January 28, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Seligman Pennsylvania Municipal Fund Series
(formerly, Seligman Pennsylvania Tax-Exempt Fund Series) (the "Fund")
Post-Effective Amendment No. 15
File Nos. 33-5793 and 811-4666
---------------------------------------------------------------------
Dear Sirs:
Following is the Edgarized filing of Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A of the Fund filed pursuant to Rule 485(b)
under the Securities Act of 1933 ("1933 Act") and Amendment No. 17 under the
Investment Company Act of 1940. The filing has been marked to show changes from
Post-Effective Amendment No. 14 filed on January 30, 1996.
This filing is being made for the purpose of updating the Fund's financials
and making certain other non-material changes as the Fund deemed appropriate. As
such, this post-effective amendment contains no disclosure that would render it
ineligible to become effective pursuant to Rule 485(b) of the 1933 Act.
If there are any questions or comments, please call the undersigned at
(212) 850-1426.
Very truly yours,
/s/ Maureen A. Coleman
-------------------------
Maureen A. Coleman
Assistant Vice President,
Law and Regulation
MAC:mc
copy w/ encl.: Keith O'Connell
<PAGE>
File No. 33-5793
As filed with the Securities and Exchange Commission on January 29, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. __ |_|
Post-Effective Amendment No. 15 |X|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 17 |X|
- --------------------------------------------------------------------------------
SELIGMAN PENNSYLVANIA MUNICIPAL FUND SERIES
(Exact name of registrant as specified in charter)
- --------------------------------------------------------------------------------
100 PARK AVENUE, NEW YORK, NEW YORK 10017
(Address of principal executive offices)
- --------------------------------------------------------------------------------
Registrant's Telephone Number: 212-850-1864 or
Toll-Free 800-221-2450
- --------------------------------------------------------------------------------
THOMAS G. ROSE, Treasurer
100 Park Avenue
New York, New York 10017
(Name and address of agent for service)
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective (check the
appropriate box).
|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, 1996 on November 26,
1996.
<PAGE>
File No. 33-5793
CROSS REFERENCE SHEET
POST-EFFECTIVE AMENDMENT NO. 15
Pursuant to Rule 481 (a)
<TABLE>
<CAPTION>
Item in Part A of Form N-1A Location in Prospectus
--------------------------- ----------------------
<S> <C>
1. Cover Page Cover Page
2. Synopsis Summary of Series Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; Organization and Capitalization
5. Management of the Fund Management Services
5a. Management's Discussion of Fund Management Services
Performance
6. Capital Stock and Other Securities Organization and Capitalization
7. Purchase of Securities Being Offered Alternative Distribution System; Purchase of Shares; Administration,
Shareholder Services and Distribution Plan
8. Redemption or Repurchase Telephone Transactions; Redemption of Shares; Exchange Privilege; Further
Information About Transactions In The Funds
9. Pending Legal Proceedings Not Applicable
Item in Part B of Form N-1A Location in Statement of Additional Information
- --------------------------- -----------------------------------------------
10. Cover Page Cover Page
11. Table Of Contents Table Of Contents
12. General Information and History Investment Objectives, Policies and Risks; General Information; Appendix C
13. Investment Objectives and Policies Investment Objectives, Policies And Risks; Investment Limitations
14. Management of the Fund Trustees and Officers; Management And Expenses
15. Control Persons and Principal Trustees and Officers
Holders of Securities
16. Investment Advisory and Other Services Management And Expenses; Distribution Services
17. Brokerage Allocations Administration, Shareholder Services and Distribution Plan;
Portfolio Transactions
18. Capital Stock and Other Securities General Information
19. Purchase, Redemption and Pricing of Purchase and Redemption of Fund Shares; Valuation
Securities Being Offered
20. Tax Status Taxes; Appendix B
21. Underwriters Distribution Services
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
================================================================================
PROSPECTUS
SELIGMAN MUNICIPAL FUND
SERIES, INC.
SELIGMAN MUNICIPAL
SERIES TRUST
SELIGMAN NEW JERSEY
MUNICIPAL FUND, INC.
SELIGMAN PENNSYLVANIA MUNICIPAL FUND SERIES
February 1, 1997
================================================================================
Seeking Income
Free From Regular Income Tax
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, NY 10017
Table of Contents
Page
Summary of Series Expenses ................. 3
Financial Highlights ....................... 10
Alternative Distribution System ............ 18
Investment Objectives and Policies ......... 19
Management Services ........................ 27
Purchase of Shares ......................... 29
Telephone Transactions ..................... 33
Redemption of Shares ....................... 34
Administration, Shareholder Services
and Distribution Plans .................. 37
Exchange Privilege ......................... 38
Further Information about
Transactions in the Funds ............... 39
Dividends and Distributions ................ 40
Taxes ...................................... 40
Shareholder Information .................... 51
Advertising a Series' Performance .......... 52
Organization and Capitalization ............ 53
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 2/97
<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, NY 10017
New York Telephone: (212) 850-1864
Toll-Free Telephone: (800) 221-2450--all continental United States
February 1, 1997
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 year; except 1% in the first year; except 1% in the first year;
first 18 months none first 18 months none first 18 months none
if initial sales thereafter if initial sales thereafter if initial sales thereafter
load was waived load was waived load was waived
in full due to in full due to in full due to
size of size of size of
purchase purchase purchase
Redemption Fees............. None None None None None None
Exchange Fees............... None None None None None None
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL SERIES OPERATING
EXPENSES
FOR FISCAL 1996 (as
percentage of average
net assets)
Management Fees........... .50% .50% .50% .50% .50% .50%
12b-1 Fees................ .09 1.00* .10 1.00* .09 1.00*
Other Expenses............ .21 .17 .25 .25 .24 .23
---- ---- ---- ---- ---- ----
Total Series Operating
Expenses ................. .80% 1.67% .85% 1.75% .83% 1.73%
==== ==== ==== ==== ==== ====
</TABLE>
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.
<TABLE>
<CAPTION>
NAT'L SERIES CO SERIES GA SERIES
---------------------- ------------------------ -------------------------
EXAMPLE CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
- ------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
An investor would pay the
following expenses on a $1,000
investment, assuming 1) 5%
annual return and (2) redemption
at the end of each time period:
1 yr..................... $ 55 $ 27+ $ 56 $ 28+ $ 56 $ 28+
3 yrs.................... 72 53 73 55 73 54
5 yrs.................... 90 91 92 95 91 94
10 yrs.................... 142 198 147 206 145 204
</TABLE>
* Includes an annual distribution fee of up to .75 of 1% and an annual service
fee of up to .25 of 1%. Pursuant to the rules of the National Association of
Securities Dealers, Inc., the aggregate deferred sales loads and annual
distribution fees on Class D shares of each Series may not exceed 6.25% of
total gross sales, subject to certain exclusions. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a
long-term Class D shareholder of a Series may pay more in total sales loads
(including distribution fees) than the economic equivalent of 6.25% of such
shareholder's investment in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: NAT'L--$17; CO--$18; GA--$18.
3
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF SERIES EXPENSES--(continued)
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 year; except 1% in the first year; except 1% in the first year;
first 18 months none first 18 months none first 18 months none
if initial sales thereafter if initial sales thereafter if initial sales thereafter
load was waived load was waived load was waived
in full due to in full due to in full due to
size of size of size of
purchase purchase purchase
Redemption Fees............. None None None None None None
Exchange Fees............... None None None None None None
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL SERIES OPERATING
EXPENSES FOR FISCAL 1996
(as percentage of
average net assets)
Management Fees........... .50% .50% .50% .50% .50% .50%
12b-1 Fees................ .10 1.00* .10 1.00* .10 1.00*
Other Expenses............ .22 .22 .24 .22 .20 .20
---- ---- ---- ---- ---- ----
Total Series Operating
Expenses ................. .82% 1.72% .84% 1.72% .80% 1.70%
==== ==== ==== ==== ==== ====
</TABLE>
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.
<TABLE>
<CAPTION>
LA SERIES MD SERIES MA SERIES
---------------------- ------------------------ -------------------------
EXAMPLE CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
An investor would pay the
following expenses on a $1,000
investment, assuming 1) 5%
annual return and (2) redemption
at the end of each time period:
1 yr..................... $ 55 $ 27+ $ 56 $ 27+ $ 55 $ 27+
3 yrs.................... 72 54 73 54 72 54
5 yrs.................... 91 93 92 93 90 92
10 yrs.................... 144 203 146 203 142 201
</TABLE>
* Includes an annual distribution fee of up to .75 of 1% and an annual service
fee of up to .25 of 1%. Pursuant to the rules of the National Association of
Securities Dealers, Inc., the aggregate deferred sales loads and annual
distribution fees on Class D shares of each Series may not exceed 6.25% of
total gross sales, subject to certain exclusions. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a
long-term Class D shareholder of a Series may pay more in total sales loads
(including distribution fees) than the economic equivalent of 6.25% of such
shareholder's investment in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: LA--$17; MD--$17; MA--$17.
4
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF SERIES EXPENSES--(continued)
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 year; except 1% in the first year; except 1% in the first year;
first 18 months none first 18 months none first 18 months none
if initial sales thereafter if initial sales thereafter if initial sales thereafter
load was waived load was waived load was waived
in full due to in full due to in full due to
size of size of size of
purchase purchase purchase
Redemption Fees............. None None None None None None
Exchange Fees............... None None None None None None
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL SERIES OPERATING
EXPENSES FOR FISCAL 1996
(as percentage of
average net assets)
Management Fees........... .50% .50% .50% .50% .50% .50%
12b-1 Fees................ .10 1.00* .10 1.00* .10 1.00*
Other Expenses............ .18 .18 .21 .21 .26 .26
---- ---- ---- ---- ----- ----
Total Series Operating
Expenses ................. .78% 1.68% .81% 1.71% .86% 1.76%
==== ==== ==== ==== ==== ====
</TABLE>
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.
<TABLE>
<CAPTION>
MI SERIES MN SERIES MO SERIES
---------------------- ------------------------- ------------------------
EXAMPLE CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
An investor would pay the
following expenses on a $1,000
investment, assuming 1) 5%
annual return and (2) redemption
at the end of each time period:
1 yr..................... $ 55 $ 27+ $ 55 $ 27+ $ 56 $ 28+
3 yrs.................... 71 53 72 54 74 55
5 yrs.................... 89 91 90 93 93 95
10 yrs.................... 140 199 143 202 149 207
</TABLE>
* Includes an annual distribution fee of up to .75 of 1% and an annual service
fee of up to .25 of 1%. Pursuant to the rules of the National Association of
Securities Dealers, Inc., the aggregate deferred sales loads and annual
distribution fees on Class D shares of each Series may not exceed 6.25% of
total gross sales, subject to certain exclusions. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a
long-term Class D shareholder of a Series may pay more in total sales loads
(including distribution fees) than the economic equivalent of 6.25% of such
shareholder's investment in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: MI--$17; MN--$17; 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 year; except 1% in the first year; except 1% in the first year;
first 18 months none first 18 months none first 18 months none
if initial sales thereafter if initial sales thereafter if initial sales thereafter
load was waived load was waived load was waived
in full due to in full due to in full due to
size of size of size of
purchase purchase purchase
Redemption Fees............. None None None None None None
Exchange Fees............... None None None None None None
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL SERIES OPERATING
EXPENSES FOR FISCAL 1996
(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............ .18 .18 .21 .17 .26 .26
---- ---- ---- ---- ---- ----
Total Series Operating
Expenses ................. 77% 1.68% .77% 1.67% .86% 1.76%
=== ==== ==== ==== ==== ====
</TABLE>
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.
<TABLE>
<CAPTION>
NY SERIES OH SERIES OR SERIES
---------------------- ------------------------- ------------------------
EXAMPLE CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
An investor would pay the
following expenses on a $1,000
investment, assuming 1) 5%
annual return and (2) redemption
at the end of each time period:
1 yr..................... $ 55 $ 27+ $ 55 $ 27+ $ 56 $ 28+
3 yrs.................... 71 53 71 53 74 55
5 yrs.................... 88 91 88 91 93 95
10 yrs.................... 138 199 138 198 149 207
</TABLE>
* Includes an annual distribution fee of up to .75 of 1% and an annual service
fee of up to .25 of 1%. Pursuant to the rules of the National Association of
Securities Dealers, Inc., the aggregate deferred sales loads and annual
distribution fees on Class D shares of each Series may not exceed 6.25% of
total gross sales, subject to certain exclusions. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a
long-term Class D shareholder of a Series may pay more in total sales loads
(including distribution fees) than the economic equivalent of 6.25% of such
shareholder's investment in such shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: NY--$17; OH--$17; OR--$18.
6
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF SERIES EXPENSES--(continued)
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 year; except 1% in the first year; except 1% in the first year;
first 18 months none first 18 months none first 18 months none
if initial sales thereafter if initial sales thereafter if initial sales thereafter
load was waived load was waived load was waived
in full due to in full due to in full due to
size of size of size of
purchase purchase purchase
Redemption Fees............. None None None None None None
Exchange Fees............... None None None None None None
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL SERIES OPERATING
EXPENSES FOR FISCAL 1996
(as percentage of average
net assets)
Management Fees........... .50% .50% .50% .50% .50% .50%
12b-1 Fees................ .10 1.00* .10 1.00* .10 1.00*
Other Expenses............ .20 .20 .24 .24 .19 .19
---- ---- ---- ---- ---- ----
Total Series Operating
Expenses ................. .80% 1.70% .84% 1.74% .79% 1.69%
==== ==== ==== ==== ==== ====
</TABLE>
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.
<TABLE>
<CAPTION>
SC SERIES CA HIGH-YIELD SERIES CA QUALITY SERIES
---------------------- ------------------------- ------------------------
EXAMPLE CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
An investor would pay the
following expenses on a $1,000
investment, assuming 1) 5%
annual return and (2) redemption
at the end of each time period:
1 yr..................... $ 55 $ 27+ $ 56 $ 28+ $ 55 $ 27+
3 yrs.................... 72 54 73 55 72 53
5 yrs.................... 90 92 92 94 89 92
10 yrs.................... 141 201 146 205 141 200
</TABLE>
* Includes an annual distribution fee of up to .75 of 1% and an annual service
fee of up to .25 of 1% (collectively, "distribution fee"). Pursuant to the
rules of the National Association of Securities Dealers, Inc., the aggregate
deferred sales loads and annual distribution fees on Class D shares of each
Series may not exceed 6.25% of total gross sales, subject to certain
exclusions. The 6.25% limitation is imposed on the Series rather than on a
per shareholder basis. Therefore, a long-term Class D shareholder of a
Series may pay more in total sales loads (including distribution fees) than
the economic equivalent of 6.25% of such shareholder's investment in such
shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: SC--$17; CA HIGH-YIELD--$18;
CA QUALITY--$17.
7
<PAGE>
SUMMARY OF SERIES EXPENSES--(continued)
<TABLE>
<CAPTION>
FL SERIES NC SERIES NJ FUND
------------------------ ------------------------ --------------------------
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 year; except 1% in the first year; except 1% in the first year;
first 18 months none first 18 months none first 18 months none
if initial sales thereafter if initial sales thereafter if initial sales thereafter
load was waived load was waived load was waived
in full due to in full due to in full due to
size of size of size of
purchase purchase purchase
Redemption Fees............. None None None None None None
Exchange Fees............... None None None None None None
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL SERIES OPERATING
EXPENSES FOR FISCAL 1996
(as percentage of average
net assets)
Management Fees........... .50% .50% .50% .50% .50% .50%
12b-1 Fees................ .24 1.00* .24 1.00* .23 1.00*
Other Expenses............ .23 .23 .32 .32 .29 .29
---- ---- ---- ---- ---- ----
Total Series Operating
Expenses ................. 97% 1.73% 1.06% 1.82% 1.02% 1.79%
==== ==== ==== ==== ==== ====
</TABLE>
In fiscal 1996, the Manager, in its discretion, waived a portion of its fee
from the Florida Series and from the North Carolina Series. In fiscal 1997, the
Manager does not expect to waive any of its fees, and the expense information in
the table has been restated to reflect the discontinuance of the management fee
waiver.
THE 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.
<TABLE>
<CAPTION>
FL SERIES NC SERIES NJ FUND
---------------------- ------------------------- ------------------------
EXAMPLE CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
An investor would pay the
following expenses on a $1,000
investment, assuming 1) 5%
annual return and (2) redemption
at the end of each time period:
1 yr..................... $ 57 $ 28+ $ 58 $ 28+ $ 57 $ 28+
3 yrs.................... 77 54 80 57 78 56
5 yrs.................... 99 94 103 99 101 97
10 yrs.................... 161 204 171 214 166 211
</TABLE>
* Includes an annual distribution fee of up to .75 of 1% and an annual service
fee of up to .25 of 1% (collectively, "distribution fee"). Pursuant to the
rules of the National Association of Securities Dealers, Inc., the aggregate
deferred sales loads and annual distribution fees on Class D shares of each
Series may not exceed 6.25% of total gross sales, subject to certain
exclusions. The 6.25% limitation is imposed on the Series rather than on a
per shareholder basis. Therefore, a long-term Class D shareholder of a
Series may pay more in total sales loads (including distribution fees) than
the economic equivalent of 6.25% of such shareholder's investment in such
shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: FL--$18; NC--$18; NJ--$18.
8
<PAGE>
SUMMARY OF SERIES EXPENSES--(continued)
PA FUND
------------------------
CLASS A CLASS D
------ ------
(INITIAL (DEFERRED
SALES LOAD SALES LOAD
ALTERNATIVE) ALTERNATIVE)
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
first 18 months year;
if initial sales None
load was waived thereafter
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 1996 (as
percentage of average
net assets)
Management Fees............................ .50% .50%
12b-1 Fees................................. .23 1.00*
Other Expenses............................. .38 .38
---- ----
Total Series Operating Expenses............ 1.11% 1.88%
==== ====
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............................................... $ 58 29+
3 yrs.............................................. 81 59
5 yrs.............................................. 106 102
10 yrs.............................................. 176 220
* Includes an annual distribution fee of up to .75 of 1% and an annual service
fee of up to .25 of 1% (collectively, "distribution fee"). Pursuant to the
rules of the National Association of Securities Dealers, Inc., the aggregate
deferred sales loads and annual distribution fees on Class D shares of each
Series may not exceed 6.25% of total gross sales, subject to certain
exclusions. The 6.25% limitation is imposed on the Series rather than on a
per shareholder basis. Therefore, a long-term Class D shareholder of a
Series may pay more in total sales loads (including distribution fees) than
the economic equivalent of 6.25% of such shareholder's investment in such
shares.
+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: PA--$19.
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 1996
financial statements and notes contained in the fiscal 1996 Annual Report of
each Fund which may be obtained by calling or writing the Funds at the telephone
numbers or address provided on the cover page of this Prospectus.
The per share operating performance data is designed to allow investors to
trace the operating performance, on a per share basis, from a Series' beginning
net asset value to the ending net asset value so that they may understand the
effect that individual items have on their investment, assuming it was held
throughout the period. Generally, the per share amounts are derived by
converting the actual dollar amounts incurred for each item, as disclosed in the
financial statements, to their equivalent per share amounts. The total return
based on net asset value measures a Series' performance assuming investors
purchased shares at the net asset value as of the beginning of the period,
invested dividends and capital gains paid at net asset value and then sold their
shares at net asset value per share on the last day of the period. The total
return computations do not reflect any sales charges investors may incur in
purchasing or selling shares. Total returns for periods of less than one year
are not annualized.
<TABLE>
<CAPTION>
NET REALIZED (DECREASE)
NET ASSET VALUE NET & UNREALIZED FROM DIVIDENDS DISTRIBUTIONS NET INCREASE NET ASSET
PER SHARE OPERATING AT BEGINNING INVESTMENT INVESTMENT INVESTMENT PAID OR FROM NET (DECREASE) IN VALUE AT
PERFORMANCE: OF PERIOD INCOME0 GAIN (LOSS) OPERATIONS DECLARED GAIN REALIZED NET ASSET VALUE END OF PERIOD
------------ --------- ------- ---------------------- -------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
National Series--Class A
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
Year ended 9/30/87....... 8.48 0.59 (0.74) (0.15) (0.59) (0.33) (1.07) 7.41
National Series--Class D
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 9/30/96....... 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
Year ended 9/30/87....... 7.07 0.47 (0.66) (0.19) (0.47) (0.03) (0.69) 6.38
Colorado Series--Class D
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 9/30/96....... 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
6/15/87*- 9/30/87........ 7.14 0.13 (0.65) (0.52) (0.13) -- (0.65) 6.49
Georgia Series--Class D
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 9/30/96....... 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
Year ended 9/30/87....... 7.93 0.55 (0.49) 0.06 (0.55) (0.08) (0.57) 7.36
Louisiana Series--Class D
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
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
RATIO OF ADJUSTED
NET ADJUSTED RATIO OF NET
TOTAL RETURN RATIO OF INVESTMENT ADJUSTED NET RATIO OF INVESTMENT
BASED ON EXPENSES INCOME NET ASSETS AT INVESTMENT EXPENSES TO INCOME
NET ASSET TO AVERAGE TO AVERAGE PORTFOLIO END OF PERIOD INCOME AVERAGE NET TO AVERAGE
VALUE NET ASSETS0 NET ASSETS0 TURNOVER (000'S OMITTED) PER SHARE0 ASSETS0 NET ASSETS0
----- ----------- ----------- -------- --------------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
National Series--Class A
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
Year ended 9/30/87....... (2.37) 0.74 7.15 64.79 133,341
National Series--Class D
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 9/30/96....... 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
Year ended 9/30/87....... (3.18) 0.77 6.61 16.70 79,961 $0.46 0.85% 6.53%
Colorado Series--Class D
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 9/30/96....... 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
6/15/87*- 9/30/87........ (7.61) 0.17+ 6.64+ 21.71 6,382 0.07 2.87+ 3.94+
Georgia Series--Class D
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 9/30/96....... 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
Year ended 9/30/87....... 0.62 0.73 7.02 10.20 49,661
Louisiana Series--Class D
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
</TABLE>
- ----------
+ Annualized.
++ For the year ended 9/30/94.
11
<PAGE>
<TABLE>
<CAPTION>
NET REALIZED (DECREASE)
NET ASSET VALUE NET & UNREALIZED FROM DIVIDENDS DISTRIBUTIONS NET INCREASE NET ASSET
PER SHARE OPERATING AT BEGINNING INVESTMENT INVESTMENT INVESTMENT PAID OR FROM NET (DECREASE) IN VALUE AT
PERFORMANCE: OF PERIOD INCOME0 GAIN (LOSS) OPERATIONS DECLARED GAIN REALIZED NET ASSET VALUE END OF PERIOD
------------ --------- ------- ---------------------- -------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maryland Series--Class A
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
Year ended 9/30/87....... 7.59 0.48 (0.72) (0.24) (0.48) -- (0.72) 6.87
Maryland Series--Class D
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 9/30/96....... 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
Year ended 9/30/87....... 8.07 0.55 (0.69) (0.14) (0.55) (0.18) (0.87) 7.20
Massachusetts Series--Class D
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 9/30/96....... 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
Year ended 9/30/87....... 8.54 0.56 (0.77) (0.21) (0.56) (0.29) (1.06) 7.48
Michigan Series--Class D
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 9/30/96....... 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
Year ended 9/30/87....... 7.99 0.53 (0.66) (0.13) (0.53) (0.21) (0.87) 7.12
Minnesota Series--Class D
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
Missouri Series--Class A
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
Year ended 9/30/87....... 7.32 0.47 (0.75) (0.28) (0.47) -- (0.75) 6.57
Missouri Series--Class D
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
</TABLE>
- ----------
o 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.
12
<PAGE>
<TABLE>
<CAPTION>
RATIO OF ADJUSTED
NET ADJUSTED RATIO OF NET
TOTAL RETURN RATIO OF INVESTMENT ADJUSTED NET RATIO OF INVESTMENT
BASED ON EXPENSES INCOME NET ASSETS AT INVESTMENT EXPENSES TO INCOME
NET ASSET TO AVERAGE TO AVERAGE PORTFOLIO END OF PERIOD INCOME AVERAGE NET TO AVERAGE
VALUE NET ASSETS0 NET ASSETS0 TURNOVER (000'S OMITTED) PER SHARE0 ASSETS0 NET ASSETS0
----- ----------- ----------- -------- --------------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Maryland Series--Class A
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
Year ended 9/30/87 .......... (3.41) 0.87 6.45 21.48 50,580
Maryland Series--Class D
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 9/30/96 .......... 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
Year ended 9/30/87 .......... (2.16) 0.79 6.95 16.14 131,404
Massachusetts Series--Class D
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 9/30/96 .......... 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
Year ended 9/30/87 .......... (2.87) 0.79 6.89 15.40 104,053
Michigan Series--Class D
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 9/30/96 .......... 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
Year ended 9/30/87 .......... (1.94) 0.89 6.85 16.76 118,093
Minnesota Series--Class D
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
Missouri Series--Class A
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
Year ended 9/30/87 (4.20) 0.82 6.51 11.53 59,122 0.47 0.89 6.43
Missouri Series--Class D
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+
</TABLE>
- ----------
+ Annualized.
++ For the year ended 9/30/94.
13
<PAGE>
<TABLE>
<CAPTION>
NET REALIZED (DECREASE)
NET ASSET VALUE NET & UNREALIZED FROM DIVIDENDS DISTRIBUTIONS NET INCREASE NET ASSET
PER SHARE OPERATING AT BEGINNING INVESTMENT INVESTMENT INVESTMENT PAID OR FROM NET (DECREASE) IN VALUE AT
PERFORMANCE: OF PERIOD INCOME0 GAIN (LOSS) OPERATIONS DECLARED GAIN REALIZED NET ASSET VALUE END OF PERIOD
------------ --------- ------- ---------------------- -------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
New York Series--Class A
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
Year ended 9/30/87....... 8.24 0.55 (0.71) (0.16) (0.55) (0.25) (0.96) 7.28
New York Series--Class D
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 9/30/96....... 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
Year ended 9/30/87....... 8.09 0.57 (0.59) (0.02) (0.57) (0.12) (0.71) 7.38
Ohio Series--Class D
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 9/30/96....... 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
10/15/86*- 9/30/87....... 7.14 0.43 (0.93) (0.50) (0.43) -- (0.93) 6.21
Oregon Series--Class D
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 9/30/96....... 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
6/30/87*-9/30/87......... 7.14 0.11 (0.47) (0.36) (0.11) -- (0.47) 6.67
South Carolina Series--Class D
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 9/30/96....... 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
Year ended 9/30/87....... 6.73 0.46 (0.53) (0.07) (0.46) (0.26) (0.79) 5.94
California High-Yield Series--Class D
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
</TABLE>
- ----------
o 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.
14
<PAGE>
<TABLE>
<CAPTION>
RATIO OF ADJUSTED
NET ADJUSTED RATIO OF NET
TOTAL RETURN RATIO OF INVESTMENT ADJUSTED NET RATIO OF INVESTMENT
BASED ON EXPENSES INCOME NET ASSETS AT INVESTMENT EXPENSES TO INCOME
NET ASSET TO AVERAGE TO AVERAGE PORTFOLIO END OF PERIOD INCOME AVERAGE NET TO AVERAGE
VALUE NET ASSETS0 NET ASSETS0 TURNOVER (000'S OMITTED) PER SHARE0 ASSETS0 NET ASSETS0
----- ----------- ----------- -------- --------------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
New York Series--Class A
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
Year ended 9/30/87 ..........(2.42) 0.77 6.90 20.42 72,782
New York Series--Class D
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 9/30/96 .......... 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
Year ended 9/30/87 ..........(0.66) 0.78 7.05 15.00 119,703
Ohio Series--Class D
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 9/30/96 .......... 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 5.86
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
10/15/86*- 9/30/87 ..........(7.68) 0.52+ 6.44+ 20.16 24,434 0.39 1.11+ 5.85+
Oregon Series--Class D
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 9/30/96 .......... 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
6/30/87*-9/30/87 ............(5.37) 0.02+ 6.34+ -- 12,033 0.08 2.08+ 4.28+
South Carolina Series--Class D
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 9/30/96 .......... 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
Year ended 9/30/87 ..........(1.46) 0.83 7.07 16.89 56,598
California High-Yield Series--Class D
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
</TABLE>
- ----------
+ Annualized.
++ For the year ended 9/30/94.
15
<PAGE>
<TABLE>
<CAPTION>
NET REALIZED (DECREASE)
NET ASSET VALUE NET & UNREALIZED FROM DIVIDENDS DISTRIBUTIONS NET INCREASE NET ASSET
PER SHARE OPERATING AT BEGINNING INVESTMENT INVESTMENT INVESTMENT PAID OR FROM NET (DECREASE) IN VALUE AT
PERFORMANCE: OF PERIOD INCOME0 GAIN (LOSS) OPERATIONS DECLARED GAIN REALIZED NET ASSET VALUE END OF PERIOD
------------ --------- ------- ---------------------- -------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California Quality Series--Class A
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
Year ended 9/30/87....... 6.73 0.45 (0.59) (0.14) (0.45) (0.13) (0.72) 6.01
California Quality Series--Class D
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 9/30/96....... 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
11/17/86*- 9/30/87....... 7.14 0.40 (1.12) (0.72) (0.40) -- (1.12) 6.02
Florida Series--Class D
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 9/30/96....... 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 9/30/96....... 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
New Jersey--Class A
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 9/30/96....... 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 9/30/96....... 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
Year ended 9/30/87....... 7.58 0.51 (0.81) (0.30) (0.51) (0.01) (0.82) 6.76
Pennsylvania--Class D
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
</TABLE>
- ----------
o 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.
16
<PAGE>
<TABLE>
<CAPTION>
RATIO OF ADJUSTED
NET ADJUSTED RATIO OF NET
TOTAL RETURN RATIO OF INVESTMENT ADJUSTED NET RATIO OF INVESTMENT
BASED ON EXPENSES INCOME NET ASSETS AT INVESTMENT EXPENSES TO INCOME
NET ASSET TO AVERAGE TO AVERAGE PORTFOLIO END OF PERIOD INCOME AVERAGE NET TO AVERAGE
VALUE NET ASSETS0 NET ASSETS0 TURNOVER (000'S OMITTED) PER SHARE0 ASSETS0 NET ASSETS0
----- ----------- ----------- -------- --------------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California Quality Series--Class A
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
Year ended 9/30/87 ...... (2.59) 0.77 6.76 15.17 58,872
California Quality Series-- Class D
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 9/30/96 ...... 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
11/17/86*- 9/30/87 ......(10.74) 0.50+ 6.85+ 28.52 22,228 0.37 1.01+ 6.35+
Florida Series--Class D
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 9/30/96 ...... 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 9/30/96 ...... 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+
New Jersey--Class A
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 9/30/96 ...... 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 9/30/96 ...... 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
Year ended 9/30/87 ...... (4.21) 0.58 6.78 9.19 30,014 0.47 1.12 6.24
Pennsylvania--Class D
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
</TABLE>
- ----------
+ Annualized.
++ For the year ended 9/30/94.
17
<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. 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. Municipal commercial paper are short-term
obligations generally having a maturity of less than nine months.
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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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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
21
<PAGE>
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.
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, 1996 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 .................................... 6%
AA/Aa ...................................... 9%
A/A ........................................ 37%
BBB/Baa .................................... 24%
BB/Ba ...................................... --
B/B ........................................ --
CCC/Caa .................................... --
Unrated .................................... 24%
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 to make
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<PAGE>
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 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
23
<PAGE>
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.
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<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
25
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credit rating categories, of Moody's (Aaa, Aa, A, Baa for bonds; MIG 1, MIG 2,
MIG 3, MIG 4 for notes; P-1--P-2 for commercial paper) or S&P (AAA, AA, A, BBB
for bonds; SP-1--SP-2 for notes; A-1+, A-1/A-2 for commercial paper). Although
bonds and notes rated in the fourth credit rating category are commonly referred
to as investment grade they may have speculative characteristics. Such
characteristics may under certain circumstances lead to a greater degree of
market fluctuations in the value of such securities than do higher rated
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 ISSUED 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.
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The interest rate is set as a specific percentage of a designated base rate,
such as the rate on a Treasury Bond or Bill or the prime rate at a major
commercial bank. Such a bond generally provides that a Series can demand payment
of the bond upon seven days' notice at an amount equal to par plus accrued
interest, which amount, in unusual circumstances, may be more or less than the
amount a Series paid for the bond.
The maturity of floating or variable rate obligations (including
participation interests therein) is deemed to be the longer of (i) the notice
period required before a Series is entitled to receive payment of the obligation
upon demand or (ii) the period remaining until the obligation's next interest
rate adjustment. If not redeemed by a Series through the demand feature, the
obligations mature on a specified date which may range up to thirty years from
the date of issuance.
PARTICIPATION INTERESTS. From time to time, a Series may purchase from banks
participation interests in all or part of specific holdings of 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 thirteen
other investment companies which, together with the Funds, make up the "Seligman
Group." The thirteen other companies are Seligman Capital Fund, Inc., Seligman
Cash Management Fund, Inc., Seligman Common Stock Fund, Inc., Seligman
Communications and Information Fund, Inc., Seligman Frontier Fund, Inc.,
Seligman Growth Fund, Inc., Seligman Henderson Global Fund Series, Inc.,
Seligman High Income Fund Series, Seligman Income Fund, Inc., Seligman
Portfolios, Inc., Seligman Quality Municipal Fund, Inc., Seligman Select
Municipal Fund, Inc. and Tri-Continental Corporation. The aggregate assets of
the Seligman Group were approximately $14.2 billion at December 31, 1996. The
Manager also provides investment management or advice to individual and
institutional accounts having a December 31, 1996 value of approximately $4.2
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
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<PAGE>
percentage of average daily net assets of that Series is presented in the
following table for the fiscal year ended September 30,1996. 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, 1996.
================================================================================
ANNUALIZED EXPENSE
MANAGEMENT FEE RATE RATIOS FOR
FOR THE YEAR ENDED THE YEAR ENDED
SERIES 9/30/96 9/30/96
------ ------------------- ------------------
CLASS A CLASS D
------- -------
National........... .50% .80% 1.67%
Colorado........... .50% .85% 1.75%
Georgia............ .50% .83% 1.73%
Louisiana.......... .50% .82% 1.72%
Maryland........... .50% .84% 1.72%
Massachusetts...... .50% .80% 1.70%
Michigan........... .50% .78% 1.68%
Minnesota.......... .50% .81% 1.71%
Missouri........... .50% .86% 1.76%
New York........... .50% .77% 1.68%
Ohio............... .50% .77% 1.67%
Oregon............. .50% .86% 1.76%
South Carolina..... .50% .80% 1.70%
California
High-Yield....... .50% .84% 1.74%
California Quality. .50% .79% 1.69%
Florida............ .50%* .97% 1.73%
North Carolina..... .49%* 1.05% 1.81%
New Jersey......... .50% 1.02% 1.79%
Pennsylvania....... .50% 1.11% 1.88%
* During the year ended September 30, 1996 the Manager, at its discretion,
waived a portion of its fees from the Florida and North Carolina Series.
================================================================================
PORTFOLIO MANAGER. Thomas G. Moles, Vice President and Senior Portfolio
Manager of each of the Funds, is a Managing Director of J. & W. Seligman & Co.
Incorporated, as well as President and Senior Portfolio Manager of Seligman
Quality Municipal Fund, Inc. and Seligman Select Municipal Fund, Inc. He is
responsible for approximately $2 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 1996 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%.
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<PAGE>
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 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 MATRIX(SM) ASSET ALLOCATION PROGRAM IS $10,000. FOR
INFORMATION ABOUT THIS PROGRAM, CONTACT SELIGMAN DATA CORP.
Orders received by an authorized dealer before the close of 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 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 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 check 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. 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 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
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>
Class A 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 the other Seligman Mutual Funds sold with an initial sales
load with the total net asset value of shares of those 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 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" on
page 55.
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
and personal holding companies; to any registered unit investment trust which is
the issuer of periodic payment plan certificates, the net proceeds of which are
invested in Series shares; to separate accounts established and maintained by an
insurance company which are exempt from registration under Section 3(c)(11) of
the 1940 Act; to registered representatives and employees (and their spouses and
minor children) of any dealer that has a sales agreement with SFSI; to
shareholders of mutual funds with objectives similar to a Series who purchase
shares with redemption proceeds of such funds (not to exceed the dollar value of
such redemption proceeds); 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; 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
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<PAGE>
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
terminations 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 any redemption 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. No CDSL will be imposed on shares
acquired though the investment of dividends or distributions from any Class A or
Class D shares of mutual funds in the Seligman Group.
To minimize the application of a CDSL to a redemption, shares acquired
pursuant to the investment of dividends and distributions (which are not subject
to a CDSL) will be redeemed first; followed by shares 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.
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.
The CDSL will be waived or reduced in the following instances:
(a) on redemptions following the death or disability of a shareholder, as
defined in section 72(m)(7) of the Code; (b) in connection with (i)
distributions from retirement plans qualified under section 401(a) of the Code
when such redemptions are necessary to make distributions to plan participants
(such payments include, but are not limited to death, disability, retirement, or
separation of service), (ii) distributions from a custodial account under
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<PAGE>
section 403(b)(7) of the Code or an individual retirement account ("IRA") due to
death, disability, or attainment of age 591/2, and (iii) a tax-free return of an
excess contribution to an IRA; (c) in whole or in part, in connection with
shares sold to current and retired Directors or Trustees of the Funds; (d) in
whole or in part, in connection with shares sold to any state, county, or city
or any instrumentality, department, authority, or agency thereof, which is
prohibited by applicable investment laws from paying a sales load or commission
in connection with the purchase of shares of any registered investment
management company; (e) pursuant to an automatic cash withdrawal service; and
(f) 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, will have the ability to effect the following
transactions via telephone: (i) redemption of Series shares, (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.
FOR INVESTORS WHO PURCHASE SHARES BY COMPLETING AND SUBMITTING AN ACCOUNT
APPLICATION (EXCEPT THOSE ACCOUNTS REGISTERED AS TRUSTS (UNLESS THE TRUSTEE AND
SOLE BENEFICIARY ARE THE SAME PERSON), CORPORATIONS OR GROUP RETIREMENT PLANS):
Unless an election is made otherwise on the Account Application, a shareholder
and the shareholder's broker/dealer of record, as designated on the Account
Application, will automatically receive telephone 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.
FOR ACCOUNTS REGISTERED AS TRUSTS (UNLESS THE TRUSTEE AND SOLE BENEFICIARY
ARE THE SAME PERSON), CORPORATIONS OR GROUP RETIREMENT PLANS: Telephone services
are not available.
All 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.
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<PAGE>
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. 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 form ("uncertificated")
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, 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, by surrendering certificates in proper form to the same address.
Certificates should be sent by registered mail. Share certificates must be
endorsed for transfer or accompanied by an endorsed stock power signed by all
shareowners exactly as their name(s) appear(s) on the account registration. The
shareholder's letter of instruction or endorsed stock power should specify the
name of the Series, the account number, class of shares (A or D) 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).
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
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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 the NYSE and
received by SFSI, the repurchase agent, before the close of business on the same
day will be executed at the net asset value per share determined at the close of
the NYSE on that day, less any applicable CDSL. Repurchase orders received from
authorized dealers after the close of the NYSE or not received by SFSI prior to
the close of business, will be executed at the net asset value determined as of
the close of the NYSE on the next trading day, less any applicable CDSL. Shares
held in a "street name" account with a broker/dealer may be sold to a Fund only
through a broker/dealer.
TELEPHONE REDEMPTIONS. Telephone redemptions of uncertificated shares payable
to the address of record may be made once per day, in an amount of up to $50,000
per account. Telephone redemption requests received by Seligman Data Corp. at
(800) 221-2450 between 8:30 a.m. and 4:00 p.m. Eastern time, on any business day
will be processed as of the close of business on that day. Redemption requests
by telephone will not be accepted within 30 days following an address change.
Qualified Plans, IRAs or other retirement plans 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 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 Boston Safe Deposit and Trust Co. rules and
regulations covering checking accounts. Separate checkbooks will be furnished
for each Series.
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There is no charge for use of checks. When honoring a check that was
processed for payment, Boston Safe Deposit and Trust Co. 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 Boston Safe Deposit and Trust Co. See "Terms and Conditions"
on page 53.
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 will be
sent to the shareholder's address of record within seven calendar days after
acceptance of the redemption order and will be made payable to all of the
registered owners on the account. With respect to shares repurchased, a check
for the proceeds will be sent to the investment dealer within seven calendar
days after acceptance of the repurchase order and will be made payable to the
investment dealer. The Funds will not permit redemptions of shares with respect
to shares purchased by check (unless certified) until Seligman Data Corp. has
received notice that the check has cleared, which may be up to 15 days from the
credit of such shares to the shareholder's account. The proceeds of a redemption
or repurchase may be more or less than the shareholder's cost.
The Funds 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 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 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.
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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, 1996 in respect of each Series' Class A shares' average
daily net assets pursuant to the Plan were as follows:
% OF
AVERAGE
SERIES NET ASSETS
------ ----------
National.................................... .09%
Colorado.................................... .10
Georgia..................................... .09
Louisiana................................... .10
Maryland.................................... .10
Massachusetts............................... .10
Michigan.................................... .10
Minnesota................................... .10
Missouri.................................... .10
New York.................................... .09
Ohio........................................ .10
Oregon...................................... .10
South Carolina.............................. .10
California High-Yield....................... .10
California Quality.......................... .10
Florida..................................... .24
North Carolina.............................. .24
New Jersey.................................. .23
Pennsylvania................................ .23
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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, 1996, 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 holding period of the original shares.
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 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.
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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.
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 between 8:30 a.m. and 4:00 p.m. Eastern time on
any business day, by Seligman Data Corp. at (800) 221-2450 will be processed as
of the close of business on that day. The registration of an account into which
an exchange is made must be identical to the registration of the account from
which shares are exchanged. When establishing a new account by an exchange of
shares, the shares being exchanged must have a value of at least the minimum
initial investment required by the fund into which the exchange is 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 order 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.
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<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Each Series intends to declare dividends of net investment income daily.
Dividends are paid on the 17th day of each month. If the 17th day of the month
falls on a weekend or holiday on which the NYSE is closed, the dividend will be
distributed on the previous business day. Payments vary in amount depending on
income received from portfolio securities, expenses of operation and the number
of days in the period.
Shares will begin earning dividends on the day on which a Series receives
payment and shares are issued. Shares continue to earn dividends through the
date preceding the date they are redeemed or delivered subsequent to repurchase.
Each Series distributes substantially all of any taxable net long-term and
short-term gain realized on investments to shareholders at least annually in
accordance with requirements under the Internal Revenue Code of 1986, as
amended, and other applicable statutory and regulatory requirements.
Shareholders may elect: (1) to receive both dividends and gain distributions
in shares; (2) to receive dividends in cash and gain distributions in shares;
(3) to receive both dividends and gain distributions in cash. In the case of
prototype retirement plans, dividends and gain distributions are reinvested in
additional shares. Unless another election is made, dividends and gain
distributions will be credited to shareholder accounts in additional shares.
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 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.
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 share-holder redeems, sells,
transfers or exchanges 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.
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.
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<PAGE>
Distributions of net capital gain, i.e., the excess of net long-term capital
gains over net short-term capital losses ("capital gain distributions") are
taxable to shareholders as long-term capital gain, whether received in shares or
cash, regardless of how long a shareholder has held shares in the Series, except
that the portion of net capital gains representing accrued market discount on
tax-exempt obligations acquired after April 30, 1993 will be taxable as ordinary
income. Individual shareholders will be subject to federal income tax on net
capital gains at a maximum rate of 28%. Net capital gain of a corporate
shareholder is taxed at the same rate as ordinary income. Distributions from a
Series' other investment income (other than exempt interest dividends) or from
net realized short-term gain will be taxable to shareholders as ordinary income,
whether received in cash or in additional shares. Distributions will not,
generally, be eligible for the dividends-received deduction for corporations.
Shareholders receiving distributions in the form of additional shares issued by
a Series will be treated for federal income tax purposes as having received a
distribution in an amount equal to the fair market value on the date of
distribution of the shares received.
Interest on indebtedness incurred or continued to purchase or carry shares of
any Series will not be deductible for federal income tax purposes to the extent
that the Series' distributions are exempt from federal income tax.
Any gain or loss realized upon a sale or redemption of shares of a Series by
a shareholder who is not a dealer in securities generally will be treated as a
long-term capital gain or loss if the shares have been held for more than twelve
months and otherwise as a short-term capital gain or loss. However, if shares on
which a long-term capital gain distribution has been received are subsequently
sold or redeemed and such shares have been held for six months or less, any loss
realized will be treated as long-term capital loss to the extent that it offsets
the long-term capital gain distribution. Moreover, any loss realized by a
shareholder upon the sale of shares of a Series held six months or less will be
disallowed to the extent of any exempt-interest dividends received by the
shareholders with respect to such shares. In addition, no loss will be allowed
on the sale or other disposition of shares of a Series if, within a period
beginning 30 days before the date of such sale or disposition and ending 30 days
after such date, the holder acquires (such as through dividend reinvestment)
securities that are substantially identical to the shares of the Series.
In determining gain or loss on shares of a Series that are sold or exchanged
within 90 days after acquisition, a shareholder generally will not be permitted
to include in the tax basis attributable to such shares the sales load incurred
in acquiring such shares to the extent of any subsequent reduction of the sales
load by reason of the Exchange or Reinstatement Privilege offered by a Fund. Any
sales load not taken into account in determining the tax basis of shares sold or
exchanged within 90 days after acquisition will be added to the shareholder's
tax basis in the shares acquired pursuant to the Exchange or Reinstatement
Privilege.
Shareholders are urged to consult their tax 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
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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 under the laws of the State of Colorado authorizing the issuance
of such obligations, (b) obligations of the United States or its possessions to
the extent included in federal taxable income, or (c) obligations of territories
or possessions of the United States to the extent federal law exempts interest
on such obligations from taxation by the states. To the extent that Colorado
Series distributions are attributable to sources not described in the preceding
sentence, such as long or short-term capital gains, such distributions will not
be exempt from Colorado income tax 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,
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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 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
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authorities, or (b) of the United States or an authority, commission,
instrumentality, possession or territory of the United States, will be exempt
from Maryland state and local income taxes when allocated or distributed to a
shareholder of the Maryland Series.
Gain realized by the Maryland Series from the sale or exchange of a bond
issued by Maryland or a political subdivision of Maryland, or of the United
States or an authority, commission or instrumentality of the United States will
not be subject to Maryland state and local income taxes.
To the extent that distributions of the Maryland Series are attributable to
sources other than those described in the preceding sentences, such as interest
received by the Maryland Series on obligations issued by states other than
Maryland, income earned on repurchase contracts, or gains realized by a
shareholder upon a redemption or exchange of Maryland Series shares, such
distributions will be subject to Maryland state and local income taxes.
Income earned on certain private activity bonds will constitute a Maryland
tax preference for individual shareholders. 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 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.
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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 Professional Limited Liability Partnership,
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 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
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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.The Ohio Supreme Court, in a subsequent
case involving the same taxpayer and the same issue, recently 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. The taxpayer has appealed to the United States
Supreme Court, which has discretion to decide if it will hear the case. Even if
the Court declines to consider the appeal, 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.
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.
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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, 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.
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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 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 school
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district or municipal income taxes in Ohio will not be subject to such taxes on
dividend distributions with respect to shares of the Ohio Series to the extent
that such distributions are properly attributable to interest (including accrued
original issue discount) on obligations issued by or on behalf of the State of
Ohio, political subdivisions thereof, or agencies or instrumentalities thereof
("Ohio Obligations"), or by the government of Puerto Rico, the Virgin Islands or
Guam, provided that the Ohio Series qualifies as a "regulated investment
company" for federal income tax purposes and that at all times at least 50% of
the value of the total assets of the Ohio Series consists of Ohio Obligations or
similar obligations of other states or their subdivisions. It is assumed for
purposes of this discussion of Ohio taxes that these requirements are satisfied.
Shares of the Ohio Series will be included in a corporation's tax base for
purposes of computing the Ohio corporation franchise tax on the net worth basis.
Dividends on shares of the Ohio Series that are attributable to gain from the
sale, exchange or other disposition of Ohio Obligations held by the Ohio Series
are not subject to the Ohio personal income tax, the net income base of the Ohio
corporation franchise tax, or school district or municipal income taxes in Ohio.
The Ohio Series is not subject to the Ohio personal income tax, Ohio school
district income taxes, the Ohio corporation franchise tax, or the Ohio dealers
in intangibles tax, provided that, with respect to the Ohio corporation
franchise tax and the Ohio dealers in intangibles tax, the Municipal Fund
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.
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.
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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 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.
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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, FORM 1099-DIV AND CHECKBOOKS CAN BE ORDERED. TO INSURE
PROMPT DELIVERY OF CHECKS, ACCOUNT STATEMENTS AND OTHER INFORMATION, SELIGMAN
DATA CORP., SHOULD BE NOTIFIED IMMEDIATELY IN WRITING OF ANY ADDRESS CHANGE.
ADDRESS CHANGES MAY BE TELEPHONED TO SELIGMAN DATA CORP. IF THE SHAREHOLDER HAS
TELEPHONE SERVICES. FOR MORE INFORMATION ABOUT TELEPHONE SERVICES, SEE
"TELEPHONE TRANSACTIONS" ABOVE.
ACCOUNT SERVICES. Shareholders are sent confirmation of financial
transactions.
Other investor services are available. These include:
o INVEST-A-CHECK(R) enables a shareholder to authorize 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 regular monthly intervals
in fixed amounts of $100 or more per fund, or regular quarterly intervals in
fixed amounts of $250 or more per fund, to purchase shares. Accounts may be
established concurrently with the Invest-A-Check(R) Service only if
accom-panied by a $100 minimum investment in conjunction with the monthly
investment option, or a $250 minimum investment in conjunction with the
quarterly investment option. For investments into the Seligman Time Horizon
Matrix(SM) Asset Allocation Program, the minimum amount is $500 at regular
monthly intervals or $1,000 at regular quarterly intervals. (See "Terms and
Conditions" on page 55).
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
meet or exceed the required minimum purchase amount and include the
shareholder's name, the name of the Series and the class of shares in which
the investment is to be made and the shareholder's account number.)
o AUTOMATIC CD TRANSFER SERVICE permits a shareholder to instruct a bank to
invest the proceeds of a maturing bank certificate of deposit ("CD") in
shares of any designated Seligman Mutual Fund. Shareholders who wish to use
this service, should contact Seligman Data Corp. or a broker to obtain the
necessary documentation. Banks may charge a penalty on CD assets withdrawn
prior to maturity. Accordingly, it will not normally be advisable to
liquidate a CD before its maturity.
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o AUTOMATIC CASH WITHDRAWAL SERVICE permits payments 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 with respect to shares that have been held for at least one year.
(See "Terms and Conditions" on page 55).
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 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
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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 Pennsylvania
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.
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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 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. After the initial investment, the value of shares
held in your Account must equal not less than two regularly scheduled
investments. If a check is not honored by the shareholder's bank, or if the
value of shares held falls below the required minimum, the Service will be
suspended. In the event that a check is returned marked "unpaid," Seligman Data
Corp. will cancel the purchase, redeem shares held in your account for an amount
sufficient to reimburse a Series for any loss it may have incurred as a result,
and charge a $10.00 return check fee. This fee 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 minimum initial investment of
$100.
AUTOMATIC CASH WITHDRAWAL SERVICE
Automatic Cash Withdrawal Service is available to Class A shareholders and
to Class D shareholders with respect to Class D shares held for one year or
more. A sufficient number of full and fractional shares will be redeemed to
provide the amount required for a scheduled payment. Redemptions will be made at
the asset value at the close of business on the specific day designated by the
shareholder of each month (or on the prior business day if the day specified
falls on a weekend or holiday). 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. 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 Boston Safe Deposit and Trust Co. 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.
Boston Safe Deposit and Trust Co. 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, 1997
SELIGMAN PENNSYLVANIA MUNICIPAL FUND SERIES
100 Park Avenue
New York, NY 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 Pennsylvania
Municipal Fund Series, dated February 1, 1997. Seligman Pennsylvania Municipal
Fund Series currently consists of one series, the Seligman Pennsylvania
Municipal Fund (the "Fund"). This Statement of Additional Information 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. Althou 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
Investment Objective, Policies and Risks...... 2
Investment Limitations........................ 5
Trustees and Officers......................... 6
Management and Expenses.......................11
Administration, Shareholder Services And
Distribution Plan............................12
Portfolio Transactions........................12
Purchase And Redemption Of Fund Shares........13
Distribution Services.........................15
Taxes.........................................15
Valuation.....................................16
Performance Information.......................16
General Information...........................18
Special Considerations Regarding Investments
In Pennsylvania Municipal Securities.........19
Financial Statements..........................22
Appendix A....................................23
Appendix B....................................26
TEDPA1A
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INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund is a non-diversified open-end management investment company or
mutual fund, organized as an unincorporated trust under the laws of the
Commonwealth of Pennsylvania in 1986. The Fund seeks to provide income exempt
from regular federal and Pennsylvania income taxes.
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 objective
and structure might be necessary in the future due to market conditions which
may result from future changes in the tax laws.
Pennsylvania Municipal Securities. Pennsylvania Municipal Securities include
notes, bonds and commercial paper issued by or on behalf of the Commonwealth of
Pennsylvania, its political subdivisions, agencies and instrumentalities, the
interest on which is, in the opinion of counsel of the issuers, exempt from
regular federal and Pennsylvania 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
"Pennsylvania 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
generally 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,
2
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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 from the proceeds of other
specific revenue sources. 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 five years or less. Municipal notes include:
1. Tax Anticipation Notes and Revenue Anticipation Notes. Tax Anticipation
Notes and Revenue Anticipation Notes are issued to finance short-term working
capital needs of political subdivisions. Generally, Tax Anticipation Notes are
issued in anticipation of various tax revenues, such as income, sales and real
property taxes, and are payable from these specific future taxes. Revenue
Anticipation Notes are issued in expectation of receipt of other kinds of
revenue, such as grant or project revenues. Usually political subdivisions issue
notes combining the qualities of both Tax and Revenue Anticipation Notes.
2. 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.
3. 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 such 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. 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 within
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 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.
To the extent that the Fund purchases securities on a when-issued basis, a
segregated account 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 Fund
3
<PAGE>
will meet its respective obligations from then available cash, the sale of
securities held in the segregated account, the sale of other securities or,
although it would not normally expect to do so, the 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. As noted elsewhere in the
Prospectus and Statement of Additional Information, any such gain is not exempt
from regular federal or from Pennsylvania 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 of rates on
Treasury Bonds or Bills or the prime rate of 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. The Fund is authorized to acquire stand-by commitments
issued by banks with respect to securities it holds although the Manager has no
present intention of investing the assets of the Fund in stand-by commitments.
These commitments would obligate the seller of the stand-by commitment to
repurchase, at the Fund's option, specified securities at a specified price.
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, and the Fund would use stand-by
commitments solely to facilitate portfolio liquidity. The stand-by commitment
generally is for a shorter term than the maturity of the security and does not
restrict in any way the Fund's right to dispose of or retain the security. There
is a risk that the seller of a stand-by commitment may not be able to repurchase
the security upon the exercise of the right to resell by the Fund. To minimize
such risks, the Fund is presently authorized to acquire stand-by commitments
solely from banks the Manager deems creditworthy. The Trustees may, in the
future, consider whether the Fund should be permitted to acquire stand-by
commitments from dealers. Prior to investing in stand-by commitments of dealers
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.
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 commitments
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 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 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 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, the municipal securities satisfying the
Fund's investment objective may not be purchased, the Fund may for defensive
purposes temporarily invest in instruments the interest on which is exempt from
regular federal income taxes, but not Pennsylvania income taxes. Such securities
would include instruments issued by states other than Pennsylvania and having
the same general characteristics as those described under "Pennsylvania
Municipal Securities."
The Fund may invest on a temporary basis in fixed-income securities, the
interest on which is only exempt from Pennsylvania income taxes or is not exempt
from either federal or Pennsylvania income taxes, pending the investment or
4
<PAGE>
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. Such securities may include 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 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 only to accomplish
the Fund's objective and not for the purpose of realizing capital gains,
although capital gains may be realized on certain portfolio transactions. For
example, capital gains may be realized when a security is sold (i) so that
another security can be purchased to obtain a higher yield (provided that
capital is preserved or enhanced), (ii) to take advantage of what the Manager
believes to be a temporary disparity in the normal yield relationship between
the two securities, (iii) when the Manager believes that the security to be
purchased is of a higher quality than its rating or current market value would
indicate, or (iv) when the Manager anticipates a decline in value due to market
risk (a rise in interest rates) or credit risk.
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 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 of
the Fund for the fiscal years ended September 30, 1994, 1995 and 1996 were
7.71%, 11.78% and 4.56%, 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;
5
<PAGE>
- - 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 Fund means the affirmative vote of the lesser of (1) more
than 50% of the outstanding shares of the Fund or (2) 67% or more of the shares
of the Fund present at a shareholders' meeting if more than 50% of the
outstanding shares of the Fund are represented at the meeting in person or by
proxy.
TRUSTEES AND OFFICERS
Trustees and officers of the Fund, 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 Fund, 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
(58) Officer and Chairman of the Executive Committee
Managing Director and Chairman, J. & W. Seligman &
Co. Incorporated, investment managers and
advisers; and Seligman Advisors, Inc., advisers;
Chairman and Chief Executive Officer, the Seligman
Group of Investment Companies; Chairman, Seligman
Financial Services, Inc., broker/dealer; Seligman
Holdings, Inc., holding company; Seligman
Services, Inc., broker/dealer; and Carbo Ceramics
Inc., ceramic proppants for oil and gas industry;
Director or Trustee, Seligman Data Corp.,
shareholder service agent; 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 Securities, Inc., broker/dealer
and J. & W. Seligman Trust Company, trust company;
and Daniel Industries, Inc., manufacturer of oil
and gas metering equipment.
6
<PAGE>
BRIAN T. ZINO* Trustee, President and Member of the Executive
(44) Committee
Director, President and Managing Director, J. & W.
Seligman & Co. Incorporated, investment managers
and advisers; and Seligman Advisors, Inc.
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, Seligman Data Corp.,
shareholder service agent; Director, Seligman
Financial Services, Inc., broker/dealer; Seligman
Services, Inc., broker/dealer; Senior Vice
President, Seligman Henderson Co., advisers;
formerly, Director and Secretary, Chuo Trust - JWS
Advisors, Inc., advisers; and Director, J. & W.
Seligman Trust Company, trust company and Seligman
Securities, Inc., broker/dealer.
RONALD T. SCHROEDER* Trustee and Member of the Executive Committee
(48)
Director, Managing Director and Chief Investment
Officer, Institutional, J. & W. Seligman & Co.
Incorporated, investment managers and advisers;
and Seligman Advisors, Inc., advisers; Director or
Trustee, the Seligman Group of Investment
Companies; Director, Seligman Holdings, Inc.,
holding company; Seligman Financial Services,
Inc., broker/dealer; Seligman Henderson Co.,
advisers; and Seligman Services, Inc.,
broker/dealer; formerly, President, the Seligman
Group of Investment Companies, except Seligman
Quality Municipal Fund, Inc. and Seligman Select
Municipal Fund, Inc.; and Director, Seligman
Securities, Inc., broker/dealer; and J. & W.
Seligman Trust Company, trust company; Seligman
Data Corp., shareholder service agent.
FRED E. BROWN* Trustee
(83)
Director and Consultant, J. & W. Seligman & Co.
Incorporated, investment managers and advisers;
Director or Trustee, the Seligman Group of
Investment Companies; Seligman Financial Services,
Inc., broker/dealer; Seligman Services, Inc.,
broker/dealer; Trudeau Institute, non-profit
biomedical research organization; Lake Placid
Center for the Arts, cultural organization; and
Lake Placid Education Foundation, education
foundation; formerly, Director, Seligman
Securities, Inc., broker/dealer; and J. & W.
Seligman Trust Company, trust company.
JOHN R. GALVIN Trustee
(67)
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,
insurance; National Committee on U.S.-China
Relations, National Defense University; the
Institute for Defense Analysis; Raytheon Co.,
electronics; and Consultant, Thomson CSF,
electronics; formerly, Ambassador, U.S. State
Department; Distinguished Policy Analyst at Ohio
State University and Olin Distinguished Professor
of National Security Studies at the United States
Military Academy. From June, 1987 to June, 1992,
he was the Supreme Allied Commander, Europe and
the Commander-in-Chief, United States European
Command. Tufts University, Packard Avenue,
Medford, MA 02155
7
<PAGE>
ALICE S. ILCHMAN Trustee
(61)
President, Sarah Lawrence College; Director or
Trustee, the Seligman Group of Investment
Companies; Chairman, The Rockefeller Foundation,
charitable foundation; and Director, NYNEX,
telephone company; and the Committee for Economic
Development; formerly, Trustee, The Markle
Foundation, philanthropic organization; and
Director, International Research and Exchange
Board, intellectual exchanges. Sarah Lawrence
College, Bronxville, New York 10708
FRANK A. McPHERSON Trustee
(63)
Chairman of the Board and Chief Executive Officer,
Kerr-McGee Corporation, energy and chemicals;
Director or Trustee, the Seligman Group of
Investment Companies; Director of Kimberly-Clark
Corporation, consumer products; Bank of Oklahoma
Holding Company; American Petroleum Institute;
Oklahoma City Chamber of Commerce; Baptist Medical
Center; Oklahoma Chapter of the Nature
Conservancy; Oklahoma Medical Research Foundation;
and United Way Advisory Board; Chairman of
Oklahoma City Public Schools Foundation; and
Member of the Business Roundtable and National
Petroleum Council. 123 Robert S. Kerr Avenue,
Oklahoma City, OK 73102
JOHN E. MEROW* Trustee
(67)
Chairman and Senior Partner, Sullivan & Cromwell,
law firm; Director or Trustee, the Seligman Group
of Investment Companies; Municipal Art Society of
New York; Commonwealth Aluminum Corporation, the
U.S. Council for International Business and the
U.S.-New Zealand Council; Chairman, American
Australian Association; Member of the American Law
Institute and Council on Foreign Relations; and
Member of the Board of Governors of Foreign Policy
Association and New York Hospital. 125 Broad
Street, New York, NY 10004
BETSY S. MICHEL Trustee
(54)
Attorney; Director or Trustee, the Seligman Group
of Investment Companies; 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
(69)
Partner, Pitney, Hardin, Kipp & Szuch, law firm;
Director or Trustee, the Seligman Group of
Investment Companies and Public Service Enterprise
Group, public utility. Park Avenue at Morris
County, P.O. Box 1945, Morristown, NJ 07962-1945
8
<PAGE>
JAMES Q. RIORDAN Trustee
(69)
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
(64)
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
(61)
Executive Vice President, Chief Operating Officer
and Director, Sammons Enterprises, Inc., Director
or Trustee, the Seligman Group of Investment
Companies, Red Man Pipe and Supply Company and
C-SPAN. 300 Crescent Court, Suite 700, Dallas, TX
75202
THOMAS G. MOLES Vice President and Senior Portfolio Manager
(53)
Director, Managing Director, (formerly, Vice
President and Portfolio Manager), J. & W. Seligman
& Co. Incorporated, investment managers and
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
(40)
Senior Vice President, Finance, J. & W. Seligman &
Co. Incorporated, investment managers and
advisers; Seligman Financial Services, Inc.,
broker/dealer; Seligman Advisors, Inc., advisers;
and Seligman Data Corp., shareholder service
agent; Vice President, the Seligman Group of
Investment Companies and Seligman Services, Inc.,
broker/dealer and; Treasurer, Seligman Holdings,
Inc., holding company; and Seligman Henderson Co.,
advisers; formerly, Senior Vice President,
Seligman Securities, Inc., broker/dealer; and
Senior Vice President, J. & W. Seligman Trust
Company, trust company.
9
<PAGE>
FRANK J. NASTA Secretary
(32)
Senior Vice President, Law and Regulation and
Corporate Secretary, J. & W. Seligman & Co.
Incorporated, investment managers and advisers and
Seligman Advisors, Inc., 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, Secretary, J.
& W. Seligman Trust Company, trust company, and
attorney, Seward & Kissel, law firm.
THOMAS G. ROSE Treasurer
(39)
Treasurer, the Seligman Group of Investment
Companies and Seligman Data Corp., shareholder
service agent; formerly, Treasurer, American
Investors Advisors, Inc. and the American
Investors Family of Funds.
The Executive Committee of the Board acts on behalf of the Board between
meetings to determine the value of securities and assets owned by the Fund for
which no market valuation is available and to elect or appoint officers of the
Fund to serve until the next meeting of the Board.
Compensation Table
<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits from Fund and
Name and Compensation Accrued as part of Fund Complex Paid
Position with Registrant from Fund (1) Fund Expenses to Trustees (2)
- --------------------------- --------------- ------------------- -------------------
<S> <C> <C> <C>
William C. Morris, Trustee and Chairman N/A N/A N/A
Brian T. Zino, Trustee and President N/A N/A N/A
Ronald T. Schroeder, Trustee N/A N/A N/A
Fred E. Brown, Trustee N/A N/A N/A
John R. Galvin, Director $2,247.19 N/A $65,000.00
Alice S. Ilchman, Director 2,282.90 N/A 66,000.00
Frank A. McPherson, Director 2,282.90 N/A 66,000.00
John E. Merow, Director 2,282.90(d) N/A 66,000.00(d)
Betsy S. Michel, Director 2,282.90 N/A 66,000.00
James C. Pitney, Director 2,247.19 N/A 65,000.00
James Q. Riordan, Director 2,282.90 N/A 66,000.00
Robert L. Shafer, Director 2,282.90 N/A 66,000.00
James N. Whitson, Director 2,282.90(d) N/A 66,000.00(d)
</TABLE>
(1) For the fiscal year ended September 30, 1996.
(2) As defined in the Fund's Prospectus, the Seligman Group of Investment
Companies consists of seventeen investment companies.
(d) Deferred. The total amounts of deferred compensation (including interest)
payable in respect of the Fund to Messrs. Merow and Whitson as of September
30, 1996 were $21,899 and $8,350, respectively. Mr. Pitney no longer defers
current compensation; however, he has accrued deferred compensation in the
amount of $13,091 as of September 30, 1996.
The Fund has a compensation arrangement under which outside Trustees may
elect to defer receiving their fees. Under this arrangement, interest will be
accrued on the deferred balances. The annual cost of such fees and interest is
included in trustees' fees and expenses, and the accumulated balance thereof at
September 30, 1996, of $43,340 is included in "Liabilities," in the Fund's
financial statements.
10
<PAGE>
Trustees and officers of the Fund 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 Fund as a group owned less than 1% of the
Class A shares of the Fund at January 10, 1997. No Trustees or officers owned
Class D shares of the Fund at that date.
As of January 10, 1997, 618,589 Class A shares, or 15.71% of the Fund's
Class A capital stock then outstanding, were registered in the name of MLPF&S
For the Sole Benefit if Its Customers, 4800 Deer Lake Drive East, Jacksonville,
FL 32246.
MANAGEMENT AND EXPENSES
Under the Management Agreement, dated December 29, 1988, 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 Fund 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. The management fees paid during fiscal 1994, 1995 and 1996 were $190,649,
$168,672 and $166,894, respectively., or .50%, .50% and .50%, respectively, of
the Fund's average net assets.
The Fund pays all its expenses other than those specifically assumed by the
Manager. These expenses include brokerage commissions, if any, interest loads,
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 payable under the
Administration, Shareholder Services and Distribution Plan described below, fees
and expenses of Trustees of the Fund not employed by or serving as a Trustee of
the Manager or its affiliates, membership dues in the Investment Company
Institute, insurance premiums and extraordinary expenses such as litigation
expenses.
The Management Agreement was unanimously approved by the Trustees at a
meeting held on October 11, 1988 and was also approved by the shareholders at a
meeting held on December 16, 1988. The Management Agreement will continue in
effect until December 29 of each year if (1) such continuance is approved
annually 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
11
<PAGE>
the reporting and monitoring of personal securities transactions by the
Manager's Director of Compliance, 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
Director of Compliance, 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 Fund under Section 12(b) of the 1940 Act and Rule 12b-1 thereunder has
been in effect since inception of the Fund.
The Plan was approved on June 10, 1986 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 April 23, 1987.
Amendments to the Plan were approved in respect of 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 under the terms of the Plan 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 with the approval of a majority of both
the Trustees and the Qualified Trustees in accordance with the applicable
provisions of the 1940 Act and the Rule thereunder.
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 Fund be made by such disinterested Trustees.
PORTFOLIO TRANSACTIONS
No brokerage commissions were paid by the Fund during the fiscal years
ended September 30, 1994, 1995 or 1996. 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
12
<PAGE>
the size of the purchase are subject to a CDSL of 1% is 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 Fund 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, 1996, the maximum offering price of the Fund's shares is as
follows:
Class A
Net asset value per share............................................ $ 7.82
Maximum sales load (4.75% of offering price)......................... .39
------
Maximum offering price per share..................................... $ 8.21
======
Class D
Net asset value and maximum offering price per share*................ $ 7.81
======
- ------------
* Class D shares are subject to a CDSL of 1% on certain 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 Fund's 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, 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 Prospectus.
The Right of Accumulation allows an investor to combine the amount being
invested in Class A shares of the Fund, Seligman Capital Fund, Seligman Common
Stock Fund, Seligman Communications and Information Fund, Seligman Frontier
Fund, Seligman Growth Fund, Seligman Henderson Global Fund Series, Seligman High
Income Fund Series, Seligman Income Fund, Seligman Municipal Fund Series,
Seligman Municipal Fund Series or Seligman New Jersey Municipal Fund, Trust that
were 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 mutual fund in the
Seligman Group 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
mutual fund in the Seligman Group 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 Prospectus, 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 Seligman Capital
Fund, Seligman Common Stock Fund, Seligman Communications and Information Fund,
Seligman Frontier Fund, Seligman Growth Fund, Seligman Henderson Global Fund
13
<PAGE>
Series, Seligman High Income Fund Series, Seligman Income Fund, Seligman
Municipal Fund Series, Seligman Municipal Series Trust and Seligman New Jersey
Municipal Fund already owned and the total net asset value of shares of Seligman
Cash Management Fund which were acquired through an exchange of shares of
another mutual fund in the Seligman Group on which there was an initial sales
load at the time of purchase. Reduced sales loads also may apply to purchases
made within a 13-month period starting up to 90 days before the date of
execution of a letter of intent. For more information concerning the terms of
the letter of intent, see "Terms and Conditions Letter of Intent - Class A" in
the Fund's 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
Fund'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 shareholders of mutual funds
with investment objectives similar to the Fund's who purchase shares with
redemption proceeds of such funds and to certain unit investment trusts as
described in the Fund's Prospectus.
Class A shares may be sold at net asset value to 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.
14
<PAGE>
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 suspended for more than
seven days, if the orderly liquidation of portfolio securities is prevented by
the closing of, or restricted trading in, the over-the-counter markets in which
Pennsylvania Municipal Securities are primarily traded due to an emergency or
order of the Securities and Exchange Commission. If payment were to be made in
securities, shareholders receiving securities could incur certain transaction
costs in receiving these securities.
DISTRIBUTION SERVICES
SFSI, an affiliate of the Manager, acts as general distributor of the
shares of the Fund and of the other mutual funds in the Seligman Group. As
general distributor of the Fund's capital stock, SFSI allows commissions to all
dealers of up to 4.25% on purchases of Class A shares of the Fund to which the
4.75% sales load applies. SFSI receives the balance of sales loads and any CDSL,
if applicable, paid by investors. The Fund and SFSI are parties to a
Distributing Agreement dated January 1, 1993.
The total sales loads paid by shareholders of the Fund for the fiscal years
ended September 30, 1996, 1995 and 1994 amounted to $28,743, $34,048 and
$41,027, respectively, of which $25,360, $30,148, and $36,112, respectively, was
paid as commissions to dealers. For the period February 1, 1994 through
September 30, 1994, and the years ended September 30, 1995 and 1996, SFSI
retained CDSL charges amounting to $619, $219 and $2,658, respectively.
Effective April 1, 1995, Seligman Services, Inc. ("SSI"), an affiliate of
the Manager, became eligible to receive commissions from certain sales of Fund
shares, as well as distribution and service fees pursuant to the Plan. For the
period ended September 30, 1995 and for the year ended September 30, 1996, SSI
received commissions of $261 and $337, respectively, from sales of Fund shares.
SSI also received distribution and service fees of $1,797 and $3,735,
respectively, pursuant to the Plan.
TAXES
The Fund intends to qualify and elect to be treated as a separate regulated
investment company under the Internal Revenue Code and thus to be relieved of
federal income tax on income distributed to shareholders; provided that it
distributes at least 90 percent of its net investment income and net short-term
capital gains, if any.
Qualification as a regulated investment company under the Internal Revenue
Code requires among other things, that (a) at least 90% of the annual gross
income of the Fund be derived from dividends, interest, payments with respect to
securities loans and gains from the sale or other disposition of stocks,
securities or currencies, or other income (including but not limited to gains
from options, futures, or forward contracts) derived with respect to its
business of investing in such stocks, securities or currencies; (b) the Fund
derives less than 30% of its gross annual income from gains from the sale or
other disposition of stock, securities and certain other assets held for less
than three months; and (c) the Fund diversify 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
15
<PAGE>
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).
As a trust, the Fund will not be subject to Pennsylvania corporate taxes,
nor will it be subject to Pennsylvania personal income tax with respect to any
taxable income currently distributed to its shareholders. Shareholders who are
subject to Pennsylvania personal income tax will be exempt from Pennsylvania
personal income tax on distributions attributable to interest on Pennsylvania
Municipal Securities or United States Government securities. To the extent that
the portfolio consists of such holdings, the shares of the Fund will be exempt
from Pennsylvania personal property taxes. 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 Fund that qualify as
exempt-interest dividends for federal income tax purposes or are derived from
interest on U.S. Government obligations. Corporations are not subject to
Pennsylvania personal property taxes.
VALUATION
The net asset value per share of each class of the Fund is determined as of
the close of the New York Exchange ("NYSE") (normally, 4:00 p.m., Eastern time),
on each day that the NYSE is open for business. The NYSE is currently closed on
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day. The Fund will also determine net
asset value for each class on each day in which there is a sufficient degree of
trading in the Fund's portfolio securities that the net asset value of Fund
shares might be materially affected. Net asset value per share for 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.
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, 1996 for the
Fund's Class A shares was 4.45%. The annualized yield was computed by dividing
the Fund's net investment income per share earned during this 30-day period by
the maximum offering price per share (i.e., the net asset value plus the maximum
sales load of 4.75% of the net amount invested) on September 30, 1996, which was
the last day of this period. The average number of Class A shares of the Fund
was 3,989,632 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.
16
<PAGE>
The tax equivalent annualized yield for the 30-day period ended September
30, 1996 for the Fund's Class A shares was 7.58%. 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 41.29% (41.29% being the assumed maximum
combined federal and state income tax rate for individual taxpayers that are
subject to Pennsylvania personal income tax). 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 one-year period ended September 30,
1996 for the Fund's Class A shares was 1.49%; for the five-year period ended
September 30, 1996 was 6.11% and since inception through the period ended
September 30, 1996 was 6.83%. 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 by the Fund over the relevant time
period were reinvested. It was then assumed that at the end of each of these
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, 1996 for the
Fund's Class D shares was 3.89%. The annualized yield was computed as for Class
A shares 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, 1996, which was the last day of this period. The average
number of Class D shares were 114,128, 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, 1996 for the Fund's Class D shares was 6.63%. The tax equivalent annualized
yield was computed as discussed above for Class A shares.
The average annual total return for the one-year period ended September 30,
1996 for the Fund's Class D shares was 4.76% and since inception through the
period ended September 30, 1996 was 2.62%. These returns were computed by
assuming a hypothetical initial payment of $1,000 in Class D shares of the Fund
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 following tables are an illustration of the total returns on a $1,000
investment in Class A for the ten years ended September 30, 1996, and in Class D
shares from the commencement of its operations through September 30, 1996,
assuming investment of all dividends and capital gain distributions.
CLASS A SHARES
<TABLE>
<CAPTION>
Value of Capital Value Total Value
Period Initial Gain of of Total
Ended 1 Investment(2) Distributions Dividends Investment(2) Return(1,3)
- ------- ------------ ------------- --------- ----------- ---------
<C> <C> <C> <C> <C>
9/30/87 $ 850 $ 1 $ 61 $ 912
9/30/88 919 3 138 1,060
9/30/89 943 3 215 1,161
17
<PAGE>
<CAPTION>
Value of Capital Value Total Value
Period Initial Gain of of Total
Ended 1 Investment(2) Distributions Dividends Investment(2) Return(1,3)
- ------- ------------ ------------- --------- ----------- ---------
<C> <C> <C> <C> <C> <C>
9/30/90 923 3 283 1,209
9/30/91 974 18 379 1,371
9/30/92 1,009 22 477 1,508
9/30/93 1,083 47 600 1,730
9/30/94 950 90 604 1,644
9/30/95 980 125 712 1,817
9/30/96 984 147 806 1,937 93 .66%
CLASS D SHARES
Value of Capital Value Total Value
Period Initial Gain of of Total
Ended 1 Investment 2 Distributions Dividends Investment2 Return1,3
- ------- ------------ ------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
9/30/94 $ 901 $ -- $ 24 $ 925
9/30/95 930 18 65 1,013
9/30/96 933 30 108 1,071 7.14%
</TABLE>
1 For the ten-year period ended September 30, 1996 for Class A shares; and
from commencement of operations of Class D shares on February 1, 1994.
2 The "Value of Initial Investment" as of the date indicated reflects the
effect of the maximum sales load, assumes that all dividends and capital
gain distributions were taken in cash and reflects changes in the net asset
value of the shares purchased with the hypothetical initial investment.
"Total Value of Investment" assumes investment of all dividends and capital
gain distributions.
3 Total return for the Fund is calculated by assuming a hypothetical initial
investment of $1,000 at the beginning of the period specified, subtracting
the maximum sales load or CDSL, if applicable; determining total value of
all dividends and distributions that would have been paid during the period
on such shares assuming that each dividend or distribution was invested in
additional shares at net asset value; calculating the total value of the
investment at the end of the period; and finally, by dividing the
difference between the amount of the hypothetical initial investment at the
beginning of the period and its value at the end of the period by the
amount of the hypothetical initial investment.
The waiver by the Manager of a portion or all of its fees and reimbursement
of certain expenses during certain of the periods (as set forth under
"Management and Expenses" herein and under "Management Services" 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 Fund 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 Fund 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 matter as to which
shareholder approval is required by the 1940 Act, (c) with respect to any
termination or reorganization of the Fund or any Series, (d) with respect to any
amendment of the Declaration of Trust (other than amendments establishing and
designating new Series or classes of shares, abolishing Series or classes of
shares when there are no units thereof outstanding, changing the name of the
Fund, 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 or applicable regulations
for the Fund's obtaining the most favorable treatment thereunder available to
18
<PAGE>
regulated investment companies, (e) to the same extent as the stockholders of a
Pennsylvania 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 Fund or the shareholders, and (f) with
respect to such additional matters relating to the Fund as may be required by
the 1940 Act, the Declaration of Trust, the By-laws of the Fund, any
registration of the Fund 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 Fund have the right, upon the declaration in
writing or vote of more than two-thirds of the Fund'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 Fund; 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.
The shareholders of a Pennsylvania 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 the Fund's
assets for any shareholder held personally liable for obligations of the Fund.
Custodian. Investors Fiduciary Trust Company, 127 West 10th Street, Kansas
City, Missouri 64105, serves as custodian for the Fund. It also maintains, under
the general supervision of the Manager, the accounting records and determines
the net asset value for the Fund.
Auditors. Deloitte & Touche LLP, independent auditors, have been selected
as auditors of the Fund. Their address is Two World Financial Center, New York,
NY 10281.
SPECIAL CONSIDERATIONS REGARDING INVESTMENTS IN
PENNSYLVANIA MUNICIPAL SECURITIES
The following information as to certain Pennsylvania considerations is
given to investors in view of the Fund's policy of investing primarily in
securities of Pennsylvania 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 Pennsylvania issuers.
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Employment. The industries traditionally strong in Pennsylvania, such as
coal, steel and railway, have declined and account for a decreasing share of
total employment. Service industries (including trade, health care, education
and finance) have grown, however, contributing increasing shares to the
Commonwealth's gross product and exceeding the manufacturing sector in each year
since 1985 as the largest single source of employment.
While the level of Pennsylvania's population basically remained constant
from 1986 through 1995, nonagricultural employment increased by 10.0% from 1986
to 1995, after declining during the early 1980's. In contrast, increases in U.S.
nonagricultural employment have been greater and declines smaller for the same
periods, with U.S. employment increasing by 18% from 1986 to 1995. Trends in the
unemployment rates of Pennsylvania and the U.S. have been similar from 1986 to
1995. From 1986 to 1990, Pennsylvania's unemployment rate was lower than the
U.S. rate. For example, Pennsylvania's unemployment rate for 1989 and 1990 was
4.5% and 5.4%, respectively, while the unemployment rate for the U.S. was 5.3%
and 5.6% for the same years. In 1994 and 1995, Pennsylvania's unemployment rate
was 6.2% and 5.9%, respectively, which slightly exceeded the U.S. employment
rate of 6.4% and 5.6% for the same years.
Commonwealth Debt. Debt service on general obligation bonds of
Pennsylvania, except those issued for highway purposes or the benefit of other
special revenue funds, is payable from Pennsylvania's general fund, the
recipient of all Commonwealth revenues that are not required to be deposited in
other funds.
As of June 30, 1996, the Commonwealth had $5,054.5 million of long-term
bonds outstanding, with debt for capital projects constituting the largest
dollar amount. Although Pennsylvania's Constitution permits the issuance of an
aggregate amount of capital project debt equal to 1.75 times the average annual
tax revenues of the preceding five fiscal years, the General Assembly may
authorize and historically has authorized a smaller amount. This constitutional
limit does not apply to other types of Pennsylvania debt such as electorate
approved debt or debt issued to rehabilitate areas affected by disaster.
However, the former may be incurred only after the enactment of legislation
calling for a referendum and usually specifying the purpose and amount of such
debt, followed by electoral approval. Similarly, debt issued to rehabilitate a
disaster area must be authorized by legislation which sets the debt limits.
These statutory and constitutional limitations imposed on bonds are also
applicable to bond anticipation notes.
Pennsylvania cannot use tax anticipation notes or any other form of debt to
fund budget deficits between fiscal years. All year-end deficits must be funded
within the succeeding fiscal year's budget. Moreover, the principal amount of
tax anticipation notes issued and outstanding for the account of a fund during a
fiscal year may not exceed 20 percent of that fund's estimated revenues for that
fiscal year.
Moral Obligations. The debt of the Pennsylvania Housing Finance Agency
("PHFA"), a state agency which provides housing for lower and moderate income
families, and certain obligations of The Hospitals and Higher Education
Facilities Authority of Philadelphia (the "Hospitals Authority") is the only
debt bearing Pennsylvania's moral obligation. PHFA's bonds, but not its notes,
are partially secured by a capital reserve fund required to be maintained by
PHFA in an amount equal to the maximum annual debt service on its outstanding
bonds in any succeeding calendar year. If there is a potential deficiency in the
capital reserve fund or if funds are necessary to avoid default on interest,
principal or sinking fund payments on bonds or notes of PHFA, the Governor must
place in Pennsylvania's budget for the next succeeding year an amount sufficient
to make up any such deficiency or to avoid any such default. The budget which
the General Assembly adopts may or may not include such amount. PHFA is not
permitted to borrow additional funds as long as any deficiency exists in the
capital reserve fund. As of June 30, 1996, PHFA had $2,349 million of bonds and
notes outstanding.
The Hospitals Authority is a municipal authority organized by the City of
Philadelphia (the "City") to, inter alia, acquire and prepare various sites for
use as intermediate care facilities for the mentally retarded. In 1986 the
Hospitals Authority issued $20.4 million of bonds, which were refunded in 1993
by a $21.1 million bond issue of the Hospitals Authority (the "Hospitals
Authority Bonds") for such facilities for the City. The Hospitals Authority
Bonds are secured by leases with the City and a debt service reserve fund for
which the Pennsylvania Department of Public Welfare (the "Department") has
agreed with the Hospitals Authority to request in the Department's annual budget
submission to the Governor, an amount of funds sufficient to alleviate any
deficiency in the debt service reserve fund that may arise. The budget as
finally adopted may or may not include the amount requested. If funds are paid
to the Hospitals Authority, the Department will obtain certain rights in the
property financed with the Hospitals Authority Bonds in return for such payment.
20
<PAGE>
In response to a delay in the availability of billable beds and the
revenues from these beds to pay debt service on the Hospitals Authority Bonds,
PHFA agreed in June 1989 to provide a $2.2 million low-interest loan to the
Hospitals Authority. The loan enabled the Hospitals Authority to make all debt
service payments on the Hospitals Authority Bonds during 1990. Enough beds were
completed in 1991 to provide sufficient revenues to the Hospitals Authority to
meet its debt service payments and to begin repaying the loan from PHFA. As of
June 30, 1996, $1.49 million of the loan was outstanding.
Other Commonwealth Obligations; Pensions. Other obligations of Pennsylvania
include long-term agreements with public authorities to make lease payments that
are in some cases pledged as security for those authorities' revenue bonds, and
two pension plans covering state public school and other employees. The total
unfunded actuarial accrued liability under the larger of these pension plans for
its fiscal year ended in 1995 was $3,102 million.
Pennsylvania Agencies. Certain Pennsylvania-created agencies have statutory
authorization to incur debt for which legislation providing for state
appropriations to pay debt service thereon is not required. The debt of these
agencies is supported solely by assets of, or revenues derived from the various
projects financed and is not an obligation of Pennsylvania. Some of these
agencies, however, are indirectly dependent on Pennsylvania funds through
various state-assisted programs. There can be no assurance that in the future
assistance of the Commonwealth will be available to these agencies. These
entities are as follows: The Delaware River Joint Toll Bridge Commission,
Delaware River Port Authority, Pennsylvania Energy Development Authority,
Pennsylvania Higher Education Assistance Agency, Pennsylvania Higher Educational
Facilities Authority, Pennsylvania Industrial Development Authority,
Pennsylvania Infrastructure Investment Authority, the Pennsylvania State Public
School Building Authority, the Pennsylvania Turnpike Commission, the
Pennsylvania Economic Development Financing Authority and the Philadelphia
Regional Port Authority.
Debt of Political Subdivisions and their Authorities. The ability of
Pennsylvania's political subdivisions, such as counties, cities and school
districts, to engage in general obligation borrowing without electorate approval
is generally limited by their recent revenue collection experience, although
generally such subdivisions can levy real property taxes unlimited as to rate or
amount to repay general obligation borrowings. Recent legislation authorizes
these subdivisions to engage in general obligation borrowings without limit as
to principal amount to fund unfunded accrued pension liabilities.
Political subdivisions can issue revenue obligations which will not affect
their general obligation borrowing capacity, but only if such revenue
obligations are either limited as to repayment from a certain type of revenue
other than tax revenues or projected to be repaid solely from project revenues.
Industrial development and municipal authorities, although created by
political subdivisions, can only issue obligations payable solely from the
revenues derived from the financed project. If the user of the project is a
political subdivision, that subdivision's full faith and credit may back the
repayment of the obligations of the industrial development or municipal
authority. Often the user of the project is a nongovernmental entity, such as a
not-for-profit hospital or university, a public utility or an industrial
corporation, and there can be no assurance that it will meet its financial
obligations or that the pledge, if any, of property financed will be adequate.
Factors affecting the business of the user of the project, such as governmental
efforts to control health care costs (in the case of hospitals), declining
enrollment and reductions in governmental financial assistance (in the case of
universities), increasing capital and operating costs (in the case of public
utilities) and economic slowdowns (in the case of industrial corporations) may
adversely affect the ability of the project user to pay the debt service on
revenue bonds issued on its behalf.
Many factors affect the financial condition of the Commonwealth and its
counties, cities, school districts and other political subdivisions, such as
social, environmental and economic conditions, many of which are not within the
control of such entities. As is the case with many states and cities, many of
the programs of the Commonwealth and its political subdivisions, particularly
human services programs, depend in part upon federal reimbursements which have
been steadily declining. In recent years the Commonwealth and various of its
political subdivisions (including particularly the City of Philadelphia and the
City of Scranton) have encountered financial difficulty due to a slowdown in the
pace of economic activity in the Commonwealth and to other factors. The Fund is
unable to predict what effect, if any, such factors would have on the Fund's
investments.
21
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FINANCIAL STATEMENTS
The Annual Report to Shareholders for the fiscal year ended September 30,
1996 is incorporated by reference into this Statement of Additional Information.
The Annual Report contains a schedule of the investments of the Fund as of
September 30, 1996, as well as certain other financial information as of that
date. The Annual Report will be furnished without charge, to investors who
request copies of the Fund's Statement of Additional Information.
22
<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
23
<PAGE>
MIG 4 are judged to be of adequate quality, carrying specific risk but having
protection commonly regarded as required of an investment security and not
distinctly or predominantly speculative.
Commercial Paper
Moody's Commercial Paper Ratings are opinions of the ability of issuers to
repay punctually promissory senior debt obligations not having an original
maturity in excess of one year. Issuers rated "Prime-1" or "P-1" indicates the
highest quality repayment capacity of the rated issue.
The designation "Prime-2" or "P-2" indicates that the issuer has a strong
capacity for repayment of senior short-term promissory obligations. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.
The designation "Prime-3" or "P-3" indicates that the issuer has an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
Issues rated "Not Prime" do not fall within any of the Prime rating
categories.
Standard & Poor's Corporation ("S&P")
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 differ 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.
24
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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.
25
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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.
26
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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 Administration Group
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.
27
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- -----------------------------
11th ANNUAL REPORT
SELIGMAN
PENNSYLVANIA
MUNICIPAL
FUND
September 30, 1996
[Logo]
- -----------------------------
Providing Income
Free From Regular Income Tax
Since 1986
<PAGE>
===============================================================================
TO THE SHAREHOLDERS
- -------------------------------------------------------------------------------
We are pleased to update you on Seligman Pennsylvania Municipal Fund, at its
fiscal year-end, September 30, 1996.
After reducing interest rates twice in 1995, and again in January 1996, the
Federal Reserve Board left rates unchanged for the next eight months. The
economy's rate of growth, which slowed in the fourth quarter of 1995, bounced
back in the second quarter of 1996. It continued to grow at a healthy pace all
year with virtually no inflationary repercussions. Reports issued in September
supported this view, showing continued increases in production, new home sales,
wages, and spending.
With the lowest unemployment rate since June 1990, strong personal incomes,
interest rates far below their 1980s levels, and few signs of inflationary
pressure, consumer confidence as measured by The Conference Board rose 25% above
its January 1996 level.
In the municipal bond market, interest rates began to decline in the third
quarter of 1995 and continued to do so until February 1996. However, as the
economy picked up steam late in the first quarter of this year, and continued to
grow in the second quarter, municipal market sentiment turned from enthusiasm to
concern regarding inflation. For the last six months, every Fed meeting was
under intense scrutiny by market participants. The inability of municipal bond
investors to gauge the future direction of rates exaggerated their response to
each economic report, with municipal bond yields drifting up or down in response
to the latest data.
On September 24, the Fed decided to maintain the current fed funds rate.
Once the decision was announced, long-term municipal bond yields, as measured by
the Bond Buyer 20-Bond General Obligation Index, declined slightly and ended the
quarter at 5.76%. The unchanged monetary policy somewhat stabilized the
municipal bond market by the end of the Fund's fourth quarter.
Going forward, we foresee continued, albeit moderate, economic growth and a
benign level of inflation. This environment of modest growth, combined with
relatively stable interest rates, should be beneficial for financial markets in
the months ahead. As always, there could be short-term volatility, but we remain
confident in the long-term outlook.
As we near the end of the year, we encourage you to review your overall
investment portfolio. When doing so, you may wish to consult your financial
advisor to discuss financial issues such as tax planning, and to ensure that you
are following the best investment strategy to help you seek your financial
goals.
At the Special Meeting of Shareholders, held on September 30, 1996, a
proposal was passed permitting the Fund to invest any portion of its net assets
in securities subject to the federal alternative minimum tax. Consequently, your
Fund's name was changed to Seligman Pennsylvania Municipal Fund. For specific
results of the Special Meeting of Shareholders, please refer to page 14.
A discussion with your Portfolio Manager about your Fund, along with
highlights of performance, long-term investment results, portfolio holdings, and
financial statements, follows this letter.
We thank you for your continued interest in Seligman Pennsylvania Municipal
Fund, and look forward to serving your investment needs in the many years to
come.
By order of the Trustees,
/s/ William C. Morris
- ---------------------
William C. Morris
Chairman
/s/ Brian T. Zino
---------------------
Brian T. Zino
President
October 30, 1996
1
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SELIGMAN PENNSYLVANIA MUNICIPAL FUND
- --------------------------------------------------------------------------------
HIGHLIGHTS September 30, 1996 Class A Class D
------- -------
Net Assets (in thousands) $31,139 $876
Yield* 4.45% 3.89%
Dividends** $0.376 $0.316
Capital Gain Distribution** $0.093 $0.093
NET ASSET Value per share
September 30, 1996 $7.82 $7.81
September 30, 1995 7.79 7.78
MAXIMUM OFFERING PRICE PER SHARE
September 30, 1996 $8.21 $7.81
September 30, 1995 8.18 7.78
Moody's/S&P Ratings+
Aaa/AAA 62%
Aa/AA 29
A/A 7
Baa/BBB 2
Holdings by Market Sector
Revenue Bonds 89%
General Obligation Bonds 11
Weighted Average maturity (Years) 23.4
* Current yield representing the annualized yield for the 30-day period ended
September 30, 1996.
** Represents per share amount paid or declared for the year ended September
30, 1996.
+ Percentages based on current market values of long-term holdings.
Note: The yields have been computed in accordance with current SEC regulations
and will vary, and the principal value of an investment will fluctuate. Shares,
if redeemed, may be worth more or less than their original cost. A small portion
of the Fund's income dividends may be subject to applicable state and local
taxes, and any amount may be subject to the federal alternative minimum tax.
Past performance is not indicative of future investment results.
2
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================================================================================
ANNUAL PERFORMANCE OVERVIEW
- --------------------------------------------------------------------------------
The following is a discussion with your Portfolio Manager regarding Seligman
Pennsylvania Municipal Fund, and a chart and table comparing your Fund's
performance to the performance of the Lehman Brothers Municipal Bond Index.
YOUR PORTFOLIO MANAGER
[PICTURE OF THOMAS G. MOLES]
Thomas G. Moles is a Managing Director of J. & W. Seligman & Co. Incorporated,
Vice President and Portfolio Manager of Seligman Pennsylvania Municipal Fund and
the other Seligman municipal mutual funds which include 19 separate portfolios,
and President and Portfolio Manager of Seligman Select Municipal Fund and
Seligman Quality Municipal Fund. He is responsible for more than $2 billion in
municipal securities. Mr. Moles, with more than 25 years of experience, has
spearheaded Seligman's municipal investment efforts since joining the firm in
1983.
What economic factors affected Seligman Pennsylvania Municipal Fund over the
past 12 months?
Throughout the fourth quarter of 1995, the majority of market participants
believed that the economy was growing at a moderate pace and that inflation
remained under control. This bullish outlook caused long-term interest rates to
decline steadily during the fourth quarter of 1995 and into the new year. By
February 1996, however, the economy began to exhibit signs of unexpected
strength and interest rates rose sharply on renewed inflation concerns. Since
then, economic data has been mixed, suggesting weakness in some areas and vigor
in others. Given these conflicting economic reports, market participants have
been unable to form a consensus with respect to the economy. As a result, each
new economic release has led to an amplified shift in interest rates.
On September 24, the Federal Reserve Board stated that it had not seen
sufficient evidence of an acceleration in inflation to warrant an increase in
the fed funds rate. The Fed's decision to hold monetary policy steady helped
stabilize the bond market and prompted a modest decline in long-term yields.
Further, by September 30, 1996, long-term municipal yields, as measured by the
Bond Buyer 20-Bond General Obligation Index, stood at 5.76%, down from 6.00% a
year ago.
What market factors influenced the Fund over the past 12 months?
In the municipal bond market, year-to-date new issue supply has increased only
marginally over 1995 levels. However, demand, in particular retail demand, has
been strong, resulting in shortages of certain types of municipal bonds. The
supply imbalance pushed buyers to bid up prices to obtain the specific bonds
they required, which caused a compression of yield spreads, or a narrowing of
yield differentials, within the various sectors of the municipal market. For
example, hospital bonds typically trade at higher yields than similarly rated
general obligation bonds, due to their complexity. This year, many typically
higher-yielding issues such as hospital bonds have been trading at or near
general obligation levels. This market aberration provided us an opportunity to
improve the relative value of the portfolio.
3
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ANNUAL PERFORMANCE OVERVIEW (continued)
- --------------------------------------------------------------------------------
What was your investment strategy in the past 12 months?
We believe that the economy is expanding at an acceptable rate of growth and
that inflation remains in check. Therefore, we have been comfortable purchasing
long-term municipal bonds in spite of the market's frequent ups and downs.
Yields on long-term municipal bonds are significantly higher than yields on
short-term municipal securities. For that reason, short-term positions were kept
to a minimum.
Further, to better protect the net asset value of the Fund during periods
of rising interest rates, we concentrated new acquisitions in current coupon
bonds rather than in discount or zero coupon bonds, as the prices of discount
and zero coupon bonds are more vulnerable to rising interest rates. Though we
primarily focus on our long-term goals rather than short-term gains, we
continuously search for ways to improve the relative value of the Fund by taking
advantage of aberrations and inefficiencies within the municipal marketplace.
What is your outlook for the Fund?
Thus far, 1996 has been a challenging year for fixed-income investors. The
debate within the municipal markets over the strength of the economy most likely
will continue to influence the direction of interest rates in the short term.
Our team, however, takes a long-term, conservative approach to managing your
Fund. We believe municipal bond funds will continue to play an important role in
helping investors meet their long-term financial goals, and we remain committed
to maintaining a diversified portfolio of quality municipal bonds while
providing our Shareholders with competitive yields.
4
<PAGE>
================================================================================
PERFORMANCE COMPARISON CHART AND TABLE September 30, 1996
- --------------------------------------------------------------------------------
This chart compares a $10,000 hypothetical investment made in Seligman
Pennsylvania Municipal Fund Class A shares with and without the maximum initial
sales charge of 4.75%, for the 10-year period ended September 30, 1996, to a
$10,000 hypothetical investment made in the Lehman Brothers Municipal Bond Index
(Lehman Index) for the same period. The performance of Seligman Pennsylvania
Municipal Fund Class D shares is not shown in this chart but is included in the
table below. It is important to keep in mind that the Lehman Index does not
include any fees or sales charges, and does not reflect state-specific bond
market performance.
With sales Without sales
charge charge Lehman Index
- ----------------------------------------------------------------------------
9/30/86 $ 9,522.02 $ 10,000.00 $10,000
12/31/86 $ 9,861.15 $ 10,356.16 $10,346
3/31/87 $ 10,112.75 $ 10,620.39 $10,596
6/30/87 $ 9,589.35 $ 10,070.72 $10,309
9/30/87 $ 9,121.12 $ 9,578.99 $10,052
12/31/87 $ 9,721.22 $ 10,209.21 $10,501
3/31/88 $ 10,052.75 $ 10,557.39 $10,863
6/30/88 $ 10,318.34 $ 10,836.31 $11,072
9/30/88 $ 10,598.75 $ 11,130.80 $11,356
12/31/88 $ 10,926.40 $ 11,474.89 $11,566
3/31/89 $ 11,001.43 $ 11,553.68 $11,642
6/30/89 $ 11,641.24 $ 12,225.68 $12,331
9/30/89 $ 11,608.78 $ 12,191.51 $12,340
12/31/89 $ 12,045.27 $ 12,649.91 $12,814
3/31/90 $ 12,008.60 $ 12,611.39 $12,872
6/30/90 $ 12,274.26 $ 12,890.39 $13,173
9/30/90 $ 12,088.65 $ 12,695.48 $13,181
12/31/90 $ 12,688.99 $ 13,325.96 $13,749
3/31/91 $ 12,881.71 $ 13,528.37 $14,060
6/30/91 $ 13,187.63 $ 13,849.65 $14,359
9/30/91 $ 13,708.08 $ 14,396.65 $14,918
12/31/91 $ 14,121.64 $ 14,830.57 $15,419
3/31/92 $ 14,166.24 $ 14,877.41 $15,465
6/30/92 $ 14,723.55 $ 15,462.69 $16,053
9/30/92 $ 15,084.47 $ 15,841.73 $16,478
12/31/92 $ 15,438.30 $ 16,213.33 $16,778
3/31/93 $ 16,028.26 $ 16,832.91 $17,401
6/30/93 $ 16,631.95 $ 17,466.91 $17,970
9/30/93 $ 17,302.83 $ 18,171.47 $18,577
12/31/93 $ 17,430.91 $ 18,305.97 $18,837
3/31/94 $ 16,315.87 $ 17,134.96 $17,803
6/30/94 $ 16,402.08 $ 17,225.49 $18,001
9/30/94 $ 16,437.03 $ 17,262.19 $18,123
12/31/94 $ 16,206.41 $ 17,020.00 $17,862
3/31/95 $ 17,436.63 $ 18,311.97 $19,125
6/30/95 $ 17,813.23 $ 18,707.48 $19,586
9/30/95 $ 18,172.09 $ 19,084.36 $20,150
12/31/95 $ 19,125.82 $ 20,085.96 $20,980
3/31/96 $ 18,698.90 $ 19,637.62 $20,726
6/30/96 $ 18,812.19 $ 19,756.59 $20,886
9/30/96 $ 19,366.24 $ 20,338.46 $21,367
- ----------------
The table below shows the average annual total returns for the one-, five-, and
10-year periods through September 30, 1996, for Seligman Pennsylvania Municipal
Fund Class A shares, with and without the maximum initial sales charge of 4.75%,
and the Lehman Index. Also included in the table are the average annual total
returns for the one-year and since-inception periods through September 30, 1996,
for Seligman Pennsylvania Municipal Fund Class D shares, with and without the
effect of the 1% contingent deferred sales load ("CDSL") imposed on shares
redeemed within one year of purchase, and the Lehman Index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
Since
One Five 10 One Inception
Year Years Years Year 2/1/94
---- ----- ----- ---- -------
<S> <C> <C> <C> <C> <C> <C>
Seligman Pennsylvania Seligman Pennsylvania
Municipal Fund Municipal Fund
Class A with Sales Charge 1.49% 6.11% 6.83% Class D with CDSL 4.76% n/a
Class A without Sales Charge 6.57 7.16 7.36 Class D without CDSL 5.76 2.62%
Lehman Index 6.04 7.45 7.89 Lehman Index 6.04 4.40
</TABLE>
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders. Performance data quoted represent changes in
prices and assume that all distributions within the periods are invested in
additional shares. The investment return and principal value of an investment
will fluctuate so that shares, if redeemed, may be worth more or less than their
original cost. Past performance is not indicative of future investment results.
5
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Ratings Market
Amount Municipal Bonds Moody's/S&P+ Value
------ --------------- ----------- ------
<S> <C> <C> <C>
$1,000,000 Berks County Municipal Authority, PA Hospital Rev. (The Reading Hospital & Medical
Center Project), 5.70% due 10/1/2014............................................ Aaa/AAA $ 1,006,050
1,000,000 Berks County Municipal Authority, PA Hospital Rev. (The Reading Hospital & Medical
Center Project), 6.10% due 10/1/2023............................................ Aaa/AAA 1,017,210
1,000,000 Delaware County Authority, PA (Haverford College Rev.), 5cents% due 11/15/2023.... Aaa/AAA 961,810
1,000,000 Delaware County Industrial Development Authority, PA (Philadelphia Suburban
Water Company), 6.35% due 8/15/2025*............................................ Aaa/AAA 1,047,110
1,000,000 Delaware County, PA GOs, 6% due 11/15/2022........................................ Aa/AA 1,005,610
1,000,000 Franklin County, PA Industrial Development Authority Hospital Rev.
(The Chambersburg Hospital Project), 6-1/4% due 7/1/2022........................ Aaa/AAA 1,039,050
1,750,000 Lehigh County, PA Industrial Development Authority Pollution Control Rev.
(Pennsylvania Power & Light Company Project), 6.40% due 11/1/2021............... Aaa/AAA 1,842,260
500,000 Montgomery County, PA Industrial Development Authority Pollution Control Rev.
(Philadelphia Electric Co.), 7.60% due 4/1/2021*................................ Baa2/BBB+ 535,895
2,000,000 Pennsylvania Higher Education Assistance Agency Student Loan Rev.,
6.40% due 3/1/2022*............................................................. Aaa/AAA 2,044,660
1,500,000 Pennsylvania Higher Educational Facilities Authority College & University Rev.
(University of Pennsylvania), 5.90% due 9/1/2014................................ Aa/AA 1,521,720
2,000,000 Pennsylvania Higher Educational Facilities Authority Rev. (Temple University),
6-1/2% due 4/1/2021............................................................. Aaa/AAA 2,132,440
2,000,000 Pennsylvania Housing Finance Agency (Single Family Mortgage Rev.),
5.45% due 10/1/2017............................................................. Aa/AA+ 1,927,380
1,800,000 Pennsylvania Housing Finance Agency (Rental Housing Rev.), 6-1/2% due 7/1/2023.... Aaa/AAA 1,860,570
2,000,000 Pennsylvania State GOs, 6-1/2% due 11/15/2011..................................... A1/AA- 2,118,180
1,500,000 Pennsylvania State Turnpike Commission Rev., 6% due 12/1/2017..................... Aaa/AAA 1,525,980
2,500,000 Philadelphia Hospitals & Higher Educational Facilities Authority, PA Hospital Rev.
(Children's Hospital of Philadelphia Project), 5% due 2/15/2021................. Aa/AA 2,231,625
1,500,000 Philadelphia, PA Airport Rev., 6.10% due 6/15/2025*............................... Aaa/AAA 1,513,920
450,000 Philadelphia Redevelopment Authority, PA (Home Mortgage Rev.), 9% due 6/1/2017 NR/AA 472,091
1,500,000 Pittsburgh, PA Water & Sewer Authority Rev., 5.65% due 9/1/2025................... Aaa/AAA 1,483,065
2,000,000 Pottsville Hospital Authority, PA Hospital Rev. (Daughters of Charity National
Health System -- Good Samaritan Regional Medical Center), 5% due 8/15/2012....... Aa/AA 1,854,900
1,500,000 University of Pittsburgh Capital Project, 6-1/8% due 6/1/2021..................... Aaa/AAA 1,525,980
-----------
Total Municipal Bonds (Cost $29,761,630) -- 95.8% ............................................................ 30,667,506
Variable Rate Demand Notes (Cost $900,000) -- 2.8%............................................................ 900,000
Other Assets Less Liabilities -- 1.4%......................................................................... 447,865
-----------
NET ASSETS -- 100.0%.......................................................................................... $32,015,371
===========
</TABLE>
- --------------------
* Interest income earned from this security is subject to the federal
alternative minimum tax.
+ Ratings have not been audited by Deloitte & Touche LLP.
See notes to financial statements.
6
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
Investments, at value:
Long-term holdings (cost $29,761,630)............................ $30,667,506
Short-term holdings (cost $900,000).............................. 900,000 $31,567,506
-----------
Cash..................................................................... 57,347
Interest receivable...................................................... 546,697
Receivable for Shares of Beneficial Interest sold........................ 9,595
Expenses prepaid to shareholder service agent ........................... 4,542
Other ................................................................... 5,170
-----------
Total Assets ............................................................ 32,190,857
-----------
Liabilities:
Dividends payable........................................................ 53,486
Payable for Shares of Beneficial Interest repurchased.................... 23,932
Accrued expenses, taxes, and other....................................... 98,068
-----------
Total Liabilities........................................................ 175,486
-----------
Net Assets........................................................... $32,015,371
===========
Composition of Net Assets:
Shares of Beneficial Interest, at par ($.001 par value; unlimited shares
authorized; 4,095,344 shares outstanding):
Class A.............................................................. $ 3,983
Class D.............................................................. 112
Additional paid-in capital............................................... 30,720,050
Undistributed net realized gain.......................................... 385,350
Net unrealized appreciation of investments............................... 905,876
-----------
Net Assets........................................................... $32,015,371
===========
Net Asset Value per share:
Class A ($31,138,860 / 3,983,151 shares)................................. $7.82
=====
Class D ($876,511 / 112,193 shares)...................................... $7.81
=====
</TABLE>
- ------------------
See notes to financial statements.
7
<PAGE>
================================================================================
STATEMENT OF OPERATIONS For the Year Ended September 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment income:
Interest.............................................................. $1,978,977
Expenses:
Management fee........................................................ $166,894
Distribution and service fees......................................... 82,641
Shareholder account services.......................................... 43,462
Auditing and legal fees............................................... 32,769
Trustees' fees and expenses........................................... 23,293
Shareholder reports and communications................................ 11,867
Custody and related services.......................................... 8,243
Registration.......................................................... 6,663
Miscellaneous......................................................... 2,153
Total expenses........................................................ 377,985
----------
Net investment income................................................. 1,600,992
Net realized and unrealized gain on investments:
Net realized gain on investments...................................... 387,910
Net change in unrealized appreciation of investments.................. 106,542
--------
Net gain on investments............................................... 494,434
----------
Increase in Net Assets from Operations................................ $2,095,426
==========
</TABLE>
- -------------------
See notes to financial statements.
8
<PAGE>
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended September 30,
1996 1995
------------------------
<S> <C> <C>
Operations:
Net investment income............................................................. $ 1,600,992 $ 1,701,722
Net realized gain on investments.................................................. 387,910 402,850
Net change in unrealized appreciation/depreciation of investments................. 106,524 1,230,484
---------- ----------
Increase in net assets from operations............................................ 2,095,426 3,335,056
---------- ----------
Distributions to shareholders:
Net investment income:
Class A....................................................................... (1,564,162) (1,694,167)
Class D....................................................................... (36,830) (7,555)
Net realized gain on investments:
Class A....................................................................... (395,780) (600,438)
Class D....................................................................... (5,886) (820)
---------- ----------
Decrease in net assets from distributions......................................... (2,002,658) (2,302,980)
========== ==========
</TABLE>
<TABLE>
<CAPTION>
TRANSACTIONS IN SHARES
OF BENEFICIAL INTEREST: SHARES
YEAR ENDED SEPTEMBER 30,
1996 1995
-------- -------
<S> <C> <C> <C> <C>
Net proceeds from sales of shares:
Class A...................................... 88,034 106,330 689,856 804,851
Class D...................................... 98,385 49,571 773,322 382,449
Shares issued in payment of dividends:
Class A...................................... 104,328 121,691 814,679 917,938
Class D...................................... 2,293 706 17,887 5,454
Exchanged from associated Funds:
Class A...................................... 50,822 31,638 400,478 235,025
Class D...................................... 12,819 1,759 102,336 13,441
Shares issued in payment of gain distributions:
Class A...................................... 33,940 59,014 266,766 406,603
Class D...................................... 644 72 5,117 498
-------- -------- ---------- ----------
Total............................................ 391,265 370,781 3,070,441 2,766,259
-------- -------- ---------- ----------
Cost of shares repurchased:
Class A...................................... (476,571) (656,287) (3,712,004) (4,898,866)
Class D...................................... (40,966) (3,075) (318,471) (23,950)
Exchanged into associated Funds:
Class A ..................................... (86,031) (24,434) (668,822) (184,951)
Class D ..................................... (15,725) -- (125,209) --
-------- -------- ---------- ----------
Total............................................ (619,293) (683,796) (4,824,506) (5,107,767)
-------- -------- ---------- ----------
Decrease in net assets from transactions
in Shares of Beneficial Interest ............ (228,028) (313,015) (1,754,065) (2,341,508)
======== ======== ---------- ----------
Decrease in net assets............................................................. (1,661,297) (1,309,432)
Net Assets:
Beginning of year.................................................................. 33,676,668 34,986,100
----------- -----------
End of year ....................................................................... $32,015,371 $33,676,668
=========== ===========
</TABLE>
- ----------------
See notes to financial statements.
9
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Seligman Pennsylvania Municipal Fund, formerly Seligman Pennsylvania
Tax-Exempt Fund (the "Fund") offers two classes of shares. All shares existing
prior to February 1, 1994, were classified as Class A shares. Class A shares are
sold with an initial sales charge of up to 4.75% and a continuing service fee of
up to 0.25% on an annual basis. Class 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 certain redemptions made within one
year of purchase. The two classes of shares 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
to which a separate vote of any class is required.
2. Significant accounting policies followed, all in conformity with generally
accepted accounting principles, are given below:
a. All tax-exempt securities and other short-term holdings maturing in more
than 60 days are valued based upon quotations provided by an independent
pricing service or, in their absence, at fair value determined in
accordance with procedures adopted by the Trustees. Short-term holdings
maturing in 60 days or less are generally valued at amortized cost.
b. There is no provision for federal income or excise tax. The Fund has
elected to be taxed as a regulated investment company and intends to
distribute substantially all taxable net income and net gain realized.
Dividends are declared daily and paid monthly.
c. Investment transactions are recorded on trade dates. Identified cost of
investments sold is used for both financial statement and federal income
tax purposes. Interest income is recorded on the accrual basis. The Fund
amortizes original issue discounts and premiums paid on purchases of
portfolio securities. Discounts other than original issue discounts are not
amortized.
d. All income, expenses (other than class-specific expenses), and realized and
unrealized gains or losses are allocated daily to each class of shares
based upon the relative value of each class. Class-specific expenses, which
include distribution and service fees and any other items that are
specifically attributed to a particular class, are charged directly to such
class. For the year ended September 30, 1996, distribution and service fees
were the only class-specific expenses.
e. The treatment for financial statement purposes of distributions made during
the year from net investment income or net realized gains may differ from
their ultimate treatment for federal income tax purposes. These differences
are caused primarily by differences in the timing of the recognition of
certain components of income, expense, and capital gain for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net assets based on their ultimate
characterization for federal income tax purposes. Any such
reclassifications will have no effect on net assets, results of operations,
or net asset value per share of the Fund.
3. Purchases and sales of portfolio securities excluding short-term investments,
for the year ended September 30, 1996, amounted to $1,483,365 and $3,824,150,
respectively.
At September 30, 1996, 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
investments amounted to $1,062,406 and $156,530, respectively.
4. J. & W. Seligman & Co. Incorporated (the "Manager") manages the affairs of
the Fund and provides the necessary personnel and facilities. Compensation of
all officers of the Fund, all trustees of the Fund who are employees or
consultants of the Manager, and all personnel of the Fund and the Manager is
paid by the Manager. The Manager's fee, calculated daily and payable monthly, is
equal to 0.50% per annum of the Fund's average daily net assets.
Seligman Financial Services, Inc. (the "Distributor"), agent for the
distribution of the Fund's shares and an
10
<PAGE>
affiliate of the Manager, received concessions of $3,383 from the sale of Class
A shares, after commissions of $25,360 paid to dealers.
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to Class A shares under which service organizations
can enter into agreements with the Distributor and receive a continuing fee 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 Fund pursuant to
the Plan. For the year ended September 30, 1996, fees paid aggregated $73,531,
or 0.23% per annum of the average daily net assets of Class A shares.
The Fund has a Plan with respect to Class D shares under which service
organizations can enter into agreements with the Distributor and receive a
continuing fee 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 Fund
to the Distributor pursuant to the Plan. For the year ended September 30, 1996,
fees paid amounted to $9,110, or 1% per annum of the average daily net assets of
Class D shares.
The Distributor is entitled to retain any CDSL imposed on certain
redemptions of Class D shares occurring within one year of purchase. For the
year ended September 30, 1996, such charges amounted to $2,658.
Seligman Services, Inc., an affiliate of the Manager, is eligible to
receive commissions from certain sales of fund shares, as well as distribution
and service fees pursuant to the Plan. For the year ended September 30, 1996,
Seligman Services, Inc. received commissions of $337 from sales of shares of the
Fund. Seligman Services, Inc. also received distribution and service fees of
$3,735, pursuant to the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged at cost $43,462 for shareholder account services.
Certain officers and trustees of the Fund are officers or directors of the
Manager, the Distributor, Seligman Services, Inc., and/or Seligman Data Corp.
Fees of $8,000 were incurred by the Fund for the legal services of Sullivan
& Cromwell, a member of which firm is a trustee of the Fund.
The Fund has a compensation arrangement under which trustees who receive
fees may elect to defer receiving such fees. Interest is accrued on the deferred
balances. The annual cost of such fees and interest is included in trustees'
fees and expenses, and the accumulated balance thereof at September 30, 1996, of
$43,340 is included in other liabilities. Deferred fees and related accrued
interest are not deductible for federal income tax purposes until such amounts
are paid.
11
<PAGE>
FINANCIAL HIGHLIGHTS
The Fund's financial highlights are presented below. The per share operating
performance data is designed to allow investors to trace the operating
performance, on a per share basis, from each class' beginning net asset value to
the ending net asset value so that they can understand what effect the
individual items have on their investment, assuming it was held throughout the
period. Generally, the per share amounts are derived by converting the actual
dollar amounts incurred for each item, as disclosed in the financial statements,
to their equivalent per share amounts using average shares outstanding.
The total return based on net asset value measures each class' performance
assuming investors purchased Fund shares at net asset value as of the beginning
of the period, reinvested dividends and capital gains paid at net asset value,
and then sold their shares at the net asset value per share on the last day of
the period. The total return computations do not reflect any sales charges
investors may incur in purchasing or selling shares of the Fund. The total
return for the period of less than one year is not annualized.
<TABLE>
<CAPTION>
Class A Class D
-------------------------------------------- --------------------------
Year Ended
Year Ended September 30, September 30, 2/1/94*
-------------------------------------------- --------------- to
1996 1995 1994 1993 1992 1996 1995 9/30/94
----- ----- ----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period .................... $7.79 $7.55 $8.61 $8.02 $7.74 $7.78 $7.54 $8.37
----- ----- ----- ----- ----- ----- ----- -----
Net investment income**......... .38 .38 .39 .42 .46 .32 .31 .22
Net realized and unrealized
investment gain (loss)........ .12 .37 (.80) .71 .30 .12 .37 (.83)
----- ----- ----- ----- ----- ----- ----- -----
Increase (decrease) from
investment operations ........ .50 .75 (.41) 1.13 .76 .44 .68 (.61)
Dividends paid or declared...... (.38) (.38) (.39) (.42) (.46) (.32) (.31) (.22)
Distributions from
net gain realized ............ (.09) (.13) (.26) (.12) (.02) (.09) (.13) --
----- ----- ----- ----- ----- ----- ----- -----
Net increase (decrease) in
net asset value............... .03 .24 (1.06) .59 .28 .03 .24 (.83)
----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period $7.82 $7.79 $7.55 $8.61 $8.02 $7.81 $7.78 $7.54
===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN BASED ON
NET ASSET VALUE: 6.57% 10.55% (5.00)% 14.71% 10.04% 5.76% 9.53% (7.50)%
RATIOS/SUPPLEMENTAL
DATA:**
Expenses to average net assets 1.11% 1.21% 1.16% 1.19% 1.01% 1.88% 2.23% 2.00%+
Net investment income to
average net assets........... 4.82% 5.05% 4.91% 5.14% 5.79% 4.05% 4.10% 4.20%+
Portfolio turnover............. 4.56% 11.78% 7.71% 40.74% 32.87% 4.56% 11.78% 7.71%++
Net assets, end of period
(000s omitted) .............. $31,139 $33,251 $34,943 $41,296 $39,431 $876 $426 $43
<FN>
- -----------------
* Commencement of offering of Class D shares.
** Had the Manager, at its discretion, not waived a portion of its fees for
the fiscal year ended 9/30/92, the net investment income per share would
have been $.45. The ratios of expenses to average net assets and of net
investment income to average net assets for the same period would have been
1.16% and 5.64%, respectively.
+ Annualized.
++ For the year ended September 30, 1994.
</FN>
</TABLE>
See notes to financial statements.
12
<PAGE>
================================================================================
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Trustees and Shareholders,
Seligman Pennsylvania Municipal Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman Pennsylvania Municipal Fund (formerly
Seligman Pennsylvania Tax-Exempt Fund) as of September 30, 1996, 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 Fund'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, 1996 by correspondence with the Fund's custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Seligman
Pennsylvania Municipal Fund as of September 30, 1996, the results of its
operations, the changes in its net assets, and the financial highlights for the
respective stated periods, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New York, New York
October 30, 1996
13
<PAGE>
================================================================================
PROXY RESULTS
- --------------------------------------------------------------------------------
Seligman Pennsylvania Municipal Fund Shareholders voted on the following
proposals at the Special Meeting of Shareholders held on September 30, 1996, in
New York, NY. Each Trustee was elected, and all other proposals were approved.
The description of each proposal and number of shares voted are as follows:
ELECTION OF TRUSTEES:
For Withheld
--------- --------
Fred E. Brown 2,473,847 39,658
John R. Galvin 2,473,847 39,658
Alice S. Ilchman 2,473,847 39,658
Frank A. McPherson 2,474,770 38,735
John E. Merow 2,474,291 39,214
Betsy S. Michel 2,474,291 39,214
William C. Morris 2,474,770 38,735
James C. Pitney 2,473,847 39,658
James Q. Riordan 2,473,847 39,658
Ronald T. Schroeder 2,474,770 38,735
Robert L. Shafer 2,474,770 38,735
James N. Whitson 2,474,770 38,735
Brian T. Zino 2,474,770 38,735
RATIFICATION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS:
For Against Abstain Non-Vote
--------- ------- ------- --------
2,435,487 1,719 76,299 n/a
APPROVAL TO PERMIT ANY PORTION OF INVESTMENTS IN SECURITIES SUBJECT TO THE
FEDERAL ALTERNATIVE MINIMUM TAX:
For Against Abstain Non-Vote
--------- ------- ------- --------
1,968,738 286,693 136,707 121,367
14
<PAGE>
================================================================================
TRUSTEES
- --------------------------------------------------------------------------------
Fred E. Brown
Director and Consultant,
J. & W. Seligman & Co. Incorporated
John R. Galvin 2
Dean, Fletcher School of Law and Diplomacy
at Tufts University
Director, USLIFE Corporation
Alice S. Ilchman 3
President, Sarah Lawrence College
Trustee, Committee for Economic Development
Director, NYNEX
Chairman, The Rockefeller Foundation
Frank A. McPherson 2
Chairman and CEO, Kerr-McGee Corporation
Director, Kimberly-Clark Corporation
Director, Baptist Medical Center
John E. Merow
Partner, Sullivan & Cromwell, Law Firm
Director, Commonwealth Aluminum Corporation
Betsy S. Michel 2
Director or Trustee,
Various Organizations
William C. Morris 1
Chairman
Chairman of the Board and President,
J. & W. Seligman & Co. Incorporated
Chairman, Carbo Ceramics Inc.
Director, Kerr-McGee Corporation
James C. Pitney 3
Partner, Pitney, Hardin, Kipp & Szuch, Law Firm
Director, Public Service Enterprise Group
James Q. Riordan 3
Director, The Brooklyn Union Gas Company
Trustee, Committee for Economic Development
Director, Dow Jones & Co., Inc.
Director, Public Broadcasting Service
Ronald T. Schroeder 1
Managing Director,
J. & W. Seligman & Co. Incorporated
Robert L. Shafer 3
Director or Trustee,
Various Organizations
James N. Whitson 2
Executive Vice President and Director,
Sammons Enterprises, Inc.
Director, C-SPAN
Director, Red Man Pipe and Supply Company
Brian T. Zino 1
President
Managing Director,
J. & W. Seligman & Co. Incorporated
Chairman, Seligman Data Corp.
- ---------------
Member:
1 Executive Committee
2 Audit Committee
3 Trustee Nominating Committee
- --------------------------------------------------------------------------------
EXECUTIVE OFFICERS
William C. Morris
Chairman
Brian T. Zino
President
Thomas G. Moles
Vice President
Lawrence P. Vogel
Vice President
Thomas G. Rose
Treasurer
Frank J. Nasta
Secretary
- --------------------------------------------------------------------------------
Manager
J. & W. Seligman & Co.
Incorporated
100 Park Avenue
New York, NY 10017
General Counsel
Sullivan & Cromwell
Independent Auditors
Deloitte & Touche LLP
General Distributor
Seligman Financial Services, Inc.
100 Park Avenue
New York, NY 10017
Shareholder Service Agent
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
Important Telephone Numbers
(800) 221-2450 Shareholder
Services
(800) 622-4597 24-Hour Automated
Telephone Access
Service
15
<PAGE>
SELIGMAN FINANCIAL SERVICES, INC.
AN AFFILIATE OF
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
This report is intended only for the information of shareholders or those who
have received the offering prospectus covering shares of Beneficial Interest of
Seligman Pennsylvania Municipal Fund, which contains information about the sales
charges, management fee, and other costs. Please read the prospectus carefully
before investing or sending money.
TEDPA2 9/96
<PAGE>
File No. 33-5793
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A- Financial Highlights for Class A shares for the ten years ended
September 30, 1996. Financial Highlights for Class D shares for the
period February 1, 1994 (commencement of operations) to September 30,
1996.
PartB- Required Financial Statements are included in the Fund's Annual Report
to shareholders, dated September 30, 1996, which is incorporated by
reference in the Statement of Additional Information. These Financial
Statements are: Portfolio of Investments as of September 30, 1996;
Statement of Assets and Liabilities as of September 30, 1996;
Statement of Operations for the year ended September 30, 1996;
Statements of Changes in Net Assets for the years ended September 30,
1996 and September 30, 1995; Notes to Financial Statements; Financial
Highlights for the five years ended September 30, 1996 for the Fund's
Class A shares and for the period February 1, 1994 (commencement of
operations) to September 30, 1996 for the Fund's Class D shares;
Report of Independent Auditors.
(b) Exhibits: All Exhibits have been previously filed and are incorporated by
reference herein, except Exhibits marked with an (*) which are attached
hereto.
(1) Form of Amended and Restated Declaration of Trust of Registrant.*
(2) Amended and Restated Bylaws of Registrant.*
(3) Not applicable.
(4) Copy of Specimen of Stock Certificate for Class D Shares. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 12 filed on January
31, 1994.)
(5) Copy of Management Agreement between each Series of the Registrant and J. &
W. Seligman & Co. Incorporated.*
(6) Distributing Agreement between Registrant and Seligman Financial Services,
Inc.*
(6a) Sales Agreement between Dealers and Seligman Financial Services, Inc.*
(7) Matched Accumulation Plan of J. & W. Seligman & Co. Incorporated.*
(7a) Deferred Compensation Plan for Directors of Seligman Group of Funds.*
(8) Custodian Agreement between Registrant and Investors Fiduciary Trust
Company.*
(9) Not applicable.
(10) Opinion and Consent of Counsel.*
(11) Consent of Independent Auditors.*
(11a) Opinion and Consent of Pennsylvania Counsel.*
(12) Not applicable.
(13) Purchase Agreement for Initial Capital for Class D shares.*
<PAGE>
File No. 33-5793
PART C. OTHER INFORMATION (continued)
(14) Copy of amended Individual Retirement Account Trust and Related Documents.
(Incorporated by reference to Seligman Municipal Fund Series, Inc.
Post-Effective Amendment No. 24 filed on November 30, 1992)
(14a)Copy of amended Comprehensive Retirement Plans for Money Purchase and/or
Prototype Profit Sharing Plan. (Incorporated by reference to Seligman
Municipal Fund Series, Inc. Post-Effective Amendment No. 24 filed on
November 30, 1992)
(14b)Copy of amended Basic Business Retirement Plans for Money Purchase and/or
Profit Sharing Plans. (Incorporated by reference to Seligman Municipal Fund
Series, Inc. Post-Effective Amendment No. 24 filed on November 30, 1992)
(14c)Copy of amended 403(b)(7) Custodial Account Plan. (Incorporated by
reference to Seligman New Jersey Municipal Fund, Inc. Pre-Effective
Amendment No. 1 filed on January 11, 1988.)
(14d)Copy of amended Simplified Employee Pension Plan (SEP). (Incorporated by
reference to Seligman Municipal Fund Series, Inc. Post-Effective Amendment
No. 24 filed on November 30, 1992)
(14e)Copy of amended J. & W. Seligman & Co. Incorporated (SARSEP) Salary
Reduction and Other Elective Simplified Employee Pension-Individual
Retirement Accounts Contribution Agreement (Under Section 408(k) of the
Internal Revenue Code). (Incorporated by reference to Seligman Municipal
Fund Series, Inc. Post-Effective Amendment No. 24 filed on November 30,
1992)
(15) Amended Administration, Shareholder Services and Distribution Plan and form
of related Agreement of Registrant.*
(16) Schedule for computation of tax equivalent yield and schedule for
computation of each performance quotation provided in Registration
Statement in response to Item 22.*
(17) Financial Data Schedules meeting the requirements of Rule 483 under the
Securities Act of 1933.*
(18) Copy of Multiclass Plan entered into by Registrant pursuant to Rule 18f-3
under the Investment Company Act of 1940.*
Item 25. Persons Controlled by or Under Common Control with Registrant - None.
Item 26. Number of Holders of Securities - As of January 10, 1997, there
were 773 recordholders of Class A Shares of Beneficial Interest and 14
recordholders of Class D shares of Beneficial Interest of the
Registrant.
Item 27. Indemnification
Reference is made to the provisions of Article V 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 this Post-Effective Amendment No. 15 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.
<PAGE>
File No. 33-5793
Item 28. Business and Other Connections of Investment Adviser - J. & W.
Seligman & Co. Incorporated, a Delaware corporation ("Manager"), is
the Registrant's investment manager. The Manager also serves as
investment manager to sixteen associated investment companies. They
are Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc.,
Seligman Common Stock Fund, Inc., Seligman Communications and
Information Fund, Inc., Seligman Frontier Fund, Inc., Seligman Growth
Fund, Inc., Seligman Henderson Global Fund Series, Inc., Seligman High
Income Fund Series, Seligman Income Fund, Inc., Seligman Municipal
Fund Series, Inc., Seligman Municipal Series Trust, Seligman New
Jersey Municipal Fund, Inc., Seligman Portfolios, Inc., Seligman
Quality Municipal Fund, Inc., Seligman Select Municipal Fund, 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. 801-5798) on August 7,
1996.
<PAGE>
File No. 33-5793
PART C. OTHER INFORMATION (continued)
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 Municipal Series Trust.
Seligman New Jersey Municipal Fund, Inc.
Seligman Portfolios, Inc.
(b)Name of each trustee, officer or partner of each principal
underwriter named in response to Item 21:
Seligman Financial Services, Inc.
As of December 31, 1996
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
------------------ --------------------- ---------------------
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 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
Danville, CA 94526
D. Ian Valentine Senior Vice President of Sales None
307 Braehead Drive
Fredericksburg, VA 22401
Bradley F. Hanson Senior Vice President of Sales, None
9707 Xylon Court Regional Sales Manager
Bloomington, MN 55438
<PAGE>
File No. 33-5793
PART C. OTHER INFORMATION (continued)
Seligman Financial Services, Inc.
As of December 31, 1996
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
------------------ --------------------- ---------------------
Karen J. Bullot* Vice President,
Retirement Plans None
John Carl* Vice President, Marketing None
Marsha E. Jacoby* Vice President, None
National Accounts Manager
William W. Johnson* Vice President, Order Desk None
Helen Simon* Vice President, Sales None
Administration Manager
James R. Besher Regional Vice President None
14000 Margaux Lane
Town & Country, MO 63017
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
Jonathan G. Evans Regional Vice President None
222 Fairmont Way
Ft. Lauderdale, FL 33326
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
Susan R. Gutterud Regional Vice President None
820 Humboldt, #6
Denver, CO 80218
Mark Lien Regional Vice President None
5904 Mimosa
Sedalia, MO 65301
Randy D. Lierman Regional Vice President None
2627 R.D. Mize Road
Independence, MO 64057
Judith L. Lyon Regional Vice President None
163 Haynes Bridge Road,
Ste 205
Alpharetta, CA 30201
David L. Meyncke Regional Vice President None
4718 Orange Grove Way
Palm Harbor, FL 34684
Melinda A. Nawn Regional Vice President None
5850 Squire Hill Court
Cincinnati, OH 45241
Tim O'Connell Regional Vice President None
14872 Summerbreeze Way
San Diego, CA 92128
Juliana Perkins Regional Vice President None
2348 Adrian Street
Newbury Park, CA 91320
<PAGE>
File No. 33-5793
PART C. OTHER INFORMATION (continued)
Seligman Financial Services, Inc.
As of December 31, 1996
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
------------------ --------------------- ---------------------
Robert H. Ruhm Regional Vice President None
167 Derby Street
Melrose, MA 02176
Diane H. Snowden Regional Vice President None
11 Thackery Lane
Cherry Hill, NJ 08003
Bruce M. Tuckey Regional Vice President None
41644 Chathman Drive
Novi, MI 48375
Andrew S. Veasey Regional Vice President None
14 Woodside
Rumson, NJ 07760
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, None
Annuity Product Manager
Sandra Floris* Assistant Vice President, None
Order Desk
Keith Landry* Assistant Vice President, None
Order Desk
Frank P. Marino* Assistant Vice President,
Mutual Fund Product Manager None
Joseph M. McGill* Assistant Vice President and None
Compliance Officer
Joyce Peress* Assistant Secretary None
* The principal business address of each of these directors and/or officers
is 100 Park Avenue, New York, NY 10017.
(c) Not Applicable.
Item 30. Location of Accounts and Records
Custodian:Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105 and
Seligman Pennsylvania Municipal Fund Series
100 Park Avenue
New York, NY 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, 1996, 1995 and 1994, the approximate cost of
these services was $4,100, $4,597 and $5,428, respectively.
Item 32.Undertakings - The Registrant undertakes: (1) if requested to do so
by the holders of at least ten percent of its outstanding shares, to
call a meeting of shareholders for the purpose of voting upon the
removal of a director or directors and to assist in communications with
other shareholders as required by Section 16(c) of the Investment
Company Act of 1940; and (2) to furnish to each person to whom a
prospectus is delivered, a copy of the Registrant's latest annual report
to shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant 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 has duly caused this
Post-Effective Amendment No. 15 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 28th day of January, 1997.
SELIGMAN PENNSYLVANIA MUNICIPAL FUND SERIES
By: /s/ William C. Morris
----------------------------
William C. Morris, Chairman*
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 15 has been signed below by the following persons
in the capacities indicated on January 28, 1997.
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
- -------------------------------- and accounting officer)
Thomas G. Rose
Fred E. Brown, Trustee )
Alice S. Ilchman, 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 )
Robert L. Shafer, Trustee )
James N. Whitson, Trustee )
Brian T. Zino, Trustee )
<PAGE>
SELIGMAN PENNSYLVANIA MUNICIPAL FUND SERIES
Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A
EXHIBIT INDEX
<TABLE>
<C> <S>
24(b)(1) Form of Amended and Restated Declaration of Trust of Registrant
24(b)(2) Amended and Restated By-Laws of Registrant
24(b)(5) Management Agreement between the Registrant and J. & W. Seligman & Co. Incorporated
24(b)(6) Distributing Agreement between Registrant and Seligman Financial Services, Inc
24(b)(6)(a) Amended Sales Agreement between Seligman Financial Services, Inc. and Dealer
24(b)(7) Matched Accumulation Plan of J. & W. Seligman & Co. Incorporated
24(b)(7)(a) Deferred Compensation Plan for Directors of Seligman Group of Funds
24(b)(8) Custodian Agreement between Registrant and Investors Fiduciary Trust Company
24(b)(10) Opinion and Consent of Counsel
24(b)(11) Consent of Independent Auditors
24(b)(11)(a) Opinion and Consent of Pennsylvania Counsel
24(b)(13) Purchase Agreement for Initial Capital for Class D Shares
24(b)(15) Amended Administration, Shareholder Services and Distribution Plan and form of Agreement of the Registrant
24(b)(16) Performance Data Computation Schedules
24(b)(17) Financial Data Schedules
24(b)(18) Multiclass Plan
</TABLE>
<PAGE>
SELIGMAN PENNSYLVANIA MUNICIPAL FUND SERIES
FORM OF AMENDED AND RESTATED
DECLARATION OF TRUST
Dated as of May 13, 1986
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I -- Name and Definitions 2
Section 1.1. Name 2
Section 1.2. Definitions 2
ARTICLE II -- Trustees 5
Section 2.1. Number of Trustees 5
Section 2.2. Election and Term 5
Section 2.3. Resignation and Removal 5
Section 2.4. Vacancies 5
Section 2.5. Delegation of Power to Other Trustees 6
ARTICLE III -- Power of Trustees 7
Section 3.1. General 7
Section 3.2. Investments 7
Section 3.3 Sale of Portfolio Securities of the Trust 7
Section 3.4. Legal Title 8
Section 3.5. Issuance and Repurchase of Securities 8
Section 3.6. Borrowing Money; Lending Trust Assets 8
Section 3.7. Delegation 8
Section 3.7. Collection and Payment 9
Section 3.8. Expenses 9
Section 3.9. Manner of Acting; By-Laws 9
Section 3.10. Miscellaneous Powers 9
Section 3.11. Principal Transactions 10
ARTICLE IV -- Adviser, Distributor, Custodian and Transfer Agent 10
Section 4.1. Adviser 10
Section 4.2. Distributor 11
Section 4.3. Custodian 11
Section 4.4. Transfer Agent 11
Section 4.5. Parties to Contract 11
ARTICLE V -- Limitations of Liability of Shareholders, Trustees and Others 12
Section 5.1. No Personal Liability of Shareholders, Trustees, etc. 12
Section 5.2. Non-Liability of Trustees, etc. 13
Section 5.3. Indemnification 13
Section 5.4. No Bond Required of Trustees 13
Section 5.5. No Duty of Investigation; Notice in Trust Instruments, etc. 13
Section 5.6. Reliance on Experts, etc. 14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE VI -- Shares of Beneficial Interest 14
Section 6.1. Beneficial Interest 14
Section 6.2. Rights of Shareholders 15
Section 6.3. Trust Only 15
Section 6.4. Issuance of Shares 16
Section 6.5. Register of Shares 16
Section 6.6. Transfer of Shares 16
Section 6.7. Notices 17
Section 6.8. Voting Powers 17
Section 6.9. Series or Classes of Shares 18
ARTICLE VII -- Redemptions 21
Section 7.1. Redemptions 21
Section 7.2. Redemption of Shares; Disclosure of Holdings 22
Section 7.3. Redemptions of Accounts 22
Section 7.4. Redemptions Pursuant to Constant Net Asset Value Provisions 22
ARTICLE VII -- Determination of Net Asset Value, Net Income and Distributions 23
Section 8.1. Net Asset Value 23
Section 8.2. Distribution to Shareholders 23
Section 8.3. Determination of Net Income; Constant Net Asset Value
of Shares of Certain Series; Reduction of Outstanding Shares 24
Section 8.4. Power to Modify Foregoing Procedures 25
ARTICLE IX -- Duration; Termination of Trust; Amendment; Mergers, etc. 25
Section 9.1. Duration 25
Section 9.2. Termination of Trust 25
Section 9.3. Amendment Procedure 26
Section 9.4. Merger, Consolidation and Sale of Assets 27
Section 9.5. Incorporation 27
ARTICLE X -- Reports to Shareholders 28
ARTICLE XI -- Miscellaneous 28
Section 11.1. Restated Declaration 29
Section 11.2 Governing Law 29
Section 11.3. Counterparts 29
Section 11.4 Inspection by Shareholders 29
Section 11.5 Reliance by Third Parties 29
Section 11.6 Provisions in Conflict with Laws or Regulations 29
SIGNATURE PAGE
</TABLE>
<PAGE>
DECLARATION OF TRUST
OF
SELIGMAN PENNSYLVANIA MUNICIPAL FUND SERIES
Dated as of May 13, 1986
THE DECLARATION OF TRUST of Seligman Pennsylvania Municipal Fund Series is
made as of the 13th day of May, 1986 by the parties signatory hereto, as
Trustees.
W I T N E S S E T H
WHEREAS, the Trustees desire to form a trust fund under the laws of
Pennsylvania for the investment and reinvestment of funds contributed thereto;
and
WHEREAS, it is proposed that the beneficial interest in the trust assets be
divided into transferable shares of beneficial interest as hereinafter provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
<PAGE>
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is Seligman
Pennsylvania Municipal Fund Series.
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "Adviser" means any party, other than the Trust or any series thereof,
to any contract described in Section 4.1 hereof.
(b) "By-Laws" means the By-Laws referred to in Section 3.8 hereof, as from
time to time amended.
(c) The terms "Commission", "Affiliated Person" and "Interested Person"
have the meanings given them in the 1940 Act.
(d) "Custodian" means any party, other than the Trust or any series
thereof, to any contract described in Section 4.3 hereof.
(e) "Declaration" means this Declaration of Trust as amended from time to
time. Reference in this Declaration of Trust to "Declaration" , "hereof" and
"hereunder" shall be deemed to refer to this Declaration rather than the article
or section in which such words appear.
(f) "Distributor" means any party, other than the Trust or any series
thereof, to any contract described in Section 4.2 hereof.
(g) "Fundamental Policies" shall mean the investment restrictions as
applicable to shares of any series or class thereof set forth in the Prospectus
and designated as fundamental policies therein.
(h) "Majority Shareholder Vote" means, unless otherwise determined by the
Trustees in accordance with Section 6.8 hereof in conjunction with the
establishment of any series or classes of shares, the vote of the holders of a
majority of Shares, which shall consist of: (i) a majority of Shares represented
in person or by proxy and entitled to vote at a meeting of Shareholders at which
a quorum, as determined in accordance with the By-Laws, is present; (ii) a
majority of Shares issued and outstanding and entitled to vote when action is
taken by written consent of Shareholders; and (iii) a "majority of the
outstanding voting securities", as that phrase is defined in the 1940 Act, when
action is taken by Shareholders with respect to any matter as to which the vote
of "a majority of the outstanding voting securities" is required under the 1940
Act; provided that in cases required or permitted under the 1940 Act or
<PAGE>
Section 6.9 hereof to be submitted to the holders of the Shares of one or more
but not all series or classes of Shares, a "Majority Shareholder Vote" means the
vote of "a majority of the outstanding voting securities," as that phrase is
defined in the 1940 Act, of the Shares of the particular series or class.
(i) "1940 Act" means the Investment Company Act of 1940 and the rules and
regulations thereunder as amended from time to time
(j) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
(k) "Prospectus" means the prospectus, including any statement of
additional information and any information or document incorporated by reference
therein, constituting part of the Registration Statement of the Trust under the
Securities Act of 1933 as such prospectus, including any statement of additional
information and any information or document incorporated by reference therein,
may be amended or supplemented and filed with the Commission from time to time,
and, in the event that there is more than one Prospectus, each relating to the
shares of any one or more series or classes of shares, "Prospectus" means the
Prospectus relating to such series or classes of shares.
(l) "Shareholder" means a record owner of outstanding Shares.
(m) "Shares" means the units of interest into which the beneficial interest
in the Trust shall be divided from time to time, including the shares of any and
all series or classes which may be established by the Trustees, and includes
fractions of Shares as well as whole Shares. Shares shall have a designated par
value of $.001 per Share.
(n) "Transfer Agent" means any party, other than the Trust or any series
thereof, to any contract described in Section 4.4 hereof.
(o) "Trust" means Seligman Pennsylvania Municipal Fund Series.
(p) "Trust Property" or "Trust Estate" means any and all property, real or
personal, tangible or intangible, which is owned or held by or for the account
of the Trust or the Trustees.
(q) "Trustees" means the persons who have signed the Declaration, so long
as they shall continue in office in accordance with the terms hereof, and all
other persons who may from time to time be duly elected or appointed, qualified
and serving as Trustees in accordance with the provisions hereof, and reference
herein to a Trustee or the Trustees shall refer to such person or persons in
their capacity as trustees hereunder.
<PAGE>
ARTICLE II
TRUSTEES
Section 2.1. Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees then in office, provided, however, that the number of
Trustees shall in no event be less than two.
Section 2.2. Election and Term. The Trustees shall be elected by a Majority
Shareholder Vote at the first meeting of Shareholders following the initial
offering of Shares of the Trust. The Trustees shall have the power to set and
alter the terms of the office of the Trustees, and they may at any time lengthen
or lessen their own terms or make their terms of unlimited duration, subject to
the resignation and removal provisions of Section 2.3 hereof. Subject to Section
16 (a) of the 1940 Act, the Trustees may elect their own successors and may,
pursuant to Section 2.4 hereof, appoint Trustees to fill vacancies. The Trustees
shall adopt By-Laws not inconsistent with this Declaration or any provision of
law to provide for election of Trustees by Shareholders at such time or times as
the Trustees shall determine to be necessary or advisable.
Section 2.3. Resignation and Removal. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any of the Trustees may be removed (provided the aggregate number of
Trustees after such removal shall not be less than the number required by
Section 2.1 hereof) with cause, by the action of two-thirds of the remaining
Trustees. Upon the resignation or removal of a Trustee, or his otherwise ceasing
to be a Trustee, he shall execute and deliver such documents as the remaining
Trustees shall require for the purpose of conveying to the Trust (or appropriate
series thereof) or the remaining Trustees any Trust Property or property of any
series thereof held in the name of the resigning or removed Trustee. Upon the
incapacity or death of any Trustee, his legal representative shall execute and
deliver on his behalf such documents as the remaining Trustees shall require as
provided in the preceding sentence.
Section 2.4. Vacancies. The term of office of a Trustee shall terminate and
a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the duties
of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy, including a vacancy
existing by reason of an increase in the number of Trustees, subject to the
provisions of Section 16 (a) of the 1940 Act, the remaining Trustees or, prior
to the public offering of Shares of the Trust, if only one Trustee shall them
remain in office, the remaining Trustee, shall fill such vacancy by the
appointment of such other person as they or he, in their or his discretion,
shall see fit, made by a written instrument signed by a majority of the
remaining Trustees or by the remaining Trustee, as the case may be. Any such
appointment
<PAGE>
shall not become effective, however, until the person named in the written
instrument of appointment shall have accepted in writing such appointment and
agreed in writing to be bound by the terms of the Declaration. An appointment of
a Trustee may be made in anticipation of a vacancy to occur at a later date by
reason of retirement, resignation or increase in the number of Trustees,
provided that such appointment shall not become effective prior to such
retirement, resignation or increase in the number of Trustees. Whenever a
vacancy in the number of Trustees shall occur, until such vacancy is filled as
provided in this Section 2.4, the Trustee in office, regardless of their number,
shall have all the powers granted to the Trustees and shall discharge all the
duties imposed upon the Trustees by the Declaration. A written instrument
certifying the existence of such vacancy signed by a majority of the Trustees
shall be conclusive evidence of the existence of such vacancy.
Section 2.5. Delegation of Power to Other Trustees. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6) months
at any one time to any other Trustee or Trustees; provided that in no case shall
less than two (2) Trustees personally exercise the powers granted to the
Trustees under the Declaration except as herein otherwise expressly provided.
<PAGE>
ARTICLE III
POWER OF TRUSTEES
Section 3.1. General. The Trustees shall have exclusive and absolute
control over the Trust Property, including the property of any series of the
Trust, and over the business of the Trust to the same extent as if the Trustees
were the sole owners of such property and business in their own right, but with
such powers of delegation as may be permitted by the Declaration. The Trustees
shall have power to conduct the business of the Trust and carry on its
operations in any and all of its branches and maintain offices both within and
without the Commonwealth of Pennsylvania, in any and all states of the United
States of America, in the District of Columbia, in foreign countries and in any
and all commonwealths, territories, dependencies, colonies, possessions,
agencies or instrumentalities of the United States of America and of foreign
governments, and to do all such other things and execute all such instruments as
they deem necessary, proper or desirable in order to promote the interests of
the Trust although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust made by the Trustees
in good faith shall be conclusive. In construing the provisions of the
Declaration, the presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 3.2. Investments. The Trustees shall have the power to:
(a) conduct, operate and carry on the business of an investment company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise acquire,
hold, pledge, sell, assign, transfer, exchange, distribute, lend or
otherwise deal in or dispose of securities (subject to the limitations of
Section 3.3 hereof), negotiable or non-negotiable instruments, obligations,
evidences of indebtedness, certificates of deposit or indebtedness,
commercial paper, repurchase agreements, reverse repurchase agreements,
options and other securities and commodities and commodities futures
contracts of any kind, including without limitation, those issued,
guaranteed or sponsored by any and all Persons including, without
limitation, states, territories and possessions of the United States, the
District of Columbia and any of the political subdivisions, agencies or
instrumentalities thereof, and by the United States Government or its
agencies or instrumentalities, or international instrumentalities, or by
any bank or savings institution, or by any corporation or organization
organized under the laws of the United States or of any state, territory or
possession thereof, and of corporations or organizations organized under
foreign laws, or in "when issued" or "delayed delivery" contracts for any
such securities, or retain Trust assets in cash and from time to time
change the investments of the assets of the Trust (subject to the
limitations of Section 3.3 hereof); and to exercise any and all rights,
powers and
<PAGE>
privileges of ownership of interest in respect of any and all such
investments of every kind and description (subject to the limitations of
Section 3.3 hereof), including, without limitation, the right to consent
and otherwise act with respect thereto, with power to designate one or more
persons, firms, associations or corporations to exercise any of said
rights, powers and privileges in respect of any of said instruments; and
the Trustees shall be deemed to have the foregoing powers with respect to
any additional securities in which the Trust may invest should the
Fundamental Policies be amended.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be
limited by any law limiting the investments which may be made by
fiduciaries.
Section 3.3. Sale of Portfolio Securities of the Trust. The Trustees shall
not have the power to vary the portfolio securities of the Trust except to:
eliminate unsafe investments in portfolio securities and investments in
portfolio securities not consistent with the preservation of the capital or the
tax status of the investments of the Trust; honor redemption orders from the
Shareholders, meet anticipated redemption requirements of the Trust and negate
gains from discount purchases of portfolio securities by the Trust; maintain a
constant net aset value per Share pursuant to, and in compliance with, an order
or rule of the Commission; reinvest the earnings from portfolio securities in
like securities; or defray normal administrative expenses of the Trust.
Section 3.4. Legal Title. Legal title to all the Trust Property, including
the Property, including the property of any series of the Trust, shall be vested
in the Trustees as joint tenants except that the Trustees shall have power to
cause legal title to any Trust Property to be held by or in the name of one or
more of the Trustees, or in the name of the Trust, or in the name of any other
Person as nominee, on such terms as the Trustees may determine, provided that
the interest of the Trust therein is appropriately protected. The right, title
and interest of the Trustees in the Trust Property and the property of each
series of the Trust shall vest automatically in each Person who may hereafter
become a Trustee. Upon the resignation, removal or death of a Trustee he shall
automatically cease to have any right, title or interest in any of the Trust
Property or the property of any series of the Trust, and the right, title and
interest of such Trustee in such property shall vest automatically in the
remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
Section 3.5. Issuance and Repurchase of Securities. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in Shares and, subject
to the provisions set forth in Articles VII, VIII and IX and Section 6.9 hereof,
to apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds or property of the particular series of the
Trust with respect to which such shares are issued, whether capital or surplus
or otherwise, to the full extent now or hereafter
<PAGE>
permitted by the laws of the Commonwealth of Pennsylvania governing business
corporations.
Section 3.6. Borrowing Money; Lending Trust Assets. Subject to the
Fundamental Policies, the Trustees shall have the power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, to endorse, guarantee,
or undertake the performance of any obligation, contract or engagement or any
other Person and to lend Trust assets.
Section 3.7. Delegation. The Trustees shall have power, consistent with
their continuing control over the Trust Property, to delegate ministerial or
discretionary powers and duties from time to time to such of their number or to
officers, employees or agents of the Trust as the Trustees deem appropriate and
in the best interest of the Trust.
Section 3.8. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
Section 3.9. Expenses. The Trustees shall have the power to incur and pay
any expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of the Declaration, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The Trustees
shall fix the compensation of all officers, employees and Trustees.
Section 3.10. Manner of Acting; By-Laws. Except as otherwise provided
herein or in the By-Laws or by any provisions of law, any action to be taken by
the Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees (a quorum being present), including any meeting held by means of a
conference telephone circuit or similar communications equipment by means of
which all persons participating in the meeting can hear each other, or by
written consents of all the Trustees. The Trustees may adopt By-Laws not
inconsistent with this Declaration to provide for the conduct of the business of
the Trust and may amend or repeal such By-Laws to the extent such power is not
reserved to the Shareholders.
Section 3.11. Miscellaneous Powers. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, and
appoint from their own number, and terminate, any one or more committees which
may exercise some or all of the power
<PAGE>
and authority of the Trustees as the Trustees may determine; (d) purchase, and
pay for out of Trust Property or the property of the appropriate series of the
Trust, insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, managers, investment advisers, distributors or independent
contractors of the Trust against all claims arising by reason of holding any
such position or by reason of any action taken or omitted to be taken by any
such Person in such capacity, whether or not constituting negligence, or whether
or not the Trust would have the power to indemnify such Person against such
liability; (e) establish pension, profit-sharing, Share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees
and agents, of the Trust; (f) to the extent permitted by law, indemnify any
person with whom the Trust has dealings, including the Adviser, Custodian,
Distributor and Transfer Agent, to such extent as the Trustees shall determine;
(g) guarantee indebtedness or contractual obligations of others; (h) determine
and change the fiscal year of the Trust and the method by which its accounts
shall be kept; and (i) adopt a seal for the Trust, but the absence of such seal
shall not impair the validity of any instrument executed on behalf of the Trust.
Section 3.12. Principal Transactions. Except in transactions permitted by
the 1940 Act or any order of exemption issued by the Commission, or effected to
implement the provisions of any agreement to which the Trust is a party, the
Trustees shall not, on behalf of the Trust, buy any securities (other than
Shares) from or sell any securities (other than Shares) to, or lend any assets
of the Trust to, any Trustee or officer of the Trust or any firm of which any
such Trustee or officer is a member acting as principal, or have any such
dealings with the Adviser or Distributor or with any Affiliated Person of such
Person; but the Trust may employ any such Person, or firm or company in which
such Person is an Interested Person, as broker, legal counsel, registrar,
transfer agent, dividend disbursing agent or custodian upon customary terms.
ARTICLE IV
ADVISER, DISTRIBUTOR,
CUSTODIAN AND TRANSFER AGENT
Section 4.1. Adviser. Subject to approval by a Majority Shareholder Vote,
the Trustees may in their discretion from time to time enter into an investment
advisory contract or contracts whereby the other party to such contract shall
undertake to furnish to the Trust or any series thereof such investment
advisory, statistical and research facilities and services, and such other
facilities and services, if any, as the Trustees shall from time to time
consider desirable and all upon such terms and conditions as the Trustees may in
their discretion determine. Notwithstanding any provisions of the Declaration,
the Trustees may
<PAGE>
authorize the Adviser (subject to such general or specific instructions as the
Trustees may from time to time adopt ) to effect purchases, sales, loans or
exchanges of portfolio securities of the Trust on behalf of the Trustees or may
authorize any officer, employee or Trustee to effect such purchases, sales,
loans or exchanges pursuant to recommendations of the Adviser (and all without
further action by the Trustees). Any such purchases, sales, loans and exchanges
shall be deemed to have been authorized by all of the Trustees. The Trustees
may, in their sole discretion, call a meeting of Shareholders in order to submit
to a vote of Shareholders at such meeting the approval or continuance of any
such investment advisory contract.
Section 4.2. Distributor. The Trustees may in their discretion from time to
time enter into a distribution contract or contracts providing for the sale of
Shares to net the Trust or any series thereof not less than the net asset value
per share (as described in Article VIII hereof) and pursuant to which the Trust
or any series of the Trust may either agree to sell the Shares to the other
party to the contract or appoint such other party its sales agent for such
Shares. In either case, any such contract shall be on such terms and conditions
as the Trustees may in their discretion determine not inconsistent with the
provisions of this Article IV.
Section 4.3. Custodian. The Trustees may in their discretion from time to
time enter into a custodian contract or contracts whereby the other party to any
such contract shall undertake to furnish custodian services to the Trust or any
series thereof, including holding the Trust's or any such series portfolio
securities and cash and maintaining books and records with respect to the
Trust's or any such series portfolio transactions. Any such contract shall have
such terms and conditions as the Trustees may in their discretion determine not
inconsistent with the Declaration. The By-Laws may make further provisions as to
the duties and appointment of any Custodian.
Section 4.4. Transfer Agent. The Trustees may in their discretion from time
to time enter into a transfer agency and shareholder service contract or
contracts whereby the other party to any such contract shall undertake to
furnish transfer agency and shareholder services to the Trust or any series
thereof. Any such contract shall have such terms and conditions as the Trustees
may in their discretion determine not inconsistent with the Declaration. Such
services may be provided by one or more Persons.
Section 4.5. Parties to Contract. Any contract of the character described
in Section 4.1, 4.2, 4.3 or 4.4 of this Article IV and any other contract may be
entered into with any Person, although one or more of the Trustees or officers
of the Trust may be such other party to the contract or an officer, director,
trustee, shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered voidable by reason of the existence of
any such relationship nor shall any Person holding such relationship be liable
merely by reason of such relationship for any loss or expense to the Trust under
or by reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article IV. The same Person may be the
other party to any contracts entered into pursuant to Section 4.1, 4.2, 4.3 or
4.4 above or otherwise, and any Trustee, officer, employee or agent of the Trust
may be
<PAGE>
financially interested or otherwise affiliated with Persons who are parties to
any or all of the contracts mentioned in this Section 4.5.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1. No Personal Liability of Shareholders, Trustees, etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, wilful misfeasance, gross negligence or
reckless disregard for his or its duty to such Person; and all such Persons
shall look solely to the Trust Property for satisfaction of claims of any nature
arising in connection with the affairs of the Trust. If any Shareholder,
Trustee, officer, employee or agent, as such, of the Trust is made a party to
any suit or proceeding to enforce any such liability, he or it shall not, on
account thereof, be held to any personal liability. The Trust shall indemnify
and hold each Shareholder harmless from and against all claims and liabilities
to which such Shareholder may become subject by reason of his being or having
been a Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability, and, upon request of such Shareholder, the Trust shall assume the
defense of any claim made against such Shareholder by reason of his being or
having been a Shareholder; provided that any such expenses shall be paid solely
out of the funds and property of the series of the Trust with respect to which
such Shareholder's Shares are issued. The rights accruing to a Shareholder under
this Section 5.1 shall not exclude any other right to which such Shareholder may
be lawfully entitled, nor shall anything herein contained restrict the right of
the Trust to indemnify or reimburse a Shareholder in any appropriate situation
even though not specifically provided herein.
Section 5.2. Non-Liability of Trustees, etc. No Trustee, officer, employee
or agent of the Trust shall be liable to the Trust, its Shareholders, or to any
Shareholder, Trustee, officer, employee, or agent thereof for any action or
failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his or
its own bad faith, wilful misfeasance, gross negligence or reckless disregard of
his or its duties. Without limiting the generality of the foregoing, no Trustee
shall be liable for the acts of any other Trustee, including a prior or
successor Trustee.
<PAGE>
Section 5.3. Indemnification.
(a) The Trustees shall provide for indemnification by the Trust of every
person who is, or has been, a Trustee or officer of the Trust against all
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a Trustee
or officer and against amounts paid or incurred by him in the settlement
thereof, in such manner not otherwise prohibited or limited by law as the
Trustees may provide from time to time in the By-Laws.
(b) The words "claim," "action," "suit," or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal, or other, including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
Section 5.4. No Bond Required of Trustees. No Trustee shall be obligated to
give any bond or other security for the performance of any of his duties
hereunder.
Section 5.5. No Duty of Investigation; Notice in Trust Instruments, etc. No
purchaser, lender, transfer agent or other Person dealing with the Trustees or
any officer, employee or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trustees
or by said officer, employee or agent or be liable for the application of money
or property paid, loaned, or delivered to or on the order of the Trustees or of
said officer employee or agent. Every obligation, contract, instrument,
certificate, Share, other security of the Trust or undertaking, and every other
act or thing whatsoever executed or done in connection with the Trust shall be
conclusively presumed to have been executed or done by the executors thereof
only in their capacity as Trustees under the Declaration or in their capacity as
officers, employees or agents of the Trust. Every written obligation, contract,
instrument, certificate, Share, other security of the Trust or undertaking made
or issued by the Trustees shall recite that the same is executed or made by them
not individually, but as Trustees under the Declaration, and that the
obligations of any such instrument are not binding upon any of the Trustees or
Shareholders, individually, but bind only the Trust Estate, and may contain any
further recital which they or he may deem appropriate, but the omission of such
recital shall not operate to bind the Trustees or Shareholders individually. The
Trustees shall at all times maintain insurance for the protection of the Trust
Property, its Shareholders, Trustees, officers, employees and agents in such
amount as the Trustees shall deem adequate to cover possible tort liability, and
such other insurance as the Trustees in their sole judgment shall deem
advisable.
Section 5.6. Reliance on Experts, etc. Each Trustee and officer or employee
of the Trust shall, in the performance of his duties, be fully and completely
justified and protected with regard to any act or any failure to act resulting
from reliance in good
<PAGE>
faith upon the books of account or other records of the Trust, upon an opinion
of counsel, or upon reports made to the Trust by any of its officers or
employees or by the Adviser, the Distributor, the Custodian, the Transfer Agent,
accountants, appraisers or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.
<PAGE>
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1. Beneficial Interest. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial interest of
$.001 par value. The number of shares of beneficial interest authorized
hereunder is unlimited. The Trustees may initially issue whole and fractional
shares of a single class, each of which shall represent an equal proportionate
share in the Trust with each other Share. The Trustees may divide or combine the
shares into a greater or lesser number of shares without thereby changing the
proportionate beneficial interests in the Trust. Subject to the provisions of
Section 6.9 hereof, the Trustees may also authorize the creation of an
additional series of shares (the proceeds of which may be invested in separate,
independently managed portfolios) and additional classes of shares within any
series. All Shares issued hereunder including, without limitation, Shares issued
in connection with a dividend in Shares or a split in Shares, shall be fully
paid and nonassessable.
Section 6.2. Rights of Shareholders. The ownership of the Trust Property
and the property of each series of the Trust of every description and the right
to conduct any business hereinbefore described are vested exclusively in the
Trustees, and the Shareholders shall have no interest therein other than the
beneficial interest conferred by their Shares, and they shall have no right to
call for any partition or division of any property, profits, rights or interests
of the Trust nor can they be called upon to assume any losses of the Trust or
suffer an assessment of any kind by virtue of their ownership of Shares. The
Shares shall be personal property giving only the rights in the Declaration
specifically set forth. The Shares shall not entitle the holder to preference,
preemptive, appraisal, conversion or exchange rights, except as the Trustees may
determine with respect to any series or class of Shares. Upon liquidation of the
Trust, holders of the Shares are entitled to share pro rata in the net assets of
the Trust available for distribution to the holders except as provided by
Section 6.9 (f) with respect to the holders of different series or classes of
Shares as provided in Section 6.9.
Section 6.3. Trust Only. It is the intention of the Trustees to create only
the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in the Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
Section 6.4. Issuance of Shares. The Trustees, in their discretion, may,
from time to time without vote of the Shareholders, issue Shares, in addition to
the then issued and outstanding Shares and Shares held in the Treasury, to such
party or parties and for such amount and type of consideration, including cash
or property,
<PAGE>
at such time or times (including, without limitation, each business day in
accordance with the maintenance of a constant net asset value per Share), and on
such terms as the Trustees may deem best, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection with
the assumption of liabilities) and businesses. In connection with any issuance
of Shares, the Trustees may issue fractional Shares. The Trustees may from time
to time divide or combine the Shares into a greater or lesser number without
thereby changing the proportionate beneficial interests in the Trust. Reductions
in the number of outstanding Shares may be made pursuant to the provisions of
Section 8.3 in order to maintain a constant net asset value per Share of any
series attempting to maintain such a constant net asset value. Contributions to
the Trust may be accepted for, and the Shares shall be redeemed as, whole Shares
and/or fractions of a Share as described in the Prospectus.
Section 6.5. Register of Shares. A register shall be kept at the principal
office of the Trust or at an office of the Transfer Agent which shall contain
the names and addresses of the Shareholders and the number of Shares held by
them respectively and a record of all transfers thereof. Such register may be in
written form or any other form capable of being converted into written form
within a reasonable time for visual inspection. Such register shall be
conclusive as to who are the holders of the Shares and who shall be entitled to
receive dividends or distributions or otherwise to exercise or enjoy the rights
of Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or distribution, nor to have notice given to him as herein or in the
By-Laws provided, until he has given his address to the Transfer Agent or such
other officer or agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued for the Shares;
however, the Trustees, in their discretion, may authorize the issuance of Share
certificates and promulgate appropriate rules and regulations as to their use.
Section 6.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees or the Transfer Agent
of a duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent or registrar nor any officer,
employee or agent of the Trust shall be affected by any notice of the proposed
transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer
<PAGE>
Agent or registrar nor any officer or agent of the Trust shall be affected by
any notice of such death, bankruptcy or incompetence, or other operation of law,
except as may otherwise be provided by the laws of the Commonwealth of
Pennsylvania.
Section 6.7. Notices. Any and all notices to which any Shareholder may be
entitled and any and all communications shall be deemed duly served or given if
mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
Section 6.8. Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Section 2.2 hereof, (ii) with
respect to any investment advisory contract as provided in Section 4.2, (iii)
with respect to termination of the Trust as provided in Section 9.2, (iv) with
respect to any amendment of the Declaration to the extent and as provided in
Section 9.3, (v) with respect to any merger, consolidation or sale of assets as
provided in Section 9.4, (vi) with respect to incorporation of the Trust to the
extent and as provided in Section 9.5, (vii) to the same extent as the
stockholders of a Pennsylvania 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 (viii) with respect to such additional matters relating to the Trust as may
be required by law, the Declaration, the By-Laws or any registration of the
Trust with the Commission (or any successor agency) or any state, or as and when
the Trustees may consider necessary or desirable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote and each
fractional Share shall be entitled to a proportionate fractional vote, except
that Shares held in the Treasury of the Trust as of the record date, as
determined in accordance with the By-Laws, shall not be voted and except that
the Trustees may, in conjunction with the establishment of any series or classes
of Shares, establish conditions under which the several series or classes shall
have separate voting rights or no voting rights. There shall be no cumulative
voting in the election of Trustees. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required by law, the
Declaration or the By-Laws to be taken by Shareholders. The By-Laws may include
further provisions for Shareholders' votes and meetings and related matters.
Section 6.9. Series or Classes of Shares. (1) If the Trustees shall divide
the Shares of the Trust into two or more series or two or more classes of any
series, as provided in Section 6.1 hereof, the following provisions shall be
applicable:
(a) All provisions herein relating to the Trust shall apply equally to each
series of the Trust except as the context otherwise requires.
(b) The number of authorized Shares and the number of Shares of each series
or of each class that may be issued shall be unlimited. The Trustees may
classify or reclassify any unissued Shares or any Shares previously issued
and reacquired of any series or class into one or more series or one or
more classes
<PAGE>
that may be established and designated from time to time. The Trustees may
hold as treasury shares (of the same or some other series or class),
reissue for such consideration and on such terms as they may determine, or
cancel any Shares of any series or any class reacquired by the Trust at
their discretion from time to time.
(c) The power of the Trustees to invest and reinvest the Trust Property
shall be governed by Sections 3.2 and 3.3 of this Declaration with respect
to any one or more series which represents the interests in the assets of
the Trust immediately prior to the establishment of two or more series and
the power of the Trustees to invest and reinvest assets applicable to any
other series shall be as set forth in the instrument of the Trustees
establishing such series.
(d) All consideration received by the Trust for the issue or sale of Shares
of a particular series or class together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series or class for all purposes, subject only
to the rights or creditors of such series, and shall be so recorded upon
the books of account of the Trust. In the event that there are any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which
are not readily identifiable as belonging to any particular series or
class, the Trustees shall allocate them among any one or more of the series
or classes established and designated from time to time in such manner and
on such basis as they, in their sole discretion, deem fair and equitable.
Each such allocation by the Trustees shall be conclusive and binding upon
the Shareholders of all series or classes for all purposes.
(e) The assets belonging to each particular series shall be charged with
the liabilities of the Trust in respect of that series and all expenses,
costs, charges and reserves attributable to that series, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are
not readily identifiable as belonging to any particular series shall be
allocated among the series on the basis of their relative average daily net
assets except where allocations of direct expenses can otherwise be fairly
made. The Trustees may from time to time in particular cases make specific
allocations of assets or liablilities among series. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the holders of all series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with
the 1940 Act, to determine which items shall be treated as income and which
items as capital; and each such determination and allocation shall be
conclusive and binding upon the Shareholders. The assets of a particular
series of the Trust shall under no circumstances be charged with
liabilities attributable to any other series of the Trust. All persons
extending credit to, or contracting
<PAGE>
with or having any claim against a particular series of the Trust shall
look only to the assets of that particular series for payment of such
credit, contract or claim.
(f) Each Share of a series of the Trust shall represent a beneficial
interest in the net assets of such series. Each holder of Shares of a
series shall be entitled to receive his pro rata share of distributions of
income and capital gains made with respect to such series. Upon redemption
of his Shares or indemnification for liabilities incurred by reason of his
being or having been a Shareholder of a series, such shareholder shall be
paid solely out of the funds and property of such series of the Trust. Upon
liquidation or termination of a series of the Trust, Shareholders of such
series shall be entitled to receive a pro rata share of the net assets of
such series. A Shareholder of a particular series of the Trust shall not be
entitled to participate in a derivative or class action on behalf of any
other series or the Shareholders of any other series of the Trust.
(g) Notwithstanding any other provisions hereof, on any matter submitted to
a vote of Shareholders of the Trust, all Shares then entitled to vote shall
be voted by individual series, except that (1) when required by the 1940
Act, Shares shall be voted in the aggregate and not by individual series,
and (2) when the Trustees have determined that the matter affects only the
interests of Shareholders of a limited number of series, then only the
Shareholders of such series shall be entitled to vote thereon. Classes
within a series shall vote with all other Shares of the series except that
the Trustees may provide that any Class shall vote separately as a Class as
to any matter when (i) required by law, rule or exemptive order, (ii) they
determine that such matter affects only the interest of Shares of such
Class or affects the interests of Shares of such Class in a manner
different from that of the other Classes or (iii) they otherwise determine
that to do so is desirable and in the best interests of the Shareholders of
such Class under the circumstances.
(h) The power of the Trustees to pay dividends and make distributions shall
be governed by Section 8.2 of this Declaration with respect to any one or
more series or classes which represents the interests in the assets of the
Trust immediately prior to the establishment of two or more series or
classes. With respect to any other series or class, dividends and
distributions on Shares of a particular series or class may be paid with
such frequency as the Trustees may determine, which may be daily or
otherwise, pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Trustees may determine, to the holders
of Shares of that series or class, from such of the income and capital
gains, accrued or realized, from the assets belonging to that series or
class, as the Trustees may determine, after providing for actual and
accrued liabilities belonging to that series or class. All dividends and
distributions on Shares of
<PAGE>
a particular series or class shall be distributed pro rata to the holders
of that series or class in proportion to the number of Shares of that
series or class held by such holders at the date and time of record
established for the payment of such dividends or distributions.
(i) The Trustees shall have the power to determine the designations,
preferences, privileges, limitations and rights, including voting and
dividend rights, of each class and series of Shares. The Trustees
(including any successor Trustees) shall have the right at any time and
from time to time to reallocate assets and expenses or to change the
designation of any series now or hereafter created, or to otherwise change
the special and relative rights of any such series, provided that such
change shall not adversely affect the rights of shareholders of a series.
(j) The establishment and designation of any series or class of Shares
shall be effective upon the execution by a majority of the then Trustees of
an instrument setting forth such establishment and designation and the
relative rights and preferences of such series or class, or as otherwise
provided in such instrument. At any time that there are no Shares
outstanding of any particular series or class previously established and
designated, the Trustees may by an instrument executed by a majority of
their number abolish that series or class and the establishment and
designation thereof. Each instrument referred to in this paragraph shall
have the status of an amendment to this Declaration.
(2) The terms of the shares of beneficial interest of the Trust as further
set by the Trustees are as follows:
(a) The Shares of the Trust shall be classified into two separate
classes, designated "Class A Shares of Beneficial Interest of the Trust"
("Class A Shares") and "Class D Shares of Beneficial Interest of the Trust"
("Class D Shares").
(b) The assets belonging to each of the Class A Shares and the Class D
Shares shall be charged with the liabilities of Shares in respect of such
Class, and all expenses, costs, charges, and reserves attributable to such
Class, as determined by the Trustees. Any general liabilities, expenses,
costs, charges or reserves of Shares that are not readily identifiable as
belonging to any Class in particular shall be allocated and charged by the
Trustees to each Class in such manner and on such basis as the Trustees in
their sole discretion may deem fair and equitable.
(c) Upon liquidation or termination of the Trust, the Shareholders of
each Class shall be entitled to a pro rata share of the net assets of the
Trust attributable to such Class.
(d) At such time as shall be permitted under the Investment Company
Act, any applicable rules and regulations thereunder and the provisions of
any
<PAGE>
exemptive order applicable to Shares, as may be determined by the Trustees
and disclosed in the then current prospectus of the Trust, Shares of a
particular Class may be automatically converted into Shares of another
Class of the Trust; provided, however, that such conversion shall be
subject to the continuing availability of an opinion of counsel to the
effect that such conversion does not constitute a taxable event under
federal income tax law. The Trustees, in their sole discretion, may suspend
any conversion feature if such opinion is no longer available.
(e) The Shares shall vote together with all other Shares from time to
time outstanding, except that the Trustees may provide that Class A Shares
and Class D Shares or any future Class shall vote separately as a Class as
to any matter when (i) required by law, rule or exemptive order, (ii) they
determine that such matter affects only the interest of Shares of such
Class or affects the interests of Shares of such Class in a manner
different from that of the other Classes or (iii) they otherwise determine
that to do so is necessary or desirable and in the best interests of the
Shareholders of such Class under the circumstances.
(f) The net asset value of each Class of Shares shall be determined on
such days and at such time or times as the Trustees shall determine. The
method of determination of the net asset value of a Class shall be
determined by the Trustees and shall be as set forth in the then current
prospectus.
(g) The Trustees may from time to time distribute ratably among the
Shareholders of a Class of Shares such proportionate share of the profits,
surplus (including paid-in surplus) capital or assets held by the Trustees
and attributable to such Class as they may deem proper.
ARTICLE VII
REDEMPTIONS
Section 7.1. Redemptions. All outstanding Shares may be redeemed at the
option of the holders thereof, upon and subject to the terms and conditions
provided in this Article VII. The Trust shall, upon application of any
Shareholder or pursuant to authorization from any Shareholder, redeem or
repurchase from such Shareholder outstanding Shares for an amount per share
determined by the Trustees in accordance with any applicable laws and
regulations; provided that (a) such amount per share shall not exceed the cash
equivalent of the proportionate interest of each Share of any class or series of
Shares in the assets of the Trust attributable to such class or series at the
time of the redemption or repurchase and (b) if so authorized by the Trustees,
the Trust
<PAGE>
may, at any time and from time to time, charge fees for effecting such
redemption or repurchase, at such rates as the Trustees may establish, as and to
the extent permitted under the 1940 Act, and may, at any time and from time to
time, pursuant to the 1940 Act, suspend such right of redemption. The procedures
for and fees, if any, chargeable in connection with effecting and suspending
redemption shall be as set forth in the Prospectus from time to time. Payment
will be made in such manner as described in the Prospectus.
Section 7.2. Redemption of Shares; Disclosure of Holdings. If the Trustees
shall, at any time and in good faith, be of the opinion that direct or indirect
ownership of Shares or other securities of the Trust has or may become
concentrated in any Person to an extent which would disqualify the Trust or any
series thereof as a regulated investment company under the Internal Revenue
Code, then the Trustees shall have the power by lot or other means deemed
equitable by them (i) to call for redemption by any such Person a number, or
principal amount, of Shares or other securities of the Trust or the series
sufficient, in the opinion of the Trustees, to maintain or bring the direct or
indirect ownership of Shares or other securities of the Trust or the series into
conformity with the requirements for such qualification and (ii) to refuse to
transfer or issue Shares or other securities of the Trust or the series to any
Person whose acquisition of the Shares or other securities of the Trust in
question could in the opinion of the Trustees result in disqualification. The
redemption shall be effected at a redemption price determined in accordance with
Section 7.1.
The holders of Shares or other securities of the Trust or any series
thereof shall upon demand disclose to the Trustees in writing such information
with respect to direct and indirect ownership of Shares or other securities of
the Trust as the Trustees deem necessary to comply with the provisions of the
Internal Revenue Code, or to comply with the requirements of any other
authority.
Section 7.3. Redemptions of Accounts. The Trustees may redeem Shares of any
Shareholder at a redemption price determined in accordance with Section 7.1 if
the aggregate net asset value of the Shares in such Shareholder's account is
less than an amount set from time to time by the Trustees, subject to such terms
and conditions as the Trustees may approve, and subject to the Trust's giving
general notice to all Shareholders of its intention to avail itself of such
right , either by publication in the Trust's Prospectus, if any, or by such
means as the Trustees may determine. Similarly, the Trustees may redeem Shares
of any Shareholder at a redemption price determined in accordance with 7.1 to
recover any account charges, as permitted by or disclosed in the Trust's
Prospectus.
Section 7.4. Redemptions Pursuant to Constant Net Asset Value Provisions.
The Trust may also reduce the number of outstanding Shares of any series
pursuant to the provisions of Section 8.3.
<PAGE>
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 8.1. Net Asset Value. The net asset value of each outstanding Share
of the Trust shall be determined on such days and at such time or times as the
Trustees may determine. The method of determination of net asset value shall be
determined by the Trustees and shall be as set forth in the Prospectus. The
power and duty to make the daily calculations may be delegated by the Trustees
to the Administrator, the Adviser, the Custodian, the Transfer Agent or such
other person as the Trustees by resolution may determine. The Trustees may
suspend the daily determination of net asset value to the extent permitted by
the 1940 Act.
Section 8.2. Distributions to Shareholders. The Trustees shall from time to
time distribute ratably among the Shareholders such proportion of the net
profits, surplus (including paid-in surplus), capital, or assets held by the
Trustees as they may deem proper. Such distribution may be made in cash or
property (including without limitation any type of obligations of the Trust or
any assets thereof), and the Trustees may distribute ratably among the
Shareholders additional Shares issuable hereunder in such manner, at such times,
and on such terms as the Trustees may deem proper. Such distributions may be
among the Shareholders of record at the time of declaring a distribution or
among the Shareholders of record at the time of declaring a distribution or
among the Shareholders of record at such later date as the Trustees shall
determine. The Trustees may always retain from the net profits such amount as
they may deem necessary to pay the debts or expenses attributable to the
relevant series of the Trust or to meet obligations of such series or as they
may deem desirable to use in the conduct of its affairs or to retain for future
requirements or extensions of the business. The Trustees may adopt and offer to
Shareholders such dividend reinvestment plans, cash dividend payout plans or
related plans as the Trustees shall deem appropriate.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
Section 8.3. Determination of Net Income; Constant Net Asset Value of
Shares of Certain Series; Reduction of Outstanding Shares. The Trustees shall
have the power to determine the net income of each series of the Trust one or
more times on each business day and at each such determination declare such net
income as dividends in additional Shares of such series. The determination of
net income and the resultant declaration of dividends shall be as set forth in
the Prospectus. In the event that any series of the Trust attempts to maintain a
constant net asset value per share of such
<PAGE>
series, if, for any reason, the net income of such series of the Trust
determined at any time is a negative amount, the Trustees shall have the power
to (i) to offset each Shareholder's pro rata share of such negative amount from
the accrued dividend account of such Shareholder, or (ii) to reduce the number
of outstanding shares of such series of the Trust by reducing the number of
Shares in the account of such Shareholder by that number of full and fractional
Shares which represents the amount of such excess negative net income, or (iii)
to cause to be recorded on the books of the Trust an asset account in the amount
of such negative net income, which account may be reduced by the amount,
provided that the same shall thereupon become the property of the Trust and
shall not be paid to any Shareholder, of dividends declared thereafter upon the
outstanding shares on the day such negative net income is experienced, until
such asset account is reduced to zero, or (iv) to combine the methods described
in clauses (i) and (ii) and (iii) of this sentence, in order to cause the net
asset value per Share of such series of the Trust to remain at a constant amount
per outstanding share immediately after each such determination and declaration.
The Trustees shall also have the power to fail to declare a dividend out of net
income for the purposes of causing the net asset value per Share of any such
series to be increased to a constant amount. The Trustees shall have full
discretion to determine whether any cash or property received shall be treated
as income or as principal and whether any item of expense shall be charged to
the income or the principal account, and their determination made in good faith
shall be conclusive upon the Shareholders. In the case of stock dividends
received, the Trustees shall have full discretion to determine, in the light of
the particular circumstances, how much, if any, of the value thereof shall be
treated as income, the balance, if any, to be treated as principal. The Trustees
shall not be required to adopt, but may at any time adopt, discontinue or amend
the practice of maintaining the net asset value per Share of any series of the
Trust at a constant amount.
Section 8.4. Power to Modify Foregoing Procedures. Notwithstanding any of
the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions, as they may deem necessary or desirable
to enable the Trust to comply with any provisions of the 1940 Act, including any
rule or regulation adopted pursuant to Section 22 of the 1940 Act by the
Commission or any securities association registered under the Securities
Exchange Act of 1934, or any order of exemption issued by said Commission, all
as in effect now or hereafter amended or modified. Without limiting the
generality of the foregoing, the Trustees may establish classes or series of
Shares in accordance with Section 6.9.
<PAGE>
ARTICLE IX
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
Section 9.1 Duration. The Trust shall continue without limitation of time
but subject to the provisions of this Article IX.
Section 9.2. Termination of Trust. (a) The Trust may be terminated (i) by
the affirmative vote of the holders of not less than two-thirds of the Shares
outstanding and entitled to vote at any meeting of Shareholders, or (ii) by an
instrument in writing, without a meeting, signed by a majority of the Trustees
and consented to by the holders of not less than two-thirds of such Shares, or
by such other vote as may be established by the Trustees with respect to any
class or series of Shares, or (iii) by the Trustees by written notice to the
Shareholders. Upon the termination of the Trust:
(i) The Trust shall carry on no business except for the purpose of winding
up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust and all
of the powers of the Trustees under this Declaration shall continue until
the affairs of the Trust shall have been wound up, including the power to
fulfill or discharge the contracts of the Trust, collect its assets, sell,
convey, assign, exchange, transfer or otherwise dispose of all or any part
of the remaining Trust Property to one or more persons at public or private
sale for consideration which may consist in whole or in part of cash,
securities or other property of any kind, discharge or pay its liabilities,
and to do all other acts appropriate to liquidate its business; provided
that any sale, conveyance, assignment, exchange, transfer or other
disposition of all or substantially all the Trust Property shall require
Shareholder approval in accordance with Section 9.4 hereof.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property, in cash or in kind or partly each,
among the Shareholders according to their respective rights.
(b) After termination of the Trust and distribution to the Shareholders as
herein provided, a majority of the Trustees shall execute and lodge among
the records of the Trust an instrument in writing setting forth the fact of
such termination, and the Trustees shall thereupon be discharged from all
further liabilities and duties hereunder, and the rights and interests of
all Shareholders shall thereupon cease.
<PAGE>
Section 9.3. Amendment Procedure. (a) This Declaration may be amended by a
Majority Shareholder Vote. The Trustees may also amend this Declaration without
the vote or consent of Shareholders to change the name of the Trust, to supply
any omission, to cure, correct or supplement any ambiguous, defective or
inconsistent provision hereof, or if they deem it necessary to conform this
Declaration to the requirements of, or to reduce or eliminate the payment of
taxes by the Trust or any series thereof under applicable federal or state laws
or regulations or the requirements of the regulated investment company
provisions of the Internal Revenue Code, but the Trustees shall not be liable
for failing so to do.
(b) No amendment may be made under this Section 9.3 which would change any
rights with respect to any Shares of the Trust by reducing the amount payable
thereon upon liquidation of the Trust or by diminishing or eliminating any
voting rights pertaining thereto, except with the vote or consent of the holders
of two-thirds of the Shares outstanding and entitled to vote, or by such other
vote as may be established by the Trustees with respect to any series or class
of Shares. Nothing contained in this Declaration shall permit the amendment of
this Declaration to impair the exemption from personal liability of the
Shareholders, Trustees, officers, employees and agents of the Trust or to permit
assessments upon Shareholders.
(c) A certificate signed by a majority of the Trustees or by Secretary or
any Assistant Secretary of the Trust, setting forth an amendment and reciting
that it was duly adopted by the Shareholders or by the Trustees as aforesaid or
a copy of the Declaration, as amended, and executed by a majority of the
Trustees or certified by the Secretary or any Assistant Secretary of the Trust,
shall be conclusive evidence of such amendment when lodged among the records of
the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by the
affirmative vote of a majority of the Trustees or by an instrument signed by a
majority of the Trustees.
Section 9.4. Merger, Consolidation and Sale of Assets. The Trust may merge
or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property, including its goodwill, upon such terms and conditions and for
such consideration when and as authorized, at any meeting of Shareholders called
for the purpose, by the affirmative vote of the holders of not less than
two-thirds of the Shares outstanding and entitled to vote, or by an instrument
or instruments in writing without a meeting, consented to by the holders of not
less than two-thirds of such Shares, or by such other vote as may be established
by the Trustees with respect to any series or class of Shares; provided,
however, that, if such merger, consolidation, sale, lease or exchange is
recommended by the Trustees, a Majority Shareholder Vote shall be sufficient
authorization; and any such merger, consolidation, sale, lease or exchange shall
be deemed for all purposes to
<PAGE>
have been accomplished under and pursuant to the statutes of the Commonwealth of
Pennsylvania. In respect of any such merger, consolidation, sale or exchange of
assets, any Shareholder shall be entitled to rights of appraisal of his Shares
to the same extent as a shareholder of a Pennsylvania business corporation in
respect of a merger, consolidation, sale or exchange of assets of a Pennsylvania
business corporation, and such rights shall be his exclusive remedy in respect
of his dissent from any such action.
Section 9.5. Incorporation. With approval of a Majority Shareholder Vote,
or by such other vote as may be established by the Trustees with respect to any
series or class of Shares, the Trustees may cause to be organized or assist in
organizing a corporation or corporations under the laws of any jurisdiction or
any other trust, partnership, association or other organization to take over all
of the Trust Property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust Property to any such corporation, trust, association or organization in
exchange for the shares or securities thereof or otherwise, and to lend money
to, subscribe for the shares or securities of, and enter into any contracts with
any such corporation, trust, partnership, association or organization in which
the Trust holds or is about to acquire shares or any other interest. The
Trustees may also cause a merger or consolidation between the Trust or any
successor thereto any such corporation, trust, partnership, association or other
organization if and to the extent permitted by law, as provided under the law
then in effect. Nothing contained herein shall be construed as requiring
approval of Shareholders for the Trustees to organize or assist in organizing
one or more corporations, trusts, partnerships, associations or other
organizations and selling, conveying or transferring a portion of the Trust
Property to such organizations or entities.
ARTICLE X
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report of the transactions of the Trust, including financial
statements which shall at least annually be certified by independent public
accountants.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Restated Declaration. A Restated Declaration, integrating
into a single instrument all of the providions of the Declaration which are then
in effect and
<PAGE>
operative, may be executed from time to time by a majority of the Trustees and
shall be conslusive evidence of all amendments contained therein and may
thereafter be referred to in lieu of the original Declaration and the various
amendments thereto.
Section 11.2. Governing Law. This Declaration is executed by the Trustees
with reference to the laws of the Commonwealth of Pennsylvania, and the rights
of all parties and the validity and construction of every provision hereof shall
be subject to and construed according to the laws of said State.
Section 11.3. Counterparts. The Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
Section 11.4. Inspection by Shareholders. The Trustees shall maintain the
original copy of this Declaration or the most recent restated Declaration and
any amendment hereto or thereto at the offices of the Trust and shall make the
same available for inspection by any Shareholder.
Section 11.5. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust, appears to be a Trustee
hereunder, or Secretary or Assistant Secretary of the Trust, certifying to: (a)
the number or identity of Trustees or Shareholders, (b) the due authorization of
the execution of any instrument or writing, (c) the form of any vote passed at a
meeting of Trustees or Shareholders, (d) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the form of any By-Laws
adopted by or the identity of any officers elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any Person dealing with the Trustees and their successors.
Section 11.6. Provisions in Conflict with Laws or Regulations. (a) The
provisions of the Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provisions shall be deemed never to have constituted a part of the
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of the Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attain only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument this 13th
day of May, 1986.
/s/ Fred E. Brown , as Trustee
------------------------
and not individually
/s/ Ronald T. Schroeder, as Trustee
------------------------
and not individually
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 13 day of May , 1986, Fred E. Brown known to me and known to be the
individual described in and who executed the foregoing instrument, personally
appeared before me and he acknowledged the foregoing instrument to be his free
act and deed.
/s/ Patricia Kuhn
------------------------
Notary Public
[SEAL]
My commission expires: ________________________
Patricia A. Kuhn
Notary Public, State of New York
No. 31-4797957
Qualified in New York County
Cert. Filed in New York County
Commission Expires Mar. 30, 1987
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On this 13 day of May , 1986, Ronald T. Schroeder known to me and known to
be the individual described in and who executed the foregoing instrument,
personally appeared before me and he acknowledged the foregoing instrument to be
his free act and deed.
/s/ Patricia Kuhn
------------------------
Notary Public
[SEAL]
My commission expires: ________________________
Patricia A. Kuhn
Notary Public, State of New York
No. 31-4797957
Qualified in New York County
Cert. Filed in New York County
Commission Expires Mar. 30, 1987
Commission Expires Mar. 30, 1987
Exhibit 2
AMENDED AND RESTATED
BY-LAWS
of
SELIGMAN PENNSYLVANIA TAX-EXEMPT FUND SERIES
<PAGE>
SELIGMAN PENNSYLVANIA TAX-EXEMPT FUND SERIES
By-Laws
ARTICLE I
Shareholders
SECTION 1. Place of Meeting. All meetings of the Shareholders shall be held
at the principal office of the Trust in the Commonwealth of Pennsylvania or at
such other place within the United States as may from time to time be designated
by the Trustees and stated in the notice of such meeting.
SECTION 2. Special or Extraordinary Meetings. Special or extraordinary
meetings of the Shareholders for any purpose or purposes may be called by the
Chairman or a majority of the Trustees, and shall be called by the Secretary
upon receipt of the request in writing signed by Shareholders holding not less
than twenty-five per cent (25%) of the Shares issued and outstanding and
entitled to vote thereat. Such request shall state the purpose or purposes of
the proposed meeting. The Secretary shall inform such Shareholders of the
reasonably estimated costs of preparing and mailing such notice of meeting and
upon payment to the Trust of such costs, the Secretary shall give notice stating
the purpose or purposes of the meeting as required in this Article and By-Law to
all Shareholders entitled to notice of such meeting. No special meeting need be
called upon the request of the holders of Shares entitled to cast less than a
majority of all votes entitled to be cast at such meeting to consider any matter
which is substantially the same as a matter voted upon at any special meeting of
Shareholders held during the preceding twelve months.
SECTION 3. Notice of Meetings. Not less than ten days' or more than ninety
days' written or printed notice of every meeting of Shareholders, stating the
time and place thereof (and the general nature of the business proposed to be
transacted at any special or extraordinary meeting), shall be given to each
Shareholder entitled to vote thereat by leaving the same with him or at his
residence or usual place of business or by mailing it, postage prepaid, and
addressed to him at his address as it appears upon the books of the Trust. If
mailed, notice shall be deemed to be given when deposited in the United States
mail addressed to the Shareholder as aforesaid.
No notice of the time, place or purpose of any meeting of Shareholders need
be given to any Shareholder who attends in person or by proxy or to any
Shareholder who executes a written waiver of such notice, either before or after
the meeting is held, and which notice is filed with the records of the meeting.
SECTION 4. Record Dates. The Trustees may fix, in advance, a date not more
than ninety (90) or less than ten (10) days preceding the date of any meeting of
Shareholders as a record date for the determination of the Shareholders entitled
to notice of and to vote at such meeting; and only Shareholders of record on
such date shall be entitled to notice of and to vote at such meeting.
SECTION 5. Quorum and Adjournment of Meetings. The presence in person or by
proxy of the holders of record of a majority of the Shares of the Trust issued
and outstanding and entitled to vote
<PAGE>
thereat shall constitute a quorum at all meetings of the Shareholders except as
otherwise provided in the Declaration of Trust. If, however, such quorum shall
not be present or represented at any meeting of the Shareholders, the holders of
a majority of the Shares present in person or by proxy shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until the requisite amount of Shares entitled to vote at such
meeting shall be present. At such adjourned meeting at which the requisite
amount of Shares entitled to vote thereat shall be represented any business may
be transacted which might have been transacted at the meeting as originally
notified.
SECTION 6. Voting and Inspectors. At all meetings, Shareholders of record
entitled to vote thereat shall have one vote for each Share standing in his name
on the books of the Trust (and such Shareholders of record holding fractional
shares, if any, shall have proportionate voting rights) on the date of the
determination of Shareholders entitled to vote at such meeting, either in person
or by proxy appointed by instrument in writing subscribed by such Shareholder or
his duly authorized attorney. No proxy shall be valid eleven months after its
date. Pursuant to a resolution of a majority of the Trustees, proxies may be
solicited in the name of one or more Trustees or officers of the Trust.
All elections shall be had and all questions decided by a majority of the
votes cast at a duly constituted meeting, except as otherwise provided by
statute or by the Declaration of Trust or by these By-Laws.
At any election of Trustees, the Chairman of the meeting may, and upon the
request of the holders of ten percent (10%) of the Shares entitled to vote at
such election shall, appoint two inspectors of election who shall first
subscribe an oath or affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after the election make a certificate of the result of the
vote taken. No candidate for the office of Trustee shall be appointed such
inspector.
SECTION 7. Conduct of Meetings. The meetings of the Shareholders shall be
presided over by the Chairman, or if he is not present, by the President, or if
none of them is present, by a Chairman to be elected at the meeting. The
Secretary of the Trust, if present, shall act as a Secretary of such meetings,
or if he is not present, an Assistant Secretary shall so act; if neither the
Secretary nor any Assistant Secretary is present, then the meeting shall elect
its Secretary.
SECTION 8. Concerning Validity of Proxies, Ballots, etc. At every meeting
of the Shareholders, all proxies shall be required and taken in charge of and
all ballots shall be required and canvassed by the Secretary of the meeting, who
shall decide all questions touching the qualification of voters, the validity of
the proxies and the acceptance or rejection of votes, unless inspectors of
election shall have been appointed by the Chairman of the meeting, in which
event such inspectors of election shall decide all such questions.
SECTION 9. Action Without Meetings. Except as otherwise provided by law,
the provisions of these By-Laws relating to notices and meetings to the contrary
notwithstanding, any action required or permitted to be taken at any meeting of
Shareholders may be taken without a meeting if a majority of the Shareholders
entitled to vote upon the action consent to the action in writing and such
consents are filed
2
<PAGE>
with the records of the Trust. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
ARTICLE II
Trustees
SECTION 1. Number and Tenure of Office. The property of the Trust shall be
controlled by and the business and affairs of the Trust shall be conducted and
managed by not less than two (2) or more than twenty (20) Trustees, as may be
fixed from time to time by a written instrument signed by a majority of the
Trustees then in office. Trustees need not be Shareholders. The tenure of office
of each Trustee shall be set by resolution of the Trustees, except that any
Trustee may resign his office or be removed from office for cause pursuant to
the provisions of the Declaration of Trust.
SECTION 2. Vacancies. In the case of any vacancy or vacancies in the office
of Trustee through death, resignation or other cause, other than an increase in
the number of Trustees, a majority of the remaining Trustees, although a
majority is less than a quorum, by an affirmative vote, or the sole remaining
Trustee, may elect a successor or successors, as the case may be, to hold
office.
SECTION 3. Increase or Decrease in Number of Directors. The Trustees, by
the vote of a majority of all the Trustees then in office, may increase the
number of Trustees and may elect Trustees to fill the vacancies created by any
such increase in the number of Trustees. The Trustees, by the vote of a majority
of all the Trustees then in office, may likewise decrease the number of Trustees
to a number not less than two.
SECTION 4 Place of Meeting. The Trustees may hold their meetings, have one
or more offices, and keep the books of the Trust, outside the Commonwealth of
Pennsylvania, at any office or offices of the Trust or at any other place as
they may from time to time by resolution determine, or in the case of meetings,
as they may from time to time by resolution determine or as shall be specified
or fixed in the respective notices or waivers of notice thereof.
SECTION 5. Regular Meetings. Regular meetings of the Trustees shall be held
at such time and on such notice as the Trustees may from time to time determine.
SECTION 6. Special Meetings. Special meetings of the Trustees may be held
from time to time upon call of the Chairman, the Secretary or two or more of the
Trustees, by oral or telegraphic or written notice duly served on or sent or
mailed to each Trustee not less than one day before such meeting. No notice of
any special meeting need be given to any Trustee who attends in person or to any
Trustee who executes a written waiver of such notice, either before or after the
meeting is held, and which notice is filed with the records of the meeting. Such
notice or waiver of notice need not state the purpose or purposes of such
meeting.
SECTION 7. Quorum. One-third of the Trustees then in office shall
constitute a quorum for the transaction of business, provided that a quorum
shall in no case be less than two Trustees. If at any meeting of Trustees there
shall be less than a quorum present, a majority of those present may adjourn the
meeting from time to time until a quorum shall have been obtained. The act of
the majority of the
3
<PAGE>
Trustees present at any meeting at which there is a quorum shall be the act of
the Trustees, except as otherwise specifically provided by statute or by the
Declaration of Trust or by these By-Laws.
SECTION 8. Committees. The Trustees, by the majority vote of all the
Trustees then in office, may appoint from the Trustees committees which shall in
each case consist of such number of Trustees (not less than two) and shall have
and may exercise such powers as the Trustees may determine in the resolution
appointing them. A majority of all the members of any such committee may
determine its action and fix the time and place of its meetings, unless the
Trustees shall otherwise provide. The Trustees shall have power at any time to
change the members and powers of any such committee, to fill vacancies and to
discharge any such committee.
SECTION 9. Telephone Meetings. Trustees or a committee of the Trustees may
participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
SECTION 10. Action Without a Meeting. Any action required or permitted to
be taken at any meeting of the Trustees or any committee thereof may be taken
without a meeting, if a written consent to such action is signed by all the
Trustees then in office or all members of such committee, as the case may be,
and such written consent is filed with the minutes of the proceedings of the
Trustees or committee.
SECTION 11. Compensation. No Trustee shall receive any stated salary or
fees from the Trust for his services as such if such trustee is, otherwise than
by reason of being such Trustee, an interested person (as such term is defined
by the Investment Company Act of 1940) of the Trust or of its investment adviser
or principal underwriter. Except as provided in the preceding sentence, Trustees
shall be entitled to receive such compensation from the Trust for their services
as may from time to time be voted by the Trustees.
ARTICLE III
Officers
SECTION 1. Executive Officers. The executive officers of the Trust shall be
chosen by the Trustees. These shall include a Chairman (who shall be a Trustee),
a President, one or more Vice Presidents (the number thereof to be determined by
the Trustees), a Secretary and a Treasurer. The Trustees may also in their
discretion appoint Assistant Secretaries, Assistant Treasurers and other
officers, agents and employees, who shall have such authority and perform such
duties as the Trustees may determine. The Trustees may fill any vacancy which
may occur in any office. Any two offices, except those of Chairman and any
President, may be held by the same person, but no officer shall execute,
acknowledge or verify any instrument in more than one capacity, if such
instrument is required by law or these By-Laws to be executed, acknowledged or
verified by two or more officers.
SECTION 2. Term of Office. The term of office of all officers shall be one
year and until their respective successors are chosen and qualified. Any officer
may be removed from office at any time with or without cause by the vote of a
majority of all the Trustees then in office.
4
<PAGE>
SECTION 3. Powers and Duties. The officers of the Trust shall have such
powers and duties as generally pertain to their respective offices, as well as
such powers and duties as may from time to time be conferred by the Trustees.
ARTICLE IV
Share Interests
SECTION 1. Certificates for Shares. Shareholders are not entitled to
receive certificates evidencing their Share ownership, unless the Trustees shall
by resolution otherwise determine.
SECTION 2. Transfer of Shares. Shares of the Trust shall be transferable on
the register of the Trust by the holder thereof in person or by his agent duly
authorized in writing, upon delivery to the Trustees or the Transfer Agent of a
duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization of such other matters as
the Trust or its agents may reasonably require.
SECTION 3. Register of Shares. A register of the Trust, containing the
names and addresses of the Shareholders and the number of Shares held by them
respectively and a record of all transfers thereof, shall be kept at the
principal offices of the Trust or, if the Trust employs a Transfer Agent, at the
offices of the Transfer Agent of the Trust.
ARTICLE V
Seal
The Trustees may provide for a suitable seal, in such form and bearing such
inscriptions as they may determine.
ARTICLE VI
Fiscal Year
The fiscal year of the Trust shall begin on the first day of October and
shall end on the last day of September in each year.
ARTICLE VII
Indemnification
A representative of the Trust shall be indemnified by the Trust with
respect to each proceeding against such representative, except a proceeding
brought by or on behalf of the Trust, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such representative in connection with such proceeding, provided
that such representative
5
<PAGE>
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust and, with respect to any criminal
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any proceeding by judgment, order, settlement, conviction or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that, the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the Trust
and, with respect to any criminal proceeding, had reasonable cause to believe
that his conduct was unlawful.
A representative of the Trust shall be indemnified by the Trust, with
respect to each proceeding brought by or on behalf of the Trust to obtain a
judgment or decree in its favor, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Trust;
except that no indemnification shall be made in respect of any claim, issue, or
matter as to which such representative has been adjudged to be liable for
negligence or misconduct in the performance of his duty to the Trust, unless and
only to the extent that the court in which the proceeding was brought, or a
court of equity in the county in which the Trust has its principal office,
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such corporate representative is fairly
and reasonably entitled to indemnity for the expenses which the court considers
proper.
To the extent that the representative of the Trust has been successful on
the merits or otherwise in defense of any proceeding referred to in the
preceding two paragraphs, or in defense of any claim, issue or matter therein,
the Trust shall indemnify him against all expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
Except as provided in the preceding paragraph any indemnification under the
first two paragraphs of this Article (unless ordered by a court) shall be made
by the Trust only as authorized in the specific case upon a determination that
indemnification of the representative of the Trust is proper in the
circumstances because he has met the applicable standard of conduct set forth in
such paragraphs. The determination shall be made (1) by the Trustees by a
majority vote of a quorum consisting of Trustees who were not parties to the
proceeding, or (2) if a quorum is not obtainable or if a quorum of disinterested
Trustees so directs, by independent legal counsel in a written opinion, or (3)
by the Shareholders.
Expenses (including attorneys' fees) incurred in defending a proceeding may
be paid by the Trust in advance of the final disposition thereof if (1)
authorized by the Trustees in the specific case, and (2) the Trust receives and
undertaking by or on behalf of the representative of the Trust to repay the
advance if it is not ultimately determined that he is entitled to be indemnified
by the Trust as authorized in this Article.
The indemnification provided by this Article shall not be deemed exclusive
of any other rights to which a representative of the Trust or other person may
be entitled under any agreement, vote of Shareholders or disinterested Trustees
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person who
has ceased to be a Trustee, officer, employee or agent and inure to the benefit
of his heirs and personal representatives.
6
<PAGE>
The Trust may purchase and maintain insurance on behalf of any person who
is or was a Trustee, officer, employee or agent of the Trust, or is or was
serving at the request of the Trust as a trustee, director, officer, employee or
agent of another trust, corporation, partnership, joint venture or other
enterprise against any liability asserted against him and incurred by him in any
such capacity or arising out of his status as such, regardless of whether the
Trust would have the power to indemnify him against the liability under the
provisions of this Article.
Nothing contained in the Section shall be construed to indemnify any
representative of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
As used in this Article "representative of the Trust" means an individual
(1) who is a present or former Trustee, officer, agent or employee of the Trust
or who serves or has served another trust corporation, partnership, joint
venture or other enterprise in one of such capacities at the request of the
Trust, and (2) who by reason of his position is, has been or is treated to be
made a party to a proceeding; and "proceeding" includes any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative.
ARTICLE VIII
Custodian
SECTION 1. The Trust shall have as custodian or custodians one or more
trust companies or banks of good standing, each having a capital, surplus and
undivided profits aggregating not less than fifty million dollars ($50,000,000),
and, to the extent required by the Investment Company Act of 1940, the funds and
securities held by the Trust shall be kept in the custody of one or more such
custodians, provided such custodian or custodians can be found ready and willing
to act, and further provided that the Trust may use as subcustodians, for the
purpose of holding any foreign securities and related funds of the Trust such
foreign banks as the Trustees may approve and as shall be permitted by law.
SECTION 2. The Trust shall upon the resignation or inability to serve of
its custodian or upon change of the custodian:
(i) in case of such resignation or inability to serve, use its best
efforts to obtain a successor custodian;
(ii) require that the cash and securities owned by the Trust be delivered
directly to the successor custodian; and
(iii) in the event that no successor custodian can be found, submit to the
Shareholders before permitting delivery of the cash and securities
owned by the Trust otherwise than to a successor custodian, the
question whether the Trust shall be liquidated or shall function
without a custodian.
7
<PAGE>
ARTICLE IX
Amendment of By-Laws
The By-Laws of the Trust may be altered, amended, added to or repealed by
the Shareholders or by majority vote of all the Trustees then in office; but any
such alteration, amendment, addition or repeal of the By-Laws by action of the
Trustees may be altered or repealed by Shareholders.
8
Exhibit 5
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT, dated as of December 29, 1988, between the SELIGMAN
PENNSYLVANIA TAX-EXMEPT FUND SERIES, a Pennsylvania trust (the "Fund") on behalf
of the QUALITY SERIES (the "Series"), and J. & W. SELIGMAN & CO. INCORPORATED, a
Delaware corporation (the "Manager").
In consideration of the mutual agreements herein made, the parties hereto
agree as follows:
1. Duties of the Manager. The Manager shall manage the affairs of the
Series including, but not limited to, continuously providing the Series with
investment management, including investment research, advice and supervision,
determining which securities shall be purchased or sold by the Series, making
purchases and sales of securities on behalf of the Series and determining how
voting and other rights with respect to securities of each Series shall be
exercised, subject in each case to the control of the trustees of the Fund and
in accordance with the objectives, policies and principles set forth in the
Registration Statement and Prospectus of the Series and the requirements of the
Investment Company Act of 1940 (the "Act") and other applicable law. In
performing such duties, the Manager shall provide such office space, such
bookkeeping, accounting, internal legal, clerical, secretarial and
administrative services (exclusive of, and in addition to, any such services
provided by any others retained by the Series) and such executive and other
personnel as shall be necessary for the operations of the Series. The Series
understands that the Manager also acts as the manager of all of the investment
companies in the Seligman Group.
Subject to Section 36 of the Act, the Manager shall not be liable to the
Series for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the management of the Series and
the performance of its duties under this Agreement except for willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under this
Agreement.
2. Expenses. The Manager shall pay all of its expenses arising from the
performance of its obligations under Section 1 and shall pay such Series'
proportional share or any salaries, fees and expenses of the trustees of the
Fund who are employees of the Manager or its affiliates. The Manager shall not
be required to pay any other expenses of the Series, including, but not limited
to, direct charges relating to the purchase and sale of portfolio securities,
interest charges, fees and expenses of independent attorneys and auditors, taxes
and governmental fees, cost of stock certificates and any other expenses
(including clerical expenses) of issue, sale, repurchase or redemption of
shares, expenses of registering and qualifying shares of the Series for sale
under federal and state securities laws, expenses of printing and distributing
reports, notices and proxy materials to existing shareholders, expenses of
corporate data processing and related services, shareholder recordkeeping and
shareholder account services, expenses of printing and filing reports and other
documents filed with governmental agencies, expenses of printing and
distributing prospectuses, expenses of annual and special shareholders'
meetings, fees and disbursements of transfer
<PAGE>
agents and custodians, expenses of disbursing dividends and distributions, fees
payable under the Administration, Shareholder Service and Distribution Plan
between the Fund and service organizations, fees and expenses of trustees of the
Fund who are not employees of the Manager or its affiliates, membership dues in
the Investment Company Institute, insurance premiums and extraordinary expenses
such as litigation expenses.
3. Compensation. (a) As compensation for the services performed and the
facilities and personnel provided by the Manager pursuant to Section 1, the
Series will pay to the Manager promptly after the end of each month a fee,
calculated on each day during such month, at an annual rate of 0.50% of the
Series' average daily net assets.
(b) If the Manager shall serve hereunder for less than the whole of any
month, the fee hereunder shall be prorated.
4. Purchase and Sale of Securities. The Manager shall purchase securities
from or through and sell securities to or through such persons, brokers or
dealers (including the Manager or an affiliate of the Manager) as the Manager
shall deem appropriate in order to carry out the policy with respect to
allocation of portfolio transactions as set forth in the Registration Statement
and Prospectus(es) of the Series or as the trustees of the Fund may direct from
time to time. In providing the Series with investment management and
supervision, it is recognized that the Manager will seek the most favorable
price and execution, and, consistent with such policy, may give consideration to
the research, statistical and other services furnished by brokers or dealers to
the Manager for its use, to the general attitude of brokers or dealers toward
investment companies and their support of them, and to such other considerations
as the trustees of the Fund may direct or authorize from time to time.
Notwithstanding the above, it is understood that it is desirable for the
Series that the Manager have access to supplemental investment and market
research and security and economic analysis provided by brokers who execute
brokerage transactions at a higher cost to the Series than may result when
allocating brokerage to other brokers on the basis of seeking the most favorable
price and execution. Therefore, the Manager is authorized to place orders for
the purchase and sale of securities for the Series with such brokers, subject to
review by the trustees of the Series from time to time with respect to the
extent and continuation of this practice. It is understood that the services
provided by such brokers may be useful to the Manager in connection with its
services to other clients as well as the Series.
The placing of purchase and sale orders may be carried out by the Manager
or any wholly-owned subsidiary of the Manager.
If, in connection with purchases and sales of securities for the Series,
the Manager or any subsidiary of the Manager may, without material risk, arrange
to receive a soliciting dealer's fee or other underwriter's or dealer's discount
or commission, the Manager shall, unless otherwise directed by the trustees of
the Fund, obtain such fee, discount or commission and the amount thereof shall
be applied to reduce the compensation to be received by the Manager pursuant to
Section 3 hereof.
<PAGE>
Nothing herein shall prohibit the trustees of the Fund from approving the
payment by the Series of additional compensation to others for consulting
services, supplemental research and security and economic analysis.
5. Term of Agreement. This Agreement shall continue in full force and
effect until the earlier of December 29, 1989 and from year to year thereafter
if such continuance is approved in the manner required by the Act if the Manager
shall not have notified the Series in writing at least 60 days prior to such
December 29 or prior to December 29 of any year thereafter that it does not
desire such continuace. This Agreement may be terminated at any time without
payment of penalty by the Series, on 60 days' written notice to the Manager by
vote of the trustees of the Fund or by vote of a majority of the outstanding
voting securities of the Series (as defined by the Act). This Agreement will
automatically terminate in the event of its assignment (as defined by the Act).
6. Right of Manager In Corporate Name. The Manager and the Series each
agree that the word "Seligman", which comprises a component of the Series' name,
is a property right of the Manager. The Series agrees and consents that (i) it
will only use the word "Seligman" as a component of its corporate name and for
no other purpose, (ii) it will not purport to grant to any third party the right
to use the word "Seligman" for any purpose, (iii) the Manager or any corporate
affiliate of the Manager may use or grant to others the right to use the word
"Seligman", or any combination or abbreviation thereof, as all or a portion of a
corporate or business name or for any commercial purpose, including a grant of
such right to any other investment company, and at the request of the Manager,
the Series will take such action as may be required to provide its consent to
the use of the word "Seligman", or any combination or abbreviation thereof, by
the Manager or any corporate affiliate of the Manager, or by any person to whom
the Manager or an affiliate of the Manager shall have granted the right to such
use; and (iv) upon the termination of any management agreement into which the
Manager and the Series may enter, the Series shall, upon request by the Manager,
promptly take such action, at its own expense, as may be necessary to change its
corporate name to one not containing the word "Seligman" and following such
change, shall not use the word Seligman, or any combination thereof, as a part
of its corporate name or for any other commercial purpose, and shall use its
best efforts to cause its officers, trustees and stockholders to take any and
all actions which the Manager may request to effect the foregoing and to
reconvey to the Manager any and all rights to such word.
7. Miscellaneous. (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to require, or
to impose any duty upon either of the parties, to do anything in violation of
any applicable laws or regulations.
(b) The Trustees of the Fund have authorized the execution of this
Agreement in their capacity as Trustees and not individually and the Manager
agrees that neither the shareholders nor the Trustees nor any officer, employee,
representative or agent of the Fund shall be personally liable upon, nor shall
resort be had to their private property for the satisfaction of, obligations
given, executed or delivered on behalf of or by the Fund, that the
<PAGE>
shareholders, Trustees, officers, employees, representatives and agents of the
Fund shall not be personally liable hereunder, and that the Manager shall look
solely to the property of the Fund for the satisfaction of any claim hereunder.
IN WITNESS WHEREOF, the Fund on behalf of the Series and the Manager have
caused this Agreement to be executed by their duly authorized officers as of the
date first above written.
SELIGMAN PENNSYLVANIA TAX-EXEMPT FUND SERIES
By_________________________________________
J. & W. SELIGMAN & CO. INCORPORATED
By_________________________________________
Exhibit 6
DISTRIBUTING AGREEMENT
DISTRIBUTING AGREEMENT, dated as of January 1, 1993, between SELIGMAN
PENNSYLVANIA TAX-EXEMPT FUND SERIES, a Pennsylvania trust (the "Fund"), and
SELIGMAN FINANCIAL SERVICES, INC., a Delaware corporation ("Seligman Financial
Services").
In consideration of the mutual agreements herein made, the parties hereto
agree as follows:
1. Exclusive Distributor. The Fund hereby agrees that Seligman Financial
Services shall be for the period of this Agreement exclusive agent for
distribution within the United States and its territories, and
Seligman Financial Services agrees to use its best efforts during such
period to effect such distribution of shares of Capital Stock
("Shares") of the Fund; provided, however, that nothing herein shall
prevent the Fund, if it so elects, from selling or otherwise
distributing its Shares directly to any persons other than dealers.
The Fund understands that Seligman Financial Services also acts as
agent for distribution of the shares of capital stock or beneficial
interest of other open-end investment companies which have entered
into management agreements with J. & W. Seligman & Co. Incorporated
(the "Manager").
2. Sales of Shares. Seligman Financial Services is authorized, as agent
for the Fund and not as principal, (a) to sell Shares of the Fund to
such dealers as Seligman Financial Services may select pursuant to the
terms of written sales agreements (which may also relate to sales of
shares of capital stock or shares of beneficial interest of other
open-end investment companies which have entered into management
agreements with the Manager), in form or forms approved by the Fund,
and (b) to sell Shares of the Fund to other purchasers on such terms
as may be provided in the then current prospectus of the Fund relating
to such Shares; provided, however, that no sales of Shares shall be
confirmed by Seligman Financial Services at any time when, according
to advice received by Seligman Financial Services from the Fund, the
officers of the Fund have for any reason sufficient to them
temporarily or permanently suspended or discontinued the sale and
issuance of the Shares. Each sale of Shares shall be effected by
Seligman Financial Services only at the applicable price determined by
the Fund in the manner prescribed in its then current prospectus
relating to such Shares. Seligman Financial Services shall comply with
all applicable laws, rules and regulations including, without limiting
the generality of the foregoing, all rules or regulations made or
adopted pursuant to Section 22 of the Investment Company Act of 1940
(the "1940 Act") by the Securities and Exchange Commission or any
securities association registered under the Securities Exchange Act of
1934.
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The Fund agrees, as long as its Shares may legally be issued, to fill
all orders confirmed by Seligman Financial Services in accordance with
the provisions of this Agreement.
3. Repurchase Agent. Seligman Financial Services is authorized, as agent
for the Fund and not as principal, to accept offers for resale to the
Fund and to repurchase on behalf of the Fund Shares of each series of
the Fund at net asset values determined by the Fund in conformity with
its then current prospectus relating to such Shares.
4. Compensation. As compensation for the services of Seligman Financial
Services under this Agreement, Seligman Financial Services shall be
entitled to receive the sales charge, determined in conformity with
the Fund's then current prospectus relating to such Shares, on all
sales of Shares of the Fund confirmed by Seligman Financial Services
hereunder and for which payment has been received, less the dealers'
concession allowed in respect of such sales. In addition, in
accordance with the terms of the Fund's Administration, Shareholder
Services and Distribution Plan(s) (the "Plan(s)"), each of the series
of the Fund may make payments from time to time to Seligman Financial
Services in accordance with the terms and limitations of, and for the
purposes set forth in the Plan(s).
5. Expenses. Seligman Financial Services agrees promptly to pay or
reimburse the Fund for all expenses (except expenses incurred by the
Fund in connection with the preparation, printing and distribution of
any prospectus or report or other communication to shareholders, to
the extent that such expenses are incurred to effect compliance with
any Federal or State law or to enable such distribution to
shareholder(s) (a) of printing and distributing copies of any
prospectus and of preparing, printing and distributing any other
material used by Seligman Financial Services in connection with
offering Shares of the Fund for sale, and (b) of advertising in
connection with such offering. The Fund agrees to pay all expenses in
connection with the registration of Shares of the Fund under the
Securities Act of 1933 (the "Act"), all fees and related expenses
which may be incurred in connection with the qualification of Shares
of the Fund for sale in such States (as well as the District of
Columbia, Puerto Rico and other territories) as Seligman Financial
Services may designate, and all expenses in connection with
maintaining facilities for the issue and transfer of its Shares, of
supplying information, prices and other data to be furnished by it
hereunder, and through Union Data Service Center, Inc., of all data
processing and related services related to the share distribution
activity contemplated hereby.
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The Fund agrees to execute such documents and to furnish such
information as may be reasonably necessary, in the discretion of the
Trustees of the Fund, in connection with the qualification of Shares
of the Fund for sale in such States (as well as the District of
Columbia, Puerto Rico and other territories) as Seligman Financial
Services may designate. Seligman Financial Services also agrees to pay
all fees and related expenses connected with its own qualification as
a broker or dealer under Federal or State laws and, except as
otherwise specifically provided in this Agreement or agreed to by the
Fund, all other expenses incurred by Seligman Financial Services in
connection with the sale of Shares of the Fund as contemplated in this
Agreement (including the expenses of qualifying the Fund as a dealer
or broker under the laws of such States as may be designated by
Seligman Financial Services, if deemed necessary or advisable by the
Fund).
It is understood and agreed that any payments made to Seligman
Financial Services pursuant to the Plan(s) may be used to defray some
or all of the expenses incurred by Seligman Financial Services
pursuant to this Agreement.
6. Prospectus and Other Information. The Fund represents and warrants to
and agrees with Seligman Financial Services that:
(a) A registration statement, including one or more prospectuses
relating to the Shares, has been filed by the Fund under the Act
and has become effective. Such registration statement, as now in
effect and as from time to time hereafter amended, and also any
other registration statement relating to the Shares which may be
filed by the Fund under the Act which shall become effective, is
herein referred to as the "Registration Statement", and any
prospectus or prospectuses filed by the Fund as a part of the
Registration Statement, as the "Prospectus".
(b) At all times during the term of this Agreement, except when the
officers of the Fund have suspended or discontinued the sale and
issuance of Shares of the Fund as contemplated by Section 2
hereof, the Registration Statement and Prospectus will conform in
all respects to the requirements of the Act and the rules and
regulations of the Securities and Exchange Commission, and
neither of such documents will include any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statement therein not
misleading, except that the foregoing does not apply to any
statements or omissions in either of such documents based upon
written information furnished to the Fund by Seligman Financial
Services specifically for use therein.
4
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The Fund agrees to prepare and furnish to Seligman Financial Services
from time to time a copy of its Prospectus, and authorizes Seligman
Financial Services to use such Prospectus, in the form furnished to
Seligman Financial Services from time to time, in connection with the
sale of the Fund's Shares. The Fund also agrees to furnish Seligman
Financial Services from time to time, for use in connection with the
sale of such Shares, such information with respect to the Fund and its
Shares as Seligman Financial Services may reasonably request.
7. Reports. Seligman Financial Services will prepare and furnish to the
Trustees of the Fund at least quarterly a written report complying
with the requirements of Rule 12b-1 under the 1940 Act setting forth
all amounts expended under the Plan(s) and the purposes for which such
expenditures were made.
8. Indemnification. (a) The Fund will indemnify and hold harmless Seligman
Financial Services and each person, if any, who controls Seligman Financial
Services within the meaning of the Act against any losses, claims, damages
or liabilities to which Seligman Financial Services or such controlling
person may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Fund's Registration Statement
or Prospectus or any other written sales material prepared by the Fund
which is utilized by Seligman Financial Services in connection with the
sale of Shares or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
(in the case of the Registration Statement and Prospectus) necessary to
make the statements therein not misleading or (in the case of such other
sales material) necessary to make the statements therein not misleading in
the light of the circumstances under which they were made; and will
reimburse Seligman Financial Services and each such controlling person for
any legal or other expenses reasonably incurred by Seligman Financial
Services or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Fund will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement or Prospectus in
conformity with written information furnished to the Fund by Seligman
Financial Services specifically for use therein; and provided, further,
that nothing herein shall be so construed as to protect Seligman Financial
Services against any liability to the Fund or its security holders to which
Seligman Financial Services would otherwise
5
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be subject by reason of willful misfeasance, bad faith or gross
negligence, in the performance of its duties, or by reason of the
reckless disregard by Seligman Financial Services of its obligations
and duties under this Agreement. This indemnity agreement will be in
addition to any liability which the Fund may otherwise have.
(b) Seligman Financial Services will indemnify and hold harmless the
Fund, each of its Trustees and officers and each person, if any,
who controls the Fund within the meaning of the Act, against any
losses, claims, damages or liabilities to which the Fund or any
such Trustee, officer or controlling person may become subject,
under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration
Statement or Prospectus or any sales material not prepared by the
Fund which is utilized in connection with the sale of Shares or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated
therein or (in the case of the Registration Statement and
Prospectus) necessary to make the statements therein not
misleading or (in the case of such other sales material)
necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, in the
case of the Registration Statement and Prospectus to the extent,
but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in
conformity with written information furnished to the Fund by
Seligman Financial Services specifically for use therein; and
Seligman Financial Services will reimburse any legal or other
expenses reasonably incurred by the Fund or any such Trustee,
officer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action. This
indemnity agreement will be in addition to any liability which
Seligman Financial Services may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against
the indemnifying party under this Section, notify the
indemnifying party of the commencement thereof; but the omission
so to notify the indemnifying party will not relieve it from
liability which it may have to any indemnified party otherwise
than under this Section. In case any such action is brought
against any indemnified party, and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may
wish, to assume the defense thereof, with counsel satisfactory to
such indemnified party, and after notice from the indemnifying
party to such indemnified party of its
6
<PAGE>
election to assume the defense thereof, the indemnifying party
will not be liable to such indemnified party under this Section
for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other
than reasonable costs of investigation.
9. Effective Date. This Agreement shall become effective upon its
execution by an authorized officer of the respective parties to this
Agreement, but in no event prior to shareholder approval of the
Plan(s).
10. Term of Agreement. This Agreement shall continue in effect until
December 31 of the year in which it is first effective and through
December 31 of each year thereafter if such continuance is approved in
the manner required by the 1940 Act and the rules thereunder and
Seligman Financial Services shall not have notified the Fund in
writing at least 60 days prior to the anniversary date of the previous
continuance that it does not desire such continuance. This Agreement
may be terminated at any time, without payment of penalty on 60 days'
written notice to the other party by vote of a majority of the
Trustees of the Fund who are not interested persons (as defined in the
1940 Act) of the Fund and have no direct or indirect financial
interest in the operation of the Plan(s) or any agreement related
thereto, or by vote of a majority of the outstanding voting securities
of the Fund (as defined in the 1940 Act). This Agreement shall
automatically terminate in the event of its assignment (as defined in
the 1940 Act).
11. Miscellaneous. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Anything herein to
the contrary notwithstanding, this Agreement shall not be construed to
require, or to impose any duty upon, either of the parties to do
anything in violation of any applicable laws or regulations.
IN WITNESS WHEREOF, the Fund and Seligman Financial Services have
caused this Agreement to be executed by their duly authorized officers as
of the date first above written.
SELIGMAN PENNSYLVANIA
TAX-EXEMPT FUND SERIES
By
-------------------------------------
Ronald T. Schroeder, President
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SELIGMAN FINANCIAL SERVICES, INC.
By
-------------------------------------
Donald R. Pitti, President
Exhibit 6a
ADDENDUM
TO
Sales Agreement
covering shares of capital stock
or shares of beneficial interest of
the Seligman Mutual Funds
between
SELIGMAN FINANCIAL SERVICES, INC.
and
DEALER
Dear Dealer:
Your Sales Agreement with Seligman Financial Services, Inc. ("SFSI") is
hereby amended to include the following provisions in connection with the
offering by certain of the Seligman Mutual Funds of Class B shares as described
in each applicable prospectus:
1. Dealer agrees to comply with the attached "Policies and Procedures" with
respect to sales of Seligman Mutual Funds offering three classes of shares.
2. SFSI shall be entitled to a contingent deferred sales load ("CDSL") on
redemptions within six years of purchase on any Class B shares sold and
within one year of purchase on any Class D shares sold. With respect to
omnibus accounts in which Class B shares or Class D shares are held at
Seligman Data Corp. ("SDC") in Dealer's name, Dealer agrees that by the
tenth day of each month it will furnish to SDC a report of each redemption
in the preceding month to which a CDSL was applicable, accompanied by a
check payable to SFSI in payment of the CDSL due.
3. If, with respect to a redemption of any Class B shares or Class D shares
sold by Dealer, the CDSL is waived because the redemption qualifies for a
waiver set forth in the Fund's prospectus, Dealer shall promptly remit to
SFSI an amount equal to the payment made by SFSI to Dealer at the time of
sale with respect to such Class B shares or Class D Shares.
4. The Dealer will comply in all respects with Notice to Members 95-80 of the
National Association of Securities Dealers, Inc. regarding members
obligations and responsibilities regarding mutual fund sales practices.
The sale of any Class A,Class B or Class D shares of a Seligman Mutual Fund
will constitute Dealer's acceptance of and agreement with the terms set forth
herein.
<PAGE>
Exhibit C
POLICIES AND PROCEDURES
In connection with the offering by the Funds of three classes of shares,
one subject to a front-end sales load and a service fee ("Class A Shares"), one
subject to a service fee, a distribution fee, no front-end sales load and a
contingent deferred sales load on redemptions within six years of purchase
("Class B Shares") and one subject to a service fee, a distribution fee, no
front-end sales load and a contingent deferred sales load on redemptions within
one year of purchase ("Class D Shares"), it is important for an investor to
choose the method of purchasing shares which best suits his or her particular
circumstances. To assist investors in these decisions, Seligman Financial
Services has instituted the following policies with respect to orders for
Shares:
1. No purchase order may be placed for Class B Shares or Class D
Shares for amounts of $4,000,000 or more.
2. Any purchase order for less than $4,000,000 may be for either
Class A, Class B or Class D Shares in light of the relevant facts
and circumstances, including:
a. the specific purchase order dollar amount;
b. the length of time the investor expects to hold his Shares;
and
c. any other relevant circumstances such as the availability of
purchases under a Letter of Intent, Volume Discount, or
Right of Accumulation.
There are instances when one method of purchasing Shares may be more
appropriate than another. For example, an investor who would qualify for a
significant discount from the maximum sales load on Class A Shares may determine
that payment of such a reduced front-end sales load and service fee is
preferable to payment of higher ongoing distribution fee. On the other hand, an
investor whose order would not qualify for such a discount may wish to have all
of his or her funds invested in Class B or Class D Shares. An investor who
expects to hold his or her shares for longer than eight years might prefer Class
B Shares over Class D Shares because of the conversion feature; once the Class B
Shares have converted to Class A Shares, the ongoing distribution fees will be
reduced. Class D Shares may remain a more attractive choice for shorter-term
investors because of the contingent deferred sales load on such shares is only
1%, and it does not apply if the investor owns his or her shares for at least
one year. If an investor anticipates that he or she will redeem his or her Class
B Shares or Class D Shares while still subject to a contingent deferred sales
charge, the investor may, depending on the amount of the purchase, pay an amount
greater than the sales load and service fee attributable to Class A Shares.
Appropriate supervisory personnel within your organization must ensure that
all employees receiving investor inquiries about the purchase of Shares of a
Fund advise the investor of then available pricing structures offered by the
Fund, and the impact of choosing one method over another. In some instances it
may be appropriate for a supervisory person to discuss a purchase with the
investor.
Questions relating to this policy should be directed to Stephen J. Hodgdon,
President, Seligman Financial Services at (212) 850-1217.
<PAGE>
SALES AGREEMENT
covering shares of capital stock
and/or shares of beneficial interest of
THE SELIGMAN MUTUAL FUNDS
Seligman Capital 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 New Jersey Tax-Exempt Fund, Inc.
Seligman Pennsylvania Tax-Exempt Fund Series
Seligman Tax-Exempt Fund Series, Inc.
Seligman Tax-Exempt Series Trust
between
SELIGMAN FINANCIAL SERVICES, INC.
and
----------------------------------------------------------------------------
Dealer
The Dealer named above and Seligman Financial Services, Inc., exclusive agent
for distribution of shares of capital stock of Seligman Capital 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 Income Fund, Inc., Seligman New
Jersey Tax-Exempt Fund, Inc., and Seligman Tax-Exempt Fund Series, Inc., and
shares of beneficial interest of Seligman High Income Fund Series, Seligman
Pennsylvania Tax-Exempt Fund, and Seligman Tax-Exempt Series Trust, agree to the
terms and conditions set forth in this agreement.
Dealer Signature Seligman Financial Services, Inc. Acceptance
- ------------------------------- -------------------------------
Principal Officer Stephen J. Hodgdon, President
SELIGMAN FINANCIAL SERVICES, INC.
100 Park Avenue
- ------------------------------- New York, New York 10017
Address
- ------------------------------- -------------------------------
Employer Identification No. Date
REV 1/95
<PAGE>
The Dealer and Seligman Financial Services, Inc. ("Seligman Financial
Services"), as exclusive agent for distribution of Class A and Class D Shares
(as described in the "Policies and Procedures," as set forth below) of the
Capital Stock and/or Class A and Class D Shares of beneficial interest
(collectively, the "Shares") of Seligman Capital 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 New Jersey Tax-Exempt Fund, Inc., Seligman Pennsylvania Tax-Exempt
Fund, Seligman Tax-Exempt Fund Series, Inc. and Seligman Tax-Exempt Series Trust
and or any other mutual fund for which Seligman Financial Services is exclusive
agent for distribution (herein called the Funds), agree as follows:
1. The Dealer agrees to comply with the attached "Policies and Procedures"
with respect to sales of Seligman Mutual Funds offering two classes of
shares, as set forth below.
2. An order for Shares of one or more of the Funds, placed by the Dealer with
Seligman Financial Services, will be confirmed at the public offering price
as described in each Fund's current prospectus. Unless otherwise agreed
when an order is placed, the Dealer shall remit the purchase price to the
Fund, or Funds, with issuing instruction, within the period of time
prescribed by existing regulations. No wire orders under $1,000 may be
placed for initial purchases.
3. Shares of the Funds shall be offered for sale and sold by the Dealer only
at the applicable public offering price currently in effect, determined in
the manner prescribed in each Fund's prospectus. Seligman Financial
Services will make a reasonable effort to notify the Dealer of any
redetermination or suspension of the current public offering price, but
Seligman Financial Services shall be under no liability for failure to do
so.
4. On each purchase of Shares by the Dealer, the Dealer shall be entitled,
based on the Class of Shares purchased and except as provided in each
Fund's current prospectus, to a concession determined as a percentage of
the price to the investor as set forth in each Fund's current prospectus.
On each purchase of Class A Shares, Seligman Financial Services reserves
the right to receive a minimum concession of $.75 per transaction. No
concessions will be paid to the Dealer for the investment of dividends in
additional shares.
5. Except for sales to and purchases from the Dealer's retail customers, all
of which shall be made at the applicable current public offering price or
the current price bid by Seligman Financial Services on behalf of the Fund,
the Dealer agrees to buy Shares only through Seligman Financial Services
and not from any other sources and to sell shares only to Seligman
Financial Services, the Fund or its redemption agent and not to any other
purchasers.
6. By signing this Agreement, both Seligman Financial Services and the Dealer
warrant that they are members of the National Association of Securities
Dealers, Inc., and agree that termination of such membership at any time
shall terminate this Agreement forthwith regardless of the provisions of
paragraph 10 hereof. Each party further agrees to comply with all rules and
regulations of such Association and specifically to observe the following
provisions:
(a) Neither Seligman Financial Services nor the Dealer shall withhold
placing customers' orders for Shares so as to profit itself as a
result of such withholding.
(b) Seligman Financial Services shall not purchase Shares from any of the
Funds except for the purpose of covering purchase orders already
received, and the Dealer shall not purchase Shares of any of the Funds
through Seligman Financial Services other than for investment, except
for the purpose of covering purchase orders already received.
<PAGE>
(c) Seligman Financial Services shall not accept a conditional order for
Shares on any basis other than at a specified definite price. The
Dealer shall not, as principal, purchase Shares of any of the Funds
from a recordholder at a price lower than the bid price, if any, then
quoted by or for the Fund, but the Dealer shall not be prevented from
selling Shares for the account of a record owner to Seligman Financial
Services, the Fund or its redemption agent at the bid price currently
quoted by or for such Fund, and charging the investor a fair
commission for handling the transaction.
(d) If Class A Shares are repurchased by a Fund or by Seligman Financial
Services as its agent, or are tendered for redemption within seven
business days after confirmation by Seligman Financial Services of the
original purchase order of the Dealer for such Shares, (i) the Dealer
shall forthwith refund to Seligman Financial Services the full
concession allowed to the Dealer on the original sales and (ii)
Seligman Financial Services shall forthwith pay to the Fund Seligman
Financial Services' share of the "sales load" on the original sale by
Seligman Financial Services, and shall also pay to the Fund the refund
which Seligman Financial Services received under (i) above. The Dealer
shall be notified by Seligman Financial Services of such repurchase or
redemption within ten days of the date that such redemption or
repurchase is placed with Seligman Financial Services, the Fund or its
authorized agent. Termination or cancellation of this Agreement shall
not relieve the Dealer or Seligman Financial Services from the
requirements of this clause (d).
7. (a) Seligman Financial Services shall be entitled to a contingent deferred
sales load ("CDSL") on redemptions within one year of purchase on any
Class D Shares sold. With respect to omnibus accounts in which Class D
Shares are held at Seligman Data Corp. ("SDC") in the Dealer's name,
the Dealer agrees that by the tenth day of each month it will furnish
to SDC a report of each redemption in the preceding month to which a
CDSL was applicable, accompanied by a check payable to Seligman
Financial Services in payment of the CDSL due.
(b) If, with respect to a redemption of any Class D Shares sold by the
Dealer, the CDSL is waived because the redemption qualifies for a
waiver set forth in the Fund's prospectus, the Dealer shall promptly
remit to Seligman Financial Services an amount equal to the payment
made by Seligman Financial Services to the Dealer at the time of sale
with respect to such Class D Shares.
8. In all transactions between Seligman Financial Services and the Dealer
under this Agreement, the Dealer will act as principal in purchasing from
or selling to Seligman Financial Services. The dealer is not for any
purposes employed or retained as or authorized to act as broker, agent or
employee of any Fund or of Seligman Financial Services and the Dealer is
not authorized in any manner to act for any Fund or Seligman Financial
Services or to make any representations on behalf of Seligman Financial
Services. In purchasing and selling Shares of any Fund under this
Agreement, the Dealer shall be entitled to rely only upon matters stated in
the current offering prospectus of the applicable Fund and upon such
written representations, if any, as may be made by Seligman Financial
Services to the Dealer over the signature of Seligman Financial Services.
9. Seligman Financial Services will furnish to the Dealer, without charge,
reasonable quantities of the current offering prospectus of each Fund and
sales material issued from time to time by Seligman Financial Services.
10. Either Party to this Agreement may cancel this Agreement by written notice
to the other party. Such cancellation shall be effective at the close of
business on the 5th day following the date on which such notice was given.
Seligman Financial Services may modify this Agreement at any time by
written notice to the Dealer. Such notice shall be deemed to have been
given on the date upon which it was either delivered personally to the
other party or any officer or member thereof, or was mailed postage-paid,
or delivered to a telegraph office for transmission to the other party at
his or its address as shown herein.
<PAGE>
11. This Agreement shall be construed in accordance with the laws of the State
of New York and shall be binding upon both parties hereto when signed by
Seligman Financial Services and by the Dealer in the spaces provided on the
cover of this Agreement. This Agreement shall not be applicable to Shares
of a Fund in a state in which such Fund Shares are not qualified for sale.
POLICIES AND PROCEDURES
In connection with the offering by the Funds of three classes of shares,
one subject to a front-end sales load and a service fee ("Class A Shares"), one
subject to a service fee, a distribution fee, no front-end sales load and a
contingent deferred sales load on redemptions within six years of purchase
("Class B Shares") and one subject to a service fee, a distribution fee, no
front-end sales load and a contingent deferred sales load on redemptions within
one year of purchase ("Class D Shares"), it is important for an investor to
choose the method of purchasing shares which best suits his or her particular
circumstances. To assist investors in these decisions, Seligman Financial
Services has instituted the following policies with respect to orders for
Shares:
1. No purchase order may be placed for Class B Shares or Class D
Shares for amounts of $4,000,000 or more.
2. Any purchase order for less than $4,000,000 may be for either
Class A, Class B or Class D Shares in light of the relevant facts
and circumstances, including:
a. the specific purchase order dollar amount;
b. the length of time the investor expects to hold his Shares;
and
c. any other relevant circumstances such as the availability of
purchases under a Letter of Intent, Volume Discount, or
Right of Accumulation.
There are instances when one method of purchasing Shares may be more
appropriate than another. For example, an investor who would qualify for a
significant discount from the maximum sales load on Class A Shares may determine
that payment of such a reduced front-end sales load and service fee is
preferable to payment of higher ongoing distribution fee. On the other hand, an
investor whose order would not qualify for such a discount may wish to have all
of his or her funds invested in Class B or Class D Shares. An investor who
expects to hold his or her shares for longer than eight years might prefer Class
B Shares over Class D Shares because of the conversion feature; once the Class B
Shares have converted to Class A Shares, the ongoing distribution fees will be
reduced. Class D Shares may remain a more attractive choice for shorter-term
investors because of the contingent deferred sales load on such shares is only
1%, and it does not apply if the investor owns his or her shares for at least
one year. If an investor anticipates that he or she will redeem his or her Class
B Shares or Class D Shares while still subject to a contingent deferred sales
charge, the investor may, depending on the amount of the purchase, pay an amount
greater than the sales load and service fee attributable to Class A Shares.
Appropriate supervisory personnel within your organization must ensure that
all employees receiving investor inquiries about the purchase of Shares of a
Fund advise the investor of then available pricing structures offered by the
Fund, and the impact of choosing one method over another. In some instances it
may be appropriate for a supervisory person to discuss a purchase with the
investor.
Questions relating to this policy should be directed to Stephen J. Hodgdon,
President, Seligman Financial Services at (212) 850-1217.
- --------------------------------------------------------------------------------
J. & W. SELIGMAN & CO. INCORPORATED
MATCHED ACCUMULATION PLAN
(As amended and restated to include
all amendments through January 1, 1995)
- --------------------------------------------------------------------------------
<PAGE>
Table of Contents
Page
----
PREAMBLE ............................................................ 1
ARTICLE I Definitions ............................................. 1
1.1 Definitions ............................................. 1
1.2 Gender .................................................. 17
ARTICLE II Participation ........................................... 17
2.1 Initial Participation ................................... 17
2.2 Reemployment ............................................ 17
ARTICLE III Profit Sharing Contributions ............................ 17
3.1 Amount of Profit Sharing
Contributions ........................................... 17
3.2 Participants Eligible for
Profit Sharing Contributions ............................ 18
3.3 Allocation of Profit Sharing
Contributions ........................................... 18
3.4 Cash Election ........................................... 19
ARTICLE IV Salary Reduction, Voluntary, Matching
and Rollover Contributions .............................. 19
4.1. Salary Reduction Contributions .......................... 19
4.2 Limitation on Optional Deferrals
and Salary Reduction
Contributions ........................................... 20
<PAGE>
4.3 Voluntary Contributions ................................. 22
4.4 Changes in Rates of Salary
Reduction Contributions and/or
Voluntary Contributions ................................. 22
4.5 Matching Contributions .................................. 23
4.6 Limitation on Voluntary
Contributions and Matching
Contributions ........................................... 23
4.7 Rollover Contributions .................................. 26
4.8 Maximum Annual Addition ................................. 26
ARTICLE V Investment of the Trust Fund ............................ 28
5.1 Funds ................................................... 28
5.2 Investment of Prospective
Contributions ........................................... 28
5.3 Investment In Funds ..................................... 29
5.4 Transfers Among Funds ................................... 29
5.5 Reinvestments of Income
and Gains ............................................... 30
5.6 Limitation on Investments
in a Fund ............................................... 30
ARTICLE VI Vesting ................................................. 30
6.1 Certain Participants Hired Before
May 31, 1993 .......................................... 30
6.2 Other Participants .................................... 30
<PAGE>
ARTICLE VII Withdrawals During Service ........................... 32
7.1 In-Service Withdrawals (Other
Than for Hardship) ................................... 32
7.2 Hardship Withdrawals ................................. 33
7.3 Complete Withdrawal .................................. 35
7.4 Payments ............................................. 35
7.5 Rollover Contributions ............................... 35
ARTICLE VIII Loans ................................................ 35
8.1 Amount of Loans ...................................... 35
8.2 Payment of Loan ...................................... 36
8.3 Terms of Loan ........................................ 36
8.4 Repayment of Loan .................................... 36
8.5 Default .............................................. 37
8.6 Termination of Service or Plan ....................... 37
8.7 Maximum Number of Loans .............................. 37
ARTICLE IX Distributions Upon Termination
of Service ........................................... 37
9.1 Termination of Service ............................... 37
9.2 Deferred Distributions ............................... 38
9.3 Commencement of Benefits ............................. 38
<PAGE>
ARTICLE X Payments of Distributions and
Withdrawals .......................................... 39
10.1 Distributions ........................................ 39
10.2 Payments ............................................. 39
10.3 Designation of Beneficiary ........................... 39
10.4 Death Benefits ....................................... 39
10.5 Payments to Minors or Other
Persons Under a Disability ........................... 40
10.6 Dividends or Capital Gain
Distributions ........................................ 40
10.7 Predecessor Plan ..................................... 40
10.8 Direct Rollovers ..................................... 40
ARTICLE XI The Trust Fund ...................................... 41
11.1 Trust Fund ......................................... 41
11.2 Trustee ............................................ 41
11.3 Prohibition Against Diversion ...................... 41
11.4 Recordkeeping ...................................... 41
11.5 Expenses ........................................... 42
11.6 Voting ............................................. 42
ARTICLE XII Valuation of Interests and Statements
of Accounts ........................................ 42
12.1 Valuation .......................................... 42
<PAGE>
12.2 Changes in Valuation ............................... 42
12.3 Statement of Account ............................... 42
ARTICLE XIII Administration ..................................... 43
13.1 Appointment of Committee ........................... 43
13.2 Powers of the Committee ............................ 43
13.3 Procedures of the Committee ........................ 43
13.4 Delegation of Duties ............................... 43
13.5 Payment of Expenses ................................ 44
13.6 Duties and Responsibilities
of the Committee ................................... 44
13.7 Indemnification .................................... 44
ARTICLE XIV Claims Procedure ................................... 45
ARTICLE XV Amendment or Termination of the Plan
or Discontinuance of Employer
Contributions ...................................... 46
15.1 Amendment .......................................... 46
15.2 Termination ........................................ 46
15.3 Merger, Consolidation or
Transfer of Assets or
Liabilities ........................................ 46
15.4 Withdrawal of Employer ............................. 46
ARTICLE XVI General Provisions ................................. 47
16.1 Plan Is Not a Contract of
Employment ......................................... 47
16.2 Plan Is for the Exclusive
Benefit of Beneficiaries ........................... 47
16.3 Nonalienation of Benefits .......................... 47
16.4 Applicable Law ..................................... 47
EXHIBIT A ......................................................... 48
<PAGE>
PREAMBLE
J. & W. Seligman & Co. Incorporated, in order to establish a systematic
method by which its employees may both share in current profits and earn and
accumulate benefits payable upon termination of employment or retirement,
adopted this profit-sharing plan now known as the J. & W. Seligman & Co.
Incorporated Matched Accumulation Plan, effective January 1, 1981.
The Plan was amended from time to time and was last restated effective
January 1, 1989. Effective January 1, 1994, the Plan is again restated in this
Plan document. Except where the context expressly provides otherwise, this Plan,
as amended and restated as of January 1, 1994, applies to employees of an
Employer employed on or after such date; changes effected by any amendments
included in this restated Plan shall not be applicable to any Participant who
retired or died or whose employment otherwise terminated prior to January 1,
1994; all rights and benefits payable with respect to him shall be determined in
accordance with the provisions of the Plan and Trust as in effect on such date
of termination of employment.
<PAGE>
ARTICLE I
Definitions
1.1 Definitions. Wherever used herein, unless the context otherwise
indicates, the following terms shall have the meanings set forth below:
Accounts: The account or accounts established and maintained
in the Trust Fund pursuant to Article V on behalf
of each Participant, representing his interest in
one or more of the Funds established hereunder.
Act: The Employee Retirement Income Security Act of
1974. All references to any section of the Act
shall be deemed to refer not only to such section
but also to any amendment thereof and any
successor statutory provision.
Affiliate: (a) Any corporation or other business entity
(other than the Corporation) that is included in a
controlled group of corporations within which the
Corporation is also included, as provided in
Section 414(b) of the Code, or which is a trade or
business under common control with the
Corporation, as provided in Section 414(c) of the
Code, determined for purposes of Section 4.8, as
if the phrase
<PAGE>
"more than 50 percent" was substituted for the
phrase "at least 80 percent" each place it appears
in Section 1563(a)(1) of the Code, (b) Union Data
Service Center, Inc., (c) any organization
(whether or not incorporated) which is a member of
an affiliated service group (as defined in Section
414(m) of the Code) which includes the Corporation
and any other entity required to be aggregated
with the Corporation pursuant to regulations under
Section 414(o) of the Code and (d) any other
corporation or entity which has been so designated
by the Board for one or more purposes under the
Plan.
Agent: Union Data Service Center, Inc.
Anniversary Year: A period of 365 days beginning on the date an
individual first receives credit for an Hour of
Service beginning with his initial Service or his
reemployment date following a Break in Service.
Average Contribution
Percentage: With respect to any group of eligible Employees
for a Year, the average of the ratios (calculated
separately for each eligible Employee in the
<PAGE>
group) of (a) the aggregate of Voluntary
Contributions and Matching Contributions
(excluding any amounts used to satisfy the minimum
allocation described in Article II of Appendix A)
made on behalf of such eligible Employees for such
Year to (b) such eligible Employees' 414(s)
Compensation for such Year. Such Average
Contribution Percentage shall be computed to the
nearest one-hundredth of one percent of the
eligible Employee's 414(s) Compensation.
Average Deferral
Percentage: With respect to any specified group of eligible
Employees for a Year, the average of the ratios
(calculated separately for each eligible Employee
in the group) of (a) the Optional Deferrals and
Salary Reduction Contributions contributed on
behalf of such eligible Employees for such Year to
(b) such eligible Employees' 414(s) Compensation.
Such Average Deferral Percentage shall be computed
to the nearest one-hundredth of one percent of the
eligible Employee's 414(s) Compensation.
Beneficiary: The person or persons designated by a Participant
as his beneficiary in accordance with Section
10.3.
<PAGE>
Board: The board of directors of the Corporation.
Break in Service: An Anniversary Year during which an individual is
credited with no more than 500 Hours of Service.
Solely for the purpose of determining whether a
Break in Service has occurred, the individual
shall be credited with one Hour of Service (up to
501 such hours) for each hour for which he is
absent from work because of (a) pregnancy, (b)
birth of a child, (c) placement of a child in
connection with his adoption by the individual or
(d) caring for a child immediately following such
child's birth or placement for adoption. Such
hours shall be credited in the Anniversary Year in
which the absence from work began if necessary to
prevent a Break in Service in that year or, in any
other case, in the next following Anniversary
Year.
Cash Distribution: The amount that a Participant elects to receive in
cash rather than to have contributed to the Plan
as an Optional Deferral pursuant to Section 3.4.
<PAGE>
Code: The Internal Revenue Code of 1986. All references
to any section of the Code shall be deemed to
refer not only to such section but also to any
amendment thereof and any successor statutory
provision.
Committee: The committee appointed by the Board pursuant to
Article XIII.
Compensation: The aggregate cash remuneration (exclusive of any
commissions from sales, institutional advisory,
brokerage or wrap fee incentive plans, bonuses,
overtime or any payment made under this Plan or
any other employee benefit plan) received by an
individual from an Employer during the Year for
services rendered for the portion of a Year during
which he is a Participant; provided, however, that
if commissions from sales and/or incentive
payments are part of an individual's compensation
arrangement, Compensation for such individual
shall include such commissions from sales and/or
incentive payments although, except as provided in
the following sentence, Compensation for such
Employees shall not exceed $100,000 ($75,000 prior
to 1993) for any Year. Solely for the purpose of
determining
<PAGE>
the maximum amount of Salary Reduction
Contributions and/or Voluntary Contributions that
may be made on behalf of or by a Participant, the
$100,000 limit included in the preceding sentence
shall not apply. In any event, effective January
1, 1994, Compensation for any Participant shall
not exceed $150,000, as adjusted by the Secretary
of the Treasury or his delegate at the same time
and in the same manner as under Section 415(d) of
the Code.
Continuous Service: An Employee's employment with one or more
Employers or Affiliates commencing on the date an
Employee completes one Hour of Service, measured
in years and completed months, and any period of
time included in any leave of absence of up to two
years authorized by an Employer or an Affiliate
and any absence due to service in the armed
forces, provided that the individual returns to
service with an Employer or Affiliate immediately
after the expiration of such leave of absence or
within 90 days after discharge from the armed
forces (but, if he does not so return, his
Continuous Service shall be deemed to have
terminated at the commencement
<PAGE>
of such period). In the case of an Employee's
severance from the Service of an Employer or
Affiliate by reason of the resignation, discharge,
retirement, or death, of such Employee, Continuous
Service of the Employee will end on the date of
such severance. In the case of an Employee's
severance from the Service of an Employer or
Affiliate for any reason other than those
described in the preceding sentence (including,
without limitation, the disability, vacation, or
layoff of the Employee), Continuous Service of the
Employee will end on the first anniversary of the
date of such severance if the Employee has not
performed an Hour of Service during such period.
Corporation: J. & W. Seligman & Co. Incorporated, a Delaware
corporation, and any successor thereto.
Disability: Physical or mental incapacity which is likely to
be permanent and which prevents an Employee from
engaging in any occupation or performing any work
for compensation or profit for which he is
qualified by education, training or experience, as
<PAGE>
determined by the Committee in its sole discretion
on the basis of medical evidence certified by a
physician or physicians designated by it.
Effective Date: January 1, 1981.
Employee: Any individual who is employed by an Employer
other than any individual who (a) is designated as
a temporary employee by the Committee based on
uniform rules consistently applied to all persons
similarly situated or (b) has an employment
agreement in effect which provides that he will
not be eligible for the Plan.
Employer: The Corporation, any Affiliate or other subsidiary
that (a) has been designated by the Board as an
Employer, (b) has adopted the Plan with the
approval of its board or directors and (c) has not
ceased to be an Employer. In adopting the Plan for
the benefit of its Employees, an entity may limit
the application of the Plan to specified employees
or a group of employees of one or more of its
locations, operations or divisions. In designating
an entity as an Employer, the Board may limit the
participation of all or a
<PAGE>
portion of the Employees of such Employer so that
they are eligible only for (a) Profit Sharing
Contributions as described in Article III or (b)
Salary Reduction Contributions, Voluntary
Contributions, Matching Contributions and Rollover
Contributions as described in Article IV.
Employer Contributions: For any Year, the sum of Profit Sharing
Contributions, Matching Contributions and Salary
Reduction Contributions contributed under the Plan
by one or more Employers on behalf of a
Participant as provided in Articles III and IV.
Family Member: With respect to any Highly Compensated Employee
who is in the group consisting of the ten
employees who receive the highest total pay from
the Corporation or any Affiliate for the Year
(determined without regard to Sections 125 and
402(e)(3) of the Code), or a Five Percent
Shareholder, such individual's spouse, lineal
ascendants or descendants and the spouses of any
lineal ascendants or descendants.
Fiduciary: Any person to the extent that he (a) exercises any
<PAGE>
discretionary authority or discretionary control
respecting management of the Plan or exercises any
authority or control respecting management or
disposition of its assets, (b) renders investment
advice for a fee or other compensation, direct or
indirect, with respect to any moneys or other
property of the Plan, or has any authority or
responsibility to do so, or (c) has any
discretionary authority or responsibility in the
administration of the Plan. Such term includes
persons designated by fiduciaries named in the
Plan to carry out fiduciary responsibilities under
the Plan.
Five Percent Shareholder: Any person who owned (or is considered to own
within the meaning of Code Section 318) more than
five percent of the outstanding stock of an
Employer or stock possessing more than five
percent of the total combined voting power of all
stock of an Employer.
414(s) Compensation: The total pay paid to an Employee by an Employer
or Affiliate for the portion of a Year during
which he was eligible to be a Participant
hereunder prior to reduction for any contributions
made on a salary reduction
<PAGE>
basis and excluded from income under Code Sections
125 and 402(e)(3); provided, however, that the
Committee may select another definition of 414(s)
Compensation so long as such definition complies
with Section 414(s) of the Code.
Fund: One of the funds established pursuant to Section
5.1, and Funds shall mean all such funds.
Highly Compensated
Employee: For any Year, an eligible Employee who:
(a) in the previous Year:
(i) was a Five Percent Shareholder;
(ii) had compensation in excess of
$75,000;
(iii) had compensation in excess of
$50,000 and was in the group consisting
of the top 20% of employees of an
Employer or Affiliate (excluding for
such purpose all employees described in
Code Section 414(g)(8)) when ranked in
order of compensation for the previous
Year; or
(iv) was an officer of an Employer
or an Affiliate and had compensation in
excess of 50 percent of the dollar
limitation in effect under Section
415(b)(1)(A) of the Code; provided,
however, that no more than 50 employees
(or, if lesser, the greater of three
employees or 10 percent of the
employees) shall be treated as officers;
or
<PAGE>
(b) in the current Year:
(i) is a Five Percent Shareholder;
or
(ii) is one of the 100 employees of
an Employer or Affiliate with the
greatest compensation for such Year and
is described in subparagraphs
(a)(ii)-(iv) above for the current Year.
The $75,000 and $50,000 thresholds in
the preceding sentence shall be adjusted
at the same time and in the same manner
as the dollar limit on benefits under a
defined benefit plan is adjusted
pursuant to Section 415(d) of the Code.
The dollar threshold for a particular
look-back year is based on the dollar
threshold in effect for the look-back
year.
A former Employee shall be considered a
Highly Compensated Employee if he was a
Highly Compensated Employee for either
the Year in which his separation from
Service began or for any Year ending on
or after the former Employee's 55th
birthday.
The determination of who is a Highly
Compensated Employee, including the
determinations of the number and
identity of
<PAGE>
Employees in the top-paid group, the top
100 Employees, the number of Employees
treated as officers and the compensation
that is considered, will be made in
accordance with Section 414(q) of the
Code and the regulations thereunder.
Hours of Service: An individual shall be credited with
Hours of Service as follows: (a) if a
record is kept of his actual hours of
Service, one Hour of Service for each
hour for which he is directly or
indirectly paid or entitled to payment
(including such time as paid vacations,
holidays, sickness or layoffs and
including back pay, if any, irrespective
of mitigation of damages) from the
Corporation or an Affiliate; (b) if no
record is kept of his actual hours of
Service, 45 Hours of Service for each
week for which he would otherwise be
entitled to receive credit for an Hour
of Service under (a) above; and (c) 40
Hours of Service for each week included
in any leave of absence of up to two
years authorized by the Corporation or
an Affiliate and in any absence due to
service in the armed forces of the
United States, provided that he returns
to Service
<PAGE>
with the Corporation or an Affiliate
immediately after the expiration of such
leave of absence or within 90 days after
discharge from the armed forces. In the
event he does not so return, his Service
shall be deemed to have terminated at
the commencement of such period. The
foregoing shall be construed so as to
avoid duplication of Hours of Service
for a single hour. The rules issued by
the U.S. Department of Labor relating to
the determination of Hours of Service
for reasons other than the performance
of duties and the crediting of Hours of
Service to computation periods, found in
DOL Regulation 2530.20Ob-2(b) and (c),
are hereby incorporated by reference.
Matching Contributions: Contributions made by the Employers on
behalf of Participants in respect of
Salary Reduction Contributions and
Voluntary Contributions made after May
1, 1993, pursuant to Section 4.5.
Nonhighly Compensated
Employee: For any Year an eligible Employee who is
not a Highly Compensated Employee.
Notice to the Committee: Written notice on a form provided by the
Committee which is properly completed
<PAGE>
and delivered to the Committee or any
member thereof by hand or mail. Notice
to the Committee shall be deemed to have
been given when it is actually received
by the Committee or any member thereof.
Nonelective Deferral: The portion of the Profit Sharing
Contribution for any Year made on behalf
of a Participant that is not subject to
an election to receive a Cash
Distribution.
Optional Deferral: The portion of the Profit Sharing
Contribution for any Year made on behalf
of a Participant that is paid to the
Trust Fund by reason of his failure to
elect to receive a Cash Distribution.
Participant: An Employee who is at the time
participating in the Plan as provided in
Article II or where required by the
context, an individual who formerly
participated in the Plan.
Plan: The J. & W. Seligman & Co. Incorporated
Matched Accumulation Plan, as set forth
in this document and as it may be
amended from time to time.
Predecessor Plan: The J. & W. Seligman & Co. Profit
Sharing Plan, and,
<PAGE>
where the context requires, the Union
Service Corporation Employees' Thrift
Plan.
Profit Sharing
Contributions: Contributions made by Employers on
behalf of Participants pursuant to
Article III including Optional Deferrals
and contributions not subject to an
election to receive a Cash Distribution.
Profit Sharing Contributions made by or
on behalf of each Employer shall be
divided by the Board between Basic
Contributions and Supplemental
Contributions.
Profits: In respect of any Year, the current or
accumulated profits of the Corporation
and its subsidiaries, as determined
under generally accepted accounting
principles, before (a) provision for
Federal, state or local income taxes
based on net income and (b) any
contributions under the Plan.
Retirement: Retirement of a Participant on or after
attainment of an age established
pursuant to the uniform policy of his
Employer.
Rollover Contributions: Contributions transferred or contributed
to the Trust Fund pursuant to Section
4.7.
<PAGE>
Salary Reduction : Contributions made on behalf
Contributions:of Participants pursuant
to Section 4.1.
Service: Service by an individual as an employee
of the Corporation or an Affiliate
(including service prior to the time it
became such to the extent determined by
the Board or as otherwise required by
law) or as a leased employee within the
meaning of Section 414(n)(2) of the Code
if the Corporation or an Affiliate was
the recipient of such leased employee's
services.
Trust Agreement: The agreement of trust as in effect at
any time between the Corporation and the
Trustee relating to the Plan, which
Trust Agreement shall form a part of the
Plan.
Trust Fund: The property which is from time to time
held by the Trustee under the Trust
Agreement, as provided in Article XI.
Trustee: The trustee or trustees under the Trust
Agreement at the particular time.
Valuation Date: The end of each business day.
<PAGE>
Voluntary Contributions: After-tax contributions made by
Participants pursuant to Section 4.3.
Year: A calendar year.
Year of Vesting Service: An Anniversary Year during which an
individual is credited with at least
1,000 Hours of Service, whether or not
he performs Service throughout such
Anniversary Year. If an individual who
was a leased employee within the meaning
of Section 414(n)(2) of the Code becomes
an Employee, and an Employer or
Affiliate was the recipient of such
individual's services as a leased
employee, his period of service as a
leased employee shall be counted in
determining his Years of Vesting
Service, provided that the requirement
described in the preceding sentence
would have been satisfied if he had been
an Employee during such period. If an
individual has a Break in Service, his
Years of Vesting Service before such
break shall be disregarded unless either
(a) at the time of the Break in Service,
he was vested in any portion of his
Account attributable to Profit Sharing
Contributions or Matched Contributions
or (b) the number of consecutive
one-year Breaks in Service was less than
the greater of five or the number of his
Years of Vesting Service prior to such
Break in Service.
1.2 Gender. Wherever used herein, words in the masculine form shall be
deemed to refer to females as well as to males.
<PAGE>
ARTICLE II
Participation
2.1 Initial Participation. An individual who was an Employee on the
Effective Date and who was a participant in a Predecessor Plan became a
Participant on such Date. Thereafter, except as provided in the following
sentence, an Employee shall become a Participant on the first day of the month
coinciding with or next following his completion of six months of Continuous
Service. In the case of an Employee whose participation is limited to the
contributions made under Article IV, he shall be eligible to become a
Participant on the first day of any month coinciding with or next following his
completion of six months of Continuous Service. Solely for the purposes of this
Article II, the term "Service" shall include service with an entity that had
adopted a Predecessor Plan.
2.2 Reemployment. A Participant shall remain such until his termination of
Service. An Employee who was (or was eligible to be) a Participant and whose
Service resumes shall again become a Participant on the date on which he again
becomes an Employee. Each other Employee who resumes employment shall be
eligible to become a Participant upon the first day of the month in which he
meets the requirements of Section 2.1.
<PAGE>
ARTICLE III
Profit Sharing Contributions
3.1 Amount of Profit Sharing Contributions. Subject to the right of the
Board to modify, amend or terminate the Plan, the rights of the Employers to
modify, suspend or discontinue their respective Profit Sharing Contributions
under the Plan and the provisions of this Article III, each Employer shall
contribute to the Plan for each Year out of Profits the amount that the Board
shall determine to be its Profit Sharing Contribution for such Year; provided,
however, that any Profit Sharing Contribution for such Year shall not be greater
than the amount which is allowable as a deduction for Federal income tax
purposes. Notwithstanding the foregoing, if any Employer, which with any other
Employer is includible in an "affiliated group" of corporations within the
meaning of Section 1504(a) of the Code, is prevented from making a contribution
which it would otherwise have made under the Plan by reason of having no current
or accumulated earnings or profits because such earnings or profits are less
than the contribution which it would otherwise have made, then so much of the
Employer Contribution which such Employer was so prevented from making shall be
made for the benefit of the Participants who are Employees of such Employer by
any other Employer or Affiliates includible in such "affiliated group" to the
extent of their respective current or accumulated earnings or profits. Such
Profit Sharing Contributions shall be allocated in accordance with Sections 3.2,
3.3 and 3.4.
3.2 Participants Eligible for Profit Sharing Contributions. Basic
Contributions and Supplemental Contributions for any Year shall be allocated as
of December 31 of such Year, in the manner provided in Section 3.3, to
individuals who are Participants on such December 31, or whose Service as
Participants terminated during such Year by Retirement, Disability or death;
provided, however, that Supplemental Contributions shall only be allocated to a
Participant or former Participant who is not entitled to receive a bonus for
such Year, as determined by his Employer. In the case of any such individual
whose Service terminated during such Year by Retirement, Disability or death and
the value of whose Accounts has been paid pursuant to Article IX prior to the
end of such Year, he (or his Beneficiary) shall
<PAGE>
receive a distribution of the amount equal to his allocable share of Profit
Sharing Contributions for such Year. In the case of each other such individual,
his allocable share of Profit Sharing Contributions (less his Cash Distribution,
if any) for such Year shall be credited to his Accounts.
3.3 Allocation of Profit Sharing Contributions. Subject to Sections 3.4 and
4.2, the Basic Contribution and Supplemental Contribution of each Employer for
any Year shall be allocated among the individuals employed by such Employer and
described in Section 3.2 as entitled to receive an allocation of Basic
Contributions and/or Supplemental Contributions, respectively, in an amount
which bears the same ratio to each such Contribution as the Compensation for
such Year of each such individual as a Participant bears to the total
Compensation of all such individuals as Participants and Employees of such
Employer for such Year.
3.4 Cash Election. Each Participant, in lieu of having his entire share of
Profit Sharing Contributions for any Year paid to the Trust Fund and applied for
his benefit as provided in Article V, may elect, by Notice to the Committee not
later than December 31 of such Year or such other date as the Committee may in
its discretion determine, to receive a Cash Distribution in an amount equal to
33-l/3%, 50% or 66-2/3% of his share of Basic Contributions and/or 33-1/3%, 50%,
66-2/3% or 100% of his share of Supplemental Contributions. Cash Distributions
shall be paid by the Employers to Participants who have elected in any Year to
receive them as soon as practicable after the close of such Year. An election to
receive a Cash Distribution for any Year shall be irrevocable. Upon the death of
a Participant prior to the payment of a Cash Distribution which he has elected,
such Cash Distribution shall be payable to his Beneficiary.
<PAGE>
ARTICLE IV
Salary Reduction, Voluntary, Matching
and Rollover Contributions
4.1 Salary Reduction Contributions. (a) Effective May 1, 1993, subject to
the limits specified below and in Sections 4.2 and 4.8, each Participant may
elect to have his Compensation for each pay period reduced from 1% to 10% (in
whole integers) and such amount shall be contributed to the Trust Fund by his
Employer on his behalf. At any time, the Committee may reduce the rate of future
Salary Reduction Contributions to be made on behalf of Highly Compensated
Employees in order to satisfy the test described in Section 4.2.
(b) In any event, the aggregate of a Participant's Salary Reduction
Contributions, Optional Deferrals and any other elective deferral contributions
(within the meaning of Code Section 402(g)(3)) contributed on behalf of a
Participant for any Year under the Plan or any other plan maintained by the
Corporation or an Affiliate may not exceed $7,000 (or such greater amount as may
be permitted pursuant to Code Section 402(g)(5)). In the event a Participant's
Optional Deferrals and Salary Reduction Contributions exceeds the applicable
limit described in the preceding sentence, such excess (plus any income or minus
any loss allocable thereto, calculated in accordance with regulations issued by
the Secretary of the Treasury) shall be returned to the Participant by April
15th of the following Year.
(c) Salary Reduction Contributions for any pay period will be paid by the
Participant's Employer to the
<PAGE>
Trust Fund as soon as feasible after the end of each pay period.
4.2 Limitation on Optional Deferrals and Salary Reduction Contributions.
(a) If the aggregate of Optional Deferrals and Salary Reduction Contributions
made on behalf of Highly Compensated Employees for any Year is in excess of the
amount permitted under the following provisions for such Highly Compensated
Employees, such excess amounts plus the pro rata share of income and losses
thereon determined in accordance with regulations issued by the Secretary of the
Treasury, shall be distributed to such Highly Compensated Employees by March 15
of the following Year.
(b) All or a portion of the aggregate of Optional Deferrals and Salary
Reduction Contributions for the Highly Compensated Employees shall be deemed to
be excessive for any Year unless one of the following tests is satisfied:
(i) the Average Deferral Percentage of Highly Compensated Employees is
not more than the Average Deferral Percentage of Nonhighly Compensated
Employees multiplied by 1.25, or
(ii) the Average Deferral Percentage of Highly Compensated Employees
is not more than the Average Deferral Percentage of Nonhighly Compensated
Employees multiplied by 2.0; provided, however, that the Average Deferral
Percentage for the Highly Compensated Employees may not exceed the Average
Deferral Percentage for the Nonhighly Compensated Employees by more than
two percentage points.
(c) In the event any portion of a Participant's Optional Deferrals and
Salary Reduction Contributions are returned pursuant to Section 4.1(b) as a
result of the $7,000 (as adjusted by the Secretary of the Treasury) limit
applicable to such contributions, (i) any excess Optional Deferrals and Salary
Reduction Contributions required to be returned pursuant to this Section 4.2
shall be reduced by
<PAGE>
the amount of such excess deferrals and (ii) such Participant's Average Deferral
Percentage shall be determined before such excess deferral is returned;
provided, however, that excess deferrals made on behalf of Nonhighly Compensated
Employees under plans of the Corporation or an Affiliate shall be excluded in
determining such Employee's Average Deferral Percentage.
The amount of Optional Deferrals and Salary Reduction Contributions to be
distributed shall be determined by reducing the maximum amount of Optional
Deferrals and Salary Reduction Contributions to an adjusted maximum percentage,
which shall be the percentage that would cause one of the tests described in
Section 4.2(b) to be satisfied if each Highly Compensated Employee who
designated a percentage greater than such adjusted maximum percentage had
instead designated such percentage. The deferral percentage for each Highly
Compensated Employee shall be the lesser of the percentage otherwise applicable
or the adjusted maximum percentage determined under this subparagraph.
In the event a Participant's Salary Reduction Contributions and/or Optional
Deferrals are distributed to the Participant pursuant to Section 4.1(b) as a
result of being in excess of the dollar limitation applicable to such
contributions or pursuant to this Section 4.2, the value of the related Matching
Contributions plus the pro rata share of income and losses thereon, determined
in accordance with regulations issued by the Secretary of the Treasury, shall be
distributed to the Participant.
In determining the Average Deferral Percentage of a Highly Compensated
Employee who has a Family Member who is an Employee, the Average Deferral
Percentage for the family group (which is treated as one Highly Compensated
Employee) shall be the Average Deferral Percentage determined by combining the
Optional Deferrals, Salary Reduction Contributions and 414(s) Compensation for
all the eligible Family Members. The determination of the Average Deferral
<PAGE>
Percentage and the treatment of excess deferrals of Highly Compensated Employees
with Family Members who are Employees shall satisfy such other requirements as
may be prescribed in regulations issued by the Secretary of the Treasury.
The Average Deferral Percentage for any Highly Compensated Employee for any
Year who is eligible to have pre-tax contributions allocated to his account
under one or more plans described in Code Section 401(k) (other than an employee
stock ownership plan described in Code Section 4975(a)(7)) maintained by the
Corporation or an Affiliate in addition to this Plan shall be determined as if
all such contributions were made to this Plan. In the event this Plan must be
combined with one or more plans (other than an employee stock ownership plan
described in Code Section 4975(e)(7)) in order to satisfy the requirements of
Sections 401(a)(4) or 410(b) of the Code (other than the average benefits test
described in Code Section 410(b)(1) (A)(ii)), then all cash or deferred
arrangements that are included in such plans shall be treated as a single
arrangement for purposes of this Section 4.2.
4.3 Voluntary Contributions. (a) Effective May 1, 1993, subject to the
limits specified below and in Sections 4.6 and 4.8, each Participant may elect
to make Voluntary Contributions to the Plan equal to 1% to 10% of his
Compensation (in whole integers) for each pay period; provided, however, that in
no event may a Participant's Voluntary Contributions exceed the difference
between (i) 10% of his Compensation and (ii) the percentage of his Compensation
contributed as a Salary Reduction Contribution. At any time, the Committee may
reduce the rate of future Contributions to be made by Highly Compensated
Employees in order to satisfy the test described in Section 4.6.
(b) Voluntary Contributions for any pay period will be paid by the
Participant's Employer to the Trust Fund as soon as feasible after the end of
each pay period.
<PAGE>
4.4 Changes in Rates of Salary Reduction Contributions and/or Voluntary
Contributions. A Participant may change the percentage of his Compensation
contributed as a Salary Reduction Contribution and/or Voluntary Contribution;
provided, however, that such change may not be made more frequently than once in
any calendar quarter. In addition, such a Participant may completely suspend
Salary Reduction Contributions and/or Voluntary Contributions at any time,
provided, however, that in the event a Participant suspends making Basic
Contributions he shall not be eligible to resume any contribution until his
Basic Contributions have been suspended for at least three months. Such changes
shall be effective with the first payroll period commencing at least five days
after receipt of the Participant's election by the Committee. If the
Compensation of a Participant is changed, the dollar amount of his Salary
Reduction Contributions and Voluntary Contributions will automatically be
changed so that the percentage contributed is not changed.
4.5 Matching Contributions. Subject to Section 4.6 and 4.8 and to the right
of the Board to modify, amend or terminate the Plan and to the right of the
Employers to modify, suspend or discontinue their respective Matching
Contributions under the Plan, each Employer shall contribute to the Plan for
each pay period on behalf of each Participant in its employ an amount equal to
100% of the first 3% of his Compensation contributed on behalf of or by a
Participant as a Salary Reduction Contribution or Voluntary Contribution for
such pay period; provided, however, that in the case of a Participant for whom
commissions from sales and/or incentive payments are part of his compensation
arrangement, Compensation used to determine the maximum amount of his Matching
Contributions shall not exceed $100,000 for any Year.
4.6 Limitation on Voluntary Contributions and Matching Contributions. (a)
If the aggregate of Voluntary Contributions and Matching Contributions made on
behalf of the Highly Compensated Employees for any Year is in excess
<PAGE>
of the amount permitted under the following provisions for such Highly
Compensated Employees, such excess contributions plus the pro rata share of
income and losses thereon determined in accordance with regulations issued by
the Secretary of the Treasury shall be returned or distributed to such Highly
Compensated Employees to the extent required to satisfy such limitations by
March 15 of the following Year.
(b) All or a portion of the aggregate of Voluntary Contributions and
Matching Contributions for the Highly Compensated Employees shall be deemed to
be excessive for any Year unless one of the following tests is satisfied:
(i) the Average Contribution Percentage of Highly Compensated
Employees is not more than the Average Contribution Percentage of Nonhighly
Compensated Employees multiplied by 1.25, or
(ii) the Average Contribution Percentage of Highly Compensated
Employees is not more than the Average Contribution Percentage of Nonhighly
Compensated Employees multiplied by 2.0; provided, however, that the
Average Contribution Percentage for the Highly Compensated Employees may
not exceed the Average Contribution Percentage for the Nonhighly
Compensated Employees by more than two percentage points.
To the extent permitted by law and to the extent elected by the
Corporation, Optional Deferrals and Salary Reduction Contributions (in excess of
the amount of such contributions used to satisfy the test described in Section
4.2) allocated to a Participant's Account may be aggregated with the Voluntary
Contributions and Matching Contributions allocated to his Account in determining
his Average Contribution Percentage provided that the requirements contained in
Treas. Reg. Section 1.401(m)-1(b)(5) are satisfied. An eligible Employee's
Average Contribution Percentage for purposes of this Section 4.6
<PAGE>
shall be determined after a Participant's excess Optional Deferrals and Salary
Reduction Contributions are distributed to the Participant.
(c) The amount of Voluntary Contributions and Matching Contributions to be
distributed shall be determined by reducing the maximum amount of Voluntary
Contributions and Matching Contributions to an adjusted maximum percentage,
which shall be the percentage that would cause the requirements described in
Section 4.6(b) to be satisfied if each Highly Compensated Employee's Average
Contribution Percentage was reduced to such percentage. The contribution
percentage for each Highly Compensated Employee shall be the lesser of the
percentage otherwise applicable or the adjusted maximum percentage determined
under this subparagraph. A Highly Compensated Employee's contribution percentage
shall be reduced by distributing (i) first, unmatched Voluntary Contributions,
(ii) second, matched Voluntary Contributions and the related Matching
Contributions and (iii) third, other Matching Contributions.
In determining the Average Contribution Percentage of a Highly Compensated
Employee who has a Family Member who is an Employee, the Average Contribution
Percentage for the family group (which is treated as one Highly Compensated
Employee) shall be the Average Contribution Percentage determined by combining
Voluntary Contributions, Matching Contributions, 414(s) Compensation and, to the
extent elected by the Corporation, Optional Deferrals and Salary Reduction
Contributions, of all the eligible Family Members. The determination of the
Average Contribution Percentage and the treatment of excess contributions of
Highly Compensated Employees with Family Members who are Employees shall satisfy
such other requirements as may be prescribed in regulations issued by the
Secretary of the Treasury.
The Average Contribution Percentage for any Highly Compensated Employee for
any Year who is eligible to have matching employer contributions made on his
behalf or to make after-tax contributions under one or more plans
<PAGE>
described in Code Section 401(a) (other than an employee stock ownership plan
described in Code Section 4975(e)(7)) maintained by the Corporation or an
Affiliate in addition to this Plan shall be determined as if all such
contributions were made to this Plan. In the event that this Plan must be
combined with one or more other plans (other than an employee stock ownership
plan described in Code Section 4975(e)(7)) in order to satisfy the requirements
of Code Section 401(a)(4) or 410(b) (other than the average benefits test
described in Code Section 410(b)(2)(A)(ii)), all employee and matching
contributions are treated as made under a single plan for purposes of Section
401(m) of the Code.
(d) In the event that both of the tests described in Sections 4.2(b) and
4.6(b) are satisfied only by using the "2.0/two point" test described in
Sections 4.2(b)(i) and 4.6(b)(i) respectively, the Average Contribution
Percentage for Highly Compensated Employees shall be reduced to the extent
necessary to satisfy the aggregate limit described in the following sentence.
The aggregate limit shall equal the greater of (i) or (ii):
(i) the sum of (A) 1.25 multiplied by the greater of the Average
Contribution Percentage or the Average Deferral Percentage for the Year for
Nonhighly Compensated Employees plus (B) the lesser of the Average
Contribution Percentage or the Average Deferral Percentage for the Year for
Nonhighly Compensated Employees plus two percentage points; provided,
however, that the amount determined under this clause may not exceed the
product of 2.0 multiplied by the lesser of the Average Contribution
Percentage or the Average Deferral Percentage for Nonhighly Compensated
Employees; or
(ii) the sum of (A) 1.25 multiplied by the lesser of the Average
Contribution Percentage or the Average Deferral Percentage for the Year for
Nonhighly Compensated Employees plus (B) the greater of the Average
Contribution Percentage or the Average Deferral Percentage for the Year for
Nonhighly Compensated Employees plus two percentage points; provided,
however, that the amount determined under this clause (B) may not exceed
the product of 2.0 multiplied by the greater of the
<PAGE>
Average Contribution Percentage or the Average Deferral Percentage for
Nonhighly Compensated Employees.
4.7 Rollover Contributions. Subject to procedures established by the
Committee, each Employee shall be entitled to transfer to the Trust Fund all or
part of his balance in excess of his own contributions from an employees' trust
described in Section 401(a) of the Code if such transfer is made (a) within 60
days of the day he receives such balance from such trust or from an individual
retirement account described in Section 408(a) of the Code or an individual
retirement annuity described in Section 408(b) of the Code to which he had
contributed part or all of such balance within 60 days following the day he
received such balance or (b) pursuant to a direct rollover of an eligible
rollover distribution (as defined in Code Section 402(c)(4)) other than a
distribution which the Employee is entitled to receive as a beneficiary. Except
for purposes of Section 7.1, Rollover Contributions shall be treated as Profit
Sharing Contributions. An Employee who has made a Rollover Contribution shall be
considered a Participant for all purposes hereunder except that he shall not be
eligible to share in Profit Sharing Contributions, to have Salary Reduction
Contributions made on his behalf or to make Voluntary Contributions until he
becomes a Participant in accordance with Section 2.1.
4.8 Maximum Annual Addition. Notwithstanding anything to the contrary in
the Plan, the maximum "annual addition" (as hereinafter defined) on behalf of
any Participant for any Year shall not exceed (and, if necessary, shall be
reduced to) the lesser of $30,000 (or, if greater, 25% of the dollar limitation
in effect under Section 415(b)(1)(A) of the Code for the Year) or 25% of his
<PAGE>
total compensation (within the meaning of Code Section 415(c)(3)) for such Year.
The 25% of compensation limitation shall not apply to any contributions
considered "annual additions" pursuant to Code Section 419A(d)(2) after the
Participant's separation from service or Code Section 415(l)(1). The "annual
addition" for a Participant in a Year shall be the sum of (a) the Employer
Contributions allocated to his Account on his behalf for such Year, (b) the
Participant's Voluntary Contributions for such Year and (c) any other amounts
considered an "annual addition" pursuant to Code Section 415(c)(2) under any
plan qualified under Code Section 401(a) maintained by an Employer or Affiliate
or under Code Sections 415(l)(1) and 419A(d)(2).
In any case where a Participant also participates in a defined benefit plan
(as defined in Section 414(j) of the Code) of the Corporation or an Affiliate in
addition to being a Participant in this Plan, the sum of his defined benefit
plan fraction and the defined contribution plan fraction (both as defined
hereinafter) for any Year may not exceed 1.0. The defined benefit plan fraction
for any Year is a fraction the numerator of which is the projected annual
benefit of the Participant under such plan (determined as of the close of the
Year), and the denominator of which is the lesser of:
(a) the product of 1.25, multiplied by the dollar limitation in effect
under Section 415(b)(1)(A) of the Code for such Year; or
(b) the product of 1.4, multiplied by the amount which may be taken
into account under Section 415(b)(1) (B) of the Code with respect to the
Participant under the plan for such Year.
<PAGE>
The defined contribution plan fraction for any Year is a fraction the
numerator of which is the sum of the annual additions to the Participant's
Account as of the close of the Year, and the denominator of which is the
sum of the lesser of the following amounts determined for such Year and for
each prior year of Service with the Corporation or an Affiliate:
(i) the product of 1.25, multiplied by the dollar limitation in effect
under Section 415(c)(1)(A) of the Code for such Year; or
(ii) the product of 1.4, multiplied by the amount which may be taken
into account under Section 415(c)(1)(B) of the Code with respect to the
Participant under the Plan for such Year.
Prior to the end of each Year, the Committee shall determine whether, and to
what extent, the limitation of this Section 4.8 will prohibit the making of
Voluntary Contributions by a Participant or, after all such Voluntary
Contributions by a Participant have been prevented from being made, of Employer
Contributions for such Year on behalf of such Participant. The Committee shall
advise any affected Participant accordingly. Employer Contributions for any Year
which cannot be allocated to Participants and credited to their Accounts within
the limitation of this Section 4.8 shall not be contributed by the Employer for
such Year.
If as a result of a reasonable error in determining the amount of a
Participant's Compensation, the annual addition for a Participant would exceed
the limits described in this Section 4.8, the amount in excess of the
permissible annual addition shall be distributed to the Participant. In
addition, Optional Deferrals, Salary Reduction Contributions and Voluntary
Contributions may be distributed or returned to a Participant to the extent
necessary so that the limitation on annual additions is satisfied.
<PAGE>
ARTICLE V
Investment of the Trust Fund
5.1 Funds. The Trustee shall maintain such Funds, as are selected by the
Committee; provided that the Corporation must serve as manager and provide
investment management and administrative services to each Fund available under
the Plan.
5.2 Investment of Prospective Contributions. Upon first becoming a
Participant, an individual shall select (a) one or more of Funds in which all
his Profit Sharing Contributions shall be invested, (b) one or more Funds in
which his Salary Reduction Contributions shall be invested, (c) one or more
Funds in which his Matching Contributions shall be invested and (d) one or more
Funds in which his Voluntary Contributions shall be invested. Each investment
direction shall be made in 5% increments and a minimum of l0% of any specified
type of contribution must be invested in any one Fund. It shall be the
responsibility of the Committee and not the Trustee, to ensure compliance with
such limits. Any investment direction given by a Participant shall be deemed to
be a continuing direction with respect to all subsequent contributions until
changed. Not more than once in any calendar quarter with respect to each
investment election, a Participant may change his investment direction with
respect to future contributions by Notice to the Committee. In the absence of an
investment direction by the Participant, his Salary Reduction Contributions,
Matching Contributions, Participant Contributions and Rollover Contributions
shall be invested in the Seligman Cash Management Fund (or any successor fund
with similar investments as selected by the Committee).
<PAGE>
5.3 Investment In Funds. As soon as practicable after the end of each Year,
in respect of Profit Sharing Contributions, and as soon as practicable after the
end of each pay period, in respect of Salary Reduction Contributions, Matching
Contributions, and Voluntary Contributions in accordance with the investment
directions of Participants, each Employer shall:
(i) except as provided in subparagraph (ii) below, forward the
contributions made by or on behalf of Participants in its employ, to the
respective Funds on behalf of the Trustee and the Trustee will be advised
by the Agent of the total amount contributed to each such Fund and the
number of shares in each such Fund to be credited to the Accounts of
Participants; and
(ii) in the event that the Tri-Continental Fund is available under the
Plan, with respect to such Fund, forward the contributions made by or on
behalf of Participants in its employ, to the Trustee for investment in such
Fund, in accordance with the methods of purchase described in the current
prospectus of Tri-Continental Corporation, whereupon the Trustee shall
advise the Agent as to the number of shares of common stock of
Tri-Continental Corporation purchased and the value of such shares and
shall deliver such shares to the Agent, and the Agent shall determine the
number of such shares to be credited to the Accounts of Participants, shall
so credit such shares and shall advise the Trustee that it has so credited
such shares.
5.4 Transfers Among Funds. A Participant may, by Notice to the Committee
given at least five business days in advance of any Valuation Date, direct the
Trustee to convert all or any part of his interest in any one or more Funds into
an interest equivalent in value in one or more other Funds; provided, however,
that any transfer involving the Tri-Continental Fund shall be made as soon as
practicable following receipt of such notice. Except as provided in
<PAGE>
Sections 5.6 and 7.4, such direction to the Trustee to convert may be given at
any time but not more than once during any calendar quarter.
5.5 Reinvestment of Income and Gains. Income and gains from investments in
each Fund will be reinvested by the Trustee in the same Fund.
5.6 Limitation on Investments in a Fund. Anything herein to the contrary
notwithstanding, the Committee shall not permit the investment or reinvestment
of moneys in any Fund if to do so would result in the Trustee's holdings of
securities in such Fund to exceed 5% of the total number of such securities then
outstanding. It shall be the responsibility of the Committee and not the Trustee
to ensure that such limit is not exceeded. Whenever it shall appear to any
Employer that the Trustee could not, by reason of the preceding sentence, be
able to invest the contributions to be made to any Fund in the next succeeding
pay period, or to make a transfer permitted by Section 5.4, each Participant who
shall have directed the investment of contributions in such Fund or the transfer
of all or any part of his Account to such Fund shall be notified by the
Committee and shall change his direction with respect to the investment of
future contributions in such Fund, or shall withdraw or change his direction to
transfer all or any part of his interest to such Fund. A change of direction
pursuant to this Section 5.6 shall not in itself disqualify a Participant from
again changing his investment direction in the same quarter.
<PAGE>
ARTICLE VI
Vesting
6.1 Certain Participants Hired Before May 31, 1993. Each Participant
employed by the Corporation or an Affiliate before May 31, 1993, who elects to
have Salary Reduction Contributions made on his behalf and/or to make Voluntary
Contributions by May 31, 1993, or when first eligible, if later, shall at all
times have a fully vested and nonforfeitable interest in his Accounts.
6.2 Other Participants. (a) Except as provided in this Section 6.2, the
interest of any Participant not described in Section 6.1 in the portion of his
Accounts attributable to Matching Contributions shall be vested in accordance
with the following schedule:
Months of Participation Vested Percentage
At least 12 but less than 24 33-l/3%
At least 24 but less than 36 66-2/3%
At least 36 or more 100%
A Participant shall receive credit for one "month of participation" for each
calendar month for which he elects to have Salary Reduction Contributions
contributed on his behalf and/or to make Voluntary Contributions (or elects to
have similar contributions made under the Union Data Service Center Inc.
Employees' Thrift Plan) for any part of such month. However, the interest of any
Participant in the portion of his Accounts attributable to Matching
Contributions who is credited with at least five Years of Vesting Service or who
dies, incurs a Disability or attains age 65 while in the employ of the
Corporation or an Affiliate shall be fully vested and nonforfeitable. In any
event, the interest of any Participant in his Accounts attributable to Profit
Sharing Contributions, Salary Reduction Contributions, Rollover Contributions
and
<PAGE>
Voluntary Contributions shall at all times be fully vested and nonforfeitable.
(b) The unvested portion of a former Participant's Account shall be
forfeited as of the earlier of the date as of which the former Participant
received a distribution of the vested portion of his Accounts pursuant to
Article IX or he incurs five consecutive one-year Breaks in Service. If 100% of
the vested portion of his Accounts is zero, the individual shall be deemed to
have received a distribution of such amount. All such forfeited amounts, reduced
by any forfeited amounts restored to Participant's Accounts pursuant to
paragraph (c) below, shall be applied to reduce future contributions required of
participating Employers.
(c) Following his termination of Service, if a Participant receives a
distribution from his Account in an amount less than 100% of the balance in that
Account and he subsequently resumes employment with an Employer, he may repay to
the Trust Fund the full amount of his prior distribution from his Account
provided that (a) he has not incurred five one-year Breaks in Service and (b)
the repayment is made prior to five years after his resumption of employment. In
the event of such repayment, the amount of his prior distribution plus any
amounts forfeited shall be restored to his Account and upon his subsequent
termination of Service, his vested interest shall include amounts previously
forfeited. In the event such a Participant does not repay the amount of his
prior distribution, his vested interest shall be based only on contributions
made subsequent to his date of reemployment.
(d) If a Participant who has withdrawn all or a portion of his Accounts
attributable to Matching Contributions pursuant to Section 7.2, his vested
interest in his Accounts attributable to Matching Contributions shall be equal
to:
P (AB + D)- D
where P equals the vesting percentage determined under the schedule in
subparagraph (a) at the relevant time, AB equals his account balance
attributable to Matching Contributions at the relevant time and D equals the
amount of the distribution.
<PAGE>
ARTICLE VII
Withdrawals During Service
7.1 In-Service Withdrawals (Other Than For Hardship). Upon Notice to the
Committee a Participant, while he is still an Employee, shall be entitled to
withdraw in cash as of such Valuation Date, in the following order:
(a) up to the amount of his Voluntary Contributions made prior to
January 1, 1987, under the Plan (not including earnings thereon) not
previously withdrawn;
(b) up to the amount attributable to his unmatched Voluntary
Contributions (including earnings thereon) made subsequent to December 31,
1986, under the Plan not previously withdrawn;
(c) an amount, as designated by the Participant, up to the value of
the earnings on the amount referred to in (a) above;
(d) up to the amount attributable to matched Voluntary Contributions
(including earnings thereon)
<PAGE>
made on or subsequent to May 1, 1993; provided, however, that in the event
of a withdrawal of such amount, the Participant shall not be eligible to
receive a Matching Contribution until the expiration of the three-month
period immediately following the receipt of the withdrawal (although he
will be eligible to share in Profit Sharing Contributions, have Salary
Reduction Contributions contributed on his behalf and contribute Voluntary
Contributions);
(e) in the case of a Participant who has attained age 59-1/2, amounts
attributable to that portion of the Profit Sharing Contributions made on
his behalf at least two years prior to the date of withdrawal (except that
such two-year limitation shall not apply if he has been a Participant in
the Plan--including participation in a Predecessor Plan--for a continuous
period of at least five years); and
(f) up to the amount attributable to his Rollover Contributions
(including earnings thereon) under the Plan not previously withdrawn.
The minimum amount of any withdrawal by a Participant under this Section 7.1
shall be equal to the lesser of (i) 10% of the Participant's interest in the
Funds, or (ii) $1,000.
<PAGE>
7.2 Hardship Withdrawals. If a Participant has withdrawn the maximum amount
permitted under Section 7.1, the Committee, under uniform rules prescribed by
it, shall permit a withdrawal of the remaining amount allocated to his Accounts
other than (i) Profit Sharing Contributions not subject to a Cash Distribution
election, (ii) any earnings attributable to Profit Sharing Contributions that
were credited to his Accounts after December 31, 1988, or (iii) earnings
attributable to Salary Reduction Contributions. A withdrawal for hardship shall
be made from the Participant's Accounts in the following order:
(a) up to the amount attributable to unmatched Salary Reduction
Contributions and Optional Deferrals (including earnings thereon credited
to his Accounts on or prior to December 31, 1988);
(b) up to the amount of matched Salary Reduction Contributions; and
(c) up to the amount attributable to vested Matching Contributions
(including earnings thereon).
For these purposes, a withdrawal for financial hardship may be made only if
it is on account of an immediate and heavy financial need of the Participant and
is necessary to satisfy such financial need. An immediate and heavy financial
need shall be considered to exist only if it arises from one or more of the
following circumstances:
(1) medical expenses, as described in Section 213(d) of the Code,
incurred or to be incurred by his spouse, child or other dependent (as
defined in Code Section 152);
(2) costs directly related to the purchase of a principal residence,
excluding mortgage payments, for the Participant or former Participant;
<PAGE>
(3) tuition payments and educational fees for the next 12 months of
post-secondary education for the Participant, his spouse, children or other
dependents;
(4) the need to prevent eviction from, or foreclosure on the mortgage
of, the Participants principal residence; and
(5) any other financial need as may be deemed by the Internal Revenue
Service to constitute an immediate and heavy financial need.
The following conditions must be satisfied for a hardship withdrawal: (A)
the withdrawal may not exceed the amount needed to satisfy the Participant's
immediate financial need created by the hardship (including any taxes or
penalties reasonably anticipated to result from the hardship withdrawal); (B)
the Participant must have obtained all distributions (other than hardship
distributions under other plans) and all nontaxable loans under all plans
maintained by the Corporation or an Affiliate; (C) the Participant will be
suspended from having Optional Deferrals and Salary Reduction Contributions made
on his behalf and from making Voluntary Contributions under the Plan and from
making before-tax contributions or after-tax contributions under any other plan
(other than a welfare plan) maintained by the Corporation or an Affiliate until
the expiration of the 12-month period immediately following the receipt of the
withdrawal; and (D) the maximum dollar amount applicable to Optional Deferrals
and Salary Reduction Contributions for the Year immediately following the Year
in which the hardship withdrawal occurs shall be reduced by the aggregate of the
Participant's Optional Deferrals and Salary Reduction Contributions for the Year
in which the hardship withdrawal occurs.
7.3 Complete Withdrawal. In the event of a complete withdrawal, there shall
be paid in cash to the Participant an amount equal to his payroll deductions
made subsequent to the applicable Valuation Date for such withdrawal.
7.4 Payments. All withdrawals pursuant to Sections 7.1 and 7.2 shall be
made by Notice to the Committee. The Participant shall designate the Fund or
Funds from which the withdrawal is to be made. The withdrawal shall be made
promptly but in no event later than 30 days following Notice to the Committee.
Payments of such withdrawals shall be made as provided in Article X.
7.5 Rollover Contributions. Rollover Contributions shall be treated as
Profit Sharing Contributions, except that solely for the purposes of this
Article VII, amounts transferred under the terms of the Plan in existence
immediately prior to January 1, 1985, shall be treated as Voluntary
Contributions to the extent that they represent the Participant's own
contributions from an employees' trust described in Section 401(a) of the Code.
<PAGE>
ARTICLE VIII
Loans
8.1 Amount of Loans. On the request of a Participant, the Committee may, in
its sole discretion and on such terms and conditions as it shall prescribe under
uniform rules, direct the Trustee to make a loan to the Participant from the
Trust Fund. Any such loan shall be secured by 50% of the value of the
Participant's Accounts in the Plan and shall be for a minimum amount of $500.
The maximum aggregate amount of any loan outstanding with respect to a
Participant at any time shall not exceed the lesser of (i) $50,000, reduced with
respect to loans made, modified or extended after December 31, 1986, by the
excess of the highest outstanding loan balance during the one-year period
preceding the date of such loan, over the outstanding loan balance on the date
of such loan or (ii) for loans granted or renewed after October 18, 1989, 50% of
the value of such Participant's Accounts.
8.2 Payment of Loan. Upon the granting of a loan to a Participant, that
portion of the Participant's interest in his Account shall be redeemed in the
manner described in Section 10.1 and transferred to the Participant. The
Participant shall designate the Fund or Funds from which the loan is to be made.
Upon repayment of principal amounts of the loan and interest, such amounts shall
be reinvested in the same Fund or Funds as current contributions of the same
character as are used to secure the loan are invested or as the Participant
directs, if the Participant is not making current contributions.
8.3 Terms of Loan. Each loan shall be for a period of not more than five
years; provided, however, that such five-year maximum period shall not apply to
a loan used to acquire a dwelling unit used as a principal residence of the
Participant. In no event will the term of any loan exceed 10 years. Each loan
shall bear interest on the unpaid balance thereof at a rate for each successive
<PAGE>
calendar year or part thereof, beginning with the year in which the loan is
made, equal to a rate determined by the Committee; provided, however, that
effective January 1, 1990, such rate shall be equal to one percentage point
above the prime interest rate charged by J. P. Morgan & Co. Incorporated on the
date the application for the loan is received by the Committee (or its
delegatee).
8.4 Repayment of Loan. Each loan shall be repaid by whichever of the
following methods shall be requested by the Participant and agreed to by the
Committee:
(a) equal installment payments of principal and interest (although the
amount of principal and interest in each installment may vary), to be
deducted from the Participant's Compensation in each of his pay periods; or
(b) with respect to loans other than loans made, modified or extended
after December 31, 1986, payment of principal at the conclusion of the term
of the loan and annual payments of interest.
Any loan may be prepaid in full at any time by payment by the Participant of the
unpaid principal and accrued interest of such loan.
8.5 Default. If a Participant defaults on any installment payment of
principal or interest on a loan, the entire unpaid principal amount of such
loan, together with any unpaid accrued interest thereon, shall immediately
become due and payable and shall be satisfied from his interest in his Accounts
determined as of the Valuation Date next preceding the date of default;
provided, however, that no amount in the individual's Accounts will be debited
prior to his termination of employment to the extent such amounts cannot be
withdrawn pursuant to Article VII.
8.6 Termination of Service or Plan. In the absence of a default and in the
event that (a) a Participant who has a loan outstanding shall terminate Service
for any reason or (b) the Plan is terminated, the entire unpaid principal amount
of such loan, together with any unpaid interest thereon, shall become
immediately due and payable and shall be paid by payment of such amounts in cash
by or on behalf of the Participant. If such cash payment is not made, the loan
shall be satisfied as if a default had occurred.
8.7 Maximum Number of Loans. Anything in the Plan to the contrary
notwithstanding, a Participant shall not have more than one loan made pursuant
to this Article VIII outstanding at any time.
<PAGE>
ARTICLE IX
Distributions Upon Termination of Service
9.1 Termination of Service. A Participant whose Service terminates for any
reason shall receive his interest in the Funds. Such interest shall be
distributed as soon as practicable following his termination of employment;
provided, however, that if the value of the Participant's Accounts exceeds
$3,500 such distribution shall not be made prior to the Valuation Date
coinciding with or next following his 65th birthday without his consent. Subject
to Section 9.2, in the event the Participant does not consent to an immediate
distribution of his Accounts, he may elect to receive his distribution as of any
Valuation Date up to the Valuation Date coinciding with or next following his
65th birthday. Such distribution shall be made in a lump sum unless prior to his
distribution date he has elected by Notice to the Committee to receive his
interest in the Funds in annual, quarterly, or monthly installments; provided,
however, that the period over which such installments shall be paid may not
exceed the life expectancy of the Participant or the joint life expectancy of
the Participant and his Beneficiary, determined as of the date of the
Participant's benefit commencement date. The minimum amount of such installments
required to be distributed in any Year shall be determined in accordance with
Code Section 401(a)(9) and the regulations issued thereunder. To the extent any
provision of the Plan is inconsistent with such Code section or such
regulations, the Plan provisions shall be disregarded.
9.2 Deferred Distribution. Notwithstanding anything to the contrary
contained in Section 9.1, if the value of a Participant's Accounts exceeds
$3,500, and his Service terminates (a) because of Disability or (b) for any
reason other than Disability after attainment of his early retirement date as
defined in the J. & W. Seligman & Co. Incorporated Retirement Income Plan, he
may elect by Notice to the Committee to defer his distribution until any
specified date no later than April 1 of the Year following the Year in which he
attains age 70-1/2. The period of deferral may later be reduced upon his
request.
9.3 Commencement of Benefits. Notwithstanding anything herein contained to
the contrary, the distribution of a Participant's interest in the Funds shall
commence no later than the April 1 of the Year following the Year in which such
Participant attains age 70-1/2, even though he continues to be a Participant
after such date. Unless a Participant (or former Participant) elects otherwise
by Notice to the Committee, distributions to a former Participant shall be made
or installment payments shall commence not later than the 60th day after the end
of the Plan Year in which occurs the later of (i) his attainment of age 65 or
(ii) the date on which his employment with an Employer terminates.
<PAGE>
ARTICLE X
Payments of Distributions and Withdrawals
10.1 Distributions. Subject to Section 10.6, all distributions and
withdrawals shall be equal to the value of the number of shares and fractions
thereof which are withdrawn, valued as of the close of business on the Valuation
Date as of which payment is made. Payment of distributions shall be made as soon
as is reasonably practicable after the date of the event giving rise to the
distribution.
10.2 Payments. Distributions and withdrawals shall be paid in cash.
10.3 Designation of Beneficiary. A Participant may by Notice to the
Committee designate one or more Beneficiaries to receive his interest on his
death. Such a designation may be changed or revoked from time to time by Notice
to the Committee and the last designation received by
<PAGE>
the Committee shall be controlling. However, a change or revocation shall not be
effective prior to its receipt by the Committee prior to the Participant's
death. The Beneficiary of a married Participant shall be his surviving spouse,
unless such spouse consents to the designation of someone else as Beneficiary in
a document filed with the Committee that acknowledges the effect of such
election and is witnessed by a notary public or a Plan representative. Such
consent shall not be required if it is established to the satisfaction of the
Committee that the consent cannot be obtained because there is no surviving
spouse, the spouse cannot be located or because of such other circumstances as
may be prescribed in regulations issued by the Secretary of the Treasury. In the
event that a Participant dies without a surviving spouse and without having in
effect at the time of his death a designation of a Beneficiary made as
aforesaid, the Beneficiary shall be, in the following order of priority, his (a)
child or children, per stirpes, (b) parents in equal shares or (c) estate.
10.4 Death Benefits. Upon the death of a Participant, his Account shall be
paid to his Beneficiary in a lump sum. If there is doubt as to the right of any
Beneficiary to receive any amount, the Trustee may either retain such amount
until the rights thereto are determined or pay such amount into any court of
appropriate jurisdiction with no further liability to anyone.
10.5 Payments to Minors or Other Persons Under a Disability. If any person
to whom benefits are otherwise payable is under the age of 18 or is, in the
opinion of the Committee, not able to care for his affairs because of physical
or mental disability, the Committee may, in its sole discretion, direct the
benefits otherwise payable to such person to be made to a third person who, in
the opinion of the Committee, may be expected to apply the payments for the
benefit of the minor or disabled person, without any responsibility on the part
of the Committee or the Trustee in respect of the application of such payments.
Payments so made shall operate as a complete discharge of any and all
<PAGE>
obligations of the Committee, the Trustee and the Trust Fund.
10.6 Dividends or Capital Gain Distributions. Anything in the Plan to the
contrary notwithstanding, in the event of the intended distribution or
withdrawal of the total interest of a Participant in any Fund during the period
between (a) the record date for payment of any dividend or capital gains
distribution declared in respect of shares of such Fund and (b) the date
additional shares shall have been credited to such Participant on account of
such dividend or capital gains distribution, then one share of such Participant
shall remain in such Fund, unless such retention in such Fund would prevent the
Participant from receiving a "lump-sum distribution" within the meaning of
Section 402 of the Code.
10.7 Predecessor Plan. Amounts transferred to the Trust Fund by a
participant or former participant in a Predecessor Plan and not otherwise
payable under this Plan shall be distributed in accordance with the applicable
provisions of such Predecessor Plan.
10.8 Direct Rollovers. Effective for distributions equal to or more than
$200 made on or after January 1, 1993, notwithstanding anything contained in the
Plan to the contrary, a distributee, as defined below, may elect, in accordance
with procedures established by the Committee, to have all or any portion of an
eligible rollover distribution (as defined in Code Section 402(c)(4)) paid
directly into an individual retirement account, individual retirement annuity or
a qualified trust in a direct rollover, provided that in the case of a qualified
trust, the terms of the related plan permit the acceptance of such distributions
and the eligible distributee is not the Participant's surviving spouse.
A distributee includes a Participant, former Participant, the surviving
spouse of a Participant or former Participant or an alternate payee under a
qualified domestic relations order who is the spouse or former spouse of the
Participant or former Participant.
<PAGE>
ARTICLE XI
The Trust Fund
11.1 Trust Fund. The Trust Fund shall be held, invested, reinvested, used
and disbursed by the Trustee in accordance with the directions of the
Participants which shall be in accordance with the provisions of the Plan and
the Trust Agreement. Subject to the provisions of the Act, no person shall have
any interest in, or right to, the Trust Fund or any part thereof, except as
expressly provided in the Plan or the Trust Agreement.
11.2 Trustee. The Board may remove the Trustee at any time upon the notice
required by the provisions of the Trust Agreement, and if the Trustee resigns or
is so removed, the Board shall designate a successor trustee.
11.3 Prohibition Against Diversion. Except as provided in this Section
11.3, no part of the assets of the Trust Fund shall, by reason of any
modification, amendment, termination or otherwise, be used for or diverted to
purposes other than for the exclusive benefit of Participants and their
Beneficiaries. Any contribution made by an Employer under a mistake of fact may
be returned to the Employer within one year after the payment of the
contribution. All contributions are conditioned on their deductibility and to
the extent any deduction is disallowed, the contribution may be returned to the
Employer within one year after the disallowance of the deduction. Both such
returned contributions shall be reduced by Trust Fund losses attributable
thereto but shall not be increased by Trust Fund gains attributable thereto.
11.4 Recordkeeping. Interests in the Funds may, pursuant to directions of
the Trustee, be maintained by the Agent in book credit form. Interest in the
Funds may be registered in the name of the Trustee or its nominee or held in
such other form as will pass by delivery.
11.5 Expenses. Brokerage commissions and transfer taxes incurred in
connection with the purchase or sale of securities shall be added to the cost
thereof or deducted from the proceeds thereof, as the case may be. All other
costs and expenses, including administrative expenses, of the Plan shall be paid
by the Employers in proportion to the value of the assets held by the Trustee
attributable to Participants employed by each Employer if not paid out of the
Trust Fund.
11.6 Voting. Each Participant shall be entitled to instruct the Trustee as
to the manner in which the securities in the Funds represented by shares
credited to his Account in the Funds are to be voted. The Trustee, either itself
or by such proxy as it may select, shall vote the securities in accordance with
such instructions, if any, or in the absence of such instructions, in accordance
with the instructions of the Committee. If no such instructions are received
from the Committee, the shares shall not be voted.
<PAGE>
ARTICLE XII
Valuation of Interests and Statements of Accounts
12.1 Valuation. The value of a Participant's interest in each Fund as of
any Valuation Date shall be determined by multiplying the number of shares or
units (carried to three decimal places) to his credit in such Fund on such Date
by the value of a share or unit in such Fund at the close of business on such
Date.
12.2 Changes in Valuation. In the event a Participant's interest in a Fund
is increased by a contribution or reduced by a distribution or withdrawal on a
Valuation Date, the number of shares or units to his credit in such Fund shall
be increased or reduced, as the case may be, on the basis of the value of a
share or unit in such Fund on the close of business on such Date. All
calculations for a Valuation Date shall be made as soon as practicable after
such Date.
12.3 Statement of Account. As soon as practicable after the end of each
Year, the Committee shall deliver to each Participant a statement setting forth
his interest in the Funds as of the last day of such Year. At the time of any
distribution or withdrawal of a Participant's interest in the Funds, the
Committee shall deliver to the person receiving the payment a statement showing
how the amount of the payment was computed. To the extent permitted by law, any
statement given by the Committee pursuant to this Section 12.3 shall be deemed
correct unless Notice to the Committee is given to the contrary within 90 days
after delivery of the statement.
<PAGE>
ARTICLE XIII
Administration
13.1 Appointment of Committee. The Plan shall be administered by a
Committee consisting of three or more Employees who shall be appointed or
removed from time to time with the approval of the boards of directors of each
of the Employers. A Participant may be a member of the Committee. No member of
the Committee shall receive compensation for his services as such. The Committee
shall report to the Employers annually and at such other times as they may
request.
13.2 Powers of the Committee. The Committee shall have all powers necessary
to administer the Plan except to the extent that any such powers are vested in
any other person by the Plan or the Committee. The Committee may from time to
time establish rules for the administration of the Plan, and it shall have the
exclusive right to interpret the Plan and to decide any matters arising in
connection with the administration and operation of the Plan. All its rules,
interpretations and decisions shall be applied in a uniform manner to all
persons similarly situated, and shall be conclusive and binding on the Employers
and on Participants and their Beneficiaries to the extent permitted by law.
13.3 Procedures of the Committee. A majority of the members of the
Committee at the time in office shall constitute a quorum for the transaction of
business. All resolutions or other action taken by the Committee shall be by
vote of a majority of its members present at any meeting or, without a meeting,
by an instrument in writing signed by all its members.
13.4 Delegation of Duties. The members of the Committee shall elect one of
their number as chairman, and shall elect a secretary who may, but need not, be
one of their number. The Committee may allocate any of its powers or duties
among its members or designate others to carry out any of its powers or duties.
It may authorize one or more of its members to execute or deliver any instrument
or to make any payment on its behalf. It may employ such counsel and agents and
require such clerical, medical, accounting and actuarial services as it may
require to carry out the provisions of the Plan, and to the extent permitted by
law it shall be entitled to rely upon all tables, valuations, certificates,
opinions or other reports furnished by such persons.
13.5 Payment of Expenses. All expenses that arise in connection with the
administration of the Plan and the Trust Agreement shall be paid by the
Employers if not paid out of the Trust Fund in accordance with Section 11.5.
13.6 Duties and Responsibilities of the Committee. (a) Every person who has
any responsibilities with respect to the Plan shall discharge such
<PAGE>
responsibilities solely in the interest of the Participants and their
Beneficiaries, for the exclusive purpose of providing benefits to such persons
and defraying reasonable expenses of administering the Plan, and with the care,
skill, prudence and diligence under the circumstances then prevailing that a
prudent man acting in a like capacity and familiar with such matters would use
in the conduct of an enterprise of like character and with like aims.
(b) The members of the Board, the members of the Committee and any
person the Committee may designate to carry out any of its duties under the
Plan may employ persons to render advice with regard to any responsibility
they may have under the Plan.
(c) No person shall be liable for any of his own acts or omissions
with respect to the Plan, or for the acts or omissions of any other person
with respect to the Plan, except to the extent required by the Act.
(d) Any person or group of persons may serve in more than one
fiduciary capacity under the Plan.
13.7 Indemnification. The Employers shall indemnify each member of the
Committee against all liabilities and expenses, including attorneys' fees,
reasonably incurred by him in connection with any actual or threatened legal
action to which he is or might be a party by reason of his membership on the
Committee, except with respect to any matters as to which he shall be adjudged
to be liable for gross negligence or willful misconduct in the performance of
his duty as such a member.
<PAGE>
ARTICLE XIV
Claims Procedure
All claims for benefits under the Plan by a Participant or Beneficiary shall be
made in writing to a person designated by the Committee for such purpose. If the
designated person receiving a claim for benefits believes that the claim should
be denied, he shall notify the claimant in writing of the denial of the claim
within 90 days (180 days, if the claimant is notified within the initial 90 day
period that an extension is necessary) after his receipt thereof. Such notice
shall (a) set forth the specific reason or reasons for the denial, making
reference to the pertinent provisions of the Plan or the Plan documents on which
the denial is based, (b) describe any additional material or information that
should be received before the claim request may be acted upon favorably, and
explain why such material or information, if any, is needed and (c) inform the
person making the claim of his right pursuant to this Article XIV to request
review of the decision by the Committee. Any such person who believes that he
has submitted all available and relevant information may appeal the denial of a
claim to the Committee by submitting a written request for review to the
Committee within 60 days after the date on which such denial is received. Such
period may be extended by the Committee for good cause shown. The person making
the request for review may examine pertinent Plan documents. The request for
review may discuss any issues relevant to the claim. The Committee shall decide
whether or not to grant the claim within 60 days after receipt of the request
for review, but this period may be extended by the Committee for up to an
additional 60 days in special circumstances. If such an extension of time for
review is required because of special circumstances, written notice of the
extension shall be furnished to the claimant prior to the commencement of the
extension. The Committee's decision shall be in writing, shall include specific
reasons for the decision and shall refer to pertinent provisions of the Plan or
of Plan documents on which the decision is based.
<PAGE>
ARTICLE XV
Amendment or Termination of the Plan or
Discontinuance of Employer Contributions
15.1 Amendment. The Corporation (for itself and the other Employers) may at
any time amend the Plan by action of the Board, but no such amendment shall have
the effect of revesting in any Employer any part of the Trust Fund or of
diverting the Trust Fund to purposes other than for the exclusive benefit of
Participants and their Beneficiaries or of reducing the interest in the Trust
Fund of Participants and their Beneficiaries at the date of such amendment.
15.2 Termination. The Employers expect to continue the Plan indefinitely,
but the continuance of the Plan and the payment of Employer Contributions for
any Year are not contractual obligations. The Corporation reserves the right, by
action of the Board, to terminate the Plan or to discontinue contributions
thereunder. On the complete discontinuance of Employer Contributions or on the
total or partial termination of the Plan, the interest of each affected
Participant shall become immediately fully vested and nonforfeitable and shall
become payable as of the Valuation Date coinciding with or next following the
date of such discontinuance or termination.
15.3 Merger, Consolidation or Transfer of Assets or Liabilities. In the
event of any merger or consolidation of the Plan with, or transfer of assets or
liabilities of the Plan to, any other plan, each Participant shall (if such
other plan then terminates) be entitled to receive a benefit immediately after
such merger, consolidation or transfer which is equal to or greater than the
benefit he would have been entitled to receive immediately before such merger,
consolidation or transfer (if the Plan had then terminated).
15.4 Withdrawal of Employer. Anything in the Plan to the contrary
notwithstanding, if at any time a corporation which is an Employer hereunder
shall cease to be an Employer, the Trustee shall determine that portion of the
Trust Fund which is applicable to any employees of such corporation who were
Participants and shall pay such portion to, or for the benefit of, such
employees or apply such portion by payment thereof to the trustee of any profit
sharing or similar plan of such corporation (or any successor thereto) or
otherwise, all as such corporation shall direct.
<PAGE>
ARTICLE XVI
General Provisions
16.1 Plan Is Not a Contract of Employment. The Plan shall not be deemed to
constitute a contract between any Employer and any Employee or to be a
consideration for, or an inducement for, the employment of any Employee by an
Employer. Nothing contained in the Plan shall be deemed to give any Employee the
right to be retained in the employ of an Employer or to interfere with the right
of an Employer to discharge or to terminate the employment of any Employee at
any time without regard to the effect that such discharge or termination may
have on any rights under the Plan.
16.2 Plan Is for the Exclusive Benefit of Beneficiaries. Anything in the
Plan to the contrary notwithstanding, no part of the property of the Trust Fund
shall, by reason of any modification, amendment or termination, or otherwise, be
used for or diverted to purposes other than for the exclusive benefit of
Participants and their Beneficiaries.
16.3 Nonalienation of Benefits. Except as may be required to comply with a
qualified domestic relations order under Section 414(p) of the Code, any benefit
payable under the Plan shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, lien or charge, and
any attempt to cause any such benefit to be so subjected shall not be recognized
except to such extent as may be required by law.
16.4 Applicable Law. The Plan shall be construed and its provisions
enforced and administered in accordance with the laws of the State of New York
except as any of such laws may be superseded by the Act. Anything in the Plan or
any amendment thereof to the contrary notwithstanding, no provision of the Plan
shall be so construed as to violate the requirements of the Act or the
requirements of the Code necessary for qualification of the Plan under Section
401(a) thereof.
<PAGE>
EXHIBIT A
Top-Heavy Provisions
Effective January 1, 1984, the following special provisions shall apply to
determine if the Plan is a Top Heavy Plan in accordance with Section 416 of the
Code and any special rules that will apply based on such status. In the event
that the provisions contained in this Exhibit A are inconsistent with the terms
contained in the remainder of the Plan, the provisions contained in this Exhibit
A shall take precedence.
ARTICLE I
Definitions
Aggregation Group: All plans maintained by the Corporation
or an Affiliate that are qualified under
the Code, provided that each such plan
satisfies at least one of the following
requirements:
(a) one or more Key Employees are
participants;
(b) the plan enables any plan in
which a Key Employee is a participant to
comply with the coverage and
nondiscrimination requirements of
Sections 401(a)(4) and 410 of the Code;
or
(c) such plan has been designated
as part of the Aggregation Group,
provided that the resulting Aggregation
Group meets the coverage and
nondiscrimination requirements of
Sections 401(a)(4) and 410 of the Code.
<PAGE>
Determination Date: With respect to any Year, the last day
of the preceding Year.
Key Employee: With respect to any Year, an employee or
former employee of the Corporation or an
Affiliate (or beneficiary of such
individual) who is a key employee
determined in accordance with Section
416 of the Code and any regulations
issued thereunder. The determination as
to whether an individual is a Key
Employee shall be based, where
applicable, on a Participant's annual
total pay as described in Code Section
414(q)(7).
Non-Key Employee: With respect to any Year, a Participant
who is not a Key Employee.
Top-Heavy Plan: With respect to any Year, the Plan, if
it is included in the Aggregation Group,
and as of the Determination Date for
such Year, the sum of:
(a) the taggregate Accounts for all
Key Employees under the Plan; and
(b) the aggregate account values
and the aggregate present values of
accrued benefits (excluding amounts
attributable to rollover contributions)
for all Key Employees under all other
plans in the Aggregation Group, exceeds
60% of all such aggregate values for all
individuals under all plans in the
Aggregation Group. In determining the
value of any individual's account or the
present value of his accrued benefits:
(1) the value of such account or
the present value of such accrued
benefits shall be increased by the sum
of the distributions made with respect
to such individual from such plan during
the five-year period ending on the
Determination Date; and
(2) the present value of his
accrued benefits under a defined benefit
plan shall be determined by using a five
percent interest rate assumption and the
mortality table used to determine a
benefit that is the actuarial equivalent
of another benefit under such plan.
Effective January 1, 1985, the value of
an individual's account or the present
value of his accrued benefits shall not
be considered in determining if the Plan
is a Top-Heavy Plan if the individual
has not performed any services for an
Employer at any time within the
five-year period ending on the
Determination Date.
Effective January 1, 1987, the
accrued benefit of a Non-Key Employee
shall be determined under the method
that is used for accrual purposes under
all plans in the Aggregation Group, or
if there is no such method, as if such
benefit accrued not more rapidly than
the slowest accrual rate determined
under Section 411(b)(1)(C) of the Code.
Top-Heavy Year: A year in which the Plan is a Top-Heavy
Plan.
<PAGE>
ARTICLE II
Minimum Allocation
Each Participant who on the last day of any Top-Heavy Year (a) is a Non-Key
Employee and (b) does not participate in a defined benefit plan maintained by
the Corporation or an Affiliate that provides that the minimum benefit
requirements applicable to top-heavy plans will be satisfied in such other plan
shall receive a minimum allocation of aggregate Employer Contributions
(excluding Optional Deferrals and Salary Reduction Contributions) for such Year
equal to a percentage of his total pay (as described in Treasury Regulation
Section 1.415-2(d)) up to $150,000 (as adjusted by the Secretary of the Treasury
to reflect increases in the cost of living) received in such Year. Such
percentage shall be equal to the lesser of three percent or the highest
percentage at which Employer Contributions (including Optional Deferrals and
Salary Reduction Contributions) are allocated to the Accounts of any Key
Employee for such Year (when expressed as a percentage of such Key Employee's
total pay up to $150,000, as adjusted). To the extent necessary to provide this
minimum allocation, the allocations to the Accounts of Key Employees shall be
reduced proportionately.
ARTICLE III
Dual Plan Limit
For any Top-Heavy Year, the denominator of the "defined contribution plan
fraction" and the "defined benefit plan fraction" (as determined under Section
415(e) of the Code and the regulations promulgated thereunder) shall be
calculated by using a factor of 1.0 rather than 1.25.
Exhibit 7a
DEFERRED COMPENSATION PLAN FOR DIRECTORS
OF EACH OF:
<TABLE>
<S> <C>
Seligman Capital Fund, Inc. Seligman International Fund Series, Inc.
Seligman Cash Management Fund, Inc. Seligman Mutual Benefit Portfolios, Inc.
Seligman Common Stock Fund, Inc. Seligman New Jersey Tax-Exempt Fund, Inc.
Seligman Communications & Seligman Pennsylvania Tax-Exempt Fund Series
Information Fund, Inc. Seligman Quality Municipal Fund, Inc.
Seligman Frontier Fund, Inc. Seligman Select Municipal Fund, Inc.
Seligman Growth Fund, Inc. Seligman Tax-Exempt Fund Series, Inc.
Seligman High Income Fund Series Tri-Continental Corporation
Seligman Income Fund,Inc.
</TABLE>
1. Election to Defer Payments. Any member of the Board of Directors/Trustees
of the Fund/Series may elect to have payment of the director's/trustees'
annual retainer or meeting fees or both for Board service deferred as
provided in this Plan. The election shall be made in writing prior to, and
to take effect from, the beginning of a calendar year, or for any
director/trustee in the year in which this Plan is adopted or for a person
elected a director/trustee in other than the last calendar quarter of a
year, prior to, and to take effect from, the beginning of the calendar
quarter next ensuing after that event. Elections shall continue in effect
until terminated in writing, any such termination to take effect on the
first day of the calendar year beginning after receipt of the notice of
termination. An election shall be irrevocable as to payments deferred in
conformity with that election.
2. Deferred Payment Account. Each deferred retainer or fee shall be credited
at the time when it otherwise would have been payable to an account to be
established in the name of the director/trustee on the books of the
Fund/Series. All amounts in such account, including interest credited
thereto, shall bear interest at a rate equivalent to the rate of return
earned on 90-day Treasury Bills in each calendar quarter. Such interest
shall be credited to the account quarterly at the end of each calendar
quarter. Amounts in the account shall not be evidenced by any note or other
security, funded or secured in any way.
3. Payment of Deferred Amounts. All amounts credited to an account pursuant to
any election by the director/trustee made as provided in (1) above shall be
paid to the director/trustee.
(a) in, or beginning in, the calendar year following the calendar year in
which the director/trustee ceases to be a director/trustee of the
Fund/Series, or
(b) in, or beginning in, the calendar year following the earlier of the
calendar year in which the director/trustee ceases to be a
director/trustee of the Fund/Series or attains age 70, and shall be
paid
<PAGE>
(c) in a lump sum payable on the first day of the calendar year in which
payment is to be made, or
(d) in 10 or fewer installments, payable on the first day of each year
commencing with the calendar year in which payment is to begin,
all as the director/trustee shall specify in making the election. If the
payment is to be made in installments, the amount of each installment shall
be equal to a fraction of the total of the amounts in the account at the
date of the payment, the numerator of which shall be one and the
denominator of which shall be the then remaining number of unpaid
installments (including the installment then to be paid). If the
director/trustee dies at any time before all amounts in the account have
been paid, such amounts shall be paid at that time in a lump sum to the
estate of the director/trustee.
4. Assignment. No deferred amount or unpaid portion thereof may be assigned or
transferred by the director/trustee except by will or the laws of descent
and distribution.
5. Withholding Taxes. The Fund/Series shall deduct from all payments any
federal, state or local taxes and other charges required by law to be
withheld with respect to such payments.
6. Amendments and Acceleration. The Board of Directors/Trustees of the
Fund/Series may at any time at its sole discretion accelerate the payment
of any unpaid amount for any or all directors/trustees or terminate this
Plan, provided that no such amendment or termination shall adversely affect
the right of directors/trustees to receive deferred amounts credited to
their account.
Revised: March 19, 1992
CUSTODY AGREEMENT
THIS AGREEMENT made the ____ day of____________, 19___, by and between
INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of
the state of Missouri, having its trust office located at 127 West 10th Street,
Kansas City, Missouri 64105 ("Custodian"), and SELIGMAN PENNSYLVANIA TAX-EXEMPT
FUND SERIES, a trust organized under the laws of the Commonwealth of
Pennsylvania, having its principal office and place of business at One Bankers
Trust Plaza, New York, New York 10006 ("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint Investors Fiduciary Trust Company as
Custodian and Recordkeeper of the securities and monies of Fund and its now
existing and future established portfolios (individually referred to herein as
Portfolio); and
WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment;
NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:
1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and appoints Custodian as
custodian of the Fund which is to include:
A. Appointment as custodian of the securities and monies at any time
owned by each Portfolio of the Fund; and
B. Appointment as agent to perform certain accounting and recordkeeping
functions required of a duly registered investment company in
compliance with applicable provisions of federal, state, and local
laws, rules and regulations including, as may be required:
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1. Providing information necessary for Fund and each Portfolio to file
required financial reports; maintaining and preserving required books,
accounts and records as the basis for such reports; and performing
certain daily functions in connection with such accounts and records,
and
2. Calculating daily net asset value of each Portfolio of the Fund, and
3. Acting as liaison with independent auditors.
2. DELIVERY OF CORPORATE DOCUMENTS. Fund has delivered or will deliver to
Custodian prior to the effective date of this Agreement, copies of the
following documents and all amendments or supplements thereto, properly
certified or authenticated:
A. Resolutions of the Board of Trustees of Fund appointing Custodian as
custodian hereunder and approving the form of this Agreement; and
B. Resolutions of the Board of Trustees of Fund designating certain
persons to give instructions on behalf of Fund to Custodian and
authorizing Custodian to rely upon such instructions.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery of Assets
Fund will deliver or cause to be delivered to Custodian on the
effective date of this Agreement, or as soon thereafter as
practicable, and from time to time thereafter, all portfolio
securities acquired by it and monies then owned by it (except as
permitted by the Investment Company Act of 1940) or from time to time
coming into its possession during the time this Agreement shall
continue in effect. Custodian shall have no responsibility or
liability whatsoever for or on account of securities or monies not so
delivered. All securities so delivered to Custodian (other than bearer
securities) shall be registered in the
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<PAGE>
name of Fund or its nominee, or of a nominee of Custodian, or shall be
properly endorsed and in form for transfer satisfactory to Custodian.
B. Delivery of Accounts and Records
Fund shall turn over to Custodian all of the Fund's relevant accounts
and records previously maintained by it. Custodian shall be entitled
to rely conclusively on the completeness and correctness of the
accounts and records turned over to it by Fund, and Fund shall
indemnify and hold Custodian harmless of and from any and all
expenses, damages and losses whatsoever arising out of or in
connection with any error, omission, inaccuracy or other deficiency of
such accounts and records or in the failure of Fund to provide any
portion of such or to provide any information needed by the Custodian
knowledgeably to perform its function hereunder.
C. Delivery of Assets to Third Parties
Custodian will receive delivery of and keep safely the assets of Fund
delivered to it from time to time and the assets of each Portfolio
segregated in a separate account. Custodian will not deliver, assign,
pledge or hypothecate any such assets to any person except as
permitted by the provisions of this Agreement or any agreement
executed by it according to the terms of Section 3.S. of this
Agreement. Upon delivery of any such assets to a subcustodian pursuant
to Section 3.S. of this agreement, Custodian will create and maintain
records identifying those assets which have been delivered to the
subcustodian as belonging to the applicable Portfolio of the Fund. The
Custodian is responsible for the safekeeping of the securities and
monies of Fund only until they have been transmitted to and received
by other persons as permitted under the terms of this Agreement,
except for securities and monies transmitted to United Missouri Bank
of Kansas City (UMBKC) and United Missouri Trust
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<PAGE>
Company of New York (UMBTC) for which Custodian remains responsible.
Custodian shall be responsible only for the monies and securities of
Fund held by it or its nominees, UMBKC or its nominees, and eligible
foreign subcustodians to the extent the domestic custodian with which
the Custodian contracts is responsible to Custodian. Custodian may
participate directly or indirectly through a subcustodian in the
Depository Trust Company, Treasury/Federal Reserve Book Entry System,
Participant Trust Company or other depository approved by the Fund (as
such entities are defined at 17 CFR Section 270.17f-4(b)).
D. Registration of Securities
Custodian will hold stocks and other registerable portfolio securities
of Fund registered in the name of Fund or its nominee or in the name
of any nominee of Custodian for whose fidelity and liability Custodian
will be fully responsible, or in street certificate form, so-called,
with or without any indication of fiduciary capacity. Unless otherwise
instructed, Custodian will register all such portfolio securities in
the name of its authorized nominee, as defined in the Internal Revenue
Code and any Regulations of the Treasury Department issued thereunder
or in any provision of any subsequent Federal tax law exempting such
transaction from liability for stock transfer taxes. All securities,
and the ownership thereof by a Portfolio of the Fund, which are held
by Custodian hereunder, however, shall at all times be identifiable on
the records of the Custodian. The Fund agrees to hold Custodian and
its nominee harmless for any liability as a record holder of
securities held in custody.
E. Exchange of Securities
Upon receipt of instructions as defined herein in Section 4.A,
Custodian will exchange, or cause to be exchanged, portfolio
4
<PAGE>
securities held by it for the account of the applicable Portfolio of
the Fund for other securities or cash issued or paid in connection
with any reorganization, recapitalization, merger, consolidation,
split-up of shares, change of par value, conversion or otherwise, and
will deposit any such securities in accordance with the terms of any
reorganization or protective plan. Without instructions, Custodian is
authorized to exchange securities held by it in temporary form for
securities in definitive form, to effect an exchange of shares when
the par value of the stock is changed, and, upon receiving payment
therefor, to surrender bonds or other securities held by it at
maturity or when advised of an earlier mandatory call for redemption,
except that Custodian shall receive instructions prior to surrendering
any convertible security. Pursuant to this paragraph, the Custodian
will inform the Fund of such corporate actions and capital changes
when it is informed of them through the publications it subscribes to.
F. Purchases of Investments of the Fund
Fund will, on each business day on which a purchase of securities
shall be made by it, deliver to Custodian instructions which shall
specify with respect to each such purchase:
1. The name of the Portfolio making such purchase;
2. The name of the issuer and description of the security;
3. The number of shares or the principal amount purchased, and
accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission, taxes
and other expenses payable in connection with the purchase;
7. The total amount payable upon such purchase; and
5
<PAGE>
8. The name of the person from whom or the broker or dealer through whom
the purchase was made.
In accordance with such instructions, Custodian will pay for out of monies
held for the account of such named Portfolio, but only insofar as monies
are available therein for such purpose, and receive the portfolio
securities so purchased by such named Portfolio, except that Custodian may
in its sole discretion advance funds to the Fund which may result in an
overdraft because the monies held by the Custodian on behalf of the Fund
are insufficient to pay the total amount payable upon such purchase. Such
payment will be made only upon receipt by Custodian of the securities so
purchased in form for transfer satisfactory to Custodian. Custodian agrees
to promptly inform Fund of any failures by sellers to make proper
deliveries of securities purchased by the Fund.
G. Sales and Deliveries of Investments of the Fund - Other than Options and
Futures Fund will, on each business day on which a sale of investment
securities of Fund has been made, deliver to Custodian instructions
specifying with respect to each such sale:
1. The name of the Portfolio making such sale;
2. The name of the issuer and description of the securities;
3. The number of shares or principal amount sold, and accrued interest,
if any;
4. The date on which the securities sold were purchased or other
information identifying the securities sold and to be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission, taxes or other
expenses payable in connection with such sale;
6
<PAGE>
8. The total amount to be received by Fund upon such sale; and
9. The name and address of the broker or dealer through whom or person to
whom the sale was made.
In accordance with such instructions, Custodian will deliver or cause to be
delivered the securities thus designated as sold for the account of such
Portfolio to the broker or other person specified in the instructions
relating to such sale, such delivery to be made only upon receipt of
payment therefor in such form as is satisfactory to Custodian, with the
understanding that Custodian may deliver or cause to be delivered
securities for payment in accordance with the customs prevailing among
dealers in securities. Custodian agrees to promptly inform Fund of any
failures of purchasers to make proper payment for securities sold by Fund.
H. Purchases or Sales of Security Options, Options on Indices and Security
Index Futures Contracts Fund will, on each business day on which a purchase
or sale of the following options and/or futures shall be made by it,
deliver to Custodian instructions which shall specify with respect to each
such purchase or sale:
1. The name of the Portfolio making such purchase or sale;
2. Security Options
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising, expiring or
closing transaction;
g. Whether the transaction involves a put or call;
7
<PAGE>
h. Whether the option is written or purchased;
i. Market on which option traded;
j. Name and address of the broker or dealer through whom the sale or
purchase was made.
3. Options on Indices
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising, expiring or
closing transaction;
h. Whether the transaction involves a put or call;
i. Whether the option is written or purchased;
j. The name and address of the broker or dealer through whom the
sale or purchase was made, or other applicable settlement
instructions.
4. Security Index Futures Contracts
a. The last trading date specified in the contract and, when
available, the closing level, thereof;
b. The index level on the date the contract is entered into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in addition to
instructions, and if not already in the possession of Custodian,
Fund shall deliver a substantially complete and executed
custodial safekeeping account and
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<PAGE>
procedural agreement which shall be incorporated by reference
into this Custody Agreement); and
f. The name and address of the futures commission merchant through
whom the sale or purchase was made, or other applicable
settlement instructions.
5. Option on Index Future Contracts
a. The underlying index futures contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening, exercising, expiring
or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased; and
i. The market on which the option is traded.
I. Securities Pledged or Loaned
If specifically allowed for in the prospectus of the applicable
Portfolio of the Fund:
1. Upon receipt of instructions, Custodian will release or cause to
be released securities held in custody to the pledgee designated
in such instructions by way of pledge or hypothecation to secure
any loan incurred by a Portfolio of the Fund; provided, however,
that the securities shall be released only upon payment to
Custodian of the monies borrowed, except that in cases where
additional collateral is required to secure a borrowing already
made, further securities may be released or caused to be released
for that purpose upon receipt of instructions. Upon receipt of
instructions, Custodian
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<PAGE>
will pay, but only from funds available for such purpose, any
such loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or notes
evidencing such loan.
2. Upon receipt of instructions, Custodian will release securities
held in custody to the borrower designated in such instructions;
provided, however, that the securities will be released only upon
deposit with Custodian of full cash collateral as specified in
such instructions, and that Fund will retain the right to any
dividends, interest or distribution on such loaned securities.
Upon receipt of instructions and the loaned securities, Custodian
will release the cash collateral to the borrower.
J. Routine Matters
Custodian will, in general, attend to all routine and mechanical
matters in connection with the sale, exchange, substitution, purchase,
transfer, or other dealings with securities or other property of Fund
except as may be otherwise provided in this Agreement or directed from
time to time by the Board of Trustees of Fund.
K. Deposit Account
Custodian will open and maintain a special purpose deposit account(s)
in the name of Custodian on behalf of each Portfolio (Accounts),
subject only to draft or order by Custodian upon receipt of
instructions. All monies received by Custodian from or for the account
of a Portfolio shall be deposited in said Accounts. Barring events not
in the control of the Custodian such as strikes, lockouts or labor
disputes, riots, war or equipment or transmission failure or damage,
fire, flood, earthquake or other natural disaster, action or
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<PAGE>
inaction of governmental authority or other causes beyond its control,
at 9:00 a.m., Kansas City time, on the second business day after
deposit of any check into Fund's Account, Custodian agrees to make Fed
Funds available to the appropriate Portfolio of the Fund in the amount
of the check. Deposits made by Federal Reserve wire will be available
to the Fund immediately and ACH wires will be available to the Fund on
the next business day. Income earned on the portfolio securities will
be credited to the applicable Portfolio of the Fund based on the
schedule attached as Exhibit A, except that income earned on portfolio
securities held by domestic subcustodians other than UMBKC, UMBTC,
Bank of New York (previously Irving Trust Company and hereinafter
referred to as BONY) and Morgan Guaranty and Trust Company (MGT) will
be credited when received. The Custodian will be entitled to reverse
any credited amounts where credits have been made and monies are not
finally collected. If monies are collected after such reversal, the
Custodian will credit the applicable Portfolio in that amount.
Custodian may open and maintain an Account in such other banks or
trust companies as may be designated by it and by properly authorized
resolution of the Board of Trustees of Fund, such Account, however, to
be in the name of Custodian on behalf of the applicable portfolio of
the Fund and subject only to its draft or order.
L. Income and other Payments to Fund
Custodian will:
1. Collect, claim and receive and deposit for the Account of each
Portfolio of the Fund all income and other payments which become
due and payable on or after the effective date of this Agreement
with respect to the securities deposited under this Agreement,
and credit the account of the applicable Portfolio
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<PAGE>
of the Fund in accordance with the schedule attached hereto as
Exhibit A, except that income earned on portfolio securities held
by domestic subcustodians other than UMBKC, UMBTC, BONY, and MGT
will be credited when received. Income from foreign securities
and assets held by eligible foreign subcustodians shall be
credited by Custodian upon receipt of income from the domestic
subcustodian contracting with the foreign eligible subcustodians.
If, for any reason, the Fund is credited with income that is not
subsequently collected, Custodian may reverse that credited
amount;
2. Execute ownership and other certificates and affidavits for all
federal, state and local tax purposes in connection with the
collection of bond and note coupons; and
3. Take such other action as may be necessary or proper in
connection with:
a. the collection, receipt and deposit of such income and other
payments, including but not limited to the presentation for
payment of:
1. all coupons and other income items requiring
presentation; and
2. all other securities which may mature or be called,
redeemed, retired or otherwise become payable and
regarding which the Custodian has actual knowledge, or
notice of which is contained in publications of the
type to which a custodian for investment companies
normally subscribes for such purpose; and
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<PAGE>
b. the endorsement for collection, in the name of the
applicable Portfolio of the Fund, of all checks, drafts or
other negotiable instruments.
Custodian, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon receipt
of instructions and upon being indemnified to its satisfaction against
the costs and expenses of such suit or other actions. Custodian will
receive, claim and collect all stock dividends, rights and other
similar items and will deal with the same pursuant to instructions.
Unless prior instructions have been received to the contrary,
Custodian will, without further instructions, sell any rights held for
the account of Fund on the last trade date prior to the date of
expiration of such rights.
M. Payment of Dividends and other Distributions
On the declaration of any dividend or other distribution on the shares
of Beneficial Interest of any Portfolio ("Portfolio Shares") by the
Board of Trustees of Fund, Fund shall deliver to Custodian
instructions with respect thereto, including a copy of the Resolution
of said Board of Trustees certified by the Secretary or an Assistant
Secretary of Fund wherein there shall be set forth the record date as
of which shareholders entitled to receive such dividend or other
distribution shall be determined, the date of payment of such dividend
or distribution, and the amount payable per share on such dividend or
distribution. Except if the ex-dividend date and the reinvestment date
of any dividend are the same, in which case funds shall remain in the
Custody Account, on the date specified in such Resolution for the
payment of such dividend or other distribution, Custodian will pay out
of the monies held for the account of the applicable Portfolio of the
Fund, insofar as the same shall be available for such purposes, and
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<PAGE>
wire to the account of the Dividend Disbursing Agent for Fund, such
amount as may be necessary to pay the amount per share payable in cash
on Portfolio Shares issued and outstanding on the record date
established by such Resolution.
N. Shares of Fund Purchased by Fund
Whenever any Portfolio Shares are repurchased or redeemed by Fund,
Fund or its agent shall advise Custodian of the aggregate dollar
amount to be paid for such shares and shall confirm such advice in
writing. Upon receipt of such advice, Custodian shall charge such
aggregate dollar amount to the Account of Portfolio and either deposit
the same in the account maintained for the purpose of paying for the
repurchase or redemption of Portfolio Shares or deliver the same in
accordance with such advice.
Custodian shall not have any duty or responsibility to determine that
Fund Shares have been removed from the proper shareholder account or
accounts or that the proper number of such shares have been canceled
and removed from the shareholder records.
O. Shares of Fund Purchased from Fund
Whenever Portfolio Shares are purchased from Fund, Fund will deposit
or cause to be deposited with Custodian the amount received for such
shares. Custodian shall not have any duty or responsibility to
determine that Portfolio Shares purchased from Fund have been added to
the proper shareholder account or accounts or that the proper number
of such shares have been added to the shareholder records.
P. Proxies and Notices
Custodian will promptly deliver or mail or have delivered or mailed to
Fund all proxies properly signed, all notices of meetings, all proxy
statements and other notices, requests or announcements affecting
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<PAGE>
or relating to securities held by Custodian for Fund and will, upon
receipt of instructions, execute and deliver or cause its nominee to
execute and deliver or mail or have delivered or mailed such proxies
or other authorizations as may be required. Except as provided by this
Agreement or pursuant to instructions hereafter received by Custodian,
neither it nor its nominee will exercise any power inherent in any
such securities, including any power to vote the same, or execute any
proxy, power of attorney, or other similar instrument voting any of
such securities, or give any consent, approval or waiver with respect
thereto, or take any other similar action.
Q. Disbursements
Custodian will pay or cause to be paid insofar as funds are available
for the purpose, bills, statements and other obligations of Fund
(including but not limited to obligations in connection with the
conversion, exchange or surrender of securities owned by Fund,
interest charges, dividend disbursements, taxes, management fees,
custodian fees, legal fees, auditors' fees, transfer agents' fees,
brokerage commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting forth the
name of the person to whom payment is to be made, the amount of the
payment, and the purpose of the payment.
R. Daily Statement of Accounts
Custodian will, within a reasonable time, render to Fund as of the
close of business on each day, a detailed statement of the amounts
received or paid and of securities received or delivered for the
account of Fund during said day. Custodian will, from time to time,
upon request by Fund, render a detailed statement of the securities
and monies held for Fund under this Agreement, and Custodian will
maintain such books and records as are necessary to enable it to do
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<PAGE>
so and will permit such persons as are authorized by Fund including
Fund's independent public accountants, access to such records or
confirmation of the contents of such records; and if demanded, will
permit federal and state regulatory agencies to examine the
securities, books and records. Upon the written instructions of Fund
or as demanded by federal or state regulatory agencies, Custodian will
instruct any subcustodian to give such persons as are authorized by
Fund including Fund's independent public accountants, access to such
records or confirmation of the contents of such records; and if
demanded, to permit federal and state regulatory agencies to examine
the books, records and securities held by subcustodian which relate to
Fund. Fund will be entitled to receive reports produced by the
Custodian's portfolio accounting system, including without limitation,
those listed on Exhibit C hereof.
S. Appointment of Subcustodians
1. Notwithstanding any other provisions of this Agreement, all of or
any of the monies or securities of Fund may be held in
Custodian's own custody or in the custody of one or more other
banks or trust companies selected by Custodian and approved by
the Fund's Board of Trustees. Any such subcustodian must have the
qualifications required for custodian under the Investment
Company Act of 1940, as amended. The subcustodian may participate
directly or indirectly in the Depository Trust Company,
Treasury/Federal Reserve Book Entry System, Participant Trust
Company or other depository approved by the Fund (as such
entities are defined at 17 CFR Sec. 270.17f-4(b)). The
appointment of UMBKC or any other subcustodian, depository, or
clearing agency used by the Custodian and approved by the Fund
will not relieve Custodian
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<PAGE>
of any of its obligations hereunder except as provided in Section
3.C hereof. The Custodian will comply with Section 17f-4 of the
Investment Company Act of 1940, as amended, as to depositories
and clearing agencies used by Custodian and approved by the Fund.
The Custodian will not be entitled to reimbursement by Fund for
any fees or expenses of any subcustodian, depository or clearing
agency.
2. Notwithstanding any other provisions of this Agreement, Fund's
foreign securities (as defined in Rule 17f-5(c)(1) under the
Investment Company Act of 1940) and Fund's cash or cash
equivalents, in amounts reasonably necessary to effect Fund's
foreign securities transactions, may be held in the custody of
one or more banks or trust companies acting as subcustodians,
according to Section 3.S.1; and thereafter, pursuant to a written
contract or contracts as approved by Fund's Board of Trustees,
may be transferred to an account maintained by such subcustodian
with an eligible foreign custodian, as defined in Rule
17f-5(c)(2), provided that any such arrangement involving a
foreign custodian shall be in accordance with the provisions of
Rule 17f-5 under the Investment Company Act of 1940 as that Rule
may be amended from time to time.
T. Accounts and Records
Custodian, with the direction and as interpreted by the Fund, Fund's
accountants and/or other tax advisors, will prepare and maintain as
complete, accurate and current all accounts and records required to be
maintained by Fund under the Internal Revenue Code of 1986 ("Code") as
amended and under the general Rules and Regulations under the
Investment Company Act of 1940 ("Rules") as amended,
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and as agreed upon between the parties and will preserve said records
in the manner and for the periods prescribed in said Code and Rules,
or for such longer period as is agreed upon by the parties. Custodian
relies upon Fund to furnish, in writing, accurate and timely
information to complete Fund's records and perform daily calculation
of the Fund's net asset value, as provided in Section 3.W. below.
Custodian shall incur no liability and Fund shall indemnify and hold
harmless Custodian from and against any liability arising from any
failure of Fund to furnish such information in a timely and accurate
manner, even if Fund subsequently provides accurate but untimely
information. It shall be the responsibility of Fund to furnish
Custodian with the declaration, record and payment dates and amounts
of any dividends or income and any other special actions required
concerning each of its securities when such information is not readily
available from generally accepted securities industry services or
publications.
U. Accounts and Records Property of Fund
Custodian acknowledges that all of the accounts and records maintained
by Custodian pursuant to this Agreement are the property of Fund, and
will be made available to Fund for inspection or reproduction within a
reasonable period of time, upon demand. Custodian will assist Fund's
independent auditors, or upon approval of Fund, or upon demand, any
regulatory body having jurisdiction over the Fund or Custodian, in any
requested review of Fund's accounts and records but shall be
reimbursed for all expenses and employee time invested in any such
review outside of routine and normal periodic reviews. Upon receipt
from Fund of the necessary information, Custodian will supply
necessary data for Fund's completion of any necessary tax returns,
questionnaires, periodic
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reports to Shareholders and such other reports and information
requests as Fund and Custodian shall agree upon from time to time.
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V. Adoption of Procedures
Custodian and Fund may from time to time adopt procedures as they
agree upon, and Custodian may conclusively assume that no procedure
approved by Fund, or directed by Fund, conflicts with or violates any
requirements of its prospectus, "Declaration of Trust", Bylaws, or any
rule or regulation of any regulatory body or governmental agency. Fund
will be responsible to notify Custodian of any changes in statutes,
regulations, rules or policies which might necessitate changes in
Custodian's responsibilities or procedures.
W. Calculation of Net Asset Value
Custodian will calculate Fund's net asset value, in accordance with
Fund's prospectus, once daily. Custodian will prepare and maintain a
daily evaluation of securities for which market quotations are
available by the use of outside services normally used and contracted
for this purpose; all other securities will be evaluated in accordance
with Fund's instructions. Custodian will have no responsibility for
the accuracy of the prices quoted by these outside services or for the
information supplied by Fund or upon instructions.
X. Overdrafts
If Custodian shall in its sole discretion advance funds to the account
of the Fund which results in an overdraft because the monies held by
Custodian on behalf of the Fund are insufficient to pay the total
amount payable upon a purchase of securities as specified in Fund's
instructions or for some other reason, the amount of the overdraft
shall be payable by the Fund to Custodian upon demand and shall bear
an interest rate determined by Custodian from the date advanced until
the date of payment. Custodian shall have a lien on the assets of the
Fund in the amount of any outstanding overdraft.
4. INSTRUCTIONS.
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A. The term "instructions", as used herein, means written or facsimile
instructions or advice to Custodian from two designated
representatives of Fund. Certified copies of resolutions of the Board
of Trustees of Fund naming two or more designated representatives to
give instructions in the name and on behalf of Fund, may be received
and accepted from time to time by Custodian as conclusive evidence of
the authority of any two designated representatives to act for Fund
and may be considered to be in full force and effect (and Custodian
will be fully protected in acting in reliance thereon) until receipt
by Custodian of notice to the contrary. Unless the resolution
delegating authority to any person to give instructions specifically
requires that the approval of anyone else will first have been
obtained, Custodian will be under no obligation to inquire into the
right of the person giving such instructions to do so. Notwithstanding
any of the foregoing provisions of this Section 4. no authorizations
or instructions received by Custodian from Fund, will be deemed to
authorize or permit any director, trustee, officer, employee, or agent
of Fund to withdraw any of the securities or similar investments of
Fund upon the mere receipt of such authorization or instructions from
such director, trustee, officer, employee or agent.
Notwithstanding any other provision of this Agreement, Custodian, upon
receipt (and acknowledgement if required at the discretion of
Custodian) of the instructions of any two designated representatives
of Fund, will undertake to deliver for Fund's account monies,
(provided such monies are on hand or available) in connection with
Fund's transactions and to wire transfer such monies to such broker,
dealer, subcustodian, bank or other agent specified in such
instructions.
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B. If oral instructions are permitted pursuant to Section 4.A. hereunder,
no later than the next business day immediately following such oral
instruction the Fund will send Custodian written confirmation of such
oral instruction. At Custodian's sole discretion, Custodian may record
on tape, or otherwise, any oral instruction whether given in person or
via telephone, each such recording identifying the parties, the date
and the time of the beginning and ending of such oral instruction.
22
<PAGE>
5. LIMITATION OF LIABILITY OF CUSTODIAN.
A. Custodian shall hold harmless and indemnify Fund from and against any
loss or liability arising out of Custodian's failure to comply with
the terms of this Agreement or arising out of Custodian's negligence
or bad faith. Custodian shall not be liable for consequential damages.
Custodian may request and obtain the advice and opinion of counsel for
Fund, or of its own counsel with respect to questions or matters of
law, and it shall be without liability to Fund for any action taken or
omitted by it in good faith, in conformity with such advice or
opinion. If Custodian reasonably believes that it could not prudently
act according to the instructions of the Fund or the Fund's counsel,
it may in its discretion, with notice to the Fund, not act according
to such instructions.
B. Custodian may rely upon the advice of Fund and upon statements of
Fund's public accountants and other persons believed by it in good
faith, to be expert in matters upon which they are consulted, and
Custodian shall not be liable for any actions taken, in good faith,
upon such statements.
C. If Fund requires Custodian in any capacity to take, with respect to
any securities, any action which involves the payment of money by it,
or which in Custodian's opinion might make it or its nominee liable
for payment of monies or in any other way, Custodian, upon notice to
Fund given prior to such actions, shall be and be kept indemnified by
Fund in an amount and form satisfactory to Custodian against any
liability on account of such action.
D. Custodian shall be protected in acting as custodian hereunder upon any
instructions, advice, notice, request, consent, certificate or other
instrument or paper reasonably appearing to it to be genuine and to
have been properly executed and shall, unless otherwise specifically
23
<PAGE>
provided herein, be entitled to receive as conclusive proof of any
fact or matter required to be ascertained from Fund hereunder, a
certificate signed by the Fund's President, or other officer
specifically authorized for such purpose.
E. Without limiting the generality of the foregoing, Custodian shall be
under no duty or obligation to inquire into, and shall not be liable
for:
1. The validity of the issue of any securities purchased by or for
Fund, the legality of the purchase thereof or evidence of
ownership required by Fund to be received by Custodian, or the
propriety of the decision to purchase or amount paid therefor;
2. The legality of the sale of any securities by or for Fund, or the
propriety of the amount for which the same are sold;
3. The legality of the issue or sale of any shares of the Beneficial
Interest of Fund, or the sufficiency of the amount to be received
therefor;
4. The legality of the repurchase or redemption of any shares of
Beneficial Interest of, or the propriety of the amount to be paid
therefor; or
5. The legality of the declaration of any dividend by Fund, or the
legality of the issue of any shares of Beneficial Interest of
Fund in payment of any stock dividend.
F. Custodian shall not be liable for, or considered to be Custodian of,
any money represented by any check, draft, wire transfer, clearing
house funds, uncollected funds, or instrument for the payment of money
received by it on behalf of Fund, until Custodian actually receives
such money, provided only that it shall advise Fund promptly if it
fails to receive any such money in the ordinary course of business,
24
<PAGE>
and use its best efforts and cooperate with Fund toward the end that
such money shall be received.
G. Custodian shall not be responsible for loss occasioned by the acts,
neglects, defaults or insolvency of any broker, bank, trust company,
or any other person with whom Custodian may deal in the absence of
negligence, or bad faith on the part of Custodian, except as provided
in Section 3.S.1 hereof.
H. Notwithstanding anything herein to the contrary, Custodian may, and
with respect to any foreign subcustodian appointed under Section
3.S.2. must, provide Fund for its approval, agreements with banks or
trust companies which will act as subcustodians for Fund pursuant to
Section 3.S of this Agreement.
6. COMPENSATION. Fund will pay to Custodian such compensation as is stated in
the Fee Schedule attached hereto as Exhibit B which may be changed from
time to time as agreed to in writing by Custodian and Fund. Custodian may
charge such compensation against monies held by it for the account of Fund.
Custodian will also be entitled, notwithstanding the provisions of Sections
5.C. or 5.D. hereof, to charge against any monies held by it for the
account of Fund the amount of any loss, damage, liability, advance, or
expense for which it shall be entitled to reimbursement under the
provisions of this Agreement including fees or expenses due to Custodian
for other services provided to the Fund by the Custodian. Custodian will
not be entitled to reimbursement by Fund for any loss or expenses of any
subcustodian.
7. TERMINATION. Either party to this Agreement may terminate the same by
notice in writing, delivered or mailed, postage prepaid, to the other party
hereto and received not less than ninety (90) days prior to the date upon
which such termination will take effect. If the Custodian terminates this
Agreement, the Fund may extend the effective date of the termination ninety
(90) days by written request to the Custodian thirty (30) days prior to the
end of the initial ninety
25
<PAGE>
(90) days notice period unless the Custodian in good faith could not
perform the duties hereunder. Upon termination of this Agreement, Fund will
pay to Custodian such compensation for its reimbursable disbursements,
costs and expenses paid or incurred to such date and Fund will use its best
efforts to obtain a successor custodian. Unless the holders of a majority
of the outstanding shares of "Beneficial Interest" of Fund vote to have the
securities, funds and other properties held under this Agreement delivered
and paid over to some other person, firm or corporation specified in the
vote, having not less the Two Million Dollars ($2,000,000) aggregate
capital, surplus and undivided profits, as shown by its last published
report, and meeting such other qualifications for custodian as set forth in
the Bylaws of Fund, the Board of Trustees of Fund will, forthwith upon
giving or receiving notice of termination of this Agreement, appoint as
successor custodian a bank or trust company having such qualifications.
Custodian will, upon termination of this Agreement, deliver to the
successor custodian so specified or appointed, at Custodian's office, all
securities then held by Custodian hereunder, duly endorsed and in form for
transfer, all funds and other properties of Fund deposited with or held by
Custodian hereunder, or will co-operate in effecting changes in
book-entries at the Depository Trust Company or in the Treasury/Federal
Reserve Book-Entry System pursuant to 31 CFR Sec. 306.118. In the event no
such vote has been adopted by the stockholders of shares of Beneficial
Interest of Fund and no written order designating a successor custodian has
been delivered to Custodian on or before the date when such termination
becomes effective, then Custodian will deliver the securities, funds and
properties of Fund to a bank or trust company at the selection of Custodian
and meeting the qualifications for custodian, if any, set forth in the
Bylaws of Fund and having not less that
26
<PAGE>
Two Million Dollars ($2,000,000) aggregate capital, surplus and undivided
profits, as shown by its last published report. Upon either such delivery
to a successor custodian, Custodian will have no further obligations or
liabilities under this Agreement. Thereafter such bank or trust company
will be the successor custodian under this Agreement and will be entitled
to reasonable compensation for its services. In the event that no such
successor custodian can be found, Fund will submit to its shareholders,
before permitting delivery of the cash and securities owned by Fund to
anyone other than a successor custodian, the question of whether Fund will
be liquidated or function without a custodian. Notwithstanding the
foregoing requirement as to delivery upon termination of this Agreement,
Custodian may make any other delivery of the securities, funds and property
of Fund which is permitted by the Investment Company Act of 1940, Fund's
Deed of Trust and Bylaws then in effect or apply to a court of competent
jurisdiction for the appointment of a successor custodian.
8. NOTICES. Notices, requests, instructions and other writings received by
Fund at One Bankers Trust Plaza, New York, New York 10006 such other
address as Fund may have designated to Custodian in writing, will be deemed
to have been properly given to Fund hereunder; and notices, requests,
instructions and other writings received by Custodian at its offices at 127
West 10th Street, Kansas City, Missouri 64105, or to such other address as
it may have designated to Fund in writing, will be deemed to have been
properly given to Custodian hereunder.
9. MISCELLANEOUS.
A. This Agreement is executed and delivered in the State of Missouri and
shall be governed by the laws of said state.
B. All the terms and provisions of this Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the respective
successor and assigns of the parties hereto.
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<PAGE>
C. No provisions of the Agreement may be amended or modified, in any
manner except by a written agreement properly authorized and executed
by both parties hereto.
D. The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
E. This Agreement shall become effective at the close of business on
the____ day of ___________, 19___ .
F. This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original but all of
which together will constitute one and the same instrument.
G. If any part, term or provision of this Agreement is by the courts held
to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be
affected, and the rights and obligations of the parties shall be
construed and enforced as if the Agreement did not contain the
particular part, term or provision held to be illegal or invalid.
H. Custodian will not release the identity of Fund to an issuer which
requests such information pursuant to the Shareholder Communications
Act of 1985 for the specific purpose of direct communications between
such issuer and Fund unless the Fund directs the Custodian otherwise.
I. This Agreement may not be assigned by either party without prior
written consent of the other party.
J. If any provision of the Agreement, either in its present form or as
amended from time to time, limits, qualifies, or conflicts with the
Investment Company Act of 1940 and the rules and regulations
promulgated thereunder, such statutes, rules and regulations shall
28
<PAGE>
be deemed to control and supersede such provision without nullifying
or terminating the remainder of the provisions of this Agreement.
29
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly respective authorized officers.
INVESTORS FIDUCIARY TRUST COMPANY
By:_______________________________
Gerard P. Dipoto, Jr.
Senior Vice President
ATTEST:
__________________
Cheryl J. Naegler
Assistant Secretary
SELIGMAN PENNSYLVANIA TAX-EXEMPT FUND
SERIES
By:_______________________________
Title:____________________________
ATTEST:
__________________
Secretary
30
BALLARD, SPAHR, ANDREWS & INGERSOLL
30 South 17th Street-20th Floor
Philadelphia, PA 19103
215-564-1800
July 7, 1986
Seligman Pennsylvania Tax-Exempt Fund Series
One Bankers Trust Plaza
New York, NY 10006
Ladies and Gentlemen:
You have requested our opinion relative to certain Pennsylvania law
aspects of the proposed Seligman Pennsylvania Tax-Exempt Fund Series (the
"Fund"). We have reviewed the Declaration of Trust, the By-Laws, the Prospectus
and the Statement of Additional Information and our opinion is based on
information contained in these documents, and such other documents and
information as we deemed relevant.
We are of the opinion that the Fund was validly formed in accordance
with Pennsylvania law and that issuance and sale of the Shares of each Series of
the Fund as contemplated by the above-referenced documents have been duly and
validly authorized by all necessary actions required to be taken on the part of
the Fund and, when issued and delivered against payment therefor, such Shares
will be duly and validly issued, fully paid and non-assessable by the Fund.
Very truly yours,
Ballard, Spahr, Andrews & Ingersoll
CONSENT OF INDEPENDENT AUDITORS
Seligman Pennsylvania Municipal Fund:
We consent to the incorporation by reference in the Statement of Additional
Information in this Post-Effective Amendment No. 15 to Registration Statement
No. 33-5793 of our report dated October 30, 1996, appearing in the annual report
to shareholders for the year ended September 30, 1996, and to the reference to
us under the caption "Financial Highlights" in the Prospectus, which is part of
such Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
January 24, 1997
Exhibit 10
BALLARD SPAHR ANDREWS & INGERSOLL
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103-7599
January 3, 1997
Seligman Pennsylvania Tax-Exempt Fund
100 Park Avenue
New York, NY 10017
Ladies and Gentlemen:
This letter amplifies our opinion dated January 18, 1996 and is
intended to apprise you on certain significant developments since that date in
the area of the Pennsylvania personal property tax.
As explained in our January 18, 1996 opinion, the personal property
tax is imposed on certain intangible investments held by residents of counties
imposing the tax. The tax does not apply to Pennsylvania state or municipal
obligations or to obligations of the U.S., and these exemptions flow through to
holders of shares of mutual funds invested in such obligations.
The decision of the United States Supreme Court last year in Fulton
Corp. v. Faulkner, 166 S. Ct. 848, invalidating a similar North Carolina
intangibles tax on constitutional grounds, gave rise to litigation in the
Pennsylvania courts challenging the validity of the Pennsylvania personal
property tax on the same principals. On December 23, 1996 the Pennsylvania
Commonwealth Court handed down a decision in Annenberg v. Commonwealth in which
a majority of the court remanded such a case to the Montgomery Common Pleas
Court for expedited consideration. While the remand was on technical grounds,
three of the judges expressed the view that the tax is unconstitutional. While
Annenberg has not yet been finally decided, it appears likely that this view
will prevail and that the tax will ultimately be determined to be at least
partially invalid.
Imposition of the tax is elective with the counties. According to
the Annenberg opinion, 28 out of a total of 67 Pennsylvania counties impose the
tax. Certain of the 38 (including Montgomery County) have indicated their
intention of abandoning the tax for the future.
Very truly yours,
Ballard Spahr Andrews & Ingersoll
Exhibit 13
INVESTMENT LETTER
SELIGMAN PENNSYLVANIA TAX-EXEMPT FUND SERIES
Seligman Pennsylvania Tax-Exempt Fund Series (the "Fund"), an open-end,
non-diversified management investment company, and the undersigned
("Purchaser"), intending to be legally bound, hereby agree as follows:
1. The Fund hereby sells to Purchaser and Purchaser purchases 1 Class D share
(the "Share") of beneficial interest (par value $.001) of the Fund at a
price equivalent to the net asset value of one share of the Fund as of the
close of business on January 31, 1994. The Fund hereby acknowledges receipt
from Purchaser of funds in such amount in full payment for the Share.
2. Purchaser represents and warrants to the Fund that the Shares are being
acquired for investment and not with a view to distribution thereof, and
that Purchaser has no present intention to redeem or dispose of the Share.
IN WITNESS WHEREOF, the parties have executed this agreement as of the 31st day
of January, 1994.
SELIGMAN PENNSYLVANIA TAX-EXEMPT FUND SERIES
By:
-----------------------------------------
Name: Lawrence P. Vogel
Title: Vice President
J. & W. SELIGMAN & CO. INCORPORATED
By:
-----------------------------------------
Name: Lawrence P. Vogel
Title: Senior Vice President
Exhibit 15
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
Section 1. Seligman Pennsylvania Tax-Exempt Fund Series (the "Trust") will
pay fees to Seligman Financial Services, Inc., the principal underwriter of its
shares (the "Distributor"), for administration, shareholder services and
distribution assistance for the Class A and Class D shares of the Trust. As a
result, the Trust is adopting this Administration, Shareholder Services and
Distribution Plan (the "Plan") pursuant to Section 12(b) of the Investment
Company Act of 1940, as amended (the "Act") and Rule 12b-1 thereunder.
Section 2. Pursuant to this Plan, the Trust may pay to the Distributor up
to 0.25% on an annual basis, payable quarterly, of the average daily net assets
of the Trust attributable to the Class A shares and up to 1.00% on an annual
basis, payable monthly, of the average daily net assets of the Trust
attributable to the Class D Shares. Such fee will be used in its entirety by the
Distributor to make payments for administration, shareholder services and
distribution assistance, including, but not limited to (i) compensation to
securities dealers and other organizations (each, a "Service Organization" and
collectively, the "Service Organizations"), for providing distribution
assistance with respect to assets invested in the Trust, (ii) compensation to
Service Organizations for providing administration, accounting and other
shareholder services with respect to Trust shareholders, and (iii) otherwise
promoting the sale of shares of the Trust, 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
the Distributor's costs incurred in connection with its marketing efforts with
respect to shares of the Trust. To the extent a Service Organization provides
administration, accounting and other shareholder services, payment for which is
not required to be made pursuant to a plan meeting the requirements of Rule
12b-1, a portion of the fee paid by the Trust shall be deemed to include
compensation for such services. The fees received from the Trust hereunder in
respect of the Class A shares may not be used to pay any interest expense,
carrying charges or other financing costs, and fees received hereunder may not
be used to pay any allocation of overhead of the Distributor. The fees of any
particular class of the Trust may not be used to subsidize the sale of shares of
any other class. The fees payable to Service Organizations from time to time
shall, within such limits, be determined by the Trustees of the Trust.
Section 3. J. & W. Seligman & Co. Incorporated, the Trust's investment
manager (the "Manager"), in its sole discretion, may make payments to the
Distributor for similar purposes. These payments will be made by the Manager
from its own resources, which may include the management fee that the Manager
receives from the Trust.
Section 4. This Plan shall continue in effect through December 31 of each
year so long as such continuance is specifically approved at least annually by
vote of a majority of both (a) the Trustees of the Trust and (b) the Qualified
Trustees, cast in person at a meeting called for the purpose of voting on such
approval.
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Section 5. The Distributor shall provide to the Trust's Trustees, and the
Trustees shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
Section 6. This Plan may be terminated by the Trust with respect to any
class at any time by vote of a majority of the Qualified Trustees, or by vote of
a majority of the outstanding voting securities of such class. If this Plan is
terminated in respect of a class, no amounts (other than amounts accrued but not
yet paid) would be owed by the Trust to the Distributor with respect to such
class.
Section 7. All agreements related to this Plan shall be in writing, and
shall be approved by vote of a majority of both (a) the Trustees of the Trust
and (b) the Qualified Trustees, cast in person at a meeting called for the
purpose of voting on such approval, provided, however, that the identity of a
particular Service Organization executing any such agreement may be ratified by
such a vote within 90 days of such execution. Any agreement related to this Plan
shall provide:
A. That such agreement may be terminated in respect of any class of the
Trust at any time, without payment of any penalty, by vote of a
majority of the Qualified Trustees or by vote of a majority of the
outstanding voting securities of the class, on not more than 60 days'
written notice to any other party to the agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
Section 8. This Plan may not be amended to increase materially the amount
of fees permitted pursuant to Section 2 hereof without the approval of a
majority of the outstanding voting securities of the relevant class and no
material amendment to this Plan shall be approved other than by vote of a
majority of both (a) the Trustees of the Trust and (b) the Qualified Trustees,
cast in person at a meeting called for the purpose of voting on such approval.
Section 9. The Trust is not obligated to pay any administration,
shareholder services or distribution expense in excess of the fee described in
Section 2 hereof, and, in the case of Class A shares, any expenses of
administration, shareholder services and distribution of Class A shares of the
Trust accrued in one fiscal year of the Trust may not be paid from
administration, shareholder services and distribution fees received from the
Trust in respect of Class A shares in any other fiscal year.
Section 10. As used in this Plan, (a) the terms "assignment", "interested
person" and "vote of a majority of the outstanding voting securities" shall have
the respective meanings specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission and (b) the term "Qualified Trustees" shall mean the
Trustees of the Trust who are not "interested persons" of the Trust and have no
direct or indirect financial interest in the operation of this Plan or in any
agreement related to this Plan.
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<PAGE>
ADMINISTRATION, SHAREHOLDER SERVICES AND
DISTRIBUTION AGREEMENT
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION AGREEMENT, dated as of
________________________________, 19__ between Seligman Financial Services, Inc.
("Seligman Financial Services") and ____________________________________________
(the "Service Organization").
The Parties hereto enter into a Administration, Shareholder Services and
Distribution Agreement ("Service Agreement") with respect to the shares of
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 New Jersey Tax-Exempt Fund, Inc., Seligman Pennsylvania
Tax-Exempt Fund Series, Seligman Tax-Exempt Fund Series, Inc., Seligman
Tax-Exempt Series Trust (the "Funds"), and any other future mutual funds that
may become members of the Seligman Group of Investment Companies which adopt an
Administration, Shareholder Services and Distribution Plan, pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended (the "Act"), and in
consideration of the mutual agreements herein made, agree as follows:
The Service Organization shall make such use of or provide such information
and services as may be necessary or appropriate (i) to provide shareholder
services to shareholders of the Funds and (ii) to assist Seligman Financial
Services in any distribution of shares of the Funds, including, without
limitation, making use of the Service Organization's name, client lists, and
publications, for the solicitation of sales of shares of the Funds to Service
Organization clients, and such other assistance as Seligman Financial Services
reasonably requests, to the extent permitted by applicable statute, rule or
regulation.
1. Except with respect to the Class D shares of a Fund for the first year
following the sale thereof, Seligman Financial Services shall pay to the
Service Organization a service fee (as defined in the National Association
of Securities Dealers, Inc. Rules of Fair Practice) not to exceed .25 of 1%
per annum of the average daily net assets of each class of shares of each
Fund attributable to the clients of the Service Organization.
2. With respect to the first year following the sale of Class D shares of a
Fund, Seligman Financial Services shall pay to the Service Organization at
or promptly after the time of sale a service fee (as defined in the
National Association of Securities Dealers, Inc. Rules of Fair Practice)
not to exceed .25 of 1% of the net asset value of the Class D shares sold
by the Service Organization. Such service fee shall be paid to the Service
Organization solely for personal services and/or the maintenance of
shareholder accounts to be provided by the Service Organization to the
purchaser of such Class D Shares over the course of the first year
following the sale.
3
<PAGE>
3. Any service fee paid hereunder shall be paid solely for personal services
and/or the maintenance of shareholder accounts. For greater certainty, no
part of a service fee shall be paid for subtransfer agency services,
subaccounting services, or administrative services.
4. In addition to payment of the service fee, from time to time Seligman
Financial Services may make payments to the Service Organization in
addition to those contemplated above for providing distribution assistance
with respect to assets invested in each Fund by its clients.
5. Neither the Service Organization nor any of its employees or agents are
authorized to make any representation concerning the Funds or the Funds'
shares except those contained in the then current Prospectus, copies of
which will be supplied by Seligman Financial Services. The Service
Organization shall have no authority to act as agent for Seligman Financial
Services or the Funds.
6. In consideration of the services provided pursuant to paragraphs 1, 2
and/or 4 above, the Service Organization shall be entitled to receive fees
as are set forth in Exhibit A hereto as may be amended from time to time by
Seligman Financial Services. Seligman Financial Services has no obligation
to make any such payments and the Service Organization agrees to waive
payment of its fee until Seligman Financial Services is in receipt of the
fee from the Fund(s). The payment of fees has been authorized pursuant to
an Administration, Shareholder Services and Distribution Plans (the
"Plans") approved by the Directors/Trustees and the shareholders of the
Funds pursuant to the requirements of the Act and such authorizations may
be withdrawn at any time.
7. It is understood that the Funds reserve the right, at their discretion and
without notice, to suspend or withdraw the sale of shares of the Funds.
This Agreement shall not be construed to authorize the Service Organization
to perform any act that Seligman Financial Services would not be permitted
to perform under the respective Distributing Agreements between each of the
Funds and Seligman Financial Services.
8. Subject to the proviso in Section 6 of the Plans, this Agreement shall
continue until December 31 of the year in which any Plan has first been
approved by shareholders and through December 31 of each year thereafter
provided such continuance is specifically approved at least annually by a
vote of a majority of (i) the Fund's Directors/Trustees and (ii) the
Qualified Directors/Trustees cast in person at a meeting called for the
purpose of voting on such approval and provided further that the Service
Organization shall not have notified Seligman Financial Services in writing
at least 60 days prior to the anniversary date of the previous continuance
that it does not desire such continuance. This Agreement may be terminated
at any time without payment of any penalty with respect to any of the Funds
by vote of a majority of the Qualified Directors/Trustees, or by vote of a
majority of the outstanding voting securities of the particular Fund or
class or series of a Fund, on 60 days' written notice to the Service
Organization and Seligman Financial Services. Notwithstanding anything
4
<PAGE>
contained herein, in the event that any of the Plans shall be terminated or
any of the Plans or any part thereof shall be found invalid or ordered
terminated by any regulatory or judicial authority, or the Service
Organization shall fail to perform the services contemplated by this
Agreement, such determination to be made in good faith by Seligman
Financial Services, this Agreement may be terminated with respect to such
Plan effective upon receipt of written notice thereof by the Service
Organization. This Agreement will also terminate automatically in the event
of its assignment.
9. All communications to Seligman Financial Services shall be sent to it at
its offices, 100 Park Avenue, New York, New York 10017.
Any notice to the Service Organization shall be duly given if mailed or
telegraphed to it at the address shown below.
10. As used in this Agreement, the terms "assignment", "interested person" and
"vote of a majority of the outstanding voting securities" shall have the
respective meanings specified in the Act and in the rules and regulations
thereunder and the term "Qualified Directors/Trustees" shall mean the
Directors/Trustees of a Fund who are not interested persons of the Fund and
have no direct or indirect financial interest in its Plan or in any
agreements related to the Plan.
11. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York. Anything herein to the contrary
notwithstanding, this Agreement shall not be construed to require, or to
impose any duty upon, any of the parties to do anything in violation of any
applicable laws or regulations.
5
<PAGE>
IN WITNESS WHEREOF, Seligman Financial Services and the Service Organization
have caused this Agreement to be executed by their duly authorized offices as of
the date first above written.
SELIGMAN FINANCIAL SERVICES, INC.
By
-------------------------------------
Stephen J. Hodgdon, President
SERVICE ORGANIZATION
-------------------------------------
By
-------------------------------------
Address
--------------------------------
-------------------------------------
1/95
6
<PAGE>
ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION AGREEMENT
EXHIBIT A
The payment schedule for Service Organizations is set forth immediately
below:
<TABLE>
<CAPTION>
Average Daily Fees as a Percentage
Net Assets of Each Fund's/Series'
Attributable to Net Assets Attributable
Fund Name Service Organizations to Service Organizations*
- --------- --------------------- -------------------------
Class A Shares/ Class D
Class A Shares Class B Shares+ Shares**
-------------- --------------- --------
<S> <C> <C> <C>
Seligman Capital Fund, Inc. $100,000 or more .25% 1.00%
Seligman Cash Management Fund, Inc. $100,000 or more -0-/.25% 1.00%
Seligman Common Stock Fund, Inc. $100,000 or more .25% 1.00%
Seligman Communications and Information Fund, Inc. $100,000 or more .25% 1.00%
Seligman Frontier Fund, Inc. $100,000 or more .25% 1.00%
Seligman Growth Fund, Inc. $100,000 or more .25% 1.00%
Seligman Henderson Global Fund Series, Inc:
Seligman Henderson Emerging Markets Growth Fund $100,000 or more .25% 1.00%
Seligman Henderson Global Smaller Companies Fund $100,000 or more .25% 1.00%
Seligman Henderson Global Growth Opportunities Fund $100,000 or more .25% 1.00%
Seligman Henderson Global Technology Fund $100,000 or more .25% 1.00%
Seligman Henderson International Fund $100,000 or more .25% 1.00%
Seligman High Income Fund Series:
U.S. Government Securities Series $100,000 or more .25% 1.00%
High-Yield Bond Series $100,000 or more .25% 1.00%
Seligman Income Fund, Inc. $100,000 or more .25% 1.00%
Seligman New Jersey Municipal Fund, Inc. $100,000 or more .25% 1.00%
Seligman Pennsylvania Municipal Fund Series $100,000 or more .25% 1.00%
Seligman Municipal Fund Series, Inc:
National Series $100,000 or more .10% 1.00%
Colorado Series $100,000 or more .10% 1.00%
Georgia Series $100,000 or more .10% 1.00%
Louisiana Series $100,000 or more .10% 1.00%
Maryland Series $100,000 or more .10% 1.00%
Massachusetts Series $100,000 or more .10% 1.00%
Michigan Series $100,000 or more .10% 1.00%
Minnesota Series $100,000 or more .10% 1.00%
Missouri Series $100,000 or more .10% 1.00%
New York Series $100,000 or more .10% 1.00%
Ohio Series $100,000 or more .10% 1.00%
Oregon Series $100,000 or more .10% 1.00%
South Carolina Series $100,000 or more .10% 1.00%
Seligman Municipal Series Trust:
California Municipal Quality Series $100,000 or more .10% 1.00%
California Municipal High-Yield Series $100,000 or more .10% 1.00%
Florida Municipal Series $100,000 or more .25% 1.00%
North Carolina Municipal Series $100,000 or more .25% 1.00%
</TABLE>
7
<PAGE>
November 21, 1996
* Included in each of the percentages above is the service fee (as defined in
the National Association of Securities Dealers, Inc. Rules of Fair
Practice) with respect to each class of shares referred to in paragraph 1
of this Agreement. Except as provided in Footnote ** below, Seligman
Financial Services shall pay the fees provided for above to the Service
Organization quarterly.
** At or promptly after the time of sale of any Class D Shares, a Service
Organization shall be paid 1.00% of the net asset value of the Class D
Shares sold by it. The difference between .75% and the amount paid is
comprised of the service fee referred to in paragraph 1 of this Agreement
for services to be provided to Class D shareholders over the course of the
one year period immediately following the sale.
+ Class B Shares are not available for the Seligman New Jersey Municipal
Fund, Inc., Seligman Pennsylvania Municipal Fund Series or any Series of
Seligman Municipal Fund Series, Inc. or Seligman Municipal Series Trust.
SELIGMAN PENNSYLVANIA MUNICIPAL FUND
"CLASS ""A"""
Tax Equivalent Yield
12/31/96
I) Formulas used in Calculation:
EY SY TY
A) TEY = - + - + -
1 - MR 1 - FT 1
B) MR = (FT + ST) - (FT * ST)
II) Where: TEY = tax equivalent yield
EY = fully exempt portion of yield
SY = state taxable portion of yield (federally exempt)
TY = taxable portion of yield
MR = maximum tax rate
FT = Federal Tax Rate
ST = State Tax Rate
4.45% - Yield of Fund
39.60% - Federal tax rate
2.80% - State tax rate
100.00% - Federal tax exempt
99.57% - State tax exempt
III) Calculations:
MR = ( 39.60% + 2.80% ) - ( 39.60% * 2.80% ) = 41.29%
4.45% * 99.57% 4.45% * 00.43%
TEY = - ----- + = - ---- = 7.58%
(1 - 41.29%) (1 - 39.60%) =
Page 1
<PAGE>
SELIGMAN PENNSYLVANIA MUNICIPAL FUND
"CLASS ""D"""
Tax Equivalent Yield
12/31/96
I) Formulas used in Calculation:
EY SY TY
A) TEY = - + - + -
1 - MR 1 - FT 1
B) MR = (FT + ST) - (FT * ST)
II) Where: TEY = tax equivalent yield
EY = fully exempt portion of yield
SY = state taxable portion of yield (federally exempt)
TY = taxable portion of yield
MR = maximum tax rate
FT = Federal Tax Rate
ST = State Tax Rate
3.89% - Yield of Fund
39.60% - Federal tax rate
2.80% - State tax rate
100.00% - Federal tax exempt
99.57% - State tax exempt
III) Calculations:
MR = ( 39.60% + 2.80% ) - ( 39.60% * 2.80% ) = 41.29%
3.89% * 99.57% 3.89% * 00.43%
TEY = - ----- + - ---- = 6.63%
(1 - 41.29%) (1 - 39.60%) =
<PAGE>
SELIGMAN PENNSYLVANIA MUNICIPAL FUND CLASS A
AVERAGE ANNUAL TOTAL RETURN OF AN ASSUMED INVESTMENT OF $1,000.00
RETURN COMPUTATION FOR THE 10.00 YEAR PERIOD ENDED 30-Sep-96
LOAD RATE EQUALS 4.75% MAXIMUM OFFERING PRICE EQ $7.95
DVD PER # OF SHARES CUMUL
DATE SHARE D/G NAV YRS ACQUIRED SHARES VALUE
- ----------- -------- ---- ------ ------ -------- --------- -----------
30-Sep-86 7.57 125.786 125.786 $952.20
17-Oct-86 0.046350 D 7.59 0.047 0.768 126.554 $960.54
17-Oct-86 0.013000 G 7.59 0.047 0.215 126.769 $962.18
30-Oct-86 0.000000 7.67 0.082 0.000 126.769 $972.32
17-Nov-86 0.044016 D 7.70 0.132 0.725 127.494 $981.70
30-Nov-86 0.000000 7.73 0.167 0.000 127.494 $985.53
17-Dec-86 0.044516 D 7.68 0.214 0.739 128.233 $984.83
31-Dec-86 7.69 0.252 0.000 128.233 $986.11
19-Jan-87 0.045930 D 7.79 0.304 0.756 128.989 $1,004.82
30-Jan-87 0.000000 7.85 0.334 0.000 128.989 $1,012.56
17-Feb-87 0.041185 D 7.83 0.384 0.678 129.667 $1,015.29
28-Feb-87 0.000000 7.83 0.414 0.000 129.667 $1,015.29
17-Mar-87 0.039562 D 7.88 0.460 0.651 130.318 $1,026.91
31-Mar-87 7.76 0.499 0.000 130.318 $1,011.27
20-Apr-87 0.048340 D 7.24 0.553 0.870 131.188 $949.80
30-Apr-87 0.000000 7.18 0.581 0.000 131.188 $941.93
18-May-87 0.038789 D 7.12 0.630 0.715 131.903 $939.15
30-May-87 0.000000 7.00 0.663 0.000 131.903 $923.32
17-Jun-87 0.040016 D 7.24 0.712 0.729 132.632 $960.26
30-Jun-87 7.23 0.748 0.000 132.632 $958.93
17-Jul-87 0.042394 D 7.27 0.795 0.773 133.405 $969.85
30-Jul-87 0.000000 7.24 0.830 0.000 133.405 $965.85
17-Aug-87 0.038142 D 7.23 0.879 0.704 134.109 $969.61
30-Aug-87 0.000000 7.20 0.915 0.000 134.109 $965.58
17-Sep-87 0.041773 D 6.85 0.964 0.818 134.927 $924.25
30-Sep-87 6.76 1.000 0.000 134.927 $912.11
19-Oct-87 0.010000 G 6.19 1.052 0.218 135.145 $836.55
19-Oct-87 0.044231 D 6.19 1.052 0.964 136.109 $842.51
30-Oct-87 0.000000 6.73 1.082 0.000 136.109 $916.01
17-Nov-87 0.039870 D 6.95 1.132 0.781 136.890 $951.39
30-Nov-87 0.000000 6.96 1.167 0.000 136.890 $952.75
17-Dec-87 0.040741 D 6.94 1.214 0.804 137.694 $955.60
31-Dec-87 7.06 1.252 0.000 137.694 $972.12
18-Jan-88 0.042801 D 7.13 1.301 0.827 138.521 $987.65
30-Jan-88 0.000000 7.36 1.334 0.000 138.521 $1,019.51
17-Feb-88 0.039818 D 7.37 1.384 0.748 139.269 $1,026.41
29-Feb-88 0.000000 7.42 1.416 0.000 139.269 $1,033.38
17-Mar-88 0.038525 D 7.24 1.463 0.741 140.010 $1,013.67
31-Mar-88 7.18 1.501 0.000 140.010 $1,005.27
18-Apr-88 0.043370 D 7.16 1.551 0.848 140.858 $1,008.54
30-Apr-88 0.000000 7.20 1.584 0.000 140.858 $1,014.18
17-May-88 0.039460 D 7.19 1.630 0.773 141.631 $1,018.33
30-May-88 0.000000 7.13 1.666 0.000 141.631 $1,009.83
19-Jun-88 0.045148 D 7.21 1.721 0.887 142.518 $1,027.55
30-Jun-88 7.24 1.751 0.000 142.518 $1,031.83
18-Jul-88 0.039410 D 7.22 1.800 0.778 143.296 $1,034.60
30-Jul-88 0.000000 7.23 1.833 0.000 143.296 $1,036.03
17-Aug-88 0.040715 D 7.18 1.882 0.813 144.109 $1,034.70
30-Aug-88 0.000000 7.22 1.918 0.000 144.109 $1,040.47
19-Sep-88 0.044672 D 7.31 1.973 0.881 144.990 $1,059.88
30-Sep-88 7.31 2.003 0.000 144.990 $1,059.88
17-Oct-88 0.038119 D 7.39 2.049 0.748 145.738 $1,077.00
30-Oct-88 0.000000 7.47 2.085 0.000 145.738 $1,088.66
17-Nov-88 0.042365 D 7.36 2.134 0.839 146.577 $1,078.81
30-Nov-88 0.000000 7.31 2.170 0.000 146.577 $1,071.48
19-Dec-88 0.043680 D 7.29 2.222 0.878 147.455 $1,074.95
31-Dec-88 7.41 2.255 0.000 147.455 $1,092.64
17-Jan-89 0.038919 D 7.48 2.301 0.767 148.222 $1,108.70
30-Jan-89 0.000000 7.53 2.337 0.000 148.222 $1,116.11
20-Feb-89 0.046015 D 7.41 2.395 0.920 149.142 $1,105.14
28-Feb-89 0.000000 7.38 2.416 0.000 149.142 $1,100.67
19-Mar-89 0.036457 D 7.34 2.468 0.741 149.883 $1,100.14
31-Mar-89 7.34 2.501 0.000 149.883 $1,100.14
17-Apr-89 0.039018 D 7.41 2.548 0.789 150.672 $1,116.48
30-Apr-89 0.000000 7.50 2.584 0.000 150.672 $1,130.04
17-May-89 0.040683 D 7.56 2.630 0.811 151.483 $1,145.21
30-May-89 0.000000 7.57 2.666 0.000 151.483 $1,146.73
19-Jun-89 0.044660 D 7.61 2.721 0.889 152.372 $1,159.55
30-Jun-89 7.64 2.751 0.000 152.372 $1,164.12
17-Jul-89 0.036784 D 7.65 2.797 0.733 153.105 $1,171.25
30-Jul-89 0.000000 7.68 2.833 0.000 153.105 $1,175.85
17-Aug-89 0.039923 D 7.57 2.882 0.807 153.912 $1,165.11
31-Aug-89 7.53 2.921 0.000 153.912 $1,158.96
18-Sep-89 0.042685 D 7.54 2.970 0.871 154.783 $1,167.06
30-Sep-89 7.50 3.003 0.000 154.783 $1,160.87
17-Oct-89 0.038560 D 7.59 3.049 0.786 155.569 $1,180.77
31-Oct-89 7.55 3.088 0.000 155.569 $1,174.55
17-Nov-89 0.044635 D 7.61 3.134 0.912 156.481 $1,190.82
30-Nov-89 7.65 3.170 0.000 156.481 $1,197.08
18-Dec-89 0.037514 D 7.66 3.219 0.766 157.247 $1,204.51
31-Dec-89 7.66 3.255 0.000 157.247 $1,204.51
17-Jan-90 0.037827 D 7.61 3.301 0.782 158.029 $1,202.60
31-Jan-90 7.51 3.340 0.000 158.029 $1,186.80
20-Feb-90 0.044882 D 7.57 3.395 0.937 158.966 $1,203.37
28-Feb-90 7.57 3.416 0.000 158.966 $1,203.37
19-Mar-90 0.034116 D 7.52 3.468 0.721 159.687 $1,200.85
31-Mar-90 7.52 3.501 0.000 159.687 $1,200.85
17-Apr-90 0.036740 D 7.51 3.548 0.781 160.468 $1,205.11
30-Apr-90 7.35 3.584 0.000 160.468 $1,179.44
17-May-90 0.038143 D 7.52 3.630 0.814 161.282 $1,212.84
31-May-90 7.55 3.668 0.000 161.282 $1,217.68
18-Jun-90 0.040290 D 7.56 3.718 0.860 162.142 $1,225.79
30-Jun-90 7.57 3.751 0.000 162.142 $1,227.41
17-Jul-90 0.037072 D 7.62 3.797 0.789 162.931 $1,241.53
31-Jul-90 7.66 3.836 0.000 162.931 $1,248.05
17-Aug-90 0.042676 D 7.49 3.882 0.928 163.859 $1,227.30
31-Aug-90 7.40 3.921 0.000 163.859 $1,212.56
17-Sep-90 0.037915 D 7.44 3.967 0.835 164.694 $1,225.32
30-Sep-90 7.34 4.003 0.000 164.694 $1,208.85
17-Oct-90 0.039287 D 7.38 4.049 0.877 165.571 $1,221.91
31-Oct-90 7.48 4.088 0.000 165.571 $1,238.47
16-Nov-90 0.041390 D 7.52 4.132 0.911 166.482 $1,251.94
16-Nov-90 0.085000 G 7.52 4.132 1.871 168.353 $1,266.01
30-Nov-90 7.53 4.170 0.000 168.353 $1,267.70
17-Dec-90 0.037191 D 7.53 4.216 0.832 169.185 $1,273.96
31-Dec-90 7.50 4.255 0.000 169.185 $1,268.89
17-Jan-91 0.039892 D 7.53 4.301 0.896 170.081 $1,280.71
31-Jan-91 7.56 4.340 0.000 170.081 $1,285.81
15-Feb-91 0.040342 D 7.65 4.381 0.897 170.978 $1,307.98
28-Feb-91 7.56 4.416 0.000 170.978 $1,292.59
15-Mar-91 0.034284 D 7.55 4.458 0.776 171.754 $1,296.74
31-Mar-91 7.50 4.501 0.000 171.754 $1,288.16
17-Apr-91 0.039440 D 7.60 4.548 0.891 172.645 $1,312.10
30-Apr-91 7.60 4.584 0.000 172.645 $1,312.10
17-May-91 0.041212 D 7.61 4.630 0.935 173.580 $1,320.94
31-May-91 7.63 4.668 0.000 173.580 $1,324.42
17-Jun-91 0.037134 D 7.52 4.715 0.857 174.437 $1,311.77
30-Jun-91 7.56 4.751 0.000 174.437 $1,318.74
17-Jul-91 0.038496 D 7.59 4.797 0.885 175.322 $1,330.69
31-Jul-91 7.62 4.836 0.000 175.322 $1,335.95
16-Aug-91 0.040204 D 7.65 4.879 0.921 176.243 $1,348.26
31-Aug-91 7.67 4.921 0.000 176.243 $1,351.78
17-Sep-91 0.037679 D 7.71 4.967 0.861 177.104 $1,365.47
30-Sep-91 7.74 5.003 0.000 177.104 $1,370.78
17-Oct-91 0.037734 D 7.75 5.049 0.862 177.966 $1,379.24
31-Oct-91 7.75 5.088 0.000 177.966 $1,379.24
15-Nov-91 0.017000 G 7.74 5.129 0.391 178.357 $1,380.48
15-Nov-91 0.038876 D 7.74 5.129 0.894 179.251 $1,387.40
30-Nov-91 7.70 5.170 0.000 179.251 $1,380.23
17-Dec-91 0.037568 D 7.75 5.216 0.869 180.120 $1,395.93
31-Dec-91 7.84 5.255 0.000 180.120 $1,412.14
17-Jan-92 0.041259 D 7.85 5.301 0.947 181.067 $1,421.38
31-Jan-92 7.80 5.340 0.000 181.067 $1,412.32
16-Feb-92 0.036841 D 7.76 5.384 0.860 181.927 $1,411.75
29-Feb-92 7.78 5.419 0.000 181.927 $1,415.39
17-Mar-92 0.036486 D 7.71 5.466 0.861 182.788 $1,409.30
31-Mar-92 7.75 5.504 0.000 182.788 $1,416.61
16-Apr-92 0.040799 D 7.81 5.548 0.955 183.743 $1,435.03
30-Apr-92 7.77 5.586 0.000 183.743 $1,427.68
15-May-92 0.034523 D 7.84 5.627 0.809 184.552 $1,446.89
31-May-92 7.83 5.671 0.000 184.552 $1,445.04
17-Jun-92 0.037612 D 7.88 5.718 0.881 185.433 $1,461.21
30-Jun-92 7.94 5.753 0.000 185.433 $1,472.34
17-Jul-92 0.039304 D 8.08 5.800 0.902 186.335 $1,505.59
31-Jul-92 8.20 5.838 0.000 186.335 $1,527.95
17-Aug-92 0.036086 D 8.07 5.885 0.833 187.168 $1,510.45
31-Aug-92 8.04 5.923 0.000 187.168 $1,504.83
17-Sep-92 0.039317 D 8.04 5.970 0.915 188.083 $1,512.19
30-Sep-92 8.02 6.005 0.000 188.083 $1,508.43
16-Oct-92 0.036412 D 7.97 6.049 0.859 188.942 $1,505.87
30-Oct-92 7.87 6.088 0.000 188.942 $1,486.97
17-Nov-92 0.036733 D 7.91 6.137 0.877 189.819 $1,501.47
17-Nov-92 0.116000 G 7.91 6.137 2.771 192.590 $1,523.39
30-Nov-92 7.94 6.173 0.000 192.590 $1,529.16
17-Dec-92 0.035879 D 7.95 6.219 0.869 193.459 $1,538.00
31-Dec-92 0.000000 7.98 6.258 0.000 193.459 $1,543.80
15-Jan-93 0.036299 D 8.00 6.299 0.878 194.337 $1,554.70
29-Jan-93 8.05 6.337 0.000 194.337 $1,564.41
17-Feb-93 0.035934 D 8.16 6.389 0.856 195.193 $1,592.77
26-Feb-93 8.33 6.414 0.000 195.193 $1,625.96
17-Mar-93 0.031482 D 8.21 6.466 0.748 195.941 $1,608.68
31-Mar-93 0.000000 8.18 6.504 0.000 195.941 $1,602.80
16-Apr-93 0.036410 D 8.26 6.548 0.864 196.805 $1,625.61
30-Apr-93 8.23 6.586 0.000 196.805 $1,619.71
17-May-93 0.033725 D 8.25 6.633 0.805 197.610 $1,630.28
31-May-93 8.24 6.671 0.000 197.610 $1,628.31
17-Jun-93 0.036134 D 8.31 6.718 0.859 198.469 $1,649.28
30-Jun-93 0.000000 8.38 6.753 0.000 198.469 $1,663.17
16-Jul-93 0.035657 D 8.41 6.797 0.841 199.310 $1,676.20
30-Jul-93 0.000000 8.34 6.836 0.000 199.310 $1,662.25
17-Aug-93 0.033293 D 8.47 6.885 0.783 200.093 $1,694.79
31-Aug-93 0.000000 8.53 6.923 0.000 200.093 $1,706.79
17-Sep-93 0.037180 D 8.60 6.970 0.865 200.958 $1,728.24
30-Sep-93 0.000000 8.61 7.005 0.000 200.958 $1,730.25
15-Oct-93 0.030048 D 8.70 7.047 0.694 201.652 $1,754.37
29-Oct-93 8.58 7.085 0.000 201.652 $1,730.17
17-Nov-93 0.034216 D 8.21 7.137 0.840 202.492 $1,662.46
17-Nov-93 0.261000 G 8.21 7.137 6.411 208.903 $1,715.09
30-Nov-93 0.000000 8.18 7.173 0.000 208.903 $1,708.83
17-Dec-93 0.033730 D 8.28 7.219 0.851 209.754 $1,736.76
31-Dec-93 0.000000 8.31 7.258 0.000 209.754 $1,743.06
17-Jan-94 0.030749 D 8.32 7.304 0.775 210.529 $1,751.60
31-Jan-94 0.000000 8.39 7.342 0.000 210.529 $1,766.34
17-Feb-94 0.032618 D 8.25 7.389 0.832 211.361 $1,743.73
28-Feb-94 0.000000 8.11 7.419 0.000 211.361 $1,714.14
17-Mar-94 0.030247 D 7.95 7.466 0.804 212.165 $1,686.71
31-Mar-94 0.000000 7.69 7.504 0.000 212.165 $1,631.55
15-Apr-94 0.033580 D 7.70 7.545 0.925 213.090 $1,640.79
29-Apr-94 0.000000 7.68 7.584 0.000 213.090 $1,636.53
17-May-94 0.032404 D 7.70 7.633 0.897 213.987 $1,647.70
31-May-94 7.74 7.671 0.000 213.987 $1,656.26
17-Jun-94 0.035535 D 7.79 7.718 0.976 214.963 $1,674.56
30-Jun-94 0.000000 7.63 7.753 0.000 214.963 $1,640.17
15-Jul-94 0.030037 D 7.70 7.795 0.839 215.802 $1,661.68
29-Jul-94 0.000000 7.78 7.833 0.000 215.802 $1,678.94
17-Aug-94 0.033035 D 7.73 7.885 0.922 216.724 $1,675.28
31-Aug-94 0.000000 7.74 7.923 0.000 216.724 $1,677.44
16-Sep-94 0.034405 D 7.61 7.967 0.980 217.704 $1,656.73
30-Sep-94 0.000000 7.55 8.005 0.000 217.704 $1,643.67
17-Oct-94 0.030469 D 7.53 8.052 0.881 218.585 $1,645.95
31-Oct-94 0.000000 7.34 8.090 0.000 218.585 $1,604.41
17-Nov-94 0.131000 CG 6.89 8.137 4.156 222.741 $1,534.69
17-Nov-94 0.033001 D 6.89 8.137 1.047 223.788 $1,541.90
30-Nov-94 0.000000 7.02 8.173 0.000 223.788 $1,570.99
16-Dec-94 0.031522 D 7.17 8.216 0.984 224.772 $1,611.62
31-Dec-94 0.000000 7.21 8.258 0.000 224.772 $1,620.61
17-Jan-95 0.031156 D 7.33 8.304 0.955 225.727 $1,654.58
31-Jan-95 0.000000 7.42 8.342 0.000 225.727 $1,674.89
17-Feb-95 0.035209 D 7.55 8.389 1.053 226.780 $1,712.19
28-Feb-95 0.000000 7.62 8.419 0.000 226.780 $1,728.06
17-Mar-95 0.028654 D 7.67 8.466 0.847 227.627 $1,745.90
31-Mar-95 0.000000 7.66 8.504 0.000 227.627 $1,743.62
17-Apr-95 0.030911 D 7.73 8.551 0.910 228.537 $1,766.59
28-Apr-95 0.000000 7.63 8.581 0.000 228.537 $1,743.74
17-May-95 0.031593 D 7.80 8.633 0.926 229.463 $1,789.81
31-May-95 0.000000 7.85 8.671 0.000 229.463 $1,801.28
16-Jun-95 0.033000 D 7.77 8.715 0.975 230.438 $1,790.50
30-Jun-95 0.000000 7.73 8.753 0.000 230.438 $1,781.29
17-Jul-95 0.030371 D 7.81 8.800 0.896 231.334 $1,806.72
31-Jul-95 0.000000 7.73 8.838 0.000 231.334 $1,788.21
17-Aug-95 0.033194 D 7.64 8.885 1.005 232.339 $1,775.07
31-Aug-95 0.000000 7.79 8.923 0.000 232.339 $1,809.92
15-Sep-95 0.031561 D 7.88 8.964 0.931 233.270 $1,838.17
30-Sep-95 7.79 9.005 0.000 233.270 $1,817.17
17-Oct-95 0.030032 D 7.91 9.052 0.886 234.156 $1,852.17
31-Oct-95 0.000000 7.90 9.090 0.000 234.156 $1,849.83
17-Nov-95 0.093000 G 7.86 9.137 2.771 236.927 $1,862.25
17-Nov-95 0.033433 D 7.86 9.137 0.996 237.923 $1,870.07
30-Nov-95 0.000000 7.94 9.173 0.000 237.923 $1,889.11
15-Dec-95 0.028243 D 7.93 9.214 0.847 238.770 $1,893.45
29-Dec-95 0.000000 8.01 9.252 0.000 238.770 $1,912.55
31-Dec-95 0.000000 8.01 9.258 0.000 238.770 $1,912.55
17-Jan-96 0.031478 D 7.98 9.304 0.942 239.712 $1,912.90
31-Jan-96 0.000000 8.01 9.342 0.000 239.712 $1,920.09
16-Feb-96 0.033594 D 8.04 9.386 1.002 240.714 $1,935.34
29-Feb-96 0.000000 7.93 9.422 0.000 240.714 $1,908.86
15-Mar-96 0.027724 D 7.67 9.463 0.870 241.584 $1,852.95
29-Mar-96 0.000000 7.74 9.501 0.000 241.584 $1,869.86
31-Mar-96 0.000000 7.74 9.507 0.000 241.584 $1,869.86
17-Apr-96 0.032165 D 7.69 9.553 1.010 242.594 $1,865.55
30-Apr-96 0.000000 7.66 9.589 0.000 242.594 $1,858.27
17-May-96 0.033455 D 7.70 9.636 1.054 243.648 $1,876.09
31-May-96 0.000000 D 7.64 9.674 0.000 243.648 $1,861.47
17-Jun-96 0.030549 D 7.60 9.721 0.979 244.627 $1,859.17
30-Jun-96 0.000000 7.69 9.756 0.000 244.627 $1,881.18
17-Jul-96 0.030932 D 7.68 9.803 0.985 245.612 $1,886.30
31-Jul-96 7.75 9.841 0.000 245.612 $1,903.49
17-Aug-96 0.033301 D 7.85 9.888 1.042 246.654 $1,936.23
31-Aug-96 7.73 9.926 0.000 246.654 $1,906.64
17-Sep-96 0.031260 D 7.78 9.973 0.991 247.645 $1,926.68
30-Sep-96 0.000000 7.82 10.008 0.000 247.645 $1,936.58
CALCULATION OF
AVERAGE ANNUAL TOTAL RETURN
P*(1+T)^N = ERV
P = INITIAL PAYMENT - $1,000.00
T = AVG. ANNUAL TOTAL RETU 6.83%
N = NUMBER OF YEARS - 10
ERV = ENDING REDEEMABLE VA $1,936.58
TOTAL RETURN FOR PERIOD 93.66%
<PAGE>
SELIGMAN PENNSYLVANIA MUNICIPAL FUND CLASS D
AVERAGE ANNUAL TOTAL RETURN OF AN ASSUMED INVESTMENT OF $1,000.00
RETURN COMPUTATION FOR THE 2.66 YEAR PERIOD ENDED 30-Sep-96
LOAD RATE EQUALS 0.00% MAXIMUM OFFERING PRICE EQ $8.370
DVD PER # OF SHARES CUMUL
DATE SHARE D/G NAV YRS ACQUIRED SHARES VALUE
- ----------- -------- ---- ------ ------ -------- --------- -----------
01-Feb-94 0.000000 8.37 119.474 119.474 $1,000.00
17-Feb-94 0.014550 D 8.25 0.044 0.211 119.685 $987.40
28-Feb-94 8.11 0.074 0.000 119.685 $970.65
17-Mar-94 0.025136 D 7.95 0.121 0.378 120.063 $954.50
31-Mar-94 0.000000 7.70 0.159 0.000 120.063 $924.49
15-Apr-94 0.028127 D 7.70 0.200 0.439 120.502 $927.87
29-Apr-94 0.000000 7.68 0.238 0.000 120.502 $925.46
17-May-94 0.027090 D 7.70 0.288 0.424 120.926 $931.13
31-May-94 7.74 0.326 0.000 120.926 $935.97
17-Jun-94 0.029526 D 7.79 0.373 0.458 121.384 $945.58
30-Jun-94 0.000000 7.63 0.408 0.000 121.384 $926.16
15-Jul-94 0.025098 D 7.70 0.449 0.396 121.780 $937.71
29-Jul-94 0.000000 7.78 0.488 0.000 121.780 $947.45
17-Aug-94 0.027567 D 7.73 0.540 0.434 122.214 $944.71
31-Aug-94 0.000000 7.74 0.578 0.000 122.214 $945.94
16-Sep-94 0.028773 D 7.61 0.622 0.462 122.676 $933.56
30-Sep-94 0.000000 7.54 0.660 0.000 122.676 $924.98
17-Oct-94 0.025441 D 7.52 0.707 0.415 123.091 $925.64
31-Oct-94 0.000000 7.34 0.745 0.000 123.091 $903.49
17-Nov-94 0.131000 CG 6.89 0.792 2.340 125.431 $864.22
17-Nov-94 0.027803 D 6.89 0.792 0.497 125.928 $867.64
30-Nov-94 0.000000 7.02 0.827 0.000 125.928 $884.01
16-Dec-94 0.026425 D 7.17 0.871 0.464 126.392 $906.23
31-Dec-94 0.000000 7.20 0.912 0.000 126.392 $910.02
17-Jan-95 0.025560 D 7.33 0.959 0.441 126.833 $929.69
31-Jan-95 0.000000 7.41 0.997 0.000 126.833 $939.83
17-Feb-95 0.028672 D 7.55 1.044 0.482 127.315 $961.23
28-Feb-95 0.000000 7.62 1.074 0.000 127.315 $970.14
17-Mar-95 0.023469 D 7.66 1.121 0.390 127.705 $978.22
31-Mar-95 0.000000 7.66 1.159 0.000 127.705 $978.22
17-Apr-95 0.025087 D 7.73 1.205 0.414 128.119 $990.36
28-Apr-95 0.000000 7.63 1.236 0.000 128.119 $977.55
17-May-95 0.025155 D 7.80 1.288 0.413 128.532 $1,002.55
31-May-95 0.000000 7.85 1.326 0.000 128.532 $1,008.98
16-Jun-95 0.024919 D 7.77 1.370 0.412 128.944 $1,001.89
30-Jun-95 0.000000 7.73 1.408 0.000 128.944 $996.74
17-Jul-95 0.022737 D 7.80 1.455 0.376 129.320 $1,008.70
31-Jul-95 0.000000 7.73 1.493 0.000 129.320 $999.64
17-Aug-95 0.027041 D 7.64 1.540 0.458 129.778 $991.50
31-Aug-95 0.000000 7.79 1.578 0.000 129.778 $1,010.97
15-Sep-95 0.026495 D 7.88 1.619 0.436 130.214 $1,026.09
30-Sep-95 7.78 1.660 0.000 130.214 $1,013.06
17-Oct-95 0.025203 D 7.91 1.707 0.415 130.629 $1,033.28
31-Oct-95 0.000000 7.89 1.745 0.000 130.629 $1,030.66
17-Nov-95 0.093000 G 7.86 1.792 1.546 132.175 $1,038.90
17-Nov-95 0.028099 D 7.86 1.792 0.467 132.642 $1,042.57
30-Nov-95 0.000000 7.93 1.827 0.000 132.642 $1,051.85
15-Dec-95 0.023643 D 7.92 1.868 0.396 133.038 $1,053.66
29-Dec-95 0.000000 8.00 1.907 0.000 133.038 $1,064.30
31-Dec-95 0.000000 8.00 1.912 0.000 133.038 $1,064.30
17-Jan-96 0.026203 D 7.98 1.959 0.437 133.475 $1,065.13
31-Jan-96 0.000000 8.00 1.997 0.000 133.475 $1,067.80
16-Feb-96 0.027933 D 8.03 2.041 0.464 133.939 $1,075.53
29-Feb-96 0.000000 7.92 2.077 0.000 133.939 $1,060.80
15-Mar-96 0.023199 D 7.67 2.118 0.405 134.344 $1,030.42
29-Mar-96 0.000000 7.74 2.156 0.000 134.344 $1,039.82
31-Mar-96 0.000000 7.74 2.162 0.000 134.344 $1,039.82
17-Apr-96 0.027023 D 7.68 2.208 0.473 134.817 $1,035.39
30-Apr-96 0.000000 7.65 2.244 0.000 134.817 $1,031.35
17-May-96 0.028159 D 7.69 2.290 0.494 135.311 $1,040.54
31-May-96 0.000000 D 7.63 2.329 0.000 135.311 $1,032.42
17-Jun-96 0.025804 D 7.59 2.375 0.460 135.771 $1,030.50
30-Jun-96 0.000000 7.69 2.411 0.000 135.771 $1,044.08
17-Jul-96 0.026156 d 7.67 2.458 0.463 136.234 $1,044.91
31-Jul-96 0.000000 7.75 2.496 0.000 136.234 $1,055.81
16-Aug-96 0.027955 d 7.84 2.540 0.486 136.720 $1,071.88
31-Aug-96 0.000000 7.72 2.581 0.000 136.720 $1,055.48
17-Sep-96 0.026274 d 7.78 2.627 0.462 137.182 $1,067.28
30-Sep-96 0.000000 7.81 2.663 0.000 137.182 $1,071.39
CALCULATION OF
AVERAGE ANNUAL TOTAL RETURN
P*(1+T)^N = ERV
P = INITIAL PAYMENT - $1,000.00
T = AVG. ANNUAL TOTAL RETU 2.62%
N = NUMBER OF YEARS - 2.663
ERV = ENDING REDEEMABLE VA $1,071.39
TOTAL RETURN FOR PERIOD 7.14%
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> SELIGMAN PENNSYLVANIA MUNICIPAL FUND CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 30661
<INVESTMENTS-AT-VALUE> 31568
<RECEIVABLES> 566
<ASSETS-OTHER> 57
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32191
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 176
<TOTAL-LIABILITIES> 176
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30724
<SHARES-COMMON-STOCK> 3983<F1>
<SHARES-COMMON-PRIOR> 4269<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 385
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 906
<NET-ASSETS> 31139<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1925<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (361)<F1>
<NET-INVESTMENT-INCOME> 1564<F1>
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 106
<NET-CHANGE-FROM-OPS> 2095
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1564)<F1>
<DISTRIBUTIONS-OF-GAINS> (396)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 139<F1>
<NUMBER-OF-SHARES-REDEEMED> (563)<F1>
<SHARES-REINVESTED> 138<F1>
<NET-CHANGE-IN-ASSETS> (1661)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 403
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 162<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 361<F1>
<AVERAGE-NET-ASSETS> 32418<F1>
<PER-SHARE-NAV-BEGIN> 7.79
<PER-SHARE-NII> .38<F1>
<PER-SHARE-GAIN-APPREC> .12<F1>
<PER-SHARE-DIVIDEND> (.38)<F1>
<PER-SHARE-DISTRIBUTIONS> (.09)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.82<F1>
<EXPENSE-RATIO> 1.11<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>004
<NAME> SELIGMAN PENNSYLVANIA MUNICIPAL FUND CL D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 30661
<INVESTMENTS-AT-VALUE> 31568
<RECEIVABLES> 566
<ASSETS-OTHER> 57
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32191
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 176
<TOTAL-LIABILITIES> 176
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30724
<SHARES-COMMON-STOCK> 112<F1>
<SHARES-COMMON-PRIOR> 55<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 385
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 906
<NET-ASSETS> 876<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 54<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (17)<F1>
<NET-INVESTMENT-INCOME> 37<F1>
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 106
<NET-CHANGE-FROM-OPS> 2095
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (37)<F1>
<DISTRIBUTIONS-OF-GAINS> (6)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 111<F1>
<NUMBER-OF-SHARES-REDEEMED> (57)<F1>
<SHARES-REINVESTED> 3<F1>
<NET-CHANGE-IN-ASSETS> 1661
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 403
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17<F1>
<AVERAGE-NET-ASSETS> 910<F1>
<PER-SHARE-NAV-BEGIN> 7.78
<PER-SHARE-NII> .32<F1>
<PER-SHARE-GAIN-APPREC> .12<F1>
<PER-SHARE-DIVIDEND> (.32)<F1>
<PER-SHARE-DISTRIBUTIONS> (.09)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.81<F1>
<EXPENSE-RATIO> 1.88<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data are fund level.
</FN>
</TABLE>
Exhibit 18
SELIGMAN GROUP OF MUTUAL FUNDS
Plan for Multiple Classes of Shares
THIS PLAN, as it may be amended from time to time, sets forth the separate
arrangement and expense allocation of each class of shares (a "Class") of each
registered open-end management investment company, or series thereof, in the
Seligman Group of Mutual Funds that offers multiple classes of shares (each, a
"Fund"). The Plan has been adopted pursuant to Rule 18f-3(d) under the
Investment Company Act of 1940, as amended (the "Act"), by a majority of the
Board of Directors or Trustees, as applicable ("Directors"), of each Fund listed
on Schedule I hereto, including a majority of the Directors who are not
interested persons of such Fund within the meaning of Section 2(a)(19) of the
Act ("Disinterested Directors"). Any material amendment to this Plan is subject
to the prior approval of the Board of Directors of each Fund to which it
relates, including a majority of the Disinterested Directors.
1. General
A. Any Fund may issue more than one Class of voting stock, provided that
each Class:
i. Shall have a different arrangement for shareholder services or
the distribution of securities or both, and shall pay all of the
expenses of that arrangement;
ii. May pay a different share of other expenses, not including
advisory or custodial fees or other expenses related to the
management of the Fund's assets, if these expenses are actually
incurred in a different amount by that Class, or if the Class
receives services of a different kind or to a different degree
than other Classes of the same Fund ("Class Level Expenses");
iii. May pay a different advisory fee to the extent that any
difference in amount paid is the result of the application of the
same performance fee provisions in the advisory contract of the
Fund to the different investment performance of each Class;
iv. Shall have exclusive voting rights on any matter submitted to
shareholders that relates solely to its arrangement;
-1-
<PAGE>
v. Shall have separate voting rights on any matter submitted to
shareholders in which the interests of one Class differ from the
interests of any other Class; and
vi. Shall have in all other respects the same rights and obligations
as each other Class of the Fund.
B. i. Except as expressly contemplated by this paragraph B., no types
or categories of expenses shall be designated Class Level
Expenses.
ii. The Directors recognize that certain expenses arising in certain
sorts of unusual situations are properly attributable solely to
one Class and therefore should be borne by that Class. These
expenses ("Special Expenses") may include, for example: (i) the
costs of preparing a proxy statement for, and holding, a special
meeting of shareholders to vote on a matter affecting only one
Class; (ii) the costs of holding a special meeting of Directors
to consider such a matter; (iii) the costs of preparing a special
report relating exclusively to shareholders of one Class; and
(iv) the costs of litigation affecting one Class exclusively. J.
& W. Seligman & Co. Incorporated (the "Manager") shall be
responsible for identifying expenses that are potential Special
Expenses.
iii. Subject to clause iv. below, any Special Expense identified by
the Manager shall be treated as a Class Level Expense.
iv. Any Special Expense identified by the Manager that is material to
the Class in respect of which it is incurred shall be submitted
by the Manager to the Directors of the relevant Fund on a case by
case basis with a recommendation by the Manager as to whether it
should be treated as a Class Level Expense. If approved by the
Directors, such Special Expense shall be treated as a Class Level
Expense of the affected class.
C. i. Realized and unrealized capital gains and losses of a Fund shall
be allocated to each class of that Fund on the basis of the
aggregate net asset value of all outstanding shares ("Record
Shares") of the Class in relation to the aggregate net asset
value of Record Shares of the Fund.
-2-
<PAGE>
ii. Income and expenses of a Fund not charged directly to a
particular Class shall be allocated to each Class of that Fund on
the following basis:
a. For periodic dividend funds, on the basis of the aggregate
net asset value of Record Shares of each Class in relation
to the aggregate net asset value of Record Shares of the
Fund.
b. For daily dividend funds, on the basis of the aggregate net
asset value of Settled Shares of each Class in relation to
the aggregate net asset value of Settled Shares of the Fund.
"Settled Shares" means Record Shares minus the number of
shares of that Class or Fund that have been issued but for
which payment has not cleared and plus the number of shares
of that Class or Fund which have been redeemed but for which
payment has not yet been issued.
D. On an ongoing basis, the Directors, pursuant to their fiduciary
responsibilities under the Act and otherwise, will monitor each Fund
for the existence of any material conflicts among the interests of its
several Classes. The Directors, including a majority of the
Disinterested Directors, shall take such action as is reasonably
necessary to eliminate any such conflicts that may develop. The
Manager and Seligman Financial Services, Inc. (the "Distributor") will
be responsible for reporting any potential or existing conflicts to
the Directors. If a conflict arises, the Manager and the Distributor
will be responsible at their own expense for remedying such conflict
by appropriate steps up to and including separating the classes in
conflict by establishing a new registered management company to
operate one of the classes.
E. The plan of each Fund adopted pursuant to Rule 12b-1 under the Act
(the "Rule 12b-1 Plan") provides that the Directors will receive
quarterly and annual statements complying with paragraph (b)(3)(ii) of
Rule 12b-1, as it may be amended from time to time. To the extent that
the Rule 12b-1 Plan in respect of a specific Class is a reimbursement
plan, then only distribution expenditures properly attributable to the
sale of shares of that Class will be used in the statements to support
the Rule 12b-1 fee charged to shareholders of such Class. In such
cases expenditures not related to the sale of a specific Class will
not be presented to the Directors to support Rule 12b-1 fees charged
to shareholders of such Class. The statements, including the
allocations upon which they are based, will be subject to the review
of the Disinterested Directors.
-3-
<PAGE>
F. Dividends paid by a Fund with respect to each Class, to the extent any
dividends are paid, will be calculated in the same manner, at the same
time and on the same day and will be in the same amount, except that
fee payments made under the Rule 12b-1 Plan relating to the Classes
will be borne exclusively by each Class and except that any Class
Level Expenses shall be borne by the applicable Class.
G. The Directors of each Fund hereby instruct such Fund's independent
auditors to review expense allocations each year as part of their
regular audit process, to inform the Directors and the Manager of any
irregularities detected and, if specifically requested by the
Directors, to prepare a written report thereon. In addition, if any
Special Expense is incurred by a Fund and is classified as a Class
Level Expense in the manner contemplated by paragraph B. above, the
independent auditors for such Fund, in addition to reviewing such
allocation, are hereby instructed to report thereon to the Audit
Committee of the relevant Fund and to the Manager. The Manager will be
responsible for taking such steps as are necessary to remedy any
irregularities so detected, and will do so at its own expense to the
extent such irregularities should reasonably have been detected and
prevented by the Manager in the performance of its services to the
Fund.
2. Specific Arrangements for Each Class
The following arrangements regarding shareholder services, expense
allocation and other indicated matters shall be in effect with respect to the
Class A shares, Class B shares and Class D shares of each Fund. The following
descriptions are qualified by reference to the more detailed description of such
arrangements set forth in the prospectus relating to each Fund, as the same may
from time to time be amended or supplemented (for each Fund, the "Relevant
Prospectus"), provided that no Relevant Prospectus may modify the provisions of
this Plan applicable to Rule 12b-1 fees or Class Level Expenses.
(a) Class A Shares
i. Class A shares are subject to an initial sales load which varies with
the size of the purchase, to a maximum of 4.75% of the public offering
price. Reduced sales loads shall apply in certain circumstances. Class
A shares of Seligman Cash Management Fund, Inc. shall not be subject
to an initial sales load.
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ii. Class A shares shall be subject to a Rule 12b-1 service fee of up to
0.25% of average daily net assets.
iii. Special Expenses attributable to the Class A shares, except those
determined by the Directors not to be Class Level Expenses of the
Class A shares in accordance with paragraph 1.B.iv., shall be Class
Level Expenses and attributed solely to the Class A shares. No other
expenses shall be treated as Class Level Expenses of the Class A
shares.
iv. The Class A shares shall be entitled to the shareholder services,
including exchange privileges, described in the Relevant Prospectus.
(b) Class D Shares
i. Class D shares are sold without an initial sales load but are subject
to a CDSL of 1% of the lesser of the current net asset value or the
original purchase price in certain cases if the shares are redeemed
within one year.
ii. Class D shares shall be subject to a Rule 12b-1 fee of up to 1.00% of
average daily net assets, consisting of an asset-based distribution
fee of up to 0.75% and a service fee of up to 0.25%.
iii. Special Expenses attributable to the Class D shares, except those
determined by the Directors not to be Class Level Expenses of the
Class D shares in accordance with paragraph 1.B.iv., shall be Class
Level Expenses and attributed solely to the Class D shares. No other
expenses shall be treated as Class Level Expenses of the Class D
shares.
iv. The Class D shares shall be entitled to the shareholder services,
including exchange privileges, described in the Relevant Prospectus.
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Schedule I
Seligman Cash Management Fund, Inc.
Seligman Capital Fund, Inc.
Seligman Common Stock, Inc.
Seligman Communications and Information Fund, Inc.
Seligman Frontier Fund, Inc.
Seligman Growth Fund, Inc.
Seligman Income Fund, Inc.
Seligman Henderson Global Growth Opportunities Fund
Seligman Henderson Global Smaller Companies Fund
Seligman Henderson Global Technology Fund
Seligman Henderson International Fund
Seligman High-Yield Bond Fund
Seligman U.S. Government Securities Fund
Seligman National Tax-Exempt Fund
Seligman California Quality Tax-Exempt Fund
Seligman California High-Yield Tax-Exempt Fund
Seligman Colorado Tax-Exempt Fund
Seligman Florida Tax-Exempt Fund
Seligman Georgia Tax-Exempt Fund
Seligman Louisiana Tax-Exempt Fund
Seligman Maryland Tax-Exempt Fund
Seligman Massachusetts Tax-Exempt Fund
Seligman Michigan Tax-Exempt Fund
Seligman Minnesota Tax-Exempt Fund
Seligman Missouri Tax-Exempt Fund
Seligman New Jersey Tax-Exempt Fund, Inc.
Seligman New York Tax-Exempt Fund
Seligman North Carolina Tax-Exempt Fund
Seligman Ohio Tax-Exempt Fund
Seligman Oregon Tax-Exempt Fund
Seligman Pennsylvania Tax-Exempt Fund
Series Seligman South Carolina Tax-Exempt Fund
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