<PAGE>
TO THE SHAREHOLDERS
Seligman Pennsylvania Municipal Fund posted strong results for its fiscal
year ended September 30, 1998. Although the growth of the US economy slowed from
its record pace, the expansion continued. Inflation and interest rates reached
their lowest levels in a quarter century, and unemployment was at its lowest
level since 1970.
Despite ongoing strength in the US, economic turmoil spread throughout the
rest of the world. The Asian financial crisis worsened, Japan failed to resolve
its banking problems, Russia's economy became chaotic, and economic crises
loomed throughout much of Latin America, particularly in Brazil. Fears of risk
in nearly all types of financial assets drove investors out of the equity
markets and into the relative safety and quality of investments such as US
Treasury bonds, often a haven from a turbulent stock market. This "flight to
quality" helped create an attractive environment for municipal bonds.
Major factors influencing the market for municipal bonds over the year were
the prolonged Treasury bond rally and heavy issuance of municipal securities.
Municipal bond holders fared well as interest rates generally declined over this
time period. Nonetheless, the performance of the municipal market lagged that of
the Treasury bond market, as investors focused on quality in view of financial
instability. Treasury bond prices rose sharply over the 12-month period, sending
yields significantly lower. At one point in the period, selected municipal
obligations traded at the same yield as Treasuries, even though municipals
offered more favorable tax treatment.
Looking ahead, we see the favorable climate for municipal bonds continuing.
Low inflation and a growing economy should serve to protect the value of
municipal investments. Fewer new issues may be entering the market, which could
tighten the supply/demand balance. This could improve overall total
rate-of-return prospects. Also, although the US economy continues to grow, this
growth is slowing, and the global situation is forcing the Federal Reserve into
a more benign strategy on interest rates. The Fed has already cut short-term
rates twice, and we expect more cuts until a semblance of international
stability emerges. Finally, the municipal market's record of safety and
stability offers further appeal to investors in these more troubled times,
especially as equity market volatility continues.
All in all, we feel the investment attractiveness of municipals remains
compelling. In this period of global economic uncertainty and low interest
rates, municipals are an appropriate alternative for those investors with
suitable investment requirements.
As you may know, companies are modifying their computer systems to recognize
dates of January 1, 2000, and beyond. This is often referred to as the "Y2K"
problem. Unless systems are updated, many applications may interpret the last
two digits of the year to mean 1900 instead of 2000. J. & W. Seligman & Co.
Incorporated, the Seligman Investment Companies, and Seligman Data Corp., your
shareholder service agent, have jointly established a team to ensure that your
investment and shareholder services are not disrupted. This team is supported by
consulting firms specializing in Y2K solutions. Substantial work has been
performed to date, and we are confident that when our plans are finalized and
all systems are tested, there will be no disruption in the services provided by
your Fund.
Thank you for your continued support of Seligman Pennsylvania Municipal Fund. We
look forward to serving your investment needs in the many years to come. A
discussion with your Portfolio Manager, performance overview, portfolio
holdings, and financial statements follow this letter.
By order of the Trustees,
/s/ William C. Morris
- ---------------------
William C. Morris
Chairman
/s/ Brian T. Zino
-----------------
Brian T. Zino
President
October 30, 1998
1
<PAGE>
Interview With Your Portfolio Manager,
Thomas G. Moles
Q. What economic factors influenced Seligman Pennsylvania Municipal Fund in
the last 12 months?
A. The continuing combination of low inflation, low unemployment, and steady
economic growth throughout the past 12 months sustained what became one of
the nation's longest peacetime economic expansions. This contributed to
the overall improvement of the financial condition of America's states,
cities, and municipalities. Over the past year, credit rating upgrades
significantly outnumbered rating downgrades. These upgrades enhanced the
overall creditworthiness of the municipal marketplace.
But, by the end of your Fund's fiscal year, there was widespread
expectation that the US may be unable to avoid the economic slowdown that
has already gripped much of the world. While many economists were calling
a recession unlikely, the fact that they were including its potential in
their forecasts implied that the ongoing domestic economic expansion would
not continue. In the final months of the fiscal year, turmoil in world
markets began to contribute to a modest slowdown in the pace of US
economic growth, and prevented an acceleration in the rate of inflation.
In September, the Federal Reserve Board lowered the federal funds rate by
one-quarter of one percent. With a warning that growing fear among
investors and lenders was threatening the nation's economic expansion, the
Fed unexpectedly cut interest rates again in October, the first time in
four and a half years that the central bank had changed interest-rate
policy outside one of its normally scheduled meetings. This unusual timing
suggested that the Fed believed that the domestic economy is beginning to
deteriorate as the worldwide financial crisis gains momentum, and that a
credit shortage may be developing that could further curb growth. Fed
officials have hinted that more interest-rate reductions will ensue if the
global financial turmoil escalates. Declining US equity markets reflected
these fears, as investors sold stocks in favor of the relative safety and
quality of US Treasury bonds, which are often considered a haven from a
volatile stock market.
A TEAM APPROACH
Seligman Pennsylvania Municipal Fund is managed by the Seligman Municipals
Team, headed by Thomas G. Moles. Mr. Moles is assisted in the management of the
Fund by a group of seasoned professionals who are responsible for research and
trading consistent with the Fund's investment objective.
[PHOTO]
Seligman Municipals Team: (from left) Audrey Kuchtyak, Theresa Barion,
Debra McGuinness, (seated) Eileen Comerford, Thomas G. Moles (Portfolio Manager)
2
<PAGE>
Interview With Your Portfolio Manager,
Thomas G. Moles
Q. What market factors influenced Seligman Pennsylvania Municipal Fund in the
last 12 months?
A. Overall, Seligman Pennsylvania Municipal Fund ended its fiscal year on a
positive note. During the period, long-term municipal yields fluctuated
within a narrow range, decreasing by almost one-half of a point. The
declining interest-rate environment led to rising prices for the majority
of holdings and competitive performance results for the Fund's net asset
value.
However, the municipal market underperformed the US Treasury market during
the 12-month period. The ongoing strength in the economy over the year
caused the supply of Treasury bonds to shrink, as the federal government
needed to borrow less after running its first budget surplus in 29 years.
But, the solid economy and low interest rates caused the supply of
municipal bonds to grow. The net reduction in Treasury financing and the
increasing municipal bond issuance was compounded by the increased
investor demand for Treasuries. These factors caused the decline in
Treasury yields to significantly outpace the drop in municipal yields.
Because of these factors, long-term municipal bonds have not been as
attractive, relative to long-term Treasuries, since 1986, when proposed
tax legislation threatened the tax-exempt status of municipal securities.
Q. What was your investment strategy?
A. Throughout the 12-month period, the long-term interest-rate outlook was
positive, and Seligman Pennsylvania Municipal Fund was positioned to
benefit from the declining interest-rate environment. The Seligman
Municipals Team engaged in duration-extension trades, selling shorter-term
holdings and replacing them with long-term, current-coupon bonds.
Current-coupon bonds have coupon rates that are at or near current market
rates. Generally, when long-term bond yields decline, the prices
appreciate more than those of shorter-term bonds.
During the past 12 months, we also improved the call protection of the
portfolios. As the bonds within the portfolio mature, older holdings
approach their optional call dates (a callable bond can be redeemed by the
issuer, prior to maturity, on specified dates and at predetermined
prices). Declining interest rates increase the risk that these bonds will
be called by the issuer. The lower interest-rate environment over the
12-month period prompted many municipal issuers to retire outstanding,
higher-coupon debt. Additionally, as a direct result of the significant
increase in refunding volume, many of the portfolio's holdings were
advance-refunded, which had a positive impact on performance. In general,
when a municipal bond is refunded, total return performance is improved,
and the bond's rating is often upgraded.
Q. What is your outlook?
A. Long-term municipal yields have fallen to levels not seen in many years.
Municipal securities continue to offer a significant yield advantage
compared to the after-tax returns of other fixed-income investments.
Further, as the yield spread between municipal and Treasury bonds
normalizes, municipal market performance should improve, relative to the
Treasury market. Finally, the municipal market's record of safety and
stability may become more appealing as volatility persists in the US
equity markets. Consequently, we remain optimistic about the long-term
prospects for the municipal bond market, and for Seligman Pennsylvania
Municipal Fund.
3
<PAGE>
Performance Overview And Portfolio Summary
This chart compares a $10,000 hypothetical investment made in Seligman
Pennsylvania Municipal Fund Class A shares with and without the initial 4.75%
maximum sales charge, for the 10-year period ended September 30, 1998, 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 on page 5. It is important to keep in mind that the Lehman Index does not
include any fees or sales charges and does not reflect state-specific bond
market performance. The table on page 5 also includes relevant portfolio
characteristics.
With Sales Charge Without Sales Charge Lehman Index
9/30/88 9,531 10,000 10,000
12/31/88 9,825 10,309 10,185
3/31/89 9,893 10,380 10,252
6/30/89 10,468 10,984 10,859
9/30/89 10,439 10,953 10,867
12/31/89 10,831 11,365 11,284
3/31/90 10,798 11,330 11,335
6/30/90 11,037 11,581 11,600
9/30/90 10,870 11,406 11,607
12/31/90 11,410 11,972 12,107
3/31/91 11584 12,154 12,381
6/30/91 11,859 12,443 12,645
9/30/91 12,327 12,934 13,136
12/31/91 12,699 13,324 13,578
3/31/92 12,739 13,366 13,619
6/30/92 13,240 13,892 14,136
9/30/92 13,564 14,232 14,511
12/31/92 13,882 14,566 14,775
3/31/93 14,413 15,123 15,323
6/30/93 14,956 15,692 15,824
9/30/93 15,559 16,325 16,359
12/31/93 15,674 16,446 16,588
3/31/94 14,672 15,394 15,677
6/30/94 14,749 15,476 15,851
9/30/94 14781 15,508 15,959
12/31/94 14,573 15,291 15,729
3/31/95 15,679 16,452 16,841
6/30/95 16,018 16,807 17,247
9/30/95 16,341 17,146 17,744
12/31/95 17,198 18,045 18,475
3/31/96 16,815 17,643 18,251
6/30/96 16,916 17,749 18,392
9/30/96 17,415 18,272 18,815
12/31/96 17,789 18,665 19,295
3/31/97 17,649 18,518 19,250
6/30/97 18,254 19,153 19,914
9/30/97 18,789 19,714 20,516
12/31/97 19336 20288 21072
3/31/98 19597 20562 21314
6/30/98 19888 20868 21638
9/30/98 20518 21528 22302
The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.
Performance data quoted represent changes in prices and assume that all
distributions within the period are invested in additional shares. The rates of
return will vary and the principal value of an investment will fluctuate.
Shares, if redeemed, may be worth more or less than their original cost. Past
performance is not indicative of future investment results.
4
<PAGE>
Performance Overview and Portfolio Summary
Investment Results Per Share
TOTAL RETURNS
For Periods Ended September 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
----------------------------------------------
CLASS D
SINCE
SIX ONE FIVE 10 INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
---------- ------ ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Class A**
With Sales Charge (0.26)% 3.98% 4.66% 7.45% n/a
Without Sales Charge 4.70 9.20 5.69 7.97 n/a
Class D**
With 1% CDSC 3.30 7.36 n/a n/a n/a
Without CDSC 4.30 8.36 n/a n/a 4.78%
Lehman Index*** 4.64 8.71 6.40 8.35 6.29+
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
For Periods Ended September 30, 1998
9/30/98 3/31/98 9/30/97 DIVIDENDS0 CAPITAL GAIN0 SEC YIELD00
-------- -------- -------- ------------ ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Class A $8.24 $8.04 $7.96 Class A $0.349 $0.081 3.39%
Class D 8.23 8.03 7.95 Class D 0.286 0.081 2.82
</TABLE>
<TABLE>
<S> <C> <C> <C>
HOLDINGS BY MARKET SECTOR++ MOODY'S/S&P RATINGS++
Revenue Bonds 78% Aaa/AAA 77%
General Obligation Bonds 22 Aa/AA 21
Baa/BBB 2
</TABLE>
WEIGHTED AVERAGE MATURITY 21.9 years
- ------------------
*Returns for periods of less than one year are not annualized.
**Return figures reflect any change in price and assume all distributions
within the period are invested in additional shares. Returns for Class A
shares are calculated with and without the effect of the initial 4.75%
maximum sales charge. Returns for Class D shares are calculated with and
without the effect of the 1% contingent deferred sales charge ("CDSC"),
charged on redemptions made within one year of the date of purchase. A
portion of the Fund's income may be subject to applicable state and local
taxes, and any amount may be subject to the federal alternative minimum tax.
***The Lehman Index is an unmanaged index that does not include any fees or
sales charges and does not reflect state-specific bond market performance.
Investors cannot invest directly in an index.
+From 1/31/94.
0 Represents per share amount paid or declared for the year ended September
30, 1998.
00 Current yield, representing the annualized yield for the 30-day period ended
September 30, 1998, has been computed in accordance with SEC regulations and
will vary.
++Percentages based on market values of long-term holdings at September 30,
1998.
5
<PAGE>
Portfolio Of Investments
September 30, 1998
<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 $ 1,124,850
1,000,000 Berks County Municipal Authority, PA Hospital Rev. (The Reading
Hospital & Medical Center Project), 6.10% due 10/1/2023.............. Aaa/AAA 1,109,670
1,000,000 Bucks County, PA GOs, 5% due 5/1/2017 ................................... Aa2/AA 1,018,260
1,000,000 Delaware County Authority, PA (Haverford College Rev.),
5 1/2% due 11/15/2023 ................................................ Aaa/AAA 1,048,520
1,000,000 Delaware County Industrial Development Authority, PA (Philadelphia
Suburban Water Company), 6.35% due 8/15/2025*......................... Aaa/AAA 1,123,020
1,000,000 Delaware Valley, PA Regional Finance Authority Local Government Rev.,
7 3/4% due 7/1/2027................................................... Aaa/AAA 1,469,790
1,300,000 Lehigh County, PA Industrial Development Authority Pollution Control Rev.
(Pennsylvania Power & Light Company Project), 6.15% due 8/1/2029...... Aaa/AAA 1,451,450
1,500,000 Montgomery County, PA GOs, 5.45% due 9/15/2022 .......................... Aaa/NR 1,566,030
500,000 Montgomery County, PA Industrial Development Authority Pollution
Control Rev. (Philadelphia Electric Co.), 7.60% due 4/1/2021*......... Baa2/BBB 541,345
2,000,000 Pennsylvania Higher Education Assistance Agency Student Loan Rev.,
6.40% due 3/1/2022*................................................... Aaa/AAA 2,102,140
1,350,000 Pennsylvania Higher Educational Facilities Authority College & University
Rev. (University of Pennsylvania), 5.90% due 9/1/2014 ................ Aa2/AA 1,469,286
1,500,000 Pennsylvania Higher Educational Facilities Authority Rev.
(Temple University), 5% due 4/1/2029.................................. Aaa/AAA 1,500,000
1,350,000 Pennsylvania Higher Educational Facilities Authority Rev.
(Drexel University), 5 3/4% due 5/1/2022.............................. Aaa/AAA 1,488,672
1,500,000 Pennsylvania Housing Finance Agency (Single Family Mortgage Rev.),
5.85% due 4/1/2017*................................................... Aa2/AA+ 1,584,360
1,350,000 Pennsylvania Housing Finance Agency (Rental Housing Rev.),
6 1/2% due 7/1/2023................................................... Aaa/AAA 1,448,024
1,500,000 Pennsylvania Intergovernmental Co-Op Authority Special Tax Rev.
(Philadelphia Funding Program), 5 1/2% due 6/15/2016.................. Aaa/AAA 1,591,665
</TABLE>
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
6
<PAGE>
Portfolio Of Investments
September 30, 1998
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
---------- ------------------- ------------- -------------
<S> <C> <C> <C>
$1,500,000 Pennsylvania State GOs, 5% due 3/1/2017.................................. Aa3/AA- $ 1,528,725
1,000,000 Pennsylvania State Turnpike Commission Rev., 6% due 12/1/2017............ Aaa/AAA 1,086,550
1,300,000 Philadelphia, PA Airport Rev., 6.10% due 6/15/2025*...................... Aaa/AAA 1,427,348
1,000,000 Philadelphia, PA Parking Authority Airport Parking Rev.,
5 1/2% due 9/1/2018................................................... Aaa/AAA 1,062,050
450,000 Philadelphia Redevelopment Authority, PA (Home Mortgage Rev.),
9% due 6/1/2017....................................................... NR/AA 495,013
1,500,000 Pittsburgh, PA Water & Sewer Authority Rev., 5.65% due 9/1/2025.......... Aaa/AAA 1,656,840
-----------
TOTAL MUNICIPAL BONDS (Cost $26,562,226)-- 95.7%....................................................... 28,893,608
VARIABLE RATE DEMAND NOTES (Cost $900,000)-- 3.0%...................................................... 900,000
OTHER ASSETS LESS LIABILITIES-- 1.3%................................................................... 394,906
-----------
NET ASSETS-- 100.0%.................................................................................... $30,188,514
===========
</TABLE>
- ------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
7
<PAGE>
Statement Of Assets And Liabilities
September 30, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value:
Long-term holdings (Cost $26,562,226)............................... $28,893,608
Short-term holdings (Cost $900,000)................................. 900,000 $29,793,608
----------
Cash................................................................................. 122,019
Interest receivable.................................................................. 410,149
Receivable for Shares of Beneficial Interest sold.................................... 19,204
Expenses prepaid to shareholder service agent........................................ 5,895
Other................................................................................ 5,689
-----------
Total Assets......................................................................... 30,356,564
-----------
LIABILITIES:
Dividends payable ................................................................... 45,106
Payable for Shares of Beneficial Interest repurchased................................ 23,755
Accrued expenses, taxes, and other................................................... 99,189
-----------
Total Liabilities.................................................................... 168,050
-----------
Net Assets........................................................................... $30,188,514
===========
COMPOSITION OF NET ASSETS:
Shares of Beneficial Interest, at par ($.001 par value; unlimited shares
authorized; 3,665,644 shares outstanding):
Class A .......................................................................... $ 3,592
Class D .......................................................................... 74
Additional paid-in capital .......................................................... 27,314,374
Undistributed net realized gain ..................................................... 539,092
Net unrealized appreciation of investments .......................................... 2,331,382
-----------
Net Assets........................................................................... $30,188,514
===========
NET ASSET VALUE PER SHARE:
Class A ($29,581,946 / 3,591,922 shares)............................................. $8.24
=====
Class D ($606,568 / 73,722 shares)................................................... $8.23
=====
</TABLE>
- ------------------
See Notes to Financial Statements.
8
<PAGE>
Statement Of Operations
For the Year Ended September 30, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest ............................................................................... $1,687,637
EXPENSES:
Management fee................................................................ $152,373
Distribution and service fees ................................................ 71,918
Shareholder account services ................................................. 54,772
Auditing and legal fees ...................................................... 46,803
Shareholder reports and communications ....................................... 21,750
Registration ................................................................. 15,114
Custody and related services ................................................. 4,630
Trustees' fees and expenses .................................................. 1,384
Miscellaneous ................................................................ 2,553
--------
Total Expenses ......................................................................... 371,297
----------
Net Investment Income .................................................................. 6,340
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on investments ............................................. 544,834
Net change in unrealized appreciation of investments.......................... 806,321
--------
Net Gain on Investments................................................................. 1,351,155
----------
Increase in Net Assets from Operations ................................................. $2,667,495
==========
</TABLE>
- ------------------
See Notes to Financial Statements.
9
<PAGE>
Statements Of Changes In Net Assets
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net investment income........................................................ $ 1,316,340 $1,430,840
Net realized gain on investments............................................. 544,834 311,880
Net change in unrealized appreciation of investments......................... 806,321 619,185
---------- ----------
Increase in Net Assets from Operations....................................... 2,667,495 2,361,905
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A................................................................... (1,288,647) (1,399,949)
Class D................................................................... (27,693) (30,891)
Net realized gain on investments:
Class A................................................................... (305,259) (378,660)
Class D................................................................... (8,304) (10,749)
---------- ----------
Decrease in Net Assets from Distributions.................................... (1,629,903) (1,820,249)
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
-------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------
<S> <C> <C> <C> <C>
1998 1997
-------- ------
Net proceeds from sale of shares:
Class A.................................... 79,757 144,416 640,708 1,125,297
Class D.................................... 13,895 9,028 112,854 70,043
Shares issued in payment of dividends:
Class A.................................... 83,374 91,536 669,895 715,104
Class D.................................... 2,463 2,977 19,744 23,276
Exchanged from associated Funds:
Class A.................................... 26,798 54,868 216,297 427,336
Class D.................................... 629 3,180 5,046 24,302
Shares issued in payment of gain distributions:
Class A.................................... 26,265 33,111 207,232 258,269
Class D.................................... 1,015 698 8,002 5,445
-------- -------- ----------- -----------
Total ........................................ 234,196 339,814 1,879,778 2,649,072
-------- -------- ----------- -----------
Cost of shares repurchased:
Class A ................................... (346,731) (502,058) (2,789,014) (3,917,233)
Class D ................................... (44,446) (25,434) (358,480) (197,052)
Exchanged into associated Funds:
Class A ................................... (59,074) (23,491) (469,552) (183,635)
Class D ................................... (2,476) -- (19,989) --
-------- -------- ----------- -----------
Total ........................................ (452,727) (550,983) (3,637,035) (4,297,920)
-------- -------- ----------- -----------
Decrease in Net Assets from Transactions
in Shares of Beneficial Interest........... (218,531) (211,169) (1,757,257) (1,648,848)
======== ======== ----------- -----------
Decrease in Net Assets....................................................... (719,665) (1,107,192)
NET ASSETS:
Beginning of year............................................................ 30,908,179 32,015,371
----------- -----------
End of Year ................................................................. $30,188,514 $30,908,179
=========== ===========
</TABLE>
- ------------------
See Notes to Financial Statements.
10
<PAGE>
Notes To Financial Statement
1. Multiple Classes of Shares -- Seligman Pennsylvania Municipal Fund (the
"Fund") offers two classes of shares. Class A shares are sold with an initial
sales charge of up to 4.75% and a continuing service fee of up to 0.25% on an
annual basis. Class A shares purchased in an amount of $1,000,000 or more are
sold without an initial sales charge but are subject to a contingent deferred
sales charge ("CDSC") 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 CDSC of 1% imposed on 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 on which a
separate vote of any class is required.
2. Significant Accounting Policies -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Fund:
a. Security Valuation -- All municipal securities and other short-term
holding s 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. Federal Taxes -- There is no provision for federal income 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.
c. Security Transactions and Related Investment Income -- Investment
transactions are recorded on trade dates. Identified cost of investments
sold is used for both financial statement and federal income tax purposes.
Interest income is recorded on the accrual basis. The Fund amortizes
original issue discounts and premiums paid on purchases of portfolio
securities. Discounts other than original issue discounts are not
amortized.
d. Multiple Class Allocations -- All income, expenses (other than
class-specific expenses), and realized and unrealized gains or losses are
allocated daily to each class of shares based upon the relative value of
the shares of each class. Class-specific expenses, which include
distribution and service fees and any other items that are specifically
attributable to a particular class, are charged directly to such class.
For the year ended September 30, 1998, distribution and service fees were
the only class-specific expenses.
e. Distributions to Shareholders -- Dividends are declared daily and paid
monthly. Other distributions paid by the Fund are recorded on the
ex-dividend date. The treatment for financial statement purposes of
distributions made to shareholders during the year from net investment
income or net realized gains may differ from their ultimate treatment for
federal income tax purposes. These differences are caused primarily by
differences in the timing of the recog nition of certain components of
income, expense, or realized capital gain for federal income tax purposes.
Where such differ ences 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 Securities -- Purchases and sales of portfolio
securities, excluding short-term investments, for the year ended September 30,
1998, amounted to $3,879,305 and $5,783,557, respectively.
At September 30, 1998, the cost of investments for federal income tax
purposes was substantially the same as the cost for financial reporting
purposes, and the tax basis gross unrealized appreciation of investments
amounted to $2,331,382.
4. Management Fee, Distribution Services, and Other Transactions -- 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
11
<PAGE>
Notes To Financial Statements
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 Advisors, Inc. (the "Distributor") (formerly Seligman Financial
Services, Inc.), agent for the distribution of the Fund's shares and an
affiliate of the Manager, received concessions of $2,928 for sales of Class A
shares, after commissions of $21,911 paid to dealers.
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distribution of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive 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,
1998, fees incurred aggregated $64,160,or 0.22% per annum of the average daily
net assets of Class A shares.
Under the Plan, with respect to Class D shares, 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, 1998, fees incurred under the Plan
amounted to $7,758, or 1% per annum of the average daily net assets of Class D
shares.
The Distributor is entitled to retain any CDSC imposed on redemptions of
Class D shares occurring within one year of purchase and on certain redemptions
of Class A shares occurring within 18 months of purchase. For the year ended
September 30, 1998, there were no such charges.
Seligman Services, Inc., an affiliate of the Manager, is eligible to
receive commissions from certain sales of shares of the Fund, as well as
distribution and service fees pursuant to the Plan. For the year ended September
30, 1998, Seligman Services, Inc. received commissions of $626 from the sale of
shares of the Fund. Seligman Services, Inc. also received distribution and
service fees of $3,759, pursuant to the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged at cost $54,772 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.
The Fund has a compensation arrangement under which trustees who receive
fees may elect to defer receiving such fees. Trustees may elect to have their
deferred fees accrue interest or earn a return based on the performance of the
Fund or other funds in the Seligman Group of Investment Companies. The cost of
such fees and earnings accrued thereon is included in trustees' fees and
expenses, and the accumulated balance thereof at September 30, 1998, of $41,436
is included in other liabilities. Deferred fees and related accrued earnings are
not deductible for federal income tax purposes until such amounts are paid.
5. Committed Line of Credit -- Effective July 1, 1998, the Fund entered
into a joint $800 million committed line of credit that is shared by
substantially all funds in the Seligman Group of Investment Companies. The
Fund's borrowings are limited to 10% of its net assets. Borrowings pursuant to
the credit facility are subject to interest at a rate equal to the overnight
federal funds rate plus 0.50% on an overnight basis. The Fund incurs a
commitment fee of 0.08% per annum on its share of the unused portion of the
credit facility. The credit facility may be drawn upon only for temporary
purposes and is subject to certain other customary restrictions. The credit
facility commitment expires one year from the date of the agreement but is
renewable with the consent of the participating banks. To date, the Fund has not
borrowed from the credit facility.
12
<PAGE>
Financial Highlights
The Fund's financial highlights are presented below. "Per share operating
performance" data is designed to allow investors to trace the operating
performance of each Class, on a per share basis, from the beginning net asset
value to the ending net asset value, so that investors can understand what
effect the individual items have on their investment, assuming it was held
throughout the period. Generally, per share amounts are derived by converting
the actual dollar amounts incurred for each item, as disclosed in the financial
statements, to their equivalent per share amounts, based on average shares
outstanding.
"Total return based on net asset value" measures each Class's performance
assuming that investors purchased Fund shares at net asset value as of the
beginning of the period, invested dividends and capital gains paid at net asset
value, and then sold their shares at the net asset value on the last day of the
period. The total return computations do not reflect any sales charges investors
may incur in purchasing or selling shares of the Fund. Total returns for periods
of less than one year are not annualized.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Year....................... $7.96 $7.82 $7.79 $7.55 $8.61
----- ----- ----- ----- -----
Net investment income ................................... 0.35 0.36 0.38 0.38 0.39
Net realized and unrealized investment gain (loss)....... 0.36 0.24 0.12 0.37 (0.80)
----- ----- ----- ----- -----
Increase (Decrease) from Investment Operations .......... 0.71 0.60 0.50 0.75 (0.41)
Dividends paid or declared............................... (0.35) (0.36) (0.38) (0.38) (0.39)
Distributions from net gain realized..................... (0.08) (0.10) (0.09) (0.13) (0.26)
----- ----- ----- ----- -----
Net Increase (Decrease) in Net Asset Value............... 0.28 0.14 0.03 0.24 (1.06)
----- ----- ----- ----- -----
Net Asset Value, End of Year ............................ $8.24 $7.96 $7.82 $7.79 $7.55
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: 9.20% 7.89% 6.57% 10.55% (5.00)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets .......................... 1.19% 1.19% 1.11% 1.21% 1.16%
Net investment income to average net assets.............. 4.34% 4.60% 4.82% 5.05% 4.91%
Portfolio turnover....................................... 13.05% 32.99% 4.56% 11.78% 7.71%
Net Assets, End of Year (000s omitted)................... $29,582 $30,092 $31,139 $33,251 $34,943
</TABLE>
- ------------------
See footnotes on page 14.
13
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class D
-------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94*
--------------------------------- TO
1998 1997 1996 1995 9/30/94
------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
PER Share Operating Performance:
Net Asset Value, Beginning of Period ........................... $7.95 $7.81 $7.78 $7.54 $8.37
----- ----- ----- ----- -----
Net investment income........................................... 0.29 0.30 0.32 0.31 0.22
Net realized and unrealized investment gain (loss).............. 0.36 0.24 0.12 0.37 (0.83)
----- ----- ----- ----- -----
Increase (Decrease) from Investment Operations.................. 0.65 0.54 0.44 0.68 (0.61)
Dividends paid or declared ..................................... (0.29) (0.30) (0.32) (0.31) (0.22)
Distributions from net gain realized ........................... (0.08) (0.10) (0.09) (0.13)
----- ----- ----- ----- -----
Net Increase (Decrease) in Net Asset Value ..................... 0.28 0.14 0.03 0.24 (0.83)
----- ----- ----- ----- -----
Net Asset Value, End of Period.................................. $8.23 $7.95 $7.81 $7.78 $7.54
===== ===== ===== ===== =====
Total return based on net asset value: 8.36% 7.07% 5.76% 9.53% (7.50)%
Ratios/Supplemental Data:
Expenses to average net assets.................................. 1.97% 1.96% 1.88% 2.23% 2.00%
Net investment income to average net assets..................... 3.56% 3.83% 4.05% 4.10% 4.20%
Portfolio turnover ............................................. 13.05% 32.99% 4.56% 11.78% 7.71%
Net Assets, End of Period (000s omitted)........................ $607 $816 $876 $426 $43
</TABLE>
- ------------------
* Commencement of offering of Class D shares.
+ Annualized.
++ For the year ended September 30, 1994.
See notes to financial statements.
14
<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 as of
September 30, 1998, the related statements of operations for the year then ended
and of changes in net assets for each of the years in the two-year period then
ended, and the financial highlights for each of the periods presented. These
financial statements and financial highlights are the responsibility of the
Fund\rquote 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 confir\- mation of securities owned as of
September 30, 1998 by correspondence with the Fund\rquote 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\line a reasonable basis for our
opinion.\par\pard\s1\sl-260\ql\sa100\tx360
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, 1998, the results of its
operations, the changes in\line its net assets, and the financial highlights for
the respective stated periods, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE
New York, New York
October 30, 1998
15
<PAGE>
Trustees
John R. Galvin 2, 4
Dean, Fletcher School of Law and Diplomacy
at Tufts University
Director, Raytheon Company
Alice S. Ilchman 3, 4
Trustee, Committee for Economic Development
Chairman, The Rockefeller Foundation
Frank A. McPherson 2, 4
Director, Kimberly-Clark Corporation
Director, Baptist Medical Center
John E. Merow 2, 4
Retired Chairman and Senior Partner,
Sullivan & Cromwell, Law Firm
Director, Commonwealth Industries, Inc.
Director, New York Presbyterian Hospital
Betsy S. Michel 2, 4
Trustee, The Geraldine R. Dodge Foundation
Chairman of the Board of Trustees, St. George's School
William C. Morris 1
Chairman
Chairman of the Board, J. & W. Seligman & Co.
Incorporated
Chairman, Carbo Ceramics Inc.
Director, Kerr-McGee Corporation
James C. Pitney 3, 4
Retired Partner, Pitney, Hardin, Kipp & Szuch,
Law Firm
James Q. Riordan 3, 4
Director, KeySpan Energy Corporation
Trustee, Committee for Economic Development
Director, Public Broadcasting Service
Richard R. Schmaltz 1
Managing Director, Director of Investments,
J. & W. Seligman & Co. Incorporated
Trustee Emeritus, Colby College
Robert L. Shafer 3, 4
Retired Vice President, Pfizer Inc.
James N. Whitson 2, 4
Director and Consultant, Sammons Enterprises, Inc.
Director, CommScope, Inc.
Director, C-SPAN
Brian T. Zino 1
President
President, J. & W. Seligman & Co. Incorporated
Chairman, Seligman Data Corp.
Director, ICI Mutual Insurance Company
Trustee Emeritus
Fred E. Brown
Director and Consultant, J. & W. Seligman & Co.
Incorporated
- ----------------
Member: 1 Executive Committee
2 Audit Committee
3 Trustee Nominating Committee
4 Board Operations Committee
16
<PAGE>
Executive Officers
William C. Morris
Chairman
Brian T. Zino
President
Thomas G. Moles
Vice President
Lawrence P. Vogel
Vice President
Thomas G. Rose
Treasurer
Frank J. Nasta
Secretary
For more Information
Manager
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
General Counsel
Sullivan & Cromwell
Independent Auditors
Deloitte & Touche LLP
General Distributor
Seligman Advisors, Inc.
100 Park Avenue
New York, NY 10017
Shareholder Service Agent
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
Important Telephone Numbers
(800) 221-2450 Shareholder
Services
(212) 682-7600 Outside the
United States
(800) 622-4597 24-Hour
Automated
Telephone
Access Service
17
<PAGE>
Glossary Of Financial Terms
Capital Gain Distribution -- A payment to mutual fund shareholders of profits
realized on the sale of securities in the fund's portfolio. For tax purposes,
these profits may be taxed at different rates, primarily depending upon the
length of time the securities were owned by the fund.
Capital Appreciation/Depreciation -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.
Compounding -- The change in the value of an investment as shareholders receive
earnings on their investment's earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will not be based on the
original $1,000, but on the $1,070, which includes the first year's earnings.
Contingent Deferred Sales Charge (CDSC) -- Depending on the class of shares
owned, a fee charged by a mutual fund when shares are sold back to the fund (the
CDSC expires after a fixed time period).
Dividend -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
Dividend Yield -- A measurement of a fund's dividend as a percentage of the
maximum offering price.
Expense Ratio -- The cost of doing business for a mutual fund, expressed as a
percent of the fund's net assets.
Investment Objective -- The shared investment goal of a fund and its
shareholders.
Management Fee -- The amount paid by a mutual fund to its investment advisor(s).
Multiple Classes of Shares -- Although an individual mutual fund invests in only
one portfolio of securities, it may offer investors several purchase options
which are "classes" of shares. Multiple classes permit shareholders to choose
the fee structure that best meets their needs and goals. Generally, each class
will differ in terms of how and when sales charges and certain fees are
assessed.
National Association of Securities Dealers, Inc. (NASD) -- A self-regulatory
body with authority over firms that distribute mutual funds.
Net Asset Value (NAV) Per Share -- The market worth of one fund share, obtained
by adding a mutual fund's total assets (securities, cash, and any accrued
earnings), subtracting liabilities, and dividing the resulting net assets by the
number of shares outstanding.
Offering Price (OP) -- The price at which a mutual fund's share can be
purchased. The offering price per share is the current net asset value plus any
sales charge.
Portfolio Turnover -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
Prospectus -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission (SEC), such as a fund's investment objective and policies, services,
investment restrictions, officers and directors, how shares are bought and
redeemed, fund fees and other charges, and the fund's financial statements.
SEC Yield -- SEC Yield refers to the net income earned by a fund during a recent
30-day period. This income is annualized and then divided by the maximum
offering price per share on the last day of the 30-day period. The SEC Yield
formula reflects semiannual compounding.
Securities and Exchange Commission -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
Statement of Additional Information -- A document that contains updated or more
detailed information about an investment company and that supplements the
prospectus. It is available at no charge upon request.
Total Return -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The Average Annual Total
Return represents the average annual compounded rate of return for the periods
presented.
Yield on Securities -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.
- -----------------
Adapted from the Investment Company Institute's 1998 Mutual Fund Fact Book.
18
<PAGE>
SELIGMAN ADVISORS, INC.
an affiliate of
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
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 9/98
SELIGMAN
Pennsylvania
Municipal Fund
Annual Report
September 30, 1998
Providing Income
Exempt From Regular
Income Tax
