File No. 2-92487
As filed with the Securities and Exchange Commission on January 26, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Pre-Effective Amendment No. __ |_|
Post-Effective Amendment No. 24 |X|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 26 |X|
SELIGMAN TAX-EXEMPT SERIES TRUST
(Exact name of registrant as specified in charter)
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
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).
|_| immediately upon filing pursuant to paragraph (b) of rule 485
|X| on February 1, 1996 pursuant to paragraph (b) of rule 485
|_| 60 days after filing pursuant to paragraph (a)(i) of rule 485
|_| on (date) pursuant to paragraph (a)(i) of rule 485
|_| 75 days after filing pursuant to paragraph (a)(ii) of rule 485
|_| on (date) pursuant to paragraph (a)(ii) 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.
Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2(a)(1) and a Rule 24f-2 Notice was
filed by Registrant on November 22, 1995.
<PAGE>
CROSS REFERENCE SHEET
POST-EFFECTIVE AMENDMENT NO. 24
Pursuant to Rule 481 (a)
<TABLE>
<CAPTION>
Item in Part A of Form N-1A Location in Prospectus
--------------------------- ----------------------
<S> <C>
1. Cover Page Cover Page
2. Synopsis Summary of Series Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; Organization and Capitalization
5. Management of the Fund Management Services
5a. Management's Discussion of Fund Management Services
Performance
6. Capital Stock and Other Securities Organization and Capitalization
7. Purchase of Securities Being Offered Alternative Distribution System; Purchase of Shares; Administration,
Shareholder Services and Distribution Plan
8. Redemption or Repurchase Telephone Transactions; Redemption of Shares; Exchange Privilege; Further
Information About Transactions In The Funds
9. Pending Legal Proceedings Not Applicable
Item in Part B of Form N-1A Location in Statement of Additional Information
- --------------------------- -----------------------------------------------
10. Cover Page Cover Page
11. Table Of Contents Table Of Contents
12. General Information and History Investment Objectives, Policies and Risks; General Information; Appendix C
13. Investment Objectives and Policies Investment Objectives, Policies And Risks; Investment Limitations
14. Management of the Fund Trustees and Officers; Management And Expenses
15. Control Persons and Principal Trustees and Officers
Holders of Securities
16. Investment Advisory and Other Services Management And Expenses; Distribution Services
17. Brokerage Allocations Administration, Shareholder Services and Distribution Plan;
Portfolio Transactions
18. Capital Stock and Other Securities General Information
19. Purchase, Redemption and Pricing of Purchase and Redemption of Fund Shares; Valuation
Securities Being Offered
20. Tax Status Taxes
21. Underwriters Distribution Services
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
SELIGMAN NEW JERSEY TAX-EXEMPT FUND, INC.
SELIGMAN PENNSYLVANIA TAX-EXEMPT FUND
SERIES SELIGMAN TAX-EXEMPT FUND SERIES, INC.
National Tax-Exempt Series, Colorado Tax-Exempt Series, Georgia Tax-Exempt
Series, Louisiana Tax-Exempt Series, Maryland Tax-Exempt Series, Massachusetts
Tax-Exempt Series, Michigan Tax-Exempt Series, Minnesota Tax-Exempt Series,
Missouri Tax-Exempt Series, New York Tax-Exempt Series, Ohio Tax-Exempt Series,
Oregon Tax-Exempt Series and South Carolina Tax-Exempt Series
SELIGMAN TAX-EXEMPT SERIES TRUST
California Tax-Exempt High-Yield Series, California Tax-Exempt Quality Series,
Florida Tax-Exempt Series and North Carolina Tax-Exempt Series
100 Park Avenue o New York, NY 10017
New York Telephone: (212) 850-1864
Toll-Free Telephone: (800) 221-2450--all continental United States
February 1, 1996
This prospectus offers shares of nineteen different series (the "Series")
which include Seligman New Jersey Tax-Exempt Fund, Inc. (the "New Jersey Fund"),
Seligman Pennsylvania Tax-Exempt Fund Series (the "Pennsylvania Fund"), National
Tax-Exempt Series (the "National Series") and twelve individual state Series of
Seligman Tax-Exempt Fund Series, Inc. (the "Tax-Exempt Fund"), and four
individual state Series of Seligman Tax-Exempt Series Trust (the "Tax-Exempt
Trust" and collectively with the New Jersey Fund, the Pennsylvania Fund and the
Tax-Exempt Fund, the "Funds"). Each of the Funds is a non-diversified, open-end
management investment company.
The Tax-Exempt Fund offers the following state Series: Colorado Tax-Exempt
Series, Georgia Tax-Exempt Series, Louisiana Tax-Exempt Series, Maryland
Tax-Exempt Series, Massachusetts Tax-Exempt Series, Michigan Tax-Exempt Series,
Minnesota Tax-Exempt Series, Missouri Tax-Exempt Series, New York Tax-Exempt
Series, Ohio Tax-Exempt Series, Oregon Tax-Exempt Series and South Carolina
Tax-Exempt Series (collectively, the "Tax-Exempt Fund State Series"). The
Tax-Exempt Trust offers the following state Series: California Tax-Exempt
Quality Series, California Tax-Exempt High-Yield Series, Florida Tax-Exempt
Series and North Carolina Tax-Exempt Series (collectively, the "Tax-Exempt Trust
State Series", and together with the Tax-Exempt Fund State Series, the New
Jersey Fund and the Pennsylvania Fund, the "State Series").
The New Jersey Fund seeks to maximize income exempt from federal income tax
and New Jersey personal income tax consistent with preservation of capital and
with consideration given to opportunities for capital gain by investing in
"investment grade" New Jersey tax-exempt securities. Investment grade securities
are rated within the four highest rating categories of Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P"). Throughout
this Prospectus, the New Jersey gross income tax is referred to as the New
Jersey personal income tax.
(continued on following page)
SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
The Pennsylvania Fund seeks to provide a high level of income exempt from
federal and Pennsylvania income taxes consistent with preservation of capital by
investing primarily in investment grade Pennsylvania tax-exempt securities.
Capital appreciation is not a consideration in the selection of investments. The
Fund may also invest in Pennsylvania tax-exempt securities that are unrated but
are believed by the Manager (as defined below) to be of comparable quality to
investment grade securities.
The Tax-Exempt Fund's National Tax-Exempt Series seeks to provide to its
shareholders maximum income exempt from federal income taxes to the extent
consistent with preservation of capital and with consideration given to
opportunities for capital gain by investing in investment grade securities the
interest on which is exempt from federal income taxes. The investment objective
of each of the individual Tax-Exempt Fund State Series is to maximize income
exempt from federal income taxes and from personal income taxes in that state,
consistent with the preservation of capital and with consideration given to
opportunities for capital gain by investing in investment grade tax-exempt
securities of the designated state, its political subdivisions, municipalities
and public authorities.
The Tax-Exempt Trust State Series, except for the California Tax-Exempt
High-Yield Series, each seek high income exempt from federal income taxes and
from personal income taxes in their respective state (other than Florida which
does not impose an individual income tax) consistent with preservation of
capital and with consideration given to capital gain, by investing in tax-exempt
securities rated in the four highest rating categories, except that the
California Tax-Exempt Quality Series pursues its investment objective by
investing only in tax-exempt securities rated in the three highest rating
categories, of Moody's or S&P.
The California Tax-Exempt High-Yield Series seeks the maximum amount of
tax-exempt income consistent with preservation of capital and with consideration
given to capital gain by investing primarily in California tax-exempt securities
that are rated in the medium and lower rating categories of Moody's or S&P or
which are unrated. The Series may invest up to 100% of its portfolio in lower
rated bonds, commonly known as "junk bonds." Such securities generally offer a
higher current yield than those in the higher rating categories but also involve
greater price volatility and risk of loss of principal and income. The
California Tax-Exempt High-Yield Series invests primarily in high-yield, high
risk securities and therefore may not be suitable for all investors. Investors
should carefully assess the risks associated with an investment in this Series.
See "Investment Objectives and Policies--Seligman California Tax-Exempt
High-Yield Series," in this Prospectus.
There can be no assurance that a Series will achieve its objective.
Investment advisory and management services are provided to the Funds by J.
& W. Seligman & Co. Incorporated (the "Manager") and each Fund's distributor is
Seligman Financial Services, Inc., an affiliate of the Manager. Each Series
offers two classes of shares. Class A shares are sold subject to an initial
sales load of up to 4.75% and an annual service fee currently charged at a rate
of up to .25 of 1% of the average daily net asset value of the Class A shares.
Class D shares are sold without an initial sales load but are subject to
contingent deferred sales loads of 1% imposed on certain redemptions within one
year of purchase, an annual distribution fee of up to .75 of 1% and an annual
service fee of up to .25 of 1% of the average daily net asset value of the Class
D shares. See "Alternative Distribution System." Shares of the Series may be
purchased through any authorized investment dealer.
This Prospectus sets forth concisely the information a prospective investor
should know about the Funds and each individual Series before investing. Please
read it carefully before you invest and keep it for future reference. Additional
information about the Funds, including a Statement of Additional Information,
has been filed with the Securities and Exchange Commission. A Statement of
Additional Information for each Series is available upon request and without
charge by calling or writing the Funds at the telephone numbers or the address
set forth above. Each Statement of Additional Information is dated the same date
as this Prospectus and is incorporated herein by reference in its entirety.
2
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF SERIES EXPENSES
The purpose of this table is to assist investors in understanding the various costs and expenses which shareholders of a Series
bear directly or indirectly. The sales load on Class A shares is a one-time charge paid at the time of purchase of shares.
Reductions in sales loads are available in certain circumstances. The CDSL on Class D shares is a one-time charge paid only if
shares are redeemed within one year of purchase. For more information concerning reduction in sales loads and for more complete
descriptions of the various costs and expenses see "Purchase Of Shares," "Redemption Of Shares" and "Management Services" herein.
Each Series' Administration, Shareholder Services and Distribution Plan to which the caption "12b-1 Fees" relates is discussed under
"Administration, Shareholder Services And Distribution Plan" herein.
NJ FUND PA FUND NAT'L SERIES CO SERIES
------------------------- ------------------------- ------------------------- -------------------------
Class A Class D Class A Class D Class A Class D Class A Class D
Shares Shares Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------ ------ ------
(Initial (Deferred (Initial (Deferred (Initial (Deferred (Initial (Deferred
Sales Load Sales Load Sales Load Sales Load Sales Load Sales Load Sales Load Sales Load
Alternative) Alternative) Alternative) Alternative) Alternative) Alternative) Alternative) Alternative)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum Sales Load
Imposed on Purchases
(as percentage of
offering price)........ 4.75% None 4.75% None 4.75% None 4.75% None
Sales Load on Reinvested
Dividends ............. None None None None None None None None
Deferred Sales Load
(as percentage of
original price or
redemption proceeds,
whichever is lower) ... None 1% during None 1% during None 1% during None 1% during
the first the first the first the first
year; None year; None year; None year; None
thereafter thereafter thereafter thereafter
Redemption Fees.......... None None None None None None None None
Exchange Fees............ None None None None None None None None
Class A Class D Class A Class D Class A Class D Class A Class D
------- ------- ------- ------- ------- ------- ------- -------
Annual Series Operating
Expenses for Fiscal
Year Ended September 30,
1995 (as percentage of
average net assets)
Management Fees........ .50% .50% .50% .50% .50% .50% .50% .50%
12b-1 Fees............. .22 1.00* .22 1.00* .09 1.00* .09 1.00*
Other Expenses......... .34 .34 .49 .49 .27 .27 .34 .34
---- ---- ---- ---- --- ---- --- ----
Total Series
Operating Expenses .. 1.06% 1.84% 1.21% 1.99% .86% 1.77% .93% 1.84%
==== ==== ==== ==== === ==== === ====
In fiscal 1995, the Manager, in its discretion, waived a portion of its fee from the New Jersey Fund. In fiscal 1996, the
Manager does not expect to waive any of its fees, and the expense information in the table has been restated to reflect the
discontinuance of the management fee waiver. The "Other Expenses" disclosed for Class D shares have been restated to reflect the
expense allocation methodology currently being used by the Series.
</TABLE>
<TABLE>
<CAPTION>
The following example should not be considered a representation of past or future expenses. Actual expenses may be greater or
less than those shown and the 5% used in this example is a hypothetical rate.
NJ FUND PA FUND NAT'L SERIES CO SERIES
------------------- ------------------- ------------------- -------------------
Example Class A Class D Class A Class D Class A Class D Class A Class D
- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
An investor would pay
the following expenses
on a $1,000 investment,
assuming (1) 5% annual
return and (2)
redemption at the end
of each time period:
1 year $ 58 $ 29+ $ 59 $ 30+ $ 56 $ 28+ $ 57 $ 29+
3 years 80 58 84 62 74 56 76 58
5 years 103 100 111 107 93 96 97 100
10 years 171 216 187 232 149 208 156 216
* Includes an annual distribution fee of up to .75 of 1% and an annual service fee of up to .25 of 1%. Pursuant to the rules of
the National Association of Securities Dealers, Inc., the aggregate deferred sales loads and annual distribution fees on Class
D shares of each Series may not exceed 6.25% of total gross sales, subject to certain exclusions. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a long-term Class D shareholder of a Series may pay
more in total sales loads (including distribution fees) than the economic equivalent of 6.25% of such shareholder's investment
in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year, the expenses on a $1,000 investment would be:
NJ--$19; PA--$20; NAT'L--$18; CO--$19.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF SERIES EXPENSES--(continued)
GA SERIES LA SERIES MD SERIES MA SERIES
------------------------- ------------------------- ------------------------- -------------------------
Class A Class D Class A Class D Class A Class D Class A Class D
Shares Shares Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------ ------ ------
(Initial (Deferred (Initial (Deferred (Initial (Deferred (Initial (Deferred
Sales Load Sales Load Sales Load Sales Load Sales Load Sales Load Sales Load Sales Load
Alternative) Alternative) Alternative) Alternative) Alternative) Alternative) Alternative) Alternative)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum Sales Load
Imposed on Purchases
(as percentage of
offering price)........ 4.75% None 4.75% None 4.75% None 4.75% None
Sales Load on Reinvested
Dividends ............. None None None None None None None None
Deferred Sales Load
(as percentage of
original price or
redemption proceeds,
whichever is lower) ... None 1% during None 1% during None 1% during None 1% during
the first the first the first the first
year; None year; None year; None year; None
thereafter thereafter thereafter thereafter
Redemption Fees.......... None None None None None None None None
Exchange Fees............ None None None None None None None None
Class A Class D Class A Class D Class A Class D Class A Class D
------- ------- ------- ------- ------- ------- ------- -------
Annual Series Operating
Expenses for Fiscal
Year Ended September 30,
1995 (as percentage of
average net assets)
Management Fees........ .50% .50% .50% .50% .50% .50% .50% .50%
12b-1 Fees............. .10 1.00* .10 1.00* .09 1.00* .10 1.00*
Other Expenses......... .36 .36 .29 .29 .37 .37 .26 .26
--- ---- --- ---- --- ---- --- ----
Total Series
Operating Expenses .. .96% 1.86% .89% 1.79% .96% 1.87% .86% 1.76%
=== ==== === ==== === ==== === ====
In fiscal 1995, the Manager, in its discretion, waived a portion of its fee from the Georgia Series. In fiscal 1996, the
Manager does not expect to waive any of its fees, and the expense information in the table has been restated to reflect the
discontinuance of the management fee waiver. The "Other Expenses" disclosed for Class D shares have been restated to reflect the
expense allocation methodology currently being used by the Series.
</TABLE>
<TABLE>
<CAPTION>
The following example should not be considered a representation of past or future expenses. Actual expenses may be greater or
less than those shown and the 5% used in this example is a hypothetical rate.
GA SERIES LA SERIES MD SERIES MA SERIES
------------------- ------------------- ------------------- -------------------
Example Class A Class D Class A Class D Class A Class D Class A Class D
- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
An investor would pay
the following expenses
on a $1,000 investment,
assuming (1) 5% annual
return and (2)
redemption at the end
of each time period:
1 year $ 57 $ 29+ $ 56 $ 28+ $ 57 $ 29+ $ 56 $ 28+
3 years 77 58 75 56 77 59 74 55
5 years 98 101 94 97 98 101 93 95
10 years 160 218 152 211 160 219 149 207
* Includes an annual distribution fee of up to .75 of 1% and an annual service fee of up to .25 of 1%. Pursuant to the rules of
the National Association of Securities Dealers, Inc., the aggregate deferred sales loads and annual distribution fees on Class
D shares of each Series may not exceed 6.25% of total gross sales, subject to certain exclusions. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a long-term Class D shareholder of a Series may pay
more in total sales loads (including distribution fees) than the economic equivalent of 6.25% of such shareholder's investment
in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year, the expenses on a $1,000 investment would be:
GA--$19; LA--$18; MD--$19; MA--$18.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF SERIES EXPENSES--(continued)
MI SERIES MN SERIES MO SERIES NY SERIES
------------------------- ------------------------- ------------------------- -------------------------
Class A Class D Class A Class D Class A Class D Class A Class D
Shares Shares Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------ ------ ------
(Initial (Deferred (Initial (Deferred (Initial (Deferred (Initial (Deferred
Sales Load Sales Load Sales Load Sales Load Sales Load Sales Load Sales Load Sales Load
Alternative) Alternative) Alternative) Alternative) Alternative) Alternative) Alternative) Alternative)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum Sales Load
Imposed on Purchases
(as percentage of
offering price)........ 4.75% None 4.75% None 4.75% None 4.75% None
Sales Load on Reinvested
Dividends ............. None None None None None None None None
Deferred Sales Load
(as percentage of
original price or
redemption proceeds,
whichever is lower) ... None 1% during None 1% during None 1% during None 1% during
the first the first the first the first
year; None year; None year; None year; None
thereafter thereafter thereafter thereafter
Redemption Fees.......... None None None None None None None None
Exchange Fees............ None None None None None None None None
Class A Class D Class A Class D Class A Class D Class A Class D
------- ------- ------- ------- ------- ------- ------- -------
Annual Series Operating
Expenses for Fiscal
Year Ended September 30,
1995 (as percentage of
average net assets)
Management Fees........ .50% .50% .50% .50% .50% .50% .50% .50%
12b-1 Fees............. .10 1.00* .10 1.00* .09 1.00* .08 1.00*
Other Expenses......... .27 .27 .27 .27 .34 .34 .30 .30
--- ---- --- ---- --- ---- --- ----
Total Series
Operating Expenses .. .87% 1.77% .87% 1.77% .93% 1.84% .88% 1.80%
=== ==== === ==== === ==== === ====
In fiscal 1995, the Manager, in its discretion, waived a portion of its fee from the Missouri Series. In fiscal 1996, the
Manager does not expect to waive any of its fees, and the expense information in the table has been restated to reflect the
discontinuance of the management fee waiver. The "Other Expenses" disclosed for Class D shares have been restated to reflect the
expense allocation methodology currently being used by the Series.
</TABLE>
<TABLE>
<CAPTION>
The following example should not be considered a representation of past or future expenses. Actual expenses may be greater or
less than those shown and the 5% used in this example is a hypothetical rate.
MI SERIES MN SERIES MO SERIES NY SERIES
------------------- ------------------- ------------------- -------------------
Example Class A Class D Class A Class D Class A Class D Class A Class D
- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
An investor would pay
the following expenses
on a $1,000 investment,
assuming (1) 5% annual
return and (2)
redemption at the end
of each time period:
1 year $ 56 $ 28+ $ 56 $ 28+ $ 57 $ 29+ $ 56 $ 28+
3 years 74 56 74 56 76 58 74 57
5 years 93 96 93 96 97 100 94 97
10 years 150 208 150 208 156 216 151 212
* Includes an annual distribution fee of up to .75 of 1% and an annual service fee of up to .25 of 1%. Pursuant to the rules of
the National Association of Securities Dealers, Inc., the aggregate deferred sales loads and annual distribution fees on Class
D shares of each Series may not exceed 6.25% of total gross sales, subject to certain exclusions. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a long-term Class D shareholder of a Series may pay
more in total sales loads (including distribution fees) than the economic equivalent of 6.25% of such shareholder's investment
in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year, the expenses on a $1,000 investment would be:
MI--$18; MN--$18; MO--$19; NY--$18.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF SERIES EXPENSES--(continued)
CA
OH SERIES OR SERIES SC SERIES HIGH-YIELD SERIES
------------------------- ------------------------- ------------------------- -------------------------
Class A Class D Class A Class D Class A Class D Class A Class D
Shares Shares Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------ ------ ------
(Initial (Deferred (Initial (Deferred (Initial (Deferred (Initial (Deferred
Sales Load Sales Load Sales Load Sales Load Sales Load Sales Load Sales Load Sales Load
Alternative) Alternative) Alternative) Alternative) Alternative) Alternative) Alternative) Alternative)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum Sales Load
Imposed on Purchases
(as percentage of
offering price)........ 4.75% None 4.75% None 4.75% None 4.75% None
Sales Load on Reinvested
Dividends ............. None None None None None None None None
Deferred Sales Load
(as percentage of
original price or
redemption proceeds,
whichever is lower) ... None 1% during None 1% during None 1% during None 1% during
the first the first the first the first
year; None year; None year; None year; None
thereafter thereafter thereafter thereafter
Redemption Fees.......... None None None None None None None None
Exchange Fees............ None None None None None None None None
Class A Class D Class A Class D Class A Class D Class A Class D
------- ------- ------- ------- ------- ------- ------- -------
Annual Series Operating
Expenses for Fiscal
Year Ended September 30,
1995 (as percentage of
average net assets)
Management Fees........ .50% .50% .50% .50% .50% .50% .50% .50%
12b-1 Fees............. .10 1.00* .10 1.00* .10 1.00* .10 1.00*
Other Expenses......... .24 .24 .31 .31 .28 .28 .30 .30
--- ---- --- ---- --- ---- --- ----
Total Series
Operating Expenses .. .84% 1.74% .91% 1.81% .88% 1.78% .90% 1.80%
=== ==== === ==== === ==== === ====
In fiscal 1995, the Manager, in its discretion, waived a portion of its fees from the Oregon Series. In fiscal 1996, the
Manager does not expect to waive any of its fees, and the expense information in the table has been restated to reflect the
discontinuance of the management fee waiver. The "Other Expenses" disclosed for Class D shares have been restated to reflect the
expense allocation methodology currently being used by the Series.
</TABLE>
<TABLE>
<CAPTION>
The following example should not be considered a representation of past or future expenses. Actual expenses may be greater or
less than those shown and the 5% used in this example is a hypothetical rate.
CA
OH SERIES OR SERIES SC SERIES HIGH-YIELD SERIES
------------------- ------------------- ------------------- -------------------
Example Class A Class D Class A Class D Class A Class D Class A Class D
- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
An investor would pay
the following expenses
on a $1,000 investment,
assuming (1) 5% annual
return and (2)
redemption at the end
of each time period:
1 year $ 56 $ 28+ $ 56 $ 28+ $ 56 $ 28+ $ 56 $ 28+
3 years 73 55 75 57 74 56 75 57
5 years 92 94 95 98 94 95 95 97
10 years 146 205 154 213 151 209 153 212
* Includes an annual distribution fee of up to .75 of 1% and an annual service fee of up to .25 of 1%. Pursuant to the rules of
the National Association of Securities Dealers, Inc., the aggregate deferred sales loads and annual distribution fees on Class
D shares of each Series may not exceed 6.25% of total gross sales, subject to certain exclusions. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a long-term Class D shareholder of a Series may pay
more in total sales loads (including distribution fees) than the economic equivalent of 6.25% of such shareholder's investment
in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year, the expenses on a $1,000 investment would be:
OH--$18; OR--$18; SC--$18; CA High-Yield--$18.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF SERIES EXPENSES--(continued)
CA QUALITY SERIES FL SERIES NC SERIES
------------------------- ------------------------- -------------------------
Class A Class D Class A Class D Class A Class D
Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------
(Initial (Deferred (Initial (Deferred (Initial (Deferred
Sales Load Sales Load Sales Load Sales Load Sales Load Sales Load
Alternative) Alternative) Alternative) Alternative) Alternative) Alternative)
<S> <C> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum Sales Load
Imposed on Purchases
(as percentage of
offering price)........ 4.75% None 4.75% None 4.75% None
Sales Load on Reinvested
Dividends ............. None None None None None None
Deferred Sales Load
(as percentage of
original price or
redemption proceeds,
whichever is lower) ... None 1% during None 1% during None 1% during
the first the first the first
year; None year; None year; None
thereafter thereafter thereafter
Redemption Fees.......... None None None None None None
Exchange Fees............ None None None None None None
Class A Class D Class A Class D Class A Class D
------- ------- ------- ------- ------- -------
Annual Series Operating
Expenses for Fiscal
Year Ended September 30,
1995 (as percentage of
average net assets)
Management Fees........ .50% .50% .50% .50% .50% .50%
12b-1 Fees............. .10 1.00* .24 1.00* .24 1.00*
Other Expenses......... .29 .29 .29 .29 .44 .44
--- ---- ---- ---- ---- ----
Total Series
Operating Expenses .. .89% 1.79% 1.03% 1.79% 1.18% 1.94%
=== ==== ==== ==== ==== ====
In fiscal 1995, the Manager, in its discretion, waived a portion of its fee from the Florida Series and from the North Carolina
Series. In fiscal 1996, the Manager does not expect to waive any of its fees, and the expense information in the table has been
restated to reflect the discontinuance of the management fee waiver. The "Other Expenses" disclosed for Class D shares have been
restated to reflect the expense allocation methodology currently being used by the Series.
</TABLE>
<TABLE>
<CAPTION>
The following example should not be considered a representation of past or future expenses. Actual expenses may be greater or
less than those shown and the 5% used in this example is a hypothetical rate.
CA QUALITY SERIES FL SERIES NC SERIES
------------------- ------------------- -------------------
Example Class A Class D Class A Class D Class A Class D
- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
An investor would pay
the following expenses
on a $1,000 investment,
assuming (1) 5% annual
return and (2)
redemption at the end
of each time period:
1 year $ 56 $ 28+ $ 58 $ 28+ $ 59 $ 30+
3 years 75 56 79 56 83 61
5 years 94 97 102 97 109 105
10 years 152 211 167 211 184 226
* Includes an annual distribution fee of up to .75 of 1% and an annual service fee of up to .25 of 1% (collectively,
"distribution fee"). Pursuant to the rules of the National Association of Securities Dealers, Inc., the aggregate deferred
sales loads and annual distribution fees on Class D shares of each Series may not exceed 6.25% of total gross sales, subject to
certain exclusions. The 6.25% limitation is imposed on the Series rather than on a per shareholder basis. Therefore, a
long-term Class D shareholder of a Series may pay more in total sales loads (including distribution fees) than the economic
equivalent of 6.25% of such shareholder's investment in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year, the expenses on a $1,000 investment would be: CA
Quality--$18; FL--$18; NC--$20.
</TABLE>
7
<PAGE>
FINANCIAL HIGHLIGHTS
Each Series' financial highlights for Class A and Class D shares for the
periods presented below have been audited by Deloitte & Touche LLP, independent
auditors. This information, which is derived from the financial and accounting
records of the Funds, should be read in conjunction with the fiscal 1995
financial statements and notes contained in the fiscal 1995 Annual Report of
each Fund which may be obtained by calling or writing the Funds at the telephone
numbers or address provided on the cover page of this Prospectus.
The per share operating performance data is designed to allow investors to
trace the operating performance, on a per share basis, from a Series' beginning
net asset value to the ending net asset value so that they may understand the
effect that individual items have on their investment, assuming it was held
throughout the period. Generally, the per share amounts are derived by
converting the actual dollar amounts incurred for each item, as disclosed in the
financial statements, to their equivalent per share amounts. The total return
based on net asset value measures a series' performance assuming investors
purchased shares at the net asset value as of the beginning of the period,
invested dividends and capital gains paid at net asset value and then sold their
shares at net asset value per share on the last day of the period. The total
return computations do not reflect any sales charges investors may incur in
purchasing or selling shares. Total returns for periods of less than one year
are not annualized.
<TABLE>
<CAPTION>
Increase
Net Realized (Decrease)
Net Asset Value Net & Unrealized from Dividends Distributions Net Increase
Per Share Operating at Beginning Investment Investment Investment Paid or from Net (Decrease) in
Performance: of Period Income# Gain (Loss) Operations Declared Gain Realized Net Asset Value
------------ --------- ------- ----------- ---------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
New Jersey--Class A
Year ended 9/30/95....... $7.40 $0.39 $0.29 $0.68 $(0.39) $(0.10) $0.19
Year ended 9/30/94....... 8.24 0.41 (0.74) (0.33) (0.41) (0.10) (0.84)
Year ended 9/30/93....... 7.74 0.42 0.61 1.03 (0.42) (0.11) 0.50
Year ended 9/30/92....... 7.49 0.44 0.27 0.71 (0.44) (0.02) 0.25
Year ended 9/30/91....... 7.01 0.44 0.51 0.95 (0.44) (0.03) 0.48
Year ended 9/30/90....... 7.17 0.45 (0.10) 0.35 (0.45) (0.06) (0.16)
Year ended 9/30/89....... 6.98 0.48 0.19 0.67 (0.48) -- 0.19
2/16/88*- 9/30/88........ 7.14 0.30 (0.16) 0.14 (0.30) -- (0.16)
New Jersey--Class D
Year ended 9/30/95....... 7.48 0.33 0.29 0.62 (0.33) (0.10) 0.19
2/1/94**- 9/30/94........ 8.14 0.23 (0.66) (0.43) (0.23) -- (0.66)
Pennsylvania--Class A
Year ended 9/30/95....... 7.55 0.38 0.37 0.75 (0.38) (0.13) 0.24
Year ended 9/30/94....... 8.61 0.39 (0.80) (0.41) (0.39) (0.26) (1.06)
Year ended 9/30/93....... 8.02 0.42 0.71 1.13 (0.42) (0.12) 0.59
Year ended 9/30/92....... 7.74 0.46 0.30 0.76 (0.46) (0.02) 0.28
Year ended 9/30/91....... 7.34 0.47 0.49 0.96 (0.47) (0.09) 0.40
Year ended 9/30/90....... 7.50 0.47 (0.16) 0.31 (0.47) -- (0.16)
Year ended 9/30/89....... 7.31 0.49 0.19 0.68 (0.49) -- 0.19
Year ended 9/30/88....... 6.76 0.50 0.56 1.06 (0.50) (0.01) 0.55
Year ended 9/30/87....... 7.58 0.51 (0.81) (0.30) (0.51) (0.01) (0.82)
7/15/86*- 9/30/86........ 7.14 0.10 0.44 0.54 (0.10) -- 0.44
Pennsylvania--Class D
Year ended 9/30/95....... 7.54 0.31 0.37 0.68 (0.31) (0.13) 0.24
2/1/94**- 9/30/94........ 8.37 0.22 (0.83) (0.61) (0.22) -- (0.83)
National Series--Class A
Year ended 9/30/95....... 7.18 0.40 0.40 0.80 (0.40) -- 0.40
Year ended 9/30/94....... 8.72 0.41 (1.04) (0.63) (0.41) (0.50) (1.54)
Year ended 9/30/93....... 8.07 0.45 0.78 1.23 (0.45) (0.13) 0.65
Year ended 9/30/92....... 7.90 0.48 0.20 0.68 (0.48) (0.03) 0.17
Year ended 9/30/91....... 7.44 0.49 0.54 1.03 (0.49) (0.08) 0.46
Year ended 9/30/90....... 7.73 0.51 (0.19) 0.32 (0.51) (0.10) (0.29)
Year ended 9/30/89....... 7.64 0.53 0.11 0.64 (0.53) (0.02) 0.09
Year ended 9/30/88....... 7.41 0.54 0.55 1.09 (0.54) (0.32) 0.23
Year ended 9/30/87....... 8.48 0.59 (0.74) (0.15) (0.59) (0.33) (1.07)
Year ended 9/30/86....... 7.47 0.64 1.20 1.84 (0.64) (0.19) 1.01
National Series--Class D
Year ended 9/30/95....... 7.18 0.32 0.39 0.71 (0.32) -- 0.39
2/1/94** - 9/30/94 ...... 8.20 0.22 (1.02) (0.80) (0.22) -- (1.02)
Colorado Series--Class A
Year ended 9/30/95....... 7.09 0.38 0.21 0.59 (0.38) -- 0.21
Year ended 9/30/94....... 7.76 0.37 (0.59) (0.22) (0.37) (0.08) (0.67)
Year ended 9/30/93....... 7.34 0.39 0.49 0.88 (0.39) (0.07) 0.42
Year ended 9/30/92....... 7.22 0.42 0.12 0.54 (0.42) -- 0.12
Year ended 9/30/91....... 6.91 0.44 0.31 0.75 (0.44) -- 0.31
Year ended 9/30/90....... 7.06 0.46 (0.15) 0.31 (0.46) -- (0.15)
Year ended 9/30/89....... 6.87 0.46 0.19 0.65 (0.46) -- 0.19
Year ended 9/30/88....... 6.38 0.46 0.53 0.99 (0.46) (0.04) 0.49
Year ended 9/30/87....... 7.07 0.47 (0.66) (0.19) (0.47) (0.03) (0.69)
5/1/86*- 9/30/86......... 7.14 0.19 (0.07) 0.12 (0.19) -- (0.07)
Colorado Series--Class D
Year ended 9/30/95....... 7.09 0.30 0.20 0.50 (0.30) -- 0.20
2/1/94** - 9/30/94....... 7.72 0.20 (0.63) (0.43) (0.20) -- (0.63)
</TABLE>
<TABLE>
<CAPTION>
Ratio of
Net
Total Return Ratio of Investment Adjusted Net
Net Asset Based on Expenses Income Net Assets at Invesment
Per Share Operating Value at Net Asset to Average to Average Portfolio End of Period Income
Performance: End of Period Value Net Assets# Net Assets# Turnover (000's omitted) Per Share#
------------ ------------- ----- ----------- ----------- -------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
New Jersey--Class A
Year ended 9/30/95....... $7.59 9.77% 1.01% 5.29% 4.66% $73,561 $0.39
Year ended 9/30/94....... 7.40 (4.25) 0.90 5.24 12.13 73,942 0.40
Year ended 9/30/93....... 8.24 14.02 0.86 5.37 15.90 82,447 0.40
Year ended 9/30/92....... 7.74 9.70 0.85 5.74 27.13 74,256 0.42
Year ended 9/30/91....... 7.49 13.97 0.81 6.02 14.64 65,044 0.42
Year ended 9/30/90....... 7.01 5.04 0.81 6.32 37.26 54,287 0.43
Year ended 9/30/89....... 7.17 9.91 0.57 6.70 16.10 51,015 0.44
2/16/88*- 9/30/88........ 6.98 1.96 0.40+ 6.92+ 8.20 35,563 0.26
New Jersey--Class D
Year ended 9/30/95....... 7.67 8.79 1.89 4.45 4.66 1,190 0.33
2/1/94**- 9/30/94........ 7.48 (5.47) 1.75+ 4.37+ 12.13++ 986 0.22
Pennsylvania--Class A
Year ended 9/30/95....... 7.79 10.55 1.21 5.05 11.78 33,251
Year ended 9/30/94....... 7.55 (5.00) 1.16 4.91 7.71 34,943
Year ended 9/30/93....... 8.61 14.71 1.19 5.14 40.74 41,296
Year ended 9/30/92....... 8.02 10.04 1.01 5.79 32.87 39,431 0.45
Year ended 9/30/91....... 7.74 13.40 0.98 6.16 25.24 37,853 0.45
Year ended 9/30/90....... 7.34 4.13 0.06 6.24 40.64 35,572 0.45
Year ended 9/30/89....... 7.50 9.53 0.92 6.56 9.05 41,856 0.47
Year ended 9/30/88....... 7.31 16.20 0.83 6.96 4.14 30,796 0.48
Year ended 9/30/87....... 6.76 (4.21) 0.58 6.78 9.19 30,014 0.47
7/15/86*- 9/30/86........ 7.58 7.19 -- 5.92+ -- 19,306 0.07
Pennsylvania--Class D
Year ended 9/30/95....... 7.78 9.53 2.23 4.10 11.78 426
2/1/94**- 9/30/94........ 7.54 (7.50) 2.00+ 4.20+ 7.71++ 43
National Series--Class A
Year ended 9/30/95....... 7.58 11.48 0.86 5.46 24.91 104,184
Year ended 9/30/94....... 7.18 (7.83) 0.85 5.30 24.86 111,374
Year ended 9/30/93....... 8.72 16.00 0.86 5.49 72.68 136,394
Year ended 9/30/92....... 8.07 8.84 0.77 6.02 63.99 132,130
Year ended 9/30/91....... 7.90 14.24 0.80 6.35 71.67 136,326
Year ended 9/30/90....... 7.44 4.10 0.78 6.64 55.01 133,412
Year ended 9/30/89....... 7.73 8.62 0.78 6.86 71.90 140,376
Year ended 9/30/88....... 7.64 16.43 0.83 7.35 40.58 135,667
Year ended 9/30/87....... 7.41 (2.37) 0.74 7.15 64.79 133,341
Year ended 9/30/86....... 8.48 26.17 0.76 7.81 62.28 110,428
National Series--Class D
Year ended 9/30/95....... 7.57 10.17 1.95 4.40 24.91 1,215
2/1/94** - 9/30/94 ...... 7.18 (9.96) 1.76+ 4.37+ 24.86++ 446
Colorado Series--Class A
Year ended 9/30/95....... 7.30 8.56 0.93 5.31 14.70 54,858
Year ended 9/30/94....... 7.09 (2.92) 0.86 5.06 10.07 58,197
Year ended 9/30/93....... 7.76 12.54 0.90 5.21 14.09 67,912
Year ended 9/30/92....... 7.34 7.74 0.81 5.81 23.22 64,900
Year ended 9/30/91....... 7.22 11.15 0.84 6.19 14.60 64,310
Year ended 9/30/90....... 6.91 4.38 0.85 6.47 31.89 63,173
Year ended 9/30/89....... 7.06 9.70 0.86 6.56 -- 62,515
Year ended 9/30/88....... 6.87 16.19 0.88 6.89 12.95 66,257
Year ended 9/30/87....... 6.38 (3.18) 0.77 6.61 16.70 79,961 0.46
5/1/86*- 9/30/86......... 7.07 1.53 0.55+ 6.31+ 12.11 63,796 0.18
Colorado Series--Class D
Year ended 9/30/95....... 7.29 7.26 2.02 4.23 14.70 193
2/1/94** - 9/30/94....... 7.09 (5.73) 1.78+ 4.05+ 10.07++ 96
</TABLE>
Adjusted
Adjusted Ratio of
Ratio of Net Investment
Expenses to Income
Average Net to Average
Assets# Net Assets#
------- -----------
New Jersey--Class A
Year ended 9/30/95....... 1.06% 5.24%
Year ended 9/30/94....... 1.07 5.07
Year ended 9/30/93....... 1.11 5.12
Year ended 9/30/92....... 1.10 5.49
Year ended 9/30/91....... 1.11 5.72
Year ended 9/30/90....... 1.12 6.01
Year ended 9/30/89....... 1.17 6.10
2/16/88*- 9/30/88........ 1.36+ 5.96+
New Jersey--Class D
Year ended 9/30/95....... 1.94 4.40
2/1/94**- 9/30/94........ 1.87+ 4.25+
Pennsylvania--Class A
Year ended 9/30/95.......
Year ended 9/30/94.......
Year ended 9/30/93.......
Year ended 9/30/92....... 1.16 5.64
Year ended 9/30/91....... 1.23 5.91
Year ended 9/30/90....... 1.31 5.99
Year ended 9/30/89....... 1.17 6.30
Year ended 9/30/88....... 1.08 6.71
Year ended 9/30/87....... 1.12 6.24
7/15/86*- 9/30/86........ 1.80+ 4.17+
Pennsylvania--Class D
Year ended 9/30/95.......
2/1/94**- 9/30/94........
National Series--Class A
Year ended 9/30/95.......
Year ended 9/30/94.......
Year ended 9/30/93.......
Year ended 9/30/92.......
Year ended 9/30/91.......
Year ended 9/30/90.......
Year ended 9/30/89.......
Year ended 9/30/88.......
Year ended 9/30/87.......
Year ended 9/30/86.......
National Series--Class D
Year ended 9/30/95.......
2/1/94** - 9/30/94 ......
Colorado Series--Class A
Year ended 9/30/95.......
Year ended 9/30/94.......
Year ended 9/30/93.......
Year ended 9/30/92.......
Year ended 9/30/91.......
Year ended 9/30/90.......
Year ended 9/30/89.......
Year ended 9/30/88.......
Year ended 9/30/87....... 0.85 6.53
5/1/86*- 9/30/86......... 0.68+ 6.20+
Colorado Series--Class D
Year ended 9/30/95.......
2/1/94** - 9/30/94.......
- ----------
# During the periods stated, the Manager, at its discretion, reimbursed
certain expenses and/or waived all or portions of its fees. The adjusted
net investment income per share and adjusted ratios reflect what the
results would have been had the Manager not reimbursed certain expenses
and/or not waived its fees.
* Commencement of offering of Class A shares.
** Commencement of offering of Class D shares.
+ Annualized
++ For the year ended 9/30/94.
8-9
<PAGE>
<TABLE>
<CAPTION>
Increase
Net Realized (Decrease)
Net Asset Value Net & Unrealized from Dividends Distributions Net Increase
Per Share Operating at Beginning Investment Investment Investment Paid or from Net (Decrease) in
Performance: of Period Income# Gain (Loss) Operations Declared Gain Realized Net Asset Value
------------ --------- ------- ----------- ---------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Georgia Series--Class A
Year ended 9/30/95....... $7.48 $0.39 $0.43 $0.82 $(0.39) $(0.10) $0.33
Year ended 9/30/94....... 8.43 0.41 (0.86) (0.45) (0.41) (0.09) (0.95)
Year ended 9/30/93....... 7.85 0.43 0.62 1.05 (0.43) (0.04) 0.58
Year ended 9/30/92....... 7.63 0.46 0.25 0.71 (0.46) (0.03) 0.22
Year ended 9/30/91....... 7.18 0.47 0.46 0.93 (0.47) (0.01) 0.45
Year ended 9/30/90....... 7.30 0.48 (0.10) 0.38 (0.48) (0.02) (0.12)
Year ended 9/30/89....... 7.09 0.48 0.22 0.70 (0.48) (0.01) 0.21
Year ended 9/30/88....... 6.49 0.49 0.60 1.09 (0.49) -- 0.60
6/15/87*- 9/30/87........ 7.14 0.13 (0.65) (0.52) (0.13) -- (0.65)
Georgia Series--Class D
Year ended 9/30/95....... 7.49 0.32 0.43 0.75 (0.32) (0.10) 0.33
2/1/94** - 9/30/94....... 8.33 0.22 (0.84) (0.62) (0.22) -- (0.84)
Louisiana Series--Class A
Year ended 9/30/95....... 7.94 0.43 0.34 0.77 (0.43) (0.14) 0.20
Year ended 9/30/94....... 8.79 0.44 (0.77) (0.33) (0.44) (0.08) (0.85)
Year ended 9/30/93....... 8.38 0.46 0.51 0.97 (0.46) (0.10) 0.41
Year ended 9/30/92....... 8.18 0.49 0.24 0.73 (0.49) (0.04) 0.20
Year ended 9/30/91....... 7.70 0.50 0.50 1.00 (0.50) (0.02) 0.48
Year ended 9/30/90....... 7.88 0.52 (0.12) 0.40 (0.52) (0.06) (0.18)
Year ended 9/30/89....... 7.79 0.53 0.15 0.68 (0.53) (0.06) 0.09
Year ended 9/30/88....... 7.36 0.55 0.49 1.04 (0.55) (0.06) 0.43
Year ended 9/30/87....... 7.93 0.55 (0.49) 0.06 (0.55) (0.08) (0.57)
10/1/85*- 9/30/86........ 7.14 0.58 0.79 1.37 (0.58) -- 0.79
Louisiana Series--Class D
Year ended 9/30/95....... 7.94 0.35 0.34 0.69 (0.35) (0.14) 0.20
2/1/94** - 9/30/94....... 8.73 0.24 (0.79) (0.55) (0.24) -- (0.79)
Maryland Series--Class A
Year ended 9/30/95....... 7.71 0.41 0.38 0.79 (0.41) (0.13) 0.25
Year ended 9/30/94....... 8.64 0.42 (0.76) (0.34) (0.42) (0.17) (0.93)
Year ended 9/30/93....... 8.15 0.44 0.59 1.03 (0.44) (0.10) 0.49
Year ended 9/30/92....... 7.94 0.46 0.24 0.70 (0.46) (0.03) 0.21
Year ended 9/30/91....... 7.45 0.47 0.49 0.96 (0.47) -- 0.49
Year ended 9/30/90....... 7.59 0.48 (0.14) 0.34 (0.48) -- (0.14)
Year ended 9/30/89....... 7.39 0.48 0.20 0.68 (0.48) -- 0.20
Year ended 9/30/88....... 6.87 0.47 0.56 1.03 (0.47) (0.04) 0.52
Year ended 9/30/87....... 7.59 0.48 (0.72) (0.24) (0.48) -- (0.72)
10/1/85*- 9/30/86........ 7.14 0.54 0.45 0.99 (0.54) -- 0.45
Maryland Series--Class D
Year ended 9/30/95....... 7.72 0.33 0.38 0.71 (0.33) (0.13) 0.25
2/1/94** - 9/30/94 ...... 8.46 0.23 (0.74) (0.51) (0.23) -- (0.74)
Massachusetts Series--Class A
Year ended 9/30/95....... 7.66 0.42 0.28 0.70 (0.42) (0.03) 0.25
Year ended 9/30/94....... 8.54 0.44 (0.67) (0.23) (0.44) (0.21) (0.88)
Year ended 9/30/93....... 8.06 0.47 0.55 1.02 (0.47) (0.07) 0.48
Year ended 9/30/92....... 7.86 0.49 0.24 0.73 (0.49) (0.04) 0.20
Year ended 9/30/91....... 7.26 0.50 0.62 1.12 (0.50) (0.02) 0.60
Year ended 9/30/90....... 7.65 0.50 (0.31) 0.19 (0.50) (0.08) (0.39)
Year ended 9/30/89....... 7.62 0.52 0.08 0.60 (0.52) (0.05) 0.03
Year ended 9/30/88....... 7.20 0.53 0.51 1.04 (0.53) (0.09) 0.42
Year ended 9/30/87....... 8.07 0.55 (0.69) (0.14) (0.55) (0.18) (0.87)
Year ended 9/30/86....... 7.30 0.60 0.78 1.38 (0.60) (0.01) 0.77
Massachusetts Series--Class D
Year ended 9/30/95....... 7.66 0.34 0.27 0.61 (0.34) (0.03) 0.24
2/1/94** - 9/30/94 ...... 8.33 0.24 (0.67) (0.43) (0.24) -- (0.67)
Michigan Series--Class A
Year ended 9/30/95....... 8.28 0.46 0.30 0.76 (0.46) (0.04) 0.26
Year ended 9/30/94....... 9.08 0.46 (0.71) (0.25) (0.46) (0.09) (0.80)
Year ended 9/30/93....... 8.68 0.47 0.59 1.06 (0.47) (0.19) 0.40
Year ended 9/30/92....... 8.38 0.50 0.35 0.85 (0.50) (0.05) 0.30
Year ended 9/30/91....... 7.89 0.51 0.51 1.02 (0.51) (0.02) 0.49
Year ended 9/30/90....... 8.14 0.52 (0.16) 0.36 (0.52) (0.09) (0.25)
Year ended 9/30/89....... 7.94 0.54 0.23 0.77 (0.54) (0.03) 0.20
Year ended 9/30/88....... 7.48 0.54 0.58 1.12 (0.54) (0.12) 0.46
Year ended 9/30/87....... 8.54 0.56 (0.77) (0.21) (0.56) (0.29) (1.06)
Year ended 9/30/86....... 7.55 0.62 1.09 1.71 (0.62) (0.10) 0.99
Michigan Series--Class D
Year ended 9/30/95....... 8.28 0.37 0.30 0.67 (0.37) (0.04) 0.26
2/1/94** - 9/30/94....... 9.01 0.25 (0.73) (0.48) (0.25) -- (0.73)
</TABLE>
<TABLE>
<CAPTION>
Ratio of
Net
Total Return Ratio of Investment Adjusted Net
Net Asset Based on Expenses Income Net Assets at Invesment
Per Share Operating Value at Net Asset to Average to Average Portfolio End of Period Income
Performance: End of Period Value Net Assets# Net Assets# Turnover (000's omitted) Per Share#
------------ ------------- ----- ----------- ----------- -------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Georgia Series--Class A
Year ended 9/30/95....... $7.81 11.66% 0.91% 5.26% 3.36% $57,678 $0.39
Year ended 9/30/94....... 7.48 (5.52) 0.73 5.21 19.34 61,466 0.40
Year ended 9/30/93....... 8.43 13.96 0.63 5.34 12.45 64,650 0.40
Year ended 9/30/92....... 7.85 9.64 0.47 5.95 10.24 44,585 0.43
Year ended 9/30/91....... 7.63 13.30 0.59 6.30 6.07 28,317 0.43
Year ended 9/30/90....... 7.18 5.19 0.53 6.53 5.83 19,002 0.44
Year ended 9/30/89....... 7.30 10.15 0.64 6.59 -- 14,452 0.44
Year ended 9/30/88....... 7.09 17.51 0.36 7.15 6.32 9,752 0.43
6/15/87*- 9/30/87........ 6.49 (7.61) 0.17+ 6.64+ 21.71 6,382 0.07
Georgia Series--Class D
Year ended 9/30/95....... 7.82 10.58 1.90 4.28 3.36 2,079 0.31
2/1/94** - 9/30/94....... 7.49 (7.57) 1.76+ 4.28+ 19.34++ 849 0.21
Louisiana Series--Class A
Year ended 9/30/95....... 8.14 10.30 0.89 5.44 4.82 61,988
Year ended 9/30/94....... 7.94 (3.83) 0.87 5.31 17.16 61,441
Year ended 9/30/93....... 8.79 12.10 0.87 5.40 9.21 67,529
Year ended 9/30/92....... 8.38 9.13 0.80 5.89 25.45 57,931
Year ended 9/30/91....... 8.18 13.49 0.83 6.31 20.85 50,089
Year ended 9/30/90....... 7.70 5.20 0.81 6.62 31.54 43,475
Year ended 9/30/89....... 7.88 9.04 0.84 6.82 12.94 43,908
Year ended 9/30/88....... 7.79 14.69 0.85 7.19 36.01 42,521
Year ended 9/30/87....... 7.36 0.62 0.73 7.02 10.20 49,661
10/1/85*- 9/30/86........ 7.93 19.47 0.62+ 7.44+ 31.18 45,338 0.57
Louisiana Series--Class D
Year ended 9/30/95....... 8.14 9.17 1.91 4.41 4.82 465
2/1/94** - 9/30/94....... 7.94 (6.45) 1.78+ 4.33+ 17.16++ 704
Maryland Series--Class A
Year ended 9/30/95....... 7.96 10.90 0.96 5.31 3.63 56,290
Year ended 9/30/94....... 7.71 (4.08) 0.92 5.17 17.68 57,263
Year ended 9/30/93....... 8.64 13.23 0.97 5.28 14.10 64,472
Year ended 9/30/92....... 8.15 9.15 0.86 5.76 29.57 57,208
Year ended 9/30/91....... 7.94 13.26 0.88 6.09 18.84 54,068
Year ended 9/30/90....... 7.45 4.47 0.87 6.26 16.50 47,283
Year ended 9/30/89....... 7.59 9.43 0.87 6.38 2.19 46,643
Year ended 9/30/88....... 7.39 15.73 0.91 6.63 17.42 45,939
Year ended 9/30/87....... 6.87 (3.41) 0.87 6.45 21.48 50,580
10/1/85*- 9/30/86........ 7.59 14.11 0.59+ 6.90+ 4.60 46,478 0.53
Maryland Series--Class D
Year ended 9/30/95....... 7.97 9.75 2.02 4.27 3.63 630
2/1/94** - 9/30/94 ...... 7.72 (6.21) 1.80+ 4.26+ 17.68++ 424
Massachusetts Series--Class A
Year ended 9/30/95....... 7.91 9.58 0.86 5.51 16.68 115,711
Year ended 9/30/94....... 7.66 (2.94) 0.85 5.46 12.44 120,149
Year ended 9/30/93....... 8.54 13.18 0.88 5.65 20.66 139,504
Year ended 9/30/92....... 8.06 9.75 0.77 6.27 27.92 128,334
Year ended 9/30/91....... 7.86 15.84 0.83 6.64 14.37 118,022
Year ended 9/30/90....... 7.26 2.48 0.79 6.66 19.26 110,246
Year ended 9/30/89....... 7.65 8.18 0.79 6.81 7.51 122,515
Year ended 9/30/88....... 7.62 15.15 0.84 7.02 21.77 126,150
Year ended 9/30/87....... 7.20 (2.16) 0.79 6.95 16.14 131,404
Year ended 9/30/86....... 8.07 19.49 0.78 7.50 27.39 131,732
Massachusetts Series--Class D
Year ended 9/30/95....... 7.90 8.33 1.95 4.47 16.68 890
2/1/94** - 9/30/94 ...... 7.66 (5.34) 1.78+ 4.52+ 12.44++ 1,099
Michigan Series--Class A
Year ended 9/30/95....... 8.54 9.56 0.87 5.50 20.48 151,589
Year ended 9/30/94....... 8.28 (2.90) 0.84 5.32 10.06 151,095
Year ended 9/30/93....... 9.08 12.97 0.83 5.41 6.33 164,638
Year ended 9/30/92....... 8.68 10.55 0.76 5.93 32.12 144,524
Year ended 9/30/91....... 8.38 13.34 0.80 6.28 22.81 129,004
Year ended 9/30/90....... 7.89 4.57 0.80 6.47 26.36 112,689
Year ended 9/30/89....... 8.14 9.91 0.81 6.67 8.24 111,180
Year ended 9/30/88....... 7.94 15.98 0.88 7.06 34.00 104,904
Year ended 9/30/87....... 7.48 (2.87) 0.79 6.89 15.40 104,053
Year ended 9/30/86....... 8.54 23.73 0.82 7.41 40.68 99,013
Michigan Series--Class D
Year ended 9/30/95....... 8.54 8.36 2.01 4.40 20.48 1,172
2/1/94** - 9/30/94....... 8.28 (5.47) 1.75+ 4.40+ 10.06++ 671
</TABLE>
Adjusted
Adjusted Ratio of
Ratio of Net Investment
Expenses to Income
Average Net to Average
Assets# Net Assets#
------- -----------
Georgia Series--Class A
Year ended 9/30/95....... 0.96% 5.21%
Year ended 9/30/94....... 0.93 5.01
Year ended 9/30/93....... 0.93 5.04
Year ended 9/30/92....... 0.87 5.55
Year ended 9/30/91....... 1.09 5.80
Year ended 9/30/90....... 1.03 6.03
Year ended 9/30/89....... 1.19 6.04
Year ended 9/30/88....... 1.35 6.17
6/15/87*- 9/30/87........ 2.87+ 3.94+
Georgia Series--Class D
Year ended 9/30/95....... 1.95 4.23
2/1/94** - 9/30/94....... 1.90+ 4.15+
Louisiana Series--Class A
Year ended 9/30/95.......
Year ended 9/30/94.......
Year ended 9/30/93.......
Year ended 9/30/92.......
Year ended 9/30/91.......
Year ended 9/30/90.......
Year ended 9/30/89.......
Year ended 9/30/88.......
Year ended 9/30/87.......
10/1/85*- 9/30/86........ 0.71+ 7.35+
Louisiana Series--Class D
Year ended 9/30/95.......
2/1/94** - 9/30/94.......
Maryland Series--Class A
Year ended 9/30/95.......
Year ended 9/30/94.......
Year ended 9/30/93.......
Year ended 9/30/92.......
Year ended 9/30/91.......
Year ended 9/30/90.......
Year ended 9/30/89.......
Year ended 9/30/88.......
Year ended 9/30/87.......
10/1/85*- 9/30/86........ 0.76+ 6.73+
Maryland Series--Class D
Year ended 9/30/95.......
2/1/94** - 9/30/94 ......
Massachusetts Series--Class A
Year ended 9/30/95.......
Year ended 9/30/94.......
Year ended 9/30/93.......
Year ended 9/30/92.......
Year ended 9/30/91.......
Year ended 9/30/90.......
Year ended 9/30/89.......
Year ended 9/30/88.......
Year ended 9/30/87.......
Year ended 9/30/86.......
Massachusetts Series--Class D
Year ended 9/30/95.......
2/1/94** - 9/30/94 ......
Michigan Series--Class A
Year ended 9/30/95.......
Year ended 9/30/94.......
Year ended 9/30/93.......
Year ended 9/30/92.......
Year ended 9/30/91.......
Year ended 9/30/90.......
Year ended 9/30/89.......
Year ended 9/30/88.......
Year ended 9/30/87.......
Year ended 9/30/86.......
Michigan Series--Class D
Year ended 9/30/95.......
2/1/94** - 9/30/94.......
- ----------
# During the periods stated, the Manager, at its discretion, reimbursed
certain expenses and/or waived all or portions of its fees. The adjusted
net investment income per share and adjusted ratios reflect what the
results would have been had the Manager not reimbursed certain expenses
and/or not waived its fees.
* Commencement of offering of Class A shares.
** Commencement of offering of Class D shares.
+ Annualized
++ For the year ended 9/30/94.
10-11
<PAGE>
<TABLE>
<CAPTION>
Increase
Net Realized (Decrease)
Net Asset Value Net & Unrealized from Dividends Distributions Net Increase
Per Share Operating at Beginning Investment Investment Investment Paid or from Net (Decrease) in
Performance: of Period Income# Gain (Loss) Operations Declared Gain Realized Net Asset Value
------------ --------- ------- ----------- ---------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Minnesota Series--Class A
Year ended 9/30/95....... $7.72 $0.45 $0.11 $0.56 $(0.45) $(0.01) $0.10
Year ended 9/30/94....... 8.28 0.45 (0.44) (0.01) (0.45) (0.12) (0.56)
Year ended 9/30/93....... 7.89 0.47 0.51 0.98 (0.47) (0.12) 0.39
Year ended 9/30/92....... 7.81 0.49 0.09 0.58 (0.49) (0.01) 0.08
Year ended 9/30/91....... 7.49 0.49 0.32 0.81 (0.49) -- 0.32
Year ended 9/30/90....... 7.60 0.49 (0.06) 0.43 (0.49) (0.05) (0.11)
Year ended 9/30/89....... 7.52 0.51 0.11 0.62 (0.51) (0.03) 0.08
Year ended 9/30/88....... 7.12 0.51 0.48 0.99 (0.51) (0.08) 0.40
Year ended 9/30/87....... 7.99 0.53 (0.66) (0.13) (0.53) (0.21) (0.87)
Year ended 9/30/86....... 7.15 0.58 0.88 1.46 (0.58) (0.04) 0.84
Minnesota Series--Class D
Year ended 9/30/95....... 7.73 0.38 0.10 0.48 (0.38) (0.01) 0.09
2/1/94** - 9/30/94 ...... 8.22 0.25 (0.49) (0.24) (0.25) -- (0.49)
Missouri Series--Class A
Year ended 9/30/95....... 7.41 0.40 0.36 0.76 (0.40) (0.07) 0.29
Year ended 9/30/94....... 8.31 0.40 (0.79) (0.39) (0.40) (0.11) (0.90)
Year ended 9/30/93....... 7.80 0.42 0.57 0.99 (0.42) (0.06) 0.51
Year ended 9/30/92....... 7.72 0.44 0.15 0.59 (0.44) (0.07) 0.08
Year ended 9/30/91....... 7.22 0.46 0.50 0.96 (0.46) -- 0.50
Year ended 9/30/90....... 7.28 0.45 (0.06) 0.39 (0.45) -- (0.06)
Year ended 9/30/89....... 7.10 0.47 0.18 0.65 (0.47) -- 0.18
Year ended 9/30/88....... 6.57 0.48 0.58 1.06 (0.48) (0.05) 0.53
Year ended 9/30/87....... 7.32 0.47 (0.75) (0.28) (0.47) -- (0.75)
7/1/86*- 9/30/86......... 7.14 0.11 0.18 0.29 (0.11) -- 0.18
Missouri Series--Class D
Year ended 9/30/95....... 7.41 0.32 0.36 0.68 (0.32) (0.07) 0.29
2/1/94** - 9/30/94 ...... 8.20 0.22 (0.79) (0.57) (0.22) -- (0.79)
New York Series--Class A
Year ended 9/30/95....... 7.67 0.42 0.36 0.78 (0.42) (0.17) 0.19
Year ended 9/30/94....... 8.75 0.43 (0.88) (0.45) (0.43) (0.20) (1.08)
Year ended 9/30/93....... 8.13 0.45 0.74 1.19 (0.45) (0.12) 0.62
Year ended 9/30/92....... 7.94 0.49 0.26 0.75 (0.49) (0.07) 0.19
Year ended 9/30/91....... 7.40 0.50 0.54 1.04 (0.50) -- 0.54
Year ended 9/30/90....... 7.71 0.51 (0.26) 0.25 (0.51) (0.05) (0.31)
Year ended 9/30/89....... 7.57 0.52 0.17 0.69 (0.52) (0.03) 0.14
Year ended 9/30/88....... 7.28 0.52 0.48 1.00 (0.52) (0.19) 0.29
Year ended 9/30/87....... 8.24 0.55 (0.71) (0.16) (0.55) (0.25) (0.96)
Year ended 9/30/86....... 7.40 0.60 0.94 1.54 (0.60) (0.10) 0.84
New York Series--Class D
Year ended 9/30/95....... 7.67 0.34 0.37 0.71 (0.34) (0.17) 0.20
2/1/94** - 9/30/94 ...... 8.55 0.23 (0.88) (0.65) (0.23) -- (0.88)
Ohio Series--Class A
Year ended 9/30/95....... 7.90 0.44 0.28 0.72 (0.44) (0.07) 0.21
Year ended 9/30/94....... 8.77 0.44 (0.70) (0.26) (0.44) (0.17) (0.87)
Year ended 9/30/93....... 8.28 0.46 0.56 1.02 (0.46) (0.07) 0.49
Year ended 9/30/92....... 8.06 0.49 0.26 0.75 (0.49) (0.04) 0.22
Year ended 9/30/91....... 7.62 0.51 0.45 0.96 (0.51) (0.01) 0.44
Year ended 9/30/90....... 7.80 0.52 (0.08) 0.44 (0.52) (0.10) (0.18)
Year ended 9/30/89....... 7.71 0.54 0.11 0.65 (0.54) (0.02) 0.09
Year ended 9/30/88....... 7.38 0.54 0.53 1.07 (0.54) (0.20) 0.33
Year ended 9/30/87....... 8.09 0.57 (0.59) (0.02) (0.57) (0.12) (0.71)
Year ended 9/30/86....... 7.27 0.61 0.87 1.48 (0.61) (0.05) 0.82
Ohio Series--Class D
Year ended 9/30/95....... 7.92 0.36 0.30 0.66 (0.36) (0.07) 0.23
2/1/94** - 9/30/94 ...... 8.61 0.24 (0.69) (0.45) (0.24) -- (0.69)
Oregon Series--Class A
Year ended 9/30/95....... 7.43 0.40 0.25 0.65 (0.40) (0.02) 0.23
Year ended 9/30/94....... 8.08 0.40 (0.59) (0.19) (0.40) (0.06) (0.65)
Year ended 9/30/93....... 7.60 0.42 0.48 0.90 (0.42) -- 0.48
Year ended 9/30/92....... 7.42 0.42 0.18 0.60 (0.42) -- 0.18
Year ended 9/30/91....... 6.96 0.44 0.46 0.90 (0.44) -- 0.46
Year ended 9/30/90....... 7.05 0.44 (0.09) 0.35 (0.44) -- (0.09)
Year ended 9/30/89....... 6.83 0.44 0.22 0.66 (0.44) -- 0.22
Year ended 9/30/88....... 6.21 0.45 0.62 1.07 (0.45) -- 0.62
10/15/86*- 9/30/87....... 7.14 0.43 (0.93) (0.50) (0.43) -- (0.93)
Oregon Series--Class D
Year ended 9/30/95....... 7.43 0.33 0.24 0.57 (0.33) (0.02) 0.22
2/1/94**- 9/30/94 ....... 8.02 0.22 (0.59) (0.37) (0.22) -- (0.59)
</TABLE>
<TABLE>
<CAPTION>
Ratio of
Net
Total Return Ratio of Investment Adjusted Net
Net Asset Based on Expenses Income Net Assets at Invesment
Per Share Operating Value at Net Asset to Average to Average Portfolio End of Period Income
Performance: End of Period Value Net Assets# Net Assets# Turnover (000's omitted) Per Share#
------------ ------------- ----- ----------- ----------- -------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Minnesota Series--Class A
Year ended 9/30/95....... $7.82 7.61% 0.87% 5.89% 5.57% $132,716
Year ended 9/30/94....... 7.72 0.12 0.85 5.70 3.30 134,990
Year ended 9/30/93....... 8.28 13.06 0.90 5.89 5.73 144,600
Year ended 9/30/92....... 7.89 7.71 0.80 6.29 12.08 151,922
Year ended 9/30/91....... 7.81 11.10 0.80 6.28 2.61 182,979
Year ended 9/30/90....... 7.49 5.79 0.81 6.40 12.10 160,930
Year ended 9/30/89....... 7.60 8.34 0.83 6.61 7.55 148,425
Year ended 9/30/88....... 7.52 14.76 0.87 6.95 35.37 132,541
Year ended 9/30/87....... 7.12 (1.94) 0.89 6.85 16.76 118,093
Year ended 9/30/86....... 7.99 21.25 0.90 7.41 24.98 108,016
Minnesota Series--Class D
Year ended 9/30/95....... 7.82 6.45 1.85 4.92 5.57 2,237
2/1/94** - 9/30/94 ...... 7.73 (3.08) 1.74+ 4.68+ 3.30++ 1,649
Missouri Series--Class A
Year ended 9/30/95....... 7.70 10.67 0.88 5.31 3.88 51,169 $0.39
Year ended 9/30/94....... 7.41 (4.85) 0.74 5.18 14.33 52,621 0.39
Year ended 9/30/93....... 8.31 13.17 0.71 5.29 17.03 56,861 0.41
Year ended 9/30/92....... 7.80 7.87 0.83 5.71 18.80 49,459
Year ended 9/30/91....... 7.72 13.61 0.88 6.10 16.30 47,659
Year ended 9/30/90....... 7.22 5.47 0.84 6.20 30.46 50,875
Year ended 9/30/89....... 7.28 9.33 0.96 6.43 32.81 49,162
Year ended 9/30/88....... 7.10 16.74 0.86 6.88 12.32 58,457
Year ended 9/30/87....... 6.57 (4.20) 0.82 6.51 11.53 59,122 0.47
7/1/86*- 9/30/86......... 7.32 3.87 0.86+ 5.21+ 0.18 45,107 0.10
Missouri Series--Class D
Year ended 9/30/95....... 7.70 9.49 1.98 4.23 3.88 515 0.32
2/1/94** - 9/30/94 ...... 7.41 (7.16) 1.70+ 4.27+ 14.33++ 350 0.22
New York Series--Class A
Year ended 9/30/95....... 7.86 10.93 0.88 5.52 34.05 83,980
Year ended 9/30/94....... 7.67 (5.37) 0.87 5.31 28.19 90,914
Year ended 9/30/93....... 8.75 15.26 0.94 5.37 27.90 104,685
Year ended 9/30/92....... 8.13 9.80 0.79 6.09 42.90 92,681
Year ended 9/30/91....... 7.94 14.56 0.80 6.57 44.57 83,684
Year ended 9/30/90....... 7.40 3.19 0.79 6.65 32.14 77,766
Year ended 9/30/89....... 7.71 9.35 0.80 6.78 47.69 75,471
Year ended 9/30/88....... 7.57 14.74 0.86 6.96 62.42 74,238
Year ended 9/30/87....... 7.28 (2.42) 0.77 6.90 20.42 72,782
Year ended 9/30/86....... 8.24 21.75 0.79 7.44 35.89 64,562
New York Series--Class D
Year ended 9/30/95....... 7.87 9.87 1.96 4.42 34.05 885
2/1/94** - 9/30/94 ...... 7.67 (7.73) 1.81+ 4.39+ 28.19++ 476
Ohio Series--Class A
Year ended 9/30/95....... 8.11 9.59 0.84 5.56 2.96 170,191
Year ended 9/30/94....... 7.90 (3.08) 0.84 5.34 9.37 171,469
Year ended 9/30/93....... 8.77 12.81 0.85 5.44 30.68 190,083
Year ended 9/30/92....... 8.28 9.68 0.75 6.02 7.15 170,427
Year ended 9/30/91....... 8.06 12.96 0.77 6.42 13.95 156,179
Year ended 9/30/90....... 7.62 5.70 0.77 6.63 16.05 136,251
Year ended 9/30/89....... 7.80 8.74 0.79 6.91 12.72 131,900
Year ended 9/30/88....... 7.71 15.76 0.83 7.20 26.71 122,386
Year ended 9/30/87....... 7.38 (0.66) 0.78 7.05 15.00 119,703
Year ended 9/30/86....... 8.09 21.17 0.80 7.62 17.21 114,023
Ohio Series--Class D
Year ended 9/30/95....... 8.15 8.67 1.93 4.48 2.96 660
2/1/94** - 9/30/94 ...... 7.92 (5.36) 1.78+ 4.41+ 9.37++ 324
Oregon Series--Class A
Year ended 9/30/95....... 7.66 9.05 0.86 5.40 2.47 59,549 0.40
Year ended 9/30/94....... 7.43 (2.38) 0.78 5.20 9.43 59,884 0.39
Year ended 9/30/93....... 8.08 12.21 0.78 5.35 8.08 62,095 0.41
Year ended 9/30/92....... 7.60 8.35 0.68 5.63 0.21 48,797 0.42
Year ended 9/30/91....... 7.42 13.25 0.71 6.06 7.60 39,350 0.42
Year ended 9/30/90....... 6.96 4.99 0.72 6.17 4.09 32,221 0.42
Year ended 9/30/89....... 7.05 9.95 0.64 6.34 0.19 30,510 0.42
Year ended 9/30/88....... 6.83 17.89 0.54 6.86 3.94 26,609 0.42
10/15/86*- 9/30/87....... 6.21 (7.68) 0.52+ 6.44+ 20.16 24,434 0.39
Oregon Series--Class D
Year ended 9/30/95....... 7.65 7.86 1.83 4.41 2.47 1,495 0.33
2/1/94**- 9/30/94 ....... 7.43 (4.76) 1.72+ 4.32+ 9.43++ 843 0.22
</TABLE>
Adjusted
Adjusted Ratio of
Ratio of Net Investment
Expenses to Income
Average Net to Average
Assets# Net Assets#
------- -----------
Minnesota Series--Class A
Year ended 9/30/95.......
Year ended 9/30/94.......
Year ended 9/30/93.......
Year ended 9/30/92.......
Year ended 9/30/91.......
Year ended 9/30/90.......
Year ended 9/30/89.......
Year ended 9/30/88.......
Year ended 9/30/87.......
Year ended 9/30/86.......
Minnesota Series--Class D
Year ended 9/30/95.......
2/1/94** - 9/30/94 ......
Missouri Series--Class A
Year ended 9/30/95....... 0.93% 5.26%
Year ended 9/30/94....... 0.88 5.04
Year ended 9/30/93....... 0.91 5.09
Year ended 9/30/92.......
Year ended 9/30/91.......
Year ended 9/30/90.......
Year ended 9/30/89.......
Year ended 9/30/88.......
Year ended 9/30/87....... 0.89 6.43
7/1/86*- 9/30/86......... 1.07+ 5.42+
Missouri Series--Class D
Year ended 9/30/95....... 2.03 4.18
2/1/94** - 9/30/94 ...... 1.80+ 4.17+
New York Series--Class A
Year ended 9/30/95.......
Year ended 9/30/94.......
Year ended 9/30/93.......
Year ended 9/30/92.......
Year ended 9/30/91.......
Year ended 9/30/90.......
Year ended 9/30/89.......
Year ended 9/30/88.......
Year ended 9/30/87.......
Year ended 9/30/86.......
New York Series--Class D
Year ended 9/30/95.......
2/1/94** - 9/30/94 ......
Ohio Series--Class A
Year ended 9/30/95.......
Year ended 9/30/94.......
Year ended 9/30/93.......
Year ended 9/30/92.......
Year ended 9/30/91.......
Year ended 9/30/90.......
Year ended 9/30/89.......
Year ended 9/30/88.......
Year ended 9/30/87.......
Year ended 9/30/86.......
Ohio Series--Class D
Year ended 9/30/95.......
2/1/94** - 9/30/94 ......
Oregon Series--Class A
Year ended 9/30/95....... 0.91 5.35
Year ended 9/30/94....... 0.89 5.09
Year ended 9/30/93....... 0.93 5.20
Year ended 9/30/92....... 0.83 5.48
Year ended 9/30/91....... 0.91 5.86
Year ended 9/30/90....... 0.93 5.96
Year ended 9/30/89....... 0.96 6.03
Year ended 9/30/88....... 1.01 6.39
10/15/86*- 9/30/87....... 1.11+ 5.85+
Oregon Series--Class D
Year ended 9/30/95....... 1.88 4.36
2/1/94**- 9/30/94 ....... 1.82+ 4.22+
- ----------
# During the periods stated, the Manager, at its discretion, reimbursed
certain expenses and/or waived all or portions of its fees. The adjusted
net investment income per share and adjusted ratios reflect what the
results would have been had the Manager not reimbursed certain expenses
and/or not waived its fees.
* Commencement of offering of Class A shares.
** Commencement of offering of Class D shares.
+ Annualized
++ For the year ended 9/30/94.
12-13
<PAGE>
<TABLE>
<CAPTION>
Increase
Net Realized (Decrease)
Net Asset Value Net & Unrealized from Dividends Distributions Net Increase
Per Share Operating at Beginning Investment Investment Investment Paid or from Net (Decrease) in
Performance: of Period Income# Gain (Loss) Operations Declared Gain Realized Net Asset Value
------------ --------- ------- ----------- ---------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
South Carolina Series--Class A
Year ended 9/30/95....... $7.61 $0.41 $0.37 $0.78 $(0.41) $(0.01) $0.36
Year ended 9/30/94....... 8.52 0.41 (0.79) (0.38) (0.41) (0.12) (0.91)
Year ended 9/30/93....... 8.00 0.43 0.54 0.97 (0.43) (0.02) 0.52
Year ended 9/30/92....... 7.71 0.45 0.31 0.76 (0.45) (0.02) 0.29
Year ended 9/30/91....... 7.23 0.46 0.52 0.98 (0.46) (0.04) 0.48
Year ended 9/30/90....... 7.37 0.48 (0.14) 0.34 (0.48) -- (0.14)
Year ended 9/30/89....... 7.21 0.48 0.17 0.65 (0.48) (0.01) 0.16
Year ended 9/30/88....... 6.67 0.50 0.54 1.04 (0.50) -- 0.54
6/30/87*-9/30/87......... 7.14 0.11 (0.47) (0.36) (0.11) -- (0.47)
South Carolina Series--Class D
Year ended 9/30/95....... 7.61 0.34 0.37 0.71 (0.34) (0.01) 0.36
2/1/94** - 9/30/94 ...... 8.42 0.22 (0.81) (0.59) (0.22) -- (0.81)
California High-Yield Series--Class A
Year ended 9/30/95....... 6.30 0.37 0.17 0.54 (0.37) -- 0.17
Year ended 9/30/94....... 6.73 0.37 (0.34) 0.03 (0.37) (0.09) (0.43)
Year ended 9/30/93....... 6.65 0.39 0.28 0.67 (0.39) (0.20) 0.08
Year ended 9/30/92....... 6.50 0.41 0.16 0.57 (0.41) (0.01) 0.15
Year ended 9/30/91....... 6.18 0.42 0.33 0.75 (0.42) (0.01) 0.32
Year ended 9/30/90....... 6.36 0.42 (0.07) 0.35 (0.42) (0.11) (0.18)
Year ended 9/30/89....... 6.27 0.44 0.15 0.59 (0.44) (0.06) 0.09
Year ended 9/30/88....... 5.94 0.44 0.39 0.83 (0.44) (0.06) 0.33
Year ended 9/30/87....... 6.73 0.46 (0.53) (0.07) (0.46) (0.26) (0.79)
Year ended 9/30/86....... 5.96 0.51 0.89 1.40 (0.51) (0.12) 0.77
California High-Yield Series--Class D
Year ended 9/30/95....... 6.31 0.31 0.17 0.48 (0.31) -- 0.17
2/1/94**- 9/30/94........ 6.67 0.21 (0.36) (0.15) (0.21) -- (0.36)
California Quality Series--Class A
Year ended 9/30/95....... 6.39 0.34 0.32 0.66 (0.34) (0.06) 0.26
Year ended 9/30/94....... 7.28 0.35 (0.73) (0.38) (0.35) (0.16) (0.89)
Year ended 9/30/93....... 6.85 0.37 0.54 0.91 (0.37) (0.11) 0.43
Year ended 9/30/92....... 6.65 0.40 0.22 0.62 (0.40) (0.02) 0.20
Year ended 9/30/91....... 6.22 0.40 0.46 0.86 (0.40) (0.03) 0.43
Year ended 9/30/90....... 6.47 0.40 (0.13) 0.27 (0.40) (0.12) (0.25)
Year ended 9/30/89....... 6.29 0.42 0.19 0.61 (0.42) (0.01) 0.18
Year ended 9/30/88....... 6.01 0.42 0.39 0.81 (0.42) (0.11) 0.28
Year ended 9/30/87....... 6.73 0.45 (0.59) (0.14) (0.45) (0.13) (0.72)
Year ended 9/30/86....... 5.98 0.49 0.83 1.32 (0.49) (0.08) 0.75
California Quality Series--Class D
Year ended 9/30/95....... 6.38 0.28 0.31 0.59 (0.28) (0.06) 0.25
2/1/94**- 9/30/94 ....... 7.13 0.19 (0.75) (0.56) (0.19) -- (0.75)
Florida Series--Class A
Year ended 9/30/95....... 7.34 0.40 0.37 0.77 (0.40) -- 0.37
Year ended 9/30/94....... 8.20 0.42 (0.74) (0.32) (0.42) (0.12) (0.86)
Year ended 9/30/93....... 7.56 0.46 0.65 1.11 (0.46) (0.01) 0.64
Year ended 9/30/92....... 7.37 0.47 0.19 0.66 (0.47) -- 0.19
Year ended 9/30/91....... 6.90 0.43 0.47 0.90 (0.43) -- 0.47
Year ended 9/30/90....... 6.99 0.45 (0.09) 0.36 (0.45) -- (0.09)
Year ended 9/30/89....... 6.71 0.46 0.28 0.74 (0.46) -- 0.28
Year ended 9/30/88....... 6.02 0.47 0.69 1.16 (0.47) -- 0.69
11/17/86*- 9/30/87....... 7.14 0.40 (1.12) (0.72) (0.40) -- (1.12)
Florida Series--Class D
Year ended 9/30/95....... 7.34 0.34 0.38 0.72 (0.34) -- 0.38
2/1/94**- 9/30/94 ..... 8.10 0.24 (0.76) (0.52) (0.24) -- (0.76)
North Carolina Series--Class A
Year ended 9/30/95....... 7.30 0.39 0.45 0.84 (0.39) (0.01) 0.44
Year ended 9/30/94....... 8.22 0.41 (0.87) (0.46) (0.41) (0.05) (0.92)
Year ended 9/30/93....... 7.61 0.43 0.63 1.06 (0.43) (0.02) 0.61
Year ended 9/30/92....... 7.39 0.44 0.22 0.66 (0.44) -- 0.22
Year ended 9/30/91....... 7.04 0.45 0.35 0.80 (0.45) -- 0.35
8/27/90*- 9/30/90........ 7.14 0.03 (0.10) (0.07) (0.03) -- (0.10)
North Carolina Series--Class D
Year ended 9/30/95....... 7.29 0.33 0.46 0.79 (0.33) (0.01) 0.45
2/1/94**- 9/30/94 ....... 8.17 0.23 (0.88) (0.65) (0.23) -- (0.88)
</TABLE>
<TABLE>
<CAPTION>
Ratio of
Net
Total Return Ratio of Investment Adjusted Net
Net Asset Based on Expenses Income Net Assets at Invesment
Per Share Operating Value at Net Asset to Average to Average Portfolio End of Period Income
Performance: End of Period Value Net Assets# Net Assets# Turnover (000's omitted) Per Share#
------------ ------------- ----- ----------- ----------- -------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
South Carolina Series--Class A
Year ended 9/30/95....... $7.97 10.69% 0.88% 5.38% 4.13% $112,421
Year ended 9/30/94....... 7.61 (4.61) 0.83 5.12 1.81 115,133
Year ended 9/30/93....... 8.52 12.52 0.85 5.19 17.69 120,589
Year ended 9/30/92....... 8.00 10.08 0.81 5.71 3.37 82,882
Year ended 9/30/91....... 7.71 13.95 0.81 6.14 9.05 63,863 $0.45
Year ended 9/30/90....... 7.23 4.48 0.73 6.47 15.26 49,234 0.47
Year ended 9/30/89....... 7.37 9.41 0.68 6.48 0.03 46,487 0.46
Year ended 9/30/88....... 7.21 16.18 0.33 7.03 12.36 26,385 0.45
6/30/87*-9/30/87......... 6.67 (5.37) 0.02+ 6.34+ -- 12,033 0.08
South Carolina Series--Class D
Year ended 9/30/95....... 7.97 9.63 1.85 4.40 4.13 1,704
2/1/94** - 9/30/94 ...... 7.61 (7.14) 1.74+ 4.29+ 1.81++ 1,478
California High-Yield Series--Class A
Year ended 9/30/95....... 6.47 8.85 0.90 5.84 17.64 51,504
Year ended 9/30/94....... 6.30 0.41 0.85 5.74 8.36 48,007
Year ended 9/30/93....... 6.73 10.66 0.88 5.94 7.70 51,218
Year ended 9/30/92....... 6.65 9.00 0.82 6.20 45.50 49,448
Year ended 9/30/91....... 6.50 12.53 0.83 6.67 5.13 49,172
Year ended 9/30/90....... 6.18 5.57 0.89 6.68 17.66 49,312
Year ended 9/30/89....... 6.36 9.61 0.89 6.85 14.70 51,079
Year ended 9/30/88....... 6.27 14.72 0.91 7.17 20.79 53,037
Year ended 9/30/87....... 5.94 (1.46) 0.83 7.07 16.89 56,598
Year ended 9/30/86....... 6.73 24.79 0.66 7.88 54.08 51,046 0.50
California High-Yield Series--Class D
Year ended 9/30/95....... 6.48 7.78 1.91 4.84 17.64 1,277
2/1/94**- 9/30/94........ 6.31 (2.47) 1.74+ 4.73+ 8.36++ 650
California Quality Series--Class A
Year ended 9/30/95....... 6.65 10.85 0.89 5.34 11.24 94,947
Year ended 9/30/94....... 6.39 (5.46) 0.81 5.20 22.16 99,020
Year ended 9/30/93....... 7.28 13.92 0.82 5.30 15.67 111,732
Year ended 9/30/92....... 6.85 9.56 0.78 5.86 34.25 93,557
Year ended 9/30/91....... 6.65 14.35 0.78 6.19 20.11 77,884
Year ended 9/30/90....... 6.22 4.22 0.83 6.31 28.61 61,854
Year ended 9/30/89....... 6.47 9.86 0.85 6.53 57.85 59,258
Year ended 9/30/88....... 6.29 14.37 0.86 6.74 46.47 58,608
Year ended 9/30/87....... 6.01 (2.59) 0.77 6.76 15.17 58,872
Year ended 9/30/86....... 6.73 23.06 0.67 7.36 28.66 53,388 0.48
California Quality Series--Class D
Year ended 9/30/95....... 6.63 9.61 1.88 4.36 11.24 863
2/1/94**- 9/30/94 ....... 6.38 (8.01) 1.77+ 4.39+ 22.16++ 812
Florida Series--Class A
Year ended 9/30/95....... 7.71 10.87 0.72 5.38 11.82 49,030 0.37
Year ended 9/30/94....... 7.34 (3.99) 0.42 5.49 6.17 49,897 0.38
Year ended 9/30/93....... 8.20 15.21 0.23 5.82 16.42 52,855 0.40
Year ended 9/30/92....... 7.56 9.24 0.17 6.32 12.62 37,957 0.41
Year ended 9/30/91....... 7.37 13.41 0.90 6.00 -- 28,173 0.42
Year ended 9/30/90....... 6.90 5.23 0.65 6.44 13.08 24,025 0.44
Year ended 9/30/89....... 6.99 11.28 0.69 6.61 2.41 23,062 0.44
Year ended 9/30/88....... 6.71 19.82 0.67 7.18 1.07 20,457 0.45
11/17/86*- 9/30/87....... 6.02 (10.74) 0.50+ 6.85+ 28.52 22,228 0.37
Florida Series--Class D
Year ended 9/30/95....... 7.72 10.07 1.66 4.53 11.82 603 0.31
2/1/94**- 9/30/94 ..... 7.34 (6.64) 1.29+ 4.61+ 6.17++ 244 0.21
North Carolina Series--Class A
Year ended 9/30/95....... 7.74 11.92 0.82 5.21 4.38 37,446 0.36
Year ended 9/30/94....... 7.30 (5.80) 0.44 5.29 15.61 38,920 0.35
Year ended 9/30/93....... 8.22 14.46 0.23 5.44 3.13 38,828 0.35
Year ended 9/30/92....... 7.61 9.23 0.14 5.83 12.51 21,836 0.34
Year ended 9/30/91....... 7.39 11.97 0.07 6.10 -- 9,255 0.22
8/27/90*- 9/30/90........ 7.04 (1.40) 0.94+ 4.48+ -- 1,377 0.01
North Carolina Series--Class D
Year ended 9/30/95....... 7.74 11.19 1.64 4.42 4.38 1,257 0.31
2/1/94**- 9/30/94 ....... 7.29 (8.15) 1.27+ 4.49+ 15.61++ 1,282 0.20
</TABLE>
Adjusted
Adjusted Ratio of
Ratio of Net Investment
Expenses to Income
Average Net to Average
Assets# Net Assets#
------- -----------
South Carolina Series--Class A
Year ended 9/30/95.......
Year ended 9/30/94.......
Year ended 9/30/93.......
Year ended 9/30/92.......
Year ended 9/30/91....... 0.91% 6.04%
Year ended 9/30/90....... 0.84 6.35
Year ended 9/30/89....... 0.88 6.28
Year ended 9/30/88....... 1.00 6.36
6/30/87*-9/30/87......... 2.08+ 4.28+
South Carolina Series--Class D
Year ended 9/30/95.......
2/1/94** - 9/30/94 ......
California High-Yield Series--Class A
Year ended 9/30/95.......
Year ended 9/30/94.......
Year ended 9/30/93.......
Year ended 9/30/92.......
Year ended 9/30/91.......
Year ended 9/30/90.......
Year ended 9/30/89.......
Year ended 9/30/88.......
Year ended 9/30/87.......
Year ended 9/30/86....... 0.80 7.73
California High-Yield Series--Class D
Year ended 9/30/95.......
2/1/94**- 9/30/94........
California Quality Series--Class A
Year ended 9/30/95.......
Year ended 9/30/94.......
Year ended 9/30/93.......
Year ended 9/30/92.......
Year ended 9/30/91.......
Year ended 9/30/90.......
Year ended 9/30/89.......
Year ended 9/30/88.......
Year ended 9/30/87.......
Year ended 9/30/86....... 0.80 7.23
California Quality Series--Class D
Year ended 9/30/95.......
2/1/94**- 9/30/94 .......
Florida Series--Class A
Year ended 9/30/95....... 1.03 5.07
Year ended 9/30/94....... 1.00 4.91
Year ended 9/30/93....... 1.03 5.01
Year ended 9/30/92....... 1.02 5.47
Year ended 9/30/91....... 1.15 5.75
Year ended 9/30/90....... 0.90 6.20
Year ended 9/30/89....... 0.94 6.36
Year ended 9/30/88....... 0.91 6.93
11/17/86*- 9/30/87....... 1.01+ 6.35+
Florida Series--Class D
Year ended 9/30/95....... 1.97 4.22
2/1/94**- 9/30/94 ..... 1.84+ 4.06+
North Carolina Series--Class A
Year ended 9/30/95....... 1.18 4.85
Year ended 9/30/94....... 1.13 4.60
Year ended 9/30/93....... 1.22 4.45
Year ended 9/30/92....... 1.40 4.57
Year ended 9/30/91....... 3.22 2.96
8/27/90*- 9/30/90........ 4.48+ 1.04+
North Carolina Series--Class D
Year ended 9/30/95....... 2.00 4.06
2/1/94**- 9/30/94 ....... 1.95+ 3.82+
- ----------
# During the periods stated, the Manager, at its discretion, reimbursed
certain expenses and/or waived all or portions of its fees. The adjusted
net investment income per share and adjusted ratios reflect what the
results would have been had the Manager not reimbursed certain expenses
and/or not waived its fees.
* Commencement of offering of Class A shares.
** Commencement of offering of Class D shares.
+ Annualized
++ For the year ended 9/30/94.
14-15
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEM
Each Series offers two classes of shares. Class A shares are sold to
investors who have concluded that they would prefer to pay an initial sales load
and have the benefit of lower continuing charges. Class D shares are sold to
investors choosing to pay no initial sales load, a higher distribution fee and,
with respect to redemptions within one year of purchase, a CDSL. The Alternative
Distribution System allows investors to choose the method of purchasing shares
that is most beneficial in light of the amount of the purchase, the length of
time the shares are expected to be held and other relevant circumstances.
Investors should determine whether under their particular circumstances it is
more advantageous to incur an initial sales load and be subject to lower ongoing
charges, as discussed below, or to have the entire initial purchase price
invested in a Series with the investment thereafter being subject to higher
ongoing charges and, for a one-year period, a CDSL.
Investors who qualify for reduced sales loads, as described under "Purchase
Of Shares" below, might choose to purchase Class A shares because Class A shares
would be subject to lower ongoing fees. The amount invested in a Series,
however, is reduced by the initial sales load deducted at the time of purchase.
Investors who do not qualify for reduced initial sales loads but expect to
maintain their investment for an extended period of time might also purchase
Class A shares because over time the accumulated continuing distribution fee of
Class D shares may exceed the initial sales load and lower distribution fee of
Class A shares. This consideration must be weighed against the fact that the
amount invested in a Series will be reduced by the initial sales load deducted
at the time of purchase. Furthermore, the distribution fees will be offset to
the extent any return is realized on the additional funds initially invested
under the Class D alternative.
Alternatively, some investors might choose to have all of their funds
invested initially by purchasing Class D shares, although remaining subject to a
higher continuing distribution fee and, for a one-year period, a CDSL as
described below. For example, an investor who does not qualify for reduced sales
loads would have to hold Class A shares for more than 6.33 years for the Class D
distribution fee to exceed the initial sales load plus the distribution fee on
Class A shares. This example does not take into account the time value of money
which further reduces the impact of the Class D shares' 1% distribution fee,
fluctuations in net asset value or the effect of the return on the investment
over this period of time.
The two classes of shares of a 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,
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
Investment Company Act of 1940, as amended (the "1940 Act"), or applicable state
law. The net income attributable to each class and dividends payable on the
shares of each class will be reduced by the amount of distribution fee of each
class. Class D shares bear higher distribution expenses which will cause the
Class D shares to pay lower dividends than the Class A shares. The two classes
also have separate exchange privileges.
The Directors or Trustees of each Fund believe that no conflict of interest
currently exists between the Class A and Class D shares. On an ongoing basis,
they, in the exercise of their fiduciary duties under the 1940 Act and
applicable state law, will seek to ensure that no such conflict arises. For this
purpose, they will monitor the Funds for the existence of any material conflict
among the classes and will take such action as is reasonably necessary to
eliminate any such conflicts that may develop.
Differences Between Classes. The primary distinctions between Class A and
Class D shares are their sales load structures and ongoing expenses as set forth
below. Each class has advantages and disadvantages for different investors, and
investors should choose the class that best suits their circumstances and their
objectives.
16
<PAGE>
Annual 12b-1 Fees
(as a % of average
Sales Load daily net assets) Other Information
---------- ----------------- -----------------
Class A Maximum initial Service fee of Initial sales load
sales load of 4.75% .25%. waived or reduced
of the public for certain
offering price. purchases.
Class D None Service fee of CDSL of 1% on
.25%; Distribution redemptions within
fee of .75%. one year of
purchase.
INVESTMENT OBJECTIVES AND POLICIES
Tax-Exempt Securities
As used in this Prospectus, "tax-exempt securities" refers to 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 (such as counties,
cities, boroughs, townships, school districts and authorities), agencies, and
instrumentalities, the interest on which is, in the opinion of counsel to the
issuers, exempt from regular federal income taxes and, in certain instances,
applicable state or local income taxes. Such securities are traded primarily in
the over-the-counter market.
Tax-exempt 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. Tax-exempt 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.
The two principal classifications of tax-exempt bonds are "general
obligation bonds" and "revenue bonds." General obligation bonds are secured by
the issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable 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, but not from
the general taxing power. In addition, certain types of "industrial development
bonds" issued by or on behalf of public authorities to obtain funds for
privately-operated facilities are eligible for purchase, provided that the
interest paid thereon qualifies as exempt from federal income taxes and, in
certain instances, applicable state and/or local taxes. Tax-exempt industrial
development bonds do not generally carry the pledge of the credit of the issuing
municipality. Interest earned from certain tax-exempt securities (including
certain industrial development bonds) that are private activity bonds, as
defined in the Internal Revenue Code of 1986, as amended, is treated as a
preference item for purposes of the alternative minimum tax. In the event a
Series invests in tax-exempt securities whose interest is subject to the
alternative minimum tax, no more than 20% of such Series' assets would be
invested in such securities, together with securities the interest on which is
subject to federal, state of local income tax.
Tax-exempt notes generally are issued to provide for short-term capital
needs and generally have maturities of 5 years or less. They include such
securities as Tax Anticipation Notes, Revenue Anticipation Notes, Bond
Anticipation Notes and Construction Loan Notes. Tax-exempt commercial paper are
short-term obligations generally having a maturity of less than nine months.
It should be noted that tax-exempt securities may be adversely affected by
local political and economic conditions and developments within a particular
state. For example, adverse conditions in an industry that is significant to the
state could have a correspondingly adverse effect on specific issuers within the
state or on anticipated revenue of the issuing state; conversely, an improving
economic outlook for a significant industry may have a positive effect on such
issuers or revenue. The value of tax-exempt securities is dependent on a variety
of factors, including general conditions in the money markets or the municipal
bond markets, political and economic factors nationally or within a state, the
size of the particular offering, the supply of tax-exempt bonds, the maturity of
the obligation, the credit quality and rating of the issue and the assistance
provided to the bond issuing authority by the applicable state. Under normal
market conditions, if general market interest rates are increasing, the prices
17
<PAGE>
of bonds will decrease. In a market of decreasing interest rates, the opposite
will generally be true. In either case, the longer the maturity, the greater the
effect. A more detailed description of the tax-exempt securities in which each
Series may invest and special factors relating to them is set forth in the
Series' Statement of Additional Information.
Seligman New Jersey Tax-Exempt Fund, Inc.
The New Jersey Fund is a non-diversified, open-end management investment
company, as defined in the 1940 Act, or mutual fund, incorporated in Maryland on
March 13, 1987.
The New Jersey Fund seeks to maximize income exempt from federal income tax
and New Jersey personal income tax to the extent consistent with preservation of
capital and with consideration given to opportunities for capital gain by
investing in New Jersey tax-exempt securities that are rated investment grade on
the date of investment. The New Jersey Fund also may invest in New Jersey
tax-exempt securities that, while not rated as investment grade, are not rated
lower than B by S&P or Moody's, or if not rated, are believed, based upon credit
analysis by the Manager, to have at least comparable credit to B rated
securities. There can be no assurance that the Fund will be able to meet its
investment objective.
The 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 federal income tax and New Jersey personal
income tax. However, in abnormal market conditions if, in the judgment of the
Manager, tax-exempt securities satisfying the Fund's objective may not be
purchased or for other temporary defensive purposes, the Fund may make
investments in securities the interest on which is exempt only from federal
income tax, such as securities issued by states other than New Jersey, or is
exempt only from New Jersey personal income tax, such as securities issued by
the U.S. Government (such as Treasury bills, notes and bonds), its agencies,
instrumentalities or authorities. Moreover, under such conditions, the Fund may
also make temporary investments in fixed-income securities the interest on which
is not exempt from either federal income tax or New Jersey personal income tax.
Such investments will be substantially in highly-rated corporate debt securities
(rated AA--, or better, by S&P or Aa3, or better, by Moody's), prime commercial
paper (rated A-1+/A-1 by S&P or P-1 by Moody's), and certificates of deposit of
"Acceptable Banking Institutions." Acceptable Banking Institutions are defined
as the 100 largest (based on assets) banks that are subject to regulatory
supervision by the U.S. Government or state governments and the 50 largest
(based on assets) foreign banks with branches or agencies in the United States.
Investments in certificates of deposit of foreign banks and foreign branches of
U.S. 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.
The Fund is permitted to purchase project notes and standby commitments;
however, the Fund has no present intention of investing in such securities.
Seligman Pennsylvania Tax-Exempt Fund Series
The Pennsylvania Fund is a non-diversified, open-end management investment
company organized as an unincorporated trust under the laws of the Commonwealth
of Pennsylvania by a Declaration of Trust dated May 13, 1986.
The Pennsylvania Fund seeks high tax-exempt income consistent with
preservation of capital by investing in Pennsylvania tax-exempt securities that
are rated investment grade on the date of investment. The Pennsylvania Fund also
may invest in unrated Pennsylvania tax-exempt securities if, based upon credit
analysis by the Manager, it is believed that such securities are of comparable
quality to investment grade securities. The securities which the Pennsylvania
Fund will hold ordinarily will have maturities in excess of one year. There can
be no assurance that the Fund will be able to meet its investment objective.
The 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 federal and Pennsylvania income taxes. However,
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in abnormal market conditions if, in the judgment of the Manager, tax-exempt
securities satisfying the Fund's objectives can not be purchased, the Fund may
make temporary investments in securities the interest on which is exempt only
from federal income tax, such as securities issued by states other than
Pennsylvania , or is exempt only from Pennsylvania income tax, such as
securities issued by the U.S. Government (such as bills, notes and bonds), its
agencies, instrumentalities or authorities. Moreover, under such conditions, the
Fund may make temporary investments in fixed-income securities the interest on
which is not exempt from either federal or Pennsylvania income taxes. Such
investments will be substantially in highly-rated corporate debt securities
(rated AA--, or better, by S&P or Aa3, or better, by Moody's), prime commercial
paper (rated A-1+/A-1 by S&P or P-1 by Moody's) and certificates of deposit of
Acceptable Banking Institutions, as defined under "Seligman New Jersey
Tax-Exempt Fund, Inc." Investments in certificates of deposit of foreign banks
and foreign branches of U.S. banks may involve certain risks, as described
above.
Although the underlying value and quality of particular securities will be
considered in selecting investments for the Fund, capital appreciation will not
be a factor. However, the Fund may sell securities held in its portfolio and, as
a result, realize capital gain or loss, in order to eliminate unsafe investments
and investments not consistent with the preservation of the capital or tax
status of the Fund; honor redemption orders; meet anticipated redemption
requirements and negate gains from discount purchases; reinvest the earnings
from portfolio securities in like securities; or defray normal administration
expenses.
The Fund is authorized to purchase standby commitments; however, the Fund
has no present intention of investing in such securities.
Seligman Tax-Exempt Fund Series, Inc.
The Tax-Exempt Fund is a non-diversified, open-end management investment
company, as defined in the 1940 Act, incorporated in Maryland on August 8, 1983.
The Tax-Exempt Fund consists of a National Series and twelve state Series, as
described below. The Tax-Exempt Fund State Series offer investments in the
following states:
Colorado Minnesota
Georgia Missouri
Louisiana New York
Maryland Ohio
Massachusetts Oregon
Michigan South Carolina
National Series seeks to maximize income exempt from federal income taxes
to the extent consistent with preservation of capital and with consideration
given to opportunities for capital gain. Under normal market conditions, the
National Series attempts to invest 100%, and as a matter of fundamental policy
will invest at least 80%, of the value of its net assets in securities 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 federal income taxes. There can be no assurance
that the Series will be able to meet its investment objective.
Tax-Exempt Fund State Series each seek to maximize income exempt from
federal income taxes and from the personal income taxes of its designated state
to the extent consistent with preservation of capital and with consideration
given to opportunities for capital gain. Each State Series attempts to invest
100%, and as a matter of fundamental policy invests at least 80%, of the value
of its net assets in securities the interest on which is exempt from federal
income taxes and from the personal income taxes of the designated state. Each
State Series may also invest in tax-exempt securities of issuers outside its
designated state if such securities bear interest that is exempt from federal
income taxes and personal income taxes of the state. If, in abnormal market
conditions, in the judgment of the Manager, tax-exempt securities satisfying the
investment objective of any of the State Series are not available or for other
defensive purposes, such State Series may temporarily invest up to 20% of the
value of its net assets in instruments the interest on which is exempt from
federal income taxes, but not State personal income taxes. Such securities would
include those set forth under "Tax-Exempt Securities" above, that would
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otherwise meet the Series' objective. There can be no assurance that a Series
will be able to meet its investment objective.
Each State Series and the National Series are expected to invest
principally, without percentage limitations, in tax-exempt securities that are
rated investment grade on the date of investment. Each Series also may invest in
unrated tax-exempt securities if, based upon credit analysis by the Manager, it
is believed that such securities are of comparable quality to investment grade
securities.
In unusual circumstances, the Tax-Exempt Fund may invest up to 20% of the
value of its net assets on a temporary basis in fixed-income securities, the
interest on which is subject to federal, state or local income tax, pending the
investment or reinvestment in tax-exempt securities of proceeds of sales of
shares or sales of portfolio 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. Investments in taxable
securities will be substantially in securities issued or guaranteed by the U.S.
Government (such as bills, notes and bonds), its agencies, instrumentalities or
authorities; highly-rated corporate debt securities (rated AA-, or better, by
S&P or Aa3, or better, by Moody's); prime commercial paper (rated A-1+/A-1 by
S&P or P-1 by Moody's) and certificates of deposit of Acceptable Banking
Institutions, as defined under "Seligman New Jersey Tax-Exempt Fund, Inc."
Investments in certificates of deposit of foreign banks and foreign branches of
U.S. banks may involve certain risks, as described above.
Seligman Tax-Exempt Series Trust
The Tax-Exempt Trust is a non-diversified open-end management investment
company, organized as an unincorporated business trust under the laws of
Massachusetts on July 27, 1984. The Tax-Exempt Trust consists of Seligman North
Carolina Tax-Exempt Series, Seligman Florida Tax-Exempt Series, Seligman
California Tax-Exempt Quality Series and Seligman California Tax-Exempt
High-Yield Series.
Seligman North Carolina Tax-Exempt Series (the "North Carolina Series") and
Seligman Florida Tax-Exempt Series (the "Florida Series") each seek high income
exempt from federal income taxes (and with respect to the North Carolina Series,
North Carolina personal income taxes) consistent with preservation of capital
and with consideration given to capital gain by investing in North Carolina or
Florida tax-exempt securities, as applicable, and investment grade commercial
paper rated within the two highest rating categories, on the date of investment.
Each Series also may invest in unrated tax-exempt securities if, based upon
credit analysis by the Manager and under the supervision of the Trustees, it is
believed that such securities are of comparable quality to investment grade
securities. There can be no assurance that a Series will be able to meet its
investment objective.
Each Series 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 North
Carolina or Florida tax-exempt securities, as applicable, the interest on which
is exempt from federal taxes and, if applicable, North Carolina personal taxes.
However, in abnormal market conditions if, in the judgment of the Manager, North
Carolina or Florida tax-exempt securities satisfying the Series' objective may
not be purchased, the Tax-Exempt Trust may make temporary investments in
securities issued by states other than North Carolina or Florida. Moreover,
under such conditions and for defensive purposes, a Series may make temporary
investments in high-quality securities, the interest on which is not exempt from
federal income tax or, if applicable, North Carolina personal taxes. Investments
in taxable securities will be substantially in securities issued or guaranteed
by the U.S. Government (such as bills, notes and bonds), its agencies,
instrumentalities or authorities; highly-rated corporate debt securities (rated
AA--, or better, by S&P or Aa3, or better, by Moody's); prime commercial paper
(rated A-1+/A-1 by S&P or P-1 by Moody's) and certificates of deposit of
Acceptable Banking Institutions, as defined under "Seligman New Jersey
Tax-Exempt Fund, Inc." Investments in certificates of deposit of foreign banks
and foreign branches of U.S. banks may involve certain risks, as described
above.
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Each Series is permitted to purchase project notes and standby commitments;
however, neither Series has any present intention of investing in such
securities.
Seligman California Tax-Exempt Quality Series (the "California Quality
Series") seeks high income exempt from federal income taxes and from the
personal income taxes of California consistent with preservation of capital and
with consideration given to capital gain by investing in California tax-exempt
securities that on the date of investment are within the three highest ratings
of Moody's (Aaa, Aa, A for bonds; MIG1, MIG2, MIG3, for notes; P-1 for
commercial paper) or S&P (AAA, AA, A for bonds; SP-1, SP-2 for notes; A-1+,
A-1/A-2 for commercial paper). The Series also may invest in unrated California
tax-exempt securities if, based upon credit analysis by the Manager, it is
believed that such securities are of comparable quality to the rated securities
in which the series may invest. The securities held by the Series ordinarily
will have maturities in excess of one year. There can be no assurance that the
Series will be able to meet its investment objective.
Seligman California Tax-Exempt High-Yield Series (the "California
High-Yield Series") seeks the maximum income exempt from federal income taxes
and from the personal income taxes of California consistent with preservation of
capital and with consideration given to capital gain by investing in California
tax-exempt securities that on the date of investment are rated within the medium
to lower rating categories by Moody's (Baa or lower for bonds; MIG3 or lower for
notes; P-2 or lower for commercial paper) or S&P (BBB or lower for bonds; A-2 or
lower for commercial paper). The Series may invest in unrated California
tax-exempt securities if, based upon credit analysis by the Manager, it is
believed that such securities are of comparable quality to securities with a
medium or low credit rating. The Securities held by the Series ordinarily will
have maturities in excess of one year. There can be no assurance that the Series
will be able to meet its investment objective.
The securities in which this Series invests generally involve greater
volatility of price and risk of loss of principal and income than securities in
higher rating categories. Shares of this Series are appropriate only for those
investors who can bear the risk inherent in seeking the highest tax-exempt
yields.
During the fiscal year ended September 30, 1995 the weighted average
ratings of the California tax-exempt long-term securities held by the California
High-Yield Series were as follows:
Percentage of Total
S&P/Moody's Ratings Investments
------------------- -----------
AAA/Aaa .............................................. 14%
AA/Aa ................................................ 7%
A/A .................................................. 25%
BBB/Baa .............................................. 13%
BB/Ba ................................................ --
B/B .................................................. --
CCC/Caa .............................................. --
Unrated .............................................. 40%
California tax-exempt securities in the fourth rating category of Moody's
and S&P, although commonly referred to as investment grade, may have some
speculative characteristics that may affect the issuer's ability to pay interest
and repay principal. California tax- exempt securities rated below the fourth
category are subject to greater risk of loss of principal and interest than
higher-rated securities, as they are predominantly speculative with respect to
the issuer's ability to pay interest and repay principal. California tax-exempt
securities rated below BBB by S&P or Baa by Moody's are also more susceptible to
price volatility due to general economic conditions and changes in interest
rates. Since tax-exempt securities are purchased from and sold to dealers,
prices at which these securities are sold will be affected by the degree of
interest of dealers to bid for them. In certain markets, dealers may be
unwilling to make bids for the securities of certain issuers that the seller
considers reasonable. Furthermore, because the net asset value of the Series'
shares reflects the degree of willingness of dealers to bid for California
tax-exempt securities, the price of the Series' shares may be subject to greater
fluctuation.
Moody's and S&P's ratings are generally accepted measures of credit risk.
They are, however, subject to certain limitations. The rating of an issuer is
based heavily on past developments and does not necessarily reflect probable
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future conditions. Ratings also are not updated continuously. For a detailed
description of the ratings, see Appendix A to the Series' Statement of
Additional Information.
The Manager attempts to minimize the risks to the Series inherent in the
investment in lower-rated California tax-exempt securities through analysis of
the particular issuer and security, trends in interest rates and local and
general economic conditions, diversification and when appropriate by investing a
substantial portion of the Series' assets in California tax-exempt securities
rated in the fourth rating category or higher.
Each of California Quality Series and California High-Yield Series 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 federal and California personal income taxes. However, in abnormal
market conditions if, in the judgment of the Manager, tax-exempt securities
satisfying a Series' objective may not be purchased, a Series may make temporary
investments in securities the interest on which is exempt only from federal
income tax, such as securities issued by states other than California. Moreover,
under such conditions, a Series may make temporary investments in high-quality
securities the interest on which is not exempt from either federal or California
personal income taxes. Investments in taxable securities will be substantially
in securities issued or guaranteed by the U.S. Government (such as bills, notes
and bonds), its agencies, instrumentalities or authorities; highly-rated
corporate debt securities (rated AA--, or better, by S&P or Aa3, or better, by
Moody's); prime commercial paper (rated A-1+/A-1 by S&P or P-1 by Moody's) and
certificates of deposit of Acceptable Banking Institutions, as defined above
under "Seligman New Jersey Tax-Exempt Fund, Inc." Investments in certificates of
deposit of foreign banks and foreign branches of U.S. banks may involve certain
risks, as described above.
Furthermore, when economic or market conditions warrant, the California
High-Yield Series may assume a temporary defensive position and invest up to 25%
of the value of its net assets in California tax-exempt securities rated within
the three highest rating categories of Moody's or S&P. The securities which the
Series will hold under this circumstance may have maturities of less than one
year.
Each of the California Quality Series and the California High-Yield Series
may enter into stand-by commitments. Under a stand-by commitment, a Series
obligates a dealer to repurchase at the Series' option specified securities at a
specified price. The exercise of a stand-by commitment is subject to the ability
of the dealer to make payment on demand. A Series would acquire stand-by
commitments solely to facilitate portfolio liquidity and not for trading
purposes. Prior to investing in stand-by commitments the Tax-Exempt Trust, if it
deems necessary based upon the advice of counsel, will apply to the Securities
and Exchange Commission for an exemptive order relating to such commitments and
the valuation thereof. There can be no assurance that the Securities and
Exchange Commission will provide such authorization.
The price which a Series would pay for tax-exempt securities with stand-by
commitments generally would be higher than the price which otherwise would be
paid for the tax-exempt securities alone. A Series will only purchase
obligations with stand-by commitments from sellers the Manager deems
creditworthy.
Stand-by commitments with respect to portfolio securities of a Series with
maturities of less than 60 days which are separate from the underlying portfolio
securities are not assigned a value. The cost of any such stand-by commitment is
carried as an unrealized loss from the time of purchase until it is exercised or
expires. Stand-by commitments with respect to portfolio securities of a Series
with maturities of 60 days or more which are separate from the underlying
portfolio securities and the underlying portfolio securities are valued at fair
value as determined in accordance with procedures established by the Board of
Trustees. The Board of Trustees would, in connection with the determination of
the value of such a stand-by commitment, consider among other factors the
creditworthiness of the writer of the stand-by commitment, the duration of the
stand-by commitment, the dates on which or the periods during which the stand-by
commitment may be exercised and the applicable rules and regulations of the
Securities and Exchange Commission.
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General
Each Fund, as a non-diversified investment company, is not limited by the
1940 Act as to the proportion of its assets that it may invest in the
obligations of a single issuer. However, each Series will comply with the
diversification requirements of the Internal Revenue Code of 1986, as amended,
and has therefore adopted an investment restriction, which may not be changed
without shareholder vote (except for the New Jersey Fund), prohibiting each
Series from purchasing with respect to 50% of the value of the respective
Series' total assets, securities of any issuer if immediately thereafter more
than 5% of such Series' total assets would be invested in the securities of any
single issuer. Furthermore, as a matter of policy, with respect to 75% of each
Series' assets, the respective Series may not purchase any revenue bonds if
thereafter more than 5% of such Series' assets would be invested in revenue
bonds of a single issuer. This policy is not fundamental and may be changed by
the Directors or Trustees, as applicable, without shareholder approval. In the
view of the Manager, the above restriction and policy reduce the risk that might
otherwise be associated with an investment in a non-diversified investment
company.
As a matter of policy, the Directors or Trustees, as applicable, will not
change a Series' investment objective without a vote of a majority of the
outstanding voting security of that Series. Under the 1940 Act, a "vote of a
majority of the outstanding voting securities" of a Series means the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of the Series
or (2) 67% or more of the shares of the Series present at a shareholder's
meeting if more than 50% of the outstanding shares of the Series are represented
at the meeting in person or by proxy.
A more detailed list of each Series' investment policies, including a list
of those restrictions or investment activities that cannot be changed without a
vote of a majority of the outstanding voting securities of a Series appears in
the Series' Statement of Additional Information.
Investment grade bonds and notes are within the four highest credit rating
categories, and investment grade commercial paper is within the two highest
credit rating categories, of Moody's (Aaa, Aa, A, Baa for bonds; MIG 1, MIG 2,
MIG 3, MIG 4 for notes; P-1--P-2 for commercial paper) or S&P (AAA, AA, A, BBB
for bonds; SP-1--SP-2 for notes; A-1+, A-1/A-2 for commercial paper). Although
bonds and notes rated in the fourth credit rating category are commonly referred
to as investment grade they may have speculative characteristics. Such
characteristics may under certain circumstances lead to a greater degree of
market fluctuations in the value of such securities than do higher rated
tax-exempt securities of similar maturities. A detailed discussion of such
characteristics and circumstances and their effect upon each Series appears in
the Statements of Additional Information under the heading "Investment
Objectives, Policies And Risks." A description of the credit ratings is
contained in Appendix A to the Statements of Additional Information.
Illiquid Securities. Each Series may invest up to 15% of the value of its
net assets in illiquid securities including "restricted securities", i.e.,
securities that must be registered under the Securities Act of 1933 before they
may be offered or sold to the public or securities that may be sold only in
privately negotiated transactions and certain participation interests in
domestic banks. The Funds may, however, invest without regard to the limitation
on illiquid securities in lease obligations which the Manager, in accordance
with guidelines that have been adopted by the Board of Directors or Trustees, as
applicable, and subject to their supervision, determines to be liquid. The
Manager will deem lease obligations liquid if they are publicly offered and have
received an investment grade rating of Baa or better by Moody's, or BBB or
better by S&P. Unrated lease obligations (or those below investment grade, where
applicable) will be considered liquid if the obligations come to the market
through an underwritten public offering and at least two dealers are willing to
give competitive bids. The Manager must, among other things, review the
creditworthiness of the municipality obligated to make payment under the unrated
(or below investment grade, where applicable) lease obligation and consider such
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factors as the existence of a rating or credit enhancement such as insurance,
the frequency of trades or quotes for the obligation and the willingness of
dealers to make a market in the obligation.
When lssued Securities. Each Series may purchase tax-exempt securities on a
"when issued" basis, which means that delivery of and payment for such
securities normally take place within 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 on such
securities may be higher or lower on the date when the instruments are actually
delivered to the buyer. A Series will generally purchase a tax-exempt security
sold on a when issued basis with the intention of actually acquiring the
securities on the settlement date. Any gain realized from any such sale of
securities will be subject to federal and state taxes.
A separate account consisting of cash or high-grade liquid debt securities
equal to the amount of outstanding purchase commitments is established with the
Funds' 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 Series meets its respective obligation
to purchase when-issued securities from outstanding cash balances, sale of
securities held in the separate account, sale of other securities or, although
they would not normally expect to do so, from the sale of the when-issued
securities themselves (which may have a greater or lesser value than the Series'
payment obligations).
Variable and Floating Rate Obligations. The interest rates payable on
certain securities in which a Series may invest are not fixed and may fluctuate
based upon changes in market rates. The interest rate on variable rate
obligations is adjusted at predesignated periods and on floating rate
obligations whenever there is a change in the market rate of interest on which
the floating rate is based.
The interest rate is set as a specific percentage of a designated base
rate, such as the rate on a Treasury Bond or Bill or the prime rate at a major
commercial bank. Such a bond generally provides that a Series can demand payment
of the bond upon seven days' notice at an amount equal to par plus accrued
interest, which amount, in unusual circumstances, may be more or less than the
amount a Series paid for the bond.
The maturity of floating or variable rate obligations (including
participation interests therein) is deemed to be the longer of (i) the notice
period required before a Series is entitled to receive payment of the obligation
upon demand or (ii) the period remaining until the obligation's next interest
rate adjustment. If not redeemed by a Series through the demand feature, the
obligations mature on a specified date which may range up to thirty years from
the date of issuance.
Participation Interests. From time to time, a Series may purchase from
banks participation interests in all or part of specific holdings of tax-exempt
securities. Each participation interest is backed by an irrevocable letter of
credit or guarantee of the selling bank. 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 a Series.
Borrowing. Each Series 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. A Series will not purchase additional
portfolio securities if such Series has outstanding borrowings in excess of 5%
of the value of its total assets.
MANAGEMENT SERVICES
The Manager. The Board of Directors or Trustees, as applicable, provides
broad supervision over the affairs of the Funds. Pursuant to Management
Agreements approved by the Directors or Trustees and the shareholders of each
Series, the Manager manages the investment of the assets of each Series and
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administers its business and other affairs. The address of the Manager is 100
Park Avenue, New York, NY 10017.
In addition to serving the Funds, the Manager serves as manager of thirteen
other investment companies which, together with the Funds, make up the "Seligman
Group." The thirteen other companies are Seligman Capital Fund, Inc., Seligman
Cash Management Fund, Inc., Seligman Common Stock Fund, Inc., Seligman
Communications and Information Fund, Inc., Seligman Frontier Fund, Inc.,
Seligman Growth Fund, Inc., Seligman Henderson Global Fund Series, Inc.,
Seligman High Income Fund Series, Seligman Income Fund, Inc., Seligman
Portfolios, Inc., Seligman Quality Municipal Fund, Inc., Seligman Select
Municipal Fund, Inc. and Tri-Continental Corporation. The aggregate assets of
the Seligman Group were approximately $11.1 billion at December 31, 1995. The
Manager also provides investment management or advice to individual and
institutional accounts having a value of approximately $4.1 billion.
Mr. William C. Morris is Chairman and President of the Manager and Chairman
of the Board and Chief Executive Officer of each Fund. Mr. Morris owns a
majority of the outstanding voting securities of the Manager.
The Manager also provides senior management for Seligman Data Corp., a
wholly owned subsidiary of certain investment companies in the Seligman Group,
which performs, at cost, certain recordkeep-ing functions for each Fund,
maintains the records of shareholder investment accounts and provides related
services.
The Manager is entitled to receive a management fee for its services,
calculated daily and payable monthly, equal to .50% of the average daily net
assets of the Series on an annual basis. The Manager has from time to time
voluntarily waived a portion of its management fee with respect to one or more
of the Series. Each Fund pays all its expenses other than those assumed by the
Manager; expenses are allocated among the Series of the Tax-Exempt Fund and of
the Tax-Exempt Trust in a manner determined by the Directors or Trustees to be
fair and equitable. The management fee paid by each Series expressed as a
percentage of average daily net assets of that Series is presented in the
following table for the fiscal year ended September 30,1995. Total expenses for
each Series' Class A and D shares, expressed as an annualized percentage of
average daily net assets, are also presented in the following table for the year
ended September 30, 1995.
- --------------------------------------------------------------------------------
Annualized Expense
Management Fee Rate Ratios for
for the year ended the year ended
Series 9/30/95 9/30/95
------ ------------------- ---------------------
Class A Class D
------- -------
New Jersey ................ .45%* 1.01% 1.89%
Pennsylvania .............. .50% 1.21% 2.23%
National .................. .50% .86% 1.95%
Colorado .................. .50% .93% 2.02%
Georgia ................... .45%* .91% 1.90%
Louisiana ................. .50% .89% 1.91%
Maryland .................. .50% .96% 2.02%
Massachusetts ............. .50% .86% 1.95%
Michigan .................. .50% .87% 2.01%
Minnesota ................. .50% .87% 1.85%
Missouri .................. .45%* .88% 1.98%
New York .................. .50% .88% 1.96%
Ohio ...................... .50% .84% 1.93%
Oregon .................... .45%* .86% 1.83%
South Carolina ............ .50% .88% 1.85%
California
High-Yield .............. .50% .90% 1.91%
California Quality ........ .50% .89% 1.88%
Florida ................... .19%* .72% 1.66%
North Carolina ............ .14%* .82% 1.64%
* During the year ended September 30, 1995 the Manager, at its discretion,
waived a portion of its fees from the Florida, Georgia, Missouri, New Jersey,
North Carolina and Oregon Series.
- --------------------------------------------------------------------------------
Portfolio Manager. Thomas G. Moles, Vice President and Senior Portfolio
Manager of each of the Funds, is a Managing Director of J. & W. Seligman & Co.
Incorporated, as well as President and Senior Portfolio Manager of Seligman
Select Municipal Fund and Seligman Quality Municipal Fund. He is responsible for
approximately $1.9 billion in tax-exempt securities. Mr. Moles, with more than
23 years of experience, has spearheaded Seligman's tax-exempt efforts since
joining the Manager in 1983.
The Manager's discussion of each Fund's performance as well as a line graph
illustrating comparative performance information between each Series of a Fund
and the Lehman Brothers Municipal Bond Index is included in the respective
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Fund's fiscal 1995 Annual Report to shareholders. Copies of a Fund's Annual
Report may be obtained, without charge, by calling or writing the Funds at the
telephone numbers or address listed on the cover page of this Prospectus.
Portfolio Transactions. Fixed income securities are generally traded on the
over-the-counter market on a "net" basis without a stated commission, through
dealers acting for their own account and not as brokers. Prices paid to dealers
will generally include a "spread", i.e., the difference between the prices at
which a dealer is willing to purchase or to sell the security at that time. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of compensation to the underwriter.
The Management Agreements recognize that in the purchase and sale of
portfolio securities, the Manager will seek the most favorable price and
execution, and, consistent with that policy, may give consideration to the
research, statistical and other services furnished by dealers to the Manager for
its use in connection with its services to the Funds as well as other clients.
Consistent with the rules of the National Association of Securities
Dealers, Inc. and subject to seeking the most favorable price and execution
available and such other policies as the Directors or Trustees may determine,
the Manager may consider sales of shares of the Funds (and, under applicable
laws, of the other Seligman Mutual Funds) as a factor in the selection of
dealers to execute portfolio transactions for the Funds.
Portfolio Turnover. A change in securities held by any Series is known as
"portfolio turnover" and may involve the payment by such Series of dealer
spreads or underwriting commissions and other transactions costs on the sale of
the securities as well as on the reinvestment of the proceeds in other
securities. While it is the policy of each Series to hold securities for
investment, changes will be made from time to time when the Manager believes
such changes will strengthen the Series' portfolio. The portfolio turnover of
any Series is not expected to exceed 100%.
PURCHASE OF SHARES
Seligman Financial Services, Inc. ("SFSI"), an affiliate of the Manager,
acts as general distributor of the Funds' shares. Its address is 100 Park
Avenue, New York, NY 10017.
Each Series issues two classes of shares: Class A shares are sold to
investors choosing the initial sales load alternative; and Class D shares are
sold to investors choosing no initial sales load, a higher distribution fee and
a CDSL on redemptions within one year of purchase. See "Alternative Distribution
System" above.
Shares of the Series may be purchased through any authorized investment
dealer. All orders will be executed at the net asset value per share next
computed after receipt of the purchase order plus, in the case of Class A
shares, a sales load which, except for shares purchased under one of the reduced
sales load plans, will vary with the size of the purchase as shown in the
schedule under "Class A shares-Initial Sales Load" below.
THE MINIMUM AMOUNT FOR INITIAL INVESTMENT IS $1,000; SUBSEQUENT INVESTMENTS
MUST BE IN THE MINIMUM AMOUNT OF $100 FOR EACH SERIES (EXCEPT FOR INVESTMENT OF
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS). THE FUNDS RESERVE THE RIGHT TO RETURN
INVESTMENTS THAT DO NOT SATISFY THESE MINIMUMS. EXCEPTIONS TO THESE MINIMUMS ARE
AVAILABLE FOR ACCOUNTS BEING ESTABLISHED CONCURRENTLY WITH THE INVEST-A-CHECK(R)
SERVICE OR THE SELIGMAN(SM) TIME HORIZON(SM) STRATEGY, AN ASSET ALLOCATION
PROGRAM.
Orders received by an authorized dealer before the close of the New York
Stock Exchange ("NYSE") (normally, 4:00 p.m. New York City time) and accepted by
SFSI before the close of business (5:00 p.m. New York City time) on the same day
will be executed at the Series' net asset value determined as of the close of
the NYSE on that day plus, in the case of Class A shares, the applicable sales
load. Orders accepted by dealers after the close of the NYSE, or received by
SFSI after the close of business, will be executed at the Series' net asset
value next determined plus, in the case of Class A shares, the applicable sales
load. The authorized dealer through which the shareholder purchases shares is
responsible for forwarding the order to SFSI promptly.
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Payment for dealer purchases may be made by check or by wire. To wire
payments, dealer orders must first be placed through SFSI's order desk and
assigned a purchase confirmation number. Funds in payment of the purchase may
then be wired to Mellon Bank, N.A., ABA #043000261, A/C (Name of Fund and
Series) (A or D), A/C #107-1011. WIRE TRANSFERS MUST INCLUDE THE PURCHASE
CONFIRMATION NUMBER AND CLIENT ACCOUNT REGISTRATION AND ACCOUNT NUMBER. Persons
other than dealers who wish to wire payment should contact Seligman Data Corp.
for specific wire instructions. Although the Funds make no charge for this
service, the transmitting bank may impose a wire service fee.
Current shareholders may purchase additional shares at any time through any
authorized dealer or by sending a check payable to "Seligman Group of Funds"
directly to Seligman Data Corp., P.O. Box 3936, New York, NY 10008-3936. Checks
for investment must be in U.S. dollars drawn on a domestic bank. The check
should include the shareholder's name, address, account number and class of
shares. If a shareholder does not provide the required information, Seligman
Data Corp. will seek further clarification and may be forced to return the check
to the shareholder. Orders sent directly to Seligman Data Corp. will be executed
at the net asset value next determined after the order is accepted plus, in the
case of Class A shares, the applicable sales load.
Seligman Data Corp. will charge a $10.00 processing fee for checks returned
to it marked "unpaid." This charge may be debited from the shareholder's
account. For the protection of the Funds and their shareholders, no redemption
proceeds will be remitted to a shareholder with respect to shares purchased by
check (unless certified) until the Fund receives notice that the check has
cleared, which may be up to 15 days from the credit of such shares to the
shareholder's account.
Valuation. The net asset value of a Series' shares is determined each day,
Monday through Friday, as of the close of the NYSE (normally, 4:00 p.m. New York
City time), on each day that the NYSE is open. Net asset value is calculated
separately for each class of a Series. Tax-exempt securities and short-term
holdings maturing in more than 60 days are valued based on quotations provided
by an independent pricing service, approved by the Directors or Trustees, or in
the absence thereof, at fair value as determined in accordance with procedures
approved by the Directors or Trustees. Short-term holdings maturing in 60 days
or less are generally valued at amortized cost. Taxable securities are valued at
market value, or in the absence thereof, fair value as determined in accordance
with procedures approved by the Directors or Trustees.
Class A Shares -- Initial Sales Load. Class A shares are subject to an
initial sales load which varies with the size of the purchase as shown in the
following schedule, and an annual service fee of up to .25% of the average daily
net asset value of Class A shares. See "Administration, Shareholder Services and
Distribution Plan" below.
- --------------------------------------------------------------------------------
Class A Shares -- Sales Load Schedule
Sales Load as a
Percentage of Regular
------------------------ Dealer
Net Amount Discount
Invested as a % of
Offering (Net Asset Offering
Amount of Purchase Price Value) 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- 3,999,999 1.00 1.01 .90
4,000,000- or more* 0 0 0
* Dealers may receive a fee of .15% on sales made without a sales load.
- --------------------------------------------------------------------------------
Referral Fee. SFSI shall pay broker/dealers, from its own resources, an
additional fee in respect of certain investments in Class A shares of the
Seligman Mutual Funds by an "eligible employee benefit plan" (as defined below
under "Special Programs") which are attributable to the particular
broker/dealer. The shares eligible for the fee are those on which an initial
front-end sales load was not paid because either (i) the participating eligible
employee benefit plan has at least $1 million invested in the Seligman Mutual
Funds or (ii) the participating employer has at least 50 eligible employees to
whom such plan is made available. The fee, which is paid monthly, is a
percentage of the average daily net asset value of eligible shares based on the
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length of time the shares have been invested in a Seligman Mutual Fund, as
follows: for shares held up to 1 year, .50% per annum; for shares held more than
1 year up to 2 years, .25% per annum; for shares held from 2 years up to 5
years, .10% per annum; and nothing thereafter.
Reduced Sales Loads. Reductions in sales loads 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 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 with purchases made on behalf of any
other fiduciary or individual account.
o Volume Discounts are provided if the total amount being invested in Class
A shares of a Series alone, or in any combination of shares of the other
Seligman Mutual Funds that are sold with a front-end sales load, reaches levels
indicated in the above sales load schedule.
o The Right of Accumulation allows an investor to combine the amount being
invested in Class A shares of the other Seligman Mutual Funds sold with a sales
load with the total net asset value of shares of those Funds already owned that
were sold with a sales load and the total net asset value of shares of Seligman
Cash Management Fund that were acquired by an investor through an exchange of
shares of another Seligman Mutual Fund on which there was a sales load to
determine reduced sales loads in accordance with the sales load schedule. An
investor or a dealer purchasing shares on behalf of an investor must indicate if
the investor has existing accounts when making investments or opening new
accounts.
o A Letter of Intent allows an investor to purchase Class A shares over a
13-month period at reduced sales loads, based upon the total amount the investor
intends to purchase plus the total net asset value of shares of the other
Seligman Mutual Funds already owned that were sold with a sales load and the
total net asset value of shares of Seligman Cash Management Fund that were
acquired by the investor through an exchange of shares of another Seligman
Mutual Fund on which there was a sales load. An investor or a dealer purchasing
shares on behalf of an investor must indicate if the investor has existing
accounts when making investments or opening new accounts. For more information
concerning terms of Letters of Intent, see "Terms and Conditions" on page 51.
Special Programs. Each Series may sell Class A shares at net asset value to
present and retired directors, trustees, officers, employees and their spouses,
(and family members of the foregoing) of the Funds, the other investment
companies in the Seligman Group, the Manager and other companies affiliated with
the Manager. Family members are defined to include lineal descendants 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 and thrift plans for such persons and to any investment
advisory, custodial, trust or other fiduciary account managed or advised by the
Manager or any affiliate.
Class A shares also may be issued without a sales load in connection with
the acquisition of cash and securities owned by other investment companies and
personal holding companies; to any registered unit investment trust which is the
issuer of periodic payment plan certificates, the net proceeds of which are
invested in Series shares; to separate accounts established and maintained by an
insurance company which are exempt from registration under Section 3(c)(11) of
the 1940 Act; to registered representatives and employees (and their spouses and
minor children) of any dealer that has a sales agreement with SFSI; to
shareholders of mutual funds with objectives similar to a Series who purchase
shares with redemption proceeds of such funds; to financial institution trust
departments; to registered investment advisers exercising investment
discretionary authority with respect to the purchase of Series shares, or
pursuant to sponsored arrangements with organizations which make recommendations
to or permit group solicitation of, its employees, members or participants in
connection with the purchase of shares of the Series; and to "eligible employee
benefit plans" (i) which have at least $1 million invested in the Seligman Group
of Mutual Funds or (ii) of employers who have at least 50 eligible employees to
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<PAGE>
whom such plan is made available and, regardless of the number of employees, if
such plan is established and maintained by any dealer that has a sales agreement
with SFSI. "Eligible employee benefit plan" means any plan or arrangement,
whether or not tax qualified, which provides for the purchase of a Series'
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 number of eligible employees. Participants in such plans are
eligible for reduced sales loads based solely on their individual investments.
Class D Shares. Class D shares are sold without an initial sales load but
are subject to a CDSL if the shares are redeemed within one year, an annual
distribution fee of up to .75 of 1% and an annual service fee of up to .25 of 1%
of the average daily net asset value of the Class D shares. SFSI will make a 1%
payment to dealers in respect of purchases of Class D shares.
A CDSL will be imposed on any redemption of Class D shares which were
purchased during the preceding twelve months; however, no such charge will be
imposed on shares acquired through the investment of dividends or distributions
from any Class D shares within the Seligman Group. The amount of any CDSL will
be paid to and retained by SFSI.
To minimize the application of CDSL to a redemption, shares acquired
pursuant to the investment of dividends and distributions (which are not subject
to a CDSL) will be redeemed first; followed by shares purchased at least one
year prior to the redemption. Shares held for the longest period of time within
the applicable one year period will then be redeemed. Additionally, for those
shares determined to be subject to the CDSL, the application of the 1% CDSL will
be made to the current net asset value or original purchase price, whichever is
less.
For example, assume an investor purchased 100 shares in January at a price
of $10.00 per share. During the first year, 5 additional shares were acquired
through investment of dividends and distributions. In January of the following
year, an additional 50 shares are purchased at a price of $12.00 per share. In
March of that year, the investor chooses to redeem $1,500.00 from the account
which now holds 155 shares with a total value of $1,898.75 ($12.25 per share).
The CDSL for this transaction would be calculated as follows:
Total shares to be redeemed
(122.449 @ $12.25) as follows: $1,500.00
=========
Dividend/Distribution shares
(5 @ $12.25) $ 61.25
Shares over 1 year old
(100 @ $12.25) 1,225.00
Shares less than 1 year old subject to
CDSL (17.449 @ $12.25) 213.75
---------
Gross proceeds of redemption $1,500.00
Less CDSL (17.449 shares @ $12.00 =
$209.39 x 1% = $2.09) (2.09)
---------
Net proceeds of redemption $1,497.91
=========
For federal income tax purposes, the amount of the CDSL will reduce the gain
or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.
The CDSL will be waived or reduced in the following instances:
(a) on redemptions following the death or disability of a shareholder, as
defined in section 72(m)(7) of the Internal Revenue Code of 1986, as amended
(the "Code"); (b) in connection with (i) distributions from retirement plans
qualified under section 401(a) of the 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), (ii)
distributions from a custodial account under section 403(b)(7) of the Code or an
individual retirement account ("IRA") due to death, disability, or attainment of
age 591/2, and (iii) a tax-free return of an excess contribution to an IRA; (c)
in whole or in part, in connection with shares sold to current and retired
Directors or Trustees of the Funds; (d) 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 shares
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<PAGE>
of any registered investment management company; (e) pursuant to an automatic
cash withdrawal service; (f) in connection with the redemption of Class D shares
of a Fund if it is combined with another mutual fund in the Seligman Group, or
another similar reorganization transaction; and (g) in connection with a Fund's
right to redeem or liquidate an account that holds below a certain minimum
number or dollar amount of shares (currently $500).
If, with respect to a redemption of any Class D shares sold by a dealer,
the CDSL is waived because the redemption qualifies for a waiver as set forth
above, the dealer shall remit to SFSI promptly upon notice an amount equal to
the 1% payment or a portion of the 1% payment paid on such shares.
SFSI 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 the Seligman Mutual Funds. SFSI 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 a registered representative who has sold or may sell a
significant amount of shares of a Fund and/or certain other mutual funds managed
by the Manager during a specified period of time. Such bonus or other incentive
may take the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and members
of their families to places within or outside the United States. The cost to
SFSI of such promotional activities and payments shall be consistent with the
rules of the National Association of Securities Dealers, Inc., as then in
effect.
TELEPHONE TRANSACTIONS
A shareholder with telephone transaction privileges, and the shareholder's
broker-dealer representative, will have the ability to effect the following
transactions via telephone: (i) redemption of a Fund's shares, (ii) exchange of
Fund shares for shares of another Seligman Mutual Fund, (iii) change of a
dividend and/or capital gain distribution option, and (iv) change of address.
All telephone transactions are effected through Seligman Data Corp. at (800)
221-2450.
For investors who purchase shares by completing and submitting an Account
Application (except those accounts registered as trusts (unless the trustee and
sole beneficiary are the same person), corporations or group retirement plans):
Unless an election is made otherwise on the Account Application, a shareholder
and the shareholder's broker-dealer of record, as designated on the Account
Application, will automatically receive telephone transaction privileges.
For investors who purchase shares through a broker-dealer: Telephone
services for a shareholder and the shareholder's representative may be elected
by completing a supplemental election application available from the
broker-dealer of record.
For accounts registered as trusts (unless the trustee and sole beneficiary
are the same person), corporations or group retirement plans: Telephone services
are not available.
All funds with the same account number (i.e., registered exactly the same)
as an existing account, including any new fund in which the shareholder invests
in the future, will automatically include telephone services if the existing
account has telephone services. Telephone services may also be elected at any
time on a supplemental application.
For accounts registered jointly (such as joint tenancies, tenants in common
and community property registrations), each owner, by accepting or requesting
telephone transaction services, authorizes each of the other owners to effect
telephone transactions on his or her behalf.
During times of drastic economic or market changes, a shareholder or the
shareholder's representative may experience difficulty in contacting Seligman
Data Corp. to request a redemption or exchange of shares of a Fund. In these
circumstances, the shareholder should consider using other redemption or
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<PAGE>
exchange procedures. Use of these other redemption or exchange procedures will
result in your redemption request being processed at a later time than if
telephone transactions had been used, and a Series' net asset value may
fluctuate during such periods.
Each Fund and Seligman Data Corp. will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These will
include: recording all telephone calls requesting account activity, requiring
that the caller provide certain requested personal and/or account information at
the time of the call for the purpose of establishing the caller's identity, and
sending a written confirmation of redemptions, exchanges or address changes to
the address of record each time activity is initiated by telephone. As long as
each Fund and Seligman Data Corp. follow instructions communicated by telephone
that were reasonably believed to be genuine at the time of their receipt,
neither they nor any of their affiliates will be liable for any loss to the
shareholder caused by an unauthorized transaction. Shareholders, of course, may
refuse or cancel telephone transaction services. In any instance where a Fund or
Seligman Data Corp. is not reasonably satisfied that instructions received by
telephone are genuine, the requested transaction will not be executed, and
neither they nor any of their affiliates will be liable for any losses which may
occur due to a delay in implementing the transaction. If a Fund or Seligman Data
Corp. does not follow the procedures described above, a Fund or Seligman Data
Corp. may be liable for any losses due to unauthorized or fraudulent
instructions. Telephone services must be effected through a representative of
Seligman Data Corp., i.e., requests may not be communicated via Seligman Data
Corp.'s automated telephone answering system. Telephone services may be
terminated by a shareholder at any time by sending a written request to Seligman
Data Corp. Written acknowledgment of termination of telephone services will be
sent to the shareholder at the address of record.
REDEMPTION OF SHARES
Regular Redemption Procedure. A shareholder may redeem shares held in book
credit form without charge (except the CDSL, if applicable) at any time BY
SENDING A WRITTEN REQUEST to Seligman Data Corp., 100 Park Avenue, New York, NY
10017. The redemption request must be signed by all persons in whose name the
shares are registered. A shareholder may redeem shares that are not in book
credit form, by surrendering certificates in proper form to the same address.
Certificates should be sent by registered mail. Share certificates must be
endorsed for transfer or accompanied by an endorsed stock power signed by all
shareowners exactly as their name(s) appear(s) on the account registration. The
shareholder's letter of instruction or endorsed stock power should specify the
name of the Series, the account number, class of shares (A or D), number of
shares or dollar amount to be redeemed. The Funds cannot accept conditional
redemption requests. If the redemption proceeds are (i) $50,000 or more, (ii) to
be paid to someone other than the shareholder of record (regardless of the
amount) or (iii) to be mailed to other than the address of record (regardless of
the amount), the signature(s) of the shareholder(s) must be guaranteed by an
eligible financial institution including, but not limited to, the following:
banks, trust companies, credit unions, securities brokers and dealers, savings
and loan associations and participants in the Securities Transfer Association
Medallion Program (STAMP), the Stock Exchanges Medallion Program (SEMP) or the
New York Stock Exchange Medallion Signature Program (MSP). A Fund reserves the
right to reject a signature guarantee where it is believed that the Fund will be
placed at risk by accepting such guarantee. A signature guarantee is also
necessary in order to change the account registration. Notarization by a notary
public is not an acceptable signature guarantee. ADDITIONAL DOCUMENTATION MAY
ALSO BE REQUIRED BY SELIGMAN DATA CORP. IN THE EVENT OF A REDEMPTION BY
CORPORATIONS, EXECUTORS, ADMINISTRATORS, TRUSTEES OR CUSTODIANS. FOR FURTHER
INFORMATION WITH RESPECT TO NECESSARY REDEMPTION REQUIREMENTS, PLEASE CONTACT
THE SHAREHOLDER SERVICES DEPARTMENT OF SELIGMAN DATA CORP. FOR ASSISTANCE. In
the case of Class A shares, and in the case of Class D shares redeemed after one
year, a shareholder will receive the net asset value per share next determined
after receipt of a request in good order. If Class D shares are redeemed within
one year of purchase, a shareholder will receive the net asset value per share
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next determined after receipt of a request in good order, less a CDSL of 1% as
described under "Purchase Of Shares -- Class D Shares" above.
A shareholder may also "sell" shares to a Fund through an investment dealer
and, in that way, be certain, providing the order is timely, of receiving the
net asset value established at the end of the day on which the dealer is given
the repurchase order (less any applicable CDSL in the case of Class D shares).
The Funds make no charge for this transaction, but the dealer may charge a
service fee. "Sell" or repurchase orders received from an authorized dealer
before the close of the NYSE and received by SFSI, the repurchase agent, before
the close of business on the same day will be executed at the net asset value
per share determined at the close of the NYSE on that day, less any applicable
CDSL. Repurchase orders received from authorized dealers after the close of the
NYSE or not received by SFSI prior to the close of business, will be executed at
the net asset value determined as of the close of the NYSE on the next trading
day, less any applicable CDSL. Shares held in a "street name" account with a
broker/dealer may be sold to a Fund only through a broker/dealer.
Check Redemption Service. The Check Redemption Service allows a shareholder
of Class A shares who owns or purchases shares in a Series worth $25,000 or more
to request Seligman Data Corp. to provide redemption checks to be drawn on the
account associated with the Series in which the shareholder is invested, in
amounts of $500 or more. The shareholder may elect to use this Service on the
Account Application or by later written request to Seligman Data Corp. Shares
for which certificates have been issued will not be available for redemption
under this Service. Dividends continue to be earned through the date preceding
the date the check clears for payment. Use of this Service is subject to Mellon
Bank, N.A. rules and regulations covering checking accounts. Separate checkbooks
will be furnished for each Series.
There is no charge for use of checks. When honoring a check that was
processed for payment, Mellon Bank, N.A. will cause a Series to redeem exactly
enough full and fractional shares from an account to cover the amount of the
check. If shares are owned jointly, redemption checks will need to be signed by
all persons, unless otherwise elected under Section 6 of the Account
Application, in which case a single signature will be acceptable.
In view of daily fluctuations in share value, the shareholder should be
certain that the amount of shares in the account is sufficient in a Series to
cover the amount of checks written on that Series. If insufficient shares are in
the account, the check will be returned marked "insufficient funds." THE FUNDS
WILL NOT REDEEM SHARES OF ONE SERIES TO COVER A CHECK WRITTEN ON ANOTHER SERIES.
SELIGMAN DATA CORP. WILL CHARGE A $10.00 PROCESSING FEE FOR ANY CHECK REDEMPTION
DRAFT RETURNED MARKED "UNPAID." THIS CHARGE MAY BE DEBITED FROM THE ACCOUNT
AGAINST WHICH THE CHECK WAS DRAWN.
Check Redemption books cannot be reordered unless the shareholder's account
has a value of $25,000 or more and Seligman Data Corp. has a certified tax
identification number on file.
Cancelled checks will be returned to a shareholder under separate cover the
month after they clear. The Check Redemption Service may be terminated at any
time by a Fund or Mellon Bank, N.A. See "Terms and Conditions" on page 51 for
further information. The Check Redemption Service is not available with respect
to Class D shares.
FOR THE PROTECTION OF THE FUNDS AND THEIR SHAREHOLDERS, NO PROCEEDS OF A
CHECK REDEMPTION WILL BE REMITTED TO A SHAREHOLDER WITH RESPECT TO SHARES
PURCHASED BY CHECK (UNLESS CERTIFIED) UNTIL SELIGMAN DATA CORP. HAS RECEIVED
NOTICE THAT THE CHECK HAS CLEARED, WHICH MAY BE UP TO 15 DAYS FROM THE CREDIT OF
SUCH SHARES TO THE SHAREHOLDER'S ACCOUNT.
Telephone Redemptions. Telephone redemptions of uncertificated shares may
be made once per day, in an amount of up to $50,000. Telephone redemption
requests must be received by Seligman Data Corp. at (800) 221-2450 between 8:30
a.m. and 4:00 p.m. New York City time, on any business day and will be processed
as of the close of business on that day. Redemption requests by telephone will
32
<PAGE>
not be accepted within 30 days following an address change. Each Fund reserves
the right to suspend or terminate its telephone redemption service at any time
without notice.
For more information about telephone redemptions, and the circumstances
under which shareholders may bear the risk of loss for a fraudulent transaction,
see "Telephone Transactions" above.
General. With respect to shares redeemed, a check for the proceeds will be
sent to the shareholder's address of record within seven calendar days after
acceptance of the redemption order and will be made payable to all of the
registered owners on the account. With respect to shares repurchased, a check
for the proceeds will be sent to the investment dealer within seven calendar
days after acceptance of the repurchase order and will be made payable to the
investment dealer. The Funds will not permit redemptions of shares with respect
to shares purchased by check (unless certified) until Seligman Data Corp. has
received notice that the check has cleared, which may be up to 15 days from the
credit of such shares to the shareholder's account. The proceeds of a redemption
or repurchase may be more or less than the shareholder's cost.
The Funds reserves the right to redeem shares owned by a shareholder whose
investment in a Series has a value of less than the minimum specified by the
Fund's Directors or Trustees which is presently $500. Shareholders are sent a
notice before such redemption is processed stating that the value of their
investment is less than the specified minimum and that they have sixty days to
make an additional investment.
Reinstatement Privilege
If a shareholder redeems Class A shares and then decides not to redeem
them, or to shift the investment to one of the other Series or to one of the
other Seligman Mutual Funds, a shareholder may, within 120 calendar days of the
date of redemption, use all or any part of the proceeds of the redemption to
reinstate, free of sales load, all or any part of the investment in shares of
such Series or in shares of any of the other Series of the Funds or any of the
other Seligman Mutual Funds. If a shareholder redeems Class D shares and the
redemption was subject to a CDSL, the shareholder may reinstate the investment
in shares of the same class of the Series or any of the other Seligman Mutual
Funds within 120 calendar days of the date of redemption and receive a credit
for the CDSL paid. Such investment will be reinstated at the net asset value per
share established as of the close of the NYSE on the day the request is
accepted. Seligman Data Corp. must be informed that the purchase is a reinstated
investment. REINSTATED SHARES MUST BE REGISTERED EXACTLY AND BE OF THE SAME
CLASS AS THE SHARES PREVIOUSLY REDEEMED.
Generally, exercise of the Reinstatement Privilege does not alter the
federal income tax status of any capital gain realized on a sale of a Series'
shares, but to the extent that any shares are sold at a loss and the proceeds
are reinvested in shares of the same Series some or all of the loss will not be
allowed as a deduction, depending upon the percentage of the proceeds
reinvested.
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
Under an Administration, Shareholder Services and Distribution Plan (the
"Plan"), each Series may pay to SFSI, the Funds' general distributor, an
administration, shareholder services and distribution fee in respect of each
Series' Class A and Class D shares. Payments under the Plan may include, but are
not limited to: (i) compensation to securities dealers and other organizations
("Service Organizations") for providing distribution assistance with respect to
assets invested in a Series, (ii) compensation to Service Organizations for
providing administration, accounting and other shareholder services with respect
to Series' shareholders, and (iii) otherwise promoting the sale of shares of
each Series, 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 SFSl's costs incurred in
connection with its marketing efforts with respect to shares of a Series. The
Manager, in its sole discretion, may also make similar payments to SFSI from its
33
<PAGE>
own resources, which may include the management fee that the Manager receives
from each Series.
Under its Plan, each Series reimburses SFSI for its expenses with respect
to Class A shares at an annual rate of up to .25% of the average daily net asset
value of a Series' Class A shares. It is expected that the proceeds from the fee
in respect of Class A shares will be used primarily to compensate Service
Organizations which enter into agreements with SFSI. Such Service Organizations
will receive from SFSI a continuing fee of up to .25% on an annual basis,
payable quarterly, of the average daily net assets of a Series' Class A shares
attributable to the particular Service Organization for providing personal
service and/or the maintenance of shareholder accounts. The fee payable from
time to time is, within such limit, determined by the Directors or Trustees of
the Funds.
The Plan as it relates to the Class A shares of the New Jersey Fund, was
first approved by the Directors on January 12, 1988 and by the shareholders on
December 16, 1988. The Plan as it relates to the Class A shares of the
Pennsylvania Fund, was first approved by the Trustees on June 10, 1986 and by
the shareholders on April 23, 1987. The Plan as it relates to the Class A shares
of the California High-Yield Series and the California Quality Series, was first
approved by the Trustees on July 21, 1992 and by the shareholders on November
23, 1992. The Plan as it relates to the Class A shares of the Florida Series,
was first approved by the Trustees on June 21, 1990 and by the shareholders on
December 7, 1990. The Plan as it relates to Class A shares of the North Carolina
Series, was first approved by the Trustees on June 21, 1990 and by the
shareholders on April 11, 1991. Each Plan as it relates to Class A shares of the
other Series, was first approved by the Directors or Trustees on July 21, 1992
and by the shareholders of each Series on November 23, 1992. The Plans are
reviewed by the Directors or Trustees annually. The total amounts paid for the
year ended September 30, 1995 in respect of each Series' Class A shares' average
daily net assets pursuant to the Plans were as follows:
% of
Average
Series Net Assets
------ ----------
New Jersey .................................................... .22%
Pennsylvania .................................................. .22
National ...................................................... .09
Colorado ...................................................... .09
Georgia ....................................................... .10
Louisiana ..................................................... .10
Maryland ...................................................... .09
Massachusetts ................................................. .10
Michigan ...................................................... .10
Minnesota ..................................................... .10
Missouri ...................................................... .09
New York ...................................................... .08
Ohio .......................................................... .10
Oregon ........................................................ .10
South Carolina ................................................ .10
California High-Yield ......................................... .10
California Quality ............................................ .10
Florida ....................................................... .24
North Carolina ................................................ .24
Under its Plan, each Series reimburses SFSI for its expenses with respect to
Class D shares at an annual rate of up to 1% of the average daily net asset
value of the Class D shares. Proceeds from a Series' Class D distribution fee
are used primarily to compensate Service Organizations for administration,
shareholder services and distribution assistance (including a continuing fee of
up to .25% on an annual basis of the average daily net asset value of a Series'
Class D shares attributable to particular Service Organizations for providing
personal services and/or the maintenance of shareholder accounts) and will
initially be used by SFSI to defray the expense of the 1% payment to be made by
it to Service Organizations at the time of the sale of Class D shares. The
amounts expended by SFSI in any one year upon the initial purchase of Class D
shares may exceed the amounts received by it from Plan payments retained.
Expenses of administration, shareholder services and distribution of a Series'
Class D shares in one fiscal year may be paid from a Series' Class D Plan fees
received in any other fiscal year. Each Plan, as it relates to Class D shares,
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was approved by the Directors or Trustees on November 18, 1993 and became
effective February 1, 1994. Each Plan is reviewed by the Directors or Trustees
annually. The total amount paid for the year ended September 30, 1995, in
respect of each Series' Class D shares pursuant to the Plan was 1.00% per annum
of each Series' average daily net assets of the Class D shares.
Seligman Services, Inc. ("SSI"), an affiliate of the Manager, is a limited
purpose broker/dealer. SSI acts as broker/dealer of record for shareholder
accounts that do not have a designated broker/dealer of record and receives
compensation from a Series pursuant to its Plan for providing personal service
and account maintenance to such accounts and other distribution services.
EXCHANGE PRIVILEGE
A shareholder may, without charge, exchange at net asset value any part or
all of an investment in a Series for shares of another Series or for shares of
the other mutual funds in the Seligman Group. Exchanges may be made by mail or
by telephone if the shareholder has telephone services.
Class A shares may be exchanged only for Class A shares, and Class D shares
may be exchanged only for Class D shares, of another Series or another mutual
fund in the Seligman Group. All exchanges will be made on the basis of relative
net asset value.
If Class D shares that are subject to a CDSL are exchanged for Class D
shares of another Series or fund, for purposes of assessing the CDSL payable
upon disposition of the exchanged Class D shares, the one year holding period
shall be reduced by the holding period of the original Class D shares.
Aside from the Series described in this Prospectus, the mutual funds in the
Seligman Group available under the Exchange Privilege are:
o Seligman Capital Fund, Inc.: seeks aggressive capital appreciation.
Current income is not an objective.
o Seligman Cash Management Fund, Inc.: invests in high quality money market
instruments. Shares are sold at net asset value.
o Seligman Common Stock Fund, Inc.: seeks favorable current income and
long-term growth of both income and capital value without exposing capital to
undue risk.
o Seligman Communications and Information Fund, Inc.: invests in shares of
companies in the communications, information and related industries to produce
capital gain. Income is not an objective.
o Seligman Frontier Fund, Inc.: seeks to produce growth in capital value,
income may be considered but will only be incidental to the fund's investment
objective.
o Seligman Growth Fund, Inc.: seeks longer-term growth in capital value and
an increase in future income.
o Seligman Henderson Global Fund Series, Inc.: consists of the Seligman
Henderson Global Growth Opportunities Fund, the Seligman Henderson Global
Smaller Companies Fund, the Seligman Henderson Global Technology Fund and the
Seligman Henderson International Fund all of which seek long-term capital
appreciation primarily through investing in companies either globally or
internationally.
o Seligman High Income Fund Series: seeks high current income by investing
in debt securities. The Fund consists of the U.S. Government Securities Series
and the High-Yield Bond Series.
o Seligman Income Fund, Inc.: seeks high current income and the possibility
of improvement of future income and capital value.
All permitted exchanges will be based on the net asset values of the
respective funds determined at the close of the NYSE on that day. Telephone
requests for exchanges must be received between 8:30 a.m. and 4:00 p.m. New York
City time on any business day, by Seligman Data Corp. at (800) 221-2450 and will
be processed as of the close of business on that day. The registration of an
account into which an exchange is made must be identical to the registration of
the account from which shares are exchanged. When establishing a new account by
an exchange of shares, the shares being exchanged must have a value of at least
the minimum initial investment required by the fund into which the exchange is
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being made. The method of receiving distributions, unless otherwise indicated,
will be carried over to the new fund account, as will telephone services.
Account services, such as Invest-A-Check(R) Service, Directed Dividends and
Automatic Cash Withdrawal Service, will not be carried over to the new fund
account unless specifically requested and permitted by the new fund. Exchange
orders may be placed to effect an exchange of a specific number of shares, an
exchange of shares equal to a specific dollar amount or an exchange of all
shares held. Shares for which certificates have been issued may not be exchanged
via telephone and may be exchanged only upon receipt of an exchange request
together with certificates representing shares to be exchanged in form for
transfer.
Telephone exchanges are only available to shareholders whose accounts are
registered individually or jointly. The terms of the exchange offer described
herein may be modified at any time; and not all of the mutual funds in the
Seligman Group are available to residents of all states. Before making any
exchange, contact your authorized investment dealer or Seligman Data Corp. to
obtain prospectuses of any of the Seligman Mutual Funds.
A broker/dealer representative will be able to effect exchanges on behalf
of a shareholder only if the shareholder has telephone services or if the
broker/dealer has entered into a Telephone Exchange Agreement with SFSI wherein
the broker/dealer must agree to indemnify SFSI and the Seligman Group of Mutual
Funds from any loss or liability incurred as a result of acceptance of telephone
exchange orders. Written confirmation of all exchanges will be forwarded to the
shareholder to whom the exchanged shares are registered and a duplicate
confirmation will be sent to the broker/dealer of record listed on the account.
SFSI reserves the right to reject any telephone exchange request. Any
rejected telephone exchange order may be processed by mail. For more information
about telephone exchanges, which, unless objected to, are assigned to certain
shareholders automatically, and the circumstances under which shareholders may
bear the risk of loss for a fraudulent transaction, see "Telephone Transactions"
above.
Exchanges of shares are sales and may result in a gain or loss for federal
and state income tax purposes.
FURTHER INFORMATION ABOUT TRANSACTIONS IN THE FUNDS
Because excessive trading (including short-term, "market timing" trading)
can hurt a Series' performance, a Fund, on behalf of a Series, may refuse any
exchange (1) from any shareholder account from which there have been two
exchanges in the preceding three month period, or (2) where the exchanged shares
equal in value the lesser of $1,000,000 or 1% of the Series' net assets. A Fund
may also refuse any exchange or purchase order from any shareholder account if
the shareholder or the shareholder's broker/dealer has been advised that
previous patterns of purchases and redemptions or exchanges have been considered
excessive. Accounts under common ownership or control, including those with the
same taxpayer ID number and those administered so as to redeem or purchase
shares based upon certain predetermined market indicators, will be considered
one account for this purpose. Additionally, each Fund reserves the right to
refuse any order for the purchase of shares.
DIVIDENDS AND DISTRIBUTIONS
Each Series intends to declare dividends of net investment income daily.
Dividends are paid on the 17th day of each month. If the 17th day of the month
falls on a weekend or holiday on which the NYSE is closed, the dividend will be
distributed on the previous business day. Payments vary in amount depending on
income received from portfolio securities, expenses of operation and the number
of days in the period.
Shares will begin earning dividends on the day on which a Series receives
payment and shares are issued. Shares continue to earn dividends through the
date preceding the date they are redeemed or delivered subsequent to repurchase.
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Each Series distributes substantially all of any taxable net long-term and
short-term gain realized on investments to shareholders at least annually in
accordance with requirements under the Internal Revenue Code of 1986, as
amended, and other applicable statutory and regulatory requirements.
Shareholders may elect: (1) to receive both dividends and gain
distributions in shares; (2) to receive dividends in cash and gain distributions
in shares; (3) to receive both dividends and gain distributions in cash. In the
case of prototype retirement plans, dividends and gain distributions are
reinvested in additional shares. Unless another election is made, dividends and
gain distributions will be credited to shareholder accounts in additional
shares. Class D shares acquired through a dividend or gain distribution and
credited to the account are not subject to a CDSL. Dividends and gain
distributions paid in shares are invested at the net asset value on the payable
date. Shareholders may elect to change their dividend and gain distribution
options by writing Seligman Data Corp. at the address listed below. If the
shareholder has telephone services, changes may also be telephoned to Seligman
Data Corp. between 8:30 a.m. and 6:00 p.m. New York City time, by either the
shareholder or the broker/dealer of record on the account. For information about
telephone services, see "Telephone Transactions." These elections must be
received by Seligman Data Corp. at least five business days before the payable
date, otherwise payment will be made in accordance with the current option on
the shareholder's account.
The per share dividends from net investment income on a Series' Class D
shares will be lower than the per share dividends on a Series' Class A shares as
a result of the higher distribution fee applicable with respect to a Series'
Class D shares. Per share dividends of the two classes may also differ as a
result of differing class expenses, if any. Distributions of net capital gains,
if any, will be paid in the same amount for Class A and Class D shares.
Shareholders exchanging into another mutual fund in the Seligman Group will
continue to receive dividends and gains as elected prior to such exchange unless
otherwise specified.
TAXES
Federal Income Taxes
Each Series intends to continue to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as amended (the "Code"). Thus
qualified, each Series will be relieved of federal income tax on income
distributed to shareholders provided that it distributes each year to its
shareholders at least 90% of its net investment income and net short-term
capital gains, if any.
If, at the close of each quarter of its taxable year, at least 50% of each
Series' total assets is invested in obligations exempt from federal income tax
the Series will be eligible to pay dividends that are excludable by shareholders
from gross income for federal income tax purposes ("exempt interest dividends").
The total amount of exempt interest dividends paid by a Series to shareholders
with respect to any taxable year cannot exceed the amount of federally
tax-exempt interest received by a Series during the year less any expenses
allocable to such interest.
Distributions of net capital gain, i.e., the excess of net long-term
capital gains over net short-term capital losses ("capital gain distributions")
are taxable to shareholders as long-term capital gain, whether received in
shares or cash, regardless of how long a shareholder has held shares in the
Series, 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 income
tax on net capital gains at a maximum rate of 28%. Net capital gain of a
corporate shareholder is taxed at the same rate as ordinary income.
Distributions from a Series' other investment income (other than exempt interest
dividends) or from net realized short-term gain will be taxable to shareholders
as ordinary income, whether received in cash or in additional shares.
Distributions will not, generally, be eligible for the dividends-received
deduction for corporations. Shareholders receiving distributions in the form of
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additional shares issued by a Series 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 Series will not be deductible for federal income tax purposes to the
extent that the Series' distributions are exempt from federal income tax.
Any gain or loss realized upon a sale or redemption of shares of a Series
by a shareholder who is not a dealer in securities generally will be treated as
a long-term capital gain or loss if the shares have been held for more than
twelve months and otherwise as a short-term capital gain or loss. 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. Moreover, any loss
realized by a shareholder upon the sale of shares of a Series held six months or
less will be disallowed to the extent of any exempt-interest dividends received
by the shareholders with respect to such shares. In addition, no loss will be
allowed on the sale or other disposition of shares of a Series 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 (such as through dividend
reinvestment) securities that are substantially identical to the shares of the
Series.
In determining gain or loss on shares of a Series 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 load
incurred in acquiring such shares to the extent of any subsequent reduction of
the sales load by reason of the Exchange or Reinstatement Privilege offered by a
Fund. Any sales load 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 advisers concerning the effect
of federal income taxes in their individual circumstances. In particular,
persons who may be "substantial users" (or "related persons" of substantial
users) of facilities financed by industrial development bonds or private
activity bonds should consult their tax advisers before purchasing shares of any
Series.
UNLESS A SHAREHOLDER INCLUDES A TAXPAYER IDENTIFICATION NUMBER (SOCIAL
SECURITY NUMBER FOR INDIVIDUALS) ON THE ACCOUNT APPLICATION AND CERTIFIES THAT
SUCH SHAREHOLDER IS NOT SUBJECT TO BACKUP WITHHOLDING, EACH FUND IS REQUIRED TO
WITHHOLD AND REMIT TO THE U.S. TREASURY A PORTION OF NON-EXEMPT 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 UP TO $50 ANNUALLY FOR EACH
ACCOUNT FOR WHICH A CERTIFIED TAXPAYER IDENTIFICATION NUMBER IS NOT PROVIDED. IN
THE EVENT THAT SUCH A FINE IS IMPOSED WITH RESPECT TO ANY UNCERTIFIED ACCOUNT IN
ANY YEAR, A CORRESPONDING CHARGE MAY BE MADE AGAINST THAT ACCOUNT.
California Taxes
In the opinion of Sullivan & Cromwell, counsel to the Funds, provided that
at the end of each quarter of its taxable year at least 50% of the total assets
of the California Quality or California High-Yield Series consist of federally
tax-exempt obligations of the State of California and its political subdivisions
("California Tax-Exempt Securities"), shareholders of each such Series who are
subject to California State taxation on dividends will not be subject to
California personal income taxes on dividends from that Series attributable to
interest received by each such Series on California Tax-Exempt Securities as
well as on certain other federally tax-exempt obligations the interest on which
is exempt from California personal income taxes. To the extent that the
distributions are derived from other income, including long- or short-term
capital gains, such distributions will not be exempt from California personal
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income taxation, and, further to the extent that they constitute long-term
capital gain dividends they will be taxed as long-term gain to a shareholder.
Interest on indebtedness incurred or continued to purchase or carry shares
of the California Quality or California High Yield Series will not be deductible
for California personal income tax purposes to the extent such Series'
distributions are exempt from California personal income tax.
Prospective investors should be aware that an investment in these Series
may not be suitable for persons who are not residents of the State of California
or who do not receive income subject to income taxes of the State.
Colorado Taxes
In the opinion of Ireland, Stapleton, Pryor & Pascoe, P.C., Colorado tax
counsel to the Tax-Exempt Fund, individuals, trusts, estates and corporations
who are holders of the Colorado Series and who are subject to the Colorado
income tax will not be subject to Colorado income tax on Colorado 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 derived from interest income received by the Colorado Series on (a)
obligations of the State of Colorado or its political subdivisions which are
issued on or after May 1,1980, and 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. To the extent that Colorado Series 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. There are no municipal income taxes in Colorado. As intangibles,
shares in the Colorado Series are exempt from Colorado property taxes.
Except during temporary defensive periods or when acceptable investments
are unavailable to the Colorado Series, at least 80% of the value of the net
assets of the Colorado Series will be maintained in debt obligations which are
exempt from federal income tax and Colorado income tax.
The Colorado Series 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.
Florida Taxes
Florida does not presently impose an income tax on individuals and thus
individual shareholders of the Florida Series will not be subject to any Florida
state income tax on distributions received from the Florida Series. However,
Florida imposes an intangible personal property tax on shares of the Florida
Series owned by a Florida resident on January 1 of each year unless such shares
qualify for an exemption from that tax. The Tax-Exempt Trust has received a
Technical Assistance Advisement from the State of Florida, Department of
Revenue, to the effect that shares of the Florida Series owned by a Florida
resident will be exempt from the intangible personal property tax so long as the
Florida Series' portfolio includes on January 1 of each year only assets, such
as Florida Tax-Exempt Securities and U.S. Government securities, which are
exempt from the Florida intangible personal property tax. Corporate shareholders
may be subject to Florida income taxes depending on the portion of the income
related to the Florida Series that is allocable to Florida under applicable
Florida law.
Georgia Taxes
In the opinion of King & Spalding, Georgia tax counsel to the Tax-Exempt
Fund, under existing Georgia law, shareholders of the Georgia Series will not be
subject to Georgia income taxes on dividends with respect to shares of the
Georgia Series 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
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Islands or Guam (collectively, "Georgia Obligations"), which are held by the
Georgia Series. Dividends, if any, derived from capital gains or other sources
generally will be taxable to shareholders of the Georgia Series for Georgia
income tax purposes. For purposes of the Georgia intangibles tax, shares of the
Georgia Series are taxable to shareholders who are otherwise subject to the
Georgia intangibles tax.
Except during temporary defensive periods or when acceptable investments
are unavailable to the Georgia Series, at least 80% of the value of the net
assets of the Georgia Series will be maintained in debt obligations which are
exempt from federal income tax and Georgia income taxes.
The Georgia Series 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 Tax-Exempt
Fund, based upon a private ruling obtained from the Louisiana Department of
Revenue and Taxation (the "Department"), and subject to the current policies of
the Department, shareholders of the Louisiana Series who are either corporations
or individuals and residents of the State of Louisiana and who are otherwise
subject to Louisiana income tax will not be subject to Louisiana income tax on
Louisiana Series 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, its governmental agencies or instrumentalities. To
the extent that distributions on the Louisiana Series 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
Series dividends.
Except during temporary defensive periods or when acceptable investments
are unavailable to the Louisiana Series, the Tax-Exempt Fund will maintain at
least 80% of the value of the net assets of the Louisiana Series in debt
obligations which are exempt from federal income tax and exempt from Louisiana
income tax.
The Louisiana Series will notify its shareholders within 60 days after the
close of the year as to the interest derived from Louisiana obligations and
exempt from Louisiana income tax.
Maryland Taxes
In the opinion of Venable, Baetjer and Howard, LLP, Maryland tax counsel to
the Tax-Exempt Fund, as long as dividends paid by the Maryland Series qualify as
interest excludable under Section 103 of the Code and the Maryland Series
qualifies as a "regulated investment company" under the Code, the portion of
exempt-interest dividends that represents interest received by the Maryland
Series 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 a
shareholder of the Maryland Series.
Gain realized by the Maryland Series 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 Series are attributable to
sources other than those described in the preceding sentences, such as interest
received by the Maryland Series 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 Series shares, such
distributions will be subject to Maryland state and local income taxes.
Income earned on certain private activity bonds will constitute a Maryland
tax preference for individual shareholders.
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Interest on indebtedness incurred or continued (directly or indirectly) by
a shareholder of the Maryland Series to purchase or carry shares of the Maryland
Series 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 Series, at least 80% of the value of the net
assets of the Maryland Series will be maintained in debt obligations which are
exempt from federal income tax and are exempt from Maryland state and local
income taxes.
The Maryland Series 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
Tax-Exempt Fund, assuming that the Tax-Exempt Fund gives the notices described
at the end of this section, holders of the Massachusetts Series who are subject
to the Massachusetts personal income tax will not be subject to tax on
distributions from the Massachusetts Series to the extent that these
distributions qualify as exempt-interest dividends of a regulated investment
company under Section 852(b)(5) of the 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 Series
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 Series. 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 Code and
which are includable in Federal gross income will be includable in the
Massachusetts income of a holder of the Massachusetts Series as capital gain.
Massachusetts Series 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 Series, the Tax-Exempt Fund will maintain
at least 80% of the value of the net assets of the Massachusetts Series in debt
obligations which are exempt from federal income tax and Massachusetts personal
income tax.
The Massachusetts Series 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, Moon, Van Dusen & Freeman, Michigan
tax counsel to the Tax-Exempt 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. The Michigan Department
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of Treasury has issued a bulletin stating that holders of interests in regulated
investment companies who are subject to the Michigan intangibles tax will be
exempt from the tax to the extent that the investment portfolio consists of U.S.
obligations and obligations of the State of Michigan or of its political
subdivisions. In addition, Michigan Series shares owned by certain financial
institutions or by certain other persons subject to the Michigan single business
tax are not subject to the Michigan intangibles tax. To the extent the
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 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 Professional Limited Liability
Partnership, Minnesota tax counsel to the Tax-Exempt Fund, provided that the
Minnesota Series qualifies as a "regulated investment company" under the Code,
and subject to the discussion in the paragraph below, shareholders of the
Minnesota Series 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 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 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 Series. If the 95% test is not met, all
exempt-interest dividends that are paid by the Minnesota Series 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 Series
are not derived from the Minnesota Sources described in the first sentence of
this paragraph, such dividends will be subject to the regular Minnesota personal
income tax. Other distributions of the Minnesota Series, including distributions
from net short-term and long-term capital gains, are generally not exempt from
the regular Minnesota personal income tax.
Legislation enacted in 1995 provides that it is the intent of the Minnesota
legislature that interest income on obligations of Minnesota governmental units,
including obligations of the Minnesota Sources described above, and
exempt-interest dividends that are derived from interest income on such
obligations, be included in the net income of individuals, estates, and trusts
for Minnesota income tax purposes if it is judicially determined that the
exemption by Minnesota of such interest or such exempt-interest dividends
unlawfully discriminates against interstate commerce because interest income on
obligations of governmental issuers located in other states, or exempt-interest
dividends derived from such obligations, is so included. This provision applies
to taxable years that begin during or after the calendar year in which such
judicial decision becomes final, regardless or the date on which the obligations
were issued, and other remedies apply for previous taxable years. The United
States Supreme Court recently denied certiorari in an Ohio case which 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. However, 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
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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 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 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 Series, including all of those that are derived
from the Minnesota Sources described above, will be subject to the Minnesota
alternative minimum tax, in the case of shareholders of the Minnesota Series who
are individuals, estates or trusts.
Subject to certain limitations that are set forth in the Minnesota rules,
Minnesota Series 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 Series who are individuals, estates, or trusts.
Minnesota Series 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
Series 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 Series, at least 80% of the value of the net
assets of the Minnesota Series will be maintained in debt obligations which are
exempt from the federal income tax and the Minnesota personal income tax,
subject to the discussion above. The Minnesota Series will invest so that the
95% test described above is met.
The Minnesota Series 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 Tax-Exempt
Fund, dividends distributed to individual shareholders of the Missouri Series
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 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 Code, distributable by the Fund to individual resident shareholders of
the Missouri Series, to the extent includable in federal adjusted gross income,
will be subject to Missouri income taxation. Shares in the Missouri Series are
not subject to Missouri personal property taxes.
Dividends paid by the Missouri Series, if any, that do not qualify as tax
exempt dividends under Section 852 (b)(5) of the Code, will be exempt from
Missouri income tax only to the extent that such dividends are derived from
interest on certain U.S. obligations that the State of Missouri is expressly
prohibited from taxing under the laws of the United States. The portion of such
dividends that is not subject to taxation by the State of Missouri may be
reduced by interest, or other expenses, in excess of $500 paid or incurred by a
shareholder in any taxable year to purchase or carry shares of the Missouri
Series of the Tax-exempt Fund or other investments producing income that is
includable in federal gross income, but exempt from Missouri income tax.
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Except during temporary defensive periods or when acceptable investments
are unavailable to the Missouri Series, at least 80% of the value of the net
assets of the Missouri Series will be maintained in debt obligations which are
exempt from federal income tax and Missouri personal income tax.
The Missouri Series 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 Jersey Taxes
In the opinion of McCarter & English, New Jersey counsel to the New Jersey
Fund, income distributions paid from a "qualified investment fund" are exempt
from the New Jersey personal income tax, to the extent attributable to
tax-exempt obligations specified by New Jersey law. As defined in N.J.S.A.
54A:6-14.1, a "qualified investment fund" is any investment or trust company, or
series of such investment company or trust registered with the Securities and
Exchange Commission, which for the calendar year in which a distribution is
paid, has (i) no investments other than interest-bearing obligations,
obligations issued at a discount, and cash and cash items, including
receivables, and financial options, futures, forward contracts, or other similar
financial instruments related to interest-bearing obligations, obligations
issued at a discount or bond indices related thereto (such financial options,
etc. being referred to herein as "Financial Instruments"), and (ii) which has at
least 80% of the aggregate principal amount of all its investments, excluding
Financial Instruments, to the extent such instruments are authorized by section
851(b) of the Code, cash and cash items, including receivables, invested in
obligations issued by New Jersey, or in obligations that are free from state or
local taxation under New Jersey and federal laws such as obligations issued by
the governments of Puerto Rico, Guam or the Virgin Islands ("Tax-Exempt
Securities"). Interest income and gains realized by the New Jersey Fund upon
disposition of obligations and distributed to the shareholders are exempt from
the New Jersey personal income tax to the extent attributable to Tax-Exempt
Securities. Gains resulting from the redemption or sale of shares of the New
Jersey Fund would also be exempt from the New Jersey personal income tax.
The New Jersey personal income tax is not applicable to corporations. For
all corporations subject to the New Jersey Corporation Business Tax, interest on
Tax-Exempt Securities is included in the net income tax base for purposes of
computing the corporation business tax. Furthermore, any gain upon the
redemption or sale of shares by a corporate shareholder is also included in the
net income tax base for purposes of computing the Corporation Business Tax.
The New Jersey Fund will notify shareholders by February 15 of each
calendar year as to the amounts of all such dividends and distributions which
are exempt from federal income taxes and New Jersey personal income tax and the
amounts, if any, which are subject to such taxes. Shareholders are, however,
urged to consult with their own tax advisors as to the federal, state or local
tax consequences in their specific circumstances.
Prospective investors should be aware that an investment in a state
tax-exempt fund may not be suitable for persons who do not receive income
subject to income taxes of such state.
New York State and City Taxes
In the opinion of Sullivan & Cromwell, counsel to the Funds, holders of
shares of the New York Series 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 Series dividends to the extent that such distributions qualify as
exempt-interest dividends under Section 852(b)(5) of the 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
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on the New York Series 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 Series 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 Series, the Tax-Exempt Fund will maintain at
least 80% of the value of the net assets of the New York Series in debt
obligations which are exempt from federal income tax and New York State and City
personal income taxes.
The Series 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.
North Carolina Taxes
In the opinion of Horack, Talley, Pharr & Lowndes, P.A., tax counsel to the
North Carolina Series, distributions from the North Carolina Series to
shareholders subject to North Carolina income taxes will not be taxable for
North Carolina income tax purposes to the extent the distributions either (i)
qualify as exempt-interest dividends of a regulated investment company under the
Code and are attributable to interest on obligations issued by the State of
North Carolina and its political subdivisions or (ii) are dividends attributable
to interest on direct obligations of the U.S. government and agencies and
possessions of the United States, so long as in both cases the North Carolina
Series provides a supporting statement to the shareholders designating the
portion of the dividends of the North Carolina Series attributable to interest
on obligations issued by the State of North Carolina and its political
subdivisions or direct obligations of the U.S. government and agencies and
possessions of the United States. In the absence of such a statement, the total
amount of the dividends will be taxable for North Carolina income tax purposes.
Distributions attributable to other sources, including exempt-interest dividends
attributable to interest on obligations of states other than North Carolina and
the political subdivisions of such other states as well as capital gains, will
be taxable for North Carolina income tax purposes.
The North Carolina Series will notify its shareholders within 60 days after
the close of its taxable year as to the amount of dividends and distributions to
the shareholders of the North Carolina Series which are exempt from North
Carolina income taxes and the dollar amount, if any, which is subject to North
Carolina income taxes.
The North Carolina tax on the value of intangible personal property has
been repealed effective January 1, 1995.
Ohio Taxes
In the opinion of Squire, Sanders & Dempsey, Ohio tax counsel to the
Tax-Exempt Fund, holders of the Ohio Series who are subject to the Ohio personal
income tax, the net income base of the Ohio corporation franchise tax, or school
district or municipal income taxes in Ohio will not be subject to such taxes on
dividend distributions with respect to shares of the Ohio Series to the extent
that such distributions are properly attributable to interest (including accrued
original issue discount) on obligations issued by or on behalf of the State of
Ohio, political subdivisions thereof, or agencies or instrumentalities thereof
("Ohio Obligations"), or by the government of Puerto Rico, the Virgin Islands or
Guam, provided that the Ohio Series 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 Series 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 Series will be included in a corporation's tax base for
purposes of computing the Ohio corporation franchise tax on the net worth basis.
Dividends on shares of the Ohio Series that are attributable to gain from
the sale, exchange or other disposition of Ohio Obligations held by the Ohio
Series are not subject to the Ohio personal income tax, the net income base of
the Ohio corporation franchise tax, or school district or municipal income taxes
in Ohio.
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The Ohio Series is not subject to the Ohio personal income tax, Ohio school
district income taxes, the Ohio corporation franchise tax, or the Ohio dealers
in intangibles tax, provided that, with respect to the Ohio corporation
franchise tax and the Ohio dealers in intangibles tax, the Tax-Exempt Fund
complies with certain reporting requirements.
Except during temporary defensive periods or when acceptable investments
are unavailable to the Ohio Series, the Tax-Exempt Fund will maintain at least
80% of the value of the net assets of the Ohio Series in debt obligations which
are exempt from federal income tax and the Ohio personal income tax and the net
income base of the Ohio corporation franchise tax.
The Ohio Series 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 Series.
Oregon Taxes
In the opinion of Schwabe, Williamson & Wyatt, Oregon tax counsel to the
Tax-Exempt Fund, under present law, individual shareholders of the Oregon Series
will not be subject to Oregon personal income taxes on distributions received
from the Oregon Series to the extent that such distributions (1) qualify as
"exempt-interest dividends" under Section 852 (b)(5) of the 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 Series are exempt from Oregon
excise tax on corporations. However, shares of the Oregon Series are not subject
to Oregon property tax.
Except during temporary defensive periods or when acceptable investments
are unavailable to the Oregon Series, at least 80% of the value of the net
assets of the Oregon Series will be maintained in debt obligations, the interest
payments of which are exempt from federal income tax and Oregon personal income
taxes.
The Oregon Series 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.
Pennsylvania Taxes
In the opinion of Ballard Spahr Andrews & Ingersoll, Pennsylvania tax
counsel to the Pennsylvania Fund, individual shareholders of the Pennsylvania
Fund who are subject to the Pennsylvania personal income tax will not be subject
to Pennsylvania personal income tax on distributions from the Pennsylvania Fund
to the extent that such distributions are attributable to interest paid on
Pennsylvania Tax-Exempt Securities or U.S. Government obligations. Distributions
attributable to most other sources, including distributions attributable to gain
on the sale of such instruments, will not be exempt from Pennsylvania personal
income tax.
The same rules apply under the tax imposed by the Philadelphia School
District on the unearned income of Philadelphia residents, except that all
capital gain distributions are exempt from the School District tax regardless of
the source from which they are paid.
Corporate shareholders who are subject to the Pennsylvania corporate net
income tax will not be subject to corporate net income tax on distributions from
the Pennsylvania Fund that qualify as "exempt-interest dividends" for federal
income tax purposes or are derived from interest on U.S. Government obligations.
Individual shareholders of the Pennsylvania Fund who are subject to the
Pennsylvania personal property tax will be exempt from Pennsylvania personal
property tax on their shares of the Pennsylvania Fund to the extent that the
Pennsylvania Fund portfolio consists of Pennsylvania Tax-Exempt Securities and
U.S. Government obligations on the annual assessment date. Corporations are not
subject to Pennsylvania personal property taxes.
Shareholders will receive an annual Statement of Account and information
regarding the federal and Pennsylvania income tax status of all distributions
made during the year. Information will also be provided to individual
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Pennsylvania shareholders regarding the portion of the value of their shares, if
any, subject to Pennsylvania personal property tax.
Prospective investors should be aware that an investment in the
Pennsylvania Fund may not be suitable for persons who are not residents of the
State of Pennsylvania or who do not receive income subject to income taxes of
the State.
South Carolina Taxes
In the opinion of Sinkler & Boyd, South Carolina tax counsel to the
Tax-Exempt Fund, shareholders of the South Carolina Series who are subject to
South Carolina individual or corporate income taxes will not be subject to such
taxes on South Carolina Series' 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 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 or dividends on
obligations of the United States and its possessions or on obligations or
securities of any authority or commission exempt from state income taxes under
the laws of the United States (collectively, "South Carolina Obligations"). To
the extent that South Carolina Series' 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 Series, at least 80% of the value of the
net assets of the South Carolina Series will be maintained in debt obligations
which are exempt from federal income tax and South Carolina income tax.
The South Carolina Series 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 tax-exempt 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 Series
may be afforded tax-exempt treatment on distributions to the extent they are
derived from tax-exempt securities issued by that state or its localities.
Prospective investors should be aware that an investment in a certain State
Series 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 advisers.
SHAREHOLDER INFORMATION
Shareholders will be sent semi-annual reports regarding their Fund. General
information about the Funds may be requested by writing the Corporate
Communications/Investor Relations Department, J. & W. Seligman & Co.
Incorporated, 100 Park Avenue, New York, NY 10017 or telephoning the Corporate
Communications/ Investor Relations Department toll-free by dialing (800)
221-7844 from all continental United States, except New York, or (212) 850-1864
in New York State and the Greater New York City area. Information about
shareholder accounts may be requested by writing Shareholder Services, Seligman
Data Corp., at the same address or by toll-free telephone by dialing (800)
221-2450 from all continental United States. Seligman Data Corp. may be
telephoned Monday through Friday (except holidays), between the hours of 8:30
a.m. and 6:00 p.m. New York City time and calls will be answered by a service
representative. 24-HOUR AUTOMATED TELEPHONE ACCESS IS AVAILABLE BY DIALING (800)
622-4597 ON A TOUCHTONE PHONE WHICH PROVIDES INSTANT ACCESS TO PRICE, YIELD,
ACCOUNT BALANCE, MOST RECENT TRANSACTION AND OTHER INFORMATION. IN ADDITION,
ACCOUNT STATEMENTS, FORM 1099-DIV AND CHECKBOOKS CAN BE ORDERED. TO INSURE
PROMPT DELIVERY OF CHECKS, ACCOUNT STATEMENTS AND OTHER INFORMATION, SELIGMAN
DATA CORP., SHOULD BE NOTIFIED IMMEDIATELY IN WRITING OF ANY ADDRESS CHANGE.
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ADDRESS CHANGES MAY BE TELEPHONED TO SELIGMAN DATA CORP. IF THE SHAREHOLDER HAS
TELEPHONE SERVICES. FOR MORE INFORMATION ABOUT TELEPHONE SERVICES, SEE
"TELEPHONE TRANSACTIONS" ABOVE.
Account Services. Shareholders are sent confirmation of financial
transactions.
Other investor services are available. These include:
o Invest-A-Check(R) enables a shareholder to authorize checks to be drawn
on a regular checking account at regular monthly intervals in fixed amounts
of $100 or more per fund, or regular quarterly intervals in fixed amounts
of $250 or more per fund, to purchase shares. Accounts may be established
concurrently with the Invest-A-Check(R) Service with a $100 minimum in
conjunction with the monthly investment option, or a $250 minimum in
conjunction with the quarterly investment option. Accounts established in
conjunction with the Invest-A-Check(R) Service must be accompanied by a
minimum initial investment of $100. (See "Terms and Conditions" on page
51).
o Automatic Dollar-Cost-Averaging Service permits a shareholder of Class A
shares of Seligman Cash Management Fund to exchange a specified amount, at
regular monthly intervals in fixed amounts of $100 or more per fund, or
regular quarterly intervals of $250 or more per fund, into Class A shares
of any other Seligman Mutual Fund, registered in the same name. The
shareholder's Cash Management Fund account must have a dollar value of at
least $5,000 at the initiation of the service. Exchanges will be made at
the public offering price.
o Dividends From Other Investments permits a shareholder to order dividends
payable on shares of other companies to be paid to and invested in
additional shares of the Series. (Dividend checks must meet or exceed the
required minimum purchase amount and include the shareholder's name, the
name of the Series and the class of shares in which the investment is to be
made and the shareholder's account number.)
o Automatic CD Transfer Service permits a shareholder to instruct a bank to
invest the proceeds of a maturing bank certificate of deposit ("CD") in
shares of any designated Seligman Mutual Fund. Shareholders who wish to use
this service, should contact Seligman Data Corp. or a broker to obtain the
necessary documentation. Banks may charge a penalty on CD assets withdrawn
prior to maturity. Accordingly, it will not normally be advisable to
liquidate a CD before its maturity.
o Automatic Cash Withdrawal Service permits payments at regular intervals
to be made to a shareholder who owns or purchases Class A shares worth
$5,000 or more held as book credits. Holders of Class D shares may elect to
use this service with respect to shares that have been held for at least
one year. (See "Terms and Conditions" on page 51).
o Directed Dividends allows a shareholder to pay dividends to another
person or to direct the payment of such dividends to another Seligman
Mutual Fund for purchase at net asset value. Dividends on Class A and Class
D shares may be directed only to shares of the same class of another
Seligman Mutual Fund.
o Overnight Delivery to service shareholder requests is available for a
$15.00 fee which may be debited from a shareholder's account, if requested.
o Copies of Account Statements will be sent to each shareholder 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 $10.00 per year, per
account, with a maximum charge of $150 per account. Statement requests
should be forwarded, along with a check, to Seligman Data Corp.
ADVERTISING A SERIES' PERFORMANCE
From time to time, a Series advertises its "yield," "tax equivalent yield,"
"average annual total return" and "total return," each of which is calculated
separately for each Series' Class A and Class D shares. THESE FIGURES ARE BASED
ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The
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"yield" of a Series' class refers to the income generated by an investment in
the Series over a 30-day period. This income is then "annualized." That is, the
amount of income generated by the investment during that 30-day period is
assumed to be generated each 30-day period for twelve periods and is shown as a
percentage of the investment. The income earned on the investment is also
assumed to be reinvested at the end of the sixth 30-day period. The "tax
equivalent yield" is calculated similarly to the "yield," except that the yield
is increased using a stated income tax rate to demonstrate the taxable yield
necessary to produce an after-tax yield equivalent to the Series. The "average
annual total return" is the annual rate required for the initial payment to grow
to the amount which would be received at the end of the specified period (one
year, five years, and ten years or since the inception of the Series), i.e., the
average annual compound rate of return, assuming the payment of the maximum
sales load, if any, when the investment was first made and that all
distributions and dividends by the Series were reinvested on the reinvestment
dates during the period. "Total return" is calculated with these same
assumptions and shows the aggregate return on an investment in a class over a
specified period (one year, five years and ten years or since the inception of
the Series). Class A total return and average annual total return quoted from
time to time are not adjusted for periods prior to commencement dates, December
27, 1990, in the case of the Florida Series, and January 1, 1993, in the case of
the California High-Yield Series, California Quality Series, and each Series of
the Tax-Exempt Fund, for the annual administration, shareholder services and
distribution fee. Such fee, if reflected, would reduce the performance quoted.
The waiver by the Manager of its fees and reimbursement of certain expenses
during certain periods (as set forth under "Financial Highlights" herein) would
positively affect the performance results quoted.
From time to time, reference may be made in advertising or promotional
material to mutual fund rankings prepared by Lipper Analytical Service, Inc.
("Lipper"), an independent reporting service that monitors the performance of
mutual funds. Lipper ranks funds in various categories by making comparative
calculations using total return. Each Series may quote its Lipper ranking in the
Municipal Bond Fund category or the Single State Municipal Bond Fund category or
its Lipper ranking for all municipal bond funds monitored by Lipper. In
addition, each class of a Series may compare its total return over a certain
period with the average performance of all funds in these Lipper categories for
the same period. In calculating the total return of a Series' Class A and Class
D shares, the Lipper analysis assumes investment of all dividends and
distributions paid but does not take into account applicable sales loads. A
Series may also refer in advertisements, or in other promotional material to
articles, comments, listings and columns in the financial and other press
pertaining to a Series' performance. Examples of such financial and other press
publications include Barron's, Business Week, CDA/Wiesenberger Mutual Funds
Investment Report, Christian Science Monitor, Financial Planning, Financial
Times, Financial World, Forbes, Fortune, Individual Investor, Investment
Advisor, Investors Business Daily, Kiplinger's, Los Angeles Times, MONEY
Magazine, Morningstar, Inc., Pensions and Investments, Smart Money, The New York
Times, The Wall Street Journal, USA Today, U.S. News and World Report,
Washington Post, Worth Magazine and Your Money.
ORGANIZATION AND CAPITALIZATION
Each Fund is a non-diversified, open-end management investment company, as
defined in the 1940 Act. The New Jersey Fund was incorporated in Maryland on
March 13, 1987. The Pennsylvania Fund was organized as an unincorporated trust
under the laws of the Commonwealth of Pennsylvania by a Declaration of Trust
dated May 13, 1986. The Tax-Exempt Fund was incorporated in Maryland on August
8, 1983. The Tax-Exempt Trust was established under the laws of the Commonwealth
of Massachusetts by a Declaration of Trust dated July 27, 1984.
The Directors or Trustees of the Funds have authority to create and
classify shares of capital stock or beneficial interest in separate Series,
without further action by shareholders. The Declarations of Trust of the
Pennsylvania Fund and the Tax-Exempt Trust permit the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest in
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separate Series. To date, shares of thirteen Series of the Tax-Exempt Fund, four
Series of the Tax-Exempt Trust, one Series of the New Jersey Fund and one Series
of the Pennsylvania Fund have been authorized, which shares constitute the
interests in the Series described herein. Further series may be added in the
future. Each of the Series' capital stock or shares of beneficial interest has a
par value of $.001 per share and is divided into two classes. Each share of each
Series' Class A and Class D common stock or beneficial interest, as applicable,
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 applicable state law.
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. In accordance with the Articles of Incorporation or Declaration of
Trust of each Fund, the Board of Directors or Trustees may authorize the
creation of additional classes of common stock or beneficial interest with such
characteristics as are permitted by Rule 18f-3 under the 1940 Act. 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.
It is the intention of the Funds not to hold Annual Meetings of
Shareholders. The Directors or Trustees may call Special Meetings of
Shareholders for action by shareholder vote as may be required by the 1940 Act,
or a Fund's Declaration of Trust or Articles of Incorporation. Pursuant to the
1940 Act, shareholders have to approve the adoption of any management contract,
distribution plan and any changes in fundamental investment policies.
Shareholders also have the right to call a meeting of shareholders for the
purpose of voting on the removal of one or more Directors or Trustees.
The shareholders of a Massachusetts business trust (the Tax-Exempt Trust)
or a Pennsylvania trust (the Pennsylvania Fund), could, under certain
circumstances, be held personally liable as partners of its obligations.
However, the Declaration of Trust of each of the Tax-Exempt Trust and the
Pennsylvania Fund, contains an express disclaimer of shareholder liability for
acts or obligations of the Trusts and also provides for indemnification and
reimbursement of expenses out of the Trusts, or Series thereof, for any
shareholder held personally liable for obligations of the Trust, or Series
thereof.
There is a possibility that one Fund might be liable for any misstatement,
inaccuracy, or incomplete disclosure in this Prospectus concerning any other
Fund contained herein. Based on the advice of counsel, however, the Funds
believe that the potential liability of each Fund with respect to the disclosure
in this Prospectus extends only to the disclosure relating to such Fund.
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TERMS AND CONDITIONS
General Account Information
Investments will be made in as many shares of a Series, including fractions
to the third decimal place, as can be purchased at the net asset value plus a
sales load, if applicable, at the close of business on the day payment is
received. If your check received in payment of a purchase of shares is
dishonored for any reason, Seligman Data Corp. may cancel the purchase and may
also redeem additional shares, if any, held in your account in an amount
sufficient to reimburse the Fund for any loss it may have incurred and charge a
$10.00 return check fee. Shareholders will receive dividends from investment
income and any distributions from gain realized on investments in shares or in
cash according to the option elected. Dividend and gain options may be changed
by notifying Seligman Data Corp. in writing at least five business days prior to
the payable date. Stock certificates will not be issued unless requested.
Replacement stock certificates will be subject to a surety fee.
Invest-A-Check(R) Service
The Invest-A-Check(R) Service is available to all shareholders. The
application is subject to acceptance by the shareholder's bank and Seligman Data
Corp. Checks in the amount specified will be drawn automatically on the
shareholder's bank on the fifth day of each month unless otherwise specified (or
on the prior business day if such day of the month falls on a weekend or
holiday) in which an investment is scheduled and invested at the public offering
price at the close of business on the same date. After the initial investment,
the value of shares held in your Account must equal not less than two regularly
scheduled investments. If a check is not honored by the shareholder's bank, or
if the value of shares held falls below the required minimum, the Service will
be suspended. In the event that a check is returned marked "unpaid," Seligman
Data Corp. will cancel the purchase, redeem shares held in your account for an
amount sufficient to reimburse a Series for any loss it may have incurred as a
result, and charge a $10.00 return check fee. This fee may be debited from the
shareholder's account. Service will be reinstated upon written request
indicating that the cause of interruption has been corrected. The Service may be
terminated by the shareholder or Seligman Data Corp. at any time by written
notice. The shareholder agrees to hold the Funds and their agents free from all
liability which may result from acts done in good faith and pursuant to these
terms. Instructions for establishing Invest-A-Check(R) Service are given on the
Account Application. In the event the shareholder exchanges all of the shares
from one Seligman Mutual Fund to another, the shareholder must re-apply for the
Invest-A-Check(R) Service in the Seligman Mutual Fund into which the exchange
was made. In the event of a partial exchange, the Invest-A-Check(R) Service will
be continued, subject to the above conditions, in the Seligman Fund from which
the exchange was made. Accounts established in conjunction with the
Invest-A-Check(R) service must be accompanied by a minimum initial investment of
$100.
Automatic Cash Withdrawal Service
Automatic Cash Withdrawal Service is available to Class A shareholders and
to Class D shareholders with respect to Class D shares held for one year or
more. A sufficient number of full and fractional shares will be redeemed to
provide the amount required for a scheduled payment. Redemptions will be made at
the asset value at the close of business on the specific day designated by the
shareholder of each month (or on the prior business day if the day specified
falls on a weekend or holiday). The shareholder may change the amount of
scheduled payments or may suspend payments by written notice to Seligman Data
Corp. at least ten days prior to the effective date of such a change or
suspension. The Service may be terminated by the shareholder or Seligman Data
Corp. at any time by written notice. It will be terminated upon proper
notification of the death or legal incapacity of the shareholder. Continued
payments in excess of dividend income invested will reduce and ultimately
exhaust capital. Withdrawals, concurrent with purchases of shares of this or any
other investment company, will be disadvantageous to you because of the payment
of duplicative sales loads, if applicable. For this reason, additional purchases
of Fund shares are discouraged when the Withdrawal Service is in effect.
Letter of Intent -- Class A Shares Only
Seligman Financial Services, Inc. will hold in escrow shares equal to 5% of
the minimum purchase amount specified. Dividends and distributions on the
escrowed shares will be paid to the shareholder or credited to the shareholder's
account. Upon completion of the specified minimum purchase within the
thirteen-month period, all shares held in escrow will be deposited in the
shareholder's account or delivered to the shareholder. The shareholder may
include the total asset value of shares of the Seligman Mutual Funds (on which a
sales load was paid) owned as of the date of a Letter of Intent toward the
completion of the Letter. If the total amount invested within the thirteen-month
period does not equal or exceed the specified minimum purchase, you will be
requested to pay the difference between the amount of the sales load paid and
the amount of the sales load applicable to the total purchase made. If, within
20 days following the mailing of a written request, you have not paid this
additional sales load to Seligman Financial Services, Inc., sufficient escrowed
shares will be redeemed for payment of the additional sales load. Shares
remaining in escrow after this payment will be released to the shareholder's
account. The intended purchase amount may be increased at any time during the
thirteen-month period by filing a revised Agreement for the same period,
provided that your Dealer furnishes evidence that an amount representing the
reduction in sales load under the new Agreement, which becomes applicable on
purchases already made under the original Agreement, will be refunded to the
shareholder and that the required additional escrowed shares are being furnished
by the shareholder.
Shares of Seligman Cash Management Fund, Inc. which have been acquired by
an exchange of shares of another Seligman Mutual Fund on which there is a sales
load may be taken into account in completing a Letter of Intent, or for Right of
Accumulation. However, shares of the Cash Management Fund which have been
purchased directly may not be used for purposes of determining reduced sales
loads on additional purchases of the other Seligman Mutual Funds.
Check Redemption Service -- Class A Shares Only
If shares are held in joint names, all shareholders must sign Section 6 of
the Account Application. All checks will require all signatures unless a lesser
number is indicated on the face of the application. Accounts in the names of
corporations, trusts, partnerships, etc. must list all authorized signatories.
In all cases, each signature guarantees the genuineness of the other
signatures. Checks may not be drawn for less than $500.
The shareholder hereby authorizes Mellon Bank, N.A. to honor checks drawn
by the shareholder and to effect a redemption of sufficient shares in the
shareholder's account to cover payment of the check. Shares in one Series cannot
be redeemed to cover a check written on another Series.
Mellon Bank, N.A. shall be liable only for its own negligence. A Fund will
not be liable for any loss, expense or cost arising out of check redemptions.
Each Fund reserves the right to change, modify or terminate this service at any
time upon notification mailed to the address of record of the shareholder(s).
SELIGMAN DATA CORP. WILL CHARGE A $10.00 PROCESSING FEE FOR ANY CHECK
REDEMPTION DRAFT RETURNED MARKED "UNPAID." THIS CHARGE MAY BE DEBITED FROM A
SHAREHOLDER'S ACCOUNT. NO REDEMPTION OF SHARES PURCHASED BY CHECK (UNLESS
CERTIFIED) WILL BE PERMITTED UNTIL THE FUND RECEIVES NOTICE THAT THE CHECK HAS
CLEARED WHICH MAY BE UP TO 15 DAYS FROM THE CREDIT OF THOSE SHARES TO A
SHAREHOLDER'S ACCOUNT.
2/96
51
<PAGE>
================================================================================
Seligman New Jersey
Tax-Exempt Fund, Inc.
Seligman Pennsylvania
Tax-Exempt Fund Series
Seligman Tax-Exempt
Fund Series, Inc.
Seligman Tax-Exempt
Series Trust
- --------------------------------------------------------------------------------
100 Park Avenue
New York, New York 10017
TABLE OF CONTENTS
Page
----
Summary Of Series Expenses ................................................ 3
Financial Highlights ...................................................... 8
Alternative Distribution System ........................................... 16
Investment Objectives And Policies ........................................ 17
Management Services ....................................................... 24
Purchase Of Shares ........................................................ 26
Telephone Transactions .................................................... 30
Redemption Of Shares ...................................................... 31
Administration, Shareholder Services
And Distribution Plan ................................................... 33
Exchange Privilege ........................................................ 35
Further Information About
Transactions In The Funds ............................................... 36
Dividends And Distributions ............................................... 36
Taxes ..................................................................... 37
Shareholder Information ................................................... 47
Advertising A Series' Performance ......................................... 48
Organization And Capitalization ........................................... 49
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund.
TE1 2/96
================================================================================
Seligman New Jersey
Tax-Exempt Fund, Inc.
Seligman Pennsylvania
Tax-Exempt Fund Series
Seligman Tax-Exempt
Fund Series, Inc.
Seligman Tax-Exempt
Series Trust
- --------------------------------------------------------------------------------
[PROMOTIONAL ARTWORK]
Prospectus
February 1, 1996
[LOGO]
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
THE SELIGMAN GROUP OF FUNDS
ACCOUNT APPLICATION
Please make your investment check payable to the
"Seligman Group of Funds" and mail it
with this completed Application to:
Seligman Data Corp. TO OPEN A SELIGMAN IRA, SEP OR PENSION/
100 Park Avenue/2nd Floor PROFIT SHARING PLAN, A SEPARATE ADOPTION
New York, NY 10017 AGREEMENT IS REQUIRED. PLEASE CALL
(800) 221-2450 RETIREMENT PLAN SERVICES FOR MORE
INFORMATION AT (800) 445-1777.
1. ACCOUNT REGISTRATION
TYPE OF ||INDIVIDUAL ||MULTIPLE OWNERS ||GIFT/TRANSFER TO MINOR ||OTHER (Corporations, Trusts, Organizations,
ACCOUNT Use Line 1 Use Lines 1, 2 & 3 Use Line 4 Use Line 5 Partnerships, etc.)
Multiple Owners will be registered as Joint Tenants with Right of Survivorship.
The first name and Social Security or Taxpayer ID Number on line 1, 4, or 5 below will be used for IRS reporting.
NAME (Minors cannot be legal owners)
PLEASE PRINT OR TYPE
1._______________________________________________________________ ___________________________ _________
First Middle Last Social Security Number Birthdate
2._______________________________________________________________ ___________________________ _________
First Middle Last Social Security Number Birthdate
3._______________________________________________________________ ___________________________ _________
First Middle Last Social Security Number Birthdate
4.______________________________, as custodian for ____________________ under the _______________
Custodian (one only) Minor (one only) State
Uniform Gift/Transfer to Minors Act_______________________________until age____________________ _________________
Minor's Social Security Number (Not more than 21) Minor's Birthdate
5._______________________________________________________________________ _____________________
Name of Corporation or Other Entity. If a Trust, also complete below. Taxpayer ID Number
TYPE OF TRUST ACCOUNT: ||Trust ||Guardianship ||Conservatorship ||Estate ||Other _________
Trustee/Fiduciary Name__________________________________ Trust Date__________________________
Trust Name ______________________________,for the benefit of (FBO)_______________________________
2. MAILING ADDRESS
ADDRESS TELEPHONE
___________________________________________ (_______)__________________(_______)_________________
Street Address or P.O. Box Daytime Evening
___________________________________________ U.S. CITIZEN? ||Yes ||No _________________________
City State Zip If no, indicate country
3. INVESTMENT SELECTION
Please indicate the dollar amount(s) you would like to invest in the space
provided below. Minimum initial investment is $1,000 per Fund ($2,500 for
Seligman Communications and Information Fund) except for accounts
established concurrently with the Invest-A-Check(R) Service (see section
6-J. of this application). IF MORE THAN ONE FUND IS SELECTED, ACCOUNTS MUST
HAVE IDENTICAL REGISTRATIONS AND CLASS OF SHARES (except for Seligman Cash
Management Fund).
PLEASE CHOOSE ONE: || Class A Shares || Class D Shares MAKE CHECK PAYABLE TO: SELIGMAN GROUP OF FUNDS
$_____________ TOTAL AMOUNT, INVESTED AS FOLLOWS:
$_____________ Seligman Communications $_____________ Seligman Common Stock Fund
and Information Fund $_____________ Seligman Income Fund
$_____________ Seligman Henderson $_____________ Seligman High-Yield Bond Fund
Global Technology Fund $_____________ Seligman U.S. Government Securities Fund
$_____________ Seligman Frontier Fund $_____________ Seligman National Tax-Exempt Fund
$_____________ Seligman Henderson Global $_____________ Seligman Tax-Exempt Fund (choose one):
Smaller Companies Fund CA-Qlty.|| FL|| MD|| MN|| NY|| OR||
$_____________ Seligman Capital Fund CA-Hy. || GA|| MA|| MO|| NC|| PA||
$_____________ Seligman Henderson Global CO || LA|| MI|| NJ|| OH|| SC||
$_____________ Growth Opportunities Fund
$_____________ Seligman Growth Fund
$_____________ Seligman Henderson
International Fund $_____________ Seligman Cash Management Fund (Class A only)
NO REDEMPTION PROCEEDS WILL BE REMITTED TO A SHAREHOLDER WITH RESPECT TO
SHARES PURCHASED BY CHECK (UNLESS CERTIFIED) UNTIL SELIGMAN DATA CORP.
RECEIVES NOTICE THAT THE CHECK HAS CLEARED, WHICH MAY BE UP TO 15 DAYS FROM
THE CREDIT OF THE SHARES TO THE SHAREHOLDER'S ACCOUNT.
<PAGE>
4. SIGNATURE AND CERTIFICATION
Under penalties of perjury I certify that the number shown on this form is
my correct Taxpayer Identification Number (Social Security Number) and that
I am not subject to backup withholding either because I have not been
notified that I am subject to backup withholding as a result of a failure
to report all interest or dividends, or the Internal Revenue Service has
notified me that I am no longer subject to backup withholding. I certify to
my legal capacity to purchase or redeem shares of each Fund for my own
Account, or for the Account of the organization named below. I have
received and read the current Prospectus of each Fund in which I am
investing and appoint Seligman Data Corp. as my agent to act in accordance
with my instructions herein.
A. ________________________________________________________________________
Date Signature of Investor
B. ________________________________________________________________________
Date Signature of Co-Investor, if any
5. BROKER/DEALER OR FINANCIAL ADVISOR DESIGNATION
________________________________________ _____________________________
Firm Name Representative's Nam
________________________________________ _____________________________
Branch Office Address Representative's ID Number
________________________________________ (______)_____________________
City State Zip Representative's Telephone Number
________________________________________
Branch Number
6. ACCOUNT OPTIONS AND SERVICES
________________________________________________________________________________
A. DIVIDENDS AND GAIN DISTRIBUTION OPTIONS
I choose the following options for each Fund listed: OPTION
------
1 2 3
Option 1. Dividends in shares, gain distributions in shares. || || || FUND NAME
Option 2. Dividends in cash, gain distributions in shares. || || || FUND NAME
Option 3. Dividends in cash, gain distributions in cash. || || || FUND NAME
__________________________________________________________________________________________
NOTE: IF NO ELECTION IS MADE, OPTION 1. WILL AUTOMATICALLY BE PUT INTO EFFECT.
All dividend and/or gain distributions taken in shares will be invested at net asset value.
__________________________________________________________________________________________
________________________________________________________________________________
B. DIVIDEND DIRECTION OPTION
If you wish to have your dividend payments made to another
party or Seligman Fund, please complete the following. I
hereby authorize and request that my dividend payments from
the following Fund(s)
__________________ __________________ __________________ be made payable to:
Fund Name Fund Name Fund Name
Name______________________ Seligman Fund__________________
Address___________________ (If opening a new account, a minimum of $1,000 is required.)
City______________________ Account Number_________________
State, Zip________________ (For an existing account.)
________________________________________________________________________________
C. LETTER OF INTENT SERVICE (CLASS A ONLY)
I intend to purchase, although I am not obligated to do so,
additional shares of Seligman _________________________
Fund within a 13-month period which, together with the
total asset value of shares owned, will aggregate at least:
||$50,000 ||$100,000 ||$250,000 ||$500,000 ||$1,000,000
||$4,000,000
I AGREE TO THE ESCROW PROVISION LISTED UNDER "TERMS AND CONDITIONS"
IN THE BACK OF EACH PROSPECTUS.
________________________________________________________________________________
D. RIGHT OF ACCUMULATION (CLASS A ONLY)
Please identify any additional Seligman Fund accounts
eligible for the Right of Accumulation or to be used toward
completion of a Letter of Intent, and check applicable box:
|| I am a trustee for the following accounts, which are
held by the same trust, estate, or under the terms of a
pension, profit sharing or other employee benefit trust
qualified under section 401 of the Internal Revenue Code.
|| In calculating my holdings for Right of Accumulation or
Letter of Intent purposes, I am including the following
additional accounts which are registered in my name, in my
spouse's name, or in the name(s) of my child(ren) under
the age of 21.
Name______________ Fund______________ Account#_____________
Name______________ Fund______________ Account#_____________
Name______________ Fund______________ Account#_____________
<PAGE>
________________________________________________________________________________
E. AUTOMATIC CASH WITHDRAWAL SERVICE
(CLASS A, OR CLASS D ONLY AFTER CLASS D SHARES ARE HELD FOR ONE YEAR)
Please send a check for $_________ withdrawn from Seligman
________________________ Fund, beginning on the __ day of
______ 19__, and thereafter on the __ day specified of
every:
||Month ||3rd Month ||6th Month ||12th Month
Make payments to: Name___________________________________
Address________________________________
City___________State________Zip________
Shares having a current value at offering price of $5,000
or more must be held in the account at initiation of
Service, and all shares must be in "book credit" form.
________________________________________________________________________________
F. AUTOMATIC DOLLAR-COST-AVERAGING SERVICE
I authorize Seligman Data Corp. to withdraw $ _____________
(minimum: $100 monthly or $250 quarterly) from my Seligman
Cash Management Fund Class A account || Monthly or
|| Quarterly to purchase Class A shares of Seligman
________________________________ Fund, beginning on the
_____ day of __________ 19 ____. Shares in the Seligman
Cash Management Fund Class A account must have a current
value of $5,000 at the initiation of Service and all shares
must be in "book credit" form.
________________________________________________________________________________
G. EXPEDITED REDEMPTION SERVICE, FOR SELIGMAN CASH MGMT. FUND ONLY
I hereby authorize Seligman Data Corp. to honor telephone
or written instructions received from me without a
signature and believed by Seligman Data Corp. to be genuine
for redemption. Proceeds will be wired ONLY to the
commercial bank listed below for credit to my account, or
to my address of record. If Expedited Redemption Service is
elected, no certificates for shares will be issued. I also
understand and agree to the risks and procedures outlined
for all telephone transactions set forth in section 6-H. of
this Application.
Investment by ||Check ______________________________________________________________________
||Wire Name of Commercial Bank (Savings Bank May Not Be Used)
_________________________ ______________________ ______________________
Bank Account Name Bank Account No. Bank Routing No.
_______________________________________________________________________________________
Address of Bank City State Zip Code
X________________________________ X____________________________________________
Signature of Investor Date Signature of Co-Investor, if any Date
______________________________________________________________________________________________________________________
================================================================================
H. CHECK REDEMPTION SERVICE (CLASS A ONLY)
Available to shareholders who own or purchase shares having
a value of at least $25,000 invested in any of the
following: Seligman High-Yield Bond Fund, Seligman Income
Fund, Seligman U.S. Government Securities Fund, and any
Seligman Tax-Exempt Fund, or $2,000 invested in Seligman
Cash Management Fund.
IF YOU WISH TO USE THIS SERVICE, YOU MUST COMPLETE SECTION
4 AND THE SIGNATURE CARD BELOW. SHAREHOLDERS ELECTING THIS
SERVICE ARE SUBJECT TO THE CONDITIONS OF THE TERMS AND
CONDITIONS IN THE BACK OF EACH PROSPECTUS.
- --------------------------------------------------------------------------------
CHECK WRITING SIGNATURE CARD Authorized Signature(s)
___________________________________________ 1.______________________________
Name of Fund for Check Redemption Service
___________________________________________ 2.______________________________
Name of Fund for Check Redemption Service
___________________________________________ 3.______________________________
Name of Fund for Check Redemption Service
__________________________________________ 4.______________________________
Account Number (If known)
__________________________________________
Account Registration (Please Print)
|| Check here if only one signature is required on checks.
|| Check here if a combination of signatures is required and specify the number:___________________.
ACCOUNTS IN THE NAMES OF CORPORATIONS, TRUSTS, PARTNERSHIPS, ETC., MUST
INDICATE THE LEGAL TITLES OF ALL AUTHORIZED SIGNATORIES. SHAREHOLDERS
ELECTING THIS SERVICE ARE SUBJECT TO THE TERMS AND CONDITIONS LISTED IN THE
PROSPECTUS.
================================================================================
<PAGE>
I. TELEPHONE SERVICE ELECTION
AVAILABLE FOR ALL TYPES OF ACCOUNTS EXCEPT AS NOTED BELOW
Unless I check the box below, I understand that I or my
representative may place the following requests by
telephone:
o Redemptions up to $50,000 o Exchanges
o Address Changes o Dividend and/or Capital
Gain Distribution Option
changes
|| I DO NOT WANT TELEPHONE SERVICES FOR MYSELF OR MY
REPRESENTATIVE NAMED IN SECTION 5 OF THIS APPLICATION
AUTHORIZATION
I understand that the telephone services are optional and
that unless I checked the box above, I authorize the Funds,
all other Seligman Funds with the same account number and
registration which I currently own or in which I invest in
the future, and Seligman Data Corp. ("SDC"), to act upon
instructions received by telephone from me or any other
person (including the representative named in section 5 of
this application) in accordance with the provisions
regarding telephone services as set forth in the current
prospectus of each such Fund, as amended from time to time.
I understand that redemptions of uncertificated shares of
up to $50,000 will be sent only to my account address of
record, and only if such address has not changed within the
30 days preceding such request.
Any telephone instructions given in respect of this account
and any account into which exchanges are made are hereby
ratified and I agree that neither the Fund(s) nor SDC will
be liable for any loss, cost or expense for acting upon
such telephone instructions reasonably believed to be
genuine and in accordance with the procedures described in
each prospectus, as amended from time to time. Such
procedures include recording of telephone instructions,
requesting personal and/or account information to verify a
caller's identity and sending written confirmations of
transactions. As a result of this policy, I may bear the
risk of any loss due to unauthorized or fraudulent
telephone instructions; provided, however, that if the
Fund(s) or SDC fail to employ such procedures, the Fund(s)
and/or SDC may be liable.
Telephone services are not available for trusts (unless the
trustee and sole beneficiary are the same person),
corporations or group retirement plans. IRA telephone
services will include only exchanges and address changes.
J. INVEST-A-CHECK(R) SERVICE
To start your Invest-A-Check(R) Service, fill out the "Bank
Authorization to Honor Pre-Authorized Checks" below, and
forward it with an unsigned bank check from your regular
checking account (marked "void", if you wish).
ACCOUNTS MAY BE ESTABLISHED CONCURRENTLY WITH THE
INVEST-A-CHECK(R) SERVICE WITH A $100 MINIMUM ($200 minimum
for Seligman Communications and Information Fund) IF THE
MONTHLY INVESTMENT OPTION IS CHOSEN, OR WITH A $250 MINIMUM
IF THE QUARTERLY INVESTMENT OPTION IS CHOSEN.
Please arrange with my bank to draw pre-authorized checks
and invest the following dollar amounts (minimum: $200
monthly or $500 quarterly for Seligman Communications and
Information Fund $100 monthly or $250 quarterly for all
other Funds) in the designated Seligman Fund(s) as
indicated:
_______________ $_________ ||Monthly ||Quarterly
Fund Name
________________ $_________ ||Monthly ||Quarterly
Fund Name
________________ $_________ ||Monthly ||Quarterly
Fund Name
I understand that my checks will be drawn on the fifth day
of the month, or prior business day, for the period
designated. I have completed the "Bank Authorization to
Honor Pre-Authorized Checks" below and have read and agree
to the Terms and Conditions applicable to the
Invest-A-Check(R) Service as set forth in each Prospectus
and as set forth below in the Bank Authorization.
X__________________________________________________________________
Signature of Investor (Please also sign Bank Authorization below.)
X__________________________________________________________________
Signature of Co-Investor, if any
________________________________________________________________________________________
BANK AUTHORIZATION TO HONOR PRE-AUTHORIZED CHECKS
________________________________________________________________________________________
To:_____________________________________________________________________________________
(Name of Bank)
________________________________________________________________________________________
Address of Bank or Branch (Street, City, State and Zip)
Please honor pre-authorized checks drawn on my account by Seligman Data Corp.,
100 Park Avenue, New York, N.Y. 10017, to the order of the Fund(s) designated
below:
____________________________________ $ ___________ ||Monthly ||Quarterly
Fund Name
____________________________________ $ ___________ ||Monthly ||Quarterly
Fund Name
____________________________________ $ ___________ ||Monthly ||Quarterly
Fund Name
and charge them to my regular checking account. Your authority to do so shall
continue until you receive written notice from me revoking it. You may
terminate your participation in this arrangement at any time by written notice
to me. I agree that your rights with respect to each pre-authorized check
shall be the same as if it were a check drawn and signed by me. I further
agree that should any such check be dishonored, with or without cause,
intentionally or inadvertently, you shall be under no liability whatsoever.
___________________________________ _________________________________________________
Checking Account Number Name(s) of Depositor(s) -- Please Print
X__________________________________________________
Signature(s) of Depositor(s) -- As Carried by Bank
X__________________________________________________
<PAGE>
- --------------------------------------------------------------------------------
To the Bank Designated above:
Your depositor(s) named in the above form has instructed us to establish the
Invest-A-Check(R) Service for his convenience. Under the terms of the Service,
your depositor(s) has pre-authorized checks to be drawn against his account in
a specific amount at regular intervals to the order of the designated Fund(s).
Checks presented to you will be magnetic-ink coded and will otherwise conform
to specifications of the American Bankers Association.
A letter of indemnification addressed to you and signed by Seligman Financial
Services, Inc., general distributor of the Seligman Mutual Funds, appears
below.
If there is anything we can do to help you in giving your depositor(s) this
additional Service which he has requested, please let us know.
SELIGMAN DATA CORP.
INDEMNIFICATION AGREEMENT
To the Bank designated above:
SELIGMAN FINANCIAL SERVICES, INC., distributor of the shares of the Seligman
Mutual Funds, hereby agrees:
(1) To indemnify and hold you harmless against any loss, damage, claim or
suit, and any costs or expenses reasonably incurred in connection therewith,
either (a) arising as a consequence of your actions in connection with the
execution and issuance of any check or draft, whether or not genuine,
purporting to be executed by Seligman Data Corp. and received by you in the
regular course of business for the purpose of payment, or (b) resulting from
the dishonor of any such check or draft, with or without cause and
intentionally or inadvertently, even though such dishonor results in
suspension or termination of the Invest-A-Check(R) Service pursuant to which
such checks or drafts are drawn.
(2) To refund to you any amount erroneously paid by you on any such check or
draft, provided claim for any such payment is made within 12 months after the
date of payment.
SELIGMAN FINANCIAL SERVICES, INC.
/S/Stephen J. Hodgdon
President
________________________________________________________________________________
<PAGE>
MANAGED BY
[J&W SELIGMAN LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
Investment Managers and Advisors
ESTABLISHED 1864
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1996
SELIGMAN CALIFORNIA TAX-EXEMPT HIGH-YIELD SERIES ("High-Yield Series")
SELIGMAN CALIFORNIA TAX-EXEMPT QUALITY SERIES ("Quality Series")
(collectively, the "Series")
100 Park Avenue
New York, N.Y. 10017
New York City Telephone (212) 850-1864
Toll-Free Telephone:
(800) 221-2450 - all continental United States
This Statement of Additional Information expands upon and supplements
the information contained in the current Prospectus of the Series, dated
February 1, 1996. It should be read in conjunction with the Prospectus, which
may be obtained by writing or calling the Series at the above address or
telephone numbers. This Statement of Additional Information, although not in
itself a Prospectus, is incorporated by reference into the Prospectus in its
entirety.
The High-Yield Series and Quality Series each offer two classes of
shares. Class A shares may be purchased at net asset value plus a sales load of
up to 4.75%. Class D shares may be purchased at net asset value and are subject
to a contingent deferred sales load ("CDSL") of 1% if redeemed within one year.
Each share of Class A and Class D represents an identical legal
interest in the investment portfolio of each Series and has the same rights
except for certain class expenses and except that Class D shares bear a higher
distribution fee that generally will cause the Class D shares to have a higher
expense ratio and pay lower dividends than Class A shares. Each Class has
exclusive voting rights with respect to its distribution plan. Although holders
of Class A and Class D shares have identical legal rights, the different
expenses borne by each Class will result in different dividends. The two classes
also have different exchange privileges.
TABLE OF CONTENTS
Page
Seligman Tax-Exempt Series Trust................. 2
Investment Objectives, Policies And Risks........ 2
Investment Limitations........................... 5
Trustees And Officers............................ 5
Management And Expenses.......................... 10
Administration, Shareholder Services
And Distribution Plan.......................... 11
Portfolio Transactions........................... 11
Purchase and Redemption Of Series' Shares........ 11
Distribution Services............................ 14
Taxes............................................ 15
Valuation........................................ 15
Performance Information ......................... 16
General Information.............................. 18
Special Considerations Regarding Investments
In California Tax-Exempt Securities............. 19
Financial Statements............................. 24
Appendix A....................................... 25
Appendix B....................................... 27
TEBCA1A
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SELIGMAN TAX-EXEMPT SERIES TRUST
The High-Yield Series and Quality Series are series of Seligman Tax-Exempt
Series Trust (the "Trust"), a non-diversified open-end management investment
company, or mutual fund, organized as an unincorporated business trust under the
laws of Massachusetts that commenced operations in 1984.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
As stated in the Prospectus, the High-Yield Series and Quality Series each
seek to provide income exempt from federal income taxes and the personal income
taxes of California consistent with preservation of capital with consideration
given to capital gain.
California Tax-Exempt Securities
California Tax-Exempt Securities include notes, bonds and commercial paper
issued by or on behalf of the State of California, its political subdivisions,
agencies, and instrumentalities, the interest on which is exempt from federal
income taxes and California state personal income taxes. Such securities are
traded primarily in an over-the-counter market. Each Series may invest no more
than 20% of its net assets in certain private activity bonds, the interest on
which is treated as a preference item for purposes of the alternative minimum
tax. See "California Tax-Exempt Securities" in the Prospectus.
Under the Investment Company Act of 1940 (the "1940 Act"), the
identification of the issuer of tax-exempt bonds, notes or commercial paper
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 the
bond is backed only by the assets and revenues of the nongovernmental user, the
nongovernmental 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.
Tax-exempt 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. Tax-exempt 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, which are considered tax-exempt bonds if
the interest paid thereon is exempt from federal income tax, 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 tax-exempt 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.
Tax-Exempt Notes generally are used to provide for short-term capital needs
and generally have maturities of one year or less. Tax-Exempt Notes include:
1. Tax Anticipation Notes. Tax Anticipation Notes are issued to finance
working capital needs of municipalities. Generally, they are issued in
anticipation of various tax revenues, such as income, sales, use and business
taxes, and are payable from these specific future taxes.
2
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2. Revenue Anticipation Notes. Revenue Anticipation Notes are issued in
expectation of receipt of other kinds of revenue, such as federal revenues
available under the Federal Revenue Sharing Programs.
3. 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.
4. Construction Loan Notes. Construction Loan Notes are sold to provide
construction financing. Permanent financing, the proceeds of which are applied
to the payment of Construction Loan Notes, is sometimes provided by a commitment
by the Government National Mortgage Association ("GNMA") to purchase the loan
notes, accompanied by a commitment by the Federal Housing Administration to
insure mortgage advances thereunder. In other instances, permanent financing is
provided by commitments of banks to purchase the loan notes.
Issues of Tax-Exempt Commercial Paper typically represent short-term,
unsecured, negotiable promissory notes. These obligations are issued by agencies
of state and local governments to finance seasonal working capital needs of
municipalities or to provide interim construction financing and are paid from
general revenues of municipalities or are refinanced with long-term debt. In
most cases, Tax-Exempt Commercial Paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions.
When-Issued Securities. Each Series may purchase tax-exempt securities on a
when-issued basis, in which case delivery and payment normally take place 15 to
45 days after the date of the commitment to purchase. The payment obligation and
the interest rate that will be received on the tax-exempt securities are each
fixed at the time the buyer enters into the commitment. Although a Series will
only purchase a tax-exempt security on a when-issued basis with the intention of
actually acquiring the securities, the Series may sell these securities before
the settlement date if it is deemed advisable.
Tax-exempt securities purchased on a when-issued basis and the securities
held in each Series are subject to changes in market value based upon the
public's perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates (which will generally result in
similar changes in value, i.e., both experiencing appreciation when interest
rates decline and depreciation when interest rates rise). Therefore, to the
extent a Series 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 a Series' assets will vary. Purchasing a
tax-exempt 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 so purchased.
A separate account of each Series consisting of cash or liquid debt
securities equal to the amount of the when-issued commitments will be
established with the Custodian and marked to market daily, with additional cash
or liquid debt securities added when necessary. When the time comes to pay for
when-issued securities, the Series will meet their respective obligations from
then available cash, sale of securities held in the separate account, sale of
other securities or, although they would not normally expect to do so, sale of
the when-issued securities themselves (which may have a value greater or lesser
than the Series' payment obligations). Sale of securities to meet such
obligations carries with it a potential for the realization of capital gain,
which is not exempt from federal or California income taxes.
Floating Rate and Variable Rate Securities. Each Series may purchase floating
rate and variable rate securities, including participation interests therein.
Investments in floating or variable rate securities normally will involve
industrial development or revenue bonds which provide that the rate of interest
is set as a specific percentage of a designated base rate, such as rates on
Treasury Bonds or Bills or the prime rate at a major commercial bank, and that a
Series can demand payment of the obligations on short notice at par plus accrued
interest, which amount may be more or less than the amount a Series paid for
them. 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, as the case may be, must be equivalent to the standards set
forth with respect to taxable investments listed below.
Stand-By Commitments. The Series may acquire stand-by commitments with respect
to securities they hold. These commitments would obligate a dealer to
repurchase, at the Series' option, specified securities at a specified price.
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The price which a Series would pay for tax-exempt securities with stand-by
commitments generally would be higher than the price which otherwise would be
paid for the municipal securities alone. A Series would use stand-by commitments
for liquidity purposes in order to permit it to remain more fully invested than
would otherwise be the case by providing a ready market for certain of its
portfolio securities at an acceptable price. The stand-by commitment generally
is for a shorter term than the maturity of the security and does not restrict in
any way the Series' right to dispose of or retain the security. There is a risk
that the seller may not be able to repurchase the security upon the exercise of
the right to resell by the Series. To minimize such risks, a Series would only
purchase obligations with stand-by commitments from sellers the Manager deems
creditworthy.
Portfolio Turnover. Portfolio transactions will be undertaken principally to
accomplish a Series' objective in relation to anticipated movements in the
general level of interest rates but a Series 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 Manager believes to be a temporary disparity in the
normal yield relationship between the two securities.
The Series' investment policies may lead to frequent changes in
investments, particularly in periods of rapidly fluctuating interest rates. A
change in securities held by a Series is known as "portfolio turnover" and may
involve the payment by the Series of dealer spreads or underwriting commissions,
and other transaction costs, on the sale of securities, as well as on the
reinvestment of the proceeds in other securities. Portfolio turnover rate for a
fiscal year is the ratio of the lesser of purchases or sales of portfolio
securities to the monthly average of the value of portfolio securities.
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
the High-Yield Series for the fiscal years ended September 30, 1994 and 1995
were 8.36% and 17.64%, respectively. For the same periods, the portfolio
turnover rates for the Quality Series were 22.16% and 11.24%, respectively. A
Series' portfolio turnover rate will not be a limiting factor when such Series
deems it desirable to sell or purchase securities.
Taxable Investments. Under normal market conditions, each Series 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
federal and California personal income tax. However in abnormal market
conditions, if, in the judgment of the Manager, the tax-exempt securities
satisfying the Series' investment objectives may not be purchased, a Series may,
for defensive purposes, temporarily invest in instruments the interest on which
is exempt from federal income taxes, but not California personal income taxes.
Such securities would include those described under "California Tax-Exempt
Securities" above that would otherwise meet the Series' objectives.
Also, in abnormal market conditions, a Series 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
tax-exempt securities of 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 AA-, or better, by Standard & Poor's
Corporation ("S&P") or Aa3, or better, by Moody's Investors Service, Inc.
("Moody's")); prime commercial paper (rated A-1+/A-1 by S&P or P-1 by Moody's);
and certificates of deposit of the 100 largest domestic banks in terms of assets
which are subject to regulatory supervision by the U.S. 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 U.S. 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.
Such temporary investments in federal but not state tax-exempt securities
and fully taxable securities will be limited as a matter of fundamental policy
to 20% of the value of a Series' net assets under normal market conditions.
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INVESTMENT LIMITATIONS
Under each Series' fundamental policies, which cannot be changed except by
vote of a majority of the outstanding voting securities of the Series, the
Series may not:
- - Borrow money, except from banks for temporary purposes (such as meeting
redemption requests or for extraordinary or emergency purposes but not for
the purchase of portfolio securities) 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 Series 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 tax-exempt securities and securities of the U.S. Government, its
agencies and instrumentalities are not considered an industry for purposes
of this limitation;
- - As to 50% of the value of its total assets, purchase securities of any
issuer if immediately thereafter more than 5% of total assets at market
value would be invested in the securities of any issuer (except that this
limitation does not apply to obligations issued or guaranteed as to
principal and interest by the U.S.
Government or its agencies or instrumentalities);
- - Invest in securities issued by other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization;
- - Purchase or hold any real estate, except that the Series 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, trustees
or officers of the Trust 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,
except that the Series may be deemed an underwriter in connection with the
purchase and sale of portfolio securities;
- - Purchase or sell commodities or commodity contracts including futures
contracts; or
- - Make loans, except to the extent that the purchase of notes, bonds or other
evidences of indebtedness or deposits with banks may be considered loans.
As a matter of policy with respect to 75% of a Series' assets, no revenue
bond will be purchased by each respective Series if as a result of such purchase
more than 5% of such Series' assets would be invested in the securities of a
single issuer. This policy is not fundamental and may be changed by the Trustees
without shareholder approval.
Under the 1940 Act, a "vote of a majority of the outstanding voting
securities" of the Trust or of a particular series of the Trust means the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares of
the Trust or of a series or (2) 67% or more of the shares of the Trust or of a
series present at a shareholders' meeting if more than 50% of the outstanding
shares of the Trust or of a series are represented at the meeting in person or
by proxy.
TRUSTEES AND OFFICERS
Trustees and officers of the Trust, together with information as to their
principal business occupations during the past five years are shown below. Each
Trustee who is an "interested person" of the Trust, as defined in the 1940 Act,
is indicated by an asterisk. Unless otherwise indicated, their addresses are 100
Park Avenue, New York, NY 10017.
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WILLIAM C. MORRIS* Trustee, Chairman of the Board, Chief Executive Officer
(57) and Chairman of the Executive Committee
Managing Director, Chairman and President, J. & W.
Seligman & Co. Incorporated, investment managers and
advisors; and Seligman Advisors, Inc., advisors; Chairman
and Chief Executive Officer, the Seligman Group of
Investment Companies; Chairman, Seligman Financial
Services, Inc., distributor; Seligman Holdings, Inc.,
holding company; Seligman Services, Inc., broker/dealer;
and Carbo Ceramics Inc., ceramic proppants for oil and gas
industry; Director or Trustee, Seligman Data Corp.,
shareholder service agent; Daniel Industries, Inc.,
manufacturer of oil and gas metering equipment; Kerr-McGee
Corporation, diversified energy company; and Sarah
Lawrence College; and a Member of the Board of Governors
of the Investment Company Institute; formerly, Chairman,
J. & W. Seligman Trust Company, trust company and Seligman
Securities, Inc., broker/dealer.
BRIAN T. ZINO* Trustee, President and Member of the Executive Committee
(43)
Director and Managing Director (formerly, Chief
Administrative and Financial Officer), J. & W. Seligman &
Co. Incorporated, investment managers and advisors; and
Seligman Advisors, Inc., advisors; Director or Trustee,
the Seligman Group of Investment Companies, President, the
Seligman Group of Investment Companies, except Seligman
Quality Municipal Fund, Inc. and Seligman Select Municipal
Fund, Inc.; Chairman, Seligman Data Corp., shareholder
service agent; Director, Seligman Financial Services,
Inc., distributor; Seligman Services, Inc., broker/dealer;
Senior Vice President, Seligman Henderson Co., advisors;
formerly, Director and Secretary, Chuo Trust - JWS
Advisors, Inc., advisors; and Director, J. & W. Seligman
Trust Company, trust company and Seligman Securities,
Inc., broker/dealer.
RONALD T. SCHROEDER* Trustee and Member of the Executive Committee
(48)
Director, Managing Director and Chief Investment Officer,
Institutional, J. & W. Seligman & Co. Incorporated,
investment managers and advisors; and Seligman Advisors,
Inc., advisors; Director or Trustee, the Seligman Group of
Investment Companies; Director, Seligman Holdings, Inc.,
holding company; Seligman Financial Services, Inc.,
distributor; Seligman Henderson Co., advisors; and
Seligman Services, Inc., broker/dealer; formerly,
President, the Seligman Group of Investment Companies,
except Seligman Quality Municipal Fund, Inc. and Seligman
Select Municipal Fund, Inc.; and Director, J. & W.
Seligman Trust Company, trust company; Seligman Data
Corp., shareholder service agent; and Seligman Securities,
Inc., broker/dealer.
FRED E. BROWN* Trustee
(82)
Director and Consultant, J. & W. Seligman & Co.
Incorporated, investment managers and advisors; Director
or Trustee, the Seligman Group of Investment Companies;
Seligman Financial Services, Inc., distributor; Seligman
Services, Inc., broker/dealer; Trudeau Institute, Inc.,
non-profit biomedical research organization; Lake Placid
Center for the Arts, cultural organization; and Lake
Placid Education Foundation, education foundation;
formerly, Director, J. & W. Seligman Trust Company, trust
company; and Seligman Securities, Inc., broker/dealer.
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JOHN R. GALVIN Trustee
(66)
Dean, Fletcher School of Law and Diplomacy at Tufts
University; Director or Trustee, the Seligman Group of
Investment Companies; Chairman of the American Council on
Germany; a Governor of the Center for Creative Leadership;
Director of USLIFE, insurance; National Committee on
U.S.-China Relations, National Defense University and the
Institute for Defense Analysis; and Consultant of Thomson
CSF, electronics. Formerly, Ambassador, U.S. State
Department; 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.
Tufts University, Packard Avenue, Medford, MA 02155
ALICE S. ILCHMAN Trustee
(60)
President, Sarah Lawrence College; Director or Trustee,
the Seligman Group of Investment Companies; Chairman, The
Rockefeller Foundation, charitable foundation; and
Director, NYNEX, telephone company; and the Committee for
Economic Development; formerly, Trustee, The Markle
Foundation, philanthropic organization; and Director,
International Research and Exchange Board, intellectual
exchanges.
Sarah Lawrence College, Bronxville, New York 10708
FRANK A. McPHERSON Trustee
(62)
Chairman of the Board and Chief Executive Officer,
Kerr-McGee Corporation, energy and chemicals; Director or
Trustee, the Seligman Group of Investment Companies;
Director of Kimberly-Clark Corporation, consumer products,
Bank of Oklahoma Holding Company, American Petroleum
Institute, Oklahoma City Chamber of Commerce, Baptist
Medical Center, Oklahoma Chapter of the Nature
Conservancy, Oklahoma Medical Research Foundation and
United Way Advisory Board; Chairman of Oklahoma City
Public Schools Foundation; and Member of the Business
Roundtable and National Petroleum Council.
123 Robert S. Kerr Avenue, Oklahoma City, OK 73102
JOHN E. MEROW* Trustee
(66)
Chairman and Senior Partner, Sullivan & Cromwell, law
firm; Director or Trustee, the Seligman Group of
Investment Companies; The Municipal Art Society of New
York; Commonwealth Aluminum Corporation, the U.S. Council
for International Business and the U.S.-New Zealand
Council; Chairman, American Australian Association; Member
of the American Law Institute and Council on Foreign
Relations; Member of the Board of Governors of Foreign
Policy Association and New York Hospital. 125 Broad
Street, New York, NY 10004
BETSY S. MICHEL Trustee
(53)
Attorney; Director or Trustee, the Seligman Group of
Investment Companies and National Association of
Independent Schools (Boston), education; Chairman of the
Board of Trustees of St. George's School (Newport, RI).
St. Bernard's Road, Gladstone, NJ 07934
7
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JAMES C. PITNEY Trustee
(69)
Partner, Pitney, Hardin, Kipp & Szuch, law firm; Director
or Trustee, the Seligman Group of Investment Companies and
Public Service Enterprise Group, public utility.
Park Avenue at Morris County, P.O. Box 1945, Morristown,
NJ 07962-1945
JAMES Q. RIORDAN Trustee
(68)
Director, Various Corporations; Director or Trustee, the
Seligman Group of Investment Companies; The Brooklyn
Museum; The Brooklyn Union Gas Company; The Committee for
Economic Development; Dow Jones & Co. Inc. and Public
Broadcasting Service; formerly, Co-Chairman of the Policy
Council of the Tax Foundation; Director and Vice Chairman,
Mobil Corporation; Director and President, Bekaert
Corporation; and Director, Tesoro Petroleum Companies,
Inc.
675 Third Avenue, Suite 3004, New York, NY 10017
ROBERT L. SHAFER Trustee
(63)
Director, Various Corporations; Director or Trustee, the
Seligman Group of Investment Companies; and USLIFE
Corporation, life insurance.
235 East 42nd Street, New York, NY 10017
JAMES N. WHITSON Trustee
(60)
Executive Vice President, Chief Operating Officer and
Director, Sammons Enterprises, Inc., Director or Trustee,
the Seligman Group of Investment Companies, Red Man Pipe
and Supply Company and C-SPAN.
300 Crescent Court, Suite 700, Dallas, TX 75202
THOMAS G. MOLES Vice President and Senior Portfolio Manager
(53)
Director, Managing Director, (formerly, Vice President and
Portfolio Manager), J. & W. Seligman & Co. Incorporated,
investment managers and advisors; Vice President and
Portfolio Manager, three other open-end investment
companies in the Seligman Family of Mutual Funds;
President and Portfolio Manager, Seligman Quality
Municipal Fund, Inc. and Seligman Select Municipal Fund,
Inc., closed-end investment companies; Director, Seligman
Financial Services, Inc., distributor; Seligman Services,
Inc., broker/dealer; and J. & W. Seligman Trust Company,
trust company; formerly, Director, Seligman Securities,
Inc., broker/dealer.
LAWRENCE P. VOGEL Vice President
(39)
Senior Vice President, Finance, J. & W. Seligman & Co.
Incorporated, investment managers and advisors; Seligman
Financial Services, Inc., distributor; and Seligman
Advisors, Inc., advisors; Vice President (formerly,
Treasurer), the Seligman Group of Investment Companies;
Senior Vice President, Finance (formerly, Treasurer),
Seligman Data Corp., shareholder service agent; Treasurer,
Seligman Holdings, Inc., holding company; and Seligman
Henderson Co., advisors; formerly, Senior Vice President,
Seligman Securities, Inc., broker/dealer; Vice President,
Finance, J. & W. Seligman Trust Company; and Senior Audit
Manager, Price Waterhouse, independent accountants.
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<PAGE>
FRANK J. NASTA Secretary
(31)
Senior Vice President, Law and Regulation and Secretary,
J. & W. Seligman & Co. Incorporated, investment managers
and advisors; Secretary, the Seligman Group of Investment
Companies, Seligman Financial Services, Inc., distributor;
Seligman Henderson Co., advisors; Seligman Services, Inc.,
broker/dealer; Chuo Trust - JWS Advisors, Inc., advisors;
and Seligman Data Corp., shareholder service agent;
formerly, attorney, Seward & Kissel.
THOMAS G. ROSE Treasurer
(38)
Treasurer, the Seligman Group of Investment Companies and
Seligman Data Corp., shareholder service agent; formerly,
Treasurer, American Investors Advisors, Inc. and the
American Investors Family of Funds.
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 Series for
which no market valuation is available and to elect or appoint officers of the
Trust to serve until the next meeting of the Board.
<TABLE>
<CAPTION>
Compensation Table
Pension or Total Compensation
Aggregate Retirement Benefits from Registrant and
Name and Compensation Accrued as part of Fund Complex Paid
Position with Registrant from Registrant (1) Fund Expenses to Trustees (2)
------------------------ ------------------- ------------- ---------------
<S> <C> <C> <C>
William C. Morris, Trustee and Chairman N/A N/A N/A
Brian T. Zino, Trustee and President N/A N/A N/A
Ronald T. Schroeder, Trustee N/A N/A N/A
Fred E. Brown, Trustee N/A N/A N/A
John R. Galvin, Trustee $ 1,795.93 N/A $41,252.75
Alice S. Ilchman, Trustee 2,948.20 N/A 68,000.00
Frank A. McPherson, Trustee 1,795.93 N/A 41,252.75
John E. Merow, Trustee 2,876.76(d) N/A 66,000.00(d)
Betsy S. Michel, Trustee 2,841.04 N/A 67,000.00
Douglas R. Nichols, Jr., Trustee* 1,080.83 N/A 24,747.25
James C. Pitney, Trustee 2,948.20 N/A 68,000.00
James Q. Riordan, Trustee 2,948.20 N/A 70,000.00
Herman J. Schmidt, Trustee* 1,080.83 N/A 24,747.25
Robert L. Shafer, Trustee 2,948.20 N/A 70,000.00
James N. Whitson, Trustee 2,876.76(d) N/A 68,000.00(d)
</TABLE>
(1) Based on remuneration received by Trustees for the Trust's four Series for
the year ended December 31, 1995.
(2) As defined in the Fund's Prospectus, the Seligman Group of Investment
Companies consists of seventeen investment companies.
* Retired May 18, 1995.
(d) Deferred.
The Trust has a compensation arrangement under which outside trustees may
elect to defer receiving their fees. Under this arrangement, interest is accrued
on the deferred balances. The annual cost of such interest is included in the
trustees' fees and expenses, and the accumulated balance thereof is included in
other liabilities in the Series' financial statements.
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<PAGE>
Trustees and officers of the Trust are also trustees, directors and
officers of some or all of the other investment companies in the Seligman Group.
The Trustees and officers of the Trust as a group owned less than 1% of the
Class A shares of the High-Yield Series at January 12, 1996. No Trustees or
officers owned any Class A shares of the Quality Series or Class D shares of
either Series at that date.
MANAGEMENT AND EXPENSES
As indicated in the Prospectus, under the Management Agreements, each dated
December 29, 1988, subject to the control of the Trustees, the Manager manages
the investment of the assets of each Series, including making purchases and
sales of portfolio securities consistent with the Series' investment objectives
and policies, and administers its business and other affairs. The Manager
provides the Trust with such office space, administrative and other services and
executive and other personnel as are necessary for Trust operations. The Manager
pays all of the compensation of Trustees of the Trust who are employees or
consultants of the Manager and the officers and employees of the Trust. The
Manager also provides senior management for Seligman Data Corp., the Trust's
shareholder service agent. The Manager is entitled to receive a management fee
from each of the Series calculated daily and payable monthly equal to 0.50% of
each Series' average daily net assets on an annual basis. The chart below
indicates the management fees paid by each Series as well as the percentage such
fee represents of each Series' respective average daily net assets for the
fiscal years ended September 30, 1995, 1994 and 1993.
% of Average Management
Daily Net Assets Fee Paid
---------------- --------
High-Yield Series
Year Ended 9/30/95 .50% $ 241,396
Year Ended 9/30/94 .50 248,761
Year Ended 9/30/93 .50 246,890
Quality Series
Year Ended 9/30/95 .50% $ 483,174
Year Ended 9/30/94 .50 532,542
Year Ended 9/30/93 .50 510,934
The Trust pays all its expenses other than those assumed by the Manager
including brokerage commissions, if any, fees and expenses of independent
attorneys and auditors, taxes and governmental fees including fees and expenses
of qualifying the Trust and its 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
existing shareholders, expenses of printing and filing reports and other
documents filed with governmental agencies, expenses of shareholders' meetings,
expenses of corporate data processing and related services, shareholder
recordkeeping and shareholder account services fees and disbursements of
transfer agents and custodians, expenses of disbursing dividends and
distributions, fees and expenses of Trustees of the Trust not employed by or
serving as a Trustee of the Manager or its affiliates, insurance premiums and
extraordinary expenses such as litigation expenses. The Trust's expenses are
allocated between the Series in a manner determined by the Trustees to be fair
and equitable.
The Manager has undertaken to certain state securities administrators, so
long as required, to reimburse the Trust for each year in the amount by which
total expenses, including the management fee, but excluding interest, taxes,
brokerage commissions and extraordinary expenses, exceed 2 1/2% of the first
$30,000,000 of average net assets, 2% of the next $70,000,000 of average net
assets and 1 1/2% of the remaining average net assets thereafter. Any such
reimbursement will be allocated between the Series in proportion to the relative
expenses of each Series.
On December 29, 1988, a majority of the outstanding voting securities of
the Manager was purchased by Mr. William C. Morris and a simultaneous
recapitalization of the Manager occurred.
10
<PAGE>
Each Management Agreement is dated December 29, 1988, and was unanimously
approved by the Trustees at a Meeting held on October 11, 1988 and was approved
by the shareholders of each Series at a meeting held on December 15, 1988. Each
Agreement will continue in effect from year to year thereafter if such
continuance is approved in the manner required by the 1940 Act (i.e. (1) by a
vote of a majority of the Trustees or of the outstanding voting securities of
the Series and (2) by a vote of a majority of the Trustees who are not parties
to the Management Agreement or interested persons of any such party) and if the
Manager shall not have notified the Series at least 60 days prior to the
anniversary date of the previous continuance that it does not desire such
continuance. The Agreement may be terminated by the Series, without penalty, on
60 days' written notice to the Manager and will terminate automatically in the
event of its assignment. Each Series has agreed to change its name upon
termination of its Management Agreement if continued use of the name would cause
confusion in the context of the Manager's business.
The Manager is a successor firm to an investment banking business founded
in 1864 which has thereafter provided investment services to individuals,
families, institutions and corporations. See Appendix B for further history of
the Manager.
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
As indicated in the Prospectus, an Administration, Shareholder Services and
Distribution Plan (the "Plan") for the Series is in effect under Section 12(b)
of the Act and Rule 12b-1 thereunder.
The Plan was approved on July 16, 1992 by the Trustees, including a
majority of the Trustees who are not "interested persons" (as defined in the
Act) of the Series and who have no direct or indirect financial interest in the
operation of the Plan or in any agreement related to the Plan (the "Qualified
Trustees") and was approved by shareholders of the Series at a Special Meeting
of Shareholders held on November 23, 1992. The Plan became effective on January
1, 1993 and 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 Trustees
and the Qualified Trustees of the Trust, cast in person at a meeting called for
the purpose of voting on such approval. Amendments to the Plan were approved in
respect of the Class D shares on November 18, 1993 by the Trustees, including a
majority of the Qualified Trustees, and became effective with respect to the
Class D shares on February 1, 1994. The Plan may not be amended to increase
materially the amounts payable to Service Organizations without the approval of
a majority of the outstanding voting securities of the Series and no material
amendment to the Plan may be made except by a majority of both the Trustees and
Qualified Trustees.
The Plan requires that the Treasurer of the Trust shall provide to the
Trustees, and the Trustees shall review, at least quarterly, a written report of
the amounts expended (and purposes therefor) under the Plan. Rule 12b-1 also
requires that the selection and nomination of Trustees who are not "interested
persons" of the Series be made by such disinterested Trustees.
PORTFOLIO TRANSACTIONS
No brokerage commissions were paid by the Series during the fiscal years
ended September 30, 1993, 1994 or 1995. When two or more Series of the Trust or
two or more of the investment companies in the Seligman Group or other
investment advisory clients of the Manager desire to buy or sell the same
security at the same time, the securities purchased or sold are allocated by the
Manager 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 already obtainable or saleable.
PURCHASE AND REDEMPTION OF SERIES SHARES
The High-Yield Series and Quality Series each issues two classes of shares:
Class A shares may be purchased at a price equal to the next determined net
asset value per share, plus a sales load. Class D shares may be purchased at a
price equal to the next determined net asset value without an initial sales
load, but a CDSL may be charged on certain redemptions within one year of
purchase. See "Alternative Distribution System," "Purchase Of Shares," and
"Redemption Of Shares" in the Series' Prospectus.
11
<PAGE>
Specimen Price Make-Up
Under the current distribution arrangements between the Trust and the
Distributor, Class A shares are sold at a maximum sales load of 4.75% and Class
D shares are sold at net asset value.* Using each Series' net asset value at
September 30, 1995, the maximum offering price of a Series' shares is as
follows:
HIGH-YIELD SERIES
Class A
Net asset value per share ................................... $6.47
Maximum sales load (4.75% of offering price) ................ .32
-----
Maximum offering price per share ............................ $6.79
=====
Class D
Net asset value and maximum offering price per share* ....... $6.48
=====
QUALITY SERIES
Class A
Net asset value per share ................................... $6.65
Maximum sales load (4.75% of offering price) ................ .33
-----
Maximum offering price per share ............................ $6.98
=====
Class D
Net asset value and maximum offering price per share* ....... $6.63
=====
- ----------
* Class D shares are subject to a CDSL of 1% on certain redemptions within one
year of purchase. See "Redemption Of Shares" in the Series' Prospectus.
Class A Shares - Reduced Sales Loads
Reductions Available. Shares of any Seligman Mutual Fund sold with a sales load
in a continuous offering will be eligible for the following reductions:
Volume Discounts are provided if the total amount being invested in Class A
shares of the High-Yield Series and Quality Series alone, the other series of
the Trust or in any combination of shares of the other mutual funds in the
Seligman Group which are sold with a sales load, reaches levels indicated in the
sales load schedule set forth in the Prospectuses.
The Right of Accumulation allows an investor to combine the amount being
invested in Class A shares of High-Yield Series and Quality Series, the other
series of the Trust, Seligman Capital Fund, Seligman Common Stock Fund, Seligman
Communications and Information Fund, Seligman Frontier Fund, Seligman Growth
Fund, Seligman Henderson Global Fund Series, Seligman High Income Fund Series,
Seligman Income Fund, Seligman New Jersey Tax-Exempt Fund, Seligman Pennsylvania
Tax-Exempt Fund Series or Seligman Tax-Exempt Fund Series that were sold with a
sales load with the total net asset value of shares of those Seligman Mutual
Funds already owned that were sold with a sales load and the total net asset
value of shares of Seligman Cash Management Fund which were acquired through an
exchange of shares of another mutual fund in the Seligman Group on which there
was a sales load at the time of purchase to determine reduced sales loads in
accordance with the schedule in the Prospectuses. The value of the shares owned,
including the value of shares of Seligman Cash Management Fund acquired in an
exchange of shares of another mutual fund in the Seligman Group on which there
is a sales load at the time of purchase will be taken into account in orders
12
<PAGE>
placed through a dealer, however, only if Seligman Financial Services, Inc.
("SFSI") is notified by an investor or a dealer of the amount owned at the time
a purchase is made and is furnished sufficient information to permit
confirmation.
A Letter of Intent allows an investor to purchase Class A shares of the
High-Yield Series and Quality Series over a 13-month period at reduced sales
loads in accordance with the schedule in the Prospectuses, based on the total
amount of Class A shares that the letter states the investor intends to purchase
plus the total net asset value of shares that were sold with a sales load of the
other series of the Trust, Seligman Capital Fund, Seligman Common Stock Fund,
Seligman Communications and Information Fund, Seligman Frontier Fund, Seligman
Growth Fund, Seligman Henderson Global Fund Series, Seligman High Income Fund
Series, Seligman Income Fund, Seligman New Jersey Tax-Exempt Fund, Seligman
Pennsylvania Tax-Exempt Fund Series and Seligman Tax-Exempt Fund Series 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 mutual fund in the
Seligman Group on which there was a sales load at the time of purchase. Reduced
sales loads 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. For more
information concerning the terms of the letter of intent, see "Terms and
Conditions - Letter of Intent" accompanying the Account Application in the
Series' Prospectus.
Persons Entitled to Reductions. Reductions in sales loads apply to purchases of
Class A shares of each Series 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,
tax-exempt organizations under Section 501 (c)(3) or (13), 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 the Series', to
receive in bulk and to distribute to each participant on a timely basis the
Series' prospectuses, 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 Series 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 loads in the Prospectus
applies to sales to "eligible employee benefit plans" (as defined in the
Prospectus), except that each Series may sell shares at net asset value to
"eligible employee benefit plans," (i) which have at least $1 million invested
in the Seligman Mutual Funds or (ii) of employers who have at least 50 eligible
employees to whom such plan is made available or, regardless of the number of
employees, if such plan is established or maintained by any dealer which has a
sales agreement with SFI. Such sales must be made in connection with a payroll
deduction system of plan funding or other systems acceptable to Seligman Data
Corp., the Trust's shareholder service agent. 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
investment dealers or SFSI.
Further Types of Reductions. Class A shares of each Series may be issued without
a sales load in connection with the acquisition of cash and securities owned by
other investment companies and personal holding companies to financial
institution trust departments, to registered investment advisers exercising
investment discretionary authority with respect to the purchase of Series
shares, or pursuant to sponsored arrangements with organizations which make
recommendations to, or permit group solicitation of, its employees, members or
participants in connection with the purchase of shares of the Series, to
separate accounts established and maintained by an insurance company which are
exempt from registration under Section 3(c)(11) of the 1940 Act, to registered
representatives and employees (and their spouses and minor children) of any
dealer that has a sales agreement with SFSI, to shareholders of mutual funds
with investment objectives similar to the Series' who purchase shares with
redemption proceeds of such funds and to certain unit investment trusts as
described in the Series' Prospectus.
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<PAGE>
Class A shares of the Series' 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.
Payment in Securities. In addition to cash, each Series may accept securities in
payment for Series shares sold at the applicable public offering price.
Generally, a Series will only consider accepting securities (1) to increase its
holdings in a portfolio security of the Series, or (2) if the Manager determines
that the offered securities are a suitable investment in a sufficient amount for
efficient management. Although no minimum has been established, it is expected
that each Series would not accept securities with a value of less than $100,000
per issue in payment for shares. A Series may reject in whole or in part offers
to pay for shares with securities, may require partial payment in cash for
applicable sales loads, and may discontinue accepting securities as payment for
shares at any time without notice. In accordance with Texas securities
regulations, should the Fund accept securities in payment for Series shares,
such transactions would be limited to a bonafide reorganization, statutory
merger, or to other acquisitions of portfolio securities (except for municipal
debt securities issued by state political subdivisions or their agencies or
instrumentalities) which meet the investment objectives and policies of a
Series; are acquired for investment and not for resale; are liquid securities
which are not restricted as to transfer either by law or liquidity of market;
and have a value which is readily ascertainable (and not established only be
evaluation procedures) as evidenced by a listing on the American Stock Exchange,
the New York Stock Exchange or NASDAQ. The Series have no present intention of
accepting securities in payment for shares.
More About Redemptions. The procedures for redemption of the Series' shares
under ordinary circumstances are set forth in the Prospectus. Whether shares are
redeemed pursuant to the Regular or the Expedited Redemption Service (less than
$1,000), a check for the proceeds ordinarily will be sent within seven calendar
days following redemption. Payment may be made in securities, subject to the
review of some state securities commissions, or postponed, if the orderly
liquidation of portfolio securities is prevented by the closing of, or
restricted trading on, the New York Stock Exchange during periods of emergency,
or during such other periods as orders by the Securities and Exchange
Commission. If payment were to be made in securities, shareholders receiving
securities could incur certain transaction costs. The Trust will not accept
orders from securities dealers for the repurchase of shares.
DISTRIBUTION SERVICES
SFSI, an affiliate of the Manager, acts as general distributor of the shares
of the Trust and of the other mutual funds in the Seligman Group. As general
distributor of the Trust's Shares of Beneficial Interest, SFSI allows
concessions to all dealers on the Quality Series and High-Yield Series up to
4.25% on purchases of Class A shares to which the 4.75% sales load applies. SFSI
receives the balance of sales loads and any CDSL paid on Class D shares, of
applicable, paid by investors. The Trust and SFSI are parties to a Distributing
Agreement dated January 1, 1993.
The total sales loads paid by shareholders of both Series for the fiscal
year ended September 30, 1995 amounted to $240,814, with allowance of $211,794
as commissions to dealers; for the fiscal year ended September 30, 1994,
amounted to $394,675, with allowance of $346,536 as commissions to dealers; and
for the fiscal year ended September 30, 1993 amounted to $690,570, with
allowance of $608,368 as commissions to dealers. For the year ended September
30, 1995, and the period February 1, 1994 through September 30, 1994, SFSI
retained CDSL charges of $687 and $643, respectively, for both Series.
Effective April 1, 1995, Seligman Services, Inc.("SSI"), an affiliate of the
Manager, became eligible to receive commissions from certain sales of shares of
the Series, as well as distribution and service fees pursuant to the Plan. For
the period ended September 30, 1995, SSI received commissions of $500 from sales
of both Series. SSI also received distribution and services fees of $1,606 with
respect to both Series.
Class A shares of the High-Yield Series and Quality Series may be sold at
net asset value to present and retired Trustees, directors, officers, employees
(and family members, as defined in the Prospectus) of the Trust, the other
investment companies in the Seligman Group, the Manager and other companies
affiliated with the Manager. 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 the Manager or any affiliate. These
sales may be made for investment purposes only, and shares may be resold only to
the Series.
14
<PAGE>
TAXES
Under the Tax Reform Act of 1986, as amended, each Series of the Trust will
be 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 Series.
As indicated in the Prospectus, each Series intends to qualify and elect to
be treated as a regulated investment company under the Internal Revenue Code and
thus to be relieved of federal income tax on amounts distributed to
shareholders; provided that it distributes at least 90% of its net investment
income and net short-term capital gains, if any.
Qualification as a regulated investment company under the Internal Revenue
Code requires among other things, that (a) at least 90% of the annual gross
income of the Series be derived from dividends, interest, payments with respect
to securities loans and gains from the sale or other disposition of stocks or
securities or foreign currencies, or other income (including but not limited to
gains from options, futures, and forward contracts) derived with respect to its
business of investing in such stocks, securities or currencies; (b) the Series
derive less than 30% of its gross annual income from gains from the sale or
other disposition of stocks, securities and certain other assets held for less
than three months; and (c) the Series diversifies its holdings so that, at the
end of each quarter of the taxable year, (i) at least 50% of the market value of
the Series assets is represented by cash, United States Government securities
and other securities limited in respect of any one issuer to an amount not
greater than 5% of the Series 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 U.S. Government
securities).
VALUATION
The net asset value per share of each class of a Series Trust is determined
as of the close of the New York Stock Exchange ("NYSE") (normally, 4:00 p.m. New
York City time), on each day that the NYSE is open. The Trust and the NYSE are
currently closed on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The Trust will
also determine net asset value for each class of a Series on each day in which
there is a sufficient degree of trading in a Series' portfolio securities that
the net asset value of Series shares might be materially affected. Net asset
value per share for a class of a Series is computed by dividing that class'
share of the value of the net assets of such Series (i.e., the value of its
assets less liabilities) by the total number of outstanding shares of such
class. All expenses of a Series, including the Manager's fee, are accrued daily
and taken into account for the purpose of determining net asset value. The net
asset value of Class D shares of a Series will generally be lower than the net
asset value of Class A shares of such Series as a result of the higher
distribution fee with respect to Class D 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 High-Yield and Quality Series tax-exempt securities are valued on the
basis of quotations provided by an independent pricing service, approved by the
Trustees, 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, in accordance with fair value as determined in accordance with
procedures approved by the Trustees. Short-term notes having remaining
maturities of 60 days or less are generally valued at amortized cost.
Generally, trading in certain securities such as tax-exempt securities,
corporate bonds, U.S. 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
Series' shares are computed as of such times. Occasionally, events affecting the
value of such securities may occur between such times and the close of the NYSE
which will not be reflected in the computation of a Series' net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities and other assets will be valued at their fair
market value as determined in good faith by the Trustees.
15
<PAGE>
PERFORMANCE INFORMATION
The annualized yield for the Class A shares of the High-Yield Series and the
Quality Series for the 30-day period ended September 30, 1995 was 4.28% and
4.60%, respectively. The annualized yield was computed by dividing the Series'
net investment income per share earned during the 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, 1995, which was the last
day of this period. The average number of Class A shares of the High-Yield
Series and Quality Series was 7,661,721 and 14,299,081, respectively, 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, as described in the
Prospectus.
The tax equivalent annualized yields for the Class A shares of the
High-Yield Series and the Quality Series for the 30-day period ended September
30, 1995 were 7.94% and 8.55%, respectively. 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 46.24% (46.24% being the assumed maximum
combined federal and state income tax rate for individual taxpayers that are
subject to California personal income taxes). Then the small portion of the
yield 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 maximum federal income tax rate). These two
calculations were then added to the portion of the yield, if any, that was not
attributable to securities, the income of which was not tax exempt.
The average annual total returns for the one-year period ended September 30,
1995 for the Class A shares of the High-Yield Series and the Quality Series were
3.74% and 5.56%, respectively; for the five-year period ended September 30, 1995
were 7.15% and 7.33%, respectively; and for the ten-year period period ended
September 30, 1995 were 8.71% and 8.38%, respectively. These returns were
computed by assuming a hypothetical initial payment of $1,000. From this $1,000,
the maximum sales load of $47.50 (4.75% of public offering price) was deducted.
It was then assumed that all of the dividends and distributions paid by a Series
over the relevant time period were reinvested. It was then assumed that at the
end of the one-year period, five-year period and ten-year period of the Series,
the entire amount was redeemed. The average annual total return was then
calculated by calculating 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).
The annualized yields for the 30-day period ended September 30, 1995 or the
Class D shares of the High-Yield Series and Quality Series were 3.60% and 3.94%,
respectively. The annualized yield was computed by dividing a Series' net
investment income per share earned during this 30-day period by the maximum
offering price per share (i.e., the net asset value) on September 30, 1995,
which was the last day of this period. The average number of Class D shares
were: High-Yield-191,847, and Quality-127,616 which was the average daily number
of shares outstanding during the 30-day period that were eligible to receive
dividends.
The tax equivalent annualized yields for the 30-day period ended September
30, 1995 for the Class D shares of the High-Yield Series and Quality Series were
6.68% and 7.33%, respectively. The tax equivalent annualized yield was computed
as discussed above for Class A shares.
The average annual total returns for the Class D shares of the High-Yield
Series and the Quality Series for the one-year period ended September 30, 1995
were 6.78% and 8.61%, respectively, and since inception through the period ended
September 30, 1995 were 3.05% and 0.50%, respectively. These returns were
computed by assuming a hypothetical initial payment of $1,000 in Class D shares
of each Series and that all of the dividends and distributions by the Series'
Class D shares over the relevant time period were reinvested. It was then
assumed that at the end of each period, the entire amount was redeemed,
subtracting the 1% CDSL, if applicable .
The tables below illustrate the total returns on a $1,000 investment in
Class A shares of each of the Series for the ten years ended September 30, 1995,
and in the Class D shares of each of the Series from the commencement of
operations through September 30, 1995, assuming investment of all dividends and
capital gain distributions.
16
<PAGE>
<TABLE>
<CAPTION>
CLASS A SHARES
Value of Capital Value Total Value
Period Initial Gain of of Total
Ended 1 Investment 2 Distributions Dividends Investment 2 Return 1,3
- ------- ------------ ------------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
HIGH-YIELD
9/30/86 $ 1,075 $ 22 $ 91 $ 1,188
9/30/87 949 61 161 1,171
9/30/88 1,002 78 263 1,343
9/30/89 1,016 92 364 1,472
9/30/90 987 113 454 1,554
9/30/91 1,038 120 591 1,749
9/30/92 1,062 124 720 1,906
9/30/93 1,075 184 850 2,109
9/30/94 1,006 198 914 2,118
9/30/95 1,034 204 1,068 2,306 130.55%
QUALITY
9/30/86 1,072 15 85 1,172
9/30/87 957 33 152 1,142
9/30/88 1,002 59 245 1,306
9/30/89 1,030 62 342 1,434
9/30/90 990 85 420 1,495
9/30/91 1,059 99 551 1,709
9/30/92 1,091 107 675 1,873
9/30/93 1,159 147 827 2,133
9/30/94 1,018 171 828 2,017
9/30/95 1,059 199 978 2,236 123.55
CLASS D SHARES
Value of Capital Value Total Value
Period Initial Gain of of Total
Ended 1 Investment 2 Distributions Dividends Investment 2 Return 1,3
- ------- ------------ ------------- --------- ------------ ----------
HIGH-YIELD
9/30/94 $ 937 $ - $ 29 $ 966
9/30/95 972 - 79 1,051 5.11%
QUALITY
9/30/94 886 - 25 911
9/30/95 930 10 68 1,008 0.83
</TABLE>
1 For the ten-year period ended September 30, 1995 for Class A shares; and
from commencement of operations of 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 load, assumes that all dividends and capital
gain distributions were taken in cash and reflects the effect of the maximum
sales load and changes in the net asset value of the shares purchased with
the hypothetical initial investment. "Total Value of Investment" assumes
investment of all dividends and capital gain distributions.
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<PAGE>
3 Total return for each Series is calculated by assuming a hypothetical
initial investment of $1,000 at the beginning of the period specified,
subtracting the maximum sales load or CDSL, 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.
A Series' Class A total return and average annual total return quoted does
not reflect the deduction of the administration, shareholder services and
distribution fee for period prior to January 1, 1993, which fee if reflected
would reduce the performance quoted.
GENERAL INFORMATION
The Trustees are authorized to classify or reclassify and issue any shares
of beneficial interest of the Trust into any number of other classes without
further action by shareholders. 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.
As a general matter, the Trust will not hold annual or other meetings of
the shareholders. This is because the Declaration of Trust provides for
shareholder voting only (a) for the election or removal of one or more Trustees
if a meeting is called for that purpose, (b) with respect to any contract as to
which shareholder approval is required by the 1940 Act, (c) with respect to any
termination or reorganization of the Trust or any series, including the Fund, to
the extent and as provided in the Declaration of Trust, (d) with respect to any
amendment of the Declaration of Trust (other than amendments establishing and
designating new series, abolishing series when there are no units thereof
outstanding, changing the name of the Trust or the name of any series, supplying
any omission, curing any ambiguity or curing, correcting or supplementing any
provision thereof which is internally inconsistent with any other provision
thereof or which is defective or inconsistent with the 1940 Act or with the
requirements of the Internal Revenue Code of 1986, as amended, or applicable
regulations for the Fund's obtaining the most favorable treatment thereunder
available to regulated investment companies), which amendments require approval
by a majority of the Shares entitled to vote, (e) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding, or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the shareholders,
and (f) with respect to such additional matters relating to the Trust as may be
required by the 1940 Act, the Declaration of Trust, the By-laws of the Trust,
any registration of the Trust with the Securities and Exchange Commission (the
"Commission") or any state, or as the Trustees may consider necessary or
desirable. Each Trustee serves until the next meeting of shareholders, if any,
called for the purpose of considering the election or reelection of such Trustee
or of a successor to such Trustee, and until the election and qualification of
his successor, if any, elected at such meeting, or until such Trustee sooner
dies, resigns, retires or is removed by the shareholders or two-thirds of the
Trustees.
The shareholders of the Trust have the right, upon the declaration in
writing or vote of more than two-thirds of the Trust's outstanding shares, to
remove a Trustee. The Trustees will call a meeting of shareholders to vote on
the removal of a Trustee upon the written request of the record holders of ten
percent of its shares. In addition, whenever ten or more shareholders of record
who have been such for at least six months preceding the date of application,
and who hold in the aggregate either shares having a net asset value of at least
$25,000 or at least 1 per centum of the outstanding shares, whichever is less,
shall apply to the Trustees in writing, stating that they wish to communicate
with other shareholders with a view to obtaining signatures to a request for a
meeting for the purpose of voting upon the question of removal of any Trustee or
Trustees and accompanied by a form of communication and request which they wish
to transmit, the Trustee shall within five business days after receipt of such
application either: (1) afford to such applicants access to a list of the names
and addresses of all shareholders as recorded on the books of the Trust; or (2)
inform such applicants as to the approximate number of shareholders of record,
and the approximate cost of mailing to them the proposed communication and form
of requests. If the Trustees elect to follow the latter course, the Trustees,
upon the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall, with
reasonable promptness, mail such material to all shareholders of record at their
addresses as recorded on the books, unless within five business days after such
tender the Trustees shall mail to such applicants and file with the Commission,
together with a copy of the material to be mailed, a written statement signed by
at least a majority of the Trustees to the effect that in their opinion either
such material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or would be
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in violation of applicable law, and specifying the basis of such opinion. After
opportunity for hearing upon the objections specified in the written statement
so filed, the Commission may, and if demanded by the Trustees or by such
applicants shall, enter an order either sustaining one or more of such
objections or refusing to sustain any of them. If the Commission shall enter an
order refusing to sustain any of such objections, or if, after the entry of an
order sustaining one or more of such objections, the Commission shall find,
after notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Trustees shall mail copies
of such material to all shareholders with reasonable promptness after the entry
of such order and the renewal of such tender.
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 the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are substantially identical or that the matter does
not significantly affect any interest of such series. However, the Rule exempts
the selection of independent public accountants, the approval of principal
distributing contracts and the election of trustees from the separate voting
requirements of the Rule.
The shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust. The Declaration of Trust also
provides for indemnification and reimbursement of expenses out of a series'
assets for any shareholder held personally liable for obligations of such
series.
Custodian. Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, serves as custodian for the Fund. It also maintains, under the
general supervision of the Manager, the accounting records and determines the
net asset value for the Fund.
Auditors. Deloitte & Touche LLP, independent auditors, have been selected as
auditors of the Fund. Their address is Two World Financial Center, New York, NY
10281.
SPECIAL CONSIDERATIONS REGARDING INVESTMENTS
IN CALIFORNIA TAX-EXEMPT SECURITIES
The following information as to certain California considerations is
given to investors in view of the Fund's policy of investing primarily in
securities of California issuers. Such information is derived from sources that
are generally available to investors and is believed by the Manager to be
accurate. Such information constitutes only a brief summary, does not purport to
be a complete description and is based on information from official statements
relating to securities offerings of California issuers.
California's economy is the largest among the 50 states and one of the
largest in the world. This diversified economy has major components in
agriculture, manufacturing, high technology, trade, entertainment, tourism and
services. The State's July 1, 1994 population of over 32 million represents over
12 percent of the total United States population, with total employment at about
14 million.
The State is subject to an annual appropriations limit imposed by
Article XIII B of the State Constitution (the "Appropriations Limit"). The
Appropriations Limit does not restrict appropriations to pay debt service on the
Bonds or other voter-authorized bonds. Article XIII B prohibits the State from
spending "appropriations subject to limitation" in excess of the Appropriations
Limit. Article XIII B, originally adopted in 1979, was modified substantially by
Propositions 98 and 111 in 1988 and 1990, respectively. "Appropriations subject
to limitation", with respect to the State, are authorizations to spend "proceeds
of taxes", which consist of tax revenues, and certain other funds, including
proceeds from regulatory licenses, user charges or other fees to the extent that
such proceeds exceed "the cost reasonably borne by that entity in providing the
regulation, product or service", but "proceeds of taxes" exclude most state
subventions to local governments, tax refunds and some benefit payments such as
unemployment insurance. No limit is imposed on appropriations of funds which are
not "proceeds of taxes", such as reasonable user charges or fees and certain
other non-tax funds.
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Not included in the Appropriations Limit are appropriations for the
debt service costs of bonds existing or authorized by January 1, 1979, or
subsequently authorized by the voters, appropriations required to comply with
mandates of courts or the federal government and, pursuant to Proposition 111,
appropriations for qualified capital outlay projects and appropriations of
revenues derived from any increase in gasoline taxes and motor vehicle weight
fees above January 1, 1990 levels. In addition, a number of recent and proposed
initiatives were structured or proposed to create new tax revenues dedicated to
certain specific uses, with such new taxes expressly exempted from the Article
XIII B limits. The Appropriations Limit may also be exceeded in cases of
emergency. However, unless the emergency arises from civil disturbance or
natural disaster declared by the Governor, and the appropriations are approved
by two-thirds of the Legislature, the Appropriations Limit for the next three
years must be reduced by the amount of the excess.
The State's Appropriations Limit in each year is based on the limit for
the prior year, adjusted annually for changes in California per capita personal
income and changes in population, and adjusted, when applicable, for any
transfer of financial responsibility of providing services to or from another
unit of government. As amended by Proposition 111, the Appropriations Limit is
tested over consecutive two-year periods. Any excess of the aggregate "proceeds
of taxes" received over such two-year period above the combined Appropriations
Limits for those two years is divided equally between transfers to local school
and community college ("K-14") districts and refunds to taxpayers.
As originally enacted in 1979, the State's Appropriations Limit was
based on 1978-79 Fiscal Year authorizations to expend proceeds of taxes and was
adjusted annually to reflect changes in cost of living and population. Starting
in the 1991-92 Fiscal Year, the State's Appropriations Limit was recalculated by
taking the actual 1986-87 Fiscal Year limit, and applying the annual adjustments
as if Proposition 111 had been in effect. This recalculation resulted in an
increase of $1 billion to the State's Appropriations Limit in the 1990-91 Fiscal
Year. The Legislature has enacted legislation to implement Article XIII B which
defines certain terms used in Article XIII B and sets forth the methods for
determining the Appropriations Limit. Government Code Section 7912 requires an
estimate of the Appropriations Limit to be included in the Governor's Budget,
and thereafter to be subject to the budget process and established in the Budget
Act.
For the 1994-95 Fiscal Year, the State Appropriations Limit and the
Appropriations Subject to Limit were estimated to be $37.5 and $31.7 billion,
respectively, resulting in an amount under the limit of approximately $5.8
billion. For the 1995-96 Fiscal Year, the State Appropriations Limit and
Appropriations Subject to Limit are estimated to be $39.3 and $32.7 billion,
respectively, resulting in an amount under the limit of approximately $6.6
billion.
In 1994 the Legislature enacted a two-year plan to retire the
accumulated State Budget Deficit through Section 12467 of the California
Government Code, enacted by Chapter 135, Statutes of 1994 (the "Budget
Adjustment Law"). Pursuant to the Budget Adjustment Law on November 15, 1994,
the State Controller issued a report which determined that there would be no
1995 cash shortfall and, therefore, no implementation of the Budget Adjustment
Law in the 1994-95 Fiscal Year. On October 16, 1995, the State Controller issued
a report (the "October Trigger Report") reviewing the estimated cash condition
of the General Fund for the 1995-96 Fiscal Year. The State Controller estimated
that the General Fund would have at least $1.4 billion of internal cash
resources on June 30, 1996 (i.e., external borrowing would not be needed on June
30, 1996). As a result of this finding, certain provisions of the Budget
Adjustment Law, which could have ultimately led to automatic, across-the-board
cuts in the General Fund budget, will not have to be implemented.
Proposition 98
On November 8, 1988, voters of the State approved Proposition 98, a
combined initiative constitutional amendment and statute called the "Classroom
Instructional Improvement and Accountability Act". Proposition 98 (as modified
by Proposition 111, which was enacted on June 5, 1990), changed State funding of
public education below the university level, and the operation of the State
Appropriations Limit, primarily by guaranteeing K-14 schools a minimum share of
General Fund revenues. Proposition 98 permits the Legislature, by two-thirds
vote of both houses and with the Governor's concurrence, to suspend the K-14
schools' minimum funding formula for a one-year period. Proposition 98 also
contains provisions transferring certain State tax revenues in excess of the
Article XIII B limit to K-14 schools. The 1995-96 Budget Act projects
Proposition 98 funding will increase by about $1.0 billion (General Fund) and
$1.2 billion total above revised 1994-95 levels.
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Fiscal Years Prior to 1994-95
In the years following the enactment of the Federal Tax Reform Act of
1986 and conforming changes to the State's tax laws, taxpayer behavior became
much more difficult to predict, and the State experienced a series of fiscal
years in which revenue came in significantly higher or lower than original
estimates. The 1989-90 Fiscal Year ended with revenues below estimates, so that
the State's budget reserve (the Special Fund for Economic Uncertainties or
"SFEU") was fully depleted by June 30, 1990. This date essentially coincided
with the start of the recent recession, and the State has subsequently
accumulated a budget deficit in the SFEU approaching $2.8 billion at its peak.
The State's budget problems in recent years have also been caused by a
structural imbalance which has been identified by the current and previous
Administrations. The largest General Fund Programs--K-14 education, health,
welfare and corrections--were increasing faster than the revenue base, driven by
the State's rapid population increases.
Starting in the 1990-91 Fiscal Year, each budget required multibillion
dollar actions to bring projected revenues and expenditures into balance and to
close large "budget gaps" which were identified. The Legislature and Governor
eventually agreed on significant cuts in program expenditures, some transfers of
program responsibilities and funding from the State to local governments,
revenue increases (particularly in the 1991-92 Fiscal Year budget), and various
one-time adjustments and accounting changes.
Despite these budget actions, as noted, the effects of the recession
led to large, unanticipated deficits in the budget reserve, the SFEU, as
compared to projected positive balances. By the 1993-94 Fiscal Year, the
accumulated deficit was so large that it was impractical to budget to retire it
in one year, so a two-year program was implemented, using the issuance of
revenue anticipation warrants to carry a portion of the deficit over the end of
the fiscal year. When the economy failed to recover sufficiently in 1993-94, a
second two-year plan was implemented in 1994-95.
Another consequence of the accumulated budget deficits, together with
other factors such as disbursement of funds to local school districts "borrowed"
from future fiscal years and hence not shown in the annual budget, was to
significantly reduce the State's cash resources available to pay its ongoing
obligations. When the Legislature and the Governor failed to adopt a budget for
the 1992-93 Fiscal Year by July 1, 1992, which would have allowed the State to
carry out its normal annual cash flow borrowing to replenish its cash reserves,
the State Controller was forced to issue registered warrants to pay a variety of
obligations representing prior years' or continuing appropriations, and mandates
from court orders. Available funds were used to make constitutionally-mandated
payments, such as debt service on bonds and warrants. Between July 1 and
September 4, 1992 the State Controller issued a total of approximately $3.8
billion of registered warrants. After that date, all remaining outstanding
registered warrants (about $2.9 billion) were called for redemption from
proceeds of the issuance of 1992 Interim Notes after the budget was adopted.
The State's cash condition became so serious in late spring of 1992
that the State Controller was required to issue revenue anticipation warrants
maturing in the following fiscal year in order to pay the State's continuing
obligations. The State was forced to rely increasingly on external debt markets
to meet its cash needs, as a succession of notes and warrants were issued in the
period from June 1992 to July 1994, often needed to pay previously maturing
notes or warrants. These borrowings were used also in part to spread out the
repayment of the accumulated budget deficit over the end of a fiscal year.
1994-95 Fiscal Year
The 1994-95 Fiscal Year represented the fourth consecutive year the
Governor and Legislature were faced with a very difficult budget environment to
produce a balanced budget. The Governor's Budget Proposal, as updated in May and
June 1994, recognized that the accumulated deficit could not be repaid in one
year, and proposed a two-year solution designed to eliminate the accumulated
budget deficit, estimated at about $1.8 billion at June 30, 1994, by June 30,
1996.
The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projected General Fund revenues and transfers of $41.9 billion, $2.1 billion
more than actual revenues received in 1993-94, and expenditures of $40.9
billion, an increase of $1.6 billion from the prior year. The revenue estimates
partly reflected the Administration's forecast of an improving economy. The
principal features of the 1994-95 Budget Act were the following:
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1. Receipt of additional federal aid of about $760 million for costs of
refugee assistance and costs of incarceration and medical care for illegal
immigrants. Analysis of the federal Fiscal Year 1995 budget by the Department of
Finance indicated that about $98 million was appropriated for California to
offset costs of incarceration of illegal immigrants, less than the $356 million
which was assumed in the State's 1994-95 Budget Act. Because of timing
considerations in applying for these federal funds, the Department of Finance
estimated that about $33 million of these funds would be received during the
State's 1994-95 Fiscal Year, with the balance to be received in the following
fiscal year. The federal budget did not contain any of the additional $400
million in funding for refugee assistance and health costs which were also
assumed in the 1994-95 Budget Act.
2. Reductions of approximately $1.1 billion in health and welfare
costs. Certain of these actions were blocked by legal challenges.
3. A General Fund increase of approximately $38 million in support for
the University of California and $65 million for California State University,
accompanied by student fee increases for both the University of California and
California State University.
4. Proposition 98 funding for K-14 schools was increased by $526
million from 1993-94 Fiscal Year levels, representing an increase for enrollment
growth and inflation. Consistent with previous budget agreements, Proposition 98
funding provided approximately $4,217 per student for K-12 schools, equal to the
level in the prior three years.
5. Additional miscellaneous cuts ($500 million), fund transfers ($255
million), and adjustment to prior years' legislation concerning property tax
shifts for local governments ($300 million).
The 1994-95 Budget Act contained no tax increases. Under legislation
enacted for the 1993-94 Budget Act, the renters' tax credit was suspended for
two years (1993 and 1994). A ballot proposition to permanently restore the
renters' tax credit after this year failed at the June 1994 election. The
Legislature enacted a further one-year suspension of the renters' tax credit,
for 1995, saving about $390 million in the 1995-96 Fiscal Year.
The 1994-95 Budget Act assumed that the State would use a cash flow
borrowing program in 1994-95 which combined one-year notes and two-year
warrants, which were issued in the summer of 1994. Issuance of the warrants
allowed the State to defer repayment of approximately $1.0 billion of its
accumulated budget deficit into the 1995-96 Fiscal Year. No automatic spending
cuts were required under the Budget Adjustment Law.
Reports by the Department of Finance in May, 1995 indicated that, with
economic recovery well underway in the State, General Fund revenues for the
entire 1994-95 Fiscal Year were above projections, and expenditures were below
projections because of slower than anticipated health/welfare caseload growth
and school enrollments. The aggregate effect improved the budget picture by
about $500 million, leaving an estimated budget deficit of about $630 million at
June 30, 1995.
Current State Budget
The discussion below of the 1995-96 Fiscal Year budget is based on
estimates and projections of revenues and expenditures for the current fiscal
year and must not be construed as statements of fact. These estimates and
projections are based upon various assumptions which may be affected by numerous
factors, including future economic conditions in the State and the nation, and
there can be no assurance that the estimates will be achieved.
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1995-96 Fiscal Year
1995-96 Budget Act - For the first time in four years, the State
entered the upcoming fiscal year with strengthening revenues and reduced
caseload growth based on an improving economy. The State entered the 1995-96
Budget negotiations with the smallest nominal "budget gap" to be closed in many
years. Nonetheless, series policy differences between the Governor and
Legislature prevented timely enactment of the budget. The 1995-96 Budget Act was
signed by the Governor on August 3, 1995, 34 days after the start of the fiscal
year. The Budget Act projected General Fund revenues and transfers of $44.1
billion, a 3.5 percent increase from the prior year. Expenditures were budgeted
at $43.4 billion, a 4 percent increase. The Department of Finance projected
that, after repaying the last of the carryover budget deficit, there would be a
positive balance of $28 million in the budget reserve, the Special Fund for
Economic Uncertainties, at June 30, 1996. The Budget Act also projected Special
Fund revenues of $12.7 billion and appropriated Special Fund expenditures of
$13.0 billion.
The Department of Finance projected cash flow borrowings in the 1995-96
Fiscal Year would be the smallest in many years, comprising about $2 billion of
notes to be issued in April, 1996, and maturing by June 30, 1996. With full
payment of $4 billion of revenue anticipation warrants on April 25, 1996, the
Department saw no further need for borrowing over the end of the fiscal year.
The available internal borrowable cash resources of the General Fund at June 30,
1996 were projected at almost $2 billion. The State Controller reviewed these
estimates in a report issued on October 16, 1995, in the third step in the
Budget Adjustment Law process. The Department of Finance updated its Fiscal Year
1995-96 revenue and expenditure and year-end cash balance estimates as part of
the 1996-97 Governor's Budget which was to be released by January 10, 1996.
The following are the principal features of the Budget Act:
1. Proposition 98 funding for schools and community colleges will
increase by about $1.0 billion (General Fund) and $1.2 billion total above
revised 1994-95 levels. Because of higher than projected revenues in 1994-95, an
additional $543 million ($91 per K-12 ADA) is appropriated to the 1994-95
Proposition 98 entitlement. A large part of this is a block grant of about $54
per pupil for any one-time purpose. Per-pupil expenditures are projected to
increase by another $126 in 1995-96 to $4,435. For the first time in several
years, a full 2.7 percent cost of living allowance is funded.
2. Cuts in health and welfare costs totaling about $0.9 billion. Some
of these cuts (totaling about $500 million) would require federal legislative
approval.
3. A 3.5 percent increase in funding for the University of California
($90 million General Fund) and the California State University system ($24
million General Fund).
4. The Budget assumes receipt of $473 million in new federal aid for
costs of illegal immigrants, above commitments already made by the federal
government. This amount is much less than estimates made in the summer of 1994
as part of the two-year budget proposal, and somewhat lower than the estimates
in the January 1995 Governor's Budget.
5. General Fund support for the Department of Corrections is increased
by about 8 percent over the prior year, reflecting estimates of increased prison
population, but funding is less than proposed in the Governor's Budget.
Subsequent Developments
Reports from the Department of Finance indicate that General Fund
revenues through the first four months of the fiscal year were about $676
million, or 5.4%, above 1995 Budget Act projections. For the four months,
personal income tax (primarily estimated tax payments) were $261 million (4.6%)
above projection; sales and use taxes were $151 million (3.5%) above projection,
and bank and corporation taxes (also primarily estimated tax payments) were $182
million (12.7%) above projection.
The State Controller's "October Trigger Report," while finding no need
to impose automatic budget cuts, noted a number of areas where there was likely
to be a divergence from the original budget estimates. On the positive side, the
State Controller noted that improving economic conditions were leading to
improved cash receipts. On the negative side, the State Controller's Report
estimated that federal actions to allow health and welfare cuts and to reimburse
the State for illegal immigrant costs were not likely to provide as much money
as had been planned, and that Proposition 98 expenditure for K-14 schools had
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been underestimated. In addition, the State Controller reported that an annual
review of internal borrowable resources resulted in a $705 million increase of
estimated available internal borrowable resources. In total, therefore, the
State Controller estimated that the State's cash position on June 30, 1996 would
be about $500 million worse than the estimate of $1.9 billion of available
internal cash resources included in the original budget, but still large enough
to avoid the Budge Adjustment Law cuts.
Litigation
Certain litigation is pending against California or its officer or
employees that, if decided adversely, could require the State to make
significant future expenditures or could impair future revenue sources. Among
the more significant of these cases are those that involve: (i) liability
stemming from the Yuba River flood litigation which could range from $800
million to $1.5 billion; (ii) the 2.3 percent reduction in AFDC payments
included in the 1994-95 Budget Act; (iii) the question of whether the United
States Department of Health and Human Services violated the Administrative
Procedures Act in granting the State a waiver from complying with requirements
for state participation in the Medicaid program; (iv) a question of the
constitutionality of the water's-edge election fee; (v) the exclusion of small
business stock gains from certain taxes which could require the State to refund
$250 million and not be able to collect previous assessments; (vi) a tax case
relating to the state's method of determining the tax on gross insurance
premiums with a potential loss of $173 million; (vii) lawsuits seeking
reimbursement for alleged state-mandated costs for special education programs
for handicapped students with potential liability of over $1 billion; (viii) a
school district seeking reimbursement for voluntary desegregation costs incurred
in the implementation of California Department of Education guidelines with a
potential loss in excess of $300 million; (ix) two lawsuits related to
contamination at the Stringfellow toxic waste site; (x) challenges to the
transfer of monies from Special fund accounts within the State Treasury to the
State's General Fund pursuant to the Budget Acts of 1991 - 1995; (xi) challenges
to the amendment of statutes prescribing specific percentages of tobacco tax
revenues to be placed in accounts to be used for health education, research
programs and medical treatment programs; (xii) a challenge to the
constitutionality of legislation which deferred payment of the State's employer
contribution to the Public Employees' Retirement System in Fiscal year 1992 -
1993; and (xiii) prison inmate entitlement claims to minimum wages under the
Fair Labor Standard Act (the "FLSA") while working for the Prison Industry
Authority.
Orange County Bankruptcy
On December 6, 1994, Orange County, California (the "County"), together
with its pooled investment funds (the "Pools") filed for protection under
Chapter 9 of the federal Bankruptcy Code, after reports that the Pools had
suffered significant market losses in their investments, causing a liquidity
crisis for the Pools and the County. More than 180 other public entities, most
of which, but not all, are located in the County, were also depositors in the
Pools. The County has reported the Pools' loss at about $1.69 billion, or about
23 percent of their initial deposits of approximately $7.5 billion. Many of the
entities which deposited moneys in the Pools, including the County, faced
interim and/or extended cash flow difficulties because of the bankruptcy filing
and may be required to reduce programs or capital projects.
The State has no existing obligation with respect to any outstanding
obligations or securities of the County or any of the other participating
entities.
FINANCIAL STATEMENTS
The Annual Report to Shareholders for the fiscal year ended September 30,
1995 is incorporated by reference into this Statement of Additional Information.
The Annual Report contains a schedule of the investments of each of the Series
as of September 30, 1995, as well as certain other financial information as of
that date. The Annual Report will be furnished, without charge, to investors who
request copies of the Series' Statement of Additional Information.
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APPENDIX A
Moody's Investors Service, Inc. ("Moody's")
Tax-Exempt Bonds
Aaa: Tax-Exempt 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: Tax-exempt 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: Tax-exempt 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: Tax-exempt 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: Tax-exempt 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: Tax-exempt 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: Tax-exempt 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: Tax-exempt 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: Tax-exempt 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.
Tax-Exempt Notes
Moody's ratings for tax-exempt 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")
Tax-Exempt Bonds
AAA: Tax-exempt bonds rated AAA are highest grade obligations. Capacity to
pay interest and repay principal is extremely strong.
AA: Tax-exempt bonds rated AA have a very high degree of safety and very
strong capacity to pay interest and repay principal and differs from the highest
rated issues only in small degree.
A: Tax-exempt 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: Tax-exempt 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: Tax-exempt 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.
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SP-2: Satisfactory capacity to pay principal and interest.
Commercial Paper
S&P Commercial Paper ratings are current assessments of the likelihood of
timely payment of debts having an original maturity of no more than 365 days.
A-1: The A-1 designation indicates that the degree of safety regarding
timely payment is very strong.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B: Issues rated "B" are regarded as having only a speculative capacity for
timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful
capacity of payment.
D: Debt rated "D" is in payment default.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of bond as a matter of policy.
The ratings assigned by S&P may be modified by the addition of a plus (+)
or minus (-) sign to show relative standing within its major rating categories.
APPENDIX B
HISTORY OF J. & W. SELIGMAN & CO. INCORPORATED
Seligman's beginnings date back to 1837, when Joseph Seligman, the
oldest of eight brothers, arrived in the United States from Germany. He earned
his living as a pack peddler in Pennsylvania, and began sending for his
brothers. The Seligmans became successful merchants, establishing businesses in
the South and East.
Backed by nearly thirty years of business success - culminating in the
sale of government securities to help finance the Civil War - Joseph Seligman,
with his brothers, established the international banking and investment firm of
J. & W. Seligman & Co. In the years that followed, the Seligman Complex played a
major role in the geographical expansion and industrial development of the
United States.
The Seligman Complex:
...Prior to 1900
o Helps finance America's fledgling railroads through underwritings.
o Is admitted to the New York Stock Exchange in 1869. Seligman remained a
member of the NYSE until 1993, when the evolution of its business made it
unnecessary.
o Becomes a prominent underwriter of corporate securities, including New
York Mutual Gas Light Company, later part of Consolidated Edison.
o Provides financial assistance to Mary Todd Lincoln and urges the Senate to
award her a pension.
o Is appointed U.S. Navy fiscal agent by President Grant.
o Becomes a leader in raising capital for America's industrial and urban
development.
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...1900-1910
o Helps Congress finance the building of the Panama Canal.
...1910s
o Participates in raising billions for Great Britain, France and Italy,
helping to finance World War I.
...1920s
o Participates in hundreds of successful underwritings including those for
some of the Country's largest companies: Briggs Manufacturing, Dodge
Brothers, General Motors, Minneapolis-Honeywell Regulatory Company, Maytag
Company, United Artists Theater Circuit and Victor Talking Machine
Company.
o Forms Tri-Continental Corporation in 1929, today the nation's largest,
diversified closed-end equity investment company, with over $2 billion in
assets and one of its oldest.
...1930s
o Assumes management of Broad Street Investing Co. Inc., its first mutual
fund, today known as Seligman Common Stock Fund, Inc.
o Establishes Investment Advisory Service.
...1940s
o Helps shape the Investment Company Act of 1940.
o Leads in the purchase and subsequent sale to the public of Newport News
Shipbuilding and Dry Dock Company, a prototype transaction for the
investment banking industry.
o Assumes management of National Investors Corporation, today Seligman
Growth Fund, Inc.
o Establishes Whitehall Fund, Inc., today Seligman Income Fund, Inc.
...1950-1989
o Develops new open-end investment companies. Today, manages more than 40
mutual fund portfolios.
o Helps pioneer state-specific, tax-exempt municipal bond funds, today
managing a national and 18 state-specific tax-exempt 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 and Seligman Quality Municipal
Fund, two closed-end funds that invest in high quality municipal bonds.
o In 1991 establishes a joint venture with Henderson Administration Group
plc, of London, known as Seligman Henderson Co., to offer global
investment products.
o Introduces Seligman Frontier Fund, Inc., a small capitalization mutual
fund.
o Launches Seligman Henderson Global Fund Series, Inc., which today offers
four separate series: Seligman Henderson International Fund, Seligman
Henderson Global Smaller Companies Fund, Seligman Henderson Global
Technology Fund, and Seligman Henderson Global Growth Opportunities Fund.
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STATEMENT OF ADDITIONAL INFORMATION
February 1, 1996
SELIGMAN FLORIDA TAX-EXEMPT SERIES
100 Park Avenue
New York, N.Y. 10017
New York City Telephone (212) 850-1864
Toll-Free Telephone:
(800) 221-2450 - all continental United States
This Statement of Additional Information expands upon and supplements
the information contained in the current Prospectus of Seligman Florida
Tax-Exempt Series (the "Fund"), dated February 1, 1996. It should be read in
conjunction with the Prospectus, which may be obtained by writing or calling the
Fund at the above address or telephone numbers. This Statement of Additional
Information, although not in itself a Prospectus, is incorporated by reference
into the Prospectus in its entirety.
The Fund offers two classes of shares. Class A shares may be purchased
at net asset value plus a sales load of up to 4.75%. Class D shares may be
purchased at net asset value and are subject to a contingent deferred sales load
("CDSL") of 1% if redeemed within one year.
Each share of Class A and Class D represents an identical legal
interest in the investment portfolio of the Fund and has the same rights except
for certain class expenses and except that Class D shares bear a higher
distribution fee that generally will cause the Class D shares to have a higher
expense ratio and pay lower dividends than Class A shares. Each Class has
exclusive voting rights with respect to its distribution plan. Although holders
of Class A and Class D shares have identical legal rights, the different
expenses borne by each Class will result in different dividends. The two classes
also have different exchange privileges.
TABLE OF CONTENTS
Page
Seligman Florida Tax-Exempt Series.............. 2
Investment Objective, Policies
And Risks...................................... 2
Investment Limitations.......................... 5
Trustees And Officers........................... 6
Management And Expenses.........................10
Administration, Shareholder Services
And Distribution Plan..........................11
Portfolio Transactions..........................12
Purchase And Redemption Of Fund Shares..........12
Distribution Services ..........................14
Taxes...........................................14
Valuation.......................................15
Performance Information.........................15
General Information.............................17
Risk Factors Regarding Investments
In Florida Tax-Exempt Securities...............18
Financial Statements............................20
Appendix A......................................20
Appendix B......................................23
TEB1A
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SELIGMAN FLORIDA TAX-EXEMPT SERIES
The Fund is a series of Seligman Tax-Exempt Series Trust (the "Trust"), a
non-diversified open-end management investment company, or mutual fund,
organized as an unincorporated business trust under the laws of Massachusetts
that commenced operations in 1984.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund seeks to provide high income exempt from federal income taxes
consistent with preservation of capital. The Fund also invests with
consideration given to capital gain.
The Fund is expected to invest principally, without percentage limitations,
in tax-exempt securities which on the date of investment are within the four
highest ratings of Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A, Baa
for bonds; MIG 1, MIG 2, MIG 3, MIG 4 for notes; P-1 for commercial paper) or
Standard & Poor's Corporation ("S&P") (AAA, AA, A, BBB for bonds; SP-1 - SP-2
for notes; A-1+, A-1/A-2 for commercial paper). Tax-exempt securities rated in
these categories are commonly referred to as investment grade. The Fund may
invest in tax-exempt securities which are not rated, or which do not fall into
the credit ratings noted above if, based upon credit analysis by the Manager, it
is believed that such securities are of comparable quality. In determining
suitability of investment in a lower rated or unrated security, the Manager 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. Tax-exempt securities in
the fourth rating category of S&P or Moody's will generally provide a higher
yield than do higher rated tax-exempt 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
tax-exempt 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
tax-exempt securities rated in the fourth rating categories than in the higher
rating categories.
A description of the rating categories is contained in Appendix A to this
Statement.
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 tax-exempt securities and for providing state and local governments
with federal credit assistance. Reevaluation of the Fund's investment objectives
and structure might be necessary in the future due to market conditions which
may result from future changes in the tax laws.
Florida Tax-Exempt Securities. Florida Tax-Exempt Securities include notes,
bonds and commercial paper issued by or on behalf of the State of Florida, its
political subdivisions, agencies, and instrumentalities, the interest on which
is exempt from federal income taxes. Such securities are traded primarily in an
over-the-counter market. The Fund may invest no more than 20% of its net assets
in certain private activity bonds, the interest on which is treated as a
preference item for purposes of the alternative minimum tax. See "Florida
Tax-Exempt Securities" in the Prospectus.
Under the Investment Company Act of 1940 (the "1940 Act"), the
identification of the issuer of tax-exempt bonds, notes or commercial paper
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 the
bond is backed only by the assets and revenues of the nongovernmental user, the
nongovernmental 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.
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Tax-exempt 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. Tax-exempt 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, which are considered tax-exempt bonds if
the interest paid thereon is exempt from federal income tax, 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 tax-exempt 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.
Tax-Exempt Notes generally are used to provide for short-term capital needs
and generally have maturities of one year or less. Tax-Exempt Notes include:
1. Tax Anticipation Notes. Tax Anticipation Notes are issued to finance
working capital needs of municipalities. Generally, they are issued in
anticipation of various tax revenues, such as income, sales, use and business
taxes, and are payable from these specific future taxes.
2. Revenue Anticipation Notes. Revenue Anticipation Notes are issued in
expectation of receipt of other kinds of revenue, such as federal revenues
available under the Federal Revenue Sharing Programs.
3. 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.
4. Construction Loan Notes. Construction Loan Notes are sold to provide
construction financing. Permanent financing, the proceeds of which are applied
to the payment of Construction Loan Notes, is sometimes provided by a commitment
by the Government National Mortgage Association ("GNMA") to purchase the loan
notes, accompanied by a commitment by the Federal Housing Administration to
insure mortgage advances thereunder. In other instances, permanent financing is
provided by commitments of banks to purchase the loan notes.
Issues of Tax-Exempt Commercial Paper typically represent short-term,
unsecured, negotiable promissory notes. These obligations are issued by agencies
of state and local governments to finance seasonal working capital needs of
municipalities or to provide interim construction financing and are paid from
general revenues of municipalities or are refinanced with long-term debt. In
most cases, Tax-Exempt Commercial Paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions.
When-Issued Securities. The Fund may purchase tax-exempt securities on a
when-issued basis, in which case delivery and payment normally take place 15 to
45 days after the date of the commitment to purchase. The payment obligation and
the interest rate that will be received on the tax-exempt securities are each
fixed at the time the buyer enters into the commitment. Although the Fund will
only purchase a tax-exempt security on a when-issued basis with the intention of
actually acquiring the securities, the Fund may sell these securities before the
settlement date if it is deemed advisable.
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Tax-exempt securities purchased on a when-issued basis and the securities
held in the Fund are subject to changes in market value based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates (which will generally result in
similar changes in value, i.e., both experiencing appreciation when interest
rates decline and depreciation when interest rates rise). Therefore, to the
extent the 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
tax-exempt 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 so purchased.
A separate account consisting of cash or liquid high-grade debt securities
equal to the amount of the when-issued commitments will be established with the
Custodian and marked to market daily, with additional cash or liquid debt
securities added when necessary. When the time comes to pay for when-issued
securities, the Fund will meet its obligations from then available cash, sale of
securities held in the separate account, sale of other securities or, although
it would not normally expect to do so, sale of the when-issued securities
themselves (which may have a value greater or lesser than the Fund's payment
obligations). Sale of securities to meet such obligations carries with it a
potential for the realization of capital gain, which is not exempt from taxes.
Floating Rate and Variable Rate Securities. The Fund may purchase floating rate
and variable rate securities, including participation interests therein.
Investments in floating or variable rate securities normally will involve
industrial development or revenue bonds which provide that the rate of interest
is set as a specific percentage of a designated base rate, such as rates on
Treasury Bonds or Bills or the prime rate at a major commercial bank, and that
the Fund can demand payment of the obligations on short notice at par plus
accrued interest, which amount may be more or less than the amount the Fund paid
for them. 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, as the case may be, must be equivalent to the standards set
forth with respect to taxable investments on page 5.
Stand-By Commitments. Under a stand-by commitment, the Fund obligates a dealer
to repurchase at the Fund's option specified securities at a specified price.
The exercise of a stand-by commitment is subject to the ability of the dealer to
make payment on demand. The Fund would acquire stand-by commitments solely to
facilitate portfolio liquidity and not for trading purposes. Prior to investing
in stand-by commitments the Fund, if it deems necessary based upon the advice of
counsel, will apply to the Securities and Exchange Commission for an exemptive
order relating to such commitments and the valuation thereof. There can be no
assurance that the Securities and Exchange Commission will issue such an
authorization.
The price which the Fund would pay for tax-exempt securities with stand-by
commitments generally would be higher than the price which otherwise would be
paid for the tax-exempt securities alone. The Fund will only purchase
obligations with stand-by commitments from sellers the Manager deems
creditworthy.
Stand-by commitments with respect to portfolio securities of the Fund with
maturities of less than 60 days which are separate from the underlying portfolio
securities are not assigned a value. The cost of any such stand-by commitment is
carried as an unrealized loss from the time of purchase until it is exercised or
expires. Stand-by commitments with respect to portfolio securities of the Fund
with maturities of 60 days or more which are separate from the underlying
portfolio securities and the underlying portfolio securities are valued at fair
value as determined in accordance with procedures established by the Board of
Trustees. The Board of Trustees would, in connection with the determination of
the value of such a stand-by commitment, consider among other factors the
creditworthiness of the writer of the stand-by commitment, the duration of the
stand-by commitment, the dates on which or the periods during which the stand-by
commitment may be exercised and the applicable rules and regulations of the
Securities and Exchange Commission.
Portfolio Turnover. Portfolio transactions will be undertaken principally to
accomplish the Fund's objective in relation to anticipated movements in the
general level of interest rates but the 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 Manager believes to be a temporary disparity in the
normal yield relationship between the two securities.
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The Fund's investment policies may lead to frequent changes in investments,
particularly in periods of rapidly fluctuating interest rates. A change in
securities held by the Fund is known as "portfolio turnover" and may involve the
payment by the Fund of dealer spreads or underwriting commissions, and other
transaction costs, on the sale of securities, as well as on the reinvestment of
the proceeds in other securities. Portfolio turnover rate for a fiscal year is
the ratio of the lesser of purchases or sales of portfolio securities to the
monthly average of the value of portfolio securities. Securities whose maturity
or expiration date at the time of acquisition were one year or less are excluded
from the calculation. The Fund's portfolio turnover rates for the fiscal years
ended September 30, 1994 and 1995, respectively, were 6.17% and 11.82%,
respectively. The Fund's portfolio turnover rate will not be a limiting factor
when the Fund deems it desirable to sell or purchase securities.
Taxable Investments. Under normal market conditions, the 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 Florida Tax-Exempt Securities the interest on
which is exempt from federal tax. However in abnormal market conditions, if, in
the judgment of the Manager, Florida Tax-Exempt Securities satisfying the Fund's
investment objectives may not be purchased, the Fund may, for defensive purposes
invest in securities other than Florida Tax-Exempt Securities including those
described under "Florida Tax-Exempt Securities" above that would otherwise meet
the Fund's objectives.
Also, in abnormal market conditions, the 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
tax-exempt securities of proceeds of sales of shares or sales of portfolio
securities, in order to avoid the necessity of liquidating portfolio investments
to meet redemption 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 AA-, or better, by Standard & Poor's or Aa3, or
better, by Moody's); prime commercial paper (rated A-1+/A-1 by Standard & Poor's
or P-1 by Moody's); and certificates of deposit of the 100 largest domestic
banks in terms of assets which are subject to regulatory supervision by the U.S.
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 U.S. 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.
INVESTMENT LIMITATIONS
Under the Fund's fundamental policies, which cannot be changed except by
vote of a majority of the outstanding voting securities of the Fund, the Fund
may not:
- - Borrow money, except from banks for temporary purposes (such as meeting
redemption requests or for extraordinary or emergency purposes but not for
the purchase of portfolio securities) 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). 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;
- - 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 tax-exempt securities and securities of the U.S. Government, its
agencies and instrumentalities are not considered an industry for purposes of
this limitation;
- - As to 50% of the value of its total assets, purchase securities of any issuer
if immediately thereafter more than 5% of total assets at market value would
be invested in the securities of any issuer (except that this limitation does
not apply to obligations issued or guaranteed as to principal and interest by
the U.S.
Government or its agencies or instrumentalities);
- - Invest in securities issued by other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization;
- - Purchase or hold any real estate, 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;
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- - Purchase or hold the securities of any issuer, if to its knowledge, trustees
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"; underwrite the securities of other issuers, except
that the Fund may be deemed an underwriter in connection with the purchase
and sale of portfolio securities;
- - Purchase or sell commodities or commodity contracts including futures
contracts; or
- - Make loans, except to the extent that the purchase of notes, bonds or other
evidences of indebtedness or deposits with banks may be considered loans.
As a matter of policy, with respect to 75% of the Fund's assets, no revenue
bond will be purchased by the Fund if as a result of such purchase more than 5%
of the Fund's assets would be invested in the securities of a single issuer.
This policy is not fundamental and may be changed by the Trustees without
shareholder approval.
Under the 1940 Act, a "vote of a majority of the outstanding voting
securities" of the Trust or of a particular series of the Trust, such as the
Fund, means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Trust or of a series or (2) 67% or more of the shares
of the Trust or of a series present at a shareholders' meeting if more than 50%
of the outstanding shares of the Trust or of a series are represented at the
meeting in person or by proxy.
TRUSTEES AND OFFICERS
Trustees and officers of the Trust, together with information as to their
principal business occupations during the past five years are shown below. Each
Trustee who is an "interested person" of the Trust, as defined in the 1940 Act,
is indicated by an asterisk. Unless otherwise indicated, their addresses are 100
Park Avenue, New York, NY 10017.
WILLIAM C. MORRIS* Trustee, Chairman of the Board, Chief Executive Officer
(57) and Chairman of the Executive Committee
Managing Director, Chairman and President, J. & W.
Seligman & Co. Incorporated, investment managers and
advisors; and Seligman Advisors, Inc., advisors;
Chairman and Chief Executive Officer, the Seligman
Group of Investment Companies; Chairman, Seligman
Financial Services, Inc., distributor; Seligman
Holdings, Inc., holding company; Seligman Services,
Inc., broker/dealer; and Carbo Ceramics Inc., ceramic
proppants for oil and gas industry; Director or
Trustee, Seligman Data Corp., shareholder service
agent; Daniel Industries, Inc., manufacturer of oil and
gas metering equipment; Kerr-McGee Corporation,
diversified energy company; and Sarah Lawrence College;
and a Member of the Board of Governors of the
Investment Company Institute; formerly, Chairman, J. &
W. Seligman Trust Company, trust company and Seligman
Securities, Inc., broker/dealer.
BRIAN T. ZINO* Trustee, President and Member of the Executive
(43) Committee
Director and Managing Director (formerly, Chief
Administrative and Financial Officer), J. & W. Seligman
& Co. Incorporated, investment managers and advisors;
and Seligman Advisors, Inc., advisors; Director or
Trustee, the Seligman Group of Investment Companies;
President, the Seligman Group of Investment Companies,
except Seligman Quality Municipal Fund, Inc. and
Seligman Select Municipal Fund, Inc.; Chairman,
Seligman Data Corp., shareholder service agent;
Director, Seligman Financial Services, Inc.,
distributor; Seligman Services, Inc., broker/dealer;
Senior Vice President, Seligman Henderson Co.,
advisors; formerly, Director and Secretary, Chuo Trust
- JWS Advisors, Inc., advisors; and Director, J. & W.
Seligman Trust Company, trust company and Seligman
Securities, Inc., broker/dealer.
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RONALD T. SCHROEDER* Trustee and Member of the Executive Committee
(48)
Director, Managing Director and Chief Investment
Officer, Institutional, J. & W. Seligman & Co.
Incorporated, investment managers and advisors; and
Seligman Advisors, Inc., advisors; Director or Trustee,
the Seligman Group of Investment Companies; Director,
Seligman Holdings, Inc., holding company; Seligman
Financial Services, Inc., distributor; Seligman
Henderson Co., advisors; and Seligman Services, Inc.,
broker/dealer; formerly, President, the Seligman Group
of Investment Companies, except of Seligman Quality
Municipal Fund, Inc. and Seligman Select Municipal
Fund, Inc.; and Director, J. & W. Seligman Trust
Company, trust company; Seligman Data Corp.,
shareholder service agent; and Seligman Securities,
Inc., broker/dealer.
FRED E. BROWN* Trustee
(82)
Director and Consultant, J. & W. Seligman & Co.
Incorporated, investment managers and advisors;
Director or Trustee, the Seligman Group of Investment
Companies; Seligman Financial Services, Inc.,
distributor; Seligman Services, Inc., broker/dealer;
Trudeau Institute, Inc., non-profit biomedical research
organization; Lake Placid Center for the Arts, cultural
organization; and Lake Placid Education Foundation,
education foundation; formerly, Director, J. & W.
Seligman Trust Company, trust company; and Seligman
Securities, Inc., broker/dealer.
JOHN R. GALVIN Trustee
(66)
Dean, Fletcher School of Law and Diplomacy at Tufts
University; Director or Trustee, the Seligman Group of
Investment Companies; Chairman of the American Council
on Germany; a Governor of the Center for Creative
Leadership; Director of USLIFE, insurance; National
Committee on U.S.-China Relations, National Defense
University and the Institute for Defense Analysis; and
Consultant of Thomson CSF, electronics. Formerly,
Ambassador, U.S. State Department; 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.
Tufts University, Packard Avenue, Medford, MA 02155
ALICE S. ILCHMAN Trustee
(60)
President, Sarah Lawrence College; Director or Trustee,
the Seligman Group of Investment Companies; Chairman,
The Rockefeller Foundation, charitable foundation; and
Director, NYNEX, telephone company; and the Committee
for Economic Development; formerly, Trustee, The Markle
Foundation, philanthropic organization; and Director,
International Research and Exchange Board, intellectual
exchanges.
Sarah Lawrence College, Bronxville, New York 10708
-7-
<PAGE>
FRANK A. McPHERSON Trustee
(62)
Chairman of the Board and Chief Executive Officer,
Kerr-McGee Corporation, energy and chemicals; Director
or Trustee, the Seligman Group of Investment Companies;
Director of Kimberly-Clark Corporation, consumer
products, Bank of Oklahoma Holding Company, American
Petroleum Institute, Oklahoma City Chamber of Commerce,
Baptist Medical Center, Oklahoma Chapter of the Nature
Conservancy, Oklahoma Medical Research Foundation and
United Way Advisory Board; Chairman of Oklahoma City
Public Schools Foundation; and Member of the Business
Roundtable and National Petroleum Council.
123 Robert S. Kerr Avenue, Oklahoma City, OK 73102
JOHN E. MEROW* Trustee
(66)
Chairman and Senior Partner, Sullivan & Cromwell, law
firm; Director or Trustee, the Seligman Group of
Investment Companies; The Municipal Art Society of New
York; Commonwealth Aluminum Corporation, the U.S.
Council for International Business and the U.S.-New
Zealand Council; Chairman, American Australian
Association; Member of the American Law Institute and
Council on Foreign Relations; Member of the Board of
Governors of Foreign Policy Association and New York
Hospital.
125 Broad Street, New York, NY 10004
BETSY S. MICHEL Trustee
(53)
Attorney; Director or Trustee, the Seligman Group of
Investment Companies and National Association of
Independent Schools (Boston), education; Chairman of
the Board of Trustees of St. George's School (Newport,
RI).
St. Bernard's Road, Gladstone, NJ 07934
JAMES C. PITNEY Trustee
(69)
Partner, Pitney, Hardin, Kipp & Szuch, law firm;
Director or Trustee, the Seligman Group of Investment
Companies and Public Service Enterprise Group, public
utility.
Park Avenue at Morris County, P.O. Box 1945,
Morristown, NJ 07962-1945
JAMES Q. RIORDAN Trustee
(68)
Director, Various Corporations; Director or Trustee,
the Seligman Group of Investment Companies; The
Brooklyn Museum; The Brooklyn Union Gas Company; The
Committee for Economic Development; Dow Jones & Co.
Inc. and Public Broadcasting Service; formerly,
Co-Chairman of the Policy Council of the Tax
Foundation; Director and Vice Chairman, Mobil
Corporation; Director and President, Bekaert
Corporation; and Director, Tesoro Petroleum Companies,
Inc.
675 Third Avenue, Suite 3004, New York, NY 10017
ROBERT L. SHAFER Trustee
(63)
Director, Various Corporations; Director or Trustee,
the Seligman Group of Investment Companies; and USLIFE
Corporation, life insurance.
235 East 42nd Street, New York, NY 10017
-8-
<PAGE>
JAMES N. WHITSON Trustee
(60)
Executive Vice President, Chief Operating Officer and
Director, Sammons Enterprises, Inc., Director or
Trustee, the Seligman Group of Investment Companies,
Red Man Pipe and Supply Company and C-SPAN. 300
Crescent Court, Suite 700, Dallas, TX 75202
THOMAS G. MOLES Vice President and Senior Portfolio Manager
(53)
Director, Managing Director, (formerly, Vice President
and Portfolio Manager), J. & W. Seligman & Co.
Incorporated, investment managers and advisors; Vice
President and Portfolio Manager, three other open-end
investment companies in the Seligman Family of Mutual
Funds; President and Portfolio Manager, Seligman
Quality Municipal Fund, Inc. and Seligman Select
Municipal Fund, Inc., closed-end investment companies;
Director, Seligman Financial Services, Inc.,
distributor; Seligman Services, Inc., broker/dealer;
and J. & W. Seligman Trust Company, trust company;
formerly, Director, Seligman Securities, Inc.,
broker/dealer.
LAWRENCE P. VOGEL Vice President
(39)
Senior Vice President, Finance, J. & W. Seligman & Co.
Incorporated, investment managers and advisors;
Seligman Financial Services, Inc., distributor; and
Seligman Advisors, Inc., advisors; Vice President
(formerly, Treasurer), the Seligman Group of Investment
Companies; Senior Vice President, Finance (formerly,
Treasurer), Seligman Data Corp., shareholder service
agent; Treasurer, Seligman Holdings, Inc., holding
company; and Seligman Henderson Co., advisors;
formerly, Senior Vice President, Seligman Securities,
Inc., broker/dealer; Vice President, Finance, J. & W.
Seligman Trust Company; and Senior Audit Manager, Price
Waterhouse, independent accountants.
FRANK J. NASTA Secretary
(31)
Senior Vice President, Law and Regulation and
Secretary, J. & W. Seligman & Co. Incorporated,
investment managers and advisors; Secretary, the
Seligman Group of Investment Companies, Seligman
Financial Services, Inc., distributor; Seligman
Henderson Co., advisors; Seligman Services, Inc.,
broker/dealer; Chuo Trust - JWS Advisors, Inc.,
advisors; and Seligman Data Corp., shareholder service
agent; formerly, attorney, Seward & Kissel.
THOMAS G. ROSE Treasurer
(38)
Treasurer, the Seligman Group of Investment Companies
and Seligman Data Corp., shareholder service agent;
formerly, Treasurer, American Investors Advisors, Inc.
and the American Investors Family of Funds.
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 Fund for
which no market valuation is available and to elect or appoint officers of the
Fund to serve until the next meeting of the Board.
-9-
<PAGE>
<TABLE>
<CAPTION>
Compensation Table
Pension or Total Compensation
Aggregate Retirement Benefits from Registrant and
Name and Compensation Accrued as part of Fund Complex Paid
Position with Registrant from Registrant (1) Fund Expenses to Trustees (2)
------------------------ ------------------- ------------- ---------------
<S> <C> <C> <C>
William C. Morris, Trustee and Chairman N/A N/A N/A
Brian T. Zino, Trustee and President N/A N/A N/A
Ronald T. Schroeder, Trustee N/A N/A N/A
Fred E. Brown, Trustee N/A N/A N/A
John R. Galvin, Trustee $ 1,795.93 N/A $41,252.75
Alice S. Ilchman, Trustee 2,948.20 N/A 68,000.00
Frank A. McPherson, Trustee 1,795.93 N/A 41,252.75
John E. Merow, Trustee 2,876.76(d) N/A 66,000.00(d)
Betsy S. Michel, Trustee 2,841.04 N/A 67,000.00
Douglas R. Nichols, Jr., Trustee* 1,080.83 N/A 24,747.25
James C. Pitney, Trustee 2,948.20 N/A 68,000.00
James Q. Riordan, Trustee 2,948.20 N/A 70,000.00
Herman J. Schmidt, Trustee* 1,080.83 N/A 24,747.25
Robert L. Shafer, Trustee 2,948.20 N/A 70,000.00
James N. Whitson, Trustee 2,876.76(d) N/A 68,000.00(d)
</TABLE>
(1) Based on remuneration received by Trustees for the Trust's four Series for
the year ended December 31, 1995.
(2) As defined in the Fund's Prospectus, the Seligman Group of Investment
Companies consists of seventeen investment companies.
* Retired May 18, 1995.
(d) Deferred.
The Trust has a compensation arrangement under which outside trustees may
elect to defer receiving their fees. Under this arrangement, interest is accrued
on the deferred balances. The annual cost of such interest is included in the
trustees' fees and expenses, and the accumulated balance thereof is included in
other liabilities in the Fund's financial statements.
Trustees and officers of the Trust are also trustees, directors and officers
of some or all of the other investment companies in the Seligman Group.
Trustees and officers of the Fund as a group owned less than 1% of the Class
A shares of the Fund at January 12, 1996. No Trustees or officers owned Class D
shares at that date.
MANAGEMENT AND EXPENSES
Under the Management Agreement, dated June 21, 1990, subject to the control
of the Trustees, the Manager manages the investment of the assets of the Fund,
including making purchases and sales of portfolio securities consistent with the
Fund's investment objectives and policies, and administers its business and
other affairs. The Manager provides the Fund with such office space,
administrative and other services and executive and other personnel as are
necessary for Fund operations. The Manager pays all of the compensation of
Trustees of the Trust who are employees or consultants of the Manager and the
officers and employees of the Fund. The Manager also provides senior management
for Seligman Data Corp., the Fund's shareholder service agent.
-10-
<PAGE>
The Manager is entitled to receive a management fee from the Fund,
calculated daily and payable monthly, equal to 0.50% of the Fund's average daily
net assets on an annual basis. For the fiscal years ended September 30, 1993,
1994 and 1995, the Manager in its discretion, waived all or a portion of its fee
from the Fund, and in some cases also elected to reimburse certain expenses of
the Fund. For the fiscal year ended September 30, 1995, the management fee paid
amounted to $94,276 or .19% of the Fund's average net assets.
The Fund pays all its expenses other than those assumed by the Manager
including brokerage commissions, if any, fees and expenses of independent
attorneys and auditors, taxes and governmental fees including fees and expenses
of qualifying the Fund and its 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
existing shareholders, expenses of printing and filing reports and other
documents filed with governmental agencies, expenses of shareholders' meetings,
expenses of corporate data processing and related services, shareholder
recordkeeping and shareholder account services fees and disbursements of
transfer agents and custodians, expenses of disbursing dividends and
distributions, fees and expenses of Trustees of the Fund not employed by or
serving as a Trustee of the Manager or its affiliates, insurance premiums and
extraordinary expenses such as litigation expenses. The Trust's expenses are
allocated between each series of the Trust in a manner determined by the
Trustees to be fair and equitable.
The Manager has undertaken to certain state securities administrators, so
long as required, to reimburse the Fund for each year in the amount by which
total expenses (including the management fee but excluding interest, taxes,
brokerage commissions, distribution fees and extraordinary expenses), exceed 2
1/2% of the first $30 million of average net assets, 2% of the next $70 million
of average net assets and 1 1/2% thereafter.
On December 29, 1988, a majority of the outstanding voting securities of the
Manager was purchased by Mr. William C. Morris and a simultaneous
recapitalization of the Manager occurred.
The Fund's Management Agreement was approved by the Trustees at a meeting
held on June 21, 1990 and was approved by the Florida shareholders at a Special
Meeting of the Fund held on December 7, 1990. The Agreement will continue in
effect from year to year thereafter if such continuance is approved in the
manner required by the 1940 Act (i.e. (1) by a vote of a majority of the
Trustees or of the outstanding voting securities of the Fund and (2) by a vote
of a majority of the Trustees who are not parties to the Management Agreement or
interested persons of any such party) and if the Manager shall not have notified
the Fund at least 60 days prior to the anniversary date of the previous
continuance that it does not desire such continuance. The Agreement may be
terminated by the Fund, without penalty, on 60 days' written notice to the
Manager and will terminate automatically in the event of its assignment. The
Fund has agreed to change its name upon termination of its Management Agreement
if continued use of the name would cause confusion in the context of the
Manager's business.
The Manager is a successor firm to an investment banking business founded in
1864 which has thereafter provided investment services to individuals, families,
institutions and corporations. See Appendix B for further history of the
Manager.
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
As indicated in the Prospectus, an Administration, Shareholder Services and
Distribution Plan (the "Plan") for the Fund will be in effect from the date
hereof under Section 12(b) of the Act and Rule 12b-1 thereunder.
The Plan was approved on June 21, 1990 by the Trustees, including a majority
of the Trustees who are not "interested persons" (as defined in the Act) of the
Fund and who have no direct or indirect financial interest in the operation of
the Plan or in any Agreement related to the Plan (the "Qualified Trustees") and
by the shareholders of the Fund on December 7, 1990. Amendments to the Plan were
approved in respect of the Class D shares on November 18, 1993 by the Trustees,
including a majority of the Qualified Trustees and became effective with respect
to the Class D shares on February 1, 1994. The 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 Trustees of the Fund and the Qualified Trustees,
cast in person at a meeting called for the purpose of voting on such approval.
The Plan may not be amended to increase materially the amounts payable to
Service Organizations without the approval of a majority of the outstanding
voting securities of the Fund and no material amendment to the Plan may be made
except by a majority of both the Trustees and the Qualified Trustees.
-11-
<PAGE>
The Plan requires that the Treasurer of the Fund shall provide to the
Trustees, and the Trustees shall review, at least quarterly, a written report of
the amounts expended (and purposes therefor) under the Plan. Rule 12b-1 also
requires that the selection and nomination of Trustees who are not "interested
persons" of the Trust be made by such disinterested Trustees.
PORTFOLIO TRANSACTIONS
No brokerage commissions were paid by the Fund during the fiscal years ended
September 30, 1993, 1994 or 1995. When the Fund or two or more of the investment
companies in the Seligman Group or other investment advisory clients of the
Manager desire to buy or sell the same security at the same time, the securities
purchased or sold are allocated by the Manager 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 already obtainable
or saleable.
PURCHASE AND REDEMPTION OF FUND SHARES
The Fund issues two classes of shares: Class A shares may be purchased at a
price equal to the next determined net asset value per share, plus a sales load.
Class D shares may be purchased at a price equal to the next determined net
asset value without an initial sales load, but a CDSL may be charged on certain
redemptions within one year of purchase. See "Alternative Distribution System,"
"Purchase Of Shares," and "Redemption Of Shares" in the Fund's Prospectus.
Specimen Price Make-Up
Under the current distribution arrangements between the Trust and the
Distributor, Class A shares are sold at a maximum sales load of 4.75% and Class
D shares are sold at net asset value.* Using the Fund's net asset value at
September 30, 1995, the maximum offering price of the Fund's shares is as
follows:
Class A
Net asset value per share...................................... $7.71
Maximum sales load (4.75% of offering price)................... .38
-----
Maximum offering price per share............................... $8.09
=====
Class D
Net asset value and maximum offering price per share*.......... $7.72
=====
- --------------
* Class D shares are subject to a CDSL of 1% on certain redemptions within
one year of purchase. See "Redemption Of Shares" in the Prospectus.
Class A Shares - Reduced Sales Loads
Reductions Available. Shares of any Seligman Mutual Fund sold with a sales load
in a continuous offering will be eligible for the following reductions:
Volume Discounts are provided if the total amount being invested in Class A
shares of the Fund alone, the other series of the Trust or in any combination of
shares of the other mutual funds in the Seligman Group which are sold with a
sales load, reaches levels indicated in the sales load schedule set forth in the
Prospectuses.
The Right of Accumulation allows an investor to combine the amount being
invested in Class A shares of the Fund, the other series of the Trust, Seligman
Capital Fund, Seligman Common Stock Fund, Seligman Communications and
Information Fund, Seligman Frontier Fund, Seligman Growth Fund, Seligman
Henderson Global Fund Series, Seligman High Income Fund Series, Seligman Income
Fund, Seligman New Jersey Tax-Exempt Fund, Seligman Pennsylvania Tax-Exempt Fund
-12-
<PAGE>
Series or Seligman Tax-Exempt Fund Series that were sold with a sales load with
the total net asset value of shares of those Seligman Mutual Funds already owned
that were sold with a sales load and the total net asset value of shares of
Seligman Cash Management Fund which were acquired through an exchange of shares
of another mutual fund in the Seligman Group on which there was a sales load at
the time of purchase to determine reduced sales loads in accordance with the
schedule in the Prospectuses. The value of the shares owned, including the value
of shares of Seligman Cash Management Fund acquired in an exchange of shares of
another mutual fund in the Seligman Group on which there is a sales load at the
time of purchase will be taken into account in orders placed through a dealer,
however, only if Seligman Financial Services, Inc. ("SFSI") is notified by an
investor or dealer of the amount owned at the time of purchase is made and is
furnished sufficient information to permit confirmation.
A Letter of Intent allows an investor to purchase Class A shares of the
Fund over a 13-month period at reduced sales loads in accordance with the
schedule in the Prospectuses, based on the total amount of Class A shares that
the letter states the investor intends to purchase plus the total net asset
value of shares that were sold with a sales load of the other series of the
Trust, Seligman Capital Fund, Seligman Common Stock Fund, Seligman
Communications and Information Fund, Seligman Frontier Fund, Seligman Growth
Fund, Seligman Henderson Global Fund Series, Seligman High Income Fund Series,
Seligman Income Fund, Seligman New Jersey Tax-Exempt Fund, Seligman Pennsylvania
Tax-Exempt Fund Series and Seligman Tax-Exempt Fund Series 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 mutual fund in the Seligman
Group on which there was a sales load at the time of purchase. Reduced sales
loads 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. For more information
concerning the terms of the letter of intent, see "Terms and Conditions - Letter
of Intent" accompanying the Account Application in the Fund's Prospectus.
Persons Entitled to Reductions. Reductions in sales loads apply to purchases of
Class A shares of the Fund 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,
tax-exempt organizations under Section 501 (c)(3) or (13), 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 the Fund, to receive
in bulk and to distribute to each participant on a timely basis the Fund
prospectuses, 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 loads in the Prospectus
applies to sales to "eligible employee benefit plans" (as defined in the
Prospectus), except that the Fund may sell shares at net asset value to
"eligible employee benefit plans," (i) which have at least $1 million invested
in the Seligman Mutual Funds or (ii) of employers who have at least 50 eligible
employees to whom such plan is made available or, regardless of the number of
employees, if such plan is established or maintained by any dealer which has a
sales agreement with SFSI. Such sales must be made in connection with a payroll
deduction system of plan funding or other systems acceptable to Seligman Data
Corp., the Trust's shareholder service agent. 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 Copr. by methods which it accepts.
Additional information about "eligible employee benefit plans" is available from
investment dealers or SFSI.
Further Types of Reductions. Class A shares may be issued without a sales load
in connection with the acquisition of cash and securities owned by other
investment companies and personal holding companies to financial institution
trust departments, to registered investment advisers exercising investment
discretionary authority with respect to the purchase of Fund shares, or pursuant
to sponsored arrangements with organizations which make recommendations to, or
permit group solicitation of, its employees, members or participants in
-13-
<PAGE>
connection with the purchase of shares of the Fund, to separate accounts
established and maintained by an insurance company which are exempt from
registration under Section 3(c)(11) of the 1940 Act, to registered
representatives and employees (and their spouses and minor children) of any
dealer that has a sales agreement with SFSI, to shareholders of mutual funds
with investment objectives similar to the Fund's who purchase shares with
redemption proceeds of such funds and to certain unit investment trusts as
described in the Fund's Prospectus.
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.
Payment in Securities. In addition to cash, the Fund may accept securities in
payment for Fund shares sold at the applicable public offering price. Generally,
the Fund will only consider accepting securities (1) to increase its holdings in
a portfolio security of the Fund, or (2) if the Manager determines that the
offered securities are a suitable investment in a sufficient amount for
efficient management. Although no minimum has been established, it is expected
that the Fund would not accept securities with a value of less than $100,000 per
issue in payment for shares. The Fund may reject in whole or in part offers to
pay for shares with securities, may require partial payment in cash for
applicable sales loads, and may discontinue accepting securities as payment for
shares at any time without notice. The Fund has no present intention of
accepting securities in payment for shares.
More About Redemptions. The procedures for redemption of Fund shares under
ordinary circumstances are set forth in the Prospectus. Payment may be made in
securities, subject to the review of some state securities commissions, or
postponed, if the orderly liquidation of portfolio securities is prevented by
the closing of, or restricted trading on, the New York Stock Exchange during
periods of emergency, or during such other periods as ordered by the Securities
and Exchange Commission. If payment were to be made in securities shareholders
receiving securities could incur certain transaction costs. The Fund will not
accept orders from securities dealers for the repurchase of shares.
DISTRIBUTION SERVICES
SFSI, an affiliate of the Manager, acts as general distributor of the shares
of the Trust and of the other mutual funds in the Seligman Group. As general
distributor of the Trust's shares of beneficial interest, SFSI allows
concessions to all dealers up to 4.25% on purchases of Class A shares to which
the 4.75% sales load applies. SFSI receives the balance of sales loads of any
CDSL paid on Class D shares. The Trust and SFSI are parties to a Distributing
Agreement dated January 1, 1993.
Total sales loads paid by shareholders of the Fund for fiscal years ended
September 30, 1995, 1994 and 1993, respectively, amounted to $106,160, $225,122,
and $496,885, respectively, of which $93,763, $198,371 and $438,708,
respectively, were paid as commissions to dealers. SFSI receives the balance of
sales loads and any CDSL, if applicable, paid by investors. For the years ended
September 30, 1995 and September 30, 1994 SFSI retained CDSL charges of $189 and
$0, respectively.
Effective April 1, 1995, Seligman Services, Inc. ("SSI"), an affiliate of
the Manager, became eligible to receive commissions from certain sales of Fund
shares, as well as distribution and service fees pursuant to the Plan. For the
period ended September 30, 1995, SSI received commissions of $213 from sales of
Fund shares. SSI also received distribution and service fees of $2,225, pursuant
to the Plan.
Class A shares may be sold at net asset value to present and retired
trustees, directors, officers, employees (and family members, as defined in the
Prospectus) of the Fund, the other investment companies in the Seligman Group,
the Manager and other companies affiliated with the Manager. 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 the
Manager or any affiliate. These sales may be made for investment purposes only,
and shares may be resold only to the Fund.
TAXES
Under the Tax Reform Act of 1986, as amended, each Series of the Trust will
be 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 Series.
-14-
<PAGE>
As indicated in the Prospectus, the Fund intends to qualify and elect to be
treated as a regulated investment company under the Internal Revenue Code and
thus to be relieved of federal income tax on amounts distributed to
shareholders; provided that it distributes at least 90% of its net investment
income and net short-term capital gains, if any.
Qualification as a regulated investment company under the Internal Revenue
Code requires among other things, that (a) at least 90% of the annual gross
income of the 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, and forward contracts) derived with respect to its
business of investing in such stocks, securities or currencies; (b) the Fund
derive less than 30% of its gross annual income from gains from the sale or
other disposition of stock, securities and certain other assets held for less
than three months; and (c) the Fund diversifies 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, United States 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 U.S. Government securities).
VALUATION
The net asset value per share of each class of the Fund is determined as of
the close of the New York Stock Exchange ("NYSE") (normally, 4:00 p.m., New York
City time) on each day that the NYSE is open. The Fund and the NYSE are
currently closed on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. The Fund will
also determine net asset value for each class on each day in which there is a
sufficient degree of trading in the Fund's portfolio securities that the net
asset value of Fund shares might be materially affected. Net asset value per
share for each class is computed by dividing such class' 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 Manager's fee, are accrued daily and taken into account for the
purpose of determining its net asset value. The net asset value of Class D
shares will generally be lower than the net asset value of Class A shares as a
result of the higher distribution fee with respect to Class D 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.
Florida tax-exempt securities will be valued on the basis of quotations
provided by an independent pricing service, approved by the Trustees, 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, in
accordance with fair value as determined in accordance with procedures approved
by the Trustees. Short-term notes having remaining maturities of 60 days or less
are generally valued at amortized cost.
Generally, trading in certain securities such as tax-exempt securities,
corporate bonds, U.S. 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
the Fund shares are computed as of such times. Occasionally, events affecting
the value of such securities may occur between such times and the close of the
NYSE which will not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur during
such period, then these securities and other assets will be valued at their fair
market value as determined in good faith by the Trustees.
PERFORMANCE INFORMATION
The annualized yield for the 30-day period ended September 30, 1995 for the
Fund's Class A shares was 4.04%. The annualized yield was computed by dividing
the 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, 1995 which was
the last day of the period. The average number of Class A shares of the Fund was
6,380,663 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
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and subtracting from that amount the total of all recurring expenses incurred
during the period (which includes fees charged pursuant to the Fund's 12b-1
plan). The 30-day yield was then annualized on a bond-equivalent basis assuming
semi-annual reinvestment and compounding of net investment income, as described
in the Prospectus.
The tax equivalent annualized yield for the 30-day period ended September
30, 1995 for the Fund's Class A shares was 6.69%. 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 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).
The average annual total return for the Fund's Class A shares for the
one-year period ended September 30, 1995 was 5.55%; for the five-year period
ended September 30, 1995 was 7.69%; and since inception through the period ended
September 30, 1995 was 6.93%. These returns were computed by assuming a
hypothetical initial payment of $1,000. From this $1,000, the maximum sales load
of $47.50 (4.75% of public offering price) was deducted. It was then assumed
that all of the dividends and distributions paid by the Fund over the relevant
time period were reinvested. It was then assumed that at the end of each of the
above periods, the entire amount was redeemed. The average annual total return
was then calculated by calculating 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).
The annualized yield for the 30-day period ended September 30, 1995 for the
Fund's Class D shares was 3.51%. The annualized yield was computed as for Class
A shares by dividing a Series' net investment income per share earned during
this 30-day period by the maximum offering price per share (i.e., the net asset
value) on September 30, 1995, which was the last day of this period. The average
number of Class D shares was 78,079 which was the average daily number of shares
outstanding during the 30-day period that were eligible to receive dividends.
The tax equivalent annualized yield for the 30-day period ended September
30, 1995 for each the Fund's Class D shares was 5.81%. The tax equivalent
annualized yield was computed as discussed above for Class A shares.
The average annual total return for the Fund's Class D shares for the
one-year period ended September 30, 1995 was 9.07% and since inception through
the period ended September 30, 1995 was 1.66%. These returns were computed by
assuming a hypothetical initial payment of $1,000 in Class D shares and that all
of the dividends and distributions by the Fund's Class D shares over the
relevant time periods were reinvested. It was then assumed that at the end of
each period, the entire amount was redeemed, subtracting the 1% CDSL, if
applicable.
The following tables illustrate the total return on a $1,000 investment in
Class A and Class D shares of the Fund from the commencement of their operations
through September 30, 1995, assuming investment of all dividends and capital
gain distributions.
CLASS A SHARES
Value of Capital Value Total Value
Period Initial Gain of of Total
Ended 1 Investment 2 Distributions Dividends Investment 2 Return 1,3
- ------- ------------ ------------- --------- ----------- --------
9/30/87 $ 803 $ -- $ 47 $ 850
9/30/88 895 -- 123 1,018
9/30/89 932 -- 201 1,133
9/30/90 920 -- 272 1,192
9/30/91 983 -- 369 1,352
9/30/92 1,008 -- 469 1,477
9/30/93 1,093 3 606 1,702
9/30/94 979 26 629 1,634
9/30/95 1,028 28 755 1,811 81.14%
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CLASS D SHARES
Value of Capital Value Total Value
Period Initial Gain of of Total
Ended 1 Investment 2 Distributions Dividends Investment 2 Return 1,3
- ------- ------------ ------------- --------- ----------- --------
9/30/94 $ 897 $ -- $ 28 $ 925
9/30/95 953 -- 75 1,028 2.77%
- -----------------
1 From commencement of operations of Class A shares on November 17, 1986; and
from commencement of operations of Class D shares on February 1, 1994.
2 The "Value of Initial Investment" as of the dates indicated reflects the
effect of the maximum sales load, 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" assumes investment of all dividends and capital
gain distributions.
3 Total return for the Fund is calculated by assuming a hypothetical initial
investment of $1,000 at the beginning of the period specified, subtracting
the maximum sales load or CDSL, 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.
The waiver by the Manager of all or a portion of its fee and the
reimbursement of certain Fund expenses during the periods (as set forth under
"Management and Expenses" herein and "Financial Highlights" in the Prospectus)
positively affected the performance results provided in this section.
The Fund's total return and average annual total return quoted from time to
time through December 27, 1990 does not reflect the deduction of the
administration, shareholder services and distribution fee, which fee if
reflected would reduce the performance quoted.
GENERAL INFORMATION
The Trustees are authorized to classify or reclassify and issue any shares
of beneficial interest of the Trust into any number of other classes without
further action by shareholders. 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.
As a general matter, the Trust will not hold annual or other meetings of the
shareholders. This is because the Declaration of Trust provides for shareholder
voting only (a) for the election or removal of one or more Trustees if a meeting
is called for that purpose, (b) with respect to any contract as to which
shareholder approval is required by the 1940 Act, (c) with respect to any
termination or reorganization of the Trust or any series, including the Fund, to
the extent and as provided in the Declaration of Trust, (d) with respect to any
amendment of the Declaration of Trust (other than amendments establishing and
designating new series, abolishing series when there are no units thereof
outstanding, changing the name of the Trust or the name of any series, supplying
any omission, curing any ambiguity or curing, correcting or supplementing any
provision thereof which is internally inconsistent with any other provision
thereof or which is defective or inconsistent with the 1940 Act or with the
requirements of the Internal Revenue Code of 1986, as amended, or applicable
regulations for the Fund's obtaining the most favorable treatment thereunder
available to regulated investment companies), which amendments require approval
by a majority of the Shares entitled to vote, (e) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding, or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the shareholders,
and (f) with respect to such additional matters relating to the Trust as may be
required by the 1940 Act, the Declaration of Trust, the By-laws of the Trust,
any registration of the Trust with the Securities and Exchange Commission (the
"Commission") or any state, or as the Trustees may consider necessary or
desirable. Each Trustee serves until the next meeting of shareholders, if any,
called for the purpose of considering the election or reelection of such Trustee
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or of a successor to such Trustee, and until the election and qualification of
his successor, if any, elected at such meeting, or until such Trustee sooner
dies, resigns, retires or is removed by the shareholders or two-thirds of the
Trustees.
The shareholders of the Trust have the right, upon the declaration in
writing or vote of more than two-thirds of the Trust's outstanding shares, to
remove a Trustee. The Trustees will call a meeting of shareholders to vote on
the removal of a Trustee upon the written request of the record holders of ten
percent of its shares. In addition, whenever ten or more shareholders of record
who have been such for at least six months preceding the date of application,
and who hold in the aggregate either shares having a net asset value of at least
$25,000 or at least 1 per centum of the outstanding shares, whichever is less,
shall apply to the Trustees in writing, stating that they wish to communicate
with other shareholders with a view to obtaining signatures to a request for a
meeting for the purpose of voting upon the question of removal of any Trustee or
Trustees and accompanied by a form of communication and request which they wish
to transmit, the Trustee shall within five business days after receipt of such
application either: (1) afford to such applicants access to a list of the names
and addresses of all shareholders as recorded on the books of the Trust; or (2)
inform such applicants as to the approximate number of shareholders of record,
and the approximate cost of mailing to them the proposed communication and form
of requests. If the Trustees elect to follow the latter course, the Trustees,
upon the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall, with
reasonable promptness, mail such material to all shareholders of record at their
addresses as recorded on the books, unless within five business days after such
tender the Trustees shall mail to such applicants and file with the Commission,
together with a copy of the material to be mailed, a written statement signed by
at least a majority of the Trustees to the effect that in their opinion either
such material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such opinion. After
opportunity for hearing upon the objections specified in the written statement
so filed, the Commission may, and if demanded by the Trustees or by such
applicants shall, enter an order either sustaining one or more of such
objections or refusing to sustain any of them. If the Commission shall enter an
order refusing to sustain any of such objections, or if, after the entry of an
order sustaining one or more of such objections, the Commission shall find,
after notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Trustees shall mail copies
of such material to all shareholders with reasonable promptness after the entry
of such order and the renewal of such tender.
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 the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are substantially identical or that the matter does
not significantly affect any interest of such series. However, the Rule exempts
the selection of independent public accountants, the approval of principal
distributing contracts and the election of trustees from the separate voting
requirements of the Rule.
The shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust. The Declaration of Trust also
provides for indemnification and reimbursement of expenses out of a series'
assets for any shareholder held personally liable for obligations of such
series.
Custodian. Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, serves as custodian for the Fund. It also maintains, under the
general supervision of the Manager, the accounting records and determines the
net asset value for the Fund.
Auditors. Deloitte & Touche LLP, independent auditors, have been selected as
auditors of the Fund. Their address is Two World Financial Center, New York, NY
10281.
RISK FACTORS REGARDING INVESTMENTS IN FLORIDA TAX-EXEMPT SECURITIES
The following information as to certain Florida considerations is given to
investors in view of the Fund's policy of concentrating its investments in
Florida issues. This information is derived from sources that are generally
available to investors and is believed to be accurate. This information
constitutes only a brief summary, does not purport to be a complete description
and has not been independently verified.
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Florida's financial operations are considerably different than most other
states because, under the State's constitution, there is no state income tax on
individuals. A constitutional amendment would be necessary to impose an income
tax on individuals. The lack of an income tax exposes total State tax
collections to more volatility than would otherwise be the case and, in the
event of an economic downswing, could affect the State's ability to pay
principal and interest in a timely manner. Florida has a proportionally greater
number of persons of retirement age; a factor that makes Florida's property and
transfer payment taxes a relatively more important source of State funding.
Because transfer payments are typically less sensitive to the business cycle
than employment income, they may act as a stabilizing force in weak economic
periods.
Florida imposes an income tax on corporate income allocable to the State, as
well as an ad valorem tax on intangible personal property, sales and use taxes
and other miscellaneous taxes. These taxes are a major source of funds to meet
state expenses, including repayment of, and interest on, obligations of the
State. A $39.1 billion general and supplemental appropriations budget was passed
for fiscal 1995-96. The State's general revenue fund budget for fiscal year
1995-96 includes revenues of $15.0 billion (a 2.7% increase over fiscal year
1994-95) and expenditures of $14.8 billion ( a 3.5% increase over 1994-95). The
State's available reserves are projected to be $165 million (1.1% of
expenditures).
In 1993, Florida's constitution was amended to limit the annual growth in
the assessed valuation of residential property, and which, over time, could
constrain growth in property taxes, a major source of revenue for local
governments. In 1994, the Florida constitution was amended to limit state
revenue collections in any fiscal year to, subject to exception, that which was
allowed in the prior fiscal year plus a growth factor, to be determined by
reference to the average annual growth rate in Florida personal income over the
previous five years.
Florida has historically experienced substantial population increases as a
result of migration to Florida from other areas of the United States and from
foreign countries, although recently population growth has been meager by
historical standards, rising only 1.4% in 1993 and 1.8% in 1994. The State's
population growth rate was 2.0% in 1994 and is anticipated to continue at 2.0 in
fiscal year 1995-96. As a result of population growth, the State may experience
a need for additional revenues to meet increased burdens on the various public
and social services provided by the State. Florida's ability to obtain increased
revenues to meet these burdens will be dependent in part upon the State's
ability to foster business and economic growth. The State's business and
economic growth could be restricted by the natural limitations of environmental
resources and the State's ability to finance adequate public facilities such as
roads and schools.
Florida's economy has continued its modest recovery from the 1990-1991
recession. Low interest rates and weak investment in recent years have created a
favorable environment for investment spending in the State, although increased
investment has not translated into strength in employment and income growth,
which have been moderate. This lack of growth has been attributed to businesses
exercising caution in expanding their payrolls. The modest employment and income
growth relegated consumption spending to a supporting role, rather than a
leading one, in the State's economic recovery. As of the second quarter of 1994,
Florida taxable sales had grown moderately in comparison to sales in the first
trimester. Florida taxable sales frequently move in a volatile manner and it is
not uncommon for high-growth quarters to be followed by declines unless the
State economy is expanding in a fairly robust manner. The Unemployment rate in
Florida for 1994 was 6.6% compared to the national unemployment rate of 6.1%.
Florida's unemployment rates for fiscal years 1995-96 and 1996-97 are forcasted
at 5.6% and 5.7%, respectively.
Despite increases in other sectors of its economy, Florida remains heavily
dependent on tourism. Second quarter 1994 tourist arrivals rose 7.3 percent
relative to the previous period, but with less than 40 million visitors on an
annualized basis, the Florida vacation industry remained in the doldrums.
Florida tourism appears to be suffering the effects of negative publicity
regarding crime against tourists in the State, "product maturity," higher prices
and more aggressive marketing by competing vacation destinations. Although the
State experienced a 4.0% drop in the number of visiting tourists in the fiscal
year 1993-94, the State anticipates an increase in the number of visiting
tourists in the current and succeeding fiscal years. The number of visiting
tourists is expected to increase by 0.1% and 4.3% during the fiscal years
1995-96 and 1996-97, respectively. The total number of visiting tourists is
expected to reach 41.4 million and 43.2 million during the fiscal years 1995-96
and 1996-97, respectively.
Housing starts in Florida vacillated in the second quarter of 1994.
Double-digit rates of change, positive or negative, occurred throughout the
State. Single-unit starts fell by 13.7 thousand, while multifamily activity
climbed by 12.2 thousand. Estimated July 1994 housing starts were the lowest
since November 1991. Increases in mortgage loan rates are believed to have led
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to the slowdown in single-unit starts. There has been a decline in Florida's
dependence on highly cyclical construction and construction-related
manufacturing sectors. For example, the total contract construction employment
as a share of total non-farm employment reached a peak of over 10% in 1973. In
1980, the share was roughly 7.5%, and in 1994, the share had edged downward to
nearly 5%. This trend is expected to continue as Florida's economy continues to
diversify.
The Fund's investment values are expected to vary in accordance with the
Fund's investment ratings, the issuer's ability to satisfy interest and/or
principal payment obligations, the relative interest rates payable on similar
investments, and the legal environment relating to creditors' rights. In
addition to the foregoing risk factors, the Fund's policy of concentrating its
investments in Florida tax-exempt securities may make it more susceptible to
risks of adverse economic, political or regulatory developments than would be
the case if the Fund were more diversified as to geographic region and/or source
of revenue.
FINANCIAL STATEMENTS
The Annual Report to Shareholders for the fiscal year ended September 30,
1995 is incorporated by reference into this Statement of Additional Information.
The Annual Report contains a schedule of the investments of the Florida Series
as of September 30, 1995, as well as certain other financial information as of
that date. The Annual Report will be furnished, without charge, to investors who
request copies of the Fund's Statement of Additional Information.
APPENDIX A
Moody's Investors Service, Inc. ("Moody's")
Tax-Exempt Bonds
Aaa: Tax-Exempt 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: Tax-exempt 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: Tax-exempt 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: Tax-exempt 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: Tax-exempt 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: Tax-exempt 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: Tax-exempt 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: Tax-exempt bonds which are rated Ca represent obligations which are
speculative in high degree. Such issues are often in default or have other
marked shortcomings.
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C: Tax-exempt 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.
Tax-Exempt Notes
Moody's ratings for tax-exempt 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.
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")
Tax-Exempt Bonds
AAA: Tax-exempt bonds rated AAA are highest grade obligations. Capacity to
pay interest and repay principal is extremely strong.
AA: Tax-exempt bonds rated AA have a very strong degree of safety and very
strong capacity to pay interest and repay principal and differs from the highest
rated issues only in small degree.
A: Tax-exempt 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.
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BBB: Tax-exempt 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: Tax-exempt 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.
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
HISTORY OF J. & W. SELIGMAN & CO. INCORPORATED
Seligman's beginnings date back to 1837, when Joseph Seligman, the
oldest of eight brothers, arrived in the United States from Germany. He earned
his living as a pack peddler in Pennsylvania, and began sending for his
brothers. The Seligmans became successful merchants, establishing businesses in
the South and East.
Backed by nearly thirty years of business success - culminating in the
sale of government securities to help finance the Civil War - Joseph Seligman,
with his brothers, established the international banking and investment firm of
J. & W. Seligman & Co. In the years that followed, the Seligman Complex played a
major role in the geographical expansion and industrial development of the
United States.
The Seligman Complex:
...Prior to 1900
o Helps finance America's fledgling railroads through underwritings.
o Is admitted to the New York Stock Exchange in 1869. Seligman remained a
member of the NYSE until 1993, when the evolution of its business made it
unnecessary.
o Becomes a prominent underwriter of corporate securities, including New
York Mutual Gas Light Company, later part of Consolidated Edison.
o Provides financial assistance to Mary Todd Lincoln and urges the Senate to
award her a pension.
o Is appointed U.S. Navy fiscal agent by President Grant.
o Becomes a leader in raising capital for America's industrial and urban
development.
...1900-1910
o Helps Congress finance the building of the Panama Canal.
...1910s
o Participates in raising billions for Great Britain, France and Italy,
helping to finance World War I.
...1920s
o Participates in hundreds of successful underwritings including those for
some of the Country's largest companies: Briggs Manufacturing, Dodge
Brothers, General Motors, Minneapolis-Honeywell Regulatory Company, Maytag
Company United Artists Theater Circuit and Victor Talking Machine Company.
o Forms Tri-Continental Corporation in 1929, today the nation's largest,
diversified closed-end equity investment company, with over $2 billion in
assets and one of its oldest.
...1930s
o Assumes management of Broad Street Investing Co. Inc., its first mutual
fund, today known as Seligman Common Stock Fund, Inc.
o Establishes Investment Advisory Service.
...1940s
o Helps shape the Investment Company Act of 1940.
o Leads in the purchase and subsequent sale to the public of Newport News
Shipbuilding and Dry Dock Company, a prototype transaction for the
investment banking industry.
o Assumes management of National Investors Corporation, today Seligman
Growth Fund, Inc.
o Establishes Whitehall Fund, Inc., today Seligman Income Fund, Inc.
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...1950-1989
o Develops new open-end investment companies. Today, manages more than 40
mutual fund portfolios.
o Helps pioneer state-specific, tax-exempt municipal bond funds, today
managing a national and 18 state-specific tax-free 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 Administration Group
plc, of London, known as Seligman Henderson Co., to offer global
investment products.
o Introduces Seligman Frontier Fund, Inc., a small capitalization mutual
fund.
o Launches Seligman Henderson Global Fund Series, Inc., which today offers
four separate series: Seligman Henderson International Fund, Seligman
Henderson Global Smaller Companies Fund, Seligman Henderson Global
Technology Fund, and Seligman Henderson Global Growth Opportunities Fund.
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STATEMENT OF ADDITIONAL INFORMATION
February 1, 1996
SELIGMAN NORTH CAROLINA TAX-EXEMPT SERIES
100 Park Avenue
New York, N.Y. 10017
New York City Telephone (212) 850-1864
Toll-Free Telephone:
(800) 221-2450 - all continental United States
This Statement of Additional Information expands upon and supplements the
information contained in the current Prospectus of Seligman North Carolina
Tax-Exempt Series (the "Fund"), dated February 1, 1996. It should be read in
conjunction with the Prospectus, which may be obtained by writing or calling the
Fund at the above address or telephone numbers. This Statement of Additional
Information, although not in itself a Prospectus, is incorporated by reference
into the Prospectus in its entirety.
The Fund offers two classes of shares. Class A shares may be purchased at
net asset value plus a sales load of up to 4.75%. Class D shares may be
purchased at net asset value and are subject to a contingent deferred sales load
("CDSL") of 1% if redeemed within one year.
Each share of Class A and Class D represents an identical legal interest in
the investment portfolio of the Fund and has the same rights except for certain
class expenses and except that Class D shares bear a higher distribution fee
that generally will cause the Class D shares to have a higher expense ratio and
pay lower dividends than Class A shares. Each Class has exclusive voting rights
with respect to its distribution plan. Although holders of Class A and Class D
shares have identical legal rights, the different expenses borne by each Class
will result in different dividends. The two classes also have different exchange
privileges.
TABLE OF CONTENTS
Page
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Seligman North Carolina
Tax-Exempt Series........................... 2
Investment Objective, Policies And Risks...... 2
Investment Limitations........................ 5
Trustees And Officers......................... 6
Management And Expenses ...................... 11
Administration, Shareholder Services
And Distribution Plan....................... 12
Portfolio Transactions........................ 12
Purchase And Redemption Of Fund Shares........ 12
Distribution Services......................... 15
Taxes......................................... 15
Valuation..................................... 15
Performance Information....................... 16
General Information........................... 18
Risk Factors Regarding Investments In
North Carolina Tax-Exempt Securities......... 19
Financial Statements.......................... 20
Appendix A.................................... 20
Appendix B.................................... 23
TEBNC1A
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SELIGMAN NORTH CAROLINA TAX-EXEMPT SERIES
The Fund is a series of Seligman Tax-Exempt Series Trust (the "Trust"), a
non-diversified open-end management investment company, or mutual fund,
organized as an unincorporated business trust under the laws of Massachusetts
that commenced operations in 1984.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
As stated in the Prospectus, the Fund seeks to provide high income exempt
from federal income taxes and the personal income taxes of North Carolina
consistent with preservation of capital. The Fund also invests with
consideration given to capital gain.
The Fund is expected to invest principally, without percentage limitations,
in tax-exempt securities which on the date of investment are within the four
highest ratings of Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A, Baa
for bonds; MIG 1, MIG 2, MIG 3, MIG 4 for notes; P-1 for commercial paper) or
Standard & Poor's Corporation ("S&P") (AAA, AA, A, BBB for bonds; SP-1 - SP-2
for notes; A-1+, A-1/A-2 for commercial paper). Tax-exempt securities rated in
these categories are commonly referred to as investment grade. The Fund may
invest in tax-exempt securities which are not rated, or which do not fall into
the credit ratings noted above if, based upon credit analysis by the Manager, it
is believed that such securities are of comparable quality. In determining
suitability of investment in a lower rated or unrated security, the Manager 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. Tax-exempt securities in
the fourth rating category of S&P or Moody's will generally provide a higher
yield than do higher rated tax-exempt 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
tax-exempt 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
tax-exempt 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 Statement.
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 tax-exempt securities and for providing state and local governments
with federal credit assistance. Reevaluation of the Fund's investment objectives
and structure might be necessary in the future due to market conditions which
may result from future changes in the tax laws.
North Carolina Tax-Exempt Securities. North Carolina Tax-Exempt Securities
include notes, bonds and commercial paper issued by or on behalf of the State of
North Carolina, its political subdivisions, agencies, and instrumentalities, the
interest on which is exempt from federal income taxes and North Carolina state
personal income taxes. Such securities are traded primarily in an
over-the-counter market. The Fund may invest no more than 20% of its net assets
in certain private activity bonds, the interest on which is treated as a
preference item for purposes of the alternative minimum tax. See "North Carolina
Tax-Exempt Securities" in the Prospectus.
Under the Investment Company Act of 1940 (the "1940 Act"), the
identification of the issuer of tax-exempt bonds, notes or commercial paper
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
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industrial development revenue bond or pollution control revenue bond, if the
bond is backed only by the assets and revenues of the nongovernmental user, the
nongovernmental 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.
Tax-exempt 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. Tax-exempt 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, which are considered tax-exempt bonds if
the interest paid thereon is exempt from federal income tax, 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 tax-exempt 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.
Tax-Exempt Notes generally are used to provide for short-term capital needs
and generally have maturities of one year or less. Tax-Exempt Notes include:
1. Tax Anticipation Notes. Tax Anticipation Notes are issued to finance working
capital needs of municipalities. Generally, they are issued in anticipation
of various tax revenues, such as income, sales, use and business taxes, and
are payable from these specific future taxes.
2. Revenue Anticipation Notes. Revenue Anticipation Notes are issued in
expectation of receipt of other kinds of revenue, such as federal revenues
available under the Federal Revenue Sharing Programs.
3. 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.
4. Construction Loan Notes. Construction Loan Notes are sold to provide
construction financing. Permanent financing, the proceeds of which are
applied to the payment of Construction Loan Notes, is sometimes provided by
a commitment by the Government National Mortgage Association ("GNMA") to
purchase the loan notes, accompanied by a commitment by the Federal Housing
Administration to insure mortgage advances thereunder. In other instances,
permanent financing is provided by commitments of banks to purchase the loan
notes.
Issues of Tax-Exempt Commercial Paper typically represent short-term,
unsecured, negotiable promissory notes. These obligations are issued by agencies
of state and local governments to finance seasonal working capital needs of
municipalities or to provide interim construction financing and are paid from
general revenues of municipalities or are refinanced with long-term debt. In
most cases, Tax-Exempt Commercial Paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions.
When-Issued Securities. The Fund may purchase tax-exempt securities on a
when-issued basis, in which case delivery and payment normally take place 15 to
45 days after the date of the commitment to purchase. The payment obligation and
the interest rate that will be received on the tax-exempt securities are each
fixed at the time the buyer enters into the commitment. Although the Fund will
only purchase a tax-exempt security on a when-issued basis with the intention of
actually acquiring the securities, the Fund may sell these securities before the
settlement date if it is deemed advisable.
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Tax-exempt securities purchased on a when-issued basis and the securities
held in the Fund are subject to changes in market value based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates (which will generally result in
similar changes in value, i.e., both experiencing appreciation when interest
rates decline and depreciation when interest rates rise). Therefore, to the
extent the 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
tax-exempt 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 so purchased.
A separate account consisting of cash or liquid high-grade debt securities
equal to the amount of the when-issued commitments will be established with the
Custodian and marked to market daily, with additional cash or liquid debt
securities added when necessary. When the time comes to pay for when-issued
securities, the Fund will meet its obligations from then available cash, sale of
securities held in the separate account, sale of other securities or, although
it would not normally expect to do so, sale of the when-issued securities
themselves (which may have a value greater or lesser than the Fund's payment
obligations). Sale of securities to meet such obligations carries with it a
potential for the realization of capital gain, which is not exempt from federal
or North Carolina income taxes.
Floating Rate and Variable Rate Securities. The Fund may purchase floating rate
and variable rate securities, including participation interests therein.
Investments in floating or variable rate securities normally will involve
industrial development or revenue bonds which provide that the rate of interest
is set as a specific percentage of a designated base rate, such as rates on
Treasury Bonds or Bills or the prime rate at a major commercial bank, and that
the Fund can demand payment of the obligations on short notice at par plus
accrued interest, which amount may be more or less than the amount the Fund paid
for them. 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, as the case may be, must be equivalent to the standards set
forth with respect to taxable investments on page 5.
Stand-By Commitments. Under a stand-by commitment, the Fund obligates a dealer
to repurchase at the Fund's option specified securities at a specified price.
The exercise of a stand-by commitment is subject to the ability of the dealer to
make payment on demand. The Fund would acquire stand-by commitments solely to
facilitate portfolio liquidity and not for trading purposes. Prior to investing
in stand-by commitments the Fund, if it deems necessary based upon the advice of
counsel, will apply to the Securities and Exchange Commission for an exemptive
order relating to such commitments and the valuation thereof. There can be no
assurance that the Securities and Exchange Commission will issue such an order.
The price which the Fund would pay for tax-exempt securities with stand-by
commitments generally would be higher than the price which otherwise would be
paid for the tax-exempt securities alone. The Fund will only purchase
obligations with stand-by commitments from sellers the Manager deems
creditworthy.
Stand-by commitments with respect to portfolio securities of the Fund with
maturities of less than 60 days which are separate from the underlying portfolio
securities are not assigned a value. The cost of any such stand-by commitment is
carried as an unrealized loss from the time of purchase until it is exercised or
expires. Stand-by commitments with respect to portfolio securities of the Fund
with maturities of 60 days or more which are separate from the underlying
portfolio securities and the underlying portfolio securities are valued at fair
value as determined in accordance with procedures established by the Board of
Trustees. The Board of Trustees would, in connection with the determination of
the value of such a stand-by commitment, consider among other factors the
creditworthiness of the writer of the stand-by commitment, the duration of the
stand-by commitment, the dates on which or the periods during which the stand-by
commitment may be exercised and the applicable rules and regulations of the
Securities and Exchange Commission.
Portfolio Turnover. Portfolio transactions will be undertaken principally to
accomplish the Fund's objective in relation to anticipated movements in the
general level of interest rates but the 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 Manager believes to be a temporary disparity in the
normal yield relationship between the two securities.
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The Fund's investment policies may lead to frequent changes in investments,
particularly in periods of rapidly fluctuating interest rates. A change in
securities held by the Fund is known as "portfolio turnover" and may involve the
payment by the Fund of dealer spreads or underwriting commissions, and other
transaction costs, on the sale of securities, as well as on the reinvestment of
the proceeds in other securities. Portfolio turnover rate for a fiscal year is
the ratio of the lesser of purchases or sales of portfolio securities to the
monthly average of the value of portfolio securities. Securities whose maturity
or expiration date at the time of acquisition were one year or less are excluded
from the calculation. The portfolio turnover rate for the fiscal years ended
September 30, 1995 and 1994 were 4.38% and 15.61%, respectively. It is estimated
that the portfolio turnover rate of the Fund will not exceed 100%. The Fund's
portfolio turnover rate will not be a limiting factor when the Fund deems it
desirable to sell or purchase securities.
Taxable Investments. Under normal market conditions, the 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
federal and North Carolina personal income tax. However in abnormal market
conditions, if, in the judgment of the Manager, the tax-exempt securities
satisfying the Fund's investment objectives may not be purchased, the Fund may,
for defensive purposes temporarily invest in instruments the interest on which
is exempt from federal income taxes, but not North Carolina personal income
taxes. Such securities would include those described under "North Carolina
Tax-Exempt Securities" above that would otherwise meet the Fund's objectives.
Also, in abnormal market conditions, the 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
tax-exempt securities of proceeds of sales of shares or sales of portfolio
securities, in order to avoid the necessity of liquidating portfolio investments
to meet redemption 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 AA-, or better, by Standard & Poor's or Aa3, or
better, by Moody's); prime commercial paper (rated A-1+/A-1 by Standard & Poor's
or P-1 by Moody's); and certificates of deposit of the 100 largest domestic
banks in terms of assets which are subject to regulatory supervision by the U.S.
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 U.S. 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.
INVESTMENT LIMITATIONS
Under the Fund's fundamental policies, which cannot be changed except by
vote of a majority of the outstanding voting securities of the Fund, the Fund
may not:
- - Borrow money, except from banks for temporary purposes (such as meeting
redemption requests or for extraordinary or emergency purposes but not for
the purchase of portfolio securities) 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). 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;
- - 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 tax-exempt securities and securities of the U.S. Government, its
agencies and instrumentalities are not considered an industry for purposes of
this limitation.
- - As to 50% of the value of its total assets, purchase securities of any issuer
if immediately thereafter more than 5% of total assets at market value would
be invested in the securities of any issuer (except that this limitation does
not apply to obligations issued or guaranteed as to principal and interest by
the U.S. Government or its agencies or instrumentalities);
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- - Invest in securities issued by other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization;
- - Purchase or hold any real estate, 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, trustees
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,
except that the Fund may be deemed an underwriter in connection with the
purchase and sale of portfolio securities;
- - Purchase or sell commodities or commodity contracts including futures
contracts; or
- - Make loans, except to the extent that the purchase of notes, bonds or other
evidences of indebtedness or deposits with banks may be considered loans.
As a matter of policy, with respect to 75% of the Fund's assets, no revenue
bond will be purchased by the Fund if as a result of such purchase more than 5%
of the Fund's assets would be invested in the securities of a single issuer.
This policy is not fundamental and may be changed by the Trustees without
shareholder approval.
Under the 1940 Act, a "vote of a majority of the outstanding voting
securities" of the Trust or of a particular series of the Trust, such as the
Fund, means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Trust or of a series or (2) 67% or more of the shares
of the Trust or of a series present at a shareholders' meeting if more than 50%
of the outstanding shares of the Trust or of a series are represented at the
meeting in person or by proxy.
TRUSTEES AND OFFICERS
Trustees and officers of the Trust, together with information as to their
principal business occupations during the past five years are shown below. Each
Trustee who is an "interested person" of the Trust, as defined in the 1940 Act,
is indicated by an asterisk. Unless otherwise indicated, their addresses are 100
Park Avenue, New York, NY 10017.
WILLIAM C. MORRIS* Trustee, Chairman of the Board, Chief Executive Officer
(57) and Chairman of the Executive Committee
Managing Director, Chairman and President, J. & W.
Seligman & Co. Incorporated, investment managers and
advisors; and Seligman Advisors, Inc., advisors;
Chairman and Chief Executive Officer, the Seligman
Group of Investment Companies; Chairman, Seligman
Financial Services, Inc., distributor; Seligman
Holdings, Inc., holding company; Seligman Services,
Inc., broker/dealer; and Carbo Ceramics Inc., ceramic
proppants for oil and gas industry; Director or
Trustee, Seligman Data Corp., shareholder service
agent; Daniel Industries, Inc., manufacturer of oil and
gas metering equipment; Kerr-McGee Corporation,
diversified energy company; and Sarah Lawrence College;
and a Member of the Board of Governors of the
Investment Company Institute; formerly, Chairman, J. &
W. Seligman Trust Company, trust company and Seligman
Securities, Inc., broker/dealer.
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BRIAN T. ZINO* Trustee, President and Member of the Executive
(43) Committee
Director and Managing Director (formerly, Chief
Administrative and Financial Officer), J. & W. Seligman
& Co. Incorporated, investment managers and advisors;
and Seligman Advisors, Inc. advisors; Director or
Trustee, the Seligman Group of Investment Companies,
President, the Seligman Group of Investment Companies,
except Seligman Quality Municipal Fund, Inc. and
Seligman Select Municipal Fund, Inc.; Chairman,
Seligman Data Corp., shareholder service agent;
Director, Seligman Financial Services, Inc.,
distributor; Seligman Services, Inc., broker/dealer;
Senior Vice President, Seligman Henderson Co.,
advisors; formerly, Director and Secretary, Chuo Trust
- JWS Advisors, Inc., advisors; and Director, J. & W.
Seligman Trust Company, trust company and Seligman
Securities, Inc., broker/dealer.
RONALD T. SCHROEDER* Trustee and Member of the Executive Committee
(48)
Director, Managing Director and Chief Investment
Officer, Institutional, J. & W. Seligman & Co.
Incorporated, investment managers and advisors; and
Seligman Advisors, Inc., advisors; Director or Trustee,
the Seligman Group of Investment Companies; Director,
Seligman Holdings, Inc., holding company; Seligman
Financial Services, Inc., distributor; Seligman
Henderson Co., advisors; and Seligman Services, Inc.,
broker/dealer; formerly, President of the Seligman
Group of Investment Companies, except Seligman Quality
Municipal Fund, Inc. and Seligman Select Municipal
Fund, Inc.; and Director, J. & W. Seligman Trust
Company, trust company; Seligman Data Corp.,
shareholder service agent; and Seligman Securities,
Inc., broker/dealer.
FRED E. BROWN* Trustee
(82)
Director and Consultant, J. & W. Seligman & Co.
Incorporated, investment managers and advisors;
Director or Trustee, the Seligman Group of Investment
Companies; Seligman Financial Services, Inc.,
distributor; Seligman Services, Inc., broker/dealer;
Trudeau Institute, Inc., non-profit biomedical research
organization; Lake Placid Center for the Arts, cultural
organization; and Lake Placid Education Foundation,
education foundation; formerly, Director, J. & W.
Seligman Trust Company, trust company; and Seligman
Securities, Inc., broker/dealer.
JOHN R. GALVIN Trustee
(66)
Dean, Fletcher School of Law and Diplomacy at Tufts
University; Director or Trustee, the Seligman Group of
Investment Companies; Chairman of the American Council
on Germany; a Governor of the Center for Creative
Leadership; Director of USLIFE, insurance; National
Committee on U.S.-China Relations, National Defense
University and the Institute for Defense Analysis; and
Consultant of Thomson CSF, electronics. Formerly,
Ambassador, U.S. State Department; 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.
Tufts University, Packard Avenue, Medford, MA 02155
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ALICE S. ILCHMAN Trustee
(60)
President, Sarah Lawrence College; Director or Trustee,
the Seligman Group of Investment Companies; Chairman,
The Rockefeller Foundation, charitable foundation; and
Director, NYNEX, telephone company; and the Committee
for Economic Development; formerly, Trustee, The Markle
Foundation, philanthropic organization; and Director,
International Research and Exchange Board, intellectual
exchanges.
Sarah Lawrence College, Bronxville, New York 10708
FRANK A. McPHERSON Trustee
(62)
Chairman of the Board and Chief Executive Officer,
Kerr-McGee Corporation, energy and chemicals; Director
or Trustee, the Seligman Group of Investment Companies;
Director of Kimberly-Clark Corporation, consumer
products, Bank of Oklahoma Holding Company, American
Petroleum Institute, Oklahoma City Chamber of Commerce,
Baptist Medical Center, Oklahoma Chapter of the Nature
Conservancy, Oklahoma Medical Research Foundation and
United Way Advisory Board; Chairman of Oklahoma City
Public Schools Foundation; and Member of the Business
Roundtable and National Petroleum Council.
123 Robert S. Kerr Avenue, Oklahoma City, OK 73102
JOHN E. MEROW* Trustee
(66)
Chairman and Senior Partner, Sullivan & Cromwell, law
firm; Director or Trustee, the Seligman Group of
Investment Companies; The Municipal Art Society of New
York; Commonwealth Aluminum Corporation, the U.S.
Council for International Business and the U.S.-New
Zealand Council; Chairman, American Australian
Association; Member of the American Law Institute and
Council on Foreign Relations; Member of the Board of
Governors of Foreign Policy Association and New York
Hospital.
125 Broad Street, New York, NY 10004
BETSY S. MICHEL Trustee
(53)
Attorney; Director or Trustee, the Seligman Group of
Investment Companies and National Association of
Independent Schools (Boston), education; Chairman of
the Board of Trustees of St. George's School (Newport,
RI).
St. Bernard's Road, Gladstone, NJ 07934
JAMES C. PITNEY Trustee
(69)
Partner, Pitney, Hardin, Kipp & Szuch, law firm;
Director or Trustee, the Seligman Group of Investment
Companies and Public Service Enterprise Group, public
utility.
Park Avenue at Morris County, P.O.Box 1945, Morristown,
NJ 07962-1945
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<PAGE>
JAMES Q. RIORDAN Trustee
(68)
Director, Various Corporations; Director or Trustee,
the Seligman Group of Investment Companies; The
Brooklyn Museum; The Brooklyn Union Gas Company; The
Committee for Economic Development; Dow Jones & Co.
Inc. and Public Broadcasting Service; formerly,
Co-Chairman of the Policy Council of the Tax
Foundation; Director and Vice Chairman, Mobil
Corporation; Director and President, Bekaert
Corporation; and Director, Tesoro Petroleum Companies,
Inc.
675 Third Avenue, Suite 3004, New York, NY 10017
ROBERT L. SHAFER Trustee
(63)
Director, Various Corporations; Director or Trustee,
the Seligman Group of Investment Companies; and USLIFE
Corporation, life insurance.
235 East 42nd Street, New York, NY 10017
JAMES N. WHITSON Trustee
(60)
Executive Vice President, Chief Operating Officer and
Director, Sammons Enterprises, Inc., Director or
Trustee, the Seligman Group of Investment Companies,
Red Man Pipe and Supply Company and C-SPAN.
300 Crescent Court, Suite 700, Dallas, TX 75202
THOMAS G. MOLES Vice President and Senior Portfolio Manager
(53)
Director, Managing Director, (formerly, Vice President
and Portfolio Manager), J. & W. Seligman & Co.
Incorporated, investment managers and advisors; Vice
President and Portfolio Manager, three other open-end
investment companies in the Seligman Family of Mutual
Funds; President and Portfolio Manager, Seligman
Quality Municipal Fund, Inc. and Seligman Select
Municipal Fund, Inc., closed-end investment companies;
Director, Seligman Financial Services, Inc.,
distributor; Seligman Services, Inc., broker/dealer;
and J. & W. Seligman Trust Company, trust company;
formerly, Director, Seligman Securities, Inc.,
broker/dealer.
LAWRENCE P. VOGEL Vice President
(39)
Senior Vice President, Finance, J. & W. Seligman & Co.
Incorporated, investment managers and advisors;
Seligman Financial Services, Inc., distributor; and
Seligman Advisors, Inc., advisors; Vice President
(formerly, Treasurer), the Seligman Group of Investment
Companies; Senior Vice President, Finance (formerly,
Treasurer), Seligman Data Corp., shareholder service
agent; Treasurer, Seligman Holdings, Inc., holding
company; and Seligman Henderson Co., advisors;
formerly, Senior Vice President, Seligman Securities,
Inc., broker/dealer; Vice President, Finance, J. & W.
Seligman Trust Company; and Senior Audit Manager, Price
Waterhouse, independent accountants.
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FRANK J. NASTA Secretary
(31)
Senior Vice President, Law and Regulation and
Secretary, J. & W. Seligman & Co. Incorporated,
investment managers and advisors; Secretary, the
Seligman Group of Investment Companies, Seligman
Financial Services, Inc., distributor; Seligman
Henderson Co., advisors; Seligman Services, Inc.,
broker/dealer; Chuo Trust - JWS Advisors, Inc.,
advisors; and Seligman Data Corp., shareholder service
agent; formerly, attorney, Seward & Kissel.
THOMAS G. ROSE Treasurer
(38)
Treasurer, the Seligman Group of Investment Companies
and Seligman Data Corp., shareholder service agent;
formerly, Treasurer, American Investors Advisors, Inc.
and the American Investors Family of Funds.
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 Fund for
which no market valuation is available and to elect or appoint officers of the
Fund to serve until the next meeting of the Board.
Compensation Table
<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits from Registrant and
Name and Compensation Accrued as part of Fund Complex Paid
Position with Registrant from Registrant (1) Fund Expenses to Trustees (2)
------------------------ ------------------- ------------- ---------------
<S> <C> <C> <C>
William C. Morris, Trustee and Chairman N/A N/A N/A
Brian T. Zino, Trustee and President N/A N/A N/A
Ronald T. Schroeder, Trustee N/A N/A N/A
Fred E. Brown, Trustee N/A N/A N/A
John R. Galvin, Trustee $ 1,795.93 N/A $41,252.75
Alice S. Ilchman, Trustee 2,948.20 N/A 68,000.00
Frank A. McPherson, Trustee 1,795.93 N/A 41,252.75
John E. Merow, Trustee 2,876.76(d) N/A 66,000.00(d)
Betsy S. Michel, Trustee 2,841.04 N/A 67,000.00
Douglas R. Nichols, Jr., Trustee* 1,080.83 N/A 24,747.25
James C. Pitney, Trustee 2,948.20 N/A 68,000.00
James Q. Riordan, Trustee 2,948.20 N/A 70,000.00
Herman J. Schmidt, Trustee* 1,080.83 N/A 24,747.25
Robert L. Shafer, Trustee 2,948.20 N/A 70,000.00
James N. Whitson, Trustee 2,876.76(d) N/A 68,000.00(d)
</TABLE>
(1) Based on remuneration received by Trustees for the Trust's four Series for
the year ended December 31, 1995.
(2) As defined in the Fund's Prospectus, the Seligman Group of Investment
Companies consists of seventeen investment companies.
* Retired May 18, 1995.
(d) Deferred.
-10-
<PAGE>
The Trust has a compensation arrangement under which outside Trustees may
elect to defer receiving their fees. Under this arrangement, interest is accrued
on the deferred balances. The annual cost of such interest is included in the
Trustees' fees and expenses, and the accumulated balance thereof is included in
other liabilities in the Fund's financial statements.
Trustees and officers of the Trust are also trustees, directors and officers
of some or all of the other investment companies in the Seligman Group.
No Trustees or officers of the Fund owned shares of the Fund at January 12,
1996.
MANAGEMENT AND EXPENSES
Under the Management Agreement, dated June 21, 1990, subject to the control
of the Trustees, the Manager manages the investment of the assets of the Fund,
including making purchases and sales of portfolio securities consistent with the
Fund's investment objectives and policies, and administers its business and
other affairs. The Manager provides the Fund with such office space,
administrative and other services and executive and other personnel as are
necessary for Fund operations. The Manager pays all of the compensation of
Trustees of the Trust who are employees or consultants of the Manager and the
officers and employees of the Fund. The Manager also provides senior management
for Seligman Data Corp., the Fund's shareholder service agent.
The Manager is entitled to receive a management fee from the Fund calculated
daily and payable monthly equal to .50% of the Fund's average daily net assets
on an annual basis. During the fiscal years ended September 30, 1993, 1994 and
1995 the Manager, in its discretion, waived all or a portion of its fee from the
Fund, and in some cases also elected to reimburse the Fund for certain expenses
incurred during the period. For the fiscal year ended September 30, 1995, the
Management fee amounted to $55,938 or .14% of the Fund's average net assets.
The Fund pays all its expenses other than those assumed by the Manager
including brokerage commissions, if any, fees and expenses of independent
attorneys and auditors, taxes and governmental fees including fees and expenses
of qualifying the Fund and its 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
existing shareholders, expenses of printing and filing reports and other
documents filed with governmental agencies, expenses of shareholders' meetings,
expenses of corporate data processing and related services, shareholder
recordkeeping and shareholder account services fees and disbursements of
transfer agents and custodians, expenses of disbursing dividends and
distributions, fees and expenses of Trustees of the Fund not employed by or
serving as a Trustee of the Manager or its affiliates, insurance premiums and
extraordinary expenses such as litigation expenses. The Trust's expenses are
allocated between each series of the Trust in a manner determined by the
Trustees to be fair and equitable.
The Manager has undertaken to certain state securities administrators, so
long as required, to reimburse the Fund for each year in the amount by which
total expenses (including the management fee, but excluding interest, taxes,
brokerage commissions, distribution fees and extraordinary expenses), exceed 2
1/2% of the first $30 million of average net assets, 2% of the next $70 million
of average net assets and 1 1/2% thereafter.
On December 29, 1988, a majority of the outstanding voting securities of the
Manager was purchased by Mr. William C. Morris and a simultaneous
recapitalization of the Manager occurred.
The Fund's Management Agreement was approved by the Trustees at a meeting
held on June 12, 1990, and was unanimously approved by the shareholders at a
meeting held on April 11, 1991. The Agreement will continue in effect from year
to year thereafter if such continuance is approved in the manner required by the
1940 Act (i.e. (1) by a vote of a majority of the Trustees or of the outstanding
voting securities of the Fund and (2) by a vote of a majority of the Trustees
who are not parties to the Management Agreement or interested persons of any
such party) and if the Manager shall not have notified the Fund at least 60 days
prior to the anniversary date of the previous continuance that it does not
desire such continuance. The Agreement may be terminated by the Fund, without
penalty, on 60 days' written notice to the Manager and will terminate
automatically in the event of its assignment. The Fund has agreed to change its
name upon termination of its Management Agreement if continued use of the name
would cause confusion in the context of the Manager's business.
-11-
<PAGE>
The Manager is a successor firm to an investment banking business founded in
1864 which has thereafter provided investment services to individuals, families,
institutions and corporations. See Appendix B for further history of the
Manager.
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
As indicated in the Prospectus, an Administration, Shareholder Services and
Distribution Plan (the "Plan") for the Fund will be in effect from the date
hereof under Section 12(b) of the Act and Rule 12b-1 thereunder.
The Plan was approved on June 21, 1990 by the Trustees, including a majority
of the Trustees who are not "interested persons" (as defined in the Act) of the
Fund and who have no direct or indirect financial interest in the operation of
the Plan or in any agreement related to the Plan (the "Qualified Trustees") and
on April 11, 1991 by the shareholders of the Fund. Amendments to the Plan were
approved in respect of the Class D shares on November 18, 1993 by the Trustees,
including a majority of the Qualified Trustees, and became effective with
respect to the Class D shares on February 1, 1994. The 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 Trustees and the Qualified Trustees of
the Fund, cast in person at a meeting called for the purpose of voting on such
approval. The Plan may not be amended to increase materially the amounts payable
to Service Organizations with respect to a class of shares without the approval
of a majority of the outstanding voting securities of the Class and no material
amendment to the Plan may be made except by a majority of both the Trustees and
the Qualified Trustees.
The Plan requires that the Treasurer of the Fund shall provide to the
Trustees, and the Trustees shall review, at least quarterly, a written report of
the amounts expended (and purposes therefor) under the Plan. Rule 12b-1 also
requires that the selection and nomination of Trustees who are not "interested
persons" of the Trust be made by such disinterested Trustees.
PORTFOLIO TRANSACTIONS
No brokerage commissions were paid by the Fund during the fiscal years ended
September 30, 1995, 1994 or 1993. When the Fund or two or more of the investment
companies in the Seligman Group or other investment advisory clients of the
Manager desire to buy or sell the same security at the same time, the securities
purchased or sold are allocated by the Manager 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 already obtainable
or saleable.
PURCHASE AND REDEMPTION OF FUND SHARES
The Fund issues two classes of shares: Class A shares may be purchased at a
price equal to the next determined net asset value per share, plus a sales load.
Class D shares may be purchased at a price equal to the next determined net
asset value without an initial sales load, but a CDSL may be charged on certain
redemptions within one year of purchase. See "Alternative Distribution System,"
"Purchase Of Shares," and "Redemption Of Shares" in the Fund's Prospectus.
Specimen Price Make-Up
Under the current distribution arrangements between the Trust and the
Distributor, Class A shares are sold at a maximum sales load of 4.75% and Class
D shares are sold at net asset value.* Using the Fund's net asset value at
September 30, 1995, the maximum offering price of the Fund's shares is as
follows:
Class A
Net asset value per share........................................... $ 7.74
Maximum sales load (4.75% of offering price)........................ .39
------
Maximum offering price per share.................................... $ 8.13
======
-12-
<PAGE>
Class D
Net asset value and maximum offering price per share*............... $ 7.74
======
- ---------
* Class D shares are subject to a CDSL of 1% on certain redemptions within
one year of purchase. See "Redemption Of Shares" in the Prospectus.
Class A Shares - Reduced Sales Loads
Reductions Available. Shares of any Seligman Mutual Fund sold with a sales load
in a continuous offering will be eligible for the following reductions:
Volume Discounts are provided if the total amount being invested in Class A
shares of the Fund alone, the other series of the Trust or in any combination of
shares of the other mutual funds in the Seligman Group which are sold with a
sales load, reaches levels indicated in the sales load schedule set forth in the
Prospectuses.
The Right of Accumulation allows an investor to combine the amount being
invested in Class A shares of the Fund, the other series of the Trust, Seligman
Capital Fund, Seligman Common Stock Fund, Seligman Communications and
Information Fund, Seligman Frontier Fund, Seligman Growth Fund, Seligman
Henderson Global Fund Series, Seligman High Income Fund Series, Seligman Income
Fund, Seligman New Jersey Tax-Exempt Fund, Seligman Pennsylvania Tax-Exempt Fund
Series, or Seligman Tax-Exempt Fund Series that were sold with a sales load with
the total net asset value of shares of those Seligman Mutual Funds already owned
that were sold with a sales load and the total net asset value of shares of
Seligman Cash Management Fund which were acquired through an exchange of shares
of another mutual fund in the Seligman Group on which there was a sales load at
the time of purchase to determine reduced sales loads in accordance with the
schedule in the Prospectuses. The value of the shares owned, including the value
of shares of Seligman Cash Management Fund acquired in an exchange of shares of
another mutual fund in the Seligman Group on which there is a sales load at the
time of purchase will be taken into account in orders placed through a dealer,
however, only if Seligman Financial Services, Inc. ("SFSI") is notified by the
investor or a dealer of the amount owned 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 of the
Fund over a 13-month period at reduced sales loads in accordance with the
schedule in the Prospectuses, based on the total amount of Class A shares that
the letter states the investor intends to purchase plus the total net asset
value of shares that were sold with a sales load of the other series of the
Trust, Seligman Capital Fund, Seligman Common Stock Fund, Seligman
Communications and Information Fund, Seligman Frontier Fund, Seligman Growth
Fund, Seligman Henderson Global Fund Series, Seligman High Income Fund Series,
Seligman Income Fund, Seligman New Jersey Tax-Exempt Fund, Seligman Pennsylvania
Tax-Exempt Fund Series and Seligman Tax-Exempt Fund Series 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 mutual fund in the Seligman
Group on which there was a sales load at the time of purchase. Reduced sales
loads 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. For more information
concerning the terms of the letter of intent, see "Terms and Conditions - Letter
of Intent" accompanying the Account Application in the Fund's Prospectus.
Persons Entitled to Reductions. Reductions in sales loads apply to purchases of
Class A shares of the Fund 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,
tax-exempt organizations under Section 501 (c)(3) or (13), 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 the Fund, to receive
in bulk and to distribute to each participant on a timely basis the Fund
prospectuses, reports and other shareholder communications.
-13-
<PAGE>
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 loads in the Prospectus
applies to sales to "eligible employee benefit plans" (as defined in the
Prospectus), except that the Fund may sell shares at net asset value to
"eligible employee benefit plans," (i) which have at least $1 million invested
in the Seligman Mutual Funds or (ii) of employers who have at least 50 eligible
employees to whom such plan is made available or, regardless of the number of
employees, if such plan is established or maintained by any dealer which has a
sales agreement with SFSI. Such sales must be made in connection with a payroll
deduction system of plan funding or other systems acceptable to Seligman Data
Corp., the Trust's shareholder service agent. 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
investment dealers or SFSI.
Further Types of Reductions. Class A shares may be issued without a sales load
in connection with the acquisition of cash and securities owned by other
investment companies and personal holding companies to financial institution
trust departments, to registered investment advisers exercising investment
discretionary authority with respect to the purchase of Fund shares, or pursuant
to sponsored arrangements with organizations which make recommendations to, or
permit group solicitation of, its employees, members or participants in
connection with the purchase of shares of the Fund, to separate accounts
established and maintained by an insurance company which are exempt from
registration under Section 3(c)(11) of the 1940 Act, to registered
representatives and employees (and their spouses and minor children) of any
dealer that has a sales agreement with SFSI, to shareholders of mutual funds
with investment objectives similar to the Fund's who purchase shares with
redemption proceeds of such funds and to certain unit investment trusts as
described in the Fund's Prospectus.
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.
Payment in Securities. In addition to cash, the Fund may accept securities in
payment for Fund shares sold at the applicable public offering price. Generally,
the Fund will only consider accepting securities (1) to increase its holdings in
a portfolio security of the Fund, or (2) if the Manager determines that the
offered securities are a suitable investment in a sufficient amount for
efficient management. Although no minimum has been established, it is expected
that the Fund would not accept securities with a value of less than $100,000 per
issue in payment for shares. The Fund may reject in whole or in part offers to
pay for shares with securities, may require partial payment in cash for
applicable sales loads, and may discontinue accepting securities as payment for
shares at any time without notice. The Fund has no present intention of
accepting securities in payment for shares.
More About Redemptions. The procedures for redemption of Fund shares under
ordinary circumstances are set forth in the Prospectus. Payment may be made in
securities, subject to the review of some state securities commissions, or
postponed, if the orderly liquidation of portfolio securities is prevented by
the closing of, or restricted trading on, the New York Stock Exchange during
periods of emergency, or during such other periods as ordered by the Securities
and Exchange Commission. If payment were to be made in securities, shareholders
receiving securities could incur certain transaction costs. The Fund will not
accept orders from securities dealers for the repurchase of shares.
-14-
<PAGE>
DISTRIBUTION SERVICES
SFSI, an affiliate of the Manager, acts as general distributor of the shares
of the Trust and of the other mutual funds in the Seligman Group. As general
distributor of the Trust's shares of beneficial interest, SFSI allows
concessions to all dealers up to 4.25% on purchases of Class A shares to which
the 4.75% sales load applies. SFSI receives the balance of sales loads and any
CDSL, if applicable, paid by investors. The Trust and SFSI are parties to a
Distributing Agreement dated January 1, 1993.
The total sales load paid by shareholders of the Fund for the fiscal year
ended September 30, 1995 amounted to $130,611, with allowance of $115,498 as
commissions to dealers; for the fiscal year ended September 30, 1994 amounted to
$261,717, with allowance of $232,335, as commissions to dealers; and for the
fiscal year ended September 30, 1993 amounted to $650,587, with allowance of
$574,851 as commissions to dealers. For the year ended September 30, 1995 and
the period February 1, 1994 through September 30, 1994, SFSI retained CDSL
charges amounting to $276 and $19, respectively.
Effective April 1, 1995, Seligman Services, Inc. ("SSI"), an affiliate of
the Manager, became eligible to receive commissions from certain sales of Fund
shares, as well as distribution and service fees pursuant to the Plan. For the
period ended September 30, 1995, SSI received commission of $85 from sales of
Fund shares. SSI also received distribution and service fees of $743, pursuant
to the Plan.
Class A shares may be sold at net asset value to present and retired
Trustees, directors, officers, employees (and family members, as defined in the
Prospectus) of the Fund, the other investment companies in the Seligman Group,
the Manager and other companies affiliated with the Manager. 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 the
Manager or any affiliate. These sales may be made for investment purposes only,
and shares may be resold only to the Fund.
TAXES
Under the Tax Reform Act of 1986, as amended, each Series of the Trust will
be 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 Series.
The Fund intends to qualify and elect to be treated as a regulated
investment company under the Internal Revenue Code and thus to be relieved of
federal income tax on amounts distributed to shareholders; provided that it
distributes at least 90% of its net investment income and net short-term capital
gains, if any.
Qualification as a regulated investment company under the Internal Revenue
Code requires among other things, that (a) at least 90% of the annual gross
income of the Trust, 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, and forward contracts) derived with respect to its
business of investing in such stocks, securities or currencies; (b) the Fund
derives less than 30% of its gross annual income from gains from the sale or
other disposition of stock, securities and certain other assets held for less
than three months; and (c) the Fund diversifies 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, United States 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 U.S. Government securities).
VALUATION
The net asset value per share of each class of the Fund is determined as of
the close of the New York Stock Exchange ("NYSE") (normally, 4:00 p.m. New York
City time) on each day that the NYSE is open. The Fund and the NYSE are
currently closed on New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. The Fund will
also determine net asset value per share for each class on each day in which
there is a sufficient degree of trading in the Fund's portfolio securities that
the net asset value of Fund shares might be materially affected. Net asset value
-15-
<PAGE>
per share for a class is computed by dividing such class' 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 Manager's fee, are accrued daily and taken into account for the
purpose of determining net asset value. The net asset value of Class D shares
will generally be lower than the net asset value of Class A shares as a result
of the higher distribution fee with respect to Class D 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.
North Carolina tax-exempt securities will be valued on the basis of
quotations provided by an independent pricing service, approved by the Trustees,
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 Trustees. Short-term notes having remaining maturities of 60 days or less
are generally valued at amortized cost.
Generally, trading in certain securities such as tax-exempt securities,
corporate bonds, U.S. 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
the Fund's shares are computed as of such times. Occasionally, events affecting
the value of such securities may occur between such times and the close of the
NYSE which will not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur during
such period, then these securities and other assets will be valued at their fair
market value as determined in good faith by the Trustees.
PERFORMANCE INFORMATION
The annualized yield for the 30-day period ended September 30, 1995 for the
Fund's Class A shares was 4.51%. The annualized yield was computed by dividing
the Fund's net investment income per share earned during a 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, 1995, the last
day of the period. The average number of Class A shares of the Fund used was
4,882,145 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 (which includes fees charged pursuant to the Fund's 12b-1
plan). The 30-day yield was then annualized on a bond-equivalent basis assuming
semi-annual reinvestment and compounding of net investment income, as described
in the Prospectus.
The tax equivalent annualized yield for the 30-day period ended September
30, 1995 for the Fund's Class A shares was 8.09%. 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 44.28% (44.28% being the assumed maximum
combined federal and state income tax rate for individual taxpayers subject to
North Carolina personal income taxes). Then the small portion of the yield
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 maximum federal income tax rate). These two
calculations were then added to the portion of the yield, if any, that was not
attributable to securities, the income of which was not tax exempt.
The average annual total return for the Fund's Class A shares for the
one-year period ended September 30, 1995 was 6.66%, for the five-year period
ended September 30, 1995 was 7.05%, and since inception through the period ended
September 30, 1995 was 6.61%. These returns were computed by assuming a
hypothetical initial payment of $1,000. From this $1,000, the maximum sales load
of $47.50 (4.75% of public offering price) was deducted. It was then assumed
that all of the dividends and distributions paid by the Class A shares over the
relevant time period were reinvested. It was then assumed that at the end of
each of the above periods, the entire amount was redeemed. The average annual
total return was then calculated by calculating 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).
-16-
<PAGE>
The annualized yield for the 30-day period ended September 30, 1995 for the
Fund's Class D shares was 4.00%. The annualized yield was computed by dividing
the net investment income per share earned during this 30-day period by the
maximum offering price per share (i.e., the net asset value) on September 30,
1995, which was the last day of this period. The average number of Class D
shares was 159,876 which was the average daily number of shares outstanding
during the 30-day period that were eligible to receive dividends.
The tax equivalent annualized yield for the 30-day period ended September
30, 1995 for the Fund's Class D shares was 7.18%. 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 44.28%, which percentages assume the
maximum combined federal and state income tax rate for individual taxpayers that
are subject to such personal income taxes.
The average annual return for the Fund's Class D shares for the one-year
period ended September 30, 1995 was 10.19% and since inception through the
period ended September 30, 1995 was 1.28%. These returns were computed by
assuming a hypothetical initial payment of $1,000 in Class D shares and that all
of the dividends and distributions by the Fund's Class D shares over the
relevant time period were reinvested. It was then assumed that at the end of
each period, the entire amount was redeemed, subtracting the 1% CDSL, if
applicable.
The tables below illustrate the total return on a $1,000 investment in Class
A and Class D shares of the Fund from the commencement of their operations
through September 30, 1995, assuming investment of all dividends and capital
gain distributions.
<TABLE>
<CAPTION>
CLASS A SHARES
Value of Capital Value Total Value
Period Initial Gain of of Total
Ended 1 Investment 2 Distributions Dividends Investment 2 Return 1,3
- ------- ------------ ------------- --------- ----------- ---------
<C> <C> <C> <C> <C> <C>
9/30/90 $ 939 $ - $ - $ 939
9/30/91 985 - 66 1,051
9/30/92 1,015 - 133 1,148
9/30/93 1,096 3 215 1,314
9/30/94 973 10 255 1,238
9/30/95 1,032 14 339 1,385 38.52%
CLASS D SHARES
Value of Capital Value Total Value
Period Initial Gain of of Total
Ended 1 Investment 2 Distributions Dividends Investment 2 Return 1,3
- ------- ------------ ------------- --------- ----------- ---------
9/30/94 $ 883 $ - $ 27 $ 910
9/30/95 947 2 72 1,021 2.13%
</TABLE>
1 From commencement of operations of Class A shares on August 27, 1990; and
from commencement of operations of 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 load, 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" assumes investment of all dividends and capital
gain distributions.
-17-
<PAGE>
3 Total return for the Fund is calculated by assuming a hypothetical initial
investment of $1,000 at the beginning of the period specified, subtracting
the maximum sales load or CDSL, 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 period by the amount of the
hypothetical initial investment.
The waiver by the Manager of all of its fees and the reimbursement of
certain Fund expenses during the periods (as set forth under "Management and
Expenses " herein and "Financial Highlights" in the Prospectus) positively
affected the performance results provided in this section.
GENERAL INFORMATION
The Trustees are authorized to classify or reclassify and issue any shares
of beneficial interest of the Trust into any number of other classes without
further action by shareholders. 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.
As a general matter, the Trust will not hold annual or other meetings of the
shareholders. This is because the Declaration of Trust provides for shareholder
voting only (a) for the election or removal of one or more Trustees if a meeting
is called for that purpose, (b) with respect to any contract as to which
shareholder approval is required by the 1940 Act, (c) with respect to any
termination or reorganization of the Trust or any series, including the Fund, to
the extent and as provided in the Declaration of Trust, (d) with respect to any
amendment of the Declaration of Trust (other than amendments establishing and
designating new series, abolishing series when there are no units thereof
outstanding, changing the name of the Trust or the name of any series, supplying
any omission, curing any ambiguity or curing, correcting or supplementing any
provision thereof which is internally inconsistent with any other provision
thereof or which is defective or inconsistent with the 1940 Act or with the
requirements of the Internal Revenue Code of 1986, as amended, or applicable
regulations for the Fund's obtaining the most favorable treatment thereunder
available to regulated investment companies), which amendments require approval
by a majority of the Shares entitled to vote, (e) to the same extent as the
stockholders of a Massachusetts business corporation as to whether or not a
court action, proceeding, or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the shareholders,
and (f) with respect to such additional matters relating to the Trust as may be
required by the 1940 Act, the Declaration of Trust, the By-laws of the Trust,
any registration of the Trust with the Securities and Exchange Commission (the
"Commission") or any state, or as the Trustees may consider necessary or
desirable. Each Trustee serves until the next meeting of shareholders, if any,
called for the purpose of considering the election or reelection of such Trustee
or of a successor to such Trustee, and until the election and qualification of
his successor, if any, elected at such meeting, or until such Trustee sooner
dies, resigns, retires or is removed by the shareholders or two-thirds of the
Trustees.
The shareholders of the Trust have the right, upon the declaration in
writing or vote of more than two-thirds of the Trust's outstanding shares, to
remove a Trustee. The Trustees will call a meeting of shareholders to vote on
the removal of a Trustee upon the written request of the record holders of ten
percent of its shares. In addition, whenever ten or more shareholders of record
who have been such for at least six months preceding the date of application,
and who hold in the aggregate either shares having a net asset value of at least
$25,000 or at least 1 per centum of the outstanding shares, whichever is less,
shall apply to the Trustees in writing, stating that they wish to communicate
with other shareholders with a view to obtaining signatures to a request for a
meeting for the purpose of voting upon the question of removal of any Trustee or
Trustees and accompanied by a form of communication and request which they wish
to transmit, the Trustee shall within five business days after receipt of such
application either: (1) afford to such applicants access to a list of the names
and addresses of all shareholders as recorded on the books of the Trust; or (2)
inform such applicants as to the approximate number of shareholders of record,
and the approximate cost of mailing to them the proposed communication and form
of requests. If the Trustees elect to follow the latter course, the Trustees,
upon the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall, with
reasonable promptness, mail such material to all shareholders of record at their
addresses as recorded on the books, unless within five business days after such
tender the Trustees shall mail to such applicants and file with the Commission,
together with a copy of the material to be mailed, a written statement signed by
at least a majority of the Trustees to the effect that in their opinion either
such material contains untrue statements of fact or omits to state facts
-18-
<PAGE>
necessary to make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such opinion. After
opportunity for hearing upon the objections specified in the written statement
so filed, the Commission may, and if demanded by the Trustees or by such
applicants shall, enter an order either sustaining one or more of such
objections or refusing to sustain any of them. If the Commission shall enter an
order refusing to sustain any of such objections, or if, after the entry of an
order sustaining one or more of such objections, the Commission shall find,
after notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Trustees shall mail copies
of such material to all shareholders with reasonable promptness after the entry
of such order and the renewal of such tender.
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 the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are substantially identical or that the matter does
not significantly affect any interest of such series. However, the Rule exempts
the selection of independent public accountants, the approval of principal
distributing contracts and the election of trustees from the separate voting
requirements of the Rule.
The shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust. The Declaration of Trust also
provides for indemnification and reimbursement of expenses out of a series'
assets for any shareholder held personally liable for obligations of such
series.
Custodian. Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, serves as custodian for the Fund. It also maintains, under the
general supervision of the Manager, the accounting records and determines the
net asset value for the Fund.
Auditors. Deloitte & Touche LLP, independent auditors, have been selected as
auditors of the Fund. Their address is Two World Financial Center, New York, NY
10281.
RISK FACTORS REGARDING INVESTMENTS IN NORTH CAROLINA TAX-EXEMPT SECURITIES
The economy of North Carolina is dependent primarily on manufacturing,
agriculture, tourism and mining. While North Carolina has been moving from an
agriculture to a service and goods producing economy in recent years,
agriculture remains a basic element in the economy of North Carolina, with
tobacco production being the leading single source of agricultural income.
Although there is diversity in the agricultural business in North Carolina,
major legislative or regulatory measures affecting the production and marketing
of tobacco or other negative factors affecting tobacco could adversely impact
the agricultural sector of the North Carolina economy. A strong agribusiness
sector also supports farmers with farm inputs (fertilizer, insecticide,
pesticide and farm machinery) and processing of commodities produced by farmers
(vegetable canning and cigarette manufacturing). North Carolina's manufacturing
employment is among the largest in the Southeast, with textiles being the
largest single source of manufacturing employment in North Carolina. However,
certain portions of the North Carolina manufacturing sector, particularly the
textile industry, have been hurt by foreign competition. Tourist spending has
become a larger factor in the North Carolina economy in recent years.
The North Carolina State Constitution requires that the total expenditures
of the State for each fiscal period covered by the budget must not exceed the
total receipts during the fiscal period and the surplus in the State Treasury at
the beginning of the period. During the State's 1990-1991 fiscal year, North
Carolina began facing a substantial budget shortfall resulting from the failure
of revenues received by the State to meet projected levels. While the State was
successful in dealing with the problem, pressure on State revenues will be an
ongoing problem. State tax revenue receipts for the last six months of 1995 have
been flat compared to significant increases in such receipts during the same
period in 1994.
During the most recent session of the State Legislature, the State's long
standing tax on the value of intangible personal property was repealed. It is
unclear what impact this repeal may have on the State's operating revenues and
budget.
-19-
<PAGE>
General obligations of the State are currently rated "AAA" and "Aaa" by S&P
and Moody's, respectively. There can be no assurance that the economic
conditions on which these ratings are based will continue or that particular
bond issues may not be adversely affected by changes in economic, political or
other conditions, including the State's response to any future budget problem.
When the budget shortfall problem first developed, the State was cautioned by
S&P and Moody's that a failure to respond adequately to the budget shortfall
could result in a reevaluation of the ratings given to the State's general
obligations and the State's response to any future budget problems will be
important to the maintenance of its current ratings. Moreover, such ratings
apply only to obligations of the State and not to those of its political
subdivisions, and the economic information provided above may not be relevant to
obligations issued by such political subdivisions.
FINANCIAL STATEMENTS
The Annual Report to Shareholders for the fiscal year ended September 30, 1995
is incorporated by reference into this Statement of Additional Information. The
Annual Report contains a schedule of the investments of the Fund as well as each
of the Trust's other series as of September 30, 1995, and certain other
financial information as of that date. The Annual Report will be furnished,
without charge, to investors who request copies of the Fund's Statement of
Additional Information.
APPENDIX A
Moody's Investors Service, Inc. ("Moody's")
Tax-Exempt Bonds
Aaa: Tax-Exempt 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: Tax-exempt 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: Tax-exempt 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: Tax-exempt 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: Tax-exempt 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: Tax-exempt 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: Tax-exempt 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: Tax-exempt bonds which are rated Ca represent obligations which are
speculative in high degree. Such issues are often in default or have other
marked shortcomings.
-20-
<PAGE>
C: Tax-exempt 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.
Tax-Exempt Notes
Moody's ratings for tax-exempt 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.
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")
Tax-Exempt Bonds
AAA: Tax-exempt bonds rated AAA are highest grade obligations. Capacity to pay
interest and repay principal is extremely strong.
AA: Tax-exempt bonds rated AA have a very high degree of safety and very
strong capacity to pay interest and repay principal and differs from the highest
rated issues only in small degree.
A: Tax-exempt 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.
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<PAGE>
BBB: Tax-exempt 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: Tax-exempt 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.
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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<PAGE>
APPENDIX B
HISTORY OF J. & W. SELIGMAN & CO. INCORPORATED
Seligman's beginnings date back to 1837, when Joseph Seligman, the
oldest of eight brothers, arrived in the United States from Germany. He earned
his living as a pack peddler in Pennsylvania, and began sending for his
brothers. The Seligmans became successful merchants, establishing businesses in
the South and East.
Backed by nearly thirty years of business success - culminating in the
sale of government securities to help finance the Civil War - Joseph Seligman,
with his brothers, established the international banking and investment firm of
J. & W. Seligman & Co. In the years that followed, the Seligman Complex played a
major role in the geographical expansion and industrial development of the
United States.
The Seligman Complex:
...Prior to 1900
o Helps finance America's fledgling railroads through underwritings.
o Is admitted to the New York Stock Exchange in 1869. Seligman remained a
member of the NYSE until 1993, when the evolution of its business made it
unnecessary.
o Becomes a prominent underwriter of corporate securities, including New
York Mutual Gas Light Company, later part of Consolidated Edison.
o Provides financial assistance to Mary Todd Lincoln and urges the Senate to
award her a pension.
o Is appointed U.S. Navy fiscal agent by President Grant.
o Becomes a leader in raising capital for America's industrial and urban
development.
...1900-1910
o Helps Congress finance the building of the Panama Canal.
...1910s
o Participates in raising billions for Great Britain, France and Italy,
helping to finance World War I.
...1920s
o Participates in hundreds of successful underwritings including those for
some of the Country's largest companies: Briggs Manufacturing, Dodge
Brothers, General Motors, Minneapolis-Honeywell Regulatory Company, Maytag
Company, United Artists Theater Circuit and Victor Talking Machine
Company.
o Forms Tri-Continental Corporation in 1929, today the nation's largest,
diversified closed-end equity investment company, with over $2 billion in
assets and one of its oldest.
...1930s
o Assumes management of Broad Street Investing Co. Inc., its first mutual
fund, today known as Seligman Common Stock Fund, Inc.
o Establishes Investment Advisory Service.
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<PAGE>
...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 40
mutual fund portfolios.
o Helps pioneer state-specific, tax-exempt municipal bond funds, today
managing a national and 18 state-specific tax-exempt 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 Administration Group
plc, of London, known as Seligman Henderson Co., to offer global
investment products.
o Introduces Seligman Frontier Fund, Inc., a small capitalization mutual
fund.
o Launches Seligman Henderson Global Fund Series, Inc., which today offers
four separate series: Seligman Henderson International Fund, Seligman
Henderson Global Smaller Companies Fund, Seligman Henderson Global
Technology Fund and Seligman Henderson Global Growth Opportunities Fund.
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<PAGE>
- -----------------------------------------------------------
Seligman
Tax-Exempt
Series Trust
- -----------------------------------------------------------
11th Annual Report
September 30, 1995
- -----------------------------------------------------------
(LOGO GOES HERE)
To the Shareholders
We are pleased to update you on Seligman Tax-Exempt Series Trust--the
California High-Yield and Quality Series, the Florida Series, and the
North Carolina Series--for the fiscal year ended September 30, 1995.
The past 12 months have been a particularly turbulent period for fixed-
income markets. During the fourth quarter of 1994, a strengthening economy
continued to fuel fears of an acceleration in the inflation rate. By mid-
November, municipal bond yields had climbed to their highest levels since
1991. Investors, until now conspicuous by their absence, were attracted by
higher yields and cautiously began buying. The municipal market, however,
was still trying to absorb an oversupply of inventory as well as attempting
to overcome the aftershocks of the Orange County, California, debacle and
thus improved at a slower rate than the U.S. Treasury market. As 1994 came
to a close, the bond market recovery was firmly under way. The Federal
Reserve Board's (FRB) decision on February 1 to once again raise the
federal funds rate helped to sustain the rally by boosting investor
confidence in the FRB's ability to contain inflation.
The U.S. economy finally began to exhibit signs of moderating during the
second quarter of 1995, spurring further declines in long-term yields. The
FRB, encouraged by economic reports, voted on July 6 to lower the federal
funds rate in order to minimize the risk of a recession. While the bond
markets initially reacted positively to this news, it wasn't long before
the next round of economic reports proved surprisingly robust, prompting
speculation that the economy was not as weak as believed. Long-term yields
reversed their decline and spiked sharply, dashing hopes of an imminent FRB
easing. The municipal market began to improve in late August as signs of
economic strength abated. By September 30, long-term yields were
essentially unchanged from a year ago.
For much of the past year, municipal market participants have been
focusing on tax reform legislation. Investors, concerned about the impact
on the tax-exempt status of municipal securities, have been demanding
higher yields as compensation. Currently, long-term municipal bonds,
compared with taxable bonds, are the most attractive they have been all
year.
A discussion with your Portfolio Manager about your Trust, along with
highlights of performance, long-term investment results, portfolio
holdings, and financial statements, follows this letter.
For any additional information about Seligman Tax-Exempt Series Trust,
or your investment in its shares, please write or call using the toll-free
telephone numbers listed on page 26 of this report.
By order of the Trustees,
/s/ William C. Morris
William C. Morris
Chairman
/s/ Brian T. Zino
Brian T. Zino
President
November 3, 1995
<PAGE>
Seligman Tax-Exempt Series Trust
<TABLE>
<CAPTION>
Highlights September 30, 1995 California California North
High-Yield Quality Florida Carolina
Series Series Series Series
Net Assets:
<S> <C> <C> <C> <C>
Class A (in millions) $51.5 $94.9 $49.0 $37.4
Class D (in millions) 1.3 0.9 0.6 1.3
Yield:*
Class A 4.28% 4.60% 4.04% 4.51%
Class D 3.60 3.94 3.51 4.00
Dividends:**
Class A $0.369 $0.344 $0.403 $0.389
Class D 0.307 0.280 0.339 0.330
Capital Gain Distributions** -- $0.058 $0.002 $0.013
Net asset value per share:
Class A $6.47 $6.65 $7.71 $7.74
Class D 6.48 6.63 7.72 7.74
Maximum offering price per share:
Class A $6.79 $6.98 $8.09 $8.13
Class D 6.48 6.63 7.72 7.74
Moody's/S&P Ratings+
Aaa/AAA 15% 67% 75% 45%
Aa/AA 7 22 16 27
A/A 25 11 9 28
Baa/BBB 14 -- -- --
Non-rated 39 -- -- --
Holdings by Market Sector+
Revenue Bonds 69% 88% 65% 77%
General Obligation Bonds 31 12 35 23
Weighted Average Maturity (years) 15.0 21.8 17.6 22.3
*Current yield representing the annualized yield for the 30-day period ended September 30, 1995.
**Represents per share amount paid or declared in respect of Class A and Class D shares during the year
ended September 30, 1995.
+Percentages based on current market values of long-term holdings.
Note: The yields have been computed in accordance with current SEC regulations and 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 small portion of each State Series' income may be subject to applicable state and local
taxes and to the federal alternative minimum tax. Past performance is not indicative of future investment
results.
</TABLE>
<PAGE>
Annual Performance Overview
The following is a biography of your Portfolio Manager, a discussion with
him regarding Seligman Tax-Exempt Series Trust, and a chart and table
comparing your Trust's performance to the performance of the Lehman
Brothers Municipal Bond Index.
Your Portfolio Manager
(PHOTO of Thomas G. Moles GOES HERE)
Thomas G. Moles is a Managing Director of J. & W. Seligman & Co.
Incorporated, as well as President and Senior Portfolio Manager of Seligman
Select Municipal Fund and Seligman Quality Municipal Fund, and Vice
President and Senior Portfolio Manager of the Seligman tax-exempt mutual
funds which include 19 separate portfolios. He is responsible for more than
$2 billion in tax-exempt securities. Mr. Moles, with more than 25 years of
experience, has spearheaded Seligman's tax-exempt efforts since joining the
firm in 1983.
Factors Affecting Seligman Tax-Exempt Series Trust
"In general, the investment environment for municipal securities in 1995
was much more advantageous than in 1994. Looking back, interest rates
continued to move higher during the fourth quarter of 1994 as negative
market sentiment prevailed. The net asset values on long-term municipal
bond mutual funds, including your Trust, declined as a result. The
municipal market was further impacted by the Orange County, California,
bankruptcy, which undermined confidence in the market.
"During the first half of 1995, yields on municipal bonds trended lower as
the economy exhibited signs of moderating. The municipal market, however,
underperformed the U.S. Treasury market due to concerns regarding tax
reform. During the third quarter, stronger-than-expected economic reports
caused a brief spike in interest rates. By September 30, however, the
overall decline in long-term yields over the past 12 months had caused the
net asset values of your Trust to improve."
Your Manager's Investment Strategy
"For much of the past year, there has been little difference between yields
on 20-year and 30-year municipal bonds. We took advantage of the narrow
yield spread and shortened maturities where opportunities allowed. By
implementing this strategy, the Trust was able to maintain yields while
lessening volatility.
"As the bond market gradually improved, your Trust assumed a less defensive
posture. Shorter-term prerefunded positions were reduced and replaced with
long-term bonds, as long-term bonds generally realize greater price
appreciation than shorter-term bonds in a declining interest rate
environment.
"The Trust continues to concentrate new purchases in higher-quality
municipal bonds. The market has not been offering enough of an additional
yield on lower-rated bonds to compensate for their increased risk. In
addition, the Trust has focused on bonds issued to provide for essential
services, such as water and sewer facilities, transportation projects, etc.
These bonds generally offer increased security because revenues derived
from the projects are often pledged as repayment for the principal and
interest on the bonds."
Looking Ahead
"The municipal market faces many challenges in the months to come. With the
Federal government shifting more and more responsibilities to individual
states, we are concerned about the impact on state budgets. Additionally,
the possibility exists that future tax reform legislation may affect the
tax-exempt status of municipal securities. At present, however, tax reform
is not a consideration in our decision making process. We will continue to
stay abreast of the latest developments and adjust our strategy
accordingly. Despite the challenges, we remain optimistic about the
prospects for the municipal market. We believe a moderating economy and a
vigilant Federal Reserve Board should keep inflation in check and prevent a
repeat of the dramatic interest rate increases that occurred in 1994."
<PAGE>
Performance Comparison Charts and Tables September 30, 1995
The following charts compare a $10,000 hypothetical investment made in each
Series of Seligman Tax-Exempt Series Trust Class A shares, with and without
the maximum initial sales charge of 4.75%, for the 10-year or since-
inception (where applicable) periods ended September 30, 1995, to a $10,000
hypothetical investment made in the Lehman Brothers Municipal Bond Index
(Lehman Index) for the same periods. The performance of each Series of
Seligman Tax-Exempt Series Trust Class D shares is not shown in the charts
but is included in the table below each chart. It is important to keep in
mind that the Lehman Index excludes the effects of any fees or sales
charges, and does not reflect state-specific bond market performance.
Seligman California Tax-Exempt High-Yield Series
(The following table is the source data for the line chart which appears
at this point in the printed document. This table is not part of the
original printed document and is shown for reference only. The same is
also true for this descriptive paragraph.)
Seligman California Tax-Exempt High-Yield Series
Class A
with without
sales charge sales charge Lehman Index
9/30/85 $9,520.77 $10,000.00 $10,000.00
12/31/85 $10,323.43 $10,843.06 $10,807.87
3/31/86 $11,334.69 $11,905.22 $11,902.14
6/30/86 $11,296.66 $11,865.27 $11,829.06
9/30/86 $11,880.77 $12,478.79 $12,464.87
12/31/86 $12,275.72 $12,893.63 $12,895.64
3/31/87 $12,622.22 $13,257.57 $13,207.78
6/30/87 $12,177.96 $12,790.95 $12,849.29
9/30/87 $11,707.44 $12,296.76 $12,529.90
12/31/87 $12,268.72 $12,886.29 $13,089.78
3/31/88 $12,771.63 $13,414.50 $13,539.73
6/30/88 $13,004.99 $13,659.62 $13,802.22
9/30/88 $13,431.15 $14,107.22 $14,156.10
12/31/88 $13,879.33 $14,577.96 $14,420.02
3/31/89 $14,027.29 $14,733.37 $14,515.52
6/30/89 $14,678.98 $15,417.85 $15,374.75
9/30/89 $14,721.66 $15,462.68 $15,385.45
12/31/89 $15,167.06 $15,930.49 $15,975.78
3/31/90 $15,301.71 $16,071.92 $16,047.33
6/30/90 $15,631.01 $16,417.79 $16,422.02
9/30/90 $15,541.83 $16,324.13 $16,431.64
12/31/90 $16,077.50 $16,886.75 $17,140.38
3/31/91 $16,446.51 $17,274.34 $17,527.83
6/30/91 $16,802.18 $17,647.91 $17,901.99
9/30/91 $17,488.55 $18,368.83 $18,597.71
12/31/91 $17,762.48 $18,656.55 $19,221.27
3/31/92 $18,017.02 $18,923.91 $19,278.39
6/30/92 $18,663.01 $19,602.40 $20,009.10
9/30/92 $19,062.02 $20,021.49 $20,541.50
12/31/92 $19,455.87 $20,435.17 $20,915.25
3/31/93 $20,021.06 $21,028.81 $21,692.06
6/30/93 $20,599.23 $21,636.07 $22,401.82
9/30/93 $21,094.50 $22,156.28 $23,159.00
12/31/93 $21,383.44 $22,459.77 $23,484.78
3/31/94 $20,891.01 $21,942.55 $22,195.61
6/30/94 $21,008.52 $22,065.98 $22,439.94
9/30/94 $21,181.22 $22,247.39 $22,593.72
12/31/94 $20,786.71 $21,833.02 $22,270.84
3/31/95 $22,133.48 $23,247.58 $23,844.34
6/30/95 $22,557.45 $23,692.89 $24,418.70
9/30/95 $23,055.37 $24,215.86 $25,120.77
The table below shows the average annual total returns for the one-, five-,
and 10-year periods through September 30, 1995, for Seligman California
Tax-Exempt High-Yield Series Class A shares, with and without the maximum
initial sales charge of 4.75%, and the Lehman Index. Also included in the
table are the average annual total returns for the one-year and since-
inception periods through September 30, 1995, for Seligman California Tax-
Exempt High-Yield Series Class D shares, with and without the effect of the
1% contingent deferred sales load ("CDSL") imposed on shares redeemed
within one year of purchase, and the Lehman Index.
Average Annual Total Returns
<TABLE>
<CAPTION>
Since
One Five 10 One Inception
Year Years Years Year 2/1/94
---- ----- ----- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Seligman California Tax-Exempt Seligman California Tax-Exempt
High-Yield Series High-Yield Series
Class A with Sales Charge 3.74% 7.15% 8.71% Class D with CDSL 6.78% n/a
Class A without Sales Charge 8.85 8.21 9.25 Class D without CDSL 7.78 3.05%
Lehman Index 11.18 8.86 9.65 Lehman Index 11.18 3.43
See page 7 for footnotes.
</TABLE>
<PAGE>
Seligman California Tax-Exempt Quality Series
(The following table is the source data for the line chart which appears
at this point in the printed document. This table is not part of the
original printed document and is shown for reference only. The same is
also true for this descriptive paragraph.)
Seligman California Tax-Exempt Quality Series
Class A
with without
sales charge sales charge Lehman Index
9/30/85 $9,522.29 $10,000.00 $10,000.00
12/31/85 $10,333.27 $10,851.66 $10,807.87
3/31/86 $11,305.52 $11,872.68 $11,902.14
6/30/86 $11,189.29 $11,750.62 $11,829.06
9/30/86 $11,718.20 $12,306.07 $12,464.87
12/31/86 $12,231.93 $12,845.56 $12,895.64
3/31/87 $12,503.32 $13,130.56 $13,207.78
6/30/87 $11,922.83 $12,520.94 $12,849.29
9/30/87 $11,414.86 $11,987.49 $12,529.90
12/31/87 $12,085.15 $12,691.41 $13,089.78
3/31/88 $12,502.91 $13,130.12 $13,539.73
6/30/88 $12,758.33 $13,398.35 $13,802.22
9/30/88 $13,054.54 $13,709.41 $14,156.10
12/31/88 $13,533.25 $14,212.14 $14,420.02
3/31/89 $13,626.57 $14,310.13 $14,515.52
6/30/89 $14,460.79 $15,186.21 $15,374.75
9/30/89 $14,341.10 $15,060.52 $15,385.45
12/31/89 $14,855.06 $15,600.26 $15,975.78
3/31/90 $14,837.34 $15,581.64 $16,047.33
6/30/90 $15,212.28 $15,975.41 $16,422.02
9/30/90 $14,946.88 $15,696.69 $16,431.64
12/31/90 $15,830.33 $16,624.46 $17,140.38
3/31/91 $16,096.70 $16,904.20 $17,527.83
6/30/91 $16,401.92 $17,224.73 $17,901.99
9/30/91 $17,091.70 $17,949.10 $18,597.71
12/31/91 $17,606.56 $18,489.80 $19,221.27
3/31/92 $17,578.29 $18,460.11 $19,278.39
6/30/92 $18,352.27 $19,272.92 $20,009.10
9/30/92 $18,725.49 $19,664.86 $20,541.50
12/31/92 $19,100.90 $20,059.10 $20,915.25
3/31/93 $20,010.30 $21,014.11 $21,692.06
6/30/93 $20,621.98 $21,656.47 $22,401.82
9/30/93 $21,332.07 $22,402.18 $23,159.00
12/31/93 $21,508.81 $22,587.79 $23,484.78
3/31/94 $20,083.52 $21,091.00 $22,195.61
6/30/94 $20,115.12 $21,124.19 $22,439.94
9/30/94 $20,167.59 $21,179.29 $22,593.72
12/31/94 $19,723.76 $20,713.20 $22,270.84
3/31/95 $21,493.30 $22,571.50 $23,844.34
6/30/95 $21,773.93 $22,866.21 $24,418.70
9/30/95 $22,354.85 $23,476.27 $25,120.77
The table below shows the average annual total returns for the one-, five-,
and 10-year periods through September 30, 1995, for Seligman California
Tax-Exempt Quality Series Class A shares, with and without the maximum
initial sales charge of 4.75%, and the Lehman Index. Also included in the
table are the average annual total returns for the one-year and since-
inception periods through September 30, 1995, for Seligman California Tax-
Exempt Quality Series Class D shares, with and without the effect of the 1%
contingent deferred sales load ("CDSL") imposed on shares redeemed within
one year of purchase, and the Lehman Index.
Average Annual Total Returns
<TABLE>
<CAPTION>
Since
One Five 10 One Inception
Year Years Years Year 2/1/94
---- ----- ----- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Seligman California Tax-Exempt Seligman California Tax-Exempt
Quality Series Quality Series
Class A with Sales Charge 5.56% 7.33% 8.38% Class D with CDSL 8.61% n/a
Class A without Sales Charge 10.85 8.38 8.91 Class D without CDSL 9.61 0.50%
Lehman Index 11.18 8.86 9.65 Lehman Index 11.18 3.43
See page 7 for footnotes.
</TABLE>
<PAGE>
Seligman Florida Tax-Exempt Series
(The following table is the source data for the line chart which appears
at this point in the printed document. This table is not part of the
original printed document and is shown for reference only. The same is
also true for this descriptive paragraph.)
Seligman Florida Tax-Exempt Series
Class A
with without
sales charge sales charge Lehman Index
11/17/86 $9,520.00 $10,000.00 $10,000.00
12/31/86 $9,440.00 $9,915.96 $9,972.40
3/31/87 $9,746.15 $10,237.55 $10,213.78
6/30/87 $9,038.15 $9,493.86 $9,936.55
9/30/87 $8,497.14 $8,925.56 $9,689.56
12/31/87 $9,211.39 $9,675.82 $10,122.53
3/31/88 $9,528.34 $10,008.75 $10,470.48
6/30/88 $9,821.14 $10,316.32 $10,673.47
9/30/88 $10,181.11 $10,694.43 $10,947.14
12/31/88 $10,602.68 $11,137.25 $11,151.23
3/31/89 $10,667.50 $11,205.34 $11,225.08
6/30/89 $11,466.91 $12,045.05 $11,889.54
9/30/89 $11,329.57 $11,900.79 $11,897.81
12/31/89 $11,806.56 $12,401.83 $12,354.32
3/31/90 $11,780.85 $12,374.83 $12,409.65
6/30/90 $12,088.56 $12,698.06 $12,669.40
9/30/90 $11,921.60 $12,522.68 $12,706.84
12/31/90 $12,568.70 $13,202.41 $13,254.92
3/31/91 $12,807.12 $13,452.86 $13,554.55
6/30/91 $13,070.42 $13,729.43 $13,843.89
9/30/91 $13,519.93 $14,201.60 $14,381.90
12/31/91 $13,902.81 $14,603.78 $14,864.10
3/31/92 $13,936.69 $14,639.37 $14,908.27
6/30/92 $14,487.07 $15,217.51 $15,473.35
9/30/92 $14,769.87 $15,514.56 $15,885.06
12/31/92 $15,164.27 $15,928.85 $16,174.09
3/31/93 $15,728.89 $16,521.94 $16,774.81
6/30/93 $16,410.07 $17,237.46 $17,323.68
9/30/93 $17,015.92 $17,873.85 $17,909.21
12/31/93 $17,214.39 $18,082.34 $18,161.15
3/31/94 $16,183.72 $16,999.71 $17,164.21
6/30/94 $16,310.21 $17,132.58 $17,353.16
9/30/94 $16,337.34 $17,161.07 $17,472.07
12/31/94 $16,264.46 $17,084.52 $17,222.38
3/31/95 $17,402.95 $18,280.41 $18,439.20
6/30/95 $17,677.99 $18,569.31 $18,883.36
9/30/95 $18,113.67 $19,026.96 $19,426.28
The table below shows the average annual total returns for the one-year,
five-year, and since-inception periods through September 30, 1995, for
Seligman Florida Tax-Exempt Series Class A shares, with and without the
maximum initial sales charge of 4.75%, and the Lehman Index. Also included
in the table are the average annual total returns for the one-year and
since-inception periods through September 30, 1995, for Seligman Florida
Tax-Exempt Series Class D shares, with and without the effect of the 1%
contingent deferred sales load ("CDSL") imposed on shares redeemed within
one year of purchase, and the Lehman Index.
Average Annual Total Returns+
<TABLE>
<CAPTION>
Since Since
One Five Inception One Inception
Year Years 11/17/86 Year 2/1/94
---- ----- --------- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Seligman Florida Seligman Florida
Tax-Exempt Series Tax-Exempt Series
Class A with Sales Charge 5.55% 7.69% 6.93% Class D with CDSL 9.07% n/a
Class A without Sales Charge 10.87 8.73 7.52 Class D without CDSL 10.07 1.66%
Lehman Index 11.18 8.86 7.81* Lehman Index 11.18 3.43
*From 11/30/86.
</TABLE>
See page 7 for footnotes.
<PAGE>
Seligman North Carolina Tax-Exempt Series
(The following table is the source data for the line chart which appears
at this point in the printed document. This table is not part of the
original printed document and is shown for reference only. The same is
also true for this descriptive paragraph.)
Seligman North Carolina Tax-Exempt Series
Class A
with without
sales charge sales charge Lehman Index
8/27/90 $9,520.00 $10,000.00 $10,000.00
9/30/90 $9,386.66 $9,859.94 $10,005.70
12/31/90 $9,783.90 $10,277.21 $10,437.27
3/31/91 $9,982.14 $10,485.43 $10,673.21
6/30/91 $10,082.82 $10,591.19 $10,901.04
9/30/91 $10,509.87 $11,039.77 $11,324.68
12/31/91 $10,823.93 $11,369.67 $11,704.39
3/31/92 $10,779.24 $11,322.73 $11,739.17
6/30/92 $11,211.91 $11,777.21 $12,184.12
9/30/92 $11,479.45 $12,058.24 $12,508.32
12/31/92 $11,706.35 $12,296.58 $12,735.90
3/31/93 $12,197.08 $12,812.04 $13,208.93
6/30/93 $12,631.47 $13,268.32 $13,641.12
9/30/93 $13,138.91 $13,801.36 $14,102.18
12/31/93 $13,225.95 $13,892.77 $14,300.57
3/31/94 $12,335.48 $12,957.41 $13,515.55
6/30/94 $12,372.28 $12,996.07 $13,664.33
9/30/94 $12,376.73 $13,000.75 $13,757.97
12/31/94 $12,254.16 $12,872.00 $13,561.36
3/31/95 $13,322.58 $13,994.27 $14,519.51
6/30/95 $13,563.10 $14,246.92 $14,869.25
9/30/95 $13,852.23 $14,550.63 $15,296.76
The table below shows the average annual total returns for the one-year,
five-year, and since-inception periods through September 30, 1995, for
Seligman North Carolina Tax-Exempt Series Class A shares, with and without
the maximum initial sales charge of 4.75%, and the Lehman Index. Also
included in the table are the average annual total returns for the one-year
and since-inception periods through September 30, 1995, for Seligman North
Carolina Tax-Exempt Series Class D shares, with and without the effect of
the 1% contingent deferred sales load ("CDSL") imposed on shares redeemed
within one year of purchase, and the Lehman Index.
Average Annual Total Returns+
<TABLE>
<CAPTION>
Since Since
One Five Inception One Inception
Year Years 8/27/90 Year 2/1/94
---- ----- --------- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Seligman North Carolina Seligman North Carolina
Tax-Exempt Series Tax-Exempt Series
Class A with Sales Charge 6.66% 7.05% 6.61% Class D with CDSL 10.19% n/a
Class A without Sales Charge 11.92 8.09 7.64 Class D without CDSL 11.19 1.28%
Lehman Index 11.18 8.86 8.72* Lehman Index 11.18 3.43
*From 8/31/90.
</TABLE>
+ At its discretion, the Manager waived all or a portion of its fees and,
in some cases, reimbursed certain expenses for the Florida and North
Carolina Series. This has the effect of increasing the Series' average
annual total returns for all periods presented.
No adjustment was made to Class A shares' performance for periods prior to
commencement dates, December 27, 1990, in the case of the Florida Series,
and January 1, 1993, in the case of the California High-Yield and
California Quality Series, for the annual Administration, Shareholder
Services and Distribution Plan fee of up to 0.25% of average daily net
assets of each Series. The performance of Class D shares will be greater
than or less than the performance shown for Class A shares, based on
differences in sales charges and fees paid by shareholders. Performance
data quoted represent changes in prices and assume that all distributions
within the periods are invested in additional shares. The investment return
and principal value of an investment will fluctuate so that shares, if
redeemed, may be worth more or less than their original cost. Past
performance is not indicative of future investment results.
<PAGE>
<TABLE>
Portfolios of Investments September 30, 1995
<CAPTION>
CALIFORNIA HIGH-YIELD SERIES
Face Ratings Market
Amount Municipal Bonds Moody's/S&P+ Value
------ --------------- ------------ -----------
<C> <S> <C> <C>
$ 710,000 Alameda, CA Community Improvement Commission Tax Allocation Bonds
(West End Community Improvement Project), 9.20% due 1/1/2016 NR/NR $ 751,457
1,000,000 Bakersfield, CA Hospital Rev. (Bakersfield Memorial Hospital), 6.50% due 1/1/2022 A/A 1,013,220
825,000 Barstow, CA Redevelopment Agency Tax Allocation Bonds (Central Redevelopment
Project), 7 5/8% due 8/1/2011 NR/NR 873,724
3,000,000 California Department of Water Resources Water System Rev. (Central Valley Project),
6% due 12/1/2020 Aa/AA 2,984,250
1,000,000 California Health Facilities Financing Authority Rev. Catholic Health Corporation
(St. Elizabeth Community Hospital Project), 6.30% due 11/15/2015 A1/A+ 1,001,950
1,500,000 California Pollution Control Financing Authority Pollution Control Rev.
(Pacific Gas & Electric Co.), 7.50% due 5/1/2016 A2/A 1,564,800
2,500,000 California Public Works Board Lease Rev. (Department of Corrections--Del Norte),
5 1/8% due 12/1/2008 A/A- 2,376,750
1,000,000 Cupertino, CA Certificates of Participation (Cupertino Public Facilities Corporation),
7.75% due 7/1/2016 NR/NR 1,047,010
175,000 Fairfield, CA Improvement Bonds (Smith Ranch Assessment District),
7.35% due 9/2/2003 NR/NR 180,448
155,000 Fairfield, CA Improvement Bonds (Smith Ranch Assessment District),
7.40% due 9/2/2007 NR/NR 159,745
1,000,000 Folsom, CA Special Tax Bonds (Willow Creek Community Facilities District No. 1),
8.25% due 12/1/2006 NR/NR 1,073,350
1,000,000 Fontana, CA Certificates of Participation (Police Facility Project), 7.75% due 4/1/2016 Baa/NR 1,038,220
500,000 Los Angeles, CA Certificates of Participation (Convention & Exhibition Center
Authority), 7 3/8% due 8/15/2018 Aaa/AAA 561,275
500,000 Los Angeles, CA Community Redevelopment Agency Multi-Family Housing Rev.
(Grand Central Square), 5.85% due 12/1/2026* A/BBB+ 436,460
1,300,000 Los Angeles, CA Wastewater System Rev., 7.10% due 6/1/2018 A1/A 1,426,841
1,000,000 Los Angeles County, CA Certificates of Participation (Sheriff's Training Academy
and San Fernando Courthouse), 7.75% due 7/1/2016 NR/NR 1,047,010
2,385,000 Los Angeles County, CA Transportation Commission Sales Tax Rev.,
5.75% due 7/1/2018 Aaa/AAA 2,308,370
400,000 Milpitas, CA Local Improvement District No. 9 (Milpitas Business Park),
7.25% due 9/2/2007 NR/NR 408,608
400,000 Milpitas, CA Local Improvement District No. 9 (Milpitas Business Park),
7.30% due 9/2/2008 NR/NR 409,380
250,000 Milpitas, CA Local Improvement District No. 9 (Milpitas Business Park),
7.30% due 9/2/2011 NR/NR 255,180
100,000 Oxnard, CA Certificates of Participation (River Ridge Public Parking Project),
9.10% due 12/1/2003 Baa1/BBB+ 102,852
1,000,000 Oxnard Union High School District, CA Certificates of Participation
(Union High School), 7.70% due 11/1/2019 NR/NR 1,139,340
750,000 Petaluma, CA Community Development Commission Tax Allocation Bonds
(Central Business District), 9.30% due 5/15/2010 Baa1/NR 756,727
2,245,000 Pleasanton, CA Joint Powers Financing Authority Reassessment Rev.,
6.15% due 9/2/2012 Baa/NR 2,237,816
1,020,000 Rancho Mirage, CA Improvement Bonds Assessment District No. 22-85
(Frank Sinatra Drive Extension), 8.30% due 9/2/2008 NR/NR 1,053,813
1,200,000 Rancho Mirage, CA Improvement Bonds Assessment District No. 22-85
(Frank Sinatra Drive Extension), 8.30% due 9/2/2011 NR/NR 1,240,296
5,000 Riverside County, CA (Single Family Mortgage Rev.), 10.50% due 9/1/2014 NR/BBB+ 5,253
2,000,000 San Francisco, CA State Building Authority Lease Rev. (State of California Dept. of
General Services Lease), 5% due 10/1/2013 A/A- 1,769,540
3,000,000 San Joaquin Hills, CA Transportation Corridor Agency (Orange County
Senior Lien Toll Road), 6.75% due 1/1/2032 NR/NR 3,040,740
1,500,000 Santa Barbara, CA Certificates of Participation (Harbor Improvement Project),
7.70% due 10/1/2016 NR/NR 1,530,435
1,000,000 Santa Clara, CA Improvement Bonds Project No. 186 (Santa Clara Convention Center
Complex), 7.10% due 9/2/2011 NR/NR 1,030,410
1,500,000 Santa Cruz, CA Hospital Rev. (Dominican Santa Cruz Hospital), 7% due 12/1/2013 A1/A+ 1,586,550
2,000,000 Santa Margarita, CA Water District G.O.'s, 7.50% due 11/1/2005 NR/NR 2,091,640
1,000,000 Southern California Public Power Authority Power Project Rev. (Multiple Projects),
6% due 7/1/2018 A/A 970,910
3,000,000 Southern California Public Power Authority Power Project Rev. (Multiple Projects),
6% due 7/1/2018 Aaa/AAA 3,203,670
940,000 Stanislaus, CA Waste-to-Energy Financing Agency Solid Waste Facility Rev.
(Ogden Martin System of Stanislaus, Inc. Project), 7.50% due 1/1/2005 NR/BBB+ 985,421
785,000 Stanislaus, CA Waste-to-Energy Financing Agency Solid Waste Facility Rev.
(Ogden Martin System of Stanislaus, Inc. Project), 7 5/8% due 1/1/2010 NR/BBB+ 834,628
250,000 Tustin, CA Improvement Bonds (Assessment District No. 85-1), 8.15% due 9/2/2011 NR/NR 256,377
615,000 Tustin, CA Improvement Bonds (Assessment District No. 85-1), 8.15% due 9/2/2011 NR/NR 635,855
1,000,000 Ukiah, CA Electric Rev., 8% due 6/1/2018 NR/AAA 1,047,160
-----------
Total Municipal Bonds (Cost $44,563,474)--88.0% 46,437,481
-----------
Variable Rate Demand Notes
--------------------------
2,000,000 New York City G.O.'s due 10/1/2021 VMIG-1/A-1+ 2,000,000
3,300,000 Person County, NC Industrial Facility & Pollution Control Rev. due 11/1/2016* P-1/NR 3,300,000
-----------
Total Variable Rate Demand Notes (Cost $5,300,000)--10.0% 5,300,000
-----------
Other Assets Less Liabilities--2.0% 1,043,830
-----------
NET ASSETS--100.0% $52,781,311
* Interest income earned from this security is subject to the federal alternative minimum tax. ===========
+ Ratings have not been audited by Deloitte & Touche LLP.
See notes to financial statements.
<PAGE>
<CAPTION>
CALIFORNIA QUALITY SERIES
Face Ratings Market
Amount Municipal Bonds Moody's/S&P+ Value
------ --------------- ------------ -----------
<C> <S> <C> <C>
$2,000,000 California Department of Water Resources Water System Rev. (Central Valley Project),
6 1/8% due 12/1/2013 Aa/AA $ 2,021,140
2,000,000 California Educational Facilities Authority Rev. (Stanford University), 6.75% due 1/1/2013 Aaa/AAA 2,187,160
3,200,000 California Educational Facilities Authority Rev. (University of Southern California Project),
5.80% due 10/1/2015 Aa/AA 3,086,304
3,440,000 California Educational Facilities Authority Rev. (Pomona College), 6% due 2/15/2017 Aa1/AA 3,439,656
4,500,000 California Educational Facilities Authority Rev. (California Institute of Technology),
6% due 1/1/2021 Aaa/AAA 4,501,755
3,000,000 California Health Facilities Financing Authority Health Facility Rev. (Kaiser Permanente),
6.50% due 12/1/2020 Aa3/AA 3,056,340
2,000,000 California Health Facilities Financing Authority Insured Hospital Rev.
(Scripps Memorial Hospital), 6 3/8% due 10/1/2022 Aaa/AAA 2,061,400
5,000 California Housing Finance Agency (Housing Revenue Insured Bonds),
8.75% due 8/1/2010 Aaa/AAA 5,309
425,000 California Housing Finance Agency (Housing Revenue Insured Bonds),
8 5/8% due 8/1/2015 Aaa/AAA 450,547
2,000,000 California Housing Finance Agency Housing Rev., 5.60% due 8/1/2024 Aaa/AAA 1,862,300
2,850,000 California Housing Finance Agency Home Mortgage Rev., 6.75% due 2/1/2025* Aa/AA- 2,911,132
960,000 California Public Capital Improvements Financing Authority (Pooled Projects),
8.10% due 3/1/2018 Aaa/AAA 1,036,819
3,000,000 California Public Works Board Lease Rev. (Correctional Facilities Improvements),
5.75% due 9/1/2021 A/A- 2,797,590
7,000,000 California State G.O.'s, 4.75% due 9/1/2010 A1/A 6,170,010
3,000,000 California Statewide Communities Development Authority Certificates of Participation
(The Trustees of the J. Paul Getty Trust), 5% due 10/1/2023 Aaa/AAA 2,632,140
5,000,000 Contra Costa Water District, CA, 5.50% due 10/1/2019 Aaa/AAA 4,732,600
3,500,000 East Bay, CA Municipal Utility District Water System Rev., 6% due 6/1/2012 Aaa/AAA 3,537,275
2,500,000 Eastern Municipal Water District Riverside County, CA Water and Sewer Rev.,
6.75% due 7/1/2012 Aaa/AAA 2,786,375
3,000,000 Fresno, CA Sewer System Rev., 5.25% due 9/1/2019 Aaa/AAA 2,760,540
2,000,000 Industry, CA G.O.'s, 7 3/8% due 7/1/2015 Aaa/AAA 2,247,300
3,000,000 Los Angeles Department of Water & Power, CA Electric Plant Rev., 6 3/8% due 2/1/2020 Aa/AA- 3,060,480
2,000,000 M-S-R Public Power Agency, CA (San Juan Project), 6 7/8% due 7/1/2019 Aaa/AAA 2,088,720
2,000,000 Marin, CA Municipal Water District Water Rev., 5.65% due 7/1/2023 A1/AA 1,885,140
3,000,000 Metropolitan Water District of Southern California Waterworks G.O.'s,
5.75% due 3/1/2014 Aaa/AAA 2,949,660
4,500,000 Northern California Power Agency Public Power Rev. (Combustion Turbine Project A-1),
6% due 8/15/2010 Aaa/AAA 4,567,815
4,500,000 Orange County, CA Local Transportation Authority (Measure M Sales Tax Rev.),
6% due 2/15/2009 Aaa/AAA 4,624,740
3,250,000 San Francisco Bay Area Rapid Transit District, CA (Sales Tax Rev.), 6.60% due 7/1/2012 Aaa/AAA 3,474,868
3,000,000 San Francisco, CA (City & County) Airport Commission Rev.
(International Airport), 6.60% due 5/1/2024* Aaa/AAA 3,160,950
3,000,000 San Francisco, CA (City & County) Public Utilities Commission Water Rev.,
6% due 11/1/2015 Aa/AA 3,001,500
2,000,000 Santa Rosa, CA (Sonoma County) Wastewater Rev. (Subregional Wastewater Project),
6.50% due 9/1/2022 Aaa/AAA 2,100,580
4,500,000 Southern California Public Power Authority Transmission Project Rev.,
5% due 7/1/2022 Aaa/AAA 3,893,085
5,000,000 University of California Regents (Multiple Purpose Projects), 6 3/8% due 9/1/2024 Aaa/AAA 5,152,100
-----------
Total Municipal Bonds (Cost $92,560,054)--98.4% 94,243,330
Variable Rate Demand Notes (Cost $300,000)--0.3% 300,000
Other Assets Less Liabilities--1.3% 1,266,225
-----------
NET ASSETS--100.0% $95,809,555
* Interest income earned from this security is subject to the federal alternative minimum tax. ===========
+ Ratings have not been audited by Deloitte & Touche LLP.
See notes to financial statements.
<PAGE>
<CAPTION>
FLORIDA SERIES
Face Ratings Market
Amount Municipal Bonds Moody's/S&P+ Value
------ --------------- ------------ -----------
<C> <S> <C> <C>
500,000 Broward County, FL G.O.'s (Environmentally Sensitive Lands Project),
6.90% due 7/1/2009 Aaa/AAA $ 532,925
2,000,000 Broward County, FL Water & Sewer Utility Rev., 6.50% due 10/1/2017 Aaa/AAA 2,227,080
2,500,000 Broward County, FL Water & Sewer Utility Rev., 5% due 10/1/2018 Aaa/AAA 2,241,825
1,500,000 Broward County School District, FL G.O.'s, 7 1/8% due 2/15/2008 Aaa/AAA 1,659,285
1,500,000 Citrus County, FL Pollution Control Rev. (Florida Power Corporation Crystal River
Power Plant Project), 6 5/8% due 1/1/2027 A1/A+ 1,574,070
2,000,000 Collier County, FL Water & Sewer Rev., 5.25% due 7/1/2021 Aaa/AAA 1,838,640
1,250,000 Dade County, FL Aviation Rev., 6 1/8% due 10/1/2020* Aaa/AAA 1,262,425
1,000,000 Dade County, FL Public Facilities Rev. (Jackson Memorial Hospital),
5.25% due 6/1/2023 Aaa/AAA 910,520
1,000,000 Dade County, FL Seaport G.O.'s, 6.25% due 10/1/2021 Aaa/AAA 1,030,420
2,000,000 Dade County Health Facilities Authority, FL Hospital Rev. (Baptist Hospital
of Miami Project), 5.25% due 5/15/2021 Aaa/AAA 1,826,700
1,000,000 Dunes Community Development District, FL Rev. (Intracoastal Waterway Bridge Project),
7% due 2/1/2007 NR/A 1,056,540
1,000,000 Florida Housing Finance Agency (General Mortgage Rev.), 6.35% due 6/1/2014 NR/AAA 1,020,140
1,000,000 Florida Housing Finance Agency Rev. (Single Family Mortgage), 6.55% due 7/1/2014* Aa/AAA 1,026,300
1,000,000 Florida State Board of Education Public Education Capital Outlay, 6.75% due 6/1/2021 Aa/AA 1,116,560
1,000,000 Florida State Department of Natural Resources Rev. (Save Our Coast),
7.35% due 7/1/2008 Aaa/AAA 1,045,700
1,000,000 Florida State Municipal Power Agency Rev. (St. Lucie Project), 5.50% due 10/1/2012 Aaa/AAA 972,030
2,500,000 Florida State Turnpike Authority Turnpike Rev., 5 5/8% due 7/1/2025 Aaa/AAA 2,441,500
1,500,000 Gainesville, FL Utilities System Rev., 5.50% due 10/1/2013 Aa/AA 1,455,000
2,500,000 Hillsborough County, FL Aviation Authority Rev. (Tampa International Airport),
5 3/8% due 10/1/2023* Aaa/AAA 2,329,225
1,000,000 Hollywood, FL Water & Sewer Rev., 6 7/8% due 10/1/2021 Aaa/AAA 1,135,670
1,050,000 Jacksonville Beach, FL Utilities Rev., 7.50% due 10/1/2014 Aaa/AAA 1,108,391
1,500,000 Jacksonville Electric Authority, FL Rev. (St. Johns River Power Park System),
5.50% due 10/1/2013 Aa1/AA 1,456,620
2,000,000 Kissimmee Utility Authority, FL Electric System Improvement Rev.,
5.25% due 10/1/2018 Aaa/AAA 1,856,440
1,000,000 Lee County, FL Transportation Facilities Rev., 6% due 10/1/2015 Aaa/AAA 1,010,650
1,000,000 Naples, FL Hospital Rev. (Naples Community Hospital, Inc. Project), 7% due 10/1/2013 Aaa/AAA 1,050,720
1,000,000 Orange County Health Facilities Authority, FL Rev. (Orlando Regional Medical Center),
6.80% due 10/1/2015 Aaa/AAA 1,072,120
2,000,000 Orlando, FL Utilities Commission Water & Electric Rev., 5.50% due 10/1/2026 Aa/AA- 1,884,020
1,000,000 Orlando-Orange County Expressway Authority, FL Expressway Rev., 7.50% due 7/1/2016 Aaa/AAA 1,046,790
1,000,000 Osceola County, FL Transportation Rev. (Osceola Parkway Project), 6.10% due 4/1/2017 Aaa/AAA 1,012,550
1,200,000 Palm Beach County, FL Criminal Justice Facilities Rev., 7.25% due 6/1/2011 Aaa/AAA 1,362,492
1,500,000 Palm Beach County, FL Water & Sewer Rev., 7 1/8% due 10/1/2009 A1/A+ 1,570,740
1,625,000 Palm Beach County, FL Water & Sewer Rev., 5.25% due 10/1/2013 Aaa/AAA 1,536,340
1,000,000 Pensacola Health Facilities Authority, FL Health Facilities Rev. (Daughters of Charity
National Health System--Sacred Heart Hospital of Pensacola), 5.25% due 1/1/2011 Aa/NR 930,350
1,000,000 St. Lucie County, FL Utility System Rev., 7 1/8% due 10/1/2017 Aaa/AAA 1,137,310
1,250,000 Volusia County, FL Educational Facilities Authority Rev. (Embry-Riddle Aeronautical
University Project), 6 5/8% due 10/15/2022 NR/AAA 1,319,025
-----------
Total Municipal Bonds (Cost $46,771,044)--96.8% 48,057,113
Variable Rate Demand Notes (Cost $500,000)--1.0% 500,000
Other Assets Less Liabilities--2.2% 1,075,778
-----------
NET ASSETS--100.0% $49,632,891
* Interest income earned from this security is subject to the federal alternative minimum tax. ===========
Ratings have not been audited by Deloitte & Touche LLP.
See notes to financial statements.
<CAPTION>
NORTH CAROLINA SERIES
Face Ratings Market
Amount Municipal Bonds Moody's/S&P+ Value
------ --------------- ------------ -----------
<C> <S> <C> <C>
1,250,000 Appalachian State University, NC Housing & Student Center System Rev.,
5 5/8% due 7/15/2015 Aaa/AAA $1,221,450
600,000 Buncombe County, NC Metropolitan Sewerage District (Sewerage System Rev.),
5.50% due 7/1/2022 Aaa/AAA 574,842
2,000,000 Charlotte-Mecklenburg Hospital Authority, NC Health Care System Rev.,
6.25% due 1/1/2020 Aa/AA 2,018,980
1,000,000 Charlotte, NC Certificates of Participation (Charlotte-Mecklenburg Law Enforcement
Center Project), 5 3/8% due 6/1/2013 Aa1/AA 961,860
2,000,000 Charlotte, NC Water & Sewer G.O.'s, 5.90% due 2/1/2017 Aaa/AAA 2,051,300
1,590,000 Concord, NC Utilities System Rev., 5.75% due 12/1/2017 Aaa/AAA 1,574,116
500,000 Cumberland County, NC Hospital Facility Rev. (Cumberland County Hospital
System, Inc.), 6% due 10/1/2021 Aaa/AAA 498,040
2,000,000 Fayetteville, NC Public Works Commission Rev., 4.75% due 3/1/2014 Aaa/AAA 1,739,540
2,500,000 Martin County Industrial Facilities and Pollution Control Financing Authority, NC
(Weyerhaeuser Company Project), 5.65% due 12/1/2023* A2/A 2,305,200
1,000,000 North Carolina Eastern Municipal Power Agency Power System Rev., 5% due 1/1/2021 Aaa/BBB+ 892,100
500,000 North Carolina Educational Facilities Financing Authority Rev. (Duke University Project),
6.75% due 10/1/2021 Aa1/AA 534,830
500,000 North Carolina Educational Facilities Financing Authority Rev. (Elon College Project),
6 3/8% due 1/1/2014 NR/AAA 515,940
600,000 North Carolina Housing Finance Agency Rev. (Multi-Family), 5.80% due 7/1/2014 Aa/AA 574,812
1,500,000 North Carolina Housing Finance Agency Rev. (Single Family), 6.50% due 3/1/2018 Aa/A+ 1,542,750
250,000 North Carolina Housing Finance Agency Rev. (Multi-Family), 5.90% due 7/1/2026 Aa/AA 237,750
750,000 North Carolina Medical Care Commission Hospital Rev. (North Carolina Baptist
Hospital Project), 6 3/8% due 6/1/2014 Aa/AA- 771,263
1,000,000 North Carolina Medical Care Commission Hospital Rev. (Mercy Hospital Project),
6.50% due 8/1/2015 NR/A- 1,016,670
1,250,000 North Carolina Medical Care Commission Hospital Rev. (Rex Hospital Project),
6.25% due 6/1/2017 A1/A+ 1,299,500
1,500,000 North Carolina Medical Care Commission Hospital Rev. (Carolina Medicorp Project),
6% due 5/1/2021 Aa/AA 1,495,995
1,000,000 North Carolina Medical Care Commission Hospital Rev. (Memorial Mission Hospital
Project), 6% due 10/1/2022 Aaa/AAA 996,020
2,250,000 North Carolina Medical Care Commission Hospital Rev. (Presbyterian Health Services
Corp. Project), 6% due 10/1/2024 Aa/AA 2,228,580
2,000,000 North Carolina Municipal Power Agency No. 1 Catawba Electric Rev., 5% due 1/1/2018 Aaa/AAA 1,762,600
3,000,000 North Carolina Municipal Power Agency No. 1 Catawba Electric Rev., 5% due 1/1/2020 Aaa/AAA 2,682,120
1,000,000 Orange, NC Water & Sewer Authority Rev., 5.20% due 7/1/2016 Aa/AA 930,310
250,000 Piedmont Triad Airport Authority, NC Airport Rev. Series "A," 6.75% due 7/1/2016 Aaa/AAA 269,042
775,000 Raleigh, NC G.O.'s, 6.50% due 3/1/2008 Aaa/AAA 838,356
200,000 Transylvania County, NC G.O.'s, 6.80% due 4/1/2007 A/A 218,324
500,000 University of North Carolina Chapel Hill Housing System Rev., 6.40% due 11/1/2010 NR/AA- 529,365
500,000 University of North Carolina Hospitals at Chapel Hill Rev., 6 3/8% due 2/15/2017 A1/AA- 519,150
1,550,000 Wake County Industrial Facilities & Pollution Control Financing Authority, NC
(Carolina Power & Light), 6.90% due 4/1/2009 A2/A1 1,670,141
1,500,000 Wake County, NC Hospital System Rev. (Wake Medical Center), 5 1/8% due 10/1/2026 Aaa/AAA 1,331,550
500,000 Wayne County, NC G.O.'s, 5.90% due 2/1/2009 A/A+ 520,630
1,440,000 Wilkes County, NC G.O.'s, 5.30% due 6/1/2007 A/A 1,443,614
-----------
Total Municipal Bonds (Cost $37,370,897)--97.6% 37,766,740
Variable Rate Demand Notes (Cost $500,000)--1.3% 500,000
Other Assets Less Liabilities--1.1% 436,162
-----------
NET ASSETS--100.0% $38,702,902
===========
* Interest income earned from this security is subject to the federal alternative minimum tax.
+ Ratings have not been audited by Deloitte & Touche LLP.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Assets and Liabilities September 30, 1995
<CAPTION>
California California North
High-Yield Quality Florida Carolina
Series Series Series Series
----------- ----------- ----------- -----------
Assets:
<S> <C> <C> <C> <C>
Investments, at value (see portfolios of investments):
Long-term holdings $46,437,481 $94,243,330 $48,057,113 $37,766,740
Short-term holdings 5,300,000 300,000 500,000 500,000
----------- ----------- ----------- -----------
51,737,481 94,543,330 48,557,113 38,266,740
Cash 70,293 145,213 65,678 53,168
Interest receivable 890,243 1,351,681 1,168,113 669,582
Receivable for Shares of Beneficial Interest sold 324,150 2,882 52,397 984
Expenses prepaid to shareholder service agent 19,954 38,052 19,693 22,151
Other -- 3,683 -- 1,521
----------- ----------- ----------- -----------
Total Assets 53,042,121 96,084,841 49,862,994 39,014,146
----------- ----------- ----------- -----------
Liabilities:
Dividends payable 101,114 168,241 85,866 64,328
Payable for Shares of Beneficial Interest repurchased 80,664 -- 62,567 188,545
Accrued expenses, taxes, and other 79,032 107,045 81,670 58,371
----------- ----------- ----------- -----------
Total Liabilities 260,810 275,286 230,103 311,244
----------- ----------- ----------- -----------
Net Assets $52,781,311 $95,809,555 $49,632,891 $38,702,902
=========== =========== =========== ===========
Composition of Net Assets:
Shares of Beneficial Interest, at par:
Class A $ 7,962 $ 14,285 $6,362 $4,839
Class D 197 130 78 162
Additional paid-in capital 50,819,382 94,151,974 48,046,264 38,235,553
Undistributed/accumulated net realized gain (loss) 79,763 (40,110) 294,118 66,505
Net unrealized appreciation of investments 1,874,007 1,683,276 1,286,069 395,843
----------- ----------- ----------- -----------
Net Assets $52,781,311 $95,809,555 $49,632,891 $38,702,902
=========== =========== =========== ===========
Net Assets:
Class A $51,504,554 $94,946,861 $49,029,496 $37,446,269
Class D $ 1,276,757 $ 862,694 $ 603,395 $ 1,256,633
Shares of Beneficial Interest outstanding (Unlimited
shares authorized, except Florida Series 20,000,000
shares authorized; $.001 par value):
Class A 7,962,130 14,285,339 6,361,677 4,838,689
Class D 197,165 130,027 78,171 162,457
Net Asset Value per share:
Class A $6.47 $6.65 $7.71 $7.74
Class D $6.48 $6.63 $7.72 $7.74
- ----------------
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Operations For the year ended September 30, 1995
<CAPTION>
California California North
High-Yield Quality Florida Carolina
Series Series Series Series
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Investment income:
Interest $3,250,691 $6,033,338 $3,002,407 $2,385,611
---------- ---------- ---------- ----------
Expenses:
Management fees 241,396 483,174 94,276 55,938
Shareholder account services 72,646 134,036 75,022 94,761
Distribution and service fees 53,370 100,684 119,281 105,492
Auditing and legal fees 25,202 25,215 26,390 28,217
Custody and related services 21,208 97,901 18,151 27,960
Shareholder reports and communications 9,317 7,820 7,458 6,758
Trustees' fees and expenses 7,984 8,115 7,298 7,153
Registration 5,363 6,697 4,099 5,697
Miscellaneous 6,985 8,704 6,769 4,217
---------- ---------- ---------- ----------
Total expenses 443,471 872,346 358,744 336,193
---------- ---------- ---------- ----------
Net investment income 2,807,220 5,160,992 2,643,663 2,049,418
---------- ---------- ---------- ----------
Net realized and unrealized gain (loss)
on investments:
Net realized gain (loss) on investments 88,139 (40,110) 295,392 67,083
Net change in unrealized appreciation/
depreciation of investments 1,121,392 4,529,579 2,057,465 2,320,714
---------- ---------- ---------- ----------
Net gain on investments 1,209,531 4,489,469 2,352,857 2,387,797
---------- ---------- ---------- ----------
Increase in net assets from operations $4,016,751 $9,650,461 $4,996,520 $4,437,215
========== ========== ========== ==========
- -----------------
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
California High-Yield California Quality
Series Series
----------------------------- -----------------------------
Year ended September 30 Year ended September 30
----------------------------- -----------------------------
1995 1994 1995 1994
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 2,807,220 $ 2,855,053 $ 5,160,992 $ 5,537,990
Net realized gain (loss) on investments 88,139 296,724 (40,110) 1,699,245
Net change in unrealized appreciation/depreciation
of investments 1,121,392 (2,966,240) 4,529,579 (13,151,970)
----------- ----------- ----------- ------------
Increase (decrease) in net assets from operations 4,016,751 185,537 9,650,461 (5,914,735)
----------- ----------- ----------- ------------
Distributions to shareholders:
Net investment income:
Class A (2,768,632) (2,841,218) (5,122,722) (5,523,434)
Class D (38,588) (13,835) (38,270) (14,556)
Net realized gain on investments:
Class A -- (651,601) (893,986) (2,473,637)
Class D -- -- (7,846) --
----------- ----------- ----------- ------------
Decrease in net assets from distributions (2,807,220) (3,506,654) (6,062,824) (8,011,627)
----------- ----------- ----------- ------------
Transactions in Shares of Beneficial Interest:*
Net proceeds from sale of shares:
Class A 6,943,019 3,186,756 3,791,860 8,288,928
Class D 707,886 702,222 336,722 742,183
Shares issued in payment of dividends:
Class A 1,388,517 1,419,731 2,556,436 2,772,508
Class D 29,049 9,395 16,286 5,784
Exchanged from associated Funds:
Class A 2,554,338 459,044 1,674,871 2,025,609
Class D 9,444 2,892 36,700 110,731
Shares issued in payment of gain distributions:
Class A -- 441,866 588,709 1,645,620
Class D -- -- 3,308 --
----------- ----------- ----------- ------------
Total 11,632,253 6,221,906 9,004,892 15,591,363
----------- ----------- ----------- -----------
Cost of shares repurchased:
Class A (6,675,164) (5,032,468) (12,989,249) (10,846,020)
Class D (12,518) (46,242) (274,505) (16,784)
Exchanged into associated Funds:
Class A (1,900,990) (380,165) (3,245,114) (2,700,925)
Class D (128,605) (2,902) (105,836) (2,000)
----------- ----------- ----------- ------------
Total (8,717,277) (5,461,777) (16,614,704) (13,565,729)
----------- ----------- ---------- ------------
Increase (decrease) in net assets from transactions
in Shares of Beneficial Interest 2,914,976 760,129 (7,609,812) 2,025,634
----------- ----------- ----------- ------------
Increase (decrease) in net assets 4,124,507 (2,560,988) (4,022,175) (11,900,728)
Net Assets:
Beginning of year 48,656,804 51,217,792 99,831,730 111,732,458
----------- ----------- ----------- ------------
End of year $52,781,311 $48,656,804 $95,809,555 $ 99,831,730
=========== =========== ============ ============
<PAGE>
<CAPTION>
North Carolina
Florida Series Series
----------------------------- ------------------------------
Year ended September 30 Year ended September 30
----------------------------- ------------------------------
1995 1994 1995 1994
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Operations:
Net investment income $ 2,643,663 $ 2,878,001 $ 2,049,418 $ 2,159,442
Net realized gain (loss) on investments 295,392 200,813 67,083 270,319
Net change in unrealized appreciation/depreciation
of investments 2,057,465 (5,275,433) 2,320,714 (4,951,199)
----------- ----------- ----------- -----------
Increase (decrease) in net assets from operations 4,996,520 (2,196,619) 4,437,215 (2,521,438)
----------- ----------- ----------- -----------
Distributions to shareholders:
Net investment income:
Class A (2,625,734) (2,874,294) (1,991,128) (2,133,632)
Class D (17,929) (3,707) (58,290) (25,810)
Net realized gain on investments:
Class A (13,355) (813,447) (67,575) (239,782)
Class D (68) -- (2,384) --
----------- ----------- ----------- -----------
Decrease in net assets from distributions (2,657,086) (3,691,448) (2,119,377) (2,399,224)
----------- ----------- ----------- -----------
Transactions in Shares of Beneficial Interest:*
Net proceeds from sale of shares:
Class A 2,612,961 5,761,739 3,259,927 7,080,082
Class D 463,188 252,386 514,321 1,346,158
Shares issued in payment of dividends:
Class A 1,095,007 1,194,799 1,126,718 1,263,936
Class D 10,660 2,701 34,388 8,781
Exchanged from associated Funds:
Class A 1,500,260 1,958,021 1,065,941 748,851
Class D 334,150 -- 583,255 --
Shares issued in payment of gain distributions:
Class A 7,441 425,883 51,235 179,478
Class D 60 -- 2,322 --
----------- ----------- ----------- -----------
Total 6,023,727 9,595,529 6,638,107 10,627,286
----------- ----------- ----------- -----------
Cost of shares repurchased:
Class A (7,404,963) (5,704,776) (7,888,154) (3,909,952)
Class D (147,983) (5,020) (171,491) (1,959)
Exchanged into associated Funds:
Class A (998,971) (711,426) (1,326,399) (419,075)
Class D (319,464) -- (1,069,453) (1,267)
------------ ----------- ----------- ------------
Total (8,871,381) (6,421,222) (10,455,497) (4,332,253)
----------- ----------- ----------- -----------
Increase (decrease) in net assets from transactions
in Shares of Beneficial Interest (2,847,654) 3,174,307 (3,817,390) 6,295,033
----------- ----------- ----------- -----------
Increase (decrease) in net assets (508,220) (2,713,760) (1,499,552) 1,374,371
Net Assets:
Beginning of year 50,141,111 52,854,871 40,202,454 38,828,083
----------- ----------- ----------- -----------
End of year $49,632,891 $50,141,111 $38,702,902 $40,202,454
=========== =========== =========== ===========
- -----------------
*The Trust began offering Class D shares on February 1, 1994.
See notes to financial statements.
</TABLE>
<PAGE>
Notes to Financial Statements
1. Seligman Tax-Exempt Series Trust (the "Trust") consists of four separate
series: the "California High-Yield Series," the "California Quality
Series," the "Florida Series," and the "North Carolina Series." Each Series
of the Trust offers two classes of shares. All shares existing prior to
February 1, 1994, were classified as Class A 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 D shares are sold without an
initial sales charge but are subject to a higher distribution fee and a
contingent deferred sales load ("CDSL") of 1% imposed on certain
redemptions made within one year of purchase. The two classes of shares for
each Series represent interests in the same portfolio of investments, have
the same rights and are generally identical in all respects except that
each class bears its separate distribution and certain class expenses and
has exclusive voting rights with respect to any matter to which a separate
vote of any class is required.
2. Significant accounting policies followed, all in conformity with
generally accepted accounting principles, are given below:
a. All tax-exempt 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 Trustees. Short-term holdings
maturing in 60 days or less are generally valued at amortized cost.
b. There is no provision for federal income or excise 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.
Dividends are declared daily and paid monthly.
c. 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
Trust amortizes original issue discounts and premiums paid on purchases
of portfolio securities. Discounts other than original issue discounts
are not amortized.
d. All income, expenses (other than class-specific expenses), and realized
and unrealized gains or losses are allocated daily to each class of
shares based upon the relative value of the shares of each class. Class-
specific expenses, which include distribution and service fees and any
other items that can be specifically attributed to a particular class,
are charged directly to such class.
e. The treatment for financial statement purposes of distributions made
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, and 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 reclassifications will have no effect on net assets,
results of operations, or net asset value per share of any Series of the
Trust.
3. Purchases and sales of portfolio securities, excluding short-term
investments, for the year ended September 30, 1995, were as follows:
Series Purchases Sales
------ ----------- -----------
California High-Yield $ 8,114,668 $ 8,718,821
California Quality 10,743,235 19,929,752
Florida 5,607,565 8,373,867
North Carolina 1,678,668 5,455,081
At September 30, 1995, the cost of investments for federal income tax
purposes was $49,923,360, $93,083,794, $48,557,113, and $38,266,740,
respectively, for the California High-Yield, California Quality, Florida
and North Carolina Series, and the tax basis gross unrealized appreciation
and depreciation of portfolio securities were as follows:
Total Total
Unrealized Unrealized
Series Appreciation Depreciation
------ ------------ ------------
California High-Yield $2,153,643 $ 339,522
California Quality 3,694,304 2,234,768
Florida 1,921,697 635,628
North Carolina 1,138,842 742,999
4. J. & W. Seligman & Co. Incorporated (the "Manager") manages the affairs
of the Trust and provides the necessary personnel and facilities.
Compensation of all officers of the Trust, all trustees of the Trust who
are employees or consultants of the Manager, and all personnel of the Trust
and the Manager is paid by the Manager. The Manager's fee is calculated
daily and payable monthly, equal to 0.50% per annum of each Series' average
daily net assets. For the year ended September 30, 1995, the Manager, at
its discretion, waived a portion of its fees for the Florida and North
Carolina Series equal to $151,047 and $141,479, respectively. The
management fee reflected in the Statements of Operations represent 0.19%
and 0.14%, respectively, per annum of their average net assets.
Seligman Financial Services, 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 sale of Class A shares:
Distributor Dealer
Series Concessions Commissions
------ ----------- -----------
California High-Yield $12,307 $ 91,517
California Quality 16,713 120,277
Florida 12,397 93,763
North Carolina 15,113 115,498
The Trust has an Administration, Shareholder Services and Distribution
Plan (the "Plan") with respect to Class A shares under which 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. The Distributor charges such fees to
the Trust pursuant to the Plan. For the year ended September 30, 1995, for
the California High-Yield, California Quality, Florida, and North Carolina
Series, fees paid aggregated $45,340, $91,898, $115,228, and $92,244,
respectively, or 0.10%, 0.10%, 0.24%, and 0.24%, respectively, per annum of
average daily net assets.
The Trust has a Plan with respect to Class D shares under which service
organizations can enter into agreements with the Distributor and receive
continuing fees for providing personal services and/or the maintenance of
shareholder accounts of up to 0.25% on an annual basis of the average daily
net assets of the Class D shares for which the organizations are
responsible, and fees for providing other distribution assistance of up to
0.75% on an annual basis of such average daily net assets. Such fees are
paid monthly by the Trust to the Distributor pursuant to the Plan. For the
year ended September 30, 1995, fees paid amounted to $8,030, $8,786,
$4,053, and $13,248, or 1% per annum of the average daily net assets of
Class D shares of the California High-Yield, California Quality, Florida,
and North Carolina Series, respectively.
The Distributor is entitled to retain any CDSL imposed on certain
redemptions of Class D shares occurring within one year of purchase. For
the year ended September 30, 1995, such charges amounted to $288 for the
California High-Yield Series, $399 for the California Quality Series, $189
for the Florida Series, and $276 for the North Carolina Series.
Effective April 1, 1995, Seligman Services, Inc., an affiliate of the
Manager, became eligible to receive commissions from certain sales of Fund
shares, as well as distribution and service fees pursuant to the Plan. For
the period ended September 30, 1995, Seligman Services, Inc. received
commissions of $798 from sales of shares of the Trust. Seligman Services,
Inc. also received distribution and service fees of $4,574, pursuant to the
Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged at cost for shareholder account services the following
amounts:
Series
------
California High-Yield $ 72,646
California Quality 134,036
Florida 75,022
North Carolina 94,761
Certain officers and trustees of the Trust are officers or directors of
the Manager, the Distributor, Seligman Services, Inc., and/or Seligman Data
Corp.
Fees of $23,000 were incurred by the Trust for the legal services of
Sullivan & Cromwell, a member of which firm is a trustee of the Trust.
The Trust has a compensation agreement under which trustees who receive
fees may elect to defer receiving such fees. Interest is accrued on the
deferred balances. Deferred fees and the related accrued interest are not
deductible for federal income tax purposes until such amounts are paid. The
cost of such fees and interest is included in trustees' fees and expenses,
and the accumulated balances thereof at September 30, 1995, were as
follows:
Series
------
California High-Yield $23,502
California Quality 23,502
Florida 10,630
North Carolina 7,207
5. Class-specific expenses charged to Class A and Class D during the year
ended September 30, 1995, which are included in the corresponding captions
of the Statements of Operations, were as follows:
<TABLE>
<CAPTION>
Shareholder
Distribution reports and
Series and service fees Registration communications
- ------ ---------------- ------------ --------------
<S> <C> <C> <C> <C>
California High-Yield: Class A $45,340 $1,034 $765
Class D 8,030 554 165
California Quality: Class A 91,898 1,328 1,026
Class D 8,786 517 207
Florida: Class A 115,228 988 364
Class D 4,053 393 18
North Carolina: Class A 92,244 1,534 579
Class D 13,248 865 363
</TABLE>
<PAGE>
6. Transactions in Shares of Beneficial Interest were as follows:*
<TABLE>
<CAPTION>
California High-Yield Series California Quality Series
---------------------------- ---------------------------
Year ended September 30 Year ended September 30
---------------------------- ---------------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sale of shares:
Class A 1,079,685 487,989 590,593 1,210,817
Class D 110,995 108,907 53,458 112,971
Shares issued in payment of dividends:
Class A 219,618 218,487 397,979 409,496
Class D 4,570 1,471 2,531 887
Exchanged from associated Funds:
Class A 404,353 70,262 265,696 294,395
Class D 1,488 452 5,830 16,307
Shares issued in payment
of gain distributions:
Class A -- 66,949 100,634 234,753
Class D -- -- 566 --
--------- --------- --------- ---------
Total 1,820,709 954,517 1,417,287 2,279,626
--------- --------- --------- ---------
Shares repurchased:
Class A (1,056,589) (772,412) (2,039,599) (1,614,125)
Class D (1,935) (7,290) (42,182) (2,585)
Exchanged into associated Funds:
Class A (302,366) (58,674) (513,872) (400,621)
Class D (21,039) (454) (17,443) (313)
--------- --------- --------- ---------
Total (1,381,929) (838,830) (2,613,096) (2,017,644)
--------- --------- ---------- ---------
Increase (decrease) in shares 438,780 115,687 (1,195,809) 261,982
========= ========= ========= =========
<PAGE>
<CAPTION>
Note 6. (continued)
Florida Series North Carolina Series
--------------------------- ---------------------------
Year ended September 30 Year ended September 30
--------------------------- ---------------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sale of shares:
Class A 347,578 734,617 438,845 892,418
Class D 60,844 33,552 72,260 175,027
Shares issued in payment of dividends:
Class A 146,628 154,793 151,286 163,227
Class D 1,419 362 4,585 1,170
Exchanged from associated Funds:
Class A 199,964 252,598 147,787 95,126
Class D 43,212 -- 82,219 --
Shares issued in payment
of gain distributions:
Class A 1,075 53,369 7,647 22,323
Class D 9 -- 347 --
--------- --------- --------- ---------
Total 800,729 1,229,291 904,976 1,349,291
--------- --------- --------- ---------
Shares repurchased:
Class A (999,949) (744,532) (1,057,443) (508,245)
Class D (19,405) (672) (22,493) (262)
Exchanged into associated Funds:
Class A (135,404) (92,862) (183,108) (54,138)
Class D (41,150) -- (150,222) (174)
--------- --------- --------- ---------
Total (1,195,908) (838,066) (1,413,266) (562,819)
--------- --------- --------- ---------
Increase (decrease) in shares (395,179) 391,225 (508,290) 786,472
========= ========= ========= =========
- ------------------------
*The Trust began offering Class D shares on February 1, 1994.
</TABLE>
<PAGE>
Financial Highlights
The Trust's financial highlights are presented below. The per share
operating performance data is designed to allow investors to trace the
operating performance, on a per share basis, from a Series' beginning net
asset value to the ending net asset value so that they can understand what
effect the individual items have on their investment assuming it was held
throughout the period. Generally, the per share amounts are derived by
converting the actual dollar amounts incurred foreach item as disclosed in
the financial statements to their equivalent per share amounts using
average shares outstanding.
The total return based on net asset value measures a Series' performance
assuming investors purchased shares at net asset value as of the beginning
of the period, reinvested dividends and capital gains paid at net asset
value, and then sold their shares at the net asset value per share on the
last day of the period. The total return computations do not reflect any
sales charges investors may incur in purchasing or selling shares of the
Trust. The total returns for periods of less than one year are not
annualized.
<TABLE>
<CAPTION>
Per Share Operating Performance:
Net Increase
Net Asset Realized & (Decrease) Distributions Net Increase
Value at Net Unrealized from Dividends from (Decrease) in
Fiscal Year Beginning Investment Investment Investment Paid or Net Gain Net Asset
or Period of Period Income* Gain (Loss) Operations Declared Realized Value
Class A:
<S> <C> <C> <C> <C> <C> <C> <C>
California High-Yield Series
Year ended 9/30/95 $6.30 $0.37 $0.17 $0.54 ($0.37) -- $0.17
Year ended 9/30/94 6.73 0.37 (0.34) 0.03 (0.37) (0.09) (0.43)
Year ended 9/30/93 6.65 0.39 0.28 0.67 (0.39) (0.20) 0.08
Year ended 9/30/92 6.50 0.41 0.16 0.57 (0.41) (0.01) 0.15
Year ended 9/30/91 6.18 0.42 0.33 0.75 (0.42) (0.01) 0.32
California Quality Series
Year ended 9/30/95 6.39 0.34 0.32 0.66 (0.34) (0.06) 0.26
Year ended 9/30/94 7.28 0.35 (0.73) (0.38) (0.35) (0.16) (0.89)
Year ended 9/30/93 6.85 0.37 0.54 0.91 (0.37) (0.11) 0.43
Year ended 9/30/92 6.65 0.40 0.22 0.62 (0.40) (0.02) 0.20
Year ended 9/30/91 6.22 0.40 0.46 0.86 (0.40) (0.03) 0.43
Florida Series
Year ended 9/30/95 7.34 0.40 0.37 0.77 (0.40) -- 0.37
Year ended 9/30/94 8.20 0.42 (0.74) (0.32) (0.42) (0.12) (0.86)
Year ended 9/30/93 7.56 0.46 0.65 1.11 (0.46) (0.01) 0.64
Year ended 9/30/92 7.37 0.47 0.19 0.66 (0.47) -- 0.19
Year ended 9/30/91 6.90 0.43 0.47 0.90 (0.43) -- 0.47
North Carolina Series
Year ended 9/30/95 7.30 0.39 0.45 0.84 (0.39) (0.01) 0.44
Year ended 9/30/94 8.22 0.41 (0.87) (0.46) (0.41) (0.05) (0.92)
Year ended 9/30/93 7.61 0.43 0.63 1.06 (0.43) (0.02) 0.61
Year ended 9/30/92 7.39 0.44 0.22 0.66 (0.44) -- 0.22
Year ended 9/30/91 7.04 0.45 0.35 0.80 (0.45) -- 0.35
Class D:
California High-Yield Series
Year ended 9/30/95 6.31 0.31 0.17 0.48 (0.31) -- 0.17
2/1/94**--9/30/94 6.67 0.21 (0.36) (0.15) (0.21) -- (0.36)
California Quality Series
Year ended 9/30/95 6.38 0.28 0.31 0.59 (0.28) (0.06) 0.25
2/1/94**--9/30/94 7.13 0.19 (0.75) (0.56) (0.19) -- (0.75)
Florida Series
Year ended 9/30/95 7.34 0.34 0.38 0.72 (0.34) -- 0.38
2/1/94**--9/30/94 8.10 0.24 (0.76) (0.52) (0.24) -- (0.76)
North Carolina Series
Year ended 9/30/95 7.29 0.33 0.46 0.79 (0.33) (0.01) 0.45
2/1/94**--9/30/94 8.17 0.23 (0.88) (0.65) (0.23) -- (0.88)
<PAGE>
<CAPTION>
Ratio of Net
Net Asset Total Return Ratio of Investment Net Assets
Value at Based on Expenses to Income at End of
Fiscal Year End Net Asset Average to Average Portfolio Period
or Period of Period Value Net Assets* Net Assets* Turnover (000's omitted)
Class A:
<S> <C> <C> <C> <C> <C> <C>
California High-Yield Series
Year ended 9/30/95 $6.47 8.85% 0.90% 5.84% 17.64% $51,504
Year ended 9/30/94 6.30 0.41 0.85 5.74 8.36 48,007
Year ended 9/30/93 6.73 10.66 0.88 5.94 7.70 51,218
Year ended 9/30/92 6.65 9.00 0.82 6.20 45.50 49,448
Year ended 9/30/91 6.50 12.53 0.83 6.67 5.13 49,172
California Quality Series
Year ended 9/30/95 6.65 10.85 0.89 5.34 11.24 94,947
Year ended 9/30/94 6.39 (5.46) 0.81 5.20 22.16 99,020
Year ended 9/30/93 7.28 13.92 0.82 5.30 15.67 111,732
Year ended 9/30/92 6.85 9.56 0.78 5.86 34.25 93,557
Year ended 9/30/91 6.65 14.35 0.78 6.19 20.11 77,884
Florida Series
Year ended 9/30/95 7.71 10.87 0.72 5.38 11.82 49,030
Year ended 9/30/94 7.34 (3.99) 0.42 5.49 6.17 49,897
Year ended 9/30/93 8.20 15.21 0.23 5.82 16.42 52,855
Year ended 9/30/92 7.56 9.24 0.17 6.32 12.62 37,957
Year ended 9/30/91 7.37 13.41 0.90 6.00 -- 28,173
North Carolina Series
Year ended 9/30/95 7.74 11.92 0.82 5.21 4.38 37,446
Year ended 9/30/94 7.30 (5.80) 0.44 5.29 15.61 38,920
Year ended 9/30/93 8.22 14.46 0.23 5.44 3.13 38,828
Year ended 9/30/92 7.61 9.23 0.14 5.83 12.51 21,836
Year ended 9/30/91 7.39 11.97 0.07 6.10 -- 9,255
Class D:
California High-Yield Series
Year ended 9/30/95 6.48 7.78 1.91 4.84 17.64 1,277
2/1/94**--9/30/94 6.31 (2.47) 1.74+ 4.73+ 8.36++ 650
California Quality Series
Year ended 9/30/95 6.63 9.61 1.88 4.36 11.24 863
2/1/94**--9/30/94 6.38 (8.01) 1.77+ 4.39+ 22.16++ 812
Florida Series
Year ended 9/30/95 7.72 10.07 1.66 4.53 11.82 603
2/1/94**--9/30/94 7.34 (6.64) 1.29+ 4.61+ 6.17++ 244
North Carolina Series
Year ended 9/30/95 7.74 11.19 1.64 4.42 4.38 1,257
2/1/94**--9/30/94 7.29 (8.15) 1.27+ 4.49+ 15.61++ 1,282
<CAPTION>
Adjusted
Adjusted Ratio of
Adjusted Net Ratio of Net Investment
Investment Expenses to Income
Fiscal Year Income Average Net to Average
or Period per Share* Assets* Net Assets*
Class A:
<S> <C> <C> <C>
California High-Yield Series
Year ended 9/30/95
Year ended 9/30/94
Year ended 9/30/93
Year ended 9/30/92
Year ended 9/30/91
California Quality Series
Year ended 9/30/95
Year ended 9/30/94
Year ended 9/30/93
Year ended 9/30/92
Year ended 9/30/91
Florida Series
Year ended 9/30/95 $0.37 1.03% 5.07%
Year ended 9/30/94 0.38 1.00 4.91
Year ended 9/30/93 0.40 1.03 5.01
Year ended 9/30/92 0.41 1.02 5.47
Year ended 9/30/91 0.42 1.15 5.75
North Carolina Series
Year ended 9/30/95 0.36 1.18 4.85
Year ended 9/30/94 0.35 1.13 4.60
Year ended 9/30/93 0.35 1.22 4.45
Year ended 9/30/92 0.34 1.40 4.57
Year ended 9/30/91 0.22 3.22 2.96
Class D:
California High-Yield Series
Year ended 9/30/95
2/1/94**--9/30/94
California Quality Series
Year ended 9/30/95
2/1/94**--9/30/94
Florida Series
Year ended 9/30/95 0.31 1.97 4.22
2/1/94**--9/30/94 0.21 1.84+ 4.06+
North Carolina Series
Year ended 9/30/95 0.31 2.00 4.06
2/1/94**--9/30/94 0.20 1.95+ 3.82+
</TABLE>
*During the periods stated, the Manager, at its discretion, waived all or
a portion of its fees and, in some cases, reimbursed certain expenses for
the Florida and North Carolina Series. The adjusted net investment income
per share and adjusted ratios reflect what the results would have been
had the Manager not waived fees and reimbursed expenses.
**Commencement of operations.
+Annualized.
++For the year ended September 30, 1994.
See notes to financial statements.
<PAGE>
Report of Independent Auditors
The Trustees and Shareholders,
Seligman Tax-Exempt Series Trust:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the California High-Yield,
California Quality, Florida and North Carolina Series of Seligman Tax-
Exempt Series Trust as of September 30, 1995, 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 Trust'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, 1995 by correspondence with the
Trust's custodian. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the California
High-Yield, California Quality, Florida and North Carolina Series of
Seligman Tax-Exempt Series Trust as of September 30, 1995, the results of
their operations, the changes in their net assets, and the financial
highlights for the respective stated periods, in conformity with generally
accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
- --------------------------
DELOITTE & TOUCHE LLP
New York, New York
November 3, 1995
<PAGE>
Trustees
Fred E. Brown
Director and Consultant,
J. & W. Seligman & Co. Incorporated
John R. Galvin 2
Dean, Fletcher School of Law and Diplomacy at
Tufts University
Director, USLIFE Corporation
Alice S. Ilchman 3
President, Sarah Lawrence College
Trustee, Committee for Economic Development
Director, NYNEX
Chairman, The Rockefeller Foundation
Frank A. McPherson 2
Chairman and CEO, Kerr-McGee Corporation
Director, Kimberly-Clark Corporation
Director, Baptist Medical Center
John E. Merow
Partner, Sullivan & Cromwell, Law Firm
Director, Commonwealth Aluminum Corporation
Betsy S. Michel 2
Director or Trustee,
Various Organizations
William C. Morris 1
Chairman
Chairman of the Board and President,
J. & W. Seligman & Co. Incorporated
Chairman, Carbo Ceramics Inc.
Director, Daniel Industries, Inc.
Director, Kerr-McGee Corporation
James C. Pitney 3
Partner, Pitney, Hardin, Kipp & Szuch, Law Firm
Director, Public Service Enterprise Group
James Q. Riordan 3
Director, The Brooklyn Union Gas Company
Trustee, Committee for Economic Development
Director, Dow Jones & Co., Inc.
Director, Public Broadcasting Service
Ronald T. Schroeder 1
Managing Director, J. & W. Seligman & Co. Incorporated
Robert L. Shafer 3
Vice President, Pfizer Inc.
Director, USLIFE Corporation
James N. Whitson 2
Executive Vice President and Director,
Sammons Enterprises, Inc.
Director, C-SPAN
Director, Red Man Pipe and Supply Company
Brian T. Zino 1
President
Managing Director, J. & W. Seligman & Co. Incorporated
- ---------------------
Member:
1 Executive Committee
2 Audit Committee
3 Trustee Nominating Committee
<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
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 Financial Services, Inc.
100 Park Avenue
New York, NY 10017
Shareholder Service Agent
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
Important Telephone Numbers
(800) 221-2450 Shareholder Services
(800) 622-4597 24-Hour Automated
Telephone
Access Service
<PAGE>
SELIGMAN FINANCIAL SERVICES, INC.
an affiliate of
(LOGO GOES HERE)
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
This report is intended only for the information of shareholders or those
who have received the offering prospectus covering shares of Beneficial
Interest of Seligman Tax-Exempt Series Trust, which contains information
about the sales charges, management fee, and other costs. Please read the
prospectus carefully before investing or sending money.
TEB2 9/95
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A - Financial Highlights for Class A shares for each Series for the
period from commencement of operations to September 30, 1995.
Financial Highlights for Class D shares for each Series for the
period February 1, 1994 (commencement of operations) to September 30,
1995.
Part B - Required Financial Statements are included in the Fund's Annual
Report to shareholders, dated September 30, 1995, which is
incorporated by reference in the Statement of Additional Information.
These Financial Statements are: Portfolios of Investments as of
September 30, 1995; Statements of Assets and Liabilities as of
September 30, 1995; Statements of Operations for the year ended
September 30, 1995; Statements of Changes in Net Assets for the years
ended September 30, 1995 and September 30, 1994; Notes to Financial
Statements; Financial Highlights for the five years ended September
30, 1995, or since commencement of operations to September 30, 1995,
for the Fund's Class A shares and for the period February 1,. 1994
(commencement of operations) to September 30, 1995 for the Fund's
Class D shares; Report of Independent Auditors.
(b) Exhibits: All Exhibits have been previously filed and are
incorporated herein by reference, except Exhibits marked with an
asterisk (*) which are attached hereto.
(1) Copy of Instrument of Establishment and Designation of the
Declaration of Trust of Registrant. (Incorporated by reference to
Registrant' s Post-Effective Amendment No. 21 filed on November 30,
1993.)
(2) Copy of Bylaws of Registrant. (Incorporated by reference to
Registrant's Initial Registration Statement filed on August 3, 1984.)
(3) N/A
(4) Copy of Specimen of Stock Certificates for Class D Shares of each
Series. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 22 filed on January 29, 1994.)
(5) Copy of Management Agreement between the Florida Series of the
Registrant and J. & W. Seligman & Co. Incorporated. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 13 filed on
August 24, 1990.)
(6a) Copy of Distributing Agreement between Registrant and Seligman
Financial Services, Inc. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 20 filed on January 29, 1993.)
(6b) Copy of Sales Agreement between Dealers and Seligman Financial
Services, Inc. (Incorporated by reference to Registrant's
Post-Effecitve Amendment No. 24 filed on February 1, 1995.)
(7) Copy of amended Retirement Income Plan of J. & W. Seligman & Co.
Incorporated and Trust. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 19 filed on November 30, 1992.)
(7a) Copy of amended Employees' Thrift Plan of Union Data Service Center,
Inc. and Trust. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 19 filed on November 30, 1992.)
(8) Copy of Custodian Agreement between Registrant and Investors
Fiduciary Trust Company. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 12 filed on August 6, 1990.)
(9) N/A
(10) Opinion and Consent of Counsel.*
(11) Consent of Independent Auditors.*
(12) N/A
<PAGE>
(13) Copy of Purchase Agreement for Initial Capital for Class D Shares.
(Incorporated by reference to Registrant's Post-Effective Amendment
No.22 filed on January 31, 1994.)
(14) Copy of amended Individual Retirement Account Trust and Related
Documents.
(Incorporated by reference to Registrant's Post-Effective
Amendment No. 19 filed on November 30, 1992.)
(14a) Copy of amended Comprehensive Retirement Plans for Money Purchase
and/or Prototype Profit Sharing Plan.
(Incorporated by reference to Registrant's Post-Effective Amendmen
No. 19 filed on November 30, 1992.)
(14b) Copy of amended Basic Business Retirement Plans for Money Purchase
and/or Profit Sharing Plans.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 19 filed on November 30, 1992.)
(14c) Copy of amended 403(b)(7) Custodial Account Plan.
(Incorporated by reference to Seligman New Jersey Tax-Exempt Fund,
Inc. Pre-Effective Amendment No. 1 filed on January 11, 1988.)
(14d) Copy of amended Simplified Employee Pension Plan (SEP).
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 19 filed on November 30, 1992.)
(14e) Copy of the amended J. & W. Seligman & Co. Incorporated (SARSEP)
Salary Reduction and Other Elective Simplified Employee
Pension-Individual Retirement Accounts Contribution Agreement (Under
Section 408(k) of the Internal Revenue Code).
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 19 filed on November 30, 1992.)
(15) Copy of amended Administration, Shareholder Services and Distribution
Plans of each Series and form of Agreement of Registrant.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 24 filed on January 31, 1994.)
(16) Schedule for computation of tax equivalent yield and schedule for
computation of each performance quotation provided in Registration
Statement in response to Item 22.*
(17) Financial Data Schedule meeting the requirements of Rule 483 under
the Securities Act of 1933.*
(18) Copy of Multiclass Plan entered into by Registrant pursuant to Rule
18f-3 under the Invesstment Company Act of 1940.*
Item 25. Persons Controlled by or Under Common Control with Registrant -
None.
Item 26. Number of Holders of Securities - As of January 12, 1996, the number
of record holders of each Series' Class A and Class D shares of the
Registrant was as follows:
Class A Class D
------- -------
California High-Yield 1,123 22
California Quality 1,809 29
Florida 931 18
North Carolina 1,056 42
Item 27. Indemnification - Incorporated by reference to the Registrant's
Registration Statement on Form N-1A (File No. 2- 92569) and
Pre-Effective Amendment Nos. 1 and 2 thereto.
Item 28. Business and Other Connections of Investment Adviser - J. & W.
Seligman & Co. Incorporated, a Delaware corporation ("Manager"), is
the Registrant's investment manager. The Manager also serves as
investment manager to sixteen associated investment companies. They
are Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc.,
Seligman Common Stock Fund, Inc., Seligman Communications and
Information Fund, Inc., Seligman Frontier Fund, Inc., Seligman Growth
Fund, Inc., Seligman Henderson Global Fund Series, Inc., Seligman
High Income Fund Series, Seligman Income Fund, Inc., Seligman
Portfolios, Inc., Seligman New Jersey Tax-Exempt Fund, Inc., Seligman
Pennsylvania Tax-Exempt Fund Series, Seligman Quality Municipal Fund,
Inc., Seligman Select Municipal Fund, Inc., Seligman Tax-Exempt Fund
Series, Inc. and Tri-Continental Corporation.
<PAGE>
The Manager has an investment advisory service division which
provides investment management or advice to private clients. The list
required by this Item 28 of officers and directors of the Manager,
together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years, is incorporated by
reference to Schedules A and D or Form ADV, filed by the Manager,
pursuant to the Investment Advisers Act of 1940 (SEC File No.
801-5798) on December , 1995.
Item 29. Principal Underwriters
(a) The names of each investment company (other than the
Registrant) for which each principal underwriter
currently distributing securities of the Registrant
also acts as a principal underwriter, depositor or
investment adviser are:
Seligman Capital Fund, Inc.
Seligman Cash Management Fund, Inc.
Seligman Common Stock Fund, Inc.
Seligman Communications and Information Fund, Inc.
Seligman Frontier Fund, Inc.
Seligman Growth Fund, Inc.
Seligman Henderson Global Fund Series, Inc.
Seligman High Income Fund Series
Seligman Income Fund, Inc.
Seligman Portfolios, Inc.
Seligman New Jersey Tax-Exempt Fund, Inc.
Seligman Pennsylvania Tax-Exempt Fund Series
Seligman Tax-Exempt Fund Series, Inc.
(b) Name of each director, officer or partner of each
principal underwriter named in response to Item 21:
Seligman Financial Services, Inc.
As of January 18, 1996
<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 Director and President
Ronald T. Schroeder* Director Director
Fred E. Brown* Director Director
William H. Hazen* Director None
Thomas G. Moles* Director Vice President and Senior
Portfolio Manager
David F. Stein* Director None
David Watts* Director None
Stephen J. Hodgdon* President None
Lawrence P. Vogel* Senior Vice President, Finance Vice President
Mark R. Gordon* Senior Vice President, Director None
of Marketing
Gerald I. Cetrulo, III Senior Vice President of Sales, None
140 West Parkway Regional Sales Manager
Pompton Plains, NJ 07444
Bradley F. Hanson Senior Vice President of Sales, None
9707 Xylon Court Regional Sales Manager
Bloomington, MN 55438
Bradley W. Larson Senior Vice President of Sales, None
367 Bryan Drive Regional Sales Manager
Danville, CA 94526
D. Ian Valentine Senior Vice President of Sales, None
307 Braehead Drive Regional Sales Manager
Fredericksburg, VA 22401
</TABLE>
<PAGE>
Seligman Financial Services, Inc.
As of January 18, 1996
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Helen Simon* Vice President, Sales None
Administration Manager
Marsha E. Jacoby* Vice President, National Accounts None
William W. Johnson* Vice President, Order Desk None
James R. Besher Regional Vice President None
14000 Margaux Lane
Town & Country, MO 63017
Brad Davis Regional Vice President None
255 4th Avenue, #2
Kirkland, WA 98033
Andrew Draluck Regional Vice President None
4215 N. Civic Center
Blvd #273
Scottsdale, AZ 85251
Jonathan Evans Regional Vice Pesident None
222 Fairmont Way
Ft. Lauderdale, FL 33326
Carla Goehring Regional Vice President None
11426 Long Pine
Houston, TX 77077
Susan Gutterud Regional Vice President None
820 Humboldt, #6
Denver, CO 80218
Mark Lien Regional Vice President None
5904 Mimosa
Sedalia, MO 65301
Randy D. Lierman Regional Vice President None
2627 R.D. Mize Road
Independence, MO 64057
Judith L. Lyon Regional Vice President None
163 Haynes Bridge Road, Ste 205
Alpharetta, CA 30201
David Meyncke Regional Vice President None
4718 Orange Grove Way
Palm Harbor, FL 34684
Herb W. Morgan Regional Vice President None
11308 Monticook Court
San Diego, CA 92127
Melinda Nawn Regional Vice President None
5850 Squire Hill Court
Cincinnati, OH 45241
Robert H. Ruhm Regional Vice President None
167 Derby Street
Melrose, MA 02176
Diane H. Snowden Regional Vice President None
11 Thackery Lane
Cherry Hill, NJ 08003
Bruce Tuckey Regional Vice President None
41644 Chathman Drive
Novi, MI 48375
</TABLE>
<PAGE>
Seligman Financial Services, Inc.
As of January 18, 1996
<TABLE>
<CAPTION>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Andrew Veasey Regional Vice President None
14 Woodside
Rumson, NJ 07760
Todd Volkman Regional Vice President None
4650 Cole Avenue, #216
Dallas, TX 75205
Kelli A. Wirth-Dumser Regional Vice President None
8618 Hornwood Court
Charlotte, NC 28215
Frank P. Marino* Assistant Vice President, Mutual
Fund Product Manager None
Frank J. Nasta* Secretary Secretary
Aurelia Lacsamana* Treasurer None
</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 30. Location of Accounts and Records
Custodian: Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105 and
Seligman Tax-Exempt Series Trust
100 Park Avenue
New York, New York 10017
Item 31. Management Services - Seligman Data Corp. ("SDC") the
Registrant's shareholder service agent, has an agreement with First
Data Investor Services Group ("FDISG") pursuant to which FDISG
provides a data processing system for certain shareholder
accounting and recordkeeping functions performed by SDC, which
commenced in July 1990. For the fiscal years ended September 30,
1995, 1994 and 1993, the approximate cost of these services for
each Series was:
1995 1994 1993
---- ---- ----
California Tax-Exempt High-Yield Series $ 5,800 $6,029 $ 7,300
California Tax-Exempt Quality Series 9,600 9,875 11,223
Florida Tax-Exempt Series 5,000 5,075 4,783
North Carolina Tax-Exempt Series 5,800 5,767 4,715
Item 32. Undertakings - The Registrant undertakes: (1) if requested to do
so by the holders of at least ten percent of its outstanding
shares, to call a meeting of shareholders for the purpose of voting
upon the removal of a director or directors and to assist in
communications with other shareholders as required by Section 16(c)
of the Investment Company Act of 1940; and (2) to furnish to each
person to whom a prospectus is delivered, a copy of the
Registrant's latest annual report to shareholders, upon request and
without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant and has duly caused this
Post-Effective Amendment No. 24 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 26th day of January, 1996.
SELIGMAN TAX-EXEMPT SERIES TRUST
By: /s/ William C. Morris
---------------------
William C. Morris, Chairman*
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 24 has been signed below by the following persons
in the capacities indicated on January 26, 1995.
Signature Title
--------- -----
/s/ William C. Morris Chairman of the Trustees (Principal
- --------------------- executive officer) and Trustee
William C. Morris*
/s/ Brian T. Zino President and Trustee
- -----------------
Brian T. Zino
/s/ Thomas G. Rose Treasurer (Principal financial
- ------------------
Thomas G. Rose and accounting officer)
Fred E. Brown, Trustee )
John R. Galvin, Trustee )
Alice S. Ilchman, Trustee )
Frank A. McPherson, Trustee )
John E. Merow, Trustee ) /s/ Brian T. Zino
- ---------------------- - -----------------
Betsy S. Michel, Trustee ) *By: Brian T. Zino, Attorney-in-fact
James C. Pitney, Trustee )
James Q. Riordan, Trustee )
Robert L. Shafer, Trustee )
James N. Whitson, Trustee )
Brian T. Zino, Trustee )
SELIGMAN GROUP OF MUTUAL FUNDS
Plan for Multiple Classes of Shares
THIS PLAN, as it may be amended from time to time, sets forth
the separate arrangement and expense allocation of each class of shares (a
"Class") of each registered open-end management investment company, or series
thereof, in the Seligman Group of Mutual Funds that offers multiple classes of
shares (each, a "Fund"). The Plan has been adopted pursuant to Rule 18f-3(d)
under the Investment Company Act of 1940, as amended (the "Act"), by a majority
of the Board of Directors or Trustees, as applicable ("Directors"), of each Fund
listed on Schedule I hereto, including a majority of the Directors who are not
interested persons of such Fund within the meaning of Section 2(a)(19) of the
Act ("Disinterested Directors"). Any material amendment to this Plan is subject
to the prior approval of the Board of Directors of each Fund to which it
relates, including a majority of the Disinterested Directors.
1. General
A. Any Fund may issue more than one Class of voting stock,
provided that each Class:
i. Shall have a different arrangement for shareholder
services or the distribution of securities or both,
and shall pay all of the expenses of that
arrangement;
ii. May pay a different share of other expenses, not
including advisory or custodial fees or other
expenses related to the management of the Fund's
assets, if these expenses are actually incurred in a
different amount by that Class, or if the Class
receives services of a different kind or to a
different degree than other Classes of the same Fund
("Class Level Expenses");
iii. May pay a different advisory fee to the extent that
any difference in amount paid is the result of the
application of the same performance fee provisions in
the advisory contract of the Fund to the different
investment performance of each Class;
iv. Shall have exclusive voting rights on any matter
submitted to shareholders that relates solely to its
arrangement;
<PAGE>
v. Shall have separate voting rights on any matter
submitted to shareholders in which the interests of
one Class differ from the interests of any other
Class; and
vi. Shall have in all other respects the same rights and
obligations as each other Class of the Fund.
B. i. Except as expressly contemplated by this paragraph
B., no types or categories of expenses shall be
designated Class Level Expenses.
ii. The Directors recognize that certain expenses arising
in certain sorts of unusual situations are properly
attributable solely to one Class and therefore should
be borne by that Class. These expenses ("Special
Expenses") may include, for example: (i) the costs of
preparing a proxy statement for, and holding, a
special meeting of shareholders to vote on a matter
affecting only one Class; (ii) the costs of holding a
special meeting of Directors to consider such a
matter; (iii) the costs of preparing a special report
relating exclusively to shareholders of one Class;
and (iv) the costs of litigation affecting one Class
exclusively. J. & W. Seligman & Co. Incorporated (the
"Manager") shall be responsible for identifying
expenses that are potential Special Expenses.
iii. Subject to clause iv. below, any Special Expense
identified by the Manager shall be treated as a Class
Level Expense.
iv. Any Special Expense identified by the Manager that is
material to the Class in respect of which it is
incurred shall be submitted by the Manager to the
Directors of the relevant Fund on a case by case
basis with a recommendation by the Manager as to
whether it should be treated as a Class Level
Expense. If approved by the Directors, such Special
Expense shall be treated as a Class Level Expense of
the affected class.
C. i. Realized and unrealized capital gains and losses
of a Fund shall be allocated to each class of that
Fund on the basis of the aggregate net asset value of
all outstanding shares ("Record Shares") of the Class
in relation to the aggregate net asset value of
Record Shares of the Fund.
<PAGE>
ii. Income and expenses of a Fund not charged directly to
a particular Class shall be allocated to each Class
of that Fund on the following basis:
a. For periodic dividend funds, on the basis of
the aggregate net asset value of Record
Shares of each Class in relation to the
aggregate net asset value of Record Shares
of the Fund.
b. For daily dividend funds, on the basis of
the aggregate net asset value of Settled
Shares of each Class in relation to the
aggregate net asset value of Settled Shares
of the Fund. "Settled Shares" means Record
Shares minus the number of shares of that
Class or Fund that have been issued but for
which payment has not cleared and plus the
number of shares of that Class or Fund which
have been redeemed but for which payment has
not yet been issued.
D. On an ongoing basis, the Directors, pursuant to their
fiduciary responsibilities under the Act and otherwise, will
monitor each Fund for the existence of any material conflicts
among the interests of its several Classes. The Directors,
including a majority of the Disinterested Directors, shall
take such action as is reasonably necessary to eliminate any
such conflicts that may develop. The Manager and Seligman
Financial Services, Inc. (the "Distributor") will be
responsible for reporting any potential or existing conflicts
to the Directors. If a conflict arises, the Manager and the
Distributor will be responsible at their own expense for
remedying such conflict by appropriate steps up to and
including separating the classes in conflict by establishing a
new registered management company to operate one of the
classes.
E. The plan of each Fund adopted pursuant to Rule 12b-1 under the
Act (the "Rule 12b-1 Plan") provides that the Directors will
receive quarterly and annual statements complying with
paragraph (b)(3)(ii) of Rule 12b-1, as it may be amended from
time to time. In the statements, only distribution
expenditures properly attributable to the sale of shares of a
specific Class will be used to support the Rule 12b-1 fee
charged to shareholders of such Class. Expenditures not
related to the sale of a specific Class will not be presented
to the Directors to support Rule 12b-1 fees charged to
shareholders of such Class. The statements, including the
allocations upon which they are based, will be subject to the
review of the Disinterested Directors.
<PAGE>
F. Dividends paid by a Fund with respect to each Class, to the
extent any dividends are paid, will be calculated in the same
manner, at the same time and on the same day and will be in
the same amount, except that fee payments made under the Rule
12b-1 Plan relating to the Classes will be borne exclusively
by each Class and except that any Class Level Expenses shall
be borne by the applicable Class.
G. The Directors of each Fund hereby instruct such Fund's
independent auditors to review expense allocations each year
as part of their regular audit process, to inform the
Directors and the Manager of any irregularities detected and,
if specifically requested by the Directors, to prepare a
written report thereon. In addition, if any Special Expense is
incurred by a Fund and is classified as a Class Level Expense
in the manner contemplated by paragraph B. above, the
independent auditors for such Fund, in addition to reviewing
such allocation, are hereby instructed to report thereon to
the Audit Committee of the relevant Fund and to the Manager.
The Manager will be responsible for taking such steps as are
necessary to remedy any irregularities so detected, and will
do so at its own expense to the extent such irregularities
should reasonably have been detected and prevented by the
Manager in the performance of its services to the Fund.
2. Specific Arrangements for Each Class
The following arrangements regarding shareholder services,
expense allocation and other indicated matters shall be in effect with respect
to the Class A shares and Class D shares of each Fund. The following
descriptions are qualified by reference to the more detailed description of such
arrangements set forth in the prospectus relating to each Fund, as the same may
from time to time be amended or supplemented (for each Fund, the "Relevant
Prospectus"), provided that no Relevant Prospectus may modify the provisions of
this Plan applicable to Rule 12b-1 fees or Class Level Expenses.
(a) Class A Shares
i. Class A shares are subject to an initial sales load
which varies with the size of the purchase, to a
maximum of 4.75% of the public offering price.
Reduced sales loads shall apply in certain
circumstances. Class A shares of Seligman Cash
Management Fund, Inc. shall not be subject to an
initial sales load.
ii. Class A shares shall be subject to a Rule 12b-1 fee
of up to 0.25% of average daily net assets.
<PAGE>
iii. Special Expenses attributable to the Class A shares,
except those determined by the Directors not to be
Class Level Expenses of the Class A shares in
accordance with paragraph 1.B.iv., shall be Class
Level Expenses and attributed solely to the Class A
shares. No other expenses shall be treated as Class
Level Expenses of the Class A shares.
iv. The Class A shares shall be entitled to the
shareholder services, including exchange privileges,
described in the Relevant Prospectus.
(b) Class D Shares
i. Class D shares are sold without an initial sales load
but are subject to a contingent deferred sales load
of 1% in certain cases if the shares are redeemed
within one year.
ii. Class D shares shall be subject to a Rule 12b-1 fee
of up to 1.00% of average daily net assets.
iii. Special Expenses attributable to the Class D shares,
except those determined by the Directors not to be
Class Level Expenses of the Class D shares in
accordance with paragraph 1.B.iv., shall be Class
Level Expenses and attributed solely to the Class D
shares. No other expenses shall be treated as Class
Level Expenses of the Class D shares.
iv. The Class D shares shall be entitled to the
shareholder services, including exchange privileges,
described in the Relevant Prospectus.
<PAGE>
Schedule I
Seligman Cash Management Fund, Inc.
Seligman Capital Fund, Inc.
Seligman Common Stock, Inc.
Seligman Communications and Information Fund, Inc.
Seligman Frontier Fund, Inc.
Seligman Growth Fund, Inc.
Seligman Income Fund, Inc.
Seligman Henderson Global Growth Opportunities Fund Seligman Henderson Global
Smaller Companies Fund Seligman Henderson Global Technology Fund Seligman
Henderson International Fund Seligman High-Yield Bond Fund Seligman U.S.
Government Securities Fund Seligman National Tax-Exempt Fund Seligman California
Quality Tax Exempt Fund Seligman California High-Yield Tax-Exempt Fund Seligman
Colorado Tax-Exempt Fund Seligman Florida Tax-Exempt Fund Seligman Georgia
Tax-Exempt Fund Seligman Louisiana Tax-Exempt Fund Seligman Maryland Tax-Exempt
Fund Seligman Massachusetts Tax-Exempt Fund Seligman Michigan Tax-Exempt Fund
Seligman Minnesota Tax-Exempt Fund Seligman Missouri Tax- Exempt Fund Seligman
New Jersey Tax-Exempt Fund, Inc. Seligman New York Tax-Exempt Fund Seligman
North Carolina Tax-Exempt Fund Seligman Ohio Tax-Exempt Fund Seligman Oregon
Tax-Exempt Fund Seligman Pennsylvania Tax-Exempt Fund Series Seligman South
Carolina Tax-Exempt Fund
January 12, 1996
Seligman Tax-Exempt Series Trust
100 Park Avenue
New York, New York 10017
Ladies and Gentlemen:
With respect to Post-Effective Amendment No. 23 to the Registration
Statement on Form N-1A under the Securities Act of 1933, as amended, of Seligman
Tax-Exempt Series Trust, of which Seligman North Carolina Tax-Exempt Series is a
series, we have reviewed the material relative to North Carolina Taxes in the
Registration Statement. Subject to such review, we have delivered to you our
updated opinion.
We consent to the filing of this consent as an exhibit to the
Registration Statement and to the reference to us under the heading "North
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,
Horack, Talley, Pharr & Lowndes
/s/ Stephen L. Smith
Stephen L. Smith
<PAGE>
January 25, 1996
J. W. Seligman & Company, Inc.
1 Bankers Trust Plaza
New York, New York 10006
Re: Seligman North Carolina Tax-Exempt Series
Gentlemen:
You have requested our assistance in preparing certain disclosure
relating to the North Carolina income tax law treatment of shareholders
investing in shares of the Seligman North Carolina Tax-Exempt Series (the
"Series") of the Seligman Tax-Exempt Series Trust (the "Trust") to be included
in the Prospectus of the Trust filed with the Securities and Exchange Commission
as part of Post-Effective Amendment Number 23 to the Registration Statement of
the Trust. You also have asked for our opinion regarding the accuracy of such
discussion.
We have prepared the discussion of the North Carolina income tax
treatment of the shareholders of the Series in the form attached as Exhibit A
hereto. We are of the opinion that this discussion is accurate under existing
law as more particularly discussed in Exhibit A and as set forth below.
Our opinion as set forth below is based solely on existing North
Carolina law on the date hereof. It also is based on the following
representations by you concerning the Trust:
1. The Trust is a non-diversified open-end management investment
company as defined in the Investment Company Act of 1940
organized as an unincorporated business trust under the laws
of the State of Massachusetts, commonly referred to as a
"Massachusetts business trust". The Trust consists of a number
of series of shares, each with a different investment
objective, one of which series is the Series.
2. Each of such series intends to qualify and to elect to be
treated as a separate regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code").
<PAGE>
3. At the close of each quarter of its taxable year, at least 50%
of the value of the total assets of the Series will be
invested in obligations exempt from federal income tax as
described in Section 103(a) of the Code such that the Series
will be eligible to pay exempt-interest dividends as defined
in Section 852(b)(5) of the Code that are excludable by the
shareholders of the Series from gross income for federal
income tax purposes.
4. The Series will mail a supporting statement to its
shareholders within sixty (60) days after the close of each
taxable year of the Series designating the amount of the
dividends of the Series which are attributable to interest
received by the Series on obligations of the State of North
Carolina and its political subdivisions and direct obligations
of the United States government and agencies and possessions
of the United States as more particularly described below.
Under North Carolina General Statutes ("N.C.G.S.") Section
105-134.5(a), a North Carolina resident's taxable income for North Carolina
income tax purposes is defined as such taxpayer's taxable income as calculated
under the Internal Revenue Code as enacted as of January 1, 1995 [including any
provisions enacted as of that date which become effective either before or after
that date], subject to certain adjustments provided for in N.C.G.S. Sections
105-134.6 and 105-134.7. Under N.C.G.S. Section 105-134.5(b), a non-resident's
taxable income for North Carolina income tax purposes is computed on the same
basis but then is multiplied by a fraction, the denominator of which is the
non-resident's gross income as calculated under the Internal Revenue Code as
enacted as of January 1, 1995, as adjusted under N.C.G.S. Sections 105-134.6 and
105-134.7, and the numerator of which is the amount of such gross income, as so
adjusted, that is derived from North Carolina sources and is attributable to the
ownership of any interest in real or tangible personal property in North
Carolina or is derived from a business, trade, profession or occupation carried
on in North Carolina.
Dividends of a regulated investment company attributable to interest on
obligations of the State of North Carolina and its political subdivisions should
qualify as exempt-interest dividends of the regulated investment company for
purposes of the Code so long as the dividends of such regulated investment
company qualify as exempt-interest dividends generally, and therefore these
dividends attributable to interest on obligations of the State of North Carolina
and its political subdivisions will not be included in the shareholder's federal
taxable income from which his North Carolina taxable income is calculated.
However, the North Carolina Department of Revenue takes the position in a
memorandum dated October 4, 1989 that a taxpayer may exclude from his North
Carolina taxable income the amount of any exempt-interest dividends attributable
to interest on obligations of the State of North Carolina and its political
subdivisions only if the regulated investment company paying such
exempt-interest dividends furnishes a supporting statement to the taxpayer
designating the portion of the distributions of the regulated investment company
attributable to interest on obligations of the State of North Carolina and its
political subdivisions. In the absence of such a statement, the total amount of
the exempt-interest dividends must be added back to taxable income for federal
income tax purposes in computing the taxpayer's taxable income for North
Carolina income tax purposes. The North Carolina Department of Revenue also
takes the position in a memorandum dated October 4, 1990 that any dividends of a
regulated investment company attributable to interest on obligations of the
State of North Carolina and its political subdivisions which are included in
federal taxable income may be deducted from federal taxable income in computing
North Carolina taxable income so long as the regulated investment company
provides a similar supporting statement designating the portion of the
distributions of the regulated investment company attributable to interest on
obligations of the State of North Carolina and its political subdivisions.
<PAGE>
Although under N.C.G.S. Section 105-134.6(b)(1), there is deducted in
calculating the North Carolina taxable income of an individual taxpayer, to the
extent included in federal gross income, interest received directly from certain
sources, including interest upon obligations of the United States and its
possessions, the North Carolina Department of Revenue previously had taken the
position that this adjustment was not to be made for the portion of the
dividends of a regulated investment company attributable to interest on
obligations of the United States and its possessions. However, in a revised
statement of position set forth in the memorandum dated October 4, 1990, the
North Carolina Department of Revenue indicated that the portion of the dividends
of a regulated investment company which represent interest on direct obligations
of the United States government may be deducted by the shareholders of such
regulated investment company from federal taxable income in calculating North
Carolina taxable income so long as the regulated investment company furnishes a
supporting statement to its shareholders designating the portion of the
distributions of the regulated investment company attributable to interest on
direct obligations of the United States government. In the absence of such a
supporting statement, the amount of the dividends attributable to interest on
direct obligations of the United States government will not be deductible from
federal taxable income in calculating North Carolina taxable income. The
Department of Revenue also has informed us that they will treat interest on
direct obligations of agencies and possessions of the United States in a similar
manner, and that the portion of the dividends of a regulated investment company
attributable to interest on direct obligations of agencies and possessions of
the United States may be deducted from federal taxable income in calculating
North Carolina taxable income so long as the regulated investment company
furnishes a supporting statement to its shareholders designating the portion of
the distributions of the regulated investment company attributable to direct
obligations of agencies and possessions of the United States.
Under N.C.G.S. Section 105-134.6(c)(1), there is to be added to federal
taxable income in calculating North Carolina taxable income, to the extent not
included in federal gross income, interest upon the obligations of states (other
than the State of North Carolina) and their political subdivisions, and the
North Carolina Department of Revenue takes the position in the memorandum dated
October 4, 1989 that this add-back adjustment must be made in determining the
North Carolina taxable income of shareholders of a regulated investment company
receiving distributions attributable to such sources.
Therefore, distributions from the Series will not be taxable to the
shareholders for North Carolina income tax purposes so long as (A) either (i)
the distributions qualify as exempt-interest dividends for federal income tax
purposes and are attributable to interest on obligations of the State of North
Carolina and its political subdivisions or (ii) the distributions are dividends
which represent interest on direct obligations of the United States government
and agencies and possessions of the United States, and (B) in both cases, the
Series furnishes the shareholders a supporting statement designating the portion
of the dividend distributions of the Series attributable to interest received by
the Series on obligations of the State of North Carolina and its political
subdivisions and direct obligations of the United States and its agencies and
possessions. Distributions attributable to interest on obligations of states
other than North Carolina and their political subdivisions will be taxable for
North Carolina income tax purposes and, under N.C.G.S. Section 105-134.6(c)(1),
the amount of any exempt-interest dividend distributions of the Series for
federal income tax purposes which are attributable to interest on the
obligations of states other than North Carolina and the political subdivisions
of such states must be added back in determining North Carolina taxable income.
Distributions attributable to capital gains and other sources which are taxable
for federal income tax purposes also will be taxable for North Carolina income
tax purposes.
<PAGE>
Except as otherwise stated herein, we have not verified the facts and
representations underlying this opinion and should any of such facts or
representations fail to be true in whole or in part, this could have the effect
of changing our opinion in whole or in part. Moreover, this opinion is based on
current North Carolina law as set forth in the statutes and certain
administrative positions of the North Carolina Department of Revenue and any
change in such law or positions could have the effect of changing our opinion in
whole or in part. Members of this firm are members of the Bar of the State of
North Carolina and do not express any opinion as to any laws other than the law
of the State of North Carolina.
Very truly yours,
HORACK, TALLEY, PHARR & LOWNDES
/s/ Stephen L. Smith
Stephen L. Smith
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>051
<NAME> SELIGMAN TAX-EXEMPT SERIES TRUST-FLORIDA CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 47271
<INVESTMENTS-AT-VALUE> 48557
<RECEIVABLES> 1240
<ASSETS-OTHER> 66
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 49863
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 230
<TOTAL-LIABILITIES> 230
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 48053
<SHARES-COMMON-STOCK> 6362<F1>
<SHARES-COMMON-PRIOR> 6802<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 294
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1286
<NET-ASSETS> 49029<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2978<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (352)<F1>
<NET-INVESTMENT-INCOME> 2626<F1>
<REALIZED-GAINS-CURRENT> 295
<APPREC-INCREASE-CURRENT> 2058
<NET-CHANGE-FROM-OPS> 4997
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2626)<F1>
<DISTRIBUTIONS-OF-GAINS> (13)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 548<F1>
<NUMBER-OF-SHARES-REDEEMED> (1135)<F1>
<SHARES-REINVESTED> 148<F1>
<NET-CHANGE-IN-ASSETS> (508)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 12
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 244<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 502<F1>
<AVERAGE-NET-ASSETS> 48757<F1>
<PER-SHARE-NAV-BEGIN> 7.34<F1>
<PER-SHARE-NII> .40<F1>
<PER-SHARE-GAIN-APPREC> .37<F1>
<PER-SHARE-DIVIDEND> (.40)<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.71<F1>
<EXPENSE-RATIO> .72<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>054
<NAME> SELIGMAN TAX-EXEMPT SERIES TRUST-FLORIDA CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 47271
<INVESTMENTS-AT-VALUE> 48557
<RECEIVABLES> 1240
<ASSETS-OTHER> 66
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 49863
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 230
<TOTAL-LIABILITIES> 230
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 48053
<SHARES-COMMON-STOCK> 78<F1>
<SHARES-COMMON-PRIOR> 33<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 294
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1286
<NET-ASSETS> 603<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 25<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (7)<F1>
<NET-INVESTMENT-INCOME> 18<F1>
<REALIZED-GAINS-CURRENT> 295
<APPREC-INCREASE-CURRENT> 2058
<NET-CHANGE-FROM-OPS> 4997
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (18)<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 104<F1>
<NUMBER-OF-SHARES-REDEEMED> (61)<F1>
<SHARES-REINVESTED> 1<F1>
<NET-CHANGE-IN-ASSETS> (508)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 12
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8<F1>
<AVERAGE-NET-ASSETS> 396<F1>
<PER-SHARE-NAV-BEGIN> 7.34<F1>
<PER-SHARE-NII> .34<F1>
<PER-SHARE-GAIN-APPREC> .38<F1>
<PER-SHARE-DIVIDEND> (.34)<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.72<F1>
<EXPENSE-RATIO> 1.66<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>021
<NAME> SELIGMAN TAX-EXEMPT SERIES TRUST-CALIFORNIA HIGH YIELD CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 49863
<INVESTMENTS-AT-VALUE> 51737
<RECEIVABLES> 1235
<ASSETS-OTHER> 70
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 53042
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 216
<TOTAL-LIABILITIES> 216
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50827
<SHARES-COMMON-STOCK> 7962<F1>
<SHARES-COMMON-PRIOR> 7617<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 80
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1874
<NET-ASSETS> 51504<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3197<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (428)<F1>
<NET-INVESTMENT-INCOME> 2769<F1>
<REALIZED-GAINS-CURRENT> 88
<APPREC-INCREASE-CURRENT> 1121
<NET-CHANGE-FROM-OPS> 4017
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2769)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1484<F1>
<NUMBER-OF-SHARES-REDEEMED> (1359)<F1>
<SHARES-REINVESTED> 220<F1>
<NET-CHANGE-IN-ASSETS> 4125
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (8)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 237<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 428<F1>
<AVERAGE-NET-ASSETS> 47515<F1>
<PER-SHARE-NAV-BEGIN> 6.30<F1>
<PER-SHARE-NII> .37<F1>
<PER-SHARE-GAIN-APPREC> .17<F1>
<PER-SHARE-DIVIDEND> (.37)<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.47<F1>
<EXPENSE-RATIO> .90<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>024
<NAME> SELIGMAN TAX-EXEMPT SERIES TRUST-CALIFORNIA HIGH-YIELD CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 49863
<INVESTMENTS-AT-VALUE> 51737
<RECEIVABLES> 1235
<ASSETS-OTHER> 70
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 53042
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 216
<TOTAL-LIABILITIES> 216
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50827
<SHARES-COMMON-STOCK> 197<F1>
<SHARES-COMMON-PRIOR> 103<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 80
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1874
<NET-ASSETS> 1277<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 54<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (15)<F1>
<NET-INVESTMENT-INCOME> 39<F1>
<REALIZED-GAINS-CURRENT> 88
<APPREC-INCREASE-CURRENT> 1121
<NET-CHANGE-FROM-OPS> 4017
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (39)<F1>
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 112<F1>
<NUMBER-OF-SHARES-REDEEMED> (23)<F1>
<SHARES-REINVESTED> 5<F1>
<NET-CHANGE-IN-ASSETS> 4125
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (8)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 15<F1>
<AVERAGE-NET-ASSETS> 798<F1>
<PER-SHARE-NAV-BEGIN> 6.31<F1>
<PER-SHARE-NII> .31<F1>
<PER-SHARE-GAIN-APPREC> .17<F1>
<PER-SHARE-DIVIDEND> (.31)<F1>
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.48<F1>
<EXPENSE-RATIO> 1.91<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>011
<NAME> SELIGMAN TAX-EXEMPT SERIES TRUST-CALIFORNIA QUALITY CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 92860
<INVESTMENTS-AT-VALUE> 94543
<RECEIVABLES> 1393
<ASSETS-OTHER> 149
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 96085
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 275
<TOTAL-LIABILITIES> 275
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 94166
<SHARES-COMMON-STOCK> 14285<F1>
<SHARES-COMMON-PRIOR> 15484<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (40)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1683
<NET-ASSETS> 94947<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5979<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (856)<F1>
<NET-INVESTMENT-INCOME> 5123<F1>
<REALIZED-GAINS-CURRENT> (40)
<APPREC-INCREASE-CURRENT> 4530
<NET-CHANGE-FROM-OPS> 9650
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5123)<F1>
<DISTRIBUTIONS-OF-GAINS> (894)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 856<F1>
<NUMBER-OF-SHARES-REDEEMED> (2553)<F1>
<SHARES-REINVESTED> 499<F1>
<NET-CHANGE-IN-ASSETS> (4022)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 889
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 13
<GROSS-ADVISORY-FEES> 479<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 856<F1>
<AVERAGE-NET-ASSETS> 878<F1>
<PER-SHARE-NAV-BEGIN> 6.39<F1>
<PER-SHARE-NII> .34<F1>
<PER-SHARE-GAIN-APPREC> .32<F1>
<PER-SHARE-DIVIDEND> (.34)<F1>
<PER-SHARE-DISTRIBUTIONS> (.06)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.65<F1>
<EXPENSE-RATIO> .89<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>014
<NAME> SELIGMAN TAX-EXEMPT SERIES TRUST-CALIFORNIA QUALITY CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 92860
<INVESTMENTS-AT-VALUE> 94543
<RECEIVABLES> 1393
<ASSETS-OTHER> 149
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 96085
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 275
<TOTAL-LIABILITIES> 275
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 94166
<SHARES-COMMON-STOCK> 130<F1>
<SHARES-COMMON-PRIOR> 127<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (40)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1683
<NET-ASSETS> 863<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 55<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (17)<F1>
<NET-INVESTMENT-INCOME> 38<F1>
<REALIZED-GAINS-CURRENT> (40)
<APPREC-INCREASE-CURRENT> 4530
<NET-CHANGE-FROM-OPS> 9650
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (38)<F1>
<DISTRIBUTIONS-OF-GAINS> (8)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 59<F1>
<NUMBER-OF-SHARES-REDEEMED> (59)<F1>
<SHARES-REINVESTED> 3<F1>
<NET-CHANGE-IN-ASSETS> (4022)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 889
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 13
<GROSS-ADVISORY-FEES> 4<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17<F1>
<AVERAGE-NET-ASSETS> 878<F1>
<PER-SHARE-NAV-BEGIN> 6.38<F1>
<PER-SHARE-NII> .28<F1>
<PER-SHARE-GAIN-APPREC> .31<F1>
<PER-SHARE-DIVIDEND> (.28)<F1>
<PER-SHARE-DISTRIBUTIONS> (.06)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.63<F1>
<EXPENSE-RATIO> 1.88<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
