<PAGE>
SELIGMAN
---------------
MUNICIPAL
SERIES TRUST
ANNUAL REPORT
SEPTEMBER 30, 1998
---------
Providing Income
Exempt 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 financial
prudence. While the world has changed dramatically in the 134 years since
Seligman first opened its doors, the firm has continued to offer its clients
high-quality investment solutions through changing times.
In the late 19th century, as the country grew, Seligman helped finance the
westward expansion of the railroads, the construction of the Panama Canal, and
the launching of urban transit systems. In the first part of the 20th century,
as America became an industrial power, the firm helped fund the growing capital
needs of the nascent automobile and steel industries.
With the formation of Tri-Continental Corporation in 1929 -- today, the nation's
largest diversified publicly-traded closed-end investment company -- Seligman
began shifting its emphasis from investment banking to investment management.
Despite the stock market crash and ensuing depression, Seligman was convinced of
the importance that investment companies could have in building wealth for
individual investors and launched its first mutual fund in 1930.
In the decades that followed, Seligman has continued to offer forward-looking
investment solutions, including funds that focus on technology stocks, municipal
bonds, and international securities.
...Values Endure
Seligman is proud of its distinctive past and of the traditional values that
continue to shape the firm's business decisions and investment judgment. While
much has changed over the years, the firm's commitment to providing prudent
investment management that seeks to build wealth for clients over time is an
enduring value that will guide Seligman into the new millennium.
Table of Contents
To the Shareholders.....................................1
Interview With Your Portfolio Manager...................2
Performance Overview and
Portfolio Summary....................................4
Portfolios of Investments...............................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
<PAGE>
To The Shareholders
Seligman Municipal Series Trust posted strong results for its fiscal year ended
September 30, 1998. Although the growth of the US economy slowed from its record
pace, the expansion continued. Inflation and interest rates reached their lowest
levels in a quarter century, and unemployment was at its lowest level since
1970.
Despite ongoing strength in the US, economic turmoil spread throughout the
rest of the world. The Asian financial crisis worsened, Japan failed to resolve
its banking problems, Russia's economy became chaotic, and economic crises
loomed throughout much of Latin America, particularly in Brazil. Fears of risk
in nearly all types of financial assets drove investors out of the equity
markets and into the relative safety and quality of investments such as US
Treasury bonds, often a haven from a turbulent stock market. This "flight to
quality" helped create an attractive environment for municipal bonds.
Major factors influencing the market for municipal bonds over the year were the
prolonged US Treasury bond rally and heavy issuance of municipal securities.
Municipal bond holders fared well as interest rates generally declined over this
time period. Nonetheless, the performance of the municipal market lagged that of
the Treasury bond market, as investors focused on quality because of concerns
about financial instability. Treasury bond prices rose sharply over the 12-month
period, sending yields significantly lower. At one point in the period, selected
municipal obligations traded at the same yield as Treasuries, even though
municipals offered more favorable tax treatment. Currently, long-term municipal
bonds have not been this attractive, relative to long-term Treasuries, since
1986, when proposed legislation threatened the tax-exempt status of municipal
securities.
Looking ahead, we see the favorable climate for municipal bonds continuing. Low
inflation and a growing economy should serve to protect the value of municipal
investments. Fewer new issues may be entering the market, which could tighten
the supply/demand balance. This could improve overall total rate-of-return
prospects. Also, although the US economy continues to grow, this growth is
slowing, and the global situation is forcing the Federal Reserve into a more
benign strategy on interest rates. The Fed has already cut short-term rates
twice, and we expect more cuts until a semblance of international stability
emerges. Finally, the municipal market's record of safety and stability offers
further appeal to investors in these more troubled times, especially as equity
market volatility continues.
All in all, we feel the investment attractiveness of municipals remains
compelling. In this period of global economic uncertainty and low interest
rates, municipals are an appropriate alternative for those investors with
suitable investment requirements.
As you may know, companies are modifying their computer systems to recognize
dates of January 1, 2000, and beyond. This is often referred to as the "Y2K"
problem. Unless systems are updated, many applications may interpret the last
two digits of the year to mean 1900 instead of 2000. J. & W. Seligman & Co.
Incorporated, the Seligman Investment Companies, and Seligman Data Corp., your
shareholder service agent, have jointly established a team to ensure that your
investment and shareholder services are not disrupted. This team is supported
by consulting firms specializing in Y2K solutions. Substantial work has been
performed to date, and we are confident that when our plans are finalized and
all systems are tested, there will be no disruption in the services provided by
your Trust.
Thank you for your continued support of Seligman Municipal Series
Trust. We look forward to serving your investment needs in the many years to
come. A discussion with your Portfolio Manager, performance overviews, portfolio
holdings, and finanical statements follow this letter. By order of the Trustees,
/s/ William C. Morris
- ---------------------
William C. Morris
Chairman
/s/ Brian T. Zino
------------------
Brian T. Zino
President
October 30, 1998
1
<PAGE>
Interview With Your Portfolio Manager,
Thomas G. Moles
Q. What economic factors influenced Seligman Municipal Series Trust in the
last 12 months?
A. The continuing combination of low inflation, low unemployment, and steady
economic growth throughout the past 12 months sustained what became one of
the nation's longest peacetime economic expansions. This contributed to the
overall improvement of the financial condition of America's states, cities,
and municipalities. Over the past year, credit rating upgrades
significantly outnumbered rating downgrades. These upgrades enhanced the
overall creditworthiness of the municipal marketplace. But, by the end of
your Trust's fiscal year, there was widespread expectation that the US may
be unable to avoid the economic slowdown that has already gripped much of
the world. While many economists were calling a recession unlikely, the
fact that they were including its potential in their forecasts implied that
the ongoing domestic economic expansion would not continue. In the final
months of the fiscal year, turmoil in world markets began to contribute to
a modest slowdown in the pace of US economic growth, and prevented an
acceleration in the rate of inflation. In September, the Federal Reserve
Board lowered the federal funds rate by one-quarter of one percent. With a
warning that growing fear among investors and lenders was threatening the
nation's economic expansion, the Fed unexpectedly cut interest rates again
in October, the first time in four and a half years that the central bank
had changed interest-rate policy outside one of its normally scheduled
meetings. This unusual timing suggested that the Fed believed that the
domestic economy is beginning to deteriorate as the worldwide financial
crisis gains momentum, and that a credit shortage may be developing that
could further curb growth. Fed officials have hinted that more
interest-rate reductions will ensue if the global financial turmoil
escalates. Declining US equity markets reflected these fears, as investors
sold stocks in favor of the relative safety and quality of US Treasury
bonds, which are often considered a haven from a volatile stock market.
Q. What market factors influenced Seligman Municipal Series Trust in the last
12 months?
A. Overall, Seligman Municipal Series Trust ended its fiscal year on a
positive note. During the period, long-term municipal yields fluctuated
within a narrow range, decreasing by almost one-half of a point. The
declining interest-rate environment led to rising prices for the majority
of holdings and competitive performance results for each Series' net asset
value.
However, the municipal market underperformed the US Treasury market
during the 12-month period. The ongoing strength in the economy over the
year caused the supply of Treasury bonds to shrink, as the federal
government needed to borrow less after running its first budget surplus in
29 years. But, the solid economy and low interest rates caused the supply
of
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.
[Photo]
Seligman Municipals Team: (from left) Audrey Kuchtyak, Theresa Barion, Debra
McGuinness, (seated) Eileen Comerford, Thomas G. Moles
(Portfolio Manager)
2
<PAGE>
Interview With Your Portfolio Manager,
Thomas G. Moles
municipal bonds to grow. The net reduction in Treasury financing and the
increasing municipal bond issuance was compounded by the increased investor
demand for Treasuries. These factors caused the decline in Treasury yields
to significantly outpace the drop in municipal yields. Because of these
factors, long-term municipal bonds have not been as attractive, relative to
long-term Treasuries, since 1986, when proposed tax legislation threatened
the tax-exempt status of municipal securities.
Q. What was your investment strategy?
A. Throughout the 12-month period, the long-term interest-rate outlook was
positive, and Seligman Municipal Series Trust was positioned to benefit
from the declining interest-rate environment. The Seligman Municipals Team
engaged in duration-extension trades, selling shorter-term holdings and
replacing them with long-term, current-coupon bonds. Current-coupon bonds
have coupon rates that are at or near current market rates. Generally, when
long-term bond yields decline, the prices appreciate more than those of
shorter-term bonds.
During the past 12 months, we also improved the call protection of the
portfolios. As our bonds mature, older holdings approach their optional
call dates (a callable bond can be redeemed by the issuer, prior to
maturity, on specified dates and at predetermined prices). Declining
interest rates increase the risk that these bonds will be called by the
issuer. The lower interest-rate environment over the 12-month period
prompted many municipal issuers to retire outstanding, higher-coupon debt.
Additionally, as a direct result of the significant increase in refunding
volume, many of the portfolio's holdings were advance-refunded, which had a
positive impact on performance. In general, when a municipal bond is
refunded, total return performance is improved, and the bond's rating is
often upgraded.
Q. What is your outlook?
A. Long-term municipal yields have fallen to levels not seen in many years.
Municipal securities continue to offer a significant yield advantage
compared to the after-tax returns of other fixed-income investments.
Further, as the yield spread between municipal and Treasury bonds
normalizes, municipal market performance should improve, relative to the
Treasury market. Finally, the municipal market's record of safety and
stability may become more appealing as volatility persists in the US equity
markets. Consequently, we remain optimistic about the long-term prospects
for the municipal bond market, and for Seligman Municipal Series Trust.
3
<PAGE>
Performance Overview And Portfolo 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, 1998, 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
With Sales Charge Without Sales Charge Lehman Index
9/30/88 9,529 10,000 10,000
12/31/88 9,847 10,334 10,185
3/31/89 9,952 10,444 10,252
6/30/89 10,414 10,929 10,859
9/30/89 10,444 10,961 10,867
12/31/89 10,760 11,292 11,284
3/31/90 10,856 11,393 11,335
6/30/90 11,090 11,638 11,600
9/30/90 11,026 11,571 11,607
12/31/90 11,406 11,970 12,107
3/31/91 11,668 12,245 12,381
6/30/91 11,920 12,510 12,645
9/30/91 12,407 13,021 13,136
12/31/91 12,602 13,225 13,578
3/31/92 12,782 13,414 13,619
6/30/92 13,241 13,895 14,136
9/30/92 13,524 14,192 14,511
12/31/92 13,803 14,486 14,775
3/31/93 14,204 14,906 15,323
6/30/93 14,614 15,337 15,824
9/30/93 14,966 15,706 16,359
12/31/93 15,171 15,921 16,588
3/31/94 14,821 15,554 15,677
6/30/94 14,905 15,642 15,851
9/30/94 15,027 15,770 15,959
12/31/94 14,747 15,477 15,729
3/31/95 15,703 16,479 16,841
6/30/95 16,004 16,795 17,247
9/30/95 16,357 17,166 17,744
12/31/95 16,894 17,729 18,475
3/31/96 16,739 17,566 18,251
6/30/96 16,971 17,811 18,392
9/30/96 17,418 18,279 18,815
12/31/96 17,827 18,708 19,295
3/31/97 17,755 18,633 19,250
6/30/97 18,361 19,269 19,914
9/30/97 18,941 19,878 20,516
12/31/97 19381 20340 21072
3/31/98 19641 20612 21314
6/30/98 19970 20957 21638
9/30/98 20542 21558 22302
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
Investment Results per Share
TOTAL RETURNS
For Periods Ended September 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-----------------------------------------------------------------------
CLASS D
SINCE
SIX ONE FIVE 10 INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Class A**
With Sales Charge (0.35)% 3.30% 5.49% 7.46% n/a
Without Sales Charge 4.59 8.45 6.54 7.98 n/a
Class D**
With 1% CDSC 2.96 6.47 n/a n/a n/a
Without CDSC 3.96 7.47 n/a n/a 5.48%
Lehman Index*** 4.64 8.71 6.40 8.35 6.29++
</TABLE>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
For Periods Ended September 30, 1998
<TABLE>
<CAPTION>
9/30/98 3/31/98 9/30/97 DIVIDENDS++ CAPITAL GAIN++ SEC YIELD+++
------- -------- ------- ----------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A $6.80 $6.66 $6.61 Class A $0.320 $0.032 3.94%
Class D 6.80 6.67 6.61 Class D 0.260 0.032 3.25
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C> <C> <C>
Revenue Bonds 85% Aaa/AAA 14% Baa/BBB 25%
General Obligation Bonds 15 Aa/AA 6 Non-Rated 3
A/A 52
WEIGHTED AVERAGE MATURITY 22.0 years
</TABLE>
- ------------
See footnotes on page 7.
4
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN CALIFORNIA MUNICIPAL QUALITY SERIES
With Sales Charge Without Sales Charge Lehman Index
9/30/88 9,530 10,000 10,000
12/31/88 9,880 10,367 10,185
3/31/89 9,948 10,438 10,252
6/30/89 10,557 11,077 10,859
9/30/89 10,470 10,986 10,867
12/31/89 10,845 11,379 11,284
3/31/90 10,832 11,366 11,335
6/30/90 11,106 11,653 11,600
9/30/90 10,912 11,450 11,607
12/31/90 11,557 12,126 12,107
3/31/91 11,751 12,330 12,381
6/30/91 11,974 12,564 12,645
9/30/91 12,478 13,093 13,136
12/31/91 12,853 13,487 13,578
3/31/92 12,833 13,465 13,619
6/30/92 13,398 14,058 14,136
9/30/92 13,670 14,344 14,511
12/31/92 13,944 14,632 14,775
3/31/93 14,608 15,328 15,323
6/30/93 15,055 15,797 15,824
9/30/93 15,573 16,341 16,359
12/31/93 15,702 16,476 16,588
3/31/94 14,662 15,384 15,677
6/30/94 14,685 15,409 15,851
9/30/94 14,723 15,449 15,959
12/31/94 14,399 15,109 15,729
3/31/95 15,691 16,464 16,841
6/30/95 15,896 16,679 17,247
9/30/95 16,320 17,124 17,744
12/31/95 17,249 18,099 18,475
3/31/96 16,886 17,718 18,251
6/30/96 17,058 17,899 18,392
9/30/96 17,463 18,323 18,815
12/31/96 17,924 18,807 19,295
3/31/97 17,802 18,670 19,250
6/30/97 18,406 19,313 19,914
9/30/97 19,013 19,950 20,516
12/31/97 19501 20462 21072
3/31/98 19675 20645 21314
6/30/98 19997 20982 21638
9/30/98 20661 21679 22302
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
Investment Results per Share
TOTAL RETURNS
For Periods Ended September 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-----------------------------------------------------------------------
CLASS D
SINCE
SIX ONE FIVE 10 INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Class A**
With Sales Charge 0.03% 3.49% 4.80% 7.53% n/a
Without Sales Charge 5.01 8.67 5.82 8.04 n/a
Class D**
With 1% CDSC 3.54 6.71 n/a n/a n/a
Without CDSC 4.54 7.71 n/a n/a 4.77%
Lehman Index*** 4.64 8.71 6.40 8.35 6.29++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
For Periods Ended September 30, 1998
9/30/98 3/31/98 9/30/97 DIVIDENDS++ CAPITAL GAIN++ SEC YIELD+++
------- -------- ------- ----------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A $7.21 $7.03 $6.99 Class A $0.334 $0.033 3.74%
Class D 7.19 7.01 6.97 Class D 0.270 0.033 3.06
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C>
Revenue Bonds 86% Aaa/AAA 71%
General Obligation Bonds 14 Aa/AA 16
A/A 13
WEIGHTED AVERAGE MATURITY 21.6 years
</TABLE>
- ----------
See footnotes on page 7.
5
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN FLORIDA MUNICIPAL SERIES
With Sales Charge Without Sales Charge Lehman Index
9/30/88 9,531 10,000 10,000
12/31/88 9,926 10,414 10,185
3/31/89 9,987 10,478 10,252
6/30/89 10,735 11,263 10,859
9/30/89 10,606 11,128 10,867
12/31/89 11,053 11,597 11,284
3/31/90 11,029 11,571 11,335
6/30/90 11,317 11,874 11,600
9/30/90 11,161 11,710 11,607
12/31/90 11,766 12,345 12,107
3/31/91 11,990 12,579 12,381
6/30/91 12,236 12,838 12,645
9/30/91 12,657 13,279 13,136
12/31/91 13,015 13,655 13,578
3/31/92 13,047 13,689 13,619
6/30/92 13,562 14,229 14,136
9/30/92 13,827 14,507 14,511
12/31/92 14,196 14,895 14,775
3/31/93 14,725 15,449 15,323
6/30/93 15,363 16,118 15,824
9/30/93 15,930 16,713 16,359
12/31/93 16,116 16,908 16,588
3/31/94 15,151 15,896 15,677
6/30/94 15,269 16,020 15,851
9/30/94 15,295 16,047 15,959
12/31/94 15,226 15,975 15,729
3/31/95 16,292 17,093 16,841
6/30/95 16,550 17,363 17,247
9/30/95 16,957 17,791 17,744
12/31/95 17,765 18,639 18,475
3/31/96 17,364 18,218 18,251
6/30/96 17,493 18,354 18,392
9/30/96 17,898 18,778 18,815
12/31/96 18,256 19,154 19,295
3/31/97 18,011 18,897 19,250
6/30/97 18,719 19,640 19,914
9/30/97 19,331 20,282 20,516
12/31/97 19960 20941 21072
3/31/98 20153 21144 21314
6/30/98 20458 21465 21638
9/30/98 21102 22140 22302
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
Investment Results per Share
TOTAL RETURNS
For Periods Ended September 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-----------------------------------------------------------------------
CLASS D
SINCE
SIX ONE FIVE 10 INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C>
Class A**
With Sales Charge (0.22)% 3.97% 4.76% 7.75% n/a
Without Sales Charge 4.71 9.16 5.79 8.27 n/a
Class D**
With 1% CDSC 3.29 7.32 n/a n/a n/a
Without CDSC 4.29 8.32 n/a n/a 4.90%
Lehman Index*** 4.64 8.71 6.40 8.35 6.29++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
For Periods Ended September 30, 1998
9/30/98 3/31/98 9/30/97 DIVIDENDS++ CAPITAL GAIN++ SEC YIELD+++
------- -------- ------- ----------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A $8.07 $7.88 $7.80 Class A $0.351 $0.072 3.74%
Class D 8.08 7.89 7.81 Class D 0.291 0.072 3.15
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C>
Revenue Bonds 87% Aaa/AAA 65%
General Obligation Bonds 13 Aa/AA 28
A/A 5
Baa/BBB 2
WEIGHTED AVERAGE MATURITY 24.6 years
</TABLE>
- -----------
See footnotes on page 7.
6
<PAGE>
PERFORMANCE OVERVIEW AND PORTFOLIO SUMMARY
SELIGMAN NORTH CAROLINA MUNICIPAL SERIES
With Sales Charge Without Sales Charge Lehman Index
8/27/90 9,520 10,000 10,000
9/30/90 9,387 9,860 10,006
12/31/90 9784 10277 10437
3/31/91 9982 10485 10673
6/30/91 10083 10591 10900
9/30/91 10510 11040 11325
12/31/91 10824 11370 11705
3/31/92 10779 11323 11740
6/30/92 11212 11777 12186
9/30/92 11479 12058 12509
12/31/92 11706 12297 12737
3/31/93 12197 12812 13209
6/30/93 12631 13268 13641
9/30/93 13139 13801 14102
12/31/93 13226 13893 14300
3/31/94 12335 12957 13515
6/30/94 12372 12996 13665
9/30/94 12377 13001 13768
12/31/94 12254 12872 13560
3/31/95 13323 13994 14518
6/30/95 13563 14247 14868
9/30/95 13852 14551 15296
12/31/95 14651 15390 15927
3/31/96 14255 14973 15734
6/30/96 14394 15120 15855
9/30/96 14738 15481 16220
12/31/96 15049 15807 16633
3/31/97 14993 15749 16595
6/30/97 15483 16264 17168
9/30/97 15918 16720 17686
12/31/97 16365 17190 18165
3/31/98 16504 17336 18374
6/30/98 16792 17638 18653
9/30/98 17287 18158 19226
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
Investment Results per Share
TOTAL RETURNS
For Periods Ended September 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
-----------------------------------------------------------------------
CLASS 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 (0.19)% 3.46% 4.62% 6.99% n/a
Without Sales Charge 4.74 8.60 5.64 7.64 n/a
Class D**
With 1% CDSC 3.34 6.77 n/a n/a n/a
Without CDSC 4.34 7.77 n/a n/a 4.83%
Lehman Index*** 4.64 8.71 6.40 8.42+ 6.29++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
For Periods Ended September 30, 1998
9/30/98 3/31/98 9/30/97 DIVIDENDS++ CAPITAL GAIN++ SEC YIELD+++
--------- -------- ------- ------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A $8.30 $8.10 $8.05 Class A $0.358 $0.064 3.54%
Class D 8.30 8.10 8.05 Class D 0.295 0.064 2.97
<CAPTION>
HOLDINGS BY MARKET SECTOR0 MOODY'S/S&P RATINGS0
<S> <C> <C> <C>
Revenue Bonds 77% Aaa/AAA 45%
General Obligation Bonds 23 Aa/AA 38
A/A 17
WEIGHTED AVERAGE MATURITY 20.0 years
</TABLE>
- -----------
* Returns for periods of less than one year are not annualized.
** Return figures reflect any change in price and assume all distributions
within the period are invested in additional shares. Returns for Class A
shares are calculated with and without the effect of the initial 4.75%
maximum sales charge. Returns for Class D shares are calculated with and
without the effect of the 1% contingent deferred sales charge ("CDSC"),
charged on redemptions made within one year of the date 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.
0 Percentages based on market values of long-term holdings at September 30,
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 year ended September
30, 1998.
+++ Current yield, representing the annualized yield for the 30-day period
ended September 30, 1998, has been computed in accordance with SEC
regulations and will vary.
7
<PAGE>
Portfolio of Investments
September 30, 1998
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 $ 2,689,075
1,000,000 California Department of Veterans' Affairs Rev. (Home Purchase),
5 1/2% due 12/1/2018*.................................................. Aa3/A+ 1,036,250
2,190,000 California Department of Water Resources Water System Rev.
Central Valley Project), 6% due 12/1/2020.............................. Aa2/AA 2,334,606
500,000 California Educational Facilities Authority Rev. (Los Angeles College
of Chiropractic Medicine), 5.60% due 11/1/2017........................ Baa2/NR 525,270
2,500,000 California Educational Facilities Authority Rev. (Loyola Marymount
University), 5 3/4% due 10/1/2024...................................... A1/NR 2,667,225
2,500,000 California Health Facilities Financing Authority Rev. (Cedars-Sinai
Medical Center), 5 1/4% due 8/1/2027................................... Aaa/AAA 2,560,025
2,500,000 California Health Facilities Financing Authority Rev. (Kaiser Permanente),
5.40% due 5/1/2028.................................................... A3/A 2,580,350
1,500,000 California Housing Finance Agency Home Mortgage Rev.,
6 3/8% due 8/1/2027*................................................... Aa2/AA- 1,617,465
2,500,000 California Housing Finance Agency (Single Family Mortgage),
5.40% due 8/1/2028*.................................................... Aaa/AAA 2,537,950
2,500,000 California Pollution Control Financing Authority Rev. (San Diego
Gas & Electric Co.), 5.85% due 6/1/2021*............................... A1/A+ 2,603,250
1,750,000 California Pollution Control Financing Authority Rev. (Pacific Gas &
Electric Co.), 5 7/8% due 6/1/2023*.................................... A1/AA- 1,851,045
1,000,000 California Pollution Control Financing Authority Rev. (Pacific Gas &
Electric Co.), 5.85% due 12/1/2023*.................................... A1/AA- 1,056,770
2,000,000 California State GOs, 5 1/4% due 10/1/2019................................. A1/A+ 2,049,000
2,500,000 Cupertino, CA Certificates of Participation (Capital Improvement Projects),
5 3/4% due 1/1/2016.................................................... A1/A+ 2,632,300
3,000,000 Foothill/Eastern Transportation Corridor Agency, CA Toll Road Rev.,
6% due 1/1/2034........................................................ Baa/BBB- 3,238,500
1,300,000 Los Angeles, CA Wastewater System Rev., 7.10% due 6/1/2018................. A1/A+ 1,353,794
1,000,000 Oxnard Union High School District, CA Certificates of Participation
(Union High School), 7.70% due 11/1/2019............................... NR/NR 1,066,160
675,000 Petaluma, CA Community Development Commission Tax Allocation Bonds
(Central Business District), 9.30% due 5/15/2010....................... Baa1/NR 678,213
2,030,000 Pleasanton, CA Joint Powers Financing Authority Reassessment Rev.,
6.15% due 9/2/2012..................................................... Baa1/NR 2,198,632
4,000,000 Puerto Rico Highway & Transportation Authority Rev., 5 1/2% due 7/1/2036... Baa1/A 4,361,840
</TABLE>
8
<PAGE>
Portfolio of Investments
September 30, 1998
CALIFORNIA HIGH-YIELD SERIES (continued)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------------------------
<S> <C> <C> <C>
$3,000,000 San Bernardino, CAJoint Powers Financing Authority (California Dept. of
Transportation Lease), 5 1/2% due 12/1/2020............................. A/A $3,129,210
2,500,000 San Joaquin Hills, CA Transportation Corridor Agency Rev. (Orange County
Toll Road), 5 1/2% due 1/15/2028........................................ Baa3/BBB- 2,591,250
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/AAA 3,423,450
2,500,000 Santa Barbara, CA Certificates of Participation, 5.70% due 3/1/2011......... A1/A+ 2,700,000
1,000,000 Santa Clara, CA Improvement Bonds Project No. 186 (Santa Clara
Convention Center Complex), 7.10% due 9/2/2011.......................... NR/NR 1,036,590
1,000,000 Southern California Public Power Authority Power Project Rev.
(Multiple Projects), 6% due 7/1/2018................................... A/A 1,025,950
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+ 767,851
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+ 1,244,699
2,500,000 Washington Township, CA Hospital District Hospital Healthcare System Rev.,
5 1/2% due 7/1/2018..................................................... A2/NR 2,570,675
2,230,000 West Covina, CA Certificates of Participation (Queen of the Valley Hospital),
6 1/2% due 8/15/2024.................................................... A2/NR 2,592,843
-----------
TOTAL MUNICIPAL BONDS (Cost $57,975,717)-- 96.8%.......................................... 62,720,238
VARIABLE RATE DEMAND NOTES (Cost $1,300,000)-- 2.0%....................................... 1,300,000
OTHER ASSETS LESS LIABILITIES-- 1.2%...................................................... 746,997
-----------
NET ASSETS-- 100.0%....................................................................... $64,767,235
===========
</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........................... Aaa/AA $3,479,790
2,000,000 California Educational Facilities Authority Rev. (Stanford University),
6 3/4% due 1/1/2013..................................................... Aaa/AAA 2,056,420
1,650,000 California Educational Facilities Authority Rev. (University of Southern
California Project), 5.80% due 10/1/2015................................ Aa3/AA 1,770,780
3,440,000 California Educational Facilities Authority Rev. (Pomona College),
6% due 2/15/2017........................................................ Aaa/AA+ 3,712,930
</TABLE>
9
<PAGE>
Portfolios Of Investments
September 30, 1998
California Quality Series (continued)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/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 $4,685,175
2,000,000 California Educational Facilities Authority Rev. (Stanford University),
5.35% due 6/1/2027..................................................... Aaa/AAA 2,081,020
1,550,000 California Educational Facilities Authority Rev. (University of Southern
California Project), 5 1/8% due 10/1/2028.............................. Aa3/AA 1,566,244
3,000,000 California Health Facilities Financing Authority Rev. (Kaiser Permanente),
6 1/2% due 12/1/2020................................................... A3/A 3,205,770
2,000,000 California Health Facilities Financing Authority Rev. (Stanford Health Care),
5% due 11/15/2028...................................................... Aaa/AAA 2,001,680
5,000 California Housing Finance Agency (Housing Revenue Insured Bonds),
8 3/4% due 8/1/2010.................................................... Aaa/AAA 5,193
425,000 California Housing Finance Agency (Housing Revenue Insured Bonds),
8 5/8% due 8/1/2015.................................................... Aaa/AAA 447,461
2,775,000 California Housing Finance Agency Home Mortgage Rev.,
6 3/4% due 2/1/2025*................................................... Aa2/AA- 2,982,015
4,000,000 California Pollution Control Financing Authority Rev. (Mobil Oil Corporation
Project), 5 1/2% due 12/1/2029*........................................ Aa2/AA 4,164,080
910,000 California Public Capital Improvements Financing Authority
(Pooled Projects), 8.10% due 3/1/2018................................. Aaa/AAA 931,640
3,000,000 California Public Works Board Lease Rev. (Correctional Facilities
Improvements), 5 3/4% due 9/1/2021..................................... A/A 3,192,810
3,000,000 California State GOs, 5% due 10/1/2023..................................... A1/A+ 3,010,080
2,500,000 California Statewide Communities Development Authority Certificates of
Participation (Citrus Valley Health Partners, Inc.), 5 1/8% due 4/1/2023 Aaa/AAA 2,538,025
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 3,009,810
4,500,000 Contra Costa, CA Water District Rev., 5% due 10/1/2024..................... Aaa/AAA 4,523,580
3,500,000 East Bay, CA Municipal Utility District Water System Rev., 5% due 6/1/2026 Aaa/AAA 3,521,105
2,500,000 Eastern Municipal Water District Riverside County, CA Water and Sewer Rev.,
6 3/4% due 7/1/2012.................................................... Aaa/AAA 3,127,750
3,000,000 Fresno, CA Sewer System Rev., 5 1/4% due 9/1/2019.......................... Aaa/AAA 3,222,270
2,000,000 Marin, CA Municipal Water District Water Rev., 5.65% due 7/1/2023.......... A1/AA 2,103,960
1,000,000 Metropolitan Water District of Southern California Waterworks GOs,
5 3/4% due 3/1/2014.................................................... Aaa/AAA 1,020,710
2,000,000 Metropolitan Water District of Southern California Waterworks GOs,
4 3/4% due 3/1/2037.................................................... Aaa/AAA 1,948,240
</TABLE>
10
<PAGE>
Portfolios Of Investments
September 30, 1998
California Quality Series (continued)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------------------------
<S> <C> <C> <C>
$3,500,000 Northern California Power Agency Public Power Rev. (Combustion
Turbine Project A-1), 6% due 8/15/2010................................. Aaa/AAA $3,575,425
4,500,000 Orange County, CA Local Transportation Authority (Measure M Sales
Tax Rev.), 6% due 2/15/2009............................................ Aaa/AAA 5,208,165
2,500,000 Rancho, CA Water District Financing Authority Rev., 5.90% due 11/1/2015.... Aaa/AAA 2,782,250
4,000,000 Regents of the University of California Rev. (Multiple Purpose Projects),
5 3/8% due 9/1/2024.................................................... Aaa/AAA 4,203,240
4,250,000 San Francisco Bay Area Rapid Transit District, CA (Sales Tax Rev.),
5% due 7/1/2028........................................................ Aaa/AAA 4,279,750
3,000,000 San Francisco, CA City and County Airports Commission Rev.
(International Airport), 6.60% due 5/1/2024*........................... Aaa/AAA 3,375,420
-----------
TOTAL MUNICIPAL BONDS (Cost $81,151,221)-- 97.7%......................................... 87,732,788
VARIABLE RATE DEMAND NOTES (Cost $1,000,000)-- 1.1%...................................... 1,000,000
OTHER ASSETS LESS LIABILITIES-- 1.2%..................................................... 1,091,154
-----------
NET ASSETS--100.0%....................................................................... $89,823,942
===========
</TABLE>
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 $ 1,003,510
1,000,000 Cape Canaveral, FL Hospital District Rev., 5 1/4% due 1/1/2028.............. NR/BBB 998,430
2,000,000 Collier County, FL Water & Sewer Rev., 5 1/4% due 7/1/2021.................. Aaa/AAA 2,044,280
1,000,000 Dade County, FL Aviation Rev., 6 1/8% due 10/1/2020*........................ Aaa/AAA 1,101,630
2,000,000 Dade County, FL Public Improvement GOs, 5 3/4% due 10/1/2016................ Aaa/AAA 2,184,680
2,000,000 Dade County, FL Water & Sewer System Rev., 5 3/4% due 10/1/2022............. Aaa/AAA 2,182,080
945,000 Florida Housing Finance Agency Rev. (General Mortgage),
6.35% due 6/1/2014...................................................... NR/AAA 1,012,180
705,000 Florida Housing Finance Agency Rev. (Single Family Mortgage),
6.55% due 7/1/2014*..................................................... Aaa/AAA 760,300
1,925,000 Florida Housing Finance Agency Rev. (Homeowner Mortgage),
6.20% due 7/1/2027*..................................................... Aa3/AA 2,053,128
2,500,000 Florida Ports Financing Commission Rev. (State Transportation Trust Fund),
5 3/4% due 6/1/2027*.................................................... Aaa/AAA 2,584,975
2,000,000 Florida State Department of Transportation GOs (Right of Way),
5.80% due 7/1/2021...................................................... Aa2/AA+ 2,165,820
2,500,000 Florida State Turnpike Authority Rev., 5 5/8% due 7/1/2025.................. Aaa/AAA 2,661,975
2,000,000 Greater Orlando Aviation Authority, FL Airport Facilities Rev.,
5 3/4% due 10/1/2023*................................................... Aaa/AAA 2,041,920
</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, 1998
Florida Series (continued)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------------------------
<S> <C> <C> <C>
$2,500,000 Hillsborough County, FL Aviation Authority Rev. (Tampa International
Airport), 5 3/8% due 10/1/2023*........................................... Aaa/AAA $ 2,556,300
1,500,000 Jacksonville Electric Authority, FL Rev. (St. John's River Power Park System),
5 3/8% due 10/1/2016...................................................... Aa2/AA 1,578,885
2,000,000 Jacksonville Electric Authority, FL Rev. (Water & Sewer System),
5 5/8% due 10/1/2037...................................................... Aa3/AA- 2,093,820
2,000,000 Jacksonville, FL Sewage & Solid Waste Disposal Facilities Rev.
(Anheuser-Busch Project), 5 7/8% due 2/1/2036*............................ A1/A+ 2,161,040
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+ 2,041,440
1,000,000 Kissimmee Utility Authority, FL Electric System Improvement Rev.,
5 1/4% due 10/1/2018...................................................... Aaa/AAA 1,022,910
1,000,000 Lee County, FL Transportation Facilities Rev., 6% due 10/1/2015............... Aaa/AAA 1,110,280
1,000,000 Osceola County, FL Transportation Rev. (Osceola Parkway Project),
6.10% due 4/1/2017........................................................ Aaa/AAA 1,085,070
1,200,000 Palm Beach County, FL Criminal Justice Facilities Rev., 7 1/4% due 6/1/2011... Aaa/AAA 1,293,840
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 2,173,220
2,000,000 Reedy Creek Improvement District, FL Utilities Rev., 5 1/8% due 10/1/2019..... Aaa/AAA 2,027,340
1,250,000 Volusia County, FL Educational Facilities Authority Rev. (Embry-Riddle
Aeronautical University Project), 6 5/8% due 10/15/2022................... NR/AAA 1,382,213
-----------
TOTAL MUNICIPAL BONDS (Cost $40,110,884)-- 97.6%............................................ 43,321,266
VARIABLE RATE DEMAND NOTES (Cost $200,000)-- 0.5%........................................... 200,000
OTHER ASSETS LESS LIABILITIES-- 1.9%........................................................ 882,398
-----------
NET ASSETS-- 100.0%......................................................................... $44,403,664
-----------
</TABLE>
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 1/2er System Rev.,
5 5/8% due 7/15/2015..................................................... Aaa/AAA $1,329,563
1,250,000 Asheville, NC Water System Rev., 5.70% due 8/1/2025.......................... Aaa/AAA 1,364,987
2,000,000 Charlotte-Mecklenberg Hospital Authority, NC Health Care System Rev.,
5 3/4% due 1/15/2021..................................................... Aa3/AA 2,164,480
1,000,000 Charlotte, NC Certificates of Participation (Charlotte-Mecklenburg Law
Enforcement 1/2er Project), 5 3/8% due 6/1/2013.......................... Aa1/AA 1,048,690
2,000,000 Charlotte, NC Water & Sewer GOs, 5.90% due 2/1/2017.......................... Aaa/AAA 2,228,580
1,000,000 Concord, NC Utilities System Rev., 5% due 12/1/2022.......................... Aaa/AAA 1,003,550
</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, 1998
North Carolina Series (continued)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------------------------
<S> <C> <C> <C>
$1,500,000 Fayetteville, NC Public Works Commission Rev., 5 1/8% due 3/1/2024.......... Aaa/AAA $ 1,518,675
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 2,665,600
500,000 North Carolina Educational Facilities Financing Authority Rev. (Duke
University Project), 6 3/4% due 10/1/2021............................... Aa1/AA+ 547,270
600,000 North Carolina Housing Finance Agency Rev. (Multi-Family),
5.80% due 7/1/2014...................................................... Aa2/AA 625,452
1,455,000 North Carolina Housing Finance Agency Rev. (Single Family),
6 1/2% due 3/1/2018..................................................... Aa2/AA 1,568,883
250,000 North Carolina Housing Finance Agency Rev. (Multi-Family),
5.90% due 7/1/2026...................................................... Aa2/AA 260,163
1,000,000 North Carolina Medical Care Commission Hospital Rev. (Memorial
Mission Hospital Project), 6% due 10/1/2022............................. Aaa/AAA 1,086,100
2,000,000 North Carolina Medical Care Commission Hospital Rev. (Presbyterian
Health Services Corp. Project), 6% due 10/1/2024........................ Aa3/AA 2,199,120
1,500,000 North Carolina Medical Care Commission Hospital Rev. (First Health
of the Carolinas Project), 5% due 10/1/2028............................. Aa3/AA- 1,486,185
1,500,000 North Carolina Medical Care Commission Hospital Rev. (Gaston Health
Care), 5% due 2/15/2029................................................. A1/A+ 1,467,795
1,500,000 North Carolina Municipal Power Agency No. 1 Catawba Electric Rev.,
5 3/4% due 1/1/2015..................................................... Aaa/AAA 1,566,420
3,000,000 North Carolina Municipal Power Agency No. 1 Catawba Electric Rev.,
5% due 1/1/2020......................................................... Aaa/AAA 3,062,250
1,000,000 Orange, NC Water & Sewer Authority Rev., 5.20% due 7/1/2016................. Aa2/AA 1,025,080
1,500,000 University of North Carolina Charlotte Rev. (Student Activity Center),
5 1/2% due 6/1/2021..................................................... Aaa/AAA 1,590,015
500,000 University of North Carolina Hospitals at Chapel Hill Rev.,
6 3/8% due 2/15/2017.................................................... Aa3/AA 547,365
1,000,000 University of North Carolina Hospitals at Chapel Hill Rev.,
5 1/4% due 2/15/2026.................................................... Aa3/AA 1,021,470
1,550,000 Wake County Industrial Facilities & Pollution Control Financing Authority,
NC (Carolina Power & Light), 6.90% due 4/1/2009......................... A2/A 1,641,558
-----------
TOTAL MUNICIPAL BONDS (Cost $30,569,108)-- 97.6%.......................................... 33,019,251
VARIABLE RATE DEMAND NOTES (Cost $200,000)-- 0.6%......................................... 200,000
OTHER ASSETS LESS LIABILITIES-- 1.8%...................................................... 594,889
-----------
NET ASSETS--100.0%........................................................................ $33,814,140
===========
</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.
13
<PAGE>
Statements of Assets and Liabilities
September 30, 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....................... $ 62,720,238 $87,732,788 $43,321,266 $33,019,251
Short-term holdings...................... 1,300,000 1,000,000 200,000 200,000
-------------- ------------- --------------- --------------
64,020,238 88,732,788 43,521,266 33,219,251
Cash........................................ 78,933 147,638 108,980 124,263
Interest receivable......................... 948,192 1,385,934 880,740 527,791
Receivable for Shares of Beneficial
Interest sold........................... 14,911 8,000 -- 57,677
Expenses prepaid to shareholder
service agent........................... 7,859 10,610 5,502 4,716
Receivable for securities sold............. -- -- 56,164 --
Other...................................... 854 1,195 600 455
-------------- ------------- --------------- --------------
Total Assets............................... 65,070,987 90,286,165 44,573,252 33,934,153
-------------- ------------- --------------- --------------
LIABILITIES:
Dividends payable.......................... 106,692 145,863 67,338 50,927
Payable for Shares of Beneficial Interest
repurchased............................. 95,451 201,668 20,751 3,929
Accrued expenses, taxes, and other......... 101,609 114,692 81,499 65,157
-------------- ------------- --------------- --------------
Total Liabilities.......................... 303,752 462,223 169,588 120,013
-------------- ------------- --------------- --------------
Net Assets................................. $64,767,235 $89,823,942 $44,403,664 $33,814,140
============== ============= =============== ==============
COMPOSITION OF NET ASSETS:
Shares of Beneficial Interest, at par:
Class A................................. $8,590 $12,142 $5,265 $3,898
Class D................................. 940 320 240 176
Additional paid-in capital................. 59,851,434 80,749,934 40,905,706 30,894,019
Undistributed net realized gain............ 161,750 2,479,979 282,071 465,904
Net unrealized appreciation
of investments.......................... 4,744,521 6,581,567 3,210,382 2,450,143
--------------- --------------- --------------- --------------
Net Assets................................. $64,767,235 $89,823,942 $44,403,664 $33,814,140
============== ============== =============== ==============
NET ASSETS:
Class A................................. $58,373,945 $87,522,215 $42,464,187 $32,357,996
Class D................................. $6,393,290 $2,301,727 $1,939,477 $1,456,144
SHARES OF BENEFICIAL INTEREST OUTSTANDING
(Unlimited shares
authorized;
$.001 par value):
Class A................................. 8,590,229 12,142,358 5,264,850 3,898,437
Class D................................. 939,805 320,032 239,980 175,528
NET ASSET VALUE PER SHARE:
Class A.................................... $6.80 $7.21 $8.07 $8.30
Class D.................................... $6.80 $7.19 $8.08 $8.30
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
Statements of Operations
For the Year Ended September 30, 1998
<TABLE>
<CAPTION>
CALIFORNIA CALIFORNIA NORTH
HIGH-YIELD QUALITY FLORIDA CAROLINA
SERIES SERIES SERIES SERIES
------------- ------------- ------------- -------------
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Interest ..................................... $3,410,721 $4,889,687 $2,413,006 $1,840,082
------------- ------------- ------------- -------------
EXPENSES:
Management fees............................... 303,287 442,776 220,971 168,365
Distribution and service fees................. 101,325 98,913 117,664 88,259
Shareholder account services.................. 73,376 99,589 55,717 45,469
Auditing and legal fees....................... 23,133 23,133 26,192 26,546
Shareholder reports and communications........ 12,357 14,417 10,062 11,568
Custody and related services.................. 11,580 7,074 10,386 7,084
Registration.................................. 8,335 6,038 9,700 10,550
Trustees' fees and expenses................... 3,695 4,267 4,591 4,711
Miscellaneous................................. 4,400 5,356 3,074 2,718
------------ ------------- ------------- -------------
Total Expenses................................ 541,488 701,563 458,357 365,270
------------ ------------- ------------- -------------
Net Investment Income......................... 2,869,233 4,188,124 1,954,649 1,474,812
------------ ------------- ------------- -------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on investments.............. 315,617 2,703,169 283,504 471,836
Net change in unrealized appreciation
of investments.............................. 1,697,381 429,796 1,624,389 828,922
------------ ------------- ------------- -------------
Net Gain on Investments ...................... 2,012,998 3,132,965 1,907,893 1,300,758
------------ ------------- ------------- -------------
Increase in Net Assets from Operations........ $4,882,231 $7,321,089 $3,862,542 $2,775,570
============ ============= ============= =============
</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,
------------------------------------------------------------------------------
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income................. $ 2,869,233 $ 2,784,733 $ 4,188,124 $ 4,596,455
Net realized gain on investments...... 315,617 211,592 2,703,169 427,389
Net change in unrealized appreciation
of investments..................... 1,697,381 1,476,067 429,796 2,834,368
------------- -------------- -------------- --------------
Increase in Net Assets from Operations 4,882,231 4,472,392 7,321,089 7,858,212
------------- -------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A............................ (2,672,172) (2,682,769) (4,112,546) (4,533,073)
Class D............................ (197,061) (101,964) (75,578) (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................. (3,141,379) (3,534,203) (4,608,473) (4,624,866)
-------------- -------------- -------------- --------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sale of shares:
Class A............................ 8,495,720 7,351,517 2,910,248 1,481,687
Class D............................ 3,342,099 1,513,626 510,845 575,550
Shares issued in payment of dividends:
Class A............................ 1,407,211 1,412,142 2,074,707 2,257,452
Class D............................ 148,218 70,066 39,918 33,256
Exchanged from associated Funds:
Class A............................ 2,763,236 1,772,009 9,378,739 19,333,888
Class D............................ 549,807 502,224 2,156,556 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................................. 16,894,870 13,126,949 17,326,084 29,011,608
------------- -------------- -------------- --------------
Cost of shares repurchased:
Class A............................ (8,007,292) (7,355,541) (9,140,974) (13,851,584)
Class D............................ (528,543) (640,001) (568,085) (280,678)
Exchanged into associated Funds:
Class A............................ (937,063) (1,923,514) (7,593,529) (20,972,562)
Class D............................ (598,369) (126,577) (1,581,236) (5,676,629)
-------------- -------------- -------------- --------------
Total................................. (10,071,267) (10,045,633) (18,883,824) (40,781,453)
-------------- -------------- -------------- --------------
Increase (Decrease) in Net Assets
from Transactions in Shares
of Beneficial Interest............. 6,823,603 3,081,316 (1,557,740) (11,769,845)
------------ -------------- -------------- --------------
Increase (Decrease) in Net Assets..... 8,564,455 4,019,505 1,154,876 (8,536,499)
NET ASSETS:
Beginning of year..................... 56,202,780 52,183,275 88,669,066 97,205,565
------------- -------------- -------------- --------------
End of Year........................... $64,767,235 $56,202,780 $89,823,942 $88,669,066
============= ============== ============== ==============
</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,
--------------------------------------- --------------------------------------
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income....................... $ 1,954,649 $ 2,131,967 $ 1,474,812 $ 1,638,605
Net realized gain on investments............ 283,504 402,363 471,836 264,968
Net change in unrealized appreciation
of investments............................ 1,624,389 899,645 828,922 797,213
------------- -------------- -------------- --------------
Increase in Net Assets from Operations...... 3,862,542 3,433,975 2,775,570 2,700,786
------------- -------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A.................................. (1,887,251) (2,069,071) (1,428,764) (1,591,157)
Class D.................................. (67,398) (62,896) (46,048) (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....................... (2,356,069) (2,764,281) (1,743,348) (1,788,884)
------------- -------------- -------------- --------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sale of shares:
Class A.................................. 1,820,657 2,176,497 1,639,241 1,480,472
Class D.................................. 549,732 211,049 321,482 124,216
Shares issued in payment of dividends:
Class A.................................. 735,335 808,742 749,183 832,006
Class D.................................. 43,291 43,942 32,807 35,063
Exchanged from associated Funds:
Class A.................................. 1,868,336 1,901,127 551,292 622,587
Class D.................................. 247,755 437,446 100,077 --
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....................................... 5,501,938 5,939,072 3,595,112 3,205,595
------------- -------------- -------------- --------------
Cost of shares repurchased:
Class A.................................. (3,801,719) (7,587,878) (3,903,375) (6,362,439)
Class D.................................. (441,648) (295,456) (260,357) (208,812)
Exchanged into associated Funds:
Class A.................................. (1,850,538) (1,470,687) (545,626) (808,253)
Class D.................................. (213,070) (29,736) (4,500) (3,500)
------------- -------------- -------------- --------------
Total....................................... (6,306,975) (9,383,757) (4,713,858) (7,383,004)
------------- -------------- -------------- --------------
Decrease in Net Assets
from Transactions in Shares
of Beneficial Interest.................... (805,037) (3,444,685) (1,118,746) (4,177,409)
------------- -------------- -------------- --------------
Increase (Decrease) in Net Assets........... 701,436 (2,774,991) (86,524) (3,265,507)
NET ASSETS:
Beginning of year........................... 43,702,228 46,477,219 33,900,664 37,166,171
------------- -------------- -------------- --------------
End of Year................................. $44,403,664 $43,702,228 $33,814,140 $33,900,664
============= ============== ============== ==============
</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. 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
con tin gent deferred sales charge ("CDSC") of 1% on redemp tions within 18
months of purchase. Class D shares are sold without an initial sales charge but
are subject to a distribution fee of up to 0.75% and a service fee of up to
0.25% on an annual basis, and a CDSC of 1% imposed on redemptions made within
one year of purchase. The two classes of shares for each Series represent
interests in the same portfolio of investments, have the same rights and are
generally identical in all respects except that each class bears its separate
distribution and certain other class expenses, and has exclusive voting rights
with respect to any matter on which a separate vote of any class is required.
2. Significant Accounting Policies -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the 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, 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 year ended September 30,
1998, were as follows:
SERIES PURCHASES SALES
- ---------- ------------ -----------
California High-Yield $13,851,880 $ 6,254,740
California Quality 26,703,196 29,319,797
Florida 2,913,810 4,572,460
North Carolina 6,793,035 8,043,512
At September 30, 1998, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes, and the
tax basis gross unrealized appreciation of portfolio securities was as follows:
TOTAL
UNREALIZED
SERIES APPRECIATION
- ---------- ------------
California High-Yield $4,744,521
California Quality 6,581,567
Florida 3,210,382
North Carolina 2,450,143
4. Management Fee, Distribution 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.
18
<PAGE>
Notes to Financial Statements
Seligman Advisors, Inc. (the "Distributor") (formerly Seligman Financial
Services, Inc.), agent for the distribution of each Series' shares and an
affiliate of the Manager, received the following concessions after commissions
were paid to dealers for sales of Class A shares:
DISTRIBUTOR DEALER
SERIES CONCESSIONS COMMISSIONS
--------- ------------ ------------
California High-Yield $17,349 $120,571
California Quality 11,984 87,663
Florida 8,741 60,667
North Carolina 6,114 43,938
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,
1998, for the California High-Yield, California Quality, Florida, and North
Carolina Series, fees incurred under the Plan aggregated $50,741, $79,348,
$99,371, and $75,601, respectively, or 0.09%, 0.09%, 0.23%, 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 year ended September 30, 1998, fees incurred under the Plan
amounted to $50,584, $19,565, $18,293, and $12,658, 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 CDSC 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, 1998, such charges amounted to $6,508 for the California
High-Yield Series, $939 for the California Quality Series, $277 for the Florida
Series, and $79 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 year ended September 30, 1998,
Seligman Services, Inc. received commissions from the sale of shares of each
Series, and distribution and service fees, pursuant to the Plan, as follows:
DISTRIBUTION AND
SERIES COMMISSIONS SERVICE FEES
---------- ------------ ------------
California High-Yield $1,887 $1,597
California Quality 1,346 2,602
Florida 2,125 4,566
North Carolina 975 2,401
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 $73,376
California Quality 99,589
Florida 55,717
North Carolina 45,469
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 September 30, 1998, are included in other liabilities as follows:
SERIES
- ----------
California High-Yield $24,628
California Quality 24,708
Florida 12,468
North Carolina 9,216
5. Committed Line of Credit -- Effective July 1, 1998, the Trust entered into a
joint $800 million committed line of credit that is shared by substantially all
funds in the Seligman Group of Investment Companies. Each Series' borrowings are
limited to 10% of its net assets. Borrowings pursuant to the credit facility are
subject to interest at a rate equal to the overnight federal funds rate plus
0.50% on an overnight basis. Each Series incurs a commitment fee of 0.08% per
annum on its share of the unused portion of the credit facility. The credit
facility may be drawn upon only for temporary purposes and is subject to certain
other customary restrictions. The credit facility commitment expires one year
from the date of the agreement but is renewable with the consent of the
participating banks. To date, the Trust has not borrowed from the credit
facility.
19
<PAGE>
Notes to Financial Statements
6. Transactions in Shares of Beneficial Interest -- Transactions in Shares of
Beneficial Interest were as follows:
<TABLE>
<CAPTION>
CALIFORNIA HIGH-YIELD CALIFORNIA QUALITY
SERIES SERIES
-------------------------------- --------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
-------------------------------- --------------------------------
1998 1997 1998 1997
------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
Sales of shares:
Class A..................................... 1,277,052 1,136,556 412,540 217,315
Class D..................................... 499,452 232,749 72,661 83,522
Shares issued in payment of dividends:
Class A..................................... 211,143 217,868 294,684 329,886
Class D..................................... 22,196 10,791 5,681 4,867
Exchanged from associated Funds:
Class A..................................... 413,298 272,963 1,335,307 2,835,364
Class D..................................... 82,354 77,936 307,189 781,157
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.......................................... 2,534,151 2,027,087 2,464,711 4,254,600
---------- ----------- ----------- ----------
Shares repurchased:
Class A..................................... (1,201,761) (1,136,607) (1,299,234) (2,029,814)
Class D..................................... (79,088) (98,590) (80,796) (41,403)
Exchanged into associated Funds:
Class A..................................... (140,692) (296,127) (1,081,747) (3,068,740)
Class D..................................... (89,085) (19,383) (225,899) (832,015)
---------- ----------- ----------- ----------
Total.......................................... (1,510,626) (1,550,707) (2,687,676) (5,971,972)
---------- ----------- ----------- ----------
Increase (decrease) in shares.................. 1,023,525 476,380 (222,965) (1,717,372)
========== =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
NORTH CAROLINA
FLORIDA SERIES SERIES
-------------------------------- --------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
-------------------------------- --------------------------------
1998 1997 1998 1997
------------- ------------ -------------- -------------
<S> <C> <C> <C> <C>
Sales of shares:
Class A....................................... 231,028 284,403 202,159 187,120
Class D....................................... 69,634 27,585 39,497 15,728
Shares issued in payment of dividends:
Class A....................................... 93,274 105,889 92,259 105,249
Class D....................................... 5,481 5,743 4,042 4,436
Exchanged from associated Funds:
Class A....................................... 237,657 250,599 67,414 78,277
Class D....................................... 31,343 56,686 12,161 --
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............................................ 698,972 777,997 442,631 404,911
---------- ----------- ----------- -----------
Shares repurchased:
Class A....................................... (482,133) (995,384) (480,689) (805,592)
Class D....................................... (55,774) (39,429) (31,930) (26,320)
Exchanged into associated Funds:
Class A....................................... (234,463) (193,665) (67,042) (102,260)
Class D....................................... (27,097) (3,903) (560) (445)
---------- ----------- ----------- -----------
Total............................................ (799,467) (1,232,381) (580,221) (934,617)
---------- ----------- ----------- -----------
Decrease in shares............................... (100,495) (454,384) (137,590) (529,706)
========== =========== =========== ===========
</TABLE>
20
<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 per for
mance of each Class, on a per share basis, from the be gin ning 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 pur chased 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
-------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Year................ $6.61 $6.50 $6.47 $6.30 $6.73
------- ------- ------- ------- -------
Net investment income............................. 0.32 0.34 0.36 0.37 0.37
Net realized and unrealized investment gain (loss) 0.22 0.20 0.05 0.17 (0.34)
------- ------- ------- ------- -------
Increase from Investment Operations............... 0.54 0.54 0.41 0.54 0.03
Dividends paid or declared........................ (0.32) (0.34) (0.36) (0.37) (0.37)
Distributions from net gain realized.............. (0.03) (0.09) (0.02) -- (0.09)
------- ------- ------- ------- -------
Net Increase (Decrease) in Net Asset Value........ 0.19 0.11 0.03 0.17 (0.43)
------- ------- ------- ------- -------
Net Asset Value, End of Year...................... $6.80 $6.61 $6.50 $6.47 $6.30
======= ======= ======= ======= =======
TOTAL RETURN BASED ON NET ASSET VALUE: 8.45% 8.74% 6.49% 8.85% 0.41%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets.................... 0.82% 0.87% 0.84% 0.90% 0.85%
Net investment income to average net assets....... 4.81% 5.26% 5.49% 5.84% 5.74%
Portfolio turnover................................ 10.75% 22.42% 34.75% 17.64% 8.36%
Net Assets, End of Year (000s omitted)............ $58,374 $52,883 $50,264 $51,504 $48,007
</TABLE>
<TABLE>
<CAPTION>
CLASS D
--------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94*
---------------------------------------------------- TO
1998 1997 1996 1995 9/30/94
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period................ $6.61 $6.51 $6.48 $6.31 $6.67
------ ------- ------- ------- --------
Net investment income............................... 0.26 0.28 0.30 0.31 0.21
Net realized and unrealized investment gain (loss).. 0.22 0.19 0.05 0.17 (0.36)
------- ------- ------- ------- --------
Increase (Decrease) from Investment Operations...... 0.48 0.47 0.35 0.48 (0.15)
Dividends paid or declared.......................... (0.26) (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.......... 0.19 0.10 0.03 0.17 (0.36)
------- ------- ------- ------- --------
Net Asset Value, End of Period...................... $6.80 $6.61 $6.51 $6.48 $6.31
======= ======= ======= ======= ========
TOTAL RETURN BASED ON NET ASSET VALUE: 7.47% 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......... 3.90% 4.36% 4.59% 4.84% 4.73%+
Portfolio turnover.................................. 10.75% 22.42% 34.75% 17.64% 8.36%++
Net Assets, End of Period (000s omitted)............ $6,393 $3,320 $1,919 $1,277 $650
</TABLE>
- ------------------------
See footnotes on page 24.
21
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
CALIFORNIA QUALITY SERIES CLASS A
-------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Year............... $6.99 $6.75 $6.65 $6.39 $7.28
------- ------- ------- ------- -------
Net investment income............................ 0.33 0.34 0.35 0.34 0.35
Net realized and unrealized investment gain (loss) 0.25 0.24 0.11 0.32 (0.73)
------- ------- ------- ------- -------
Increase (Decrease) from Investment Operations... 0.58 0.58 0.46 0.66 (0.38)
Dividends paid or declared....................... (0.33) (0.34) (0.35) (0.34) (0.35)
Distributions from net gain realized............. (0.03) -- (0.01) (0.06) (0.16)
------- ------- ------- ------- -------
Net Increase (Decrease) in Net Asset Value....... 0.22 0.24 0.10 0.26 (0.89)
------- ------- ------- ------- -------
Net Asset Value, End of Year..................... $7.21 $6.99 $6.75 $6.65 $6.39
======= ======= ======= ======= =======
TOTAL RETURN BASED ON NET ASSET VALUE: 8.67% 8.87% 7.00% 10.85% (5.46)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets................... 0.77% 0.82% 0.79% 0.89% 0.81%
Net investment income to average net assets...... 4.75% 4.99% 5.11% 5.34% 5.20%
Portfolio turnover............................... 30.82% 12.16% 12.84% 11.24% 22.16%
Net Assets, End of Year (000s omitted)........... $87,522 $86,992 $95,560 $94,947 $99,020
</TABLE>
<TABLE>
<CAPTION>
CLASS D
---------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94*
------------------------------------------------------ TO
1998 1997 1996 1995 9/30/94
-------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period.............. $6.97 $6.74 $6.63 $6.38 $7.13
------- ------- ------- ------- --------
Net investment income............................. 0.27 0.28 0.28 0.28 0.19
Net realized and unrealized investment gain (loss) 0.25 0.23 0.12 0.31 (0.75)
------- ------- ------- ------- --------
Increase (Decrease) from Investment Operations.... 0.52 0.51 0.40 0.59 (0.56)
Dividends paid or declared........................ (0.27) (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........ 0.22 0.23 0.11 0.25 (0.75)
------- ------- ------- ------- --------
Net Asset Value, End of Period.................... $7.19 $6.97 $6.74 $6.63 $6.38
======= ======= ======= ======= ========
TOTAL RETURN BASED ON NET ASSET VALUE: 7.71% 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....... 3.84% 4.09% 4.21% 4.36% 4.39%+
Portfolio turnover................................ 30.82% 12.16% 12.84% 11.24% 22.16%++
Net Assets, End of Period (000s omitted).......... $2,302 $1,677 $1,645 $863 $812
</TABLE>
- -------------------
See footnotes on page 24.
22
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
FLORIDA SERIES CLASS A
-------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------------
1998 1997 1996 1995 1994
-------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Year................. $7.80 $7.67 $7.71 $7.34 $8.20
------- ------- ------- ------- -------
Net investment income.............................. 0.35 0.36 0.38 0.40 0.42
Net realized and unrealized investment gain (loss). 0.34 0.23 0.04 0.37 (0.74)
------- ------- ------- ------- -------
Increase (Decrease) from Investment Operations..... 0.69 0.59 0.42 0.77 (0.32)
Dividends paid or declared......................... (0.35) (0.36) (0.38) (0.40) (0.42)
Distributions from net gain realized............... (0.07) (0.10) (0.08) -- (0.12)
------- ------- ------- ------- -------
Net Increase (Decrease) in Net Asset Value......... 0.27 0.13 (0.04) 0.37 (0.86)
------- ------- ------- ------- -------
Net Asset Value, End of Year....................... $8.07 $7.80 $7.67 $7.71 $7.34
======= ======= ======= ======= =======
TOTAL RETURN BASED ON NET ASSET VALUE: 9.16% 8.01% 5.54% 10.87% (3.99)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets..................... 1.00% 1.04% 0.97% 0.72% 0.42%
Net investment income to average net assets........ 4.45% 4.70% 4.90% 5.38% 5.49%
Portfolio turnover................................. 6.73% 33.68% 18.53% 11.82% 6.17%
Net Assets, End of Year (000s omitted)............. $42,464 $42,024 $45,200 $49,030 $49,897
Without expense reimbursement and/or
management fee waiver:**
Net investment income per share................. $0.38 $0.37 $0.38
Ratios:
Expenses to average net assets.................. 0.97% 1.03% 1.00%
Net investment income to average net assets..... 4.90% 5.07% 4.91%
</TABLE>
<TABLE>
<CAPTION>
CLASS D
------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94*
-------------------------------------------------- TO
1998 1997 1996 1995 9/30/94
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period.............. $7.81 $7.68 $7.72 $7.34 $8.10
------- ------- ------- ------- --------
Net investment income............................. 0.29 0.30 0.32 0.34 0.24
Net realized and unrealized investment gain (loss) 0.34 0.23 0.04 0.38 (0.76)
------- ------- ------- ------- --------
Increase (Decrease) from Investment Operations.... 0.63 0.53 0.36 0.72 (0.52)
Dividends paid or declared........................ (0.29) (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........ 0.27 0.13 (0.04) 0.38 (0.76)
------- ------- ------- ------- --------
Net Asset Value, End of Period.................... $8.08 $7.81 $7.68 $7.72 $7.34
======= ======= ======= ======= ========
TOTAL RETURN BASED ON NET ASSET VALUE: 8.32% 7.18% 4.74% 10.07% (6.64)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets.................... 1.77% 1.81% 1.73% 1.66% 1.29%+
Net investment income to average net assets....... 3.68% 3.93% 4.14% 4.53% 4.61%+
Portfolio turnover................................ 6.73% 33.68% 18.53% 11.82% 6.17%++
Net Assets, End of Period (000s omitted).......... $1,940 $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%+
</TABLE>
- ---------------------
See footnotes on page 24.
23
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
NORTH CAROLINA SERIES CLASS A
--------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Year.................. $8.05 $7.84 $7.74 $7.30 $8.22
------- ------- ------- ------- -------
Net investment income............................... 0.36 0.37 0.37 0.39 0.41
Net realized and unrealized investment gain (loss).. 0.31 0.24 0.11 0.45 (0.87)
------- ------- ------- ------- -------
Increase (Decrease) from Investment Operations...... 0.67 0.61 0.48 0.84 (0.46)
Dividends paid or declared.......................... (0.36) (0.37) (0.37) (0.39) (0.41)
Distributions from net gain realized................ (0.06) (0.03) (0.01) (0.01) (0.05)
------- ------- ------- ------- -------
Net Increase (Decrease) in Net Asset Value.......... 0.25 0.21 0.10 0.44 (0.92)
------- ------- ------- ------- -------
Net Asset Value, End of Year........................ $8.30 $8.05 $7.84 $7.74 $7.30
======= ======= ======= ======= =======
TOTAL RETURN BASED ON NET ASSET VALUE: 8.60% 8.01% 6.39% 11.92% (5.80)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets...................... 1.05% 1.09% 1.05% 0.82% 0.44%
Net investment income to average net assets......... 4.41% 4.66% 4.75% 5.21% 5.29%
Portfolio turnover.................................. 20.37% 13.04% 15.12% 4.38% 15.61%
Net Assets, End of Year (000s omitted).............. $32,358 $32,684 $35,934 $37,446 $38,920
Without expense reimbursement and/or
management fee waiver:**
Net investment income per share.................. $0.37 $0.36 $0.35
Ratios:
Expenses to average net assets................... 1.06% 1.18% 1.13%
Net investment income to average net assets...... 4.74% 4.85% 4.60%
</TABLE>
<TABLE>
<CAPTION>
CLASS D
-------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94*
---------------------------------------------------- TO
1998 1997 1996 1995 9/30/94
-------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period............. $8.05 $7.83 $7.74 $7.29 $8.17
------- ------- ------- ------- --------
Net investment income............................ 0.30 0.31 0.31 0.33 0.23
Net realized and unrealized investment gain (loss) 0.31 0.25 0.10 0.46 (0.88)
------- ------- ------- ------- --------
Increase (Decrease) from Investment Operations.... 0.61 0.56 0.41 0.79 (0.65)
Dividends paid or declared........................ (0.30) (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........ 0.25 0.22 0.09 0.45 (0.88)
------- ------- ------- ------- --------
Net Asset Value, End of Period.................... $8.30 $8.05 $7.83 $7.74 $7.29
======= ======= ======= ======= ========
TOTAL RETURN BASED ON NET ASSET VALUE: 7.77% 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....... 3.64% 3.90% 3.99% 4.42% 4.49%+
Portfolio turnover................................ 20.37% 13.04% 15.12% 4.38% 15.61%++
Net Assets, End of Period (000s omitted).......... $1,456 $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%+
</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>
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, 1998, the related statements of operations for the year then ended
and of changes in net assets for each of the years in the two-year period then
ended, and the financial highlights for each of the periods presented. These
financial statements and financial highlights are the responsibility of the
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, 1998 by correspondence with the Trust's custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the California
High-Yield, California Quality, Florida, and North Carolina Series of Seligman
Municipal Series Trust as of September 30, 1998, the results of their
operations, the changes in their net assets, and the financial highlights for
the respective stated periods, in conformity with generally accepted accounting
principles.
/s/Deloitte & Touche LLP
- ------------------------
DELOITTE & TOUCHE LLP
New York, New York
October 30, 1998
25
<PAGE>
Trustees
John R. Galvin 2, 4
Dean, Fletcher School of Law and Diplomacy
at Tufts University
Director, Raytheon Company
Alice S. Ilchman 3, 4
Trustee, Committee for Economic Development
Chairman, The Rockefeller Foundation
Frank A. McPherson 2, 4
Director, Kimberly-Clark Corporation
Director, Baptist Medical Center
John E. Merow 2, 4
Retired Chairman and Senior Partner,
Sullivan & Cromwell, Law Firm
Director, Commonwealth Industries, Inc
Director, New York Presbyterian Hospital
Betsy S. Michel 2, 4
Trustee, The Geraldine R. Dodge Foundation
Chairman of the Board of Trustees, St. George's School
William C. Morris 1
Chairman
Chairman of the Board, J. & W. Seligman & Co.
Incorporated
Chairman, Carbo Ceramics Inc.
Director, Kerr-McGee Corporation
James C. Pitney 3, 4
Retired Partner, Pitney, Hardin, Kipp & Szuch, Law Firm
James Q. Riordan 3, 4
Director, KeySpan Energy Corporation
Trustee, Committee for Economic Development
Director, Public Broadcasting Service
Richard R. Schmaltz 1
Managing Director, Director of Investments,
J. & W. Seligman & Co. In cor po rat ed
Trustee Emeritus, Colby College
Robert L. Shafer 3, 4
Retired Vice President, Pfizer, Inc.
James N. Whitson 2, 4
Director and Consultant, Sammons Enterprises, Inc.
Director, CommScope, Inc.
Director, C-SPAN
Brian T. Zino 1
President
President, J. & W. Seligman & Co. Incorporated
Chairman, Seligman Data Corp.
Director, ICIMutual Insurance Company
Trustee Emeritus
Fred E. Brown
Director and Consultant, J. & W. Seligman & Co.
Incorporated
- ----------------
Member: 1 Executive Committee
2 Audit Committee
3 Trustee Nominating Committee
4 Board Operations 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 Advisors, Inc.
100 Park Avenue
New York, NY 10017
Shareholder Service Agent
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
Important Telephone Numbers
(800) 221-2450 Shareholder
Services
(212) 682-7600 Outside the
United States
(800) 622-4597 24-Hour
Au to mat ed
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 taxed at different rates, primarily depending upon the
length of time the securities were owned by the fund.
Capital Appreciation/Depreciation -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.
Compounding -- The change in the value of an investment as shareholders receive
earnings on their investment's earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will not be based on the
original $1,000, but on the $1,070, which includes the first year's earnings.
Contingent Deferred Sales Charge (CDSC) -- Depending on the class of shares
owned, a fee charged by a mutual fund when shares are sold back to the fund (the
CDSC expires after a fixed time period).
Dividend -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
Dividend Yield -- A measurement of a fund's dividend as a percentage of the
maximum offering price.
Expense Ratio -- The cost of doing business for a mutual fund, expressed as a
percent of the fund's net assets.
Investment Objective -- The shared investment goal of a fund and its
shareholders.
Management Fee -- The amount paid by a mutual fund to its investment advisor(s).
Multiple Classes of Shares -- Although an individual mutual fund invests in only
one portfolio of securities, it may offer investors several purchase options
which are "classes" of shares. Multiple classes permit shareholders to choose
the fee structure that best meets their needs and goals. Generally, each class
will differ in terms of how and when sales charges and certain fees are
assessed.
National Association of Securities Dealers, Inc. (NASD) -- A self-regulatory
body with authority over firms that distribute mutual funds.
Net Asset Value (NAV) Per Share -- The market worth of one fund share, obtained
by adding a mutual fund's total assets (securities, cash, and any accrued
earnings), subtracting liabilities, and dividing the resulting net assets by the
number of shares outstanding.
Offering Price (OP) -- The price at which a mutual fund's share can be
purchased. The offering price per share is the current net asset value plus any
sales charge.
Portfolio Turnover -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
Prospectus -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission (SEC), such as a fund's investment objective and policies, services,
investment restrictions, officers and directors, how shares are bought and
redeemed, fund fees and other charges, and the fund's financial statements.
SEC Yield -- SEC Yield refers to the net income earned by a fund during a recent
30-day period. This income is annualized and then divided by the maximum
offering price per share on the last day of the 30-day period. The SEC Yield
formula reflects semiannual compounding.
Securities and Exchange Commission -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
Statement of Additional Information -- A document that contains updated or more
detailed information about an investment company and that supplements the
prospectus. It is available at no charge upon request.
Total Return -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The Average Annual Total
Return represents the average annual compounded rate of return for the periods
presented.
Yield on Securities -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.
- -----------------
Adapted from the Investment Company Institute's 1998 Mutual Fund Fact Book.
28
<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 ADVISORS, INC.
an affiliate of
JWS
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
TEB2 9/98
