File No. 2-92569
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. __ |_|
Post-Effective Amendment No. 26 |X|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 28 |X|
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SELIGMAN MUNICIPAL SERIES TRUST
(Exact name of registrant as specified in charter)
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100 PARK AVENUE, NEW YORK, NEW YORK 10017
(Address of principal executive offices)
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Registrant's Telephone Number: 212-850-1864 or
Toll-Free 800-221-2450
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THOMAS G. ROSE, Treasurer
100 Park Avenue
New York, New York 10017
(Name and address of agent for service)
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It is proposed that this filing will become effective (check the
appropriate box).
|X| immediately upon filing pursuant to paragraph (b) of rule 485
|_| on (date) pursuant to paragraph (b) of rule 485
|_| 60 days after filing pursuant to paragraph (a)(i) of rule 485
|_| on (date) pursuant to paragraph (a)(i) of rule 485
|_| 75 days after filing pursuant to paragraph (a)(ii) of rule 485
|_| on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2(a)(1) and a Rule 24f-2 Notice was
filed by Registrant for its fiscal year ended September 30, 1997 on December 10,
1997.
<PAGE>
<TABLE>
<CAPTION>
File No. 2-92569
CROSS REFERENCE SHEET
POST-EFFECTIVE AMENDMENT NO. 26
PURSUANT TO RULE 481 (A)
ITEM IN PART A OF FORM N-1A LOCATION IN PROSPECTUS
--------------------------- ----------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Summary of Series Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; Organization and Capitalization
5. Management of the Fund Management Services
5a. Management's Discussion of Fund Management Services
Performance
6. Capital Stock and Other Securities Organization and Capitalization
7. Purchase of Securities Being Offered Alternative Distribution System; Purchase of Shares; Administration,
Shareholder Services and Distribution Plan
8. Redemption or Repurchase Telephone Transactions; Redemption of Shares; Exchange Privilege;
Further Information About Transactions In The Funds
9. Pending Legal Proceedings Not Applicable
ITEM IN PART B OF FORM N-1A LOCATION IN STATEMENT OF ADDITIONAL INFORMATION
- --------------------------- -----------------------------------------------
10. Cover Page Cover Page
11. Table Of Contents Table Of Contents
12. General Information and History Investment Objectives, Policies and Risks; General Information;
Appendix C
13. Investment Objectives and Policies Investment Objectives, Policies And Risks; Investment Limitations
14. Management of the Fund Trustees and Officers; Management And Expenses
15. Control Persons and Principal Trustees and Officers
Holders of Securities
16. Investment Advisory and Other Services Management And Expenses; Distribution Services
17. Brokerage Allocations Administration, Shareholder Services and Distribution Plan;
Portfolio Transactions
18. Capital Stock and Other Securities General Information
19. Purchase, Redemption and Pricing of Purchase and Redemption of Fund Shares; Valuation
Securities Being Offered
20. Tax Status Taxes; Special Considerations Regarding Investments in California
Municipal Securities; Fisk Factors Regarding Investments in Florida
Municipal Securities; Fisk Factors Regarding Investments in North
Carolina Municipal Securities
21. Underwriters Distribution Services
</TABLE>
<PAGE>
File No. 2-92569
CROSS REFERENCE SHEET (continued)
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
<PAGE>
SELIGMAN MUNICIPAL FUND
SERIES, INC.
SELIGMAN MUNICIPAL
SERIES TRUST
SELIGMAN NEW JERSEY
MUNICIPAL FUND, INC.
SELIGMAN PENNSYLVANIA
MUNICIPAL FUND SERIES
================================================================================
100 Park Avenue
New York, New York 10017
Table of Contents
Page
Summary of Series Expenses ................................... 3
Financial Highlights ......................................... 10
Alternative Distribution System .............................. 20
Investment Objectives and Policies ........................... 21
Management Services .......................................... 29
Purchase of Shares ........................................... 30
Telephone Transactions ....................................... 35
Redemption of Shares ......................................... 36
Administration, Shareholder Services
and Distribution Plans ................................... 39
Exchange Privilege ........................................... 40
Further Information about
Transactions in the Funds ................................ 42
Dividends and Gain Distributions ............................. 42
Taxes ........................................................ 43
Shareholder Information ...................................... 53
Advertising a Series' Performance ............................ 54
Organization and Capitalization .............................. 55
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund.
MUNI-1 2/98
================================================================================
PROSPECTUS
================================================================================
SELIGMAN MUNICIPAL FUND
SERIES, INC.
SELIGMAN MUNICIPAL
SERIES TRUST
SELIGMAN NEW JERSEY
MUNICIPAL FUND, INC.
SELIGMAN PENNSYLVANIA
MUNICIPAL FUND SERIES
================================================================================
February 1, 1998
Seeking Income
Free From Regular Income Tax
<PAGE>
SELIGMAN MUNICIPAL FUND SERIES, INC.
National Municipal Series, Colorado Municipal Series, Georgia Municipal Series,
Louisiana Municipal Series, Maryland Municipal Series, Massachusetts
Municipal Series, Michigan Municipal Series, Minnesota Municipal Series,
Missouri Municipal Series, New York Municipal Series, Ohio Municipal Series,
Oregon Municipal Series and South Carolina Municipal Series
SELIGMAN MUNICIPAL SERIES TRUST
California Municipal High-Yield Series, California Municipal Quality Series,
Florida Municipal Series and North Carolina Municipal Series
SELIGMAN NEW JERSEY MUNICIPAL FUND, INC.
SELIGMAN PENNSYLVANIA MUNICIPAL FUND SERIES
100 Park Avenue o New York, New York 10017
New York Telephone: (212) 850-1864
Toll-Free Telephone: (800) 221-2450--all continental United States
February 1, 1998
This prospectus offers shares of nineteen different series (the "Series")
which include National Municipal Series (the "National Series") and twelve
individual state Series of Seligman Municipal Fund Series, Inc. (the "Municipal
Fund"), four individual state Series of Seligman Municipal Series Trust (the
"Municipal Trust"), Seligman New Jersey Municipal Fund, Inc. (the "New Jersey
Fund"), and Seligman Pennsylvania Municipal Fund Series (the "Pennsylvania Fund"
and collectively with the Municipal Fund, the Municipal Trust and the New Jersey
Fund, the "Funds"). Each of the Funds is a non-diversified, open-end management
investment company.
The Municipal Fund offers the following state Series: Colorado Municipal
Series, Georgia Municipal Series, Louisiana Municipal Series, Maryland Municipal
Series, Massachusetts Municipal Series, Michigan Municipal Series, Minnesota
Municipal Series, Missouri Municipal Series, New York Municipal Series, Ohio
Municipal Series, Oregon Municipal Series and South Carolina Municipal Series
(collectively, the "Municipal Fund State Series"). The Municipal Trust offers
the following state Series: California Municipal Quality Series, California
Municipal High-Yield Series, Florida Municipal Series and North Carolina
Municipal Series (collectively, the "Municipal Trust State Series", and together
with the Municipal Fund State Series, the New Jersey Fund and the Pennsylvania
Fund, the "Series").
This Prospectus sets forth concisely the information a prospective
investor should know about the Funds and each individual Series before
investing. Please read it carefully before you invest and keep it for future
reference. Additional information about the Funds, including Statements of
Additional Information, has been filed with the Securities and Exchange
Commission. Statements of Additional Information are available upon request and
without charge by calling or writing the Funds at the telephone numbers or the
address set forth above. Each Statement of Additional Information is dated the
same date as this Prospectus and is incorporated herein by reference in its
entirety. (continued on following page)
SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
The Municipal Fund's National Municipal Series seeks to provide to its
shareholders maximum income exempt from regular federal income taxes to the
extent consistent with preservation of capital and with consideration given to
opportunities for capital gain by investing in investment grade securities the
interest on which is exempt from regular federal income taxes. The investment
objective of each of the individual Municipal Fund State Series is to maximize
income exempt from regular federal income taxes and from personal income taxes
in that state, consistent with the preservation of capital and with
consideration given to opportunities for capital gain by investing in investment
grade municipal securities of the designated state, its political subdivisions,
municipalities and public authorities.
The Municipal Trust State Series, except for the California Municipal
High-Yield Series, each seek high income exempt from regular federal income
taxes and from personal income taxes in their respective state (other than
Florida which does not impose an individual income tax) consistent with
preservation of capital and with consideration given to capital gain, by
investing in municipal securities rated in the four highest rating categories,
except that the California Municipal Quality Series pursues its investment
objective by investing only in municipal securities rated in the three highest
rating categories of Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Corporation ("S&P").
The California Municipal High-Yield Series seeks the maximum amount of
income exempt from regular federal income taxes and California personal income
taxes consistent with preservation of capital and with consideration given to
capital gain by investing primarily in California municipal securities that are
rated in the medium and lower rating categories of Moody's or S&P or which are
unrated. The Series may invest up to 100% of its portfolio in lower rated bonds,
commonly known as "junk bonds." Such securities generally offer a higher current
yield than those in the higher rating categories but also involve greater price
volatility and risk of loss of principal and income. The California Municipal
High-Yield Series invests primarily in high-yield, high risk securities and
therefore may not be suitable for all investors. Investors should carefully
assess the risks associated with an investment in this Series. See "Investment
Objectives and Policies--Seligman California Municipal High-Yield Series," in
this Prospectus.
The New Jersey Fund seeks to maximize income exempt from regular federal
income tax and New Jersey personal income tax consistent with preservation of
capital and with consideration given to opportunities for capital gain by
investing in "investment grade" New Jersey municipal securities. Investment
grade securities are rated within the four highest rating categories of
"Moody's" or "S&P." Throughout this Prospectus, the New Jersey gross income tax
is referred to as the New Jersey personal income tax.
The Pennsylvania Fund seeks to provide a high level of income exempt from
regular federal and Pennsylvania income taxes consistent with preservation of
capital by investing primarily in investment grade Pennsylvania municipal
securities. Capital appreciation is not a consideration in the selection of
investments. The Fund may also invest in Pennsylvania municipal securities that
are unrated but are believed by the Manager (as defined below) to be of
comparable quality to investment grade securities.
There can be no assurance that a Series will achieve its objective.
Investment advisory and management services are provided to the Funds by
J. & W. Seligman & Co. Incorporated (the "Manager") and each Fund's distributor
is Seligman Financial Services, Inc., an affiliate of the Manager. Each Series
offers two classes of shares. Class A shares are sold subject to an initial
sales load of up to 4.75% and an annual service fee currently charged at a rate
of up to .25% of the average daily net asset value of the Class A shares. Class
A shares purchased in an amount of $1,000,000 or more are sold without an
initial sales load but are subject to a contingent deferred sales load ("CDSL")
of 1% on redemptions within eighteen months of purchase. Class D shares are sold
without an initial sales load but are subject to a CDSL of 1% imposed on certain
redemptions within one year of purchase, an annual distribution fee of up to
.75% and an annual service fee of up to .25% of the average daily net asset
value of the Class D shares. Any CDSL payable upon redemption of shares will be
assessed on the lesser of the current net asset value or the original purchase
price of the shares redeemed. No CDSL will be imposed on shares acquired through
the reinvestment of dividends or distributions received from any class of
shares. See "Alternative Distribution System." Shares of the Series may be
purchased through any authorized investment dealer.
2
<PAGE>
SUMMARY OF SERIES EXPENSES
The purpose of this table is to assist investors in understanding the
various costs and expenses which shareholders of a Series bear directly or
indirectly. The sales load on Class A shares is a one-time charge paid at the
time of purchase of shares. Reductions in initial sales loads are available in
certain circumstances. Class A shares are not subject to an initial sales load
for purchases of $1,000,000 or more; however, such shares are subject to a CDSL,
a one-time charge, only if the shares are redeemed within eighteen months of
purchase. The CDSL on Class D shares is a one-time charge paid only if shares
are redeemed within one year of purchase. For more information concerning
reduction in sales loads and for more complete descriptions of the various costs
and expenses see "Purchase of Shares," "Redemption of Shares" and "Management
Services" herein. Each Fund's Administration, Shareholder Services and
Distribution Plan, to which the caption "12b-1 Fees" relates is discussed under
"Administration, Shareholder Services and Distribution Plans" herein.
<TABLE>
<CAPTION>
NAT'L SERIES CO SERIES GA SERIES
------------------------ ---------------------- ----------------------
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------ ------- ------- ------ ------
(INITIAL (DEFERRED (INITIAL (DEFERRED (INITIAL (DEFERRED
SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD
ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE)
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases (as percentage of
offering price)....................... 4.75% None 4.75% None 4.75% None
Sales Load on Reinvested Dividends.... None None None None None None
Deferred Sales Load (as percentage
of original price or redemption
proceeds, whichever is lower)...... None; 1% during None; 1% during None; 1% during
except 1% in the first except 1% the first except 1% the first
first 18 months year; None in first 18 year; None in first 18 year; None
if initial sales thereafter months if thereafter months if thereafter
load was waived initial sales initial sales
in full due to size load was load was waived
of purchase waived in full in full
due to size due to size
of purchase of purchase
Redemption Fees....................... None None None None None None
Exchange Fees......................... None None None None None None
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
ANNUAL SERIES OPERATING EXPENSES
FOR FISCAL 1997 (as percentage of
average net assets)
Management Fees.................... .50% .50% .50% .50% .50% .50%
12b-1 Fees......................... .09 1.00* .09 1.00* .10 1.00*
Other Expenses..................... .25 .25 .31 .31 .29 .29
---- ---- ---- ---- ---- -----
Total Series Operating Expenses.... .84% 1.75% .90% 1.81% .89% 1.79%
==== ===== ==== ==== ==== =====
THE FOLLOWING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN AND THE 5% USED IN THIS EXAMPLE IS A HYPOTHETICAL RATE.
NAT'L SERIES CO SERIES GA SERIES
---------------------- ------------------ --------------------
EXAMPLE CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
- ------- ------- ------- ------- ------- -------- -------
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end
of each time period:
1 yr.............................. $ 56 $ 28+ $ 56 $ 28+ $ 56 $ 28+
3 yrs............................. 73 55 75 57 75 56
5 yrs............................. 92 95 95 98 94 97
10 yrs............................. 146 206 153 213 152 211
</TABLE>
* Includes an annual distribution fee of .75 of 1% and an annual service fee
of .25 of 1%. Pursuant to the rules of the National Association of
Securities Dealers, Inc., the aggregate deferred sales loads and annual
distribution fees on Class D shares of each Series may not exceed 6.25% of
total gross sales, subject to certain exclusions. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a
long-term Class D shareholder of a Series may pay more in total sales loads
(including distribution fees) than the economic equivalent of 6.25% of such
shareholder's investment in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: NAT'L--$18; CO--$18; GA--$18.
3
<PAGE>
SUMMARY OF SERIES EXPENSES--(CONTINUED)
<TABLE>
<CAPTION>
LA SERIES MD SERIES MA SERIES
------------------------ ---------------------- ----------------------
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------ ------- ------ ------- ------
(INITIAL (DEFERRED (INITIAL (DEFERRED (INITIAL (DEFERRED
SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD
ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE)
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases (as percentage of
offering price)....................... 4.75% None 4.75% None 4.75% None
Sales Load on Reinvested Dividends.... None None None None None None
Deferred Sales Load (as percentage
of original price or redemption
proceeds, whichever is lower)...... None; 1% during None; 1% during None; 1% during
except 1% in the first except 1% the first except 1% the first
first 18 months year; None in first 18 year; None in first 18 year; None
if initial sales thereafter months if thereafter months if thereafter
load was waived initial sales initial sales
in full due to size load was load was waived
of purchase waived in full in full
due to size due to size
of purchase of purchase
Redemption Fees....................... None None None None None None
Exchange Fees......................... None None None None None None
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
ANNUAL SERIES OPERATING EXPENSES
FOR FISCAL 1997 (as percentage of
average net assets)
Management Fees.................... .50% .50% .50% .50% .50% .50%
12b-1 Fees......................... .10 1.00* .09 1.00* .10 1.00*
Other Expenses..................... .26 .26 .31 .31 .24 .24
---- ---- ---- ---- ---- -----
Total Series Operating Expenses.... .86% 1.76% .90% 1.81% .84% 1.74%
==== ===== ==== ==== ==== =====
THE FOLLOWING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN AND THE 5% USED IN THIS EXAMPLE IS A HYPOTHETICAL RATE.
LA SERIES MD SERIES MA SERIES
---------------------- ------------------ --------------------
EXAMPLE CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
- ------- ------- ------- -------- ------- -------- -------
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end
of each time period:
1 yr.............................. $ 56 $ 28+ $ 56 $ 28+ $ 56 $ 28+
3 yrs............................. 74 55 75 57 73 55
5 yrs............................. 93 95 95 98 92 94
10 yrs............................. 149 207 153 213 146 205
</TABLE>
* Includes an annual distribution fee of .75 of 1% and an annual service fee
of .25 of 1%. Pursuant to the rules of the National Association of
Securities Dealers, Inc., the aggregate deferred sales loads and annual
distribution fees on Class D shares of each Series may not exceed 6.25% of
total gross sales, subject to certain exclusions. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a
long-term Class D shareholder of a Series may pay more in total sales loads
(including distribution fees) than the economic equivalent of 6.25% of such
shareholder's investment in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: LA--$18; MO--$18; MA--$18.
4
<PAGE>
SUMMARY OF SERIES EXPENSES--(CONTINUED)
<TABLE>
<CAPTION>
MI SERIES MN SERIES MO SERIES
------------------------ ---------------------- ----------------------
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------ ------- ------
(INITIAL (DEFERRED (INITIAL (DEFERRED (INITIAL (DEFERRED
SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD
ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE)
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases (as percentage of
offering price)....................... 4.75% None 4.75% None 4.75% None
Sales Load on Reinvested Dividends.... None None None None None None
Deferred Sales Load (as percentage
of original price or redemption
proceeds, whichever is lower)...... None; 1% during None; 1% during None; 1% during
except 1% in the first except 1% the first except 1% the first
first 18 months year; None in first 18 year; None in first 18 year; None
if initial sales thereafter months if thereafter months if thereafter
load was waived initial sales initial sales
in full due to size load was load was waived
of purchase waived in full in full
due to size due to size
of purchase of purchase
Redemption Fees....................... None None None None None None
Exchange Fees......................... None None None None None None
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
ANNUAL SERIES OPERATING EXPENSES
FOR FISCAL 1997 (as percentage of
average net assets)
Management Fees.................... .50% .50% .50% .50% .50% .50%
12b-1 Fees......................... .10 1.00* .10 1.00* .09 1.00*
Other Expenses..................... .21 .21 .25 .25 .30 .30
---- ---- ---- ---- ---- -----
Total Series Operating Expenses.... .81% 1.71% .85% 1.75% .89% 1.80%
==== ===== ==== ==== ==== =====
THE FOLLOWING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN AND THE 5% USED IN THIS EXAMPLE IS A HYPOTHETICAL RATE.
NAT'L SERIES CO SERIES GA SERIES
---------------------- ------------------ --------------------
EXAMPLE CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
- ------- ------- ------- ------- ------- -------- -------
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end
of each time period:
1 yr.............................. $ 55 $ 27+ $ 56 $ 28+ $ 56 $ 28+
3 yrs............................. 72 54 73 55 75 57
5 yrs............................. 90 93 92 95 94 97
10 yrs............................. 143 202 147 206 152 212
</TABLE>
* Includes an annual distribution fee of .75 of 1% and an annual service fee
of .25 of 1%. Pursuant to the rules of the National Association of
Securities Dealers, Inc., the aggregate deferred sales loads and annual
distribution fees on Class D shares of each Series may not exceed 6.25% of
total gross sales, subject to certain exclusions. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a
long-term Class D shareholder of a Series may pay more in total sales loads
(including distribution fees) than the economic equivalent of 6.25% of such
shareholder's investment in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: MI--$17; MN--$18; MO--$18.
5
<PAGE>
SUMMARY OF SERIES EXPENSES--(CONTINUED)
<TABLE>
<CAPTION>
NY SERIES OH SERIES OR SERIES
------------------------ ---------------------- ----------------------
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
(INITIAL (DEFERRED (INITIAL (DEFERRED (INITIAL (DEFERRED
SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD
ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE)
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases (as percentage of
offering price)....................... 4.75% None 4.75% None 4.75% None
Sales Load on Reinvested Dividends.... None None None None None None
Deferred Sales Load (as percentage
of original price or redemption
proceeds, whichever is lower)...... None; 1% during None; 1% during None; 1% during
except 1% in the first except 1% the first except 1% the first
first 18 months year; None in first 18 year; None in first 18 year; None
if initial sales thereafter months if thereafter months if thereafter
load was waived initial sales initial sales
in full due to size load was load was waived
of purchase waived in full in full
due to size due to size
of purchase of purchase
Redemption Fees....................... None None None None None None
Exchange Fees......................... None None None None None None
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
ANNUAL SERIES OPERATING EXPENSES
FOR FISCAL 1997 (as percentage of
average net assets)
Management Fees.................... .50% .50% .50% .50% .50% .50%
12b-1 Fees......................... .09 1.00* .10 1.00* .10 1.00*
Other Expenses..................... .23 .23 .21 .21 .30 .30
---- ---- ---- ---- ---- -----
Total Series Operating Expenses.... .82% 1.73% .81% 1.71% .90% 1.80%
==== ===== ==== ==== ==== =====
THE FOLLOWING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN AND THE 5% USED IN THIS EXAMPLE IS A HYPOTHETICAL RATE.
NAT'L SERIES CO SERIES GA SERIES
---------------------- ------------------ --------------------
EXAMPLE CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
- ------- ------- ------- ------- ------- -------- -------
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end
of each time period:
1 yr.............................. $ 55 $ 28+ $ 55 $ 27+ $ 56 $ 28+
3 yrs............................. 72 54 72 54 75 57
5 yrs............................. 91 94 90 93 95 97
10 yrs............................. 144 204 143 202 153 212
</TABLE>
* Includes an annual distribution fee of .75 of 1% and an annual service fee
of .25 of 1%. Pursuant to the rules of the National Association of
Securities Dealers, Inc., the aggregate deferred sales loads and annual
distribution fees on Class D shares of each Series may not exceed 6.25% of
total gross sales, subject to certain exclusions. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a
long-term Class D shareholder of a Series may pay more in total sales loads
(including distribution fees) than the economic equivalent of 6.25% of such
shareholder's investment in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: NY--$18; OH--$17; OR--$18.
6
<PAGE>
SUMMARY OF SERIES EXPENSES--(CONTINUED)
<TABLE>
<CAPTION>
SC SERIES CA HIGH-YIELD SERIES CA QUALITY SERIES
------------------------ ---------------------- ----------------------
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
(INITIAL (DEFERRED (INITIAL (DEFERRED (INITIAL (DEFERRED
SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD
ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE)
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases (as percentage of
offering price)....................... 4.75% None 4.75% None 4.75% None
Sales Load on Reinvested Dividends.... None None None None None None
Deferred Sales Load (as percentage
of original price or redemption
proceeds, whichever is lower)...... None; 1% during None; 1% during None; 1% during
except 1% in the first except 1% the first except 1% the first
first 18 months year; None in first 18 year; None in first 18 year; None
if initial sales thereafter months if thereafter months if thereafter
load was waived initial sales initial sales
in full due to size load was load was waived
of purchase waived in full in full
due to size due to size
of purchase of purchase
Redemption Fees....................... None None None None None None
Exchange Fees......................... None None None None None None
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
ANNUAL SERIES OPERATING EXPENSES
FOR FISCAL 1997 (as percentage of
average net assets)
Management Fees.................... .50% .50% .50% .50% .50% .50%
12b-1 Fees......................... .09 1.00* .10 1.00* .10 1.00*
Other Expenses..................... .25 .25 .27 .27 .22 .22
---- ---- ---- ---- ---- -----
Total Series Operating Expenses.... .84% 1.75% .87% 1.77% .82% 1.72%
==== ===== ==== ==== ==== =====
THE FOLLOWING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN AND THE 5% USED IN THIS EXAMPLE IS A HYPOTHETICAL RATE.
SC SERIES CA HIGH-YIELD SERIES CA QUALITY SERIES
---------------------- -------------------- --------------------
EXAMPLE CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
- ------- ------- ------- ------- ------- -------- -------
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end
of each time period:
1 yr.............................. $ 56 $ 28+ $ 56 $ 28+ $ 55 $ 27+
3 yrs............................. 73 55 74 56 72 54
5 yrs............................. 92 95 93 96 91 93
10 yrs............................. 146 206 150 208 144 203
</TABLE>
* Includes an annual distribution fee of .75 of 1% and an annual service fee
of .25 of 1%. Pursuant to the rules of the National Association of
Securities Dealers, Inc., the aggregate deferred sales loads and annual
distribution fees on Class D shares of each Series may not exceed 6.25% of
total gross sales, subject to certain exclusions. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a
long-term Class D shareholder of a Series may pay more in total sales loads
(including distribution fees) than the economic equivalent of 6.25% of such
shareholder's investment in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: SC--$18; CA HIGH-YEILD--$18;
CA QUALITY--$17.
7
<PAGE>
SUMMARY OF SERIES EXPENSES--(CONTINUED)
<TABLE>
<CAPTION>
FL SERIES NC SERIES NJ SERIES
------------------------ ---------------------- ----------------------
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
(INITIAL (DEFERRED (INITIAL (DEFERRED (INITIAL (DEFERRED
SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD
ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE)
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases (as percentage of
offering price)....................... 4.75% None 4.75% None 4.75% None
Sales Load on Reinvested Dividends.... None None None None None None
Deferred Sales Load (as percentage
of original price or redemption
proceeds, whichever is lower)...... None; 1% during None; 1% during None; 1% during
except 1% in the first except 1% the first except 1% the first
first 18 months year; None in first 18 year; None in first 18 year; None
if initial sales thereafter months if thereafter months if thereafter
load was waived initial sales initial sales
in full due to size load was load was waived
of purchase waived in full in full
due to size due to size
of purchase of purchase
Redemption Fees....................... None None None None None None
Exchange Fees......................... None None None None None None
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
ANNUAL SERIES OPERATING EXPENSES
FOR FISCAL 1997 (as percentage of
average net assets)
Management Fees.................... .50% .50% .50% .50% .50% .50%
12b-1 Fees......................... .23 1.00* .24 1.00* .23 1.00*
Other Expenses..................... .31 .31 .35 .35 .33 .33
---- ---- ---- ---- ---- -----
Total Series Operating Expenses.... 1.04% 1.81% 1.09% 1.85% 1.06% 1.83%
===== ===== ===== ===== ==== =====
THE FOLLOWING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN AND THE 5% USED IN THIS EXAMPLE IS A HYPOTHETICAL RATE.
FL SERIES NC SERIES NJ SERIES
---------------------- ------------------ --------------------
EXAMPLE CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
- ------- ------- ------- ------- ------- -------- -------
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end
of each time period:
1 yr.............................. $ 58 $ 28+ $ 58 $ 29+ $ 58 $ 29+
3 yrs............................. 79 57 81 58 80 58
5 yrs............................. 102 98 105 100 103 99
10 yrs............................. 169 213 174 217 171 215
</TABLE>
* Includes an annual distribution fee of .75 of 1% and an annual service fee
of .25 of 1%. Pursuant to the rules of the National Association of
Securities Dealers, Inc., the aggregate deferred sales loads and annual
distribution fees on Class D shares of each Series may not exceed 6.25% of
total gross sales, subject to certain exclusions. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a
long-term Class D shareholder of a Series may pay more in total sales loads
(including distribution fees) than the economic equivalent of 6.25% of such
shareholder's investment in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: FL--$18; NC--$19; NJ--$19.
8
<PAGE>
SUMMARY OF SERIES EXPENSES--(CONTINUED)
<TABLE>
<CAPTION>
PA FUND
---------------------------
CLASS A CLASS D
------- -------
(INITIAL (DEFERRED
SALES LOAD SALES LOAD
ALTERNATIVE) ALTERNATIVE)
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases (as percentage of
offering price)................................... 4.75% None
Sales Load on Reinvested Dividends................ None None
Deferred Sales Load (as percentage
of original price or redemption
proceeds, whichever is lower).................. None; 1% during
except 1% in the first year;
first 18 months None
if initial sales thereafter
load was waived
in full due to size
of purchase
Redemption Fees.................................... None None
Exchange Fees...................................... None None
CLASS A CLASS D
------- -------
ANNUAL SERIES OPERATING EXPENSES FOR
FISCAL 1997 (as percentage of
average net assets)
Management Fees................................. .50% .50%
12b-1 Fees...................................... .23 1.00*
Other Expenses.................................. .46 .46
---- ----
Total Series Operating Expenses................. 1.19% 1.96%
===== =====
THE FOLLOWING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN AND
THE 5% USED IN THIS EXAMPLE IS A HYPOTHETICAL RATE.
PA FUND
--------------------------
EXAMPLE CLASS A CLASS D
- ------- ------- -------
An investor would pay
the following expenses
on a $1,000 investment,
assuming (1) 5% annual
return and (2) redemption
at the end of each time period:
1 yr........................................... $ 59 $ 30+
3 yrs.......................................... 83 62
5 yrs.......................................... 110 106
10 yrs.......................................... 185 229
* Includes an annual distribution fee of .75 of 1% and an annual service fee
of .25 of 1%. Pursuant to the rules of the National Association of
Securities Dealers, Inc., the aggregate deferred sales loads and annual
distribution fees on Class D shares of each Series may not exceed 6.25% of
total gross sales, subject to certain exclusions. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a
long-term Class D shareholder of a Series may pay more in total sales loads
(including distribution fees) than the economic equivalent of 6.25% of such
shareholder's investment in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: PA--$20.
</TABLE>
9
<PAGE>
FINANCIAL HIGHLIGHTS
Each Series' financial highlights for Class A and Class D shares for the
periods presented below have been audited by Deloitte & Touche LLP, independent
auditors. This information, which is derived from the financial and accounting
records of the Funds, should be read in conjunction with the fiscal 1997
financial statements and notes contained in the fiscal 1997 Annual Report of
each Fund which may be obtained by calling or writing the Funds at the telephone
numbers or address provided on the cover page of this Prospectus.
"Per share operating performance" data is designed to allow investors to
trace the operating performance, on a per share basis, from the beginning net
asset value to the ending net asset value so that they can understand the effect
that individual items have on their investment, assuming it was held throughout
the period. Generally, the per share amounts are derived by converting the
actual dollar amounts incurred for each item, as disclosed in the financial
statements, to their equivalent per share amounts.
"Total return based on net asset value" measures a Series' performance
assuming investors purchased shares at the net asset value as of the beginning
of the period, invested dividends and capital gains paid at net asset value and
then sold their shares at net asset value per share on the last day of the
period. The total return computations do not reflect any sales charges investors
may incur in purchasing or selling shares. Total returns for periods of less
than one year are not annualized.
<TABLE>
<CAPTION>
NET
NET ASSET REALIZED INCREASE NET NET
VALUE & (DECREASE) INCREASE ASSET
AT NET UNREALIZED FROM DIVIDENDS DISTRIBUTIONS (DECREASE) VALUE AT
PER SHARE OPERATING BEGINNING INVESTMENT INVESTMENT INVESTMENT PAID OR FROM NET IN NET END OF
PERFORMANCE: OF PERIOD INCOME@ GAIN (LOSS) OPERATIONS DECLARED GAIN REALIZED ASSET VALUE PERIOD
- ------------------- --------- ---------- ----------- ---------- --------- -------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NATIONAL SERIES--CLASS A
Year ended 9/30/97........ $7.70 $0.39 $0.31 $0.70 $(0.39) -- $0.31 $8.01
Year ended 9/30/96........ 7.58 0.40 0.12 0.52 (0.40) -- 0.12 7.70
Year ended 9/30/95........ 7.18 0.40 0.40 0.80 (0.40) -- 0.40 7.58
Year ended 9/30/94........ 8.72 0.41 (1.04) (0.63) (0.41) $(0.50) (1.54) 7.18
Year ended 9/30/93........ 8.07 0.45 0.78 1.23 (0.45) (0.13) 0.65 8.72
Year ended 9/30/92........ 7.90 0.48 0.20 0.68 (0.48) (0.03) 0.17 8.07
Year ended 9/30/91........ 7.44 0.49 0.54 1.03 (0.49) (0.08) 0.46 7.90
Year ended 9/30/90........ 7.73 0.51 (0.19) 0.32 (0.51) (0.10) (0.29) 7.44
Year ended 9/30/89........ 7.64 0.53 0.11 0.64 (0.53) (0.02) 0.09 7.73
Year ended 9/30/88........ 7.41 0.54 0.55 1.09 (0.54) (0.32) 0.23 7.64
NATIONAL SERIES--CLASS D
Year ended 9/30/97........ 7.70 0.32 0.32 0.64 (0.32) -- 0.32 8.02
Year ended 9/30/96........ 7.57 0.33 0.13 0.46 (0.33) -- 0.13 7.70
Year ended 9/30/95........ 7.18 0.32 0.39 0.71 (0.32) -- 0.39 7.57
2/1/94*- 9/30/94 ......... 8.20 0.22 (1.02) (0.80) (0.22) -- (1.02) 7.18
COLORADO SERIES--CLASS A
Year ended 9/30/97........ 7.27 0.37 0.15 0.52 (0.37) -- 0.15 7.42
Year ended 9/30/96........ 7.30 0.37 (0.03) 0.34 (0.37) -- (0.03) 7.27
Year ended 9/30/95........ 7.09 0.38 0.21 0.59 (0.38) -- 0.21 7.30
Year ended 9/30/94........ 7.76 0.37 (0.59) (0.22) (0.37) (0.08) (0.67) 7.09
Year ended 9/30/93........ 7.34 0.39 0.49 0.88 (0.39) (0.07) 0.42 7.76
Year ended 9/30/92........ 7.22 0.42 0.12 0.54 (0.42) -- 0.12 7.34
Year ended 9/30/91........ 6.91 0.44 0.31 0.75 (0.44) -- 0.31 7.22
Year ended 9/30/90........ 7.06 0.46 (0.15) 0.31 (0.46) -- (0.15) 6.91
Year ended 9/30/89........ 6.87 0.46 0.19 0.65 (0.46) -- 0.19 7.06
Year ended 9/30/88........ 6.38 0.46 0.53 0.99 (0.46) (0.04) 0.49 6.87
COLORADO SERIES--CLASS D
Year ended 9/30/97........ 7.27 0.30 0.15 0.45 (0.30) -- 0.15 7.42
Year ended 9/30/96........ 7.29 0.31 (0.02) 0.29 (0.31) -- (0.02) 7.27
Year ended 9/30/95........ 7.09 0.30 0.20 0.50 (0.30) -- 0.20 7.29
2/1/94*- 9/30/94.......... 7.72 0.20 (0.63) (0.43) (0.20) -- (0.63) 7.09
GEORGIA SERIES--CLASS A
Year ended 9/30/97........ 7.87 0.38 0.28 0.66 (0.38) (0.03) 0.25 8.12
Year ended 9/30/96........ 7.81 0.39 0.11 0.50 (0.39) (0.05) 0.06 7.87
Year ended 9/30/95........ 7.48 0.39 0.43 0.82 (0.39) (0.10) 0.33 7.81
Year ended 9/30/94........ 8.43 0.41 (0.86) (0.45) (0.41) (0.09) (0.95) 7.48
Year ended 9/30/93........ 7.85 0.43 0.62 1.05 (0.43) (0.04) 0.58 8.43
Year ended 9/30/92........ 7.63 0.46 0.25 0.71 (0.46) (0.03) 0.22 7.85
Year ended 9/30/91........ 7.18 0.47 0.46 0.93 (0.47) (0.01) 0.45 7.63
Year ended 9/30/90........ 7.30 0.48 (0.10) 0.38 (0.48) (0.02) (0.12) 7.18
Year ended 9/30/89........ 7.09 0.48 0.22 0.70 (0.48) (0.01) 0.21 7.30
Year ended 9/30/88........ 6.49 0.49 0.60 1.09 (0.49) -- 0.60 7.09
GEORGIA SERIES--CLASS D
Year ended 9/30/97........ 7.88 0.31 0.28 0.59 (0.31) (0.03) 0.25 8.13
Year ended 9/30/96........ 7.82 0.32 0.11 0.43 (0.32) (0.05) 0.06 7.88
Year ended 9/30/95........ 7.49 0.32 0.43 0.75 (0.32) (0.10) 0.33 7.82
2/1/94*- 9/30/94.......... 8.33 0.22 (0.84) (0.62) (0.22) -- (0.84) 7.49
LOUISIANA SERIES--CLASS A
Year ended 9/30/97........ 8.16 0.41 0.23 0.64 (0.41) (0.11) 0.12 8.28
Year ended 9/30/96........ 8.14 0.42 0.08 0.50 (0.42) (0.06) 0.02 8.16
Year ended 9/30/95........ 7.94 0.43 0.34 0.77 (0.43) (0.14) 0.20 8.14
Year ended 9/30/94........ 8.79 0.44 (0.77) (0.33) (0.44) (0.08) (0.85) 7.94
Year ended 9/30/93........ 8.38 0.46 0.51 0.97 (0.46) (0.10) 0.41 8.79
Year ended 9/30/92........ 8.18 0.49 0.24 0.73 (0.49) (0.04) 0.20 8.38
Year ended 9/30/91........ 7.70 0.50 0.50 1.00 (0.50) (0.02) 0.48 8.18
Year ended 9/30/90........ 7.88 0.52 (0.12) 0.40 (0.52) (0.06) (0.18) 7.70
Year ended 9/30/89........ 7.79 0.53 0.15 0.68 (0.53) (0.06) 0.09 7.88
Year ended 9/30/88........ 7.36 0.55 0.49 1.04 (0.55) (0.06) 0.43 7.79
- ----------
@ During the periods stated, the Manager, at its discretion, reimbursed
certain expenses and/or waived all or portions of its fees. The adjusted
net investment income per share and adjusted ratios reflect what the
results would have been had the Manager not reimbursed certain expenses
and/or not waived its fees.
* Commencement of offering of shares.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
ADJUSTED
RATIO OF RATIO OF
NET ADJUSTED ADJUSTED NET
TOTAL RETURN RATIO OF INVESTMENT NET RATIO OF INVESTMENT
BASED ON EXPENSES INCOME NET ASSETS AT INVESTMENT EXPENSES INCOME
PER SHARE OPERATING NET ASSET TO AVERAGE TO AVERAGE PORTFOLIO END OF PERIOD INCOME TO AVERAGE TO AVERAGE
PERFORMANCE: VALUE NET ASSETS@ NET ASSETS@ TURNOVER (000'S OMITTED) PER SHARE@ NET ASSETS@ NET ASSETS@
------------ ----- ------------ ----------- -------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
National Series--Class A
Year ended 9/30/97......... 9.40% 0.84% 5.05% 20.63% $ 97,481
Year ended 9/30/96......... 6.97 0.80 5.19 33.99 98,767
Year ended 9/30/95......... 11.48 0.86 5.46 24.91 104,184
Year ended 9/30/94......... (7.83) 0.85 5.30 24.86 111,374
Year ended 9/30/93......... 16.00 0.86 5.49 72.68 136,394
Year ended 9/30/92......... 8.84 0.77 6.02 63.99 132,130
Year ended 9/30/91......... 14.24 0.80 6.35 71.67 136,326
Year ended 9/30/90......... 4.10 0.78 6.64 55.01 133,412
Year ended 9/30/89......... 8.62 0.78 6.86 71.90 140,376
Year ended 9/30/88......... 16.43 0.83 7.35 40.58 135,667
National Series--Class D
Year ended 9/30/97......... 8.56 1.75 4.15 20.63 2,279
Year ended 9/30/96......... 6.13 1.67 4.27 33.99 4,826
Year ended 9/30/95......... 10.17 1.95 4.40 24.91 1,215
2/1/94*- 9/30/94 .......... (9.96) 1.76+ 4.37+ 24.86++ 446
Colorado Series--Class A
Year ended 9/30/97......... 7.30 0.90 5.01 3.99 49,780
Year ended 9/30/96......... 4.76 0.85 5.07 12.39 52,295
Year ended 9/30/95......... 8.56 0.93 5.31 14.70 54,858
Year ended 9/30/94......... (2.92) 0.86 5.06 10.07 58,197
Year ended 9/30/93......... 12.54 0.90 5.21 14.09 67,912
Year ended 9/30/92......... 7.74 0.81 5.81 23.22 64,900
Year ended 9/30/91......... 11.15 0.84 6.19 14.60 64,310
Year ended 9/30/90......... 4.38 0.85 6.47 31.89 63,173
Year ended 9/30/89......... 9.70 0.86 6.56 -- 62,515
Year ended 9/30/88......... 16.19 0.88 6.89 12.95 66,257
Colorado Series--Class D
Year ended 9/30/97......... 6.34 1.81 4.10 3.99 238
Year ended 9/30/96......... 3.95 1.75 4.17 12.39 255
Year ended 9/30/95......... 7.26 2.02 4.23 14.70 193
2/1/94*- 9/30/94........... (5.73) 1.78+ 4.05+ 10.07++ 96
Georgia Series--Class A
Year ended 9/30/97......... 8.65 0.89 4.82 12.28 50,614
Year ended 9/30/96......... 6.56 0.83 4.94 16.24 50,995
Year ended 9/30/95......... 11.66 0.91 5.26 3.36 57,678 $0.39 0.96% 5.21%
Year ended 9/30/94......... (5.52) 0.73 5.21 19.34 61,466 0.40 0.93 5.01
Year ended 9/30/93......... 13.96 0.63 5.34 12.45 64,650 0.40 0.93 5.04
Year ended 9/30/92......... 9.64 0.47 5.95 10.24 44,585 0.43 0.87 5.55
Year ended 9/30/91......... 13.30 0.59 6.30 6.07 28,317 0.43 1.09 5.80
Year ended 9/30/90......... 5.19 0.53 6.53 5.83 19,002 0.44 1.03 6.03
Year ended 9/30/89......... 10.15 0.64 6.59 -- 14,452 0.44 1.19 6.04
Year ended 9/30/88......... 17.51 0.36 7.15 6.32 9,752 0.43 1.35 6.17
Georgia Series--Class D
Year ended 9/30/97......... 7.67 1.79 3.92 12.28 2,640
Year ended 9/30/96......... 5.60 1.73 4.03 16.24 2,327
Year ended 9/30/95......... 10.58 1.90 4.28 3.36 2,079 0.31 1.95 4.23
2/1/94*- 9/30/94........... (7.57) 1.76+ 4.28+ 19.34++ 849 0.21 1.90+ 4.15+
Louisiana Series--Class A
Year ended 9/30/97......... 8.17 0.86 5.08 16.08 56,199
Year ended 9/30/96......... 6.32 0.82 5.15 10.08 57,264
Year ended 9/30/95......... 10.30 0.89 5.44 4.82 61,988
Year ended 9/30/94......... (3.83) 0.87 5.31 17.16 61,441
Year ended 9/30/93......... 12.10 0.87 5.40 9.21 67,529
Year ended 9/30/92......... 9.13 0.80 5.89 25.45 57,931
Year ended 9/30/91......... 13.49 0.83 6.31 20.85 50,089
Year ended 9/30/90......... 5.20 0.81 6.62 31.54 43,475
Year ended 9/30/89......... 9.04 0.84 6.82 12.94 43,908
Year ended 9/30/88......... 14.69 0.85 7.19 36.01 42,521
- ----------
+ Annualized.
++ For the year ended 9/30/94.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
NET
NET ASSET REALIZED INCREASE NET NET
VALUE & (DECREASE) INCREASE ASSET
AT NET UNREALIZED FROM DIVIDENDS DISTRIBUTIONS (DECREASE) VALUE AT
PER SHARE OPERATING BEGINNING INVESTMENT INVESTMENT INVESTMENT PAID OR FROM NET IN NET END OF
PERFORMANCE: OF PERIOD INCOME@ GAIN (LOSS) OPERATIONS DECLARED GAIN REALIZED ASSET VALUE PERIOD
- ------------------- --------- ---------- ----------- ---------- --------- -------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LOUISIANA SERIES--CLASS D
Year ended 9/30/97........ $8.16 $0.34 $0.22 $0.56 $(0.34) $(0.11) $0.11 $8.27
Year ended 9/30/96........ 8.14 0.35 0.08 0.43 (0.35) (0.06) 0.02 8.16
Year ended 9/30/95........ 7.94 0.35 0.34 0.69 (0.35) (0.14) 0.20 8.14
2/1/94*- 9/30/94.......... 8.73 0.24 (0.79) (0.55) (0.24) -- (0.79) 7.94
MARYLAND SERIES--CLASS A
Year ended 9/30/97........ 7.99 0.40 0.19 0.59 (0.40) (0.04) 0.15 8.14
Year ended 9/30/96........ 7.96 0.40 0.06 0.46 (0.40) (0.03) 0.03 7.99
Year ended 9/30/95........ 7.71 0.41 0.38 0.79 (0.41) (0.13) 0.25 7.96
Year ended 9/30/94 ....... 8.64 0.42 (0.76) (0.34) (0.42) (0.17) (0.93) 7.71
Year ended 9/30/93........ 8.15 0.44 0.59 1.03 (0.44) (0.10) 0.49 8.64
Year ended 9/30/92........ 7.94 0.46 0.24 0.70 (0.46) (0.03) 0.21 8.15
Year ended 9/30/91........ 7.45 0.47 0.49 0.96 (0.47) -- 0.49 7.94
Year ended 9/30/90........ 7.59 0.48 (0.14) 0.34 (0.48) -- (0.14) 7.45
Year ended 9/30/89........ 7.39 0.48 0.20 0.68 (0.48) -- 0.20 7.59
Year ended 9/30/88........ 6.87 0.47 0.56 1.03 (0.47) (0.04) 0.52 7.39
MARYLAND SERIES--CLASS D
Year ended 9/30/97........ 7.99 0.33 0.20 0.53 (0.33) (0.04) 0.16 8.15
Year ended 9/30/96........ 7.97 0.33 0.05 0.38 (0.33) (0.03) 0.02 7.99
Year ended 9/30/95........ 7.72 0.33 0.38 0.71 (0.33) (0.13) 0.25 7.97
2/1/94*- 9/30/94 ......... 8.46 0.23 (0.74) (0.51) (0.23) -- (0.74) 7.72
MASSACHUSETTS SERIES--CLASS A
Year ended 9/30/97........ 7.85 0.40 0.22 0.62 (0.40) (0.08) 0.14 7.99
Year ended 9/30/96........ 7.91 0.41 0.05 0.46 (0.41) (0.11) (0.06) 7.85
Year ended 9/30/95........ 7.66 0.42 0.28 0.70 (0.42) (0.03) 0.25 7.91
Year ended 9/30/94........ 8.54 0.44 (0.67) (0.23) (0.44) (0.21) (0.88) 7.66
Year ended 9/30/93........ 8.06 0.47 0.55 1.02 (0.47) (0.07) 0.48 8.54
Year ended 9/30/92........ 7.86 0.49 0.24 0.73 (0.49) (0.04) 0.20 8.06
Year ended 9/30/91........ 7.26 0.50 0.62 1.12 (0.50) (0.02) 0.60 7.86
Year ended 9/30/90........ 7.65 0.50 (0.31) 0.19 (0.50) (0.08) (0.39) 7.26
Year ended 9/30/89........ 7.62 0.52 0.08 0.60 (0.52) (0.05) 0.03 7.65
Year ended 9/30/88........ 7.20 0.53 0.51 1.04 (0.53) (0.09) 0.42 7.62
MASSACHUSETTS SERIES--CLASS D
Year ended 9/30/97........ 7.84 0.33 0.23 0.56 (0.33) (0.08) 0.15 7.99
Year ended 9/30/96........ 7.90 0.34 0.05 0.39 (0.34) (0.11) (0.06) 7.84
Year ended 9/30/95........ 7.66 0.34 0.27 0.61 (0.34) (0.03) 0.24 7.90
2/1/94*- 9/30/94 ......... 8.33 0.24 (0.67) (0.43) (0.24) -- (0.67) 7.66
MICHIGAN SERIES--CLASS A
Year ended 9/30/97........ 8.46 0.43 0.23 0.66 (0.43) (0.09) 0.14 8.60
Year ended 9/30/96........ 8.54 0.45 0.06 0.51 (0.45) (0.14) (0.08) 8.46
Year ended 9/30/95........ 8.28 0.46 0.30 0.76 (0.46) (0.04) 0.26 8.54
Year ended 9/30/94........ 9.08 0.46 (0.71) (0.25) (0.46) (0.09) (0.80) 8.28
Year ended 9/30/93........ 8.68 0.47 0.59 1.06 (0.47) (0.19) 0.40 9.08
Year ended 9/30/92........ 8.38 0.50 0.35 0.85 (0.50) (0.05) 0.30 8.68
Year ended 9/30/91........ 7.89 0.51 0.51 1.02 (0.51) (0.02) 0.49 8.38
Year ended 9/30/90........ 8.14 0.52 (0.16) 0.36 (0.52) (0.09) (0.25) 7.89
Year ended 9/30/89........ 7.94 0.54 0.23 0.77 (0.54) (0.03) 0.20 8.14
Year ended 9/30/88........ 7.48 0.54 0.58 1.12 (0.54) (0.12) 0.46 7.94
MICHIGAN SERIES--CLASS D
Year ended 9/30/97........ 8.45 0.36 0.23 0.59 (0.36) (0.09) 0.14 8.59
Year ended 9/30/96........ 8.54 0.37 0.05 0.42 (0.37) (0.14) (0.09) 8.45
Year ended 9/30/95........ 8.28 0.37 0.30 0.67 (0.37) (0.04) 0.26 8.54
2/1/94*- 9/30/94.......... 9.01 0.25 (0.73) (0.48) (0.25) -- (0.73) 8.28
MINNESOTA SERIES--CLASS A
Year ended 9/30/97........ 7.68 0.40 0.11 0.51 (0.40) -- 0.11 7.79
Year ended 9/30/96........ 7.82 0.42 (0.12) 0.30 (0.42) (0.02) (0.14) 7.68
Year ended 9/30/95........ 7.72 0.45 0.11 0.56 (0.45) (0.01) 0.10 7.82
Year ended 9/30/94........ 8.28 0.45 (0.44) 0.01 (0.45) (0.12) (0.56) 7.72
Year ended 9/30/93........ 7.89 0.47 0.51 0.98 (0.47) (0.12) 0.39 8.28
Year ended 9/30/92........ 7.81 0.49 0.09 0.58 (0.49) (0.01) 0.08 7.89
Year ended 9/30/91........ 7.49 0.49 0.32 0.81 (0.49) -- 0.32 7.81
Year ended 9/30/90........ 7.60 0.49 (0.06) 0.43 (0.49) (0.05) (0.11) 7.49
Year ended 9/30/89........ 7.52 0.51 0.11 0.62 (0.51) (0.03) 0.08 7.60
Year ended 9/30/88........ 7.12 0.51 0.48 0.99 (0.51) (0.08) 0.40 7.52
MINNESOTA SERIES--CLASS D
Year ended 9/30/97........ 7.68 0.33 0.11 0.44 (0.33) -- 0.11 7.79
Year ended 9/30/96........ 7.82 0.35 (0.12) 0.23 (0.35) (0.02) (0.14) 7.68
Year ended 9/30/95........ 7.73 0.38 0.10 0.48 (0.38) (0.01) 0.09 7.82
2/1/94*- 9/30/94 ......... 8.22 0.25 (0.49) (0.24) (0.25) -- (0.49) 7.73
- ----------
@ During the periods stated, the Manager, at its discretion, reimbursed
certain expenses and/or waived all or portions of its fees. The adjusted
net investment income per share and adjusted ratios reflect what the
results would have been had the Manager not reimbursed certain expenses
and/or not waived its fees.
* Commencement of offering of shares.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
ADJUSTED
RATIO OF RATIO OF
NET ADJUSTED ADJUSTED NET
TOTAL RETURN RATIO OF INVESTMENT NET RATIO OF INVESTMENT
BASED ON EXPENSES INCOME NET ASSETS AT INVESTMENT EXPENSES INCOME
PER SHARE OPERATING NET ASSET TO AVERAGE TO AVERAGE PORTFOLIO END OF PERIOD INCOME TO AVERAGE TO AVERAGE
PERFORMANCE: VALUE NET ASSETS@ NET ASSETS@ TURNOVER (000'S OMITTED) PER SHARE@ NET ASSETS@ NET ASSETS@
- ------------------- ------------ ---------- ---------- --------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Louisiana Series--Class D
Year ended 9/30/97......... 7.07% 1.76% 4.18% 16.08% $ 509
Year ended 9/30/96......... 5.37 1.72 4.25 10.08 389
Year ended 9/30/95......... 9.17 1.91 4.41 4.82 465
2/1/94*- 9/30/94........... (6.45) 1.78+ 4.33+ 17.16++ 704
Maryland Series--Class A
Year ended 9/30/97......... 7.64 0.90 4.99 14.79 52,549
Year ended 9/30/96......... 6.00 0.84 5.05 5.56 54,041
Year ended 9/30/95......... 10.90 0.96 5.31 3.63 56,290
Year ended 9/30/94 ........ (4.08) 0.92 5.17 17.68 57,263
Year ended 9/30/93......... 13.23 0.97 5.28 14.10 64,472
Year ended 9/30/92......... 9.15 0.86 5.76 29.57 57,208
Year ended 9/30/91......... 13.26 0.88 6.09 18.84 54,068
Year ended 9/30/90......... 4.47 0.87 6.26 16.50 47,283
Year ended 9/30/89........ 9.43 0.87 6.38 2.19 46,643
Year ended 9/30/88......... 15.73 0.91 6.63 17.42 45,939
Maryland Series--Class D
Year ended 9/30/97......... 6.80 1.81 4.08 14.79 2,063
Year ended 9/30/96......... 4.91 1.72 4.14 5.56 2,047
Year ended 9/30/95......... 9.75 2.02 4.27 3.63 630
2/1/94*- 9/30/94 .......... (6.21) 1.80+ 4.26+ 17.68++ 424
Massachusetts Series--Class A
Year ended 9/30/97......... 8.11 0.84 5.06 29.26 110,011
Year ended 9/30/96......... 5.97 0.80 5.24 26.30 109,872
Year ended 9/30/95......... 9.58 0.86 5.51 16.68 115,711
Year ended 9/30/94......... (2.94) 0.85 5.46 12.44 120,149
Year ended 9/30/93......... 13.18 0.88 5.65 20.66 139,504
Year ended 9/30/92......... 9.75 0.77 6.27 27.92 128,334
Year ended 9/30/91......... 15.84 0.83 6.64 14.37 118,022
Year ended 9/30/90......... 2.48 0.79 6.66 19.26 110,246
Year ended 9/30/89......... 8.18 0.79 6.81 7.51 122,515
Year ended 9/30/88......... 15.15 0.84 7.02 21.77 126,150
Massachusetts Series--Class D
Year ended 9/30/97........ 7.29 1.74 4.16 29.26 1,245
Year ended 9/30/96........ 5.01 1.70 4.32 26.30 1,405
Year ended 9/30/95........ 8.33 1.95 4.47 16.68 890
2/1/94*- 9/30/94 ......... (5.34) 1.78+ 4.52+ 12.44++ 1,099
Michigan Series--Class A
Year ended 9/30/97........ 8.16 0.81 5.13 10.98 143,370
Year ended 9/30/96........ 6.16 0.78 5.29 19.62 148,178
Year ended 9/30/95........ 9.56 0.87 5.50 20.48 151,589
Year ended 9/30/94........ (2.90) 0.84 5.32 10.06 151,095
Year ended 9/30/93........ 12.97 0.83 5.41 6.33 164,638
Year ended 9/30/92........ 10.55 0.76 5.93 32.12 144,524
Year ended 9/30/91........ 13.34 0.80 6.28 22.81 129,004
Year ended 9/30/90........ 4.57 0.80 6.47 26.36 112,689
Year ended 9/30/89........ 9.91 0.81 6.67 8.24 111,180
Year ended 9/30/88........ 15.98 0.88 7.06 34.00 104,904
Michigan Series--Class D
Year ended 9/30/97........ 7.19 1.71 4.23 10.98 1,845
Year ended 9/30/96........ 5.09 1.68 4.39 19.62 1,486
Year ended 9/30/95........ 8.36 2.01 4.40 20.48 1,172
2/1/94*- 9/30/94.......... (5.47) 1.75+ 4.40+ 10.06++ 671
Minnesota Series--Class A
Year ended 9/30/97....... 6.85 0.85 5.21 6.88 121,674
Year ended 9/30/96....... 3.99 0.81 5.47 26.89 126,173
Year ended 9/30/95....... 7.61 0.87 5.89 5.57 132,716
Year ended 9/30/94....... 0.12 0.85 5.70 3.30 134,990
Year ended 9/30/93....... 13.06 0.90 5.89 5.73 144,600
Year ended 9/30/92....... 7.71 0.80 6.29 12.08 151,922
Year ended 9/30/91....... 11.10 0.80 6.28 2.61 182,979
Year ended 9/30/90....... 5.79 0.81 6.40 12.10 160,930
Year ended 9/30/89....... 8.34 0.83 6.61 7.55 148,425
Year ended 9/30/88....... 14.76 0.87 6.95 35.37 132,541
Minnesota Series--Class D
Year ended 9/30/97....... 5.89 1.75 4.31 6.88 1,799
Year ended 9/30/96....... 3.06 1.71 4.57 26.89 2,036
Year ended 9/30/95....... 6.45 1.85 4.92 5.57 2,237
2/1/94*- 9/30/94 ........ (3.08) 1.74+ 4.68+ 3.30++ 1,649
- ----------
+ Annualized.
++ For the year ended 9/30/94.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NET
NET ASSET REALIZED INCREASE NET NET
VALUE & (DECREASE) INCREASE ASSET
AT NET UNREALIZED FROM DIVIDENDS DISTRIBUTIONS (DECREASE) VALUE AT
PER SHARE OPERATING BEGINNING INVESTMENT INVESTMENT INVESTMENT PAID OR FROM NET IN NET END OF
PERFORMANCE: OF PERIOD INCOME@ GAIN (LOSS) OPERATIONS DECLARED GAIN REALIZED ASSET VALUE PERIOD
- ------------------- --------- ---------- ----------- ---------- --------- -------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MISSOURI SERIES--CLASS A
Year ended 9/30/97........ $7.71 0.38 $0.19 $ 0.57 $(0.38) $(0.08) $0.11 $7.82
Year ended 9/30/96........ 7.70 0.39 0.08 0.47 (0.39) (0.07) 0.01 7.71
Year ended 9/30/95........ 7.41 0.40 0.36 0.76 (0.40) (0.07) 0.29 7.70
Year ended 9/30/94........ 8.31 0.40 (0.79) (0.39) (0.40) (0.11) (0.90) 7.41
Year ended 9/30/93........ 7.80 0.42 0.57 0.99 (0.42) (0.06) 0.51 8.31
Year ended 9/30/92........ 7.72 0.44 0.15 0.59 (0.44) (0.07) 0.08 7.80
Year ended 9/30/91........ 7.22 0.46 0.50 0.96 (0.46) -- 0.50 7.72
YEAR ENDED 9/30/90 7.28 0.45 (0.06) 0.39 (0.45) -- (0.06) 7.22
Year ended 9/30/89........ 7.10 0.47 0.18 0.65 (0.47) -- 0.18 7.28
Year ended 9/30/88........ 6.57 0.48 0.58 1.06 (0.48) (0.05) 0.53 7.10
MISSOURI SERIES--CLASS D
Year ended 9/30/97........ 7.72 0.31 0.18 0.49 (0.31) (0.08) 0.10 7.82
Year ended 9/30/96........ 7.70 0.32 0.09 0.41 (0.32) (0.07) 0.02 7.72
Year ended 9/30/95........ 7.41 0.32 0.36 0.68 (0.32) (0.07) 0.29 7.70
2/1/94*- 9/30/94 ......... 8.20 0.22 (0.79) (0.57) (0.22) -- (0.79) 7.41
NEW YORK SERIES--CLASS A
Year ended 9/30/97........ 7.98 0.41 0.32 0.73 (0.41) (0.02) 0.30 8.28
Year ended 9/30/96........ 7.86 0.42 0.12 0.54 (0.42) -- 0.12 7.98
Year ended 9/30/95........ 7.67 0.42 0.36 0.78 (0.42) (0.17) 0.19 7.86
Year ended 9/30/94........ 8.75 0.43 (0.88) (0.45) (0.43) (0.20) (1.08) 7.67
Year ended 9/30/93........ 8.13 0.45 0.74 1.19 (0.45) (0.12) 0.62 8.75
Year ended 9/30/92........ 7.94 0.49 0.26 0.75 (0.49) (0.07) 0.19 8.13
Year ended 9/30/91........ 7.40 0.50 0.54 1.04 (0.50) -- 0.54 7.94
Year ended 9/30/90........ 7.71 0.51 (0.26) 0.25 (0.51) (0.05) (0.31) 7.40
Year ended 9/30/89........ 7.57 0.52 0.17 0.69 (0.52) (0.03) 0.14 7.71
Year ended 9/30/88........ 7.28 0.52 0.48 1.00 (0.52) (0.19) 0.29 7.57
NEW YORK SERIES--CLASS D
Year ended 9/30/97........ 7.98 0.34 0.33 0.67 (0.34) (0.02) 0.31 8.29
Year ended 9/30/96........ 7.87 0.34 0.11 0.45 (0.34) -- 0.11 7.98
Year ended 9/30/95........ 7.67 0.34 0.37 0.71 (0.34) (0.17) 0.20 7.87
2/1/94*- 9/30/94 ......... 8.55 0.23 (0.88) (0.65) (0.23) -- (0.88) 7.67
OHIO SERIES--CLASS A
Year ended 9/30/97........ 8.09 0.42 0.17 0.59 (0.42) (0.07) 0.10 8.19
Year ended 9/30/96........ 8.11 0.43 0.02 0.45 (0.43) (0.04) (0.02) 8.09
Year ended 9/30/95........ 7.90 0.44 0.28 0.72 (0.44) (0.07) 0.21 8.11
Year ended 9/30/94........ 8.77 0.44 (0.70) (0.26) (0.44) (0.17) (0.87) 7.90
Year ended 9/30/93........ 8.28 0.46 0.56 1.02 (0.46) (0.07) 0.49 8.77
Year ended 9/30/92........ 8.06 0.49 0.26 0.75 (0.49) (0.04) 0.22 8.28
Year ended 9/30/91........ 7.62 0.51 0.45 0.96 (0.51) (0.01) 0.44 8.06
Year ended 9/30/90........ 7.80 0.52 (0.08) 0.44 (0.52) (0.10) (0.18) 7.62
Year ended 9/30/89........ 7.71 0.54 0.11 0.65 (0.54) (0.02) 0.09 7.80
Year ended 9/30/88........ 7.38 0.54 0.53 1.07 (0.54) (0.20) 0.33 7.71
OHIO SERIES--CLASS D
Year ended 9/30/97........ 8.13 0.35 0.17 0.52 (0.35) (0.07) 0.10 8.23
Year ended 9/30/96........ 8.15 0.36 0.02 0.38 (0.36) (0.04) (0.02) 8.13
Year ended 9/30/95........ 7.92 0.36 0.30 0.66 (0.36) (0.07) 0.23 8.15
2/1/94*- 9/30/94 ......... 8.61 0.24 (0.69) (0.45) (0.24) -- (0.69) 7.92
OREGON SERIES--CLASS A
Year ended 9/30/97........ 7.65 0.38 0.26 0.64 (0.38) (0.04) 0.22 7.87
Year ended 9/30/96........ 7.66 0.40 -- 0.40 (0.40) (0.01) (0.01) 7.65
Year ended 9/30/95........ 7.43 0.40 0.25 0.65 (0.40) (0.02) 0.23 7.66
Year ended 9/30/94........ 8.08 0.40 (0.59) (0.19) (0.40) (0.06) (0.65) 7.43
Year ended 9/30/93........ 7.60 0.42 0.48 0.90 (0.42) -- 0.48 8.08
Year ended 9/30/92........ 7.42 0.42 0.18 0.60 (0.42) -- 0.18 7.60
Year ended 9/30/91........ 6.96 0.44 0.46 0.90 (0.44) -- 0.46 7.42
Year ended 9/30/90........ 7.05 0.44 (0.09) 0.35 (0.44) -- (0.09) 6.96
Year ended 9/30/89........ 6.83 0.44 0.22 0.66 (0.44) -- 0.22 7.05
Year ended 9/30/88........ 6.21 0.45 0.62 1.07 (0.45) -- 0.62 6.83
OREGON SERIES--CLASS D
Year ended 9/30/97........ 7.64 0.31 0.27 0.58 (0.31) (0.04) 0.23 7.87
Year ended 9/30/96........ 7.65 0.33 -- 0.33 (0.33) (0.01) (0.01) 7.64
Year ended 9/30/95........ 7.43 0.33 0.24 0.57 (0.33) (0.02) 0.22 7.65
2/1/94*- 9/30/94 ......... 8.02 0.22 (0.59) (0.37) (0.22) -- (0.59) 7.43
SOUTH CAROLINA SERIES--CLASS A
Year ended 9/30/97........ 8.07 0.40 0.22 0.62 (0.40) (0.13) 0.09 8.16
Year ended 9/30/96........ 7.97 0.41 0.12 0.53 (0.41) (0.02) 0.10 8.07
Year ended 9/30/95........ 7.61 0.41 0.37 0.78 (0.41) (0.01) 0.36 7.97
Year ended 9/30/94........ 8.52 0.41 (0.79) (0.38) (0.41) (0.12) (0.91) 7.61
Year ended 9/30/93........ 8.00 0.43 0.54 0.97 (0.43) (0.02) 0.52 8.52
Year ended 9/30/92........ 7.71 0.45 0.31 0.76 (0.45) (0.02) 0.29 8.00
Year ended 9/30/91........ 7.23 0.46 0.52 0.98 (0.46) (0.04) 0.48 7.71
Year ended 9/30/90........ 7.37 0.48 (0.14) 0.34 (0.48) -- (0.14) 7.23
Year ended 9/30/89........ 7.21 0.48 0.17 0.65 (0.48) (0.01) 0.16 7.37
Year ended 9/30/88........ 6.67 0.50 0.54 1.04 (0.50) -- 0.54 7.21
- ----------
@ During the periods stated, the Manager, at its discretion, reimbursed
certain expenses and/or waived all or portions of its fees. The adjusted
net investment income per share and adjusted ratios reflect what the
results would have been had the Manager not reimbursed certain expenses
and/or not waived its fees.
* Commencement of offering of shares.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
ADJUSTED
RATIO OF RATIO OF
NET ADJUSTED ADJUSTED NET
TOTAL RETURN RATIO OF INVESTMENT NET RATIO OF INVESTMENT
BASED ON EXPENSES INCOME NET ASSETS AT INVESTMENT EXPENSES INCOME
PER SHARE OPERATING NET ASSET TO AVERAGE TO AVERAGE PORTFOLIO END OF PERIOD INCOME TO AVERAGE TO AVERAGE
PERFORMANCE: VALUE NET ASSETS@ NET ASSETS@ TURNOVER (000'S OMITTED) PER SHARE@ NET ASSETS@ NET ASSETS@
- ------------------- ------------ ---------- ---------- --------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Missouri Series--Class A
Year ended 9/30/97....... 7.70% 0.89% 4.93% 6.47% $ 52,766
Year ended 9/30/96....... 6.27 0.86 5.03 8.04 49,941
Year ended 9/30/95....... 10.67 0.88 5.31 3.88 51,169 $0.39 0.93% 5.26%
Year ended 9/30/94....... (4.85) 0.74 5.18 14.33 52,621 0.39 0.88 5.04
Year ended 9/30/93....... 13.17 0.71 5.29 17.03 56,861 0.41 0.91 5.09
Year ended 9/30/92....... 7.87 0.83 5.71 18.80 49,459
Year ended 9/30/91....... 13.61 0.88 6.10 16.30 47,659
Year ended 9/30/90 5.47 0.84 6.20 30.46 50,875
Year ended 9/30/89....... 9.33 0.96 6.43 32.81 49,162
Year ended 9/30/88....... 16.74 0.86 6.88 12.32 58,457
Missouri Series--Class D
Year ended 9/30/97....... 6.60 1.80 4.02 6.47 474
Year ended 9/30/96....... 5.46 1.76 4.13 8.04 565
Year ended 9/30/95....... 9.49 1.98 4.23 3.88 515 0.32 2.03 4.18
2/1/94*- 9/30/94 ........ (7.16) 1.70+ 4.27+ 14.33++ 350 0.22 1.80+ 4.17+
New York Series--Class A
Year ended 9/30/97....... 9.45 0.82 5.09 23.83 83,528
Year ended 9/30/96....... 6.97 0.77 5.24 25.88 82,719
Year ended 9/30/95....... 10.93 0.88 5.52 34.05 83,980
Year ended 9/30/94....... (5.37) 0.87 5.31 28.19 90,914
Year ended 9/30/93....... 15.26 0.94 5.37 27.90 104,685
Year ended 9/30/92....... 9.80 0.79 6.09 42.90 92,681
Year ended 9/30/91....... 14.56 0.80 6.57 44.57 83,684
Year ended 9/30/90....... 3.19 0.79 6.65 32.14 77,766
Year ended 9/30/89....... 9.35 0.80 6.78 47.69 75,471
Year ended 9/30/88....... 14.74 0.86 6.96 62.42 74,238
New York Series--Class D
Year ended 9/30/97....... 8.60 1.73 4.18 23.83 1,572
Year ended 9/30/96....... 5.86 1.68 4.33 25.88 1,152
Year ended 9/30/95....... 9.87 1.96 4.42 34.05 885
2/1/94*- 9/30/94 ........ (7.73) 1.81+ 4.39+ 28.19++ 476
Ohio Series--Class A
Year ended 9/30/97....... 7.54 0.81 5.19 11.76 154,419
Year ended 9/30/96....... 5.68 0.77 5.32 12.90 162,243
Year ended 9/30/95....... 9.59 0.84 5.56 2.96 170,191
Year ended 9/30/94....... (3.08) 0.84 5.34 9.37 171,469
Year ended 9/30/93....... 12.81 0.85 5.44 30.68 190,083
Year ended 9/30/92....... 9.68 0.75 6.02 7.15 170,427
Year ended 9/30/91....... 12.96 0.77 6.42 13.95 156,179
Year ended 9/30/90....... 5.70 0.77 6.63 16.05 136,251
Year ended 9/30/89....... 8.74 0.79 6.91 12.72 131,900
Year ended 9/30/88....... 15.76 0.83 7.20 26.71 122,386
Ohio Series--Class D
Year ended 9/30/97....... 6.57 1.71 4.29 11.76 1,160
Year ended 9/30/96....... 4.74 1.67 4.42 12.90 1,011
Year ended 9/30/95....... 8.67 1.93 4.48 2.96 660
2/1/94*- 9/30/94 ........ (5.36) 1.78+ 4.41+ 9.37++ 324
Oregon Series--Class A
Year ended 9/30/97....... 8.60 0.90 4.88 19.46 55,239
Year ended 9/30/96....... 5.27 0.86 5.18 28.65 57,345
Year ended 9/30/95....... 9.05 0.86 5.40 2.47 59,549 0.40 0.91 5.35
Year ended 9/30/94....... (2.38) 0.78 5.20 9.43 59,884 0.39 0.89 5.09
Year ended 9/30/93....... 12.21 0.78 5.35 8.08 62,095 0.41 0.93 5.20
Year ended 9/30/92....... 8.35 0.68 5.63 0.21 48,797 0.42 0.83 5.48
Year ended 9/30/91....... 13.25 0.71 6.06 7.60 39,350 0.42 0.91 5.96
Year ended 9/30/90....... 4.99 0.72 6.17 4.09 32,221 0.42 0.93 5.96
Year ended 9/30/89....... 9.95 0.64 6.34 0.19 30,510 0.42 0.96 6.03
Year ended 9/30/88....... 17.89 0.54 6.86 3.94 26,609 0.42 1.01 6.39
Oregon Series--Class D
Year ended 9/30/97....... 7.77 1.80 3.98 19.46 1,678
Year ended 9/30/96....... 4.33 1.76 4.28 28.65 1,540
Year ended 9/30/95....... 7.86 1.83 4.41 2.47 1,495 0.33 1.88 4.36
2/1/94*- 9/30/94 ........ (4.76) 1.72+ 4.32+ 9.43++ 843 0.22 1.82+ 4.22+
South Carolina Series--Class A
Year ended 9/30/97....... 7.99 0.84 5.04 -- 101,018
Year ended 9/30/96....... 6.82 0.80 5.15 20.66 108,163
Year ended 9/30/95....... 10.69 0.88 5.38 4.13 112,421
Year ended 9/30/94....... (4.61) 0.83 5.12 1.81 115,133
Year ended 9/30/93....... 12.52 0.85 5.19 17.69 120,589
Year ended 9/30/92....... 10.08 0.81 5.71 3.37 82,882
Year ended 9/30/91....... 13.95 0.81 6.14 9.05 63,863 0.45 0.91 6.04
Year ended 9/30/90....... 4.48 0.73 6.47 15.26 49,234 0.47 0.84 6.35
Year ended 9/30/89....... 9.41 0.68 6.48 0.03 46,487 0.46 0.88 6.28
Year ended 9/30/88....... 16.18 0.33 7.03 12.36 26,385 0.45 1.00 6.36
- ----------
+ Annualized.
++ For the year ended 9/30/94.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
NET
NET ASSET REALIZED INCREASE NET NET
VALUE & (DECREASE) INCREASE ASSET
AT NET UNREALIZED FROM DIVIDENDS DISTRIBUTIONS (DECREASE) VALUE AT
PER SHARE OPERATING BEGINNING INVESTMENT INVESTMENT INVESTMENT PAID OR FROM NET IN NET END OF
PERFORMANCE: OF PERIOD INCOME@ GAIN (LOSS) OPERATIONS DECLARED GAIN REALIZED ASSET VALUE PERIOD
- ------------------- --------- ---------- ----------- ---------- --------- -------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SOUTH CAROLINA SERIES--CLASS D
Year ended 9/30/97........ $8.06 $0.33 $0.23 $0.56 $(0.33) $(0.13) $0.10 $8.16
Year ended 9/30/96........ 7.97 0.34 0.11 0.45 (0.34) (0.02) 0.09 8.06
Year ended 9/30/95........ 7.61 0.34 0.37 0.71 (0.34) (0.01) 0.36 7.97
2/1/94*- 9/30/94 ......... 8.42 0.22 (0.81) (0.59) (0.22) -- (0.81) 7.61
CALIFORNIA HIGH-YIELD SERIES--CLASS A
Year ended 9/30/97........ 6.50 0.34 0.20 0.54 (0.34) (0.09) 0.11 6.61
YEAR ENDED 9/30/96........ 6.47 0.36 0.05 0.41 (0.36) (0.02) 0.03 6.50
Year ended 9/30/95........ 6.30 0.37 0.17 0.54 (0.37) -- 0.17 6.47
Year ended 9/30/94........ 6.73 0.37 (0.34) 0.03 (0.37) (0.09) (0.43) 6.30
Year ended 9/30/93........ 6.65 0.39 0.28 0.67 (0.39) (0.20) 0.08 6.73
Year ended 9/30/92........ 6.50 0.41 0.16 0.57 (0.41) (0.01) 0.15 6.65
Year ended 9/30/91........ 6.18 0.42 0.33 0.75 (0.42) (0.01) 0.32 6.50
Year ended 9/30/90........ 6.36 0.42 (0.07) 0.35 (0.42) (0.11) (0.18) 6.18
Year ended 9/30/89........ 6.27 0.44 0.15 0.59 (0.44) (0.06) 0.09 6.36
Year ended 9/30/88........ 5.94 0.44 0.39 0.83 (0.44) (0.06) 0.33 6.27
CALIFORNIA HIGH-YIELD SERIES--CLASS D
Year ended 9/30/97......... 6.51 0.28 0.19 0.47 (0.28) (0.09) 0.10 6.61
Year ended 9/30/96......... 6.48 0.30 0.05 0.35 (0.30) (0.02) 0.03 6.51
Year ended 9/30/95......... 6.31 0.31 0.17 0.48 (0.31) -- 0.17 6.48
2/1/94*- 9/30/94........... 6.67 0.21 (0.36) (0.15) (0.21) -- (0.36) 6.31
CALIFORNIA QUALITY SERIES--CLASS A
Year ended 9/30/97......... 6.75 0.34 0.24 0.58 (0.34) -- 0.24 6.99
Year ended 9/30/96......... 6.65 0.35 0.11 0.46 (0.35) (0.01) 0.10 6.75
Year ended 9/30/95......... 6.39 0.34 0.32 0.66 (0.34) (0.06) 0.26 6.65
Year ended 9/30/94......... 7.28 0.35 (0.73) (0.38) (0.35) (0.16) (0.89) 6.39
Year ended 9/30/93......... 6.85 0.37 0.54 0.91 (0.37) (0.11) 0.43 7.28
Year ended 9/30/92......... 6.65 0.40 0.22 0.62 (0.40) (0.02) 0.20 6.85
Year ended 9/30/91......... 6.22 0.40 0.46 0.86 (0.40) (0.03) 0.43 6.65
Year ended 9/30/90......... 6.47 0.40 (0.13) 0.27 (0.40) (0.12) (0.25) 6.22
Year ended 9/30/89......... 6.29 0.42 0.19 0.61 (0.42) (0.01) 0.18 6.47
Year ended 9/30/88......... 6.01 0.42 0.39 0.81 (0.42) (0.11) 0.28 6.29
CALIFORNIA QUALITY SERIES--CLASS D
Year ended 9/30/97......... 6.74 0.28 0.23 0.51 (0.28) -- 0.23 6.97
Year ended 9/30/96......... 6.63 0.28 0.12 0.40 (0.28) (0.01) 0.11 6.74
Year ended 9/30/95......... 6.38 0.28 0.31 0.59 (0.28) (0.06) 0.25 6.63
2/1/94*- 9/30/94 .......... 7.13 0.19 (0.75) (0.56) (0.19) -- (0.75) 6.38
FLORIDA SERIES--CLASS A
Year ended 9/30/97......... 7.67 0.36 0.23 0.59 (0.36) (0.10) 0.13 7.80
Year ended 9/30/96......... 7.71 0.38 0.04 0.42 (0.38) (0.08) (0.04) 7.67
Year ended 9/30/95......... 7.34 0.40 0.37 0.77 (0.40) -- 0.37 7.71
Year ended 9/30/94......... 8.20 0.42 (0.74) (0.32) (0.42) (0.12) (0.86) 7.34
Year ended 9/30/93......... 7.56 0.46 0.65 1.11 (0.46) (0.01) 0.64 8.20
Year ended 9/30/92......... 7.37 0.47 0.19 0.66 (0.47) -- 0.19 7.56
Year ended 9/30/91......... 6.90 0.43 0.47 0.90 (0.43) -- 0.47 7.37
Year ended 9/30/90......... 6.99 0.45 (0.09) 0.36 (0.45) -- (0.09) 6.90
Year ended 9/30/89......... 6.71 0.46 0.28 0.74 (0.46) -- 0.28 6.99
Year ended 9/30/88......... 6.02 0.47 0.69 1.16 (0.47) -- 0.69 6.71
FLORIDA SERIES--CLASS D
Year ended 9/30/97......... 7.68 0.30 0.23 0.53 (0.30) (0.10) 0.13 7.81
Year ended 9/30/96......... 7.72 0.32 0.04 0.36 (0.32) (0.08) (0.04) 7.68
Year ended 9/30/95......... 7.34 0.34 0.38 0.72 (0.34) -- 0.38 7.72
2/1/94*- 9/30/94 .......... 8.10 0.24 (0.76) (0.52) (0.24) -- (0.76) 7.34
NORTH CAROLINA SERIES--CLASS A
Year ended 9/30/97........ 7.84 0.37 0.24 0.61 (0.37) (0.03) 0.21 8.05
Year ended 9/30/96........ 7.74 0.37 0.11 0.48 (0.37) (0.01) 0.10 7.84
Year ended 9/30/95........ 7.30 0.39 0.45 0.84 (0.39) (0.01) 0.44 7.74
Year ended 9/30/94........ 8.22 0.41 (0.87) (0.46) (0.41) (0.05) (0.92) 7.30
Year ended 9/30/93........ 7.61 0.43 0.63 1.06 (0.43) (0.02) 0.61 8.22
Year ended 9/30/92........ 7.39 0.44 0.22 0.66 (0.44) -- 0.22 7.61
Year ended 9/30/91........ 7.04 0.45 0.35 0.80 (0.45) -- 0.35 7.39
8/27/90*- 9/30/90......... 7.14 0.03 (0.10) (0.07) (0.03) -- (0.10) 7.04
NORTH CAROLINA SERIES--CLASS D
Year ended 9/30/97........ 7.83 0.31 0.25 0.56 (0.31) (0.03) 0.22 8.05
Year ended 9/30/96........ 7.74 0.31 0.10 0.41 (0.31) (0.01) 0.09 7.83
Year ended 9/30/95........ 7.29 0.33 0.46 0.79 (0.33) (0.01) 0.45 7.74
2/1/94*- 9/30/94 ......... 8.17 0.23 (0.88) (0.65) (0.23) -- (0.88) 7.29
- ----------
@ During the periods stated, the Manager, at its discretion, reimbursed
certain expenses and/or waived all or portions of its fees. The adjusted
net investment income per share and adjusted ratios reflect what the
results would have been had the Manager not reimbursed certain expenses
and/or not waived its fees.
* Commencement of offering of shares.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
ADJUSTED
RATIO OF RATIO OF
NET ADJUSTED ADJUSTED NET
TOTAL RETURN RATIO OF INVESTMENT NET RATIO OF INVESTMENT
BASED ON EXPENSES INCOME NET ASSETS AT INVESTMENT EXPENSES INCOME
PER SHARE OPERATING NET ASSET TO AVERAGE TO AVERAGE PORTFOLIO END OF PERIOD INCOME TO AVERAGE TO AVERAGE
PERFORMANCE: VALUE NET ASSETS@ NET ASSETS@ TURNOVER (000'S OMITTED) PER SHARE@ NET ASSETS@ NET ASSETS@
- ------------------- ------------ ---------- ---------- --------- ------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
South Carolina Series--Class D
Year ended 9/30/97....... 7.15% 1.75% 4.13% -- $ 3,663
Year ended 9/30/96....... 5.73 1.70 4.25 20.66% 2,714
Year ended 9/30/95....... 9.63 1.85 4.40 4.13 1,704
2/1/94*- 9/30/94 ........ (7.14) 1.74+ 4.29+ 1.81++ 1,478
California High-Yield Series--Class A
Year ended 9/30/97....... 8.74 0.87 5.26 22.42 52,883
Year ended 9/30/96....... 6.49 0.84 5.49 34.75 50,264
Year ended 9/30/95....... 8.85 0.90 5.84 17.64 51,504
Year ended 9/30/94....... 0.41 0.85 5.74 8.36 48,007
Year ended 9/30/93....... 10.66 0.88 5.94 7.70 51,218
Year ended 9/30/92....... 9.00 0.82 6.20 45.50 49,448
Year ended 9/30/91....... 12.53 0.83 6.67 5.13 49,172
Year ended 9/30/90....... 5.57 0.89 6.68 17.66 49,312
Year ended 9/30/89....... 9.61 0.89 6.85 14.70 51,079
Year ended 9/30/88....... 14.72 0.91 7.17 20.79 53,037
California High-Yield Series--Class D
Year ended 9/30/97....... 7.60 1.77 4.36 22.42 3,320
Year ended 9/30/96....... 5.53 1.74 4.59 34.75 1,919
Year ended 9/30/95....... 7.78 1.91 4.84 17.64 1,277
2/1/94*- 9/30/94......... (2.47) 1.74+ 4.73+ 8.36++ 650
California Quality Series--Class A
Year ended 9/30/97....... 8.87 0.82 4.99 12.16 86,992
Year ended 9/30/96....... 7.00 0.79 5.11 12.84 95,560
Year ended 9/30/95....... 10.85 0.89 5.34 11.24 94,947
Year ended 9/30/94....... (5.46) 0.81 5.20 22.16 99,020
Year ended 9/30/93....... 13.92 0.82 5.30 15.67 111,732
Year ended 9/30/92....... 9.56 0.78 5.86 34.25 93,557
Year ended 9/30/91....... 14.35 0.78 6.19 20.11 77,884
Year ended 9/30/90....... 4.22 0.83 6.31 28.61 61,854
Year ended 9/30/89....... 9.86 0.85 6.53 57.85 59,258
Year ended 9/30/88....... 14.37 0.86 6.74 46.47 58,608
California Quality Series--Class D
Year ended 9/30/97....... 7.75 1.72 4.09 12.16 1,677
Year ended 9/30/96....... 6.20 1.69 4.21 12.84 1,645
Year ended 9/30/95....... 9.61 1.88 4.36 11.24 863
2/1/94*- 9/30/94 ........ (8.01) 1.77+ 4.39+ 22.16++ 812
Florida Series--Class A
Year ended 9/30/97....... 8.01 1.04 4.70 33.68 42,024
Year ended 9/30/96....... 5.54 0.97 4.90 18.53 45,200 $0.38 0.97% 4.90%
Year ended 9/30/95....... 10.87 0.72 5.38 11.82 49,030 0.37 1.03 5.07
Year ended 9/30/94....... (3.99) 0.42 5.49 6.17 49,897 0.38 1.00 4.91
Year ended 9/30/93....... 15.21 0.23 5.82 16.42 52,855 0.40 1.03 5.01
Year ended 9/30/92....... 9.24 0.17 6.32 12.62 37,957 0.41 1.02 5.47
Year ended 9/30/91....... 13.41 0.90 6.00 -- 28,173 0.42 1.15 5.75
Year ended 9/30/90....... 5.23 0.65 6.44 13.08 24,025 0.44 0.90 6.20
Year ended 9/30/89....... 11.28 0.69 6.61 2.41 23,062 0.44 0.94 6.36
Year ended 9/30/88....... 19.82 0.67 7.18 1.07 20,457 0.45 0.91 6.93
Florida Series--Class D
Year ended 9/30/97....... 7.18 1.81 3.93 33.68 1,678
Year ended 9/30/96....... 4.74 1.73 4.14 18.53 1,277 0.32 1.73 4.14
Year ended 9/30/95....... 10.07 1.66 4.53 11.82 603 0.31 1.97 4.22
2/1/94*- 9/30/94 ........ (6.64) 1.29+ 4.61+ 6.17++ 244 0.21 1.84+ 4.06+
North Carolina Series--Class A
Year ended 9/30/97....... 8.01 1.09 4.66 13.04 32,684
Year ended 9/30/96....... 6.39 1.05 4.75 15.12 35,934 0.37 1.06 4.74
Year ended 9/30/95....... 11.92 0.82 5.21 4.38 37,446 0.36 1.18 4.85
Year ended 9/30/94....... (5.80) 0.44 5.29 15.61 38,920 0.35 1.13 4.60
Year ended 9/30/93....... 14.46 0.23 5.44 3.13 38,828 0.35 1.22 4.45
Year ended 9/30/92....... 9.23 0.14 5.83 12.51 21,836 0.34 1.40 4.57
Year ended 9/30/91....... 11.97 0.07 6.10 -- 9,255 0.22 3.22 2.96
8/27/90*- 9/30/90........ (1.40) 0.94+ 4.48+ -- 1,377 0.01 4.48+ 1.04+
North Carolina Series--Class D
Year ended 9/30/97....... 7.33 1.85 3.90 13.04 1,217
Year ended 9/30/96....... 5.45 1.81 3.99 15.12 1,232 0.31 1.82 3.98
Year ended 9/30/95....... 11.19 1.64 4.42 4.38 1,257 0.31 2.00 4.06
2/1/94*- 9/30/94 ........ (8.15) 1.27+ 4.49+ 15.61++ 1,282 0.20 1.95+ 3.82
- ----------
+ Annualized.
++ For the year ended 9/30/94.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NET
NET ASSET REALIZED INCREASE NET NET
VALUE & (DECREASE) INCREASE ASSET
AT NET UNREALIZED FROM DIVIDENDS DISTRIBUTIONS (DECREASE) VALUE AT
PER SHARE OPERATING BEGINNING INVESTMENT INVESTMENT INVESTMENT PAID OR FROM NET IN NET END OF
PERFORMANCE: OF PERIOD INCOME@ GAIN (LOSS) OPERATIONS DECLARED GAIN REALIZED ASSET VALUE PERIOD
- ------------------- --------- ---------- ----------- ---------- --------- -------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NEW JERSEY--CLASS A
Year ended 9/30/97........ $7.60 $0.36 $0.21 $0.57 $(0.36) $(0.25) $(0.04) $7.56
Year ended 9/30/96........ 7.59 0.39 0.01 0.40 (0.39) -- 0.01 7.60
Year ended 9/30/95........ 7.40 0.39 0.29 0.68 (0.39) (0.10) 0.19 7.59
Year ended 9/30/94........ 8.24 0.41 (0.74) (0.33) (0.41) (0.10) (0.84) 7.40
Year ended 9/30/93........ 7.74 0.42 0.61 1.03 (0.42) (0.11) 0.50 8.24
YEAR ENDED 9/30/92 7.49 0.44 0.27 0.71 (0.44) (0.02) 0.25 7.74
Year ended 9/30/91........ 7.01 0.44 0.51 0.95 (0.44) (0.03) 0.48 7.49
Year ended 9/30/90........ 7.17 0.45 (0.10) 0.35 (0.45) (0.06) (0.16) 7.01
Year ended 9/30/89........ 6.98 0.48 0.19 0.67 (0.48) -- 0.19 7.17
2/16/88*- 9/30/88......... 7.14 0.30 (0.16) 0.14 (0.30) -- (0.16) 6.98
NEW JERSEY--CLASS D
Year ended 9/30/97........ 7.68 0.31 0.21 0.52 (0.31) (0.25) (0.04) 7.64
Year ended 9/30/96........ 7.67 0.33 0.01 0.34 (0.33) -- 0.01 7.68
Year ended 9/30/95........ 7.48 0.33 0.29 0.62 (0.33) (0.10) 0.19 7.67
2/1/94*- 9/30/94.......... 8.14 0.23 (0.66) (0.43) (0.23) -- (0.66) 7.48
PENNSYLVANIA--CLASS A
Year ended 9/30/97........ 7.82 0.36 0.24 0.60 (0.36) (0.10) 0.14 7.96
Year ended 9/30/96........ 7.79 0.38 0.12 0.50 (0.38) (0.09) 0.03 7.82
Year ended 9/30/95........ 7.55 0.38 0.37 0.75 (0.38) (0.13) 0.24 7.79
Year ended 9/30/94........ 8.61 0.39 (0.80) (0.41) (0.39) (0.26) (1.06) 7.55
Year ended 9/30/93........ 8.02 0.42 0.71 1.13 (0.42) (0.12) 0.59 8.61
Year ended 9/30/92........ 7.74 0.46 0.30 0.76 (0.46) (0.02) 0.28 8.02
Year ended 9/30/91........ 7.34 0.47 0.49 0.96 (0.47) (0.09) 0.40 7.74
Year ended 9/30/90........ 7.50 0.47 (0.16) 0.31 (0.47) -- (0.16) 7.34
Year ended 9/30/89........ 7.31 0.49 0.19 0.68 (0.49) -- 0.19 7.50
Year ended 9/30/88........ 6.76 0.50 0.56 1.06 (0.50) (0.01) 0.55 7.31
PENNSYLVANIA--CLASS D
Year ended 9/30/97........ 7.81 0.30 0.24 0.54 (0.30) (0.10) 0.14 7.95
Year ended 9/30/96........ 7.78 0.32 0.12 0.44 (0.32) (0.09) 0.03 7.81
Year ended 9/30/95........ 7.54 0.31 0.37 0.68 (0.31) (0.13) 0.24 7.78
2/1/94*- 9/30/94.......... 8.37 0.22 (0.83) (0.61) (0.22) -- (0.83) 7.54
- ----------
@ During the periods stated, the Manager, at its discretion, reimbursed
certain expenses and/or waived all or portions of its fees. The adjusted
net investment income per share and adjusted ratios reflect what the
results would have been had the Manager not reimbursed certain expenses
and/or not waived its fees.
* Commencement of offering of shares.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
ADJUSTED
RATIO OF RATIO OF
NET ADJUSTED ADJUSTED NET
TOTAL RETURN RATIO OF INVESTMENT NET RATIO OF INVESTMENT
BASED ON EXPENSES INCOME NET ASSETS AT INVESTMENT EXPENSES INCOME
PER SHARE OPERATING NET ASSET TO AVERAGE TO AVERAGE PORTFOLIO END OF PERIOD INCOME TO AVERAGE TO AVERAGE
PERFORMANCE: VALUE NET ASSETS@ NET ASSETS@ TURNOVER (000'S OMITTED) PER SHARE@ NET ASSETS@ NET ASSETS@
- ------------------- ------------ ---------- ---------- --------- ------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
New Jersey--Class A
Year ended 9/30/97....... 7.96% 1.06% 4.90% 20.22% $62,597
Year ended 9/30/96....... 5.37 1.02 5.06 25.65 66,293
Year ended 9/30/95....... 9.77 1.01 5.29 4.66 73,561 $0.39 1.06% 5.24%
Year ended 9/30/94....... (4.25) 0.90 5.24 12.13 73,942 0.40 1.07 5.07
Year ended 9/30/93....... 14.02 0.86 5.37 15.90 82,447 0.40 1.11 5.12
Year ended 9/30/92 9.70 0.85 5.74 27.13 74,256 0.42 1.10 5.49
Year ended 9/30/91....... 13.97 0.81 6.02 14.64 65,044 0.42 1.11 5.72
Year ended 9/30/90....... 5.04 0.81 6.32 37.26 54,287 0.43 1.12 6.01
Year ended 9/30/89....... 9.91 0.57 6.70 16.10 51,015 0.44 1.17 6.10
2/16/88*- 9/30/88........ 1.96 0.40+ 6.92+ 8.20 35,563 0.26 1.36+ 5.96+
New Jersey--Class D
Year ended 9/30/97....... 7.10 1.83 4.13 20.22 1,282
Year ended 9/30/96....... 4.56 1.79 4.29 25.65 1,152
Year ended 9/30/95....... 8.79 1.89 4.45 4.66 1,190 0.33 1.94 4.40
2/1/94*- 9/30/94......... (5.47) 1.75+ 4.37+ 12.13++ 986 0.22 1.87+ 4.25+
Pennsylvania--Class A
Year ended 9/30/97....... 7.89 1.19 4.60 32.99 30,092
Year ended 9/30/96....... 6.57 1.11 4.82 4.56 31,139
Year ended 9/30/95....... 10.55 1.21 5.05 11.78 33,251
Year ended 9/30/94....... (5.00) 1.16 4.91 7.71 34,943
Year ended 9/30/93....... 14.71 1.19 5.14 40.74 41,296
Year ended 9/30/92....... 10.04 1.01 5.79 32.87 39,431 0.45 1.16 5.64
Year ended 9/30/91....... 13.40 0.98 6.16 25.24 37,853 0.45 1.23 5.91
Year ended 9/30/90....... 4.13 0.06 6.24 40.64 35,572 0.45 1.31 5.99
Year ended 9/30/89....... 9.53 0.92 6.56 9.05 41,856 0.47 1.17 6.30
Year ended 9/30/88....... 16.20 0.83 6.96 4.14 30,796 0.48 1.08 6.71
Pennsylvania--Class D
Year ended 9/30/97....... 7.07 1.96 3.83 32.99 816
Year ended 9/30/96....... 5.76 1.88 4.05 4.56 876
Year ended 9/30/95....... 9.53 2.23 4.10 11.78 426
2/1/94*- 9/30/94......... (7.50) 2.00+ 4.20+ 7.71++ 43
- ----------
+ Annualized.
++ For the year ended 9/30/94.
</TABLE>
19
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEM
Each Series offers two classes of shares. Class A shares are sold to
investors who have concluded that they would prefer to pay an initial sales load
and have the benefit of lower continuing charges. Class D shares are sold to
investors choosing to pay no initial sales load, a higher distribution fee and,
with respect to redemptions within one year of purchase, a CDSL. The Alternative
Distribution System allows investors to choose the method of purchasing shares
that is most beneficial in light of the amount of the purchase, the length of
time the shares are expected to be held and other relevant circumstances.
Investors should determine whether under their particular circumstances it is
more advantageous to incur an initial sales load and be subject to lower ongoing
charges, as discussed below, or to have the entire initial purchase price
invested in a Series with the investment thereafter being subject to higher
ongoing charges and, for a one-year period, a CDSL.
Investors who expect to maintain their investment for an extended period of
time might choose to purchase Class A shares because over time the accumulated
continuing distribution fee of Class D shares may exceed the initial sales load
and lower distribution fee of Class A shares. This consideration must be weighed
against the fact that the amount invested in a Series will be reduced by the
initial sales load deducted at the time of purchase. Furthermore, the higher
distribution fees on Class D shares will be offset to the extent any return is
realized on the additional funds initially invested therein that would have been
equal to the amount of the initial sales load on Class A shares.
Investors who qualify for reduced initial sales loads, as described under
"Purchase of Shares" below, might also choose to purchase Class A shares because
the sales load deducted at the time of purchase would be less or waived in full.
However, investors should consider the effect of the 1% CDSL imposed on shares
on which the initial sales load was waived in full because the amount of Class A
shares purchased reached $1,000,000 or more.
Alternatively, some investors might choose to have all of their funds
invested initially by purchasing Class D shares, although remaining subject to a
higher continuing distribution fee and, for a one-year period, a CDSL as
described below. For example, an investor who does not qualify for reduced sales
loads would have to hold Class A shares for more than 6.33 years for the Class D
distribution fee to exceed the initial sales load plus the distribution fee on
Class A shares. This example does not take into account the time value of money
which further reduces the impact of the Class D shares' 1% distribution fee,
fluctuations in net asset value or the effect of the return on the investment
over this period of time.
Investors should understand that the purpose and function of the initial
sales load (and deferred sales load, when applicable) with respect to Class A
shares is the same as those of the deferred sales load and higher distribution
fees with respect to Class D shares in that the sales loads and distribution
fees applicable to a Class provide for the financing of the distribution of the
shares of the Series.
The two classes of shares of a Series represent interests in the same
portfolio of investments, have the same rights and are generally identical in
all respects except that each class bears its separate distribution and,
potentially, certain other class expenses and has exclusive voting rights with
respect to any matter to which a separate vote of any class is required by the
Investment Company Act of 1940, as amended (the "1940 Act"), or applicable state
law. The net income attributable to each class and dividends payable on the
shares of each class will be reduced by the amount of distribution fee of each
class. Class D shares bear higher distribution expenses which will cause the
Class D shares to pay lower dividends than the Class A shares. The two classes
also have separate exchange privileges.
The Directors or Trustees of each Fund believe that no conflict of interest
currently exists between the Class A and Class D shares of each Series. On an
ongoing basis, they, in the exercise of their fiduciary duties under the 1940
Act and applicable state law, will seek to ensure that no such conflict arises.
For this purpose, they will monitor the Funds for the existence of any material
conflict among the classes and will take such action as is reasonably necessary
to eliminate any such conflicts that may develop.
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DIFFERENCES BETWEEN CLASSES. The primary differences between Class A and
Class D shares are their sales load structures and ongoing expenses as set forth
below. Each class has advantages and disadvantages for different investors, and
investors should choose the class that best suits their circumstances and their
objectives.
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE
SALES LOAD DAILY NET ASSETS) OTHER INFORMATION
---------- ------------------ -----------------
CLASS A Maximum initial Service fee of Initial sales load
sales load of 4.75% .25%. waived or reduced
of the public for certain
offering price. purchases.
CDSL of 1% on
redemptions within
18 months of
purchase on
shares on which
initial sales load
was waived in full
due to the size of
the purchase.
CLASS D None Service fee of CDSL of 1% on
.25%; Distribution redemptions within
fee of .75%. one year of
purchase.
INVESTMENT OBJECTIVES AND POLICIES
MUNICIPAL SECURITIES
As used in this Prospectus, "municipal securities" refers to short-term
notes, commercial paper and intermediate and long-term bonds issued by or on
behalf of states, territories and possessions of the United States and the
District of Columbia, and their political subdivisions (such as counties,
cities, boroughs, townships, school districts and authorities), agencies, and
instrumentalities, the interest on which is, in the opinion of counsel to the
issuers, exempt from regular federal income taxes and, in certain instances,
applicable state or local income taxes. Such interest may, however, be subject
to the federal alternative minimum tax. Such securities are traded primarily in
the over-the-counter market.
Municipal bonds are issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, schools,
streets, water and sewer works, and gas and electric utilities. Municipal bonds
also may be issued in connection with the refunding of outstanding obligations,
obtaining funds to lend to other public institutions and for general operating
expenses.
The two principal classifications of municipal bonds are "general obligation
bonds" and "revenue bonds." General obligation bonds are secured by the issuer's
pledge of its faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source, but not from the general
taxing power. In addition, certain types of "industrial development bonds"
issued by or on behalf of public authorities to obtain funds for
privately-operated facilities are eligible for purchase, provided that the
interest paid thereon qualifies as exempt from regular federal income taxes and,
in certain instances, applicable state and/or local taxes. Tax-exempt industrial
development bonds do not generally carry the pledge of the credit of the issuing
municipality. Interest earned from certain municipal securities (including
certain industrial development bonds) that are private activity bonds, as
defined in the Internal Revenue Code of 1986, as amended (the "Code"), is
treated as a preference item for purposes of the alternative minimum tax. Each
Series may invest any portion of its assets in municipal securities the interest
on which is subject to the alternative minimum tax. Under normal circumstances,
each Series will invest at least 80% of its net assets in municipal securities
the interest on which is exempt from regular federal income tax (although such
interest may be subject to the federal alternative minimum tax) and state or
local income tax.
Municipal notes generally are issued to provide for short-term capital needs
and generally have maturities of 5 years or less. They include such securities
as Tax Anticipation Notes, Revenue Anticipation Notes, Bond Anticipation Notes
and Construction Loan Notes.
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Municipal commercial paper are short-term obligations generally having a
maturity of less than nine months.
It should be noted that municipal securities may be adversely affected by
local political and economic conditions and developments within a particular
state. For example, adverse conditions in an industry that is significant to the
state could have a correspondingly adverse effect on specific issuers within the
state or on anticipated revenue of the issuing state; conversely, an improving
economic outlook for a significant industry may have a positive effect on such
issuers or revenue. The value of municipal securities is dependent on a variety
of factors, including general conditions in the money markets or the municipal
bond markets, political and economic factors nationally or within a state, the
size of the particular offering, the supply of municipal bonds, the maturity of
the obligation, the credit quality and rating of the issue and the assistance
provided to the bond issuing authority by the applicable state. Under normal
market conditions, if general market interest rates are increasing, the prices
of bonds will decrease. In a market of decreasing interest rates, the opposite
will generally be true. In either case, the longer the maturity, the greater the
effect. A more detailed description of the municipal securities in which each
Series may invest and special factors relating to them is set forth in each
Series' Statement of Additional Information.
SELIGMAN MUNICIPAL FUND SERIES, INC.
The Municipal Fund is a non-diversified, open-end management investment
company, as defined in the 1940 Act, incorporated in Maryland on August 8, 1983.
The Municipal Fund consists of a National Series and twelve state Series, as
described below. The Municipal Fund State Series offer investments in the
following states:
Colorado Minnesota
Georgia Missouri
Louisiana New York
Maryland Ohio
Massachusetts Oregon
Michigan South Carolina
NATIONAL SERIES seeks to maximize income exempt from regular federal income
taxes to the extent consistent with preservation of capital and with
consideration given to opportunities for capital gain. Under normal market
conditions, the National Series attempts to invest 100%, and as a matter of
fundamental policy will invest at least 80%, of the value of its net assets in
securities of states, territories and possessions of the United States and the
District of Columbia, and their political subdivisions, agencies and
instrumentalities, the interest on which is exempt from regular federal income
taxes. Such interest, however, may be subject to the federal alternative minimum
tax. There can be no assurance that the National Series will be able to meet its
investment objective.
MUNICIPAL FUND STATE SERIES each seek to maximize income exempt from regular
federal income taxes and from the personal income taxes of its designated state
to the extent consistent with preservation of capital and with consideration
given to opportunities for capital gain. Each Municipal Fund State Series
attempts to invest 100%, and as a matter of fundamental policy invests at least
80%, of the value of its net assets in securities the interest on which is
exempt from regular federal income taxes and from the personal income taxes of
the designated state. Such interest, however, may be subject to the federal
alternative minimum tax. Each Municipal Fund State Series may also invest in
municipal securities of issuers outside its designated state if such securities
bear interest that is exempt from regular federal income taxes and personal
income taxes of the state. If, in abnormal market conditions, in the judgment of
the Manager, municipal securities satisfying the investment objective of any of
the Municipal Fund State Series are not available or for other defensive
purposes, such Municipal Fund State Series may temporarily invest up to 20% of
the value of its net assets in instruments the interest on which is exempt from
regular federal income taxes, but not State personal income taxes. Such
securities would include those set forth under "Municipal Securities" above,
that would otherwise meet the Series' objective. There can be no assurance that
a Municipal Fund State Series will be able to meet its investment objective.
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<PAGE>
Each Municipal Fund State Series and the National Series are expected to
invest principally, without percentage limitations, in municipal securities that
are rated investment grade on the date of investment. Each Series also may
invest in unrated municipal securities if, based upon credit analysis by the
Manager, it is believed that such securities are of comparable quality to
investment grade securities.
In unusual circumstances, the Municipal Fund may invest up to 20% of the
value of its net assets on a temporary basis in fixed-income securities, the
interest on which is subject to federal, state or local income tax, pending the
investment or reinvestment in municipal securities of proceeds of sales of
shares or sales of portfolio securities or in order to avoid the necessity of
liquidating portfolio investments to meet redemptions of shares by investors or
where market conditions due to rising interest rates or other adverse factors
warrant temporary investing for defensive purposes. Investments in taxable
securities will be substantially in securities issued or guaranteed by the U.S.
Government (such as bills, notes and bonds), its agencies, instrumentalities or
authorities; highly-rated corporate debt securities (rated AA-, or better, by
S&P or Aa3, or better, by Moody's); prime commercial paper (rated A-1+/A-1 by
S&P or P-1 by Moody's) and certificates of deposit of "Acceptable Banking
Institutions." Acceptable Banking Institutions are defined as the 100 largest
(based on assets) banks that are subject to regulatory supervision by the U.S.
Government or state governments and the 50 largest (based on assets) foreign
banks with branches or agencies in the United States. Investments in
certificates of deposit of foreign banks and foreign branches of U.S. banks may
involve certain risks, including different regulation, use of different
accounting procedures, political or other economic developments, exchange
controls, or possible seizure or nationalization of foreign deposits.
SELIGMAN MUNICIPAL SERIES TRUST
The Municipal Trust is a non-diversified open-end management investment
company, organized as an unincorporated business trust under the laws of
Massachusetts on July 27, 1984. The Municipal Trust consists of Seligman North
Carolina Municipal Series, Seligman Florida Municipal Series, Seligman
California Municipal Quality Series and Seligman California Municipal High-Yield
Series.
SELIGMAN NORTH CAROLINA MUNICIPAL SERIES (the "North Carolina Series") and
SELIGMAN FLORIDA MUNICIPAL SERIES (the "Florida Series") each seek high income
exempt from regular federal income taxes (and with respect to the North Carolina
Series, North Carolina personal income taxes) consistent with preservation of
capital and with consideration given to capital gain by investing in North
Carolina or Florida municipal securities, as applicable, and investment grade
commercial paper rated within the two highest rating categories, on the date of
investment. Each Series also may invest in unrated municipal securities if,
based upon credit analysis by the Manager and under the supervision of the
Trustees, it is believed that such securities are of comparable quality to
investment grade securities. There can be no assurance that a Series will be
able to meet its investment objective.
Each Series will attempt to invest 100%, and as a matter of fundamental
policy will invest at least 80%, of the value of its net assets in North
Carolina or Florida municipal securities, as applicable, the interest on which
is exempt from regular federal taxes and, if applicable, North Carolina personal
taxes. Such interest, however, may be subject to the federal alternative minimum
tax. In abnormal market conditions if, in the judgment of the Manager, North
Carolina or Florida municipal securities satisfying such Series' objective may
not be purchased, the Municipal Trust may make temporary investments in
securities issued by states other than North Carolina or Florida. Moreover,
under such conditions and for defensive purposes, a Series may make temporary
investments in high-quality securities, the interest on which is not exempt from
federal income tax or, if applicable, North Carolina personal taxes. Investments
in taxable securities will be substantially in securities issued or guaranteed
by the U.S. Government (such as bills, notes and bonds), its agencies,
instrumentalities or authorities; highly-rated corporate debt securities (rated
AA-, or better, by S&P or Aa3, or bet-
23
<PAGE>
ter, by Moody's); prime commercial paper (rated A-1+/A-1 by S&P or P-1 by
Moody's) and certificates of deposit of Acceptable Banking Institutions, as
defined under "Seligman Municipal Fund Series, Inc." Investments in certificates
of deposit of foreign banks and foreign branches of U.S. banks may involve
certain risks, as described above.
Each Series is permitted to purchase project notes and standby commitments;
however, neither Series has any present intention of investing in such
securities.
SELIGMAN CALIFORNIA MUNICIPAL QUALITY SERIES (the "California Quality
Series") seeks high income exempt from regular federal income taxes and from the
personal income taxes of California consistent with preservation of capital and
with consideration given to capital gain by investing in California municipal
securities that on the date of investment are within the three highest ratings
of Moody's (Aaa, Aa, A for bonds; MIG1, MIG2, MIG3, for notes; P-1 for
commercial paper) or S&P (AAA, AA, A for bonds; SP-1, SP-2 for notes; A-1+,
A-1/A-2 for commercial paper). The Series also may invest in unrated California
municipal securities if, based upon credit analysis by the Manager, it is
believed that such securities are of comparable quality to the rated securities
in which the series may invest. The securities held by the California Quality
Series ordinarily will have maturities in excess of one year. There can be no
assurance that the California Quality Series will be able to meet its investment
objective.
SELIGMAN CALIFORNIA MUNICIPAL HIGH-YIELD SERIES (the "California High-Yield
Series") seeks the maximum income exempt from regular federal income taxes and
from the personal income taxes of California consistent with preservation of
capital and with consideration given to capital gain by investing in California
municipal securities that on the date of investment are rated within the medium
to lower rating categories of Moody's (Baa or lower for bonds; MIG3 or lower for
notes; P-2 or lower for commercial paper) or S&P (BBB or lower for bonds; A-2 or
lower for commercial paper). The Series may invest in unrated California
municipal securities if, based upon credit analysis by the Manager, it is
believed that such securities are of comparable quality to securities with a
medium or low credit rating. The securities held by the Series ordinarily will
have maturities in excess of one year. There can be no assurance that the Series
will be able to meet its investment objective.
The securities in which the California High-Yield Series invests generally
involve greater volatility of price and risk of loss of principal and income
than securities in higher rating categories. Shares of the California High-Yield
Series are appropriate only for those investors who can bear the risk inherent
in seeking the highest tax-exempt yields.
During the fiscal year ended September 30, 1997 the weighted average ratings
of the California municipal long-term securities held by the California High-
Yield Series were as follows:
PERCENTAGE OF TOTAL
S&P/MOODY'S RATINGS INVESTMENTS
----------------------- --------------------
AAA/Aaa ....................................................... 2%
AA/Aa ......................................................... 9%
A/A ........................................................... 50%
BBB/Baa ....................................................... 17%
BB/Ba ......................................................... --
B/B ........................................................... --
CCC/Caa ....................................................... --
Unrated ....................................................... 22%
California municipal securities in the fourth rating category of Moody's and
S&P, although commonly referred to as investment grade, may have some
speculative characteristics that may affect the issuer's ability to pay interest
and repay principal. California municipal securities rated below the fourth
category are subject to greater risk of loss of principal and interest than
higher-rated securities, as they are predominantly speculative with respect to
the issuer's ability to pay interest and repay principal. California municipal
securities rated below BBB by S&P or Baa by Moody's are also more susceptible to
price volatility due to general economic conditions and changes in interest
rates. Since municipal securities are purchased from and sold to dealers, prices
at which these securities are sold will be affected by the degree of interest of
dealers to bid for them. In certain markets, dealers may be unwilling
24
<PAGE>
to make bids for the securities of certain issuers that the seller considers
reasonable. Furthermore, because the net asset value of the California
High-Yield Series' shares reflects the degree of willingness of dealers to bid
for California municipal securities, the price of the California High-Yield
Series' shares may be subject to greater fluctuation.
Moody's and S&P's ratings are generally accepted measures of credit risk.
They are, however, subject to certain limitations. The rating of an issuer is
based heavily on past developments and does not necessarily reflect probable
future conditions. Ratings also are not updated continuously. For a detailed
description of the ratings, see Appendix A to the Series' Statement of
Additional Information.
The Manager attempts to minimize the risks to the California High-Yield
Series inherent in the investment in lower-rated California municipal securities
through analysis of the particular issuer and security, trends in interest rates
and local and general economic conditions, diversification and when appropriate
by investing a substantial portion of the Series' assets in California municipal
securities rated in the fourth rating category or higher.
Each of the California Quality Series and the California High-Yield Series
will attempt to invest 100%, and as a matter of fundamental policy will invest
at least 80%, of the value of its net assets in securities the interest on which
is exempt from regular federal and California personal income taxes. Such
interest, however, may be subject to the federal alternative minimum tax. In
abnormal market conditions if, in the judgment of the Manager, municipal
securities satisfying a Series' objective may not be purchased, a Series may
make temporary investments in securities the interest on which is exempt only
from regular federal income tax, such as securities issued by states other than
California. Moreover, under such conditions, a Series may make temporary
investments in high-quality securities the interest on which is not exempt from
either federal or California personal income taxes. Investments in taxable
securities will be substantially in securities issued or guaranteed by the U.S.
Government (such as bills, notes and bonds), its agencies, instrumentalities or
authorities; highly-rated corporate debt securities (rated AA-, or better, by
S&P or Aa3, or better, by Moody's); prime commercial paper (rated A-1+/A-1 by
S&P or P-1 by Moody's) and certificates of deposit of Acceptable Banking
Institutions, as defined above under "Seligman Municipal Fund Series, Inc."
Investments in certificates of deposit of foreign banks and foreign branches of
U.S. banks may involve certain risks, as described above.
Furthermore, when economic or market conditions warrant, the California
High-Yield Series may assume a temporary defensive position and invest up to 25%
of the value of its net assets in California municipal securities rated within
the three highest rating categories of Moody's or S&P. The securities which the
Series will hold under this circumstance may have maturities of less than one
year.
Each of the California Quality Series and the California High-Yield Series
may enter into stand-by commitments. Under a stand-by commitment, a Series
obligates a dealer to repurchase at the Series' option specified securities at a
specified price. The exercise of a stand-by commitment is subject to the ability
of the dealer to make payment on demand. A Series would acquire stand-by
commitments solely to facilitate portfolio liquidity and not for trading
purposes. Prior to investing in stand-by commitments the Municipal Trust, if it
deems necessary based upon the advice of counsel, will apply to the Securities
and Exchange Commission for an exemptive order relating to such commitments and
the valuation thereof. There can be no assurance that the Securities and
Exchange Commission will provide such authorization.
The price which a Series would pay for municipal securities with stand-by
commitments generally would be higher than the price which otherwise would be
paid for the municipal securities alone. A Series will only purchase obligations
with stand-by commitments from sellers the Manager deems creditworthy.
Stand-by commitments with respect to portfolio securities of a Series with
maturities of less than 60 days which are separate from the underlying portfolio
securities are not assigned a value. The cost of any such
25
<PAGE>
stand-by commitment is carried as an unrealized loss from the time of purchase
until it is exercised or expires. Stand-by commitments with respect to portfolio
securities of a Series with maturities of 60 days or more which are separate
from the underlying portfolio securities and the underlying portfolio securities
are valued at fair value as determined in accordance with procedures established
by the Board of Trustees. The Board of Trustees would, in connection with the
determination of the value of such a stand-by commitment, consider among other
factors the creditworthiness of the writer of the stand-by commitment, the
duration of the stand-by commitment, the dates on which or the periods during
which the stand-by commitment may be exercised and the applicable rules and
regulations of the Securities and Exchange Commission.
SELIGMAN NEW JERSEY MUNICIPAL FUND, INC.
The New Jersey Fund is a non-diversified, open-end management investment
company, as defined in the 1940 Act, or mutual fund, incorporated in Maryland on
March 13, 1987.
The New Jersey Fund seeks to maximize income exempt from regular federal
income tax and New Jersey personal income tax consistent with preservation of
capital and with consideration given to opportunities for capital gain by
investing in New Jersey municipal securities that are rated investment grade on
the date of investment. The New Jersey Fund also may invest in New Jersey
municipal securities that, while not rated as investment grade, are not rated
lower than B by S&P or Moody's, or if not rated, are believed, based upon credit
analysis by the Manager, to have at least comparable credit to B rated
securities. There can be no assurance that the New Jersey Fund will be able to
meet its investment objective.
The New Jersey Fund will attempt to invest 100%, and as a matter of
fundamental policy, will invest at least 80%, of the value of its net assets in
securities the interest on which is exempt from regular federal income tax and
New Jersey personal income tax. Such interest may, however, be subject to the
federal alternative minimum tax. In abnormal market conditions if, in the
judgment of the Manager, municipal securities satisfying the New Jersey Fund's
objective may not be purchased or for other temporary defensive purposes, the
New Jersey Fund may make investments in securities the interest on which is
exempt only from regular federal income tax, such as securities issued by states
other than New Jersey, or is exempt only from New Jersey personal income tax,
such as securities issued by the U.S. Government (such as Treasury bills, notes
and bonds), its agencies, instrumentalities or authorities. Moreover, under such
conditions, the New Jersey Fund may also make temporary investments in
fixed-income securities the interest on which is not exempt from either federal
income tax or New Jersey personal income tax. Such investments will be
substantially in highly-rated corporate debt securities (rated AA-, or better,
by S&P or Aa3, or better, by Moody's), prime commercial paper (rated A-1+/A-1 by
S&P or P-1 by Moody's), and certificates of deposit of Acceptable Banking
Institutions as defined under "Seligman Municipal Fund Series, Inc." Investments
in certificates of deposit of foreign banks and foreign branches of U.S. banks
may involve certain risks, as described above.
The New Jersey Fund is permitted to purchase project notes and standby
commitments; however, the New Jersey Fund has no present intention of investing
in such securities.
SELIGMAN PENNSYLVANIA MUNICIPAL FUND SERIES
The Pennsylvania Fund is a non-diversified, open-end management investment
company organized as an unincorporated trust under the laws of the Commonwealth
of Pennsylvania by a Declaration of Trust dated May 13, 1986.
The Pennsylvania Fund seeks high income exempt from regular federal income
tax and Pennsylvania income taxes consistent with preservation of capital by
investing in Pennsylvania municipal securities that are rated investment grade
on the date of investment. The Pennsylvania Fund also may invest in unrated
Pennsylvania municipal securities if, based upon credit analysis by the Manager,
it is believed that such securities are of comparable quality to investment
grade securities. The securities which the Pennsylvania Fund will hold
ordinarily will have maturities in excess of one year. There can be no assurance
that the Fund will be able to meet its investment objective.
26
<PAGE>
The Pennsylvania Fund will attempt to invest 100%, and as a matter of
fundamental policy will invest at least 80%, of the value of its net assets in
securities the interest on which is exempt from regular federal and Pennsylvania
income taxes. Such interest, however, may be subject to the federal alternative
minimum tax. In abnormal market conditions if, in the judgment of the Manager,
municipal securities satisfying the Pennsylvania Fund's objectives can not be
purchased, the Pennsylvania Fund may make temporary investments in securities
the interest on which is exempt only from regular federal income tax, such as
securities issued by states other than Pennsylvania, or is exempt only from
Pennsylvania income tax, such as securities issued by the U.S. Government (such
as bills, notes and bonds), its agencies, instrumentalities or authorities.
Moreover, under such conditions, the Pennsylvania Fund may make temporary
investments in fixed-income securities the interest on which is not exempt from
either federal or Pennsylvania income taxes. Such investments will be
substantially in highly-rated corporate debt securities (rated AA-, or better,
by S&P or Aa3, or better, by Moody's), prime commercial paper (rated A-1+/A-1 by
S&P or P-1 by Moody's) and certificates of deposit of Acceptable Banking
Institutions, as defined under "Seligman Municipal Fund Series, Inc."
Investments in certificates of deposit of foreign banks and foreign branches of
U.S. banks may involve certain risks, as described above.
Although the underlying value and quality of particular securities will be
considered in selecting investments for the Pennsylvania Fund, capital
appreciation will not be a factor. However, the Pennsylvania Fund may sell
securities held in its portfolio and, as a result, realize capital gain or loss,
in order to eliminate unsafe investments and investments not consistent with the
preservation of the capital or tax status of the Pennsylvania Fund; honor
redemption orders; meet anticipated redemption requirements and negate gains
from discount purchases; reinvest the earnings from portfolio securities in like
securities; or defray normal administration expenses.
The Pennsylvania Fund is authorized to purchase standby commitments;
however, the Pennsylvania Fund has no present intention of investing in such
securities.
GENERAL
Each Fund, as a non-diversified investment company, is not limited by the
1940 Act as to the proportion of its assets that it may invest in the
obligations of a single issuer. However, each Series will comply with the
diversification requirements of the Code, as amended, and has therefore adopted
an investment restriction, which may not be changed without shareholder vote
(except for the New Jersey Fund), prohibiting each Series from purchasing with
respect to 50% of the value of the respective Series' total assets, securities
of any issuer if immediately thereafter more than 5% of such Series' total
assets would be invested in the securities of any single issuer. Furthermore, as
a matter of policy, with respect to 75% of each Series' assets, the respective
Series may not purchase any revenue bonds if thereafter more than 5% of such
Series' assets would be invested in revenue bonds of a single issuer. This
policy is not fundamental and may be changed by the Directors or Trustees, as
applicable, without shareholder approval. In the view of the Manager, the above
restriction and policy reduce the risk that might otherwise be associated with
an investment in a non-diversified investment company.
As a matter of policy, the Directors or Trustees, as applicable, will not
change a Series' investment objective without a vote of a majority of the
outstanding voting security of that Series. Under the 1940 Act, a "vote of a
majority of the outstanding voting securities" of a Series means the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of the Series
or (2) 67% or more of the shares of the Series present at a shareholder's
meeting if more than 50% of the outstanding shares of the Series are represented
at the meeting in person or by proxy.
A more detailed list of each Series' investment policies, including a list
of those restrictions or investment activities that cannot be changed without a
vote of a majority of the outstanding voting securities of a Series appears in
the Series' Statement of Additional Information.
Investment grade bonds and notes are within the four highest credit rating
categories, and investment grade commercial paper is within the two highest
credit rating categories, of Moody's (Aaa, Aa, A, Baa for bonds;
27
<PAGE>
MIG 1, MIG 2, MIG 3, MIG 4 for notes; P-1--P-2 for commercial paper) or S&P
(AAA, AA, A, BBB for bonds; SP-1--SP-2 for notes; A-1+, A-1/A-2 for commercial
paper). Although bonds and notes rated in the fourth credit rating category are
commonly referred to as investment grade they may have speculative
characteristics. Such characteristics may under certain circumstances lead to a
greater degree of market fluctuations in the value of such securities than do
higher rated municipal securities of similar maturities. A detailed discussion
of such characteristics and circumstances and their effect upon each Series
appears in the Statements of Additional Information under the heading
"Investment Objectives, Policies And Risks." A description of the credit ratings
is contained in Appendix A to the Statements of Additional Information.
ILLIQUID SECURITIES. Each Series may invest up to 15% of its net assets in
illiquid securities including restricted securities, (i.e., securities not
readily marketable without registration under the Securities Act of 1933 (the
"1933 Act")) and other securities that are not readily marketable. Each Series
may purchase restricted securities that can be offered and sold to "qualified
institutional buyers" under Rule 144A of the 1933 Act, and the Manager, acting
pursuant to procedures approved by the Funds' Boards of Directors or Trustees,
may determine, when appropriate, that specific Rule 144A securities are liquid
and not subject to the 15% limitation on illiquid securities. Should this
determination be made, the Manager, acting pursuant to such procedures, will
carefully monitor the security (focusing on such factors, amount others, as
trading activity and availability of information) to determine that the Rule
144A security continues to be liquid. It is not possible to predict with
assurance exactly how the market for Rule 144A securities will further evolve.
This investment practice could have the effect of increasing the level of
illiquidity in a Series, if and to the extent that qualified institutional
buyers become for a time uninterested in purchasing Rule 144A securities.
WHEN LSSUED SECURITIES. Each Series may purchase municipal securities on a
"when issued" basis, which means that delivery of and payment for such
securities normally take place within 45 days after the date of the buyer's
purchase commitment. The payment obligation and the interest rate on when-issued
securities are each fixed at the time the purchase commitment is made, although
no interest accrues to a purchaser prior to the settlement of the purchase of
the securities. As a result the yields obtained and the market value on such
securities may be higher or lower on the date when the instruments are actually
delivered to the buyer. A Series will generally purchase a municipal security
sold on a when issued basis with the intention of actually acquiring the
securities on the settlement date. Any gain realized from any such sale of
securities will be subject to federal and state taxes.
A separate account consisting of cash or high-grade liquid debt securities
equal to the amount of outstanding purchase commitments is established with the
Funds' Custodian in connection with any purchase of when issued securities. The
account is marked to market daily, with additional cash or liquid high-grade
debt securities added when necessary. A Series meets its respective obligation
to purchase when-issued securities from outstanding cash balances, sale of
securities held in the separate account, sale of other securities or, although
they would not normally expect to do so, from the sale of the when-issued
securities themselves (which may have a greater or lesser value than the Series'
payment obligations).
VARIABLE AND FLOATING RATE OBLIGATIONS. The interest rates payable on certain
securities in which a Series may invest are not fixed and may fluctuate based
upon changes in market rates. The interest rate on variable rate obligations is
adjusted at predesignated periods and on floating rate obligations whenever
there is a change in the market rate of interest on which the floating rate is
based.
The interest rate is set as a specific percentage of a designated base rate,
such as the rate on a Treasury Bond or Bill or the prime rate at a major
commercial bank. Such a bond generally provides that a Series can demand payment
of the bond upon seven days' notice at an amount equal to par plus accrued
interest,
28
<PAGE>
which amount, in unusual circumstances, may be more or less than the amount a
Series paid for the bond.
The maturity of floating or variable rate obligations (including
participation interests therein) is deemed to be the longer of (i) the notice
period required before a Series is entitled to receive payment of the obligation
upon demand or (ii) the period remaining until the obligation's next interest
rate adjustment. If not redeemed by a Series through the demand feature, the
obligations mature on a specified date which may range up to thirty years from
the date of issuance.
PARTICIPATION INTERESTS. From time to time, a Series may purchase from banks
participation interests in all or part of specific holdings of municipal
securities. Each participation interest is backed by an irrevocable letter of
credit or guarantee of the selling bank. Participation interests will be
purchased only if, in the opinion of counsel, interest income on such interests
will be tax-exempt when distributed as dividends to shareholders of a Series.
BORROWING. Each Series may borrow money only from banks and only for
temporary or emergency purposes (but not for the purchase of portfolio
securities) in an amount not in excess of 10% of the value of its total assets
at the time the borrowing is made (not including the amount borrowed). Permitted
borrowings may be secured or unsecured. A Series will not purchase additional
portfolio securities if such Series has outstanding borrowings in excess of 5%
of the value of its total assets.
MANAGEMENT SERVICES
THE MANAGER. The Board of Directors or Trustees, as applicable, provides
broad supervision over the affairs of the Funds. Pursuant to Management
Agreements approved by the Directors or Trustees and the shareholders of each
Series, the Manager manages the investment of the assets of each Series and
administers its business and other affairs. The address of the Manager is 100
Park Avenue, New York, NY 10017.
In addition to serving the Funds, the Manager serves as manager of fourteen
other investment companies which, together with the Funds, make up the "Seligman
Group." These companies are Seligman Capital Fund, Inc., Seligman Cash
Management Fund, Inc., Seligman Common Stock Fund, Inc., Seligman Communications
and Information Fund, Inc., Seligman Frontier Fund, Inc., Seligman Growth Fund,
Inc., Seligman Henderson Global Fund Series, Inc., Seligman High Income Fund
Series, Seligman Income Fund, Inc., Seligman Portfolios, Inc., Seligman Quality
Municipal Fund, Inc., Seligman Select Municipal Fund, Inc., Seligman Value Fund
Series, Inc. and Tri-Continental Corporation. The aggregate assets of the
Seligman Group were approximately $18.0 billion at December 31, 1997. The
Manager also provides investment management or advice to institutional and other
accounts having a December 31, 1997 value of approximately $6.3 billion.
Mr. William C. Morris is Chairman of the Manager and Chairman of the Board
and Chief Executive Officer of each Fund. Mr. Morris owns a majority of the
outstanding voting securities of the Manager.
The Manager also provides senior management for Seligman Data Corp., a
wholly owned subsidiary of certain investment companies in the Seligman Group,
which performs, at cost, certain recordkeep-ing functions for each Fund,
maintains the records of shareholder investment accounts and provides related
services.
The Manager is entitled to receive a management fee from each Series for its
services, calculated daily and payable monthly, equal to .50% of the average
daily net assets of each Series on an annual basis. The Manager has from time to
time voluntarily waived a portion of its management fee with respect to one or
more of the Series. Each Fund pays all its expenses other than those assumed by
the Manager; expenses are allocated among the Series of the Municipal Fund and
of the Municipal Trust in a manner determined by the Directors or Trustees to be
fair and equitable. The management fee paid by each Series expressed as a
percentage of average daily net assets of that Series is presented in the
following table for the fiscal year ended September 30,1997. Total expenses for
each Series' Class A and D shares, expressed as an annualized percentage of
average daily net assets, are also presented in the following table for the year
ended September 30, 1997.
29
<PAGE>
- --------------------------------------------------------------------------------
ANNUALIZED EXPENSE
MANAGEMENT FEE RATE RATIOS FOR
FOR THE YEAR ENDED THE YEAR ENDED
SERIES 9/30/97 9/30/97
------ ------- ---------------
CLASS A CLASS D
------- -------
National.................. .50% .84% 1.75%
Colorado.................. .50% .90% 1.81%
Georgia................... .50% .89% 1.79%
Louisiana................. .50% .86% 1.76%
Maryland.................. .50% .90% 1.81%
Massachusetts............. .50% .84% 1.74%
Michigan.................. .50% .81% 1.71%
Minnesota................. .50% .85% 1.75%
Missouri.................. .50% .89% 1.80%
New York.................. .50% .82% 1.73%
Ohio...................... .50% .81% 1.71%
Oregon.................... .50% .90% 1.80%
South Carolina............ .50% .84% 1.75%
California
High-Yield.............. .50% .87% 1.77%
California Quality........ .50% .82% 1.72%
Florida................... .50% 1.04% 1.81%
North Carolina............ .50% 1.09% 1.85%
New Jersey................ .50% 1.06% 1.83%
Pennsylvania.............. .50% 1.19% 1.96%
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT. Thomas G. Moles, Vice President and Senior Portfolio
Manager of each of the Funds, is a Managing Director of J. & W. Seligman & Co.
Incorporated, as well as President and Senior Portfolio Manager of Seligman
Quality Municipal Fund, Inc. and Seligman Select Municipal Fund, Inc. He is
responsible for more than $1.8 billion in municipal securities. Mr. Moles, with
more than 25 years of experience, has spearheaded Seligman's municipal
investment efforts since joining the Manager in 1983.
The Manager's discussion of each Series' performance as well as a line graph
illustrating comparative performance information between each Series of a Fund
and the Lehman Brothers Municipal Bond Index is included in the respective
Fund's fiscal 1997 Annual Report to shareholders. Copies of a Fund's Annual
Report may be obtained, without charge, by calling or writing the Funds at the
telephone numbers or address listed on the cover page of this Prospectus.
PORTFOLIO TRANSACTIONS. Fixed income securities are generally traded on the
over-the-counter market on a "net" basis without a stated commission, through
dealers acting for their own account and not as brokers. Prices paid to dealers
will generally include a "spread", i.e., the difference between the prices at
which a dealer is willing to purchase or to sell the security at that time. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of compensation to the underwriter.
The Management Agreements recognize that in the purchase and sale of
portfolio securities, the Manager will seek the most favorable price and
execution, and, consistent with that policy, may give consideration to the
research, statistical and other services furnished by dealers to the Manager for
its use in connection with its services to the Funds as well as other clients.
Consistent with the Rules of the National Association of Securities Dealers,
Inc. and subject to seeking the most favorable price and execution available and
such other policies as the Directors or Trustees may determine, the Manager may
consider sales of shares of the Funds (and, under applicable laws, of the other
Seligman Mutual Funds) as a factor in the selection of dealers to execute
portfolio transactions for the Funds.
PORTFOLIO TURNOVER. A change in securities held by any Series is known as
"portfolio turnover" and may involve the payment by such Series of dealer
spreads or underwriting commissions and other transactions costs on the sale of
the securities as well as on the reinvestment of the proceeds in other
securities. While it is the policy of each Series to hold securities for
investment, changes will be made from time to time when the Manager believes
such changes will strengthen the Series' portfolio. The portfolio turnover of
any Series is not expected to exceed 100%.
PURCHASE OF SHARES
Seligman Financial Services, Inc. ("SFSI"), an affiliate of the Manager,
acts as general distributor of the Series' shares. Its address is 100 Park
Avenue, New York, NY 10017.
Each Series issues two classes of shares: Class A shares are sold to
investors choosing the initial sales load alternative; and Class D shares are
sold to investors choosing no initial sales load, a higher distribution
30
<PAGE>
fee and a CDSL on redemptions within one year of purchase. See "Alternative
Distribution System" above.
Shares of the Series may be purchased through any authorized investment
dealer. All orders will be executed at the net asset value per share next
computed after receipt of the purchase order plus, in the case of Class A
shares, a sales load which, except for shares purchased under one of the reduced
sales load plans, will vary with the size of the purchase as shown in the
schedule under "Class A shares--Initial Sales Load" below.
THE MINIMUM AMOUNT FOR INITIAL INVESTMENT IS $1,000 FOR EACH SERIES;
SUBSEQUENT INVESTMENTS MUST BE IN THE MINIMUM AMOUNT OF $100 (EXCEPT FOR
INVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS). THE FUNDS RESERVE THE
RIGHT TO RETURN INVESTMENTS THAT DO NOT SATISFY THESE MINIMUMS. EXCEPTIONS TO
THESE MINIMUMS ARE AVAILABLE FOR ACCOUNTS BEING ESTABLISHED CONCURRENTLY WITH
THE INVEST-A-CHECK(R) SERVICE. THE MINIMUM AMOUNT FOR INITIAL INVESTMENT IN THE
SELIGMAN TIME HORIZON MATRIXSM ASSET ALLOCATION PROGRAM IS $10,000. FOR
INFORMATION ABOUT THIS PROGRAM, CONTACT YOUR FINANCIAL ADVISOR.
The minimum amount for initial investment in each Series is $500 for
investors who purchase shares of the Fund through Merrill Lynch's MFA or MFA
Select Programs.
There is no minimum investment required for investors who purchase shares
of the Series through wrap fee programs.
Orders received by an authorized dealer by the close of regular trading on
the New York Stock Exchange ("NYSE") (normally, 4:00 p.m. Eastern time) and
accepted by SFSI before the close of business (5:00 p.m. Eastern time) on the
same day will be executed at the Series' net asset value determined as of the
close of regular trading on the NYSE on that day plus, in the case of Class A
shares, any applicable sales load. Orders accepted by dealers after the close of
regular trading on the NYSE, or received by SFSI after the close of business,
will be executed at the Series' net asset value next determined plus, in the
case of Class A shares, any applicable sales load. The authorized dealer through
which the shareholder purchases shares is responsible for forwarding the order
to SFSI promptly.
Payment for dealer purchases may be made by check or by wire. To wire
payments, dealer orders must first be placed through SFSI's order desk and
assigned a purchase confirmation number. Funds in payment of the purchase may
then be wired to Mellon Bank, N.A., ABA #043000261, A/C (Name of Fund and
Series) (A or D), A/C #107-1011. WIRE TRANSFERS MUST INCLUDE THE PURCHASE
CONFIRMATION NUMBER AND CLIENT ACCOUNT REGISTRATION AND ACCOUNT NUMBER. Persons
other than dealers who wish to wire payment should contact Seligman Data Corp.
for specific wire instructions. Although the Funds make no charge for this
service, the transmitting bank may impose a wire service fee.
Current shareholders may purchase additional shares of the Fund at any time
through any authorized dealer or by sending a check payable to "Seligman Group
of Funds" in our postage-paid return envelope or directly to SELIGMAN DATA
CORP., P.O. BOX 3947, NEW YORK, NY 10008-3947. Checks for investment must be in
U.S. dollars drawn on a domestic bank. The checks should be accompanied by an
investment slip (provided on the bottom of shareholder account statements) and
include the shareholder's name, address, account number, Fund or Series name and
class of shares (A or D). IF A SHAREHOLDER DOES NOT PROVIDE THE REQUIRED
INFORMATION, SELIGMAN DATA CORP. WILL SEEK FURTHER CLARIFICATION AND MAY BE
FORCED TO RETURN THE CHECK TO THE SHAREHOLDER. IF ONLY THE CLASS DESIGNATION IS
MISSING, THE INVESTMENT WILL AUTOMATICALLY BE MADE IN CLASS A SHARES. Credit
card convenience checks and third party checks (i.e., checks made payable to
someone other than the "Seligman Group of Funds") may not be used to open a new
fund account or purchase additional shares of the Fund. Orders sent directly to
Seligman Data Corp. will be executed at the net asset value next determined
after the order is accepted plus, in the case of Class A shares, any applicable
sales load.
Seligman Data Corp. may charge a $10.00 processing fee for checks returned
to it as uncollectable. This charge may be deducted from the shareholder's
account. For the protection of the Funds and their shareholders, no redemption
proceeds will be remitted to a shareholder with respect to shares purchased by
check (unless certified) until the Fund receives notice that the check has
cleared, which may be up to 15 days from the credit of such shares to the
shareholder's account.
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<PAGE>
VALUATION. The net asset value of a Series' shares is determined as of the
close of regular trading on the NYSE (normally, 4:00 p.m. Eastern time), each
day, Monday through Friday, except on days that the NYSE is closed. Net asset
value is calculated separately for each class of a Series. Municipal securities
and short-term holdings maturing in more than 60 days are valued based on
quotations provided by an independent pricing service, approved by the Directors
or Trustees, or in the absence thereof, at fair value as determined in
accordance with procedures approved by the Directors or Trustees. Short-term
holdings maturing in 60 days or less are generally valued at amortized cost.
Taxable securities are valued at market value, or in the absence thereof, fair
value as determined in accordance with procedures approved by the Directors or
Trustees.
Although the legal rights of Class A and Class D shares are substantially
identical, the different expenses borne by each class will result in different
net asset values and dividends. The net asset value of Class D shares will
generally be lower than the net asset value of Class A shares as a result of the
higher distribution fee charged to Class D shares. In addition, net asset value
per share of the two classes will be effected to the extent any other class
expenses differ among classes.
CLASS A SHARES -- INITIAL SALES LOAD. Class A shares are subject to an
initial sales load which varies with the size of the purchase as shown in the
following schedule, and an annual service fee of up to .25% of the average daily
net asset value of Class A shares. See "Administration, Shareholder Services and
Distribution Plans" below.
- --------------------------------------------------------------------------------
CLASS A SHARES -- SALES LOAD SCHEDULE
SALES LOAD AS A
PERCENTAGE OF REGULAR
------------------ DEALER
NET AMOUNT DISCOUNT
INVESTED AS A % OF
OFFERING (NET ASSET OFFERING
AMOUNT OF PURCHASE PRICE VALUE) PRICE
------------------ -------- ---------- ---------
Less than $ 50,000 4.75% 4.99% 4.25%
$ 50,000- 99,999 4.00 4.17 3.50
100,000- 249,999 3.50 3.63 3.00
250,000- 499,999 2.50 2.56 2.25
500,000- 999,999 2.00 2.04 1.75
1,000,000- or more* 0 0 0
* Shares acquired at net asset value pursuant to the above schedule will
be subject to a CDSL of 1% if redeemed within 18 months of purchase. See
"Purchase of Shares--Contingent Deferred Sales Load."
- --------------------------------------------------------------------------------
There is no initial sales load on purchases of Class A shares of $1,000,000
or more ("NAV sales"); however, such shares are subject to a CDSL of 1% if
redeemed within eighteen months of purchase.
SFSI shall pay broker/dealers, from its own resources, a fee on NAV sales,
calculated as follows; 1.00% NAV of sales up to but not including $2 million;
.80% of NAV sales from $2 million up to but not including $3 million; .50% of
NAV sales from $3 million up to but not including $5 million; and .25% of NAV
sales from $5 million and above. The calculation of the fee will be based on
assets held by a "single person" as defined below.
SFSI shall also pay broker/dealers, from its own resources, a fee in respect
of certain investments in Class A shares of the Seligman Mutual Funds by an
"eligible employee benefit plan" (as defined below under "Special Programs")
which are attributable to the particular broker/dealer. The shares eligible for
the fee are those on which an initial front-end sales load was not paid because
either the participating eligible employee benefit plan has at least (i)
$500,000 invested in the Seligman Group of Mutual Funds or (ii) 50 eligible
employees to whom such plan is made available. Class A shares representing only
an initial purchase of Seligman Cash Management Fund are not eligible for the
fee. Such shares will become eligible for the fee once they are exchanged for
shares of another Seligman Mutual Fund. The payment is based on cumulative sales
for each Plan during a single calendar year, or portion thereof. The payment
schedule, for each calendar year is as follows: 1.00% of sales up to but not
including $2 million; .80% of sales from $2 million up to but not including $3
million; .50% of sales from $3 million up to but not including $5 million; and
.25% of sales from $5 million and above.
REDUCED SALES LOADS. Reductions in sales loads apply to purchases of Class A
shares by a "single person," including an individual, members of a family unit
comprising husband, wife and minor children purchasing securities for their own
account, or a trustee or other fiduciary purchasing for a single fiduciary
account or single trust. Purchases made by a trustee or other fiduciary for a
fiduciary account may not be aggregated with purchases made on behalf of any
other fiduciary or individual account.
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<PAGE>
Shares purchased without an initial sales load in accordance with the sales
load schedule or pursuant to a Volume Discount, Right of Accumulation or Letter
of Intent are subject to a CDSL of 1% on redemptions within eighteen months of
purchase.
O VOLUME DISCOUNTS are provided if the total amount being invested in Class
A shares of a Series alone, or in any combination of shares of the other
Seligman Mutual Funds that are sold with an initial sales load, reaches levels
indicated in the above sales load schedule.
O THE RIGHT OF ACCUMULATION allows an investor to combine the amount being
invested in shares of any Seligman Mutual Fund sold with an initial sales load
with the total net asset value of shares sold with an initial sales load,
including shares of Seligman Cash Management Fund that were acquired by an
investor through an exchange of shares of another Seligman Mutual Fund on which
there was an initial sales load, to determine reduced sales loads in accordance
with the sales load schedule. An investor or a dealer purchasing shares on
behalf of an investor must indicate if the investor has existing accounts when
making investments or opening new accounts.
O A LETTER OF INTENT allows an investor to purchase Class A shares over a
13-month period at reduced initial sales loads, based upon the total amount the
investor intends to purchase plus the total net asset value of shares of the
other Seligman Mutual Funds already owned that were sold with an initial sales
load and the total net asset value of shares of Seligman Cash Management Fund
that were acquired by the investor through an exchange of shares of another
Seligman Mutual Fund on which there was an initial sales load. An investor or a
dealer purchasing shares on behalf of an investor must indicate if the investor
has existing accounts when making investments or opening new accounts. For more
information concerning terms of Letters of Intent, see "Terms and Conditions."
SPECIAL PROGRAMS. Each Series may sell Class A shares at net asset value to
present and retired directors, trustees, officers, employees and their spouses,
(and family members of the foregoing) of the Funds, the other investment
companies in the Seligman Group, the Manager and other companies affiliated with
the Manager. Family members are defined to include lineal descendants and lineal
ancestors, siblings (and their spouses and children) and any company or
organization controlled by any of the foregoing. Such sales also may be made to
employee benefit plans and thrift plans for such persons and to any investment
advisory, custodial, trust or other fiduciary account managed or advised by the
Manager or any affiliate.
Class A shares also may be issued without an initial sales load in
connection with the acquisition of cash and securities owned by other investment
companies; to any registered unit investment trust which is the issuer of
periodic payment plan certificates, the net proceeds of which are invested in
Series shares; to separate accounts established and maintained by an insurance
company which are exempt from registration under Section 3(c)(11) of the 1940
Act; to registered representatives and employees (and their spouses and minor
children) of any dealer that has a sales agreement with SFSI; to financial
institution trust departments; to registered investment advisers exercising
investment discretionary authority with respect to the purchase of Series
shares, or pursuant to sponsored arrangements with organizations which make
recommendations to or permit group solicitation of, its employees, members or
participants in connection with the purchase of shares of the Series; to other
investment companies in the Seligman Group in connection with a deferred fee
arrangement for outside directors; and to "eligible employee benefit plans"
which have at least (i) $500,000 invested in the Seligman Group of Mutual Funds
or (ii) 50 eligible employees to whom such plan is made available. "Eligible
employee benefit plan" means any plan or arrangement, whether or not tax
qualified, which provides for the purchase of a Series' shares. Sales of shares
to such plans must be made in connection with a payroll deduction system of plan
funding or other system acceptable to Seligman Data Corp.
Section 403(b) plans sponsored by public educational institutions are not
eligible for net asset value purchases based on the aggregate investment made by
the plan or number of eligible employees. Employee benefit plans eligible for
net asset value sales, as described above, will be subject to a CDSL of 1% for
ter-
33
<PAGE>
minations at the plan level only, on redemptions of shares purchased within
eighteen months prior to plan termination. Sales pursuant to a 401(k) alliance
program which has an agreement with SFSI are available at net asset value and
are not subject to a CDSL.
CLASS D SHARES. Class D shares are sold without an initial sales load but
are subject to a CDSL if the shares are redeemed within one year, an annual
distribution fee of up to .75% and an annual service fee of up to .25% of the
average daily net asset value of the Class D shares. SFSI will make a 1% payment
to dealers in respect of purchases of Class D shares.
CONTINGENT DEFERRED SALES LOAD. A CDSL will be imposed on redemptions of
Class D shares which were purchased during the preceding twelve months. The
amount of any CDSL will initially be used by SFSI to defray the expense of the
payment of 1% made by it to Service Organizations (as defined under
"Administration, Shareholder Services and Distribution Plan") at the time of
sale.
A CDSL of 1% will also be imposed on any redemption of Class A shares
purchased during the preceding eighteen months if such shares were acquired at
net asset value pursuant to the sales load schedule provided under "Class A
Shares--Initial Sales Load." Employee Benefit plans eligible for net asset sales
as described above under "Special Programs" may be subject to a CDSL of 1% for
terminations at the plan level only, on redemptions of shares purchased within
eighteen months prior to plan termination.
The 1% CDSL normally imposed on redemptions of certain Class A shares (i.e.,
those purchased during the preceding eighteen months at net asset value pursuant
to the sales load schedule provided under "Class A Shares--Initial Sales Load")
will be waived on shares that were purchased through Dean Witter Reynolds, Inc.
("Dean Witter") by certain Chilean institutional investors (i.e., pension plans,
insurance companies and mutual funds). Upon redemption of such shares within an
eighteen-month period, Dean Witter will reimburse SFSI a pro rata portion of the
fee it received from SFSI at the time of sale of such shares.
To minimize the application of a CDSL to a redemption, shares acquired
pursuant to the investment of dividends and capital gain distributions (which
are not subject to a CDSL) will be redeemed first; followed by shares held for a
period of time longer than the applicable CDSL period. Shares held for the
longest period of time within the applicable CDSL period will then be redeemed.
Additionally, for those shares determined to be subject to a CDSL, the CDSL will
be assessed on the current net asset value or original purchase price, whichever
is less. No CDSL will be imposed on shares acquired through the investment of
dividends or distributions from any Class A or Class D shares of mutual funds in
the Seligman Group.
For example, assume an investor purchased 100 shares in January at a price
of $10.00 per share. During the first year, 5 additional shares were acquired
through investment of dividends and distributions. In January of the following
year, an additional 50 shares were purchased at a price of $12.00 per share. In
March of that year, the investor chooses to redeem $1,500.00 from the account
which now holds 155 shares with a total value of $1,898.75 ($12.25 per share).
The CDSL for this transaction would be calculated as follows:
Total shares to be redeemed
(122.449 @ $12.25) as follows: $ 1,500.00
==========
Dividend/Distribution shares
(5 @ $12.25) $ 61.25
Shares over 1 year old
(100 @ $12.25) 1,225.00
Shares less than 1 year old subject to
CDSL (17.449 @ $12.25) 213.75
----------
Gross proceeds of redemption $1,500.00
Less CDSL (17.449 shares @ $12.00 =
$209.39 x 1% = $2.09) (2.09)
----------
Net proceeds of redemption $ 1,497.91
==========
For federal income tax purposes, the amount of the CDSL will reduce the
gain or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.
34
<PAGE>
The CDSL will be waived or reduced in the following instances:
(a) on redemptions following the death or disability (as defined in section
72(m)(7) of the Code) of a shareholder or beneficial owner; (b) in connection
with (i) distributions from retirement plans qualified under section 401(a) of
the Code when such redemptions are necessary to make distributions to plan
participants (such payments include, but are not limited to death, disability,
retirement, or separation of service), (ii) distributions from a custodial
account under section 403(b)(7) of the Code or an individual retirement account
(an "IRA") due to death, disability, minimum distribution requirements after
attainment of age 701/2, or, for accounts established prior to January 1, 1998,
attainment of age 591/2, and (iii) a tax-free return of an excess contribution
to an IRA; (c) in whole or in part, in connection with shares sold to current
and retired Directors or Trustees of the Funds; (d) in whole or in part, in
connection with shares sold to any state, county, or city or any
instrumentality, department, authority, or agency thereof, which is prohibited
by applicable investment laws from paying a sales load or commission in
connection with the purchase of shares of any registered investment management
company; (e) in whole or in part, in connection with automatic cash withdrawals;
(f) in connection with participation in the Merrill Lynch Small Market 401(k)
Program; and (g) in connection with the redemption of shares of a Fund if it is
combined with another mutual fund in the Seligman Group, or another similar
reorganization transaction.
If, with respect to a redemption of any Class A or Class D shares sold by a
dealer, the CDSL is waived because the redemption qualifies for a waiver as set
forth above, the dealer shall remit to SFSI promptly upon notice an amount equal
to the payment or a portion of the payment made by SFSI at the time of sale of
such shares.
SFSI may from time to time assist dealers by, among other things, providing
sales literature to, and holding informational programs for the benefit of,
dealers' registered representatives. Dealers may limit the participation of
registered representatives in such informational programs by means of sales
incentive programs which may require the sale of minimum dollar amounts of
shares of the Seligman Mutual Funds. SFSI may from time to time pay a bonus or
other incentive to dealers that sell shares of the Seligman Mutual Funds. In
some instances, these bonuses or incentives may be offered only to certain
dealers which employ a registered representative who has sold or may sell a
significant amount of shares of a Fund and/or certain other mutual funds managed
by the Manager during a specified period of time. Such bonus or other incentive
may take the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and members
of their families to places within or outside the United States. The cost to
SFSI of such promotional activities and payments shall be consistent with the
Rules of the National Association of Securities Dealers, Inc., as then in
effect.
TELEPHONE TRANSACTIONS
A shareholder with telephone transaction privileges, AND THE SHAREHOLDER'S
BROKER/DEALER REPRESENTATIVE, has the ability to effect the following
transactions via telephone: (i) redemption of Series shares with proceeds sent
to address or record (up to $50,000 per day per fund account), (ii) exchange of
Series shares for shares of the same class of another Seligman Mutual Fund,
(iii) change of a dividend and/or capital gain distribution option, and (iv)
change of address. All telephone transactions are effected through Seligman Data
Corp. at (800) 221-2450.
Unless an election is made otherwise on the Account Application, a
shareholder and the shareholder's broker/dealer of record, as designated on the
Account Application, will automatically receive telephone services.
FOR INVESTORS WHO PURCHASE SHARES THROUGH A BROKER/DEALER: Telephone
services for a shareholder and the shareholder's representative may be elected
by completing a supplemental election application available from the
broker/dealer of record.
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FOR CORPORATIONS OR GROUP RETIREMENT PLANS: Telephone services are not
permitted.
All Seligman Mutual Funds with the same account number (i.e., registered
exactly the same) as an existing account, including any new fund in which the
shareholder invests in the future, will automatically include telephone services
if the existing account has telephone services. Telephone services may also be
elected at any time on a supplemental telephone services election form.
For accounts registered jointly (such as joint tenancies, tenants in common
and community property registrations), each owner, by accepting or requesting
telephone transaction services, authorizes each of the other owners to effect
telephone transactions on his or her behalf.
During times of drastic economic or market changes, a shareholder or the
shareholder's representative may experience difficulty in contacting Seligman
Data Corp. to request a redemption or exchange of Series shares via telephone.
In these circumstances, the shareholder should consider using other redemption
or exchange procedures. (See "Redemption of Shares.") Use of these other
redemption or exchange procedures may result in the request being processed at a
later time than if a telephone transaction had been used, and a Series' net
asset value may fluctuate during such periods.
Each Fund and Seligman Data Corp. will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These will
include: recording all telephone calls requesting account activity, requiring
that the caller provide certain requested personal and/or account information at
the time of the call for the purpose of establishing the caller's identity, and
sending a written confirmation of redemptions, exchanges or address changes to
the address of record each time activity is initiated by telephone. As long as
each Fund and Seligman Data Corp. follow instructions communicated by telephone
that were reasonably believed to be genuine at the time of their receipt,
neither they nor any of their affiliates will be liable for any loss to the
shareholder caused by an unauthorized transaction. In any instance where a Fund
or Seligman Data Corp. is not reasonably satisfied that instructions received by
telephone are genuine, the requested transaction will not be executed, and
neither they nor any of their affiliates will be liable for any losses which may
occur due to a delay in implementing the transaction. If a Fund or Seligman Data
Corp. does not follow the procedures described above, such Fund or Seligman Data
Corp. may be liable for any losses due to unauthorized or fraudulent
instructions. Telephone transactions must be effected through a representative
of Seligman Data Corp., i.e., requests may not be communicated via Seligman Data
Corp.'s automated telephone answering system. Shareholders, of course, may
refuse or cancel telephone transaction services. Telephone services may be
terminated by a shareholder at any time by sending a written request to Seligman
Data Corp. Written acknowledgment of the addition of telephone services to an
existing account or termination of telephone services will be sent to the
shareholder at the address of record.
REDEMPTION OF SHARES
A shareholder may redeem shares held in book credit ("uncertificated") form
without charge, except a CDSL, if applicable, at any time by SENDING A WRITTEN
REQUEST to Seligman Data Corp., P.O. Box 3947, New York, NY 10008-3947; or if
request is being sent by overnight delivery service to 100 Park Avenue, New
York, NY 10017. The redemption request must be signed by all persons in whose
name the shares are registered. A shareholder may redeem shares that are not in
book credit form without charge, except a CDSL, if applicable, by surrendering
certificates in proper form to the same address. Certificates should be sent
certified or registered mail, return receipt is advisable (may increase mailing
time). Share certificates must be endorsed for transfer or accompanied by an
endorsed stock power signed by all shareowners exactly as their name(s)
appear(s) on the account registration. The shareholder's letter of instruction
or endorsed stock power should specify the name of the Series, the account
number, class of shares (A or D) and number of shares or dollar amount to be
redeemed. The Funds cannot accept conditional redemption requests (i.e.,
requests to sell shares at a specific price or on a future date).
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If the redemption proceeds are (i) $50,000 or more, (ii) to be paid to
someone other than the shareholder of record (regardless of the amount) or (iii)
to be mailed to other than the address of record (regardless of the amount), the
signature(s) of the shareholder(s) must be guaranteed by an eligible financial
institution including, but not limited to, the following: banks, trust
companies, credit unions, securities brokers and dealers, savings and loan
associations and participants in the Securities Transfer Association Medallion
Program (STAMP), the Stock Exchanges Medallion Program (SEMP) or the New York
Stock Exchange Medallion Signature Program (MSP). A Fund reserves the right to
reject a signature guarantee where it is believed that the Fund will be placed
at risk by accepting such guarantee. A signature guarantee is also necessary in
order to change the account registration. Notarization by a notary public is not
an acceptable signature guarantee. ADDITIONAL DOCUMENTATION MAY ALSO BE REQUIRED
BY SELIGMAN DATA CORP. IN THE EVENT OF A REDEMPTION BY A CORPORATION, EXECUTOR,
ADMINISTRATOR, TRUSTEE, CUSTODIAN OR RETIREMENT PLAN. FOR FURTHER INFORMATION
WITH RESPECT TO REDEMPTION REQUIREMENTS, PLEASE CONTACT THE SHAREHOLDER SERVICES
DEPARTMENT OF SELIGMAN DATA CORP. FOR ASSISTANCE.
In the case of Class A shares (except for shares purchased without an
initial sales load due to the size of the purchase), and in the case of Class D
shares redeemed after one year, a shareholder will receive the net asset value
per share next determined after receipt of a request in good order. If Class A
shares which were purchased without an initial sales load because the purchase
amount was $1,000,000 or more are redeemed within eighteen months of purchase, a
shareholder will receive the net asset value per share next determined after
receipt of a request in good order, less a CDSL of 1% as described under
"Purchase of Shares--Class A Shares--Initial Sales Load" above. If Class D
shares are redeemed within one year of purchase, a shareholder will receive the
net asset value per share next determined after receipt of a request in good
order, less a CDSL of 1% as described under "Purchase of Shares -- Class D
Shares" above.
A shareholder may also "sell" shares to a Fund through an investment dealer
and, in that way, be certain, providing the order is timely, of receiving the
net asset value established at the end of the day on which the dealer is given
the repurchase order (less any applicable CDSL). The Funds make no charge for
this transaction, but the dealer may charge a service fee. "Sell" or repurchase
orders received from an authorized dealer before the close of regular trading on
the NYSE (normally 4:00 p.m. Eastern Time) and received by SFSI, the repurchase
agent, before the close of business on the same day will be executed at the net
asset value per share determined at the close of the NYSE on that day, less any
applicable CDSL. Repurchase orders received from authorized dealers after the
close of the NYSE or not received by SFSI prior to the close of business, will
be executed at the net asset value determined as of the close of the NYSE on the
next trading day, less any applicable CDSL. Shares held in a "street name"
account with a broker/dealer may be sold to a Fund only through a broker/dealer.
TELEPHONE REDEMPTIONS. Telephone redemptions of uncertificated shares may be
made once per day, in an amount of up to $50,000 per fund account. Proceeds will
be sent to the address of record. Telephone redemption requests received by
Seligman Data Corp. at (800) 221-2450 by the close of regular trading on the
NYSE (normally 4:00 p.m. Eastern Time) will be processed at the Fund's net asset
value determined as of the close of business on that day. Redemption requests by
telephone will not be accepted within 30 days following an address change. IRAs,
group retirement plans, corporations and trusts for which the name of the
current trustee does not appear in the account registration are not eligible for
telephone redemptions. Each Fund reserves the right to suspend or terminate its
telephone redemption service at any time without notice.
For more information about telephone redemptions, and the circumstances
under which shareholders may bear the risk of loss for a fraudulent transaction,
see "Telephone Transactions" above.
CHECK REDEMPTION SERVICE. The Check Redemption Service allows a shareholder
who owns or purchases
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shares in a Series worth $25,000 or more to request Seligman Data Corp. to
provide redemption checks to be drawn on the account associated with the Series
in which the shareholder is invested, in amounts of $500 or more. The
shareholder may elect to use this Service on the Account Application or by later
written request to Seligman Data Corp. Shares for which certificates have been
issued will not be available for redemption under this Service. Holders of Class
A shares should bear in mind that check redemptions of Class A shares acquired
at net asset value due to the size of the purchase may be subject to a CDSL.
Holder of Class D shares may use this Service with respect to shares that have
been held for at least one year. Dividends continue to be earned through the
date preceding the date the check clears for payment. Use of this Service is
subject to Mellon Bank, N.A. rules and regulations covering checking accounts.
Separate checkbooks will be furnished for each Series.
There is no charge for use of checks. When honoring a check that was
processed for payment, Mellon Bank, N.A. will cause a Series to redeem exactly
enough full and fractional shares from an account to cover the amount of the
check and any applicable CDSL. If shares are owned jointly, redemption checks
will need to be signed by all persons, unless otherwise elected under Section 6
of the Account Application, in which case a single signature will be acceptable.
In view of daily fluctuations in share value, the shareholder should be
certain that the amount of shares in the account is sufficient in a Series to
cover the amount of checks written on that Series. If insufficient shares are in
the account, the check will be returned marked "insufficient funds." THE FUNDS
WILL NOT REDEEM SHARES OF ONE SERIES TO COVER A CHECK WRITTEN ON ANOTHER SERIES.
SELIGMAN DATA CORP. WILL CHARGE A $10.00 PROCESSING FEE FOR ANY CHECK REDEMPTION
DRAFT RETURNED AS UNCOLLECTABLE. THIS CHARGE MAY BE DEDUCTED FROM THE
SHAREHOLDER'S ACCOUNT.
Check Redemption books cannot be reordered unless the shareholder's account
has a value of $25,000 or more and Seligman Data Corp. has a certified Tax
Identification Number on file.
Cancelled checks will be returned to a shareholder under separate cover the
month after they clear. The Check Redemption Service may be terminated at any
time by a Fund or Mellon Bank, N.A. See "Terms and Conditions."
FOR THE PROTECTION OF THE FUNDS AND THEIR SHAREHOLDERS, NO PROCEEDS OF A
CHECK REDEMPTION WILL BE REMITTED TO A SHAREHOLDER WITH RESPECT TO SHARES
PURCHASED BY CHECK (UNLESS CERTIFIED) UNTIL SELIGMAN DATA CORP. HAS RECEIVED
NOTICE THAT THE CHECK HAS CLEARED, WHICH MAY BE UP TO 15 DAYS FROM THE CREDIT OF
SUCH SHARES TO THE SHAREHOLDER'S ACCOUNT.
GENERAL. With respect to shares redeemed, a check for the proceeds, less any
applicable CDSL, will be sent to the shareholder's address of record within
seven calendar days after acceptance of the redemption order and will be made
payable to all of the registered owners on the account. With respect to shares
repurchased, a check for the proceeds will be sent to the investment dealer
within seven calendar days after acceptance of the repurchase order and will be
made payable to the investment dealer. Payment of redemption proceeds will be
delayed on redemptions of shares purchased by check (unless certified) until
Seligman Data Corp. receives notice that the check has cleared, which may be up
to 15 days from the credit of such shares to the shareholder's account. No
interest is paid on the redemption proceeds after the redemption but before the
funds are paid. The proceeds of a redemption or repurchase may be more or less
than the shareholder's cost.
The Funds reserve the right to redeem shares owned by a shareholder whose
investment in a Series has a value of less than minimum amount specified by the
Funds' Directors or Trustees, which is presently $500. Shareholders would be
sent a notice before such redemption is processed stating that the value of
their investment in a Series is less than the specified minimum and that they
have sixty days to make an additional investment.
REINSTATEMENT PRIVILEGE
If a shareholder redeems Class A shares and then decides to reinvest them,
or to shift the investment to one of the other Seligman Mutual Funds, the
shareholder may, within 120 calendar days of the date of redemption, use all or
any part of the proceeds of the
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redemption to reinstate, free of an initial sales load, all or any part of the
investment in Class A shares of the Series or any of the other Seligman Mutual
Funds. If a shareholder redeems shares and the redemption was subject to a CDSL,
the shareholder may reinstate the investment in shares of the same class of the
Series or any of the other Seligman Mutual Funds within 120 calendar days of the
date of redemption and receive a credit for the applicable CDSL paid. Such
investment will be reinstated at the net asset value per share established as of
the close of the NYSE on the day the request is accepted. Seligman Data Corp.
must be informed that the purchase is a reinstated investment. REINSTATED SHARES
MUST BE REGISTERED EXACTLY AND BE OF THE SAME CLASS AS THE SHARES PREVIOUSLY
RE-DEEMED; AND THE FUND'S MINIMUM INITIAL INVESTMENT AMOUNT MUST BE MET AT THE
TIME OF REINSTATEMENT.
Generally, exercise of the Reinstatement Privilege does not alter the
federal income tax status of any capital gain realized on a sale of a Series'
shares, but to the extent that any shares are sold at a loss and the proceeds
are reinvested in shares of the same Series, some or all of the loss will not be
allowed as a deduction, depending upon the percentage of the proceeds
reinvested.
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLANS
Under each Fund's Administration, Shareholder Services and Distribution Plan
(the "Plan"), each Series may pay to SFSI an administration, shareholder
services and distribution fee in respect of each Series' Class A and Class D
shares. Payments under the Plan may include, but are not limited to: (i)
compensation to securities dealers and other organizations ("Service
Organizations") for providing distribution assistance with respect to assets
invested in a Series, (ii) compensation to Service Organizations for providing
administration, accounting and other shareholder services with respect to
Series' shareholders, and (iii) otherwise promoting the sale of shares of each
Series, including paying for the preparation of advertising and sales literature
and the printing and distribution of such promotional materials and prospectuses
to prospective investors and defraying SFSl's costs incurred in connection with
its marketing efforts with respect to shares of a Series. The Manager, in its
sole discretion, may also make similar payments to SFSI from its own resources,
which may include the management fee that the Manager receives from each Series.
Under its Plan, each Series reimburses SFSI for its expenses with respect to
Class A shares at an annual rate of up to .25% of the average daily net asset
value of a Series' Class A shares. It is expected that the proceeds from the fee
in respect of Class A shares will be used primarily to compensate Service
Organizations which enter into agreements with SFSI. Such Service Organizations
will receive from SFSI a continuing fee of up to .25% on an annual basis,
payable quarterly, of the average daily net assets of a Series' Class A shares
attributable to the particular Service Organization for providing personal
service and/or the maintenance of shareholder accounts. The fee payable from
time to time is, within such limit, determined by the Directors or Trustees of
the Funds.
The Plan, as it relates to Class A shares of the Municipal Fund, was first
approved by the Directors on July 21, 1992 and by the shareholders of each
Series on November 23, 1992. The Plan, as it relates to the Class A shares of
the California High-Yield Series and the California Quality Series, was first
approved by the Trustees on July 21, 1992 and by the shareholders on November
23, 1992. The Plan, as it relates to the Class A shares of the Florida Series,
was first approved by the Trustees on June 21, 1990 and by the shareholders on
December 7, 1990. The Plan, as it relates to Class A shares of the North
Carolina Series, was first approved by the Trustees on June 21, 1990 and by the
shareholders on April 11, 1991. The Plan, as it relates to the Class A shares of
the New Jersey Fund, was first approved by the Directors on January 12, 1988 and
by the shareholders on December 16, 1988. The Plan, as it relates to the Class A
shares of the Pennsylvania Fund, was first approved by the Trustees on June 10,
1986 and by the shareholders on April 23, 1987. The total amounts paid for the
year ended September 30, 1997 in respect of each Series' Class A shares' average
daily net assets pursuant to the Plan were as follows:
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% OF
AVERAGE
SERIES NET ASSETS
------ ----------
National.................................................... .09%
Colorado.................................................... .09
Georgia..................................................... .10
Louisiana................................................... .10
Maryland.................................................... .09
Massachusetts............................................... .10
Michigan.................................................... .10
Minnesota................................................... .10
Missouri.................................................... .09
New York.................................................... .09
Ohio........................................................ .10
Oregon...................................................... .10
South Carolina.............................................. .09
California High-Yield....................................... .10
California Quality.......................................... .10
Florida..................................................... .23
North Carolina.............................................. .24
New Jersey.................................................. .23
Pennsylvania................................................ .23
Under its Plan, each Series reimburses SFSI for its expenses with respect to
Class D shares at an annual rate of up to 1% of the average daily net asset
value of the Class D shares. Proceeds from a Series' Class D distribution fee
are used primarily to compensate Service Organizations for administration,
shareholder services and distribution assistance (including a continuing fee of
up to .25% on an annual basis of the average daily net asset value of a Series'
Class D shares attributable to particular Service Organizations for providing
personal services and/or the maintenance of shareholder accounts) and will
initially be used by SFSI to defray the expense of the 1% payment to be made by
it to Service Organizations at the time of the sale of Class D shares. The
amounts expended by SFSI in any one year upon the initial purchase of Class D
shares may exceed the amounts received by it from Plan payments retained.
Expenses of administration, shareholder services and distribution of a Series'
Class D shares in one fiscal year may be paid from a Series' Class D Plan fees
received in any other fiscal year. Each Plan, as it relates to Class D shares,
was approved by the Directors or Trustees on November 18, 1993 and became
effective February 1, 1994. The total amount paid for the year ended September
30, 1997, in respect of each Series' Class D shares pursuant to the Plan was
1.00% per annum of each Series' Class D shares' average daily net assets. Each
Plan is reviewed by the Directors or Trustees annually.
Seligman Services, Inc. ("SSI"), an affiliate of the Manager, is a limited
purpose broker/dealer. SSI acts as broker/dealer of record for shareholder
accounts that do not have a designated broker/dealer of record and receives
compensation from a Series pursuant to its Plan for providing personal service
and account maintenance to such accounts and other distribution services.
EXCHANGE PRIVILEGE
A shareholder may, without charge, exchange at net asset value any part or
all of an investment in a Series for shares of another Series or for shares of
the other mutual funds in the Seligman Group. Exchanges may be made by mail or
by telephone if the shareholder has telephone services.
Class A and Class D shares may be exchanged only for Class A and Class D
shares, respectively, of another Seligman Mutual Fund on the basis of relative
net asset value.
If shares that are subject to a CDSL are exchanged for shares of another
Seligman Mutual Fund, then for purposes of assessing the CDSL payable upon
disposition of the exchanged shares, the applicable holding period shall be
reduced by the period for which the original shares were held.
Aside from the Series described in this Prospectus, the Seligman Mutual
Funds available under the Exchange Privilege are:
O SELIGMAN CAPITAL FUND, INC. seeks aggressive capital appreciation. Current
income is not an objective.
O SELIGMAN CASH MANAGEMENT FUND, INC. invests in high quality money market
instruments. Shares are sold at net asset value.
O SELIGMAN COMMON STOCK FUND, INC. seeks favorable current income and
long-term growth of both
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income and capital value without exposing capital to undue risk.
O SELIGMAN COMMUNICATIONS AND INFORMATION FUND, INC. invests in shares of
companies in the communications, information and related industries to produce
capital gain. Income is not an objective.
O SELIGMAN FRONTIER FUND, INC. seeks to produce growth in capital value,
income may be considered but will only be incidental to the fund's investment
objective.
O SELIGMAN GROWTH FUND, INC. seeks longer-term growth in capital value and
an increase in future income.
O SELIGMAN HENDERSON GLOBAL FUND SERIES, INC. consists of the Seligman
Henderson Emerging Markets Growth Fund, the Seligman Henderson Global Growth
Opportunities Fund, the Seligman Henderson Global Smaller Companies Fund, the
Seligman Henderson Global Technology Fund and the Seligman Henderson
International Fund all of which seek long-term capital appreciation primarily
through investing in companies either globally or internationally.
O SELIGMAN HIGH INCOME FUND SERIES seeks high current income by investing in
debt securities. The Fund consists of the Seligman U.S. Government Securities
Series and the Seligman High-Yield Bond Series.
O SELIGMAN INCOME FUND, INC. seeks high current income and the possibility
of improvement of future income and capital value.
O SELIGMAN VALUE FUND SERIES, INC. consists of the Seligman Large-Cap Value
Fund and the Seligman Small-Cap Value Fund, each of which seeks long-term
capital appreciation by investing in equity securities of value companies
primarily located in the U.S.
All permitted exchanges will be based on the net asset values of the
respective funds determined at the close of the NYSE on that day. Telephone
requests for exchanges received by the close of regular trading on the NYSE
(normally, 4:00 p.m. Eastern Time) by Seligman Data Corp. at (800) 221-2450 will
be processed as of the close of business on that day. Requests received after
the close of regular trading on the NYSE will be processed at the net asset
value per share calculated the following business day. The registration of an
account into which an exchange is made must be identical to the registration of
the account from which shares are exchanged. When establishing a new account by
an exchange of shares, the shares being exchanged must have a value of at least
the minimum initial investment required by the fund into which the exchange is
being made. THE METHOD OF RECEIVING DISTRIBUTIONS, UNLESS OTHERWISE INDICATED,
WILL BE CARRIED OVER TO THE NEW FUND ACCOUNT, AS WILL TELEPHONE SERVICES.
ACCOUNT SERVICES, SUCH AS INVEST-A-CHECK(R) SERVICE, DIRECTED DIVIDENDS AND
AUTOMATIC CASH WITHDRAWAL SERVICE, WILL NOT BE CARRIED OVER TO THE NEW FUND
ACCOUNT UNLESS SPECIFICALLY REQUESTED AND PERMITTED BY THE NEW FUND. Exchange
orders may be placed to effect an exchange of a specific number of shares, an
exchange of shares equal to a specific dollar amount or an exchange of all
shares held. Shares for which certificates have been issued may not be exchanged
via telephone and may be exchanged only upon receipt of an exchange request
together with certificates representing shares to be exchanged in proper form.
The terms of the exchange offer described herein may be modified at any
time; and not all of the mutual funds in the Seligman Group are available to
residents of all states. Before making any exchange, contact your authorized
investment dealer or Seligman Data Corp. to obtain prospectuses of any of the
Seligman Mutual Funds.
A broker/dealer representative will be able to effect exchanges on behalf of
a shareholder only if the shareholder has telephone services or if the
broker/dealer has entered into a Telephone Exchange Agreement with SFSI wherein
the broker/dealer must agree to indemnify SFSI and the Seligman Group of Mutual
Funds from any loss or liability incurred as a result of acceptance of telephone
exchange orders. Written confirmation of all exchanges will be forwarded to the
shareholder to whom the exchanged shares are registered and a duplicate
confirmation will be sent to the broker/dealer of record listed on the account.
SFSI reserves the right to reject any telephone exchange request. Any
rejected telephone exchange or-
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der may be processed by mail. For more information about telephone exchange
privileges, which, unless objected to, are assigned to certain shareholders
automatically, and the circumstances under which shareholders may bear the risk
of loss for a fraudulent transaction, see "Telephone Transactions" above.
Exchanges of shares are sales and may result in a gain or loss for federal
and state income tax purposes.
FURTHER INFORMATION ABOUT
TRANSACTIONS IN THE FUNDS
Because excessive trading (including short-term, "market timing" trading)
can hurt a Series' performance, a Fund, on behalf of a Series, may refuse any
exchange (1) from any shareholder account from which there have been two
exchanges in the preceding three month period, or (2) where the exchanged shares
equal in value the lesser of $1,000,000 or 1% of the Series' net assets. A Fund
may also refuse any exchange or purchase order from any shareholder account if
the shareholder or the shareholder's broker/dealer has been advised that
previous patterns of purchases and redemptions or exchanges have been considered
excessive. Accounts under common ownership or control, including those with the
same taxpayer ID number and those administered so as to redeem or purchase
shares based upon certain predetermined market indicators, will be considered
one account for this purpose. Additionally, each Fund reserves the right to
refuse any order for the purchase of shares.
DIVIDENDS AND GAIN DISTRIBUTIONS
Each Series intends to declare dividends of net investment income daily.
Dividends are paid on the 17th day of each month. If the 17th day of the month
falls on a weekend or holiday on which the NYSE is closed, the dividend will be
distributed on the previous business day. Payments vary in amount depending on
income received from portfolio securities, expenses of operation and the number
of days in the period.
Shares will begin earning dividends on the day on which a Series receives
payment and shares are issued. Shares continue to earn dividends through the
date preceding the date they are redeemed or delivered subsequent to repurchase.
Each Series distributes substantially all of any taxable net long-term and
short-term gain realized on investments to shareholders at least annually in
accordance with requirements under the Internal Revenue Code of 1986, as
amended, and other applicable statutory and regulatory requirements.
Shareholders may elect: (1) to receive both dividends and gain distributions
in shares; (2) to receive dividends in cash and gain distributions in shares;
(3) to receive both dividends and gain distributions in cash. Cash dividends and
gain distributions are paid by check. In the case of prototype retirement plans,
dividends and gain distributions are reinvested in additional shares. Unless
another election is made, dividends and gain distributions will be credited to
shareholder accounts in additional shares. Shares acquired through a dividend or
gain distribution and credited to a shareholder's account are not subject to an
initial sales load or a CDSL. Dividends and gain distributions paid in shares
are invested on the payable date using the net asset value of the ex-dividend
date. Shareholders may elect to change their dividend and gain distribution
options by writing Seligman Data Corp. at the address listed below. If the
shareholder has telephone services, changes may also be telephoned to Seligman
Data Corp. between 8:30 a.m. and 6:00 p.m. Eastern time, by either the
shareholder or the broker/dealer of record on the account. For information about
telephone services, see "Telephone Transactions." These elections must be
received by Seligman Data Corp. before the record date for the dividend or
distribution in order to be effective for such dividend or gain distribution.
The per share dividends from net investment income on a Series' Class D
shares will be lower than the per share dividends on a Series' Class A shares as
a result of the higher distribution fee applicable with respect to a Series'
Class D shares. Per share dividends of the two classes may also differ as a
result of differing class expenses, if any. Distributions of net capital gains,
if any, will be paid in the same amount for Class A and Class D shares.
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Shareholders exchanging shares for shares of another Seligman Mutual Fund
will continue to receive dividends and gains as elected prior to such exchange
unless otherwise specified. In the event that a shareholder redeems all shares
in an account between the record date and the payable date, the value of any
dividends or gain distributions declared will be paid in cash regardless of the
existing election. A transfer or exchange of all shares (closing an account),
between the record date and payable date, will result in the value of dividends
or gain distributions being paid to the new fund account in accordance with the
option on the closed account, unless Seligman Data Corp. is instructed
otherwise.
TAXES
FEDERAL INCOME TAXES
Each Series intends to continue to qualify as a regulated investment company
under the Code. Thus qualified, each Series will be relieved of regular federal
income tax on income distributed to shareholders provided that it distributes
each year to its shareholders at least 90% of its net investment income and net
short-term capital gains, if any.
If, at the close of each quarter of its taxable year, at least 50% of each
Series' total assets is invested in obligations exempt from regular federal
income tax the Series will be eligible to pay dividends that are excludable by
shareholders from gross income for regular federal income tax purposes ("exempt
interest dividends"). The total amount of exempt interest dividends paid by a
Series to shareholders with respect to any taxable year cannot exceed the amount
of federally tax-exempt interest received by a Series during the year less any
expenses allocable to such interest.
Distributions of net capital gain (i.e., the excess of net long-term capital
gains over net short-term capital losses ("capital gain distributions")) are
taxable to shareholders as long-term capital gain, whether received in shares or
cash, regardless of how long a shareholder has held shares in the Series, except
that the portion of net capital gains representing accrued market discount on
tax-exempt obligations acquired after April 30, 1993 will be taxable as ordinary
income. Individual shareholders will be subject to federal income tax on
distributions of net capital gains at a maximum rate of 28% if designated as
derived from the Series' capital gains from property held for more than one year
and at a maximum rate of 20% if designated as derived from the Series' capital
gains from property held for more than eighteen months. Net capital gain of a
corporate shareholder is taxed at the same rate as ordinary income.
Distributions from a Series' other investment income (other than exempt interest
dividends) or from net realized short-term gain will be taxable to shareholders
as ordinary income, whether received in cash or in additional shares.
Distributions will not, generally, be eligible for the dividends-received
deduction for corporations. Shareholders receiving distributions in the form of
additional shares issued by a Series will be treated for federal income tax
purposes as having received a distribution in an amount equal to the fair market
value on the date of distribution of the shares received.
Interest on indebtedness incurred or continued to purchase or carry shares
of any Series will not be deductible for federal income tax purposes to the
extent that the Series' distributions are exempt from federal income tax.
Any gain or loss realized upon a sale or redemption of shares of a Series by
a shareholder who is not a dealer in securities generally will be treated as a
long-term capital gain or loss if the shares have been held for more than twelve
months and otherwise as a short-term capital gain or loss. However, if shares on
which a long-term capital gain distribution has been received are subsequently
sold or redeemed and such shares have been held for six months or less, any loss
realized will be treated as long-term capital loss to the extent that it offsets
the long-term capital gain distribution. Moreover, any loss realized by a
shareholder upon the sale of shares of a Series held six months or less will be
disallowed to the extent of any exempt-interest dividends received by the
shareholders with respect to such shares. In addition, no loss will be allowed
on the sale or other disposition of shares of a Series if, within a period
beginning 30 days before the date of such sale or disposition and ending 30 days
after such date, the holder acquires (such as through dividend reinvestment)
securities that are substantially identical to the shares of the Series.
Individual shareholders will be subject to federal income tax as long-term
capital gains at a maximum rate of 28% in respect of shares held for more than
one year and at a maximum rate of 20% in respect of shares held for more than
eighteen months.
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In determining gain or loss on shares of a Series that are sold or exchanged
within 90 days after acquisition, a shareholder generally will not be permitted
to include in the tax basis attributable to such shares the sales load incurred
in acquiring such shares to the extent of any subsequent reduction of the sales
load by reason of the Exchange or Reinstatement Privilege offered by a Fund. Any
sales load not taken into account in determining the tax basis of shares sold or
exchanged within 90 days after acquisition will be added to the shareholder's
tax basis in the shares acquired pursuant to the Exchange or Reinstatement
Privilege.
Shareholders are urged to consult their tax advisors concerning the effect
of federal income taxes in their individual circumstances. In particular,
persons who may be "substantial users" (or "related persons" of substantial
users) of facilities financed by industrial development bonds or private
activity bonds should consult their tax advisors before purchasing shares of any
Series.
UNLESS A SHAREHOLDER INCLUDES A TAXPAYER IDENTIFICATION NUMBER (SOCIAL
SECURITY NUMBER FOR INDIVIDUALS) ON THE ACCOUNT APPLICATION AND CERTIFIES THAT
SUCH SHAREHOLDER IS NOT SUBJECT TO BACKUP WITHHOLDING, EACH FUND IS REQUIRED TO
WITHHOLD AND REMIT TO THE U.S. TREASURY A PORTION OF NON-EXEMPT DISTRIBUTIONS
AND OTHER REPORTABLE PAYMENTS TO THE SHAREHOLDER. THE RATE OF BACKUP WITHHOLDING
IS 31%. SHAREHOLDERS SHOULD BE AWARE THAT, UNDER REGULATIONS PROMULGATED BY THE
INTERNAL REVENUE SERVICE, A FUND MAY BE FINED UP TO $50 ANNUALLY FOR EACH
ACCOUNT FOR WHICH A CERTIFIED TAXPAYER IDENTIFICATION NUMBER IS NOT PROVIDED. IN
THE EVENT THAT SUCH A FINE IS IMPOSED, A FUND MAY CHARGE A SERVICE FEE OF UP TO
$50 THAT MAY BE DEDUCTED FROM THE SHAREHOLDER'S ACCOUNT AND OFFSET AGAINST ANY
UNDISTRIBUTED DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. EACH FUND ALSO RESERVES
THE RIGHT TO CLOSE ANY ACCOUNT WHICH DOES NOT HAVE A CERTIFIED TAXPAYER
IDENTIFICATION NUMBER WITH RESPECT TO ANY UNCERTIFIED ACCOUNT IN ANY YEAR, A
CORRESPONDING CHARGE MAY BE MADE AGAINST THAT ACCOUNT.
CALIFORNIA TAXES
In the opinion of Sullivan & Cromwell, counsel to the Funds, provided that
at the end of each quarter of its taxable year at least 50% of the total assets
of the California Quality or California High-Yield Series consist of federally
tax-exempt obligations of the State of California and its political subdivisions
("California Municipal Securities"), shareholders of each such Series who are
subject to California State taxation on dividends will not be subject to
California personal income taxes on dividends from that Series attributable to
interest received by each such Series on California Municipal Securities as well
as on certain other federally tax-exempt obligations the interest on which is
exempt from California personal income taxes. To the extent that the
distributions are derived from other income, including long- or short-term
capital gains, such distributions will not be exempt from California personal
income taxation, and, further to the extent that they constitute long-term
capital gain dividends they will be taxed as long-term gain to a shareholder.
Interest on indebtedness incurred or continued to purchase or carry shares
of the California Quality or California High-Yield Series will not be deductible
for California personal income tax purposes to the extent such Series'
distributions are exempt from California personal income tax.
Prospective investors should be aware that an investment in these Series may
not be suitable for persons who are not residents of the State of California or
who do not receive income subject to income taxes of the State.
COLORADO TAXES
In the opinion of Ireland, Stapleton, Pryor & Pascoe, P.C., Colorado tax
counsel to the Municipal Fund, individuals, trusts, estates and corporations who
are holders of the Colorado Series and who are subject to the Colorado income
tax will not be subject to Colorado income tax or the Colorado alternative
minimum tax on Colorado Series dividends to the extent that such dividends
qualify as exempt-interest dividends of a regulated investment company under
Section 852(b)(5) of the Code, which are derived from interest income received
by the Colorado Series on (a) obligations of the State of Colorado or its
political subdivisions which are issued on or after May 1,1980, or if issued
before May 1,1980, to the extent such interest is specifically exempt from
income taxation un-
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der the laws of the State of Colorado authorizing the issuance of such
obligations, (b) obligations of the United States or its possessions to the
extent included in federal taxable income, or (c) obligations of territories or
possessions of the United States to the extent federal law exempts interest on
such obligations from taxation by the states. To the extent that Colorado Series
distributions are attributable to sources not described in the preceding
sentence, such as long or short-term capital gains, such distributions will not
be exempt from Colorado income tax and may be subject to Colorado's alternative
minimum tax. There are no municipal income taxes in Colorado. As intangibles,
shares in the Colorado Series are exempt from Colorado property taxes.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Colorado Series, at least 80% of the value of the net assets
of the Colorado Series will be maintained in debt obligations which are exempt
from regular federal income tax and Colorado income tax.
The Colorado Series will notify its shareholders within 60 days after the
close of the year as to the interest derived from Colorado obligations and
exempt from the Colorado income tax.
FLORIDA TAXES
Florida does not presently impose an income tax on individuals and thus
individual shareholders of the Florida Series will not be subject to any Florida
state income tax on distributions received from the Florida Series. However,
Florida imposes an intangible personal property tax on shares of the Florida
Series owned by a Florida resident on January 1 of each year unless such shares
qualify for an exemption from that tax. The Municipal Trust has received a
Technical Assistance Advisement from the State of Florida, Department of
Revenue, to the effect that shares of the Florida Series owned by a Florida
resident will be exempt from the Florida Intangible Personal Property Tax so
long as the Florida Series' portfolio includes on January 1 of each year only
assets, such as Florida tax-exempt securities and United States Government
securities, that are exempt from the Florida Intangible Personal Property Tax.
Corporate shareholders may be subject to Florida income taxes depending on the
portion of the income related to the Florida Series that is allocable to Florida
under applicable Florida law.
GEORGIA TAXES
In the opinion of King & Spalding, Georgia tax counsel to the Municipal
Fund, under existing Georgia law, shareholders of the Georgia Series will not be
subject to Georgia income taxes on dividends with respect to shares of the
Georgia Series to the extent that such distributions represent "exempt-interest
dividends" for federal income tax purposes that are attributable to
interest-bearing obligations issued by or on behalf of the State of Georgia or
its political subdivisions, or by the governments of Puerto Rico, the Virgin
Islands or Guam (collectively, "Georgia Obligations"), which are held by the
Georgia Series. Dividends, if any, derived from capital gains or other sources
generally will be taxable to shareholders of the Georgia Series for Georgia
income tax purposes.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Georgia Series, at least 80% of the value of the net assets
of the Georgia Series will be maintained in debt obligations which are exempt
from regular federal income tax and Georgia income taxes.
The Georgia Series will notify its shareholders within 60 days after the
close of the year as to the interest derived from Georgia Obligations and exempt
from Georgia income taxes.
LOUISIANA TAXES
In the opinion of Liskow & Lewis, Louisiana tax counsel to the Municipal
Fund, based upon a private ruling obtained from the Louisiana Department of
Revenue and Taxation (the "Department"), and subject to the current policies of
the Department, shareholders of the Louisiana Series who are corporations;
individuals and residents of the State of Louisiana; and, for taxable periods
beginning after December 31, 1996, trusts or estates; all of whom are otherwise
subject to Louisiana income tax, will not be subject to Louisiana income tax on
Louisiana Series dividends to the extent that such dividends are attributable to
interest on tax-exempt obligations of the State of Louisiana or its political or
governmental subdivisions, or its
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governmental agencies or instrumentalities. To the extent that distributions on
the Louisiana Series are attributable to sources other than those described in
the preceding sentence, such distributions, including but not limited to,
long-term or short-term capital gains, will not be exempt from Louisiana income
tax.
Non-resident individuals maintaining their domicile other than in the State
of Louisiana will not be subject to Louisiana income tax on their Louisiana
Series dividends.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Louisiana Series, the Municipal Fund will maintain at least
80% of the value of the net assets of the Louisiana Series in debt obligations
which are exempt from federal income tax and exempt from Louisiana income tax.
The Louisiana Series will notify its shareholders within 60 days after the
close of the year as to the interest derived from Louisiana obligations and
exempt from Louisiana income tax.
MARYLAND TAXES
In the opinion of Venable, Baetjer and Howard, LLP, Maryland tax counsel to
the Municipal Fund, as long as dividends paid by the Maryland Series qualify as
interest excludable under Section 103 of the Code and the Maryland Series
qualifies as a "regulated investment company" under the Code, the portion of
exempt-interest dividends that represents interest received by the Maryland
Series on obligations (a) of Maryland or its political subdivisions and
authorities, or (b) of the United States or an authority, commission,
instrumentality, possession or territory of the United States, will be exempt
from Maryland state and local income taxes when allocated or distributed to a
shareholder of the Maryland Series.
Gain realized by the Maryland Series from the sale or exchange of a bond
issued by Maryland or a political subdivision of Maryland, or of the United
States or an authority, commission or instrumentality of the United States will
not be subject to Maryland state and local income taxes.
To the extent that distributions of the Maryland Series are attributable to
sources other than those described in the preceding sentences, such as interest
received by the Maryland Series on obligations issued by states other than
Maryland, income earned on repurchase contracts, or gains realized by a
shareholder upon a redemption or exchange of Maryland Series shares, such
distributions will be subject to Maryland state and local income taxes.
Interest on indebtedness incurred or continued (directly or indirectly) by a
shareholder of the Maryland Series to purchase or carry shares of the Maryland
Series will not be deductible for Maryland state and local income tax purposes
to the extent such interest is allocable to exempt-interest dividends.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Maryland Series, at least 80% of the value of the net assets
of the Maryland Series will be maintained in debt obligations which are exempt
from regular federal income tax and are exempt from Maryland state and local
income taxes.
The Maryland Series will notify its shareholders within 60 days after the
close of the year as to the interest derived from Maryland obligations and
exempt from Maryland state and local income taxes.
MASSACHUSETTS TAXES
In the opinion of Palmer & Dodge, Massachusetts tax counsel to the Municipal
Fund, assuming that the Municipal Fund gives the notices described at the end of
this section, holders of the Massachusetts Series who are subject to the
Massachusetts personal income tax will not be subject to tax on distributions
from the Massachusetts Series to the extent that these distributions qualify as
exempt-interest dividends of a regulated investment company under Section
852(b)(5) of the Code which are directly attributable to interest on obligations
issued by the Commonwealth of Massachusetts, its instrumentalities or its
political subdivisions or by the government of Puerto Rico or by its authority,
by the
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government of Guam or by its authority, or by the government of the Virgin
Islands or its authority (collectively, "Massachusetts Obligations"). Except to
the extent excluded as capital gain, distributions of income to Massachusetts
holders of the Massachusetts Series that are attributable to sources other than
those described in the preceding sentence will be includable in the
Massachusetts income of the holders of the Massachusetts Series. Distributions
will not be subject to tax to the extent that they qualify as capital gain
dividends which are attributable to obligations issued by the Commonwealth of
Massachusetts, its instrumentalities or political subdivisions under any
provision of law which exempts capital gain on the obligation from Massachusetts
income taxation. Distributions which qualify as capital gain dividends under
Section 852(b)(3)(C) of the Code and which are includable in Federal gross
income will be includable in the Massachusetts income of a holder of the
Massachusetts Series as capital gain.
Massachusetts Series dividends are not excluded in determining the
Massachusetts excise tax on corporations.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Massachusetts Series, the Municipal Fund will maintain at
least 80% of the value of the net assets of the Massachusetts Series in debt
obligations which are exempt from regular federal income tax and Massachusetts
personal income tax.
The Massachusetts Series will notify its shareholders within 60 days after
the close of the year as to the interest and capital gains derived from
Massachusetts Obligations and exempt from Massachusetts personal income tax.
MICHIGAN TAXES
In the opinion of Dickinson, Wright, Moon, Van Dusen & Freeman, Michigan tax
counsel to the Municipal Fund, holders of the Michigan Series who are subject to
the Michigan income tax or single business tax will not be subject to the
Michigan income tax or single business tax on Michigan Series dividends to the
extent that such distributions qualify as exempt-interest dividends of a
regulated investment company under Section 852(b)(5) of the Code which are
attributable to interest on tax-exempt obligations of the State of Michigan, or
its political or governmental subdivisions, its governmental agencies or
instrumentalities (as well as certain other federally tax-exempt obligations,
the interest on which is exempt from Michigan tax, such as, for example, certain
obligations of Puerto Rico) (collectively, "Michigan Obligations"). To the
extent that distributions on the Michigan Series are attributable to sources
other than those described in the preceding sentence, such distributions,
including, but not limited to, long or short-term capital gains, will not be
exempt from Michigan income tax or single business tax. The Michigan Department
of Treasury has issued a bulletin stating that holders of interests in regulated
investment companies who are subject to the Michigan intangibles tax will be
exempt from the tax to the extent that the investment portfolio consists of U.S.
obligations and obligations of the State of Michigan or of its political
subdivisions. In addition, Michigan Series shares owned by certain financial
institutions or by certain other persons subject to the Michigan single business
tax are not subject to the Michigan intangibles tax. To the extent the
distributions on the Michigan Series are not subject to Michigan income tax,
they are not subject to the uniform city income tax imposed by certain Michigan
cities.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Michigan Series, at least 80% of the value of the net assets
of the Michigan Series will be maintained in debt obligations which are exempt
from regular federal income tax and Michigan income and single business taxes.
The Michigan Series will notify its shareholders within 60 days after the
close of the year as to the interest derived from Michigan Obligations and
exempt from Michigan income tax.
MINNESOTA TAXES
In the opinion of Faegre & Benson LLP, Minnesota tax counsel to the
Municipal Fund, provided that the Minnesota Series qualifies as a "regulated
investment company" under the Code, and subject to the discussion
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in the paragraph below, shareholders of the Minnesota Series who are
individuals, estates, or trusts and who are subject to the regular Minnesota
personal income tax will not be subject to such regular Minnesota tax on
Minnesota Series dividends to the extent that such distributions qualify as
exempt-interest dividends of a regulated investment company under Section
852(b)(5) of the Code which are derived from interest income on tax-exempt
obligations of the State of Minnesota, or its political or governmental
subdivisions, municipalities, governmental agencies or instrumentalities
("Minnesota Sources"). The foregoing will apply, however, only if the portion of
the exempt-interest dividends from such Minnesota Sources that is paid to all
shareholders represents 95% or more of the exempt-interest dividends that are
paid by the Minnesota Series. If the 95% test is not met, all exempt-interest
dividends that are paid by the Minnesota Series will be subject to the regular
Minnesota personal income tax. Even if the 95% test is met, to the extent that
exempt-interest dividends that are paid by the Minnesota Series are not derived
from the Minnesota Sources described in the first sentence of this paragraph,
such dividends will be subject to the regular Minnesota personal income tax.
Other distributions of the Minnesota Series, including distributions from net
short-term and long-term capital gains, are generally not exempt from the
regular Minnesota personal income tax.
Legislation enacted in 1995 provides that it is the intent of the Minnesota
legislature that interest income on obligations of Minnesota governmental units,
including obligations of the Minnesota Sources described above, and
exempt-interest dividends that are derived from interest income on such
obligations, be included in the net income of individuals, estates, and trusts
for Minnesota income tax purposes if it is judicially determined that the
exemption by Minnesota of such interest or such exempt-interest dividends
unlawfully discriminates against interstate commerce because interest income on
obligations of governmental issuers located in other states, or exempt-interest
dividends derived from such obligations, is so included. This provision applies
to taxable years that begin during or after the calendar year in which such
judicial decision becomes final, regardless of the date on which the obligations
were issued, and other remedies apply for previous taxable years. The United
States Supreme Court in 1995 denied certiorari in a case in which an Ohio state
court upheld an exemption for interest income on obligations of Ohio
governmental issuers, even though interest income on obligations of non-Ohio
governmental issuers, was subject to tax. In 1997, the United States Supreme
Court denied certiorari in a subsequent case from Ohio, involving the same
taxpayer and the same issue, in which the Ohio Supreme Court refused to
reconsider the merits of the case on the ground that the previous final state
court judgment barred any claim arising out of the transaction that was the
subject of the previous action. It cannot be predicted whether a similar case
will be brought in Minnesota or elsewhere, or what the outcome of such case
would be.
Minnesota presently imposes an alternative minimum tax on individuals,
estates, and trusts that is based, in part, on such taxpayers' federal
alternative minimum taxable income, which includes federal tax preference items.
The Code provides that interest on specified private activity bonds is a federal
tax preference item, and that an exempt-interest dividend of a regulated
investment company constitutes a federal tax preference item to the extent of
its proportionate share of the interest on such private activity bonds.
Accordingly, exempt-interest dividends that are attributable to such private
activity bond interest, even though they are derived from the Minnesota Sources
described above, will be included in the base upon which such Minnesota
alternative minimum tax is computed. In addition, the entire portion of
exempt-interest dividends that is received by such shareholders and that is
derived from sources other than the Minnesota Sources described above is also
subject to the Minnesota alternative minimum tax. Further, should the 95% test
that is described above fail to be met, all of the exempt-interest dividends
that are paid by the Minnesota Series, including all of those that are derived
from the Minnesota Sources described above, will be subject to the Minnesota
alternative minimum tax, in the case of shareholders of the Minnesota Series who
are individuals, estates or trusts.
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Subject to certain limitations that are set forth in the Minnesota rules,
Minnesota Series dividends, if any, that are derived from interest on certain
United States obligations are not subject to the regular Minnesota personal
income tax or the Minnesota alternative minimum tax, in the case of shareholders
of the Minnesota Series who are individuals, estates, or trusts.
Minnesota Series distributions, including exempt-interest dividends, are not
excluded in determining the Minnesota franchise tax on corporations that is
measured by taxable income and alternative minimum taxable income. Minnesota
Series distributions may also be taken into account in certain cases in
determining the minimum fee that is imposed on corporations, S corporations, and
partnerships.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Minnesota Series, at least 80% of the value of the net assets
of the Minnesota Series will be maintained in debt obligations which are exempt
from the regular federal income tax. Such debt obligations may, however, be
subject to the federal alternative minimum tax. A similar percentage will
generally also apply with respect to the regular Minnesota personal income tax,
and such debt obligations may likewise be subject to the Minnesota alternative
minimum tax, in each case subject to the entire discussion above. The Minnesota
Series will invest so that the 95% test described above is met.
The Minnesota Series will notify its shareholders within 30 days after the
close of the year as to the interest derived from Minnesota obligations and
exempt from the Minnesota personal income tax, subject to the discussion above.
MISSOURI TAXES
In the opinion of Bryan Cave LLP, Missouri tax counsel to the Municipal
Fund, dividends distributed to individual shareholders of the Missouri Series
will be exempt from the Missouri personal income tax imposed by Chapter 143 of
the Missouri Revised Statutes to the extent that such dividends qualify as
exempt interest dividends of a regulated investment company under Section
852(b)(5) of the Code and are derived from interest on obligations of the State
of Missouri or any of its political subdivisions or authorities or obligations
issued by the government of Puerto Rico or its authority (collectively,
"Missouri Obligations"). Capital gain dividends, as defined in Section 852(b)(3)
of the Code, distributable by the Fund to individual resident shareholders of
the Missouri Series, to the extent includable in federal adjusted gross income,
will be subject to Missouri income taxation. Shares in the Missouri Series are
not subject to Missouri personal property taxes.
Dividends paid by the Missouri Series, if any, that do not qualify as tax
exempt dividends under Section 852 (b)(5) of the Code, will be exempt from
Missouri income tax only to the extent that such dividends are derived from
interest on certain U.S. obligations that the State of Missouri is expressly
prohibited from taxing under the laws of the United States. The portion of such
dividends that is not subject to taxation by the State of Missouri may be
reduced by interest, or other expenses, in excess of $500 paid or incurred by a
shareholder in any taxable year to purchase or carry shares of the Missouri
Series of the Municipal Fund or other investments producing income that is
includable in federal gross income, but exempt from Missouri income tax.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Missouri Series, at least 80% of the value of the net assets
of the Missouri Series will be maintained in debt obligations which are exempt
from regular federal income tax and Missouri personal income tax.
The Missouri Series will notify its shareholders within 60 days after the
close of the year as to the interest derived from Missouri Obligations and
exempt from the Missouri personal income tax.
NEW JERSEY TAXES
In the opinion of McCarter & English, New Jersey counsel to the New Jersey
Fund, income distributions paid from a "qualified investment fund" are exempt
from the New Jersey personal income tax, to the extent attributable to
tax-exempt obligations specified by New Jersey law. As defined in N.J.S.A.
54A:6-14.1, a "qualified investment fund" is any investment or trust company, or
series of such investment company or trust registered with the Securities and
Exchange Commission,
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which for the calendar year in which a distribution is paid, has (i) no
investments other than interest-bearing obligations, obligations issued at a
discount, and cash and cash items, including receivables, and financial options,
futures, forward contracts, or other similar financial instruments related to
interest-bearing obligations, obligations issued at a discount or bond indices
related thereto (such financial options, etc. being referred to herein as
"Financial Instruments"), and (ii) which has at least 80% of the aggregate
principal amount of all its investments, excluding Financial Instruments, to the
extent such instruments are authorized by section 851(b) of the Code, cash and
cash items, including receivables, invested in obligations issued by New Jersey,
or in obligations that are free from state or local taxation under New Jersey
and federal laws such as obligations issued by the governments of Puerto Rico,
Guam or the Virgin Islands ("Municipal Securities"). Interest income and gains
realized by the New Jersey Fund upon disposition of obligations and distributed
to the shareholders are exempt from the New Jersey personal income tax to the
extent attributable to Municipal Securities. Gains resulting from the redemption
or sale of shares of the New Jersey Fund would also be exempt from the New
Jersey personal income tax.
The New Jersey personal income tax is not applicable to corporations. For
all corporations subject to the New Jersey Corporation Business Tax, interest on
Municipal Securities is included in the net income tax base for purposes of
computing the corporation business tax. Furthermore, any gain upon the
redemption or sale of shares by a corporate shareholder is also included in the
net income tax base for purposes of computing the Corporation Business Tax.
The New Jersey Fund will notify shareholders by February 15 of each calendar
year as to the amounts of all such dividends and distributions which are exempt
from federal income taxes and New Jersey personal income tax and the amounts, if
any, which are subject to such taxes. Shareholders are, however, urged to
consult with their own tax advisors as to the federal, state or local tax
consequences in their specific circumstances.
Prospective investors should be aware that an investment in a state
municipal fund may not be suitable for persons who do not receive income subject
to income taxes of such state.
NEW YORK STATE AND CITY TAXES
In the opinion of Sullivan & Cromwell, counsel to the Funds, holders of
shares of the New York Series who are subject to New York State and City tax on
dividends will not be subject to New York State and City personal income taxes
on New York Series dividends to the extent that such distributions qualify as
exempt-interest dividends under Section 852(b)(5) of the Code and represent
interest income attributable to federally tax-exempt obligations of the State of
New York and its political subdivisions (as well as certain other federally
tax-exempt obligations the interest on which is exempt from New York State and
City personal income taxes such as, for example, certain obligations of Puerto
Rico) (collectively, "New York Obligations"). To the extent that distributions
on the New York Series are derived from other income, including long or
short-term capital gains, such distributions will not be exempt from State or
City personal income taxes.
Dividends on the New York Series are not excluded in determining New York
State or City franchise taxes on corporations and financial institutions.
Except during temporary defensive periods or when acceptable investments are
unavailable to the New York Series, the Municipal Fund will maintain at least
80% of the value of the net assets of the New York Series in debt obligations
which are exempt from regular federal income tax and New York State and City
personal income taxes.
The Series will notify its shareholders within 45 days after the close of
the year as to the interest derived from New York Obligations and exempt from
New York State and City personal income taxes.
NORTH CAROLINA TAXES
In the opinion of Horack, Talley, Pharr & Lowndes, P.A., tax counsel to the
North Carolina Series, distributions from the North Carolina Series to
shareholders subject
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to North Carolina income taxes will not be taxable for North Carolina income tax
purposes to the extent the distributions either (i) qualify as exempt-interest
dividends of a regulated investment company under the Code and are attributable
to interest on obligations issued by the State of North Carolina and its
political subdivisions or (ii) are dividends attributable to interest on direct
obligations of the U.S. government and agencies and possessions of the United
States, so long as in both cases the North Carolina Series provides a supporting
statement to the shareholders designating the portion of the dividends of the
North Carolina Series attributable to interest on obligations issued by the
State of North Carolina and its political subdivisions or direct obligations of
the U.S. government and agencies and possessions of the United States. In the
absence of such a statement, the total amount of the dividends will be taxable
for North Carolina income tax purposes. Distributions attributable to other
sources, including exempt-interest dividends attributable to interest on
obligations of states other than North Carolina and the political subdivisions
of such other states as well as capital gains, will be taxable for North
Carolina income tax purposes.
The North Carolina Series will notify its shareholders within 60 days after
the close of its taxable year as to the amount of dividends and distributions to
the shareholders of the North Carolina Series which are exempt from North
Carolina income taxes and the dollar amount, if any, which is subject to North
Carolina income taxes.
OHIO TAXES
In the opinion of Squire, Sanders & Dempsey L.L.P., Ohio tax counsel to the
Municipal Fund, holders of the Ohio Series who are subject to the Ohio personal
income tax, the net income base of the Ohio corporation franchise tax, or
municipal income or school district taxes in Ohio will not be subject to such
taxes on dividend distributions with respect to shares of the Ohio Series
("Distributions") to the extent that such distributions are properly
attributable to interest (including accrued original issue discount) on
obligations issued by or on behalf of the State of Ohio, political subdivisions
thereof, or agencies or instrumentalities thereof ("Ohio Obligations"), provided
that the Ohio Series qualifies as a "regulated investment company" for federal
income tax purposes and that at all times at least 50% of the value of the total
assets of the Ohio Series consists of Ohio Obligations or similar obligations of
other states or their subdivisions. It is assumed for purposes of this
discussion of Ohio taxes that these requirements are satisfied. Shares of the
Ohio Series will be included in a corporation's tax base for purposes of
computing the Ohio corporation franchise tax on the net worth basis.
Distributions that are properly attributable to gain from the sale, exchange
or other disposition of Ohio Obligations held by the Ohio Series are not subject
to the Ohio personal income tax, the net income base of the Ohio corporation
franchise tax, or municipal income or school district taxes in Ohio.
Distributions properly attributable to interest on obligations of Puerto
Rico, the Virgin Islands or Guam, the interest on which is exempt from state
income taxes under the laws of the United States are exempt from the Ohio
personal income tax and municipal income and school district taxes in Ohio, and,
provided such interest is excluded from gross income for Federal income tax
purposes, are excluded from the net income base of the Ohio Corporation
franchise tax.
The Ohio Series is not subject to the Ohio personal income tax or municipal
income or school district taxes in Ohio. The Ohio Series is not subject to
corporation franchise tax or the Ohio dealers in intangibles tax, provided that,
if the Ohio Series has a significant nexus to the State of Ohio to be subject to
Ohio taxation, then such entity shall be exempt from taxes only if it complies
with certain reporting requirements.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Ohio Series, the Municipal Fund will maintain at least 80% of
the value of the net assets of the Ohio Series in debt obligations which are
exempt from regular federal income tax and the Ohio personal income tax and the
net income base of the Ohio corporation franchise tax.
The Ohio Series will notify its shareholders within 60 days after the close
of the year as to the status for Ohio tax purposes of distributions with respect
to shares of the Ohio Series.
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OREGON TAXES
In the opinion of Schwabe, Williamson & Wyatt, Oregon tax counsel to the
Municipal Fund, under present law, individual shareholders of the Oregon Series
will not be subject to Oregon personal income taxes on distributions received
from the Oregon Series to the extent that such distributions (1) qualify as
"exempt-interest dividends" under Section 852 (b)(5) of the Code and (2) are
derived from interest on obligations of the State of Oregon or any of its
political subdivisions or authorities or from interest on obligations of the
governments of Puerto Rico, Guam, the Virgin Islands or the Northern Mariana
Islands (collectively, "Oregon Obligations"). Other distributions, including any
long-term and short-term capital gains, will generally not be exempt from
personal income taxes in Oregon.
No portion of distributions from the Oregon Series are exempt from Oregon
excise tax on corporations. However, shares of the Oregon Series are not subject
to Oregon property tax.
Except during temporary defensive periods or when acceptable investments are
unavailable to the Oregon Series, at least 80% of the value of the net assets of
the Oregon Series will be maintained in debt obligations, the interest payments
of which are exempt from regular federal income tax and Oregon personal income
taxes.
The Oregon Series will notify its shareholders within 60 days after the
close of the year as to the interest derived from Oregon Obligations and exempt
from Oregon personal income taxes.
PENNSYLVANIA TAXES
In the opinion of Ballard Spahr Andrews & Ingersoll, Pennsylvania tax
counsel to the Pennsylvania Fund, individual shareholders of the Pennsylvania
Fund who are subject to the Pennsylvania personal income tax will not be subject
to Pennsylvania personal income tax on distributions from the Pennsylvania Fund
to the extent that such distributions are attributable to interest paid on
Pennsylvania Municipal Securities or U.S. Government obligations. Distributions
attributable to most other sources, including distributions attributable to gain
on the sale of such instruments, will not be exempt from Pennsylvania personal
income tax.
The same rules apply under the tax imposed by the Philadelphia School
District on the unearned income of Philadelphia residents, except that all
capital gain distributions are exempt from the School District tax regardless of
the source from which they are paid.
Corporate shareholders who are subject to the Pennsylvania corporate net
income tax will not be subject to corporate net income tax on distributions from
the Pennsylvania Fund that qualify as "exempt-interest dividends" for federal
income tax purposes or are derived from interest on U.S. Government obligations.
Individual shareholders of the Pennsylvania Fund who are subject to the
Pennsylvania personal property tax will be exempt from Pennsylvania personal
property tax on their shares of the Pennsylvania Fund to the extent that the
Pennsylvania Fund portfolio consists of Pennsylvania Municipal Securities and
U.S. Government obligations on the annual assessment date. Corporations are not
subject to Pennsylvania personal property taxes.
Shareholders will receive an annual Statement of Account and information
regarding the federal and Pennsylvania income tax status of all distributions
made during the year. Information will also be provided to individual
Pennsylvania shareholders regarding the portion of the value of their shares, if
any, subject to Pennsylvania personal property tax.
Prospective investors should be aware that an investment in the Pennsylvania
Fund may not be suitable for persons who are not residents of the State of
Pennsylvania or who do not receive income subject to income taxes of the State.
Investors should also be aware that there is litigation in progress in the
Pennsylvania courts that may result in the personal property tax being declared
unconstitutional in whole or in part.
SOUTH CAROLINA TAXES
In the opinion of Sinkler & Boyd, South Carolina tax counsel to the
Municipal Fund, shareholders of the South Carolina Series who are subject to
South Carolina individual or corporate income taxes will not be subject to such
taxes on South Carolina Series' dividends to the extent that such dividends
qualify as either (1) exempt-interest dividends of a regulated
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investment company under Section 852(b)(5) of the Code, which are derived from
interest on tax-exempt obligations of the State of South Carolina or any of its
political subdivisions or on obligations of the Government of Puerto Rico that
are exempt from federal income tax; or (2) dividends derived from interest or
dividends on obligations of the United States and its possessions or on
obligations or securities of any authority or commission exempt from state
income taxes under the laws of the United States (collectively, "South Carolina
Obligations"). To the extent that South Carolina Series' distributions are
attributable to other sources, such as long or short-term capital gains, such
distributions will not be exempt from South Carolina taxes.
Except during temporary defensive periods or when acceptable investments are
unavailable to the South Carolina Series, at least 80% of the value of the net
assets of the South Carolina Series will be maintained in debt obligations which
are exempt from regular federal income tax and South Carolina income tax.
The South Carolina Series will notify its shareholders within 60-days after
the close of the year as to the interest derived from South Carolina Obligations
and exempt from South Carolina income taxes.
OTHER STATE AND LOCAL TAXES
The exemption of interest on municipal securities for federal income tax
purposes does not necessarily result in exemption under the income tax laws of
any state or city. Except as noted above with respect to a particular state,
distributions from a Series may be taxable to investors under state and local
law even though all or a part of such distributions may be derived from
federally tax-exempt sources or from obligations which, if received directly,
would be exempt from such income tax. In some states, shareholders of the
National Series may be afforded tax-exempt treatment on distributions to the
extent they are derived from municipal securities issued by that state or its
localities. Prospective investors should be aware that an investment in a
certain Series may not be suitable for persons who are not residents of the
designated state or who do not receive income subject to income taxes in that
state. Shareholders should consult their own tax advisors.
SHAREHOLDER INFORMATION
Shareholders will be sent semi-annual reports regarding their Fund. General
information about the Funds may be requested by writing the Corporate
Communications/Investor Relations Department, J. & W. Seligman & Co.
Incorporated, 100 Park Avenue, New York, NY 10017 or telephoning the Corporate
Communications/ Investor Relations Department toll-free by dialing (800)
221-7844 from all continental United States, except New York, or (212) 850-1864
in New York State and the Greater New York City area. Information about
shareholder accounts may be requested by writing Shareholder Services, Seligman
Data Corp., at the same address or by toll-free telephone by dialing (800)
221-2450 from all continental United States. Seligman Data Corp. may be
telephoned Monday through Friday (except holidays), between the hours of 8:30
a.m. and 6:00 p.m. Eastern time and calls will be answered by a service
representative. 24-HOUR AUTOMATED TELEPHONE ACCESS IS AVAILABLE BY DIALING (800)
622-4597 ON A TOUCHTONE PHONE WHICH PROVIDES INSTANT ACCESS TO PRICE, YIELD,
ACCOUNT BALANCE, MOST RECENT TRANSACTION AND OTHER INFORMATION. IN ADDITION,
ACCOUNT STATEMENTS AND FORM 1099-DIV CAN BE ORDERED. TO INSURE PROMPT DELIVERY
OF DISTRIBUTION CHECKS, ACCOUNT STATEMENTS AND OTHER INFORMATION, SELIGMAN DATA
CORP., SHOULD BE NOTIFIED IMMEDIATELY IN WRITING OF ANY ADDRESS CHANGE. ADDRESS
CHANGES MAY BE TELEPHONED TO SELIGMAN DATA CORP. IF THE SHAREHOLDER HAS
TELEPHONE SERVICES. FOR MORE INFORMATION ABOUT TELEPHONE SERVICES, SEE
"TELEPHONE TRANSACTIONS" ABOVE.
ACCOUNT SERVICES. Shareholders are sent confirmation of financial
transactions.
Other investor services are available. These include:
O INVEST-A-CHECK(R) SERVICE enables a shareholder to authorize additional
purchases of shares automatically by electronic funds transfer from the
shareholder'S saving or checking account, if the bank that maintains the
account is a member of the Automated Clearing House ("ACH"), or by
preauthorized checks to be drawn on the shareholder's checking account at
regu-
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lar monthly intervals in fixed amounts of $100 or more per fund, or
regular quarterly intervals in fixed amounts of $250 or more per fund, to
purchase shares. Accounts may be established concurrently with the
Invest-A-Check(R) Service only if accompanied by a check for at least $100
iN conjunction with the monthly investment option, or a check for at least
$250 in conjunction with the quarterly investment option. For investments
into the Seligman Time Horizon MatrixSM Asset Allocation Program, the
minimum amount is $500 at regular monthly intervals or $1,000 at regular
quarterly intervals. By utilizing the Invest-A-Check(R) Service to establish
an account, you are agreeing to continue the Service until the Fund's
minimum investment amount is met. If yoU elect to cancel the Service prior
to meeting the minimum, your account may be subject to closure. (See "Terms
and Conditions.")
O AUTOMATIC DOLLAR-COST-AVERAGING SERVICE permits a shareholder of shares of
Seligman Cash Management Fund to exchange a specified amount, at regular
monthly intervals in fixed amounts of $100 or more per fund, or regular
quarterly intervals of $250 or more per fund, from shares of any class of
the Cash Management Fund into shares of the same class of any other Seligman
Mutual Fund, registered in the same name. For exchanges into the Seligman
Time Horizon MatrixSM Asset Allocation Program, the minimum amount is $500
at regular monthly intervals or $1,000 at regular quarterly intervals. The
shareholder's Cash Management Fund account must have a dollar value of at
least $5,000 at the initiation of the service and all shares must be in
"book credit" form. Exchanges will be made at the public offering price.
O DIVIDENDS FROM OTHER INVESTMENTS permits a shareholder to order dividends
payable on shares of other companies to be paid to and invested in
additional shares of the Series or another Seligman Mutual Fund. (Dividend
checks must include the shareholder's name, the name of the Series and the
class of shares in which the investment is to be made and the shareholder's
account number.) If the dividends are to be invested in a new fund account,
the first investment must meet the required minimum purchase amount for such
fund.
O AUTOMATIC CD TRANSFER SERVICE permits a shareholder to instruct a bank to
invest the proceeds of a maturing bank certificate of deposit ("CD") in
shares of any designated Seligman Mutual Fund. Shareholders who wish to use
this service, should contact Seligman Data Corp. or a broker to obtain the
necessary documentation. Banks may charge a penalty on CD assets withdrawn
prior to maturity. Accordingly, it will not normally be advisable to
liquidate a CD before its maturity.
O AUTOMATIC CASH WITHDRAWAL SERVICE permits payments in fixed amounts of $50
or more at regular intervals to be made to a shareholder who owns or
purchases shares worth $5,000 or more held as book credits. Holders of Class
A shares purchased at net asset value because the purchase amount was
$1,000,000 or more should bear in mind that withdrawals may be subject to a
1% CDSL if made within eighteen months of purchase of such shares. Holders
of Class D shares may elect to use this service, although certain
withdrawals may be subject to a CDSL. (See "Terms and Conditions.")
O DIRECTED DIVIDENDS allows a shareholder to pay dividends to another person
or to direct the payment of such dividends to another Seligman Mutual Fund
for purchase at net asset value. Dividends on Class A and Class D shares may
be directed only to shares of the same class of another Seligman Mutual
Fund.
O OVERNIGHT DELIVERY to service shareholder requests is available for a
$15.00 fee which will be deducted from a shareholder's account,if requested.
O COPIES OF ACCOUNT STATEMENTS will be sent to each shareholder free of
charge for the current year and most recent prior year. Copies of year-end
statements for prior years are available for a fee of $10.00 per year, per
account, with a maximum charge of $150 per account. Statement requests
should be forwarded, along with a check, to Seligman Data Corp.
ADVERTISING A SERIES' PERFORMANCE
From time to time, a Series advertises its "yield," "tax equivalent yield,"
"average annual total return" and "total
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return," each of which is calculated separately for each Series' Class A and
Class D shares. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT
INTENDED TO INDICATE FUTURE PERFORMANCE. The "yield" of a Series' class refers
to the income generated by an investment in the Series over a 30-day period.
This income is then "annualized." That is, the amount of income generated by the
investment during that 30-day period is assumed to be generated each 30-day
period for twelve periods and is shown as a percentage of the investment. The
"tax equivalent yield" is calculated similarly to the "yield," except that the
yield is increased using a stated income tax rate to demonstrate the taxable
yield necessary to produce an after-tax yield equivalent to the Series. The
"average annual total return" is the annual rate required for the initial
payment to grow to the amount which would be received at the end of the
specified period (one year, five years, and ten years or since the inception of
the Series), i.e., the average annual compound rate of return, assuming the
payment of the maximum sales load, if any, when the investment was first made
and that all distributions and dividends by the Series were reinvested on the
reinvestment dates during the period. "Total return" is calculated with these
same assumptions and shows the aggregate return on an investment in a class over
a specified period (one year, five years and ten years or since the inception of
the Series). Class A total return and average annual total return quoted from
time to time are not adjusted for periods prior to commencement dates, December
27, 1990, in the case of the Florida Series, and January 1, 1993, in the case of
the California High-Yield Series, California Quality Series, and each Series of
the Municipal Fund, for the annual administration, shareholder services and
distribution fee. Such fee, if reflected, would reduce the performance quoted.
The waiver by the Manager of its fees and reimbursement of certain expenses
during certain periods (as set forth under "Financial Highlights" herein) would
positively affect the performance results quoted.
From time to time, reference may be made in advertising or promotional
material to mutual fund rankings prepared by Lipper Analytical Service, Inc.
("Lipper"), an independent reporting service that monitors the performance of
mutual funds. Lipper ranks funds in various categories by making comparative
calculations using total return. Each Series may quote its Lipper ranking in the
Municipal Bond Fund category or the Single State Municipal Bond Fund category or
its Lipper ranking for all municipal bond funds monitored by Lipper. In
addition, each class of a Series may compare its total return over a certain
period with the average performance of all funds in these Lipper categories for
the same period. In calculating the total return of a Series' Class A and Class
D shares, the Lipper analysis assumes investment of all dividends and
distributions paid but does not take into account applicable sales loads. A
Series may also refer in advertisements, or in other promotional material to
articles, comments, listings and columns in the financial and other press
pertaining to a Series' performance. Examples of such financial and other press
publications include BARRON'S, BUSINESS WEEK, CDA/WIESENBERGER MUTUAL FUNDS
INVESTMENT REPORT, CHRISTIAN SCIENCE MONITOR, FINANCIAL PLANNING, FINANCIAL
TIMES, FINANCIAL WORLD, FORBES, FORTUNE, INDIVIDUAL INVESTOR, INVESTMENT
ADVISOR, INVESTORS BUSINESS DAILY, KIPLINGER'S, LOS ANGELES TIMES, MONEY
MAGAZINE, MORNINGSTAR, INC., PENSIONS AND INVESTMENTS, SMART MONEY, THE NEW YORK
TIMES, THE WALL STREET JOURNAL, USA TODAY, U.S. NEWS AND WORLD REPORT,
WASHINGTON POST, WORTH MAGAZINE and YOUR MONEY.
ORGANIZATION AND CAPITALIZATION
Each Fund is a non-diversified, open-end management investment company, as
defined in the 1940 Act. The Municipal Fund was incorporated in Maryland on
August 8, 1983. The Municipal Trust was established under the laws of the
Commonwealth of Massachusetts by a Declaration of Trust dated July 27, 1984. The
New Jersey Fund was incorporated in Maryland on March 13, 1987. The Pennsylvania
Fund was organized as an unincorporated trust under the laws of the Commonwealth
of Pennsylvania by a Declaration of Trust dated May 13, 1986.
The Directors or Trustees of the Funds have authority to create and classify
shares of capital stock or beneficial interest in separate Series, without
further action by shareholders. The Declarations of Trust of the Penn-
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sylvania Fund and the Municipal Trust permit the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest in separate Series.
To date, shares of thirteen Series of the Municipal Fund, four Series of the
Municipal Trust, one Series of the New Jersey Fund and one Series of the
Pennsylvania Fund have been authorized, which shares constitute the interests in
the Series described herein. Further series may be added in the future. Each of
the Series' capital stock or shares of beneficial interest has a par value of
$.001 per share and is divided into two classes. Each share of each Series'
Class A and Class D common stock or beneficial interest, as applicable, is equal
as to earnings, assets and voting privileges, except that each class bears its
own separate distribution and, potentially, certain other class expenses and has
exclusive voting rights with respect to any matter to which a separate vote of
any class is required by the 1940 Act or applicable state law. Each Fund has
adopted a plan (the "Multiclass Plan") pursuant to Rule 18f-3 under the 1940 Act
permitting the issuance and sales of multiple classes of common stock, or
beneficial interest. In accordance with the Articles of Incorporation or
Declaration of Trust of each Fund, the Board of Directors or Trustees may
authorize the creation of additional classes of common stock or beneficial
interest with such characteristics as are permitted by the Multiclass Plan and
Rule 18f-3. The 1940 Act requires that where more than one class exists, each
class must be preferred over all other classes in respect of assets specifically
allocated to such class. All shares have noncumulative voting rights for the
election of directors or trustees, as applicable. Each outstanding share is
fully paid and non-assessable, and each is freely transferable. There are no
liquidation, conversion or preemptive rights.
It is the intention of the Funds not to hold Annual Meetings of
Shareholders. The Directors or Trustees may call Special Meetings of
Shareholders for action by shareholder vote as may be required by the 1940 Act,
or a Fund's Articles of Incorporation or Declaration of Trust. Pursuant to the
1940 Act, shareholders have to approve the adoption of any management contract,
distribution plan and any changes in fundamental investment policies.
Shareholders also have the right to call a meeting of shareholders for the
purpose of voting on the removal of one or more Directors or Trustees.
The shareholders of a Massachusetts business trust (the Municipal Trust) or
a Pennsylvania trust (the Pennsylvania Fund), could, under certain
circumstances, be held personally liable as partners of its obligations.
However, the Declaration of Trust of each of the Municipal Trust and the
Pennsylvania Fund, contains an express disclaimer of shareholder liability for
acts or obligations of the Trusts and also provides for indemnification and
reimbursement of expenses out of the Trusts, or Series thereof, for any
shareholder held personally liable for obligations of the Trust, or Series
thereof.
THERE IS A POSSIBILITY THAT ONE FUND MIGHT BE LIABLE FOR ANY MISSTATEMENT,
INACCURACY, OR INCOMPLETE DISCLOSURE IN THIS PROSPECTUS CONCERNING ANY OTHER
FUND CONTAINED HEREIN. BASED ON THE ADVICE OF COUNSEL, HOWEVER, THE FUNDS
BELIEVE THAT THE POTENTIAL LIABILITY OF EACH FUND WITH RESPECT TO THE DISCLOSURE
IN THIS PROSPECTUS EXTENDS ONLY TO THE DISCLOSURE RELATING TO SUCH FUND.
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TERMS AND CONDITIONS
GENERAL ACCOUNT INFORMATION
Investments will be made in as many shares of a Series, including
fractions to the third decimal place, as can be purchased at the net asset value
plus a sales load, if applicable, at the close of business on the day payment is
received. If your check received in payment of a purchase of shares is
dishonored for any reason, Seligman Data Corp. may cancel the purchase and may
also redeem additional shares, if any, held in the shareholder's account in an
amount sufficient to reimburse the Fund for any loss it may have incurred and
charge a $10.00 return check fee. Shareholders will receive dividends from
investment income and any distributions from gain realized on investments in
shares or in cash according to the option elected. Dividend and gain options may
be changed by notifying Seligman Data Corp. in writing at least five business
days prior to the payable date. Stock certificates will not be issued unless
requested. Replacement stock certificates and certain waiver of probate
procedures will be subject to a surety fee.
INVEST-A-CHECK(R) SERVICE
The Invest-A-Check(R) Service is available to all shareholders. The
application is subject to acceptance by the shareholder's bank and Seligman Data
Corp. CheckS in the amount specified will be drawn automatically on the
shareholder's bank on the fifth day of each month unless otherwise specified (or
on the prior business day if such day of the month falls on a weekend or
holiday) in which an investment is scheduled and invested at the close of
business on the same date. By utilizing the Invest-A-Check(R) Service to
establish an account, you are agreeing to continue the Service until the Fund's
minimum investment amount is met. If you elect to canceL the Service prior to
meeting the minimum, your account may be subject to closure. If a check is not
honored by the shareholder's bank, or if the value of shares held falls below
the required minimum, the Service will be suspended. In the event that a check
is returned marked "unpaid," Seligman Data Corp. will cancel the purchase,
redeem shares held in your account for an amount sufficient to reimburse a
Series for any loss it may have incurred as a result, and charge a $10.00 return
check fee. This fee will be deducted from the shareholder's account. Service
will be reinstated upon written request indicating that the cause of
interruption has been corrected. The Service may be terminated by the
shareholder or Seligman Data Corp. at any time by written notice. The
shareholder agrees to hold the Funds and their agents free from all liability
which may result from acts done in good faith and pursuant to these terms.
Instructions for establishing Invest-A-Check(R) Service are given on thE Account
Application. In the event the shareholder exchanges all of the shares from one
Seligman Mutual Fund to another, the shareholder must re-apply for the
Invest-A-Check(R) Service in the Seligman Mutual Fund into which the exchange
was made. In the event of a partial exchange, the Invest-A-Check(R) Service will
be continued, subject to the above conditions, in the Seligman Fund from which
the exchange was made. Accounts established in conjunction with the
Invest-A-Check(R) servicE must be accompanied by a check for at least $100 in
connection with the monthly investment option or a check for at least $250 in
connection with the quarterly investment option.
AUTOMATIC CASH WITHDRAWAL SERVICE
A sufficient number of full and fractional shares will be redeemed to
provide the amount required for a scheduled payment and any applicable CDSL.
Redemptions will be made at the asset value at the close of business on the
specific day designated by the shareholder of each month (or on the prior
business day if the day specified falls on a weekend or holiday) less, in the
case of Class D shares, any applicable CDSL. Automatic withdrawals of Class A
shares which were purchased at net asset value because the purchase amount was
$1,000,000 or more may be subject to a CDSL if made within 18 months of purchase
of such shares. Under this Service, a Class D shareholder who requests both
dividends and capital gain distributions in additional shares may withdraw up to
10% of the value of the shareholder's fund account (at the time of election) per
annum, without the imposition of a CDSL. A minimum payment amount of $50 per
cycle is needed to establish this Service. The shareholder may change the amount
of scheduled payments or may suspend payments by written notice to Seligman Data
Corp. at least ten days prior to the effective date of such a change or
suspension. The Service may be terminated by the shareholder or Seligman Data
Corp. at any time by written notice. It will be terminated upon proper
notification of the death or legal incapacity of the shareholder. Continued
payments in excess of dividend income invested will reduce and ultimately
exhaust capital. Withdrawals, concurrent with purchases of shares of this or any
other investment company, will be disadvantageous to you because of the payment
of duplicative sales loads, if applicable. For this reason, additional purchases
of Fund shares are discouraged when the Withdrawal Service is in effect.
LETTER OF INTENT -- CLASS A SHARES ONLY
Seligman Financial Services, Inc. will hold in escrow shares equal to 5%
of the minimum purchase amount specified. Dividends and distributions on the
escrowed shares will be paid to the shareholder or credited to the shareholder's
account. Upon completion of the specified minimum purchase within the
thirteen-month period, all shares held in escrow will be deposited into the
shareholder's account or delivered to the shareholder. The shareholder may
include the total asset value of shares of the Seligman Mutual Funds (on which
an initial sales load was paid) owned as of the date of a Letter of Intent
toward the completion of the Letter. If the total amount invested within the
thirteen-month period does not equal or exceed the specified minimum purchase,
you will be requested to pay the difference between the amount of the sales load
paid and the amount of the sales load applicable to the total purchase made. If,
within 20 days following the mailing of a written request, the shareholder has
not paid this additional sales load to Seligman Financial Services, Inc.,
sufficient escrowed shares will be redeemed for payment of the additional sales
load. Shares remaining in escrow after this payment will be released to the
shareholder's account. The intended purchase amount may be increased at any time
during the thirteen-month period by filing a revised Agreement for the same
period, provided that your Dealer furnishes evidence that an amount representing
the reduction in sales load under the new Agreement, which becomes applicable on
purchases already made under the original Agreement, will be refunded to the
shareholder and that the required additional escrowed shares are being furnished
by the shareholder.
Shares of Seligman Cash Management Fund, Inc. which have been acquired by
an exchange of shares of another Seligman Mutual Fund on which there is a sales
load may be taken into account in completing a Letter of Intent, or for Right of
Accumulation. However, shares of the Cash Management Fund which have been
purchased directly may not be used for purposes of determining reduced sales
loads on additional purchases of the other Seligman Mutual Funds.
CHECK REDEMPTION SERVICE
The Check Redemption Service is available to Class A shareholders and to
Class D shareholders with respect to Class D shares held for one year or more.
For Class A shares which were purchased at net asset value because the purchase
amount was $1,000,000 or more, check redemption within 18 months of purchase may
be subject to a CDSL. If shares are held in joint names, all shareholders must
sign the Check Redemption section of the Account Application. All checks will
require all signatures unless a lesser number is indicated in the Check
Redemption section. Accounts in the names of corporations, trusts, partnerships,
etc. must list all authorized signatories. In all cases, each signature
guarantees the genuineness of the other signatures. Checks may not be drawn for
less than $500.
The shareholder hereby authorizes Mellon Bank, N.A. to honor checks drawn
by the shareholder and to effect a redemption of sufficient shares in the
shareholder's account to cover payment of the check and any applicable CDSL.
Shares in one Series cannot be redeemed to cover a check written on another
Series.
Mellon Bank, N.A. shall be liable only for its own negligence. A Fund will
not be liable for any loss, expense or cost arising out of check redemptions.
Each Fund reserves the right to change, modify or terminate this service at any
time upon notification mailed to the address of record of the shareholder(s).
SELIGMAN DATA CORP. WILL CHARGE A $10.00 PROCESSING FEE FOR ANY CHECK
REDEMPTION DRAFT RETURNED AS UNCOLLECTABLE. THIS CHARGE MAY BE DEDUCTED FROM THE
ACCOUNT AGAINST WHICH THE CHECK WAS DRAWN. NO REDEMPTION OF SHARES PURCHASED BY
CHECK (UNLESS CERTIFIED) WILL BE PERMITTED UNTIL THE FUND RECEIVES NOTICE THAT
THE CHECK HAS CLEARED WHICH MAY BE UP TO 15 DAYS FROM THE CREDIT OF THOSE SHARES
TO A SHAREHOLDER'S ACCOUNT.
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STATEMENT OF ADDITIONAL INFORMATION
February 1, 1998
SELIGMAN CALIFORNIA MUNICIPAL HIGH-YIELD SERIES ("High-Yield Series")
SELIGMAN CALIFORNIA MUNICIPAL QUALITY SERIES ("Quality Series")
(collectively, the "Series")
100 Park Avenue
New York, New York 10017
New York City Telephone (212) 850-1864
Toll-Free Telephone:
(800) 221-2450 - all continental United States
This Statement of Additional Information expands upon and supplements
the information contained in the current Prospectus of the Series, dated
February 1, 1998. It should be read in conjunction with the Prospectus, which
may be obtained by writing or calling the Series at the above address or
telephone numbers. This Statement of Additional Information, although not in
itself a Prospectus, is incorporated by reference into the Prospectus in its
entirety.
The High-Yield Series and Quality Series each offer two classes of
shares. Class A shares may be purchased at net asset value plus a sales load of
up to 4.75%. Class A shares purchased in an amount of $1,000,000 or more are
sold without an initial sales load but are subject to a contingent deferred
sales load ("CDSL") of 1% (of the current net asset value or the original
purchase price, whichever is less) if such shares are redeemed within eighteen
months of purchase. Class D shares may be purchased at net asset value and are
subject to a CDSL of 1% if redeemed within one year.
Each share of Class A and Class D represents an identical legal
interest in the investment portfolio of each Series and has the same rights
except for certain class expenses and except that Class D shares bear a higher
distribution fee that generally will cause the Class D shares to have a higher
expense ratio and pay lower dividends than Class A shares. Each Class has
exclusive voting rights with respect to its distribution plan. Although holders
of Class A and Class D shares have identical legal rights, the different
expenses borne by each Class will result in different dividends. The two classes
also have different exchange privileges.
TABLE OF CONTENTS
Page
Seligman Municipal Series Trust.................... 2
Investment Objectives, Policies and Risks.......... 2
Investment Limitations............................. 5
Trustees and Officers.............................. 6
Management and Expenses............................ 10
Administration, Shareholder Services
and Distribution Plan............................ 11
Portfolio Transactions............................. 12
Purchase and Redemption of Series' Shares.......... 12
Distribution Services.............................. 15
Taxes.............................................. 15
Valuation.......................................... 15
Performance Information............................ 16
General Information................................ 18
Special Considerations Regarding Investments
In California Municipal Securities............... 20
Financial Statements............................... 25
Appendix A......................................... 26
Appendix B......................................... 29
TEA1A
<PAGE>
SELIGMAN MUNICIPAL SERIES TRUST
The High-Yield Series and Quality Series are series of Seligman Municipal
Series Trust (the "Trust"), a non-diversified open-end management investment
company, or mutual fund, organized as an unincorporated business trust under the
laws of Massachusetts that commenced operations in 1984.
INVESTMENT OBJECTIVES, POLICIES AND RISKS
The High-Yield Series and Quality Series each seek to provide income exempt
from regular federal income taxes and the personal income taxes of California
consistent with preservation of capital with consideration given to capital
gain.
CALIFORNIA MUNICIPAL SECURITIES
California Municipal Securities include notes, bonds and commercial paper
issued by or on behalf of the State of California, its political subdivisions,
agencies, and instrumentalities, the interest on which is exempt from regular
federal income taxes and California state personal income taxes. Such securities
are traded primarily in an over-the-counter market. Each Series may invest,
without percentage limitations, in certain private activity bonds, the interest
on which is treated as a preference item for purposes of the alternative minimum
tax. See "California Municipal Securities" in the Prospectus.
Under the Investment Company Act of 1940 (the "1940 Act"), the
identification of the issuer of municipal bonds, notes or commercial paper
depends on the terms and conditions of the obligation. If the assets and
revenues of an agency, authority, instrumentality or other political subdivision
are separate from those of the government creating the subdivision and the
obligation is backed only by the assets and revenues of the subdivision, such
subdivision is regarded as the sole issuer. Similarly, in the case of an
industrial development revenue bond or pollution control revenue bond, if the
bond is backed only by the assets and revenues of the nongovernmental user, the
nongovernmental user is regarded as the sole issuer. If in either case the
creating government or another entity guarantees an obligation, the security is
treated as an issue of such guarantor to the extent of the value of the
guarantee.
Municipal bonds are issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, schools,
streets, water and sewer works, and gas and electric utilities. Municipal bonds
also may be issued in connection with the refunding of outstanding obligations,
obtaining funds to lend to other public institutions, and for general operating
expenses. Industrial development bonds, which are considered municipal bonds if
the interest paid thereon is exempt from regular federal income tax (such
interest, however, may be subject to the federal alternative minimum tax), are
issued by or on behalf of public authorities to obtain funds to provide various
privately-operated facilities for business and manufacturing, housing, sports,
pollution control, and for airport, mass transit, port and parking facilities.
The two principal classifications of municipal bonds are "general
obligation" and "revenue." General obligation bonds are secured by the issuer's
pledge of its full faith, credit and taxing power for the payment of principal
and interest. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source. Although industrial
development bonds ("IDBs") are issued by municipal authorities, they are
generally secured by the revenues derived from payments of the industrial user.
The payment of principal and interest on IDBs is dependent solely on the ability
of the user of the facilities financed by the bonds to meet its financial
obligations and the pledge, if any, of real and personal property so financed as
security for such payment.
Municipal Notes generally are used to provide for short-term capital needs
and generally have maturities of one year or less. Municipal Notes include:
1. TAX ANTICIPATION NOTES. Tax Anticipation Notes are issued to finance
working capital needs of municipalities. Generally, they are issued in
anticipation of various tax revenues, such as income, sales, use and business
taxes, and are payable from these specific future taxes.
2
<PAGE>
2. REVENUE ANTICIPATION NOTES. Revenue Anticipation Notes are issued in
expectation of receipt of other kinds of revenue, such as federal revenues
available under the Federal Revenue Sharing Programs.
3. BOND ANTICIPATION NOTES. Bond Anticipation Notes are issued to provide
interim financing until long-term financing can be arranged. In most cases, the
long-term bonds then provide the money for the repayment of the Notes.
4. CONSTRUCTION LOAN NOTES. Construction Loan Notes are sold to provide
construction financing. Permanent financing, the proceeds of which are applied
to the payment of Construction Loan Notes, is sometimes provided by a commitment
by the Government National Mortgage Association ("GNMA") to purchase the loan
notes, accompanied by a commitment by the Federal Housing Administration to
insure mortgage advances thereunder. In other instances, permanent financing is
provided by commitments of banks to purchase the loan notes.
Issues of Municipal COMMERCIAL PAPER typically represent short-term,
unsecured, negotiable promissory notes. These obligations are issued by agencies
of state and local governments to finance seasonal working capital needs of
municipalities or to provide interim construction financing and are paid from
general revenues of municipalities or are refinanced with long-term debt. In
most cases, Municipal Commercial Paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions.
WHEN-ISSUED SECURITIES. Each Series may purchase municipal securities on a
when-issued basis, in which case delivery and payment normally take place 15 to
45 days after the date of the commitment to purchase. The payment obligation and
the interest rate that will be received on the municipal securities are each
fixed at the time the buyer enters into the commitment. Although a Series will
only purchase a municipal security on a when-issued basis with the intention of
actually acquiring the securities, the Series may sell these securities before
the settlement date if it is deemed advisable.
Municipal securities purchased on a when-issued basis and the securities
held in each Series are subject to changes in market value based upon the
public's perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates (which will generally result in
similar changes in value, I.E., both experiencing appreciation when interest
rates decline and depreciation when interest rates rise). Therefore, to the
extent a Series remains substantially fully invested at the same time that it
has purchased securities on a when-issued basis, there will be a greater
possibility that the market value of a Series' assets will vary. Purchasing a
municipal security on a when-issued basis can involve a risk that the yields
available in the market when the delivery takes place may be higher than those
obtained on the security so purchased.
A separate account of each Series consisting of cash or liquid debt
securities equal to the amount of the when-issued commitments will be
established with the Custodian and marked to market daily, with additional cash
or liquid debt securities added when necessary. When the time comes to pay for
when-issued securities, the Series will meet their respective obligations from
then available cash, sale of securities held in the separate account, sale of
other securities or, although they would not normally expect to do so, sale of
the when-issued securities themselves (which may have a value greater or lesser
than the Series' payment obligations). Sale of securities to meet such
obligations carries with it a potential for the realization of capital gain,
which is not exempt from federal or California income taxes.
FLOATING RATE AND VARIABLE RATE SECURITIES. Each Series may purchase floating
rate and variable rate securities, including participation interests therein.
Investments in floating or variable rate securities normally will involve
industrial development or revenue bonds which provide that the rate of interest
is set as a specific percentage of a designated base rate, such as rates on
Treasury Bonds or Bills or the prime rate at a major commercial bank, and that a
Series can demand payment of the obligations on short notice at par plus accrued
interest, which amount may be more or less than the amount a Series paid for
them. Variable rate securities provide for a specified periodic adjustment in
the interest rate, while floating rate securities have an interest rate which
changes whenever there is a change in the designated base interest rate.
Frequently such securities are secured by letters of credit or other credit
support arrangements provided by banks. The quality of the underlying creditor
or of the bank, as the case may be, must be equivalent to the standards set
forth with respect to taxable investments listed below.
STAND-BY COMMITMENTS. The Series may acquire stand-by commitments with respect
to securities they hold. These commitments would obligate a dealer to
repurchase, at the Series' option, specified securities at a specified price.
3
<PAGE>
The price which a Series would pay for municipal securities with stand-by
commitments generally would be higher than the price which otherwise would be
paid for the municipal securities alone. A Series would use stand-by commitments
for liquidity purposes in order to permit it to remain more fully invested than
would otherwise be the case by providing a ready market for certain of its
portfolio securities at an acceptable price. The stand-by commitment generally
is for a shorter term than the maturity of the security and does not restrict in
any way the Series' right to dispose of or retain the security. There is a risk
that the seller may not be able to repurchase the security upon the exercise of
the right to resell by the Series. To minimize such risks, a Series would only
purchase obligations with stand-by commitments from sellers the Manager deems
creditworthy.
TAXABLE INVESTMENTS. Under normal market conditions, each Series will attempt to
invest 100% and as a matter of fundamental policy will invest at least 80% of
the value of its net assets in securities the interest on which is exempt from
regular federal income tax and California personal income tax. Such interest,
however, may be subject to the federal alternative minimum tax. In abnormal
market conditions, if, in the judgment of the Manager, the municipal securities
satisfying the Series' investment objectives may not be purchased, a Series may,
for defensive purposes, temporarily invest in instruments the interest on which
is exempt from regular federal income taxes, but not California personal income
taxes. Such securities would include those described under "California Municipal
Securities" above that would otherwise meet the Series' objectives.
Also, in abnormal market conditions, a Series may invest on a temporary
basis in fixed-income securities, the interest on which is subject to federal,
state or local income taxes, pending the investment or reinvestment in municipal
securities of proceeds of sales of shares or sales of portfolio securities, in
order to avoid the necessity of liquidating portfolio investments to meet
redemptions of shares by investors or where market conditions due to rising
interest rates or other adverse factors warrant temporary investing for
defensive purposes. Investments in taxable securities will be substantially in
securities issued or guaranteed by the United States Government (such as bills,
notes and bonds), its agencies, instrumentalities or authorities; highly-rated
corporate debt securities (rated AA-, or better, by Standard & Poor's
Corporation ("S&P") or Aa3, or better, by Moody's Investors Service, Inc.
("Moody's")); prime commercial paper (rated A-1+/A-1 by S&P or P-1 by Moody's);
and certificates of deposit of the 100 largest domestic banks in terms of assets
which are subject to regulatory supervision by the U.S. Government or state
governments and the 50 largest foreign banks in terms of assets with branches or
agencies in the United States. Investments in certificates of deposit of foreign
banks and foreign branches of U.S. banks may involve certain risks, including
different regulation, use of different accounting procedures, political or other
economic developments, exchange controls, or possible seizure or nationalization
of foreign deposits.
Such temporary investments in federal but not state municipal securities
and fully taxable securities will be limited as a matter of fundamental policy
to 20% of the value of a Series' net assets under normal market conditions.
PORTFOLIO TURNOVER. Portfolio transactions will be undertaken principally to
accomplish a Series' objective in relation to anticipated movements in the
general level of interest rates but a Series may also engage in short-term
trading consistent with its objective. Securities may be sold in anticipation of
a market decline (a rise in interest rates) or purchased in anticipation of a
market rise (a decline in interest rates) and later sold. In addition, a
security may be sold and another purchased at approximately the same time to
take advantage of what the Manager believes to be a temporary disparity in the
normal yield relationship between the two securities.
The Series' investment policies may lead to frequent changes in
investments, particularly in periods of rapidly fluctuating interest rates. A
change in securities held by a Series is known as "portfolio turnover" and may
involve the payment by the Series of dealer spreads or underwriting commissions,
and other transaction costs, on the sale of securities, as well as on the
reinvestment of the proceeds in other securities. Portfolio turnover rate for a
fiscal year is the ratio of the lesser of purchases or sales of portfolio
securities to the monthly average of the value of portfolio securities.
Securities whose maturity or expiration date at the time of acquisition were one
year or less are excluded from the calculation. The portfolio turnover rates for
the High-Yield Series for the fiscal years ended September 30, 1997 and 1996
were 22.42% and 34.75%, respectively. For the same periods, the portfolio
turnover rates for the Quality Series were 12.16% and 12.84%, respectively. A
Series' portfolio turnover rate will not be a limiting factor when such Series
deems it desirable to sell or purchase securities.
4
<PAGE>
INVESTMENT LIMITATIONS
Under each Series' fundamental policies, which cannot be changed except by
vote of a majority of the outstanding voting securities of the Series, each
Series may not:
- - Borrow money, except from banks for temporary purposes (such as meeting
redemption requests or for extraordinary or emergency purposes but not for
the purchase of portfolio securities) in an amount not to exceed 10% of the
value of its total assets at the time the borrowing is made (not including
the amount borrowed). A Series will not purchase additional portfolio
securities if such Series has outstanding borrowings in excess of 5% of the
value of its total assets;
- - Mortgage or pledge any of its assets, except to secure permitted borrowings
noted above;
- - Invest more than 25% of total assets at market value in any one industry;
except that municipal securities and securities of the U.S. Government, its
agencies and instrumentalities are not considered an industry for purposes
of this limitation;
- - As to 50% of the value of its total assets, purchase securities of any
issuer if immediately thereafter more than 5% of total assets at market
value would be invested in the securities of any issuer (except that this
limitation does not apply to obligations issued or guaranteed as to
principal and interest by the U.S. Government or its agencies or
instrumentalities);
- - Invest in securities issued by other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization;
- - Purchase or hold any real estate, except that the Series may invest in
securities secured by real estate or interests therein or issued by persons
(other than real estate investment trusts) which deal in real estate or
interests therein;
- - Purchase or hold the securities of any issuer, if to its knowledge, trustees
or officers of the Trust individually owning beneficially more than 0.5% of
the securities of that issuer own in the aggregate more than 5% of such
securities;
- - Write or purchase put, call, straddle or spread options; purchase securities
on margin or sell "short"; or underwrite the securities of other issuers,
except that the Series may be deemed an underwriter in connection with the
purchase and sale of portfolio securities;
- - Purchase or sell commodities or commodity contracts including futures
contracts; or
- - Make loans, except to the extent that the purchase of notes, bonds or other
evidences of indebtedness or deposits with banks may be considered loans.
As a matter of policy, with respect to 75% of a Series' assets, no revenue
bond will be purchased if as a result of such purchase more than 5% of such
Series' assets would be invested in the securities of a single issuer. This
policy is not fundamental and may be changed by the Trustees without shareholder
approval.
Under the 1940 Act, a "vote of a majority of the outstanding voting
securities" of a Series means the affirmative vote of the lesser of (1) more
than 50% of the outstanding shares of the Series or (2) 67% or more of the
shares of the Series present at a shareholders' meeting if more than 50% of the
outstanding shares of the Series are represented at the meeting in person or by
proxy.
5
<PAGE>
TRUSTEES AND OFFICERS
Trustees and officers of the Trust, together with information as to their
principal business occupations during the past five years are shown below. Each
Trustee who is an "interested person" of the Trust, as defined in the 1940 Act,
is indicated by an asterisk. Unless otherwise indicated, their addresses are 100
Park Avenue, New York, NY 10017.
WILLIAM C. MORRIS* Trustee, Chairman of the Board, Chief Executive
(59) Officer and Chairman of the Executive Committee
Chairman, J. & W. Seligman & Co. Incorporated,
investment managers and advisers; Chairman and
Chief Executive Officer, the Seligman Group of
Investment Companies; Chairman, Seligman Financial
Services, Inc., broker/dealer; Seligman Services,
Inc., broker/dealer; and Carbo Ceramics Inc.,
ceramic proppants for oil and gas industry;
Director, Seligman Data Corp., shareholder service
agent; Kerr-McGee Corporation, diversified energy
company; and Sarah Lawrence College; and a Member
of the Board of Governors of the Investment
Company Institute; formerly, President, J. & W.
Seligman & Co. Incorporated; Chairman, Seligman
Advisors, Inc., advisers; Seligman Holdings, Inc.,
holding company; Seligman Securities, Inc.,
broker/dealer and J. & W. Seligman Trust Company,
trust company; and Director, Daniel Industries,
Inc., manufacturer of oil and gas metering
equipment.
BRIAN T. ZINO* Trustee, President and Member of the Executive
(45) Committee Director and President, J. & W. Seligman
& Co. Incorporated, investment managers and
advisers; President (with the exception of
Seligman Quality Municipal Fund, Inc. and Seligman
Select Municipal Fund, Inc.) and Director or
Trustee, the Seligman Group of Investment
Companies; Chairman and President, Seligman Data
Corp., shareholder service agent; Director,
Seligman Financial Services, Inc., broker/dealer;
Seligman Services, Inc., broker/dealer; and
Seligman Henderson Co., advisers; formerly,
Director, Seligman Advisors, Inc., advisers;
Seligman Securities, Inc., broker/dealer; and J. &
W. Seligman Trust Company, trust company.
RICHARD R. SCHMALTZ* Director and Member of the Executive Committee
(57) Managing Director, Director of Investments, J. &
W. Seligman & Co. Incorporated; Director of
Seligman Henderson Co. and Trustee Emeritus of
Colby College; formerly, Director, Investment
Research at Neuberger & Berman from May 1993 to
September 1996 and Executive Vice President of
McGlinn Capital from July 1987 to May 1993.
JOHN R. GALVIN Trustee
(68)
Dean, Fletcher School of Law and Diplomacy at
Tufts University; Director or Trustee, the
Seligman Group of Investment Companies; Chairman,
American Council on Germany; a Governor of the
Center for Creative Leadership; Director, USLIFE
Corporation, life insurance; Raytheon Co.,
electronics; National Defense University; and the
Institute for Defense Analysis; and formerly,
Ambassador, U.S. State Department for negotiations
in Bosnia; Distinguished Policy Analyst at Ohio
State University and Olin Distinguished Professor
of National Security Studies at the United States
Military Academy. From June, 1987 to June, 1992,
he was the Supreme Allied Commander, Europe and
the Commander-in-Chief, United States European
Command. Tufts University, Packard Avenue,
Medford, MA 02155
6
<PAGE>
ALICE S. ILCHMAN Trustee
(62)
President, Sarah Lawrence College; Director or
Trustee, the Seligman Group of Investment
Companies; and the Committee for Economic
Development; and Chairman, The Rockefeller
Foundation, charitable foundation; formerly,
Trustee, The Markle Foundation, philanthropic
organization; and Director, NYNEX, telephone
company; and International Research and Exchange
Board, intellectual exchanges. Sarah Lawrence
College, Bronxville, New York 10708
FRANK A. McPHERSON Trustee
(64)
Director, various corporations; Director or
Trustee, the Seligman Group of Investment
Companies; Director, Kimberly-Clark Corporation,
consumer products; Bank of Oklahoma Holding
Company; Oklahoma City Chamber of Commerce;
Baptist Medical Center; Oklahoma Chapter of the
Nature Conservancy; Oklahoma Medical Research
Foundation; and National Boys and Girls Clubs of
America; Chairman of Oklahoma City Public Schools
Foundation; and Member of the Business Roundtable
and National Petroleum Council; formerly, Chairman
of the Board and Chief Executive Officer,
Kerr-McGee Corporation, energy and chemicals.
123 Robert S. Kerr Avenue, Oklahoma City, OK 73102
JOHN E. MEROW Trustee
(68)
Retired Chairman and Senior Partner, Sullivan &
Cromwell, law firm; Director or Trustee, the
Seligman Group of Investment Companies; Director,
Commonwealth Industries, Inc.; the Foreign Policy
Association; Municipal Art Society of New York;
the U.S. Council for International Business; and
The New York and Presbyterian Hospital; Chairman,
American Australian Association; The New York and
Presbyterian Hospital Care Network, Inc.;
Vice-Chairman, the U.S.-New Zealand Council; and
Member of the American Law Institute and Council
on Foreign Relations.
125 Broad Street, New York, NY 10004
BETSY S. MICHEL Trustee
(55)
Attorney; Director or Trustee, the Seligman Group
of Investment Companies and Trustee, Geraldine R.
Dodge Foundation, charitable foundation; Chairman
of the Board of Trustees of St. George's School
(Newport, RI), formerly, Director, the National
Association of Independent Schools (Washington,
DC), education.
St. Bernard's Road, P.O. Box 449, Gladstone, NJ
07934
JAMES C. PITNEY Trustee
(71)
Retired Partner, Pitney, Hardin, Kipp & Szuch, law
firm; Director or Trustee, the Seligman Group of
Investment Companies; formerly, Director, Public
Service Enterprise Group, public utility.
Park Avenue at Morris County, P.O. Box 1945,
Morristown, NJ 07962-1945
7
<PAGE>
JAMES Q. RIORDAN Trustee
(70)
Director, various corporations; Director or
Trustee, the Seligman Group of Investment
Companies; The Houston Exploration Company, The
Brooklyn Museum; The Brooklyn Union Gas Company;
The Committee for Economic Development; Dow Jones
& Co., Inc. and Public Broadcasting Service;
formerly, Co-Chairman of the Policy Council of the
Tax Foundation; Director, Tesoro Petroleum
Companies, Inc.; and Director and President,
Bekaert Corporation.
675 Third Avenue, Suite 3004, New York, NY 10017
ROBERT L. SHAFER Trustee
(65)
Director, various corporations; Director or
Trustee, the Seligman Group of Investment
Companies and USLIFE Corporation, life insurance;
formerly, Vice President, Pfizer Inc.,
pharmaceuticals.
235 East 42nd Street, New York, NY 10017
JAMES N. WHITSON Trustee
(62)
Executive Vice President, Chief Operating Officer
and Director, Sammons Enterprises, Inc.; Director
or Trustee, the Seligman Group of Investment
Companies; C-SPAN; and Commscope, manufacturer of
coaxial cables; formerly, Director, Red Man Pipe
and Supply Company, piping and other materials.
300 Crescent Court, Suite 700, Dallas, TX 75202
THOMAS G. MOLES Vice President and Senior Portfolio Manager
(54)
Director and Managing Director, (formerly, Vice
President and Portfolio Manager), J. & W. Seligman
& Co. Incorporated, investment managers and
advisers; Vice President and Portfolio Manager,
three other open-end investment companies in the
Seligman Family of Mutual Funds; President and
Portfolio Manager, Seligman Quality Municipal
Fund, Inc. and Seligman Select Municipal Fund,
Inc., closed-end investment companies; Director,
Seligman Financial Services, Inc., broker/dealer;
Seligman Services, Inc., broker/dealer; formerly,
Director, Seligman Securities, Inc.,
broker/dealer; and J. & W. Seligman Trust Company,
trust company.
LAWRENCE P. VOGEL Vice President
(41)
Senior Vice President, Finance, J. & W. Seligman &
Co. Incorporated, investment managers and
advisors; Seligman Financial Services, Inc.,
broker/dealer; and Seligman Data Corp.,
shareholder service agent; Vice President, the
Seligman Group of Investment Companies and
Seligman Services, Inc., broker/dealer; and
Treasurer, Seligman Henderson Co., advisers;
formerly, Senior Vice President, Finance, Seligman
Advisors, Inc., advisers; and Treasurer, Seligman
Holdings, Inc., holding company.
8
<PAGE>
FRANK J. NASTA Secretary
(33)
Senior Vice President, Law and Regulation and
Corporate Secretary, J. & W. Seligman & Co.
Incorporated, investment managers and advisors;
Secretary, the Seligman Group of Investment
Companies, Seligman Financial Services, Inc.,
broker/dealer; Seligman Henderson Co., advisors;
Seligman Services, Inc., broker/dealer; and
Seligman Data Corp., shareholder service agent;
formerly, Senior Vice President, Law and
Regulation and Corporate Secretary, Seligman
Advisors, Inc., advisors; and an attorney at
Seward & Kissel, law firm.
THOMAS G. ROSE Treasurer
(40)
Treasurer, the Seligman Group of Investment
Companies and Seligman Data Corp., shareholder
service agent.
The Executive Committee of the Board acts on behalf of the Board between
meetings to determine the value of securities and assets owned by the Series for
which no market valuation is available and to elect or appoint officers of the
Trust to serve until the next meeting of the Board.
<TABLE>
<CAPTION>
Compensation Table
Pension or Total Compensation
Aggregate Retirement Benefits from Trust and
Name and Compensation Accrued as part of Fund Complex Paid
Position with Trust from Trust(1) Fund Expenses to Trustees (1)(2)
------------------- ------------- ------------- ------------------
<S> <C> <C> <C>
William C. Morris, Trustee and Chairman N/A N/A N/A
Brian T. Zino, Trustee and President N/A N/A N/A
Richard R. Schmaltz, Trustee N/A N/A N/A
Ronald T. Schroeder, Trustee** N/A N/A N/A
Fred E. Brown, Trustee Emeritus*** N/A N/A N/A
John R. Galvin, Trustee $2,448.33 N/A $67,000.00
Alice S. Ilchman, Trustee 2,370.05 N/A 65,000.00
Frank A. McPherson, Trustee 2,412.61 N/A 66,000.00
John E. Merow, Trustee 2,370.05 N/A 65,000.00
Betsy S. Michel, Trustee 2,448.33 N/A 67,000.00
James C. Pitney, Trustee 2,327.49 N/A 64,000.00
James Q. Riordan, Trustee 2,405.77 N/A 66,000.00
Robert L. Shafer, Trustee 2,405.77 N/A 66,000.00
James N. Whitson, Trustee 2,455.17(d) N/A 67,000.00(d)
</TABLE>
(1) Based on remuneration received by Trustees for the Trust's four Series for
the fiscal year ended September 30, 1997. Effective January 16, 1998, the
per meeting fee for Trustees was increased by $1,000, which is allocated
among all Funds in the Fund Complex.
(2) As defined in the Prospectus, the Seligman Group of Investment Companies
consists of eighteen investment companies.
** Retired May 15, 1997.
*** Retired as Trustee and designated Trustee Emeritus on March 20, 1997.
(d) Deferred.
The Trust has a compensation arrangement under which outside trustees may
elect to defer receiving their fees. Under this arrangement, interest is accrued
on the deferred balances. The annual cost of such fees and interest is included
in the
9
<PAGE>
Trustees' fees and expenses, and the accumulated balance thereof is included in
"Liabilities" in the Trust's financial statements. The total amount of deferred
compensation (including interest) payable in respect of the Trust to Mr. Whitson
as of September 30, 1997 was $13,448. Messrs. Merow and Pitney no longer defer
current compensation; however, they have accrued deferred compensation in the
amounts of $39,026 and $28,133 as of September 30, 1997. The Fund has applied
for and received exemptive relief that would permit a director who has elected
deferral of his or her fees to choose a rate of return equal to either (i) the
interest rate on short-term Treasury bills, or (ii) the rate of return on the
shares of any of the investment companies advised by the manager, as designated
by the director. The Fund may, but is not obligated to, purchase shares of such
investment companies to hedge its obligations in connection with this deferral
arrangement.
Trustees and officers of the Trust are also trustees, directors and
officers of some or all of the other investment companies in the Seligman Group.
The Trustees and officers of the Trust as a group owned less than 1% of the
Class A shares of the High-Yield Series at January 2, 1998. No Trustees or
officers owned any Class A shares of the Quality Series or Class D shares of
either Series at that date.
MANAGEMENT AND EXPENSES
Under the Management Agreements, each dated December 29, 1988, subject to
the control of the Trustees, the Manager manages the investment of the assets of
each Series, including making purchases and sales of portfolio securities
consistent with the Series' investment objectives and policies, and administers
its business and other affairs. The Manager provides the Trust with such office
space, administrative and other services and executive and other personnel as
are necessary for Trust operations. The Manager pays all of the compensation of
Trustees of the Trust who are employees or consultants of the Manager and the
officers and employees of the Trust. The Manager also provides senior management
for Seligman Data Corp., the Trust's shareholder service agent. The Manager is
entitled to receive a management fee from each of the Series calculated daily
and payable monthly equal to 0.50% of each Series' average daily net assets on
an annual basis. The chart below indicates the management fees paid by each
Series as well as the percentage such fee represents of each Series' respective
average daily net assets for the fiscal years ended September 30, 1997, 1996 and
1995.
% of Average Management
Daily Net Assets Fee Paid
---------------- --------
HIGH-YIELD SERIES
Year Ended 9/30/97 .50% $266,730
Year Ended 9/30/96 .50 252,643
Year Ended 9/30/95 .50 241,396
QUALITY SERIES
Year Ended 9/30/97 .50% $461,278
Year Ended 9/30/96 .50 483,123
Year Ended 9/30/95 .50 483,174
The Trust pays all its expenses other than those assumed by the Manager
including brokerage commissions, if any, fees and expenses of independent
attorneys and auditors, taxes and governmental fees including fees and expenses
of qualifying the Trust and its shares under federal and state securities laws,
cost of stock certificates and expenses of repurchase or redemption of shares,
expenses of printing and distributing reports, notices and proxy materials to
existing shareholders, expenses of printing and filing reports and other
documents filed with governmental agencies, expenses of shareholders' meetings,
expenses of corporate data processing and related services, shareholder
recordkeeping and shareholder account services fees and disbursements of
transfer agents and custodians, expenses of disbursing dividends and
distributions, fees and expenses of Trustees of the Trust not employed by or
serving as a Trustee of the Manager or its affiliates, insurance premiums and
extraordinary expenses such as litigation expenses. The Trust's expenses are
allocated between the Series in a manner determined by the Trustees to be fair
and equitable.
Each Series' Management Agreement was unanimously approved by the Trustees
at a Meeting held on October 11, 1988 and was approved by the shareholders of
each Series at a meeting held on December 15, 1988. Each Management Agreement
will continue in effect until December 31 of each year if (1) such continuance
is approved in the manner required by the 1940
10
<PAGE>
Act (i.e., by a vote of a majority of the Trustees or of the outstanding voting
securities of the Series and by a vote of a majority of the Trustees who are not
parties to the Management Agreement or interested persons of any such party) and
(2) if the Manager shall not have notified the Series at least 60 days prior to
the anniversary date of the previous continuance that it does not desire such
continuance. A Management Agreement may be terminated by a Series, without
penalty, on 60 days' written notice to the Manager and will terminate
automatically in the event of its assignment. Each Series has agreed to change
its name upon termination of its Management Agreement if continued use of the
name would cause confusion in the context of the Manager's business.
The Manager is a successor firm to an investment banking business founded
in 1864 which has thereafter provided investment services to individuals,
families, institutions and corporations. On December 29, 1988, a majority of the
outstanding voting securities of the Manager was purchased by Mr. William C.
Morris and a simultaneous recapitalization of the Manager occurred. See Appendix
B for further history of the Manager.
Officers, directors and employees of the Manager are permitted to engage in
personal securities transactions, subject to the Manager's Code of Ethics (the
"Ethics Code"). The Ethics Code proscribes certain practices with regard to
personal securities transactions and personal dealings, provides a framework for
the reporting and monitoring of personal securities transactions by the
Manager's Compliance Officer, and sets forth a procedure of identifying, for
disciplinary action, those individuals who violate the Ethics Code. The Ethics
Code prohibits each of the officers, directors and employees (including all
portfolio managers) of the Manager from purchasing or selling any security that
the officer, director or employee knows or believes (i) was recommended by the
Manager for purchase or sale by any client, including the Fund, within the
preceding two weeks, (ii) has been reviewed by the Manager for possible purchase
or sale within the preceding two weeks, (iii) is being purchased or sold by any
client, (iv) is being considered by a research analyst, (v) is being acquired in
a private placement, unless prior approval has been obtained from the Manager's
Compliance Officer, or (vi) is being acquired during an initial or secondary
public offering. The Ethics Code also imposes a strict standard of
confidentiality and requires portfolio managers to disclose any interest they
may have in the securities or issuers that they recommend for purchase by any
client.
The Ethics Code also prohibits (i) each portfolio manager or member of an
investment team from purchasing or selling any security within seven calendar
days of the purchase or sale of the security by a client's account (including
investment company accounts) for which the portfolio manager or investment team
manages and (ii) each employee from engaging in short-term trading (a purchase
and sale or vice-versa within 60 days). Any profit realized pursuant to either
of these prohibitions must be disgorged.
Officers, directors and employees are required, except under very limited
circumstances, to engage in personal securities transactions through the
Manager's order desk. The order desk maintains a list of securities that may not
be purchased due to a possible conflict with clients. All officers, directors
and employees are also required to disclose all securities beneficially owned by
them on December 31 of each year.
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
An Administration, Shareholder Services and Distribution Plan (the "Plan")
for the Series is in effect under Section 12(b) of the 1940 Act and Rule 12b-1
thereunder.
The Plan was approved on July 16, 1992 by the Trustees, including a
majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust and who have no direct or indirect financial interest in
the operation of the Plan or in any agreement related to the Plan (the
"Qualified Trustees") and was approved by shareholders of each Series at a
Special Meeting of Shareholders held on November 23, 1992. The Plan became
effective on January 1, 1993 and will continue in effect until December 31 of
each year so long as such continuance is approved annually by a majority vote of
both the Trustees and the Qualified Trustees of the Trust, cast in person at a
meeting called for the purpose of voting on such approval. Amendments to the
Plan were approved in respect of the Class D shares on November 18, 1993 by the
Trustees, including a majority of the Qualified Trustees, and became effective
with respect to the Class D shares on February 1, 1994. The Plan may not be
amended to increase materially the amounts payable to Service Organizations
without the approval of a majority of the outstanding voting securities of the
Series and no material amendment to the Plan may be made except by a majority of
both the Trustees and Qualified Trustees.
11
<PAGE>
The Plan requires that the Treasurer of the Trust shall provide to the
Trustees, and the Trustees shall review, at least quarterly, a written report of
the amounts expended (and purposes therefor) under the Plan. Rule 12b-1 also
requires that the selection and nomination of Trustees who are not "interested
persons" of the Trust be made by such disinterested Trustees.
PORTFOLIO TRANSACTIONS
No brokerage commissions were paid by either Series during the fiscal years
ended September 30, 1997, 1996 or 1995. When two or more Series of the Trust or
two or more of the investment companies in the Seligman Group or other
investment advisory clients of the Manager desire to buy or sell the same
security at the same time, the securities purchased or sold are allocated by the
Manager in a manner believed to be equitable to each. There may be possible
advantages or disadvantages of such transactions with respect to price or the
size of positions already obtainable or saleable.
PURCHASE AND REDEMPTION OF SERIES SHARES
The High-Yield Series and Quality Series each issues two classes of shares:
Class A shares may be purchased at a price equal to the next determined net
asset value per share, plus a sales load. Class A shares purchased at net asset
value without an initial sales load due to the size of the purchase are subject
to a CDSL of 1% if such shares are redeemed within eighteen months of purchase.
Class D shares may be purchased at a price equal to the next determined net
asset value without an initial sales load, but a CDSL may be charged on certain
redemptions within one year of purchase. See "Alternative Distribution System,"
"Purchase of Shares," and "Redemption of Shares" in the Series' Prospectus.
SPECIMEN PRICE MAKE-UP
Under the current distribution arrangements between the Trust and the
Distributor, Class A shares are sold at a maximum sales load of 4.75% and Class
D shares are sold at net asset value.* Using each Series' net asset value at
September 30, 1997, the maximum offering price of a Series' shares is as
follows:
HIGH-YIELD SERIES
CLASS A
Net asset value per share......................................... $ 6.61
Maximum sales load (4.75% of offering price)...................... .33
------
Maximum offering price per share.................................. $ 6.94
======
CLASS D
Net asset value and maximum offering price per share*............. $ 6.61
======
QUALITY SERIES
CLASS A
Net asset value per share......................................... $ 6.99
Maximum sales load (4.75% of offering price)...................... .35
------
Maximum offering price per share.................................. $ 7.34
======
CLASS D
Net asset value and maximum offering price per share*............. $ 6.97
======
- ----------
12
<PAGE>
* Class D shares are subject to a CDSL of 1% on redemptions within one year
of purchase. Class A shares purchased at net asset value due to the size of
the purchase are subject to a CDSL of 1% on redemptions within eighteen
months of purchase of such shares. See "Redemption of Shares" in the
Prospectus.
CLASS A SHARES - REDUCED INITIAL SALES LOADS
REDUCTIONS AVAILABLE. Shares of any Seligman Mutual Fund sold with an initial
sales load in a continuous offering will be eligible for the following
reductions:
VOLUME DISCOUNTS are provided if the total amount being invested in Class A
shares of the High-Yield Series and Quality Series alone, the other series of
the Trust or in any combination of shares of the other mutual funds in the
Seligman Group which are sold with an initial sales load, reaches levels
indicated in the sales load schedule set forth in the Prospectuses.
THE RIGHT OF ACCUMULATION allows an investor to combine the amount being
invested in Class A shares of High-Yield Series and Quality Series, the other
series of the Trust and shares of other Seligman Mutual Funds sold with an
initial sales load with the total net asset value of shares of those mutual
funds already owned that were sold with an initial sales load and the total net
asset value of shares of Seligman Cash Management Fund which were acquired
through an exchange of shares of another Seligman Mutual Fund on which there was
an initial sales load at the time of purchase to determine reduced sales loads
in accordance with the schedule in the Prospectuses. The value of the shares
owned, including the value of shares of Seligman Cash Management Fund acquired
in an exchange of shares of another Seligman Mutual Fund on which there is an
initial sales load at the time of purchase will be taken into account in orders
placed through a dealer, however, only if Seligman Financial Services, Inc.
("SFSI") is notified by an investor or a dealer of the amount owned at the time
a purchase is made and is furnished sufficient information to permit
confirmation.
A LETTER OF INTENT allows an investor to purchase Class A shares of the
High-Yield Series and Quality Series over a 13-month period at reduced initial
sales loads in accordance with the schedule in the Prospectuses, based on the
total amount of Class A shares that the letter states the investor intends to
purchase plus the total net asset value of shares that were sold with an initial
sales load of the other series of the Trust and other Seligman Mutual Funds
already owned and the total net asset value of shares of Seligman Cash
Management Fund which were acquired through an exchange of shares of another
Seligman Mutual Fund on which there was an initial sales load at the time of
purchase. Reduced initial sales loads also may apply to purchases made within a
13-month period starting up to 90 days before the date of execution of a letter
of intent. For more information concerning the terms of the letter of intent,
see "Terms and Conditions - Letter of Intent" in the Prospectus.
Class A shares purchased without an initial sales load in accordance with
the sales load schedule in the Prospectus or pursuant to a Volume Discount,
Right of Accumulation or Letter of Intent are subject to a CDSL of 1% on
redemptions of such shares within eighteen months of purchase.
PERSONS ENTITLED TO REDUCTIONS. Reductions in sales loads apply to purchases of
Class A shares of each Series by a "single person," including an individual;
members of a family unit comprising husband, wife and minor children; or a
trustee or other fiduciary purchasing for a single fiduciary account. Employee
benefit plans qualified under Section 401 of the Internal Revenue Code of 1986,
as amended (the "Code"), tax-exempt organizations under Section 501 (c)(3) or
(13) of the Code, and non-qualified employee benefit plans that satisfy uniform
criteria are considered "single persons" for this purpose. The uniform criteria
are as follows:
1. Employees must authorize the employer, if requested by the Series', to
receive in bulk and to distribute to each participant on a timely basis the
Series' prospectuses, reports and other shareholder communications.
2. Employees participating in a plan will be expected to make regular periodic
investments (at least annually). A participant who fails to make such
investments may be dropped from the plan by the employer or the Series 12
months and 30 days after the last regular investment in his account. In such
event, the dropped participant would lose the discount on share purchases to
which the plan might then be entitled.
3. The employer must solicit its employees for participation in such an
employee benefit plan or authorize and assist an investment dealer in making
enrollment solicitations.
13
<PAGE>
ELIGIBLE EMPLOYEE BENEFIT PLANS. The table of sales loads in the Prospectus
applies to sales to "eligible employee benefit plans" (as defined in the
Prospectus), except that each Series may sell shares at net asset value to
"eligible employee benefit plans," which have at least (i) $500,000 invested in
the Seligman Mutual Funds or (ii) 50 eligible employees to whom such plan is
made available. Such sales must be made in connection with a payroll deduction
system of plan funding or other systems acceptable to Seligman Data Corp., the
Trust's shareholder service agent. Such sales are believed to require limited
sales effort and sales related expenses and therefore are made at net asset
value. Contributions or account information for plan participation also should
be transmitted to Seligman Data Corp. by methods which it accepts. Additional
information about "eligible employee benefit plans" is available from investment
dealers or SFSI.
FURTHER TYPES OF REDUCTIONS. Class A shares of each Series may be issued without
an initial sales load in connection with the acquisition of cash and securities
owned by other investment companies and personal holding companies to financial
institution trust departments, to registered investment advisers exercising
investment discretionary authority with respect to the purchase of Series
shares, or pursuant to sponsored arrangements with organizations which make
recommendations to, or permit group solicitation of, its employees, members or
participants in connection with the purchase of shares of the Series, to
separate accounts established and maintained by an insurance company which are
exempt from registration under Section 3(c)(11) of the 1940 Act, to registered
representatives and employees (and their spouses and minor children) of any
dealer that has a sales agreement with SFSI; to financial institution trust
departments; to registered investment advisers exercising discretionary
investment authority with respect to the purchase of Fund shares; to accounts of
financial institutions or broker/dealers that charge account management fees,
provided the manager or one of its affiliates has entered into an agreement with
respect to such accounts; pursuant to sponsored arrangements with organizations
which make recommendations to or permit group solicitations of, its employees,
members or participants in connection with the purchase of shares of the Fund;
to other investment companies in the Seligman Group in connection with a
deferred fee arrangement for outside directors; and to "eligible employee
benefit plans" which have at least (i) $500,000 invested in the Seligman Mutual
Funds or (ii) 50 eligible employees to whom such plan is made available.
"Eligible employee benefit plan" means any plan or arrangement, whether or not
tax qualified, which provides for the purchase of Fund shares. Sales of shares
to such plans must be made in connection with a payroll deduction system of plan
funding or other system acceptable to Seligman Data Corp.
Class A shares of the High-Yield Series and Quality Series may be sold at
net asset value to present and retired Trustees, directors, officers, employees
(and family members, as defined in the Prospectus) of the Trust, the other
investment companies in the Seligman Group, the Manager and other companies
affiliated with the Manager. Such sales also may be made to employee benefit
plans for such persons and to any investment advisory, custodial, trust or other
fiduciary account managed or advised by the Manager or any affiliate. These
sales may be made for investment purposes only, and shares may be resold only to
the Series.
Class A shares of the Series' may be sold at net asset value to these
persons since such sales require less sales effort and lower sales related
expenses as compared with sales to the general public.
PAYMENT IN SECURITIES. In addition to cash, each Series may accept securities in
payment for Series shares sold at the applicable public offering price.
Generally, a Series will only consider accepting securities (1) to increase its
holdings in a portfolio security of the Series, or (2) if the Manager determines
that the offered securities are a suitable investment in a sufficient amount for
efficient management. Although no minimum has been established, it is expected
that each Series would not accept securities with a value of less than $100,000
per issue in payment for shares. A Series may reject in whole or in part offers
to pay for shares with securities, may require partial payment in cash for
applicable sales loads, and may discontinue accepting securities as payment for
shares at any time without notice. The Series have no present intention of
accepting securities in payment for shares.
MORE ABOUT REDEMPTIONS. The procedures for redemption of the Series' shares
under ordinary circumstances are set forth in the Prospectus. Whether shares are
redeemed pursuant to the Regular or the Expedited Redemption Service (less than
$1,000), a check for the proceeds ordinarily will be sent within seven calendar
days following redemption. Payment may be made in securities, or postponed, if
the orderly liquidation of portfolio securities is prevented by the closing of,
or restricted trading on, the New York Stock Exchange, during periods of
emergency, or during such other periods as ordered by the Securities and
Exchange Commission. If payment were to be made in securities, shareholders
receiving securities could incur certain transaction costs. The Trust will not
accept orders from securities dealers for the repurchase of shares.
14
<PAGE>
DISTRIBUTION SERVICES
SFSI, an affiliate of the Manager, acts as general distributor of the shares
of the Trust and of the other mutual funds in the Seligman Group. As general
distributor of the Trust's shares of beneficial interest, SFSI allows
commissions to all dealers of up to 4.25% on purchases of Class A shares of the
Series to which the 4.75% sales load applies. SFSI receives the balance of sales
loads and any CDSL, if applicable, paid by investors. The Trust and SFSI are
parties to a Distributing Agreement dated January 1, 1993.
The total sales loads paid by shareholders of the High-Yield Series and the
Quality Series for the fiscal year ended September 30, 1997 amounted to $146,934
and $55,181, respectively, with an allowance of $129,666 and $48,253,
respectively, as commissions to dealers; for the fiscal year ended September 30,
1996 amounted to $114,640 and $118,847, respectively, with allowance of $100,612
and $104,653, respectively, as commissions to dealers; and for the fiscal year
ended September 30, 1995 amounted to $103,824 and $136,990, respectively, with
allowance of $91,517 and $120,277, respectively, as commissions to dealers. For
the fiscal years ended September 30, 1997, 1996 and 1995, SFSI retained CDSL
charges of $1,363, $443 and $288, respectively, for the High-Yield Series. For
the years ended September 30, 1997, 1996 and 1995, SFSI retained CDSL charges of
$1,420, $526 and $399, respectively, for the Quality Series.
Effective April 1, 1995, Seligman Services, Inc. ("SSI"), an affiliate of
the Manager, became eligible to receive commissions from certain sales of shares
of the Series, as well as distribution and service fees pursuant to the Plan.
For the year ended September 30, 1997, SSI received commissions of $495 from
sales of the High-Yield Series and $1,571 from sales of the Quality Series. SSI
also received distribution and service fees of $1,414 with respect to the
High-Yield Series and $2,688 with respect to the Quality Series. For the year
ended September 30, 1996, SSI received commissions of $28 from sales of the
High-Yield Series and $2,241 from sales of the Quality Series. SSI also received
distribution and services fees of $1,592 with respect to the High-Yield Series
and $2,753 with respect to the Quality Series. For the period ended September
30, 1995, SSI received commissions of $218 from sales of the High-Yield Series
and $282 from sales of the Quality Series. SSI also received distribution and
service fees of $465 with respect to the High-Yield Series and $1,141 with
respect to the Quality Series.
TAXES
Under the Code, each Series of the Trust will be treated as a separate
corporation for federal income tax purposes. As a result, determinations of net
investment income, exempt-interest dividends and net long-term and short-term
capital gain and loss will be made separately for each Series.
Each Series intends to qualify and elect to be treated as a regulated
investment company under the Code and thus to be relieved of federal income tax
on amounts distributed to shareholders; provided that it distributes at least
90% of its net investment income and net short-term capital gains, if any.
Qualification as a regulated investment company under the Code requires
among other things, that (a) at least 90% of the annual gross income of the
Series be derived from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of stocks or securities or
foreign currencies, or other income (including but not limited to gains from
options, futures, and forward contracts) derived with respect to its business of
investing in such stocks, securities or currencies; and (b) the Series
diversifies its holdings so that, at the end of each quarter of the taxable
year, (i) at least 50% of the market value of the Series assets is represented
by cash, United States Government securities and other securities limited in
respect of any one issuer to an amount not greater than 5% of the Series assets
and 10% of the outstanding voting securities of such issuer, and (ii) not more
than 25% of the value of its assets is invested in the securities of any one
issuer (other than U.S. Government securities).
VALUATION
The net asset value per share of each class of a Series Trust is determined
as of the close of regular trading on the New York Stock Exchange ("NYSE")
(normally, 4:00 p.m. Eastern time), on each day that the NYSE is open. The Trust
and the NYSE are currently closed on New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The Trust will also determine net asset
value for each
15
<PAGE>
class of a Series on each day in which there is a sufficient degree of trading
in a Series' portfolio securities that the net asset value of Series shares
might be materially affected. Net asset value per share for a class of a Series
is computed by dividing that class' share of the value of the net assets of such
Series (i.e., the value of its assets less liabilities) by the total number of
outstanding shares of such class. All expenses of a Series, including the
Manager's fee, are accrued daily and taken into account for the purpose of
determining net asset value. The net asset value of Class D shares of a Series
will generally be lower than the net asset value of Class A shares of such
Series as a result of the higher distribution fee with respect to Class D
shares. It is expected, however, that the net asset value per share of the two
classes will tend to converge immediately after the recording of dividends,
which will differ by approximately the amount of the distribution and other
class expenses accrual differential between the classes.
The High-Yield and Quality Series municipal securities are valued on the
basis of quotations provided by an independent pricing service, approved by the
Trustees, which uses information with respect to transactions in bonds,
quotations from bond dealers, market transactions in comparable securities and
various relationships between securities in determining value. In the absence of
such quotations, in accordance with fair value as determined in accordance with
procedures approved by the Trustees. Short-term notes having remaining
maturities of 60 days or less are generally valued at amortized cost.
Generally, trading in certain securities such as municipal securities,
corporate bonds, U.S. Government securities, and money market instruments is
substantially completed each day at various times prior to the close of the
NYSE. The values of such securities used in determining the net asset value of a
Series' shares are computed as of such times. Occasionally, events affecting the
value of such securities may occur between such times and the close of the NYSE
which will not be reflected in the computation of a Series' net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities and other assets will be valued at their fair
market value as determined in good faith by the Trustees.
PERFORMANCE INFORMATION
The annualized yield for the Class A shares of the High-Yield Series and the
Quality Series for the 30-day period ended September 30, 1997 was 4.15% and
4.08%, respectively. The annualized yield was computed by dividing the Series'
net investment income per share earned during the 30-day period by the maximum
offering price per share (i.e., the net asset value plus the maximum sales load
of 4.75% of the net amount invested) on September 30, 1997, which was the last
day of this period. The average number of Class A shares of the High-Yield
Series and Quality Series was 7,970,961 and 12,644,829, respectively, which was
the average daily number of shares outstanding during the 30-day period that
were eligible to receive dividends. Income was computed by totaling the interest
earned on all debt obligations during the 30-day period and subtracting from
that amount the total of all recurring expenses incurred during the period. The
30-day yield was then annualized on a bond-equivalent basis assuming semi-annual
reinvestment and compounding of net investment income, as described in the
Prospectus.
The tax equivalent annualized yields for the Class A shares of the
High-Yield Series and the Quality Series for the 30-day period ended September
30, 1997 were 7.57% and 7.44%, respectively. The tax equivalent annualized yield
was computed by first computing the annualized yield as discussed above. Then
the portion of the yield attributable to securities the income of which was
exempt for federal and state income tax purposes was determined. This portion of
the yield was then divided by one minus 45.22% (45.22% being the assumed maximum
combined federal and state income tax rate for individual taxpayers that are
subject to California personal income taxes). Then the small portion of the
yield attributable to securities the income of which was exempt only for federal
income tax purposes was determined. This portion of the yield was then divided
by one minus 39.6% (39.6% being the maximum federal income tax rate). These two
calculations were then added to the portion of the yield, if any, that was not
attributable to securities, the income of which was NOT tax exempt.
The average annual total returns for the one-year period ended September 30,
1997 for the Class A shares of the High-Yield Series and the Quality Series were
3.64% and 3.66%, respectively; for the five-year period ended September 30, 1997
were 5.94% and 5.79%, respectively; and for the ten-year period ended September
30, 1997 were 8.06% and 8.07%, respectively. These returns were computed by
assuming a hypothetical initial payment of $1,000. From this $1,000, the maximum
sales load of $47.50 (4.75% of public offering price) was deducted. It was then
assumed that all of the dividends and distributions paid by a Series over the
relevant time period were reinvested. It was then assumed that at the end of the
one-year period, five-year period and ten-year period of the Series, the entire
amount was redeemed. The average annual
16
<PAGE>
total return was then calculated by calculating the annual rate required for the
initial payment to grow to the amount which would have been received upon
redemption (i.e., the average annual compound rate of return).
The annualized yields for the 30-day period ended September 30, 1997 or the
Class D shares of the High-Yield Series and Quality Series were 3.47% and 3.40%,
respectively. The annualized yield was computed by dividing a Series' net
investment income per share earned during this 30-day period by the maximum
offering price per share (i.e., the net asset value) on September 30, 1997,
which was the last day of this period. The average number of Class D shares
were: High-Yield-499,114, and Quality-282,802 which was the average daily number
of shares outstanding during the 30-day period that were eligible to receive
dividends.
The tax equivalent annualized yields for the 30-day period ended September
30, 1997 for the Class D shares of the High-Yield Series and Quality Series were
6.33% and 6.20%, respectively. The tax equivalent annualized yield was computed
as discussed above for Class A shares.
The average annual total returns for the Class D shares of the High-Yield
Series and the Quality Series for the one-year period ended September 30, 1997
were 6.60% and 6.75%, respectively, and since inception through the period ended
September 30, 1997 were 4.95% and 3.98%, respectively. These returns were
computed by assuming a hypothetical initial payment of $1,000 in Class D shares
of each Series and that all of the dividends and distributions by the Series'
Class D shares over the relevant time period were reinvested. It was then
assumed that at the end of each period, the entire amount was redeemed,
subtracting the 1% CDSL, if applicable .
The tables below illustrate the total returns on a $1,000 investment in
Class A shares of each of the Series for the ten years ended September 30, 1997,
and in the Class D shares of each of the Series from the commencement of
operations through September 30, 1997, assuming investment of all dividends and
capital gain distributions.
<TABLE>
<CAPTION>
CLASS A SHARES
VALUE OF CAPITAL VALUE TOTAL VALUE
YEAR INITIAL GAIN OF OF TOTAL
ENDED 1 INVESTMENT 2 DISTRIBUTIONS DIVIDENDS INVESTMENT 2 RETURN 1,3
- ------- ------------ ------------- --------- ------------ ----------
<C> <C> <C> <C> <C> <C>
HIGH-YIELD
9/30/88 $ 1,005 $ 11 $ 76 $ 1,092
9/30/89 1,019 22 156 1,197
9/30/90 991 40 233 1,264
9/30/91 1,042 44 336 1,422
9/30/92 1,066 47 437 1,550
9/30/93 1,079 95 541 1,715
9/30/94 1,010 110 602 1,722
9/30/95 1,036 113 725 1,874
9/30/96 1,042 120 834 1,996
9/30/97 1,060 152 959 2,171 117.08%
QUALITY
9/30/88 996 21 72 1,089
9/30/89 1,026 22 149 1,197
9/30/90 986 42 219 1,247
9/30/91 1,054 52 320 1,426
9/30/92 1,085 58 419 1,562
9/30/93 1,154 89 537 1,780
9/30/94 1,013 113 557 1,683
9/30/95 1,053 136 676 1,865
9/30/96 1,070 141 785 1,996
9/30/97 1,107 147 919 2,173 117.30%
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
CLASS D SHARES
VALUE OF CAPITAL VALUE TOTAL VALUE
YEAR/PERIOD INITIAL GAIN OF OF TOTAL
ENDED 1 INVESTMENT 2 DISTRIBUTIONS DIVIDENDS INVESTMENT 2 RETURN 1,3
- ------- ------------ ------------- --------- ------------ ----------
<C> <C> <C> <C> <C> <C>
HIGH-YIELD
9/30/94 $ 946 $ - $ 29 $ 975
9/30/95 972 - 79 1,051
9/30/96 976 4 129 1,109
9/30/97 992 20 182 1,194 19.36%
QUALITY
9/30/94 895 - 25 920
9/30/95 930 10 68 1,008
9/30/96 945 12 114 1,071
9/30/97 978 12 164 1,154 15.39%
</TABLE>
1 For the ten-year period ended September 30, 1997 for Class A shares; and
from commencement of operations of Class D shares on February 1, 1994.
2 The "Value of Initial Investment" as of the date indicated reflects the
effect of the maximum sales load or CDSL, if applicable, assumes that all
dividends and capital gain distributions were taken in cash and reflects the
effect of the maximum sales load and changes in the net asset value of the
shares purchased with the hypothetical initial investment. "Total Value of
Investment" reflects the effect of the CDSL, if applicable, and assumes
investment of all dividends and capital gain distributions.
3 Total return for each Series is calculated by assuming a hypothetical
initial investment of $1,000 at the beginning of the period specified,
subtracting the maximum sales load or CDSL, if applicable; determining total
value of all dividends and distributions that would have been paid during
the period on such shares assuming that each dividend or distribution was
invested in additional shares at net asset value; calculating the total
value of the investment at the end of the period; and finally, by dividing
the difference between the amount of the hypothetical initial investment at
the beginning of the period and its value at the end of the period by the
amount of the hypothetical initial investment.
A Series' Class A total return and average annual total return quoted does
not reflect the deduction of the administration, shareholder services and
distribution fee for period prior to January 1, 1993, which fee if reflected
would reduce the performance quoted.
GENERAL INFORMATION
The Trustees are authorized to classify or reclassify and issue any shares
of beneficial interest of the Trust into any number of other classes without
further action by shareholders. The 1940 Act requires that where more than one
class exists, each class must be preferred over all other classes in respect of
assets specifically allocated to such class.
As a general matter, the Trust will not hold annual or other meetings of
the shareholders. This is because the Declaration of Trust provides for
shareholder voting only (a) for the election or removal of one or more Trustees
if a meeting is called for that purpose, (b) with respect to any contract as to
which shareholder approval is required by the 1940 Act, (c) with respect to any
termination or reorganization of the Trust or any series, including the Fund, to
the extent and as provided in the Declaration of Trust, (d) with respect to any
amendment of the Declaration of Trust (other than amendments establishing and
designating new series, abolishing series when there are no units thereof
outstanding, changing the name of the Trust or the name of any series, supplying
any omission, curing any ambiguity or curing, correcting or supplementing any
provision thereof which is internally inconsistent with any other provision
thereof or which is defective or inconsistent with the 1940 Act or with the
requirements of the Code, or applicable regulations for the Fund's obtaining the
most favorable treatment thereunder available to regulated investment
companies), which amendments require approval by a majority of the
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<PAGE>
Shares entitled to vote, (e) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding, or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or the shareholders, and (f) with
respect to such additional matters relating to the Trust as may be required by
the 1940 Act, the Declaration of Trust, the By-laws of the Trust, any
registration of the Trust with the Securities and Exchange Commission (the
"Commission") or any state, or as the Trustees may consider necessary or
desirable. Each Trustee serves until the next meeting of shareholders, if any,
called for the purpose of considering the election or reelection of such Trustee
or of a successor to such Trustee, and until the election and qualification of
his successor, if any, elected at such meeting, or until such Trustee sooner
dies, resigns, retires or is removed by the shareholders or two-thirds of the
Trustees.
The shareholders of the Trust have the right, upon the declaration in
writing or vote of more than two-thirds of the Trust's outstanding shares, to
remove a Trustee. The Trustees will call a meeting of shareholders to vote on
the removal of a Trustee upon the written request of the record holders of ten
percent of its shares. In addition, whenever ten or more shareholders of record
who have been such for at least six months preceding the date of application,
and who hold in the aggregate either shares having a net asset value of at least
$25,000 or at least 1 per centum of the outstanding shares, whichever is less,
shall apply to the Trustees in writing, stating that they wish to communicate
with other shareholders with a view to obtaining signatures to a request for a
meeting for the purpose of voting upon the question of removal of any Trustee or
Trustees and accompanied by a form of communication and request which they wish
to transmit, the Trustee shall within five business days after receipt of such
application either: (1) afford to such applicants access to a list of the names
and addresses of all shareholders as recorded on the books of the Trust; or (2)
inform such applicants as to the approximate number of shareholders of record,
and the approximate cost of mailing to them the proposed communication and form
of requests. If the Trustees elect to follow the latter course, the Trustees,
upon the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall, with
reasonable promptness, mail such material to all shareholders of record at their
addresses as recorded on the books, unless within five business days after such
tender the Trustees shall mail to such applicants and file with the Commission,
together with a copy of the material to be mailed, a written statement signed by
at least a majority of the Trustees to the effect that in their opinion either
such material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such opinion. After
opportunity for hearing upon the objections specified in the written statement
so filed, the Commission may, and if demanded by the Trustees or by such
applicants shall, enter an order either sustaining one or more of such
objections or refusing to sustain any of them. If the Commission shall enter an
order refusing to sustain any of such objections, or if, after the entry of an
order sustaining one or more of such objections, the Commission shall find,
after notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Trustees shall mail copies
of such material to all shareholders with reasonable promptness after the entry
of such order and the renewal of such tender.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted by the provisions of the 1940 Act or applicable state law, or
otherwise, to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are substantially identical or that the matter does
not significantly affect any interest of such series. However, the Rule exempts
the selection of independent public accountants, the approval of principal
distributing contracts and the election of trustees from the separate voting
requirements of the Rule.
The shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust. The Declaration of Trust also
provides for indemnification and reimbursement of expenses out of a series'
assets for any shareholder held personally liable for obligations of such
series.
CUSTODIAN. Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City,
Missouri 64105, serves as custodian for the Fund. It also maintains, under the
general supervision of the Manager, the accounting records and determines the
net asset value for the Fund.
AUDITORS. Deloitte & Touche LLP, independent auditors, have been selected as
auditors of the Fund. Their address is Two World Financial Center, New York, NY
10281.
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<PAGE>
SPECIAL CONSIDERATIONS REGARDING INVESTMENTS
IN CALIFORNIA MUNICIPAL SECURITIES
The following information as to certain California considerations is
given to investors in view of the Fund's policy of investing primarily in
securities of California issuers. Such information is derived from sources that
are generally available to investors and is believed by the Manager to be
accurate. Such information constitutes only a brief summary, does not purport to
be a complete description and is based on information from official statements
relating to securities offerings of California issuers.
California's economy, the largest among the 50 states and one of the
largest in the world, has major components in agriculture, manufacturing, high
technology, trade, entertainment, tourism, construction and services.
California's economy is approaching a major milestone in 1997 as gross state
domestic product is expected to pass the $1 trillion mark. As a stand alone
economy, California's economy would rank seventh in the world, ahead of China's
and behind the United Kingdom. The State's August 1, 1996 population of 32.4
million represents over 12 percent of the total United States population, with
total employment over 14 million.
From 1990-1993, the State suffered through a severe recession, the
worst since the 1930's, heavily influenced by large cutbacks in
defense/aerospace industries and military base closures and a major drop in real
estate construction. California's economy has been recovering and growing
steadily stronger since the start of 1994, to the point where the State's
economic growth is outpacing the rest of the nation. More than 300,000 nonfarm
jobs were added in the State in 1996, while personal income grew by more than
$55 billion. Another 380,000 jobs are expected to be created in 1997. The
unemployment rate, while still higher than the national average, fell to the low
6% range in mid-1997, compared to over 10% at the worst of the recession.
California's economic expansion is being fueled by strong growth in
high-technology industries, including computer software, electronics
manufacturing and motion picture/television production; growth is also strong in
business services, export trade, and manufacturing, with even the aerospace
sector now showing increased employment. The State's economy is now much more
balanced and diversified than it was during the 1980's. Nonresidential real
estate construction has grown rapidly in response to the growth in the economy.
Residential construction has been growing slowly since the depths of the
recession, but remains much lower (as measured by annual new unit permits) than
the late 1980's.
The State is subject to an annual appropriations limit imposed by
Article XIII B of the State Constitution (the "Appropriations Limit"). The
Appropriations Limit does not restrict appropriations to pay debt service on the
Bonds or other voter-authorized bonds. Article XIII B prohibits the State from
spending "appropriations subject to limitation" in excess of the Appropriations
Limit. "Appropriations subject to limitation", with respect to the State, are
authorizations to spend "proceeds of taxes", which consist of tax revenues, and
certain other funds, including proceeds from regulatory licenses, user charges
or other fees to the extent that such proceeds exceed "the cost reasonably borne
by that entity in providing the regulation, product or service", but "proceeds
of taxes" exclude most state subventions to local governments, tax refunds and
some benefit payments such as unemployment insurance. No limit is imposed on
appropriations of funds which are not "proceeds of taxes", such as reasonable
user charges or fees and certain other non-tax funds.
Not included in the Appropriations Limit are appropriations for the
debt service costs of bonds existing or authorized by January 1, 1979, or
subsequently authorized by the voters, appropriations required to comply with
mandates of courts or the federal government, appropriations for qualified
capital outlay projects, appropriations of revenues derived from any increase in
gasoline taxes and motor vehicle weight fees above January 1, 1990 levels, and
appropriation of certain special taxes imposed by initiative (e.g. cigarettes
and tobacco taxes). The Appropriations Limit may also be exceeded in cases of
emergency.
The State's Appropriations Limit in each year is based on the limit for
the prior year, adjusted annually for changes in California per capita personal
income and changes in population, and adjusted, when applicable, for any
transfer of financial responsibility of providing services to or from another
unit of government. The Appropriations Limit is tested over consecutive two-year
periods. Any excess of the aggregate "proceeds of taxes" received over such
two-year period above the combined Appropriations Limits for those two years is
divided equally between transfers to local school and community college ("K-14")
districts and refunds to taxpayers.
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<PAGE>
The Legislature has enacted legislation to implement Article XIII B
which defines certain terms used in Article XIII B and sets forth the methods
for determining the Appropriations Limit. Government Code Section 7912 requires
an estimate of the Appropriations Limit to be included in the Governor's Budget,
and thereafter to be subject to the budget process and established in the Budget
Act.
For the 1996-1997 Fiscal Year, the State Appropriations Limit and the
Appropriations Subject to Limit were estimated to be $42.0 and $35.3 billion,
respectively, resulting in an amount under the limit of approximately $6.7
billion. For the 1997-1998 Fiscal Year, the State Appropriations Limit and
Appropriations Subject to Limit are estimated to be $44.8 and $38.0 billion,
respectively, resulting in an amount under the limit of approximately $6.8
billion.
PROPOSITION 98
On November 8, 1988, voters of the State approved Proposition 98, a
combined initiative constitutional amendment and statute called the "Classroom
Instructional Improvement and Accountability Act". Proposition 98 (as modified
by Proposition 111, which was enacted on June 5, 1990), changed State funding of
public education below the university level, and the operation of the State
Appropriations Limit, primarily by guaranteeing K-14 schools a minimum share of
General Fund revenues. Proposition 98 permits the Legislature, by two-thirds
vote of both houses and with the Governor's concurrence, to suspend the K-14
schools' minimum funding formula for a one-year period. Proposition 98 also
contains provisions transferring certain State tax revenues in excess of the
Article XIII B limit to K-14 schools. The 1997-1998 Budget Act contains a large
increase in funding for K-14 education under Proposition 98, reflecting strong
revenues which have exceeded initial budgeted amounts. Part of the nearly $1.75
billion increased spending is allocated to prior fiscal years.
FISCAL YEARS PRIOR TO 1995-96
Pressures on the State's budget in the late 1980's and early 1990's
were caused by a combination of external economic conditions and growth of the
largest General Fund Programs--K-14 education, health, welfare and
corrections--at rates faster than the revenue base. These pressures could
continue as the State's overall population and school age population continue to
grow, and as the State's corrections program responds to a "Three Strikes" law
enacted in 1994, which requires mandatory life prison terms for certain
third-time felony offenders. In addition, the State's health and welfare
programs are in a transition period as a result of recent federal and State
welfare reform initiatives.
As a result of these factors and others, and especially because a
severe recession between 1990-1994 reduced revenues and increased expenditures
for social welfare programs, from the late 1980's until 1992-93, the State had a
period of budget imbalance. During this period, expenditures exceeded revenues
in four out of six years, and the State accumulated and sustained a budget
deficit in its reserve the Special Fund for Economic Uncertainties ("SFEU")
approaching $2.8 billion at its peak at June 30, 1993. Between 1991-92 and
1994-95 Fiscal Years, each budget required multibillion dollar actions to bring
projected revenues and expenditures into balance, including significant cuts in
health and welfare program expenditures; transfers of program responsibilities
and funding from the State to local governments; transfers of program
responsibilities and funding from State to local governments; transfers of or
about $3.6 billion in annual local property tax revenues to local school
districts, thereby reducing State funding for schools under Proposition 98; and
revenue increases (particularly in the 1991-92 Fiscal Year budget),most of which
were for a short duration.
Despite these budget actions, as noted, the effects of the recession
led to large, unanticipated deficits in the budget reserve, the SFEU, as
compared to projected positive balances. By the 1993-94 Fiscal Year, the
accumulated deficit was so large that it was impractical to budget to retire it
in one year, so a two-year program was implemented, using the issuance of
revenue anticipation warrants to carry a portion of the deficit over the end of
the fiscal year. When the economy failed to recover sufficiently in 1993-94, a
second two-year plan was implemented in 1994-95, again using cross-fiscal year
revenue anticipation warrants to partly finance the deficit into the 1995-96
fiscal year.
Another consequence of the accumulated budget deficits, together with
other factors such as disbursement of funds to local school districts "borrowed"
from future fiscal years and hence not shown in the annual budget, was to
significantly reduce the State's cash resources available to pay its ongoing
obligations. When the Legislature and the Governor failed to adopt a budget for
the 1992-93 Fiscal Year by July 1, 1992, which would have allowed the State to
carry out its normal
21
<PAGE>
annual cash flow borrowing to replenish its cash reserves, the State Controller
issued registered warrants to pay a variety of obligations representing prior
years' or continuing appropriations, and mandates from court orders. Available
funds were used to make constitutionally-mandated payments, such as debt service
on bonds and warrants. Between July 1 and September 4, 1992, when the budget was
adopted, the State Controller issued a total of approximately $3.8 billion of
registered warrants.
For several fiscal years during the recession, the State was forced to
rely increasingly on external debt markets to meet its cash needs, as a
succession of notes and revenue anticipation warrants were issued in the period
from June 1992 to July 1994, often needed to pay previously maturing notes or
warrants. These borrowings were used also in part to spread out the repayment of
the accumulated budget deficit over the end of a fiscal year. The last and
largest of these borrowings was $4.0 billion of revenue anticipation warrants
issued in July, 1994 and maturing on April 25, 1996.
1995-96 AND 1996-97 FISCAL YEARS
With the end of the recession, and a growing economy starting in 1994,
the State's financial condition improved markedly in the last two fiscal years,
with a combination of better than expected revenues, slowdown in growth of
social welfare programs, and continued spending restraint based on the actions
taken in earlier years. The last of the recession-induced budget deficits was
repaid, allowing the State's budget reserve (the SEFU) to post a positive cash
balance for only the second time in the 1990's, totaling $281 million as of June
30, 1997. The State's cash position also returned to health, as cash flow
borrowing was limited to $3 billion in 1996-97, and no deficit borrowing has
occurred over the end of these last two fiscal years.
In each of these two fiscal years, the State budget contained the
following major features:
1. Expenditures for K-14 schools grew significantly, as the new
revenues were directed to school spending under Proposition 98. This new money
allowed several new education initiatives to be funded, and raised K-12
per-pupil spending to around $4,900 by Fiscal Year 1996-97.
2. The budgets restrained health and welfare spending levels, holding
to the reduced benefit levels enacted in earlier years, and attempted to reduce
General Fund spending by calling for greater support from the federal
government. The State also attempted to shift to the federal government a larger
share of the cost of incarceration and social services for illegal aliens. Some
of these efforts were successful, and federal welfare reform also helped, but as
a whole the federal support never reached the levels anticipated when the
budgets were enacted. These funding shortfalls were, however, filled by the
strong revenue collections, which exceeded expectations.
3. General Fund support for the University of California and California
State Universities grew by an average of 5.2 percent and 3.3 percent per year,
respectively, and there were no increases in student fees.
4. General Fund support for the Department of Corrections grew as
needed to meet increased prison populations. No new prisons were approved for
construction, however.
5. There were no tax increases, and starting January 1, 1997, there was
a 5 percent cut in corporate taxes. The suspension of the Renter's Tax Credit,
first taken as a cost-saving measure during the recession, was continued.
As noted, the economy grew strongly during these fiscal years, and as a
result, the General Fund took in substantially greater tax revenues (around $2.2
billion in 1995-96 and $1.6 billion in 1996-97) than were initially planned when
the budgets were enacted. These additional funds were largely directed to school
spending as mandated by Proposition 98, and to make up shortfalls from reduced
federal health and welfare aid. As a result, there was not any dramatic increase
in budget reserves, although the accumulated budget deficit from the recession
years was finally eliminated in the past fiscal year.
CURRENT STATE BUDGET
THE DISCUSSION BELOW OF THE 1997-98 FISCAL YEAR BUDGET IS BASED ON
ESTIMATES AND PROJECTIONS OF REVENUES AND EXPENDITURES FOR THE CURRENT FISCAL
YEAR AND MUST NOT BE CONSTRUED AS STATEMENTS OF FACT. THESE ESTIMATES AND
PROJECTIONS ARE
22
<PAGE>
BASED UPON VARIOUS ASSUMPTIONS WHICH MAY BE AFFECTED BY NUMEROUS FACTORS,
INCLUDING FUTURE ECONOMIC CONDITIONS IN THE STATE AND THE NATION, AND THERE CAN
BE NO ASSURANCE THAT THE ESTIMATES WILL BE ACHIEVED.
1997-98 FISCAL YEAR
On January 9, 1997, the Governor released his proposed budget for the
1997-98 Fiscal Year (the "Proposed Budget"). The Proposed Budget estimated
General Fund revenues and transfers of about $50.7 billion, and proposed
expenditures of $50.3 billion, which would leave a budget reserve in the SFEU of
about $500 million. The Proposed Budget included provisions for a further 10%
cut in Bank and Corporate Taxes, which ultimately was not enacted by the
Legislature.
At the time of the May Revision, released on May 14, 1997, the
Department of Finance increased its revenue estimate for the upcoming fiscal
year by $1.3 billion, in response to the continued strong growth in the State's
economy. Budget negotiations continued into the summer, with major issued to be
resolved including final agreement on State welfare reform, increase in State
employee salaries and consideration of a tax cut proposed by the Governor.
In May, 1997, action was taken by the California Supreme Court in an
ongoing lawsuit, PERS v. Wilson, which made final a judgment against the State
requiring an immediate payment from the General Fund to the Public Employees
Retirement Fund ("PERF") to make up certain deferrals in annual retirement fund
contributions which had been legislated in earlier years for budget savings, and
which the courts found to be unconstitutional. On July 30, 1997, following a
direction from the Governor, the Controller transferred $1.235 billion from the
General Fund to the PERF in satisfaction of the judgment, representing the
principle amount of the improperly deferred payments from 1995-96 and 1996-97.
FISCAL YEAR 1997-98 BUDGET ACT
Once the pension payment eliminated essentially all the "increased"
revenue in the budget, final agreement was reached within a few weeks on the
welfare package and the remainder of the budget. The Legislature passed the
Budget Bill on August 11, 1997, along with numerous related bills to implement
its provisions. On August 18, 1997, the Governor signed the Budget Act, but
vetoed about $314 million of specific spending items, primarily in health and
welfare and education areas from both the General Fund and Special Funds.
The Budget Act anticipates General Fund revenues and transfers of $52.5
billion (a 6.8 percent increase over the final 1996-97 amount), and expenditures
of $52.8 billion (an 8.0 percent increase from the 1996-97 levels). On a
budgetary basis, the budget reserve (SFEU) is projected to decrease from $408
million at June 30, 1997 to $112 million at June 30, 1998. The Budget Act also
includes Special Fund expenditures of $14.4 billion (as against estimated
Special Fund revenues of $14.0 billion), and $2.1 billion of expenditures from
various Bond Funds. Following enactment of the Budget Act, the State implemented
its normal annual cash flow borrowing program, issuing $3 billion of notes which
mature on June 30, 1998.
The following are major features of the 1997-98 Budget Act:
1. For the second year in a row, the Budget contains a large increase
in funding for K-14 education under Proposition 98, reflecting strong revenues
which have exceeded initial budgeted amounts. Part of the nearly $1.75 billion
in increased spending is allocated to prior fiscal years. Funds are provided to
fully pay for the cost-of-living-increase component of Proposition 98, and to
extend the class size reduction and reading initiatives.
2. The Budget Act reflects the $1.235 billion pension case judgment
payment, and brings funding of the State's pension contribution back to the
quarterly basis which existed prior to the deferral actions which were
invalidated by the courts. There is no provision for any additional payments
relating to this court case.
3. Continuing the third year of a four-year "compact" which the
Administration has made with higher education units, funding from the General
Fund for the University of California and California State University has
increased by about 6 percent ($121 million and $107 million, respectively), and
there was no increase in student fees.
4. Because of the effect of the pension payment, most other State
programs were continued at 1996-97 levels, adjusted for caseload changes.
23
<PAGE>
5. Health and welfare costs are contained, continuing generally the
grant levels from prior years, as part of the initial implementation of the new
CalWORKs program.
6. Unlike prior years, this Budget Act does not depend on uncertain
federal budget actions. About $300 million in federal funds, already included in
the federal FY 1997 and 1998 budgets, are included in the Budget Act, to offset
incarceration costs for illegal aliens.
7. The Budget Act contains no tax increases, and no tax reductions. The
Renters Tax Credit was suspended for another year, saving approximately $500
million.
Prior to the end of the Legislative Session on September 13, 1997, the
Legislature passed a bill restoring $203 million of education-related
expenditures which the Governor had vetoed in the original Budget Act, based on
agreement with the Governor on an education testing program. The Governor signed
several bills implementing a new education testing program, and is expected to
sign the bill to restore the funding. The Legislature also passed a bill to
restore $48 million of welfare cost savings which had been part of earlier
legislation vetoed by the Governor. This bill was signed by the Governor in
early October.
Also prior to the end of the Legislative Session, the Legislature
passed several bills encompassing a coordinated package of fiscal reforms,
mostly to take effect after the 1997-98 Fiscal Year. Included in the package are
a variety of phased-in tax cuts, conformity with certain provisions of the
federal tax reform law passed earlier in the year, and reform of funding for
county trial courts, with the State to assume greater financial responsibility.
The Governor signed most of these bills in early October, with a few bills
remaining to be signed. The Department of Finance estimates that the major
impact of these fiscal reforms will occur in Fiscal Year 1998-99 and subsequent
years. The Department further estimates that a small projected revenue loss in
Fiscal Year 1997-98 will be more than offset by increased Personal Income Tax
receipts which will be generated by the new, more favorable federal state and
state capital gains tax rate.
LITIGATION
Certain litigation is pending against California or its officer or
employees that, if decided adversely, could require the State to make
significant future expenditures or could impair future revenue sources. Among
the more significant of these cases are those that involve: (i) liability for
damages stemming from the 1986 Yuba River flood. Damages of $500,000 were
awarded to a sample of plaintiffs. The State's potential liability to the
remaining plaintiffs ranges from $800 million to $1.5 billion. An appeal has
been filed; (ii) two cases concerning AFDC grant payments, one seeking to
invalidate grant reductions and the other challenging the authority of the State
to grant reductions, with potential liability estimated at $831 million; (iii)
lawsuits seeking reimbursement for alleged state-mandated costs for special
education programs for handicapped students with potential liability of over $1
billion; (iv) lawsuits related to contamination at the Stringfellow toxic waste
site seeking recovery for past cost of clean-up estimated at $200 million to
$800 million; (v) challenges to the transfer of over $900 million from Special
fund accounts within the State Treasury to the State's General Fund pursuant to
the Budget Acts of 1993 - 1996; (vi) challenges to the amendment of statutes
prescribing specific percentages of tobacco tax revenues to be placed in
accounts to be used for health education, research programs and medical
treatment programs involving appropriations of approximately $166 million.
ORANGE COUNTY BANKRUPTCY
On December 6, 1994, Orange County, California (the "County"), together
with its pooled investment funds (the "Pools") filed for protection under
Chapter 9 of the federal Bankruptcy Code, after reports that the Pools had
suffered significant market losses in their investments, causing a liquidity
crisis for the Pools and the County. More than 180 other public entities, most
of which, but not all, are located in the County, were also depositors in the
Pools. The County has reported the Pools' loss at about $1.69 billion, or about
23 percent of their initial deposits of approximately $7.5 billion. Many of the
entities which deposited moneys in the Pools, including the County, faced
interim and/or extended cash flow difficulties because of the bankruptcy filing
and may be required to reduce programs or capital projects.
The State has no existing obligation with respect to any outstanding obligations
or securities of the County or any of the other participating entities.
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FINANCIAL STATEMENTS
The Annual Report to Shareholders for the fiscal year ended September 30,
1997 contains a schedule of the investments of each of the Series as of
September 30, 1997, as well as certain other financial information as of that
date. The financial statements and notes included in the Annual Report, and the
Independent Auditor's Report therein, are incorporated herein by reference. The
Annual Report will be furnished, without charge, to investors who request copies
of this Statement of Additional Information.
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APPENDIX A
Moody's Investors Service, Inc. ("Moody's")
MUNICIPAL BONDS
Aaa: Municipal bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk. Interest payments
are protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa: Municipal bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than Aaa bonds because margins
of protection may not be as large or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A: Municipal bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Municipal bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be characteristically lacking or may be
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact may have speculative characteristics as well.
Ba: Municipal bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate, and thereby
not well safeguarded during other good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Municipal bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Municipal bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest.
Ca: Municipal bonds which are rated Ca represent obligations which are
speculative in high degree. Such issues are often in default or have other
marked shortcomings.
C: Municipal bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers (1, 2 and 3) in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; modifier 2 indicates a mid-range ranking; and modifier 3
indicates that the issuer ranks in the lower end of its generic rating category.
MUNICIPAL NOTES
Moody's ratings for Municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG). This distinction is in recognition of
the differences between short-term and long-term credit risk. Loans bearing the
designation MIG 1 are of the best quality, enjoying strong protection by
established cash flows of funds for their servicing or by established and
broad-based access to the market for refinancing. Loans bearing the designation
MIG 2 are of high quality, with margins of protection ample although not so
large as in the preceding group. Loans bearing the designation MIG 3 are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Market access for refinancing in
particular, is likely to be less well established. Notes bearing the designation
MIG 4 are
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judged to be of adequate quality, carrying specific risk but having protection
commonly regarded as required of an investment security and not distinctly or
predominantly speculative.
COMMERCIAL PAPER
Moody's Commercial Paper Ratings are opinions of the ability of issuers to
repay punctually promissory senior debt obligations not having an original
maturity in excess of one year. Issuers rated "Prime-1" or "P-1" indicates the
highest quality repayment capacity of the rated issue.
The designation "Prime-2" or "P-2" indicates that the issuer has a strong
capacity for repayment of senior short-term promissory obligations. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.
The designation "Prime-3" or "P-3" indicates that the issuer has an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
Issues rated "Not Prime" do not fall within any of the Prime rating
categories.
STANDARD & POOR'S CORPORATION ("S&P")
MUNICIPAL BONDS
AAA: Municipal bonds rated AAA are highest grade obligations. Capacity to
pay interest and repay principal is extremely strong.
AA: Municipal bonds rated AA have a very high degree of safety and very
strong capacity to pay interest and repay principal and differs from the highest
rated issues only in small degree.
A: Municipal bonds rated A are regarded as upper medium grade. They have a
strong degree of safety and capacity to pay interest and repay principal
although they are somewhat more susceptible in the long term to the adverse
effects of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB: Municipal bonds rated BBB are regarded as having a satisfactory degree
of safety and capacity to pay interest and re-pay principal. Whereas they
normally exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and re-pay principal for bonds in this category than for bonds in
higher rated categories.
BB, B, CCC, CC: Municipal bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and pre-pay principal in accordance with the terms of the bond. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposure to adverse
conditions.
C: The rating C is reserved for income bonds on which no interest is being
paid.
D: Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of bond as a matter of policy.
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MUNICIPAL NOTES
SP-1: Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
COMMERCIAL PAPER
S&P Commercial Paper ratings are current assessments of the likelihood of
timely payment of debts having an original maturity of no more than 365 days.
A-1: The A-1 designation indicates that the degree of safety regarding
timely payment is very strong.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B: Issues rated "B" are regarded as having only a speculative capacity for
timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful
capacity of payment.
D: Debt rated "D" is in payment default.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of bond as a matter of policy.
The ratings assigned by S&P may be modified by the addition of a plus (+)
or minus (-) sign to show relative standing within its major rating categories.
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APPENDIX B
HISTORY OF J. & W. SELIGMAN & CO. INCORPORATED
Seligman's beginnings date back to 1837, when Joseph Seligman, the
oldest of eight brothers, arrived in the United States from Germany. He earned
his living as a pack peddler in Pennsylvania, and began sending for his
brothers. The Seligmans became successful merchants, establishing businesses in
the South and East.
Backed by nearly thirty years of business success - culminating in the
sale of government securities to help finance the Civil War - Joseph Seligman,
with his brothers, established the international banking and investment firm of
J. & W. Seligman & Co. In the years that followed, the Seligman Complex played a
major role in the geographical expansion and industrial development of the
United States.
THE SELIGMAN COMPLEX:
...Prior to 1900
o Helps finance America's fledgling railroads through underwritings.
o Is admitted to the New York Stock Exchange in 1869. Seligman remained a
member of the NYSE until 1993, when the evolution of its business made it
unnecessary.
o Becomes a prominent underwriter of corporate securities, including New
York Mutual Gas Light Company, later part of Consolidated Edison.
o Provides financial assistance to Mary Todd Lincoln and urges the Senate to
award her a pension.
o Is appointed U.S. Navy fiscal agent by President Grant.
o Becomes a leader in raising capital for America's industrial and urban
development.
...1900-1910
o Helps Congress finance the building of the Panama Canal.
...1910s
o Participates in raising billions for Great Britain, France and Italy,
helping to finance World War I.
...1920s
o Participates in hundreds of successful underwritings including those for
some of the Country's largest companies: Briggs Manufacturing, Dodge
Brothers, General Motors, Minneapolis-Honeywell Regulatory Company, Maytag
Company, United Artists Theater Circuit and Victor Talking Machine
Company.
o Forms Tri-Continental Corporation in 1929, today the nation's largest,
diversified closed-end equity investment company, with over $2 billion in
assets and one of its oldest.
...1930s
o Assumes management of Broad Street Investing Co. Inc., its first mutual
fund, today known as Seligman Common Stock Fund, Inc.
o Establishes Investment Advisory Service.
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...1940s
o Helps shape the Investment Company Act of 1940.
o Leads in the purchase and subsequent sale to the public of Newport News
Shipbuilding and Dry Dock Company, a prototype transaction for the
investment banking industry.
o Assumes management of National Investors Corporation, today Seligman
Growth Fund, Inc.
o Establishes Whitehall Fund, Inc., today Seligman Income Fund, Inc.
...1950-1989
o Develops new open-end investment companies. Today, manages more than 40
mutual fund portfolios.
o Helps pioneer state-specific, municipal bond funds, today managing a
national and 18 state-specific municipal funds.
o Establishes J. & W. Seligman Trust Company and J. & W. Seligman Valuations
Corporation.
o Establishes Seligman Portfolios, Inc., an investment vehicle offered
through variable annuity products.
...1990s
o Introduces Seligman Select Municipal Fund and Seligman Quality Municipal
Fund, two closed-end funds that invest in high quality municipal bonds.
o In 1991 establishes a joint venture with Henderson plc, of London, known
as Seligman Henderson Co., to offer global investment products.
o Introduces to the public Seligman Frontier Fund, Inc., a small
capitalization mutual fund.
o Launches Seligman Henderson Global Fund Series, Inc., which today offers
five separate series: Seligman Henderson International Fund, Seligman
Henderson Global Smaller Companies Fund, Seligman Henderson Global
Technology Fund, Seligman Henderson Global Growth Opportunities Fund and
Seligman Henderson Emerging Markets Growth Fund.
o Launches Seligman Value Fund Series, which currently offers two separate
series: Seligman Large-Cap Value Fund and Seligman Small-Cap Value Fund.
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STATEMENT OF ADDITIONAL INFORMATION
February 1, 1998
SELIGMAN FLORIDA MUNICIPAL SERIES
100 Park Avenue
New York, New York 10017
New York City Telephone (212) 850-1864
Toll-Free Telephone:
(800) 221-2450 - all continental United States
This Statement of Additional Information expands upon and supplements
the information contained in the current Prospectus of Seligman Florida
Municipal Series (the "Fund"), dated February 1, 1998. It should be read in
conjunction with the Prospectus, which may be obtained by writing or calling the
Fund at the above address or telephone numbers. This Statement of Additional
Information, although not in itself a Prospectus, is incorporated by reference
into the Prospectus in its entirety.
The Fund offers two classes of shares. Class A shares may be purchased
at net asset value plus a sales load of up to 4.75%. Class A shares purchased in
an amount of $1,000,000 or more are sold without an initial sales load but are
subject to a contingent deferred sales load ("CDSL") of 1% (of the current net
asset value or the original purchase price, whichever is less) if such shares
are redeemed within eighteen months of purchase. Class D shares may be purchased
at net asset value and are subject to a CDSL of 1% if redeemed within one year.
Each share of Class A and Class D represents an identical legal
interest in the investment portfolio of the Fund and has the same rights except
for certain class expenses and except that Class D shares bear a higher
distribution fee that generally will cause the Class D shares to have a higher
expense ratio and pay lower dividends than Class A shares. Each Class has
exclusive voting rights with respect to its distribution plan. Although holders
of Class A and Class D shares have identical legal rights, the different
expenses borne by each Class will result in different dividends. The two classes
also have different exchange privileges.
TABLE OF CONTENTS
Page
Seligman Florida Municipal Series............... 2
Investment Objective, Policies
and Risks...................................... 2
Investment Limitations.......................... 5
Trustees and Officers........................... 6
Management and Expenses.........................10
Administration, Shareholder Services
and Distribution Plan..........................11
Portfolio Transactions..........................12
Purchase and Redemption of Fund Shares..........12
Distribution Services ..........................14
Taxes...........................................15
Valuation.......................................15
Performance Information.........................15
General Information.............................17
Risk Factors Regarding Investments
In Florida Municipal Securities................19
Financial Statements............................20
Appendix A......................................21
Appendix B......................................24
TEB1A
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SELIGMAN FLORIDA MUNICIPAL SERIES
The Fund is a series of Seligman Municipal Series Trust (the "Trust"), a
non-diversified open-end management investment company, or mutual fund,
organized as an unincorporated business trust under the laws of Massachusetts
that commenced operations in 1984.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund seeks to provide high income exempt from regular federal income
taxes consistent with preservation of capital. The Fund also invests with
consideration given to capital gain.
The Fund is expected to invest principally, without percentage limitations,
in municipal securities which on the date of investment are within the four
highest ratings of Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A, Baa
for bonds; MIG 1, MIG 2, MIG 3, MIG 4 for notes; P-1 for commercial paper) or
Standard & Poor's Corporation ("S&P") (AAA, AA, A, BBB for bonds; SP-1 - SP-2
for notes; A-1+, A-1/A-2 for commercial paper). Municipal securities rated in
these categories are commonly referred to as investment grade. The Fund may
invest in municipal securities which are not rated, or which do not fall into
the credit ratings noted above if, based upon credit analysis by the Manager, it
is believed that such securities are of comparable quality. In determining
suitability of investment in a lower rated or unrated security, the Manager will
take into consideration asset and debt service coverage, the purpose of the
financing, history of the issuer, existence of other rated securities of the
issuer and other considerations as may be relevant, including comparability to
other issuers.
Although securities rated in the fourth rating category are commonly
referred to as investment grade, investment in such securities could involve
risks not usually associated with bonds rated in the first three categories.
Bonds rated BBB by S&P are more likely as a result of adverse economic
conditions or changing circumstance to exhibit a weakened capacity to pay
interest and re-pay principal than bonds in higher rating categories and bonds
rated Baa by Moody's lack outstanding investment characteristics and in fact
have speculative characteristics according to Moody's. Municipal securities in
the fourth rating category of S&P or Moody's will generally provide a higher
yield than do higher rated municipal securities of similar maturities; however,
they are subject to a greater degree of fluctuation in value as a result of
changing interest rates and economic conditions. The market value of the
municipal securities will also be affected by the degree of interest of dealers
to bid for them, and in certain markets dealers may be more unwilling to trade
municipal securities rated in the fourth rating categories than in the higher
rating categories.
A description of the rating categories is contained in Appendix A to this
Statement.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities and for providing state and local governments
with federal credit assistance. Reevaluation of the Fund's investment objectives
and structure might be necessary in the future due to market conditions which
may result from future changes in the tax laws.
FLORIDA MUNICIPAL SECURITIES. Florida Municipal Securities include notes, bonds
and commercial paper issued by or on behalf of the State of Florida, its
political subdivisions, agencies, and instrumentalities, the interest on which
is exempt from regular federal income taxes. Such securities are traded
primarily in an over-the-counter market. The Fund may invest, without percentage
limitations, in certain private activity bonds, the interest on which is treated
as a preference item for purposes of the alternative minimum tax. See "Florida
Municipal Securities" in the Prospectus.
Under the Investment Company Act of 1940 (the "1940 Act"), the
identification of the issuer of municipal bonds, notes or commercial paper
depends on the terms and conditions of the obligation. If the assets and
revenues of an agency, authority, instrumentality or other political subdivision
are separate from those of the government creating the subdivision and the
obligation is backed only by the assets and revenues of the subdivision, such
subdivision is regarded as the sole issuer. Similarly, in the case of an
industrial development revenue bond or pollution control revenue bond, if the
bond is backed only by the assets and revenues of the nongovernmental user, the
nongovernmental user is regarded as the sole issuer. If in either case the
creating government or another entity guarantees an obligation, the security is
treated as an issue of such guarantor to the extent of the value of the
guarantee.
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Municipal bonds are issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, schools,
streets, water and sewer works, and gas and electric utilities. Municipal bonds
also may be issued in connection with the refunding of outstanding obligations,
obtaining funds to lend to other public institutions, and for general operating
expenses. Industrial development bonds, which are considered municipal bonds if
the interest paid thereon is exempt from regular federal income tax (such
interest, however, may be subject to the federal alternative minimum tax), are
issued by or on behalf of public authorities to obtain funds to provide various
privately-operated facilities for business and manufacturing, housing, sports,
pollution control, and for airport, mass transit, port and parking facilities.
The two principal classifications of municipal bonds are "general
obligation" and "revenue." General obligation bonds are secured by the issuer's
pledge of its full faith, credit and taxing power for the payment of principal
and interest. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source. Although industrial
development bonds ("IDBs") are issued by municipal authorities, they are
generally secured by the revenues derived from payments of the industrial user.
The payment of principal and interest on IDBs is dependent solely on the ability
of the user of the facilities financed by the bonds to meet its financial
obligations and the pledge, if any, of real and personal property so financed as
security for such payment.
Municipal Notes generally are used to provide for short-term capital needs
and generally have maturities of one year or less. Municipal Notes include:
1. TAX ANTICIPATION NOTES. Tax Anticipation Notes are issued to finance
working capital needs of municipalities. Generally, they are issued in
anticipation of various tax revenues, such as income, sales, use and business
taxes, and are payable from these specific future taxes.
2. REVENUE ANTICIPATION NOTES. Revenue Anticipation Notes are issued in
expectation of receipt of other kinds of revenue, such as federal revenues
available under the Federal Revenue Sharing Programs.
3. BOND ANTICIPATION NOTES. Bond Anticipation Notes are issued to provide
interim financing until long-term financing can be arranged. In most cases, the
long-term bonds then provide the money for the repayment of the Notes.
4. CONSTRUCTION LOAN NOTES. Construction Loan Notes are sold to provide
construction financing. Permanent financing, the proceeds of which are applied
to the payment of Construction Loan Notes, is sometimes provided by a commitment
by the Government National Mortgage Association ("GNMA") to purchase the loan
notes, accompanied by a commitment by the Federal Housing Administration to
insure mortgage advances thereunder. In other instances, permanent financing is
provided by commitments of banks to purchase the loan notes.
Issues of Municipal COMMERCIAL PAPER typically represent short-term,
unsecured, negotiable promissory notes. These obligations are issued by agencies
of state and local governments to finance seasonal working capital needs of
municipalities or to provide interim construction financing and are paid from
general revenues of municipalities or are refinanced with long-term debt. In
most cases, Municipal Commercial Paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions.
WHEN-ISSUED SECURITIES. The Fund may purchase municipal securities on a
when-issued basis, in which case delivery and payment normally take place 15 to
45 days after the date of the commitment to purchase. The payment obligation and
the interest rate that will be received on the municipal securities are each
fixed at the time the buyer enters into the commitment. Although the Fund will
only purchase a municipal security on a when-issued basis with the intention of
actually acquiring the securities, the Fund may sell these securities before the
settlement date if it is deemed advisable.
Municipal securities purchased on a when-issued basis and the securities
held in the Fund are subject to changes in market value based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates (which will generally result in
similar changes in value, I.E., both experiencing appreciation when interest
rates decline and depreciation when interest rates rise). Therefore, to the
extent the Fund remains substantially fully invested at the same time that it
has purchased securities on a when-issued basis, there will be a greater
possibility that the market value of
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the Fund's assets will vary. Purchasing a municipal security on a when-issued
basis can involve a risk that the yields available in the market when the
delivery takes place may be higher than those obtained on the security so
purchased.
A separate account consisting of cash or liquid high-grade debt securities
equal to the amount of the when-issued commitments will be established with the
Custodian and marked to market daily, with additional cash or liquid debt
securities added when necessary. When the time comes to pay for when-issued
securities, the Fund will meet its obligations from then available cash, sale of
securities held in the separate account, sale of other securities or, although
it would not normally expect to do so, sale of the when-issued securities
themselves (which may have a value greater or lesser than the Fund's payment
obligations). Sale of securities to meet such obligations carries with it a
potential for the realization of capital gain, which is not exempt from taxes.
FLOATING RATE AND VARIABLE RATE SECURITIES. The Fund may purchase floating rate
and variable rate securities, including participation interests therein.
Investments in floating or variable rate securities normally will involve
industrial development or revenue bonds which provide that the rate of interest
is set as a specific percentage of a designated base rate, such as rates on
Treasury Bonds or Bills or the prime rate at a major commercial bank, and that
the Fund can demand payment of the obligations on short notice at par plus
accrued interest, which amount may be more or less than the amount the Fund paid
for them. Variable rate securities provide for a specified periodic adjustment
in the interest rate, while floating rate securities have an interest rate which
changes whenever there is a change in the designated base interest rate.
Frequently such securities are secured by letters of credit or other credit
support arrangements provided by banks. The quality of the underlying creditor
or of the bank, as the case may be, must be equivalent to the standards set
forth with respect to taxable investments on page 5.
STAND-BY COMMITMENTS. Under a stand-by commitment, the Fund obligates a dealer
to repurchase at the Fund's option specified securities at a specified price.
The exercise of a stand-by commitment is subject to the ability of the dealer to
make payment on demand. The Fund would acquire stand-by commitments solely to
facilitate portfolio liquidity and not for trading purposes. Prior to investing
in stand-by commitments the Fund, if it deems necessary based upon the advice of
counsel, will apply to the Securities and Exchange Commission for an exemptive
order relating to such commitments and the valuation thereof. There can be no
assurance that the Securities and Exchange Commission will issue such an
authorization.
The price which the Fund would pay for municipal securities with stand-by
commitments generally would be higher than the price which otherwise would be
paid for the municipal securities alone. The Fund will only purchase obligations
with stand-by commitments from sellers the Manager deems creditworthy.
Stand-by commitments with respect to portfolio securities of the Fund with
maturities of less than 60 days which are separate from the underlying portfolio
securities are not assigned a value. The cost of any such stand-by commitment is
carried as an unrealized loss from the time of purchase until it is exercised or
expires. Stand-by commitments with respect to portfolio securities of the Fund
with maturities of 60 days or more which are separate from the underlying
portfolio securities and the underlying portfolio securities are valued at fair
value as determined in accordance with procedures established by the Board of
Trustees. The Board of Trustees would, in connection with the determination of
the value of such a stand-by commitment, consider among other factors the
creditworthiness of the writer of the stand-by commitment, the duration of the
stand-by commitment, the dates on which or the periods during which the stand-by
commitment may be exercised and the applicable rules and regulations of the
Securities and Exchange Commission.
TAXABLE INVESTMENTS. Under normal market conditions, the Fund will attempt to
invest 100% and as a matter of fundamental policy will invest at least 80% of
the value of its net assets in Florida Municipal Securities the interest on
which is exempt from regular federal tax. Such interest, however, may be subject
to the federal alternative minimum tax. In abnormal market conditions, if, in
the judgment of the Manager, Florida Municipal Securities satisfying the Fund's
investment objectives may not be purchased, the Fund may, for defensive purposes
invest in securities other than Florida Municipal Securities including those
described under "Florida Municipal Securities" above that would otherwise meet
the Fund's objectives.
Also, in abnormal market conditions, the Fund may invest on a temporary
basis in fixed-income securities, the interest on which is subject to regular
federal, state or local income taxes, pending the investment or reinvestment in
municipal securities of proceeds of sales of shares or sales of portfolio
securities, in order to avoid the necessity of liquidating portfolio investments
to meet redemption of shares by investors or where market conditions due to
rising interest rates or other adverse factors warrant temporary investing for
defensive purposes. Investments in taxable securities will be substantially in
securities
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issued or guaranteed by the United States Government (such as bills, notes and
bonds), its agencies, instrumentalities or authorities; highly-rated corporate
debt securities (rated AA-, or better, by Standard & Poor's or Aa3, or better,
by Moody's); prime commercial paper (rated A-1+/A-1 by Standard & Poor's or P-1
by Moody's); and certificates of deposit of the 100 largest domestic banks in
terms of assets which are subject to regulatory supervision by the U.S.
Government or state governments and the 50 largest foreign banks in terms of
assets with branches or agencies in the United States. Investments in
certificates of deposit of foreign banks and foreign branches of U.S. banks may
involve certain risks, including different regulation, use of different
accounting procedures, political or other economic developments, exchange
controls, or possible seizure or nationalization of foreign deposits.
PORTFOLIO TURNOVER. Portfolio transactions will be undertaken principally to
accomplish the Fund's objective in relation to anticipated movements in the
general level of interest rates but the Fund may also engage in short-term
trading consistent with its objective. Securities may be sold in anticipation of
a market decline (a rise in interest rates) or purchased in anticipation of a
market rise (a decline in interest rates) and later sold. In addition, a
security may be sold and another purchased at approximately the same time to
take advantage of what the Manager believes to be a temporary disparity in the
normal yield relationship between the two securities.
The Fund's investment policies may lead to frequent changes in investments,
particularly in periods of rapidly fluctuating interest rates. A change in
securities held by the Fund is known as "portfolio turnover" and may involve the
payment by the Fund of dealer spreads or underwriting commissions, and other
transaction costs, on the sale of securities, as well as on the reinvestment of
the proceeds in other securities. Portfolio turnover rate for a fiscal year is
the ratio of the lesser of purchases or sales of portfolio securities to the
monthly average of the value of portfolio securities. Securities whose maturity
or expiration date at the time of acquisition were one year or less are excluded
from the calculation. The Fund's portfolio turnover rates for the fiscal years
ended September 30, 1997 and 1996, respectively, were 33.68% and 18.53%,
respectively. The Fund's portfolio turnover rate will not be a limiting factor
when the Fund deems it desirable to sell or purchase securities.
INVESTMENT LIMITATIONS
Under the Fund's fundamental policies, which cannot be changed except by
vote of a majority of the outstanding voting securities of the Fund, the Fund
may not:
- - Borrow money, except from banks for temporary purposes (such as meeting
redemption requests or for extraordinary or emergency purposes but not for
the purchase of portfolio securities) in an amount not to exceed 10% of the
value of its total assets at the time the borrowing is made (not including
the amount borrowed). The Fund will not purchase additional portfolio
securities if the Fund has outstanding borrowings in excess of 5% of the
value of its total assets;
- - Mortgage or pledge any of its assets, except to secure permitted borrowings
noted above;
- - Invest more than 25% of total assets at market value in any one industry;
except that municipal securities and securities of the U.S. Government, its
agencies and instrumentalities are not considered an industry for purposes of
this limitation;
- - As to 50% of the value of its total assets, purchase securities of any issuer
if immediately thereafter more than 5% of total assets at market value would
be invested in the securities of any issuer (except that this limitation does
not apply to obligations issued or guaranteed as to principal and interest by
the U.S. Government or its agencies or instrumentalities);
- - Invest in securities issued by other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization;
- - Purchase or hold any real estate, except that the Fund may invest in
securities secured by real estate or interests therein or issued by persons
(other than real estate investment trusts) which deal in real estate or
interests therein;
- - Purchase or hold the securities of any issuer, if to its knowledge, trustees
or officers of the Fund individually owning beneficially more than 0.5% of
the securities of that issuer own in the aggregate more than 5% of such
securities;
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<PAGE>
- - Write or purchase put, call, straddle or spread options; purchase securities
on margin or sell "short"; underwrite the securities of other issuers, except
that the Fund may be deemed an underwriter in connection with the purchase
and sale of portfolio securities;
- - Purchase or sell commodities or commodity contracts including futures
contracts; or
- - Make loans, except to the extent that the purchase of notes, bonds or other
evidences of indebtedness or deposits with banks may be considered loans.
As a matter of policy, with respect to 75% of the Fund's assets, no revenue
bond will be purchased by the Fund if as a result of such purchase more than 5%
of the Fund's assets would be invested in the securities of a single issuer.
This policy is not fundamental and may be changed by the Trustees without
shareholder approval.
Under the 1940 Act, a "vote of a majority of the outstanding voting
securities" of the Trust or of a particular series of the Trust, such as the
Fund, means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Trust or of a series or (2) 67% or more of the shares
of the Trust or of a series present at a shareholders' meeting if more than 50%
of the outstanding shares of the Trust or of a series are represented at the
meeting in person or by proxy.
TRUSTEES AND OFFICERS
Trustees and officers of the Trust, together with information as to their
principal business occupations during the past five years are shown below. Each
Trustee who is an "interested person" of the Trust, as defined in the 1940 Act,
is indicated by an asterisk. Unless otherwise indicated, their addresses are 100
Park Avenue, New York, NY 10017.
WILLIAM C. MORRIS* Trustee, Chairman of the Board, Chief Executive
(59) Officer and Chairman of the Executive Committee
Chairman, J. & W. Seligman & Co. Incorporated,
investment managers and advisers; Chairman and Chief
Executive Officer, the Seligman Group of Investment
Companies; Chairman, Seligman Financial Services,
Inc., broker/dealer; Seligman Services, Inc.,
broker/dealer; and Carbo Ceramics Inc., ceramic
proppants for oil and gas industry; Director,
Seligman Data Corp., shareholder service agent;
Kerr-McGee Corporation, diversified energy company;
and Sarah Lawrence College; and a Member of the Board
of Governors of the Investment Company Institute;
formerly, President, J. & W. Seligman & Co.
Incorporated; Chairman, Seligman Advisors, Inc.,
advisers; Seligman Holdings, Inc., holding company;
Seligman Securities, Inc., broker/dealer and J. & W.
Seligman Trust Company, trust company; and Director,
Daniel Industries, Inc., manufacturer of oil and gas
metering equipment.
BRIAN T. ZINO* Trustee, President and Member of the Executive
(45) Committee
Director and President, J. & W. Seligman & Co.
Incorporated, investment managers and advisers;
Director or Trustee, the Seligman Group of Investment
Companies; President (with the exception of Seligman
Quality Municipal Fund, Inc. and Seligman Select
Municipal Fund, Inc.), and Director or Trustee,
Seligman Group of Investment Companies; Chairman and
President, Seligman Data Corp., shareholder service
agent; Director, Seligman Financial Services, Inc.,
distributor; Seligman Services, Inc., broker/dealer;
and Seligman Henderson Co., advisers; formerly,
Director, Seligman Advisors, Inc., advisers; Seligman
Securities, Inc., broker/dealer; and J. & W. Seligman
Trust Company, trust company.
-6-
<PAGE>
RICHARD R. SCHMALTZ* Director and Member of the Executive Committee
(57)
Managing Director, Director of Investments, J. & W.
Seligman & Co. Incorporated; Director of Seligman
Henderson Co. and Trustee Emeritus of Colby College;
formerly, Director, Investment Research at Neuberger
& Berman from May 1993 to September 1996 and
Executive Vice President of McGlinn Capital from July
1987 to May 1993.
JOHN R. GALVIN Trustee
(68)
Dean, Fletcher School of Law and Diplomacy at Tufts
University; Director or Trustee, the Seligman Group
of Investment Companies; Chairman, American Council
on Germany; a Governor of the Center for Creative
Leadership; Director, USLIFE Corporation, life
insurance; Raytheon Co., electronics; National
Defense University; and the Institute for Defense
Analysis; formerly, Ambassador, U.S. State Department
for negotiations in Bosnia; Distinguished Policy
Analyst at Ohio State University and Olin
Distinguished Professor of National Security Studies
at the United States Military Academy. From June,
1987 to June, 1992, he was the Supreme Allied
Commander, Europe and the Commander-in-Chief, United
States European Command. Tufts University, Packard
Avenue, Medford, MA 02155
ALICE S. ILCHMAN Trustee
(62)
President, Sarah Lawrence College; Director or
Trustee, the Seligman Group of Investment Companies;
and the Committee for Economic Development; and
Chairman, The Rockefeller Foundation, charitable
foundation; formerly, Trustee, The Markle Foundation,
philanthropic organization; and Director, NYNEX,
telephone company; and International Research and
Exchange Board, intellectual exchanges. Sarah
Lawrence College, Bronxville, New York 10708
FRANK A. McPHERSON Trustee
(64)
Director, various corporations; Director or Trustee,
the Seligman Group of Investment Companies; Director
of Kimberly-Clark Corporation, consumer products,
Bank of Oklahoma Holding Company, Oklahoma City
Chamber of Commerce, Baptist Medical Center, Oklahoma
Chapter of the Nature Conservancy, Oklahoma Medical
Research Foundation and National Boys and Girls Clubs
of America; Chairman of Oklahoma City Public Schools
Foundation; and Member of the Business Roundtable and
National Petroleum Council; formerly, Chairman of the
Board and Chief Executive Officer, Kerr-McGee
Corporation, energy and chemicals.
123 Robert S. Kerr Avenue, Oklahoma City, OK 73102
JOHN E. MEROW Trustee
(68)
Retired Chairman and Senior Partner, Sullivan &
Cromwell, law firm; Director or Trustee, the Seligman
Group of Investment Companies; Director, Commonwealth
Industries, Inc.; the Foreign Policy Association;
Municipal Art Society of New York; the U.S. Council
for International Business; and The New York and
Presbyterian Hospital; Chairman, American Australian
Association; The New York and Presbyterian Hospital
Care Network, Inc.; Vice-Chairman, the U.S.-New
Zealand Council; and Member of the American Law
Institute and Council on Foreign Relations.
125 Broad Street, New York, NY 10004
-7-
<PAGE>
BETSY S. MICHEL Trustee
(55)
Attorney; Director or Trustee, the Seligman Group of
Investment Companies and Trustee, Geraldine R. Dodge
Foundation, charitable foundation; Chairman of the
Board of Trustees of St. George's School (Newport,
RI); formerly, Director, National Association of
Independent Schools (Washington, DC), education. St.
Bernard's Road, P.O. Box 449, Gladstone, NJ 07934
JAMES C. PITNEY Trustee
(71)
Retired Partner, Pitney, Hardin, Kipp & Szuch, law
firm; Director or Trustee, the Seligman Group of
Investment Companies; formerly, Director, Public
Service Enterprise Group, public utility.
Park Avenue at Morris County, P.O. Box 1945,
Morristown, NJ 07962-1945
JAMES Q. RIORDAN Trustee
(70)
Director, various corporations; Director or Trustee,
the Seligman Group of Investment Companies; The
Houston Exploration Company; The Brooklyn Museum; The
Brooklyn Union Gas Company; The Committee for
Economic Development; Dow Jones & Co., Inc. and
Public Broadcasting Service; formerly, Co-Chairman of
the Policy Council of the Tax Foundation; Director
and President, Bekaert Corporation; and Director,
Tesoro Petroleum Companies, Inc.
675 Third Avenue, Suite 3004, New York, NY 10017
ROBERT L. SHAFER Trustee
(65)
Director, various corporations; Director or Trustee,
the Seligman Group of Investment Companies and USLIFE
Corporation, life insurance; formerly, Vice
President, Pfizer Inc., pharmaceuticals.
235 East 42nd Street, New York, NY 10017
JAMES N. WHITSON Trustee
(62)
Executive Vice President, Chief Operating Officer and
Director, Sammons Enterprises, Inc.; Director or
Trustee, the Seligman Group of Investment Companies;
C-SPAN; and Commscope, manufacturer of coaxial
cables; formerly, Director, Red Man Pipe and Supply
Company, piping and other materials.
300 Crescent Court, Suite 700, Dallas, TX 75202
THOMAS G. MOLES Vice President and Senior Portfolio Manager
(54) Director, Managing Director, (formerly, Vice
President and Portfolio Manager), J. & W. Seligman &
Co. Incorporated, investment managers and advisers;
Vice President and Portfolio Manager, three other
open-end investment companies in the Seligman Family
of Mutual Funds; President and Portfolio Manager,
Seligman Quality Municipal Fund, Inc. and Seligman
Select Municipal Fund, Inc., closed-end investment
companies; Director, Seligman Financial Services,
Inc., broker/dealer; Seligman Services, Inc.,
broker/dealer; formerly, Director, Seligman
Securities, Inc., broker/dealer and J. & W. Seligman
Trust Company, trust company.
-8-
<PAGE>
LAWRENCE P. VOGEL Vice President
(41)
Senior Vice President, Finance, J. & W. Seligman &
Co. Incorporated, investment managers and advisers;
Seligman Financial Services, Inc., broker/dealer; and
Seligman Data Corp., shareholder service agent; Vice
President, the Seligman Group of Investment Companies
and Seligman Services, Inc. broker/dealer; and
Treasurer, Seligman Henderson Co., advisers;
formerly, Senior Vice President, Finance, Seligman
Advisors, Inc., advisers; and Treasurer, Seligman
Holdings, Inc., holding company.
FRANK J. NASTA Secretary
(33)
Senior Vice President, Law and Regulation and
Corporate Secretary, J. & W. Seligman & Co.
Incorporated, investment managers and advisers;
Secretary, the Seligman Group of Investment
Companies, Seligman Financial Services, Inc.;
Seligman Henderson Co., advisers; Seligman Services,
Inc., broker/dealer; and Seligman Data Corp.,
shareholder service agent; formerly, Senior Vice
President, Law and Regulation and Corporate
Secretary, Seligman Advisors, Inc., advisers; and an
attorney at Seward & Kissel, law firm.
THOMAS G. ROSE Treasurer
(40)
Treasurer, the Seligman Group of Investment Companies
and Seligman Data Corp., shareholder service agent.
The Executive Committee of the Board acts on behalf of the Board between
meetings to determine the value of securities and assets owned by the Fund for
which no market valuation is available and to elect or appoint officers of the
Fund to serve until the next meeting of the Board.
<TABLE>
<CAPTION>
Compensation Table
Pension or Total Compensation
Aggregate Retirement Benefits from Trust and
Name and Compensation Accrued as part of Fund Complex Paid
Position with Trust from Trust (1) Fund Expenses to Trustees (1)(2)
------------------- -------------- ------------- ------------------
<S> <C> <C> <C>
William C. Morris, Trustee and Chairman N/A N/A N/A
Brian T. Zino, Trustee and President N/A N/A N/A
Richard R. Schmaltz, Trustee N/A N/A N/A
Ronald T. Schroeder, Trustee** N/A N/A N/A
Fred E. Brown, Trustee Emeritus*** N/A N/A N/A
John R. Galvin, Trustee $2,448.33 N/A $67,000.00
Alice S. Ilchman, Trustee 2,370.05 N/A 65,000.00
Frank A. McPherson, Trustee 2,412.61 N/A 66,000.00
John E. Merow, Trustee 2,370.05 N/A 65,000.00
Betsy S. Michel, Trustee 2,448.33 N/A 67,000.00
James C. Pitney, Trustee 2,327.49 N/A 64,000.00
James Q. Riordan, Trustee 2,405.77 N/A 66,000.00
Robert L. Shafer, Trustee 2,405.77 N/A 66,000.00
James N. Whitson, Trustee 2,455.17(d) N/A 67,000.00(d)
</TABLE>
(1) Based on remuneration received by Trustees for the Trust's four series for
the fiscal year ended September 30, 1997. Effective January 16, 1998, the
per meeting fee for Trustees was increased by $1,000, which is allocated
among all Funds in the Fund Complex.
-9-
<PAGE>
(2) As defined in the Prospectus, the Seligman Group of Investment Companies
consists of eighteen investment companies.
** Retired May 15, 1997.
*** Retired as Trustee and designated Trustee Emeritus on March 20, 1997.
(d) Deferred.
The Trust has a compensation arrangement under which outside trustees may
elect to defer receiving their fees. Under this arrangement, interest is accrued
on the deferred balances. The annual cost of such fees and interest is included
in the trustees' fees and expenses, and the accumulated balance thereof is
included in "Liabilities" in the Trust's financial statements. The total amount
of deferred compensation (including interest) payable in respect of the Trust to
Mr. Whitson as of September 30, 1997 was $13,448. Messrs. Merow and Pitney no
longer defer current compensation; however, they have accrued deferred
compensation in the amounts of $39,026 and $28,133, respectively, as of
September 30, 1997. The Fund has applied for and received exemptive relief that
would permit a director who has elected deferral of his or her fees to choose a
rate of return equal to either (i) the interest rate on short-term Treasury
bills, or (ii) the rate of return on the shares of any of the investment
companies advised by the manager, as designated by the director. The Fund may,
but is not obligated to, purchase shares of such investment companies to hedge
its obligations in connection with this deferral arrangement.
Trustees and officers of the Trust are also trustees, directors and officers
of some or all of the other investment companies in the Seligman Group.
Trustees and officers of the Trust as a group owned less than 1% of the
Class A shares of the Fund at January 2, 1998. No Trustees or officers owned
Class D shares of the Fund at that date.
MANAGEMENT AND EXPENSES
Under the Management Agreement, dated June 21, 1990, subject to the control
of the Trustees, the Manager manages the investment of the assets of the Fund,
including making purchases and sales of portfolio securities consistent with the
Fund's investment objectives and policies, and administers its business and
other affairs. The Manager provides the Fund with such office space,
administrative and other services and executive and other personnel as are
necessary for Fund operations. The Manager pays all of the compensation of
Trustees of the Trust who are employees or consultants of the Manager and the
officers and employees of the Fund. The Manager also provides senior management
for Seligman Data Corp., the Fund's shareholder service agent.
The Manager is entitled to receive a management fee from the Fund,
calculated daily and payable monthly, equal to 0.50% of the Fund's average daily
net assets on an annual basis. For the fiscal years ended September 30, 1995 and
1996, the Manager in its discretion, waived all or a portion of its fee from the
Fund, and in some cases also elected to reimburse certain expenses of the Fund
for certain expenses incurred during the periods. For the fiscal year ended
September 30, 1997, the management fee paid amounted to $228,202 or .50% of the
Fund's average net assets.
The Fund pays all its expenses other than those assumed by the Manager
including brokerage commissions, if any, fees and expenses of independent
attorneys and auditors, taxes and governmental fees including fees and expenses
of qualifying the Fund and its shares under federal and state securities laws,
cost of stock certificates and expenses of repurchase or redemption of shares,
expenses of printing and distributing reports, notices and proxy materials to
existing shareholders, expenses of printing and filing reports and other
documents filed with governmental agencies, expenses of shareholders' meetings,
expenses of corporate data processing and related services, shareholder
recordkeeping and shareholder account services fees and disbursements of
transfer agents and custodians, expenses of disbursing dividends and
distributions, fees and expenses of Trustees of the Fund not employed by or
serving as a Trustee of the Manager or its affiliates, insurance premiums and
extraordinary expenses such as litigation expenses. The Trust's expenses are
allocated between each series of the Trust in a manner determined by the
Trustees to be fair and equitable.
The Fund's Management Agreement was approved by the Trustees at a meeting
held on June 21, 1990 and was approved by the Florida shareholders at a Special
Meeting of the Fund held on December 7, 1990. The Agreement will continue in
effect until December 31 of each year if (1) such continuance is approved in the
manner required by the 1940 Act (i.e., by a
-10-
<PAGE>
vote of a majority of the Trustees or of the outstanding voting securities of
the Fund and by a vote of a majority of the Trustees who are not parties to the
Management Agreement or interested persons of any such party) and (2) the
Manager shall not have notified the Fund at least 60 days prior to December 31
of any year that it does not desire such continuance. The Agreement may be
terminated by the Fund, without penalty, on 60 days' written notice to the
Manager and will terminate automatically in the event of its assignment. The
Fund has agreed to change its name upon termination of its Management Agreement
if continued use of the name would cause confusion in the context of the
Manager's business.
The Manager is a successor firm to an investment banking business founded in
1864 which has thereafter provided investment services to individuals, families,
institutions and corporations. On December 29, 1988, a majority of the
outstanding voting securities of the Manager was purchased by Mr. William C.
Morris and a simultaneous recapitalization of the Manager occurred. See Appendix
B for further history of the Manager.
Officers, directors and employees of the Manager are permitted to engage in
personal securities transactions, subject to the Manager's Code of Ethics (the
"Ethics Code"). The Ethics Code proscribes certain practices with regard to
personal securities transactions and personal dealings, provides a framework for
the reporting and monitoring of personal securities transactions by the
Manager's Compliance Officer, and sets forth a procedure of identifying, for
disciplinary action, those individuals who violate the Ethics Code. The Ethics
Code prohibits each of the officers, directors and employees (including all
portfolio managers) of the Manager from purchasing or selling any security that
the officer, director or employee knows or believes (i) was recommended by the
Manager for purchase or sale by any client, including the Fund, within the
preceding two weeks, (ii) has been reviewed by the Manager for possible purchase
or sale within the preceding two weeks, (iii) is being purchased or sold by any
client, (iv) is being considered by a research analyst, (v) is being acquired in
a private placement, unless prior approval has been obtained from the Manager's
Compliance Officer, or (vi) is being acquired during an initial or secondary
public offering. The Ethics Code also imposes a strict standard of
confidentiality and requires portfolio managers to disclose any interest they
may have in the securities or issuers that they recommend for purchase by any
client.
The Ethics Code also prohibits (i) each portfolio manager or member of an
investment team from purchasing or selling any security within seven calendar
days of the purchase or sale of the security by a client's account (including
investment company accounts) for which the portfolio manager or investment team
manages and (ii) each employee from engaging in short-term trading (a purchase
and sale or vice-versa within 60 days). Any profit realized pursuant to either
of these prohibitions must be disgorged.
Officers, directors and employees are required, except under very limited
circumstances, to engage in personal securities transactions through the
Manager's order desk. The order desk maintains a list of securities that may not
be purchased due to a possible conflict with clients. All officers, directors
and employees are also required to disclose all securities beneficially owned by
them on December 31 of each year.
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
As indicated in the Prospectus, an Administration, Shareholder Services and
Distribution Plan (the "Plan") for the Fund will be in effect from the date
hereof under Section 12(b) of the 1940 Act and Rule 12b-1 thereunder.
The Plan was approved on June 21, 1990 by the Trustees, including a majority
of the Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Fund and who have no direct or indirect financial interest in the operation
of the Plan or in any Agreement related to the Plan (the "Qualified Trustees")
and by the shareholders of the Fund on December 7, 1990. Amendments to the Plan
were approved in respect of the Class D shares on November 18, 1993 by the
Trustees, including a majority of the Qualified Trustees and became effective
with respect to the Class D shares on February 1, 1994. The Plan will continue
in effect until December 31 of each year so long as such continuance is approved
annually by a majority vote of both the Trustees of the Fund and the Qualified
Trustees, cast in person at a meeting called for the purpose of voting on such
approval. The Plan may not be amended to increase materially the amounts payable
to Service Organizations without the approval of a majority of the outstanding
voting securities of the Fund and no material amendment to the Plan may be made
except by a majority of both the Trustees and the Qualified Trustees.
The Plan requires that the Treasurer of the Fund shall provide to the
Trustees, and the Trustees shall review, at least quarterly, a written report of
the amounts expended (and purposes therefor) under the Plan. Rule 12b-1 also
requires that the selection and nomination of Trustees who are not "interested
persons" of the Trust be made by such disinterested Trustees.
-11-
<PAGE>
PORTFOLIO TRANSACTIONS
No brokerage commissions were paid by the Fund during the fiscal years ended
September 30, 1997, 1996 or 1995. When the Fund or two or more of the investment
companies in the Seligman Group or other investment advisory clients of the
Manager desire to buy or sell the same security at the same time, the securities
purchased or sold are allocated by the Manager in a manner believed to be
equitable to each. There may be possible advantages or disadvantages of such
transactions with respect to price or the size of positions already obtainable
or saleable.
PURCHASE AND REDEMPTION OF FUND SHARES
The Fund issues two classes of shares: Class A shares may be purchased at a
price equal to the next determined net asset value per share, plus a sales load.
Class A shares purchased at net asset value without an initial sales load due to
the size of the purchase are subject to a CDSL of 1% if such shares are redeemed
within eighteen months of purchase. Class D shares may be purchased at a price
equal to the next determined net asset value without an initial sales load, but
a CDSL may be charged on certain redemptions within one year of purchase. See
"Alternative Distribution System," "Purchase of Shares," and "Redemption of
Shares" in the Fund's Prospectus.
SPECIMEN PRICE MAKE-UP
Under the current distribution arrangements between the Trust and the
Distributor, Class A shares are sold at a maximum sales load of 4.75% and Class
D shares are sold at net asset value.* Using the Fund's net asset value at
September 30, 1997, the maximum offering price of the Fund's shares is as
follows:
CLASS A
Net asset value per share...................................... $7.80
Maximum sales load (4.75% of offering price)................... .39
-----
Maximum offering price per share............................... $8.19
=====
CLASS D
Net asset value and maximum offering price per share*.......... $7.81
=====
- --------------
* Class D shares are subject to a CDSL of 1% on redemptions within one year
of purchase. Class A shares purchased at net asset value due to the size of
the purchase are subject to a CDSL of 1% on redemption within eighteen
months of purchase of such shares. See "Redemption of Shares" in the
Prospectus.
CLASS A SHARES - REDUCED INITIAL SALES LOADS
REDUCTIONS AVAILABLE. Shares of any Seligman Mutual Fund sold with an initial
sales load in a continuous offering will be eligible for the following
reductions:
VOLUME DISCOUNTS are provided if the total amount being invested in Class A
shares of the Fund alone, the other series of the Trust or in any combination of
shares of the other mutual funds in the Seligman Group which are sold with an
initial sales load, reaches levels indicated in the sales load schedule set
forth in the Prospectuses.
THE RIGHT OF ACCUMULATION allows an investor to combine the amount being
invested in Class A shares of the Fund, the other series of the Trust and shares
of other Seligman Mutual Funds sold with an initial sales load with the total
net asset value of shares of those Seligman Mutual Funds already owned that were
sold with an initial sales load and the total net asset value of shares of
Seligman Cash Management Fund which were acquired through an exchange of shares
of another Seligman
-12-
<PAGE>
Mutual Fund on which there was an initial sales load at the time of purchase to
determine reduced sales loads in accordance with the schedule in the
Prospectuses. The value of the shares owned, including the value of shares of
Seligman Cash Management Fund acquired in an exchange of shares of another
Seligman Mutual Fund on which there is an initial sales load at the time of
purchase will be taken into account in orders placed through a dealer, however,
only if Seligman Financial Services, Inc. ("SFSI") is notified by an investor or
dealer of the amount owned at the time of purchase is made and is furnished
sufficient information to permit confirmation.
A LETTER OF INTENT allows an investor to purchase Class A shares of the
Fund over a 13-month period at reduced initial sales loads in accordance with
the schedule in the Prospectuses, based on the total amount of Class A shares
that the letter states the investor intends to purchase plus the total net asset
value of shares that were sold with an initial sales load of the other series of
the Trust and other Seligman Mutual Funds already owned and the total net asset
value of shares of Seligman Cash Management Fund which were acquired through an
exchange of shares of another Seligman Mutual Fund on which there was an initial
sales load at the time of purchase. Reduced initial sales loads also may apply
to purchases made within a 13-month period starting up to 90 days before the
date of execution of a letter of intent. For more information concerning the
terms of the letter of intent, see "Terms and Conditions - Letter of Intent -
Class A Shares" in the Prospectus.
Class A shares purchased without an initial sales load in accordance with
the sales load schedule in the Series Prospectus, or pursuant to a Volume
Discount, Right of Accumulation or Letter of Intent are subject to a CDSL of 1%
on redemptions of such shares within eighteen months of purchase.
PERSONS ENTITLED TO REDUCTIONS. Reductions in initial sales loads apply to
purchases of Class A shares of the Fund by a "single person," including an
individual; members of a family unit comprising husband, wife and minor
children; or a trustee or other fiduciary purchasing for a single fiduciary
account. Employee benefit plans qualified under Section 401 of the Internal
Revenue Code of 1986, as amended (the "Code"), tax-exempt organizations under
Section 501 (c)(3) or (13) of the Code, and non-qualified employee benefit plans
that satisfy uniform criteria are considered "single persons" for this purpose.
The uniform criteria are as follows:
1. Employees must authorize the employer, if requested by the Fund, to receive
in bulk and to distribute to each participant on a timely basis the Fund
prospectuses, reports and other shareholder communications.
2. Employees participating in a plan will be expected to make regular periodic
investments (at least annually). A participant who fails to make such
investments may be dropped from the plan by the employer or the Fund 12
months and 30 days after the last regular investment in his account. In such
event, the dropped participant would lose the discount on share purchases to
which the plan might then be entitled.
3. The employer must solicit its employees for participation in such an
employee benefit plan or authorize and assist an investment dealer in making
enrollment solicitations.
ELIGIBLE EMPLOYEE BENEFIT PLANS. The table of sales loads in the Prospectus
applies to sales to "eligible employee benefit plans" (as defined in the
Prospectus), except that the Fund may sell shares at net asset value to
"eligible employee benefit plans," which have at least (i) $500,000 invested in
the Seligman Mutual Funds or (ii) 50 eligible employees to whom such plan is
made available. Such sales must be made in connection with a payroll deduction
system of plan funding or other systems acceptable to Seligman Data Corp., the
Trust's shareholder service agent. Such sales are believed to require limited
sales effort and sales related expenses and therefore are made at net asset
value. Contributions or account information for plan participation also should
be transmitted to Seligman Data Corp. by methods which it accepts. Additional
information about "eligible employee benefit plans" is available from investment
dealers or SFSI.
FURTHER TYPES OF REDUCTIONS. Class A shares may be issued without an initial
sales load in connection with the acquisition of cash and securities owned by
other investment companies and personal holding companies to financial
institution trust departments, to registered investment advisers exercising
investment discretionary authority with respect to the purchase of Fund shares,
or pursuant to sponsored arrangements with organizations which make
recommendations to, or permit group solicitation of, its employees, members or
participants in connection with the purchase of shares of the Fund, to separate
accounts established and maintained by an insurance company which are exempt
from registration under Section 3(c)(11) of the 1940 Act, to registered
representatives and employees (and their spouses and minor children) of any
dealer that has a sales
-13-
<PAGE>
agreement with SFSI; to financial institution trust departments; to registered
investment advisers exercising discretionary investment authority with respect
to the purchase of Fund shares; to accounts of financial institutions or
broker/dealers that charge account management fees, provided the manager or one
of its affiliates has entered into an agreement with respect to such accounts;
pursuant to sponsored arrangements with organizations which make recommendations
to or permit group solicitations of, its employees, members or participants in
connection with the purchase of shares of the Fund; to other investment
companies in the Seligman Group in connection with a deferred fee arrangement
for outside directors; and to "eligible employee benefit plans" which have at
least (i) $500,000 invested in the Seligman Mutual Funds or (ii) 50 eligible
employees to whom such plan is made available. "Eligible employee benefit plan"
means any plan or arrangement, whether or not tax qualified, which provides for
the purchase of Fund shares. Sales of shares to such plans must be made in
connection with a payroll deduction system of plan funding or other system
acceptable to Seligman Data Corp.
Class A shares may be sold at net asset value to present and retired
trustees, directors, officers, employees (and family members, as defined in the
Prospectus) of the Fund, the other investment companies in the Seligman Group,
the Manager and other companies affiliated with the Manager. Such sales also may
be made to employee benefit plans for such persons and to any investment
advisory, custodial, trust or other fiduciary account managed or advised by the
Manager or any affiliate. These sales may be made for investment purposes only,
and shares may be resold only to the Fund.
Class A shares may be sold at net asset value to these persons since such
sales require less sales effort and lower sales related expenses as compared
with sales to the general public.
PAYMENT IN SECURITIES. In addition to cash, the Fund may accept securities in
payment for Fund shares sold at the applicable public offering price. Generally,
the Fund will only consider accepting securities (1) to increase its holdings in
a portfolio security of the Fund, or (2) if the Manager determines that the
offered securities are a suitable investment in a sufficient amount for
efficient management. Although no minimum has been established, it is expected
that the Fund would not accept securities with a value of less than $100,000 per
issue in payment for shares. The Fund may reject in whole or in part offers to
pay for shares with securities, may require partial payment in cash for
applicable sales loads, and may discontinue accepting securities as payment for
shares at any time without notice. The Fund has no present intention of
accepting securities in payment for shares.
MORE ABOUT REDEMPTIONS. The procedures for redemption of Fund shares under
ordinary circumstances are set forth in the Prospectus. Payment may be made in
securities or postponed, or the right of redemption may be suspended for more
than seven days, if the orderly liquidation of portfolio securities is prevented
by the closing of, or restricted trading on, the New York Stock Exchange during
periods of emergency, or during such other periods as ordered by the Securities
and Exchange Commission. If payment were to be made in securities shareholders
receiving securities could incur certain transaction costs. The Fund will not
accept orders from securities dealers for the repurchase of shares.
DISTRIBUTION SERVICES
SFSI, an affiliate of the Manager, acts as general distributor of the shares
of the Trust and of the other mutual funds in the Seligman Group. As general
distributor of the Fund's shares of beneficial interest, SFSI allows commissions
to all dealers of up to 4.25% on purchases of Class A shares to which the 4.75%
sales load applies. SFSI receives the balance of sales loads or any CDSL, if
applicable, paid by investors. The Trust and SFSI are parties to a Distributing
Agreement dated January 1, 1993.
Total sales loads paid by shareholders of the Fund for fiscal years ended
September 30, 1997, 1996 and 1995, respectively, amounted to $76,147, $82,207
and $106,160, respectively, of which $66,804, $72,852 and $93,763, respectively,
were paid as commissions to dealers. For the years ended September 30, 1997,
1996 and 1995, SFSI retained CDSL charges of $0, $138 and $189, respectively.
Effective April 1, 1995, Seligman Services, Inc. ("SSI"), an affiliate of
the Manager, became eligible to receive commissions from certain sales of Fund
shares, as well as distribution and service fees pursuant to the Plan. For the
fiscal years ended September 30, 1997 and 1996, and for the period ended
September 30, 1995, SSI received commissions of $1,118, $1,101 and $213,
respectively, from sales of Fund shares. SSI also received distribution and
service fees of $5,302, $5,070 and $2,225, respectively, pursuant to the Plan.
-14-
<PAGE>
TAXES
Under the Code, each Series of the Trust will be treated as a separate
corporation for federal income tax purposes. As a result, determinations of net
investment income, exempt interest dividends and net long-term and short-term
capital gain and loss will be made separately for each Series.
As indicated in the Prospectus, the Fund intends to qualify and elect to be
treated as a regulated investment company under the Code and thus to be relieved
of federal income tax on amounts distributed to shareholders; provided that it
distributes at least 90% of its net investment income and net short-term capital
gains, if any.
Qualification as a regulated investment company under the Code requires
among other things, that (a) at least 90% of the annual gross income of the Fund
be derived from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of stocks, securities or
currencies, or other income (including but not limited to gains from options,
futures, and forward contracts) derived with respect to its business of
investing in such stocks, securities or currencies; and (b) the Fund diversifies
its holdings so that, at the end of each quarter of the taxable year, (i) at
least 50% of the market value of the Fund's assets is represented by cash,
United States Government securities and other securities limited in respect of
any one issuer to an amount not greater than 5% of the Fund's assets and 10% of
the outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of its assets is invested in the securities of any one issuer (other
than U.S. Government securities).
VALUATION
The net asset value per share of each class of the Fund is determined as of
the close of regular trading on the New York Stock Exchange ("NYSE") (normally,
4:00 p.m., Eastern time) on each day that the NYSE is open. The Fund and the
NYSE are currently closed on New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. The Fund will also determine net asset
value for each class on each day in which there is a sufficient degree of
trading in the Fund's portfolio securities that the net asset value of Fund
shares might be materially affected. Net asset value per share for each class is
computed by dividing such class' share of the value of the net assets of the
Fund (i.e., the value of its assets less liabilities) by the total number of
outstanding shares of such class. All expenses of the Fund, including the
Manager's fee, are accrued daily and taken into account for the purpose of
determining its net asset value. The net asset value of Class D shares will
generally be lower than the net asset value of Class A shares as a result of the
higher distribution fee with respect to Class D shares. It is expected, however,
that the net asset value per share of the two classes will tend to converge
immediately after the recording of dividends, which will differ by approximately
the amount of the distribution and other class expenses accrual differential
between the classes.
Florida municipal securities will be valued on the basis of quotations
provided by an independent pricing service, approved by the Trustees, which uses
information with respect to transactions in bonds, quotations from bond dealers,
market transactions in comparable securities and various relationships between
securities in determining value. In the absence of such quotations, in
accordance with fair value as determined in accordance with procedures approved
by the Trustees. Short-term notes having remaining maturities of 60 days or less
are generally valued at amortized cost.
Generally, trading in certain securities such as municipal securities,
corporate bonds, U.S. Government securities, and money market instruments is
substantially completed each day at various times prior to the close of the
NYSE. The values of such securities used in determining the net asset value of
the Fund shares are computed as of such times. Occasionally, events affecting
the value of such securities may occur between such times and the close of the
NYSE which will not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur during
such period, then these securities and other assets will be valued at their fair
market value as determined in good faith by the Trustees.
PERFORMANCE INFORMATION
The annualized yield for the 30-day period ended September 30, 1997 for the
Fund's Class A shares was 4.07%. The annualized yield was computed by dividing
the Fund's net investment income per share earned during this 30-day period by
-15-
<PAGE>
the maximum offering price per share (i.e., the net asset value plus the maximum
sales load of 4.75% of the net amount invested) on September 30, 1997 which was
the last day of the period. The average number of Class A shares of the Fund was
5,441,808 which was the average daily number of shares outstanding during the
30-day period that were eligible to receive dividends. Income was computed by
totaling the interest earned on all debt obligations during the 30-day period
and subtracting from that amount the total of all recurring expenses incurred
during the period (which includes fees charged pursuant to the Fund's 12b-1
plan). The 30-day yield was then annualized on a bond-equivalent basis assuming
semi-annual reinvestment and compounding of net investment income, as described
in the Prospectus.
The tax equivalent annualized yield for the 30-day period ended September
30, 1997 for the Fund's Class A shares was 6.74%. The tax equivalent annualized
yield was computed by first computing the annualized yield as discussed above.
Then the portion of the yield attributable to securities the income of which was
exempt for federal income tax purposes was determined. This portion of the yield
was then divided by one minus 39.6% (39.6% being the assumed maximum federal
income tax rate for individual taxpayers).
The average annual total return for the Fund's Class A shares for the
one-year period ended September 30, 1997 was 2.91%; for the five-year period
ended September 30, 1997 was 5.89%; and for the ten-year period ended September
30, 1997 was 8.76%. These returns were computed by assuming a hypothetical
initial payment of $1,000. From this $1,000, the maximum sales load of $47.50
(4.75% of public offering price) was deducted. It was then assumed that all of
the dividends and distributions paid by the Fund over the relevant time period
were reinvested. It was then assumed that at the end of each of the above
periods, the entire amount was redeemed. The average annual total return was
then calculated by calculating the annual rate required for the initial payment
to grow to the amount which would have been received upon redemption (i.e., the
average annual compound rate of return).
The annualized yield for the 30-day period ended September 30, 1997 for the
Fund's Class D shares was 3.53%. The annualized yield was computed as for Class
A shares by dividing a Series' net investment income per share earned during
this 30-day period by the maximum offering price per share (i.e., the net asset
value) on September 30, 1997, which was the last day of this period. The average
number of Class D shares was 212,904 which was the average daily number of
shares outstanding during the 30-day period that were eligible to receive
dividends.
The tax equivalent annualized yield for the 30-day period ended September
30, 1997 for each the Fund's Class D shares was 5.84%. The tax equivalent
annualized yield was computed as discussed above for Class A shares.
The average annual total return for the Fund's Class D shares for the
one-year period ended September 30, 1997 was 6.18% and since inception through
the period ended September 30, 1997 was 3.98%. These returns were computed by
assuming a hypothetical initial payment of $1,000 in Class D shares and that all
of the dividends and distributions by the Fund's Class D shares over the
relevant time periods were reinvested. It was then assumed that at the end of
each period, the entire amount was redeemed, subtracting the 1% CDSL, if
applicable.
The following tables illustrate the total returns on a $1,000 investment in
Class A and Class D shares of the Fund from the commencement of their operations
through September 30, 1997, assuming investment of all dividends and capital
gain distributions.
<TABLE>
<CAPTION>
CLASS A SHARES
VALUE OF CAPITAL VALUE TOTAL VALUE
YEAR INITIAL GAIN OF OF TOTAL
ENDED 1 INVESTMENT 2 DISTRIBUTIONS DIVIDENDS INVESTMENT 2 RETURN 1,3
- ------- ------------ ------------- --------- ------------ ----------
<C> <C> <C> <C> <C> <C>
9/30/88 $ 1,062 $ - $ 79 $ 1,141
9/30/89 1,106 - 164 1,270
9/30/90 1,092 - 244 1,336
9/30/91 1,166 - 350 1,516
9/30/92 1,196 - 460 1,656
9/30/93 1,297 3 607 1,907
9/30/94 1,161 29 641 1,831
9/30/95 1,220 31 780 2,031
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
CLASS A SHARES
VALUE OF CAPITAL VALUE TOTAL VALUE
YEAR INITIAL GAIN OF OF TOTAL
ENDED 1 INVESTMENT 2 DISTRIBUTIONS DIVIDENDS INVESTMENT 2 RETURN 1,3
- ------- ------------ ------------- --------- ------------ ----------
<C> <C> <C> <C> <C> <C>
9/30/96 $ 1,214 $51 $878 $ 2,143
9/30/97 1,234 82 999 2,315 131.48%
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARES
VALUE OF CAPITAL VALUE TOTAL VALUE
YEAR/PERIOD INITIAL GAIN OF OF TOTAL
ENDED 1 INVESTMENT 2 DISTRIBUTIONS DIVIDENDS INVESTMENT 2 RETURN 1,3
- ------- ------------ ------------- --------- ------------ ----------
<C> <C> <C> <C> <C> <C>
9/30/94 $ 906 $ - $ 28 $ 934
9/30/95 953 -- 75 1,028
9/30/96 948 11 117 1,076
9/30/97 964 26 164 1,154 15.37%
</TABLE>
- -----------------
1 For the ten year period ended September 30, 1997 for Class A shares; and
from commencement of operations of Class D shares on February 1, 1994.
2 The "Value of Initial Investment" as of the dates indicated reflects the
effect of the maximum sales load and CDSL, if applicable, assumes that all
dividends and capital gain distributions were taken in cash and reflects
changes in the net asset value of the shares purchased with the hypothetical
initial investment. "Total Value of Investment" reflects the effect of the
CDSL, if applicable, and assumes investment of all dividends and capital
gain distributions.
3 Total return for the Fund is calculated by assuming a hypothetical initial
investment of $1,000 at the beginning of the period specified, subtracting
the maximum sales load or CDSL, if applicable; determining total value of
all dividends and distributions that would have been paid during the period
on such shares assuming that each dividend or distribution was invested in
additional shares at net asset value; calculating the total value of the
investment at the end of the period; and finally, by dividing the difference
between the amount of the hypothetical initial investment at the beginning
of the period and its value at the end of the period by the amount of the
hypothetical initial investment.
The waiver by the Manager of all or a portion of its fee and the
reimbursement of certain Fund expenses during the periods (as set forth under
"Management and Expenses" herein and "Financial Highlights" in the Prospectus)
positively affected the performance results provided in this section.
The Fund's total return and average annual total return quoted from time to
time through December 27, 1990 does not reflect the deduction of the
administration, shareholder services and distribution fee, which fee if
reflected would reduce the performance quoted.
GENERAL INFORMATION
The Trustees are authorized to classify or reclassify and issue any shares
of beneficial interest of the Trust into any number of other classes without
further action by shareholders. The 1940 Act requires that where more than one
class exists, each class must be preferred over all other classes in respect of
assets specifically allocated to such class.
As a general matter, the Trust will not hold annual or other meetings of the
shareholders. This is because the Declaration of Trust provides for shareholder
voting only (a) for the election or removal of one or more Trustees if a meeting
is called for that purpose, (b) with respect to any contract as to which
shareholder approval is required by the 1940 Act, (c) with respect to any
termination or reorganization of the Trust or any series, including the Fund, to
the extent and as provided in the Declaration of Trust, (d) with respect to any
amendment of the Declaration of Trust (other than amendments establishing and
designating new series, abolishing series when there are no units thereof
outstanding, changing the name of the Trust or the name of any series, supplying
any omission, curing any ambiguity or curing, correcting or supplementing any
provision thereof which is internally inconsistent with any other provision
thereof or which is defective or inconsistent with the 1940 Act or with the
requirements of the Internal Revenue Code of 1986, as amended, or applicable
regulations for the Fund's
-17-
<PAGE>
obtaining the most favorable treatment thereunder available to regulated
investment companies), which amendments require approval by a majority of the
Shares entitled to vote, (e) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding, or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or the shareholders, and (f) with
respect to such additional matters relating to the Trust as may be required by
the 1940 Act, the Declaration of Trust, the By-laws of the Trust, any
registration of the Trust with the Securities and Exchange Commission (the
"Commission") or any state, or as the Trustees may consider necessary or
desirable. Each Trustee serves until the next meeting of shareholders, if any,
called for the purpose of considering the election or reelection of such Trustee
or of a successor to such Trustee, and until the election and qualification of
his successor, if any, elected at such meeting, or until such Trustee sooner
dies, resigns, retires or is removed by the shareholders or two-thirds of the
Trustees.
The shareholders of the Trust have the right, upon the declaration in
writing or vote of more than two-thirds of the Trust's outstanding shares, to
remove a Trustee. The Trustees will call a meeting of shareholders to vote on
the removal of a Trustee upon the written request of the record holders of ten
percent of its shares. In addition, whenever ten or more shareholders of record
who have been such for at least six months preceding the date of application,
and who hold in the aggregate either shares having a net asset value of at least
$25,000 or at least 1 per centum of the outstanding shares, whichever is less,
shall apply to the Trustees in writing, stating that they wish to communicate
with other shareholders with a view to obtaining signatures to a request for a
meeting for the purpose of voting upon the question of removal of any Trustee or
Trustees and accompanied by a form of communication and request which they wish
to transmit, the Trustee shall within five business days after receipt of such
application either: (1) afford to such applicants access to a list of the names
and addresses of all shareholders as recorded on the books of the Trust; or (2)
inform such applicants as to the approximate number of shareholders of record,
and the approximate cost of mailing to them the proposed communication and form
of requests. If the Trustees elect to follow the latter course, the Trustees,
upon the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall, with
reasonable promptness, mail such material to all shareholders of record at their
addresses as recorded on the books, unless within five business days after such
tender the Trustees shall mail to such applicants and file with the Commission,
together with a copy of the material to be mailed, a written statement signed by
at least a majority of the Trustees to the effect that in their opinion either
such material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such opinion. After
opportunity for hearing upon the objections specified in the written statement
so filed, the Commission may, and if demanded by the Trustees or by such
applicants shall, enter an order either sustaining one or more of such
objections or refusing to sustain any of them. If the Commission shall enter an
order refusing to sustain any of such objections, or if, after the entry of an
order sustaining one or more of such objections, the Commission shall find,
after notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Trustees shall mail copies
of such material to all shareholders with reasonable promptness after the entry
of such order and the renewal of such tender.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted by the provisions of the 1940 Act or applicable state law, or
otherwise, to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are substantially identical or that the matter does
not significantly affect any interest of such series. However, the Rule exempts
the selection of independent public accountants, the approval of principal
distributing contracts and the election of trustees from the separate voting
requirements of the Rule.
The shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust. The Declaration of Trust also
provides for indemnification and reimbursement of expenses out of a series'
assets for any shareholder held personally liable for obligations of such
series.
CUSTODIAN. Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City,
Missouri 64105, serves as custodian for the Fund. It also maintains, under the
general supervision of the Manager, the accounting records and determines the
net asset value for the Fund.
AUDITORS. Deloitte & Touche LLP, independent auditors, have been selected as
auditors of the Fund. Their address is Two World Financial Center, New York, NY
10281.
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<PAGE>
RISK FACTORS REGARDING INVESTMENTS IN FLORIDA MUNICIPAL SECURITIES
The following information as to certain Florida considerations is given to
investors in view of the Fund's policy of concentrating its investments in
Florida issues. This information is derived from sources that are generally
available to investors and is believed to be accurate. This information
constitutes only a brief summary, does not purport to be a complete description
and has not been independently verified.
Florida's financial operations are considerably different than most other
states because, under the State's constitution, there is no state income tax on
individuals. Florida's constitution prohibits the levy, under the authority of
the State, of an individual income tax upon the income of natural persons who
are residents or citizens of Florida in excess of amounts which may be credited
against or deducted from any similar tax levied by the United States or any
other state. Accordingly, a constitutional amendment would be necessary to
impose a state individual income tax in excess of the foregoing constitutional
limitations. The lack of an income tax exposes total State tax collections to
more volatility than would otherwise be the case and, in the event of an
economic downswing, could affect the State's ability to pay principal and
interest in a timely manner. Florida has a proportionally greater number of
persons of retirement age; a factor that makes Florida's property and transfer
payment taxes a relatively more important source of State funding. Because
transfer payments are typically less sensitive to the business cycle than
employment income, they may act as a stabilizing force in weak economic periods.
Florida imposes an income tax on corporate income allocable to the State, as
well as an ad valorem tax on intangible personal property, sales and use taxes
and other miscellaneous taxes. These taxes are a major source of funds to meet
state expenses, including repayment of, and interest on, obligations of the
State. Financial operations of the State of Florida covering all receipts and
expenditures are maintained through the use of four funds (the General Revenue
Fund, Trust Funds, the Working Capital Fund and The Budget Stabilization Fund).
The General Revenue Fund receives the majority of State tax revenues. The Trust
Funds consist of monies received by the State which under law or trust agreement
are segregated for a purpose authorized by law. Revenues in the General Revenue
Fund which are in excess of the amount needed to meet appropriations may be
transferred to the Working Capital Fund. The Florida Constitution and Statutes
mandate that the State budget be kept in balance from currently available
revenues each State fiscal year (July 1 - June 30). For fiscal year 1997-98, the
estimated total funds available are reported to be $42 billion. The estimated
General Revenue plus Working Capital and Budget Stabilization Fund
appropriations at July 1997 are estimated at $17.114 billion with unencumbered
reserves at the end of fiscal year 1997-98 estimated at $1.036 million. For
fiscal year 1997-98, the estimated General Revenue plus Working Capital and
Budget Stabilization Funds are projected to be $18.110 billion, a 9% increase
over the estimated $16.6 billion available in fiscal year 1996-97. The Florida
and U.S. unemployment rates for 1996 were 5.05% and 5.4%, respectively.
Unemployment figures at the end of third quarter 1997 showed U.S. unemployment
rates hitting a twenty-four year low of 4.7% with the average Florida
unemployment rate for the year at 4.88%.
In 1993, Florida's constitution was amended to limit the annual growth in
the assessed valuation of residential property, and which, over time, could
constrain growth in property taxes, a major source of revenue for local
governments. While no immediate ratings implications are expected, the amendment
could have a negative impact on the financial performance of local governments
over time and lead to ratings revisions which may have a negative impact on the
prices of affected bonds. In 1994, the Florida constitution was amended to limit
state revenue collections in any fiscal year to, subject to exception, that
which was allowed in the prior fiscal year plus a growth factor, to be
determined by reference to the average annual growth rate in Florida personal
income over the previous five years.
Florida has historically experienced substantial population increases as a
result of migration to Florida from other areas of the United States and from
foreign countries, although recent population growth has been modest by
historical standards. Between 1960 and 1995, Florida's population grew by 9.2
million people, a 185% increase or more than 4 times the 46% growth rate in the
U.S. population over the same period. However, after rising from 1992 to 1993
from 1.4% to 2.1% in 1993-94, population growth has leveled off, moving from an
estimated 1.9% in 1994-95 to 1.85% in 1996-97; the general population is
expected to grow at 1.8% in 1997-98. As a result of population growth, the State
may experience a need for additional revenues to meet increased burdens on the
various public and social services provided by the State. Florida's ability to
obtain increased revenues to meet these burdens will be dependent in part upon
the State's ability to foster business and economic growth. The State's business
and economic growth could be restricted by the natural limitations of
environmental resources and the State's ability to finance adequate public
facilities such as roads and schools.
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<PAGE>
Despite increases in other sectors of its economy, Florida remains heavily
dependent on tourism. Three years ago Florida tourism was negatively impacted by
the effects of publicity regarding crime against tourists in the state, product
maturity, higher prices and more aggressive marketing by competing vacation
destinations. In 1994, slightly less than 40 million persons visited Florida on
an annual basis. Since then tourism has been improving. In 1996-97,
approximately 43 million visitors were recorded and the forecast for 1997-98 is
44.6 million visitors, an increase of 3.7%. Estimates for 1998-99 call for an
additional 900,000 visitors annually, rising to 45.5 million. Despite such
optimism, the tourism industry can be very volatile predicated on numerous
uncontrolled factors such as good public relations, weather, access to
reasonably priced transportation and disposable income.
Housing starts from 1991 through 1996 averaged 111,279 units annually in the
State of Florida. Results for 1995 showed 119,775 units constructed; in 1996,
122,380 units were built. Estimates show increasing numbers of units being
constructed in the next two years. Housing starts are, however, reliant upon
interest rates and disposable income, which can significantly impact demand in
the event of an economic downturn. There has been a decline in Florida's
dependence on highly cyclical construction and construction-related
manufacturing sectors. For example, the total contract construction employment
as a share of total non-farm employment reached a peak of 10% in 1973. In 1980,
the share was roughly 7.5% and in 1997 the share had reportedly edged downward
to nearly 2.5%. This trend is expected to continue as Florida's economy
continues to diversify.
The ability of the State and its local units of government to satisfy its
debt obligations may be affected by numerous factors which impact on the
economic vitality of the State in general and the particular region of the State
in which the issuer of the debt obligations in located. South Florida is
particularly susceptible to international trade and currency imbalances and to
economic dislocations in Central and South America, due to its geographical
location and its involvement with foreign trade, tourism and investment capital.
North and central Florida are impacted by problems in the agricultural sector,
particularly with regard to the citrus and sugar industries. Short-term adverse
economic conditions may be created in these areas, and in the State as a whole,
due to crop failures, severe weather conditions or other agriculture-related
problems. The State economy also has historically been dependent on the tourism
and construction industries and is, therefore, sensitive to trends in those
sectors.
The Fund's investment values are expected to vary in accordance with the
Fund's investment ratings, the issuer's ability to satisfy interest and/or
principal payment obligations, the relative interest rates payable on similar
investments, and the legal environment relating to creditors' rights. In
addition to the foregoing risk factors, the Fund's policy of concentrating its
investments in Florida municipal securities may make it more susceptible to
risks of adverse economic, political or regulatory developments than would be
the case if the Fund were more diversified as to geographic region and/or source
of revenue.
FINANCIAL STATEMENTS
The Annual Report to Shareholders for the fiscal year ended September 30,
1997 contains a schedule of the investments of the Florida Series as of
September 30, 1997, as well as certain other financial information as of that
date. The financial statements and notes included in the Annual Report, and the
Independent Auditor's Report therein, are incorporated herein by reference. The
Annual Report will be furnished, without charge, to investors who request copies
of this Statement of Additional Information.
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<PAGE>
APPENDIX A
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
MUNICIPAL BONDS
Aaa: Municipal bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk. Interest payments
are protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa: Municipal bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than Aaa bonds because margins
of protection may not be as large or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A: Municipal bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Municipal bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be characteristically lacking or may be
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact may have speculative characteristics as well.
Ba: Municipal bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate, and thereby
not well safeguarded during other good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Municipal bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Municipal bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest.
Ca: Municipal bonds which are rated Ca represent obligations which are
speculative in high degree. Such issues are often in default or have other
marked shortcomings.
C: Municipal bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers (1, 2 and 3) in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; modifier 2 indicates a mid-range ranking; and modifier 3
indicates that the issuer ranks in the lower end of its generic rating category.
MUNICIPAL NOTES
Moody's ratings for municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG). This distinction is in recognition of
the differences between short-term and long-term credit risk. Loans bearing the
designation MIG 1 are of the best quality, enjoying strong protection by
established cash flows of funds for their servicing or by established and
broad-based access to the market for refinancing. Loans bearing the designation
MIG 2 are of high quality, with margins of protection ample although not so
large as in the preceding group. Loans bearing the designation MIG 3 are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Market access for refinancing in
particular, is likely to be less well established. Notes bearing the designation
MIG 4 are
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judged to be of adequate quality, carrying specific risk but having protection
commonly regarded as required of an investment security and not distinctly or
predominantly speculative.
COMMERCIAL PAPER
Moody's Commercial Paper Ratings are opinions of the ability of issuers to
repay punctually promissory senior debt obligations not having an original
maturity in excess of one year. Issuers rated "Prime-1" or "P-1" indicates the
highest quality repayment capacity of the rated issue.
The designation "Prime-2" or "P-2" indicates that the issuer has a strong
capacity for repayment of senior short-term promissory obligations. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.
The designation "Prime-3" or "P-3" indicates that the issuer has an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
Issues rated "Not Prime" do not fall within any of the Prime rating
categories.
STANDARD & POOR'S CORPORATION ("S&P")
MUNICIPAL BONDS
AAA: Municipal bonds rated AAA are highest grade obligations. Capacity to
pay interest and repay principal is extremely strong.
AA: Municipal bonds rated AA have a very strong degree of safety and very
strong capacity to pay interest and repay principal and differs from the highest
rated issues only in small degree.
A: Municipal bonds rated A are regarded as upper medium grade. They have a
strong degree of safety and capacity to pay interest and repay principal
although they are somewhat more susceptible in the long term to the adverse
effects of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB: Municipal bonds rated BBB are regarded as having a satisfactory degree
of safety and capacity to pay interest and re-pay principal. Whereas they
normally exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and re-pay principal for bonds in this category than for bonds in
higher rated categories.
BB, B, CCC, CC: Municipal bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and pre-pay principal in accordance with the terms of the bond. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposure to adverse
conditions.
C: The rating C is reserved for income bonds on which no interest is being
paid.
D: Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of bond as a matter of policy.
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MUNICIPAL NOTES
SP-1: Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
COMMERCIAL PAPER
S&P Commercial Paper ratings are current assessments of the likelihood of
timely payment of debts having an original maturity of no more than 365 days.
A-1: The A-1 designation indicates that the degree of safety regarding
timely payment is very strong.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B: Issues rated "B" are regarded as having only a speculative capacity for
timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful
capacity of payment.
D: Debt rated "D" is in payment default.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of bond as a matter of policy.
The ratings assigned by S&P may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within its major rating categories.
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APPENDIX B
HISTORY OF J. & W. SELIGMAN & CO. INCORPORATED
Seligman's beginnings date back to 1837, when Joseph Seligman, the
oldest of eight brothers, arrived in the United States from Germany. He earned
his living as a pack peddler in Pennsylvania, and began sending for his
brothers. The Seligmans became successful merchants, establishing businesses in
the South and East.
Backed by nearly thirty years of business success - culminating in the
sale of government securities to help finance the Civil War - Joseph Seligman,
with his brothers, established the international banking and investment firm of
J. & W. Seligman & Co. In the years that followed, the Seligman Complex played a
major role in the geographical expansion and industrial development of the
United States.
THE SELIGMAN COMPLEX:
...Prior to 1900
o Helps finance America's fledgling railroads through underwritings.
o Is admitted to the New York Stock Exchange in 1869. Seligman remained a
member of the NYSE until 1993, when the evolution of its business made it
unnecessary.
o Becomes a prominent underwriter of corporate securities, including New
York Mutual Gas Light Company, later part of Consolidated Edison.
o Provides financial assistance to Mary Todd Lincoln and urges the Senate to
award her a pension.
o Is appointed U.S. Navy fiscal agent by President Grant.
o Becomes a leader in raising capital for America's industrial and urban
development.
...1900-1910
o Helps Congress finance the building of the Panama Canal.
...1910s
o Participates in raising billions for Great Britain, France and Italy,
helping to finance World War I.
...1920s
o Participates in hundreds of successful underwritings including those for
some of the Country's largest companies: Briggs Manufacturing, Dodge
Brothers, General Motors, Minneapolis-Honeywell Regulatory Company, Maytag
Company United Artists Theater Circuit and Victor Talking Machine Company.
o Forms Tri-Continental Corporation in 1929, today the nation's largest,
diversified closed-end equity investment company, with over $2 billion in
assets and one of its oldest.
...1930s
o Assumes management of Broad Street Investing Co. Inc., its first mutual
fund, today known as Seligman Common Stock Fund, Inc.
o Establishes Investment Advisory Service.
...1940s
o Helps shape the Investment Company Act of 1940.
o Leads in the purchase and subsequent sale to the public of Newport News
Shipbuilding and Dry Dock Company, a prototype transaction for the
investment banking industry.
o Assumes management of National Investors Corporation, today Seligman
Growth Fund, Inc.
o Establishes Whitehall Fund, Inc., today Seligman Income Fund, Inc.
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...1950-1989
o Develops new open-end investment companies. Today, manages more than 40
mutual fund portfolios.
o Helps pioneer state-specific, municipal bond funds, today managing a
national and 18 state-specific municipal funds.
o Establishes J. & W. Seligman Trust Company and J. & W. Seligman Valuations
Corporation.
o Establishes Seligman Portfolios, Inc., an investment vehicle offered
through variable annuity products.
...1990s
o Introduces Seligman Select Municipal Fund, Inc. and Seligman Quality
Municipal Fund, Inc., two closed-end funds that invest in high quality
municipal bonds.
o In 1991 establishes a joint venture with Henderson plc, of London, known
as Seligman Henderson Co., to offer global investment products.
o Introduces to the public Seligman Frontier Fund, Inc., a small
capitalization mutual fund.
o Launches Seligman Henderson Global Fund Series, Inc., which today offers
five separate series: Seligman Henderson International Fund, Seligman
Henderson Global Smaller Companies Fund, Seligman Henderson Global
Technology Fund, Seligman Henderson Global Growth Opportunities Fund and
Seligman Henderson Emerging Markets Growth Fund.
o Launches Seligman Value Fund Series, which currently offers two separate
series: Seligman Large-Cap Value Fund and Seligman Small-Cap Value Fund.
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STATEMENT OF ADDITIONAL INFORMATION
February 1, 1998
SELIGMAN NORTH CAROLINA MUNICIPAL SERIES
100 Park Avenue
New York, New York 10017
New York City Telephone (212) 850-1864
Toll-Free Telephone:
(800) 221-2450 - all continental United States
This Statement of Additional Information expands upon and supplements
the information contained in the current Prospectus of Seligman North Carolina
Municipal Series (the "Fund"), dated February 1, 1998. It should be read in
conjunction with the Prospectus, which may be obtained by writing or calling the
Fund at the above address or telephone numbers. This Statement of Additional
Information, although not in itself a Prospectus, is incorporated by reference
into the Prospectus in its entirety.
The Fund offers two classes of shares. Class A shares may be purchased
at net asset value plus a sales load of up to 4.75%. Class A shares purchased in
an amount of $1,000,000 or more are sold without an initial sales load but are
subject to a contingent deferred sales load ("CDSL") of 1% (of the current net
asset value or the original purchase price, whichever is less) if such shares
are redeemed within eighteen months of purchase. Class D shares may be purchased
at net asset value and are subject to a CDSL of 1% if redeemed within one year.
Each share of Class A and Class D represents an identical legal
interest in the investment portfolio of the Fund and has the same rights except
for certain class expenses and except that Class D shares bear a higher
distribution fee that generally will cause the Class D shares to have a higher
expense ratio and pay lower dividends than Class A shares. Each Class has
exclusive voting rights with respect to its distribution plan. Although holders
of Class A and Class D shares have identical legal rights, the different
expenses borne by each Class will result in different dividends. The two classes
also have different exchange privileges.
TABLE OF CONTENTS
Page
Seligman North Carolina
Municipal Series............................ 2
Investment Objective, Policies and Risks...... 2
Investment Limitations........................ 5
Trustees and Officers......................... 6
Management and Expenses ...................... 10
Administration, Shareholder Services
and Distribution Plan....................... 12
Portfolio Transactions........................ 12
Purchase and Redemption of Fund Shares........ 12
Distribution Services......................... 15
Taxes......................................... 15
Valuation..................................... 15
Performance Information....................... 16
General Information........................... 18
Risk Factors Regarding Investments In
North Carolina Municipal Securities.......... 19
Financial Statements.......................... 20
Appendix A.................................... 21
Appendix B.................................... 24
TEBNC1A
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SELIGMAN NORTH CAROLINA MUNICIPAL SERIES
The Fund is a series of Seligman Municipal Series Trust (the "Trust"), a
non-diversified open-end management investment company, or mutual fund,
organized as an unincorporated business trust under the laws of Massachusetts
that commenced operations in 1984.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund seeks to provide high income exempt from regular federal income
taxes and the personal income taxes of North Carolina consistent with
preservation of capital. The Fund also invests with consideration given to
capital gain.
The Fund is expected to invest principally, without percentage limitations,
in municipal securities which on the date of investment are within the four
highest ratings of Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A, Baa
for bonds; MIG 1, MIG 2, MIG 3, MIG 4 for notes; P-1 for commercial paper) or
Standard & Poor's Corporation ("S&P") (AAA, AA, A, BBB for bonds; SP-1 - SP-2
for notes; A-1+, A-1/A-2 for commercial paper). Municipal securities rated in
these categories are commonly referred to as investment grade. The Fund may
invest in municipal securities which are not rated, or which do not fall into
the credit ratings noted above if, based upon credit analysis by the Manager, it
is believed that such securities are of comparable quality. In determining
suitability of investment in a lower rated or unrated security, the Manager will
take into consideration asset and debt service coverage, the purpose of the
financing, history of the issuer, existence of other rated securities of the
issuer and other considerations as may be relevant, including comparability to
other issuers.
Although securities rated in the fourth rating category are commonly
referred to as investment grade, investment in such securities could involve
risks not usually associated with bonds rated in the first three categories.
Bonds rated BBB by S&P are more likely as a result of adverse economic
conditions or changing circumstance to exhibit a weakened capacity to pay
interest and re-pay principal than bonds in higher rating categories, and bonds
rated Baa by Moody's lack outstanding investment characteristics and in fact
have speculative characteristics according to Moody's. Municipal securities in
the fourth rating category of S&P or Moody's will generally provide a higher
yield than do higher rated municipal securities of similar maturities; however,
they are subject to a greater degree of fluctuation in value as a result of
changing interest rates and economic conditions. The market value of the
municipal securities will also be affected by the degree of interest of dealers
to bid, for them, and in certain markets dealers may be more unwilling to trade
municipal securities rated in the fourth rating categories than in the higher
rating categories.
A description of the credit rating categories is contained in Appendix A to
this Statement.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities and for providing state and local governments
with federal credit assistance. Reevaluation of the Fund's investment objectives
and structure might be necessary in the future due to market conditions which
may result from future changes in the tax laws.
NORTH CAROLINA MUNICIPAL SECURITIES. North Carolina Municipal Securities include
notes, bonds and commercial paper issued by or on behalf of the State of North
Carolina, its political subdivisions, agencies, and instrumentalities, the
interest on which is exempt from regular federal income taxes and North Carolina
state personal income taxes. Such securities are traded primarily in an
over-the-counter market. The Fund may invest, without percentage limitations, in
certain private activity bonds, the interest on which is treated as a preference
item for purposes of the alternative minimum tax. See "North Carolina Municipal
Securities" in the Prospectus.
Under the Investment Company Act of 1940 (the "1940 Act"), the
identification of the issuer of municipal bonds, notes or commercial paper
depends on the terms and conditions of the obligation. If the assets and
revenues of an agency, authority, instrumentality or other political subdivision
are separate from those of the government creating the subdivision and the
obligation is backed only by the assets and revenues of the subdivision, such
subdivision is regarded as the sole issuer. Similarly, in the case of an
industrial development revenue bond or pollution control revenue bond, if the
bond is backed only
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by the assets and revenues of the nongovernmental user, the nongovernmental user
is regarded as the sole issuer. If in either case the creating government or
another entity guarantees an obligation, the security is treated as an issue of
such guarantor to the extent of the value of the guarantee.
Municipal bonds are issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, schools,
streets, water and sewer works, and gas and electric utilities. Municipal bonds
also may be issued in connection with the refunding of outstanding obligations,
obtaining funds to lend to other public institutions, and for general operating
expenses. Industrial development bonds, which are considered municipal bonds if
the interest paid thereon is exempt from regular federal income tax (such
interest, however, may be subject to the federal alternative minimum tax), are
issued by or on behalf of public authorities to obtain funds to provide various
privately-operated facilities for business and manufacturing, housing, sports,
pollution control, and for airport, mass transit, port and parking facilities.
The two principal classifications of municipal bonds are "general
obligation" and "revenue." General obligation bonds are secured by the issuer's
pledge of its full faith, credit and taxing power for the payment of principal
and interest. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source. Although industrial
development bonds ("IDBs") are issued by municipal authorities, they are
generally secured by the revenues derived from payments of the industrial user.
The payment of principal and interest on IDBs is dependent solely on the ability
of the user of the facilities financed by the bonds to meet its financial
obligations and the pledge, if any, of real and personal property so financed as
security for such payment.
Municipal Notes generally are used to provide for short-term capital needs
and generally have maturities of one year or less. Municipal Notes include:
1. TAX ANTICIPATION NOTES. Tax Anticipation Notes are issued to finance working
capital needs of municipalities. Generally, they are issued in anticipation
of various tax revenues, such as income, sales, use and business taxes, and
are payable from these specific future taxes.
2. REVENUE ANTICIPATION NOTES. Revenue Anticipation Notes are issued in
expectation of receipt of other kinds of revenue, such as federal revenues
available under the Federal Revenue Sharing Programs.
3. BOND ANTICIPATION NOTES. Bond Anticipation Notes are issued to provide
interim financing until long-term financing can be arranged. In most cases,
the long-term bonds then provide the money for the repayment of the Notes.
4. CONSTRUCTION LOAN NOTES. Construction Loan Notes are sold to provide
construction financing. Permanent financing, the proceeds of which are
applied to the payment of Construction Loan Notes, is sometimes provided by
a commitment by the Government National Mortgage Association ("GNMA") to
purchase the loan notes, accompanied by a commitment by the Federal Housing
Administration to insure mortgage advances thereunder. In other instances,
permanent financing is provided by commitments of banks to purchase the loan
notes.
Issues of Municipal COMMERCIAL PAPER typically represent short-term,
unsecured, negotiable promissory notes. These obligations are issued by agencies
of state and local governments to finance seasonal working capital needs of
municipalities or to provide interim construction financing and are paid from
general revenues of municipalities or are refinanced with long-term debt. In
most cases, Municipal Commercial Paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions.
WHEN-ISSUED SECURITIES. The Fund may purchase municipal securities on a
when-issued basis, in which case delivery and payment normally take place 15 to
45 days after the date of the commitment to purchase. The payment obligation and
the interest rate that will be received on the municipal securities are each
fixed at the time the buyer enters into the commitment. Although the Fund will
only purchase a municipal security on a when-issued basis with the intention of
actually acquiring the securities, the Fund may sell these securities before the
settlement date if it is deemed advisable.
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Municipal securities purchased on a when-issued basis and the securities
held in the Fund are subject to changes in market value based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates (which will generally result in
similar changes in value, I.E., both experiencing appreciation when interest
rates decline and depreciation when interest rates rise). Therefore, to the
extent the Fund remains substantially fully invested at the same time that it
has purchased securities on a when-issued basis, there will be a greater
possibility that the market value of the Fund's assets will vary. Purchasing a
municipal security on a when-issued basis can involve a risk that the yields
available in the market when the delivery takes place may be higher than those
obtained on the security so purchased.
A separate account consisting of cash or liquid high-grade debt securities
equal to the amount of the when-issued commitments will be established with the
Custodian and marked to market daily, with additional cash or liquid debt
securities added when necessary. When the time comes to pay for when-issued
securities, the Fund will meet its obligations from then available cash, sale of
securities held in the separate account, sale of other securities or, although
it would not normally expect to do so, sale of the when-issued securities
themselves (which may have a value greater or lesser than the Fund's payment
obligations). Sale of securities to meet such obligations carries with it a
potential for the realization of capital gain, which is not exempt from federal
or North Carolina income taxes.
FLOATING RATE AND VARIABLE RATE SECURITIES. The Fund may purchase floating rate
and variable rate securities, including participation interests therein.
Investments in floating or variable rate securities normally will involve
industrial development or revenue bonds which provide that the rate of interest
is set as a specific percentage of a designated base rate, such as rates on
Treasury Bonds or Bills or the prime rate at a major commercial bank, and that
the Fund can demand payment of the obligations on short notice at par plus
accrued interest, which amount may be more or less than the amount the Fund paid
for them. Variable rate securities provide for a specified periodic adjustment
in the interest rate, while floating rate securities have an interest rate which
changes whenever there is a change in the designated base interest rate.
Frequently such securities are secured by letters of credit or other credit
support arrangements provided by banks. The quality of the underlying creditor
or of the bank, as the case may be, must be equivalent to the standards set
forth with respect to taxable investments on page 5.
STAND-BY COMMITMENTS. Under a stand-by commitment, the Fund obligates a dealer
to repurchase at the Fund's option specified securities at a specified price.
The exercise of a stand-by commitment is subject to the ability of the dealer to
make payment on demand. The Fund would acquire stand-by commitments solely to
facilitate portfolio liquidity and not for trading purposes. Prior to investing
in stand-by commitments the Fund, if it deems necessary based upon the advice of
counsel, will apply to the Securities and Exchange Commission for an exemptive
order relating to such commitments and the valuation thereof. There can be no
assurance that the Securities and Exchange Commission will issue such an order.
The price which the Fund would pay for municipal securities with stand-by
commitments generally would be higher than the price which otherwise would be
paid for the municipal securities alone. The Fund will only purchase obligations
with stand-by commitments from sellers the Manager deems creditworthy.
Stand-by commitments with respect to portfolio securities of the Fund with
maturities of less than 60 days which are separate from the underlying portfolio
securities are not assigned a value. The cost of any such stand-by commitment is
carried as an unrealized loss from the time of purchase until it is exercised or
expires. Stand-by commitments with respect to portfolio securities of the Fund
with maturities of 60 days or more which are separate from the underlying
portfolio securities and the underlying portfolio securities are valued at fair
value as determined in accordance with procedures established by the Board of
Trustees. The Board of Trustees would, in connection with the determination of
the value of such a stand-by commitment, consider among other factors the
creditworthiness of the writer of the stand-by commitment, the duration of the
stand-by commitment, the dates on which or the periods during which the stand-by
commitment may be exercised and the applicable rules and regulations of the
Securities and Exchange Commission.
TAXABLE INVESTMENTS. Under normal market conditions, the Fund will attempt to
invest 100% and as a matter of fundamental policy will invest at least 80% of
the value of its net assets in securities the interest on which is exempt from
regular federal and North Carolina personal income tax. Such interest, however,
may be subject to the federal alternative minimum tax. However in abnormal
market conditions, if, in the judgment of the Manager, the municipal securities
satisfying the Fund's investment objectives may not be purchased, the Fund may,
for defensive purposes temporarily invest in instruments the interest
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on which is exempt from regular federal income taxes, but not North Carolina
personal income taxes. Such securities would include those described under
"North Carolina Municipal Securities" above that would otherwise meet the Fund's
objectives.
Also, in abnormal market conditions, the Fund may invest on a temporary
basis in fixed-income securities, the interest on which is subject to federal,
state or local income taxes, pending the investment or reinvestment in municipal
securities of proceeds of sales of shares or sales of portfolio securities, in
order to avoid the necessity of liquidating portfolio investments to meet
redemption of shares by investors or where market conditions due to rising
interest rates or other adverse factors warrant temporary investing for
defensive purposes. Investments in taxable securities will be substantially in
securities issued or guaranteed by the United States Government (such as bills,
notes and bonds), its agencies, instrumentalities or authorities; highly-rated
corporate debt securities (rated AA-, or better, by Standard & Poor's or Aa3, or
better, by Moody's); prime commercial paper (rated A-1+/A-1 by Standard & Poor's
or P-1 by Moody's); and certificates of deposit of the 100 largest domestic
banks in terms of assets which are subject to regulatory supervision by the U.S.
Government or state governments and the 50 largest foreign banks in terms of
assets with branches or agencies in the United States. Investments in
certificates of deposit of foreign banks and foreign branches of U.S. banks may
involve certain risks, including different regulation, use of different
accounting procedures, political or other economic developments, exchange
controls, or possible seizure or nationalization of foreign deposits.
PORTFOLIO TURNOVER. Portfolio transactions will be undertaken principally to
accomplish the Fund's objective in relation to anticipated movements in the
general level of interest rates but the Fund may also engage in short-term
trading consistent with its objective. Securities may be sold in anticipation of
a market decline (a rise in interest rates) or purchased in anticipation of a
market rise (a decline in interest rates) and later sold. In addition, a
security may be sold and another purchased at approximately the same time to
take advantage of what the Manager believes to be a temporary disparity in the
normal yield relationship between the two securities.
The Fund's investment policies may lead to frequent changes in investments,
particularly in periods of rapidly fluctuating interest rates. A change in
securities held by the Fund is known as "portfolio turnover" and may involve the
payment by the Fund of dealer spreads or underwriting commissions, and other
transaction costs, on the sale of securities, as well as on the reinvestment of
the proceeds in other securities. Portfolio turnover rate for a fiscal year is
the ratio of the lesser of purchases or sales of portfolio securities to the
monthly average of the value of portfolio securities. Securities whose maturity
or expiration date at the time of acquisition were one year or less are excluded
from the calculation. The portfolio turnover rate for the fiscal years ended
September 30, 1997 and 1996 were 13.04% and 15.12%, respectively. It is
estimated that the portfolio turnover rate of the Fund will not exceed 100%. The
Fund's portfolio turnover rate will not be a limiting factor when the Fund deems
it desirable to sell or purchase securities.
INVESTMENT LIMITATIONS
Under the Fund's fundamental policies, which cannot be changed except by
vote of a majority of the outstanding voting securities of the Fund, the Fund
may not:
- - Borrow money, except from banks for temporary purposes (such as meeting
redemption requests or for extraordinary or emergency purposes but not for
the purchase of portfolio securities) in an amount not to exceed 10% of the
value of its total assets at the time the borrowing is made (not including
the amount borrowed). The Fund will not purchase additional portfolio
securities if the Fund has outstanding borrowings in excess of 5% of the
value of its total assets;
- - Mortgage or pledge any of its assets, except to secure permitted borrowings
noted above;
- - Invest more than 25% of total assets at market value in any one industry;
except that municipal securities and securities of the U.S. Government, its
agencies and instrumentalities are not considered an industry for purposes of
this limitation.
- - As to 50% of the value of its total assets, purchase securities of any issuer
if immediately thereafter more than 5% of total assets at market value would
be invested in the securities of any issuer (except that this limitation does
not apply to obligations issued or guaranteed as to principal and interest by
the U.S. Government or its agencies or instrumentalities);
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- - Invest in securities issued by other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization;
- - Purchase or hold any real estate, except that the Fund may invest in
securities secured by real estate or interests therein or issued by persons
(other than real estate investment trusts) which deal in real estate or
interests therein;
- - Purchase or hold the securities of any issuer, if to its knowledge, trustees
or officers of the Fund individually owning beneficially more than 0.5% of
the securities of that issuer own in the aggregate more than 5% of such
securities;
- - Write or purchase put, call, straddle or spread options; purchase securities
on margin or sell "short"; or underwrite the securities of other issuers,
except that the Fund may be deemed an underwriter in connection with the
purchase and sale of portfolio securities;
- - Purchase or sell commodities or commodity contracts including futures
contracts; or
- - Make loans, except to the extent that the purchase of notes, bonds or other
evidences of indebtedness or deposits with banks may be considered loans.
As a matter of policy, with respect to 75% of the Fund's assets, no revenue
bond will be purchased by the Fund if as a result of such purchase more than 5%
of the Fund's assets would be invested in the securities of a single issuer.
This policy is not fundamental and may be changed by the Trustees without
shareholder approval.
Under the 1940 Act, a "vote of a majority of the outstanding voting
securities" of the Trust or of a particular series of the Trust, such as the
Fund, means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Trust or of a series or (2) 67% or more of the shares
of the Trust or of a series present at a shareholders' meeting if more than 50%
of the outstanding shares of the Trust or of a series are represented at the
meeting in person or by proxy.
TRUSTEES AND OFFICERS
Trustees and officers of the Trust, together with information as to their
principal business occupations during the past five years are shown below. Each
Trustee who is an "interested person" of the Trust, as defined in the 1940 Act,
is indicated by an asterisk. Unless otherwise indicated, their addresses are 100
Park Avenue, New York, NY 10017.
WILLIAM C. MORRIS* Trustee, Chairman of the Board, Chief Executive
(59) Officer and Chairman of the Executive Committee
Chairman, J. & W. Seligman & Co. Incorporated,
investment managers and advisers; Chairman and Chief
Executive Officer, the Seligman Group of Investment
Companies; Chairman, Seligman Financial Services, Inc.,
broker/dealer; Seligman Services, Inc., broker/dealer;
and Carbo Ceramics Inc., ceramic proppants for oil and
gas industry; Director, Seligman Data Corp.,
shareholder service agent; Kerr-McGee Corporation,
diversified energy company; and Sarah Lawrence College;
and a Member of the Board of Governors of the
Investment Company Institute; formerly, President, J. &
W. Seligman & Co. Incorporated, Chairman, Seligman
Advisors, Inc., advisers; Seligman Holdings, Inc.,
holding company; Seligman Securities, Inc.,
broker/dealer and J. & W. Seligman Trust Company, trust
company; and Director, Daniel Industries, Inc.,
manufacturer of oil and gas metering equipment.
-6-
<PAGE>
BRIAN T. ZINO* Trustee, President and Member of the Executive
(45) Committee
Director and President, J. & W. Seligman & Co.
Incorporated, investment managers and advisers;
Director or Trustee, the Seligman Group of Investment
Companies, President (with the exception of Seligman
Quality Municipal Fund, Inc. and Seligman Select
Municipal Fund, Inc.), and Director or Trustee, the
Seligman Group of Investment Companies; Chairman and
President, Seligman Data Corp., shareholder service
agent; Director, Seligman Financial Services, Inc.,
broker/dealer; Seligman Services, Inc., broker/dealer;
and Seligman Henderson Co., advisers; formerly,
Director, Seligman Advisors, Inc. advisers; Seligman
Securities, Inc., broker/dealer; and J. & W. Seligman
Trust Company, trust company.
RICHARD R. SCHMALTZ* Director and Member of the Executive Committee
(57)
Managing Director, Director of Investments, J. & W.
Seligman & Co. Incorporated; Director of Seligman
Henderson Co. and Trustee Emeritus of Colby College;
formerly, Director, Investment Research at Neuberger &
Berman from May 1993 to September 1996 and Executive
Vice President of McGlinn Capital from July 1987 to May
1993.
JOHN R. GALVIN Trustee
(68)
Dean, Fletcher School of Law and Diplomacy at Tufts
University; Director or Trustee, the Seligman Group of
Investment Companies; Chairman, American Council on
Germany; a Governor of the Center for Creative
Leadership; Director, USLIFE Corporation, life
insurance; Raytheon Co., electronics; National Defense
University; and the Institute for Defense Analysis; and
formerly, Ambassador, U.S. State Department for
negotiations in Bosnia; Distinguished Policy Analyst at
Ohio State University and Olin Distinguished Professor
of National Security Studies at the United States
Military Academy. From June, 1987 to June, 1992, he was
the Supreme Allied Commander, Europe and the
Commander-in-Chief, United States European Command.
Tufts University, Packard Avenue, Medford, MA 02155
ALICE S. ILCHMAN Trustee
(62)
President, Sarah Lawrence College; Director or Trustee,
the Seligman Group of Investment Companies; and the
Committee for Economic Development; and Chairman, The
Rockefeller Foundation, charitable foundation;
formerly, Trustee, The Markle Foundation, philanthropic
organization; and Director, NYNEX, telephone company;
and International Research and Exchange Board,
intellectual exchanges. Sarah Lawrence College,
Bronxville, New York 10708
-7-
<PAGE>
FRANK A. McPHERSON Trustee
(64)
Director, various corporations; Director or Trustee,
the Seligman Group of Investment Companies; Director of
Kimberly-Clark Corporation, consumer products, Bank of
Oklahoma Holding Company, Oklahoma City Chamber of
Commerce, Baptist Medical Center, Oklahoma Chapter of
the Nature Conservancy, Oklahoma Medical Research
Foundation and National Boys and Girls Clubs of
America; Chairman of Oklahoma City Public Schools
Foundation; and Member of the Business Roundtable and
National Petroleum Council; formerly, Chairman of the
Board and Chief Executive Officer, Kerr-McGee
Corporation, energy and chemicals.
123 Robert S. Kerr Avenue, Oklahoma City, OK 73102
JOHN E. MEROW Trustee
(68)
Retired Chairman and Senior Partner, Sullivan &
Cromwell, law firm; Director or Trustee, the Seligman
Group of Investment Companies; Director, Commonwealth
Industries, Inc.; the Foreign Policy Association;
Municipal Art Society of New York; U.S. Council for
International Business; and The New York and
Presbyterian Hospital; Chairman, American Australian
Association; The New York and Presbyterian Hospital
Care Network, Inc.; Vice-Chairman, the U.S.-New Zealand
Council; and Member of the American Law Institute and
Council on Foreign Relations.
125 Broad Street, New York, NY 10004
BETSY S. MICHEL Trustee
(55)
Attorney; Director or Trustee, the Seligman Group of
Investment Companies; and Trustee, Geraldine R. Dodge
Foundation, charitable foundation; Chairman of the
Board of Trustees of St. George's School (Newport, RI);
formerly, Director, the National Association of
Independent Schools (Washington, DC), education. St.
Bernard's Road, P.O. Box 449, Gladstone, NJ 07934
JAMES C. PITNEY Trustee
(71)
Retired Partner, Pitney, Hardin, Kipp & Szuch, law
firm; Director or Trustee, the Seligman Group of
Investment Companies; formerly, Director, Public
Service Enterprise Group, public utility.
Park Avenue at Morris County, P.O. Box 1945,
Morristown, NJ 07962-1945
JAMES Q. RIORDAN Trustee
(70)
Director, various corporations; Director or Trustee,
the Seligman Group of Investment Companies; The Houston
Exploration Company; The Brooklyn Museum; The Brooklyn
Union Gas Company; The Committee for Economic
Development; Dow Jones & Co., Inc. and Public
Broadcasting Service; formerly, Co-Chairman of the
Policy Council of the Tax Foundation; Director, Tesoro
Petroleum Companies, Inc.; and Director and President,
Bekaert Corporation.
675 Third Avenue, Suite 3004, New York, NY 10017
-8-
<PAGE>
ROBERT L. SHAFER Trustee
(65)
Director, various corporations; Director or Trustee,
the Seligman Group of Investment Companies and USLIFE
Corporation, life insurance; formerly, Vice President
Pfizer, Inc., pharmaceuticals. 235 East 42nd Street,
New York, NY 10017
JAMES N. WHITSON Trustee
(62)
Executive Vice President, Chief Operating Officer and
Director, Sammons Enterprises, Inc.; Director or
Trustee, the Seligman Group of Investment Companies;
C-SPAN; and Commscope, manufacturer of coaxial cables;
formerly, Director, Red Man Pipe and Supply Company,
piping and other materials.
300 Crescent Court, Suite 700, Dallas, TX 75202
THOMAS G. MOLES Vice President and Senior Portfolio Manager
(54)
Director, Managing Director, (formerly, Vice President
and Portfolio Manager), J. & W. Seligman & Co.
Incorporated, investment managers and advisers; Vice
President and Portfolio Manager, three other open-end
investment companies in the Seligman Family of Mutual
Funds; President and Portfolio Manager, Seligman
Quality Municipal Fund, Inc. and Seligman Select
Municipal Fund, Inc., closed-end investment companies;
Director, Seligman Financial Services, Inc.,
broker/dealer; Seligman Services, Inc., broker/dealer;
formerly, Director, Seligman Securities, Inc.,
broker/dealer and J. & W. Seligman Trust Company, trust
company.
LAWRENCE P. VOGEL Vice President
(41)
Senior Vice President, Finance, J. & W. Seligman & Co.
Incorporated, investment managers and advisers;
Seligman Financial Services, Inc., broker/dealer; and
Seligman Data Corp., shareholder service agent; Vice
President, the Seligman Group of Investment Companies;
and Seligman Services, Inc., broker/dealer; and
Treasurer, Seligman Henderson Co., advisers; formerly,
Senior Vice President, Finance, Seligman Advisors,
Inc., advisers; and Treasurer, Seligman Holdings, Inc.,
holding company.
FRANK J. NASTA Secretary
(33)
Senior Vice President, Law and Regulation and Corporate
Secretary, J. & W. Seligman & Co. Incorporated,
investment managers and advisers; Secretary, the
Seligman Group of Investment Companies, Seligman
Financial Services, Inc., broker/dealer; Seligman
Henderson Co., advisers; Seligman Services, Inc.,
broker/dealer; and Seligman Data Corp., shareholder
service agent; formerly, Senior Vice President, Law and
Regulation and Corporate Secretary, Seligman Advisors,
Inc., advisers; and an attorney at Seward & Kissel, law
firm.
THOMAS G. ROSE Treasurer
(40)
Treasurer, the Seligman Group of Investment Companies
and Seligman Data Corp., shareholder service agent.
-9-
<PAGE>
The Executive Committee of the Board acts on behalf of the Board between
meetings to determine the value of securities and assets owned by the Fund for
which no market valuation is available and to elect or appoint officers of the
Fund to serve until the next meeting of the Board.
<TABLE>
<CAPTION>
Compensation Table
Pension or Total Compensation
Aggregate Retirement Benefits from Trust and
Name and Compensation Accrued as part of Fund Complex Paid
Position with Trust from Trust (1) Fund Expenses To Trustees (1)(2)
------------------- -------------- ------------- ------------------
<S> <C> <C> <C>
William C. Morris, Trustee and Chairman N/A N/A N/A
Brian T. Zino, Trustee and President N/A N/A N/A
Richard R. Schmaltz, Trustee N/A N/A N/A
Ronald T. Schroeder, Trustee** N/A N/A N/A
Fred E. Brown, Trustee Emeritus*** N/A N/A N/A
John R. Galvin, Trustee $2,448.33 N/A $67,000.00
Alice S. Ilchman, Trustee 2,370.05 N/A 65,000.00
Frank A. McPherson, Trustee 2,412.61 N/A 66,000.00
John E. Merow, Trustee 2,370.05 N/A 65,000.00
Betsy S. Michel, Trustee 2,448.33 N/A 67,000.00
James C. Pitney, Trustee 2,327.49 N/A 64,000.00
James Q. Riordan, Trustee 2,405.77 N/A 66,000.00
Robert L. Shafer, Trustee 2,405.77 N/A 66,000.00
James N. Whitson, Trustee 2,455.17(d) N/A 67,000.00(d)
</TABLE>
(1) Based on remuneration received by Trustees for the Trust's four Series for
the fiscal year ended September 30, 1997. Effective January 16, 1998, the
per meeting fee for Trustees was increased by $1,000, which is allocated
among all Fund's in the Fund Complex.
(2) As defined in the Prospectus, the Seligman Group of Investment Companies
consists of eighteen investment companies.
** Retired May 15, 1997.
*** Retired as Trustee and designated Trustee Emeritus on March 20, 1997.
(d) Deferred.
The Trust has a compensation arrangement under which outside Trustees may
elect to defer receiving their fees. Under this arrangement, interest is accrued
on the deferred balances. The annual cost of such fees and interest is included
in the trustees' fees and expenses, and the accumulated balance thereof is
included in "Liabilities" in the Fund's financial statements. The total amount
of deferred compensation (including interest) payable in respect of the Trust to
Mr. Whitson as of September 30, 1997 was $13,448. Messrs. Merow and Pitney no
longer defer current compensation; however, they have accrued deferred
compensation in the amounts of $39,026 and $28,133 as of September 30, 1997. The
Fund has applied for and received exemptive relief that would permit a director
who has elected deferral of his or her fees to choose a rate of return equal to
either (i) the interest rate on short-term Treasury bills, or (ii) the rate of
return on the shares of any of the investment companies advised by the manager,
as designated by the director. The Fund may, but is not obligated to, purchase
shares of such investment companies to hedge its obligations in connection with
this deferral arrangement.
Trustees and officers of the Trust are also trustees, directors and officers
of some or all of the other investment companies in the Seligman Group.
No Trustees or officers of the Fund owned shares of the Fund at January 2,
1998.
-10-
<PAGE>
MANAGEMENT AND EXPENSES
Under the Management Agreement, dated June 21, 1990, subject to the control
of the Trustees, the Manager manages the investment of the assets of the Fund,
including making purchases and sales of portfolio securities consistent with the
Fund's investment objectives and policies, and administers its business and
other affairs. The Manager provides the Fund with such office space,
administrative and other services and executive and other personnel as are
necessary for Fund operations. The Manager pays all of the compensation of
Trustees of the Trust who are employees or consultants of the Manager and the
officers and employees of the Fund. The Manager also provides senior management
for Seligman Data Corp., the Fund's shareholder service agent.
The Manager is entitled to receive a management fee from the Fund calculated
daily and payable monthly equal to .50% of the Fund's average daily net assets
on an annual basis. During the fiscal years ended September 30, 1995 and 1996
the Manager, in its discretion, waived all or a portion of its fee from the
Fund, and in some cases also elected to reimburse the Fund for certain expenses
incurred during the periods. For the fiscal year ended September 30, 1997, the
Management fee amounted to $176,659 or .50% of the Fund's average net assets.
The Fund pays all its expenses other than those assumed by the Manager
including brokerage commissions, if any, fees and expenses of independent
attorneys and auditors, taxes and governmental fees including fees and expenses
of qualifying the Fund and its shares under federal and state securities laws,
cost of stock certificates and expenses of repurchase or redemption of shares,
expenses of printing and distributing reports, notices and proxy materials to
existing shareholders, expenses of printing and filing reports and other
documents filed with governmental agencies, expenses of shareholders' meetings,
expenses of corporate data processing and related services, shareholder
recordkeeping and shareholder account services fees and disbursements of
transfer agents and custodians, expenses of disbursing dividends and
distributions, fees and expenses of Trustees of the Fund not employed by or
serving as a Trustee of the Manager or its affiliates, insurance premiums and
extraordinary expenses such as litigation expenses. The Trust's expenses are
allocated between each series of the Trust in a manner determined by the
Trustees to be fair and equitable.
The Fund's Management Agreement was approved by the Trustees at a meeting
held on June 12, 1990, and was unanimously approved by the shareholders at a
meeting held on April 11, 1991. The Agreement will continue in effect until
December 29 of each year if (1) such continuance is approved in the manner
required by the 1940 Act (i.e., by a vote of a majority of the Trustees or of
the outstanding voting securities of the Fund and by a vote of a majority of the
Trustees who are not parties to the Management Agreement or interested persons
of any such party) and (2) the Manager shall not have notified the Fund at least
60 days prior to December 29 of any year that it does not desire such
continuance. The Agreement may be terminated by the Fund, without penalty, on 60
days' written notice to the Manager and will terminate automatically in the
event of its assignment. The Fund has agreed to change its name upon termination
of its Management Agreement if continued use of the name would cause confusion
in the context of the Manager's business.
The Manager is a successor firm to an investment banking business founded in
1864 which has thereafter provided investment services to individuals, families,
institutions and corporations. On December 29, 1988, a majority of the
outstanding voting securities of the Manager was purchased by Mr. William C.
Morris and a simultaneous recapitalization of the Manager occurred. See Appendix
B for further history of the Manager.
Officers, directors and employees of the Manager are permitted to engage in
personal securities transactions, subject to the Manager's Code of Ethics (the
"Ethics Code"). The Ethics Code proscribes certain practices with regard to
personal securities transactions and personal dealings, provides a framework for
the reporting and monitoring of personal securities transactions by the
Manager's Compliance Officer, and sets forth a procedure of identifying, for
disciplinary action, those individuals who violate the Ethics Code. The Ethics
Code prohibits each of the officers, directors and employees (including all
portfolio managers) of the Manager from purchasing or selling any security that
the officer, director or employee knows or believes (i) was recommended by the
Manager for purchase or sale by any client, including the Fund, within the
preceding two weeks, (ii) has been reviewed by the Manager for possible purchase
or sale within the preceding two weeks, (iii) is being purchased or sold by any
client, (iv) is being considered by a research analyst, (v) is being acquired in
a private placement, unless prior approval has been obtained from the Manager's
Compliance Officer, or (vi) is being acquired during an initial or
-11-
<PAGE>
secondary public offering. The Ethics Code also imposes a strict standard of
confidentiality and requires portfolio managers to disclose any interest they
may have in the securities or issuers that they recommend for purchase by any
client.
The Ethics Code also prohibits (i) each portfolio manager or member of an
investment team from purchasing or selling any security within seven calendar
days of the purchase or sale of the security by a client's account (including
investment company accounts) for which the portfolio manager or investment team
manages and (ii) each employee from engaging in short-term trading (a purchase
and sale or vice-versa within 60 days). Any profit realized pursuant to either
of these prohibitions must be disgorged.
Officers, directors and employees are required, except under very limited
circumstances, to engage in personal securities transactions through the
Manager's order desk. The order desk maintains a list of securities that may not
be purchased due to a possible conflict with clients. All officers, directors
and employees are also required to disclose all securities beneficially owned by
them on December 31 of each year.
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
As indicated in the Prospectus, an Administration, Shareholder Services and
Distribution Plan (the "Plan") for the Fund will be in effect from the date
hereof under Section 12(b) of the 1940 Act and Rule 12b-1 thereunder.
The Plan was approved on June 21, 1990 by the Trustees, including a majority
of the Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Fund and who have no direct or indirect financial interest in the operation
of the Plan or in any agreement related to the Plan (the "Qualified Trustees")
and on April 11, 1991 by the shareholders of the Fund. Amendments to the Plan
were approved in respect of the Class D shares on November 18, 1993 by the
Trustees, including a majority of the Qualified Trustees, and became effective
with respect to the Class D shares on February 1, 1994. The Plan will continue
in effect until December 31 of each year so long as such continuance is approved
annually by a majority vote of both the Trustees and the Qualified Trustees of
the Fund, cast in person at a meeting called for the purpose of voting on such
approval. The Plan may not be amended to increase materially the amounts payable
to Service Organizations with respect to a class of shares without the approval
of a majority of the outstanding voting securities of the Class and no material
amendment to the Plan may be made except by a majority of both the Trustees and
the Qualified Trustees.
The Plan requires that the Treasurer of the Fund shall provide to the
Trustees, and the Trustees shall review, at least quarterly, a written report of
the amounts expended (and purposes therefor) under the Plan. Rule 12b-1 also
requires that the selection and nomination of Trustees who are not "interested
persons" of the Trust be made by such disinterested Trustees.
PORTFOLIO TRANSACTIONS
No brokerage commissions were paid by the Fund during the fiscal years ended
September 30, 1997, 1996 or 1995. When the Fund or two or more of the investment
companies in the Seligman Group or other investment advisory clients of the
Manager desire to buy or sell the same security at the same time, the securities
purchased or sold are allocated by the Manager in a manner believed to be
equitable to each. There may be possible advantages or disadvantages of such
transactions with respect to price or the size of positions already obtainable
or saleable.
PURCHASE AND REDEMPTION OF FUND SHARES
The Fund issues two classes of shares: Class A shares may be purchased at a
price equal to the next determined net asset value per share, plus a sales load.
Class A shares purchased at net asset value without an initial sales load due to
the size of the purchase are subject to a CDSL of 1% if such shares are redeemed
within eighteen months of purchase. Class D shares may be purchased at a price
equal to the next determined net asset value without an initial sales load, but
a CDSL may be charged on certain redemptions within one year of purchase. See
"Alternative Distribution System," "Purchase of Shares," and "Redemption of
Shares" in the Fund's Prospectus.
-12-
<PAGE>
SPECIMEN PRICE MAKE-UP
Under the current distribution arrangements between the Trust and the
Distributor, Class A shares are sold at a maximum sales load of 4.75% and Class
D shares are sold at net asset value.* Using the Fund's net asset value at
September 30, 1997, the maximum offering price of the Fund's shares is as
follows:
CLASS A
Net asset value per share.................................... $ 8.05
Maximum sales load (4.75% of offering price)................. .40
------
Maximum offering price per share............................. $ 8.45
======
CLASS D
Net asset value and maximum offering price per share*........ $ 8.05
======
- ---------
* Class D shares are subject to a CDSL of 1% on redemptions within one year
of purchase. Class A shares purchased at net asset value due to the size of
the purchase are subject to a CDSL of 1% on redemption within eighteen
months of purchase of such shares. See "Redemption of Shares" in the
Prospectus.
CLASS A SHARES - REDUCED INITIAL SALES LOADS
REDUCTIONS AVAILABLE. Shares of any Seligman Mutual Fund sold with an initial
sales load in a continuous offering will be eligible for the following
reductions:
VOLUME DISCOUNTS are provided if the total amount being invested in Class A
shares of the Fund alone, the other series of the Trust or in any combination of
shares of the other mutual funds in the Seligman Group which are sold with an
initial sales load, reaches levels indicated in the sales load schedule set
forth in the Prospectuses.
THE RIGHT OF ACCUMULATION allows an investor to combine the amount being
invested in Class A shares of the Fund, the other series of the Trust and shares
of other Seligman Mutual Funds sold with an initial sales load with the total
net asset value of shares of those other mutual funds already owned that were
sold with an initial sales load and the total net asset value of shares of
Seligman Cash Management Fund which were acquired through an exchange of shares
of another Seligman Mutual Fund on which there was an initial sales load at the
time of purchase to determine reduced sales loads in accordance with the
schedule in the Prospectuses. The value of the shares owned, including the value
of shares of Seligman Cash Management Fund acquired in an exchange of shares of
another Seligman Mutual Fund on which there is an initial sales load at the time
of purchase will be taken into account in orders placed through a dealer,
however, only if Seligman Financial Services, Inc. ("SFSI") is notified by the
investor or a dealer of the amount owned at the time the purchase is made and is
furnished sufficient information to permit confirmation.
A LETTER OF INTENT allows an investor to purchase Class A shares of the
Fund over a 13-month period at reduced initial sales loads in accordance with
the schedule in the Prospectuses, based on the total amount of Class A shares
that the letter states the investor intends to purchase plus the total net asset
value of shares that were sold with an initial sales load of the other series of
the Trust and other Seligman Mutual Funds already owned and the total net asset
value of shares of Seligman Cash Management Fund which were acquired through an
exchange of shares of another Seligman Mutual Fund on which there was an initial
sales load at the time of purchase. Reduced initial sales loads also may apply
to purchases made within a 13-month period starting up to 90 days before the
date of execution of a letter of intent. For more information concerning the
terms of the letter of intent, see "Terms and Conditions - Letter of Intent -
Class A shares" in the Fund's Prospectus.
-13-
<PAGE>
Class A shares purchased without an initial sales load in accordance with
the sales load schedule in the Series prospectus, or pursuant to a Volume
Discount, Right of Accumulation or Letter of Intent are subject to a CDSL of 1%
on redemptions of such shares within eighteen months of purchase.
PERSONS ENTITLED TO REDUCTIONS. Reductions in sales loads apply to purchases of
Class A shares of the Fund by a "single person," including an individual;
members of a family unit comprising husband, wife and minor children; or a
trustee or other fiduciary purchasing for a single fiduciary account. Employee
benefit plans qualified under Section 401 of the Internal Revenue Code of 1986,
as amended (the "Code), tax-exempt organizations under Section 501 (c)(3) or
(13) of the Code, and non-qualified employee benefit plans that satisfy uniform
criteria are considered "single persons" for this purpose. The uniform criteria
are as follows:
1. Employees must authorize the employer, if requested by the Fund, to receive
in bulk and to distribute to each participant on a timely basis the Fund
prospectuses, reports and other shareholder communications.
2. Employees participating in a plan will be expected to make regular periodic
investments (at least annually). A participant who fails to make such
investments may be dropped from the plan by the employer or the Fund 12
months and 30 days after the last regular investment in his account. In such
event, the dropped participant would lose the discount on share purchases to
which the plan might then be entitled.
3. The employer must solicit its employees for participation in such an
employee benefit plan or authorize and assist an investment dealer in making
enrollment solicitations.
ELIGIBLE EMPLOYEE BENEFIT PLANS. The table of sales loads in the Prospectus
applies to sales to "eligible employee benefit plans" (as defined in the
Prospectus), except that the Fund may sell shares at net asset value to
"eligible employee benefit plans," which have at least (i) $500,000 invested in
the Seligman Mutual Funds or (ii) 50 eligible employees to whom such plan is
made available. Such sales must be made in connection with a payroll deduction
system of plan funding or other systems acceptable to Seligman Data Corp., the
Trust's shareholder service agent. Such sales are believed to require limited
sales effort and sales related expenses and therefore are made at net asset
value. Contributions or account information for plan participation also should
be transmitted to Seligman Data Corp. by methods which it accepts. Additional
information about "eligible employee benefit plans" is available from investment
dealers or SFSI.
FURTHER TYPES OF REDUCTIONS. Class A shares may be issued without an initial
sales load in connection with the acquisition of cash and securities owned by
other investment companies and personal holding companies to financial
institution trust departments, to registered investment advisers exercising
investment discretionary authority with respect to the purchase of Fund shares,
or pursuant to sponsored arrangements with organizations which make
recommendations to, or permit group solicitation of, its employees, members or
participants in connection with the purchase of shares of the Fund, to separate
accounts established and maintained by an insurance company which are exempt
from registration under Section 3(c)(11) of the 1940 Act, to registered
representatives and employees (and their spouses and minor children) of any
dealer that has a sales agreement with SFSI; to financial institution trust
departments; to registered investment advisers exercising discretionary
investment authority with respect to the purchase of Fund shares; to accounts of
financial institutions or broker/dealers that charge account management fees,
provided the manager or one of its affiliates has entered into an agreement with
respect to such accounts; pursuant to sponsored arrangements with organizations
which make recommendations to or permit group solicitations of, its employees,
members or participants in connection with the purchase of shares of the Fund;
to other investment companies in the Seligman Group in connection with a
deferred fee arrangement for outside directors; and to "eligible employee
benefit plans" which have at least (i) $500,000 invested in the Seligman Mutual
Funds or (ii) 50 eligible employees to whom such plan is made available.
"Eligible employee benefit plan" means any plan or arrangement, whether or not
tax qualified, which provides for the purchase of Fund shares. Sales of shares
to such plans must be made in connection with a payroll deduction system of plan
funding or other system acceptable to Seligman Data Corp.
Class A shares may be sold at net asset value to present and retired
Trustees, directors, officers, employees (and family members, as defined in the
Prospectus) of the Fund, the other investment companies in the Seligman Group,
the Manager and other companies affiliated with the Manager. Such sales also may
be made to employee benefit plans for such persons and to
-14-
<PAGE>
any investment advisory, custodial, trust or other fiduciary account managed or
advised by the Manager or any affiliate. These sales may be made for investment
purposes only, and shares may be resold only to the Fund.
Class A shares may be sold at net asset value to these persons since such
sales require less sales effort and lower sales related expenses as compared
with sales to the general public.
PAYMENT IN SECURITIES. In addition to cash, the Fund may accept securities in
payment for Fund shares sold at the applicable public offering price. Generally,
the Fund will only consider accepting securities (1) to increase its holdings in
a portfolio security of the Fund, or (2) if the Manager determines that the
offered securities are a suitable investment in a sufficient amount for
efficient management. Although no minimum has been established, it is expected
that the Fund would not accept securities with a value of less than $100,000 per
issue in payment for shares. The Fund may reject in whole or in part offers to
pay for shares with securities, may require partial payment in cash for
applicable sales loads, and may discontinue accepting securities as payment for
shares at any time without notice. The Fund has no present intention of
accepting securities in payment for shares.
MORE ABOUT REDEMPTIONS. The procedures for redemption of Fund shares under
ordinary circumstances are set forth in the Prospectus. Payment may be made in
securities or postponed, if the orderly liquidation of portfolio securities is
prevented by the closing of, or restricted trading on, the New York Stock
Exchange during periods of emergency, or during such other periods as ordered by
the Securities and Exchange Commission. If payment were to be made in
securities, shareholders receiving securities could incur certain transaction
costs. The Fund will not accept orders from securities dealers for the
repurchase of shares.
DISTRIBUTION SERVICES
SFSI, an affiliate of the Manager, acts as general distributor of the shares
of the Trust and of the other mutual funds in the Seligman Group. As general
distributor of the Trust's shares of beneficial interest, SFSI allows
commissions to all dealers of up to 4.25% on purchases of Class A shares to
which the 4.75% sales load applies. SFSI receives the balance of sales loads and
any CDSL, if applicable, paid by investors. The Trust and SFSI are parties to a
Distributing Agreement dated January 1, 1993.
The total sales load paid by shareholders of the Fund for the fiscal year
ended September 30, 1997 amounted to $51,778, with an allowance of $45,457 as
commissions to dealers; for the fiscal year ended September 30, 1996 amounted to
$104,210, with an allowance of $91,647 as commissions to dealers; for the fiscal
year ended September 30, 1995 amounted to $130,611, with allowance of $115,498
as commissions to dealers. For the years ended September 30, 1997, 1996 and
1995, SFSI retained CDSL charges amounting to $0, $5 and $276, respectively.
Effective April 1, 1995, Seligman Services, Inc. ("SSI"), an affiliate of
the Manager, became eligible to receive commissions from certain sales of Fund
shares, as well as distribution and service fees pursuant to the Plan. For the
years ended September 30, 1997 and 1996, and for the period ended September 30,
1995, SSI received commission of $0, $171 and $85, respectively, from sales of
Fund shares. SSI also received distribution and service fees of $1,858, $1,638
and $743, respectively, pursuant to the Plan.
TAXES
Under the Code, each Series of the Trust will be treated as a separate
corporation for federal income tax purposes. As a result, determinations of net
investment income, exempt interest dividends and net long-term and short-term
capital gain and loss will be made separately for each Series.
The Fund intends to qualify and elect to be treated as a regulated
investment company under the Code and thus to be relieved of federal income tax
on amounts distributed to shareholders; provided that it distributes at least
90% of its net investment income and net short-term capital gains, if any.
-15-
<PAGE>
Qualification as a regulated investment company under the Code requires
among other things, that (a) at least 90% of the annual gross income of the
Trust, be derived from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of stocks, securities or
currencies, or other income (including but not limited to gains from options,
futures, and forward contracts) derived with respect to its business of
investing in such stocks, securities or currencies; and (b) the Fund diversifies
its holdings so that, at the end of each quarter of the taxable year, (i) at
least 50% of the market value of the Fund's assets is represented by cash,
United States Government securities and other securities limited in respect of
any one issuer to an amount not greater than 5% of the Fund's assets and 10% of
the outstanding voting securities of such issuer, and (ii) not more than 25% of
the value of its assets is invested in the securities of any one issuer (other
than U.S. Government securities).
VALUATION
The net asset value per share of each class of the Fund is determined as of
the close of regular trading on the New York Stock Exchange ("NYSE") (normally,
4:00 p.m. Eastern time) on each day that the NYSE is open. The Fund and the NYSE
are currently closed on New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day. The Fund will also determine net asset value per share for
each class on each day in which there is a sufficient degree of trading in the
Fund's portfolio securities that the net asset value of Fund shares might be
materially affected. Net asset value per share for a class is computed by
dividing such class' share of the value of the net assets of the Fund (i.e., the
value of its assets less liabilities) by the total number of outstanding shares
of such class. All expenses of the Fund, including the Manager's fee, are
accrued daily and taken into account for the purpose of determining net asset
value. The net asset value of Class D shares will generally be lower than the
net asset value of Class A shares as a result of the higher distribution fee
with respect to Class D shares. It is expected, however, that the net asset
value per share of the two classes will tend to converge immediately after the
recording of dividends, which will differ by approximately the amount of the
distribution and other class expenses accrual differential between the classes.
North Carolina municipal securities will be valued on the basis of
quotations provided by an independent pricing service, approved by the Trustees,
which uses information with respect to transactions in bonds, quotations from
bond dealers, market transactions in comparable securities and various
relationships between securities in determining value. In the absence of such
quotations, fair value will be determined in accordance with procedures approved
by the Trustees. Short-term notes having remaining maturities of 60 days or less
are generally valued at amortized cost.
Generally, trading in certain securities such as municipal securities,
corporate bonds, U.S. Government securities, and money market instruments is
substantially completed each day at various times prior to the close of the
NYSE. The values of such securities used in determining the net asset value of
the Fund's shares are computed as of such times. Occasionally, events affecting
the value of such securities may occur between such times and the close of the
NYSE which will not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur during
such period, then these securities and other assets will be valued at their fair
market value as determined in good faith by the Trustees.
PERFORMANCE INFORMATION
The annualized yield for the 30-day period ended September 30, 1997 for the
Fund's Class A shares was 4.05%. The annualized yield was computed by dividing
the Fund's net investment income per share earned during a 30-day period by the
maximum offering price per share (i.e., the net asset value plus the maximum
sales load of 4.75% of the net amount invested) on September 30, 1997, the last
day of the period. The average number of Class A shares of the Fund used was
4,100,176 which was the average daily number of shares outstanding during the
30-day period that were eligible to receive dividends. Income was computed by
totaling the interest earned on all debt obligations during the 30-day period
and subtracting from that amount the total of all recurring expenses incurred
during the period (which includes fees charged pursuant to the Fund's 12b-1
plan). The 30-day yield was then annualized on a bond-equivalent basis assuming
semi-annual reinvestment and compounding of net investment income, as described
in the Prospectus.
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<PAGE>
The tax equivalent annualized yield for the 30-day period ended September
30, 1997 for the Fund's Class A shares was 7.27%. The tax equivalent annualized
yield was computed by first computing the annualized yield as discussed above.
Then the portion of the yield attributable to securities the income of which was
exempt for federal and state income tax purposes was determined. This portion of
the yield was then divided by one minus 44.28% (44.28% being the assumed maximum
combined federal and state income tax rate for individual taxpayers subject to
North Carolina personal income taxes). Then the small portion of the yield
attributable to securities, the income of which was exempt only for federal
income tax purposes was determined. This portion of the yield was then divided
by one minus 39.6% (39.6% being the maximum federal income tax rate). These two
calculations were then added to the portion of the yield, if any, that was not
attributable to securities, the income of which was not tax exempt.
The average annual total return for the Fund's Class A shares for the
one-year period ended September 30, 1997 was 2.89%, for the five-year period
ended September 30, 1997 was 5.72%, and since inception through the period ended
September 30, 1997 was 6.77%. These returns were computed by assuming a
hypothetical initial payment of $1,000. From this $1,000, the maximum sales load
of $47.50 (4.75% of public offering price) was deducted. It was then assumed
that all of the dividends and distributions paid by the Class A shares over the
relevant time period were reinvested. It was then assumed that at the end of
each of the above periods, the entire amount was redeemed. The average annual
total return was then calculated by calculating the annual rate required for the
initial payment to grow to the amount which would have been received upon
redemption (i.e., the average annual compound rate of return).
The annualized yield for the 30-day period ended September 30, 1997 for the
Fund's Class D shares was 3.50%. The annualized yield was computed by dividing
the net investment income per share earned during this 30-day period by the
maximum offering price per share (i.e., the net asset value) on September 30,
1997, which was the last day of this period. The average number of Class D
shares was 157,610 which was the average daily number of shares outstanding
during the 30-day period that were eligible to receive dividends.
The tax equivalent annualized yield for the 30-day period ended September
30, 1997 for the Fund's Class D shares was 6.28%. The tax equivalent annualized
yield was computed by first computing the annualized yield as discussed above.
Then the portion of the yield attributable to securities the income of which was
exempt for federal and state income tax purposes was determined. This portion of
the yield was then divided by one minus 44.28%, which percentages assume the
maximum combined federal and state income tax rate for individual taxpayers that
are subject to such personal income taxes.
The average annual return for the Fund's Class D shares for the one-year
period ended September 30, 1997 was 6.33% and since inception through the period
ended September 30, 1997 was 4.04%. These returns were computed by assuming a
hypothetical initial payment of $1,000 in Class D shares and that all of the
dividends and distributions by the Fund's Class D shares over the relevant time
period were reinvested. It was then assumed that at the end of each period, the
entire amount was redeemed, subtracting the 1% CDSL, if applicable.
The tables below illustrate the total returns on a $1,000 investment in
Class A and Class D shares of the Fund from the commencement of their operations
through September 30, 1997, assuming investment of all dividends and capital
gain distributions.
<TABLE>
<CAPTION>
CLASS A SHARES
VALUE OF CAPITAL VALUE TOTAL VALUE
YEAR/PERIOD INITIAL GAIN OF OF TOTAL
ENDED 1 INVESTMENT 2 DISTRIBUTIONS DIVIDENDS INVESTMENT 2 RETURN 1,3
- ------- ------------ ------------- --------- ------------ ----------
<C> <C> <C> <C> <C>
9/30/90 $ 939 $ - $ - $ 939
9/30/91 985 - 66 1,051
9/30/92 1,015 - 133 1,148
9/30/93 1,096 3 215 1,314
9/30/94 973 10 255 1,238
9/30/95 1,032 14 339 1,385
</TABLE>
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<PAGE>
CLASS A SHARES
<TABLE>
<CAPTION>
VALUE OF CAPITAL VALUE TOTAL VALUE
YEAR/PERIOD INITIAL GAIN OF OF TOTAL
ENDED 1 INVESTMENT 2 DISTRIBUTIONS DIVIDENDS INVESTMENT 2 RETURN 1,3
- ------- ------------ ------------- --------- ------------ ----------
<C> <C> <C> <C> <C> <C>
9/30/96 1,045 16 413 1,474
9/30/97 1,073 23 496 1,592 59.18%
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARES
VALUE OF CAPITAL VALUE TOTAL VALUE
YEAR/PERIOD INITIAL GAIN OF OF TOTAL
ENDED 1 INVESTMENT 2 DISTRIBUTIONS DIVIDENDS INVESTMENT 2 RETURN 1,3
- ------- ------------ ------------- --------- ------------ ----------
<C> <C> <C> <C> <C> <C>
9/30/94 $ 892 $ - $ 26 $ 918
9/30/95 947 2 72 1,021
9/30/96 958 4 115 1,077
9/30/97 986 8 162 1,156 15.59%
</TABLE>
1 From commencement of operations of Class A shares on August 27, 1990; and
from commencement of operations of Class D shares on February 1, 1994.
2 The "Value of Initial Investment" as of the date indicated reflects the
effect of the maximum sales load and CDSL, if applicable, assumes that all
dividends and capital gain distributions were taken in cash and reflects
changes in the net asset value of the shares purchased with the hypothetical
initial investment. "Total Value of Investment" reflects the effect of the
CDSL, if applicable, and assumes investment of all dividends and capital
gain distributions.
3 Total return for the Fund is calculated by assuming a hypothetical initial
investment of $1,000 at the beginning of the period specified, subtracting
the maximum sales load or CDSL, if applicable; determining total value of
all dividends and distributions that would have been paid during the period
on such shares assuming that each dividend or distribution was invested in
additional shares at net asset value; calculating the total value of the
investment at the end of the period; and finally, by dividing the difference
between the amount of the hypothetical initial investment at the beginning
of the period and its value at the end of period by the amount of the
hypothetical initial investment.
The waiver by the Manager of all of its fees and the reimbursement of
certain Fund expenses during the periods (as set forth under "Management and
Expenses " herein and "Financial Highlights" in the Prospectus) positively
affected the performance results provided in this section.
GENERAL INFORMATION
The Trustees are authorized to classify or reclassify and issue any shares
of beneficial interest of the Trust into any number of other classes without
further action by shareholders. The 1940 Act requires that where more than one
class exists, each class must be preferred over all other classes in respect of
assets specifically allocated to such class.
As a general matter, the Trust will not hold annual or other meetings of the
shareholders. This is because the Declaration of Trust provides for shareholder
voting only (a) for the election or removal of one or more Trustees if a meeting
is called for that purpose, (b) with respect to any contract as to which
shareholder approval is required by the 1940 Act, (c) with respect to any
termination or reorganization of the Trust or any series, including the Fund, to
the extent and as provided in the Declaration of Trust, (d) with respect to any
amendment of the Declaration of Trust (other than amendments establishing and
designating new series, abolishing series when there are no units thereof
outstanding, changing the name of the Trust or the name of any series, supplying
any omission, curing any ambiguity or curing, correcting or supplementing any
provision thereof which is internally inconsistent with any other provision
thereof or which is defective or inconsistent with the 1940 Act or with the
requirements of the Code, or applicable regulations for the Fund's obtaining the
most favorable treatment thereunder available to regulated investment
companies), which amendments require approval by a majority of the Shares
entitled
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<PAGE>
to vote, (e) to the same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding, or claim should or
should not be brought or maintained derivatively or as a class action on behalf
of the Trust or the shareholders, and (f) with respect to such additional
matters relating to the Trust as may be required by the 1940 Act, the
Declaration of Trust, the By-laws of the Trust, any registration of the Trust
with the Securities and Exchange Commission (the "Commission") or any state, or
as the Trustees may consider necessary or desirable. Each Trustee serves until
the next meeting of shareholders, if any, called for the purpose of considering
the election or reelection of such Trustee or of a successor to such Trustee,
and until the election and qualification of his successor, if any, elected at
such meeting, or until such Trustee sooner dies, resigns, retires or is removed
by the shareholders or two-thirds of the Trustees.
The shareholders of the Trust have the right, upon the declaration in
writing or vote of more than two-thirds of the Trust's outstanding shares, to
remove a Trustee. The Trustees will call a meeting of shareholders to vote on
the removal of a Trustee upon the written request of the record holders of ten
percent of its shares. In addition, whenever ten or more shareholders of record
who have been such for at least six months preceding the date of application,
and who hold in the aggregate either shares having a net asset value of at least
$25,000 or at least 1 per centum of the outstanding shares, whichever is less,
shall apply to the Trustees in writing, stating that they wish to communicate
with other shareholders with a view to obtaining signatures to a request for a
meeting for the purpose of voting upon the question of removal of any Trustee or
Trustees and accompanied by a form of communication and request which they wish
to transmit, the Trustee shall within five business days after receipt of such
application either: (1) afford to such applicants access to a list of the names
and addresses of all shareholders as recorded on the books of the Trust; or (2)
inform such applicants as to the approximate number of shareholders of record,
and the approximate cost of mailing to them the proposed communication and form
of requests. If the Trustees elect to follow the latter course, the Trustees,
upon the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall, with
reasonable promptness, mail such material to all shareholders of record at their
addresses as recorded on the books, unless within five business days after such
tender the Trustees shall mail to such applicants and file with the Commission,
together with a copy of the material to be mailed, a written statement signed by
at least a majority of the Trustees to the effect that in their opinion either
such material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such opinion. After
opportunity for hearing upon the objections specified in the written statement
so filed, the Commission may, and if demanded by the Trustees or by such
applicants shall, enter an order either sustaining one or more of such
objections or refusing to sustain any of them. If the Commission shall enter an
order refusing to sustain any of such objections, or if, after the entry of an
order sustaining one or more of such objections, the Commission shall find,
after notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Trustees shall mail copies
of such material to all shareholders with reasonable promptness after the entry
of such order and the renewal of such tender.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted by the provisions of the 1940 Act or applicable state law, or
otherwise, to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are substantially identical or that the matter does
not significantly affect any interest of such series. However, the Rule exempts
the selection of independent public accountants, the approval of principal
distributing contracts and the election of trustees from the separate voting
requirements of the Rule.
The shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust. The Declaration of Trust also
provides for indemnification and reimbursement of expenses out of a series'
assets for any shareholder held personally liable for obligations of such
series.
CUSTODIAN. Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City,
Missouri 64105, serves as custodian for the Fund. It also maintains, under the
general supervision of the Manager, the accounting records and determines the
net asset value for the Fund.
AUDITORS. Deloitte & Touche LLP, independent auditors, have been selected as
auditors of the Fund. Their address is Two World Financial Center, New York, NY
10281.
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<PAGE>
RISK FACTORS REGARDING INVESTMENTS IN NORTH CAROLINA MUNICIPAL SECURITIES
While North Carolina has been moving from an agricultural to a service and
goods producing economy in recent years, agriculture remains a basic element in
the economy of North Carolina, with tobacco production being the leading single
source of agricultural income. Although there is diversity in the agricultural
business in North Carolina, major legislative or regulatory measures affecting
the production and marketing of tobacco or other negative factors affecting
tobacco could adversely impact the agricultural sector of the North Carolina
economy. A strong agribusiness sector also supports farmers with farm inputs
(fertilizer, insecticide, pesticide and farm machinery) and processing of
commodities produced by farmers (vegetable canning and cigarette manufacturing).
Manufacturing, tourism and mining also remain important to the State's economy.
North Carolina's manufacturing employment is among the largest in the Southeast,
with textiles being the largest single source of manufacturing employment in
North Carolina. However, certain portions of the North Carolina manufacturing
sector, particularly the textile industry, have been hurt by foreign competition
and textiles and apparel continue to experience declines. Tourist spending has
become a larger factor in the North Carolina economy in recent years. While most
sectors of the North Carolina economy, excluding textiles, have experienced
growth in the last few years, the rate of future growth is expected to be slowed
by a limited increase in available new labor. In fact, while continued economic
growth for North Carolina is projected for 1998, the rate of that growth is
forecast to slow statewide and in most regions of the State. A major reason for
the expected slower growth is a reduction in retail sales growth together with
slower residential construction.
The North Carolina State Constitution requires that the total expenditures
of the State for each fiscal period covered by the budget must not exceed the
total receipts during the fiscal period and the surplus in the State Treasury at
the beginning of the period. During the State's 1990-1991 fiscal year, North
Carolina began facing a substantial budget shortfall resulting from the failure
of revenues received by the State to meet projected levels. While the State was
successful in dealing with the problem, pressure on State revenues will be an
ongoing problem. Because of taxpayer litigation concerning the now repealed
intangibles tax, North Carolina is facing having to pay a multi-million dollar
tax refund of the intangibles tax for certain years. The State has set aside
certain funds in anticipation of having to pay these refunds.
General obligations of the State are currently rated "AAA" and "Aaa" by S&P
and Moody's, respectively. There can be no assurance that the economic
conditions on which these ratings are based will continue or that particular
bond issues may not be adversely affected by changes in economic, political or
other conditions, including the State's response to any future budget problem.
When the budget shortfall problem first developed, the State was cautioned by
S&P and Moody's that a failure to respond adequately to the budget shortfall
could result in a reevaluation of the ratings given to the State's general
obligations and the State's response to any future budget problems will be
important to the maintenance of its current ratings. Moreover, such ratings
apply only to obligations of the State and not to those of its political
subdivisions, and the economic information provided above may not be relevant to
obligations issued by such political subdivisions.
FINANCIAL STATEMENTS
The Annual Report to Shareholders for the fiscal year ended September 30, 1997
contains a schedule of the investments of the Fund as well as each of the
Trust's other series as of September 30, 1997, and certain other financial
information as of that date. The financial statements and notes included in the
Annual Report, and the Independent Auditor's Report thereon, are incorporated
herein by reference. The Annual Report will be furnished, without charge, to
investors who request copies of this Statement of Additional Information.
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<PAGE>
APPENDIX A
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
MUNICIPAL BONDS
Aaa: Municipal bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk. Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa: Municipal bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than Aaa bonds because margins of
protection may not be as large or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A: Municipal bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Municipal bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be characteristically lacking or may be
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact may have speculative characteristics as well.
Ba: Municipal bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate, and thereby
not well safeguarded during other good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Municipal bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Municipal bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca: Municipal bonds which are rated Ca represent obligations which are
speculative in high degree. Such issues are often in default or have other
marked shortcomings.
C: Municipal bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers (1, 2 and 3) in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; modifier 2 indicates a mid-range ranking; and modifier 3
indicates that the issuer ranks in the lower end of its generic rating category.
MUNICIPAL NOTES
Moody's ratings for municipal notes and other short-term loans are designated
Moody's Investment Grade (MIG). This distinction is in recognition of the
differences between short-term and long-term credit risk. Loans bearing the
designation MIG 1 are of the best quality, enjoying strong protection by
established cash flows of funds for their servicing or by established and
broad-based access to the market for refinancing. Loans bearing the designation
MIG 2 are of high quality, with margins of protection ample although not so
large as in the preceding group. Loans bearing the designation MIG 3 are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Market access for refinancing in
particular, is likely to be less well established. Notes bearing the designation
MIG 4 are
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<PAGE>
judged to be of adequate quality, carrying specific risk but having protection
commonly regarded as required of an investment security and not distinctly or
predominantly speculative.
COMMERCIAL PAPER
Moody's Commercial Paper Ratings are opinions of the ability of issuers to
repay punctually promissory senior debt obligations not having an original
maturity in excess of one year. Issuers rated "Prime-1" or "P-1" indicates the
highest quality repayment capacity of the rated issue.
The designation "Prime-2" or "P-2" indicates that the issuer has a strong
capacity for repayment of senior short-term promissory obligations. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.
The designation "Prime-3" or "P-3" indicates that the issuer has an acceptable
capacity for repayment of short-term promissory obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Issues rated "Not Prime" do not fall within any of the Prime rating
categories.
STANDARD & POOR'S CORPORATION ("S&P")
MUNICIPAL BONDS
AAA: Municipal bonds rated AAA are highest grade obligations. Capacity to pay
interest and repay principal is extremely strong.
AA: Municipal bonds rated AA have a very high degree of safety and very strong
capacity to pay interest and repay principal and differs from the highest rated
issues only in small degree.
A: Municipal bonds rated A are regarded as upper medium grade. They have a
strong degree of safety and capacity to pay interest and repay principal
although they are somewhat more susceptible in the long term to the adverse
effects of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB: Municipal bonds rated BBB are regarded as having a satisfactory degree of
safety and capacity to pay interest and re-pay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
re-pay principal for bonds in this category than for bonds in higher rated
categories.
BB, B, CCC, CC: Municipal bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and pre-pay principal in accordance with the terms of the bond. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposure to adverse
conditions.
C: The rating C is reserved for income bonds on which no interest is being
paid.
D: Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of bond as a matter of policy.
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<PAGE>
MUNICIPAL NOTES
SP-1: Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest.
COMMERCIAL PAPER
S&P Commercial Paper ratings are current assessments of the likelihood of
timely payment of debts having an original maturity of no more than 365 days.
A-1: The A-1 designation indicates that the degree of safety regarding timely
payment is very strong.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B: Issues rated "B" are regarded as having only a speculative capacity for
timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful
capacity of payment.
D: Debt rated "D" is in payment default.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of bond as a matter of policy.
The ratings assigned by S&P may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within its major rating categories.
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<PAGE>
APPENDIX B
HISTORY OF J. & W. SELIGMAN & CO. INCORPORATED
Seligman's beginnings date back to 1837, when Joseph Seligman, the
oldest of eight brothers, arrived in the United States from Germany. He earned
his living as a pack peddler in Pennsylvania, and began sending for his
brothers. The Seligmans became successful merchants, establishing businesses in
the South and East.
Backed by nearly thirty years of business success - culminating in the
sale of government securities to help finance the Civil War - Joseph Seligman,
with his brothers, established the international banking and investment firm of
J. & W. Seligman & Co. In the years that followed, the Seligman Complex played a
major role in the geographical expansion and industrial development of the
United States.
THE SELIGMAN COMPLEX:
...Prior to 1900
o Helps finance America's fledgling railroads through underwritings.
o Is admitted to the New York Stock Exchange in 1869. Seligman remained a
member of the NYSE until 1993, when the evolution of its business made it
unnecessary.
o Becomes a prominent underwriter of corporate securities, including New
York Mutual Gas Light Company, later part of Consolidated Edison.
o Provides financial assistance to Mary Todd Lincoln and urges the Senate to
award her a pension.
o Is appointed U.S. Navy fiscal agent by President Grant.
o Becomes a leader in raising capital for America's industrial and urban
development.
...1900-1910
o Helps Congress finance the building of the Panama Canal.
...1910s
o Participates in raising billions for Great Britain, France and Italy,
helping to finance World War I.
...1920s
o Participates in hundreds of successful underwritings including those for
some of the Country's largest companies: Briggs Manufacturing, Dodge
Brothers, General Motors, Minneapolis-Honeywell Regulatory Company, Maytag
Company, United Artists Theater Circuit and Victor Talking Machine
Company.
o Forms Tri-Continental Corporation in 1929, today the nation's largest,
diversified closed-end equity investment company, with over $2 billion in
assets and one of its oldest.
...1930s
o Assumes management of Broad Street Investing Co. Inc., its first mutual
fund, today known as Seligman Common Stock Fund, Inc.
o Establishes Investment Advisory Service.
-24-
<PAGE>
...1940s
o Helps shape the Investment Company Act of 1940.
o Leads in the purchase and subsequent sale to the public of Newport News
Shipbuilding and Dry Dock Company, a prototype transaction for the
investment banking industry.
o Assumes management of National Investors Corporation, today Seligman
Growth Fund, Inc.
o Establishes Whitehall Fund, Inc., today Seligman Income Fund, Inc.
...1950-1989
o Develops new open-end investment companies. Today, manages more than 40
mutual fund portfolios.
o Helps pioneer state-specific, municipal bond funds, today managing a
national and 18 state-specific municipal funds.
o Establishes J. & W. Seligman Trust Company and J. & W. Seligman Valuations
Corporation.
o Establishes Seligman Portfolios, Inc., an investment vehicle offered
through variable annuity products.
...1990s
o Introduces Seligman Select Municipal Fund, Inc. and Seligman Quality
Municipal Fund, Inc., two closed-end funds that invest in high quality
municipal bonds.
o In 1991 establishes a joint venture with Henderson plc, of London, known
as Seligman Henderson Co., to offer global investment products.
o Introduces to the public Seligman Frontier Fund, Inc., a small
capitalization mutual fund.
o Launches Seligman Henderson Global Fund Series, Inc., which today offers
five separate series: Seligman Henderson International Fund, Seligman
Henderson Global Smaller Companies Fund, Seligman Henderson Global
Technology Fund, Seligman Henderson Global Growth Opportunities Fund and
Seligman Henderson Emerging Markets Growth Fund.
o Launches Seligman Value Fund Series, which currently offers two separate
series: Seligman Large-Cap Value Fund and Seligman Small-Cap Value Fund.
-25-
<PAGE>
- -------------------------------------------------------------------------------
Portfolios of Investments
September 30, 1997
CALIFORNIA HIGH-YIELD SERIES
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------- ------------
<S> <C> <C> <C>
$2,500,000 Alameda, CA Certificates of Participation (City Hall Seismic Upgrade Project),
6.20% due 5/1/2025................................................................. NR/A $ 2,623,000
3,000,000 California Department of Water Resources Water System Rev.
(Central Valley Project), 6% due 12/1/2020......................................... Aa2/AA 3,145,710
2,500,000 California Educational Facilities Authority Rev.
(Loyola Marymount University), 5-3/4% due 10/1/2024.............................. A1/N 2,552,200
1,500,000 California Housing Finance Agency Home Mortgage Rev., 6-3/8 % due 8/1/2027*........ Aa2/AA- 1,567,290
2,500,000 California Pollution Control Financing Authority Pollution Control Rev.
(San Diego Gas & Electric Co.), 5.85% due 6/1/2021*................................ A1/A+ 2,540,650
2,000,000 California State GOs, 5-1/4% due 10/1/2019 A1/A+ 1,964,160
2,500,000 Cupertino, CA Certificates of Participation (Capital Improvement Projects),
5-3/4% due 1/1/2016.............................................................. A1/A+ 2,550,200
1,000,000 Folsom, CA Special Tax Bonds (Willow Creek Community Facilities District No. 1),
8-1/4% due 12/1/2006............................................................. NR/NR 1,037,200
3,000,000 Foothill/Eastern Transportation Corridor Agency, CA Toll Road Rev., 6% due 1/1/2034 Baa/BBB- 3,091,980
500,000 Los Angeles, CA Certificates of Participation (Convention & Exhibition
Center Authority), 7-3/8% due 8/15/2018........................................... Aaa/AAA 538,680
1,300,000 Los Angeles, CA Wastewater System Rev., 7.10% due 6/1/2018............................ A1/A 1,384,539
1,000,000 Oxnard Union High School District, CA Certificates of Participation
(Union High School), 7.70% due 11/1/2019............................................ NR/NR 1,092,410
705,000 Petaluma, CA Community Development Commission Tax Allocation Bonds
(Central Business District), 9.30% due 5/15/2010.................................... Baa1/NR 707,961
2,140,000 Pleasanton, CA Joint Powers Financing Authority Reassessment Rev.,
6.15% due 9/2/2012.................................................................. Baa3/NR 2,262,002
2,000,000 Puerto Rico Highway & Transportation Authority Highway Rev., 5-1/2% due 7/1/2036... Baa1/A 2,006,800
3,000,000 San Bernadino, CA Joint Powers Financing Authority (California Dept. of
Transportation Lease), 5-1/2% due 12/1/2020....................................... A/A 2,968,740
2,500,000 San Joaquin Hills, CA Transportation Corridor Agency Rev. (Orange County Toll
Road), 5-1/2% due 1/15/2028....................................................... Baa3/BBB- 2,442,125
3,000,000 San Joaquin Hills, CA Transportation Corridor Agency Rev. (Orange County Senior
Lien Toll Road), 6-3/4% due 1/1/2032.............................................. NR/NR 3,400,650
2,500,000 Santa Barbara, CA Certificates of Participation, 5.70% due 3/1/2011 A1/A+ 2,550,075
1,000,000 Santa Clara, CA Improvement Bonds Project No. 186 (Santa Clara Convention Center
Complex), 7.10% due 9/2/2011........................................................ NR/N 1,034,570
1,500,000 Santa Cruz, CA Hospital Rev. (Dominican Santa Cruz Hospital), 7% due 12/1/2013 A1/A+ 1,537,170
2,000,000 Santa Margarita, CA Water District GOs, 7-1/2% due 11/1/2005........................ NR/NR 2,043,720
1,000,000 Southern California Public Power Authority Power Project Rev. (Multiple Projects),
6% due 7/1/2018..................................................................... A/A 1,018,380
805,000 Stanislaus, CA Waste-to-Energy Financing Agency Solid Waste Facility Rev.
(Ogden Martin System of Stanislaus, Inc. Project), 7-1/2% due 1/1/2005........... NR/BBB+ 857,204
</TABLE>
- ---------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
8
<PAGE>
- -------------------------------------------------------------------------------
Portfolios of Investments
September 30, 1997
CALIFORNIA HIGH-YIELD SERIES (continued)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------- ------------
<S> <C> <C> <C>
$1,230,000 Stanislaus, CA Waste-to-Energy Financing Agency Solid Waste Facility Rev.
(Ogden Martin System of Stanislaus, Inc. Project), 7-5/8% due 1/1/2010......... NR/BBB+ $ 1,319,396
2,500,000 Washington Township, CA Hospital District Hospital Healthcare System Rev.,
5-1/2% due 7/1/2018............................................................ A2/NR 2,457,275
2,230,000 West Covina, CA Certificates of Participation (Queen of the Valley Hospital),
6-1/2% due 8/15/2024........................................................... A2/A 2,432,373
----------
TOTAL MUNICIPAL BONDS (Cost $50,079,320) -- 94.5%................................................ 53,126,460
----------
VARIABLE RATE DEMAND NOTES
-------------------------------------
800,000 New York City, NYGOs due 10/1/2021............................................... VMIG-1/A-1+ 800,000
3,300,000 New York City, NY Municipal Water Finance Authority Water & Sewer System Rev.
due 6/15/2025.................................................................. VMIG-1/A-1+ 3,300,000
200,000 New York State Energy Research & Development Authority Pollution Control Rev.
due 7/1/2015................................................................... NR/A-1+ 200,000
300,000 Person County, NC Industrial Facilities & Pollution Control Financing Authority Rev.
due 11/1/2016.................................................................. P-1/NR 300,000
-----------
TOTAL VARIABLE RATE DEMAND NOTES (Cost $4,600,000) -- 8.2%...................................................... 4,600,000
-----------
OTHER ASSETS LESS LIABILITIES -- (2.7)%......................................................................... (1,523,680)
-----------
NET ASSETS -- 100.0%............................................................................................ $56,202,780
-----------
-----------
</TABLE>
CALIFORNIA QUALITY SERIES
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------- ------------
<S> <C> <C> <C>
$3,000,000 California Department of Water Resources Water System Rev.
(Central Valley Project), 6.10% due 12/1/2029................................. Aa2/AA $ 3,382,350
2,000,000 California Educational Facilities Authority Rev. (Stanford University),
6-3/4% due 1/1/2013........................................................... Aaa/AAA 2,104,960
3,200,000 California Educational Facilities Authority Rev. (University of Southern
California Project), 5.80% due 10/1/2015...................................... Aa3/AA 3,315,904
3,440,000 California Educational Facilities Authority Rev. (Pomona College), 6% due 2/15/2017 Aa1/AA+ 3,600,751
4,500,000 California Educational Facilities Authority Rev. (California Institute
of Technology), 6% due 1/1/2021............................................... Aaa/AAA 4,652,685
2,000,000 California Educational Facilities Authority Rev. (Stanford University),
5.35% due 6/1/2027............................................................ Aaa/AAA 1,999,840
3,000,000 California Health Facilities Financing Authority Health Facility Rev.
(Kaiser Permanente), 6-1/2% due 12/1/2020..................................... Aa3/AA 3,221,730
2,000,000 California Health Facilities Financing Authority Insured Hospital Rev.
(Scripps Memorial Hospital), 6-3/8% due 10/1/2022............................. Aaa/AAA 2,176,700
5,000 California Housing Finance Agency (Housing Revenue Insured Bonds),
8-3/4% due 8/1/2010........................................................... Aaa/AAA 5,242
</TABLE>
- ------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
9
<PAGE>
- -------------------------------------------------------------------------------
Portfolios of Investments
September 30, 1997
CALIFORNIA QUALITY SERIES (continued)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------- ------------
<S> <C> <C> <C>
$425,000 California Housing Finance Agency (Housing Revenue Insured Bonds),
8-5/8% due 8/1/2015........................................................... Aaa/AAA $ 444,750
2,795,000 California Housing Finance Agency Home Mortgage Rev., 6-3/4% due 2/1/2025*...... Aa2/AA- 2,952,554
4,000,000 California Pollution Control Financing Authority Rev. (Mobil Oil Corporation
Project), 5-1/2% due 12/1/2029*............................................... Aa2/AA 3,926,840
925,000 California Public Capital Improvements Financing Authority (Pooled Projects),
8.10% due 3/1/2018............................................................ Aaa/AAA 959,317
3,000,000 California Public Works Board Lease Rev. (Correctional Facilities Improvements),
5-3/4% due 9/1/2021.......................................................... A/A 3,027,030
3,000,000 California State GOs, 5.90% due 4/1/2023....................................... A1/A+ 3,127,200
3,000,000 California Statewide Communities Development Authority Certificates of
Participation (The Trustees of the J. Paul Getty Trust), 5% due 10/1/2023.... Aaa/AAA 2,849,430
5,000,000 Contra Costa, CA Water District Rev., 5-1/2% due 10/1/2019..................... Aaa/AAA 5,021,100
3,500,000 East Bay, CA Municipal Utility District Water System Rev., 6% due 6/1/2012.... Aaa/AAA 3,711,505
2,500,000 Eastern Municipal Water District Riverside County, CA Water and Sewer Rev.,
6-3/4% due 7/1/2012.......................................................... Aaa/AAA 2,981,500
3,000,000 Fresno, CA Sewer System Rev., 5-1/4% due 9/1/2019.............................. Aaa/AAA 3,007,650
2,000,000 Industry, CA GOs, 7-3/8% due 7/1/2015.......................................... Aaa/AAA 2,156,340
2,000,000 Marin, CA Municipal Water District Water Rev., 5.65% due 7/1/2023.............. A1/AA 2,021,060
3,000,000 Metropolitan Water District of Southern California Waterworks GOs,
5-3/4% due 3/1/2014.......................................................... Aaa/AAA 3,050,880
3,500,000 Northern California Power Agency Public Power Rev. (Combustion Turbine Project A-1),
6% due 8/15/2010............................................................. Aaa/AAA 3,577,385
4,500,000 Orange County, CA Local Transportation Authority (Measure M Sales Tax Rev.),
6% due 2/15/2009............................................................. Aaa/AAA 5,006,430
2,500,000 Rancho, CA Water District Financing Authority Rev., 5.90% due 11/1/2015........ Aaa/AAA 2,655,650
3,250,000 San Francisco Bay Area Rapid Transit District, CA (Sales Tax Rev.),
6.60% due 7/1/2012........................................................... Aaa/AAA 3,548,610
3,000,000 San Francisco, CA (City & County) Airport Commission Rev. (International Airport),
6.60% due 5/1/2024*.......................................................... Aaa/AAA 3,290,190
5,000,000 University of California Regents (Multiple Purpose Projects), 6-3/8% due 9/1/2024 Aaa/AAA 5,441,050
-----------
TOTAL MUNICIPAL BONDS (Cost $81,064,862) -- 98.4%.............................................................. 87,216,633
VARIABLE RATE DEMAND NOTES (Cost $200,000) -- 0.2%............................................................. 200,000
OTHER ASSETS LESS LIABILITIES -- 1.4%.......................................................................... 1,252,433
-----------
NETASSETS-- 100.0%............................................................................................. $88,669,066
-----------
-----------
</TABLE>
- ----------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
10
<PAGE>
- -------------------------------------------------------------------------------
Portfolios of Investments
September 30, 1997
FLORIDA SERIES
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------- ------------
<S> <C> <C> <C>
$1,000,000 Broward County, FL Water & Sewer Utility Rev., 5% due 10/1/2018................. Aaa/AAA $ 952,530
1,500,000 Broward County School District, FL GOs, 7-1/8% due 2/15/2008.................... Aaa/AAA 1,592,505
1,500,000 Citrus County, FL Pollution Control Rev. (Florida Power Corporation
Crystal River Power Plant Project), 6-5/8% due 1/1/2027....................... A1/A+ 1,612,320
2,000,000 Collier County, FL Water & Sewer Rev., 5-1/4% due 7/1/2021...................... Aaa/AAA 1,941,700
1,250,000 Dade County, FL Aviation Rev., 6-1/8% due 10/1/2020*............................ Aaa/AAA 1,313,937
2,000,000 Dade County, FL Public Improvement GOs, 5-3/4% due 10/1/2016.................... Aaa/AAA 2,090,880
2,000,000 Dade County, FL Water & Sewer System Rev., 5-3/4% due 10/1/2022................. Aaa/AAA 2,062,920
1,000,000 Florida Housing Finance Agency (General Mortgage Rev.), 6.35% due 6/1/2014...... NR/AAA 1,047,420
705,000 Florida Housing Finance Agency Rev. (Single Family Mortgage), 6.55% due 7/1/2014* Aaa/AAA 745,474
1,985,000 Florida Housing Finance Agency Rev. (Homeowner Mortgage), 6.20% due 7/1/2027*... Aa3/AA 2,057,929
2,500,000 Florida Ports Financing Commission Rev. (State Transportation Trust Fund),
5-3/8% due 6/1/2027*.......................................................... Aaa/AAA 2,422,375
2,000,000 Florida State Department of Transportation GOs (Right of Way), 5.80% due 7/1/2021 Aa2/AA+ 2,059,240
2,500,000 Florida State Turnpike Authority Turnpike Rev., 5-5/8% due 7/1/2025............. Aaa/AAA 2,531,625
2,500,000 Hillsborough County, FL Aviation Authority Rev. (Tampa International Airport),
5-3/8% due 10/1/2023*......................................................... Aaa/AAA 2,390,500
1,500,000 Jacksonville Electric Authority, FL Rev. (St. John's River Power Park System),
5-3/8% due 10/1/2016.......................................................... Aa1/AA 1,501,650
2,000,000 Jacksonville Electric Authority, FL (Water & Sewer System Rev.),
5-5/8% due 10/1/2037.......................................................... Aa3/AA- 2,006,560
2,000,000 Jacksonville, FL Sewage & Solid Waste Disposal Facilities Rev. (Anheuser-Busch
Project), 5-7/8% due 2/1/2036*................................................ A1/A+ 2,039,400
2,000,000 Jacksonville Health Facilities Authority, FL Hospital Rev. (Charity Obligated
Group--Baptist/St. Vincent's Health System Inc.), 5-1/4% due 8/15/2027........ Aa2/AA+ 1,929,780
2,000,000 Kissimmee Utility Authority, FL Electric System Improvement Rev.,
5-1/4% due 10/1/2018.......................................................... Aaa/AAA 1,955,220
1,000,000 Lee County, FL Transportation Facilities Rev., 6% due 10/1/2015................. Aaa/AAA 1,075,510
1,000,000 Osceola County, FL Transportation Rev. (Osceola Parkway Project),
6.10% due 4/1/2017............................................................ Aaa/AAA 1,058,150
1,200,000 Palm Beach County, FL Criminal Justice Facilities Rev., 7-1/4% due 6/1/2011..... Aaa/AAA 1,317,060
2,000,000 Polk County, FL Industrial Development Authority Solid Waste Disposal
Facilities Rev. (Tampa Electric Company Project), 5.85% due 12/1/2030*........ Aa2/A1+ 2,047,760
2,000,000 Reedy Creek Improvement District, FL Utilities Rev., 5-1/8% due 10/1/2019....... Aaa/AAA 1,949,780
1,250,000 Volusia County, FL Educational Facilities Authority Rev. (Embry-Riddle Aeronautical
University Project), 6-5/8% due 10/15/2022.................................... NR/AAA 1,373,325
-----------
TOTAL MUNICIPAL BONDS (Cost $41,489,557) -- 98.6%............................................................... 43,075,550
OTHER ASSETS LESS LIABILITIES -- 1.4%........................................................................... 626,678
-----------
NET ASSETS -- 100.0%............................................................................................ $43,702,228
-----------
-----------
</TABLE>
- -----------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
11
<PAGE>
- -------------------------------------------------------------------------------
Portfolios of Investments
September 30, 1997
NORTH CAROLINA SERIES
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------- ------------
<S> <C> <C> <C>
$1,250,000 Appalachian State University, NC Housing & Student Center System Rev.,
5-5/8% due 7/15/2015.......................................................... Aaa/AAA $ 1,278,750
1,250,000 Asheville, NC Water System Rev., 5.70% due 8/1/2025............................. Aaa/AAA 1,286,563
600,000 Buncombe County, NC Metropolitan Sewerage District (Sewerage System Rev.),
5-1/2% due 7/1/2022........................................................... Aaa/AAA 601,446
2,000,000 Charlotte-Mecklenberg Hospital Authority, NC Health Care System Rev.,
5-3/4% due 1/15/2021.......................................................... Aa3/AA 2,045,020
1,000,000 Charlotte, NC Certificates of Participation (Charlotte-Mecklenburg Law Enforcement
Center Project), 5-3/8% due 6/1/2013.......................................... Aa1/AA 1,021,660
2,000,000 Charlotte, NC Water & Sewer GOs, 5.90% due 2/1/2017............................. Aaa/AAA 2,113,060
1,590,000 Concord, NC Utilities System Rev., 5-3/4% due 12/1/2017......................... Aaa/AAA 1,634,949
2,500,000 Martin County Industrial Facilities and Pollution Control Financing Authority, NC
Solid Waste Disposal Rev. (Weyerhaeuser Company Project), 6% due 11/1/2025*... A2/A 2,588,975
500,000 North Carolina Educational Facilities Financing Authority Rev. (Duke University
Project), 6-3/4% due 10/1/2021................................................ Aa1/AA+ 547,420
500,000 North Carolina Educational Facilities Financing Authority Rev. (Elon College Project),
6-3/8% due 1/1/2014........................................................... NR/AAA 532,120
600,000 North Carolina Housing Finance Agency Rev. (Multi-Family), 5.80% due 7/1/2014... Aa2/AA 615,276
1,455,000 North Carolina Housing Finance Agency Rev. (Single Family), 6-1/2% due 3/1/2018 Aa2/AA 1,532,886
250,000 North Carolina Housing Finance Agency Rev. (Multi-Family), 5.90% due 7/1/2026... Aa2/AA 254,843
750,000 North Carolina Medical Care Commission Hospital Rev. (North Carolina Baptist
Hospital Project), 6-3/8% due 6/1/2014........................................ Aa3/AA 799,140
1,500,000 North Carolina Medical Care Commission Hospital Rev. (Carolina Medicorp Project),
6% due 5/1/2021............................................................... Aa3/AA 1,535,280
1,000,000 North Carolina Medical Care Commission Hospital Rev. (Memorial Mission Hospital
Project), 6% due 10/1/2022.................................................... Aaa/AAA 1,036,960
2,250,000 North Carolina Medical Care Commission Hospital Rev. (Presbyterian Health Services
Corp. Project), 6% due 10/1/2024.............................................. Aa3/AA 2,357,212
1,500,000 North Carolina Municipal Power Agency No. 1 Catawba Electric Rev.,
5-3/4% due 1/1/2015........................................................... Aaa/AAA 1,531,830
3,000,000 North Carolina Municipal Power Agency No. 1 Catawba Electric Rev.,
5% due 1/1/2020............................................................... Aaa/AAA 2,916,570
1,000,000 Orange, NC Water & Sewer Authority Rev., 5.20% due 7/1/2016..................... Aa/AA 998,730
775,000 Raleigh, NC GOs, 6-1/2% due 3/1/2008............................................ Aaa/AAA 839,464
200,000 Transylvania County, NC GOs, 6.80% due 4/1/2007................................. A2/A 214,204
1,500,000 University of North Carolina Charlotte Rev. (Student Activity Center),
5-1/2% due 6/1/2021........................................................... Aaa/AAA 1,506,570
500,000 University of North Carolina Hospitals at Chapel Hill Rev., 6-3/8% due 2/15/2017 Aa3/AA 535,145
1,000,000 University of North Carolina Hospitals at Chapel Hill Rev., 5-1/4% due 2/15/2026 Aa3/AA 979,700
</TABLE>
- -----------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
12
<PAGE>
- -------------------------------------------------------------------------------
Portfolios of Investments
September 30, 1997
NORTH CAROLINA SERIES (continued)
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- --------------------- ------------- ------------
<S> <C> <C> <C>
$1,550,000 Wake County Industrial Facilities & Pollution Control Financing Authority, NC
(Carolina Power & Light), 6.90% due 4/1/2009.................................. A2/A $ 1,665,165
-----------
TOTAL MUNICIPAL BONDS (Cost $31,347,717) -- 97.2%............................................................... 32,968,938
VARIABLE RATE DEMAND NOTES (Cost $400,000) -- 1.2%.............................................................. 400,000
OTHER ASSETS LESS LIABILITIES -- 1.6%........................................................................... 531,726
-----------
NET ASSETS -- 100.0%............................................................................................ $33,900,664
===========
</TABLE>
- -------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
13
<PAGE>
- -------------------------------------------------------------------------------
Statements of Assets and Liabilities
September 30, 1997
<TABLE>
<CAPTION>
CALIFORNIA CALIFORNIA NORTH
HIGH-YIELD QUALITY FLORIDA CAROLINA
SERIES SERIES SERIES SERIES
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (see portfolios of investments):
Long-term holdings................................ $53,126,460 $87,216,633 $43,075,550 $32,968,938
Short-term holdings............................... 4,600,000 200,000 -- 400,000
----------- ----------- ----------- -----------
57,726,460 87,416,633 43,075,550 33,368,938
Cash ................................................ 200,988 186,757 -- 130,316
Interest receivable.................................. 907,850 1,337,118 813,012 561,114
Expenses prepaid to shareholder service agent........ 7,225 12,382 6,702 4,926
Receivable for Shares of Beneficial Interest sold.... 1,020 -- 34,031 12,250
Other................................................ 1,913 1,654 1,043 635
----------- ----------- ----------- -----------
Total Assets......................................... $58,845,456 $88,954,544 $43,930,338 $34,078,179
----------- ----------- ----------- -----------
LIABILITIES:
Payable for securities purchased..................... $ 2,450,672 $ -- $ -- $ --
Dividends payable.................................... 95,690 153,500 67,751 52,299
Payable for Shares of Beneficial Interest
repurchased.......................................... 2,170 8,467 76,498 53,700
Payable to custodian................................. -- -- 7,195 --
Accrued expenses, taxes, and other................... 94,144 123,511 76,666 71,516
----------- ----------- ----------- -----------
Total Liabilities ................................... 2,642,676 285,478 228,110 177,515
----------- ----------- ----------- -----------
Net Assets........................................... $56,202,780 $88,669,066 $43,702,228 $33,900,664
=========== =========== =========== ===========
COMPOSITION OF NET ASSETS:
Shares of Beneficial Interest, at par:
Class A........................................... $ 8,005 $ 12,445 $ 5,390 $ 4,061
Class D........................................... 502 240 215 151
Additional paid-in capital........................... 53,028,854 82,307,451 41,710,643 32,012,627
Undistributed net realized gain...................... 118,279 197,159 399,987 262,604
Net unrealized appreciation of investments........... 3,047,140 6,151,771 1,585,993 1,621,221
----------- ----------- ----------- -----------
Net Assets........................................... $56,202,780 $88,669,066 $43,702,228 $33,900,664
=========== =========== =========== ===========
NET ASSETS:
Class A.............................................. $52,882,700 $86,992,344 $42,024,374 $32,684,042
Class D. ............................................ $ 3,320,080 $ 1,676,722 $ 1,677,854 $ 1,216,622
SHARES OF BENEFICIAL INTEREST OUTSTANDING
(Unlimited shares authorized; $.001
par value):
Class A.............................................. 8,004,601 12,444,958 5,390,482 4,060,328
Class D. ............................................ 501,908 240,397 214,843 151,227
NET ASSET VALUE PER SHARE:
Class A.............................................. $6.61 $6.99 $7.80 $8.05
Class D.............................................. $6.61 $6.97 $7.81 $8.05
</TABLE>
- ------------
See Notes to Financial Statements.
14
<PAGE>
- -------------------------------------------------------------------------------
Statements of Operations
For the Year Ended September 30, 1997
<TABLE>
<CAPTION>
CALIFORNIA CALIFORNIA NORTH
HIGH-YIELD QUALITY FLORIDA CAROLINA
SERIES SERIES SERIES SERIES
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest ............................................ $3,267,781 $5,365,795 $2,617,708 $2,031,696
---------- ---------- ---------- ----------
EXPENSES:
Management fees...................................... 266,730 461,278 228,202 176,659
Distribution and service fees........................ 73,541 104,672 118,458 94,898
Shareholder account services......................... 65,920 104,028 57,529 48,486
Auditing and legal fees.............................. 24,013 21,013 24,283 23,954
Shareholder reports and communications............... 15,120 20,408 8,883 8,525
Custody and related services......................... 13,081 24,614 24,669 17,102
Trustees' fees and expenses.......................... 8,455 8,740 7,716 7,458
Registration......................................... 7,971 8,426 6,933 7,172
Shareholders' meeting................................ 5,703 8,969 4,752 4,977
Miscellaneous........................................ 2,514 7,192 4,316 3,860
---------- ---------- ---------- ----------
Total Expenses....................................... 483,048 769,340 485,741 393,091
---------- ---------- ---------- ----------
Net Investment Income................................ 2,784,733 4,596,455 2,131,967 1,638,605
---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments..................... 211,592 427,389 402,363 264,968
Net change in unrealized appreciation
of investments....................................... 1,476,067 2,834,368 899,645 797,213
---------- ---------- ---------- ----------
Net Gain on Investments ............................. 1,687,659 3,261,757 1,302,008 1,062,181
---------- ---------- ---------- ----------
Increase in Net Assets from Operations............... $4,472,392 $7,858,212 $3,433,975 $2,700,786
========== ========== ========== ==========
</TABLE>
- -------------
See Notes to Financial Statements.
15
<PAGE>
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
CALIFORNIA HIGH-YIELD SERIES CALIFORNIA QUALITY SERIES
------------------------------- -------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
------------------------------- -------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ...................... $ 2,784,733 $ 2,761,416 $ 4,596,455 $ 4,933,062
Net realized gain on investments............ 211,592 761,672 427,389 10,779
Net change in unrealized appreciation
of investments.............................. 1,476,067 (302,934) 2,834,368 1,634,127
----------- ----------- ----------- -----------
Increase in Net Assets from
Operations.................................. 4,472,392 3,220,154 7,858,212 6,577,968
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A.................................. (2,682,769) (2,694,728) (4,533,073) (4,886,875)
Class D.................................. (101,964) (66,688) (63,382) (46,187)
Net realized gain on investments:
Class A.................................. (722,261) (181,195) (27,957) (170,861)
Class D.................................. (27,209) (4,083) (454) (1,627)
----------- ----------- ----------- -----------
Decrease in Net Assets from
Distributions............................... (3,534,203) (2,946,694) (4,624,866) (5,105,550)
----------- ----------- ----------- -----------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sale of shares:
Class A.................................. 7,351,517 7,028,522 1,481,687 4,563,152
Class D.................................. 1,513,626 971,455 575,550 938,009
Shares issued in payment of dividends:
Class A.................................. 1,412,142 1,381,074 2,257,452 2,408,049
Class D.................................. 70,066 51,365 33,256 28,597
Exchanged from associated Funds:
Class A.................................. 1,772,009 2,237,849 19,333,888 6,680,456
Class D.................................. 502,224 197,372 5,312,748 601,980
Shares issued in payment of
gain distribution:
Class A.................................. 483,204 123,013 16,799 108,888
Class D.................................. 22,161 3,665 228 857
----------- ----------- ----------- -----------
Total ...................................... 13,126,949 11,994,315 29,011,608 15,329,988
----------- ----------- ----------- -----------
Cost of shares repurchased:
Class A.................................. (7,355,541) (10,210,483) (13,851,584) (8,519,741)
Class D.................................. (640,001) (128,873) (280,678) (208,709)
Exchanged into associated Funds:
Class A.................................. (1,923,514) (2,054,893) (20,972,562) (6,087,884)
Class D.................................. (126,577) (471,562) (5,676,629) (590,062)
----------- ----------- ----------- -----------
Total ...................................... (10,045,633) (12,865,811) (40,781,453) (15,406,396)
----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets
from Transactions in Shares of
Beneficial Interest......................... 3,081,316 (871,496) (11,769,845) (76,408)
----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets........... 4,019,505 (598,036) (8,536,499) 1,396,010
NET ASSETS:
Beginning of year........................... 52,183,275 52,781,311 97,205,565 95,809,555
----------- ----------- ----------- -----------
End of Year................................. $56,202,780 $52,183,275 $88,669,066 $97,205,565
=========== =========== =========== ===========
</TABLE>
- ---------------
See Notes to Financial Statements.
16
<PAGE>
- -------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
FLORIDA SERIES NORTH CAROLINA SERIES
------------------------------- -------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
------------------------------- -------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income ...................... $ 2,131,967 $ 2,389,445 $ 1,638,605 $ 1,798,784
Net realized gain on investments............ 402,363 848,068 264,968 150,901
Net change in unrealized appreciation
of investments.............................. 899,645 (599,721) 797,213 428,165
----------- ----------- ----------- -----------
Increase in Net Assets from
Operations.................................. 3,433,975 2,637,792 2,700,786 2,377,850
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A.................................. (2,069,071) (2,340,450) (1,591,157) (1,748,201)
Class D.................................. (62,896) (48,995) (47,448) (50,583)
Net realized gain on investments:
Class A.................................. (611,829) (503,822) (145,565) (67,229)
Class D.................................. (20,485) (8,426) (4,714) (2,262)
----------- ----------- ----------- -----------
Decrease in Net Assets from
Distributions............................... (2,764,281) (2,901,693) (1,788,884) (1,868,275)
----------- ----------- ----------- -----------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST:
Net proceeds from sale of shares:
Class A.................................. 2,176,497 2,194,401 1,480,472 2,675,748
Class D.................................. 211,049 844,824 124,216 263,673
Shares issued in payment of dividends:
Class A.................................. 808,742 944,497 832,006 915,705
Class D.................................. 43,942 27,492 35,063 37,861
Exchanged from associated Funds:
Class A.................................. 1,901,127 1,720,648 622,587 558,685
Class D.................................. 437,446 132,950 -- 3,221
Shares issued in payment of
gain distribution:
Class A.................................. 344,983 274,175 106,938 49,273
Class D.................................. 15,286 3,798 4,313 2,102
----------- ----------- ----------- -----------
Total ...................................... 5,939,072 6,142,785 3,205,595 4,506,268
----------- ----------- ----------- -----------
Cost of shares repurchased:
Class A.................................. (7,587,878) (7,546,385) (6,362,439) (5,507,260)
Class D.................................. (295,456) (254,841) (208,812) (151,705)
Exchanged into associated Funds:
Class A.................................. (1,470,687) (1,167,372) (808,253) (695,424)
Class D.................................. (29,736) (65,958) (3,500) (198,185)
----------- ----------- ----------- -----------
Total ...................................... (9,383,757) (9,034,556) (7,383,004) (6,552,574)
----------- ----------- ----------- -----------
Decrease in Net Assets
from Transactions in Shares of
Beneficial Interest......................... (3,444,685) (2,891,771) (4,177,409) (2,046,306)
----------- ----------- ----------- -----------
Decrease in Net Assets...................... (2,774,991) (3,155,672) (3,265,507) (1,536,731)
NET ASSETS:
Beginning of year........................... 46,477,219 49,632,891 37,166,171 38,702,902
----------- ----------- ----------- -----------
End of Year................................. $43,702,228 $46,477,219 $33,900,664 $37,166,171
=========== =========== =========== ===========
</TABLE>
- ------------
See Notes to Financial Statements.
17
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements
1. Multiple Classes of Shares -- Seligman Municipal Series Trust (the "Trust")
consists of four separate series: the "California High-Yield Series," the
"California Quality Series," the "Florida Series," and the "North Carolina
Series." Each Series of the Trust offers two classes of shares. All shares
existing prior to February 1, 1994, the commencement date of Class D shares,
were classified as Class A shares. Class A shares are sold with an initial sales
charge of up to 4.75% and a continuing service fee of up to 0.25% on an annual
basis. Class A shares purchased in an amount of $1,000,000 or more are sold
without an initial sales charge but are subject to a contingent deferred sales
load ("CDSL") of 1% on redemptions within 18 months of purchase. Class D shares
are sold without an initial sales charge but are subject to a distribution fee
of up to 0.75% and a service fee of up to 0.25% on an annual basis, and a CDSL
of 1% imposed on redemptions made within one year of purchase. The two classes
of shares for each Series represent interests in the same portfolio of
investments, have the same rights and are generally identical in all respects
except that each class bears its separate distribution and certain other class
expenses, and has exclusive voting rights with respect to any matter on which a
separate vote of any class is required.
2. Significant Accounting Policies -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Trust:
a. Security Valuation -- All municipal securities and other short-term holdings
maturing in more than 60 days are valued based upon quotations provided by
an independent pricing service or, in their absence, at fair value
determined in accordance with procedures approved by the Trustees.
Short-term holdings maturing in 60 days or less are generally valued at
amortized cost.
b. Federal Taxes -- There is no provision for federal income tax. Each Series
has elected to be taxed as a regulated investment company and intends to
distribute substantially all taxable net income and net gain realized.
c. Security Transactions and Related Investment Income -- Investment
transactions are recorded on trade dates. Identified cost of investments
sold is used for both financial statement and federal income tax purposes.
Interest income is recorded on the accrual basis. The Trust amortizes
original issue discounts and premiums paid on purchases of portfolio
securities. Discounts other than original
issue discounts are not amortized.
d. Multiple Class Allocations -- All income, expenses (other than
class-specific expenses), and realized and unrealized gains or losses are
allocated daily to each class of shares based upon the relative value of the
shares of each class. Class-specific expenses, which include distribution
and service fees and any other items that are specifically attributable to
a particular class, are charged directly to such class. For the year ended
September 30, 1997, distribution and service fees were the only
class-specific expenses.
e. Distributions to Shareholders -- Dividends are declared daily and paid
monthly. Other distributions paid by the Trust are recorded on the
ex-dividend date. The treatment for financial statement purposes of
distributions made to shareholders during the year from net investment
income or net realized gains may differ from their ultimate treatment for
federal income tax purposes. These differences are caused primarily by
differences in the timing of the recognition of certain components of
income, expense, or realized capital gain for federal income tax purposes.
Where such differences are permanent in nature, they are reclassified in the
components of net assets based on their ultimate characterization for
federal income tax purposes. Any such reclassifications will have no effect
on net assets, results of operations, or net asset value per share of any
series of the Trust.
3. Purchases and Sales of Securities -- Purchases and sales of portfolio
securities, excluding short-term investments, for the year ended September 30,
1997, were as follows:
SERIES PURCHASES SALES
- ---------- ------------ ------------
California High-Yield $12,095,620 $11,643,627
California Quality 10,963,840 20,983,040
Florida 15,089,050 18,279,160
North Carolina 4,549,405 10,481,680
At September 30, 1997, the cost of investments for federal income tax
purposes was substantially the same as the cost for financial reporting
purposes, and the tax basis gross unrealized appreciation and depreciation of
portfolio securities were as follows:
TOTAL TOTAL
UNREALIZED UNREALIZED
SERIES APPRECIATION DEPRECIATION
- ---------- -------------- --------------
California High-Yield $3,078,058 $30,918
California Quality 5,958,601 30,570
Florida 1,668,548 82,555
North Carolina 1,646,933 25,712
18
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements
4. Management Fee, Administrative Services, and Other Transactions -- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the Trust
and provides the necessary personnel and facilities. Compensation of all
officers of the Trust, all trustees of the Trust who are employees or
consultants of the Manager, and all personnel of the Trust and the Manager is
paid by the Manager. The Manager's fee is calculated daily and payable monthly,
equal to 0.50% per annum of each Series' average daily net assets.
Seligman Financial Services, Inc. (the "Distributor"), agent for the
distribution of each Series' shares, and an affiliate of the Manager, received
the following concessions after commissions were paid to dealers for sale of
Class A shares:
DISTRIBUTOR DEALER
SERIES CONCESSIONS COMMISSIONS
- ---------- -------------- --------------
California High-Yield $17,268 $129,666
California Quality 6,928 48,253
Florida 9,343 66,804
North Carolina 6,321 45,457
The Trust has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distribution of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive continuing fees of up to 0.25% on an annual basis,
payable quarterly, of the average daily net assets of the Class A shares
attributable to the particular service organizations for providing personal
services and/or the maintenance of shareholder accounts. The Distributor charges
such fees to the Trust pursuant to the Plan. For the year ended September 30,
1997, for the California High-Yield, California Quality, Florida, and North
Carolina Series, fees paid aggregated $50,032, $89,151, $102,441, and $82,738
respectively, or 0.10%, 0.10%, 0.23%, and 0.24%, respectively, per annum of
average daily net assets.
Under the Plan, with respect to Class D shares, service organizations can
enter into agreements with the Distributor and receive continuing fees for
providing personal services and/or the maintenance of shareholder accounts of up
to 0.25% on an annual basis of the average daily net assets of the Class D
shares for which the organizations are responsible, and fees for providing other
distribution assistance of up to 0.75% on an annual basis of such average daily
net assets. Such fees are paid monthly by the Trust to the Distributor pursuant
to the Plan. For the year ended September 30, 1997, fees paid amounted to
$23,509, $15,521, $16,017, and $12,160, or 1% per annum of the average daily net
assets of Class D shares of the California High-Yield, California Quality,
Florida, and North Carolina Series, respectively.
The Distributor is entitled to retain any CDSL imposed on redemptions of
Class D shares occurring within one year of purchase and on certain redemptions
of Class A shares occurring within 18 months of purchase. For the year ended
September 30, 1997, such charges amounted to $1,363 for the California
High-Yield Series and $1,420 for the California Quality Series.
Seligman Services, Inc., an affiliate of the Manager, is
eligible to receive commissions from certain sales of Trust shares, as well as
distribution and service fees pursuant to the Plan. For the year ended September
30, 1997, Seligman Services, Inc. received commissions from the sale of shares
of each Series, and distribution and service fees, pursuant to the Plan, as
follows:
DISTRIBUTION AND
SERIES COMMISSIONS SERVICE FEES
- ---------- ------------- -------------------
California High-Yield $ 495 $1,414
California Quality 1,571 2,688
Florida 1,118 5,302
North Carolina -- 1,858
Seligman Data Corp., which is owned by certain associated investment
companies, charged at cost for shareholder account services the following
amounts:
SERIES
- ----------
California High-Yield $ 65,492
California Quality 103,599
Florida 57,101
North Carolina 48,058
Certain officers and trustees of the Trust are officers or directors of the
Manager, the Distributor, Seligman Services, Inc., and/or Seligman Data Corp.
The Trust has a compensation agreement under which trustees who receive fees
may elect to defer receiving such fees. Interest is accrued on the deferred
balances. Deferred fees and the related accrued interest are not deductible for
federal income tax purposes until such amounts are paid. The cost of such fees
and interest is included in trustees' fees and expenses, and the accumulated
balances thereof at September 30, 1997, were as follows:
SERIES
- ----------
California High-Yield $28,210
California Quality 28,242
Florida 13,974
North Carolina 10,181
19
<PAGE>
- -------------------------------------------------------------------------------
Notes to Financial Statements
5. Transactions in Shares of Beneficial Interest -- Transactions in Shares of
Beneficial Interest were as follows:
<TABLE>
<CAPTION>
CALIFORNIA HIGH-YIELD CALIFORNIA QUALITY
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sale of shares:
Class A........................................ 1,136,556 1,087,963 217,315 673,408
Class D........................................ 232,749 152,012 83,522 139,499
Shares issued in payment of dividends:
Class A........................................ 217,868 213,528 329,886 356,784
Class D........................................ 10,791 7,942 4,867 4,255
Exchanged from associated Funds:
Class A........................................ 272,963 343,880 2,835,364 996,761
Class D........................................ 77,936 30,371 781,157 89,271
Shares issued in payment of gain distributions:
Class A........................................ 74,799 18,896 2,456 16,012
Class D........................................ 3,425 562 33 126
---------- ---------- ---------- ----------
Total............................................. 2,027,087 1,855,154 4,254,600 2,276,116
---------- ---------- ---------- ----------
Shares repurchased:
Class A........................................ (1,136,607) (1,573,674) (2,029,814) (1,264,284)
Class D........................................ (98,590) (19,819) (41,403) (31,274)
Exchanged into associated Funds:
Class A........................................ (296,127) (317,574) (3,068,740) (905,529)
Class D........................................ (19,383) (73,253) (832,015) (87,668)
---------- ---------- ---------- ----------
Total............................................. (1,550,707) (1,984,320) (5,971,972) (2,288,755)
---------- ---------- ---------- ----------
Increase (decrease) in shares..................... 476,380 (129,166) (1,717,372) (12,639)
========== ========== ========== ==========
<CAPTION>
NORTH CAROLINA
FLORIDA SERIES SERIES
------------------------- -------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sale of shares:
Class A........................................ 284,403 284,373 187,120 342,388
Class D........................................ 27,585 109,057 15,728 34,006
Shares issued in payment of dividends:
Class A........................................ 105,889 122,783 105,249 116,783
Class D........................................ 5,743 3,582 4,436 4,830
Exchanged from associated Funds:
Class A........................................ 250,599 222,479 78,277 72,372
Class D........................................ 56,686 17,046 -- 425
Shares issued in payment of gain distributions:
Class A........................................ 45,096 35,286 13,554 6,221
Class D........................................ 1,996 488 547 265
---------- ---------- ---------- ----------
Total............................................. 777,997 795,094 404,911 577,290
---------- ---------- ---------- ----------
Shares repurchased:
Class A........................................ (995,384) (981,300) (805,592) (704,359)
Class D........................................ (39,429) (33,593) (26,320) (19,457)
Exchanged into associated Funds:
Class A........................................ (193,665) (151,754) (102,260) (88,114)
Class D........................................ (3,903) (8,586) (445) (25,245)
---------- ---------- ---------- ----------
Total............................................. (1,232,381) (1,175,233) (934,617) (837,175)
---------- ---------- ---------- ----------
Decrease in shares................................ (454,384) (380,139) (529,706) (259,885)
========== ========== ========== ==========
20
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
The Trust's financial highlights are presented below. "Per share operating
performance" data is designed to allow investors to trace the operating
performance of each Class, on a per share basis, from the beginning net asset
value to the ending net asset value, so that investors can understand what
effect the individual items have on their investment, assuming it was held
throughout the period. Generally, per share amounts are derived by converting
the actual dollar amounts incurred for each item, as disclosed in the financial
statements, to their equivalent per share amounts, based on average shares
outstanding.
"Total return based on net asset value" measures each Class's performance
assuming that investors purchased shares at net asset value as of the beginning
of the period, invested dividends and capital gains paid at net asset value, and
then sold their shares at the net asset value on the last day of the period. The
total return computations do not reflect any sales charges investors may incur
in purchasing or selling shares of each Series. Total returns for periods of
less than one year are not annualized.
<TABLE>
<CAPTION>
CALIFORNIA HIGH-YIELD SERIES CLASS A CLASS D
------------------------------------------- ------------------------------
YEAR ENDED 2/1/94*
YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, TO
------------------------------------------- ---------------------
1997 1996 1995 1994 1993 1997 1996 1995 9/30/94
----- ----- ----- ----- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period ........ $6.50 $6.47 $6.30 $6.73 $6.65 $6.51 $6.48 $6.31 $6.67
----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment income........................ .34 .36 .37 .37 .39 .28 .30 .31 .21
Net realized and unrealized investment
gain (loss)................................ .20 .05 .17 (.34) .28 .19 .05 .17 (.36)
----- ----- ----- ----- ----- ----- ----- ----- -----
Increase (Decrease) from Investment
Operations................................... .54 .41 .54 .03 .67 .47 .35 .48 (.15)
Dividends paid or declared................... (.34) (.36) (.37) (.37) (.39) (.28) (.30) (.31) (.21)
Distributions from net gain realized......... (.09) (.02) -- (.09) (.20) (.09) (.02) -- --
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Increase (Decrease) in Net Asset Value... .11 .03 .17 (.43) .08 .10 .03 .17 (.36)
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period............... $6.61 $6.50 $6.47 $6.30 $6.73 $6.61 $6.51 $6.48 $6.31
===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN BASED
ON NET ASSET VALUE: 8.74% 6.49% 8.85% .41% 10.66% 7.60% 5.53% 7.78% (2.47)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets............... .87% .84% .90% .85% .88% 1.77% 1.74% 1.91% 1.74%+
Net investment income to average net assets.. 5.26% 5.49% 5.84% 5.74% 5.94% 4.36% 4.59% 4.84% 4.73%+
Portfolio turnover........................... 22.42% 34.75% 17.64% 8.36% 7.70% 22.42% 34.75% 17.64% 8.36%++
Net Assets, End of Period
(000s omitted)............................... $52,883 $50,264 $51,504 $48,007 $51,218 $3,320 $1,919 $1,277 $650
</TABLE>
- --------------
See footnotes on page 24.
21
<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
CALIFORNIA QUALITY SERIES CLASS A CLASS D
------------------------------------------- ------------------------------
YEAR ENDED 2/1/94*
YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, TO
------------------------------------------- ---------------------
1997 1996 1995 1994 1993 1997 1996 1995 9/30/94
----- ----- ----- ----- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period......... $6.75 $6.65 $6.39 $7.28 $6.85 $6.74 $6.63 $6.38 $7.13
----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment income........................ .34 .35 .34 .35 .37 .28 .28 .28 .19
Net realized and unrealized investment
gain (loss)................................ .24 .11 .32 (.73) .54 .23 .12 .31 (.75)
----- ----- ----- ----- ----- ----- ----- ----- -----
Increase (Decrease) from Investment
Operations................................... .58 .46 .66 (.38) .91 .51 .40 .59 (.56)
Dividends paid or declared................... (.34) (.35) (.34) (.35) (.37) (.28) (.28) (.28) (.19)
Distributions from net gain realized......... -- (.01) (.06) (.16) (.11) -- (.01) (.06) --
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Increase (Decrease) in Net Asset Value... .24 .10 .26 (.89) .43 .23 .11 .25 (.75)
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period............... $6.99 $6.75 $6.65 $6.39 $7.28 $6.97 $6.74 $6.63 $6.38
===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN BASED
ON NET ASSET VALUE: 8.87% 7.00% 10.85% (5.46)% 13.92% 7.75% 6.20% 9.61% (8.01)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets............... .82% .79% .89% .81% .82% 1.72% 1.69% 1.88% 1.77%+
Net investment income to average net assets.. 4.99% 5.11% 5.34% 5.20% 5.30% 4.09% 4.21% 4.36% 4.39%+
Portfolio turnover........................... 12.16% 12.84% 11.24% 22.16% 15.67% 12.16% 12.84% 11.24% 22.16%++
Net Assets, End of Period
(000s omitted)............................... $86,992 $95,560 $94,947 $99,020 $111,732 $1,677 $1,645 $863 $812
</TABLE>
- --------------
See footnotes on page 24.
22
<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
FLORIDA SERIES CLASS A CLASS D
----------------------------------------------- ------------------------------
YEAR ENDED 2/1/94*
YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, TO
----------------------------------------------- ---------------------
1997 1996 1995 1994 1993 1997 1996 1995 9/30/94
----- ----- ----- ----- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period........... $7.67 $7.71 $7.34 $8.20 $7.56 $7.68 $7.72 $7.34 $8.10
----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment income.......................... .36 .38 .40 .42 .46 .30 .32 .34 .24
Net realized and unrealized investment
gain (loss).................................. .23 .04 .37 (.74) .65 .23 .04 .38 (.76)
----- ----- ----- ----- ----- ----- ----- ----- -----
Increase (Decrease) from Investment
Operations..................................... .59 .42 .77 (.32) 1.11 .53 .36 .72 (.52)
Dividends paid or declared..................... (.36) (.38) (.40) (.42) (.46) (.30) (.32) (.34) (.24)
Distributions from net gain realized........... (.10) (.08) -- (.12) (.01) (.10) (.08) -- --
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Increase (Decrease) in Net Asset Value..... .13 (.04) .37 (.86) .64 .13 (.04) .38 (.76)
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period................. $7.80 $7.67 $7.71 $7.34 $8.20 $7.81 $7.68 $7.72 $7.34
===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN BASED
ON NET ASSET VALUE: 8.01% 5.54% 10.87% (3.99)% 15.21% 7.18% 4.74% 10.07% (6.64)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets................. 1.04% .97% .72% .42% .23% 1.81% 1.73% 1.66% 1.29%+
Net investment income to average net assets.... 4.70% 4.90% 5.38% 5.49% 5.82% 3.93% 4.14% 4.53% 4.61%+
Portfolio turnover............................. 33.68% 18.53% 11.82% 6.17% 16.42% 33.68% 18.53% 11.82% 6.17%++
Net Assets, End of Period
(000s omitted)................................. $42,024 $45,200 $49,030 $49,897 $52,855 $1,678 $1,277 $603 $244
Without expense reimbursement and/or
management fee waiver:**
Net investment income per share............. $.38 $.37 $.38 $.40 $.32 $.31 $.21
Ratios:
Expenses to average net assets.............. .97% 1.03% 1.00% 1.03% 1.73% 1.97% 1.84%+
Net investment income to average net assets. 4.90% 5.07% 4.91% 5.01% 4.14% 4.22% 4.06%+
</TABLE>
- -------------
See footnotes on page 24.
23
<PAGE>
- -------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
NORTH CAROLINA SERIES CLASS A CLASS D
----------------------------------------------- ------------------------------
YEAR ENDED 2/1/94*
YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, TO
----------------------------------------------- ---------------------
1997 1996 1995 1994 1993 1997 1996 1995 9/30/94
----- ----- ----- ----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period........ $7.84 $7.74 $7.30 $8.22 $7.61 $7.83 $7.74 $7.29 $8.17
----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment income....................... .37 .37 .39 .41 .43 .31 .31 .33 .23
Net realized and unrealized investment
gain (loss)............................... .24 .11 .45 (.87) .63 .25 .10 .46 (.88)
----- ----- ----- ----- ----- ----- ----- ----- -----
Increase (Decrease) from Investment
Operations.................................. .61 .48 .84 (.46) 1.06 .56 .41 .79 (.65)
Dividends paid or declared.................. (.37) (.37) (.39) (.41) (.43) (.31) (.31) (.33) (.23)
Distributions from net gain realized........ (.03) (.01) (.01) (.05) (.02) (.03) (.01) (.01) --
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Increase (Decrease) in Net Asset Value.. .21 .10 .44 (.92) .61 .22 .09 .45 (.88)
----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period.............. $8.05 $7.84 $7.74 $7.30 $8.22 $8.05 $7.83 $7.74 $7.29
===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN BASED
ON NET ASSET VALUE: 8.01% 6.39% 11.92% (5.80)% 14.46% 7.33% 5.45% 11.19% (8.15)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets.............. 1.09% 1.05% .82% .44% .23% 1.85% 1.81% 1.64% 1.27%+
Net investment income to average net assets. 4.66% 4.75% 5.21% 5.29% 5.44% 3.90% 3.99% 4.42% 4.49%+
Portfolio turnover.......................... 13.04% 15.12% 4.38% 15.61% 3.13% 13.04% 15.12% 4.38% 15.61%++
Net Assets, End of Period
(000s omitted).............................. $32,684 $35,934 $37,446 $38,920 $38,828 $1,217 $1,232 $1,257 $1,282
Without expense reimbursement and/or
management fee waiver:**
Net investment income per share.......... $.37 $.36 $.35 $.35 $.31 $.31 $.20
Ratios:
Expenses to average net assets........... 1.06% 1.18% 1.13% 1.22% 1.82% 2.00% 1.95%+
Net investment income to average
net assets.............................. 4.74% 4.85% 4.60% 4.45% 3.98% 4.06% 3.82%+
</TABLE>
- --------------
* Commencement of operations.
** During the periods stated, the Manager, at its discretion, waived all or a
portion of its fees and, in some cases, reimbursed certain expenses for the
Florida and North Carolina Series.
+ Annualized.
++ For the year ended September 30, 1994.
See Notes to Financial Statements.
24
<PAGE>
- -------------------------------------------------------------------------------
Report of Independent Auditors
The Trustees and Shareholders,
Seligman Municipal Series Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of the California High-Yield, California Quality,
Florida, and North Carolina Series of Seligman Municipal Series Trust, as of
September 30, 1997, the related statements of operations for the year then ended
and of changes in net assets for each of the years in the two-year period then
ended, and the financial highlights for each of the periods presented. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements.
Our procedures included confirmation of securities owned as of September 30,
1997 by correspondence with the Trust's custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the California
High-Yield, California Quality, Florida, and North Carolina Series of Seligman
Municipal Series Trust as of September 30, 1997, the results of their
operations, the changes in their net assets, and the financial highlights for
the respective stated periods, in conformity with generally accepted accounting
principles.
/S/DELOITTE & TOUCHE LLP
New York, New York
October 31, 1997
<PAGE>
File No. 2-92569
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Part A - Financial Highlights for Class A shares of each Series for the ten
years ended September 30, 1997 or for the period from commencement of
operations to September 30, 1997. Financial Highlights for Class D
shares for each Series for the period February 1, 1994 (commencement
of operations) to September 30, 1997.
Part B - Required Financial Statements for each Series of the Fund are
included in the Fund's Annual Report to shareholders, dated September
30, 1997, which is incorporated by reference in the Statement of
Additional Information. These Financial Statements are: Portfolios of
Investments as of September 30, 1997; Statements of Assets and
Liabilities as of September 30, 1997; Statements of Operations for
the year ended September 30, 1997; Statements of Changes in Net
Assets for the years ended September 30, 1997 and September 30, 1996;
Notes to Financial Statements; Financial Highlights for the five
years ended September 30, 1997 for the Class A shares of each Series
of the Fund and for the period February 1, 1994 (commencement of
operations) to September 30, 1997 for the Class D shares of each
Series of the Fund; Report of Independent Auditors.
(b) Exhibits: All Exhibits have been previously filed and are
incorporated herein by reference, except Exhibits marked with an
asterisk (*) which are attached hereto.
(1) Form of Amended and Restated Declaration of Trust of Registrant.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 25, filed on January 29, 1997.)
(2) Amended and Restated Bylaws of Registrant. (Incorporated by reference
to Registrant's Post-Effective Amendment No. 25, filed on January 29,
1997.)
(3) Not Applicable
(4) Copy of Specimen of Stock Certificates for Class D Shares of each
Series. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 22 filed on January 29, 1994.)
(5) Management Agreeement between the Registrant on behalf of the
California High-Yield Municipal Series and J. & W. Seligman & Co.
Incorporated. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 25, filed on January 29, 1997.)
(5)(a) Management Agreeement between the Registrant on behalf of the
California Quality Municipal Series and J. & W. Seligman & Co.
Incorporated. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 25, filed on January 29, 1997.)
(5)(b) Management Agreeement between the Registrant on behalf of the Florida
Municipal Series and J. & W. Seligman & Co. Incorporated.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 25, filed on January 29, 1997.)
(5)(c) Management Agreeement between the Registrant on behalf of the North
Carolina Municipal Series and J. & W. Seligman & Co. Incorporated.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 25, filed on January 29, 1997.)
(6) Copy of Distributing Agreement between Registrant and Seligman
Financial Services, Inc. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 25, filed on January 29, 1997.)
(6)(a) Copy of Amended Sales Agreement between Dealers and Seligman Financial
Services, Inc. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 25, filed on January 29, 1997.)
(7) Matched Accumulation Plan of J. & W. Seligman & Co. Incorporated.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 25, filed on January 29, 1997.)
(7)(a) Deferred Compensation Plan for Directors of Seligman Group of Funds.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 25, filed on January 29, 1997.)
<PAGE>
File No. 2-92569
PART C. OTHER INFORMATION (continued)
(8) Custodian Agreement between Registrant and Investors Fiduciary Trust
Company. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 25, filed on January 29, 1997.)
(9) Not Applicable
(10) Opinions and Consents of Counsel. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 25, filed on January 29,
1997.)
(11) Consent of Independent Auditors.*
(11a) Opinion and Consent of California Counsel.*
(11b) Opinion and Consent of North Carolina Counsel.*
(12) Not Applicable
(13) Copy of Purchase Agreement for Initial Capital for Class D Shares.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 25, filed on January 29, 1997.)
(14) The Seligman IRA Plan Agreement.
(Incorporated by reference to Exhibit 14 of Registration Statement No.
333-20621, Pre-Effective Amendment No. 2, filed on April 17, 1997.)
(14a) The Seligman Simple IRA Plan Set-Up Kit.
(Incorporated by reference to Exhibit 14 of Registration Statement No.
333-20621, Pre-Effective Amendment No. 2, filed on April 17, 1997.)
(14b) The Seligman Simple IRA Plan Agreement.
(Incorporated by reference to Exhibit 14 of Registration Statement No.
333-20621, Pre-Effective Amendment No. 2, filed on April 17, 1997.)
(15) Copy of amended Administration, Shareholder Services and Distribution
Plans of each Series and form of Agreement of Registrant.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 25, filed on January 29, 1997.)
(16) Schedule for computation of tax equivalent yield and schedule for
computation of each performance quotation provided in Registration
Statement in response to Item 22. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 25, filed on January 29,
1997.)
(17) Financial Data Schedules meeting the requirements of Rule 483 under
the Securities Act of 1933.*
(18) Copy of Multiclass Plan for Seligman Group of Funds pursuant to Rule
18f-3 under the Investment Company Act of 1940. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 25, filed on
January 29, 1997.)
Other Exhibits: Powers of Attorney
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT -
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES - As of January 2, 1998, the
number of record holders of each Series' Class A and Class D
shares of the Registrant was as follows:
Class A Class D
------- -------
California High-Yield 1,060 43
California Quality 1,492 32
Florida 775 19
North Carolina 816 44
<PAGE>
File No. 2-92569
PART C. OTHER INFORMATION (continued)
ITEM 27. INDEMNIFICATION
Reference is made to the provisions of Article VII of Registrant's
Amended and Restated Declaration of Trust filed as Exhibit 24(b)(1)
and Article VII of Registrant's Amended and Restated By-Laws filed
as Exhibit 24(b)(2) to Registrant's Post-Effective Amendment No. 25
to the Registration Statement.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised by the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a trustee, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER - J. & W.
Seligman & Co. Incorporated, a Delaware corporation ("Manager"), is
the Registrant's investment manager. The Manager also serves as
investment manager to seventeen associated investment companies.
They are Seligman Capital Fund, Inc., Seligman Cash Management
Fund, Inc., Seligman Common Stock Fund, Inc., Seligman
Communications and Information Fund, Inc., Seligman Frontier Fund,
Inc., Seligman Growth Fund, Inc., Seligman Henderson Global Fund
Series, Inc., Seligman High Income Fund Series, Seligman Income
Fund, Inc., Seligman Municipal Fund Series, Inc., Seligman New
Jersey Municipal Fund, Inc., Seligman Pennsylvania Municipal Fund
Series, Seligman Portfolios, Inc., Seligman Quality Municipal Fund,
Inc., Seligman Select Municipal Fund, Inc., Seligman Value Fund
Series, Inc. and Tri-Continental Corporation.
The Manager has an investment advisory service division which
provides investment management or advice to private clients. The
list required by this Item 28 of officers and directors of the
Manager, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged
in by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D or Form ADV, filed
by the Manager, pursuant to the Investment Advisers Act of 1940
(SEC File No. 801-15798) on June 3, 1997.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) The names of each investment company (other than the
Registrant) for which each principal underwriter
currently distributing securities of the Registrant
also acts as a principal underwriter, depositor or
investment adviser are:
Seligman Capital Fund, Inc.
Seligman Cash Management Fund, Inc.
Seligman Common Stock Fund, Inc.
Seligman Communications and Information Fund, Inc.
Seligman Frontier Fund, Inc.
Seligman Growth Fund, Inc.
Seligman Henderson Global Fund Series, Inc.
Seligman High Income Fund Series
Seligman Income Fund, Inc.
Seligman Municipal Fund Series, Inc.
Seligman New Jersey Municipal Fund, Inc.
Seligman Pennsylvania Municipal Fund Series
Seligman Portfolios, Inc.
Seligman Value Fund Series, Inc.
(b) Name of each director, officer or partner of each
principal underwriter named in response to Item 21:
<PAGE>
File No. 2-92569
PART C. OTHER INFORMATION (continued)
<TABLE>
<CAPTION>
SELIGMAN FINANCIAL SERVICES, INC.
AS OF DECEMBER 31, 1997
-----------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C> <C>
WILLIAM C. MORRIS* Director Chairman of the
Board and Chief
Executive Officer
BRIAN T. ZINO* Director President and
Trustee
RONALD T. SCHROEDER* Director Trustee
FRED E. BROWN* Director Trustee
WILLIAM H. HAZEN* Director None
THOMAS G. MOLES* Director None
DAVID F. STEIN* Director None
STEPHEN J. HODGDON* President and Director None
CHARLES W. KADLEC* Chief Investment Strategist None
LAWRENCE P. VOGEL* Senior Vice President, Finance Vice President
ED LYNCH* Senior Vice President, Director None
of Marketing
MARK R. GORDON* Senior Vice President, Director None
of Marketing
GERALD I. CETRULO, III Senior Vice President of Sales None
140 West Parkway
Pompton Plains, NJ 07444
BRADLEY W. LARSON Senior Vice President of Sales None
367 Bryan Drive
Alamo, CA 94526
MICHELLE L. MCCANN Vice President, Manager, Retirement None
Plans Marketing
MICHAEL R. SANDERS Vice President, Product Manager None
Managed Money Services
CHARLES L. VON BREITENBACH, II* Vice President, Product Manager None
Managed Money Services
ROBERT T. HAUSLER* Global Mutual Funds, None
Product Management
MARSHA E. JACOBY* Vice President, National Accounts None
Manager
WILLIAM W. JOHNSON* Vice President, Order Desk None
TRACY A. SALOMON* Vice President, Retirement None
Marketing Manager
HELEN SIMON* Vice President, Sales None
Administration Manager
J. BRERETON YOUNG* Vice President, Mutual Funds None
Product Manager
PETER J. CAMPAGNA Vice President, Regional Retirement None
1130 Green Meadow Court Plans Manager
Acworth, GA 30102
CHARLES E. WENZEL Vice President, Regional Retirement None
703 Greenwood Road Plans Manager
Wilmington, DE 19807
JAMES R. BESHER Regional Vice President None
14000 Margaux Lane
Town & Country, MO 63017
RICHARD B. CALLAGHAN Regional Vice President None
7821 Dakota Lane
Orland Park, IL 60462
</TABLE>
<PAGE>
File No. 2-92569
PART C. OTHER INFORMATION (continued)
<TABLE>
<CAPTION>
SELIGMAN FINANCIAL SERVICES, INC.
AS OF DECEMBER 31, 1997
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C> <C>
BRADFORD C. DAVIS Regional Vice President None
255 4th Avenue, #2
Kirkland, WA 98033
CHRISTOPHER J. DERRY Regional Vice President None
2380 Mt. Lebanon Church Road
Alvaton, KY 42122
KENNETH DOUGHERTY Regional Vice President None
8640 Finlarig Drive
Dublin, OH 43017
ANDREW DRALUCK Regional Vice President None
4032 E. Williams Drive
Phoenix, AZ 85024
JONATHAN G. EVANS Senior Vice President of Sales None
222 Fairmont Way
Ft. Lauderdale, FL 33326
EDWARD S. FINOCCHIARO Regional Vice President None
120 Screenhouse Lane
Duxbury, MA 02332
MICHAEL C. FORGEA Regional Vice President None
32 W. Anapamu Street # 186
Santa Barbara, CA 93101
DAVID L. GARDNER Regional Vice President None
2504 Clublake Trail
McKinney, TX 75070
CARLA A. GOEHRING Regional Vice President None
11426 Long Pine
Houston, TX 77077
MARK LIEN Regional Vice President None
5904 Mimosa
Sedalia, MO 65301
JUDITH L. LYON Regional Vice President None
163 Haynes Bridge Road, Ste 205
Alpharetta, CA 30201
DAVID L. MEYNCKE Regional Vice President None
4718 Orange Grove Way
Palm Harbor, FL 34684
TIM O'CONNELL Regional Vice President None
14872 Summerbreeze Way
San Diego, CA 92128
THOMAS PARNELL Regional Vice President None
5250 Greystone Drive #107
Inver Grove Heights, MN 55077
JULIANA PERKINS Regional Vice President None
2348 Adrian Street
Newbury Park, CA 91320
DAVID K. PETZKE Regional Vice President None
2714 Winding Trail Place
Boulder, CO 80304
NICHOLAS ROBERTS Regional Vice President None
200 Broad Street, Apt. 2225
Stamford, CT 06901
</TABLE>
<PAGE>
File No. 2-92569
PART C. OTHER INFORMATION (continued)
<TABLE>
<CAPTION>
SELIGMAN FINANCIAL SERVICES, INC.
AS OF DECEMBER 31, 1997
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C> <C>
DIANE H. SNOWDEN Regional Vice President None
11 Thackery Lane
Cherry Hill, NJ 08003
BRUCE M. TUCKEY Senior Vice President of Sales None
41644 Chathman Drive
Novi, MI 48375
ANDREW S. VEASEY Senior Vice President of Sales None
14 Woodside
Rumson, NJ 07760
STEVE WILSON Regional Vice President None
83 Kaydeross Park
Saratoga Springs, NY 12866
KELLI A. WIRTH-DUMSER Regional Vice President None
8618 Hornwood Court
Charlotte, NC 28215
FRANK J. NASTA* Secretary Secretary
AURELIA LACSAMANA* Treasurer None
JEFFREY S. DEAN* Assistant Vice President, Marketing None
SANDRA FLORIS* Assistant Vice President, Order Desk None
KEITH LANDRY* Assistant Vice President, Order Desk None
GAIL S. CUSHING* Assistant Vice President, None
National Accounts Manager
JOSEPH M. MCGILL* Assistant Vice President and None
Compliance Officer
JACK TALVY* Assistant Vice President, Internal None
Marketing Services Manager
JOYCE PERESS* Assistant Secretary None
</TABLE>
* The principal business address of each of these directors and/or officers is
100 Park Avenue, New York, NY 10017.
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Custodian: Investors Fiduciary Trust Company
801 Pennsylvania
Kansas City, Missouri 64105 AND
Seligman Municipal Series Trust
100 Park Avenue
New York, New York 10017
ITEM 31. MANAGEMENT SERVICES - Seligman Data Corp. ("SDC") the Registrant's
shareholder service agent, has an agreement with First Data Investor
Services Group ("FDISG") pursuant to which FDISG provides a data
processing system for certain shareholder accounting and
recordkeeping functions performed by SDC, which commenced in July
1990. For the fiscal years ended September 30, 1997, 1996 and 1995,
the approximate cost of these services for each Series was:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
California Municipal High-Yield Series $6,100 $5,900 $5,800
California Municipal Quality Series 8,500 9,100 9,600
Florida Municipal Series 4,500 4,700 5,000
North Carolina Municipal Series 4,900 5,400 5,800
</TABLE>
<PAGE>
File No. 2-92569
PART C. OTHER INFORMATION (continued)
ITEM 32. UNDERTAKINGS -The Registrant undertakes: (1) if requested to do so by
the holders of at least ten percent of its outstanding shares, to
call a meeting of shareholders for the purpose of voting upon the
removal of a director or directors and to assist in communications
with other shareholders as required by Section 16(c) of the
Investment Company Act of 1940; and (2) to furnish to each person to
whom a prospectus is delivered, a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
<PAGE>
File No. 2-92569
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and
the Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Post-Effective Amendment pursuant
to Rule 485(b) under the Securities Act of 1933 and and has duly caused this
Post-Effective Amendment No. 26 to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 27th day of January, 1998.
SELIGMAN MUNICIPAL SERIES TRUST
By: /s/ WILLIAM C. MORRIS
----------------------------------
William C. Morris, Chairman*
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 26 has been signed below by the following persons
in the capacities indicated on January 27, 1998.
Signature Title
--------- -----
/s/ WILLIAM C. MORRIS Chairman of the Trustees (Principal
- -------------------------------------- executive officer) and Trustee
William C. Morris*
/s/ BRIAN T. ZINO President and Trustee
- --------------------------------------
Brian T. Zino
/s/ THOMAS G. ROSE Treasurer (Principal financial
- --------------------------------------
Thomas G. Rose and accounting officer)
John R. Galvin, Trustee )
Alice S. Ilchman, Trustee )
Frank A. McPherson, Trustee )
John E. Merow, Trustee ) /s/ BRIAN T. ZINO
Betsy S. Michel, Trustee ) -----------------------------------
James C. Pitney, Trustee ) *By: Brian T. Zino, Attorney-in-fact
James Q. Riordan, Trustee )
Richard R. Schmaltz, Trustee )
Robert L. Shafer, Trustee )
James N. Whitson, Trustee )
<PAGE>
File No. 2-92569
SELIGMAN MUNICIPAL SERIES TRUST
Post-Effective Amendment No. 26 to the
Registration Statement on Form N-1A
EXHIBIT INDEX
Item No. Description
- -------- -----------
24 (b) (11) Consent of Independent Auditors.
24 (b) (11) (a) Opinion and Consent of California Counsel.
24 (b) (11) (b) Opinion and Consent of North Carolina Counsel.
24 (b) (17) Financial Data Schedules
Other Exhibits Powers of Attorney
CONSENT OF INDEPENDENT AUDITORS
Seligman Municipal Series Trust, Inc.:
We consent to the use in Post-Effective Amendment No. 26 to Registration
Statement No. 2-92569 of our report dated October 31, 1997, appearing in the
Annual Report to Shareholders for the year ended September 30, 1997,
incorporated by reference in the Statement of Additional Information, and to the
reference to us under the caption "Financial Highlights" in the Prospectus,
which is also part of such Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
January 23, 1998
Sullivan & Cromwell
125 Broad Street
New York, New York 10004-2498
(212) 558-4000
January 27, 1998
Seligman Municipal Series Trust,
100 Park Avenue, 8th Floor,
New York, New York 10017.
Ladies and Gentlemen:
We have acted as counsel to Seligman Municipal Series Trust (the
"Trust"), and you have requested our opinion regarding the California personal
income tax consequences to holders of certain of the series of shares of
beneficial interest in the Trust.
The Trust, an unincorporated business trust organized under the laws
of Massachusetts pursuant to a Declaration of Trust (the "Declaration"), is an
open-end, non-diversified management investment company. Article VI of the
Declaration authorizes the issuance of shares or units of beneficial interest in
the Trust. The shares may be divided into series of shares, the proceeds of
which may be invested in separate investment portfolios. Each share in a series
represents a beneficial interest in the net assets of the series, and each
shareholder in a series is entitled to receive such shareholder's pro rata share
of the distributions of income and capital gains with respect to such series.
Upon redemption of a shareholder's shares in a series, the shareholder is paid
solely out of the funds and property of such series, and, upon liquidation or
termination of a series, a shareholder is entitled only to such shareholder's
pro rata share of the net assets of such series.
<PAGE>
All consideration received by the Trust for the issue or sale of
shares in a series, all assets in which such consideration is invested, and all
income from such assets, including any proceeds derived from the sale, exchange,
or liquidation of such assets, belong to that series, subject only to the rights
of creditors of the series. The assets belonging to each series are charged with
the liabilities attributable to that series only and with all expenses, costs,
charges, and reserves attributable to that series.
At present, the Trust offers separate investment series, each with
different investment objectives and policies and each composed of different
types of assets and having different shareholders. The Quality Series seeks high
tax-exempt income consistent with preservation of capital and with consideration
given to capital gain by investing in obligations of the state of California and
its political subdivisions the interest on which is exempt from Federal and
California personal income tax ("California tax-exempt securities") rated within
or of quality comparable to the three highest rating categories of Moody's
Investors Service ("Moody's") or Standard & Poor's Rating Service ("S&P"). The
High-Yield Series seeks the maximum amount of tax-exempt income consistent with
preservation of capital and with consideration given to capital gain by
investing primarily in California tax-exempt securities which are rated in the
medium and lower rating categories of Moody's or S&P or which are unrated (the
Quality Series and the High-Yield Series are collectively referred to herein as
"Series").
It is expected that any further series to be established under the
Declaration and offered by the Trust will have investment objectives and
policies, types of assets, and shareholders that are different from those of the
Series and any other series currently established under the Declaration. Section
6.9 of the Declaration provides that if the Trustees divide shares of the
<PAGE>
Trust into two or more series of classes, then all provisions of the Declaration
shall apply equally to each series.
The income of each Series will consist primarily of interest on
California tax-exempt securities, and the balance will consist in part of
interest on certain other securities which is excluded from gross income for
Federal and California personal income tax purposes (Non-California tax-exempt
securities").
In connection with this opinion we have assumed, with your consent,
that each series of the Trust is a separate regulated investment company taxable
under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code")
and that dividends paid by each Series will constitute in whole or in part
"exempt-interest dividends" within the meaning of Section 852(b)(5) of the Code.
On the basis of the foregoing, and our consideration of such matters
as we have considered necessary, we advise you that, in our opinion, for
California personal income tax purposes:
(1) Dividends received by a shareholder who is subject to
California personal income tax are generally includable in California
gross income. However, dividends received from each Series attributable
to interest received by the Series during its taxable year on
California tax-exempt securities and on Non-California tax-exempt
securities are excludable from California gross income provided that at
the end of each quarter of its taxable year, at least 50 percent of the
value of the total assets of the Series consists of such securities.
Section 17145 of the California Revenue and Taxation Code. Because each
Series will be treated as a separate regulated investment company, the
determination under Section 17145 with respect to a Series will be made
solely on the basis of the
<PAGE>
proportion of the value of the total assets of that Series constituting
California tax-exempt securities and Non-California tax-exempt
securities.
(2) Capital gain dividends of each Series, as defined in
Section 852(b)(3) of the Code, will be taxed as long-term capital gain
to a shareholder. Section 17088(a) of the California Revenue and
Taxation Code.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement for the Trust. In giving such consent we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Sullivan & Cromwell
Horack, Talley, Pharr & Lowndes
Professional Association
2600 One First Union Center
301 South College Street
Charlotte, North Carolina 28202-6038
December 9, 1997
Seligman Municipal Series Trust
100 Park Avenue
New York, New York 100017
Ladies and Gentlemen:
With respect to Post-Effective Amendment No. 26 to the Registration
Statement on Form N-1A under the Securities Act of 1933, as amended, of Seligman
Municipal Series Trust, of which Seligman North Carolina Municipal Series is a
series, we have reviewed the material relative to North Carolina Taxes in the
Registration Statement. Subject to such review, our opinion as delivered to you
and as filed with the Securities and Exchange Commission remains unchanged.
We consent to the filing of this consent as an exhibit to the
Registration Statement and to the reference to us under the heading "North
Carolina Taxes." In giving such consent, we do not thereby admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
Very truly yours,
Horack, Talley, Pharr & Lowndes
/s/ Stephen L. Smith
----------------------------------
Stephen L. Smith
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN
MUNICIPAL SERIES TRUST, a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 18th day of September, 1997.
/s/ JOHN R. GALVIN (L.S.)
----------------------------------
John R. Galvin
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN
MUNICIPAL SERIES TRUST, a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
her attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in her name and stead, in her capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 18th day of September, 1997.
/s/ ALICE S. ILCHMAN (L.S.)
----------------------------------
Alice S. Ilchman
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN
MUNICIPAL SERIES TRUST, a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 18th day of September, 1997.
/s/ FRANK A. MCPHERSON (L.S.)
----------------------------------
Frank A. McPherson
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN
MUNICIPAL SERIES TRUST, a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 18th day of September, 1997.
/s/ JOHN E. MEROW (L.S.)
----------------------------------
John E. Merow
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN
MUNICIPAL SERIES TRUST, a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
her attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in her name and stead, in her capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 18th day of September, 1997.
/s/ BETSY S. MICHEL (L.S.)
----------------------------------
Betsy S. Michel
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN
MUNICIPAL SERIES TRUST, a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 18th day of September, 1997.
/s/ WILLIAM C. MORRIS (L.S.)
----------------------------------
William C. Morris
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN
MUNICIPAL SERIES TRUST, a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 20th day of November, 1997.
/s/ JAMES C. PITNEY (L.S.)
----------------------------------
James C. Pitney
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN
MUNICIPAL SERIES TRUST, a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 18th day of September, 1997.
/s/ JAMES Q. RIORDAN (L.S.)
----------------------------------
James Q. Riordan
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN
MUNICIPAL SERIES TRUST, a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 18th day of September, 1997.
/s/ RICHARD R. SCHMALTZ (L.S.)
----------------------------------
Richard R. Schmaltz
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN
MUNICIPAL SERIES TRUST, a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 18th day of September, 1997.
/s/ ROBERT L. SHAFER (L.S.)
----------------------------------
Robert L. Shafer
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN
MUNICIPAL SERIES TRUST, a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 18th day of September, 1997.
/s/ JAMES N. WHITSON (L.S.)
----------------------------------
James N. Whitson
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN
MUNICIPAL SERIES TRUST, a Maryland corporation, which proposes to file with the
Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.
Executed this 18th day of September, 1997.
/s/ BRIAN T. ZINO (L.S.)
----------------------------------
Brian T. Zino
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>021
<NAME> SELIGMAN MUNICIPAL SERIES TRUST-CALIFORNA HIGH-YIELD CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 54679
<INVESTMENTS-AT-VALUE> 57726
<RECEIVABLES> 918
<ASSETS-OTHER> 201
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58845
<PAYABLE-FOR-SECURITIES> 2451
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 191
<TOTAL-LIABILITIES> 2642
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53038
<SHARES-COMMON-STOCK> 8005<F1>
<SHARES-COMMON-PRIOR> 7735<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 118
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3047
<NET-ASSETS> 52883<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3124<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (441)<F1>
<NET-INVESTMENT-INCOME> 2683<F1>
<REALIZED-GAINS-CURRENT> 211
<APPREC-INCREASE-CURRENT> 1476
<NET-CHANGE-FROM-OPS> 4472
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2683)<F1>
<DISTRIBUTIONS-OF-GAINS> (722)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1410<F1>
<NUMBER-OF-SHARES-REDEEMED> (1433)<F1>
<SHARES-REINVESTED> 293<F1>
<NET-CHANGE-IN-ASSETS> 4020
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 656
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 255<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 441<F1>
<AVERAGE-NET-ASSETS> 50970<F1>
<PER-SHARE-NAV-BEGIN> 6.50<F1>
<PER-SHARE-NII> .34<F1>
<PER-SHARE-GAIN-APPREC> .20<F1>
<PER-SHARE-DIVIDEND> (.34)<F1>
<PER-SHARE-DISTRIBUTIONS> (.09)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.61<F1>
<EXPENSE-RATIO> .87<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>024
<NAME> SELIGMAN MUNICIPAL SERIES TRUST-CALIFORNA HIGH-YIELD CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 54679
<INVESTMENTS-AT-VALUE> 57726
<RECEIVABLES> 918
<ASSETS-OTHER> 201
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58845
<PAYABLE-FOR-SECURITIES> 2451
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 191
<TOTAL-LIABILITIES> 2642
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53038
<SHARES-COMMON-STOCK> 502<F1>
<SHARES-COMMON-PRIOR> 295<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 118
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3047
<NET-ASSETS> 3320<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 144<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (42)<F1>
<NET-INVESTMENT-INCOME> 102<F1>
<REALIZED-GAINS-CURRENT> 211
<APPREC-INCREASE-CURRENT> 1476
<NET-CHANGE-FROM-OPS> 4472
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (102)<F1>
<DISTRIBUTIONS-OF-GAINS> (27)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 311<F1>
<NUMBER-OF-SHARES-REDEEMED> (118)<F1>
<SHARES-REINVESTED> 14<F1>
<NET-CHANGE-IN-ASSETS> 4020
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 656
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 12<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 42<F1>
<AVERAGE-NET-ASSETS> 2342<F1>
<PER-SHARE-NAV-BEGIN> 6.51<F1>
<PER-SHARE-NII> .28<F1>
<PER-SHARE-GAIN-APPREC> .19<F1>
<PER-SHARE-DIVIDEND> (.28)<F1>
<PER-SHARE-DISTRIBUTIONS> (.09)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.61<F1>
<EXPENSE-RATIO> 1.77<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>011
<NAME> SELIGMAN MUNICIPAL SERIES TRUST-CALIFORNA QUALITY CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 81265
<INVESTMENTS-AT-VALUE> 87417
<RECEIVABLES> 1351
<ASSETS-OTHER> 187
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 88955
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 286
<TOTAL-LIABILITIES> 286
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 82320
<SHARES-COMMON-STOCK> 12445<F1>
<SHARES-COMMON-PRIOR> 14159<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 197
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6152
<NET-ASSETS> 86992<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5276<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (743)<F1>
<NET-INVESTMENT-INCOME> 4533<F1>
<REALIZED-GAINS-CURRENT> 428
<APPREC-INCREASE-CURRENT> 2834
<NET-CHANGE-FROM-OPS> 7858
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4533)<F1>
<DISTRIBUTIONS-OF-GAINS> (28)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3053<F1>
<NUMBER-OF-SHARES-REDEEMED> (5099)<F1>
<SHARES-REINVESTED> 332<F1>
<NET-CHANGE-IN-ASSETS> (8537)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (202)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 454<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 743<F1>
<AVERAGE-NET-ASSETS> 90746<F1>
<PER-SHARE-NAV-BEGIN> 6.75<F1>
<PER-SHARE-NII> .34<F1>
<PER-SHARE-GAIN-APPREC> .24<F1>
<PER-SHARE-DIVIDEND> (.34)<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.99<F1>
<EXPENSE-RATIO> (.82)<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>014
<NAME> SELIGMAN MUNICIPAL SERIES TRUST-CALIFORNA QUALITY CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 81265
<INVESTMENTS-AT-VALUE> 87417
<RECEIVABLES> 1351
<ASSETS-OTHER> 187
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 88955
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 286
<TOTAL-LIABILITIES> 286
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 82320
<SHARES-COMMON-STOCK> 240<F1>
<SHARES-COMMON-PRIOR> 244<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 197
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6152
<NET-ASSETS> 1677<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 90<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (27)<F1>
<NET-INVESTMENT-INCOME> 63<F1>
<REALIZED-GAINS-CURRENT> 428
<APPREC-INCREASE-CURRENT> 2834
<NET-CHANGE-FROM-OPS> 7858
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (63)<F1>
<DISTRIBUTIONS-OF-GAINS> (1)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 865<F1>
<NUMBER-OF-SHARES-REDEEMED> (874)<F1>
<SHARES-REINVESTED> 5<F1>
<NET-CHANGE-IN-ASSETS> (8537)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (202)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27<F1>
<AVERAGE-NET-ASSETS> 1549<F1>
<PER-SHARE-NAV-BEGIN> 6.74<F1>
<PER-SHARE-NII> .28<F1>
<PER-SHARE-GAIN-APPREC> .23<F1>
<PER-SHARE-DIVIDEND> (.28)<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.97<F1>
<EXPENSE-RATIO> 1.72<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>051
<NAME> SELIGMAN MUNICIPAL SERIES TRUST-FLORIDA CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 41490
<INVESTMENTS-AT-VALUE> 43076
<RECEIVABLES> 854
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 43930
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 228
<TOTAL-LIABILITIES> 228
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41716
<SHARES-COMMON-STOCK> 5390<F1>
<SHARES-COMMON-PRIOR> 5894<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 400
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1586
<NET-ASSETS> 42024<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2526<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (457)<F1>
<NET-INVESTMENT-INCOME> 2069<F1>
<REALIZED-GAINS-CURRENT> 402
<APPREC-INCREASE-CURRENT> 900
<NET-CHANGE-FROM-OPS> 3434
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2069)<F1>
<DISTRIBUTIONS-OF-GAINS> (612)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 535<F1>
<NUMBER-OF-SHARES-REDEEMED> (1189)<F1>
<SHARES-REINVESTED> 150<F1>
<NET-CHANGE-IN-ASSETS> (2775)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 630
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 220<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 457<F1>
<AVERAGE-NET-ASSETS> 43978<F1>
<PER-SHARE-NAV-BEGIN> 7.67<F1>
<PER-SHARE-NII> .36<F1>
<PER-SHARE-GAIN-APPREC> .23<F1>
<PER-SHARE-DIVIDEND> (.36)<F1>
<PER-SHARE-DISTRIBUTIONS> (.10)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.80<F1>
<EXPENSE-RATIO> 1.04<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>054
<NAME> SELIGMAN MUNICIPAL SERIES TRUST-FLORIDA CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 41490
<INVESTMENTS-AT-VALUE> 43076
<RECEIVABLES> 854
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 43930
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 228
<TOTAL-LIABILITIES> 228
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41716
<SHARES-COMMON-STOCK> 215<F1>
<SHARES-COMMON-PRIOR> 166<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 400
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1586
<NET-ASSETS> 1678<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 92<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (29)<F1>
<NET-INVESTMENT-INCOME> 63<F1>
<REALIZED-GAINS-CURRENT> 402
<APPREC-INCREASE-CURRENT> 900
<NET-CHANGE-FROM-OPS> 3434
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (63)<F1>
<DISTRIBUTIONS-OF-GAINS> (20)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 84<F1>
<NUMBER-OF-SHARES-REDEEMED> (43)<F1>
<SHARES-REINVESTED> 8<F1>
<NET-CHANGE-IN-ASSETS> (2775)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 630
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 29<F1>
<AVERAGE-NET-ASSETS> 1603<F1>
<PER-SHARE-NAV-BEGIN> 7.68<F1>
<PER-SHARE-NII> .30<F1>
<PER-SHARE-GAIN-APPREC> .23<F1>
<PER-SHARE-DIVIDEND> (.30)<F1>
<PER-SHARE-DISTRIBUTIONS> (.10)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.81<F1>
<EXPENSE-RATIO> 1.81<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>041
<NAME> SELIGMAN MUNICIPAL SERIES TRUST-NORTH CAROLINA CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 31748
<INVESTMENTS-AT-VALUE> 33369
<RECEIVABLES> 579
<ASSETS-OTHER> 130
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34078
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 177
<TOTAL-LIABILITIES> 177
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32017
<SHARES-COMMON-STOCK> 4061<F1>
<SHARES-COMMON-PRIOR> 4584<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 263
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1621
<NET-ASSETS> 32684<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1962<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (371)<F1>
<NET-INVESTMENT-INCOME> 1591<F1>
<REALIZED-GAINS-CURRENT> 265
<APPREC-INCREASE-CURRENT> 797
<NET-CHANGE-FROM-OPS> 2701
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1591)<F1>
<DISTRIBUTIONS-OF-GAINS> (146)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 266<F1>
<NUMBER-OF-SHARES-REDEEMED> (908)<F1>
<SHARES-REINVESTED> 119<F1>
<NET-CHANGE-IN-ASSETS> (3265)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 148
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 171<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 371<F1>
<AVERAGE-NET-ASSETS> 34132<F1>
<PER-SHARE-NAV-BEGIN> 7.84<F1>
<PER-SHARE-NII> .37<F1>
<PER-SHARE-GAIN-APPREC> .24<F1>
<PER-SHARE-DIVIDEND> (.37)<F1>
<PER-SHARE-DISTRIBUTIONS> (.03)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.05<F1>
<EXPENSE-RATIO> 1.09<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>044
<NAME> SELIGMAN MUNICIPAL SERIES TRUST-NORTH CAROLINA CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 31748
<INVESTMENTS-AT-VALUE> 33369
<RECEIVABLES> 579
<ASSETS-OTHER> 130
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34078
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 177
<TOTAL-LIABILITIES> 177
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32017
<SHARES-COMMON-STOCK> 151<F1>
<SHARES-COMMON-PRIOR> 157<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 263
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1621
<NET-ASSETS> 1217<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 70<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (22)<F1>
<NET-INVESTMENT-INCOME> 48<F1>
<REALIZED-GAINS-CURRENT> 265
<APPREC-INCREASE-CURRENT> 797
<NET-CHANGE-FROM-OPS> 2701
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (48)<F1>
<DISTRIBUTIONS-OF-GAINS> (4)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16<F1>
<NUMBER-OF-SHARES-REDEEMED> (27)<F1>
<SHARES-REINVESTED> 5<F1>
<NET-CHANGE-IN-ASSETS> (3265)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 148
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 22<F1>
<AVERAGE-NET-ASSETS> 1217<F1>
<PER-SHARE-NAV-BEGIN> 7.83<F1>
<PER-SHARE-NII> .31<F1>
<PER-SHARE-GAIN-APPREC> .25<F1>
<PER-SHARE-DIVIDEND> (.31)<F1>
<PER-SHARE-DISTRIBUTIONS> (.03)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.05<F1>
<EXPENSE-RATIO> 1.85<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
