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SELIGMAN
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SELIGMAN
MUNICIPAL
SERIES TRUST
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Providing Income Free From Regular Income Tax
SEPTEMBER 30, 1997 * ANNUAL REPORT
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Over the Long Term -- J. & W. Seligman & Co. Incorporated
TIME IS THE TEST
In an industry that has changed dramatically in recent years, it's
comforting to know that stability, tradition, and consistent professional
service can still be found in an investment management firm.
J. & W. Seligman & Co. Incorporated has been providing financial services
for more than 130 years. From its beginning, Seligman has followed a long-term
approach to making money for its clients, by managing investment products and
providing services of the highest quality. Today, Seligman manages the
Seligman Group of Funds, which offers investors more than 50 investment options.
A PLACE IN HISTORY
Established in 1864, Seligman played a major role in the geographical
expansion and industrial development of the United States. The firm helped
finance the westward path of the railroads and the building of the Panama Canal.
In the late 1800s and early 1900s, the firm was instrumental in financing the
fledgling automobile and steel industries. Seligman also participated in the
original underwritings for some of the nation's most prominent companies,
including General Motors, Victor Talking Machine, United Artists Theater
Circuit, and Maytag. In 1929, Seligman introduced Tri-Continental Corporation --
which today is the nation's largest diversified closed-end investment company.
In 1930, Seligman began managing its first mutual fund, Broad Street Investing
Co., now known as Seligman Common Stock Fund.
SELIGMAN MUNICIPAL SERIES TRUST
Seligman Municipal Series Trust, which commenced operations on November 20,
1984, is a series of state-specific municipal bond funds that seek to maximize
income exempt from regular federal income taxes and from personal income taxes
in the applicable state. This is done consistent with the preservation of
capital and with consideration given to opportunities for capital gain by
investing in municipal securities of the designated state, its political
subdivisions, municipalities, and public authorities.
James, Jesse, and Joseph Seligman
TABLE OF CONTENTS
To the Shareholders.................................... 1
Interview With Your Portfolio Manager.................. 2
Performance Overview and Portfolio Summary............. 4
Portfolios of Investments.............................. 8
Statements of Assets and Liabilities................... 14
Statements of Operations............................... 15
Statements of Changes in Net Assets.................... 16
Notes to Financial Statements.......................... 18
Financial Highlights................................... 21
Report of Independent Auditors......................... 25
Trustees............................................... 26
Executive Officers and For More Information............ 27
Glossary of Financial Terms............................ 28
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To the Shareholders
Seligman Municipal Series Trust posted strong results in its fiscal year
ended September 30, 1997. The steady growth of the economy, combined with benign
levels of inflation, reduced yields in the municipal bond market beginning in
May. Bond prices rose, improving the Trust's total returns as it continued to
provide monthly income free from regular income tax. Additional information on
the Trust's investment results begins on page 4.
Long-term municipal bond yields fluctuated within a narrow range during the
Trust's first quarter and into the early part of 1997. By March, yields began to
rise in response to reports of strong economic growth and in anticipation of a
Federal Reserve Board interest rate increase. After raising the federal funds
rate to 5.50% from 5.25% on March 25, the Fed left rates unchanged. As economic
growth continued without prompting a noticeable increase in inflation, the
municipal bond market rallied from May to July, and then traded within a narrow
range from August to September.
The yield on the Bond Buyer 20-Bond General Obligation Index, a benchmark for
the municipal market, ended the Trust's fiscal year at 5.36% on September 30,
1997, significantly lower than its 12-month high of 5.88% on April 10, and only
slightly higher than the July 31 low of 5.23%. The yield for the Bond Buyer
20-Bond General Obligation Index stood at 5.76% on September 30, 1996.
While economic indicators have been mixed recently, the overall tone of the
environment is good. Unemployment levels have remained historically low,
consumer and producer prices have been fairly stable, consumer spending has been
increasing at a reasonable rate, and orders for durable goods - goods that have
a life span of three or more years - have been rising. This economic expansion
has improved the financial well-being of municipalities and increased investor
confidence in the municipal bond market.
The next few months could be more challenging, given the recent volatility
in the global equity markets and the business slowdown in Southeast Asia.
Nevertheless, US economic reports remain positive overall. There are still a few
areas where potential inflationary problems persist, particularly in the labor
market. A significant increase in labor costs could prompt the Fed to become
more restrictive and move interest rates up another notch, though this is a
fading risk given recent international events. Nonetheless, the future prospects
of both the municipal bond market and your Trust remain positive. Supply and
demand levels in the municipal market should remain favorable regardless of the
short-term impact of any Fed move.
We thank you for your continued interest in Seligman Municipal Series Trust,
and look forward to serving your investment needs in the many years to come.
A discussion with your Portfolio Manager, performance overviews, portfolio
holdings, and financial statements follow this letter.
By order of the Trustees,
/S/ William C. Morris
Chairman
/S/ Brian T. Zino
President
October 31, 1997
1
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Interview With Your Portfolio Manager, Thomas G. Moles
Q. What economic factors affected Seligman Municipal Series Trust in the last
12 months?
A. A healthy economy and a stable rate of inflation would seem the best of all
possible worlds. However, for much of the past year, the fixed-income markets
were most heavily influenced by economic growth and whether or not inflation
was an important risk factor. The longer the economic expansion endured, the
more anxious some market participants became that rising inflation was just
around the corner. The strong employment picture was of particular concern.
While low unemployment resulted in scattered labor shortages, it did not
translate into meaningfully higher wages. To date, wage pressures continue
to be restrained, mainly due to productivity improvements and global
competition. The market's reluctance to accept the premise that economic
vigor and low inflation are not mutually exclusive has prevented long-term
interest rates from falling to levels that would better reflect this
remarkable economic environment.
Q. What market factors affected Seligman Municipal Series Trust in the last
12 months?
A. Seligman Municipal Series Trust ended its fiscal year on a positive note.
During the past 12 months, long-term municipal yields, as measured by the
Bond Buyer 20-Bond General Obligation Index, fluctuated within a narrow
trading range. At September 30, 1997, yields were almost a half-point lower
than at the beginning of the Trust's fiscal year. The declining interest
rate environment led to rising prices for the majority of the holdings and
favorable performance results for each Series.
Investor demand for municipal securities generally kept pace with supply,
contributing to the relative stability of the municipal bond market. While
new issue volume has increased modestly over the past several years, it has
had a negligible impact on the total outstanding supply of municipal bonds
due to a record number of bond calls and redemptions.
Additionally, the extraordinary economic expansion, now in its seventh
year, continued to improve credit trends for the nation's states, cities, and
municipalities. Year-to-date, credit rating upgrades significantly
outnumbered rating downgrades. Within Seligman Municipal Series Trust, the
overall credit quality of the portfolios improved as several of our holdings
received upgraded ratings.
Q. What was your investment strategy?
A. Consistent with our positive long-term interest rate outlook, new purchases
were concentrated in longer maturity bonds. Generally, for a parallel
decline in yields, long-term bonds appreciate more in price than
shorter-term bonds. Long-term bonds also offer significantly higher yields
than shorter-term bonds, allowing us to improve the Trust's yields. Further,
given the market's short-term volatility, we sought to lessen the impact
of temporary interest rate increases on the Trust's net asset values
without sacrificing future upside potential. To do
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A TEAM APPROACH
Seligman Municipal Series Trust is managed by the Seligman Municipals Team,
headed by Thomas G. Moles. Mr. Moles is assisted in the management of the Trust
by a group of seasoned professionals who are responsible for research and
trading consistent with the Trust's investment objective.
YOUR PORTFOLIO MANAGER
Thomas G. Moles is a Managing Director of J. & W. Seligman & Co. Incorporated,
Vice President and Portfolio Manager of Seligman Municipal Series Trust and the
other Seligman municipal mutual funds that include 19 separate portfolios, and
President and Portfolio Manager of Seligman Select Municipal Fund and Seligman
Quality Municipal Fund. He is responsible for more than $1.8 billion in
municipal securities. Mr. Moles, with more than 25 years of experience, has
spearheaded Seligman's municipal investment efforts since joining the firm in
1983.
Seligman Municipals Team: (from left) Audrey Kuchtyak, Theresa Barion, Debra
McGuinness, (seated) Eileen Comerford, Thomas G. Moles (Portfolio Manager)
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2
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Interview With Your Portfolio Manager, Thomas G. Moles
this, we elected to purchase mostly current coupon bonds (bonds with coupon
rates at or near current market rates). Current coupon bonds are
intrinsically less sensitive to changes in interest rates than lower coupon
bonds of the same maturity.
As each Series matures, older, callable portfolio holdings are approaching
their optional call dates, resulting in increased reinvestment risk.
(Callable bonds are bonds that are redeemable on specified dates and at
specified prices -- prior to maturity -- at the option of the issuer.) In
general, an open-end fund's income distributions will, over time, move
toward current market levels as a result of portfolio activity, shareholder
transactions, and bond calls and redemptions. In the past year, we focused
on improving the Trust's call protection by selling shorter-call bonds and
replacing them with longer-call bonds, while attempting to minimize the
impact on income distributions.
Q. What is the outlook?
A. While fixed-income market participants remain cautious, economic fundamentals
point to a continuation of steady, moderate growth with low inflation. We,
therefore, remain optimistic regarding the long-term prospects of the Trust.
Stable long-term interest rates, improving credit trends, and attractive
real rates of return bode well for the performance of the municipal bond
market going forward. We believe municipal bond funds will continue to play
an important role in helping investors meet their investment goals. At
Seligman, we have a straightforward approach to managing municipal bond
funds. We invest for the long term, building diversified portfolios of
quality bonds, and always work to provide our shareholders with competitive
investment returns.
3
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Performance Overview and Portfolio Summary
The following charts compare a $10,000 hypothetical investment made in each
Series of Seligman Municipal Series Trust Class A shares, with and without the
initial 4.75% maximum sales charge, for the 10-year or since-inception (where
applicable) periods ended September 30, 1997, 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 Municipal 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 does not
include any fees or sales charges and does not reflect state-specific bond
market performance. The table below each chart also includes relevant portfolio
characteristics for each Series.
SELIGMAN CALIFORNIA MUNICIPAL HIGH-YIELD SERIES
California High-Yield Series Class A
With Without
Sales Sales
DATE Charge Charge Lehman Index
- -----------------------------------------------------
30-Sep-87 $9,519 $10,000 10,000
31-Dec-87 9,976 10,479 10,447
31-Mar-88 10,385 10,909 10,806
30-Jun-88 10,574 11,108 11,015
30-Sep-88 10,921 11,472 11,297
31-Dec-88 11,285 11,855 11,506
31-Mar-89 11,405 11,982 11,582
30-Jun-89 11,935 12,538 12,268
30-Sep-89 11,970 12,575 12,276
31-Dec-89 12,332 12,955 12,747
31-Mar-90 12,442 13,070 12,805
30-Jun-90 12,709 13,351 13,104
30-Sep-90 12,637 13,275 13,112
31-Dec-90 13,072 13,733 13,677
31-Mar-91 13,373 14,048 13,987
30-Jun-91 13,662 14,352 14,285
30-Sep-91 14,220 14,938 14,840
31-Dec-91 14,443 15,172 15,339
31-Mar-92 14,649 15,389 15,385
30-Jun-92 15,175 15,941 15,969
30-Sep-92 15,499 16,282 16,393
31-Dec-92 15,819 16,618 16,691
31-Mar-93 16,279 17,101 17,310
30-Jun-93 16,749 17,595 17,876
30-Sep-93 17,152 18,018 18,480
31-Dec-93 17,387 18,265 18,739
31-Mar-94 16,986 17,844 17,710
30-Jun-94 17,082 17,945 17,907
30-Sep-94 17,222 18,092 18,029
31-Dec-94 16,902 17,755 17,769
31-Mar-95 17,997 18,905 19,025
30-Jun-95 18,341 19,268 19,484
30-Sep-95 18,746 19,693 20,045
31-Dec-95 19,362 20,339 20,871
31-Mar-96 19,184 20,152 20,618
30-Jun-96 19,450 20,433 20,777
30-Sep-96 19,963 20,971 21,255
31-Dec-96 20,430 21,462 21,797
31-Mar-97 20,349 21,377 21,747
30-Jun-97 21,043 22,106 22,497
30-Sep-97 21,708 22,804 23,177
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
For Periods Ended September 30, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL
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CLASS D
SIX ONE FIVE 10 SINCE INCEPTION
MONTHS YEAR YEARS YEARS 2/1/94
---------- ------ ------- ------- ---------------
<S> <C> <C> <C> <C> <C>
CLASS A*
With Sales Charge 1.57% 3.64% 5.94% 8.06% n/a
Without Sales Charge 6.68 8.74 6.97 8.59 n/a
CLASS D*
With 1% CDSL 5.03 6.60 n/a n/a n/a
Without CDSL 6.03 7.60 n/a n/a 4.95%
LEHMAN INDEX** 6.57 9.03 7.17 8.77 5.64++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
For Periods Ended September 30, 1997
9/30/97 3/31/97 9/30/96 DIVIDENDS++ CAPITAL GAIN++ SEC YIELD+++
------- -------- ------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $6.61 $6.36 $6.50 CLASS A $0.341 $0.094 4.15%
CLASS D 6.61 6.37 6.51 CLASS D 0.283 0.094 3.47
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR 0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C> <C> <C>
Revenue Bonds 83% Aaa/AAA 1% Baa/BBB 24%
General Obligation Bonds 17 Aa/AA 9 Non-Rated 16
A/A 50
WEIGHTED AVERAGE MATURITY 20.6 years
</TABLE>
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See footnotes on page 7.
4
<PAGE>
Performance Overview and Portfolio Summary
SELIGMAN CALIFORNIA MUNICIPAL QUALITY SERIES
California Quality Series Class A
With Without
Sales Sales
DATE Charge Charge Lehman Index
- ----------------------------------------------
30-Sep-87 $9,525 $10,000 10,000
31-Dec-87 10,084 10,587 10,447
31-Mar-88 10,432 10,953 10,806
30-Jun-88 10,646 11,177 11,015
30-Sep-88 10,893 11,436 11,297
31-Dec-88 11,292 11,856 11,506
31-Mar-89 11,370 11,938 11,582
30-Jun-89 12,066 12,668 12,268
30-Sep-89 11,966 12,564 12,276
31-Dec-89 12,395 13,014 12,747
31-Mar-90 12,380 12,998 12,805
30-Jun-90 12,693 13,327 13,104
30-Sep-90 12,472 13,094 13,112
31-Dec-90 13,209 13,868 13,677
31-Mar-91 13,431 14,102 13,987
30-Jun-91 13,686 14,369 14,285
30-Sep-91 14,261 14,973 14,840
31-Dec-91 14,691 15,424 15,339
31-Mar-92 14,667 15,399 15,385
30-Jun-92 15,313 16,078 15,969
30-Sep-92 15,625 16,405 16,393
31-Dec-92 15,938 16,733 16,691
31-Mar-93 16,697 17,530 17,310
30-Jun-93 17,207 18,066 17,876
30-Sep-93 17,799 18,688 18,480
31-Dec-93 17,947 18,843 18,739
31-Mar-94 16,758 17,594 17,710
30-Jun-94 16,784 17,622 17,907
30-Sep-94 16,828 17,668 18,029
31-Dec-94 16,457 17,279 17,769
31-Mar-95 17,934 18,829 19,025
30-Jun-95 18,168 19,075 19,484
30-Sep-95 18,653 19,584 20,045
31-Dec-95 19,715 20,699 20,871
31-Mar-96 19,300 20,263 20,618
30-Jun-96 19,496 20,470 20,777
30-Sep-96 19,959 20,956 21,255
31-Dec-96 20,486 21,509 21,797
31-Mar-97 20,347 21,363 21,747
30-Jun-97 21,037 22,087 22,497
30-Sep-97 21,730 22,815 23,177
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
For Periods Ended September 30, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL
---------------------------------------------------------------------------
CLASS D
SIX ONE FIVE 10 SINCE INCEPTION
MONTHS YEAR YEARS YEARS 2/1/94
---------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
CLASS A*
With Sales Charge 1.79% 3.66% 5.79% 8.07% n/a
Without Sales Charge 6.80 8.87 6.82 8.60 n/a
CLASS D*
With 1% CDSL 5.34 6.75 n/a n/a n/a
Without CDSL 6.34 7.75 n/a n/a 3.98%
LEHMAN INDEX** 6.57 9.03 7.17 8.77 5.64++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
For Periods Ended September 30, 1997
9/30/97 3/31/97 9/30/96 DIVIDENDS++ CAPITAL GAIN++ SEC YIELD+++
------- -------- ------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $6.99 $6.71 $6.75 CLASS A $0.342 $0.002 4.08%
CLASS D 6.97 6.69 6.74 CLASS D 0.279 0.002 3.40
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR* MOODY'S/S&P RATINGS*
<S> <C> <C> <C>
Revenue Bonds 87% Aaa/AAA 67%
General Obligation Bonds 13 Aa/AA 23
A/A 10
WEIGHTED AVERAGE MATURITY 20.4 years
</TABLE>
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See footnotes on page 7.
5
<PAGE>
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Performance Overview and Portfolio Summary
SELIGMAN FLORIDA MUNICIPAL SERIES
Florida Series Class A
With Without
Sales Sales
DATE Charge Charge Lehman Index
- ---------------------------------------------
31-Sep-87 $9,525 $10,000 10,000
31-Dec-87 10,326 10,841 10,447
31-Mar-88 10,681 11,214 10,806
30-Jun-88 11,010 11,558 11,015
30-Sep-88 11,413 11,982 11,297
31-Dec-88 11,886 12,478 11,506
31-Mar-89 11,958 12,554 11,582
30-Jun-89 12,854 13,495 12,268
30-Sep-89 12,700 13,333 12,276
31-Dec-89 13,235 13,895 12,747
31-Mar-90 13,206 13,865 12,805
30-Jun-90 13,551 14,227 13,104
30-Sep-90 13,364 14,030 13,112
31-Dec-90 14,090 14,792 13,677
31-Mar-91 14,357 15,072 13,987
30-Jun-91 14,652 15,382 14,285
30-Sep-91 15,156 15,911 14,840
31-Dec-91 15,585 16,362 15,339
31-Mar-92 15,623 16,402 15,385
30-Jun-92 16,240 17,049 15,969
30-Sep-92 16,557 17,382 16,393
31-Dec-92 16,999 17,846 16,691
31-Mar-93 17,632 18,511 17,310
30-Jun-93 18,396 19,313 17,876
30-Sep-93 19,075 20,026 18,480
31-Dec-93 19,297 20,259 18,739
31-Mar-94 18,142 19,046 17,710
30-Jun-94 18,284 19,195 17,907
30-Sep-94 18,314 19,227 18,029
31-Dec-94 18,233 19,141 17,769
31-Mar-95 19,509 20,481 19,025
30-Jun-95 19,817 20,805 19,484
30-Sep-95 20,306 21,317 20,045
31-Dec-95 21,273 22,333 20,871
31-Mar-96 20,793 21,829 20,618
30-Jun-96 20,947 21,991 20,777
30-Sep-96 21,431 22,499 21,255
31-Dec-96 21,861 22,950 21,797
31-Mar-97 21,567 22,642 21,747
30-Jun-97 22,415 23,532 22,497
30-Sep-97 23,148 24,301 23,177
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
For Periods Ended September 30, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL
---------------------------------------------------------------------------
CLASS D
SIX ONE FIVE 10 SINCE INCEPTION
MONTHS YEAR YEARS YEARS 2/1/94
---------- ------ ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
CLASS A*
With Sales Charge 2.25% 2.91% 5.89% 8.76% n/a
Without Sales Charge 7.33 8.01 6.93 9.29 n/a
CLASS D*
With 1% CDSL 5.77 6.18 n/a n/a n/a
Without CDSL 6.77 7.18 n/a n/a 3.98%
LEHMAN INDEX** 6.57 9.03 7.17 8.77 5.64++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
For Periods Ended September 30, 1997
9/30/97 3/31/97 9/30/96 DIVIDENDS++ CAPITAL GAIN++ SEC YIELD+++
------- -------- ------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $7.80 $7.44 $7.67 CLASS A $0.359 $0.103 4.07%
CLASS D 7.81 7.46 7.68 CLASS D 0.300 0.103 3.53
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS 0
<S> <C> <C> <C>
Revenue Bonds 84% Aaa/AAA 65%
General Obligation Bonds 16 Aa/AA 27
A/A 8
WEIGHTED AVERAGE MATURITY 24.6 years
</TABLE>
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See footnotes on page 7.
6
<PAGE>
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Performance Overview and Portfolio Summary
SELIGMAN NORTH CAROLINA MUNICIPAL SERIES
North Carolina Series Class A
With Without
Sales Sales
DATE Charge Charge Lehman Index
- ---------------------------------------------
27-Aug-90 $9,520 $10,000 10,000
30-Sep-90 9,387 9,860 10,006
31-Dec-90 9,784 10,277 10,437
31-Mar-91 9,982 10,485 10,673
30-Jun-91 10,083 10,591 10,900
30-Sep-91 10,510 11,040 11,325
31-Dec-91 10,824 11,370 11,705
31-Mar-92 10,779 11,323 11,740
30-Jun-92 11,212 11,777 12,186
30-Sep-92 11,479 12,058 12,509
31-Dec-92 11,706 12,297 12,737
31-Mar-93 12,197 12,812 13,209
30-Jun-93 12,631 13,268 13,641
30-Sep-93 13,139 13,801 14,102
31-Dec-93 13,226 13,893 14,300
31-Mar-94 12,335 12,957 13,515
30-Jun-94 12,372 12,996 13,665
30-Sep-94 12,377 13,001 13,758
31-Dec-94 12,254 12,872 13,560
31-Mar-95 13,323 13,994 14,518
30-Jun-95 13,563 14,247 14,868
30-Sep-95 13,852 14,551 15,296
31-Dec-95 14,651 15,390 15,927
31-Mar-96 14,255 14,973 15,734
30-Jun-96 14,394 15,120 15,855
30-Sep-96 14,738 15,481 16,220
31-Dec-96 15,049 15,807 16,633
31-Mar-97 14,993 15,749 16,595
30-Jun-97 15,483 16,264 17,168
30-Sep-97 15,918 16,720 17,686
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
For Periods Ended September 30, 1997
<TABLE>
<CAPTION>
AVERAGE ANNUAL
------------------------------------------------------------
CLASS A CLASS D
SIX ONE FIVE SINCE INCEPTION SINCE INCEPTION
MONTHS YEAR YEARS 8/27/90*** 2/1/94
---------- ------ ------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
CLASS A*
With Sales Charge 1.09% 2.89% 5.72% 6.77% n/a
Without Sales Charge 6.17 8.01 6.76 7.51 n/a
CLASS D*
With 1% CDSL 4.77 6.33 n/a n/a n/a
Without CDSL 5.77 7.33 n/a n/a 4.04%
LEHMAN INDEX** 6.57 9.03 7.17 8.38+ 5.64++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
For Periods Ended September 30, 1997
9/30/97 3/31/97 9/30/96 DIVIDENDS++ CAPITAL GAIN++ SEC YIELD+++
------- -------- ------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $8.05 $7.76 $7.84 CLASS A $0.368 $0.032 4.05%
CLASS D 8.05 7.76 7.83 CLASS D 0.308 0.032 3.50
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C>
Revenue Bonds 82% Aaa/AAA 46%
General Obligation Bonds 18 Aa/AA 40
A/A 14
WEIGHTED AVERAGE MATURITY 21.5 years
</TABLE>
- -------------------
* Return figures reflect any change in price and assume all distributions
within the period are invested in additional shares. Returns for Class A
shares are calculated with and without the effect of the initial 4.75%
maximum sales charge. Returns for Class D shares are calculated with and
without the effect of the 1% contingent deferred sales load ("CDSL"),
charged only on redemptions made within one year of the date of purchase.
No adjustment was made to the performance of Class A shares 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 for each Series. The rates of return will vary and the principal
value of an investment will fluctuate. Shares, if redeemed, may be worth
more or less than their original cost. A portion of each Series' income may
be subject to applicable state and local taxes, and any amount may be
subject to the federal alternative minimum tax.
Past performance is not indicative of future investment results.
** The Lehman Index is an unmanaged index that does not include any fees or
sales charges and does not reflect state-specific bond market performance.
Investors cannot invest directly in an index.
*** At its discretion, the Manager waived all or a portion of its fees and, in
some cases, reimbursed certain expenses for the North Carolina Series. This
has the effect of increasing the Series' average annual total returns for
the since-inception period.
++ From 1/31/94.
+ From 8/31/90.
++ Represents per share amount paid or declared for the year ended September
30, 1997.
+++ Current yield, representing the annualized yield for the 30-day period
ended September 30, 1997, has been computed in accordance with SEC
regulations and will vary.
0 Percentages based on market values of long-term holdings at
September 30, 1997.
7
<PAGE>
- -------------------------------------------------------------------------------
Portfolios of Investments
September 30, 1997
CALIFORNIA HIGH-YIELD SERIES
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------- ------------
<S> <C> <C> <C>
$2,500,000 Alameda, CA Certificates of Participation (City Hall Seismic Upgrade Project),
6.20% due 5/1/2025................................................................. NR/A $ 2,623,000
3,000,000 California Department of Water Resources Water System Rev.
(Central Valley Project), 6% due 12/1/2020......................................... Aa2/AA 3,145,710
2,500,000 California Educational Facilities Authority Rev.
(Loyola Marymount University), 5-3/4% due 10/1/2024.............................. A1/N 2,552,200
1,500,000 California Housing Finance Agency Home Mortgage Rev., 6-3/8 % due 8/1/2027*........ Aa2/AA- 1,567,290
2,500,000 California Pollution Control Financing Authority Pollution Control Rev.
(San Diego Gas & Electric Co.), 5.85% due 6/1/2021*................................ A1/A+ 2,540,650
2,000,000 California State GOs, 5-1/4% due 10/1/2019 A1/A+ 1,964,160
2,500,000 Cupertino, CA Certificates of Participation (Capital Improvement Projects),
5-3/4% due 1/1/2016.............................................................. A1/A+ 2,550,200
1,000,000 Folsom, CA Special Tax Bonds (Willow Creek Community Facilities District No. 1),
8-1/4% due 12/1/2006............................................................. NR/NR 1,037,200
3,000,000 Foothill/Eastern Transportation Corridor Agency, CA Toll Road Rev., 6% due 1/1/2034 Baa/BBB- 3,091,980
500,000 Los Angeles, CA Certificates of Participation (Convention & Exhibition
Center Authority), 7-3/8% due 8/15/2018........................................... Aaa/AAA 538,680
1,300,000 Los Angeles, CA Wastewater System Rev., 7.10% due 6/1/2018............................ A1/A 1,384,539
1,000,000 Oxnard Union High School District, CA Certificates of Participation
(Union High School), 7.70% due 11/1/2019............................................ NR/NR 1,092,410
705,000 Petaluma, CA Community Development Commission Tax Allocation Bonds
(Central Business District), 9.30% due 5/15/2010.................................... Baa1/NR 707,961
2,140,000 Pleasanton, CA Joint Powers Financing Authority Reassessment Rev.,
6.15% due 9/2/2012.................................................................. Baa3/NR 2,262,002
2,000,000 Puerto Rico Highway & Transportation Authority Highway Rev., 5-1/2% due 7/1/2036... Baa1/A 2,006,800
3,000,000 San Bernadino, CA Joint Powers Financing Authority (California Dept. of
Transportation Lease), 5-1/2% due 12/1/2020....................................... A/A 2,968,740
2,500,000 San Joaquin Hills, CA Transportation Corridor Agency Rev. (Orange County Toll
Road), 5-1/2% due 1/15/2028....................................................... Baa3/BBB- 2,442,125
3,000,000 San Joaquin Hills, CA Transportation Corridor Agency Rev. (Orange County Senior
Lien Toll Road), 6-3/4% due 1/1/2032.............................................. NR/NR 3,400,650
2,500,000 Santa Barbara, CA Certificates of Participation, 5.70% due 3/1/2011 A1/A+ 2,550,075
1,000,000 Santa Clara, CA Improvement Bonds Project No. 186 (Santa Clara Convention Center
Complex), 7.10% due 9/2/2011........................................................ NR/N 1,034,570
1,500,000 Santa Cruz, CA Hospital Rev. (Dominican Santa Cruz Hospital), 7% due 12/1/2013 A1/A+ 1,537,170
2,000,000 Santa Margarita, CA Water District GOs, 7-1/2% due 11/1/2005........................ NR/NR 2,043,720
1,000,000 Southern California Public Power Authority Power Project Rev. (Multiple Projects),
6% due 7/1/2018..................................................................... A/A 1,018,380
805,000 Stanislaus, CA Waste-to-Energy Financing Agency Solid Waste Facility Rev.
(Ogden Martin System of Stanislaus, Inc. Project), 7-1/2% due 1/1/2005........... NR/BBB+ 857,204
</TABLE>
- ---------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
8
<PAGE>
- -------------------------------------------------------------------------------
Portfolios of Investments
September 30, 1997
CALIFORNIA HIGH-YIELD SERIES (continued)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------- ------------
<S> <C> <C> <C>
$1,230,000 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+ $ 1,319,396
2,500,000 Washington Township, CA Hospital District Hospital Healthcare System Rev.,
5-1/2% due 7/1/2018............................................................ A2/NR 2,457,275
2,230,000 West Covina, CA Certificates of Participation (Queen of the Valley Hospital),
6-1/2% due 8/15/2024........................................................... A2/A 2,432,373
----------
TOTAL MUNICIPAL BONDS (Cost $50,079,320) -- 94.5%................................................ 53,126,460
----------
VARIABLE RATE DEMAND NOTES
-------------------------------------
800,000 New York City, NYGOs due 10/1/2021............................................... VMIG-1/A-1+ 800,000
3,300,000 New York City, NY Municipal Water Finance Authority Water & Sewer System Rev.
due 6/15/2025.................................................................. VMIG-1/A-1+ 3,300,000
200,000 New York State Energy Research & Development Authority Pollution Control Rev.
due 7/1/2015................................................................... NR/A-1+ 200,000
300,000 Person County, NC Industrial Facilities & Pollution Control Financing Authority Rev.
due 11/1/2016.................................................................. P-1/NR 300,000
-----------
TOTAL VARIABLE RATE DEMAND NOTES (Cost $4,600,000) -- 8.2%...................................................... 4,600,000
-----------
OTHER ASSETS LESS LIABILITIES -- (2.7)%......................................................................... (1,523,680)
-----------
NET ASSETS -- 100.0%............................................................................................ $56,202,780
-----------
-----------
</TABLE>
CALIFORNIA QUALITY SERIES
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------- ------------
<S> <C> <C> <C>
$3,000,000 California Department of Water Resources Water System Rev.
(Central Valley Project), 6.10% due 12/1/2029................................. Aa2/AA $ 3,382,350
2,000,000 California Educational Facilities Authority Rev. (Stanford University),
6-3/4% due 1/1/2013........................................................... Aaa/AAA 2,104,960
3,200,000 California Educational Facilities Authority Rev. (University of Southern
California Project), 5.80% due 10/1/2015...................................... Aa3/AA 3,315,904
3,440,000 California Educational Facilities Authority Rev. (Pomona College), 6% due 2/15/2017 Aa1/AA+ 3,600,751
4,500,000 California Educational Facilities Authority Rev. (California Institute
of Technology), 6% due 1/1/2021............................................... Aaa/AAA 4,652,685
2,000,000 California Educational Facilities Authority Rev. (Stanford University),
5.35% due 6/1/2027............................................................ Aaa/AAA 1,999,840
3,000,000 California Health Facilities Financing Authority Health Facility Rev.
(Kaiser Permanente), 6-1/2% due 12/1/2020..................................... Aa3/AA 3,221,730
2,000,000 California Health Facilities Financing Authority Insured Hospital Rev.
(Scripps Memorial Hospital), 6-3/8% due 10/1/2022............................. Aaa/AAA 2,176,700
5,000 California Housing Finance Agency (Housing Revenue Insured Bonds),
8-3/4% due 8/1/2010........................................................... Aaa/AAA 5,242
</TABLE>
- ------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
9
<PAGE>
- -------------------------------------------------------------------------------
Portfolios of Investments
September 30, 1997
CALIFORNIA QUALITY SERIES (continued)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------- ------------
<S> <C> <C> <C>
$425,000 California Housing Finance Agency (Housing Revenue Insured Bonds),
8-5/8% due 8/1/2015........................................................... Aaa/AAA $ 444,750
2,795,000 California Housing Finance Agency Home Mortgage Rev., 6-3/4% due 2/1/2025*...... Aa2/AA- 2,952,554
4,000,000 California Pollution Control Financing Authority Rev. (Mobil Oil Corporation
Project), 5-1/2% due 12/1/2029*............................................... Aa2/AA 3,926,840
925,000 California Public Capital Improvements Financing Authority (Pooled Projects),
8.10% due 3/1/2018............................................................ Aaa/AAA 959,317
3,000,000 California Public Works Board Lease Rev. (Correctional Facilities Improvements),
5-3/4% due 9/1/2021.......................................................... A/A 3,027,030
3,000,000 California State GOs, 5.90% due 4/1/2023....................................... A1/A+ 3,127,200
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 2,849,430
5,000,000 Contra Costa, CA Water District Rev., 5-1/2% due 10/1/2019..................... Aaa/AAA 5,021,100
3,500,000 East Bay, CA Municipal Utility District Water System Rev., 6% due 6/1/2012.... Aaa/AAA 3,711,505
2,500,000 Eastern Municipal Water District Riverside County, CA Water and Sewer Rev.,
6-3/4% due 7/1/2012.......................................................... Aaa/AAA 2,981,500
3,000,000 Fresno, CA Sewer System Rev., 5-1/4% due 9/1/2019.............................. Aaa/AAA 3,007,650
2,000,000 Industry, CA GOs, 7-3/8% due 7/1/2015.......................................... Aaa/AAA 2,156,340
2,000,000 Marin, CA Municipal Water District Water Rev., 5.65% due 7/1/2023.............. A1/AA 2,021,060
3,000,000 Metropolitan Water District of Southern California Waterworks GOs,
5-3/4% due 3/1/2014.......................................................... Aaa/AAA 3,050,880
3,500,000 Northern California Power Agency Public Power Rev. (Combustion Turbine Project A-1),
6% due 8/15/2010............................................................. Aaa/AAA 3,577,385
4,500,000 Orange County, CA Local Transportation Authority (Measure M Sales Tax Rev.),
6% due 2/15/2009............................................................. Aaa/AAA 5,006,430
2,500,000 Rancho, CA Water District Financing Authority Rev., 5.90% due 11/1/2015........ Aaa/AAA 2,655,650
3,250,000 San Francisco Bay Area Rapid Transit District, CA (Sales Tax Rev.),
6.60% due 7/1/2012........................................................... Aaa/AAA 3,548,610
3,000,000 San Francisco, CA (City & County) Airport Commission Rev. (International Airport),
6.60% due 5/1/2024*.......................................................... Aaa/AAA 3,290,190
5,000,000 University of California Regents (Multiple Purpose Projects), 6-3/8% due 9/1/2024 Aaa/AAA 5,441,050
-----------
TOTAL MUNICIPAL BONDS (Cost $81,064,862) -- 98.4%.............................................................. 87,216,633
VARIABLE RATE DEMAND NOTES (Cost $200,000) -- 0.2%............................................................. 200,000
OTHER ASSETS LESS LIABILITIES -- 1.4%.......................................................................... 1,252,433
-----------
NETASSETS-- 100.0%............................................................................................. $88,669,066
-----------
-----------
</TABLE>
- ----------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
10
<PAGE>
- -------------------------------------------------------------------------------
Portfolios of Investments
September 30, 1997
FLORIDA SERIES
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------- ------------
<S> <C> <C> <C>
$1,000,000 Broward County, FL Water & Sewer Utility Rev., 5% due 10/1/2018................. Aaa/AAA $ 952,530
1,500,000 Broward County School District, FL GOs, 7-1/8% due 2/15/2008.................... Aaa/AAA 1,592,505
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+ 1,612,320
2,000,000 Collier County, FL Water & Sewer Rev., 5-1/4% due 7/1/2021...................... Aaa/AAA 1,941,700
1,250,000 Dade County, FL Aviation Rev., 6-1/8% due 10/1/2020*............................ Aaa/AAA 1,313,937
2,000,000 Dade County, FL Public Improvement GOs, 5-3/4% due 10/1/2016.................... Aaa/AAA 2,090,880
2,000,000 Dade County, FL Water & Sewer System Rev., 5-3/4% due 10/1/2022................. Aaa/AAA 2,062,920
1,000,000 Florida Housing Finance Agency (General Mortgage Rev.), 6.35% due 6/1/2014...... NR/AAA 1,047,420
705,000 Florida Housing Finance Agency Rev. (Single Family Mortgage), 6.55% due 7/1/2014* Aaa/AAA 745,474
1,985,000 Florida Housing Finance Agency Rev. (Homeowner Mortgage), 6.20% due 7/1/2027*... Aa3/AA 2,057,929
2,500,000 Florida Ports Financing Commission Rev. (State Transportation Trust Fund),
5-3/8% due 6/1/2027*.......................................................... Aaa/AAA 2,422,375
2,000,000 Florida State Department of Transportation GOs (Right of Way), 5.80% due 7/1/2021 Aa2/AA+ 2,059,240
2,500,000 Florida State Turnpike Authority Turnpike Rev., 5-5/8% due 7/1/2025............. Aaa/AAA 2,531,625
2,500,000 Hillsborough County, FL Aviation Authority Rev. (Tampa International Airport),
5-3/8% due 10/1/2023*......................................................... Aaa/AAA 2,390,500
1,500,000 Jacksonville Electric Authority, FL Rev. (St. John's River Power Park System),
5-3/8% due 10/1/2016.......................................................... Aa1/AA 1,501,650
2,000,000 Jacksonville Electric Authority, FL (Water & Sewer System Rev.),
5-5/8% due 10/1/2037.......................................................... Aa3/AA- 2,006,560
2,000,000 Jacksonville, FL Sewage & Solid Waste Disposal Facilities Rev. (Anheuser-Busch
Project), 5-7/8% due 2/1/2036*................................................ A1/A+ 2,039,400
2,000,000 Jacksonville Health Facilities Authority, FL Hospital Rev. (Charity Obligated
Group--Baptist/St. Vincent's Health System Inc.), 5-1/4% due 8/15/2027........ Aa2/AA+ 1,929,780
2,000,000 Kissimmee Utility Authority, FL Electric System Improvement Rev.,
5-1/4% due 10/1/2018.......................................................... Aaa/AAA 1,955,220
1,000,000 Lee County, FL Transportation Facilities Rev., 6% due 10/1/2015................. Aaa/AAA 1,075,510
1,000,000 Osceola County, FL Transportation Rev. (Osceola Parkway Project),
6.10% due 4/1/2017............................................................ Aaa/AAA 1,058,150
1,200,000 Palm Beach County, FL Criminal Justice Facilities Rev., 7-1/4% due 6/1/2011..... Aaa/AAA 1,317,060
2,000,000 Polk County, FL Industrial Development Authority Solid Waste Disposal
Facilities Rev. (Tampa Electric Company Project), 5.85% due 12/1/2030*........ Aa2/A1+ 2,047,760
2,000,000 Reedy Creek Improvement District, FL Utilities Rev., 5-1/8% due 10/1/2019....... Aaa/AAA 1,949,780
1,250,000 Volusia County, FL Educational Facilities Authority Rev. (Embry-Riddle Aeronautical
University Project), 6-5/8% due 10/15/2022.................................... NR/AAA 1,373,325
-----------
TOTAL MUNICIPAL BONDS (Cost $41,489,557) -- 98.6%............................................................... 43,075,550
OTHER ASSETS LESS LIABILITIES -- 1.4%........................................................................... 626,678
-----------
NET ASSETS -- 100.0%............................................................................................ $43,702,228
-----------
-----------
</TABLE>
- -----------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
11
<PAGE>
- -------------------------------------------------------------------------------
Portfolios of Investments
September 30, 1997
NORTH CAROLINA SERIES
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------- ------------
<S> <C> <C> <C>
$1,250,000 Appalachian State University, NC Housing & Student Center System Rev.,
5-5/8% due 7/15/2015.......................................................... Aaa/AAA $ 1,278,750
1,250,000 Asheville, NC Water System Rev., 5.70% due 8/1/2025............................. Aaa/AAA 1,286,563
600,000 Buncombe County, NC Metropolitan Sewerage District (Sewerage System Rev.),
5-1/2% due 7/1/2022........................................................... Aaa/AAA 601,446
2,000,000 Charlotte-Mecklenberg Hospital Authority, NC Health Care System Rev.,
5-3/4% due 1/15/2021.......................................................... Aa3/AA 2,045,020
1,000,000 Charlotte, NC Certificates of Participation (Charlotte-Mecklenburg Law Enforcement
Center Project), 5-3/8% due 6/1/2013.......................................... Aa1/AA 1,021,660
2,000,000 Charlotte, NC Water & Sewer GOs, 5.90% due 2/1/2017............................. Aaa/AAA 2,113,060
1,590,000 Concord, NC Utilities System Rev., 5-3/4% due 12/1/2017......................... Aaa/AAA 1,634,949
2,500,000 Martin County Industrial Facilities and Pollution Control Financing Authority, NC
Solid Waste Disposal Rev. (Weyerhaeuser Company Project), 6% due 11/1/2025*... A2/A 2,588,975
500,000 North Carolina Educational Facilities Financing Authority Rev. (Duke University
Project), 6-3/4% due 10/1/2021................................................ Aa1/AA+ 547,420
500,000 North Carolina Educational Facilities Financing Authority Rev. (Elon College Project),
6-3/8% due 1/1/2014........................................................... NR/AAA 532,120
600,000 North Carolina Housing Finance Agency Rev. (Multi-Family), 5.80% due 7/1/2014... Aa2/AA 615,276
1,455,000 North Carolina Housing Finance Agency Rev. (Single Family), 6-1/2% due 3/1/2018 Aa2/AA 1,532,886
250,000 North Carolina Housing Finance Agency Rev. (Multi-Family), 5.90% due 7/1/2026... Aa2/AA 254,843
750,000 North Carolina Medical Care Commission Hospital Rev. (North Carolina Baptist
Hospital Project), 6-3/8% due 6/1/2014........................................ Aa3/AA 799,140
1,500,000 North Carolina Medical Care Commission Hospital Rev. (Carolina Medicorp Project),
6% due 5/1/2021............................................................... Aa3/AA 1,535,280
1,000,000 North Carolina Medical Care Commission Hospital Rev. (Memorial Mission Hospital
Project), 6% due 10/1/2022.................................................... Aaa/AAA 1,036,960
2,250,000 North Carolina Medical Care Commission Hospital Rev. (Presbyterian Health Services
Corp. Project), 6% due 10/1/2024.............................................. Aa3/AA 2,357,212
1,500,000 North Carolina Municipal Power Agency No. 1 Catawba Electric Rev.,
5-3/4% due 1/1/2015........................................................... Aaa/AAA 1,531,830
3,000,000 North Carolina Municipal Power Agency No. 1 Catawba Electric Rev.,
5% due 1/1/2020............................................................... Aaa/AAA 2,916,570
1,000,000 Orange, NC Water & Sewer Authority Rev., 5.20% due 7/1/2016..................... Aa/AA 998,730
775,000 Raleigh, NC GOs, 6-1/2% due 3/1/2008............................................ Aaa/AAA 839,464
200,000 Transylvania County, NC GOs, 6.80% due 4/1/2007................................. A2/A 214,204
1,500,000 University of North Carolina Charlotte Rev. (Student Activity Center),
5-1/2% due 6/1/2021........................................................... Aaa/AAA 1,506,570
500,000 University of North Carolina Hospitals at Chapel Hill Rev., 6-3/8% due 2/15/2017 Aa3/AA 535,145
1,000,000 University of North Carolina Hospitals at Chapel Hill Rev., 5-1/4% due 2/15/2026 Aa3/AA 979,700
</TABLE>
- -----------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
12
<PAGE>
- -------------------------------------------------------------------------------
Portfolios of Investments
September 30, 1997
NORTH CAROLINA SERIES (continued)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------- ------------
<S> <C> <C> <C>
$1,550,000 Wake County Industrial Facilities & Pollution Control Financing Authority, NC
(Carolina Power & Light), 6.90% due 4/1/2009.................................. A2/A $ 1,665,165
-----------
TOTAL MUNICIPAL BONDS (Cost $31,347,717) -- 97.2%............................................................... 32,968,938
VARIABLE RATE DEMAND NOTES (Cost $400,000) -- 1.2%.............................................................. 400,000
OTHER ASSETS LESS LIABILITIES -- 1.6%........................................................................... 531,726
-----------
NET ASSETS -- 100.0%............................................................................................ $33,900,664
-----------
-----------
</TABLE>
- -------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
13
<PAGE>
- -------------------------------------------------------------------------------
Statements of Assets and Liabilities
September 30, 1997
<TABLE>
<CAPTION>
CALIFORNIA CALIFORNIA NORTH
HIGH-YIELD QUALITY FLORIDA CAROLINA
SERIES SERIES SERIES SERIES
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (see portfolios of investments):
Long-term holdings................................ $53,126,460 $87,216,633 $43,075,550 $32,968,938
Short-term holdings............................... 4,600,000 200,000 -- 400,000
----------- ----------- ----------- -----------
57,726,460 87,416,633 43,075,550 33,368,938
Cash ................................................ 200,988 186,757 -- 130,316
Interest receivable.................................. 907,850 1,337,118 813,012 561,114
Expenses prepaid to shareholder service agent........ 7,225 12,382 6,702 4,926
Receivable for Shares of Beneficial Interest sold.... 1,020 -- 34,031 12,250
Other................................................ 1,913 1,654 1,043 635
----------- ----------- ----------- -----------
Total Assets......................................... $58,845,456 $88,954,544 $43,930,338 $34,078,179
----------- ----------- ----------- -----------
LIABILITIES:
Payable for securities purchased..................... $ 2,450,672 $ -- $ -- $ --
Dividends payable.................................... 95,690 153,500 67,751 52,299
Payable for Shares of Beneficial Interest
repurchased.......................................... 2,170 8,467 76,498 53,700
Payable to custodian................................. -- -- 7,195 --
Accrued expenses, taxes, and other................... 94,144 123,511 76,666 71,516
----------- ----------- ----------- -----------
Total Liabilities ................................... 2,642,676 285,478 228,110 177,515
----------- ----------- ----------- -----------
Net Assets........................................... $56,202,780 $88,669,066 $43,702,228 $33,900,664
=========== =========== =========== ===========
COMPOSITION OF NET ASSETS:
Shares of Beneficial Interest, at par:
Class A........................................... $ 8,005 $ 12,445 $ 5,390 $ 4,061
Class D........................................... 502 240 215 151
Additional paid-in capital........................... 53,028,854 82,307,451 41,710,643 32,012,627
Undistributed net realized gain...................... 118,279 197,159 399,987 262,604
Net unrealized appreciation of investments........... 3,047,140 6,151,771 1,585,993 1,621,221
----------- ----------- ----------- -----------
Net Assets........................................... $56,202,780 $88,669,066 $43,702,228 $33,900,664
=========== =========== =========== ===========
NET ASSETS:
Class A.............................................. $52,882,700 $86,992,344 $42,024,374 $32,684,042
Class D. ............................................ $ 3,320,080 $ 1,676,722 $ 1,677,854 $ 1,216,622
SHARES OF BENEFICIAL INTEREST OUTSTANDING
(Unlimited shares authorized; $.001
par value):
Class A.............................................. 8,004,601 12,444,958 5,390,482 4,060,328
Class D. ............................................ 501,908 240,397 214,843 151,227
NET ASSET VALUE PER SHARE:
Class A.............................................. $6.61 $6.99 $7.80 $8.05
Class D.............................................. $6.61 $6.97 $7.81 $8.05
</TABLE>
- ------------
See Notes to Financial Statements.
14
<PAGE>
- -------------------------------------------------------------------------------
Statements of Operations
For the Year Ended September 30, 1997
<TABLE>
<CAPTION>
CALIFORNIA CALIFORNIA NORTH
HIGH-YIELD QUALITY FLORIDA CAROLINA
SERIES SERIES SERIES SERIES
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest ............................................ $3,267,781 $5,365,795 $2,617,708 $2,031,696
---------- ---------- ---------- ----------
EXPENSES:
Management fees...................................... 266,730 461,278 228,202 176,659
Distribution and service fees........................ 73,541 104,672 118,458 94,898
Shareholder account services......................... 65,920 104,028 57,529 48,486
Auditing and legal fees.............................. 24,013 21,013 24,283 23,954
Shareholder reports and communications............... 15,120 20,408 8,883 8,525
Custody and related services......................... 13,081 24,614 24,669 17,102
Trustees' fees and expenses.......................... 8,455 8,740 7,716 7,458
Registration......................................... 7,971 8,426 6,933 7,172
Shareholders' meeting................................ 5,703 8,969 4,752 4,977
Miscellaneous........................................ 2,514 7,192 4,316 3,860
---------- ---------- ---------- ----------
Total Expenses....................................... 483,048 769,340 485,741 393,091
---------- ---------- ---------- ----------
Net Investment Income................................ 2,784,733 4,596,455 2,131,967 1,638,605
---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments..................... 211,592 427,389 402,363 264,968
Net change in unrealized appreciation
of investments....................................... 1,476,067 2,834,368 899,645 797,213
---------- ---------- ---------- ----------
Net Gain on Investments ............................. 1,687,659 3,261,757 1,302,008 1,062,181
---------- ---------- ---------- ----------
Increase in Net Assets from Operations............... $4,472,392 $7,858,212 $3,433,975 $2,700,786
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
- -------------
See Notes to Financial Statements.
15
<PAGE>
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
CALIFORNIA HIGH-YIELD SERIES CALIFORNIA QUALITY SERIES
------------------------------- -------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
------------------------------- -------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ...................... $ 2,784,733 $ 2,761,416 $ 4,596,455 $ 4,933,062
Net realized gain on investments............ 211,592 761,672 427,389 10,779
Net change in unrealized appreciation
of investments.............................. 1,476,067 (302,934) 2,834,368 1,634,127
----------- ----------- ----------- -----------
Increase in Net Assets from
Operations.................................. 4,472,392 3,220,154 7,858,212 6,577,968
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A.................................. (2,682,769) (2,694,728) (4,533,073) (4,886,875)
Class D.................................. (101,964) (66,688) (63,382) (46,187)
Net realized gain on investments:
Class A.................................. (722,261) (181,195) (27,957) (170,861)
Class D.................................. (27,209) (4,083) (454) (1,627)
----------- ----------- ----------- -----------
Decrease in Net Assets from
Distributions............................... (3,534,203) (2,946,694) (4,624,866) (5,105,550)
----------- ----------- ----------- -----------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sale of shares:
Class A.................................. 7,351,517 7,028,522 1,481,687 4,563,152
Class D.................................. 1,513,626 971,455 575,550 938,009
Shares issued in payment of dividends:
Class A.................................. 1,412,142 1,381,074 2,257,452 2,408,049
Class D.................................. 70,066 51,365 33,256 28,597
Exchanged from associated Funds:
Class A.................................. 1,772,009 2,237,849 19,333,888 6,680,456
Class D.................................. 502,224 197,372 5,312,748 601,980
Shares issued in payment of
gain distribution:
Class A.................................. 483,204 123,013 16,799 108,888
Class D.................................. 22,161 3,665 228 857
----------- ----------- ----------- -----------
Total ...................................... 13,126,949 11,994,315 29,011,608 15,329,988
----------- ----------- ----------- -----------
Cost of shares repurchased:
Class A.................................. (7,355,541) (10,210,483) (13,851,584) (8,519,741)
Class D.................................. (640,001) (128,873) (280,678) (208,709)
Exchanged into associated Funds:
Class A.................................. (1,923,514) (2,054,893) (20,972,562) (6,087,884)
Class D.................................. (126,577) (471,562) (5,676,629) (590,062)
----------- ----------- ----------- -----------
Total ...................................... (10,045,633) (12,865,811) (40,781,453) (15,406,396)
----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets
from Transactions in Shares of
Beneficial Interest......................... 3,081,316 (871,496) (11,769,845) (76,408)
----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets........... 4,019,505 (598,036) (8,536,499) 1,396,010
NET ASSETS:
Beginning of year........................... 52,183,275 52,781,311 97,205,565 95,809,555
----------- ----------- ----------- -----------
End of Year................................. $56,202,780 $52,183,275 $88,669,066 $97,205,565
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
- ---------------
See Notes to Financial Statements.
16
<PAGE>
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
FLORIDA SERIES NORTH CAROLINA SERIES
------------------------------- -------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
------------------------------- -------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ...................... $ 2,131,967 $ 2,389,445 $ 1,638,605 $ 1,798,784
Net realized gain on investments............ 402,363 848,068 264,968 150,901
Net change in unrealized appreciation
of investments.............................. 899,645 (599,721) 797,213 428,165
----------- ----------- ----------- -----------
Increase in Net Assets from
Operations.................................. 3,433,975 2,637,792 2,700,786 2,377,850
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A.................................. (2,069,071) (2,340,450) (1,591,157) (1,748,201)
Class D.................................. (62,896) (48,995) (47,448) (50,583)
Net realized gain on investments:
Class A.................................. (611,829) (503,822) (145,565) (67,229)
Class D.................................. (20,485) (8,426) (4,714) (2,262)
----------- ----------- ----------- -----------
Decrease in Net Assets from
Distributions............................... (2,764,281) (2,901,693) (1,788,884) (1,868,275)
----------- ----------- ----------- -----------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sale of shares:
Class A.................................. 2,176,497 2,194,401 1,480,472 2,675,748
Class D.................................. 211,049 844,824 124,216 263,673
Shares issued in payment of dividends:
Class A.................................. 808,742 944,497 832,006 915,705
Class D.................................. 43,942 27,492 35,063 37,861
Exchanged from associated Funds:
Class A.................................. 1,901,127 1,720,648 622,587 558,685
Class D.................................. 437,446 132,950 -- 3,221
Shares issued in payment of
gain distribution:
Class A.................................. 344,983 274,175 106,938 49,273
Class D.................................. 15,286 3,798 4,313 2,102
----------- ----------- ----------- -----------
Total ...................................... 5,939,072 6,142,785 3,205,595 4,506,268
----------- ----------- ----------- -----------
Cost of shares repurchased:
Class A.................................. (7,587,878) (7,546,385) (6,362,439) (5,507,260)
Class D.................................. (295,456) (254,841) (208,812) (151,705)
Exchanged into associated Funds:
Class A.................................. (1,470,687) (1,167,372) (808,253) (695,424)
Class D.................................. (29,736) (65,958) (3,500) (198,185)
----------- ----------- ----------- -----------
Total ...................................... (9,383,757) (9,034,556) (7,383,004) (6,552,574)
----------- ----------- ----------- -----------
Decrease in Net Assets
from Transactions in Shares of
Beneficial Interest......................... (3,444,685) (2,891,771) (4,177,409) (2,046,306)
----------- ----------- ----------- -----------
Decrease in Net Assets...................... (2,774,991) (3,155,672) (3,265,507) (1,536,731)
NET ASSETS:
Beginning of year........................... 46,477,219 49,632,891 37,166,171 38,702,902
----------- ----------- ----------- -----------
End of Year................................. $43,702,228 $46,477,219 $33,900,664 $37,166,171
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
- ------------
See Notes to Financial Statements.
17
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements
1. Multiple Classes of Shares -- Seligman Municipal 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, the commencement date of Class D shares,
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 A shares purchased in an amount of $1,000,000 or more are sold
without an initial sales charge but are subject to a contingent deferred sales
load ("CDSL") of 1% on redemptions within 18 months of purchase. Class D shares
are sold without an initial sales charge but are subject to a distribution fee
of up to 0.75% and a service fee of up to 0.25% on an annual basis, and a CDSL
of 1% imposed on redemptions made within one year of purchase. The two classes
of shares for each Series represent interests in the same portfolio of
investments, have the same rights and are generally identical in all respects
except that each class bears its separate distribution and certain other class
expenses, and has exclusive voting rights with respect to any matter on which a
separate vote of any class is required.
2. Significant Accounting Policies -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Trust:
a. Security Valuation -- All municipal securities and other short-term holdings
maturing in more than 60 days are valued based upon quotations provided by
an independent pricing service or, in their absence, at fair value
determined in accordance with procedures approved by the Trustees.
Short-term holdings maturing in 60 days or less are generally valued at
amortized cost.
b. Federal Taxes -- There is no provision for federal income tax. Each Series
has elected to be taxed as a regulated investment company and intends to
distribute substantially all taxable net income and net gain realized.
c. Security Transactions and Related Investment Income -- Investment
transactions are recorded on trade dates. Identified cost of investments
sold is used for both financial statement and federal income tax purposes.
Interest income is recorded on the accrual basis. The Trust amortizes
original issue discounts and premiums paid on purchases of portfolio
securities. Discounts other than original
issue discounts are not amortized.
d. Multiple Class Allocations -- All income, expenses (other than
class-specific expenses), and realized and unrealized gains or losses are
allocated daily to each class of shares based upon the relative value of the
shares of each class. Class-specific expenses, which include distribution
and service fees and any other items that are specifically attributable to
a particular class, are charged directly to such class. For the year ended
September 30, 1997, distribution and service fees were the only
class-specific expenses.
e. Distributions to Shareholders -- Dividends are declared daily and paid
monthly. Other distributions paid by the Trust are recorded on the
ex-dividend date. The treatment for financial statement purposes of
distributions made to shareholders during the year from net investment
income or net realized gains may differ from their ultimate treatment for
federal income tax purposes. These differences are caused primarily by
differences in the timing of the recognition of certain components of
income, expense, or realized capital gain for federal income tax purposes.
Where such differences are permanent in nature, they are reclassified in the
components of net assets based on their ultimate characterization for
federal income tax purposes. Any such 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 Securities -- Purchases and sales of portfolio
securities, excluding short-term investments, for the year ended September 30,
1997, were as follows:
SERIES PURCHASES SALES
- ---------- ------------ ------------
California High-Yield $12,095,620 $11,643,627
California Quality 10,963,840 20,983,040
Florida 15,089,050 18,279,160
North Carolina 4,549,405 10,481,680
At September 30, 1997, the cost of investments for federal income tax
purposes was substantially the same as the cost for financial reporting
purposes, and the tax basis gross unrealized appreciation and depreciation of
portfolio securities were as follows:
TOTAL TOTAL
UNREALIZED UNREALIZED
SERIES APPRECIATION DEPRECIATION
- ---------- -------------- --------------
California High-Yield $3,078,058 $30,918
California Quality 5,958,601 30,570
Florida 1,668,548 82,555
North Carolina 1,646,933 25,712
18
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements
4. Management Fee, Administrative Services, and Other Transactions -- 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.
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 $17,268 $129,666
California Quality 6,928 48,253
Florida 9,343 66,804
North Carolina 6,321 45,457
The Trust has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distribution of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive continuing fees of up to 0.25% on an annual basis,
payable quarterly, of the average daily net assets of the Class A shares
attributable to the particular service organizations for providing personal
services and/or the maintenance of shareholder accounts. The Distributor charges
such fees to the Trust pursuant to the Plan. For the year ended September 30,
1997, for the California High-Yield, California Quality, Florida, and North
Carolina Series, fees paid aggregated $50,032, $89,151, $102,441, and $82,738
respectively, or 0.10%, 0.10%, 0.23%, and 0.24%, respectively, per annum of
average daily net assets.
Under the Plan, with respect to Class D shares, service organizations can
enter into agreements with the Distributor and receive continuing fees for
providing personal services and/or the maintenance of shareholder accounts of up
to 0.25% on an annual basis of the average daily net assets of the Class D
shares for which the organizations are responsible, and fees for providing other
distribution assistance of up to 0.75% on an annual basis of such average daily
net assets. Such fees are paid monthly by the Trust to the Distributor pursuant
to the Plan. For the year ended September 30, 1997, fees paid amounted to
$23,509, $15,521, $16,017, and $12,160, 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 redemptions of
Class D shares occurring within one year of purchase and on certain redemptions
of Class A shares occurring within 18 months of purchase. For the year ended
September 30, 1997, such charges amounted to $1,363 for the California
High-Yield Series and $1,420 for the California Quality Series.
Seligman Services, Inc., an affiliate of the Manager, is
eligible to receive commissions from certain sales of Trust shares, as well as
distribution and service fees pursuant to the Plan. For the year ended September
30, 1997, Seligman Services, Inc. received commissions from the sale of shares
of each Series, and distribution and service fees, pursuant to the Plan, as
follows:
DISTRIBUTION AND
SERIES COMMISSIONS SERVICE FEES
- ---------- ------------- -------------------
California High-Yield $ 495 $1,414
California Quality 1,571 2,688
Florida 1,118 5,302
North Carolina -- 1,858
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 $ 65,492
California Quality 103,599
Florida 57,101
North Carolina 48,058
Certain officers and trustees of the Trust are officers or directors of the
Manager, the Distributor, Seligman Services, Inc., and/or Seligman Data Corp.
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, 1997, were as follows:
SERIES
- ----------
California High-Yield $28,210
California Quality 28,242
Florida 13,974
North Carolina 10,181
19
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements
5. Transactions in Shares of Beneficial Interest -- Transactions in Shares of
Beneficial Interest were as follows:
<TABLE>
<CAPTION>
CALIFORNIA HIGH-YIELD CALIFORNIA QUALITY
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sale of shares:
Class A........................................ 1,136,556 1,087,963 217,315 673,408
Class D........................................ 232,749 152,012 83,522 139,499
Shares issued in payment of dividends:
Class A........................................ 217,868 213,528 329,886 356,784
Class D........................................ 10,791 7,942 4,867 4,255
Exchanged from associated Funds:
Class A........................................ 272,963 343,880 2,835,364 996,761
Class D........................................ 77,936 30,371 781,157 89,271
Shares issued in payment of gain distributions:
Class A........................................ 74,799 18,896 2,456 16,012
Class D........................................ 3,425 562 33 126
---------- ---------- ---------- ----------
Total............................................. 2,027,087 1,855,154 4,254,600 2,276,116
---------- ---------- ---------- ----------
Shares repurchased:
Class A........................................ (1,136,607) (1,573,674) (2,029,814) (1,264,284)
Class D........................................ (98,590) (19,819) (41,403) (31,274)
Exchanged into associated Funds:
Class A........................................ (296,127) (317,574) (3,068,740) (905,529)
Class D........................................ (19,383) (73,253) (832,015) (87,668)
---------- ---------- ---------- ----------
Total............................................. (1,550,707) (1,984,320) (5,971,972) (2,288,755)
---------- ---------- ---------- ----------
Increase (decrease) in shares..................... 476,380 (129,166) (1,717,372) (12,639)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
<CAPTION>
NORTH CAROLINA
FLORIDA SERIES SERIES
------------------------- -------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sale of shares:
Class A........................................ 284,403 284,373 187,120 342,388
Class D........................................ 27,585 109,057 15,728 34,006
Shares issued in payment of dividends:
Class A........................................ 105,889 122,783 105,249 116,783
Class D........................................ 5,743 3,582 4,436 4,830
Exchanged from associated Funds:
Class A........................................ 250,599 222,479 78,277 72,372
Class D........................................ 56,686 17,046 -- 425
Shares issued in payment of gain distributions:
Class A........................................ 45,096 35,286 13,554 6,221
Class D........................................ 1,996 488 547 265
---------- ---------- ---------- ----------
Total............................................. 777,997 795,094 404,911 577,290
---------- ---------- ---------- ----------
Shares repurchased:
Class A........................................ (995,384) (981,300) (805,592) (704,359)
Class D........................................ (39,429) (33,593) (26,320) (19,457)
Exchanged into associated Funds:
Class A........................................ (193,665) (151,754) (102,260) (88,114)
Class D........................................ (3,903) (8,586) (445) (25,245)
---------- ---------- ---------- ----------
Total............................................. (1,232,381) (1,175,233) (934,617) (837,175)
---------- ---------- ---------- ----------
Decrease in shares................................ (454,384) (380,139) (529,706) (259,885)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
20
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
The Trust's financial highlights are presented below. "Per share operating
performance" data is designed to allow investors to trace the operating
performance of each Class, on a per share basis, from the beginning net asset
value to the ending net asset value, so that investors can understand what
effect the individual items have on their investment, assuming it was held
throughout the period. Generally, per share amounts are derived by converting
the actual dollar amounts incurred for each item, as disclosed in the financial
statements, to their equivalent per share amounts, based on average shares
outstanding.
"Total return based on net asset value" measures each Class's performance
assuming that investors purchased shares at net asset value as of the beginning
of the period, invested dividends and capital gains paid at net asset value, and
then sold their shares at the net asset value on the last day of the period. The
total return computations do not reflect any sales charges investors may incur
in purchasing or selling shares of each Series. Total returns for periods of
less than one year are not annualized.
<TABLE>
<CAPTION>
CALIFORNIA HIGH-YIELD SERIES CLASS A CLASS D
------------------------------------------- ------------------------------
YEAR ENDED 2/1/94*
YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, TO
------------------------------------------- ---------------------
1997 1996 1995 1994 1993 1997 1996 1995 9/30/94
----- ----- ----- ----- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period ........ $6.50 $6.47 $6.30 $6.73 $6.65 $6.51 $6.48 $6.31 $6.67
----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment income........................ .34 .36 .37 .37 .39 .28 .30 .31 .21
Net realized and unrealized investment
gain (loss)................................ .20 .05 .17 (.34) .28 .19 .05 .17 (.36)
----- ----- ----- ----- ----- ----- ----- ----- -----
Increase (Decrease) from Investment
Operations................................... .54 .41 .54 .03 .67 .47 .35 .48 (.15)
Dividends paid or declared................... (.34) (.36) (.37) (.37) (.39) (.28) (.30) (.31) (.21)
Distributions from net gain realized......... (.09) (.02) -- (.09) (.20) (.09) (.02) -- --
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Increase (Decrease) in Net Asset Value... .11 .03 .17 (.43) .08 .10 .03 .17 (.36)
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period............... $6.61 $6.50 $6.47 $6.30 $6.73 $6.61 $6.51 $6.48 $6.31
===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN BASED
ON NET ASSET VALUE: 8.74% 6.49% 8.85% .41% 10.66% 7.60% 5.53% 7.78% (2.47)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets............... .87% .84% .90% .85% .88% 1.77% 1.74% 1.91% 1.74%+
Net investment income to average net assets.. 5.26% 5.49% 5.84% 5.74% 5.94% 4.36% 4.59% 4.84% 4.73%+
Portfolio turnover........................... 22.42% 34.75% 17.64% 8.36% 7.70% 22.42% 34.75% 17.64% 8.36%++
Net Assets, End of Period
(000s omitted)............................... $52,883 $50,264 $51,504 $48,007 $51,218 $3,320 $1,919 $1,277 $650
</TABLE>
- --------------
See footnotes on page 24.
21
<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
CALIFORNIA QUALITY SERIES CLASS A CLASS D
------------------------------------------- ------------------------------
YEAR ENDED 2/1/94*
YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, TO
------------------------------------------- ---------------------
1997 1996 1995 1994 1993 1997 1996 1995 9/30/94
----- ----- ----- ----- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period......... $6.75 $6.65 $6.39 $7.28 $6.85 $6.74 $6.63 $6.38 $7.13
----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment income........................ .34 .35 .34 .35 .37 .28 .28 .28 .19
Net realized and unrealized investment
gain (loss)................................ .24 .11 .32 (.73) .54 .23 .12 .31 (.75)
----- ----- ----- ----- ----- ----- ----- ----- -----
Increase (Decrease) from Investment
Operations................................... .58 .46 .66 (.38) .91 .51 .40 .59 (.56)
Dividends paid or declared................... (.34) (.35) (.34) (.35) (.37) (.28) (.28) (.28) (.19)
Distributions from net gain realized......... -- (.01) (.06) (.16) (.11) -- (.01) (.06) --
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Increase (Decrease) in Net Asset Value... .24 .10 .26 (.89) .43 .23 .11 .25 (.75)
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period............... $6.99 $6.75 $6.65 $6.39 $7.28 $6.97 $6.74 $6.63 $6.38
===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN BASED
ON NET ASSET VALUE: 8.87% 7.00% 10.85% (5.46)% 13.92% 7.75% 6.20% 9.61% (8.01)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets............... .82% .79% .89% .81% .82% 1.72% 1.69% 1.88% 1.77%+
Net investment income to average net assets.. 4.99% 5.11% 5.34% 5.20% 5.30% 4.09% 4.21% 4.36% 4.39%+
Portfolio turnover........................... 12.16% 12.84% 11.24% 22.16% 15.67% 12.16% 12.84% 11.24% 22.16%++
Net Assets, End of Period
(000s omitted)............................... $86,992 $95,560 $94,947 $99,020 $111,732 $1,677 $1,645 $863 $812
</TABLE>
- --------------
See footnotes on page 24.
22
<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
FLORIDA SERIES CLASS A CLASS D
----------------------------------------------- ------------------------------
YEAR ENDED 2/1/94*
YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, TO
----------------------------------------------- ---------------------
1997 1996 1995 1994 1993 1997 1996 1995 9/30/94
----- ----- ----- ----- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period........... $7.67 $7.71 $7.34 $8.20 $7.56 $7.68 $7.72 $7.34 $8.10
----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment income.......................... .36 .38 .40 .42 .46 .30 .32 .34 .24
Net realized and unrealized investment
gain (loss).................................. .23 .04 .37 (.74) .65 .23 .04 .38 (.76)
----- ----- ----- ----- ----- ----- ----- ----- -----
Increase (Decrease) from Investment
Operations..................................... .59 .42 .77 (.32) 1.11 .53 .36 .72 (.52)
Dividends paid or declared..................... (.36) (.38) (.40) (.42) (.46) (.30) (.32) (.34) (.24)
Distributions from net gain realized........... (.10) (.08) -- (.12) (.01) (.10) (.08) -- --
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Increase (Decrease) in Net Asset Value..... .13 (.04) .37 (.86) .64 .13 (.04) .38 (.76)
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period................. $7.80 $7.67 $7.71 $7.34 $8.20 $7.81 $7.68 $7.72 $7.34
===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN BASED
ON NET ASSET VALUE: 8.01% 5.54% 10.87% (3.99)% 15.21% 7.18% 4.74% 10.07% (6.64)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets................. 1.04% .97% .72% .42% .23% 1.81% 1.73% 1.66% 1.29%+
Net investment income to average net assets.... 4.70% 4.90% 5.38% 5.49% 5.82% 3.93% 4.14% 4.53% 4.61%+
Portfolio turnover............................. 33.68% 18.53% 11.82% 6.17% 16.42% 33.68% 18.53% 11.82% 6.17%++
Net Assets, End of Period
(000s omitted)................................. $42,024 $45,200 $49,030 $49,897 $52,855 $1,678 $1,277 $603 $244
Without expense reimbursement and/or
management fee waiver:**
Net investment income per share............. $.38 $.37 $.38 $.40 $.32 $.31 $.21
Ratios:
Expenses to average net assets.............. .97% 1.03% 1.00% 1.03% 1.73% 1.97% 1.84%+
Net investment income to average net assets. 4.90% 5.07% 4.91% 5.01% 4.14% 4.22% 4.06%+
</TABLE>
- -------------
See footnotes on page 24.
23
<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
NORTH CAROLINA SERIES CLASS A CLASS D
----------------------------------------------- ------------------------------
YEAR ENDED 2/1/94*
YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, TO
----------------------------------------------- ---------------------
1997 1996 1995 1994 1993 1997 1996 1995 9/30/94
----- ----- ----- ----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period........ $7.84 $7.74 $7.30 $8.22 $7.61 $7.83 $7.74 $7.29 $8.17
----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment income....................... .37 .37 .39 .41 .43 .31 .31 .33 .23
Net realized and unrealized investment
gain (loss)............................... .24 .11 .45 (.87) .63 .25 .10 .46 (.88)
----- ----- ----- ----- ----- ----- ----- ----- -----
Increase (Decrease) from Investment
Operations.................................. .61 .48 .84 (.46) 1.06 .56 .41 .79 (.65)
Dividends paid or declared.................. (.37) (.37) (.39) (.41) (.43) (.31) (.31) (.33) (.23)
Distributions from net gain realized........ (.03) (.01) (.01) (.05) (.02) (.03) (.01) (.01) --
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Increase (Decrease) in Net Asset Value.. .21 .10 .44 (.92) .61 .22 .09 .45 (.88)
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period.............. $8.05 $7.84 $7.74 $7.30 $8.22 $8.05 $7.83 $7.74 $7.29
===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN BASED
ON NET ASSET VALUE: 8.01% 6.39% 11.92% (5.80)% 14.46% 7.33% 5.45% 11.19% (8.15)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets.............. 1.09% 1.05% .82% .44% .23% 1.85% 1.81% 1.64% 1.27%+
Net investment income to average net assets. 4.66% 4.75% 5.21% 5.29% 5.44% 3.90% 3.99% 4.42% 4.49%+
Portfolio turnover.......................... 13.04% 15.12% 4.38% 15.61% 3.13% 13.04% 15.12% 4.38% 15.61%++
Net Assets, End of Period
(000s omitted).............................. $32,684 $35,934 $37,446 $38,920 $38,828 $1,217 $1,232 $1,257 $1,282
Without expense reimbursement and/or
management fee waiver:**
Net investment income per share.......... $.37 $.36 $.35 $.35 $.31 $.31 $.20
Ratios:
Expenses to average net assets........... 1.06% 1.18% 1.13% 1.22% 1.82% 2.00% 1.95%+
Net investment income to average
net assets.............................. 4.74% 4.85% 4.60% 4.45% 3.98% 4.06% 3.82%+
</TABLE>
- --------------
* Commencement of operations.
** 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.
+ Annualized.
++ For the year ended September 30, 1994.
See Notes to Financial Statements.
24
<PAGE>
- -------------------------------------------------------------------------------
Report of Independent Auditors
The Trustees and Shareholders,
Seligman Municipal 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 Municipal Series Trust, as of
September 30, 1997, 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,
1997 by correspondence with the Trust's custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the California
High-Yield, California Quality, Florida, and North Carolina Series of Seligman
Municipal Series Trust as of September 30, 1997, the results of their
operations, the changes in their net assets, and the financial highlights for
the respective stated periods, in conformity with generally accepted accounting
principles.
/S/DELOITTE & TOUCHE LLP
New York, New York
October 31, 1997
25
<PAGE>
- -------------------------------------------------------------------------------
Trustees
Fred E. Brown
Trustee Emeritus
Director and Consultant, J. & W. Seligman & Co. Incorporated
John R. Galvin 2
Dean, Fletcher School of Law and Diplomacy
at Tufts University
Director, Raytheon Company
Director, USLIFE Corporation
Alice S. Ilchman 3
President, Sarah Lawrence College
Trustee, Committee for Economic Development
Chairman, The Rockefeller Foundation
Frank A. McPherson 2
Director, Kimberly-Clark Corporation
Director, Baptist Medical Center
John E. Merow
Retired Chairman and Senior Partner,
Sullivan & Cromwell, Law Firm
Director, Commonwealth Aluminum Corporation
Betsy S. Michel 2
Trustee, Geraldine R. Dodge Foundation
Chairman of the Board of Trustees, St. George's School
William C. Morris 1
Chairman
Chairman of the Board, J. & W. Seligman & Co. Incorporated
Chairman, Carbo Ceramics Inc.
Director, Kerr-McGee Corporation
James C. Pitney 3
Retired Partner, Pitney, Hardin, Kipp & Szuch, Law Firm
James Q. Riordan 3
Director, The Brooklyn Union Gas Company
Trustee, Committee for Economic Development
Director, Dow Jones & Co., Inc.
Director, Public Broadcasting Service
Richard R. Schmaltz 1
Managing Director, J. & W. Seligman & Co. Incorporated
Trustee Emeritus, Colby College
Robert L. Shafer 3
Retired 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
President, J. & W. Seligman & Co. Incorporated
Chairman, Seligman Data Corp.
- ----------------
Member: 1 Executive Committee
2 Audit Committee
3 Trustee Nominating Committee
26
<PAGE>
- -------------------------------------------------------------------------------
Executive Officers
William C. Morris
Chairman
Brian T. Zino
President
Thomas G. Moles
Vice President
Lawrence P. Vogel
Vice President
Thomas G. Rose
Treasurer
Frank J. Nasta
Secretary
FOR MORE INFORMATION
Manager
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
General Counsel
Sullivan & Cromwell
Independent Auditors
Deloitte & Touche LLP
General Distributor
Seligman 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
27
<PAGE>
- -------------------------------------------------------------------------------
Glossary of Financial Terms
CAPITAL GAIN DISTRIBUTION -- A payment to mutual fund shareholders of profits
realized on the sale of securities in a fund's portfolio. For tax purposes,
these profits may be considered short-, mid-, or long-term capital gains and may
be taxed at different rates.
CAPITAL APPRECIATION/DEPRECIATION -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.
COMPOUNDING -- The change in the value of an investment as shareholders receive
earnings on their investment's earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will be based not on the
original $1,000, but on the $1,070, which includes the first year's earnings.
CONTINGENT DEFERRED SALES LOAD (CDSL) -- Depending on the class of shares owned,
a fee charged by a mutual fund when shares are sold back to the fund (the CDSL
expires after a fixed time period).
DIVIDEND -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
DIVIDEND YIELD -- A measurement of a fund's dividend as a percentage of the
maximum offering price.
EXPENSE RATIO -- The cost of doing business for a mutual fund, expressed as a
percent of the fund's net assets.
INVESTMENT OBJECTIVE -- The shared investment goal of a fund and its
shareholders.
MANAGEMENT FEE -- The amount paid by a mutual fund to its investment advisor(s).
MULTIPLE CLASSES OF SHARES -- Although an individual mutual fund invests in only
one portfolio of securities, it may offer investors several purchase options
which are "classes" of shares. Multiple classes permit shareholders to choose
the fee structure that best meets their needs and goals. Generally, each class
will differ in terms of how and when sales charges and certain fees are
assessed.
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (NASD) -- A self-regulatory
body with authority over firms that distribute mutual funds.
NET ASSET VALUE (NAV) PER SHARE -- The market worth of one fund share, obtained
by adding a mutual fund's total assets (securities, cash, and any accrued
earnings), subtracting liabilities, and dividing the resulting net assets by the
number of shares outstanding.
OFFERING PRICE (OP) -- The price at which a mutual fund's share can be
purchased. The offering price per share is the current net asset value plus any
sales charge.
PORTFOLIO TURNOVER -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
PROSPECTUS -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission (SEC), such as a fund's investment objective and policies, services,
investment restrictions, officers and directors, how shares are bought and
redeemed, fund fees and other charges, and the fund's financial statements.
SEC YIELD -- SEC Yield refers to the net income earned by a fund during a recent
30-day period. This income is annualized and then divided by the maximum
offering price per share on the last day of the 30-day period. The SEC Yield
formula reflects semiannual compounding.
SECURITIES AND EXCHANGE COMMISSION -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
STATEMENT OF ADDITIONAL INFORMATION -- Document that contains updated or more
detailed information about a mutual fund and supplements the prospectus. It is
available at no charge upon request.
TOTAL RETURN -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The Average Annual Total
Return represents the average annual compounded rate of return for the periods
presented.
YIELD ON SECURITIES -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.
- -------------
Adapted from the Investment Company Institute's 1997 Mutual Fund Fact Book.
28
<PAGE>
SELIGMAN FINANCIAL SERVICES, INC.
an affiliate of
[GRAPHIC OMITTED]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
This material is intended only for the information of shareholders or those who
have received the offering prospectus covering shares of Beneficial Interest
of Seligman Municipal 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 9/97 Printed on Recycled Paper
