolios of investments):
Long-term holdings ............................ $ 94,412,784 $ 125,030,911 $ 108,171,364 $ 42,440,008
Short-term holdings ........................... 5,100,000 1,500,000 1,200,000 900,000
------------- ------------- ------------- -------------
99,512,784 126,530,911 109,371,364 43,340,008
Cash ............................................ 137,487 129,361 88,212 146,038
Interest receivable ............................. 1,485,087 2,397,470 1,843,294 862,910
Expenses prepaid to shareholder
service agent ................................. 13,231 16,753 15,877 6,048
Receivable for Capital Stock sold ............... 41,352 953 74,291 10,711
Receivable for securities sold .................. 86,740 -- -- --
Other ........................................... 1,307 1,580 1,363 545
------------- ------------- ------------- -------------
TOTAL ASSETS .................................... 101,277,988 129,077,028 111,394,401 44,366,260
------------- ------------- ------------- -------------
LIABILITIES:
Dividends payable ............................... 139,211 191,115 164,837 63,086
Payable for Capital Stock
repurchased ................................... 87,133 981,856 77,290 165,101
Payable for securities purchased ................ 4,839,869 -- -- --
Accrued expenses and other ...................... 121,211 155,727 130,950 62,839
------------- ------------- ------------- -------------
TOTAL LIABILITIES ............................... 5,187,424 1,328,698 373,077 291,026
------------- ------------- ------------- -------------
NET ASSETS ...................................... $ 96,090,564 $ 127,748,330 $ 111,021,324 $ 44,075,234
============= ============= ============= =============
COMPOSITION OF NET ASSETS:
Capital Stock, at par:
Class A ....................................... $ 12,444 $ 15,613 $ 14,827 $ 5,960
Class C ....................................... 31 15 -- 3
Class D ....................................... 393 258 252 85
Additional paid-in capital ...................... 96,975,267 127,215,076 111,141,369 44,443,642
Undistributed/accumulated net
realized gain (loss) .......................... 541,088 481,659 594,745 42,082
Net unrealized appreciation
(depreciation) of investments ................. (1,438,659) 35,709 (729,869) (416,538)
------------- ------------- ------------- -------------
Net Assets ...................................... $ 96,090,564 $ 127,748,330 $ 111,021,324 $ 44,075,234
============= ============= ============= =============
NET ASSETS:
Class A ....................................... $ 92,929,094 $ 125,559,543 $ 109,165,501 $ 43,436,867
Class C ....................................... $ 228,113 $ 114,458 $ 7 $ 21,241
Class D ....................................... $ 2,933,357 $ 2,074,329 $ 1,855,816 $ 617,126
SHARES OF CAPITAL STOCK
OUTSTANDING ($.001 par value):
Class A ....................................... 12,444,174 15,613,059 14,826,476 5,960,302
Class C ....................................... 30,554 14,249 1 2,914
Class D ....................................... 392,913 258,231 252,040 84,672
NET ASSET VALUE PER SHARE:
CLASS A ....................................... $ 7.47 $ 8.04 $ 7.36 $ 7.29
CLASS C ....................................... $ 7.47 $ 8.03 $ 7.36 $ 7.29
CLASS D ....................................... $ 7.47 $ 8.03 $ 7.36 $ 7.29
<CAPTION>
NEW YORK OHIO OREGON SOUTH CAROLINA
SERIES SERIES SERIES SERIES
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (See
portfolios of investments):
Long-term holdings ............................. $ 78,180,702 $ 133,637,865 $ 55,207,662 $ 96,986,191
Short-term holdings ............................ 500,000 600,000 500,000 400,000
------------- ------------- ------------- -------------
78,680,702 134,237,865 55,707,662 97,386,191
Cash ............................................. 130,687 89,261 71,713 144,015
Interest receivable .............................. 1,375,340 2,407,651 1,048,750 1,808,965
Expenses prepaid to shareholder
service agent .................................. 10,207 17,767 7,561 13,231
Receivable for Capital Stock sold ................ 2,590 51,418 4,764 23,946
Receivable for securities sold ................... -- -- 140,353
Other ............................................ 990 1,693 688 1,238
------------- ------------- ------------- -------------
TOTAL ASSETS ..................................... 80,200,516 136,805,655 56,981,491 99,377,586
------------- ------------- ------------- -------------
LIABILITIES:
Dividends payable ................................ 118,517 206,237 80,916 147,603
Payable for Capital Stock
repurchased .................................... 112,851 69,428 123,324 46,032
Payable for securities purchased ................. -- -- -- --
Accrued expenses and other ....................... 103,552 151,264 73,470 119,666
------------- ------------- ------------- -------------
TOTAL LIABILITIES ................................ 334,920 426,929 277,710 313,301
------------- ------------- ------------- -------------
NET ASSETS ....................................... $ 79,865,596 $ 136,378,726 $ 56,703,781 $ 99,064,285
============= ============= ============= =============
COMPOSITION OF NET ASSETS:
Capital Stock, at par:
Class A ........................................ $ 9,984 $ 17,681 $ 7,281 $ 12,104
Class C ........................................ 24 2 -- 44
Class D ........................................ 369 173 298 775
Additional paid-in capital ....................... 80,123,675 136,080,439 56,265,935 99,383,656
Undistributed/accumulated net
realized gain (loss) ........................... (38,453) 273,565 379,720 813,776
Net unrealized appreciation
(depreciation) of investments .................. (230,003) 6,866 50,547 (1,146,070)
------------- ------------- ------------- -------------
Net Assets ....................................... $ 79,865,596 $ 136,378,726 $ 56,703,781 $ 99,064,285
============= ============= ============= =============
NET ASSETS:
Class A ........................................ $ 76,832,420 $ 135,034,266 $ 54,472,877 $ 92,793,466
Class C ........................................ $ 189,227 $ 17,354 $ 8 $ 335,045
Class D ........................................ $ 2,843,949 $ 1,327,106 $ 2,230,896 $ 5,935,774
SHARES OF CAPITAL STOCK
OUTSTANDING ($.001 par value):
Class A ........................................ 9,983,619 17,680,543 7,280,478 12,103,778
Class C ........................................ 24,565 2,261 1 43,745
Class D ........................................ 369,232 172,900 298,402 775,003
NET ASSET VALUE PER SHARE:
CLASS A ........................................ $ 7.70 $ 7.64 $ 7.48 $ 7.67
CLASS C ........................................ $ 7.70 $ 7.68 $ 7.48 $ 7.66
CLASS D ........................................ $ 7.70 $ 7.68 $ 7.48 $ 7.66
</TABLE>
39
<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
NATIONAL COLORADO GEORGIA LOUISIANA MARYLAND
SERIES SERIES SERIES SERIES SERIES
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest ...................................... $ 5,963,680 $ 2,594,201 $ 2,700,531 $ 3,099,085 $ 3,167,637
----------- ----------- ----------- ----------- -----------
EXPENSES:
Management fees ............................... 527,074 236,902 247,712 276,780 280,990
Distribution and service fees ................. 167,666 54,836 75,460 62,013 85,666
Shareholder account services .................. 138,107 64,517 71,553 72,335 80,702
Auditing and legal fees ....................... 31,737 26,562 20,612 27,761 25,316
Registration .................................. 29,474 12,083 11,553 8,536 15,550
Custody and related services .................. 18,973 11,897 9,305 9,067 12,824
Shareholder reports and communications ........ 12,045 5,098 7,481 7,172 7,179
Directors' fees and expenses .................. 9,028 7,090 7,031 7,347 7,361
Miscellaneous ................................. 4,689 2,941 3,061 3,166 3,221
----------- ----------- ----------- ----------- -----------
TOTAL EXPENSES ................................ 938,793 421,926 453,768 474,177 518,809
----------- ----------- ----------- ----------- -----------
NET INVESTMENT INCOME ......................... 5,024,887 2,172,275 2,246,763 2,624,908 2,648,828
----------- ----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments ....... 211,923 430,454 884,473 303,123 30,812
Net change in unrealized
appreciation of investments ................. (8,530,095) (3,920,316) (4,441,923) (4,254,499) (3,439,773)
----------- ----------- ----------- ----------- -----------
NET LOSS ON INVESTMENTS ....................... (8,318,172) (3,489,862) (3,557,450) (3,951,376) (3,408,961)
----------- ----------- ----------- ----------- -----------
DECREASE IN NET ASSETS FROM OPERATIONS ........ $(3,293,285) $(1,317,587) $(1,310,687) $(1,326,468) $ (760,133)
=========== =========== =========== =========== ===========
</TABLE>
- ----------
See Notes to Financial Statements.
40
<PAGE>
<TABLE>
<CAPTION>
MASSACHUSETTS MICHIGAN MINNESOTA MISSOURI
SERIES SERIES SERIES SERIES
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest.................................. $ 5,682,127 $ 7,724,930 $ 6,626,483 $ 2,601,285
----------- ----------- ----------- -----------
EXPENSES:
Management fees........................... 527,272 696,613 596,977 242,203
Distribution and service fees............. 129,426 165,574 140,152 52,103
Shareholder account services.............. 136,008 182,464 170,276 70,841
Auditing and legal fees................... 34,033 38,939 43,018 24,454
Registration.............................. 16,123 21,254 17,758 11,577
Custody and related services.............. 27,374 28,645 28,666 11,821
Shareholder reports and communications.... 14,444 17,965 10,452 5,643
Directors' fees and expenses.............. 8,653 9,147 8,879 7,118
Miscellaneous............................. 4,802 5,893 5,347 3,086
----------- ----------- ----------- -----------
TOTAL EXPENSES............................ 898,135 1,166,494 1,021,525 428,846
----------- ----------- ----------- -----------
NET INVESTMENT INCOME..................... 4,783,992 6,558,436 5,604,958 2,172,439
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: 836,791 616,641 607,305 48,875
Net realized gain (loss) on investments...
Net change in unrealized (10,688,280) (10,841,083) (8,515,969) (3,922,017)
appreciation of investments ----------- ----------- ----------- -----------
(9,851,489) (10,224,442) (7,908,664) (3,873,142)
NET LOSS ON INVESTMENTS................... ----------- ----------- ----------- -----------
$(5,067,497) $(3,666,006) $(2,303,706) $(1,700,703)
DECREASE IN NET ASSETS FROM OPERATIONS.... =========== =========== =========== ===========
<CAPTION>
NEW YORK OHIO OREGON SOUTH CAROLINA
SERIES SERIES SERIES SERIES
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest.................................. $ 4,666,126 $ 8,269,587 $ 3,216,326 $ 5,944,698
----------- ----------- ----------- -----------
EXPENSES:
Management fees........................... 428,752 740,911 299,155 542,489
Distribution and service fees............. 114,966 162,097 84,456 165,063
Shareholder account services.............. 105,556 191,068 82,032 145,959
Auditing and legal fees................... 27,899 43,949 33,035 33,604
Registration.............................. 14,964 21,199 11,508 14,928
Custody and related services.............. 8,280 22,362 12,281 24,859
Shareholder reports and communications.... 11,028 10,679 5,110 12,403
Directors' fees and expenses.............. 8,294 9,373 7,239 7,967
Miscellaneous............................. 4,052 6,142 3,323 4,780
----------- ----------- ----------- -----------
TOTAL EXPENSES............................ 723,791 1,207,780 538,139 952,052
----------- ----------- ----------- -----------
NET INVESTMENT INCOME..................... 3,942,335 7,061,807 2,678,187 4,992,646
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS: (30,466) 297,271 383,853 969,149
Net realized gain (loss) on investments...
Net change in unrealized (7,250,070) (11,188,018) (4,304,261) (9,667,415)
appreciation of investments ----------- ----------- ----------- -----------
(7,280,536) (10,890,747) (3,920,408) (8,698,266)
NET LOSS ON INVESTMENTS................... ----------- ----------- ----------- -----------
$(3,338,201) $(3,828,940) $(1,242,221) $(3,705,620)
DECREASE IN NET ASSETS FROM OPERATIONS.... =========== =========== =========== ===========
</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,
--------------------------------------------------------------------------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income .............. $ 5,024,887 $ 4,996,585 $ 2,172,275 $ 2,274,183 $ 2,246,763 $ 2,287,170
Net realized gain on investments ... 211,923 1,375,240 430,454 1,217,468 884,473 355,347
NET CHANGE IN UNREALIZED
APPRECIATION OF INVESTMENTS ...... (8,530,095) 2,557,155 (3,920,316) 133,704 (4,441,923) 1,483,755
------------ ------------ ------------ ------------ ------------ ------------
Increase (Decrease) in Net Assets
from Operations .................. (3,293,285) 8,928,980 (1,317,587) 3,625,355 (1,310,687) 4,126,272
------------ ------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A .......................... (4,766,686) (4,774,389) (2,141,971) (2,263,810) (2,145,554) (2,185,497)
Class C .......................... (996) -- (638) -- (1,879) --
Class D .......................... (257,205) (222,196) (29,666) (10,373) (99,330) (101,673)
Net realized gain on investments:
Class A .......................... -- -- -- -- (256,931) (187,062)
Class C .......................... -- -- -- -- -- --
Class D .......................... -- -- -- -- (15,052) (10,787)
------------ ------------ ------------ ------------ ------------ ------------
DECREASE IN NET ASSETS
FROM DISTRIBUTIONS (5,024,887) (4,996,585) (2,172,275) (2,274,183) (2,518,746) (2,485,019)
------------ ------------ ------------ ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares .. 5,374,193 8,028,491 3,938,964 1,430,445 3,266,648 2,957,644
Investment of dividends ............ 2,813,446 2,791,404 1,250,466 1,272,671 1,454,489 1,509,764
Exchanged from associated Funds .... 22,062,389 24,012,099 7,143,293 2,248,315 945,166 314,227
Shares issued in payment of
gain distributions .............. -- -- -- -- 213,097 154,849
------------ ------------ ------------ ------------ ------------ ------------
Total .............................. 30,250,028 34,831,994 12,332,723 4,951,431 5,879,400 4,936,484
------------ ------------ ------------ ------------ ------------ ------------
Cost of shares repurchased ......... (11,785,860) (10,630,348) (4,176,969) (7,648,076) (7,410,411) (7,514,108)
Exchanged into associated Funds .... (20,956,923) (18,592,948) (4,966,613) (2,745,460) (686,937) (1,084,357)
------------ ------------ ------------ ------------ ------------ ------------
Total .............................. (32,742,783) (29,223,296) (9,143,582) (10,393,536) (8,097,348) (8,598,465)
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL SHARE TRANSACTIONS . (2,492,755) 5,608,698 3,189,141 (5,442,105) (2,217,948) (3,661,981)
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS .. (10,810,927) 9,541,093 (300,721) (4,090,933) (6,047,381) (2,020,728)
NET ASSETS:
Beginning of year .................. 109,301,363 99,760,270 45,927,159 50,018,092 51,233,286 53,254,014
------------ ------------ ------------ ------------ ------------ ------------
END OF YEAR ........................ $ 98,490,436 $109,301,363 $ 45,626,438 $ 45,927,159 $ 45,185,905 $ 51,233,286
============ ============ ============ ============ ============ ============
</TABLE>
- ----------------
See Notes to Financial Statements.
42
<PAGE>
<TABLE>
<CAPTION>
LOUISIANA SERIES MARYLAND SERIES
-------------------------- --------------------------
YEAR Ended SEPTEMBER 30, YEAR Ended SEPTEMBER 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income ................ $ 2,624,908 $ 2,755,599 $ 2,648,828 $ 2,639,840
Net realized gain on investments ..... 303,123 750,930 30,812 183,975
Net change in unrealized
appreciation of investments ....... (4,254,499) 904,770 (3,439,773) 1,341,557
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS ................... (1,326,468) 4,411,299 (760,133) 4,165,372
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ............................ (2,592,830) (2,732,585) (2,529,563) (2,539,788)
Class C ............................ -- -- (491) --
Class D ............................ (32,078) (23,014) (118,774) (100,052)
Net realized gain on investments:
Class A ............................ (742,225) (95,055) (184,646) (307,098)
Class C ............................ -- -- -- --
Class D ............................ (11,055) (862) (10,939) (11,949)
----------- ----------- ----------- -----------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS ...................... (3,378,188) (2,851,516) (2,844,413) (2,958,887)
----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares .... 2,639,130 1,868,262 2,360,545 5,140,080
Investment of dividends .............. 1,282,591 1,383,759 1,604,067 1,575,152
Exchanged from associated Funds ...... 79,357 74,752 302,980 311,127
Shares issued in payment of
gain distributions ................ 498,800 65,667 148,824 236,682
----------- ----------- ----------- -----------
Total ................................ 4,936,484 3,392,440 4,416,416 7,263,041
----------- ----------- ----------- -----------
Cost of shares repurchased ........... (4,264,493) (4,248,647) (6,166,502) (4,776,521)
Exchanged into associated Funds ...... (224,567) (266,535) (291,435) (285,947)
----------- ----------- ----------- -----------
Total ................................ (4,489,060) (4,515,182) (6,457,937) (5,062,468)
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL SHARE TRANSACTIONS ... 10,818 (1,122,742) (2,041,521) 2,200,573
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS .... (4,693,838) 437,041 (5,646,067) 3,407,058
NET ASSETS:
Beginning of year .................... 57,144,652 56,707,611 58,018,613 54,611,555
----------- ----------- ----------- -----------
END OF YEAR .......................... $52,450,814 $57,144,652 $52,372,546 $58,018,613
=========== =========== =========== ===========
<CAPTION>
MASSACHUSETTS SERIES MICHIGAN SERIES
--------------------------- ----------------------------
YEAR Ended SEPTEMBER 30, YEAR Ended SEPTEMBER 30,
--------------------------- ----------------------------
1999 1998 1999 1998
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ................ $ 4,783,992 $ 5,151,550 $ 6,558,436 $ 6,920,269
Net realized gain on investments ..... 836,791 360,413 616,641 2,466,720
Net change in unrealized
appreciation of investments ....... (10,688,280) 4,686,395 (10,841,083) 2,641,464
----------- ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS ................... (5,067,497) 10,198,358 (3,666,006) 12,028,453
----------- ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ............................ (4,692,195) (5,099,272) (6,466,582) (6,853,272)
Class C ............................ (1,124) -- (678) --
Class D ............................ (90,673) (52,278) (91,176) (66,997)
Net realized gain on investments:
Class A ............................ (643,189) (1,288,484) (2,565,404) (1,235,329)
Class C ............................ -- -- -- --
Class D ............................ (9,341) (14,760) (38,013) (15,651)
----------- ------------ ------------ ------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS ...................... (5,436,522) (6,454,794) (9,161,853) (8,171,249)
----------- ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares .... 4,563,932 2,818,298 5,706,815 5,106,070
Investment of dividends .............. 2,809,223 3,089,407 3,963,684 4,240,543
Exchanged from associated Funds ...... 22,685,568 10,975,607 835,726 3,035,133
Shares issued in payment of
gain distributions ................ 465,453 958,304 1,930,148 925,258
----------- ------------ ------------ ------------
TOTAL ................................ 30,524,176 17,841,616 12,436,373 13,307,004
----------- ------------ ------------ ------------
Cost of shares repurchased ........... (10,234,861) (10,348,233) (16,216,494) (13,011,091)
Exchanged into associated Funds ...... (24,490,848) (11,696,486) (1,646,007) (3,366,149)
----------- ------------ ------------ ------------
Total ................................ (34,725,709) (22,044,719) (17,862,501) (16,377,240)
----------- ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL SHARE TRANSACTIONS ... (4,201,533) (4,203,103) (5,426,128) (3,070,236)
----------- ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS .... (14,705,552) (459,539) (18,253,987) 786,968
NET ASSETS:
Beginning of year .................... 110,796,116 111,255,655 146,002,317 145,215,349
----------- ------------ ------------ ------------
END OF YEAR .......................... $96,090,564 $110,796,116 $127,748,330 $146,002,317
=========== ============ ============ ============
</TABLE>
43
<PAGE>
STATEMENTS 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,
---------------------------- -------------------------- ----------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income ................. $ 5,604,958 $ 5,966,394 $ 2,172,439 $ 2,391,647 $ 3,942,335 $ 4,037,530
Net realized gain (loss) on investments 607,305 2,326,890 48,875 792,748 (30,466) 2,733,067
Net change in unrealized
appreciation of investments ........ (8,515,969) 714,989 (3,922,017) 984,919 (7,250,070) 1,350,015
------------ ------------ ----------- ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS .................... (2,303,706) 9,008,273 (1,700,703) 4,169,314 (3,338,201) 8,120,612
------------ ------------ ----------- ----------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ............................. (5,526,321) (5,891,605) (2,152,510) (2,377,089) (3,833,260) (3,969,021)
Class C ............................. -- -- (274) -- (1,806) --
Class D ............................. (78,637) (74,789) (19,655) (14,558) (107,269) (68,509)
Net realized gain on investments:
Class A ............................. (1,489,186) (139,563) (736,677) (437,159) (2,031,676) (837,486)
Class C ............................. -- -- -- -- -- --
Class D ............................. (27,145) (2,075) (6,599) (3,680) (55,062) (15,723)
------------ ------------ ----------- ----------- ------------ ------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS ...................... (7,121,289) (6,108,032) (2,915,715) (2,832,486) (6,029,073) (4,890,739)
------------ ------------ ----------- ----------- ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net Proceeds from sales of shares ..... 3,756,676 4,343,082 1,479,059 1,598,115 7,652,890 3,946,501
Investment of dividends ............... 3,721,959 3,976,085 1,107,523 1,147,741 2,390,775 2,391,974
Exchanged from associated Funds ....... 827,963 506,489 521,150 223,404 5,429,214 3,356,915
Shares issued in payment of
gain distributions ................. 1,216,730 114,384 492,702 284,656 1,677,700 678,964
------------ ------------ ----------- ----------- ------------ ------------
Total ................................. 9,523,328 8,940,040 3,600,434 3,253,916 17,150,579 10,374,354
------------ ------------ ----------- ----------- ------------ ------------
Cost of shares repurchased ............ (11,554,954) (10,445,285) (5,000,231) (6,940,785) (8,097,861) (8,302,159)
Exchanged into associated Funds ....... (998,565) (1,391,785) (275,964) (522,272) (6,823,431) (3,398,115)
------------ ------------ ----------- ----------- ------------ ------------
Total ................................. (12,553,519) (11,837,070) (5,276,195) (7,463,057) (14,921,292) (11,700,274)
------------ ------------ ----------- ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL SHARE TRANSACTIONS ..... (3,030,191) (2,897,030) (1,675,761) (4,209,141) 2,229,287 (1,325,920)
------------ ------------ ----------- ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS ..... (12,455,186) 3,211 (6,292,179) (2,872,313) (7,137,987) 1,903,953
NET ASSETS:
Beginning of year ..................... 123,476,510 123,473,299 50,367,413 53,239,726 87,003,583 85,099,630
------------ ------------ ----------- ----------- ------------ ------------
END OF YEAR ........................... $111,021,324 $123,476,510 $44,075,234 $50,367,413 $ 79,865,596 $ 87,003,583
============ ============ =========== =========== ============ ============
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
OHIO SERIES OREGON SERIES SOUTH CAROLINA SERIES
---------------------------- --------------------------- ----------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
---------------------------- --------------------------- ----------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income ................. $ 7,061,807 $ 7,551,775 $ 2,678,187 $ 2,628,729 $ 4,992,646 $ 5,074,598
Net realized gain (loss) on investments 297,271 3,398,423 383,853 375,535 969,149 1,214,196
Net change in unrealized
appreciation of investments ........ (11,188,018) 1,953,712 (4,304,261) 1,637,046 (9,667,415) 2,638,545
------------ ------------ ----------- ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS .................... (3,828,940) 12,903,910 (1,242,221) 4,641,310 (3,705,620) 8,927,339
------------ ------------ ----------- ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ............................. (7,006,935) (7,504,421) (2,584,867) (2,555,801) (4,761,901) (4,905,709)
Class C ............................. (117) -- -- -- (3,556) --
Class D ............................. (54,755) (47,354) (93,320) (72,928) (227,189) (168,889)
Net realized gain on investments:
Class A ............................. (2,412,770) (2,017,799) (359,284) (700,268) (835,120) (905,320)
Class C ............................. -- -- -- -- -- --
Class D ............................. (18,170) (15,589) (16,245) (21,792) (44,640) (34,538)
------------ ------------ ----------- ------------ ------------ ------------
DECREASE IN NET ASSETS FROM
DISTRIBUTIONS ...................... (9,492,747) (9,585,163) (3,053,716) (3,350,789) (5,872,406) (6,014,456)
------------ ------------ ----------- ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net Proceeds from sales of shares ..... 3,574,358 3,924,808 5,650,520 5,491,603 5,997,523 12,987,023
Investment of dividends ............... 4,309,497 4,659,364 1,700,123 1,645,108 2,859,370 2,937,857
Exchanged from associated Funds ....... 1,299,228 474,687 1,106,856 168,042 364,330 504,151
Shares issued in payment of
gain distributions ................. 1,836,174 1,546,463 293,110 555,040 700,269 730,165
------------ ------------ ----------- ------------ ------------ ------------
Total ................................. 11,019,257 10,605,322 8,750,609 7,859,793 9,921,492 17,159,196
------------ ------------ ----------- ------------ ------------ ------------
Cost of shares repurchased ............ (14,258,117) (13,498,231) (6,217,621) (5,366,485) (12,479,379) (11,443,252)
Exchanged into associated Funds ....... (1,290,220) (1,775,539) (1,784,796) (449,600) (721,823) (1,387,967)
------------ ------------ ----------- ------------ ------------ ------------
Total ................................. (15,548,337) (15,273,770) (8,002,417) (5,816,085) (13,201,202) (12,831,219)
------------ ------------ ----------- ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL SHARE TRANSACTIONS ..... (4,529,080) (4,668,448) 748,192 2,043,708 (3,279,710) 4,327,977
------------ ------------ ----------- ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS ..... (17,850,767) (1,349,701) (3,547,745) 3,334,229 (12,857,736) 7,240,860
NET ASSETS:
Beginning of year ..................... 154,229,493 155,579,194 60,251,526 56,917,297 111,922,021 104,681,161
------------ ------------ ----------- ------------ ------------ ------------
END OF YEAR ........................... $136,378,726 $154,229,493 $56,703,781 $ 60,251,526 $ 99,064,285 $111,922,021
============ ============ =========== ============ ============ ============
</TABLE>
- ----------
See Notes to Financial Statements.
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 three
classes of shares. Class A shares are sold with an initial sales charge of up to
4.75% and a continuing service fee of up to 0.25% on an annual basis. Class A
shares purchased in an amount of $1,000,000 or more are sold without an initial
sales charge but are subject to a contingent deferred sales charge ("CDSC") of
1% on redemptions within 18 months of purchase. The Fund began offering Class C
shares on May 27, 1999. Class C shares are sold with an initial sales charge of
up to 1% and are subject to a distribution fee of up to 0.75% and a service fee
of up to 0.25% on an annual basis, and a CDSC, if applicable, of 1% imposed on
redemptions made within 18 months of purchase. Class D shares are sold without
an initial sales charge but are subject to a distribution fee of up to 0.75% and
a service fee of up to 0.25% on an annual basis, and a CDSC, if applicable, of
1% imposed on redemptions made within one year of purchase. The three 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 -- Each Series' income, expenses (other than
class-specific expenses), and realized and unrealized gains or losses are
allocated daily to each class of shares of that Series 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, 1999, distribution and service fees
were the only class-specific expenses.
E. DISTRIBUTIONS TO SHAREHOLDERS -- Dividends are declared daily and paid
monthly. Other distributions paid by the Fund are recorded on 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,
1999, were as follows:
SERIES PURCHASES SALES
------ --------- -----
National $13,710,320 $16,318,815
Colorado 7,204,322 3,868,319
Georgia 11,587,368 13,068,608
Louisiana 4,677,642 5,179,825
Maryland 975,380 1,750,616
Massachusetts 24,515,790 28,748,480
Michigan 5,130,252 13,737,393
Minnesota 11,442,088 16,600,430
Missouri 4,903,510 7,378,015
New York 9,891,643 10,169,039
Ohio 8,765,830 15,311,230
Oregon 8,177,695 7,168,620
South Carolina 19,017,505 22,447,948
46
<PAGE>
NOTES TO FINANCIAL STATEMENTS
At September 30, 1999, each Series' cost of investments for federal income
tax purposes was substantially the same as the cost for financial reporting
purposes, and the tax basis gross unrealized appreciation and depreciation of
portfolio securities were as follows:
TOTAL TOTAL
UNREALIZED UNREALIZED
SERIES APPRECIATION DEPRECIATION
------ ------------ ------------
National $1,705,295 $2,484,287
Colorado 983,850 1,643,337
Georgia 1,431,042 1,272,868
Louisiana 1,387,501 1,373,032
Maryland 1,662,116 678,840
Massachusetts 1,483,033 2,921,692
Michigan 3,272,639 3,236,930
Minnesota 2,639,804 3,369,673
Missouri 969,122 1,385,660
New York 2,017,724 2,247,727
Ohio 3,301,161 3,294,295
Oregon 1,479,649 1,429,102
South Carolina 1,662,139 2,808,209
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"), 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 and
Class C shares:
DISTRIBUTOR DEALER
SERIES CONCESSIONS COMMISSIONS
- -------------- ----------------- -----------------
National $10,666 $ 78,581
Colorado 6,661 48,597
Georgia 9,380 72,550
Louisiana 10,366 75,186
Maryland 8,989 67,823
Massachusetts 15,801 110,978
Michigan 15,721 117,807
Minnesota 16,002 112,488
Missouri 5,149 38,995
New York 11,345 89,869
Ohio 12,275 89,395
Oregon 16,867 124,997
South Carolina 18,815 139,299
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, 1999, the Distributor charged such fees to the Fund pursuant to
the Plan as follows:
TOTAL FEES % OF AVERAGE
SERIES PAID NET ASSETS
------ ---------- ------------
National $102,335 .10%
Colorado 46,686 .10
Georgia 47,988 .10
Louisiana 53,706 .10
Maryland 54,772 .10
Massachusetts 104,516 .10
Michigan 141,587 .10
Minnesota 119,493 .10
Missouri 46,594 .10
New York 85,866 .10
Ohio 147,925 .10
Oregon 58,613 .10
South Carolina 103,775 .10
Under the Plan, with respect to Class C and 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 C and 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, 1999, fees incurred under the Plan equivalent to 1% per annum of
the average daily net assets of Class C and Class D shares were as follows:
SERIES CLASS C CLASS D SERIES CLASS C CLASS D
------ ------- ------- ------ ---------------
National $238 $65,093 Minnesota $ -- $20,659
Colorado 163 7,987 Missouri 64 5,445
Georgia 481 26,991 New York 451 28,649
Louisiana -- 8,307 Ohio 29 14,143
Maryland 121 30,773 Oregon -- 25,843
Massachusetts 293 24,617 South
Michigan 169 23,818 Carolina 892 60,396
47
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The Distributor is entitled to retain any CDSC imposed on certain redemptions of
Class A and Class C shares occurring within 18 months of purchase and on
redemptions of Class D shares occurring within one year after purchase. For the
year ended September 30, 1999, such charges were as follows:
SERIES SERIES
------ ------
National $2,363 Minnesota $ 456
Colorado 592 Missouri 21
Georgia 1,741 New York 1,233
Louisiana 42 Ohio 452
Maryland 1,050 Oregon 3,106
Massachusetts 1,088 South Carolina 6,858
Michigan 894
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, 1999,
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 $2,960 $8,433
Colorado 660 2,725
Georgia 205 938
Louisiana 357 956
Maryland 3,964 1,481
Massachusetts 880 2,251
Michigan 1,929 3,104
Minnesota 730 2,745
Missouri -- 3,144
New York 1,097 14,043
Ohio 174 4,351
Oregon 652 1,815
South Carolina 2,061 6,392
Seligman Data Corp., which is owned by certain associated investment
companies, charged at cost for shareholder account services the following
amounts:
SERIES SERIES
- ------------- --------------
National $138,107 Minnesota $170,276
Colorado 64,517 Missouri 70,841
Georgia 71,553 New York 105,556
Louisiana 72,335 Ohio 191,068
Maryland 80,702 Oregon 82,032
Massachusetts 136,008 South Carolina 145,959
Michigan 182,464
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
selected Series 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, 1999, are included in other
liabilities as follows:
SERIES SERIES
- ------------- --------------
National $18,163 Minnesota $15,709
Colorado 11,698 Missouri 11,710
Georgia 11,045 New York 15,553
Louisiana 12,637 Ohio 15,833
Maryland 12,634 Oregon 11,554
Massachusetts 15,649 South Carolina 11,267
Michigan 15,306
5. COMMITTED LINE OF CREDIT -- The Fund is a participant in a joint $750 million
committed line of credit that is shared by substantially all funds in the
Seligman Group of Investment Companies. 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%. 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 in June 2000, but is renewable annually with
the consent of the participating banks. For the year ended September 30, 1999,
the Fund had not borrowed from the credit facility.
6. CAPITAL LOSS CARRYFORWARD -- At September 30, 1999, the National Series had a
net capital loss carryforward for federal income tax purposes of $1,347,292,
which is available for offset against future taxable net capital gains, expiring
in various amounts through 2003. Accordingly, no capital gain distribution is
expected to be paid to shareholders of the National Series until net capital
gains have been realized in excess of the available capital loss carryforward.
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, 1999, 100,000,000 shares were authorized for
each Series of the Fund. Transactions in shares of Capital Stock were as
follows:
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
----------------------------------------------- ---------------- --------------------------------------------
YEAR ENDED SEPTEMBER 30, MAY 27, 1999* TO YEAR ENDED SEPTEMBER 30,
----------------------------------------------- SEPTEMBER 30, --------------------------------------------
1999 1998 1999 1999 1998
---------------------- ---------------------- ---------------- ------------------- -----------------------
NATIONAL SERIES SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- ----------- ------ -------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net proceeds from
sales of shares 522,795 $4,248,236 873,287 $7,098,841 14,919 $118,601 123,246 $1,007,356 114,176 $929,650
Investment of
dividends ..... 326,477 2,639,265 321,523 2,620,048 77 594 21,570 173,587 21,003 171,356
Exchanged from
associated
Funds ......... 2,035,910 16,425,324 865,763 7,059,979 -- -- 697,233 5,637,065 2,093,008 16,952,120
Shares issued in
payment of gain
distributions . -- -- -- -- -- -- -- -- -- --
---------- ----------- ---------- ----------- ------ -------- -------- ---------- ---------- -----------
Total ........... 2,885,182 23,312,825 2,060,573 16,778,868 14,996 119,195 842,049 6,818,008 2,228,187 18,053,126
---------- ----------- ---------- ----------- ------ -------- -------- ---------- ---------- -----------
Cost of shares
repurchased ...(1,251,160) (10,091,427) (1,226,722) (9,998,684) -- -- (209,777) (1,694,433) (77,574) (631,664)
Exchanged into
associated
Funds .........(2,125,455) (17,090,673) (747,805) (6,101,457) -- -- (468,791) (3,866,250) (1,545,820) 12,491,491)
---------- ----------- ---------- ----------- ------ -------- -------- ---------- ---------- -----------
Total ...........(3,376,615) (27,182,100) (1,974,527) (16,100,141) -- -- (678,568) (5,560,683) (1,623,394) (13,123,155)
---------- ----------- ---------- ----------- ------ -------- -------- ---------- ---------- -----------
Increase
(Decrease) .... (491,433) $(3,869,275) 86,046 $678,727 14,996 $119,195 163,481 $1,257,325 604,793 $4,929,971
========== =========== ========== =========== ====== ======== ======== ========== ========== ===========
</TABLE>
* Commencement of offering of Class C shares.
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
------------------------------------------------- ------------------ -------------------------------------
YEAR ENDED SEPTEMBER 30, MAY 27, 1999* TO YEAR ENDED SEPTEMBER 30,
------------------------------------------------- SEPTEMBER 30, -------------------------------------
1999 1998 1999 1999 1998
----------------------- ------------------------ ------------------ ------------------ -----------------
COLORADO SERIES SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ---------- ---------- ----------- ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net proceeds from
sales of shares .. 446,957 $3,319,830 171,756 $1,287,016 28,937 $209,488 54,407 $409,646 19,107 $143,429
Investment of
dividends ........ 165,388 1,232,318 168,624 1,265,360 40 290 2,384 17,858 974 7,311
Exchanged from
associated Funds . 909,439 6,824,823 294,638 2,208,315 -- -- 41,999 318,470 5,319 40,000
Shares issued in
payment of gain
distributions .... -- -- -- -- -- -- -- -- -- --
---------- ---------- ---------- ----------- ------- -------- ------- -------- ------- --------
Total .............. 1,521,784 11,376,971 635,018 4,760,691 28,977 209,778 98,790 745,974 25,400 190,740
---------- ---------- ---------- ----------- ------- -------- ------- -------- ------- --------
Cost of shares
repurchased ...... (555,222) (4,113,017) (1,009,933) (7,569,275) (6,956) (49,460) (1,952) (14,492) (10,459) (78,801)
Exchanged into
associated Funds . (642,500) (4,774,441) (363,810) (2,730,725) (13,536) (97,324) (12,506) (94,848) (1,959) (14,735)
---------- ---------- ---------- ----------- ------- -------- ------- -------- ------- --------
Total .............. (1,197,722) (8,887,458) (1,373,743) (10,300,000) (20,492) (146,784) (14,458) (109,340) (12,418) (93,536)
---------- ---------- ---------- ----------- ------- -------- ------- -------- ------- --------
Increase (Decrease) 324,062 $2,489,513 (738,725) $(5,539,309) 8,485 $62,994 84,332 $636,634 12,982 $97,204
========== ========== ========== =========== ======= ======== ======= ======== ======= ========
</TABLE>
* Commencement of offering of Class C shares.
49
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
----------------------------------------------- ------------------ -------------------------------------------
YEAR ENDED SEPTEMBER 30, MAY 27, 1999* TO YEAR ENDED SEPTEMBER 30,
----------------------------------------------- ------------------ -------------------------------------------
1999 1998 SEPTEMBER 30, 1999 1999 1998
---------------------- ---------------------- ------------------ -------------------- --------------------
GEORGIA SERIES SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- ----------- ------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net proceeds from
sales of shares 316,556 $2,581,779 248,416 $2,038,654 22,407 $180,954 60,850 $503,915 111,889 $918,990
Investment of
dividends ...... 169,142 1,378,731 173,232 1,422,482 212 1,669 9,056 74,089 10,608 87,282
Exchanged from
associated Funds 107,712 888,905 31,751 260,904 -- -- 6,834 56,261 6,394 53,323
Shares issued in
payment of gain
distributions .. 24,233 200,164 17,956 145,261 -- -- 1,562 12,933 1,182 9,588
-------- ----------- -------- ----------- ------ -------- -------- --------- -------- ---------
Total ............. 617,643 5,049,579 471,355 3,867,301 22,619 182,623 78,302 647,198 130,073 1,069,183
-------- ----------- -------- ----------- ------ -------- -------- --------- -------- ---------
Cost of shares
repurchased .... (809,338) (6,556,764) (844,100) (6,905,867) -- -- (104,845) (853,647) (73,925) (608,241)
Exchanged into
associated Funds (75,068) (609,761) (86,018) (703,073) -- -- (9,346) (77,176) (46,291) (381,284)
-------- ----------- -------- ----------- ------ -------- -------- --------- -------- ---------
Total ............. (884,406) (7,166,525) (930,118) (7,608,940) -- -- (114,191) (930,823) (120,216) (989,525)
-------- ----------- -------- ----------- ------ -------- -------- --------- -------- ---------
Increase (Decrease) (266,763) $(2,116,946) (458,763) $(3,741,639) 22,619 $182,623 (35,889) $(283,625) 9,857 $79,658
======== =========== ======== =========== ====== ======== ======== ========= ======== =========
</TABLE>
* Commencement of offering of Class C shares.
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
---------------------------------------------- ------------------ ------------------------------------------
YEAR ENDED SEPTEMBER 30, MAY 27, 1999* TO YEAR ENDED SEPTEMBER 30,
---------------------------------------------- ------------------ ------------------------------------------
1999 1998 SEPTEMBER 30, 1999 1999 1998
--------------------- ---------------------- ------------------ ------------------- -------------------
LOUISIANA SERIES SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- ----------- ------ ------ ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net proceeds from
sales of shares ... 286,860 $2,335,829 191,119 $1,593,079 1 $8 36,897 $303,293 32,909 $275,183
Investment of
dividends ......... 153,834 1,263,489 163,549 1,366,881 -- -- 2,320 19,102 2,019 16,878
Exchanged from
associated Funds .. 8,079 67,137 3,509 29,131 -- -- 1,465 12,220 5,444 45,621
Shares issued in
payment of gain
distributions ..... 58,865 490,938 7,857 64,975 -- -- 944 7,862 84 692
-------- ---------- -------- ----------- ------ ------ ------- -------- ------- --------
Total ............... 507,638 4,157,393 366,034 3,054,066 1 8 41,626 342,477 40,456 338,374
-------- ---------- -------- ----------- ------ ------ ------- -------- ------- --------
Cost of shares
repurchased ....... (496,701) (4,067,199) (505,091) (4,220,025) -- -- (23,790) (197,294) (3,426) (28,622)
Exchanged into
associated Funds .. (27,551) (224,567) (31,881) (266,535) -- -- -- -- -- --
-------- ---------- -------- ----------- ------ ------ ------- -------- ------- --------
Total ............... (524,252) (4,291,766) (536,972) (4,486,560) -- -- (23,790) (197,294) (3,426) (28,622)
-------- ---------- -------- ----------- ------ ------ ------- -------- ------- --------
Increase (Decrease) . (16,614) $(134,373) (170,938) $(1,432,494) 1 $8 17,836 $145,183 37,030 $309,752
======== ========== ======== =========== ====== ====== ======= ======== ======= ========
</TABLE>
* Commencement of offering of Class C shares.
50
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
----------------------------------------------- ------------------ ------------------------------------------
YEAR ENDED SEPTEMBER 30, MAY 27, 1999* TO YEAR ENDED SEPTEMBER 30,
----------------------------------------------- ------------------ ------------------------------------------
1999 1998 SEPTEMBER 30, 1999 1999 1998
---------------------- ---------------------- ------------------ ------------------- --------------------
MARYLAND SERIES SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- ----------- ------ ------- ------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net proceeds from
sales of shares .. 219,835 $1,796,871 452,967 $3,716,423 9,572 $76,445 59,308 $487,229 173,585 $1,423,657
Investment of
dividends ........ 185,215 1,505,823 182,716 1,496,930 1 8 12,056 98,236 9,536 78,222
Exchanged from
associated Funds . 31,342 253,207 35,858 294,333 -- -- 6,029 49,773 2,043 16,794
Shares issued in
payment of gain
distributions .... 16,816 138,396 27,829 225,691 -- -- 1,266 10,428 1,354 10,991
-------- ----------- -------- ----------- ----- ------- ------- --------- ------- ----------
Total .............. 453,208 3,694,297 699,370 5,733,377 9,573 76,453 78,659 645,666 186,518 1,529,664
-------- ----------- -------- ----------- ----- ------- ------- --------- ------- ----------
Cost of shares
repurchased ...... (666,448) (5,412,629) (519,240) (4,254,611) -- -- (92,244) (753,873) (63,527) (521,910)
Exchanged into
associated Funds . (29,780) (241,553) (34,518) (282,486) -- -- (6,195) (49,882) (423) (3,461)
-------- ----------- -------- ----------- ----- ------- ------- --------- ------- ----------
Total .............. (696,228) (5,654,182) (553,758) (4,537,097) -- -- (98,439) (803,755) (63,950) (525,371)
-------- ----------- -------- ----------- ----- ------- ------- --------- ------- ----------
Increase (Decrease) (243,020) $(1,959,885) 145,612 $1,196,280 9,573 $76,453 (19,780) $(158,089) 122,568 $1,004,293
======== =========== ======== =========== ===== ======= ======= ========= ======= ==========
</TABLE>
* Commencement of offering of Class C shares.
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
------------------------------------------------- ------------------ ----------------------------------------
YEAR ENDED SEPTEMBER 30, MAY 27, 1999* TO YEAR ENDED SEPTEMBER 30,
------------------------------------------------- ------------------ ----------------------------------------
MASSACHUSETTS 1999 1998 SEPTEMBER 30, 1999 1999 1998
------------------------ ----------------------- ------------------ --------------------- -----------------
SERIES SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- ----------- ------ -------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net proceeds from
sales of shares 394,021 $3,161,511 301,803 $2,426,260 30,519 $233,167 144,406 $1,169,254 48,564 $392,038
Investment of
dividends ...... 346,377 2,758,847 381,287 3,066,637 14 103 6,391 50,273 2,830 22,770
Exchanged from
associated Funds 2,678,695 21,337,252 1,354,117 10,859,223 21 157 166,950 1,348,159 14,321 116,384
Shares issued in
payment of gain
distributions .. 56,744 460,197 120,229 951,011 -- -- 648 5,256 923 7,293
---------- ----------- ---------- ----------- ------ -------- -------- ---------- ------- --------
Total ............. 3,475,837 27,717,807 2,157,436 17,303,131 30,554 233,427 318,395 2,572,942 66,638 538,485
---------- ----------- ---------- ----------- ------ -------- -------- ---------- ------- --------
Cost of shares
repurchased .... (1,208,459) (9,620,904) (1,241,182) (9,987,117) -- -- (78,032) (613,957) (44,816) (361,116)
Exchanged into
associated Funds (3,050,731) (24,293,627) (1,454,254) (11,696,486) -- -- (25,100) (197,221) -- --
---------- ----------- ---------- ----------- ------ -------- -------- ---------- ------- --------
Total ............. (4,259,190) (33,914,531) (2,695,436) (21,683,603) -- -- (103,132) (811,178) (44,816) (361,116)
---------- ----------- ---------- ----------- ------ -------- -------- ---------- ------- --------
Increase (Decrease) (783,353) $(6,196,724) (538,000) $(4,380,472) 30,554 $233,427 215,263 $1,761,764 21,822 $177,369
========== =========== ========== =========== ====== ======== ======== ========== ======= ========
</TABLE>
* Commencement of offering of Class C shares.
51
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
-------------------------------------------------- ------------------ ----------------------------------------
YEAR ENDED SEPTEMBER 30, MAY 27, 1999* TO YEAR ENDED SEPTEMBER 30,
-------------------------------------------------- ------------------ ----------------------------------------
1999 1998 SEPTEMBER 30, 1999 1999 1998
------------------------ ------------------------ ------------------ -------------------- ------------------
MICHIGAN SERIES SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------------------------ ------------------------ ----------------- -------------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net proceeds from
sales of shares . 566,910 $4,817,469 552,545 $4,780,685 14,221 $116,801 90,158 $772,545 37,739 $325,385
Investment of
dividends ....... 460,956 3,901,810 484,322 4,190,240 28 226 7,291 61,648 5,822 50,303
Exchanged from
associated Funds 61,998 530,458 339,541 2,928,969 -- -- 34,906 305,268 12,157 106,164
Shares issued in
payment of gain
distributions ... 221,134 1,897,325 106,820 911,174 -- -- 3,830 32,823 1,653 14,084
---------- ----------- ---------- ----------- ------ -------- -------- --------- ------- --------
Total ............ 1,310,998 11,147,062 1,483,228 12,811,068 14,249 117,027 136,185 1,172,284 57,371 495,936
---------- ----------- ---------- ----------- ------ -------- -------- --------- ------- --------
Cost of shares
repurchased ..... (1,838,104) (15,497,098) (1,447,886) (12,531,450) -- -- (86,833) (719,396) (55,636) (479,641)
Exchanged into
associated Funds (192,577) (1,646,007) (382,652) (3,299,610) -- -- -- -- (7,657) (66,539)
---------- ----------- ---------- ----------- ------ -------- -------- --------- ------- --------
Total ............ (2,030,681) (17,143,105) (1,830,538) (15,831,060) -- -- (86,833) (719,396) (63,293) (546,180)
---------- ----------- ---------- ----------- ------ -------- -------- --------- ------- --------
Increase
(Decrease) ...... (719,683) $(5,996,043) (347,310) $(3,019,992) 14,249 $117,027 49,352 $452,888 (5,922) $(50,244)
========== =========== ========== =========== ====== ======== ======== ========= ======= ========
</TABLE>
* Commencement of offering of Class C shares.
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
-------------------------------------------------- ------------------ ----------------------------------------
YEAR ENDED SEPTEMBER 30, MAY 27, 1999* TO YEAR ENDED SEPTEMBER 30,
-------------------------------------------------- ------------------ ----------------------------------------
1999 1998 SEPTEMBER 30, 1999 1999 1998
------------------------ ------------------------ --------------- ------------------- ------------------
MINNESOTA SERIES SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- ------------ ------ ------ ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net proceeds from
sales of shares 448,156 $3,467,423 480,210 $3,759,777 1,000 $8,000 37,069 $289,245 74,514 $583,305
Investment of
dividends ...... 475,864 3,675,004 502,233 3,934,003 -- -- 6,072 46,955 5,371 42,082
Exchanged from
associated Funds 79,497 621,391 47,797 373,852 -- -- 26,054 206,572 16,965 132,637
Shares issued in
payment of gain
distributions .. 153,173 1,196,281 14,480 112,803 -- -- 2,615 20,449 203 1,581
---------- ----------- ---------- ------------ ----- ------ ------- --------- ------- ---------
Total ............. 1,156,690 8,960,099 1,044,720 8,180,435 1 8 71,810 563,221 97,053 759,605
---------- ----------- ---------- ------------ ----- ------ ------- --------- ------- ---------
Cost of shares
repurchased .... (1,415,157) (10,904,586) (1,308,615) (10,246,157) -- -- (83,338) (650,368) (25,476) (199,128)
Exchanged into
associated Funds (131,646) (998,565) (138,742) (1,084,969) -- -- -- -- (38,924) (306,816)
---------- ----------- ---------- ------------ ----- ------ ------- --------- ------- ---------
Total ............. (1,546,803) (11,903,151) (1,447,357) (11,331,126) -- -- (83,338) (650,368) (64,400) (505,944)
---------- ----------- ---------- ------------ ----- ------ ------- --------- ------- ---------
Increase
(Decrease) ....... (390,113) $(2,943,052) (402,637) $(3,150,691) 1 $8 (11,528) $(87,147) 32,653 $253,661
========== =========== ========== ============ ===== ====== ======= ========= ======= =========
</TABLE>
* Commencement of offering of Class C shares.
52
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
--------------------------------------------- ------------------- ------------------------------------------
YEAR ENDED SEPTEMBER 30, MAY 27, 1999* TO YEAR ENDED SEPTEMBER 30,
--------------------------------------------- ------------------- ------------------------------------------
1999 1998 SEPTEMBER 30, 1999 1999 1998
--------------------- ---------------------- ------------------- ------------------- ---------------------
MISSOURI SERIES SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------------------- ---------------------- ------------------- ------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net proceeds from
sales of shares 143,714 $1,117,391 192,882 $1,518,510 2,887 $21,877 43,815 $339,791 10,178 $79,605
Investment of
dividends...... 141,770 1,091,323 144,574 1,135,261 27 202 2,082 15,998 1,589 12,480
Exchanged from
associated Funds 63,527 497,543 28,380 223,404 -- -- 2,979 23,607 -- --
Shares issued in
payment of gain
distributions.. 62,316 486,691 36,308 281,752 -- -- 770 6,011 374 2,904
-------- ----------- -------- ----------- ------ -------- -------- --------- --------- --------
Total............. 411,327 3,192,948 402,144 3,158,927 2,914 22,079 49,646 385,407 12,141 94,989
-------- ----------- -------- ----------- ------ -------- -------- --------- --------- --------
Cost of shares
repurchased.... (640,800) (4,889,919) (861,837) (6,778,544) -- -- (14,354) (110,312) (20,769) (162,241)
Exchanged into
associated Funds (33,222) (255,281) (66,519) (522,272) -- -- (2,657) (20,683) -- --
-------- ----------- -------- ----------- ------ -------- -------- --------- --------- --------
Total............. (674,022) (5,145,200) (928,356) (7,300,816) -- -- (17,011) (130,995) (20,769) (162,241)
-------- ----------- -------- ----------- ------ -------- -------- --------- --------- ---------
Increase (Decrease) (262,695) $(1,952,252) (526,212) $(4,141,889) 2,914 $ 22,079 32,635 $ 254,412 (8,628) $ (67,252)
======== =========== ======== =========== ====== ======== ======== ========= ========= =========
</TABLE>
* Commencement of offering of Class C shares.
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
------------------------------------------------ ------------------- ----------------------------------------
YEAR ENDED SEPTEMBER 30, MAY 27, 1999* TO YEAR ENDED SEPTEMBER 30,
------------------------------------------------ ------------------- ----------------------------------------
1999 1998 SEPTEMBER 30, 1999 1999 1998
---------------------- ----------------------- -------------------- ------------------- --------------------
NEW YORK SERIES SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- ------------ ------- ----------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net proceeds from
sales of shares 802,995 $6,593,637 409,090 $3,404,935 35,036 $278,217 94,489 $781,036 64,754 $541,566
Investment of
dividends...... 284,109 2,315,942 280,689 2,342,732 83 644 9,087 74,189 5,891 49,242
Exchanged from
associated Funds 589,737 4,819,554 389,085 3,247,626 -- -- 72,704 609,660 12,843 109,289
Shares issued in
payment of gain
distributions.. 196,696 1,630,608 81,252 666,270 -- -- 5,681 47,092 1,546 12,694
---------- ----------- ---------- ----------- ------- ------- ------- -------- ------- --------
Total............. 1,873,537 15,359,741 1,160,116 9,661,563 35,119 278,861 181,961 1,511,977 85,034 712,791
---------- ----------- ---------- ----------- ------- ------- ------- -------- ------- --------
Cost of shares
repurchased.... (952,833) (7,728,238) (974,859) (8,149,245) (5,721) (45,709) (39,787) (323,914) (18,301) (152,914)
Exchanged into
associated
Funds (803,766) (6,577,087) (404,227) (3,375,173) (4,833) (37,500) (26,500) (208,844) (2,738) (22,942)
---------- ----------- ---------- ----------- ------- ------- ------- -------- ------- --------
Total........... (1,756,599) (14,305,325) (1,379,086) (11,524,418) (10,554) (83,209) (66,287) (532,758) (21,039) (175,856)
---------- ----------- ---------- ----------- ------- ------- ------- -------- ------- --------
Increase
(Decrease) 116,938 $ 1,054,416 (218,970) $(1,862,855) 24,565 $195,652 115,674 $ 979,219 63,995 $ 536,935
========== =========== ========== =========== ======= ======== ======= ========= ========= =========
</TABLE>
* Commencement of offering of Class C shares.
53
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
------------------------------------------------- ------------------ ----------------------------------------
YEAR ENDED SEPTEMBER 30, MAY 27, 1999* TO YEAR ENDED SEPTEMBER 30,
------------------------------------------------- ------------------ ----------------------------------------
1999 1998 SEPTEMBER 30, 1999 1999 1998
------------------------ ---------------------- ------------------ ------------------- ------------------
OHIO SERIES SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- --------- ------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net proceeds from
sales of shares 361,672 $2,918,252 453,643 $3,716,543 2,248 $17,828 78,121 $638,278 25,288 $208,265
Investment of
dividends ...... 530,982 4,266,794 563,375 4,618,664 13 95 5,281 42,608 4,941 40,700
Exchanged from
associated Funds 134,140 1,074,172 49,472 404,291 -- -- 27,382 225,056 8,543 70,396
Shares issued in
payment of gain
distributions .. 223,380 1,820,544 189,198 1,532,501 -- -- 1,911 15,630 1,715 13,962
---------- ----------- ---------- ----------- ----- ------- -------- -------- ------- --------
Total ............. 1,250,174 10,079,762 1,255,688 10,271,999 2,261 17,923 112,695 921,572 40,487 333,323
---------- ----------- ---------- ----------- ----- ------- -------- -------- ------- --------
Cost of shares
repurchased .... (1,741,673) (13,920,913) (1,599,143) (13,102,427) -- -- (42,299) (337,204) (48,136) (395,804)
Exchanged into
associated
Funds ......... (131,868) (1,057,828) (214,380) (1,758,230) -- -- (28,756) (232,392) (2,092) (17,309)
---------- ----------- ---------- ----------- ----- ------- -------- -------- ------- --------
Total ............. (1,873,541) (14,978,741) (1,813,523) (14,860,657) -- -- (71,055) (569,596) (50,228) (413,113)
---------- ----------- ---------- ----------- ----- ------- -------- -------- ------- --------
Increase (Decrease) (623,367) $(4,898,979) (557,835) $(4,588,658) 2,261 $17,923 41,640 $351,976 (9,741) $(79,790)
========== =========== ========== =========== ===== ======= ======== ======== ======= ========
</TABLE>
* Commencement of offering of Class C shares.
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
------------------------------------------------ -------------------- ----------------------------------------
YEAR ENDED SEPTEMBER 30, MAY 27, 1999* TO YEAR ENDED SEPTEMBER 30,
------------------------------------------------ -------------------- ----------------------------------------
1999 1998 SEPTEMBER 30, 1999 1999 1998
----------------------- ----------------------- -------------------- ------------------- -------------------
OREGON SERIES SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------------------- ----------------------- ------------------ ------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net proceeds from
sales of shares 679,526 $5,340,535 578,820 $4,579,085 1 $8 39,323 $309,977 115,620 $912,518
Investment of
dividends ...... 209,299 1,637,871 201,391 1,588,261 -- -- 7,942 62,252 7,211 56,847
Exchanged from
associated Funds 130,494 1,028,496 15,314 120,904 -- -- 9,849 78,360 5,944 47,138
Shares issued in
payment of gain
distributions .. 35,501 281,167 69,111 536,993 -- -- 1,508 11,943 2,326 18,047
--------- ---------- -------- ---------- ----- ------ ------- --------- ------- ---------
Total ............. 1,054,820 8,288,069 864,636 6,825,243 1 8 58,622 462,532 131,101 1,034,550
--------- ---------- -------- ---------- ----- ------ ------- --------- ------- ---------
Cost of shares
repurchased .... (706,461) (5,517,373) (666,927) (5,263,365) -- -- (89,753) (700,248) (13,128) (103,120)
Exchanged into
associated Funds (226,571) (1,784,105) (55,368) (437,002) -- -- (87) (691) (1,600) (12,598)
--------- ---------- -------- ---------- ----- ------ ------- --------- ------- ---------
Total ............. (933,032) (7,301,478) (722,295) (5,700,367) -- -- (89,840) (700,939) (14,728) (115,718)
--------- ---------- -------- ---------- ----- ------ ------- --------- ------- ---------
Increase (Decrease) 121,788 $986,591 142,341 $1,124,876 1 $8 (31,218) $(238,407) 116,373 $918,832
========= ========== ======== ========== ===== ====== ======= ========= ======= =========
</TABLE>
* Commencement of offering of Class C shares.
54
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
------------------------------------------------ -------------------- -----------------------------------------
YEAR ENDED SEPTEMBER 30, MAY 27, 1999* TO YEAR ENDED SEPTEMBER 30,
------------------------------------------------ -------------------- -----------------------------------------
SOUTH CAROLINA 1999 1998 SEPTEMBER 30, 1999 1999 1998
SERIES ------------------------ ---------------------- -------------------- ------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ---------- --------- -------- --------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net proceeds from
sales of shares.. 495,837 $4,009,453 1,307,029 $10,736,862 43,342 $344,052 201,377 $1,644,018 273,163 $2,250,161
Investment of
dividends...... 333,372 2,699,308 341,280 2,804,800 403 3,128 19,414 156,934 16,202 133,057
Exchanged from
associated Funds 39,056 319,755 54,738 452,032 -- -- 5,412 44,575 6,370 52,119
Shares issued in
payment of gain
distributions.. 80,358 661,343 86,250 698,627 -- -- 4,735 38,926 3,898 31,538
---------- ------------ ---------- ----------- ------ -------- --------- --------- ------- -----------
Total............. 948,623 7,689,859 1,789,297 14,692,321 43,745 347,180 230,938 1,884,453 299,633 2,466,875
---------- ------------ ---------- ----------- ------ -------- --------- --------- ------- -----------
Cost of shares
repurchased.... (1,450,098) (11,588,440) (1,319,559) (10,837,647) -- -- (111,023) (890,939) (73,888) (605,605)
Exchanged into
associated Funds (76,691) (620,953) (162,725) (1,330,837) -- -- (12,742) (100,870) (6,993) (57,130)
---------- ------------ ---------- ----------- ------ -------- --------- --------- ------- -----------
Total............. (1,526,789) (12,209,393) (1,482,284) (12,168,484) -- -- (123,765) (991,809) (80,881) (662,735)
---------- ------------ ---------- ----------- ------ -------- --------- --------- ------- -----------
Increase (Decrease) (578,166) $ (4,519,534) 307,013 $ 2,523,837 43,745 $347,180 107,173 $ 892,644 218,752 $ 1,804,140
========== ============ ========== =========== ====== ======== ========= ========= ======= ===========
</TABLE>
* Commencement of offering of Class C shares.
55
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below are intended to help you understand the financial
performance of each Class of each Series for the past five years or from its
inception if less than five years. Certain information reflects financial
results for a single share of a Class that was held throughout the periods
shown. Per share amounts are calculated using average shares outstanding during
the period. "Total return" shows the rate that you would have earned (or lost)
on an investment in each Class, assuming you reinvested all your dividends and
capital gain distributions. Total returns do not reflect any sales charges and
are not annualized for periods of less than one year.
NATIONAL SERIES
<TABLE>
<CAPTION>
CLASS A CLASS C
---------------------------------------------------- ----------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------- 5/27/99**
TO
1999 1998 1997 1996 1995 9/30/99
------- -------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD ....... $8.32 $8.01 $7.70 $7.58 $7.18 $8.08
------- -------- ------- ------- -------- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ...................... 0.39 0.39 0.39 0.40 0.40 0.11
Net realized and unrealized gain (loss)
on investments ........................... (0.64) 0.31 0.31 0.12 0.40 (0.40)
------- -------- ------- ------- -------- -----
TOTAL FROM INVESTMENT OPERATIONS ........... (0.25) 0.70 0.70 0.52 0.80 (0.29)
------- -------- ------- ------- -------- -----
LESS DISTRIBUTIONS:
Dividends from net investment income ....... (0.39) (0.39) (0.39) (0.40) (0.40) (0.11)
Distributions from net realized capital gain -- -- -- -- -- --
------- -------- ------- ------- -------- -----
TOTAL DISTRIBUTIONS ........................ (0.39) (0.39) (0.39) (0.40) (0.40) (0.11)
------- -------- ------- ------- -------- -----
NET ASSET VALUE, END OF PERIOD ............. $7.68 $8.32 $8.01 $7.70 $7.58 $7.68
======= ======== ======= ======= ======== =====
TOTAL RETURN: .............................. (3.11)% 9.00% 9.40% 6.97% 11.48% (3.38)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000s omitted) ... $90,296 $101,909 $97,481 $98,767 $104,184 $115
Ratio of expenses to average net assets .... 0.83% 0.80% 0.84% 0.80% 0.86% 1.74%+
Ratio of net income to average net assets .. 4.83% 4.82% 5.05% 5.19% 5.46% 4.10%+
Portfolio turnover rate .................... 13.37% 18.00% 20.63% 33.99% 24.91% 13.37%++
</TABLE>
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR .................... $8.31 $8.02 $7.70 $7.57 $7.18
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.32 0.32 0.32 0.33 0.32
Net realized and unrealized gain (loss)
on investments ...................................... (0.63) 0.29 0.32 0.13 0.39
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.31) 0.61 0.64 0.46 0.71
----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.32) (0.32) (0.32) (0.33) (0.32)
Distributions from net realized capital gain .......... -- -- -- -- --
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ................................... (0.32) (0.32) (0.32) (0.33) (0.32)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR .......................... $7.68 $8.31 $8.02 $7.70 $7.57
===== ===== ===== ===== =====
TOTAL RETURN: (3.85)% 7.76% 8.56% 6.13% 10.17%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year (000s omitted) ................ $8,079 $7,392 $2,279 $4,826 $1,215
Ratio of expenses to average net assets ............... 1.73% 1.71% 1.75% 1.67% 1.95%
Ratio of net income to average net assets ............. 3.93% 3.91% 4.15% 4.27% 4.40%
Portfolio turnover rate ............................... 13.37% 18.00% 20.63% 33.99% 24.91%
</TABLE>
- -------------
See footnotes on page 68.
56
<PAGE>
FINANCIAL HIGHLIGHTS
COLORADO SERIES
<TABLE>
<CAPTION>
CLASS A CLASS C
--------------------------------------------------- ---------
5/27/99**
YEAR ENDED SEPTEMBER 30, TO
---------------------------------------------------
1999 1998 1997 1996 1995 9/30/99
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD ................. $7.64 $7.42 $7.27 $7.30 $7.09 $7.47
----- ----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................ 0.34 0.36 0.37 0.37 0.38 0.10
Net realized and unrealized gain (loss)
on investments ..................................... (0.54) 0.22 0.15 (0.03) 0.21 (0.38)
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ..................... (0.20) 0.58 0.52 0.34 0.59 (0.28)
----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income ................. (0.34) (0.36) (0.37) (0.37) (0.38) (0.10)
Distributions from net realized capital gain ......... -- -- -- -- -- --
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS .................................. (0.34) (0.36) (0.37) (0.37) (0.38) (0.10)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ....................... $7.10 $7.64 $7.42 $7.27 $7.30 $7.09
===== ===== ===== ===== ===== =====
TOTAL RETURN: (2.67)% 8.03% 7.30% 4.76% 8.56% (3.93)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000s omitted) ............. $44,649 $45,583 $49,780 $52,295 $54,858 $60
Ratio of expenses to average net assets .............. 0.87% 0.90% 0.90% 0.85% 0.93% 1.73%+
Ratio of net income to average net assets ............ 4.60% 4.80% 5.01% 5.07% 5.31% 3.85%+
Portfolio turnover rate .............................. 7.91% 28.66% 3.99% 12.39% 14.70% 7.91%++
</TABLE>
<TABLE>
<CAPTION>
CLASS D
---------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR .................... $7.63 $7.42 $7.27 $7.29 $7.09
----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.28 0.29 0.30 0.31 0.30
Net realized and unrealized gain (loss)
on investments ...................................... (0.54) 0.21 0.15 (0.02) 0.20
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.26) 0.50 0.45 0.29 0.50
----- ----- ----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.28) (0.29) (0.30) (0.31) (0.30)
Distributions from net realized capital gain .......... -- -- -- -- --
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ................................... (0.28) (0.29) (0.30) (0.31) (0.30)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR .......................... $7.09 $7.63 $7.42 $7.27 $7.29
===== ===== ===== ===== =====
TOTAL RETURN: (3.57)% 6.90% 6.34% 3.95% 7.26%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year (000s omitted) ................ $917 $344 $238 $255 $193
Ratio of expenses to average net assets ............... 1.77% 1.80% 1.81% 1.75% 2.02%
Ratio of net income to average net assets ............. 3.70% 3.90% 4.10% 4.17% 4.23%
Portfolio turnover rate ............................... 7.91% 28.66% 3.99% 12.39% 14.70%
</TABLE>
- ----------------------
See footnotes on page 68.
57
<PAGE>
FINANCIAL HIGHLIGHTS
GEORGIA SERIES
<TABLE>
<CAPTION>
CLASS A CLASS C
--------------------------------------------------- ----------
YEAR ENDED SEPTEMBER 30, 5/27/99**
--------------------------------------------------- TO
1999 1998 1997 1996 1995 9/30/99
---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD .................. $8.38 $8.12 $7.87 $7.81 $7.48 $8.17
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.37 0.38 0.38 0.39 0.39 0.11
Net realized and unrealized gain (loss)
on investments ...................................... (0.58) 0.29 0.28 0.11 0.43 (0.41)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.21) 0.67 0.66 0.50 0.82 (0.30)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.37) (0.38) (0.38) (0.39) (0.39) (0.11)
Distributions from net realized capital gain .......... (0.05) (0.03) (0.03) (0.05) (0.10) --
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ................................... (0.42) (0.41) (0.41) (0.44) (0.49) (0.11)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ........................ $7.75 $8.38 $8.12 $7.87 $7.81 $7.76
====== ====== ====== ====== ====== ======
TOTAL RETURN: ......................................... (2.63)% 8.44% 8.65% 6.56% 11.66% (3.84)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000s omitted) .............. $42,692 $48,424 $50,614 $50,995 $57,678 $176
Ratio of expenses to average net assets ............... 0.87% 0.89% 0.89% 0.83% 0.91% 1.74%+
Ratio of net income to average net assets ............. 4.59% 4.57% 4.82% 4.94% 5.26% 3.89%+
Portfolio turnover rate ............................... 23.93% 2.92% 12.28% 16.24% 3.36% 23.93%++
Without management fee waiver:*
Ratio of expenses to average net assets ............... 0.96%
Ratio of net income to average net assets ............. 5.21%
</TABLE>
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR .................... $8.40 $8.13 $7.88 $7.82 $7.49
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.30 0.30 0.31 0.32 0.32
Net realized and unrealized gain (loss)
on investments ...................................... (0.59) 0.30 0.28 0.11 0.43
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.29) 0.60 0.59 0.43 0.75
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.30) (0.30) (0.31) (0.32) (0.32)
Distributions from net realized capital gain .......... (0.05) (0.03) (0.03) (0.05) (0.10)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ................................... (0.35) (0.33) (0.34) (0.37) (0.42)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR .......................... $7.76 $8.40 $8.13 $7.88 $7.82
====== ====== ====== ====== ======
TOTAL RETURN: ......................................... (3.61)% 7.59% 7.67% 5.60% 10.58%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year (000s omitted) ................ $2,318 $2,809 $2,640 $2,327 $2,079
Ratio of expenses to average net assets ............... 1.77% 1.80% 1.79% 1.73% 1.90%
Ratio of net income to average net assets ............. 3.69% 3.66% 3.92% 4.03% 4.28%
Portfolio turnover rate ............................... 23.93% 2.92% 12.28% 16.24% 3.36%
Without management fee waiver:*
Net investment income per share ....................... $0.31
Ratio of expenses to average net assets ............... 1.95%
Ratio of net income to average net assets ............. 4.23%
</TABLE>
- -----------------
See footnotes on page 68.
58
<PAGE>
FINANCIAL HIGHLIGHTS
LOUISIANA SERIES
<TABLE>
<CAPTION>
CLASS A CLASS C
--------------------------------------------------- ----------
YEAR ENDED SEPTEMBER 30, 5/27/99**
--------------------------------------------------- TO
1999 1998 1997 1996 1995 9/30/99
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD .................. $8.51 $8.28 $8.16 $8.14 $7.94 $8.19
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.39 0.41 0.41 0.42 0.43 0.11
Net realized and unrealized gain (loss)
on investments ...................................... (0.59) 0.24 0.23 0.08 0.34 (0.39)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.20) 0.65 0.64 0.50 0.77 (0.28)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.39) (0.41) (0.41) (0.42) (0.43) (0.11)
Distributions from net realized capital gain .......... (0.11) (0.01) (0.11) (0.06) (0.14) --
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ................................... (0.50) (0.42) (0.52) (0.48) (0.57) (0.11)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ........................ $7.81 $8.51 $8.28 $8.16 $8.14 $7.80
====== ====== ====== ====== ====== ======
TOTAL RETURN: ......................................... (2.44)% 8.08% 8.17% 6.32% 10.30% (3.55)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000s omitted) .............. $51,543 $56,308 $56,199 $57,264 $61,988 $ --
Ratio of expenses to average net assets ............... 0.84% 0.88% 0.86% 0.82% 0.89% 1.71%+
Ratio of net income to average net assets ............. 4.76% 4.86% 5.08% 5.15% 5.44% 4.00%+
Portfolio turnover rate ............................... 8.67% 15.72% 16.08% 10.08% 4.82% 8.67%++
</TABLE>
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR .................... $8.50 $8.27 $8.16 $8.14 $7.94
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.32 0.33 0.34 0.35 0.35
Net realized and unrealized gain (loss)
on investments ...................................... (0.59) 0.24 0.22 0.08 0.34
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.27) 0.57 0.56 0.43 0.69
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.32) (0.33) (0.34) (0.35) (0.35)
Distributions from net realized capital gain .......... (0.11) (0.01) (0.11) (0.06) (0.14)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ................................... (0.43) (0.34) (0.45) (0.41) (0.49)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR .......................... $7.80 $8.50 $8.27 $8.16 $8.14
====== ====== ====== ====== ======
TOTAL RETURN: ......................................... (3.33)% 7.11% 7.07% 5.37% 9.17%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year (000s omitted) ................ $908 $837 $509 $389 $465
Ratio of expenses to average net assets ............... 1.74% 1.78% 1.76% 1.72% 1.91%
Ratio of net income to average net assets ............. 3.86% 3.96% 4.18% 4.25% 4.41%
Portfolio turnover rate ............................... 8.67% 15.72% 16.08% 10.08% 4.82%
</TABLE>
- -----------------
See footnotes on page 68.
59
<PAGE>
FINANCIAL HIGHLIGHTS
MARYLAND SERIES
<TABLE>
<CAPTION>
CLASS A CLASS C
--------------------------------------------------- ----------
YEAR ENDED SEPTEMBER 30, 5/27/99**
--------------------------------------------------- TO
1999 1998 1997 1996 1995 9/30/99
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD .................. $8.32 $8.14 $7.99 $7.96 $7.71 $8.13
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.39 0.40 0.40 0.40 0.41 0.11
Net realized and unrealized gain (loss)
on investments ...................................... (0.50) 0.23 0.19 0.06 0.38 (0.33)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.11) 0.63 0.59 0.46 0.79 (0.22)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.39) (0.40) (0.40) (0.40) (0.41) (0.11)
Distributions from net realized capital gain .......... (0.03) (0.05) (0.04) (0.03) (0.13) --
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ................................... (0.42) (0.45) (0.44) (0.43) (0.54) (0.11)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ........................ $7.79 $8.32 $8.14 $7.99 $7.96 $7.80
====== ====== ====== ====== ====== ======
TOTAL RETURN: ......................................... (1.45)% 7.89% 7.64% 6.00% 10.90% (2.83)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000s omitted) .............. $49,523 $54,891 $52,549 $54,041 $56,290 $75
Ratio of expenses to average net assets ............... 0.87% 0.89% 0.90% 0.84% 0.96% 1.75%+
Ratio of net income to average net assets ............. 4.77% 4.82% 4.99% 5.05% 5.31% 4.04%+
Portfolio turnover rate ............................... 1.80% 7.59% 14.79% 5.56% 3.63% 1.80%++
</TABLE>
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR .................... $8.33 $8.15 $7.99 $7.97 $7.72
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.31 0.32 0.33 0.33 0.33
Net realized and unrealized gain (loss)
on investments ...................................... (0.50) 0.23 0.20 0.05 0.38
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.19) 0.55 0.53 0.38 0.71
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.31) (0.32) (0.33) (0.33) (0.33)
Distributions from net realized capital gain .......... (0.03) (0.05) (0.04) (0.03) (0.13)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ................................... (0.34) (0.37) (0.37) (0.36) (0.46)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR .......................... $7.80 $8.33 $8.15 $7.99 $7.97
====== ====== ====== ====== ======
TOTAL RETURN: ......................................... (2.00)% 6.91% 6.80% 4.91% 9.75%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year (000s omitted) ................ $2,775 $3,128 $2,063 $2,047 $630
Ratio of expenses to average net assets ............... 1.77% 1.80% 1.81% 1.72% 2.02%
Ratio of net income to average net assets ............. 3.87% 3.91% 4.08% 4.14% 4.27%
Portfolio turnover rate ............................... 1.80% 7.59% 14.79% 5.56% 3.63%
</TABLE>
- -----------------
See footnotes on page 68.
60
<PAGE>
FINANCIAL HIGHLIGHTS
MASSACHUSETTS SERIES
<TABLE>
<CAPTION>
CLASS A CLASS C
--------------------------------------------------- ----------
YEAR ENDED SEPTEMBER 30, 5/27/99**
--------------------------------------------------- TO
1999 1998 1997 1996 1995 9/30/99
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $8.27 $7.99 $7.85 $7.91 $7.66 $7.96
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.36 0.38 0.40 0.41 0.42 0.10
Net realized and unrealized gain (loss)
on investments (0.75) 0.37 0.22 0.05 0.28 (0.49)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS (0.39) 0.75 0.62 0.46 0.70 (0.39)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.36) (0.38) (0.40) (0.41) (0.42) (0.10)
Distributions from net realized capital gain (0.05) (0.09) (0.08) (0.11) (0.03) --
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.41) (0.47) (0.48) (0.52) (0.45) (0.10)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $7.47 $8.27 $7.99 $7.85 $7.91 $7.47
====== ====== ====== ====== ====== ======
TOTAL RETURN: (4.85)% 9.80% 8.11% 5.97% 9.58% (5.02)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000s omitted) $92,929 $109,328 $110,011 $109,872 $115,711 $228
Ratio of expenses to average net assets 0.83% 0.80% 0.84% 0.80% 0.86% 1.73%+
Ratio of net income to average net assets 4.56% 4.72% 5.06% 5.24% 5.51% 3.80%+
Portfolio turnover rate 23.88% 13.41% 29.26% 26.30% 16.68% 23.88%++
</TABLE>
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR $8.26 $7.99 $7.84 $7.90 $7.66
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.29 0.31 0.33 0.34 0.34
Net realized and unrealized gain (loss)
on investments (0.74) 0.36 0.23 0.05 0.27
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS (0.45) 0.67 0.56 0.39 0.61
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.29) (0.31) (0.33) (0.34) (0.34)
Distributions from net realized capital gain (0.05) (0.09) (0.08) (0.11) (0.03)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.34) (0.40) (0.41) (0.45) (0.37)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $7.47 $8.26 $7.99 $7.84 $7.90
====== ====== ====== ====== ======
TOTAL RETURN: (5.61)% 8.68% 7.29% 5.01% 8.33%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year (000s omitted) $2,934 $1,468 $1,245 $1,405 $809
Ratio of expenses to average net assets 1.73% 1.71% 1.74% 1.70% 1.95%
Ratio of net income to average net assets 3.66% 3.81% 4.16% 4.32% 4.47%
Portfolio turnover rate 23.88% 13.41% 29.26% 26.30% 16.68%
</TABLE>
- -----------------
See footnotes on page 68.
<PAGE>
FINANCIAL HIGHLIGHTS
MICHIGAN SERIES
<TABLE>
<CAPTION>
CLASS A CLASS C
--------------------------------------------------- ----------
YEAR ENDED SEPTEMBER 30, 5/27/99**
--------------------------------------------------- TO
1999 1998 1997 1996 1995 9/30/99
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $8.83 $8.60 $8.46 $8.54 $8.28 $8.43
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.40 0.41 0.43 0.45 0.46 0.11
Net realized and unrealized gain (loss)
on investments (0.63) 0.30 0.23 0.06 0.30 (0.40)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS (0.23) 0.71 0.66 0.51 0.76 (0.29)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.40) (0.41) (0.43) (0.45) (0.46) (0.11)
Distributions from net realized capital gain (0.16) (0.07) (0.09) (0.14) (0.04) --
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.56) (0.48) (0.52) (0.59) (0.50) (0.11)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $8.04 $8.83 $8.60 $8.46 $8.54 $8.03
====== ====== ====== ====== ====== ======
TOTAL RETURN: (2.77)% 8.63% 8.16% 6.16% 9.56% (3.55)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000s omitted) $125,560 $144,161 $143,370 $148,178 $151,589 $114
Ratio of expenses to average net assets 0.82% 0.79% 0.81% 0.78% 0.87% 1.73%+
Ratio of net income to average net assets 4.73% 4.78% 5.13% 5.29% 5.50% 3.96%+
Portfolio turnover rate 3.73% 23.60% 10.98% 19.62% 20.48% 3.73%++
</TABLE>
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR $8.82 $8.59 $8.45 $8.54 $8.28
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.32 0.33 0.36 0.37 0.37
Net realized and unrealized gain (loss)
on investments (0.63) 0.30 0.23 0.05 0.30
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS (0.31) 0.63 0.59 0.42 0.67
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.32) (0.33) (0.36) (0.37) (0.37)
Distributions from net realized capital gain (0.16) (0.07) (0.09) (0.14) (0.04)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.48) (0.40) (0.45) (0.51) (0.41)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $8.03 $8.82 $8.59 $8.45 $8.54
====== ====== ====== ====== ======
TOTAL RETURN: (3.65)% 7.66% 7.19% 5.09% 8.36%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year (000s omitted) $2,074 $1,841 $1,845 $1,486 $1,172
Ratio of expenses to average net assets 1.72% 1.70% 1.71% 1.68% 2.01%
Ratio of net income to average net assets 3.83% 3.87% 4.23% 4.39% 4.40%
Portfolio turnover rate 3.73% 23.60% 10.98% 19.62% 20.48%
</TABLE>
- -----------------
See footnotes on page 68.
62
<PAGE>
FINANCIAL HIGHLIGHTS
MINNESOTA SERIES
<TABLE>
<CAPTION>
CLASS A CLASS C
--------------------------------------------------- ----------
YEAR ENDED SEPTEMBER 30, 5/27/99**
--------------------------------------------------- TO
1999 1998 1997 1996 1995 9/30/99
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD $7.98 $7.79 $7.68 $7.82 $7.72 $7.72
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.36 0.38 0.40 0.42 0.45 0.10
Net realized and unrealized gain (loss)
on investments (0.52) 0.20 0.11 (0.12) 0.11 (0.36)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS (0.16) 0.58 0.51 0.30 0.56 (0.26)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.36) (0.38) (0.40) (0.42) (0.45) (0.10)
Distributions from net realized capital gain (0.10) (0.01) -- (0.02) (0.01) --
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.46) (0.39) (0.40) (0.44) (0.46) (0.10)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $7.36 $7.98 $7.79 $7.68 $7.82 $7.36
====== ====== ====== ====== ====== ======
TOTAL RETURN: (2.09)% 7.68% 6.85% 3.99% 7.61% (3.47)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000s omitted) $109,165 $121,374 $121,674 $126,173 $132,716 $ --
Ratio of expenses to average net assets 0.84% 0.81% 0.85% 0.81% 0.87% 1.74%+
Ratio of net income to average net assets 4.71% 4.87% 5.21% 5.47% 5.89% 3.94%+
Portfolio turnover rate 9.74% 21.86% 6.88% 26.89% 5.57% 9.74%++
</TABLE>
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR $7.98 $7.79 $7.68 $7.82 $7.73
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.30 0.31 0.33 0.35 0.38
Net realized and unrealized gain (loss)
on investments (0.52) 0.20 0.11 (0.12) 0.10
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS (0.22) 0.51 0.44 0.23 0.48
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.30) (0.31) (0.33) (0.35) (0.38)
Distributions from net realized capital gain (0.10) (0.01) -- (0.02) (0.01)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.40) (0.32) (0.33) (0.37) (0.39)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $7.36 $7.98 $7.79 $7.68 $7.82
====== ====== ====== ====== ======
TOTAL RETURN: (2.96)% 6.71% 5.89% 3.06% 6.45%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year (000s omitted) $1,856 $2,103 $1,799 $2,036 $2,237
Ratio of expenses to average net assets 1.74% 1.72% 1.75% 1.71% 1.85%
Ratio of net income to average net assets 3.81% 3.96% 4.31% 4.57% 4.92%
Portfolio turnover rate 9.74% 21.86% 6.88% 26.89% 5.57%
</TABLE>
- -----------------
See footnotes on page 68.
63
<PAGE>
FINANCIAL HIGHLIGHTS
MISSOURI SERIES
<TABLE>
<CAPTION>
CLASS A CLASS C
--------------------------------------------------- ----------
YEAR ENDED SEPTEMBER 30, 5/27/99**
--------------------------------------------------- TO
1999 1998 1997 1996 1995 9/30/99
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
---- ---- ---- ---- ----
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD .................. $8.03 $7.82 $7.71 $7.70 $7.41 $7.68
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.35 0.36 0.38 0.39 0.40 0.10
Net realized and unrealized gain (loss)
on investments ...................................... (0.62) 0.28 0.19 0.08 0.36 (0.39)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.27) 0.64 0.57 0.47 0.76 (0.29)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.35) (0.36) (0.38) (0.39) (0.40) (0.10)
Distributions from net realized capital gain .......... (0.12) (0.07) (0.08) (0.07) (0.07) --
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ................................... (0.47) (0.43) (0.46) (0.46) (0.47) (0.10)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ........................ $7.29 $8.03 $7.82 $7.71 $7.70 $7.29
====== ====== ====== ====== ====== ======
TOTAL RETURN: ......................................... (3.58)% 8.41% 7.70% 6.27% 10.67% (3.95)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000s omitted) .............. $43,437 $49,949 $52,766 $49,941 $51,169 $21
Ratio of expenses to average net assets ............... 0.87% 0.89% 0.89% 0.86% 0.88% 1.74%+
Ratio of net income to average net assets ............. 4.50% 4.59% 4.93% 5.03% 5.31% 3.75%+
Portfolio turnover rate ............................... 10.43% 21.26% 6.47% 8.04% 3.88% 10.43%++
Without management fee waiver:*
Net investment income per share ....................... $0.39
Ratio of expenses to average net assets ............... 0.93%
Ratio of net income to average net assets ............. 5.26%
</TABLE>
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR .................... $8.03 $7.82 $7.72 $7.70 $7.41
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.28 0.29 0.31 0.32 0.32
Net realized and unrealized gain (loss)
on investments ...................................... (0.62) 0.28 0.18 0.09 0.36
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.34) 0.57 0.49 0.41 0.68
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.28) (0.29) (0.31) (0.32) (0.32)
Distributions from net realized capital gain .......... (0.12) (0.07) (0.08) (0.07) (0.07)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ................................... (0.40) (0.36) (0.39) (0.39) (0.39)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR .......................... $7.29 $8.03 $7.82 $7.72 $7.70
====== ====== ====== ====== ======
TOTAL RETURN: ......................................... (4.46)% 7.45% 6.60% 5.46% 9.49%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year (000s omitted) ................ $617 $418 $474 $565 $515
Ratio of expenses to average net assets ............... 1.77% 1.79% 1.80% 1.76% 1.98%
Ratio of net income to average net assets ............. 3.60% 3.69% 4.02% 4.13% 4.23%
Portfolio turnover rate ............................... 10.43% 21.26% 6.47% 8.04% 3.88%
Without management fee waiver:*
Ratio of expenses to average net assets ............... 2.03%
Ratio of net income to average net assets ............. 4.18%
</TABLE>
- ---------------
See footnotes on page 68.
64
<PAGE>
FINANCIAL HIGHLIGHTS
NEW YORK SERIES
<TABLE>
<CAPTION>
CLASS A CLASS C
--------------------------------------------------- ----------
YEAR ENDED SEPTEMBER 30, 5/27/99**
--------------------------------------------------- TO
1999 1998 1997 1996 1995 9/30/99
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD .................. $8.60 $8.28 $7.98 $7.86 $7.67 $8.14
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.38 0.40 0.41 0.42 0.42 0.11
Net realized and unrealized gain (loss)
on investments ...................................... (0.69) 0.40 0.32 0.12 0.36 (0.44)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.31) 0.80 0.73 0.54 0.78 (0.33)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.38) (0.40) (0.41) (0.42) (0.42) (0.11)
Distributions from net realized capital gain .......... (0.21) (0.08) (0.02) -- (0.17) --
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ................................... (0.59) (0.48) (0.43) (0.42) (0.59) (0.11)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ........................ $7.70 $8.60 $8.28 $7.98 $7.86 $7.70
====== ====== ====== ====== ====== ======
TOTAL RETURN: ......................................... (3.86)% 10.02% 9.45% 6.97% 10.93% (4.22)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000s omitted) .............. $76,833 $84,822 $83,528 $82,719 $83,980 $189
Ratio of expenses to average net assets ............... 0.81% 0.81% 0.82% 0.77% 0.88% 1.69%+
Ratio of net income to average net assets ............. 4.63% 4.74% 5.09% 5.24% 5.52% 3.96%+
Portfolio turnover rate ............................... 11.85% 39.85% 23.83% 25.88% 34.05% 11.85%++
</TABLE>
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR .................... $8.60 $8.29 $7.98 $7.87 $7.67
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.30 0.32 0.34 0.34 0.34
Net realized and unrealized gain (loss)
on investments ...................................... (0.69) 0.39 0.33 0.11 0.37
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.39) 0.71 0.67 0.45 0.71
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.30) (0.32) (0.34) (0.34) (0.34)
Distributions from net realized capital gain .......... (0.21) (0.08) (0.02) -- (0.17)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ................................... (0.51) (0.40) (0.36) (0.34) (0.51)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR .......................... $7.70 $8.60 $8.29 $7.98 $7.87
====== ====== ====== ====== ======
TOTAL RETURN: ......................................... (4.73)% 8.88% 8.60% 5.86% 9.87%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year (000s omitted) ................ $2,844 $2,182 $1,572 $1,152 $885
Ratio of expenses to average net assets ............... 1.71% 1.72% 1.73% 1.68% 1.96%
Ratio of net income to average net assets ............. 3.73% 3.83% 4.18% 4.33% 4.42%
Portfolio turnover rate ............................... 11.85% 39.85% 23.83% 25.88% 34.05%
</TABLE>
- -----------------
See footnotes on page 68.
65
<PAGE>
FINANCIAL HIGHLIGHTS
OHIO SERIES
<TABLE>
<CAPTION>
CLASS A CLASS C
--------------------------------------------------- ----------
YEAR ENDED SEPTEMBER 30, 5/27/99**
--------------------------------------------------- TO
1999 1998 1997 1996 1995 9/30/99
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD .................. $8.37 $8.19 $8.09 $8.11 $7.90 $8.06
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.38 0.40 0.42 0.43 0.44 0.11
Net realized and unrealized gain (loss)
on investments ...................................... (0.60) 0.29 0.17 0.02 0.28 (0.38)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.22) 0.69 0.59 0.45 0.72 (0.27)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.38) (0.40) (0.42) (0.43) (0.44) (0.11)
Distributions from net realized capital gain .......... (0.13) (0.11) (0.07) (0.04) (0.07) --
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ................................... (0.51) (0.51) (0.49) (0.47) (0.51) (0.11)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ........................ $7.64 $8.37 $8.19 $8.09 $8.11 $7.68
====== ====== ====== ====== ====== ======
TOTAL RETURN: ......................................... (2.68)% 8.77% 7.54% 5.68% 9.59% (3.51)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000s omitted) .............. $135,034 $153,126 $154,419 $162,243 $170,191 $18
Ratio of expenses to average net assets ............... 0.81% 0.78% 0.81% 0.77% 0.84% 1.71%+
Ratio of net income to average net assets ............. 4.78% 4.92% 5.19% 5.32% 5.56% 3.99%+
Portfolio turnover rate ............................... 6.07% 24.74% 11.76% 12.90% 2.96% 6.07%++
</TABLE>
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR .................... $8.41 $8.23 $8.13 $8.15 $7.92
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.31 0.33 0.35 0.36 0.36
Net realized and unrealized gain (loss)
on investments ...................................... (0.60) 0.29 0.17 0.02 0.30
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.29) 0.62 0.52 0.38 0.66
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.31) (0.33) (0.35) (0.36) (0.36)
Distributions from net realized capital gain .......... (0.13) (0.11) (0.07) (0.04) (0.07)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ................................... (0.44) (0.44) (0.42) (0.40) (0.43)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR .......................... $7.68 $8.41 $8.23 $8.13 $8.15
====== ====== ====== ====== ======
TOTAL RETURN: ......................................... (3.52)% 7.78% 6.57% 4.74% 8.67%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year (000s omitted) ................ $1,327 $1,103 $1,160 $1,011 $660
Ratio of expenses to average net assets ............... 1.71% 1.69% 1.71% 1.67% 1.93%
Ratio of net income to average net assets ............. 3.88% 4.01% 4.29% 4.42% 4.48%
Portfolio turnover rate ............................... 6.07% 24.74% 11.76% 12.90% 2.96%
</TABLE>
- -----------------
See footnotes on page 68.
66
<PAGE>
FINANCIAL HIGHLIGHTS
OREGON SERIES
<TABLE>
<CAPTION>
CLASS A CLASS C
--------------------------------------------------- ----------
YEAR ENDED SEPTEMBER 30, 5/27/99**
--------------------------------------------------- TO
1999 1998 1997 1996 1995 9/30/99
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD .................. $8.05 $7.87 $7.65 $7.66 $7.43 $7.83
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.35 0.36 0.38 0.40 0.40 0.10
Net realized and unrealized gain (loss)
on investments ...................................... (0.52) 0.28 0.26 -- 0.25 (0.35)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.17) 0.64 0.64 0.40 0.65 (0.25)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.35) (0.36) (0.38) (0.40) (0.40) (0.10)
Distributions from net realized capital gain .......... (0.05) (0.10) (0.04) (0.01) (0.02) --
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ................................... (0.40) (0.46) (0.42) (0.41) (0.42) (0.10)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ........................ $7.48 $8.05 $7.87 $7.65 $7.66 $7.48
====== ====== ====== ====== ====== ======
TOTAL RETURN: ......................................... (2.16)% 8.48% 8.60% 5.27% 9.05% (3.32)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000s omitted) .............. $54,473 $57,601 $55,239 $57,345 $59,549 $ --
Ratio of expenses to average net assets ............... 0.86% 0.88% 0.90% 0.86% 0.86% 1.73%+
Ratio of net income to average net assets ............. 4.52% 4.60% 4.88% 5.18% 5.40% 3.77%+
Portfolio turnover rate ............................... 12.28% 12.62% 19.46% 28.65% 2.47% 12.28%++
Without management fee waiver:*
Ratio of expenses to average net assets ............... 0.91%
Ratio of net income to average net assets ............. 5.35%
</TABLE>
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR .................... $8.04 $7.87 $7.64 $7.65 $7.43
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.28 0.29 0.31 0.33 0.33
Net realized and unrealized gain (loss)
on investments ...................................... (0.51) 0.27 0.27 .-- 0.24
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.23) 0.56 0.58 0.33 0.57
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.28) (0.29) (0.31) (0.33) (0.33)
Distributions from net realized capital gain .......... (0.05) (0.10) (0.04) (0.01) (0.02)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ................................... (0.33) (0.39) (0.35) (0.34) (0.35)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR .......................... $7.48 $8.04 $7.87 $7.64 $7.65
====== ====== ====== ====== ======
TOTAL RETURN: ......................................... (2.92)% 7.37% 7.77% 4.33% 7.86%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year (000s omitted) ................ $2,231 $2,650 $1,678 $1,540 $1,495
Ratio of expenses to average net assets ............... 1.76% 1.79% 1.80% 1.76% 1.83%
Ratio of net income to average net assets ............. 3.62% 3.69% 3.98% 4.28% 4.41%
Portfolio turnover rate ............................... 12.28% 12.62% 19.46% 28.65% 2.47%
Without management fee waiver:*
Ratio of expenses to average net assets ............... 1.88%
Ratio of net income to average net assets ............. 4.36%
</TABLE>
- -----------------
See footnotes on page 68.
67
<PAGE>
FINANCIAL HIGHLIGHTS
SOUTH CAROLINA SERIES
<TABLE>
<CAPTION>
CLASS A CLASS C
--------------------------------------------------- ----------
YEAR ENDED SEPTEMBER 30, 5/27/99**
--------------------------------------------------- TO
1999 1998 1997 1996 1995 9/30/99
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF PERIOD .................. $8.38 $8.16 $8.07 $7.97 $7.61 $8.08
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.38 0.39 0.40 0.41 0.41 0.11
Net realized and unrealized gain (loss)
on investments ...................................... (0.64) 0.29 0.22 0.12 0.37 (0.42)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.26) 0.68 0.62 0.53 0.78 (0.31)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.38) (0.39) (0.40) (0.41) (0.41) (0.11)
Distributions from net realized capital gain .......... (0.07) (0.07) (0.13) (0.02) (0.01) --
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ................................... (0.45) (0.46) (0.53) (0.43) (0.42) (0.11)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ........................ $7.67 $8.38 $8.16 $8.07 $7.97 $7.66
====== ====== ====== ====== ====== ======
TOTAL RETURN: ......................................... (3.32)% 8.66% 7.99% 6.82% 10.69% (4.01)%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000s omitted) .............. $92,793 $106,328 $101,018 $108,163 $112,421 $335
Ratio of expenses to average net assets ............... 0.83% 0.80% 0.84% 0.80% 0.88% 1.72%+
Ratio of net income to average net assets ............. 4.65% 4.74% 5.04% 5.15% 5.38% 3.96%+
Portfolio turnover rate ............................... 18.06% 16.63% -- 20.66% 4.13% 18.06%++
</TABLE>
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
NET ASSET VALUE, BEGINNING OF YEAR .................... $8.38 $8.16 $8.06 $7.97 $7.61
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ................................. 0.30 0.31 0.33 0.34 0.34
Net realized and unrealized gain (loss)
on investments ...................................... (0.65) 0.29 0.23 0.11 0.37
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ...................... (0.35) 0.60 0.56 0.45 0.71
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income .................. (0.30) (0.31) (0.33) (0.34) (0.34)
Distributions from net realized capital gain .......... (0.07) (0.07) (0.13) (0.02) (0.01)
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ................................... (0.37) (0.38) (0.46) (0.36) (0.35)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR .......................... $7.66 $8.38 $8.16 $8.06 $7.97
====== ====== ====== ====== ======
TOTAL RETURN: ......................................... (4.32)% 7.68% 7.15% 5.73% 9.63%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of year (000s omitted) ................ $5,936 $5,594 $3,663 $2,714 $1,704
Ratio of expenses to average net assets ............... 1.73% 1.71% 1.75% 1.70% 1.85%
Ratio of net income to average net assets ............. 3.75% 3.83% 4.13% 4.25% 4.40%
Portfolio turnover rate ............................... 18.06% 16.63% -- 20.66% 4.13%
</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 C shares.
+ Annualized.
++ For the year ended September 30, 1999.
See Notes to Financial Statements.
68
<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 Seligman Municipal Fund Series, Inc.
(comprising, respectively, the National, Colorado, Georgia, Louisiana, Maryland,
Massachusetts, Michigan, Minnesota, Missouri, New York, Ohio, Oregon, and South
Carolina Series) as of September 30, 1999, the related statements of operations
for the year then ended and of changes in net assets for each of the years in
the two-year period then ended, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1999 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 referred to
above present fairly, in all material respects, the financial position of each
of the respective Series constituting the Seligman Municipal Fund Series, Inc.
as of September 30, 1999, the results of their operations, the changes in their
net assets, and their financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
New York, New York
November 5, 1999
- --------------------------------------------------------------------------------
69
<PAGE>
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
JOHN R. GALVIN 2, 4
DEAN, Fletcher School of Law and Diplomacy
at Tufts University
DIRECTOR, Raytheon Company
ALICE S. ILCHMAN 3, 4
TRUSTEE, Committee for Economic Development
CHAIRMAN, The Rockefeller Foundation
FRANK A. MCPHERSON 2, 4
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
DIRECTOR, Conoco Inc.
JOHN E. MEROW 2, 4
RETIRED CHAIRMAN AND SENIOR PARTNER,
Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Industries, Inc.
DIRECTOR, New York Presbyterian Hospital
BETSY S. MICHEL 2, 4
TRUSTEE, The Geraldine R. Dodge Foundation
WILLIAM C. MORRIS 1
CHAIRMAN
CHAIRMAN OF THE BOARD,
J. & W. Seligman & Co. Incorporated
CHAIRMAN, Carbo Ceramics Inc.
DIRECTOR, Kerr-McGee Corporation
JAMES C. PITNEY 3, 4
RETIRED PARTNER, Pitney, Hardin, Kipp & Szuch, Law Firm
JAMES Q. RIORDAN 3, 4
DIRECTOR, KeySpan Energy Corporation
TRUSTEE, Committee for Economic Development
DIRECTOR, Public Broadcasting Service
RICHARD R. SCHMALTZ 1
MANAGING DIRECTOR, DIRECTOR OF INVESTMENTS,
J. & W. Seligman & Co. Incorporated
TRUSTEE EMERITUS, Colby College
ROBERT L. SHAFER 3, 4
RETIRED VICE PRESIDENT, Pfizer Inc.
JAMES N. WHITSON 2, 4
DIRECTOR AND CONSULTANT, Sammons Enterprises, Inc.
DIRECTOR, C-SPAN
DIRECTOR, CommScope, Inc.
BRIAN T. ZINO 1
PRESIDENT
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.
DIRECTOR, ICI Mutual Insurance Company
MEMBER OF THE BOARD OF GOVERNORS,
Investment Company Institute
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
- --------------------------------------------------------------------------------
70
<PAGE>
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
WILLIAM C. MORRIS
CHAIRMAN
BRIAN T. ZINO
PRESIDENT
THOMAS G. MOLES
VICE PRESIDENT
LAWRENCE P. VOGEL
VICE PRESIDENT
THOMAS G. ROSE
TREASURER
FRANK J. NASTA
SECRETARY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
MANAGER
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
GENERAL COUNSEL
Sullivan & Cromwell
INDEPENDENT AUDITORS
Deloitte & Touche LLP
GENERAL DISTRIBUTOR
Seligman Advisors, Inc.
100 Park Avenue
New York, NY 10017
SHAREHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
IMPORTANT TELEPHONE NUMBERS
(800) 221-2450 Shareholder Services
(212) 682-7600 Outside the United States
(800) 622-4597 24-Hour Automated Telephone Access Service
- --------------------------------------------------------------------------------
71
<PAGE>
GLOSSARY OF FINANCIAL TERMS
CAPITAL GAIN DISTRIBUTION -- A payment to mutual fund shareholders of profits
realized on the sale of securities in a fund's portfolio.
CAPITAL APPRECIATION/DEPRECIATION -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.
COMPOUNDING -- The change in the value of an investment as shareholders receive
earnings on their investment's earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will not be based on the
original $1,000, but on the $1,070, which includes the first year's earnings.
CONTINGENT DEFERRED SALES CHARGE (CDSC) -- Depending on the class of shares
owned, a fee charged by a mutual fund when shares are sold back to the fund. The
CDSC expires after a fixed time period.
DIVIDEND -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
DIVIDEND YIELD -- A measurement of a fund's dividend as a percentage of the
maximum offering price or net asset value.
EXPENSE RATIO -- The cost of doing business for a mutual fund, expressed as a
percent of the fund's net assets.
INVESTMENT OBJECTIVE -- The shared investment goal of a fund and its
shareholders.
MANAGEMENT FEE -- The amount paid by a mutual fund to its investment advisor(s).
MULTIPLE CLASSES OF SHARES -- Although an individual mutual fund invests in only
one portfolio of securities, it may offer investors several purchase options
which are "classes" of shares. Multiple classes permit shareholders to choose
the fee structure that best meets their needs and goals. Generally, each class
will differ in terms of how and when sales charges and certain fees are
assessed.
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (NASD) -- A self-regulatory
body with authority over firms that distribute mutual funds.
NET ASSET VALUE (NAV) PER SHARE -- The market worth of one fund share, obtained
by adding a mutual fund's total assets (securities, cash, and any accrued
earnings), subtracting liabilities, and dividing the resulting net assets by the
number of shares outstanding.
OFFERING PRICE -- The price at which a mutual fund's share can be purchased. The
offering price per share is the current net asset value plus any sales charge.
PORTFOLIO TURNOVER -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
PROSPECTUS -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission (SEC), such as a fund's investment objective and policies, services,
investment restrictions, how shares are bought and sold, fund fees and other
charges, and the fund's financial highlights.
SEC YIELD -- SEC Yield refers to the net income earned by a fund during a recent
30-day period. This income is annualized and then divided by the maximum
offering price per share on the last day of the 30-day period. The SEC Yield
formula reflects semiannual compounding.
SECURITIES AND EXCHANGE COMMISSION -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
STATEMENT OF ADDITIONAL INFORMATION -- A document that contains more detailed
information about an investment company and that supplements the prospectus. It
is available at no charge upon request.
TOTAL RETURN -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The AVERAGE ANNUAL TOTAL
RETURN represents the average annual compounded rate of return for the periods
presented.
YIELD ON SECURITIES -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.
- --------------------
Adapted from the Investment Company Institute's 1999 MUTUAL FUND FACT BOOK.
72
<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 1864
100 PARK AVENUE, NEW YORK, NY 10017
TEA2 9/99 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) Articles Supplementary dated May 24, 1999. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 35 filed on
May 28, 1999.)
(a)(1) 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) Addendum to Sales/Bank Agreement. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 57 to the Registration
Statement of Seligman Capital Fund, Inc. (File No. 811-1886) filed
on May 28, 1999.)
(e)(1) Form of Bank Agreement between Seligman Advisors, Inc. and Banks.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 57 to the Registration Statement of Seligman Capital Fund, Inc.
(File No. 811-1886) filed on May 28, 1999.)
(e)(2) Distributing Agreement between Registrant and Seligman Advisors,
Inc. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 30 filed on January 29, 1997.)
(e)(3) Sales Agreement between Dealers and Seligman Advisors, 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. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 34 filed on January 29, 1999.)
(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 in respect of Class C shares.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 35 filed on May 28, 1999.)
(i)(1) 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.
C-1
<PAGE>
PART C. OTHER INFORMATION (continued)
(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.
(j)(10) *Consent of Ohio Counsel.
(j)(11) *Opinion and Consent of Oregon Counsel.
(j)(12) *Consent of South Carolina Counsel.
(k) Not applicable.
(l) Form of Purchase Agreement for Initial Capital for Class C shares.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 35 filed on May 28, 1999.)
(l)(1) 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
of Registrant. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 35 filed on May 28, 1999.)
(m)(1) Amended Administration, Shareholder Services and Distribution
Agreement between Seligman Advisors, Inc. and Dealers. (Incorporated
by reference to Post-Effective Amendment No. 57 to the Registration
Statement of Seligman Capital Fund, Inc. (File No. 811-1886) filed
on May 28, 1999.)
(n) Rule 18f-3 Plan. Plan of Multiple Classes of Shares (three Classes)
pursuant to Rule 18f-3 Plan under the Investment Company Act of
1940. (Incorporated by reference to Registrant's Post Effective
Amendment No. 35 filed on May 8, 1999.)
(p) *Code of Ethics.
(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.
C-2
<PAGE>
PART C. OTHER INFORMATION (continued)
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended 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 (Seligman), is
the Registrant's investment manager. Seligman also serves as
investment manager to nineteen 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 Global Fund Series, Inc., Seligman High Income
Fund Series, Seligman Income Fund, Inc., Seligman Municipal Series
Trust, Seligman New Jersey Municipal Fund, Inc., Seligman New
Technologies Fund, Inc., Seligman Pennsylvania Municipal Fund Series,
Seligman Portfolios, Inc., Seligman Quality Municipal Fund, Inc.,
Seligman Select Municipal Fund, Inc., Seligman Time Horizon/Harvester
Series, Inc., Seligman Value Fund Series, Inc. and Tri-Continental
Corporation.
Seligman has an investment advisory service division which provides
investment management or advice to private clients. The list required
by this Item 26 of officers and directors of Seligman, together with
information as to any other business, profession, vocation or
employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to
Schedules A and D of Form ADV, filed by Seligman pursuant to the
Investment Advisers Act of 1940, as amended (SEC File No. 801-15798)
on March 31, 1999.
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 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 Time Horizon/Harvester Series, Inc.
Seligman Value Fund Series, Inc.
C-3
<PAGE>
PART C. OTHER INFORMATION (continued)
(b) Name of each director, officer or partner of Registrant's
principal underwriter named in response to Item 20.
Seligman Advisors, Inc.
As of December 31,1999
<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, Division None
14000 Margaux Lane Sales Director
Town & Country, MO 63017
Gerald I. Cetrulo, III Senior Vice President, Sales None
140 West Parkway
Pompton Plains, NJ 07444
Matthew A. Digan* Senior Vice President, Domestic None
Funds
Jonathan G. Evans Senior Vice President, Sales None
222 Fairmont Way
Ft. Lauderdale, FL 33326
T. Wayne Knowles Senior Vice President, Division None
104 Morninghills Court Sales Director
Cary, NC 27511
Joseph Lam Senior Vice President, Regional None
Seligman International Inc. Director, Asia
Suite 1133, Central Building
One Pedder Street
Central Hong Kong
Bradley W. Larson Senior Vice President, Sales None
367 Bryan Drive
Alamo, CA 94526
Michelle L. McCann-Rappa* Senior Vice President, Retirement None
Plans
Scott H. Novak* Senior Vice President, Insurance None
Jeff Rold Senior Vice President, Product None
181 East 73rd Street, Apt 20B Business Management
New York, New York 10021
</TABLE>
C-4
<PAGE>
PART C. OTHER INFORMATION (continued)
Seligman Advisors, Inc.
As of December 31, 1999
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
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 Drive
Rumson, NJ 07760
Charles L. von Breitenbach, II* Senior Vice President, Managed None
Money
J. Brereton Young* Senior Vice President, Director None
of Sales Development
Jeffrey S. Dean* Vice President, Business Analysis None
Mason S. Flinn Vice President, Regional Retirement None
2130 Fillmore Street Plans Manager
BMB 280
San Francisco, CA 94115-2224
Marsha E. Jacoby* Vice President, Offshore Business None
Manager
Jody Knapp Vice President, Regional Retirement None
17011 East Monterey Drive Plans Manager
Fountain Hills, AZ 85268
David W. Mountford Vice President, Regional Retirement None
7131 NW 46th Street Plans Manager
Lauderhill, FL 33319
Ronald W. Pond* Vice President, Portfolio Advisor None
Jeffery C. Pleet* Vice President, Regional Retirement None
Plans Manager
Tracy A. Salomon* Vice President, Retirement Marketing None
Helen Simon* Vice President, Sales Administration None
Gary A. Terpening* Vice President, Director of Business None
Development
Charles E. Wenzel Vice President, Regional Retirement None
117 Carpetners Row Plans Manager
Mount Chanin, DE 19710
Daniel Chambers Regional Vice President None
4618 Lorraine Avenue
Dallas, TX 75209
</TABLE>
C-5
<PAGE>
PART C. OTHER INFORMATION (continued)
Seligman Advisors, Inc.
As of December 31, 1999
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Richard B. Callaghan Regional Vice President None
7821 Dakota Lane
Orland Park, IL 60462
Kevin Casey Regional Vice President None
19 Bayview Avenue
Babylon, NY 11702
Bradford C. Davis Regional Vice President None
241 110th Avenue SE
Bellevue, WA 98004
Cathy Des Jardins Regional Vice President None
PMB 152
1705 14th Street
Boulder, CO 80302
Kenneth Dougherty Regional Vice President None
8640 Finlarig Drive
Dublin, OH 43017
Kelli A. Wirth Dumser Regional Vice President None
7121 Jardiniere Court
Charlotte, NC 28226
Edward S. Finocchiaro Regional Vice President None
120 Screenhouse Lane
Duxbury, MA 02332
Michael C. Forgea Regional Vice President None
32 W. Anapamu Street # 186
Santa Barbara, CA 93101
Carla A. Goehring Regional Vice President None
11426 Long Pine
Houston, TX 77077
Michael K. Lewallen Regional Vice President None
908 Tulip Poplar Lane
Birmingham, AL 35244
Judith L. Lyon Regional Vice President None
7105 Harbour Landing
Alpharetta, GA 30005
Leslie A. Mudd Regional Vice President None
5243 East Calle Redonda
Phoenix, AZ 85018
Tim O'Connell Regional Vice President None
11908 Acacia Glen Court
San Diego, CA 92128
George M. Palmer, Jr. Regional Vice President None
1805 Richardson Place
Tampa, FL 33606
Thomas Parnell Regional Vice President None
1575 Edgecomb Road
St. Paul, MN 55116
</TABLE>
C-6
<PAGE>
PART C. OTHER INFORMATION (continued)
Seligman Advisors, Inc.
As of December 31, 1999
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Craig Prichard Regional Vice President None
9207 Cross Oaks Court
Fairfax Station, VA 22039
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
James Taylor Regional Vice President None
290 Bellington Lane
Creve Coeur, MO 63141
Steve Wilson Regional Vice President None
83 Kaydeross Park Road
Saratoga Springs, NY 12866
Frank J. Nasta* Secretary Secretary
Aurelia Lacsamana* Treasurer None
Gail S. Cushing* Assistant Vice President, National None
Accounts Manager
Sandra G. Floris* Assistant Vice President, Order Desk None
Keith Landry* Assistant Vice President, Order Desk None
Albert A. Pisano* Assistant Vice President and None
Compliance Officer
Joyce Peress* Assistant Secretary Assistant Secretary
</TABLE>
* The principal business address of each of these directors and/or officers is
100 Park Avenue, New York, NY 10017.
(c) Not Applicable.
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 10% of its outstanding shares, to call a
meeting of shareholders for the purpose of voting upon the removal of
a director or directors and to assist in communications with other
shareholders as required by Section 16(c) of the Investment Company
Act of 1940, as amended 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.
C-7
<PAGE>
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 No. 36 to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 36 to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the 27th day of
January, 2000.
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. 36 has been signed below by the following persons in the
capacities indicated on January 27, 2000.
Signature Title
/s/ William C. Morris Chairman of the Board (Principal
- ---------------------------------------- Executive Officer) and Director
William C. Morris
/s/Brian T. Zino President and Director
- ----------------------------------------
Brian T. Zino
/s/ Thomas G. Rose Treasurer (Principal Financial and
- ---------------------------------------- Accounting Officer)
Thomas G. Rose
John R. Galvin, Director )
Alice S. Ilchman, Director )
Frank A. McPherson, Director )
John E. Merow, Director ) /s/ Brian T. Zino
-----------------
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>
SELIGMAN MUNICIPAL FUND SERIES, INC.
Post-Effective Amendment No. 36 to the
Registration Statement on Form N-1A
EXHIBIT INDEX
Form N-1A Item No. Description
- ------------------ -----------
Item 23(j) Consent of Independent Auditors
Item 23(j)(1) Consent of Colorado Counsel
Item 23(j)(2) Consent of Georgia Counsel
Item 23(j)(3) Opinion and Consent of Louisiana Counsel
Item 23(j)(4) Consent of Maryland Counsel
Item 23(j)(5) Consent of Massachusetts Counsel
Item 23(j)(6) Consent of Michigan Counsel
Item 23(j)(7) Opinion and Consent of Minnesota Counsel
Item 23(j)(8) Consent of Missouri Counsel
Item 23(j)(9) Opinion and Consent of New York Counsel
Item 23(j)(10) Consent of Ohio Counsel
Item 23(j)(11) Opinion and Consent of Oregon Counsel
Item 23(j)(12) Consent of South Carolina Counsel
Item 23(p) Code of Ethics
CONSENT OF INDEPENDENT AUDITORS
Seligman Municipal Fund Series, Inc.:
We consent to the use in Post-Effective Amendment No. 36 to Registration
Statement No. 2-86008 of our report dated November 5, 1999, appearing in the
Annual Report to Shareholders for the year ended September 30, 1999,
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.
/s/ Deloitte & Touche LLP
New York, New York
January 24, 2000
IRELAND
STAPLETON
1675 Broadway, Suite 2600
Denver, Colorado 80202
December 27, 1999
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
With respect to Post-Effective Amendment No. 36 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.
Sincerely,
Ireland, Stapleton, Pryor & Pascoe, P.C.
By: /s/ William E. Tanis
--------------------
William E. Tanis
Vice President
WET:kcd
KING & SPALDING
191 Peachtree Street
Atlanta, Georgia 30303-1763
Telephone: 404/572-4600
Facsimile: 404/572-5100
EMAIL:
404/572-4656 [email protected] 404/572-5137
December 22, 1999
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, NY 10017
Ladies and Gentlemen:
With respect to the Post-Effective Amendment No. 36 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,
KING & SPALDING
By: /s/Robert L. Steed
--------------------
Robert L. Steed
LISKOW & LEWIS
Writer's Direct Dial No. (504) 556-4112
New Orleans, Louisiana
December 15, 1999
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
<PAGE>
December 15, 1999 LISKOW & LEWIS
Page 2
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 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.
<PAGE>
December 15, 1999 LISKOW & LEWIS
Page 3
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
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
<PAGE>
December 15, 1999 LISKOW & LEWIS
Page 4
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 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.
<PAGE>
December 15, 1999 LISKOW & LEWIS
Page 5
We hereby consent to the filing of this opinion as an exhibit to
Post-Effective Amendment No. 36 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,
LISKOW & LEWIS
By: /s/ Robert S. Angelico
----------------------------
Robert S. Angelico
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 14, 1999
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
With respect to Post-Effective Amendment No. 36 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
December 20, 1999
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
With respect to Post-Effective Amendment 36 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
500 WOODWARD AVENUE, SUITE 4000
DETROIT, MICHIGAN 48226-3425
TELEPHONE: (313) 223-3500
FACSIMILE: (313) 223-3598
http://www.dickinson-wright.com
THOMAS D. HAMMERSCHMIDT JR.
[email protected]
December 16, 1999 (313) 223-3536
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
With respect to Post-Effective Amendment No. 36 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
DETROIT 436952
Counsellors At Law
DETROIT BLOOMFIELD HILLS LANSING GRAND RAPIDS WASHINGTON, D.C.
FAEGRE & BENSON LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402-3901
December 22, 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 personal 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 its political or governmental subdivisions,
municipalities, governmental agencies or instrumentalities, so as to generate as
large a
<PAGE>
Seligman Municipal Fund Series, Inc.
December 22, 1999
Page 2
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.
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
<PAGE>
Seligman Municipal Fund Series, Inc.
December 22, 1999
Page 3
(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
generally 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 provides
that it 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 that 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.
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.
- --------
(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.
December 22, 1999
Page 4
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.
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.
<PAGE>
Seligman Municipal Fund Series, Inc.
December 22, 1999
Page 5
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement to be filed on or about the week of January 24, 2000,
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
M1:572169.01
BRYAN CAVE LLP
3500 ONE KANSAS CITY PLACE
1200 MAIN STREET
KANSAS CITY, MISSOURI 64105-2100
January ,2000
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, NY 10017
RE: Seligman Municipal Fund Series/Missouri Fund
Ladies and Gentlemen:
With respect to Post-Effective Amendment No. 36 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
Seligman Municipal Fund Series, Inc. -1-
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
January 21, 2000
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
<PAGE>
Seligman Municipal Fund Series, Inc. -2-
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 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
<PAGE>
Seligman Municipal Fund Series, Inc. -3-
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 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
<PAGE>
Seligman Municipal Fund Series, Inc. -4-
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 reference to us and 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.
Very truly yours,
/S/ SULLIVAN & CROMWELL
SULLVIAN & CROMWELL
Squire, Sanders & Dempsey
L.L.P.
Counsellors at Law
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
December 14, 1999
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, New York 10017
Re: Seligman Municipal Fund Series, Inc. - Post-Effective Amendment No. 36
Ladies and Gentlemen:
We have acted as Ohio tax counsel with respect to Post-Effective Amendment
No. 36 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.
Library: Cleveland; Document #: 82236v1
SCHWABE
WILLIAMSON
& WYATT
P.C.
ATTORNEYS AT LAW
PACWEST CENTER, SUITES 1600-1800
1211 SOUTHWEST FIFTH AVENUE O PORTLAND, OREGON 97204-3795
TELEPHONE: 503 222-9981 FAX: 503 796-2900 TELEX: 650-686-1360
ROY D. LAMBERT
Admitted in OregonDirect Line:
(503) 796-2923E-Mail:
E-mail: [email protected] December 2, 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.
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
Portland BEND Seattle Vancouver Washington
Oregon Oregon Washington Washington District of Columbia
503 222-9981 541 330-0904 206 622-1711 360 694-7551 202 661-7060
<PAGE>
Seligman Municipal Fund Series, Inc.
December 2, 1999
Page 2
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.
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. 36 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,
/s/SCHWABE WILLIAMSON & WYATT
SCHWABE WILLIAMSON & WYATT
RDL:flw
-------------------------------------------------
SINKLER & BOYD, P.A.
-------------------------------------------------
ATTORNEYS AT LAW
THE PALMETTO CENTER
1426 MAIN STREET, SUITE 1200
COLUMBIA, SOUTH CAROLINA 29201-2834
TELEPHONE (803) 779-3080
FAX (803) 765-1243
www.sinklerboyd.com
CHARLESTON OFFICE: GREENVILLE OFFICE:
160 EAST BAY STREET 15 SOUTH MAIN STREET, SUITE 500
POST OFFICE BOX 340 POST OFFICE BOX 275
CHARLESTON, SOUTH CAROLINA 29402-0340 GREENVILLE, SOUTH CAROLINA 29602-0275
TELEPHONE (843) 722-3366 TELEPHONE (864) 467-1100
FAX (843) 722-2266 FAX (864) 467-1521
REPLY TO:
COLUMBIA OFFICE
POST OFFICE BOX 11889
COLUMBIA, SC 29211-1889
January 19, 2000
Seligman Municipal Fund Series, Inc.
100 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
With respect to Post-Effective Amendment No. 36 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. 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 "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.
-----------------------
Sinkler & Boyd, P.A.
CODE OF ETHICS
J. & W. Seligman & Co. Incorporated
Seligman Advisors, Inc.
Seligman Services, Inc.
Seligman Data Corp.
Seligman International, Inc.
Seligman International UK Limited
The Seligman Group of Investment Companies
I. Introduction
A primary duty of all directors, officers and employees (collectively
"Employees") of J. & W. Seligman & Co. Incorporated, its subsidiaries and
affiliates (collectively, "Seligman") is to be faithful to the interest of the
various Seligman advisory clients, including the registered and unregistered
companies advised by Seligman (collectively, "Clients"). Directors of the
Seligman Registered Investment Companies also have a duty to the Seligman
Registered Investment Companies and their shareholders. Persons who are
Disinterested Directors are "Employees" for purposes of this Code of Ethics.
Through the years, Seligman and its predecessor organizations have had a
reputation of maintaining the highest business and ethical standards and have
been favored with the confidence of investors and the financial community. Such
a reputation and confidence are not easily gained and are among the most
precious assets of Seligman. In large measure, they depend on the devotion and
integrity with which each Employee discharges his or her responsibilities. Their
preservation and development must be a main concern of each Employee, and each
Employee has a primary obligation to avoid any action or activity that could
produce conflict between the interest of the Clients and that Employee's
self-interest.
The purpose of this Code of Ethics ("Code") is to set forth the policies of
Seligman in the matter of conflicts of interest and to provide a formal record
for each Employee's reference and guidance. This Code is also designed to
prevent any act, practice or course of business prohibited by the rules and
regulations governing our industry.
Each Employee owes a fiduciary duty to each Client. Therefore, all Employees
must avoid activities, interests and relationships that might appear to
interfere with making decisions in the best interest of the Clients.
As an Employee, you must at all times:
1. Avoid serving your own personal interests ahead of the interests of
Clients. You may not cause a Client to take action, or not to take action,
for your personal benefit rather than the Client's benefit.
2. Avoid taking inappropriate advantage of your position. The receipt of
investment opportunities, perquisites or gifts from persons seeking
business with Clients or with Seligman could call into question the
exercise of your better judgment. Therefore, you must not give or receive
benefits that would compromise your ability to act in the best interest of
the Clients.
3. Conduct all personal Securities Transactions in full compliance with the
Code, including the pre-authorization and reporting requirements, and
comply fully with the Seligman Insider Trading Policies and Procedures (See
Appendix A).
While Seligman encourages you and your families to develop personal investment
programs, you must not take any action that could cause even the appearance that
an unfair or improper action has been taken. Accordingly, you must follow the
policies set forth below with respect to trading in your Account(s). This Code
places reliance on the good sense and judgment of you as an Employee; however,
if you are unclear as to the Code's meaning, you should seek the advice of the
Law and Regulation Department and assume the Code will be interpreted in the
most restrictive manner. Questionable situations should be resolved in favor of
Clients.
<PAGE>
Technical compliance with the Code's procedures will not insulate from scrutiny
any trades that indicate a violation of your fiduciary duties.
Application of the Code to Disinterested Directors
Disinterested Directors are only subject to the reporting requirements in
Section III.5(b) of the Code. Disinterested Directors are not subject to other
provisions of the Code but are subject to the requirements of the federal
securities laws and other applicable laws, such as the prohibition on trading in
securities of an issuer while in possession of material non-public information.
II. Definitions
(a) "Accounts" means all Employee Accounts and Employee Related Accounts.
(b) "Beneficial Interest" is broadly interpreted. The SEC has said that
the final determination of Beneficial Interest is a question to be
determined in the light of the facts of each particular case. The
terms Employee Account and Employee Related Account, as defined below,
generally define Beneficial Interest. However, the meaning of
"Beneficial Interest" may be broader than that described below. If
there are any questions as to Beneficial Interest, please contact the
Director of Compliance, General Counsel or Associate General Counsel.
(i) "Employee Account" means the following securities Accounts: (i)
any of your personal account(s); (ii) any joint or
tenant-in-common account in which you have an interest or are a
participant; (iii) any account for which you act as trustee,
executor, or custodian; (iv) any account over which you have
investment discretion or otherwise can exercise control,
including the accounts of entities controlled directly or
indirectly by you; (v) any account in which you have a direct or
indirect interest through a contract, arrangement or otherwise
(e.g., economic, voting power, power to buy or sell, or
otherwise); (vi) any account held by pledges, or for a
partnership in which you are a member, or by a corporation which
you should regard as a personal holding company; (vii) any
account held in the name of another person in which you do not
have benefits of ownership, but which you can vest or revest
title in yourself at once or some future time; (viii) any account
of which you have benefit of ownership; and (ix) accounts
registered by custodians, brokers, executors or other fiduciaries
for your benefit.
(ii) "Employee Related Account" means any Account of (i) your spouse
and minor children and (ii) any account of relatives or any other
persons to whose support you materially contribute, directly or
indirectly.
(c) "Disinterested Director" means a director or trustee of a Seligman
Registered Investment Company who is not an "interested person" of
such investment company within the meaning of Section 2(a)(19) of the
Investment Company Act of 1940.
(d) "Equivalent Security" includes, among other things, an option to
purchase or sell a Security or an instrument convertible or
exchangeable into a Security.
(e) "Investment Team" means one or more Investment Teams formed by the
Manager in various investment disciplines to review and approve
Securities for purchase and sale by Client Accounts. This includes a
team's leader, portfolio managers, research analysts, traders and
their direct supervisors.
(f) "Security" includes, among other things, stocks, notes, bonds,
debentures, and other evidences of indebtedness (including loan
participation and assignments), limited partnership interests,
investment contracts, and all derivative instruments (e.g., options
and warrants).
<PAGE>
(g) "Securities Transaction" means a purchase or sale of a Security.
(h) "Seligman Registered Investment Company" means an investment company
registered under the Investment Company Act of 1940 for which Seligman
serves as investment manager or adviser.
III. Personal Securities Transactions
1. Prohibited Transactions
These apply to all of your Accounts.
(a) Seven-Day Blackout: If you are a member of an Investment Team,
Securities Transactions are prohibited within seven calendar days
either before or after the purchase or sale of the relevant security
(or an Equivalent Security) by a Client whose Account is managed by
your Investment Team.
(b) Intention to Buy or Sell for Clients: Securities Transactions are
prohibited at a time when you intend, or know of another's intention,
to purchase or sell that Security (or an Equivalent Security) on
behalf of a Client.
(c) Sixty-Day Holding Period: Profits on Securities Transactions made
within a sixty-day period are prohibited and must be disgorged. This
is a prohibition of short term trading. Specifically,
o Purchase of a Security within 60 days of your sale of the
Security (or an Equivalent Security), at a price that is less
than the price in the previous sale is prohibited.
o Sale of a Security within the 60 day period of your purchase of
the Security (or an Equivalent Security), at a price that is
greater than the price in the previous purchase is prohibited.
Examples are as follows:
1. Employee purchases 100 shares of XYZ ($10 a share) on January 1.
Employee sells 100 shares of XYZ ($15 a share) on February 15.
Employee must disgorge $500.
2. Employee purchases 100 shares of XYZ ($10 a share) on January 1.
Employee purchases 50 shares of XYZ ($12 a share) on January 30.
Employee sells 50 shares of XYZ ($15 a share) on March 15.
Employee must disgorge $150. (The March 15 sale may not be
matched to the January 1 purchase).
3. Employee purchases 100 shares of XYZ ($10 a share) on January 1.
Employee sells 100 shares of XYZ ($10 a share) on February 1.
Employee purchases 100 shares of XYZ ($9 a share) on March 1
Employee must disgorge $100. (The February 1 sale is permissible
because no profit was made. However, the March 1 purchase is
matched against the February 1 sale resulting in a $100 profit).
(d) Restricted Transactions: Transactions in a Security are prohibited (i)
on the day of a purchase or sale of the Security by a Client, or (ii)
anytime a Client's order in the Security is open on the trading desk.
Other Securities may be restricted from time to time as deemed
appropriate by the Law and Regulation Department.
<PAGE>
(e) Short Sales: If you are a member of an Investment Team, you may not
engage in any short sale of a Security if, at the time of the
transaction, any Client managed by your Team has a long position in
that same Security. However, this prohibition does not prevent you
from engaging short sales against the box and covered call writing, as
long as these personal trades are in accordance with the sixty-day
holding period described above.
(f) Public Offerings: Acquisitions of Securities in initial and secondary
public offerings are prohibited, unless granted an exemption by the
Director of Compliance. An exemption for an initial public offering
will only be granted in certain limited circumstances, for example,
the demutualization of a savings bank.
(g) Private Placements: Acquisition of Securities in a private placement
is prohibited absent prior written approval by the Director of
Compliance.
(h) Market Manipulation: Transactions intended to raise, lower, or
maintain the price of any Security or to create a false appearance of
active trading are prohibited.
(i) Inside Information: You may not trade, either personally or on behalf
of others, on material, non-public information or communicate
material, non-public information to another in violation of the law.
This policy extends to activities within and outside your duties at
Seligman. (See Appendix A).
2. Maintenance of Accounts
All Accounts that have the ability to engage in Securities Transactions
must be maintained at Ernst & Company (Investec) and/or the specific
Merrill Lynch branch office located at 712 Fifth Avenue, New York, NY. You
are required to notify the Director of Compliance of any change to your
account status. This includes opening a new Account, converting,
transferring or closing an existing account or acquiring Beneficial
Interest in an Account through marriage or otherwise. You must place all
orders for Securities Transactions in these Account(s) with the Equity
Trading Desk or the appropriate Fixed Income Team as set forth in Section
III.3 ("Trade Pre-authorization Requirements").
The Director of Compliance may grant exceptions to the foregoing
requirements on a case by case basis. All requests for exceptions must be
applied for in writing and submitted for approval to the Director of
Compliance and will be subject to certain conditions.
3. Trade Pre-authorization Requirements
All Securities Transactions in an Employee Account or Employee Related
Account must be pre-authorized, except for Securities Transactions set
forth in Section III.4 ("Exempt Transactions").
(a) Trade Authorization Request Form: Prior to entering an order for a
Securities Transaction in an Employee Account or Employee Related
Account, which is subject to pre-authorization, you must complete a
Trade Authorization Request Form (set forth in Appendix B) and submit
the completed Form (faxed or hand delivered) to the Director of
Compliance (or designee).
(b) Review of the Form and Trade Execution: After receiving the completed
Trade Authorization Request Form, the Director of Compliance (or
designee) will review the information and, as soon as practical,
determine whether to authorize the proposed Securities Transaction.
The authorization, date and time of the authorization must be
reflected on the Form. Once approved the order may then be executed by
Equity Trading Desk or the appropriate Fixed Income Team, except for
accounts for which an exemption was granted under Section III.2.
<PAGE>
(c) Length of Trade Authorization Approval: Any authorization, if granted,
is effective until the earliest of (i) its revocation, (ii) the close
of business on the day from which authorization was granted or (iii)
your discovery that the information in the Trade Authorization Request
Form is no longer accurate. If the Securities Transaction was not
placed or executed within that period, a new pre-authorization must be
obtained. A new pre-authorization need not be obtained for orders
which cannot be filled in one day due to an illiquid market, so long
as such order was placed for execution on the day the original
pre-authorization was given.
No order for a Securities Transaction may be placed prior to the Director
of Compliance (or designee) receiving the completed Trade Pre-authorization
Form and approving the transaction. In some cases, trades may be rejected
for a reason that is confidential.
4. Exempt Transactions
The prohibitions of this Code shall not apply to the following Securities
Transactions in your Account(s):
(a) Purchases or sales of Securities which are non-volitional (i.e., not
involving any investment decision or recommendation).
(b) Purchases of Securities through certain corporate actions (such as
stock dividends, dividend reinvestments, stock splits, mergers,
consolidations, spin-offs, or other similar corporate reorganizations
or distributions generally applicable to all holders of the same class
of Securities).
(c) Purchases of Securities effected upon the exercise of rights issued by
an issuer pro rata to all holders of a class of its Securities, to the
extent such rights were acquired from the issuer.
(d) Purchases or sales of open-end registered investment companies, U.S.
Government Securities and money market instruments (e.g., U.S.
Treasury Securities, bankers acceptances, bank certificates of
deposit, commercial paper and repurchase agreements).
(e) Purchases of Securities which are part of an automatic dividend
reinvestment plan or stock accumulation plan; however, quarterly
account statement of such plans must be sent to the Director of
Compliance.
(f) Securities Transactions that are granted a prior exemption by the
Director of Compliance, the General Counsel or the Associate General
Counsel.
5. Reporting
(a) You must arrange for the Director of Compliance to receive from the
executing broker, dealer or bank duplicate copies of each confirmation
and account statement for each Securities Transaction in an Employee
Account or Employee Related Account.
(b) If you are a Disinterested Director you are required to report the
information specified below with respect to any Securities Transaction
in any Securities Account in which you have Beneficial Interest, if
you knew, or in the ordinary course of fulfilling your official duties
as a Disinterested Director, should have known, that during 15 days
immediately before or after the date of your transaction, the Security
(or Equivalent Security) was purchased or sold by a Seligman
Registered Investment Company or considered for purchase or sale by a
Seligman Registered Investment Company. Such report shall be made not
later than 10 days after the end of the calendar quarter in which the
Transaction was effected and shall contain the following information:
<PAGE>
(i) The date of the transaction, the name of the company, the number
of shares, and the principal amount of each Security involved;
(ii) The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(iii) The price at which the transaction was effected;
(iv) The name of the broker, dealer or bank with or through whom the
transaction was effected; and
(v) The date the report is submitted.
(c) You are required to disclose all Securities beneficially owned by you
within ten days of commencement of employment and at the end of each
calendar year within 10 days thereafter (See Appendix C).
(d) You are also required to disclose all Employee and Employee Related
Securities Accounts, Private Securities Transactions and Outside
Activities, Affiliations and Investments upon commencement of
employment and annually thereafter (See Appendix D).
(e) Any report may contain a statement that the report shall not be
construed as an admission by you, that you have any direct or indirect
beneficial ownership in the Security to which the report relates.
(f) The Director of Compliance or his designee will review all reports.
6. Dealings with the Clients
You should not have any direct or indirect investment interest in the
purchase or sale of any Security or property from or to Clients. This is a
prohibition against dealings between you and the Clients and is not
intended to preclude or limit investment transactions by you in Securities
or property, provided such transactions are not in conflict with the
provisions of this Code.
7. Preferential Treatment, Favors and Gifts
You are prohibited from giving and receiving gifts of significant value or
cost from any person or entity that does business with or on behalf of any
Client. You should also avoid preferential treatment, favors, gifts and
entertainment which might, or might appear to, influence adversely or
restrict the independent exercise of your best efforts and best judgments
on behalf of the Clients or which might tend in any way to impair
confidence in Seligman by Clients. Cash Gifts that do not exceed $100 in
value per person for a calendar year are permissible. Ordinary courtesies
of business life, or ordinary business entertainment, and gifts of
inconsequential value are also permissible. However, they should not be so
frequent nor so extensive as to raise any question of impropriety.
8. Outside Business Activities and Service as a Director, Trustee or in a
Fiduciary Capacity of any Organization
You may not engage in any outside business activities or serve as a
Director, Trustee or in a fiduciary capacity of any organization, without
the prior written consent of the Director of Compliance.
<PAGE>
9. Remedies of the Code
Upon discovering a violation of this Code, sanctions may be imposed against
the person concerned as may be deemed appropriate, including, among other
things, a letter of censure, fines, suspension or termination of personal
trading rights and/or employment.
As part of any sanction, you may be required to absorb any loss from the
trade. Any profits realized, as a result of your personal transaction that
violates the Code must be disgorged to a charitable organization, which you
may designate.
10. Compliance Certification
At least once a year, you will be required to certify on the Employee
Certification Form (set forth in Appendix E) that you have read and
understand this Code, that you have complied with the requirements of the
Code, and that you have disclosed or reported all personal Securities
Transactions pursuant to the provisions of the Code.
11. Inquiries Regarding the Code
If you have any questions regarding this Code or any other
compliance-related matter, please call the Director of Compliance, or in
his absence, the General Counsel or Associate General Counsel.
--------------------------------
William C. Morris
Chairman
December 22, 1966
Revised: March 8, 1968 December 7, 1990
January 14, 1970 November 18, 1991
March 21, 1975 April 1, 1993
May 1, 1981 November 1, 1994
May 1, 1982 February 28, 1995
April 1, 1985 November 19, 1999*
March 27, 1989
*Refers to the incorporation of the Code of Ethics of the Seligman Investment
Companies originally adopted June 12, 1962, as amended.
<PAGE>
Appendix A
Amended November 19, 1999
J. & W. Seligman & Co. Incorporated - Insider Trading Policies and Procedures
SECTION I. BACKGROUND
Introduction
United States law creates an affirmative duty on the part of broker-dealers
and investment advisers to establish, maintain and enforce written policies and
procedures that provide a reasonable and proper system of supervision,
surveillance and internal control to prevent the misuse of material, non-public
information by the broker-dealer, investment adviser or any person associated
with them. The purpose of these procedures is to meet those requirements. The
following procedures apply to J. & W. Seligman & Co. Incorporated, its
subsidiaries and affiliates (collectively, "Seligman") and all officers,
directors and employees (collectively, "Employees") thereof.
Statement of Policy
No Employee may trade, either personally or on behalf of others, on
material, non-public information or communicate material, non-public information
to another in violation of the law. This policy extends to activities within and
outside their duties at Seligman. Each Employee must read, acknowledge receipt
and retain a copy of these procedures.
Inside Information
The term "insider trading" is not defined in the federal securities laws,
but generally is used to refer to the use of material, non-public information to
trade in securities or to communicate material, non-public information to
others.
While the law concerning insider trading is not static, it is understood
that the law generally prohibits:
A. trading by an insider, while in possession of material, non-public
information, or
B. trading by a non-insider, while knowingly in possession of material,
non-public information, where the information either was disclosed to
the non-insider in violation of an insider's duty to keep it
confidential or was misappropriated, or
C. communicating material, non-public information to others.
The elements of insider trading and the penalties for such unlawful conduct
are discussed below. If you have any questions after reviewing these procedures,
you should consult the Director of Compliance, General Counsel or Associate
General Counsel.
1. Who Is An Insider?
The concept of "insider" is broad. It includes Employees of a company. In
addition, a person can be a "temporary insider" if he or she enters into a
special confidential relationship in the conduct of a company's affairs and
as a result is given access to information solely for the company's
purposes. A temporary insider can include, among others, a company's
attorneys, accountants, consultants, bank lending officers, and the
Employees of such organizations. In addition, Seligman may become a
temporary insider of a company it advises or for which it performs other
services. According to the Supreme Court, the company must expect the
outsider to keep the disclosed non-public information
<PAGE>
confidential and the relationship must at least imply such a duty before
the outsider will be considered an insider.
2. What Is Material Information?
Trading on inside information is not a basis for liability unless the
information is material. "Material information" generally is defined as
information for which there is a substantial likelihood that a reasonable
investor would consider it important in making his or her investment
decisions, or information that is reasonably certain to have a substantial
affect on the price of a company's securities. Information that Employees
should consider material includes, but is not limited to: dividend changes,
earnings estimates, changes in previously released earnings estimates,
significant merger or acquisition proposals or agreements, major
litigation, liquidation problems and extraordinary management developments.
In addition, information about major contracts or new customers could also
qualify as material, depending upon the importance of such developments to
the company's financial condition or anticipated performance.
Material information does not have to relate to a company's business. For
example, in Carpenter v. U.S., 408 U.S. 316 (1987), the Supreme Court
considered as material certain information about the contents of a
forthcoming newspaper column that was expected to affect the market price
of a Security. In that case, a Wall Street Journal reporter was found
criminally liable for disclosing to others the dates that reports on
various companies would appear in the Journal and whether those reports
would be favorable or not.
3. What Is Non-Public Information?
Information is non-public until it has been effectively communicated to the
market place. One must be able to point to some fact to show that the
information is generally public. For example, information found in a report
filed with the SEC, or appearing in Dow Jones, Reuters Economic Services,
The Wall Street Journal or other publications of general circulation would
be considered public. However, see Section II, Paragraph 2.
4. Penalties for Insider Trading
Penalties for trading on or communicating material, non-public information
are severe, both for individuals involved in such unlawful conduct and
their employers. A person can be subject to some or all of the penalties
below even if he or she does not personally benefit from the violation.
Penalties include:
- Civil injunctions
- Disgorgement of profits
- Jail sentences
- Fines for the person who committed the violation of up to three times
the profit gained or loss avoided, whether or not the person actually
benefited, and
- Fines for the employer or other controlling person of up to the
greater of $1,000,000 or three times the amount of the profit gained
or loss avoided.
In addition, any violation of policies and procedures set forth herein can
be expected to result in serious sanctions by Seligman, including dismissal of
the persons involved.
<PAGE>
SECTION II. PROCEDURES
Procedures to Implement Policy Against Insider Trading.
The following procedures have been established to assist the Employees of
Seligman in avoiding insider trading, and to aid Seligman in preventing,
detecting and imposing sanctions against insider trading. Every Employee of
Seligman must follow these procedures or risk serious sanctions, including
dismissal, substantial personal liability and criminal penalties. If you have
any questions about these procedures you should consult the Director of
Compliance, the General Counsel or Associate General Counsel.
1. Identifying Inside Information.
Before trading for yourself or others (including investment companies and
private Accounts managed by Seligman), in the securities of a company about
which you may have potential inside information, ask yourself the following
questions:
a. Is the information material? Is this information that an investor
would consider important in making his or her investment decisions? Is
this information that would substantially affect the market price of
the securities if generally disclosed?
b. Is the information non-public? To whom has this information been
provided? Has the information been effectively communicated to the
marketplace in a publication of general circulation or does it fall
within the circumstances set forth in paragraph 2 below.
If, after consideration of the above, you believe that the information is
material and non-public, or if you have questions as to whether the information
is material and non-public, you should take the following steps:
c. Report the matter immediately to the Director of Compliance, General
Counsel or Associate General Counsel.
d. Do not purchase or sell the securities on behalf of yourself or
others, including investment companies or private Accounts managed by
Seligman.
e. Do not communicate the information inside or outside Seligman other
than to the Director of Compliance, General Counsel or Associate
General Counsel.
f. After the Director of Compliance, General Counsel or Associate General
Counsel has reviewed the issue, you will be instructed to continue the
prohibitions against trading and communication, or you will be allowed
to trade and communicate the information.
2. Important Specific Examples
a. If you have a telephone or face-to-face conversation with a senior
executive of a publicly-traded company and are provided information
about the company that you have reason to believe has not yet been
disclosed in a widely-disseminated publication such as a press
release, quarterly report or other public filing, you have received
non-public information. This information is considered non-public even
if you believe that the company executive would provide the same
information to other analysts or portfolio managers who call the
company. Until information has been disclosed in a manner that makes
it available to (or capable of being accessed by) the investment
community as a whole, it is considered non-public. If the information
is material, as described above, you may not trade while in possession
of this information unless you first discuss the matter and obtain
approval from the Director of Compliance, General Counsel or Associate
General Counsel. Although it may be lawful for an analyst to act on
the basis of material information that the company's management has
chosen to disclose selectively to that analyst, where the information
is provided in a one-on-one context,
<PAGE>
regulators are likely to question such conduct. Approval from the Law
and Regulation Department will therefore depend on the specific
circumstances of the information and the disclosure. Under the Supreme
Court's important decision of Dirks v. SEC, 463 U.S. 646 (1983),
securities analysts may be free to act on selectively disclosed
material information if it is provided by company executives
exclusively to achieve proper corporate purposes.
b. If you obtain material information in the course of an analysts'
conference call or meeting conducted by a publicly-traded company in
the ordinary course of its business in which representatives of
several other firms or investors are also present (as distinguished
from the one-on-one situation described in the preceding paragraph),
you may act on the basis of that information without need to consult
with the Director of Compliance, General Counsel or Associate General
Counsel, even if the information has not yet been published by the
news media. You should be aware, however, that if there is something
highly unusual about the meeting or conference call that leads you to
question whether it has been authorized by the company or is otherwise
suspect, you should first consult with the Director of Compliance,
General Counsel or Associate General Counsel.
c. If you are provided material information by a company and are
requested to keep such information confidential, you may not trade
while in possession of that information before first obtaining the
approval of the Director of Compliance, General Counsel or the
Associate General Counsel.
As these examples illustrate, the legal requirements governing insider
trading are not always obvious. You should therefore always consult with the
Director of Compliance, General Counsel or Associate General Counsel if you have
any question at all about the appropriateness of your proposed conduct.
3. Restricting Access To Material, Non-Public Information
Information in your possession that you identify as material and non-public
may not be communicated to anyone, including persons within Seligman,
except as provided in paragraphs 1 and 2 above. In addition, care should be
taken so that such information is secure. For example, files containing
material, non-public information should be sealed; access to computer files
containing material, non-public information should be restricted.
4. Resolving Issues Concerning Insider Trading
If, after consideration of the items set forth in paragraphs 1 and 2, doubt
remains as to whether information is material or non-public, or if there is
any unresolved question as to the applicability or interpretation of the
foregoing procedures, or as to the propriety of any action, it must be
discussed with the Director of Compliance, General Counsel and or the
Associate General Counsel before trading or communicating the information
to anyone.
5. Personal Securities Trading
All Employees shall follow with respect to personal Securities trading the
procedures set forth in the Code of Ethics. In addition, no Employee shall
establish a brokerage Account with a Firm other than those previously
approved without the prior consent of the Director of Compliance and every
Employee shall be subject to reporting requirements under Section III.5 of
the Code of Ethics. The Director of Compliance, or his designee, shall
monitor the personal Securities trading of all Employees.
<PAGE>
Appendix B
Amended November 19, 1999
J. & W. SELIGMAN & CO. INCORPORATED
TRADE AUTHORIZATION REQUEST FORM
<TABLE>
<S> <C>
1. Name of Employee/Telephone Number: ______________________________
2. If different than #1, name of the person in whose
account the trade will occur: ______________________________
3. Relationship of (2) to (1): ______________________________
4. Name the firm at which the account is held: ______________________________
5. Name of Security: ______________________________
6. Number of shares or units to be bought or
sold or amount of bond: ______________________________
7. Approximate price per share, unit or bond: ______________________________
8. Check those that are applicable: _______ Purchase ______ Sale
_____ Market Order ______ Limit Order (Price of Limit Order: _____)
9. Do you possess material non public information regarding
the Security or the issuer of the Security? ______ Yes ______ No
10. To your knowledge, are there any outstanding (purchase or
sell) orders for this Security or any Equivalent Security by
a Seligman Client? ______ Yes ______ No
11. To your knowledge, is this Security or Equivalent Security
being considered for purchase or sale for one or more
Seligman Clients? ______ Yes ______ No
12. Is this Security being acquired in an initial or secondary public
offering? ______ Yes ______ No
13. Is this Security being acquired in a private placement? ______ Yes ______ No
14. Have you or any Related Account covered by the pre-
authorization provisions of the Code purchased or sold
this Security within the past 60 days? ______ Yes ______ No
</TABLE>
<PAGE>
- - - - - -
For Investment Team Members Only:
<TABLE>
<S> <C> <C>
15. Has any Client Account managed by your team purchased or sold this
Security or Equivalent Security within the past seven calendar days or do
you expect any such account to purchase or sell this Security or
Equivalent Security within seven
calendar days of your purchase or sale? ______ Yes ______ No
</TABLE>
16. Why is this Security Transaction appropriate for you and not for one or
more of your team's Clients?
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
- - - - - -
I have read the J. & W. Seligman & Co. Incorporated Code of Ethics, as revised
on November 19, 1999, within the prior 12 months and believe that the proposed
trade(s) fully complies with the requirements of the Code of Ethics and Insider
Trading policy.
___________________________
Employee Signature
___________________________
Date Submitted
Authorized by: ________________________
Date: ________________________
<PAGE>
Appendix C
Amended November 19, 1999
REPORT OF SECURITIES BENEFICIALLY OWNED
AS OF DECEMBER 31, 1999
The following is a list of all Securities positions (except open-end
investment companies, U.S. Government Securities and money market instruments)
in which I have direct or indirect beneficial ownership, as defined in the Code
of Ethics. This includes Securities held at home, in safe deposit boxes or by an
issuer.
<TABLE>
<CAPTION>
Description of Security No. of Shares Principal Amount Location of Security
<S> <C> <C> <C>
__________________________ ____________ ___________________ __________________
__________________________ ____________ ___________________ __________________
__________________________ ____________ ___________________ __________________
__________________________ ____________ ___________________ __________________
__________________________ ____________ ___________________ __________________
__________________________ ____________ ___________________ __________________
</TABLE>
_______ The list above (and any additional sheets I have attached)
represents all my Securities positions in which I have direct
or indirect beneficial ownership as defined in the Code of
Ethics.
_______ I only have a beneficial ownership interest in open-end
investment companies, U.S. Government Securities and money
market instruments, and/or I do not beneficially own any
Securities.
Date: ________________________ ____________________________
First Last, Company
<PAGE>
Appendix D
Amended November 19, 1999
EMPLOYEE REPORTING QUESTIONNAIRE
<TABLE>
<S> <C> <C>
Employee Name: ___________________________ Ext: ______ Department: ___________________
Please Print
Company/Affiliate: ______________________________ Supervisor: ___________________
1. Securities Accounts
Do you have any Accounts in which Securities can be purchased or sold over
which you have control or in which you have a Beneficial Interest, as
defined in Seligman's Code of Ethics?
Yes _______ No ________
If yes, please list all such Accounts:
Account Account Type of
Institution Number Title Account
____________________________ ________________ __________________________ ______________
____________________________ ________________ __________________________ ______________
____________________________ ________________ __________________________ ______________
2. Financial Interests
Do you have any private placements, restricted stock warrants, general or
limited partnerships, or other investment interests in any organization
(public, private or charitable) not held in the accounts listed above?
Please include Securities and certificates held in your custody.
Yes _______ No _______
If yes, please describe: __________________________________________________________________________________________
___________________________________________________________________________________________________________________
3. Outside Activities/Affiliations
a) Do you have any activities outside Seligman or its affiliates for
which you receive additional compensation:
Yes _______ No _______
If yes, please describe: __________________________________________________________________________________________
___________________________________________________________________________________________________________________
b) Do you serve in the capacity of officer, director, partner or employee
(or in any other fiduciary capacity) for any company or organization
(public, private or charitable) other than Seligman or its affiliates.
Yes ________ No _______
If yes, please describe: __________________________________________________________________________________________
___________________________________________________________________________________________________________________
I hereby certify that I have read and understand the foregoing statements
and that each of my responses thereto are true and complete. I agree to
immediately inform the Director of Compliance if there is any change in any
of the above answers. I also understand that any misrepresentation or
omissions of facts in response to this questionnaire and failure to
immediately inform the Director of Compliance of any changes to responses
provided herein may result in termination of my employment.
____________________________________ ___________________________
Employee's Signature Date
____________________________________
Title
</TABLE>
<PAGE>
Appendix E
Amended November 19, 1999
Annual Certification of Compliance with the Code of Ethics
I acknowledge that I have received and read the Code of Ethics and Insider
Trading Policies and Procedures, as amended on November 19, 1999 and hereby
agree, in consideration of my continued employment by J. & W. Seligman & Co.
Incorporated, or one of its subsidiaries or affiliates, to comply with the Code
of Ethics and Insider Trading Policies and Procedures.
I hereby certify that during the past calendar year:
1. In accordance with the Code of Ethics, I have fully disclosed the
Securities holdings in my Employee Account(s) and Employee Related
Account(s) (as defined in the Code of Ethics).
2. In accordance with the Code of Ethics, I have maintained all Employee
Accounts and Employee Related Accounts at Ernst & Company (Investec) or
Merrill Lynch located at 712 Fifth Avenue, New York, NY except for Accounts
as to which the Director of Compliance has provided written permission to
maintain elsewhere.
3. In accordance with the Code of Ethics, except for transactions exempt from
reporting under the Code of Ethics, I have arranged for the Director of
Compliance to receive duplicate confirmations and statements for each
Securities Transaction of all Employee Accounts and Employee Related
Accounts, and I have reported all Securities Transactions in each of my
Employee Accounts and Employee Related Accounts.
4. I have complied with the Code of Ethics in all other respects.
_______________________________
Employee Signature
_______________________________
Date:____________ Print Name
