<PAGE>
SELIGMAN
Municipal
Series Trust
Mid-Year Report
March 31, 1998
Providing Income
Free From Regular
Income Tax
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
<PAGE>
SELIGMAN -- TIMES CHANGE ... VALUES ENDURE
J. & W. Seligman & Co. Incorporated is a firm with a long tradition of
investment expertise, offering a broad array of investment choices to help
today's investors seek their long-term financial goals.
Times Change...
Established in 1864, Seligman's history of providing financial services has been
marked not by fanfare, but rather by a quiet and firm adherence to managing
investments prudently. While the world has changed dramatically in the 134 years
since Seligman first opened its doors, the firm has continued to offer its
clients high-quality investment solutions for these changing times.
In the late 19th century, as the country grew, Seligman helped finance the
westward expansion of the railroads, the construction of the Panama Canal, and
the launching of urban transit systems. In the first part of the 20th century,
as America became an industrial power, the firm helped fund the growing capital
needs of the nascent automobile and steel industries.
With the formation of Tri-Continental Corporation in 1929--today, the nation's
largest, diversified, publicly-traded closed-end investment company--Seligman
began shifting its emphasis from investment banking to investment management.
Despite the stock market crash and ensuing depression, Seligman was convinced
of the importance mutual funds could play in building wealth for individual
investors and launched its first open-end fund in 1930.
In the decades that followed, Seligman has continued to offer forward-looking
investment solutions, including funds that focus on technology stocks,
municipal bonds, and international securities.
James, Jesse, and Joseph Seligman, 1870
... Values Endure
Seligman is proud of its distinctive past and of the traditional values that
continue to shape the firm's business decisions and investment judgment. While
much has changed over the years, the firm's commitment to providing prudent
investment management that seeks to build wealth for clients over time is an
enduring value that will guide Seligman into the new millennium.
Table of Contents
To the Shareholders ......................... 1
Interview With Your Portfolio Manager ....... 2
Performance Overview and Portfolio Summary .. 3
Portfolios of Investments ................... 7
Statements of Assets and Liabilities ........ 13
Statements of Operations .................... 14
Statements of Changes in Net Assets ......... 15
Notes to Financial Statements ............... 17
Financial Highlights ........................ 20
Report of Independent Auditors .............. 26
Trustees .................................... 27
Executive Officers and For More Information . 28
Glossary of Financial Terms ................. 29
<PAGE>
TO THE SHAREHOLDERS
Seligman Municipal Series Trust posted solid investment results for the six
months ended March 31, 1998. Throughout the period, the US economy's expansion
continued unabated and inflation was virtually nonexistent, supporting the
lasting rally in the municipal bond market. As a result, the Trust's investment
results improved as the portfolio's bond prices appreciated.
The municipal bond market has also benefited from favorable municipal tax
receipts and a reduced federal budget deficit. The Federal Reserve Board's
decision to maintain current short-term interest rate levels in the period also
helped maintain the optimism of municipal market participants. While greater
uncertainty regarding the sustainability of the rate of economic growth
slightly increased yields in the first calendar quarter of 1998, they remained
in a narrow range. Municipal bond issuers took advantage of the market
environment and issued a record number of bonds in the first three months of
the year, which historically is a slow period for new issuance. The yield on
the Bond Buyer 20-Bond General Obligation Index, a benchmark for the municipal
bond market, stood at 5.20% on March 31, 1998, having declined from the 5.36%
yield on September 30, 1997.
Looking ahead, the ultimate effect of the Asian recession on the US economy
remains to be seen. Thus far, the primary effect has been a countering of US
inflationary pressures, with the reduced cost of imported goods offsetting the
increase in wages caused by the tight US labor market. However, we still
anticipate a net slowdown in the rate of economic expansion for the balance of
1998. Nonetheless, while the stock markets may become more volatile as
corporate earnings weaken, the outlook for the municipal bond market remains
optimistic. A continuation of the positive fundamentals, which characterized
the municipal market for the past six months, should support the municipal bond
market for the remainder of the year. Further, a decrease in US Treasury bond
issuance will likely benefit the municipal bond market, as a reduction in
Treasury supply would likely force Treasury yields lower relative to municipal
yields.
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 and the Trust's portfolios of
investments and financial statements follow this letter. The Trusts investment
results appear on pages 3 to 6.
By order of the Trustees,
/s/ William Morris
William C. Morris
Chairman
/s/ Brian T. Zino
Brian T. Zino
President
May 1, 1998
1
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGER,
THOMAS G. MOLES
Q. What economic and market factors influenced Seligman Municipal Series Trust
in the last six months?
A. Seligman Municipal Series Trust ended the first six months of fiscal-year
1998 on a positive note, as declining long-term municipal yields boosted the
Trust's net asset values. The rally in the municipal bond market continued
throughout the past six months and by mid-January 1998, positive fundamentals
caused long-term municipal yields to fall to the lowest level in 26 years.
Soon after, though, the rally stalled due to signs of an increase in the
pace of economic growth. Yields rose modestly, but then settled into a
narrow trading range for the remainder of the first quarter of 1998. At
March 31, long-term municipal yields were a quarter point above the
January-1998 lows, but still remained at the lowest level in almost five
years.
Further, in a widely anticipated move, the Federal Reserve Board
voted on March 31 to leave the fed funds rate unchanged. Additionally, the
minutes of the Feds February meeting, released on April 2, revealed that
the Fed elected to maintain a neutral policy directive, rather than to
reinstate a tightening bias. This suggests that the Fed was not overly
concerned that economic growth was in imminent danger of exceeding its
non-inflationary potential. The Feds "wait-and-see" posture in the face of
robust economic growth suggests that the Fed believes that the impact of
the Asian financial crisis could be sufficient to slow the economy and
preclude any intervention. Further, while inflation remains at such a
favorable rate, the risk of waiting is likely minimal.
Q. What was your investment strategy?
A. The positive interest rate environment prompted a sharp increase in
municipal bond issuance. For the first quarter of 1998, total volume rose
70% versus the same period last year. More specifically, municipal bonds
issued for refunding purposes surged a dramatic 136%. (Refunding bonds are
issued to retire outstanding, higher-coupon debt. Proceeds from the
refunding issue are deposited in an escrow account, generally comprised of
government obligations, which provides debt service on the refunded bonds.)
Seligman Municipal Series Trust benefited from the supply situation in two
ways: First, municipal bond prices were temporarily depressed by the heavy
supply. This presented us with an opportunity to purchase bonds at cheaper
levels than would have existed during a period of light supply. Second, as
a direct result of the increase in refunding activity, most of the Trusts
portfolios had bonds refunded. In general, when a municipal bond is
refunded, total return performance is improved, and the bond's rating is
often upgraded.
Finally, the current economic expansion, now in its eighth year, has
contributed to an improvement in the financial condition of the nation's
states, cities, and municipalities. Through in-depth credit analysis, we
are able to identify those credits most likely to be upgraded by one or
more of the nationally recognized rating agencies. We are, therefore, able
to purchase bonds prior to an upgrade when its yield reflects the lower
rating. Over the past six months, rating upgrades of portfolio holdings
significantly outnumbered rating downgrades.
Q. What is your outlook?
A. We anticipate a continuation of the positive fundamentals that have
characterized the municipal market over the past six months. Going forward,
stable long-term interest rates, improving credit trends, and attractive
real rates of return bode well for the performance of the municipal bond
market. Consequently, we remain optimistic regarding the long-term
prospects for Seligman Municipal Series Trust.
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.
[PICTURE]
Seligman Municipals Team: (from left) Audrey Kuchtyak, Theresa Barion, Debra
McGuinness, (seated) Eileen Comerford, Thomas G. Moles (Portfolio Manager)
2
<PAGE>
Performance Overview and Portfolio Summary
Seligman California Municipal High-Yield Series
<TABLE>
<CAPTION>
Investment Results per Share
Total Returns
For Periods Ended March 31, 1998
AVERAGE ANNUAL
------------------------------------------------------------
CLASS D
SINCE
SIX ONE FIVE 10 INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Class A**
With Sales Charge (1.24)% 5.32% 5.66% 7.52% n/a
Without Sales Charge 3.69 10.62 6.70 8.04 n/a
Class D**
With 1% CDSL 2.38 8.61 n/a n/a n/a
Without CDSL 3.38 9.61 n/a n/a 5.18%
Lehman Brothers
Municipal Bond Index*** 3.89 10.72 6.83 8.34 5.91ooo
</TABLE>
NET ASSET VALUE
<TABLE>
<CAPTION>
March 31, 1998 September 30, 1997 March 31, 1997
-------------- ------------------ --------------
<S> <C> <C> <C>
Class A $6.66 $6.61 $6.36
Class D 6.67 6.61 6.37
DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
For Periods Ended March 31, 1998
CAPITAL SEC
DIVIDENDS ++ GAIN++ YIELD+++
--------- ------- -------
Class A $0.160 $0.032 4.12%
Class D 0.129 0.032 3.40
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR 0 MOODYS/S&P RATINGS 0
<S> <C> <C> <C>
Revenue Bonds 87% Aaa/AAA 16%
General Obligation Bonds 13 Aa/AA 6
A/A 49
Baa/BBB 25
Non-Rated 4
WEIGHTED AVERAGE MATURITY 22.5 years
</TABLE>
- -------------
See footnotes on page 6.
3
<PAGE>
Performance Overview and Portfolio Summary
Seligman California Municipal Quality Series
Investment Results per Share
Total Returns
For Periods Ended March 31, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
------------------------------------------------------------
CLASS D
SINCE
SIX ONE FIVE 10 INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Class A**
With Sales Charge (1.45)% 5.34% 5.11% 7.46% n/a
Without Sales Charge 3.49 10.52 6.14 7.98 n/a
Class D**
With 1% CDSL 2.03 8.55 n/a n/a n/a
Without CDSL 3.03 9.55 n/a n/a 4.24%
Lehman Brothers
Municipal Bond Index*** 3.89 10.72 6.83 8.34 5.91ooo
</TABLE>
NET ASSET VALUE
<TABLE>
<CAPTION>
March 31, 1998 September 30, 1997 March 31, 1997
-------------- ------------------ --------------
<S> <C> <C> <C>
Class A $7.03 $6.99 $6.71
Class D 7.01 6.97 6.69
DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
For Periods Ended March 31, 1998
CAPITAL SEC
DIVIDENDS ++ GAIN++ YIELD+++
--------- ------- -------
Class A $0.169 $0.033 4.02%
Class D 0.137 0.033 3.31
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR 0 MOODYS/S&P RATINGS 0
<S> <C> <C> <C>
Revenue Bonds 86% Aaa/AAA 70%
General Obligation Bonds 14 Aa/AA 16
A/A 14
WEIGHTED AVERAGE MATURITY 21.6 years
</TABLE>
- -------------
See footnotes on page 6.
4
<PAGE>
Performance Overview and Portfolio Summary
Seligman Florida Municipal Series
Investment Results per Share
Total Returns
For Periods Ended March 31, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
------------------------------------------------------------
CLASS D
SINCE
SIX ONE FIVE 10 INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Class A**
With Sales Charge (0.71)% 6.59% 5.44% 7.97% n/a
Without Sales Charge 4.25 11.89 6.48 8.49 n/a
Class D**
With 1% CDSL 2.86 9.89 n/a n/a n/a
Without CDSL 3.86 10.89 n/a n/a 4.44%
Lehman Brothers
Municipal Bond Index*** 3.89 10.72 6.83 8.34 5.91ooo
</TABLE>
NET ASSET VALUE
<TABLE>
<CAPTION>
March 31, 1998 September 30, 1997 March 31, 1997
-------------- ------------------ --------------
<S> <C> <C> <C>
Class A $7.88 $7.80 $7.44
Class D 7.89 7.81 7.46
DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
For Periods Ended March 31, 1998
CAPITAL SEC
DIVIDENDS ++ GAIN++ YIELD+++
--------- ------- -------
Class A $0.176 $0.072 3.94%
Class D 0.147 0.072 3.38
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR 0 MOODYS/S&P RATINGS 0
<S> <C> <C> <C>
Revenue Bonds 84% Aaa/AAA 68%
General Obligation Bonds 16 Aa/AA 27
A/A 5
WEIGHTED AVERAGE MATURITY 24.1 years
</TABLE>
- -------------
See footnotes on page 6.
5
<PAGE>
Performance Overview and Portfolio Summary
Seligman North Carolina Municipal Series
Investment Results per Share
Total Returns
For Periods Ended March 31, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
------------------------------------------------------------
CLASS A CLASS D
SINCE SINCE
SIX ONE FIVE INCEPTION INCEPTION
MONTHS* YEAR YEARS 8/27/90 00 2/1/94
--------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Class A**
With Sales Charge (1.22)% 4.81% 5.21% 6.82% n/a
Without Sales Charge 3.68 10.08 6.24 7.51 n/a
Class D**
With 1% CDSL 2.29 8.25 n/a n/a n/a
Without CDSL 3.29 9.25 n/a n/a 4.35%
Lehman Brothers
Municipal Bond Index*** 3.89 10.72 6.83 8.35+ 5.91ooo
</TABLE>
NET ASSET VALUE
<TABLE>
<CAPTION>
March 31, 1998 September 30, 1997 March 31, 1997
-------------- ------------------ --------------
<S> <C> <C> <C>
Class A $8.10 $8.05 $7.76
Class D 8.10 8.05 7.76
DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
For Periods Ended March 31, 1998
CAPITAL SEC
DIVIDENDS ++ GAIN++ YIELD+++
--------- ------- -------
Class A $0.180 $0.064 3.92%
Class D 0.149 0.064 3.33
</TABLE>
<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR 0 MOODYS/S&P RATINGS 0
<S> <C> <C> <C>
Revenue Bonds 85% Aaa/AAA 45%
General Obligation Bonds 15 Aa/AA 42
A/A 13
WEIGHTED AVERAGE MATURITY 22.4 years
<FN>
- ---------------
* Returns for periods of less than one year are not annualized.
** Return figures reflect any change in price and assume all
distributions within the period are invested in additional shares. Returns for
Class A shares are calculated with and without the effect of the initial 4.75%
maximum sales charge. Returns for Class D shares are calculated with and without
the effect of the 1% contingent deferred sales load ("CDSL"), charged 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 Brothers Municipal Bond 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.
0 Percentages based on market values of long-term holdings at March 31, 1998.
00 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 six months
ended March 31, 1998.
+++ Current yield, representing the annualized yield for the 30-day
period ended March 31, 1998, has been computed in accordance with SEC
regulations and will vary.
</FN>
</TABLE>
6
<PAGE>
Portfolios of Investments
March 31, 1998
California High-Yield Series
<TABLE>
<CAPTION>
Face Ratings + Market
Amount Municipal Bonds Moodys/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 $ 2,656,875
1,000,000 California Department of Veterans Affairs Rev. (Home Purchase),
5 1/2% due 12/1/2018*....................................................... Aa3/A+ 1,016,290
2,190,000 California Department of Water Resources Water System Rev.
(Central Valley Project), 6% due 12/1/2020.................................. Aa2/AA 2,287,871
810,000 California Department of Water Resources Water System Rev.
(Central Valley Project), 6% due 12/1/2020.................................. Aaa/AA 869,057
500,000 California Educational Facilities Authority Rev.
(Los Angeles College of Chiropractic Medicine), 5.60% due 11/1/2017......... Baa2/NR 509,800
2,500,000 California Educational Facilities Authority Rev.
(Loyola Marymount University), 5 3/4% due 10/1/2024......................... A1/NR 2,604,000
2,500,000 California Health Facilities Financing Authority Rev. (Cedars-Sinai
Medical Center), 5 1/4% due 8/1/2027........................................ Aaa/AAA 2,488,675
1,500,000 California Housing Finance Agency Home Mortgage Rev.,
6 3/8% due 8/1/2027*........................................................ Aa2/AA- 1,592,550
2,500,000 California Housing Finance Agency (Single Family Mortgage),
5.40% due 8/1/2028*......................................................... Aaa/AAA 2,499,800
2,500,000 California Pollution Control Financing Authority Rev. (San Diego
Gas & Electric Co.), 5.85% due 6/1/2021*.................................... A1/A+ 2,592,950
1,750,000 California Pollution Control Financing Authority Rev. (Pacific Gas &
Electric Co.), 5 7/8% due 6/1/2023*......................................... A1/AA- 1,812,370
1,000,000 California Pollution Control Financing Authority Rev. (Pacific Gas &
Electric Co.), 5.85% due 12/1/2023*......................................... A1/AA- 1,036,110
2,000,000 California State GOs, 5 1/4% due 10/1/2019.................................... A1/A+ 2,008,920
2,500,000 Cupertino, CA Certificates of Participation (Capital Improvement Projects),
5 3/4% due 1/1/2016......................................................... A1/A+ 2,594,475
3,000,000 Foothill/Eastern Transportation Corridor Agency, CA Toll Road Rev.,
6% due 1/1/2034............................................................. Baa/BBB- 3,149,520
500,000 Los Angeles, CA Certificates of Participation (Convention & Exhibition
Center Authority), 7 3/8% due 8/15/2018..................................... Aaa/AAA 531,885
1,300,000 Los Angeles, CA Wastewater System Rev., 7.10% due 6/1/2018.................... A1/A+ 1,367,769
1,000,000 Oxnard Union High School District, CA Certificates of Participation
(Union High School), 7.70% due 11/1/2019.................................... NR/NR 1,079,030
705,000 Petaluma, CA Community Development Commission Tax Allocation Bonds
(Central Business District), 9.30% due 5/15/2010............................ Baa1/NR 708,123
2,060,000 Pleasanton, CA Joint Powers Financing Authority Reassessment Rev.,
6.15% due 9/2/2012.......................................................... Baa3/NR 2,203,685
<FN>
- --------------
+ 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
</FN>
</TABLE>
7
<PAGE>
Portfolios of Investments
March 31, 1998
California High-Yield Series (continued)
<TABLE>
<CAPTION>
Face Ratings+ Market
Amount Municipal Bonds Moodys/S&P Value
------ --------------- ---------- -----------
<S> <C> <C> <C>
$4,000,000 Puerto Rico Highway & Transportation Authority Rev., 5 1/2% due 7/1/2036....... Baa1/A $ 4,178,520
3,000,000 San Bernardino, CA Joint Powers Financing Authority (California Dept. of
Transportation Lease), 5 1/2% due 12/1/2020................................. A/A 3,044,700
2,500,000 San Joaquin Hills, CA Transportation Corridor Agency Rev. (Orange County
Toll Road), 5 1/2% due 1/15/2028............................................ Baa3/BBB- 2,509,875
3,000,000 San Joaquin Hills, CA Transportation Corridor Agency Rev. (Orange County
Senior Lien Toll Road), 6 3/4% due 1/1/2032................................. Aaa/NR 3,389,220
2,500,000 Santa Barbara, CA Certificates of Participation, 5.70% due 3/1/2011........... A1/A+ 2,611,475
1,000,000 Santa Clara, CA Improvement Bonds Project No. 186 (Santa Clara
Convention Center Complex), 7.10% due 9/2/2011.............................. NR/NR 1,035,730
1,000,000 Southern California Public Power Authority Power Project Rev.
(Multiple Projects), 6% due 7/1/2018....................................... A/A 1,020,940
730,000 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+ 773,815
1,180,000 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+ 1,258,140
2,500,000 Washington Township, CA Hospital District Hospital Healthcare System Rev.,
5 1/2% due 7/1/2018......................................................... A2/NR 2,516,100
2,230,000 West Covina, CA Certificates of Participation (Queen of the Valley Hospital),
6 1/2% due 8/15/2024........................................................ A2/A 2,457,170
-----------
TOTAL MUNICIPAL BONDS (Cost $56,804,759) -- 98.5%............................................................. 60,405,440
VARIABLE RATE DEMAND NOTES (Cost $200,000) -- 0.3%............................................................ 200,000
OTHER ASSETS LESS LIABILITIES -- 1.2%......................................................................... 720,730
-----------
NET ASSETS -- 100.0%.......................................................................................... $61,326,170
===========
</TABLE>
California Quality Series
<TABLE>
<CAPTION>
Face Ratings+ Market
Amount Municipal Bonds Moodys/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............................... Aaa/AA $ 3,389,580
2,000,000 California Educational Facilities Authority Rev. (Stanford University),
6 3/4% due 1/1/2013......................................................... Aaa/AAA 2,081,340
3,200,000 California Educational Facilities Authority Rev. (University of Southern
California Project), 5.80% due 10/1/2015.................................... Aa3/AA 3,374,848
3,440,000 California Educational Facilities Authority Rev. (Pomona College),
6% due 2/15/2017............................................................ Aa1/AA+ 3,640,071
<FN>
- ------------
+ Ratings have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</FN>
</TABLE>
8
<PAGE>
Portfolios of Investments
March 31, 1998
California Quality Series (continued)
<TABLE>
<CAPTION>
Face Ratings+ Market
Amount Municipal Bonds Moodys/S&P Value
------ --------------- ---------- -----------
<S> <C> <C> <C>
$4,500,000 California Educational Facilities Authority Rev. (California Institute
of Technology), 6% due 1/1/2021............................................. Aaa/AAA $ 4,670,505
2,000,000 California Educational Facilities Authority Rev. (Stanford University),
5.35% due 6/1/2027.......................................................... Aaa/AAA 2,032,360
3,000,000 California Health Facilities Financing Authority Rev. (Kaiser Permanente),
6 1/2% due 12/1/2020........................................................ A2/A+ 3,203,040
2,000,000 California Health Facilities Financing Authority Rev. (Stanford Health Care),
5% due 11/15/2028........................................................... Aaa/AAA 1,921,180
5,000 California Housing Finance Agency (Housing Revenue Insured Bonds),
8 3/4% due 8/1/2010......................................................... Aaa/AAA 5,215
425,000 California Housing Finance Agency (Housing Revenue Insured Bonds),
8 5/8% due 8/1/2015......................................................... Aaa/AAA 442,616
2,785,000 California Housing Finance Agency Home Mortgage Rev.,
6 3/4% due 2/1/2025*........................................................ Aa2/AA- 2,963,268
4,000,000 California Pollution Control Financing Authority Rev. (Mobil Oil Corporation
Project), 5 1/2% due 12/1/2029*............................................. Aa2/AA 4,074,040
910,000 California Public Capital Improvements Financing Authority
(Pooled Projects), 8.10% due 3/1/2018....................................... Aaa/AAA 931,321
3,000,000 California Public Works Board Lease Rev. (Correctional Facilities
Improvements), 5 3/4% due 9/1/2021.......................................... A/A 3,055,590
3,000,000 California State GOs, 5.90% due 4/1/2023....................................... A1/A+ 3,170,520
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 2,907,540
4,500,000 Contra Costa, CA Water District Rev., 5% due 10/1/2024......................... Aaa/AAA 4,358,745
3,500,000 East Bay, CA Municipal Utility District Water System Rev., 5% due 6/1/2026..... Aaa/AAA 3,391,815
2,500,000 Eastern Municipal Water District Riverside County, CA Water and Sewer Rev.,
6 3/4% due 7/1/2012......................................................... Aaa/AAA 3,007,400
3,000,000 Fresno, CA Sewer System Rev., 5 1/4% due 9/1/2019.............................. Aaa/AAA 3,093,780
2,000,000 Industry, CA GOs, 7 3/8% due 7/1/2015.......................................... Aaa/AAA 2,128,800
2,000,000 Marin, CA Municipal Water District Water Rev., 5.65% due 7/1/2023.............. A1/AA 2,062,140
3,000,000 Metropolitan Water District of Southern California Waterworks GOs,
5 3/4% due 3/1/2014......................................................... Aaa/AAA 3,054,660
3,500,000 Northern California Power Agency Public Power Rev. (Combustion
Turbine Project A-1), 6% due 8/15/2010...................................... Aaa/AAA 3,593,800
4,500,000 Orange County, CA Local Transportation Authority (Measure M Sales
Tax Rev.), 6% due 2/15/2009................................................. Aaa/AAA 5,042,160
2,500,000 Rancho, CA Water District Financing Authority Rev., 5.90% due 11/1/2015........ Aaa/AAA 2,702,200
<FN>
- ----------------
+ 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
</FN>
</TABLE>
9
<PAGE>
Portfolios of Investments
March 31, 1998
California Quality Series (continued)
<TABLE>
<CAPTION>
Face Ratings+ Market
Amount Municipal Bonds Moodys/S&P Value
------ --------------- ---------- -----------
<S> <C> <C> <C>
$4,000,000 Regents of the University of California Rev. (Multiple Purpose Projects),
5 3/8% due 9/1/2024......................................................... Aaa/AAA $ 4,066,400
4,250,000 San Francisco Bay Area Rapid Transit District, CA (Sales Tax Rev.),
5% due 7/1/2028............................................................. Aaa/AAA 4,114,510
3,000,000 San Francisco, CA (City & County) Airport Commission Rev.
(International Airport), 6.60% due 5/1/2024*................................ Aaa/AAA 3,300,030
-----------
TOTAL MUNICIPAL BONDS (Cost $80,894,407) -- 97.9%.............................................................. 85,779,474
VARIABLE RATE DEMAND NOTES (Cost $700,000) -- 0.8%............................................................. 700,000
OTHER ASSETS LESS LIABILITIES -- 1.3%.......................................................................... 1,177,707
-----------
NET ASSETS -- 100.0%........................................................................................... $87,657,181
===========
</TABLE>
Florida Series
<TABLE>
<CAPTION>
Face Ratings+ Market
Amount Municipal Bonds Moodys/S&P Value
------ --------------- ---------- -----------
<S> <C> <C> <C>
$1,000,000 Broward County, FL Water & Sewer Utility Rev., 5% due 10/1/2018................ Aaa/AAA $ 978,670
1,500,000 Broward County School District, FL GOs, 7 1/8% due 2/15/2008................... Aaa/AAA 1,573,860
2,000,000 Collier County, FL Water & Sewer Rev., 5 1/4% due 7/1/2021..................... Aaa/AAA 2,001,020
1,250,000 Dade County, FL Aviation Rev., 6 1/8% due 10/1/2020*........................... Aaa/AAA 1,348,988
2,000,000 Dade County, FL Public Improvement GOs, 5 3/4% due 10/1/2016................... Aaa/AAA 2,127,420
2,000,000 Dade County, FL Water & Sewer System Rev., 5 3/4% due 10/1/2022................ Aaa/AAA 2,107,700
1,000,000 Florida Housing Finance Agency Rev. (General Mortgage),
6.35% due 6/1/2014.......................................................... NR/AAA 1,058,180
705,000 Florida Housing Finance Agency Rev. (Single Family Mortgage),
6.55% due 7/1/2014*......................................................... Aaa/AAA 752,263
1,985,000 Florida Housing Finance Agency Rev. (Homeowner Mortgage),
6.20% due 7/1/2027*......................................................... Aa3/AA 2,085,520
2,500,000 Florida Ports Financing Commission Rev. (State Transportation Trust Fund),
5 3/8% due 6/1/2027*........................................................ Aaa/AAA 2,505,000
2,000,000 Florida State Department of Transportation GOs (Right of Way),
5.80% due 7/1/2021.......................................................... Aa2/AA+ 2,095,880
2,500,000 Florida State Turnpike Authority Rev., 5 5/8% due 7/1/2025..................... Aaa/AAA 2,585,575
2,000,000 Greater Orlando Aviation Authority, FL Airport Facilities Rev.,
5 1/4% due 10/1/2023*....................................................... Aaa/AAA 1,977,840
2,500,000 Hillsborough County, FL Aviation Authority Rev. (Tampa International
Airport), 5 3/8% due 10/1/2023*............................................. Aaa/AAA 2,503,825
<FN>
- ----------------
+ 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
</FN>
</TABLE>
10
<PAGE>
Portfolios of Investments
March 31, 1998
Florida Series (continued)
<TABLE>
<CAPTION>
Face Ratings+ Market
Amount Municipal Bonds Moodys/S&P Value
------ --------------- ---------- -----------
<S> <C> <C> <C>
$1,500,000 Jacksonville Electric Authority, FL Rev. (St. Johns River Power Park System),
5 3/8% due 10/1/2016........................................................ Aa2/AA $ 1,531,650
2,000,000 Jacksonville Electric Authority, FL Rev. (Water & Sewer System),
5 5/8% due 10/1/2037........................................................ Aa3/AA- 2,060,440
2,000,000 Jacksonville, FL Sewage & Solid Waste Disposal Facilities Rev.
(Anheuser-Busch Project), 5 7/8% due 2/1/2036*.............................. A1/A+ 2,079,320
2,000,000 Jacksonville Health Facilities Authority, FL Hospital Rev. (Charity Obligated
Group -- Baptist/St. Vincents Health System Inc.), 5 1/4% due 8/15/2027..... Aa2/AA+ 1,982,120
1,000,000 Kissimmee Utility Authority, FL Electric System Improvement Rev.,
5 1/4% due 10/1/2018........................................................ Aaa/AAA 1,000,610
1,000,000 Lee County, FL Transportation Facilities Rev., 6% due 10/1/2015................ Aaa/AAA 1,084,890
1,000,000 Osceola County, FL Transportation Rev. (Osceola Parkway Project),
6.10% due 4/1/2017.......................................................... Aaa/AAA 1,074,950
1,200,000 Palm Beach County, FL Criminal Justice Facilities Rev., 7% due 6/1/2011........ Aaa/AAA 1,304,364
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/AA 2,093,740
2,000,000 Reedy Creek Improvement District, FL Utilities Rev., 5 1/8% due 10/1/2019...... Aaa/AAA 1,973,080
1,250,000 Volusia County, FL Educational Facilities Authority Rev. (Embry-Riddle
Aeronautical University Project), 6 5/8% due 10/15/2022..................... NR/AAA 1,372,938
-----------
TOTAL MUNICIPAL BONDS (COST $41,002,889) -- 97.7%............................................................. 43,259,843
VARIABLE RATE DEMAND NOTES (COST $300,000) -- 0.7%............................................................ 300,000
OTHER ASSETS LESS LIABILITIES -- 1.6%......................................................................... 713,126
-----------
NET ASSETS -- 100.0%.......................................................................................... $44,272,969
===========
</TABLE>
North Carolina Series
<TABLE>
<CAPTION>
Face Ratings+ Market
Amount Municipal Bonds Moodys/S&P Value
------ --------------- ---------- -----------
<S> <C> <C> <C>
$1,250,000 Appalachian State University, NC Housing & Student Center System
Rev., 5 3/8% due 7/15/2015.................................................. Aaa/AAA $ 1,299,450
1,250,000 Asheville, NC Water System Rev., 5.70% due 8/1/2025............................ Aaa/AAA 1,311,612
2,000,000 Charlotte-Mecklenberg Hospital Authority, NC Health Care System Rev.,
5 3/4% due 1/15/2021........................................................ Aa3/AA 2,100,600
1,000,000 Charlotte, NC Certificates of Participation (Charlotte-Mecklenburg Law
Enforcement Center Project), 5 3/8% due 6/1/2013............................ Aa1/AA 1,019,270
2,000,000 Charlotte, NC Water & Sewer GOs, 5.90% due 2/1/2017............................ Aaa/AAA 2,145,200
1,590,000 Concord, NC Utilities System Rev., 5 3/4% due 12/1/2017........................ Aaa/AAA 1,658,608
1,500,000 Fayetteville, NC Public Works Commission Rev., 5 1/8% due 3/1/2024............. Aaa/AAA 1,477,725
<FN>
- ----------------
+ 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
</FN>
</TABLE>
11
<PAGE>
Portfolios of Investments
March 31, 1998
North Carolina Series (continued)
<TABLE>
<CAPTION>
Face Ratings+ Market
Amount Municipal Bonds Moodys/S&P Value
------ --------------- ---------- -----------
<S> <C> <C> <C>
$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 $ 2,641,600
500,000 North Carolina Educational Facilities Financing Authority Rev. (Duke
University Project), 6 3/4% due 10/1/2021................................... Aa1/AA+ 545,465
600,000 North Carolina Housing Finance Agency Rev. (Multi-Family),
5.80% due 7/1/2014.......................................................... Aa2/AA 618,840
1,455,000 North Carolina Housing Finance Agency Rev. (Single Family),
6 1/2% due 3/1/2018......................................................... Aa2/AA 1,557,054
250,000 North Carolina Housing Finance Agency Rev. (Multi-Family),
5.90% due 7/1/2026.......................................................... Aa2/AA 257,395
1,500,000 North Carolina Medical Care Commission Health Care Rev.
(Carolina Medicorp Project), 5 1/4% due 5/1/2026............................ Aa3/AA 1,502,070
1,000,000 North Carolina Medical Care Commission Hospital Rev. (Memorial
Mission Hospital Project), 6% due 10/1/2022................................. Aaa/AAA 1,074,320
2,250,000 North Carolina Medical Care Commission Hospital Rev. (Presbyterian
Health Services Corp. Project), 6% due 10/1/2024............................ Aa3/AA 2,392,583
1,500,000 North Carolina Medical Care Commission Hospital Rev. (First Health
of the Carolinas Project), 5% due 10/1/2028................................. Aa3/AA- 1,434,495
1,500,000 North Carolina Municipal Power Agency No. 1 Catawba Electric Rev.,
5 3/4% due 1/1/2015......................................................... Aaa/AAA 1,545,000
3,000,000 North Carolina Municipal Power Agency No. 1 Catawba Electric Rev.,
5% due 1/1/2020............................................................. Aaa/AAA 2,980,350
1,000,000 Orange, NC Water & Sewer Authority Rev., 5.20% due 7/1/2016.................... Aa2/AA 1,004,710
1,500,000 University of North Carolina Charlotte Rev. (Student Activity Center),
5 1/2% due 6/1/2021......................................................... Aaa/AAA 1,542,285
500,000 University of North Carolina Hospitals at Chapel Hill Rev.,
6 3/8% due 2/15/2017........................................................ Aa3/AA 541,735
1,000,000 University of North Carolina Hospitals at Chapel Hill Rev.,
5 1/4% due 2/15/2026........................................................ Aa3/AA 1,000,700
1,550,000 Wake County Industrial Facilities & Pollution Control Financing Authority,
NC (Carolina Power & Light), 6.90% due 4/1/2009............................. A2/A 1,653,990
-----------
TOTAL MUNICIPAL BONDS (COST $31,499,178) -- 98.4%............................................................. 33,305,057
OTHER ASSETS LESS LIABILITIES -- 1.6%......................................................................... 545,609
-----------
NET ASSETS -- 100.0%.......................................................................................... $33,850,666
===========
<FN>
- ----------------
+ 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.
</FN>
</TABLE>
12
<PAGE>
Statements of Assets and Liabilities
March 31, 1998
<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.......... $60,405,440 $85,779,474 $43,259,843 $33,305,057
Short-term holdings......... 200,000 700,000 300,000 --
----------- ----------- ----------- -----------
60,605,440 86,479,474 43,559,843 33,305,057
Cash................................ 128,462 189,471 149,463 136,354
Interest receivable................. 962,829 1,252,199 905,493 530,252
Receivable for Shares of Beneficial
Interest sold....................... 116,936 32,006 28,801 9
Expenses prepaid to shareholder
service agent....................... 6,858 9,905 5,334 4,572
Other............................... 6,114 4,434 4,159 4,091
----------- ----------- ----------- -----------
Total Assets........................ 61,826,639 87,967,489 44,653,093 33,980,335
----------- ----------- ----------- -----------
LIABILITIES:
Payable for Shares of Beneficial Interest
repurchased......................... 283,765 20,700 220,454 6,631
Dividends payable................... 110,171 161,368 74,201 57,019
Accrued expenses, taxes, and other.. 106,533 128,240 85,469 66,019
----------- ----------- ----------- -----------
Total Liabilities................... 500,469 310,308 380,124 129,669
----------- ----------- ----------- -----------
Net Assets.......................... $61,326,170 $87,657,181 $44,272,969 $33,850,666
=========== =========== =========== ===========
COMPOSITION OF NET ASSETS:
Shares of Beneficial Interest, at par:
Class A..................... $ 8,393 $ 12,222 $ 5,371 $ 4,019
Class D..................... 814 254 250 158
Additional paid-in capital.......... 57,686,725 80,847,394 41,825,662 31,734,508
Undistributed net realized gain..... 29,557 1,912,244 184,732 306,102
Net unrealized appreciation
of investments...................... 3,600,681 4,885,067 2,256,954 1,805,879
----------- ----------- ----------- -----------
Net Assets.......................... $61,326,170 $87,657,181 $44,272,969 $33,850,666
=========== =========== =========== ===========
Net Assets:
Class A............................. $55,896,366 $85,875,774 $42,300,696 $32,568,861
Class D............................. $ 5,429,804 $ 1,781,407 $ 1,972,273 $ 1,281,805
SHARES OF BENEFICIAL INTEREST
OUTSTANDING (Unlimited shares
authorized; $.001 par value):
Class A............................. 8,392,976 12,222,392 5,371,022 4,019,226
Class D............................. 814,426 254,073 249,907 158,271
NET ASSET VALUE PER SHARE:
Class A............................. $6.66 $7.03 $7.88 $8.10
Class D............................. $6.67 $7.01 $7.89 $8.10
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
Statements of Operations
For the Six Months Ended March 31, 1998
<TABLE>
<CAPTION>
CALIFORNIA CALIFORNIA NORTH
HIGH-YIELD QUALITY FLORIDA CAROLINA
SERIES SERIES SERIES SERIES
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest.......................... $1,661,259 $2,487,660 $1,216,809 $ 930,707
---------- ---------- ---------- ----------
EXPENSES:
Management fees................... 147,265 222,541 110,640 84,406
Distribution and service fees..... 44,914 48,241 61,723 43,335
Shareholder account services...... 34,931 49,387 27,023 23,277
Auditing and legal fees........... 12,485 10,983 12,668 12,358
Shareholder reports and communications 5,448 6,153 5,708 4,481
Custody and related services...... 4,426 4,265 3,725 6,158
Registration...................... 3,989 4,166 3,359 3,495
Trustees' fees and expenses....... 3,945 4,101 3,339 3,155
Miscellaneous..................... 2,492 2,857 1,691 1,517
---------- ---------- ---------- ----------
Total Expenses.................... 259,895 352,694 229,876 182,182
---------- ---------- ---------- ----------
Net Investment Income............. 1,401,364 2,134,966 986,933 748,525
---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments.. 183,424 2,135,434 186,165 312,034
Net change in unrealized appreciation
of investments.................... 553,541 (1,266,704) 670,961 184,658
---------- ---------- ---------- ----------
Net Gain on Investments........... 736,965 868,730 857,126 496,692
---------- ---------- ---------- ----------
Increase in Net Assets from
Operations........................ $2,138,329 $3,003,696 $1,844,059 $1,245,217
========== ========== ========== ==========
</TABLE>
- ------------------
See Notes to Financial Statements.
14
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
CALIFORNIA HIGH-YIELD SERIES CALIFORNIA QUALITY SERIES
------------------------------------ ------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
3/31/98 9/30/97 3/31/98 9/30/97
--------------- ---------------- --------------- ----------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income........ $ 1,401,364 $ 2,784,733 $ 2,134,966 $ 4,596,455
Net realized gain on
investments.................. 183,424 211,592 2,135,434 427,389
Net change in unrealized
appreciation of investments.. 553,541 1,476,067 (1,266,704) 2,834,368
----------- ----------- ----------- -----------
Increase in Net Assets from
Operations................... 2,138,329 4,472,392 3,003,696 7,858,212
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A.............. (1,320,170) (2,682,769) (2,097,188) (4,533,073)
Class D.............. (81,194) (101,964) (37,778) (63,382)
Net realized gain on investments:
Class A.............. (255,159) (722,261) (410,719) (27,957)
Class D.............. (16,987) (27,209) (9,630) (454)
----------- ----------- ----------- -----------
Decrease in Net Assets
from Distributions........... (1,673,510) (3,534,203) (2,555,315) (4,624,866)
----------- ----------- ----------- -----------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sale of shares:
Class A.............. 5,260,206 7,351,517 1,415,196 1,481,687
Class D.............. 2,414,043 1,513,626 56,434 575,550
Shares issued in payment of
dividends:
Class A.............. 700,710 1,412,142 1,050,644 2,257,452
Class D.............. 55,678 70,066 20,430 33,256
Exchanged from associated Funds:
Class A.............. 1,343,786 1,772,009 7,581,361 19,333,888
Class D.............. 247,877 502,224 1,936,770 5,312,748
Shares issued in payment of
gain distributions:
Class A.............. 174,948 483,204 249,515 16,799
Class D.............. 13,631 22,161 5,556 228
----------- ----------- ----------- -----------
Total........................ 10,210,879 13,126,949 12,315,906 29,011,608
----------- ----------- ----------- -----------
Cost of shares repurchased:
Class A.............. (4,170,813) (7,355,541) (4,739,335) (13,851,584)
Class D.............. (173,813) (640,001) (422,038) (280,678)
Exchanged into associated Funds:
Class A.............. (739,440) (1,923,514) (7,115,668) (20,972,562)
Class D.............. (468,242) (126,577) (1,499,131) (5,676,629)
----------- ----------- ----------- -----------
Total........................ (5,552,308) (10,045,633) (13,776,172) (40,781,453)
----------- ----------- ----------- -----------
Increase (Decrease) in Net
Assets from Transactions in
Shares of Beneficial Interest 4,658,571 3,081,316 (1,460,266) (11,769,845)
----------- ----------- ----------- -----------
Increase (Decrease) in Net
Assets....................... 5,123,390 4,019,505 (1,011,885) (8,536,499)
NET ASSETS:
Beginning of period.......... 56,202,780 52,183,275 88,669,066 97,205,565
----------- ----------- ----------- -----------
End of Period................ $61,326,170 $56,202,780 $87,657,181 $88,669,066
=========== =========== =========== ===========
</TABLE>
- ----------------
See Notes to Financial Statements.
15
<PAGE>
Statements of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
FLORIDA SERIES NORTH CAROLINA SERIES
------------------------------------ ------------------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
3/31/98 9/30/97 3/31/98 9/30/97
--------------- ---------------- --------------- ----------------
OPERATIONS:
<S> <C> <C> <C> <C>
Operations:
Net investment income....... $ 986,933 $ 2,131,967 $ 748,525 $ 1,638,605
Net realized gain on
investments................. 186,165 402,363 312,034 264,968
Net change in unrealized
appreciation of investments. 670,961 899,645 184,658 797,213
----------- ----------- ----------- -----------
Increase in Net Assets from
Operations.................. 1,844,059 3,433,975 1,245,217 2,700,786
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A............. (954,280) (2,069,071) (725,970) (1,591,157)
Class D............. (32,653) (62,896) (22,555) (47,448)
Net realized gain on
investments:
Class A............. (385,124) (611,829) (259,010) (145,565)
Class D............. (16,296) (20,485) (9,526) (4,714)
----------- ----------- ----------- -----------
Decrease in Net Assets
from Distributions.......... (1,388,353) (2,764,281) (1,017,061) (1,788,884)
----------- ----------- ----------- -----------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sale of shares:
Class A............. 1,075,936 2,176,497 952,784 1,480,472
Class D............. 305,820 211,049 73,953 124,216
Shares issued in payment of dividends:
Class A............. 372,034 808,742 375,922 832,006
Class D............. 22,085 43,942 16,185 35,063
Exchanged from associated Funds:
Class A............. 1,402,144 1,901,127 30,950 622,587
Class D............. 214,765 437,446 -- --
Shares issued in payment of
gain distributions:
Class A............. 224,788 344,983 192,301 106,938
Class D............. 12,044 15,286 8,729 4,313
----------- ----------- ----------- -----------
Total....................... 3,629,616 5,939,072 1,650,824 3,205,595
----------- ----------- ----------- -----------
Cost of shares repurchased:
Class A............. (1,860,336) (7,587,878) (1,794,098) (6,362,439)
Class D............. (108,476) (295,456) (37,711) (208,812)
Exchanged into associated Funds:
Class A............. (1,377,138) (1,470,687) (93,169) (808,253)
Class D............. (168,631) (29,736) (4,000) (3,500)
----------- ----------- ----------- -----------
Total....................... (3,514,581) (9,383,757) (1,928,978) (7,383,004)
----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets
from Transactions in Shares
of Beneficial Interest...... 115,035 (3,444,685) (278,154) (4,177,409)
----------- ----------- ----------- -----------
Increase (Decrease) in Net
Assets...................... 570,741 (2,774,991) (49,998) (3,265,507)
NET ASSETS:
Beginning of period......... 43,702,228 46,477,219 33,900,664 37,166,171
----------- ----------- ----------- -----------
End of Period............... $44,272,969 $43,702,228 $33,850,666 $33,900,664
=========== =========== =========== ===========
</TABLE>
- ----------------
See Notes to Financial Statements.
16
<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 six months ended March 31, 1998, distribution and service fees were the
only class-specific expenses.
e. Distributions to Shareholders -- Dividends are declared daily and paid
monthly. Other distributions paid by the 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 six months ended March 31,
1998, were as follows:
Series Purchases Sales
- ---------- ------------ ------------
California High-Yield $11,351,880 $ 4,802,550
California Quality 17,965,063 20,270,500
Florida 1,950,160 2,621,235
North Carolina 4,397,985 4,558,229
At March 31, 1998, the cost of investments for federal income tax
purposes was substantially the same as the cost for financial reporting
purposes, and the tax basis gross unrealized appreciation and depreciation of
portfolio securities were as follows:
Total Total
Unrealized Unrealized
Series Appreciation Depreciation
- ---------- ------------ ------------
California High-Yield $3,600,881 $ 200
California Quality 4,864,667 203,340
Florida 2,256,954 --
North Carolina 1,832,384 26,505
17
<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 sales of
Class A shares:
Distributor Dealer
Series Concessions Commissions
- ---------- ------------ ------------
California High-Yield $8,650 $60,785
California Quality 6,120 45,768
Florida 4,945 34,656
North Carolina 3,859 28,428
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 six months ended March 31,
1998, for the California High-Yield, California Quality, Florida, and North
Carolina Series, fees incurred under the Plan aggregated $24,159, $38,571,
$52,985, and $37,221, respectively, or 0.09%, 0.09%, 0.24%, and 0.23%,
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 six months ended March 31, 1998, fees incurred under the
Plan amounted to $20,755, $9,670, $8,738, and $6,114, respectively, 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 six months
ended March 31, 1998, such charges amounted to $1,709 for the California
High-Yield Series, $312 for the California Quality Series, $292 for the Florida
Series, and $34 for the North Carolina 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 six months ended March 31, 1998,
Seligman Services, Inc. received commissions for sales 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 $ 7 $ 769
California Quality 869 1,343
Florida -- 2,312
North Carolina -- 1,142
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 $34,931
California Quality 49,387
Florida 27,023
North Carolina 23,277
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. Trustees may elect to have their
deferred fees accrue interest or earn a return based on the performance of the
Trust or other funds in the Seligman Group of Investment Companies. Deferred
fees and related accrued earnings are not deductible for federal income tax
purposes until such amounts are paid. The cost of such fees and earnings accrued
thereon is included in trustees' fees and expenses, and the accumulated balances
thereof at March 31, 1998, are included in other liabilities as follows:
Series
- ----------
California High-Yield $29,236
California Quality 29,300
Florida 14,626
North Carolina 10,727
18
<PAGE>
Notes to Financial Statements
5. Transactions in Shares of Beneficial Interest--Transactions in Shares of
Beneficial Interest were as follows:
California High-Yield California Quality
Series Series
---------------------- ----------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
3/31/98 9/30/97 3/31/98 9/30/97
------------ --------- ----------- ----------
Sales of shares:
Class A................... 793,226 1,136,556 201,119 217,315
Class D................... 360,589 232,749 8,058 83,522
Shares issued in payment of
dividends:
Class A................... 105,459 217,868 149,495 329,886
Class D................... 8,361 10,791 2,915 4,867
Exchanged from associated Funds:
Class A................... 202,147 272,963 1,079,870 2,835,364
Class D................... 37,329 77,936 276,252 781,157
Shares issued in payment of
gain distributions:
Class A................... 26,588 74,799 35,850 2,456
Class D................... 2,068 3,425 799 33
--------- --------- --------- ---------
Total........................ 1,535,767 2,027,087 1,754,358 4,254,600
--------- --------- --------- ---------
Shares repurchased:
Class A................... (627,997) (1,136,607) (674,979) (2,029,814)
Class D................... (26,167) (98,590) (60,037) (41,403)
Exchanged into associated Funds:
Class A................... (111,048) (296,127) (1,013,921) (3,068,740)
Class D................... (69,662) (19,383) (214,311) (832,015)
--------- --------- --------- ---------
Total........................ (834,874) (1,550,707) (1,963,248) (5,971,972)
--------- --------- --------- ---------
Increase (decrease) in shares 700,893 476,380 (208,890) (1,717,372)
========= ========= ========= =========
North Carolina
Florida Series Series
---------------------- ----------------------
Six Months Year Six Months Year
Ended Ended Ended Ended
3/31/98 9/30/97 3/31/98 9/30/97
------------ --------- ----------- ----------
Sales of shares:
Class A................... 136,667 284,403 117,787 187,120
Class D................... 38,854 27,585 9,100 15,728
Shares issued in payment of
dividends:
Class A................... 47,330 105,889 46,449 105,249
Class D................... 2,804 5,743 2,001 4,436
Exchanged from associated Funds:
Class A................... 178,441 250,599 3,807 78,277
Class D................... 27,198 56,686 -- --
Shares issued in payment of
gain distributions:
Class A................... 29,005 45,096 24,008 13,554
Class D................... 1,550 1,996 1,091 547
--------- --------- --------- ---------
Total........................ 461,849 777,997 204,243 404,911
--------- --------- --------- ---------
Shares repurchased:
Class A................... (236,457) (995,384) (221,595) (805,592)
Class D................... (13,818) (39,429) (4,650) (26,320)
Exchanged into associated Funds:
Class A................... (174,446) (193,665) (11,558) (102,260)
Class D................... (21,524) (3,903) (498) (445)
--------- --------- --------- ---------
Total........................ (446,245) (1,232,381) (238,301) (934,617)
--------- --------- --------- ---------
Increase (decrease) in shares 15,604 (454,384) (34,058) (529,706)
========= ========= ========= =========
19
<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.
California High-Yield Series
CLASS A
--------------------------------------------
SIX
MONTHS YEAR ENDED SEPTEMBER 30,
ENDED --------------------------------------
3/31/98 1997 1996 1995 1994 1993
------- ------ ------ ------ ------ ------
PER SHARE OPERATING
PERFORMANCE:
Net Asset Value,
Beginning of Period... $6.61 $6.50 $6.47 $6.30 $6.73 $6.65
----- ----- ----- ----- ----- -----
Net investment income. 0.16 0.34 0.36 0.37 0.37 0.39
Net realized and
unrealized investment
gain (loss)........... 0.08 0.20 0.05 0.17 (0.34) 0.28
----- ----- ----- ----- ----- -----
Increase (Decrease)
from Investment
Operations............ 0.24 0.54 0.41 0.54 0.03 0.67
Dividends paid or
declared.............. (0.16) (0.34) (0.36) (0.37) (0.37) (0.39)
Distributions from net
gain realized......... (0.03) (0.09) (0.02) -- (0.09) (0.20)
----- ----- ----- ----- ----- -----
Net Increase (Decrease)
in Net Asset Value.... 0.05 0.11 0.03 0.17 (0.43) 0.08
----- ----- ----- ----- ----- -----
Net Asset Value, End of
Period................ $6.66 $6.61 $6.50 $6.47 $6.30 $6.73
===== ===== ===== ===== ===== =====
TOTAL RETURN BASED ON
NET ASSET VALUE: 3.69% 8.74% 6.49% 8.85% 0.41% 10.66%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net
assets................ 0.82%+ 0.87% 0.84% 0.90% 0.85% 0.88%
Net investment income
to average net assets. 4.82%+ 5.26% 5.49% 5.84% 5.74% 5.94%
Portfolio turnover.... 8.59% 22.42% 34.75% 17.64% 8.36% 7.70%
Net Assets, End of
Period (000s omitted). $55,896 $52,883 $50,264 $51,504 $48,007 $51,218
- -----------
See footnotes on page 25.
20
<PAGE>
Financial Highlights
California High-Yield Series (continued)
CLASS D
------------------------------------------------
SIX
MONTHS YEAR ENDED SEPTEMBER 30, 2/1/94*
ENDED ------------------------------ TO
3/31/98 1997 1996 1995 9/30/94
------- -------- -------- ------- --------
PER SHARE OPERATING
PERFORMANCE:
Net Asset Value,
Beginning of Period... $6.61 $6.51 $6.48 $6.31 $6.67
----- ----- ----- ----- -----
Net investment income. 0.13 0.28 0.30 0.31 0.21
Net realized and
unrealized investment
gain (loss)........... 0.09 0.19 0.05 0.17 (0.36)
----- ----- ----- ----- -----
Increase (Decrease)
from Investment
Operations............ 0.22 0.47 0.35 0.48 (0.15)
Dividends paid or
declared.............. (0.13) (0.28) (0.30) (0.31) (0.21)
Distributions from net
gain realized......... (0.03) (0.09) (0.02) -- --
----- ----- ----- ----- -----
Net Increase (Decrease)
in Net Asset Value.... 0.06 0.10 0.03 0.17 (0.36)
----- ----- ----- ----- -----
Net Asset Value, End of
Period................ $6.67 $6.61 $6.51 $6.48 $6.31
===== ===== ===== ===== =====
TOTAL RETURN BASED ON
NET ASSET VALUE: 3.38% 7.60% 5.53% 7.78% (2.47)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net
assets................ 1.73%+ 1.77% 1.74% 1.91% 1.74%+
Net investment income
to average net assets. 3.91%+ 4.36% 4.59% 4.84% 4.73%+
Portfolio turnover.... 8.59% 22.42% 34.75% 17.64% 8.36%++
Net Assets, End of
Period (000s omitted). $5,430 $3,320 $1,919 $1,277 $650
California Quality Series
CLASS A
--------------------------------------------
SIX
MONTHS YEAR ENDED SEPTEMBER 30,
ENDED --------------------------------------
3/31/98 1997 1996 1995 1994 1993
------- ------ ------ ------ ------ ------
PER SHARE OPERATING
PERFORMANCE:
Net Asset Value,
Beginning of Period... $6.99 $6.75 $6.65 $6.39 $7.28 $6.85
----- ----- ----- ----- ----- -----
Net investment income. 0.17 0.34 0.35 0.34 0.35 0.37
Net realized and
unrealized investment
gain (loss)........... 0.07 0.24 0.11 0.32 (0.73) 0.54
----- ----- ----- ----- ----- -----
Increase (Decrease)
from Investment
Operations............ 0.24 0.58 0.46 0.66 0.38 0.91
Dividends paid or
declared.............. (0.17) (0.34) (0.35) (0.34) (0.35) (0.37)
Distributions from net
gain realized......... (0.03) -- (0.01) (0.06) (0.16) (0.11)
----- ----- ----- ----- ----- -----
Net Increase (Decrease)
in Net Asset Value.... 0.04 0.24 0.10 0.26 (0.89) 0.43
----- ----- ----- ----- ----- -----
Net Asset Value, End of
Period................ $7.03 $6.99 $6.75 $6.65 $6.39 $7.28
===== ===== ===== ===== ===== =====
TOTAL RETURN BASED ON
NET ASSET VALUE: 3.49% 8.87% 7.00% 10.85% (5.46)% 13.92%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net
assets................ 0.77%+ 0.82% 0.79% 0.89% 0.81% 0.82%
Net investment income
to average net assets. 4.81%+ 4.99% 5.11% 5.34% 5.20% 5.30%
Portfolio turnover.... 20.63% 12.16% 12.84% 11.24% 22.16% 15.67%
Net Assets, End of
Period (000s omitted). $85,876 $86,992 $95,560 $94,947 $99,020 $111,732
- ------------
See footnotes on page 25.
21
<PAGE>
Financial Highlights
California Quality Series (continued)
CLASS D
------------------------------------------------
SIX
MONTHS YEAR ENDED SEPTEMBER 30, 2/1/94*
ENDED ------------------------------ TO
3/31/98 1997 1996 1995 9/30/94
------- -------- -------- ------- --------
PER SHARE OPERATING
PERFORMANCE:
Net Asset Value,
Beginning of Period... $6.97 $6.74 $6.63 $6.38 $7.13
----- ----- ----- ----- -----
Net investment income. 0.14 0.28 0.28 0.28 0.19
Net realized and
unrealized investment
gain (loss)........... 0.07 0.23 0.12 0.31 (0.75)
----- ----- ----- ----- -----
Increase (Decrease)
from Investment
Operations............ 0.21 0.51 0.40 0.59 (0.56)
Dividends paid or
declared.............. (0.14) (0.28) (0.28) (0.28) (0.19)
Distributions from net
gain realized......... (0.03) -- (0.01) (0.06) --
----- ----- ----- ----- -----
Net Increase (Decrease)
in Net Asset Value.... 0.04 0.23 0.11 0.25 (0.75)
----- ----- ----- ----- -----
Net Asset Value, End of
Period................ $7.01 $6.97 $6.74 $6.63 $6.38
===== ===== ===== ===== =====
TOTAL RETURN BASED ON
NET ASSET VALUE: 3.03% 7.75% 6.20% 9.61% (8.01)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net
assets................ 1.68%+ 1.72% 1.69% 1.88% 1.77%+
Net investment income
to average net assets. 3.90%+ 4.09% 4.21% 4.36% 4.39%+
Portfolio turnover.... 20.63% 12.16% 12.84% 11.24% 22.16%++
Net Assets, End of
Period (000s omitted). $1,781 $1,677 $1,645 $863 $812
Florida Series
CLASS A
--------------------------------------------
SIX
MONTHS YEAR ENDED SEPTEMBER 30,
ENDED --------------------------------------
3/31/98 1997 1996 1995 1994 1993
------- ------ ------ ------ ------ ------
PER SHARE OPERATING
PERFORMANCE:
Net Asset Value,
Beginning of Period... $7.80 $7.67 $7.71 $7.34 $8.20 $7.56
----- ----- ----- ----- ----- -----
Net investment income. 0.18 0.36 0.38 0.40 0.42 0.46
Net realized and
unrealized investment
gain (loss)........... 0.15 0.23 0.04 0.37 (0.74) 0.65
----- ----- ----- ----- ----- -----
Increase (Decrease)
from Investment
Operations............ 0.33 0.59 0.42 0.77 (0.32) 1.11
Dividends paid or
declared.............. (0.18) (0.36) (0.38) (0.40) (0.42) (0.46)
Distributions from net
gain realized......... (0.07) (0.10) (0.08) -- (0.12) (0.01)
----- ----- ----- ----- ----- -----
Net Increase (Decrease)
in Net Asset Value.... 0.08 0.13 (0.04) 0.37 (0.86) 0.64
----- ----- ----- ----- ----- -----
Net Asset Value, End of
Period................ $7.88 $7.80 $7.67 $7.71 $7.34 $8.20
===== ===== ===== ===== ===== =====
TOTAL RETURN BASED ON
NET ASSET VALUE: 4.25% 8.01% 5.54% 10.87% (3.99)% 15.21%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net
assets................ 1.00%+ 1.04% 0.97% 0.72% 0.42% 0.23%
Net investment income
to average net assets. 4.49%+ 4.70% 4.90% 5.38% 5.49% 5.82%
Portfolio turnover.... 4.49% 33.68% 18.53% 11.82% 6.17% 16.42%
Net Assets, End of
Period (000s omitted). $42,301 $42,024 $45,200 $49,030 $49,897 $52,855
Without expense
reimbursement and/or
management fee waiver:**
Net investment
income per share.... $0.38 $0.37 $0.38 $0.40
Ratios:
Expenses to average
net assets.......... 0.97% 1.03% 1.00% 1.03%
Net investment income
to average net assets 4.90% 5.07% 4.91% 5.01%
22
- ------------
See footnotes on page 25.
<PAGE>
Florida Series (continued)
CLASS D
------------------------------------------------
SIX
MONTHS YEAR ENDED SEPTEMBER 30, 2/1/94*
ENDED ------------------------------ TO
3/31/98 1997 1996 1995 9/30/94
------- -------- -------- ------- --------
PER SHARE OPERATING
PERFORMANCE:
Net Asset Value,
Beginning of Period... $7.81 $7.68 $7.72 $7.34 $8.10
----- ----- ----- ----- -----
Net investment income. 0.15 0.30 0.32 0.34 0.24
Net realized and
unrealized investment
gain (loss)........... 0.15 0.23 0.04 0.38 (0.76)
----- ----- ----- ----- -----
Increase (Decrease)
from Investment
Operations............ 0.30 0.53 0.36 0.72 (0.52)
Dividends paid or
declared.............. (0.15) (0.30) (0.32) (0.34) (0.24)
Distributions from net
gain realized......... (0.07) (0.10) (0.08) -- --
----- ----- ----- ----- -----
Net Increase (Decrease)
in Net Asset Value.... 0.08 0.13 (0.04) 0.38 (0.76)
----- ----- ----- ----- -----
Net Asset Value, End of
Period................ $7.89 $7.81 $7.68 $7.72 $7.34
===== ===== ===== ===== =====
TOTAL RETURN BASED ON
NET ASSET VALUE: 3.86% 7.18% 4.74% 10.07% (6.64)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net
assets................ 1.76%+ 1.81% 1.73% 1.66% 1.29%+
Net investment income
to average net assets. 3.73%+ 3.93% 4.14% 4.53% 4.61%+
Portfolio turnover.... 4.49% 33.68% 18.53% 11.82% 6.17%++
Net Assets, End of
Period (000s omitted). $1,972 $1,678 $1,277 $603 $244
Without expense
reimbursement and/or
management fee waiver:**
Net investment
income per share.... $0.32 $0.31 $0.21
Ratios:
Expenses to average
net assets.......... 1.73% 1.97% 1.84%
Net investment income
to average net assets 4.14% 4.22% 4.06%
- ------------
See footnotes on page 25.
23
<PAGE>
Financial Highlights
North Carolina Series
CLASS A
--------------------------------------------
SIX
MONTHS YEAR ENDED SEPTEMBER 30,
ENDED --------------------------------------
3/31/98 1997 1996 1995 1994 1993
------- ------ ------ ------ ------ ------
PER SHARE OPERATING
PERFORMANCE:
Net Asset Value,
Beginning of Period... $8.05 $7.84 $7.74 $7.30 $8.22 $7.61
----- ----- ----- ----- ----- -----
Net investment income. 0.18 0.37 0.37 0.39 0.41 0.43
Net realized and
unrealized investment
gain (loss)........... 0.11 0.24 0.11 0.45 (0.87) 0.63
----- ----- ----- ----- ----- -----
Increase (Decrease)
from Investment
Operations............ 0.29 0.61 0.48 0.84 (0.46) 1.06
Dividends paid or
declared.............. (0.18) (0.37) (0.37) (0.39) (0.41) (0.43)
Distributions from net
gain realized......... (0.06) (0.03) (0.01) (0.01) (0.05) (0.02)
----- ----- ----- ----- ----- -----
Net Increase (Decrease)
in Net Asset Value.... 0.05 0.21 0.10 0.44 (0.92) 0.61
----- ----- ----- ----- ----- -----
Net Asset Value, End of
Period................ $8.10 $8.05 $7.84 $7.74 $7.30 $8.22
===== ===== ===== ===== ===== =====
TOTAL RETURN BASED ON
NET ASSET VALUE: 3.68% 8.01% 6.39% 11.92% (5.80)% 14.46%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net
assets................ 1.05%+ 1.09% 1.05% 0.82% 0.44% 0.23%
Net investment income
to average net assets. 4.46%+ 4.66% 4.75% 5.21% 5.29% 5.44%
Portfolio turnover.... 13.08% 13.04% 15.12% 4.38% 15.61% 3.13%
Net Assets, End of
Period (000s omitted). $32,569 $32,684 $35,934 $37,446 $38,920 $38,828
Without expense
reimbursement and/or
management fee waiver:**
Net investment
income per share.... $0.37 $0.36 $0.35 $0.35
Ratios:
Expenses to average
net assets.......... 1.06% 1.18% 1.13% 1.22%
Net investment income
to average net assets 4.74% 4.85% 4.60% 4.45%
- ----------
See footnotes on page 25.
24
<PAGE>
North Carolina Series (continued)
CLASS D
------------------------------------------------
SIX
MONTHS YEAR ENDED SEPTEMBER 30, 2/1/94*
ENDED ------------------------------ TO
3/31/98 1997 1996 1995 9/30/94
------- -------- -------- ------- --------
PER SHARE OPERATING
PERFORMANCE:
Net Asset Value,
Beginning of Period... $8.05 $7.83 $7.74 $7.29 $8.17
----- ----- ----- ----- -----
Net investment income. 0.15 0.31 0.31 0.33 0.23
Net realized and
unrealized investment
gain (loss)........... 0.11 0.25 0.10 0.46 (0.88)
----- ----- ----- ----- -----
Increase (Decrease)
from Investment
Operations............ 0.26 0.56 0.41 0.79 (0.65)
Dividends paid or
declared.............. (0.15) (0.31) (0.31) (0.33) (0.23)
Distributions from net
gain realized......... (0.06) (0.03) (0.01) (0.01) --
----- ----- ----- ----- -----
Net Increase (Decrease)
in Net Asset Value.... 0.05 0.22 0.09 0.45 (0.88)
----- ----- ----- ----- -----
Net Asset Value, End of
Period................ $8.10 $8.05 $7.83 $7.74 $7.29
===== ===== ===== ===== =====
TOTAL RETURN BASED ON
NET ASSET VALUE: 3.29% 7.33% 5.45% 11.19% (8.15)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net
assets................ 1.82%+ 1.85% 1.81% 1.64% 1.27%+
Net investment income
to average net assets. 3.69%+ 3.90% 3.99% 4.42% 4.49%+
Portfolio turnover.... 13.08% 13.04% 15.12% 4.38% 15.61%++
Net Assets, End of
Period (000s omitted). $1,282 $1,217 $1,232 $1,257 $1,282
Without expense
reimbursement and/or
management fee waiver:**
Net investment
income per share.... $0.31 $0.31 $0.20
Ratios:
Expenses to average
net assets.......... 1.82% 2.00% 1.95%
Net investment income
to average net assets 3.98% 4.06% 3.82%
- ------------
* 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.
25
<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
March 31, 1998, the related statements of operations for the six months then
ended and of changes in net assets for the six months then ended and for the
year ended September 30, 1997, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Trusts 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 March
31, 1998 by correspondence with the Trusts custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the California
High-Yield, California Quality, Florida, and North Carolina Series of Seligman
Municipal Series Trust as of March 31, 1998, the results of their operations,
the changes in their net assets, and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
/s/DELOITTE & TOUCHE LLP
New York, New York
May 1, 1998
26
<PAGE>
TRUSTEES
John R. Galvin 2
Dean, Fletcher School of Law and Diplomacy
at Tufts University
Director, Raytheon Company
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 Industries, Inc
Trustee, The New York and Presbyterian Hospital
Betsy S. Michel 2
Trustee, The Geraldine R. Dodge Foundation
Chairman of the Board of Trustees, St. Georges 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, 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.
James N. Whitson 2
Director and Consultant, Sammons Enterprises, Inc.
Director, CommScope, Inc.
Director, C-SPAN
Brian T. Zino 1
President
President, J. & W. Seligman & Co. Incorporated
Chairman, Seligman Data Corp.
Trustee Emeritus
Fred E. Brown
Director and Consultant, J. & W. Seligman & Co.
Incorporated
- ----------------
Member: 1 Executive Committee
2 Audit Committee
3 Trustee Nominating Committee
27
<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
(212) 682-7600 Outside the
Continental
United States
(800) 622-4597 24-Hour
Automated
Telephone
Access Service
28
<PAGE>
Glossary of Financial Terms
Capital Gain Distribution -- A payment to mutual fund shareholders of profits
realized on the sale of securities in a fund's portfolio. For tax purposes,
these profits may be taxed at different rates, primarily depending upon the
length of time the securities were owned by the fund.
Capital Appreciation/Depreciation -- An increase or decrease in the market
value of a mutual funds portfolio securities, which is reflected in the net
asset value of the funds 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 investments earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will not be based on the
original $1,000, but on the $1,070, which includes the first year's earnings.
Contingent Deferred Sales 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 -- A document that contains updated or
more detailed information about a mutual fund and that supplements the
prospectus. It is available at no charge upon request.
Total Return -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The Average Annual Total
Return represents the average annual compounded rate of return for the periods
presented.
Yield on Securities -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.
- -----------
Adapted from the Investment Company Institute's 1997 Mutual Fund Fact Book.
29
<PAGE>
This report is intended only for the information of shareholders or those who
have received the offering prospectus covering shares of Beneficial Interest of
Seligman 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.
SELIGMAN FINANCIAL SERVICES, INC.
AN AFFILIATE OF
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
TEB3 3/98
Printed on Recycled Paper
