SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 485APOS
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. __ |_|
Post-Effective Amendment No. 16 |X|
--
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 18 |X|
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SELIGMAN NEW JERSEY MUNICIPAL FUND, INC.
(Exact name of registrant as specified in charter)
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100 PARK AVENUE, NEW YORK, NEW YORK 10017
(Address of principal executive offices)
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Registrant's Telephone Number: 212-850-1864 or
Toll-Free 800-221-2450
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THOMAS G. ROSE, Treasurer
100 Park Avenue
New York, New York 10017
(Name and address of agent for service)
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It is proposed that this filing will become effective (check the
appropriate box).
|_| 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)(1) of rule 485
|X| on January 20, 1999 pursuant to paragraph (a)(1) of rule 485
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|_| 75 days after filing pursuant to paragraph (a)(2) of rule 485
|_| on (date) pursuant to paragraph (a)(2) of rule 485.
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If appropriate, check the following box:
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
SELIGMAN
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MUNICIPAL FUNDS
SELIGMAN MUNICIPAL FUND
SERIES, INC.
SELIGMAN MUNICIPAL
SERIES TRUST
SELIGMAN NEW JERSEY
MUNICIPAL FUND, INC.
SELIGMAN PENNSYLVANIA
Municipal Fund Series
As with all mutual funds, the Securities and Exchange Commission has neither
approved nor disapproved these Funds, and it has not determined the prospectus
to be accurate or adequate. Any representation to the contrary is a criminal
offense.
An investment in these Funds or any other fund cannot provide a complete
investment program. The suitability of an investment in a Fund should be
evaluated based on the investment objective, strategies and risks described
herein, considered in light of all of the other investments in your portfolio,
as well as your risk tolerance, financial goals, and time horizons. We recommend
that you consult your financial advisor to determine if one or more of these
Funds is suitable for you.
[GRAPHIC]
PROSPECTUS
FEBRUARY 1, 1999
-------
SEEKING
INCOME
EXEMPT FROM
REGULAR
INCOME TAX
managed by
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
MUNI-1 2/99
<PAGE>
TABLE OF CONTENTS
THE FUNDS
A discussion of the investment strategies, risks, performance and expenses of
the Funds.
Overview of the Funds 1
National Fund 5
California High-Yield Fund 7
California Quality Fund 9
Colorado Fund 11
Florida Fund 13
Georgia Fund 15
Louisiana Fund 17
Maryland Fund 19
Massachusetts Fund 21
Michigan Fund 23
Minnesota Fund 25
Missouri Fund 27
New Jersey Fund 29
New York Fund 31
North Carolina Fund 33
Ohio Fund 35
Oregon Fund 37
Pennsylvania Fund 39
South Carolina Fund 41
SHAREHOLDER INFORMATION
Deciding Which Class of Shares
to Buy 43
Pricing of Fund Shares 45
Opening Your Account 45
How to Buy Additional Shares 45
How to Exchange Shares Between
the Seligman Mutual Funds 46
How to Sell Shares 47
Important Policies That May Affect
Your Account 48
Dividends and Capital Gain
Distributions 49
Taxes 49
The Seligman Mutual Funds 50
Financial Highlights 51
How to Contact Us 61
For More Information back cover
TIMES CHANGE ... VALUES ENDURE
<PAGE>
THE FUNDS
OVERVIEW OF THE FUNDS
This Prospectus contains information about four separate funds, which together
offer 19 investment options:
Seligman Municipal Fund Series offers the following 13 series:
NATIONAL FUND MASSACHUSETTS FUND NEW YORK FUND
COLORADO FUND MICHIGAN FUND OHIO FUND
GEORGIA FUND MINNESOTA FUND OREGON FUND
LOUISIANA FUND MISSOURI FUND SOUTH CAROLINA FUND
MARYLAND FUND
Seligman Municipal Series Trust offers the following four series:
CALIFORNIA HIGH-YIELD FUND FLORIDA FUND
CALIFORNIA QUALITY FUND NORTH CAROLINA FUND
Seligman New Jersey Municipal Fund, Inc. (NEW JERSEY FUND)
Seligman Pennsylvania Municipal Fund Series (PENNSYLVANIA FUND)
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Seligman Municipal Funds seek to provide income exempt from regular federal
income taxes and, as applicable, state and local income taxes.
The Funds are managed for total return, which means, in addition to income
considerations, the Funds (except the Pennsylvania Fund) look to enhance
portfolio returns by pursuing opportunities for capital appreciation. At all
times, safety of principal is a primary concern of all of the Funds. However,
there is no assurance that the Funds will meet their objectives.
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ALTERNATIVE MINIMUM TAX (AMT): A tax imposed on certain types of income to
ensure that all taxpayers pay at least a minimum amount of taxes.
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Each Fund has its own strategies and risks. However, each Fund normally invests
at least 80% of its net assets in municipal securities that pay interest that is
exempt from regular federal income taxes and (except the National Fund) income
taxes in its respective state. Income may be subject to the federal alternative
minimum tax.
Municipal securities are issued by state and local governments, their agencies
and authorities, as well as territories and possessions of the United States,
and the District of Columbia. Municipal bonds are issued to obtain funds to
finance various public or private projects, to meet general expenses, and to
refinance outstanding debt.
The Funds use a top-down method of selecting securities to purchase. This means
the investment manager analyzes the current interest rate environment and trends
in the municipal market to formulate investment strategy before selecting
individual securities. The investment manager determines the appropriate cash
positions, quality focus, sector emphasis, coupon selection, and maturity and
then uses in-depth credit analysis to evaluate individual securities considered
for purchase.
Portfolio holdings are continually monitored to identify securities which should
be sold as a result of a deterioration in credit quality. A Fund may also sell a
security when there is a better investment opportunity available in the market.
The Funds (except the California High-Yield Fund) will purchase only investment-
grade municipal securities, defined as those issues rated in the four highest
rating categories by independent rating agencies at the time of purchase. The
Funds may also purchase non-rated securities, if based on credit analysis, the
investment manager believes that such securities are of comparable value to
investment grade securities.
Under normal market conditions, the Funds will invest in longer maturity bonds
(typically, bonds with maturities in excess of ten years). However, a Fund may
shorten or lengthen maturities to achieve its objectives.
1
<PAGE>
As a defensive measure, a Fund may invest a considerable amount of its portfolio
in cash or in securities that are subject to regular federal income tax or, if
applicable, the income tax of its designated state. A Fund would take such a
defensive position only temporarily in seeking to minimize extreme volatility
caused by adverse market, economic or other conditions or in anticipating
significant withdrawals from the Fund. However, such a position is inconsistent
with the Funds' principal strategies and could prevent a Fund from achieving its
investment objective.
PRINCIPAL RISKS
The value of your investment in a Fund will fluctuate with fluctuations in the
value of the Fund's investment portfolio. The principal factors that may affect
the value of a Fund's portfolio are changes in interest rates and the credit
worthiness of the Fund's portfolio holdings.
INTEREST RATE RISK. Changes in market interest rates will affect the value of a
Fund's investment portfolio. In general, the market value of a municipal bond
moves in the opposite direction of interest rates: the market value decreases
when interest rates rise and increases when interest rates decline. A Fund's net
asset value per share moves in the same direction as the market value of the
municipal securities held in its portfolio. Therefore, as interest rates rise,
you should expect a Fund's net asset value per share to fall and if interest
rates decline, the Fund's net asset value per share should rise.
Additionally, longer maturity bonds (like those held by the Funds) are generally
more sensitive to changes in interest rates. Each Fund's strategy of investing
in longer maturity bonds could subject its portfolio holdings to a greater
degree of market price volatility.
Declining interest rates increase the risk that portfolio holdings which contain
call features could be redeemed by the issuer. Proceeds of called bonds may be
reinvested at lower yields, which could affect the level of income a Fund
generates.
CREDIT RISK. A municipal bond issue could deteriorate in quality to the extent
that its rating is downgraded or its market value declines relative to
comparable municipal securities. Credit risk also includes the risk that an
issuer of a municipal bond would be unable to make interest and principal
payments.
The investment manager seeks to minimize the credit risk inherent in municipal
securities by performing its own in-depth credit analysis on every municipal
security before purchase and by continuing to monitor all securities while they
remain in the portfolio. Each Fund may purchase municipal bonds that are insured
as to the payment of principal and interest. However, the Funds view insurance
as an enhancement and will not purchase a bond unless the investment manager
approves the underlying credit.
The Funds are also subject to the following risks:
CONCENTRATION RISK. Each Fund (except the National Fund) invests in municipal
securities issued by a single state. Specific events or factors affecting a
particular state may have an impact on the municipal securities of that state
without affecting the municipal market in general. The Funds seek to minimize
this risk by diversifying investments within the state. In addition, each Fund
is subject to certain investment restrictions limiting the amount of its assets
that can be invested in the securities of a single issuer.
MARKET RISK. At times, market conditions could result in a lack of liquidity.
The municipal market is an over-the-counter market, which means that the Funds
purchase and sell portfolio holdings through municipal bond dealers. A Fund's
ability to sell securities held in its portfolio is dependent on the willingness
and ability of market participants to provide bids that reflect current market
levels. Adverse market conditions could result in a lack of liquidity in that
there are no ready buyers. Lower-rated securities may be less liquid than
higher-rated securities.
An investment in any of the Funds is not a deposit in a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
2
<PAGE>
PAST PERFORMANCE
The past performance information presented for each Fund provides some
indication of the risks of investing in the Fund. Each Fund offers two Classes
of shares. The tables show how the performance of Class A shares has varied year
to year, as well as how each Class's performance compares to the Lehman Brothers
Municipal Bond Index, a widely-used measure of municipal bond performance.
Although each Fund's fiscal year ends on September 30, the performance
information is provided on a calendar year basis to assist you in comparing the
returns of the Funds with the returns of other mutual funds. How a Fund has
performed in the past, however, is not necessarily an indication of how the Fund
will perform in the future. Total returns will vary between each Fund's Class A
and Class D shares due to their different fees and expenses.
FEES AND EXPENSES
The fee and expense table provided for each Fund summarizes the fees and
expenses that you may pay as a shareholder of a Fund. Each Class of shares has
its own sales charge schedule and is subject to different ongoing fees.
Shareholder fees are charged directly to you. Annual fund operating expenses are
deducted from a Fund's assets and are therefore paid indirectly by you and other
Fund shareholders.
Accompanying each Fund's fee and expense table is an example intended to help
you compare the expenses of investing in that Fund with the expenses of
investing in other mutual funds.
MANAGEMENT OF THE FUNDS
A Board of Directors or Board of Trustees (as applicable) provides broad
supervision over the affairs of each Fund.
Each Fund's manager is J. & W. Seligman & Co. Incorporated (Seligman), 100 Park
Avenue, New York, New York 10017. Seligman manages the investment of each Fund's
assets, including making purchases and sales of portfolio securities consistent
with each Fund's investment objective and strategies, and administers each
Fund's business and other affairs.
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AFFILIATES OF SELIGMAN:
SELIGMAN ADVISORS, INC. (SELIGMAN ADVISORS): Each Fund's general distributor;
responsible for accepting orders for purchases and sales of Fund shares.
SELIGMAN SERVICES, INC. (SSI):
A limited purpose broker/dealer; acts as the broker/dealer of record for
shareholder accounts that do not have a designated financial advisor.
SELIGMAN DATA CORP. (SDC):
Each Fund's shareholder service agent; provides shareholder account services to
the Fund at cost.
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Established in 1864, Seligman currently serves as manager to 18 US registered
investment companies, which offer more than 50 investment portfolios with
approximately $XX.X billion in assets as of December 31, 1998. Seligman also
provides investment management or advice to institutional or other accounts
having an aggregate value at December 31, 1998, of approximately $XX.X billion.
Each Fund pays Seligman a fee for its management services equal to an annual
rate of .50% of its average daily net assets.
The Funds are managed by the Seligman Municipals Team, headed by Thomas G.
Moles. Mr. Moles, a Managing Director of Seligman, is Vice President and Senior
Portfolio Manager of each Fund. Mr. Moles is also President and Portfolio
Manager of Seligman Quality Municipal Fund, Inc. and Seligman Select Municipal
Fund, Inc., two closed-end investment companies. He is responsible for more than
$1.8 billion in municipal securities and, with 25 years of experience, has
spearheaded Seligman's municipal investment efforts since joining the firm in
1983.
DESCRIPTIONS OF EACH FUND BEGIN ON PAGE 5.
3
<PAGE>
YEAR 2000
As the millennium approaches, mutual funds, financial and business
organizations, and individuals could be adversely affected if their computer
systems do not properly process and calculate date-related information and data
on and after January 1, 2000. Like other mutual funds, the Funds rely upon
service providers and their computer systems for its day-to-day operations. Many
of the Funds' service providers in turn depend upon computer systems of their
vendors. Seligman and SDC, have established a year 2000 project team. The team's
purpose is to assess the state of readiness of Seligman and SDC and the Funds'
other service providers and vendors. The team is comprised of several
information technology and business professionals, as well as outside
consultants. The Project Manager of the team reports directly to the
Administrative Committee of Seligman. The Project Manager and other members of
the team also report to each Fund's Board and its Audit Committee.
The team has identified the service providers and vendors who furnish critical
services or software systems to the Funds, including firms with which the Funds
trade and firms responsible for shareholder account recordkeeping. The team is
working with these critical service providers and vendors to evaluate the impact
year 2000 issues may have on their ability to provide uninterrupted services to
the Funds. The team will assess the feasibility of their year 2000 plans. The
team has made progress on its year 2000 contingency plans -- recovery efforts
the team will employ in the event that year 2000 issues adversely affect the
Funds. The team anticipates finalizing these plans in the near future.
The Funds anticipate the team will have implemented all significant components
of the team's year 2000 plans by mid-1999, including appropriate testing of
critical systems and receipt of satisfactory assurances from critical service
providers and vendors regarding their year 2000 compliance. The Funds believe
that the critical systems on which they rely will function properly on and after
the year 2000, but this is not guaranteed. If these systems do not function
properly, or the Funds' critical service providers are not successful in
implementing their year 2000 plans, the Funds' operations may be adversely
affected, including pricing and securities trading and settlement, and the
provision of shareholder services.
In addition, the Funds hold securities issued by governmental or
quasi-governmental issuers, which, like other organizations, may be susceptible
to year 2000 concerns. Year 2000 issues may affect an issuer's operations,
creditworthiness, and ability to make timely payment on any indebtedness and
could have an adverse impact on the value of its securities. If a Fund holds
these securities, its performance could be negatively affected. Seligman seeks
to identify an issuer's state of year 2000 readiness as part of the research it
employs. However, the perception of an issuer's year 2000 preparedness is only
one of the many factors considered in determining whether to buy, sell, or
continue to hold a security. Information provided by issuers concerning their
state of readiness may or may not be accurate or readily available.
SDC has informed the Funds that it does not expect the cost of its services to
increase materially as a result of the modifications to its computer systems
necessary to prepare for the year 2000. The Funds will not pay to remediate the
systems of Seligman or bear directly the costs to remediate the systems of any
other service providers or vendors, other than SDC.
4
<PAGE>
NATIONAL FUND
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The National Fund 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.
The National Fund uses the following strategies to pursue its objective:
The National Fund invests at least 80% of its net assets in municipal securities
of states, territories, and possessions of the United States, and the District
of Columbia, and their political subdivisions, agencies, and instrumentalities
that are rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The National Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
5
<PAGE>
NATIONAL FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
[The following table represents a chart in the printed piece.]
9.8% 1989
5.8% 1990
12.1% 1991
7.9% 1992
14.1% 1993
-9.9% 1994
20.1% 1995
3.4% 1996
10.4% 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED 12/31/98
CLASS D
SINCE
ONE FIVE TEN INCEPTION
YEAR YEARS YEARS 2/1/94
------- ------- -------- -----------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
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FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .. 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ... none(1) 1%
ANNUAL FUND OPERATING
EXPENSES FOR FISCAL 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ......................... .50% .50%
Distribution and/or
Service (12b-1) Fees .................. .09% 1.00%
Other Expenses .......................... .21% .21%
----- -----
Total Annual Fund Operating Expenses .... .80% 1.71%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within 18
months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 274 539 928 2,019
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 174 539 928 2,019
6
<PAGE>
CALIFORNIA HIGH-YIELD FUND
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The California High-Yield Fund 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.
The California High-Yield Fund uses the following strategies to pursue its
objective:
The California High-Yield Fund invests at least 80% of its net assets in
California municipal securities that are within any rating category, including
securities rated below investment grade or securities that are not rated.
In selecting securites to purchase, the investment manager may consider the
current market conditions, the availability of lower-rated securities, and
whether lower-rated securities offer yields high enough relative to yields on
investment grade securities to justify their higher risk.
The Fund generally invests in long-term municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The California High-Yield Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of California issuers.
Therefore, the Fund's performance may be affected by local, state, or
regional factors, including state or local legislation or policy changes,
economics, or natural disasters.
o Lower-rated municipal bonds are subject to a greater degree of credit risk
than higher-rated bonds. They generally involve greater price volatility and
risk of loss of principal and income than higher rated bonds.
7
<PAGE>
CALIFORNIA HIGH-YIELD FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
[The following table represents a chart in the printed piece.]
9.3% 1989
6.0% 1990
10.5% 1991
9.5% 1992
9.9% 1993
-2.8% 1994
14.6% 1995
5.5% 1996
8.7% 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED 12/31/98
CLASS D
SINCE
ONE FIVE TEN INCEPTION
YEAR YEARS YEARS 2/1/94
------- ------- -------------------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) . 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) .. none(1) 1%
ANNUAL FUND OPERATING
EXPENSES FOR FISCAL 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ........................ .50% .50%
Distribution and/or
Service (12b-1) Fees ................. .09% 1.00%
Other Expenses ......................... .23% .23%
----- -----
Total Annual Fund Operating Expenses ... .82% 1.73%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within 18
months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $555 $724 $908 $1,440
Class D 276 545 939 2,041
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $555 $724 $908 $1,440
Class D 176 545 939 2,041
8
<PAGE>
CALIFORNIA QUALITY FUND
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The California Quality Fund 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.
The California Quality Fund uses the following strategies to pursue its
objective:
The California Quality Fund invests at least 80% of its net assets in California
municipal securities that are within the three highest ratings of Moody's (Aaa,
Aa, or A) or S&P (AAA, AA, or A) on the date of purchase.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The California Quality Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of California issuers.
Therefore, the Fund's performance may be affected by local, state, or
regional factors, including state or local legislation or policy changes,
economics, or natural disasters.
9
<PAGE>
CALIFORNIA QUALITY FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
[The following table represents a chart in the printed piece.]
9.8% 1989
6.6% 1990
11.2% 1991
8.5% 1992
12.6% 1993
-8.3% 1994
19.8% 1995
3.9% 1996
8.8% 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED 12/31/98
CLASS D
SINCE
ONE FIVE TEN INCEPTION
YEAR YEARS YEARS 2/1/94
------- ------- ------- -----------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) . 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) .. none(1) 1%
ANNUAL FUND OPERATING
EXPENSES FOR FISCAL 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ........................ .50% .50%
Distribution and/or
Service (12b-1) Fees ................. .09% 1.00%
Other Expenses ......................... .18% .18%
----- -----
Total Annual Fund Operating Expenses ... .77% 1.68%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within 18
months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $550 $709 $883 $1,384
Class D 271 530 913 1,987
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Class A $550 $709 $883 $1,384
Class D 171 530 913 1,987
10
<PAGE>
COLORADO FUND
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Colorado Fund seeks to maximize income exempt from federal income taxes and
from Colorado personal income taxes to the extent consistent with preservation
of capital and with consideration given to opportunities for capital gain.
The Colorado Fund uses the following strategies to pursue its objective:
The Colorado Fund invests at least 80% of its net assets in Colorado municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Colorado Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of Colorado issuers. Therefore,
the Fund's performance may be affected by local, state, or regional factors,
including state or local legislation or policy changes, economics, or natural
disasters.
11
<PAGE>
COLORADO FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
[The following table represents a chart in the printed piece.]
10.0% 89
5.1% 90
9.4% 91
7.7% 92
11.1% 93
-5.1% 94
14.0% 95
3.4% 96
7.5% 97
0 98
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED 12/31/98
CLASS D
SINCE
ONE FIVE TEN INCEPTION
YEAR YEARS YEARS 2/1/94
------- ------- ------- -----------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) . 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) none(1) 1%
ANNUAL FUND OPERATING
EXPENSES FOR FISCAL 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ......................... .50% .50%
Distribution and/or
Service (12b-1) Fees .................. .10% .10%
Other Expenses .......................... .30% .30%
----- -----
Total Annual Fund Operating Expenses .... .90% 1.80%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within 18
months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $562 $784 $950 $1,530
Class D 283 566 975 2,116
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $562 $748 $950 $1,530
Class D 183 566 975 2,116
12
<PAGE>
FLORIDA FUND
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The Florida Fund seeks high income exempt from regular federal income taxes to
the extent consistent with preservation of capital and with consideration given
to opportunities for capital gain.
The Florida Fund uses the following strategies to pursue its objective:
The Florida Fund invests at least 80% of its net assets in Florida municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Florida Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of Florida issuers. Therefore,
the Fund's performance may be affected by local, state, or regional factors,
including state or local legislation or policy changes, economics, or natural
disasters.
13
<PAGE>
FLORIDA FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
[The following table represents a chart in the printed piece.]
11.4% 1989
6.5% 1990
10.6% 1991
9.1% 1992
13.5% 1993
-5.5% 1994
16.7% 1995
2.8% 1996
9.3% 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
------- ------- ------- -----------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) . 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) .. none(1) 1%
ANNUAL FUND OPERATING
EXPENSES FOR FISCAL 1998
- -----------------------
(as a percentage of average net assets)
Management Fees ........................ .50% .50%
Distribution and/or
Service (12b-1) Fees ................. .23% 1.00%
Other Expenses ......................... .27% .27%
----- -----
Total Annual Fund Operating Expenses ... 1.00% 1.77%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within 18
months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $572 $778 $1,001 $1,641
Class D 280 559 959 $2,084
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $572 $778 $1,001 $1,641
Class D 180 557 959 2,084
14
<PAGE>
GEORGIA FUND
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Georgia Fund seeks to maximize income exempt from federal income taxes and
from Georgia personal income taxes to the extent consistent with preservation of
capital and with consideration given to opportunities for capital gain.
The Georgia Fund uses the following strategies to pursue its objective:
The Georgia Fund invests at least 80% of its net assets in Georgia municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Georgia Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of Georgia issuers. Therefore,
the Fund's performance may be affected by local, state, or regional factors,
including state or local legislation or policy changes, economics, or natural
disasters.
15
<PAGE>
GEORGIA FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
[The following table represents a chart in the printed piece.]
9.9% 1989
7.0% 1990
11.0% 1991
9.0% 1992
12.2% 1993
-7.6% 1994
19.2% 1995
3.9% 1996
9.0% 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED 12/31/98
CLASS D
SINCE
ONE FIVE TEN INCEPTION
YEAR YEARS YEARS 2/1/94
------- ------- ------- -----------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) . 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) .. none(1) 1%
ANNUAL FUND OPERATING
EXPENSES FOR FISCAL 1998
- -----------------------
(as a percentage of average net assets)
Management Fees ........................ .50% .50%
Distribution and/or
Service (12b-1) Fees ................. .09% 1.00%
Other Expenses ......................... .30% .30%
----- -----
Total Annual Fund Operating Expenses ... .89% 1.80%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within 18
months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 283 566 $975 2,116
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 183 566 975 2,116
16
<PAGE>
LOUISIANA FUND
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Louisiana Fund seeks to maximize income exempt from federal income taxes and
from Louisiana personal income taxes to the extent consistent with preservation
of capital and with consideration given to opportunities for capital gain.
The Louisiana Fund uses the following strategies to pursue its objective:
The Louisiana Fund invests at least 80% of its net assets in Louisiana municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Louisiana Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of Louisiana issuers. Therefore,
the Fund's performance may be affected by local, state, or regional factors,
including state or local legislation or policy changes, economics, or natural
disasters.
17
<PAGE>
LOUISIANA FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
[The following table represents a chart in the printed piece.]
10.1% 1989
6.9% 1990
11.4% 1991
7.8% 1992
11.4% 1993
-5.9% 1994
17.1% 1995
3.5% 1996
8.4% 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED 12/31/98
CLASS D
SINCE
ONE FIVE TEN INCEPTION
YEAR YEARS YEARS 2/1/94
------- ------- ------- -----------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) . 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) .. none(1) 1%
ANNUAL FUND OPERATING
EXPENSES FOR FISCAL 1998
- -----------------------
(as a percentage of average net assets)
Management Fees ........................ .50% .50%
Distribution and/or
Service (12b-1) Fees ................. .10% 1.00%
Other Expenses ......................... .28% .28%
----- -----
Total Annual Fund Operating Expenses ... .88% 1.78%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within 18
months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $561 $742 $939 $1,508
Class D $281 560 964 2,095
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $561 $742 $939 $1,508
Class D 181 560 964 2,095
18
<PAGE>
MARYLAND FUND
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Maryland Fund seeks to maximize income exempt from federal income taxes and
from Maryland personal income taxes to the extent consistent with preservation
of capital and with consideration given to opportunities for capital gain.
The Maryland Fund uses the following strategies to pursue its objective:
The Maryland Fund invests at least 80% of its net assets in Maryland municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Maryland Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of Maryland issuers. Therefore,
the Fund's performance may be affected by local, state, or regional factors,
including state or local legislation or policy changes, economics, or natural
disasters.
19
<PAGE>
MARYLAND FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
[The following table represents a chart in the printed piece.]
10.5% 1989
6.2% 1990
10.5% 1991
8.2% 1992
11.9% 1993
-5.5% 1994
16.8% 1995
3.7% 1996
8.1% 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
------- ------- ------- -----------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) . 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) .. none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- -----------------------
(as a percentage of average net assets)
Management Fees ........................ .50% .50%
Distribution and/or
Service (12b-1) Fees ................. .09% 1.00%
Other Expenses ......................... .30% .30%
----- -----
Total Annual Fund Operating Expenses ... .89% 1.80%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within 18
months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 283 566 975 2,116
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 183 566 975 2,116
20
<PAGE>
MASSACHUSETTS FUND
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Massachusetts Fund seeks to maximize income exempt from federal income taxes
and from Massachusetts personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain.
The Massachusetts Fund uses the following strategies to pursue its objective:
The Massachusetts Fund invests at least 80% of its net assets in Massachusetts
municipal securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Massachusetts Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of Massachusetts issuers.
Therefore, the Fund's performance may be affected by local, state, or
regional factors, including state or local legislation or policy changes,
economics, or natural disasters.
21
<PAGE>
MASSACHUSETTS FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
[The following table represents a chart in the printed piece.]
8.7% 1989
5.5% 1990
13.0% 1991
9.1% 1992
11.5% 1993
-4.4% 1994
15.2% 1995
4.2% 1996
8.7% 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
------- ------- ------- -----------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) . 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) .. none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- -----------------------
(as a percentage of average net assets)
Management Fees ........................ .50% .50%
Distribution and/or
Service (12b-1) Fees ................. .09% 1.00%
Other Expenses ......................... .21% .21%
----- -----
Total Annual Fund Operating Expenses ... .80% 1.71%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within 18
months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 274 539 928 2,019
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 174 539 928 2,019
22
<PAGE>
MICHIGAN FUND
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Michigan Fund seeks to maximize income exempt from federal income taxes and
from Michigan personal income taxes to the extent consistent with preservation
of capital and with consideration given to opportunities for capital gain.
The Michigan Fund uses the following strategies to pursue its objective:
The Michigan Fund invests at least 80% of its net assets in Michigan municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Michigan Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of Michigan issuers. Therefore,
the Fund's performance may be affected by local, state, or regional factors,
including state or local legislation or policy changes, economics, or natural
disasters.
23
<PAGE>
MICHIGAN FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
[The following table represents a chart in the printed piece.]
10.7% 1989
5.9% 1990
12.0% 1991
9.3% 1992
11.4% 1993
-4.8% 1994
15.8% 1995
3.8% 1996
8.7% 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
------- ------- -------------------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------ ------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) . 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) .. none(1) 1%
ANNUAL FUND OPERATING
EXPENSES FOR FISCAL 1998
- ------------------------
(as a percentage of average net assets)
Management Fees ........................ .50% .50%
Distribution and/or
Service (12b-1) Fees ................. .09% 1.00%
Other Expenses ......................... .20% .20%
----- -----
Total Annual Fund Operating Expenses ... .79% 1.70%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within 18
months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $552 $715 $893 $1,406
Class D 273 536 923 2,009
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $552 $715 $893 $1,406
Class D 173 536 923 2,009
24
<PAGE>
MINNESOTA FUND
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Minnesota Fund seeks to maximize income exempt from federal income taxes and
from Minnesota personal income taxes to the extent consistent with preservation
of capital and with consideration given to opportunities for capital gain.
The Minnesota Fund uses the following strategies to pursue its objective:
The Minnesota Fund invests at least 80% of its net assets in Minnesota municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Minnesota Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of Minnesota issuers. Therefore,
the Fund's performance may be affected by local, state, or regional factors,
including state or local legislation or policy changes, economics, or natural
disasters.
25
<PAGE>
MINNESOTA FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
[The following table represents a chart in the printed piece.]
9.9% 1989
6.6% 1990
7.5% 1991
7.7% 1992
13.5% 1993
-2.5% 1994
11.4% 1995
3.4% 1996
7.0% 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
------- ------- -------------------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
- --------------------------------------------------------------------------------
FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) . 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) .. none(1) 1%
ANNUAL FUND OPERATING
EXPENSES FOR FISCAL 1998
- -----------------------
(as a percentage of average net assets)
Management Fees ........................ .50% .50%
Distribution and/or
Service (12b-1) Fees ................. .09% 1.00%
Other Expenses ......................... .22% .22%
----- -----
Total Annual Fund Operating Expenses ... .81% 1.72%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within 18
months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $554 $721 $903 $1,429
Class D 275 542 933 2,030
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $554 $721 $903 $1,429
Class D 175 542 933 2,030
26
<PAGE>
MISSOURI FUND
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Missouri Fund seeks to maximize income exempt from federal income taxes and
from Missouri personal income taxes to the extent consistent with preservation
of capital and with consideration given to opportunities for capital gain.
The Missouri Fund uses the following strategies to pursue its objective:
The Missouri Fund invests at least 80% of its net assets in Missouri municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Missouri Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of Missouri issuers. Therefore,
the Fund's performance may be affected by local, state, or regional factors,
including state or local legislation or policy changes, economics, or natural
disasters.
27
<PAGE>
MISSOURI FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
9.5% 1989
7.0% 1990
11.4% 1991
7.2% 1992
11.4% 1993
-6.3% 1994
17.0% 1995
3.7% 1996
8.1% 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED 12/31/98
CLASS D
SINCE
ONE FIVE TEN INCEPTION
YEAR YEARS YEARS 2/1/94
------- ------- ------- ----------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does
not reflect any fees or sales charges, and does not reflect state-specific
bond market performance.
(1) From 1/31/94.
FEES AND EXPENSES
SHAREHOLDER FEES CLASS A CLASS D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) ........ 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ......... none(1) 1%
ANNUAL FUND OPERATING
EXPENSES FOR FISCAL 1998
- -----------------------
(as a percentage of average net assets)
Management Fees ............................... .50% .50%
Distribution and/or
Service (12b-1) Fees ........................ .10% 1.00%
Other Expenses ................................ .29% .29%
----- -----
Total Annual Fund Operating Expenses .......... .89% 1.79%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within 18
months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 282 563 970 2,105
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 182 563 970 2,105
28
<PAGE>
NEW JERSEY FUND
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The New Jersey Fund seeks to maximize income exempt from regular federal income
tax and New Jersey gross income tax consistent with preservation of capital and
with consideration given to opportunities for capital gain.
The New Jersey Fund uses the following strategies to pursue its objective:
The New Jersey Fund invests at least 80% of its net assets in New Jersey
municipal securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The New Jersey Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of New Jersey issuers.
Therefore, the Fund's performance may be affected by local, state, or
regional factors, including state or local legislation or policy changes,
economics, or natural disasters.
29
<PAGE>
NEW JERSEY FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
10.6% 1989
6.8% 1990
11.0% 1991
9.0% 1992
12.3% 1993
-6.2% 1994
19.5% 1995
2.7% 1996
8.7% 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
------- ------- -------------------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that
does not reflect any fees or sales charges, and does not reflect
state-specific bond market performance.
(1) From 1/31/94.
FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .... 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ..... none(1) 1%
ANNUAL FUND OPERATING
EXPENSES FOR FISCAL 1998
- -----------------------
(as a percentage of average net assets)
Management Fees ........................... .50% .50%
Distribution and/or
Service (12b-1) Fees .................... .22% 1.00%
Other Expenses ............................ .30% .30%
----- -----
Total Annual Fund Operating Expenses ...... 1.02% 1.80%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within 18
months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $574 $784 $1,011 $1,664
Class D 283 566 975 2,116
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Class A $574 $784 $1,011 $1,664
Class D 183 566 975 2,116
30
<PAGE>
NEW YORK FUND
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The New York Fund seeks to maximize income exempt from federal income taxes and
from New York personal income taxes to the extent consistent with preservation
of capital and with consideration given to opportunities for capital gain.
The New York Fund uses the following strategies to pursue its objective:
The New York Fund invests at least 80% of its net assets in New York municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The New York Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of New York issuers. Therefore,
the Fund's performance may be affected by local, state, or regional factors,
including state or local legislation or policy changes, economics, or natural
disasters.
31
<PAGE>
NEW YORK FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
9.4% 1989
4.2% 1990
13.5% 1991
9.3% 1992
13.2% 1993
-7.9% 1994
19.3% 1995
3.9% 1996
10.0% 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED 12/31/98
CLASS D
SINCE
ONE FIVE TEN INCEPTION
YEAR YEARS YEARS 2/1/94
------- ------- -------------------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does
not reflect any fees or sales charges, and does not reflect state-specific
bond market performance.
(1) From 1/31/94.
FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) ........ 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ......... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- -----------------------
(as a percentage of average net assets)
Management Fees ............................... .50% .50%
Distribution and/or
Service (12b-1) Fees ........................ .09% 1.00%
Other Expenses ................................ .22% .22%
----- -----
Total Annual Fund Operating Expenses .......... .81% 1.72%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within
18 months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $554 $721 $903 $1,429
Class D 275 542 933 2,030
If you did not sell your shares at the end of each period, your expenses would
be:
1 Year 3 Years 5 Years 10 Years
----- ------- ------- --------
Class A $554 $721 $903 $1,429
Class D 175 542 933 2,030
32
<PAGE>
NORTH CAROLINA FUND
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The North Carolina Fund seeks high income exempt from regular federal income
taxes and North Carolina personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain.
The North Carolina Fund uses the following strategies to pursue its objective:
The North Carolina Fund invests at least 80% of its net assets in North Carolina
municipal securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The North Carolina Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of North Carolina issuers.
Therefore, the Fund's performance may be affected by local, state, or
regional factors, including state or local legislation or policy changes,
economics, or natural disasters.
33
<PAGE>
NORTH CAROLINA FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
0.208 1990
0.106 1991
0.082 1992
0.129 1993
-0.074 1994
0.195 1995
0.027 1996
0.087 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED 12/31/98
CLASS A CLASS D
SINCE SINCE
ONE FIVE INCEPTION INCEPTION
YEAR YEARS 8/27/90 2/1/94
------- ------- --------- ----------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1) (2)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does
not reflect any fees or sales charges, and does not reflect state-specific
bond market performance.
(1) From 8/31/90.
(2) From 1/31/94.
FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) ....... 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ........ none(1) 1%
ANNUAL FUND OPERATING
EXPENSES FOR FISCAL 1998
- -----------------------
(as a percentage of average net assets)
Management Fees .............................. .50% .50%
Distribution and/or
Service (12b-1) Fees ....................... .23% 1.00%
Other Expenses ............................... .32% .32%
----- -----
Total Annual Fund Operating Expenses ......... 1.05% 1.82%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within
18 months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Class A $577 $793 $1,027 $1,697
Class D 285 573 985 2,137
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $577 $793 $1,027 $1,697
Class D 185 573 985 2,137
34
<PAGE>
OHIO FUND
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Ohio Fund seeks to maximize income exempt from federal income taxes and from
Ohio personal income taxes to the extent consistent with preservation of capital
and with consideration given to opportunities for capital gain.
The Ohio Fund uses the following strategies to pursue its objective:
The Ohio Fund invests at least 80% of its net assets in Ohio municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Ohio Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of Ohio issuers. Therefore, the
Fund's performance may be affected by local, state, or regional factors,
including state or local legislation or policy changes, economics, or natural
disasters.
35
<PAGE>
OHIO FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
9.9% 1989
6.6% 1990
11.3% 1991
8.4% 1992
11.6% 1993
-4.9% 1994
15.2% 1995
3.8% 1996
8.4% 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
------- ------- ------ ----------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) ........ 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ......... none(1) 1%
ANNUAL FUND OPERATING
EXPENSES FOR FISCAL 1998
- -----------------------
(as a percentage of average net assets)
Management Fees ............................... .50% .50%
Distribution and/or
Service (12b-1) Fees ........................ .09% 1.00%
Other Expenses ................................ .19% .19%
----- -----
Total Annual Fund Operating Expenses .......... .78% 1.69%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within 18
months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $551 $712 $888 $1,395
Class D 272 533 918 1,998
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Class A $551 $712 $888 $1,395
Class D 172 533 918 1,998
36
<PAGE>
OREGON FUND
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The Oregon Fund seeks to maximize income exempt from federal income taxes and
from Oregon personal income taxes to the extent consistent with preservation of
capital and with consideration given to opportunities for capital gain.
The Oregon Fund uses the following strategies to pursue its objective:
The Oregon Fund invests at least 80% of its net assets in Oregon municipal
securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The Oregon Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of Oregon issuers. Therefore,
the Fund's performance may be affected by local, state, or regional factors,
including state or local legislation or policy changes, economics, or natural
disasters.
37
<PAGE>
OREGON FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
10.4% 1989
6.5% 1990
10.8% 1991
7.8% 1992
10.9% 1993
-4.6% 1994
14.6% 1995
3.8% 1996
9.0% 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
----- ------ ------ ----------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does
not reflect any fees or sales charges, and does not reflect state-specific
bond market performance.
(1) From 1/31/94.
FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------- ------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) ......... 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) .......... none(1) 1%
ANNUAL FUND OPERATING
EXPENSES FOR FISCAL 1998
- -----------------------
(as a percentage of average net assets)
Management Fees ................................ .50% .50%
Distribution and/or
Service (12b-1) Fees ......................... .09% 1.00%
Other Expenses ................................. .29% .29%
----- -----
Total Annual Fund Operating Expenses ........... .88% 1.79%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within 18
months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $561 $742 $939 $1,508
Class D 282 563 970 2,105
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Class A $561 $742 $939 $1,508
Class D 182 563 970 2,105
38
<PAGE>
PENNSYLVANIA FUND
INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES
The Pennsylvania Fund seeks high income exempt from regular federal income tax
and Pennsylvania income taxes consistent with preservation of capital.
The Pennsylvania Fund uses the following strategies to pursue its objective:
The Pennsylvania Fund invests at least 80% of its net assets in Pennsylvania
municipal securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of Pennsylvania issuers.
Therefore, the Fund's performance may be affected by local, state, or
regional factors, including state or local legislation or policy changes,
economics, or natural disasters.
39
<PAGE>
PENNSYLVANIA FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
10.2% 1989
5.4% 1990
11.3% 1991
9.3% 1992
12.9% 1993
-7.0% 1994
18.0% 1995
3.5% 1996
8.7% 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
------ ------- ------- ------------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does
not reflect any fees or sales charges, and does not reflect state-specific
bond market performance.
(1) From 1/31/94.
FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) ........... 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............ none(1) 1%
ANNUAL FUND OPERATING
EXPENSES FOR FISCAL 1998
- -----------------------
(as a percentage of average net assets)
Management Fees .................................. .50% .50%
Distribution and/or
Service (12b-1) Fees ........................... .22% 1.00%
Other Expenses ................................... .47% .47%
----- -----
Total Annual Fund Operating Expenses ............. 1.19% 1.97%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within 18
months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Class A $591 $835 $1,098 $1,850
Class D 300 618 1,062 2,296
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $591 $835 $1,098 $1,850
Class D 200 618 1,062 2,296
40
<PAGE>
SOUTH CAROLINA FUND
INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES
The South Carolina Fund seeks to maximize income exempt from federal income
taxes and from South Carolina personal income taxes to the extent consistent
with preservation of capital and with consideration given to opportunities for
capital gain.
The South Carolina Fund uses the following strategies to pursue its objective:
The South Carolina Fund invests at least 80% of its net assets in South Carolina
municipal securities rated investment grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
PRINCIPAL RISKS
The South Carolina Fund is subject to the following principal risks:
o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.
o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.
o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.
o If certain securities or industries represented in the Fund's portfolio do
not perform as expected, the Fund's net asset value may decline.
o The Fund invests in the municipal securities of South Carolina issuers.
Therefore, the Fund's performance may be affected by local, state, or
regional factors, including state or local legislation or policy changes,
economics, or natural disasters.
41
<PAGE>
SOUTH CAROLINA FUND
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.
CLASS A ANNUAL TOTAL RETURNS
CALENDAR YEARS
10.6% 1989
6.0% 1990
11.5% 1991
8.4% 1992
11.7% 1993
-6.7% 1994
17.7% 1995
4.0% 1996
8.7% 1997
0 1998
Best calendar quarter return: XX.X% - quarter ended ____
Worst calendar quarter return: XX.X% - quarter ended ____
Average Annual Total Returns
Periods Ended 12/31/98
Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
------- ------- -------------------
Class A
Class D
Lehman Brothers
Municipal Bond Index (1)
The Lehman Brothers Municipal Bond Index is an unmanaged index that does
not reflect any fees or sales charges, and does not reflect state-specific
bond market performance.
(1) From 1/31/94.
FEES AND EXPENSES
SHAREHOLDER FEES Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .......... 4.75% none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ........... none(1) 1%
ANNUAL FUND OPERATING
EXPENSES FOR FISCAL 1998
- -----------------------
(as a percentage of average net assets)
Management Fees ................................. .50% .50%
Distribution and/or
Service (12b-1) Fees .......................... .09% 1.00%
Other Expenses .................................. .21% .21%
----- -----
Total Annual Fund Operating Expenses ............ .80% 1.71%
===== =====
(1) If you buy Class A shares for $1,000,000 or more you do not pay an initial
sales charge, but your shares will be subject to a 1% CDSC if sold within
18 months.
Example
- -------
This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 274 539 928 $2,019
If you did not sell your shares at the end of each period, your expenses would
be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 174 539 928 2,019
42
<PAGE>
SHAREHOLDER INFORMATION
DECIDING WHICH CLASS OF SHARES TO BUY
Each Fund's Class A and Class D shares represent an interest in the same
portfolio of investments. However, each Class has its own sales charge schedule
and is subject to different ongoing 12b-1 fees. When deciding which Class of
shares to buy, you should consider, among other things:
o The amount you plan to invest.
o How long you intend to remain invested in the Fund, or another Seligman
mutual fund.
o If you would prefer to pay an initial sales charge and lower ongoing 12b-1
fees, or be subject to a CDSC and pay higher ongoing 12b-1 fees.
o Whether you may be eligible for reduced or no sales charges when you buy
or sell shares.
Your financial advisor will be able to help you decide which Class of shares
best meets your needs.
- --------------------------------------------------------------------------------
Class A
o Initial sales charge on Fund purchases, as set forth below:
<TABLE>
<CAPTION>
Sales Charge Regular Dealer
Sales Charge as a % Discount
as a % of Net as a % of
Amount of your Investment of Offering Price(1) Amount Invested Offering Price
-------------------------- ---------------- ---------------- --------------
<S> <C> <C> <C>
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 and over(2) 0.00 0.00 0.00
</TABLE>
(1) "Offering Price" is the amount that you actually pay for Fund shares;
it includes the initial sales charge.
(2) You will not pay a sales charge on purchases of $1 million or more,
but you will be subject to a 1% CDSC if you sell your shares within 18
months.
o Annual 12b-1 fee (for shareholder services) of up to 0.25%.
o No sales charge on reinvested dividends or capital gain distributions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D
o No initial sales charge on purchases.
o A 1% CDSC on shares sold within one year of purchase.
o Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
o No CDSC on redemptions of shares purchased with reinvested dividends or
capital gain distributions.
- --------------------------------------------------------------------------------
Each Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of
1940 that allows each Class to pay 12b-1 fees for the sale and distribution of
its shares and/or for providing services to shareholders.
Because 12b-1 fees are paid out of each Class's assets on an ongoing basis, over
time these fees will increase your investment expenses and may cost you more
than other types of sales charges.
43
<PAGE>
The Board of Directors or Trustees, as applicable, believes that no conflict of
interest currently exists between a Fund's Class A and Class D shares. On an
ongoing basis, the Directors or Trustees, in the exercise of their fiduciary
duties under the Investment Company Act of 1940 and applicable state law, will
seek to ensure that no such conflict arises.
HOW CDSCS ARE CALCULATED
To minimize the amount of CDSC you may pay when you sell your shares, each Fund
assumes that shares acquired through reinvested dividends and capital gain
distributions (which are not subject to a CDSC) are sold first. Shares that have
been in your account long enough so they are not subject to a CDSC are sold
next. After these shares are exhausted, shares will be sold in the order they
were purchased (oldest to youngest). The amount of any CDSC that you pay will be
based on the shares' original purchase price or current net asset value,
whichever is less.
You will not pay a CDSC when you exchange shares of any Fund to buy shares of
the same class of any other Seligman mutual fund. For the purpose of calculating
the CDSC when you sell your shares, it will be assumed that you held the shares
since the date of your original purchase in the Fund.
PRICING OF FUND SHARES
When you buy or sell shares, you do so at the Class's net asset value (NAV) next
calculated after Seligman Advisors accepts your request. Any applicable sales
charge will be included in the purchase price for Class A shares. Purchase or
sale orders received by an authorized dealer or financial advisor by the close
of regular trading on the New York Stock Exchange (NYSE) (normally 4:00 p.m.
Eastern time) and accepted by Seligman Advisors before the close of business
(5:00 p.m. Eastern time) on the same day will be executed at the Class's NAV
calculated as of the close of regular trading on the NYSE on that day.
If your order is received by your broker/dealer or financial advisor after the
close of regular trading on the NYSE, or is accepted by Seligman Advisors after
the close of business, the order will be executed at the Class's NAV calculated
as of the close of regular trading on the next NYSE trading day. When you sell
shares, you receive the Class's per share NAV, less any applicable CDSC.
The NAV of a Fund's shares is determined each day, Monday through Friday, on
days that the NYSE is open for trading. Because of their higher 12b-1 fees, the
NAV of Class D shares will generally be lower than the NAV of Class A shares.
Securities owned by a Fund are valued at current market prices. If reliable
market prices are unavailable, securities are valued in accordance with
procedures approved by the Board of Directors or Trustees, as applicable.
- --------------------------------------------------------------------------------
NAV: Computed separately for each Class of a Fund by dividing that Class's share
of the value of the net assets of the Fund (i.e., its assets less liabilities)
by the total number of outstanding shares of the Class.
- --------------------------------------------------------------------------------
44
<PAGE>
OPENING YOUR ACCOUNT
The Funds' shares are sold through authorized broker/dealers or financial
advisors who have sales agreements with Seligman Advisors. There are several
programs under which you may be eligible for reduced sales charges. Ask your
financial advisor if any of these programs apply to you.
To make your initial investment in a Fund, contact your financial advisor or
complete an account application and send it with your check directly to SDC at
the address provided on the account application. If you do not choose a Class,
your investment will automatically be made in Class A shares.
The required minimum initial investments are:
o Regular (non-retirement) accounts: $1,000
o For accounts opened concurrently with Invest-A-Check(R):
$100 to open if you will be making monthly investments
$250 to open if you will be making quarterly investments
If you buy shares by check and subsequently sell the shares, SDC will not send
your proceeds until 15 calendar days have elapsed from the date of your purchase
to ensure your check clears.
You will be sent a statement confirming your purchase, and any subsequent
transactions in your account. You will receive a consolidated statement at the
close of each calendar quarter detailing transactions in the Fund and all other
Seligman funds you own under the same account number. Duplicate account
statements will be sent to you 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 per year, per account, with a maximum charge of $150 per
account request. Send your request and a check for the fee to SDC.
IF YOU WANT TO BE ABLE TO BUY, SELL, OR EXCHANGE SHARES BY TELEPHONE, YOU
SHOULD COMPLETE AN APPLICATION WHEN YOU OPEN YOUR ACCOUNT. THIS WILL PREVENT
YOU FROM HAVING TO COMPLETE A SUPPLEMENTAL ELECTION FORM (WHICH MAY REQUIRE A
SIGNATURE GUARANTEE) AT A LATER DATE.
HOW TO BUY ADDITIONAL SHARES
After you have made your initial investment, there are many options available to
make additional purchases of Fund shares. Shares may be purchased through your
authorized broker/dealer or financial advisor, or you may send a check directly
to SDC. Please provide either an investment slip or a note that provides your
name(s), Fund name, and account number. Your investment will be made in the
Class you already own.
Send investment checks to:
Seligman Data Corp.
P.O. Box 9766
Providence, RI 02940-5051
Your check must be in US dollars and be drawn on a US bank. Third party and
credit card convenience checks cannot be used for investment.
45
<PAGE>
You may also use the following account services to make additional investments:
INVEST-A-CHECK(R). You may buy Fund shares electronically from a savings or
checking account of an Automated Clearing House (ACH) member bank. If your bank
is not a member of ACH, the Fund will debit your checking account by
preauthorized checks. You may buy Fund shares at regular monthly intervals in
fixed amounts of $100 or more, or regular quarterly intervals in fixed amounts
of $250 or more. If you use Invest-A-Check(R), you must continue to make
automatic investments until the Fund's minimum initial investment of $1,000 is
met or your account may be closed.
AUTOMATIC DOLLAR-COST-AVERAGING. If you have at least $5,000 in Seligman Cash
Management Fund, you may exchange uncertificated shares of that fund to buy
shares of the same class of any Seligman mutual fund at regular monthly
intervals in fixed amounts of $100 or more or regular quarterly intervals in
fixed amounts of $250 or more. If you exchange Class A shares, you may pay an
initial sales charge to buy shares.
AUTOMATIC CD TRANSFER. You may instruct your bank to invest the proceeds of a
maturing bank CD in shares of the Fund. If you wish to use this service, contact
SDC or your financial advisor to obtain the necessary forms. Because your bank
may charge you a penalty, it is not normally advisable to withdraw CD assets
before maturity.
DIVIDENDS FROM OTHER INVESTMENTS. You may have your dividends from other
companies paid to the Fund. (Dividend checks must include your name, account
number, Fund name and Class of shares.)
DIRECT DEPOSIT. You may buy Fund shares electronically with funds from your
employer, the IRS or any other institution that provides direct deposit. Call
SDC for more information.
SELIGMAN TIME HORIZON MATRIXSM. (Requires an initial total investment of
$10,000.) This is a needs-based investment process, designed to help you and
your financial advisor plan to seek your long-term financial goals. It considers
your financial needs, and helps frame a personalized asset allocation strategy
around the cost of your future commitments and the time you have to meet them.
Contact your financial advisor for more information.
SELIGMAN HARVESTER. If you are a retiree or nearing retirement, this program is
designed to help you establish an investment strategy that seeks to meet your
income needs throughout your retirement. The strategy is customized to your
personal financial situation by allocating your assets to seek to address your
income requirements, and prioritizing your expenses and establishing a prudent
withdrawal schedule.
HOW TO EXCHANGE SHARES BETWEEN THE SELIGMAN MUTUAL FUNDS
You may sell Fund shares to buy shares of the same Class of another Seligman
mutual fund or you may sell shares of another Seligman mutual fund to buy Fund
shares. Exchanges will be made at each fund's respective NAV. You will not pay
an initial sales charge when you exchange, unless you exchange Class A shares of
Seligman Cash Management Fund to buy shares of a Fund or another Seligman mutual
fund.
Only your dividend and capital gain distribution options and telephone services
will be automatically carried over to any new fund account. If you wish any
other account options to be carried over to the new fund (for example,
Invest-a-Check(R) or Systematic Withdrawals), you must specifically request so
at the time of your exchange.
Exchanges into a new fund must meet the new fund's required minimum initial
investment.
See "The Seligman Mutual Funds" for a list of the funds available for exchange.
Before making an exchange, contact your financial advisor or SDC to obtain the
applicable fund prospectus(es), which you should read and understand before
investing.
46
<PAGE>
HOW TO SELL SHARES
The easiest way to sell Fund shares is by phone. If you have telephone services,
you may be able use this service to sell Fund shares. Restrictions apply to
certain types of accounts. Please see "Important Policies That May Affect Your
Account."
Generally, when you sell Fund shares by phone, a check for the proceeds is sent
to your address of record. If you have current ACH bank information on file, you
may have the proceeds of the sale of your Fund shares directly deposited into
your bank account (typically, 3-4 business days after your shares are sold).
You may always send a written request to sell shares of any Fund. It may take
longer to get your money if you send your request by mail.
You may need to provide additional documents to sell shares if you are:
o a corporation; o an executor or administrator; o a trustee or custodian;
or
o in a retirement plan.
If your Fund shares are represented by certificates, you will need to surrender
the certificates to SDC before you sell your shares.
Contact your financial advisor or SDC's Shareholder Services Department for
information on selling your shares under any of the above circumstances.
You will need to guarantee your signature(s) if the proceeds are:
(1) $50,000 or more;
(2) to be paid to someone other than all account owners, or
(3) mailed to other than your address of record.
---------------------------------------------------------------------
SIGNATURE GUARANTEE:
PROTECTS YOU AND THE FUNDS FROM FRAUD. IT
GUARANTEES THAT A SIGNATURE IS GENUINE. A
GUARANTEE MUST BE OBTAINED FROM AN ELIGIBLE
FINANCIAL INSTITUTION. NOTARIZATION BY A NOTARY PUBLIC
IS NOT AN ACCEPTABLE GUARANTEE.
---------------------------------------------------------------------
You may also use the following account services to sell shares:
SYSTEMATIC WITHDRAWAL PLAN. If you have at least $5,000 in a Fund, you may
withdraw (sell) a fixed amount (minimum of $50) of uncertificated shares at
regular intervals. A check will be sent to you at your address of record or, if
you have current ACH bank information on file, you may have your payments
directly deposited to your predesignated bank account in 3-4 business days after
your shares are sold. If you bought $1,000,000 or more of Class A shares without
an initial sales charge, your withdrawals may be subject to a 1% CDSC if they
occur within 18 months of purchase. If you own Class D shares and reinvest your
dividends and capital gain distributions, you may withdraw 10% of the value of
your Fund account (at the time of election) annually without a CDSC.
CHECK REDEMPTION SERVICE. If you have at least $25,000 in a Fund, you may use
this service to draw checks against your Fund account in amounts of $500 or
more. If you have shares represented by certificates, those shares will not be
available to draw checks against. If you bought $1,000,000 or more of Class A
shares without an initial sales charge, you may be subject to a 1% CDSC if you
draw checks against the shares within 18 months of purchase. If you own Class D
shares, you may only draw checks against shares that have been held for one year
or more. If you did not elect this service on your account application, you must
complete a supplemental election form to add this service to your account.
Contact SDC for more information.
47
<PAGE>
IMPORTANT POLICIES THAT MAY AFFECT YOUR ACCOUNT
To protect you and other shareholders, the Funds reserve the right to:
o Refuse an exchange request if:
1. you have exchanged twice from the same fund in any three-month
period.
2. the amount you wish to exchange equals the lesser of $1,000,000 or
1% of a Fund's net assets, or
3. you or your financial advisor have been advised that previous
patterns of purchases and sales or exchanges have been considered
excessive.
o Refuse any request to buy Fund shares.
o Reject any request received by telephone.
o Suspend or terminate telephone services.
o Reject a signature guarantee that SDC believes may be fraudulent.
o Close your account if its value falls below $500.
o Close your account if it does not have a certified taxpayer identification
number.
TELEPHONE SERVICES
You and your broker/dealer representative or financial advisor will be able to
place the following requests by telephone, unless you indicate on your account
application that you do not want telephone services:
o Sale of uncertificated shares (up to $50,000 per day)
o Exchanges
o Dividend and/or capital gain distribution option changes
o Address changes
o Establish systematic withdrawals to address of record
If you do not complete an account application when you open your account,
telephone services must be elected on a supplemental election form.
Restrictions apply to certain types of accounts:
o Trust accounts on which the current trustee is not listed may not sell
Fund shares by phone.
o Corporations may not sell Fund shares by phone.
o IRAs may only exchange Fund shares or request address changes by phone.
o Group retirement plans may not sell Fund shares by phone; plans that allow
participants to exchange by phone must provide a letter of authorization
signed by the plan custodian or trustee and provide a supplemental
election form signed by all plan participants.
Unless you have current ACH bank information on file, you will not be able to
sell Fund shares by phone within thirty days following an address change.
Your request must be communicated to an SDC representative. You may not request
any phone transactions via the automated access line.
You may cancel telephone services at any time by sending a written request to
SDC. Each account owner, by accepting or adding telephone services, authorizes
each of the other owners to make requests by phone. Your broker/dealer
representative or financial advisor may not establish telephone services without
your written authorization. SDC will send written confirmation to the address of
record when telephone services are added or terminated.
During times of heavy call volume, you may not be able to get through to SDC by
phone to request a sale or exchange of shares. In this case, you may need to
write, and it may take longer for your request to be processed. A Fund's NAV may
fluctuate during this time.
The Funds and SDC will not be liable for processing requests received by phone
as long as it was reasonable to believe that the request was genuine.
REINSTATEMENT PRIVILEGE
If you sell Fund shares, you may, within 120 calendar days, use part or all of
the proceeds to buy shares of the Fund or any other Seligman mutual fund
(reinstate your investment) without paying an initial sales charge or, if you
paid a CDSC when you sold your shares, receiving a credit for the applicable
CDSC paid. This privilege is available only once each calendar year. Contact
your financial advisor for more information. You should consult your tax advisor
concerning possible tax consequences of exercising this privilege.
48
<PAGE>
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Funds generally declare any dividends from net investment income daily and
pay dividends on the 17th of each month. If the 17th day of a month falls on a
weekend or on a NYSE holiday, the dividend will be distributed on the previous
business day. The Funds distribute net capital gains realized on investments
annually. It is expected that the Funds' distributions will be primarily income
dividends.
Shareholders may elect to: (1) reinvest both dividends and capital gain
distributions;
(2) take dividends in cash and reinvest capital gain distributions; or
(3) take both dividends and capital gain distributions in cash.
Your dividends and capital gain distributions will be reinvested if you do not
instruct otherwise.
If you want to change your election, you may write SDC at the address listed on
the back cover of this prospectus, or, if you have telephone services, you or
your financial advisor may call SDC. Your request must be received by SDC before
the record date to be effective for that dividend or capital gain distribution.
Cash dividends or capital gain distributions will be sent by check to your
address of record or, if you have current ACH bank information on file, directly
deposited into your predesignated bank account within 3-4 business days from the
payable date.
Dividends and capital gain distributions are reinvested to buy additional shares
on the payable date using the NAV of the payable date.
Dividends on Class D shares will be lower than the dividends on Class A shares
as a result of their higher 12b-1 fees. Capital gain distributions, if any, will
be paid in the same amount for each Class.
- -----------------------------------------------------------------
DIVIDEND:
A payment by a mutual fund,
usually derived from the fund's
net investment income
(dividends and interest earned
on portfolio securities less
expenses).
CAPITAL GAIN DISTRIBUTION:
A payment to mutual fund
shareholders which represents
profits realized on the sale of
securities in a Fund's portfolio.
EX-DIVIDEND DATE:
The day on which any declared
distributions (dividends or
capital gains) are deducted
from the Fund's assets before it
calculates its NAV.
- -----------------------------------------------------------------
TAXES
The Funds intend to pay dividends that are exempt from regular income tax. A
Fund may invest a portion of its assets in securities that generate income that
is not exempt from federal or state income tax. Income exempt from federal tax
may be subject to state and local tax. If you wish more specific information on
the possible tax consequences of investing in a particular Fund, you should read
that Fund's Statement of Additional Information.
Any capital gains distributed by a Fund may be taxable, whether you take them in
cash or reinvest them to buy additional Fund shares. Capital gains may be taxed
at different rates depending on the length of time the Fund holds its assets.
When you sell Fund shares, any gain or loss you realize will generally be
treated as a long-term capital gain or loss if you held your shares for more
than one year, or as a short-term capital gain or loss if you held your shares
for one year or less. However, if you sell Fund shares on which a long-term
capital gain distribution has been received and you held the shares for six
months or less, any loss you realize will be treated as a long-term capital loss
to the extent that it offsets the long-term capital gain distribution.
An exchange of Fund shares is a sale and may result in a gain or loss for
federal income tax purposes.
EACH JANUARY, YOU WILL BE SENT INFORMATION ON THE TAX STATUS OF ANY
DISTRIBUTIONS MADE DURING THE PREVIOUS CALENDAR YEAR. BECAUSE EACH SHAREHOLDER'S
SITUATION IS UNIQUE, YOU SHOULD ALWAYS CONSULT YOUR TAX ADVISOR CONCERNING THE
EFFECT INCOME TAXES MAY HAVE ON YOUR INDIVIDUAL INVESTMENT.
49
<PAGE>
THE SELIGMAN MUTUAL FUNDS
EQUITY
SPECIALTY
- -------------------------------------------------------------------------------
SELIGMAN COMMUNICATIONS AND
INFORMATION FUND
Seeks capital appreciation by investing in companies operating in all aspects of
the communications, information, and related industries.
SELIGMAN HENDERSON GLOBAL TECHNOLOGY FUND
Seeks long-term capital appreciation by investing primarily in global securities
(US and non-US) of companies in the technology and technology-related
industries.
SELIGMAN HENDERSON EMERGING MARKETS GROWTH FUND
Seeks long-term capital appreciation by investing primarily in equity securities
of companies in emerging markets.
SMALL COMPANY
- --------------------------------------------------------------------------------
SELIGMAN FRONTIER FUND
Seeks to maximize capital appreciation by investing primarily in small company
growth stocks.
SELIGMAN SMALL-CAP VALUE FUND
Seeks long-term capital appreciation by investing in equities of small
companies, deemed to be "value" companies by the investment manager.
SELIGMAN HENDERSON GLOBAL SMALLER COMPANIES FUND
Seeks long-term capital appreciation by investing in securities of smaller
companies around the world, including the US.
MEDIUM COMPANY
- --------------------------------------------------------------------------------
SELIGMAN CAPITAL FUND
Seeks capital appreciation by investing in the common stocks of companies with
significant potential for growth.
LARGE COMPANY
- --------------------------------------------------------------------------------
SELIGMAN GROWTH FUND
Seeks long-term growth of capital value and an increase in future income.
SELIGMAN HENDERSON GLOBAL GROWTH OPPORTUNITIES FUND
Seeks capital appreciation by investing primarily in equity securities of
companies that have the potential to benefit from global economic or social
trends.
SELIGMAN LARGE-CAP VALUE FUND
Seeks long-term capital appreciation by investing in equities of large
companies, deemed to be "value" companies by the investment manager.
SELIGMAN COMMON STOCK FUND
Seeks favorable, but not the highest, current income and long-term growth of
both income and capital, without exposing capital to undue risk. Seligman
Henderson International Fund Seeks long-term capital appreciation by investing
in securities of medium- to large-sized companies, primarily in the developed
markets outside the US.
BALANCED
- --------------------------------------------------------------------------------
SELIGMAN INCOME FUND
Seeks high current income and improvement in capital value over the long term,
consistent with prudent risk of capital.
FIXED-INCOME
INCOME
- --------------------------------------------------------------------------------
SELIGMAN HIGH-YIELD BOND SERIES
Seeks to maximize current income by investing in a diversified portfolio of
high-yielding, high-risk corporate bonds, commonly referred to as "junk bonds."
SELIGMAN U.S. GOVERNMENT SECURITIES SERIES
Seeks high current income primarily by investing in a diversified portfolio of
securities guaranteed by the US government, its agencies, or instrumentalities,
which have maturities greater than one year.
MUNICIPAL
- --------------------------------------------------------------------------------
SELIGMAN MUNICIPAL FUNDS:
NATIONAL FUND*
Seeks maximum income, free from regular federal income taxes.
STATE-SPECIFIC FUNDS:
Seek to maximize income free from regular federal income taxes and from income
taxes in the designated state.
California Louisiana New Jersey
o High-Yield Maryland New York
o Quality Massachusetts North Carolina
Colorado Michigan Ohio
Florida Minnesota Oregon
Georgia Missouri Pennsylvania
South Carolina
* A small portion of income may be subject to state taxes.
MONEY MARKET
- --------------------------------------------------------------------------------
SELIGMAN CASH MANAGEMENT FUND
Seeks to preserve capital and to maximize liquidity and current income, by
investing only in high-quality money market securities having a maturity of 90
days or less. The fund seeks to maintain a constant net asset value of $1.00 per
share.
50
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below are intended to help you understand the financial performance
of each Fund's Classes for the past five years or, if less than five years, the
period of the Class's operations. Certain information reflects financial results
for a single Class share held throughout the periods shown. "Total return" shows
how much you would have earned (or lost) on an investment in the Fund (assuming
you reinvested all your dividends and capital gain distributions). Total returns
do not reflect any sales charges. , independent auditors, have audited this
information for each Fund. Their report, along with Fund's financial statements,
is included in each Fund's annual report, which is available upon request.
<TABLE>
<CAPTION>
NATIONAL FUND
CLASS A CLASS D
---------------------------------------- -------------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
---------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
---- ---- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period ..... $7.70 $7.58 $7.18 $8.72 $7.70 $7.57 $7.18 $8.20
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.39 0.40 0.40 0.41 0.32 0.33 0.32 0.22
Net realized and
unrealized gain
(loss) on
investments ........... 0.31 0.12 0.40 (1.04) 0.32 0.13 0.39 (1.02)
Total from investment
operations .............. 0.70 0.52 0.80 (0.63) 0.64 0.46 0.71 (0.80)
Less distributions:
Dividends (from net
investment income) .... (0.39) (0.40) (0.40) (0.41) (0.32) (0.33) (0.32) (0.22)
Distributions
(from net realized
capital gains) ........ -- -- -- (0.50) -- -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.39) (0.40) (0.40) (0.91) (0.32) (0.33) (0.32) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ........... $8.01 $7.70 $7.58 $7.18 $8.02 $7.70 $7.57 $7.18
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return .............. 9.40% 6.97% 11.48% (7.83)% 8.56% 6.13% 10.17% (9.96)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $97,481 $98,767 $104,184 $111,374 $2,279 $4,826 $1,215 $446
Ratio of expenses to
average net assets ...... 0.84% 0.80% 0.86% 0.85% 1.75% 1.67% 1.95% 1.76%(3)
Ratio of net investment
income to average
net assets .............. 5.05% 5.19% 5.46% 5.30% 4.15% 4.27% 4.40% 4.37%(3)
Portfolio turnover rate ... 20.63% 33.99% 24.91% 24.86% 20.63% 33.99% 24.91% 24.86%(4)
</TABLE>
- ---------
See footnotes on page 60.
51
<PAGE>
<TABLE>
<CAPTION>
CALIFORNIA HIGH-YIELD FUND
CLASS A CLASS D
---------------------------------------- -------------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
---------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
---- ---- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period ..... $6.50 $6.47 $6.30 $6.73 $6.51 $6.48 $6.31 $6.67
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.34 0.36 0.37 0.37 0.28 0.30 0.31 0.21
Net realized and
unrealized gain
(loss) on investments . 0.20 0.05 0.17 (0.34) 0.19 0.05 0.17 (0.36)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations .............. 0.54 0.41 0.54 0.03 0.47 0.35 0.48 (0.15)
Less distributions:
Dividends (from net
investment income) .... (0.34) (0.36) (0.37) (0.37) (0.28) (0.30) (0.31) (0.21)
Distributions
(from net realized
capital gains) ........ (0.09) (0.02) -- (0.09) (0.09) (0.02) -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.43) (0.38) (0.37) (0.46) (0.37) (0.32) (0.31) (0.21)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ........... $6.61 $6.50 $6.47 $6.30 $6.61 $6.51 $6.48 $6.31
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return .............. 8.74% 6.49% 8.85% 0.41% 7.60% 5.53% 7.78% (2.47)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $52,883 $50,264 $51,504 $48,007 $3,320 $1,919 $1,277 $650
Ratio of expenses to
average net assets ...... 0.87% 0.84% 0.90% 0.85% 1.77% 1.74% 1.91% 1.74%(3)
Ratio of net investment
income to average
net assets .............. 5.26% 5.49% 5.84% 5.74% 4.36% 4.59% 4.84% 4.73%(3)
Portfolio turnover rate ... 22.42% 34.75% 17.64% 8.36% 22.42% 34.75% 17.64% 8.36%(4)
CALIFORNIA QUALITY FUND
PER SHARE DATA:
Net asset value,
beginning of period ..... $6.75 $6.65 $6.39 $7.28 $6.74 $6.63 $6.38 $7.13
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.34 0.35 0.34 0.35 0.28 0.28 0.28 0.19
Net realized and
unrealized gain
(loss) on investments . 0.24 0.11 0.32 (0.73) 0.23 0.12 0.31 (0.75)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations .............. 0.58 0.46 0.66 (0.38) 0.51 0.40 0.59 (0.56)
Less distributions:
Dividends (from net
investment income) (0.34) (0.35) (0.34) (0.35) (0.28) (0.28) (0.28) (0.19)
Distributions
(from net realized
capital gains) ......... -- (0.01) (0.06) (0.16) -- (0.01) (0.06) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.34) (0.36) (0.40) (0.51) (0.28) (0.29) (0.34) (0.19)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ........... $6.99 $6.75 $6.65 $6.39 $6.97 $6.74 $6.63 $6.38
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return .............. 8.87% 7.00% 10.85% (5.46)% 7.75% 6.20% 9.61% (8.01)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $86,992 $95,560 $94,947 $99,020 $1,677 $1,645 $863 $812
Ratio of expenses to
average net assets ...... 0.82% 0.79% 0.89% 0.81% 1.72% 1.69% 1.88% 1.77%(3)
Ratio of net investment
income to average
net assets .............. 4.99% 5.11% 5.34% 5.20% 4.09% 4.21% 4.36% 4.39%(3)
Portfolio turnover rate ... 12.16% 12.84% 11.24% 22.16% 12.16% 12.84% 11.24% 22.16%(4)
</TABLE>
- ---------
See footnotes on page 60.
52
<PAGE>
<TABLE>
<CAPTION>
COLORADO FUND
CLASS A CLASS D
CLASS A CLASS D
---------------------------------------- -------------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
---------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
---- ---- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period ..... $7.27 $7.30 $7.09 $7.76 $7.27 $7.29 $7.09 $7.72
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.37 0.37 0.38 0.37 0.30 0.31 0.30 0.20
Net realized and
unrealized gain
(loss) on investments . 0.15 (0.03) 0.21 (0.59) 0.15 (0.02) 0.20 (0.63)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ............. 0.52 0.34 0.59 (0.22) 0.45 0.29 0.50 (0.43)
Less distributions:
Dividends (from net
investment income) .... (0.37) (0.37) (0.38) (0.37) (0.30) (0.31) (0.30) (0.20)
Distributions
(from net realized
capital gains) ........ -- -- -- (0.08) -- -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.37) (0.37) (0.38) (0.45) (0.30) (0.31) (0.30) (0.20)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ........... $7.42 $7.27 $7.30 $7.09 $7.42 $7.27 $7.29 $7.09
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return 7.30% 4.76% 8.56% (2.92)% 6.34% 3.95% 7.26% (5.73)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $49,780 $52,295 $54,858 $58,197 $238 $255 $193 $96
Ratio of expenses to
average net assets ...... 0.90% 0.85% 0.93% 0.86% 1.81% 1.75% 2.02% 1.78%(3)
Ratio of net investment
income to average
net assets .............. 5.01% 5.07% 5.31% 5.06% 4.10% 4.17% 4.23% 4.05%(3)
Portfolio turnover rate ... 3.99% 12.39% 14.70% 10.07% 3.99% 12.39% 14.70% 10.07%(4)
FLORIDA FUND
PER SHARE DATA:
Net asset value,
beginning of period .... $7.67 $7.71 $7.34 $8.20 $7.68 $7.72 $7.34 $8.10
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.36 0.38 0.40 0.42 0.30 0.32 0.34 0.24
Net realized and
unrealized gain
(loss) on investments . 0.23 0.04 0.37 (0.74) 0.23 0.04 0.38 (0.76)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations .............. 0.59 0.42 0.77 (0.32) 0.53 0.36 0.72 (0.52)
Less distributions:
Dividends (from net
investment income) .... (0.36) (0.38) (0.40) (0.42) (0.30) (0.32) (0.34) (0.24)
Distributions
(from net realized
capital gains) ........ (0.10) (0.08) -- (0.12) (0.10) (0.08) -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.46) (0.46) (0.40) (0.54) (0.40) (0.40) (0.34) (0.24)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ........... $7.80 $7.67 $7.71 $7.34 $7.81 $7.68 $7.72 $7.34
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return 8.01% 5.54% 10.87% (3.99)% 7.18% 4.74% 10.07% (6.64)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $42,024 $45,200 $49,030 $49,897 $1,678 $1,277 $603 $244
Ratio of expenses to
average net assets ...... 1.04% 0.97% 0.72% 0.42% 1.81% 1.73% 1.66% 1.29%(3)
Ratio of net investment
income to average
net assets .............. 4.70% 4.90% 5.38% 5.49% 3.93% 4.14% 4.53% 4.61%(3)
Portfolio turnover rate ... 33.68% 18.53% 11.82% 6.17% 33.68% 18.53% 11.82% 6.17%(4)
Without management
fee waiver:(5)
Net investment income
per share ............. $0.38 $0.37 $0.38 $0.32 $0.31 $0.21
Ratios:
Expenses to average
net assets ............ 0.97% 1.03% 1.00% 1.73% 1.97% 1.84%(3)
Net investment income to
average net assets .... 4.90% 5.07% 4.91% 4.14% 4.22% 4.08%(3)
</TABLE>
- ---------
See footnotes on page 60.
53
<PAGE>
GEORGIA FUND
<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------- -------------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
---------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
---- ---- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period ..... $7.87 $7.81 $7.48 $8.43 $7.88 $7.82 $7.49 $8.33
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.38 0.39 0.39 0.41 0.31 0.32 0.32 0.22
Net realized and
unrealized gain
(loss) on investments . 0.28 0.11 0.43 (0.86) 0.28 0.11 0.43 (0.84)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations .............. 0.66 0.50 0.82 (0.45) 0.59 0.43 0.75 (0.62)
Less distributions:
Dividends (from net
investment income) .... (0.38) (0.39) (0.39) (0.41) (0.31) (0.32) (0.32) (0.22)
Distributions
(from net realized
capital gains) ......... (0.03) (0.05) (0.10) (0.09) (0.03) (0.05) (0.10) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.41) (0.44) (0.49) (0.50) (0.44) (0.37) (0.42) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ........... $8.12 $7.87 $7.81 $7.48 $8.13 $7.88 $7.82 $7.49
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return .............. 8.65% 6.56% 11.66% (5.52)% 7.67% 5.60% 10.58% (7.57)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $50,614 $50,995 $57,678 $61,466 $2,640 $2,327 $2,079 $849
Ratio of expenses to
average net assets ...... 0.89% 0.83% 0.91% 0.73% 1.79% 1.73% 1.90% 1.76%(3)
Ratio of net investment
income to average
net assets .............. 4.82% 4.94% 5.26% 5.21% 3.92% 4.03% 4.28% 4.28%(3)
Portfolio turnover rate ... 12.28% 16.24% 3.36% 19.34% 12.28% 16.24% 3.36% 19.34%(4)
Without management fee
waiver:(5)
Net investment income
per share ............. $0.39 $0.40 $0.31 $0.21
Ratios:
Expenses to average
net assets 0.96% 0.93% 1.95% 1.90%(3)
Net investment income to
average net assets .... 5.21% 5.01% 4.23% 4.15%(3)
LOUISIANA FUND
PER SHARE DATA:
Net asset value,
beginning of period ..... 8.16 $8.14 $7.94 $8.79 $8.16 $8.14 $7.94 $8.73
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.41 0.42 0.43 0.44 0.34 0.35 0.35 0.24
Net realized and
unrealized gain
(loss) on investments . 0.23 0.08 0.34 (0.77) 0.22 0.08 0.34 (0.79)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations .............. 0.64 0.50 0.77 (0.33) 0.56 0.43 0.69 (0.55)
Less distributions:
Dividends (from net
investment income) .... (0.41) (0.42) (0.43) (0.44) (0.34) (0.35) (0.35) (0.24)
Distributions
(from net realized
capital gains) ........ (0.11) (0.06) (0.14) (0.08) (0.11) (0.06) (0.14) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.52) (0.48) (0.57) (0.52) (0.45) (0.41) (0.49) (0.24)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ........... $8.28 $8.16 $8.14 $7.94 $8.27 $8.16 $8.14 $7.94
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return 8.17% 6.32% 10.30% (3.83)% 7.07% 5.37% 9.17% (6.45)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $56,199 $57,264 $61,988 $61,441 $509 $389 $465 $704
Ratio of expenses to
average net assets ...... 0.86% 0.82% 0.89% 0.87% 1.76% 1.72% 1.91% 1.78%(3)
Ratio of net investment
income to average
net assets .............. 5.08% 5.15% 5.44% 5.31% 4.18% 4.25% 4.41% 4.33%(3)
Portfolio turnover rate ... 16.08% 10.08% 4.82% 17.16% 16.08% 10.08% 4.82% 17.16%(4)
</TABLE>
- ---------
See footnotes on page 60.
54
<PAGE>
<TABLE>
<CAPTION>
MARYLAND FUND
CLASS A CLASS D
---------------------------------------- -------------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
---------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
---- ---- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period ..... $7.99 $7.96 $7.71 $8.64 $7.99 $7.97 $7.72 $8.46
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.40 0.40 0.41 0.42 0.33 0.33 0.33 0.23
Net realized
and unrealized
gain (loss)
on investments ........ 0.19 0.06 0.38 (0.76) 0.20 0.05 0.38 (0.74)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations .............. 0.59 0.46 0.79 (0.34) 0.53 0.38 0.71 (0.51)
Less distributions:
Dividends (from net
investment income) .... (0.40) (0.40) (0.41) (0.42) (0.33) (0.33) (0.33) (0.23)
Distributions
(from net realized
capital gains) ........ (0.04) (0.03) (0.13) (0.17) (0.04) (0.03) (0.13) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.44) (0.43) (0.54) (0.59) (0.37) (0.36) (0.46) (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ............ $8.14 $7.99 $7.96 $7.71 $8.15 $7.99 $7.97 $7.72
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return 7.64% 6.00% 10.90% (4.08)% 6.80% 4.91% 9.75% (6.21)% (2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $52,549 $54,041 $56,290 $57,263 $2,063 $2,047 $630 $424
Ratio of expenses to
average net assets ...... 0.90% 0.84% 0.96% 0.92% 1.81% 1.72% 2.02% 1.80%(3)
Ratio of net investment
income to average
net assets .............. 4.99% 5.05% 5.31% 5.17% 4.08% 4.14% 4.27% 4.26%(3)
Portfolio turnover rate ... 14.79% 5.56% 3.63% 17.68% 14.79% 5.56% 3.63% 17.68%(4)
MASSACHUSETTS FUND
PER SHARE DATA:
Net asset value,
beginning of period ..... $7.85 $7.91 $7.66 $8.54 $7.84 $7.90 $7.66 $8.33
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.40 0.41 0.42 0.44 0.33 0.34 0.34 0.24
Net realized and
unrealized gain
(loss) on investments . 0.22 0.05 0.28 (0.67) 0.23 0.05 0.27 (0.67)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations .............. 0.62 0.46 0.70 (0.23) 0.56 0.39 0.61 (0.43)
Less distributions:
Dividends (from net
investment income) .... (0.40) (0.41) (0.42) (0.44) (0.33) (0.34) (0.34) (0.24)
Distributions
(from net realized
capital gains) ........ (0.08) (0.11) (0.03) (0.21) (0.08) (0.11) (0.03) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.48) (0.52) (0.45) (0.65) (0.41) (0.45) (0.37) (0.24)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ........... $7.99 $7.85 $7.91 $7.66 $7.99 $7.84 $7.90 $7.66
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return .............. 8.11% 5.97% 9.58% (2.94)% 7.29% 5.01% 8.33% (5.34)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) $110,011 $109,872 $115,711 $120,149 $1,245 $1,405 $809 $1,099
Ratio of expenses to
average net assets ...... 0.84% 0.80% 0.86% 0.85% 1.74% 1.70% 1.95% 1.78%(3)
Ratio of net investment
income to average
net assets .............. 5.06% 5.24% 5.51% 5.46% 4.16% 4.32% 4.47% 4.52%(3)
Portfolio turnover rate ... 29.26% 26.30% 16.68% 12.44% 29.26% 26.30% 16.68% 12.44%(4)
</TABLE>
- ---------
See footnotes on page 60.
55
<PAGE>
<TABLE>
<CAPTION>
MICHIGAN FUND
CLASS A CLASS D
---------------------------------------- -------------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
---------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
---- ---- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period ..... $8.46 $8.54 $8.28 $9.08 $8.45 $8.54 $8.28 $9.01
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.43 0.45 0.46 0.46 0.36 0.37 0.37 0.25
Net realized and
unrealized gain
(loss) on investments . 0.23 0.06 0.30 (0.71) 0.23 0.05 0.30 (0.73)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations .............. 0.66 0.51 0.76 (0.25) 0.59 0.42 0.67 (0.48)
Less distributions:
Dividends (from net
investment income) .... (0.43) (0.45) (0.46) (0.46) (0.36) (0.37) (0.37) (0.25)
Distributions
(from net realized
capital gains) ........ (0.09) (0.14) (0.04) (0.09) (0.09) (0.14) (0.04) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.52) (0.59) (0.50) (0.55) (0.45) (0.51) (0.41) (0.25)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ........... $8.60 $8.46 $8.54 $8.28 $8.59 $8.45 $8.54 $8.28
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return 8.16% 6.16% 9.56% (2.90)% 7.19% 5.09% 8.36% (5.47)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $143,370 $148,178 $151,589 $151,095 $1,845 $1,486 $1,172 $671
Ratio of expenses to
average net assets ...... 0.81% 0.78% 0.87% 0.84% 1.71% 1.68% 2.01% 1.75%(3)
Ratio of net investment
income to average
net assets ............. 5.13% 5.29% 5.50% 5.32% 4.23% 4.39% 4.40% 4.40%(3)
Portfolio turnover rate ... 10.98% 19.62% 20.48% 10.06% 10.98% 19.62% 20.48% 10.06%(4)
MINNESOTA FUND
PER SHARE DATA:
Net asset value,
beginning of period ..... $7.68 $7.82 $7.72 $8.28 $7.68 $7.82 $7.73 $8.22
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.40 0.42 0.45 0.45 0.33 0.35 0.38 0.25
Net realized and
unrealized gain
(loss) on investments .. 0.11 (0.12) 0.11 (0.44) 0.11 (0.12) 0.10 (0.49)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ............. 0.51 0.30 0.56 0.01 0.44 0.23 0.48 (0.24)
Less distributions:
Dividends (from net
investment income) .... (0.40) (0.42) (0.45) (0.45) (0.33) (0.35) (0.38) (0.25)
Distributions
(from net realized
capital gains) ........ -- (0.02) (0.01) (0.12) -- (0.02) (0.01) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.40) (0.44) (0.46) (0.57) (0.33) (0.37) (0.39) (0.24)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ........... $7.79 $7.68 $7.82 $7.72 $7.79 $7.68 $7.82 $7.73
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return 6.85% 3.99% 7.61% 0.12% 5.89% 3.06% 6.45% (3.08)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $121,674 $126,173 $132,716 $134,990 $1,799 $2,036 $2,237 $1,649
Ratio of expenses to
average net assets ...... 0.85% 0.81% 0.87% 0.85% 1.75% 1.71% 1.85% 1.74%(3)
Ratio of net investment
income to average
net assets .............. 5.21% 5.47% 5.89% 5.70% 4.31% 4.57% 4.92% 4.68%(3)
Portfolio turnover rate ... 6.88% 26.89% 5.57% 3.30% 6.88% 26.89% 5.57% 3.30%(4)
</TABLE>
- ---------
See footnotes on page 60.
56
<PAGE>
<TABLE>
<CAPTION>
MISSOURI FUND
CLASS A CLASS D
---------------------------------------- -------------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
---------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
---- ---- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period ..... $7.71 $7.70 $7.41 $8.31 $7.72 $7.70 $7.41 $8.20
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.38 0.39 0.40 0.40 0.31 0.32 0.32 0.22
Net realized and
unrealized gain
(loss) on investments . 0.19 0.08 0.36 (0.79) 0.18 0.09 0.36 (0.79)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations .............. 0.57 0.47 0.76 (0.39) 0.49 0.41 0.68 (0.57)
Less distributions:
Dividends (from net
investment income) .... (0.38) (0.39) (0.40) (0.40) (0.31) (0.32) (0.32) (0.22)
Distributions
(from net realized
capital gains) ........ (0.08) (0.07) (0.07) (0.11) (0.08) (0.07) (0.07) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.46) (0.46) (0.47) (0.51) (0.39) (0.39) (0.39) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ........... $7.82 $7.71 $7.70 $7.41 $7.82 $7.72 $7.70 $7.41
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return .............. 7.70% 6.27% 10.67% (4.85)% 6.60% 5.46% 9.49% (7.16)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $52,766 $49,941 $51,169 $52,621 $474 $565 $515 $350
Ratio of expenses to
average net assets ...... 0.89% 0.86% 0.88% 0.74% 1.80% 1.76% 1.98% 1.70%(3)
Ratio of net investment
income to average
net assets .............. 4.93% 5.03% 5.31% 5.18% 4.02% 4.13% 4.23% 4.27%(3)
Portfolio turnover rate ... 6.47% 8.04% 3.88% 14.33% 6.47% 8.04% 3.88% 14.33%(4)
Without management
fee waiver:(5)
Net investment income
per share ............. $0.39 $0.39 $0.32 $0.22
Ratios:
Expenses to average
net assets ............ 0.93% 0.88% 2.03% 1.80%(3)
Net investment
income to average
net assets ............ 5.26% 5.04% 4.18% 4.17%(3)
NEW JERSEY FUND
PER SHARE DATA:
Net asset value,
beginning of period ..... $7.60 $7.59 $7.40 $8.24 $7.68 $7.67 $7.48 $8.14
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.36 0.39 0.39 0.41 0.31 0.33 0.33 0.23
Net realized and
unrealized gain
(loss) on investments .. 0.21 0.01 0.29 (0.74) 0.21 0.01 0.29 (0.66)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations .............. 0.57 0.40 0.68 (0.33) 0.52 0.34 0.62 (0.43)
Less distributions:
Dividends (from net
investment income) .... (0.36) (0.39) (0.39) (0.41) (0.31) (0.33) (0.33) (0.23)
Distributions
(from net realized
capital gains) ........ (0.25) -- (0.10) (0.10) (0.25) -- (0.10) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.61) (0.39) (0.49) (0.51) (0.56) (0.33) (0.43) (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ........... $7.56 $7.60 $7.59 $7.40 $7.64 $7.68 $7.67 $7.48
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return .............. 7.96% 5.37% 9.77% (4.25)% 7.10% 4.56% 8.79% (5.47)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $62,597 $66,293 $73,561 $73,942 $1,282 $1,152 $1,190 $986
Ratio of expenses to
average net assets ...... 1.06% 1.02% 1.01% 0.90% 1.83% 1.79% 1.89% 1.75%(3)
Ratio of net investment
income to average
net assets .............. 4.90% 5.06% 5.29% 5.24% 4.13% 4.29% 4.45% 4.37%(3)
Portfolio turnover rate ... 20.22% 25.65% 4.66% 12.13% 20.22% 25.65% 4.66% 12.13%(4)
Without management fee
waiver:(5)
Net investment income
per share ............. $0.39 $0.40 $0.33 $0.22
Ratios:
Expenses to average
net assets ............ 1.06% 1.07% 1.94% 1.87%(3)
Net investment income to
average net assets .... 5.24% 5.07% 4.40% 4.25%(3)
</TABLE>
- ---------
See footnotes on page 60.
57
<PAGE>
<TABLE>
<CAPTION>
NEW YORK FUND
CLASS A CLASS D
---------------------------------------- -------------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
---------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
---- ---- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period ..... $7.98 $7.86 $7.67 $8.75 $7.98 $7.87 $7.67 $8.55
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.41 0.42 0.42 0.43 0.34 0.34 0.34 0.23
Net realized and
unrealized gain
(loss) on investments . 0.32 0.12 0.36 (0.88) 0.33 0.11 0.37 (0.88)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations .............. 0.73 0.54 0.78 (0.45) 0.67 0.45 0.71 (0.65)
Less distributions:
Dividends (from net
investment income) .... (0.41) (0.42) (0.42) (0.43) (0.34) (0.34) (0.34) (0.23)
Distributions
(from net realized
capital gains) ........ (0.02) -- (0.17) (0.20) (0.02) -- (0.17) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.43) (0.42) (0.59) (0.63) (0.36) (0.34) (0.51) (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ........... $8.28 $7.98 $7.86 $7.67 $8.29 $7.98 $7.87 $7.67
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return .............. 9.45% 6.97% 10.93% (5.37)% 8.60% 5.86% 9.87% (7.73)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $83,528 $82,719 $83,980 $90,914 $1,572 $1,152 $885 $476
Ratio of expenses to
average net assets ...... 0.82% 0.77% 0.88% 0.87% 1.73% 1.68% 1.96% 1.81%(3)
Ratio of net investment
income to average
net assets .............. 5.09% 5.24% 5.52% 5.31% 4.18% 4.33% 4.42% 4.39%(3)
Portfolio turnover rate ... 23.83% 25.88% 34.05% 28.19% 23.83% 25.88% 34.05% 28.19%(4)
NORTH CAROLINA FUND
PER SHARE DATA:
Net asset value,
beginning of period ..... $7.84 $7.74 $7.30 $8.22 $7.83 $7.74 $7.29 $8.17
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.37 0.37 0.39 0.41 0.31 0.31 0.33 0.23
Net realized and
unrealized gain
(loss) on investments .. 0.24 0.11 0.45 (0.87) 0.25 0.10 0.46 (0.88)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations .............. 0.61 0.48 0.84 (0.46) 0.56 0.41 0.79 (0.65)
Less distributions:
Dividends (from net
investment income) .... (0.37) (0.37) (0.39) (0.41) (0.31) (0.31) (0.33) (0.23)
Distributions
(from net realized
capital gains) ........ (0.03) (0.01) (0.01) (0.05) (0.03) (0.01) (0.01) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.40) (0.38) (0.40) (0.46) (0.34) (0.32) (0.34) (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ........... $8.05 $7.84 $7.74 $7.30 $8.05 $7.83 $7.74 $7.29
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return .............. 8.01% 6.39% 11.92% (5.80)% 7.33% 5.45% 11.19% (8.15)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $32,684 $35,934 $37,446 $38,920 $1,217 $1,232 $1,257 $1,282
Ratio of expenses to
average net assets ...... 1.09% 1.05% 0.82% 0.44% 1.85% 1.81% 1.64% 1.27%(3)
Ratio of net investment
income to average
net assets .............. 4.66% 4.75% 5.21% 5.29% 3.90% 3.99% 4.42% 4.49%(3)
Portfolio turnover rate ... 13.04% 15.12% 4.38% 15.61% 13.04% 15.12% 4.38% 15.61%(4)
Without management
fee waiver:(5)
Net investment income
per share ............. $0.37 $0.36 $0.35 $0.31 $0.31 $0.20
Ratios:
Expenses to average
net assets ............ 1.06% 1.18% 1.13% 1.82% 2.00% 1.95%(3)
Net investment income to
average net assets .... 4.74% 4.85% 4.60% 3.98% 4.06% 3.82%(3)
</TABLE>
- ---------
See footnotes on page 60.
58
<PAGE>
<TABLE>
<CAPTION>
OHIO FUND
CLASS A CLASS D
---------------------------------------- -------------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
---------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
---- ---- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period ..... $8.09 $8.11 $7.90 $8.77 $8.13 $8.15 $7.92 $8.61
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.42 0.43 0.44 0.44 0.35 0.36 0.36 0.24
Net realized and
unrealized gain
(loss) on investments . 0.17 0.02 0.28 (0.70) 0.17 0.02 0.30 (0.69)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations .............. 0.59 0.45 0.72 (0.26) 0.52 0.38 0.66 (0.45)
Less distributions:
Dividends (from net
investment income) .... (0.42) (0.43) (0.44) (0.44) (0.35) (0.36) (0.36) (0.24)
Distributions
(from net realized
capital gains) ........ (0.07) (0.04) (0.07) (0.17) (0.07) (0.04) (0.07) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.49) (0.47) (0.51) (0.61) (0.42) (0.40) (0.43) (0.24)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period $8.19 $8.09 $8.11 $7.90 $8.23 $8.13 $8.15 $7.92
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return 7.54% 5.68% 9.59% (3.08)% 6.57% 4.74% 8.67% (5.36)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $154,419 $162,243 $170,191 $171,469 $1,160 $1,011 $660 $324
Ratio of expenses to
average net assets ...... 0.81% 0.77% 0.84% 0.84% 1.71% 1.67% 1.93% 1.78%(3)
Ratio of net investment
income to average
net assets .............. 5.19% 5.32% 5.56% 5.34% 4.29% 4.42% 4.48% 4.41%(3)
Portfolio turnover rate ... 11.76% 12.90% 2.96% 9.37% 11.76% 12.90% 2.96% 9.37%(4)
OREGON FUND
PER SHARE DATA:
Net asset value,
beginning of period ..... $7.65 $7.66 $7.43 $8.08 $7.64 $7.65 $7.43 $8.02
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.38 0.40 0.40 0.40 0.31 0.33 0.33 0.22
Net realized and
unrealized gain
(loss) on investments . 0.26 -- 0.25 (0.59) 0.27 -- 0.24 (0.59)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations .............. 0.64 0.40 0.65 (0.19) 0.58 0.33 0.57 (0.37)
Less distributions:
Dividends (from net
investment income) .... (0.38) (0.40) (0.40) (0.40) (0.31) (0.33) (0.33) (0.22)
Distributions
(from net realized
capital gains) ........ (0.04) (0.01) (0.02) (0.06) (0.04) (0.01) (0.02) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.42) (0.41) (0.42) (0.46) (0.35) (0.34) (0.35) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period .......... $7.87 $7.65 $7.66 $7.43 $7.87 $7.64 $7.65 $7.43
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return .............. 8.60% 5.27% 9.05% (2.38)% 7.77% 4.33% 7.86% (4.76)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $55,239 $57,345 $59,549 $59,884 $1,678 $1,540 $1,495 $843
Ratio of expenses to
average net assets ..... 0.90% 0.86% 0.86% 0.78% 1.80% 1.76% 1.83% 1.72%(3)
Ratio of net investment
income to average
net assets .............. 4.88% 5.18% 5.40% 5.20% 3.98% 4.28% 4.41% 4.32%(3)
Portfolio turnover rate ... 19.46% 28.65% 2.47% 9.43% 19.46% 28.65% 2.47% 9.43%(4)
Without management
fee waiver:(5)
Net investment income
per share ............. $0.40 $0.39 $0.33 $0.22
Ratios:
Expenses to average
net assets ............ 0.91% 0.89% 1.88% 1.82%(3)
Net investment income to
average net assets .... 5.35% 5.09% 4.36% 4.22%(3)
</TABLE>
- ---------
See footnotes on page 60.
59
<PAGE>
<TABLE>
<CAPTION>
PENNSYLVANIA FUND
CLASS A CLASS D
---------------------------------------- -------------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
---------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
---- ---- ---- ---- ---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period ..... $7.82 $7.79 $7.55 $8.61 $7.81 $7.78 $7.54 $8.37
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.36 0.38 0.38 0.39 0.30 0.32 0.31 0.22
Net realized and
unrealized gain
(loss) on investments . 0.24 0.12 0.37 (0.80) 0.24 0.12 0.37 (0.83)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations .............. 0.60 0.50 0.75 (0.41) 0.54 0.44 0.68 (0.61)
Less distributions:
Dividends (from net
investment income) .... (0.36) (0.38) (0.38) (0.39) (0.30) (0.32) (0.31) (0.22)
Distributions
(from net realized
capital gains) ........ (0.10) (0.09) (0.13) (0.26) (0.10) (0.09) (0.13) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.46) (0.47) (0.51) (0.65) (0.40) (0.41) (0.44) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ........... $7.96 $7.82 $7.79 $7.55 $7.95 $7.81 $7.78 $7.54
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return .............. 7.89% 6.57% 10.55% (5.00)% 7.07% 5.76% 9.53% (7.50)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $30,092 $31,139 $33,251 $34,943 $816 $876 $426 $43
Ratio of expenses to
average net assets ...... 1.19% 1.11% 1.21% 1.16% 1.96% 1.88% 2.23% 2.00%(3)
Ratio of net investment
income to average
net assets .............. 4.60% 4.82% 5.05% 4.91% 3.83% 4.05% 4.10% 4.20%(3)
Portfolio turnover rate ... 32.99% 4.56% 11.78% 7.71% 32.99% 4.56% 11.78% 7.71%(4)
SOUTH CAROLINA FUND
PER SHARE DATA:
Net asset value,
beginning of period ..... $8.07 $7.97 $7.61 $8.52 $8.06 $7.97 $7.61 $8.42
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Investment operations:
Net investment income ... 0.40 0.41 0.41 0.41 0.33 0.34 0.34 0.22
Net realized and
unrealized gain
(loss) on investments . 0.22 0.12 0.37 (0.79) 0.23 0.11 0.37 (0.81)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations .............. 0.62 0.53 0.78 (0.38) 0.56 0.45 0.71 (0.59)
Less distributions:
Dividends (from net
investment income) .... (0.40) (0.41) (0.41) (0.41) (0.33) (0.34) (0.34) (0.22)
Distributions
(from net realized
capital gains) ........ (0.13) (0.02) (0.01) (0.12) (0.13) (0.02) (0.01) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ....... (0.53) (0.43) (0.42) (0.53) (0.46) (0.36) (0.35) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ........... $8.16 $8.07 $7.97 $7.61 $8.16 $8.06 $7.97 $7.61
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return .............. 7.99% 6.82% 10.69% (4.61) 7.15% 5.73% 9.63% (7.14)%(2)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) .......... $101,018 $108,163 $112,421 $115,133 $3,663 $2,714 $1,704 $1,478
Ratio of expenses to
average net assets ...... 0.84% 0.80% 0.88% 0.83% 1.75% 1.70% 1.85% 1.74%(3)
Ratio of net investment
income to average
net assets .............. 5.04% 5.15% 5.38% 5.12% 4.13% 4.25% 4.40% 4.29%(3)
Portfolio turnover rate ... -- 20.66% 4.13% 1 .81% -- 20.66% 4.13% 1.81%(4)
</TABLE>
- -------------------
(1) Commencement of offering of Class D shares.
(2) Not annualized.
(3) Annualized.
(4) For the year ended September 30, 1994.
(5) During the periods presented, Seligman, at its discretion, waived
a portion of its fee.
60
<PAGE>
HOW TO CONTACT US
THE FUND Write: Corporate Communications/Investor
Relations Department
J. & W. Seligman & Co. Incorporated
100 Park Avenue, New York, NY 10017
Phone: Toll-Free (800) 221-7844 in the US or
(212) 850-1864 outside the US
Website: http://www.seligman.com
YOUR REGULAR
(NON-RETIREMENT)
ACCOUNT Write: Shareholder Services Department
Seligman Data Corp.
100 Park Avenue, New York, NY 10017
Phone: Toll-Free (800) 221-2450 in the US or
(212) 682-7600 outside the US
Website: http://www.seligman.com
YOUR RETIREMENT
ACCOUNT Write: Retirement Plan Services
Seligman Data Corp.
100 Park Avenue, New York, NY 10017
Phone: Toll-Free (800) 445-1777
- --------------------------------------------------------------------------------
24-hour telephone access is available by dialing (800) 622-4597 on a
touchtone telephone. You will have instant access to price, yield,
account balance, most recent transaction, and other information.
- --------------------------------------------------------------------------------
61
<PAGE>
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
THE FOLLOWING INFORMATION IS AVAILABLE WITHOUT CHARGE UPON REQUEST: CALL
TOLL-FREE (800) 221-2450 IN THE US OR (212) 682-7600 OUTSIDE THE US.
STATEMENT OF ADDITIONAL INFORMATION (SAI) CONTAINS ADDITIONAL INFORMATION ABOUT
THE FUND. IT IS ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION (SEC) AND IS
INCORPORATED BY REFERENCE INTO (IS LEGALLY PART OF) THIS PROSPECTUS.
ANNUAL/SEMI-ANNUAL REPORTS CONTAIN ADDITIONAL INFORMATION ABOUT THE FUND'S
INVESTMENTS. IN THE FUND'S ANNUAL REPORT, YOU WILL FIND A DISCUSSION OF THE
MARKET CONDITIONS AND INVESTMENT STRATEGIES THAT SIGNIFICANTLY AFFECTED THE
FUND'S PERFORMANCE DURING ITS LAST FISCAL YEAR.
- --------------------------------------------------------------------------------
SELIGMAN ADVISORS, INC.
AN AFFILIATE OF
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
Information about the Fund, including the SAI, can be viewed and copied at the
SEC's Public Reference Room in Washington, DC. For information about the
operation of the Public Reference Room, call (800) SEC-0330. The SAI,
Annual/Semi-Annual reports and other information about the Fund are also
available on the SEC's Internet site: http://www.sec.gov.
Copies of this information may be obtained, upon payment of a duplicating fee,
by writing: Public Reference Section of the SEC, Washington, DC 20549-6009.
SEC FILE NUMBERS: Seligman Municipal Fund Series, Inc.: 811-3828
Seligman Municipal Series Trust: 811-4250
Seligman New Jersey Municipal Fund, Inc.: 811-5126
Seligman Pennsylvania Municipal Fund Series: 811-4666
<PAGE>
SELIGMAN NEW JERSEY MUNICIPAL FUND, INC.
Statement of Additional Information
February 1, 1999
100 Park Avenue
New York, New York 10017
(212) 850-1864
Toll Free Telephone: (800) 221-2450
For Retirement Plan Information - Toll-Free Telephone: (800) 445-1777
This Statement of Additional Information (SAI) expands upon and supplements the
information contained in the current Prospectus of the Seligman Municipal Funds,
dated February 1, 1999. This SAI, although not in itself a prospectus, is
incorporated by reference into the Prospectus in its entirety. It should be read
in conjunction with the prospectus, which may be obtained by writing or calling
the Fund at the above address or telephone numbers.
The financial statements and notes included in the Fund's Annual Report, and the
Independent Auditors' report thereon, are incorporated herein by reference. The
Annual Report will be furnished to you without charge if you request a copy of
this SAI.
Table of Contents
Fund History .............................................................. 2
Description of the Fund and Its Investments and Risks ..................... 2
Management of the Fund .................................................... 8
Control Persons and Principal Holders of Securities ....................... 12
Investment Advisory and Other Services .................................... 13
Brokerage Allocation and Other Practices .................................. 17
Shares of Capital Stock and Other Securities .............................. 18
Purchase, Redemption, and Pricing of Shares ............................... 18
Taxation of the Fund ...................................................... 23
Underwriters .............................................................. 25
Calculation of Performance Data ........................................... 26
Financial Statements ...................................................... 28
General Information ....................................................... 29
Appendix A ................................................................ 30
Appendix B ................................................................ 33
Appendix C ................................................................ 49
-1-
<PAGE>
Fund History
The Fund was incorporated under the laws of the state of Maryland on March 13,
1987.
Description of the Fund and Its Investments and Risks
Classification
The Fund is a diversified open-end management investment company, or mutual
fund.
Investment Strategies and Risks
The following information regarding the Fund's investments and risks supplements
the information contained in the Fund's Prospectus.
The Fund seeks to maximize income exempt from regular federal income tax and New
Jersey gross 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. Throughout this SAI , the New
Jersey gross income tax is referred to as the New Jersey personal income tax.
The Fund is expected to invest principally, without percentage limitations, in
municipal securities which on the date of purchase are rated within the four
highest rating categories of Moody's Investors Service (Moody's) or Standard &
Poor's Corporation (S&P). Municipal Securities rated in these categories are
commonly referred to as investment grade. The Fund may invest in municipal
securities that are not rated, or which do not fall into the credit ratings
noted above if, based upon credit analysis, it is believed that such securities
are of comparable quality. In determining suitability of investment in a lower
rated or unrated security, the Fund will take into consideration asset and debt
service coverage, the purpose of the financing, history of the issuer, existence
of other rated securities of the issuer and other considerations as may be
relevant, including comparability to other issuers.
Although securities rated in the fourth rating category are commonly referred to
as investment grade, investment in such securities could involve risks not
usually associated with bonds rated in the first three categories. Bonds rated
BBB by S&P are more likely as a result of adverse economic conditions or
changing circumstance to exhibit a weakened capacity to pay interest and re-pay
principal than bonds in higher rating categories and bonds rated Baa by Moody's
lack outstanding investment characteristics and in fact have speculative
characteristics according to Moody's. Municipal securities in the fourth rating
category of S&P or Moody's will generally provide a higher yield than do higher
rated municipal securities of similar maturities; however, they are subject to a
greater degree of fluctuation in value as a result of changing interest rates
and economic conditions. The market value of the municipal securities will also
be affected by the degree of interest of dealers to bid for them, and in certain
markets dealers may be more unwilling to trade municipal securities rated in the
fourth rating categories than in the higher rating categories.
A description of the credit rating categories is contained in Appendix A to this
Statement.
New Jersey Municipal Securities. New Jersey Municipal Securities include bonds,
notes and commercial paper issued by or on behalf of the State of New Jersey,
its political subdivisions, agencies, and instrumentalities, the interest on
which is exempt from regular federal income tax and New Jersey personal income
tax. Such securities are traded primarily in an over-the-counter market. The
Fund may invest,
-2-
<PAGE>
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.
Under the Investment Company Act of 1940 (1940 Act), the identification of the
issuer of municipal bonds or notes 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 only the assets and revenues of the non-governmental
user back the bond, the non-governmental 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.
The Fund invests principally in long-term municipal bonds. Municipal bonds are
issued to obtain funds for various public purposes, including the construction
of a wide range of public facilities such as airports, bridges, highways,
housing, hospitals, mass transportation, schools, streets, water and sewer
works, and gas and electric utilities. Municipal bonds also may be issued in
connection with the refunding of outstanding obligations, obtaining funds to
lend to other public institutions, and for general operating expenses.
Industrial development bonds, which are considered municipal bonds if the
interest paid thereon is exempt from regular federal income tax (such interest,
however, may be subject to the federal alternative minimum tax), are issued by
or on behalf of public authorities to obtain funds to provide various
privately-operated facilities for business and manufacturing, housing, sports,
pollution control, and for airport, mass transit, port and parking facilities.
The two principal classifications of municipal bonds are "general obligation"
and "revenue." General obligation bonds are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source. Although industrial
development bonds (IDBs) are issued by municipal authorities, they are generally
secured by the revenues derived from payments of the industrial user. The
payment of principal and interest on IDBs is dependent solely on the ability of
the user of the facilities financed by the bonds to meet its financial
obligations and the pledge, if any, of real and personal property so financed as
security for such payment.
The Fund, with respect to 75% of its assets, will not purchase any revenue bonds
if as a result of such purchase more than 5% of such Fund's assets would be
invested in the revenue bonds of a single issuer.
The Fund may also invest in municipal notes. 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-
<PAGE>
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.
Variable and Floating Rate Securities. A Fund may purchase floating or 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 either
pegged to money market rates or set as a specific percentage of a designated
base rate, such as rates on Treasury Bonds or Treasury Bills or the prime rate
of a major commercial bank. A floating rate or variable rate security generally
provides that a Fund can demand payment of the obligation on short notice (daily
or weekly, depending on the terms of the obligation) at an amount equal to par
(face value) plus accrued interest. In Unusual circumstances, the amount
received may be more or less than the amount the Fund paid for the securities.
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 below.
The maturity of variable or floating rate obligations (including participation
interests therein) is deemed to be the longer of (1) the notice period required
before a Fund is entitled to receive payment of the obligation upon demand, or
(2) the period remaining until the obligation's next interest rate adjustment.
If the Fund does not redeem the obligation through the demand feature, the
obligation will mature on a specific date, which may range up to thirty years
from the date of its issuance.
Participation Interests. From time to time, a Fund may purchase from banks,
participation interests in all or part of specific holdings of municipal
securities. A participation interest gives the Fund an undivided interest in the
municipal security in the proportion that the Fund's participation interest
bears to the total principal amount of the municipal security and provides the
demand repurchase feature described above. Participations are frequently backed
by an irrevocable letter of credit or guarantee of a bank that the Fund has
determined meets its prescribed quality standards. A Fund has the right to sell
the instrument back to the bank and draw on the letter of credit on demand, on
short notice, for all or any part of the Fund's participation interest in the
municipal security, plus accrued interest. Each Fund intends to exercise the
demand under the letter of credit only (1) upon a default under the terms of the
documents of the municipal security, (2) as needed to provide liquidity in order
to meet redemptions, or (3) to maintain a high quality investment portfolio.
Banks will retain a service and letter of credit fee and a fee for issuing
repurchase commitments in an amount equal to the excess of the interest paid on
the municipal securities over the negotiated yield at which the instruments are
purchased by a Fund. 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 the Fund. The Funds currently do not
purchase participation interests and have no current intention of doing so.
When-Issued Securities. Each Fund may purchase municipal securities on a
"when-issued" basis, which means that delivery of and payment for securities
normally take place in less than 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 of such
securities may be higher or lower on the date the securities are actually
delivered to the buyer. A Fund will generally purchase a municipal security sold
on a when-issued basis with the intention of actually acquiring the securities
on the settlement date.
-4-
<PAGE>
A separate account consisting of cash or high-grade liquid debt securities equal
to the amount of outstanding purchase commitments is established with the Fund's
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 Fund meets in respective obligation to
purchase when-issued securities from outstanding cash balances, sale of other
securities or, although it would not normally expect to do so, form the sale of
the when-issued securities themselves (which may have a market value greater or
lesser than the Fund's payment obligations).
Municipal securities purchased on a when-issued basis and the other securities
held in each 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 a 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 purchased on a when-issued basis.
Standby Commitments. The Funds are authorized to acquire standby commitments
issued by banks with respect to securities they hold, although the Funds have no
present intention of investing any assets in standby commitments. These
commitments would obligate the seller of the standby commitment to repurchase,
at a Fund's option, specified securities at a specified price.
The price which a Fund would pay for municipal securities with standby
commitments generally would be higher than the price which otherwise would be
paid for the municipal securities alone, and the Fund would use standby
commitments solely to facilitate portfolio liquidity. The standby 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 standby commitment may not be able to repurchase
the security upon the exercise of the right to resell by the Fund. To minimize
such risks, each Fund is presently authorized to acquire standby commitments
solely from banks deemed creditworthy. The Board of Directors may, in the
future, consider whether the Funds should be permitted to acquire standby
commitments from dealers. Prior to investing in standby commitments of dealers,
a 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.
Standby commitments with respect to portfolio securities of a 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 standby commitments is
carried as an unrealized loss from the time of purchase until it is exercised or
expires. Standby commitments with respect to portfolio securities of a 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 Directors. The Board of Directors would, in
connection with the determination of value of such a standby commitment,
consider, among other factors, the creditworthiness of the writer of the standby
commitment, the duration of the standby commitment, the dates on which or the
periods during which the standby commitment may be exercised and the applicable
rules and regulations of the Securities and Exchange Commission.
Borrowing. Each Fund 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
-5-
<PAGE>
borrowings may be secured or unsecured. 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.
Taxable Investments. Under normal market conditions, each 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 California personal income tax. Such interest,
however, may be subject to the federal alternative minimum tax.
Under normal market conditions, temporary investments in taxable securities will
be limited as a matter of fundamental policy to 20% of the value of a Fund's net
assets.
As a matter of policy, with respect to 50% of the value of its total assets,
securities of any issuer will not be purchased by the Fund 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 US
Government or its agencies or instrumentalities) at the close of each quarter of
its taxable year.
Except as otherwise specifically noted above, the Fund's investment strategies
are not fundamental and the Fund, with the approval of the Board of Directors,
may change such strategies without the vote of shareholders.
Fund Policies
The Fund is subject to fundamental policies that place restrictions on certain
types of investments. These policies cannot be changed except by vote of a
majority of the outstanding voting securities of a Fund. Under these policies,
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 US Government, its
agencies, and instrumentalities are not considered an industry for purposes
of this limitation.
- - Invest in securities issued by other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization and
except to the extent permitted by Section 12 of the 1940 Act;
- - Purchase or hold any real estate, except that the Fund may invest in
securities secured by real estate or interests therein or issued by persons
(other than real estate investment trusts) which deal in real estate or
interests therein;
- - Purchase or hold the securities of any issuer, if to its knowledge,
directors 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;
-6-
<PAGE>
- - Write or purchase put, call, straddle or spread options except that the
Fund may acquire standby commitments; 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.
The Fund also may not change its investment objective without shareholder
approval.
Under the 1940 Act, a "vote of a majority of the outstanding voting securities"
of a 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.
Temporary Defensive Position
In abnormal market conditions, if, in the judgment of a Fund, municipal
securities satisfying a Fund's investment objectives may not be purchased, a
Fund may, for defensive purposes, temporarily invest in instruments the interest
on which is exempt from regular federal income taxes, but not state personal
income taxes. Such securities would include those described under "California
Municipal Securities" above that would otherwise meet the Fund's objectives.
Also, in abnormal market conditions, a Fund may invest on a temporary basis in
fixed-income securities, the interest on which is subject to federal, state, or
local income taxes, pending the investment or reinvestment in municipal
securities of the proceeds of sales of shares or sales of portfolio securities,
in order to avoid the necessity of liquidating portfolio investments to meet
redemptions of shares by investors or where market conditions due to rising
interest rates or other adverse factors warrant temporary investing for
defensive purposes. Investments in taxable securities will be substantially in
securities issued or guaranteed by the United States Government (such as bills,
notes and bonds), its agencies, instrumentalities or authorities; highly-rated
corporate debt securities (rated Aa3 or better by Moody's or AA- or better by
S&P); prime commercial paper (rated P-1 by Moody's or A-1+/A-1 by S&P); and
certificates of deposit of the 100 largest domestic banks in terms of assets
which are subject to regulatory supervision by the US 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 US banks may involve certain risks, including
different regulation, use of different accounting procedures, political or other
economic developments, exchange controls, or possible seizure or nationalization
of foreign deposits.
Portfolio Turnover
Portfolio transactions will be undertaken principally to accomplish the Fund's
objective in relation to anticipated movements in the general level of interest
rates but the Fund may also engage in short-term trading consistent with its
objective. Securities may be sold in anticipation of a market decline (a rise in
interest rates) or purchased in anticipation of a market rise (a decline in
interest rates) and later sold. In addition, a security may be sold and another
purchased at approximately the same time to take advantage of what the
investment manager believes to be a temporary disparity in the normal yield
relationship between the two securities.
The Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned during
-7-
<PAGE>
the year. Securities whose maturity or expiration date at the time of
acquisition were one year or less are excluded from the calculation. The Fund's
portfolio turnover rates for the fiscal years ended September 30, 1998 and 1997,
were 23.37% and 20.22 %, respectively. The Fund's portfolio turnover rate will
not be a limiting factor when the Fund deems it desirable to sell or purchase
securities.
Management of the Fund
Board of Directors
The Board of Directors provides broad supervision over the affairs of the Fund.
Management Information
Directors and officers of the Fund, together with information as to their
principal business occupations during the past five years, are shown below. Each
Director 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.
<TABLE>
<S> <C> <C>
William C. Morris* Director, Chairman of the Chairman, J. & W. Seligman & Co. Incorporated, Chairman and Chief
(60) Board, Chief Executive Executive Officer, the Seligman Group of investment companies;
Officer and Chairman of the Chairman, Seligman Advisors, Inc, Seligman Services, Inc., and
Executive Committee Carbo Ceramics Inc., ceramic proppants for oil and gas industry;
Director, Seligman Data Corp., Kerr-McGee Corporation,
diversified energy company; and Sarah Lawrence College; and a
Member of the Board of Governors of the Investment Company
Institute. Formerly, Director, Daniel Industries Inc.,
manufacturer of oil and gas metering equipment.
Brian T. Zino* Director, President and Director and President, J. & W. Seligman & Co. Incorporated;
(46) Member of the Executive President (with the exception of Seligman Quality Municipal Fund,
Committee Inc. and Seligman Select Municipal Fund, Inc.) and Director or
Trustee, the Seligman Group of investment companies; Chairman,
Seligman Data Corp.; Director, Seligman Advisors, Inc., Seligman
Services, Inc., and Seligman Henderson Co.
Richard R. Schmaltz* Director and Member of the Director and Managing Director, Director of Investments, J. & W.
(58) Executive Committee Seligman & Co. Incorporated; Director or Trustee, the Seligman
Group of investment companies; Director, Seligman Henderson Co.,
and Trustee Emeritus of Colby College. Formerly, Director,
Investment Research at Neuberger & Berman from May 1993 to
September 1996.
</TABLE>
-8-
<PAGE>
<TABLE>
<S> <C> <C>
John R. Galvin Director Dean, Fletcher School of Law and Diplomacy at Tufts University;
(69) Director or Trustee, the Seligman Group of investment companies;
Tufts University Chairman, American Council on Germany; a Governor of the Center
Packard Avenue, for Creative Leadership; Director; Raytheon Co., electronics;
Medford, MA 02155 National Defense University; and the Institute for Defense
Analysis. Formerly, Director, USLIFE Corporation; Ambassador,
U.S. State Department for negotiations in Bosnia; Distinguished
Policy Analyst at Ohio State University and Olin Distinguished
Professor of National Security Studies at the United States
Military Academy. From June, 1987 to June, 1992, he was the
Supreme Allied Commander, Europe and the Commander-in-Chief,
United States European Command.
Alice S. Ilchman Director Retired President, Sarah Lawrence College; Director or Trustee,
(63) the Seligman Group of investment companies; Director, the
18 Highland Circle Committee for Economic Development; and Chairman, The Rockefeller
Bronxville, NY 10708 Foundation, charitable foundation. Formerly, Trustee, The Markle
Foundation, philanthropic organization; and Director, NYNEX,
telephone company; and International Research and Exchange Board,
intellectual exchanges.
Frank A. McPherson Director Retired Chairman and Chief Executive Officer of Kerr-McGee
(65) Corporation; Director or Trustee, the Seligman Group of
123 Robert S. Kerr Ave. investment companies; Director, Kimberly-Clark Corporation,
Oklahoma City, OK 73102 consumer products; Bank of Oklahoma Holding Company; Baptist
Medical Center; Oklahoma Chapter of the Nature Conservancy;
Oklahoma Medical Research Foundation; and National Boys and Girls
Clubs of America; and Member of the Business Roundtable and
National Petroleum Council. Formerly, Chairman, Oklahoma City
Public Schools Foundation; and Director, Federal Reserve System's
Kansas City Reserve Bank and the Oklahoma City Chamber of
Commerce.
John E. Merow Director Retired Chairman and Senior Partner, Sullivan & Cromwell, law
(69) firm; Director or Trustee, the Seligman Group of investment
125 Broad Street, companies; Director, Commonwealth Industries, Inc., manufacturers
New York, NY 10004 of aluminum sheet products; the Foreign Policy Association;
Municipal Art Society of New York; the U.S. Council for
International Business; and The New York and Presbyterian
Hospital; Chairman, American Australian Association; and
</TABLE>
-9-
<PAGE>
<TABLE>
<S> <C> <C>
The New York and Presbyterian Hospital Care Network, Inc.;
Vice-Chairman, the U.S.-New Zealand Council; and Member of the
American Law Institute and Council on Foreign Relations.
Betsy S. Michel Director Attorney; Director or Trustee, the Seligman Group of investment
(56) companies; Trustee, the Geraldine R. Dodge Foundation, charitable
P.O. Box 449 foundation; and Chairman of the Board of Trustees of St. George's
Gladstone, NJ 07934 School (Newport, RI). Formerly, Director, the National
Association of Independent Schools (Washington, DC).
James C. Pitney Director Retired Partner, Pitney, Hardin, Kipp & Szuch, law firm; Director
(72) or Trustee, the Seligman Group of investment companies. Formerly,
Park Avenue at Morris County, Director, Public Service Enterprise Group, public utility
P.O. Box 1945, Morristown, NJ
07962
James Q. Riordan Director Director or Trustee, the Seligman Group of investment companies;
(71) Director, The Houston Exploration Company; The Brooklyn Museum,
675 Third Avenue, KeySpan Energy Corporation; and Public Broadcasting Service; and
Suite 3004 Trustee, the Committee for Economic Development. Formerly,
New York, NY 10017 Co-Chairman of the Policy Council of the Tax Foundation;
Director, Tesoro Petroleum Companies, Inc. and Dow Jones & Co.,
Inc.; Director and President, Bekaert Corporation; and
Co-Chairman, Mobil Corporation.
Robert L. Shafer Director Retired Vice President, Pfizer Inc.; Director or Trustee, the
(66) Seligman Group of investment companies. Formerly, Director,
235 East 42nd Street, USLIFE Corporation.
New York, NY 10017
James N. Whitson Director Director and Consultant, Sammons Enterprises, Inc.; Director or
(63) Trustee, the Seligman Group of investment companies; C-SPAN; and
300 Crescent Court, CommScope, Inc. manufacturer of coaxial cables. Formerly,
Suite 700 Executive Vice President, Chief Operating Officer, Sammons
Dallas, TX 75202 Enterprises, Inc.; and Director, Red Man Pipe and Supply Company,
piping and other materials.
Thomas G. Moles Vice President and Senior Director and Managing Director, J. & W. Seligman & Co.
(56) Portfolio Manager Incorporated; Vice President and Senior Portfolio Manager, three
other open-end investment companies in the Seligman Group;
President and Senior Portfolio Manager, Seligman Quality
Municipal Fund, Inc. and Seligman Select Municipal Fund, Inc.,
closed-end investment
</TABLE>
-10-
<PAGE>
<TABLE>
<S> <C> <C>
companies; and Director, Seligman Advisors, Inc. and Seligman
Services, Inc.
Lawrence P. Vogel Vice President Senior Vice President, Finance, J. & W. Seligman & Co.
(42) Incorporated, Seligman Advisors, Inc., and Seligman Data Corp.;
Vice President, the Seligman Group of investment companies; and
Seligman Services, Inc., and Treasurer, Seligman Henderson Co.
Frank J. Nasta Secretary Senior Vice President, Law and Regulation and Corporate
(34) Secretary, J. & W. Seligman & Co. Incorporated; Secretary,
the Seligman Group of investment companies, Seligman
Advisors, Inc., Seligman Henderson Co., Seligman Services,
Inc., and Seligman Data Corp.
Thomas G. Rose Treasurer Treasurer, the Seligman Group of investment companies and
(41) Seligman Data Corp.
</TABLE>
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 Funds for
which no market valuation is available, and to elect or appoint officers of the
Funds to serve until the next meeting of the Board.
Directors and officers of the Funds are also directors and officers of some or
all of the other investment companies in the Seligman Group.
Compensation
<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits from Funds and
Name and Compensation Accrued as Part of Fund Complex Paid
Position with Fund from Fund (1) Fund Expenses to Directors (1)(2)
------------------ ------------- ------------- -------------------
<S> <C> <C> <C>
William C. Morris, Director and Chairman N/A N/A N/A
Brian T. Zino, Director and President N/A N/A N/A
Richard R. Schmaltz, Director N/A N/A N/A
John R. Galvin, Director $ N/A $
Alice S. Ilchman, Director N/A
Frank A. McPherson, Director N/A
John E. Merow, Director N/A
Betsy S. Michel, Director N/A
James C. Pitney, Director N/A
James Q. Riordan, Director N/A
Robert L. Shafer, Director N/A
James N. Whitson, Director (d) N/A (d)
</TABLE>
- ----------
(1) For the Fund's fiscal year ended September 30, 1998. Effective January 16,
1998, the per meeting fee for Directors was increased by $1,000, which is
allocated among all funds in the Fund Complex.
(2) The Seligman Group of investment companies consists of eighteen investment
companies.
(d) Deferred.
-11-
<PAGE>
The Fund has a compensation arrangement under which outside directors 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 the directors' fees and expenses, and the accumulated balance thereof is
included in other liabilities in the Fund's financial statements. The total
amount of deferred compensation (including interest) payable in respect of the
Fund to Mr. Whitson as of September 30, 1998 was $__________. Messrs. Merow and
Pitney no longer defer current compensation; however, they have accrued deferred
compensation in the amounts of $__________ and $__________ , respectively, as of
September 30, 1998.
The Fund has applied for and received exemptive relief that would permit a
director who has elected deferral of his or her fees to choose a rate of return
equal to either (1) the interest rate on short-term Treasury bills, or (2) the
rate of return on the shares of any of the investment companies advised by J. &
W. Seligman & Co. Incorporated, as designated by the director. The Fund may, but
is not obligated to, purchase shares of such investment companies to hedge its
obligations in connection with this deferral arrangement.
Sales Charges
Class A shares of the Fund may be issued without a sales charge to present and
retired directors, trustees, officers, employees (and their family members) of
the Fund, the other investment companies in the Seligman Group, and J. & W.
Seligman & Co. Incorporated and its affiliates. Family members are defined to
include lineal descendents 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 for such persons and to
any investment advisory, custodial, trust or other fiduciary account managed or
advised by J. & W. Seligman & Co. Incorporated or any affiliate. These sales may
be made for investment purposes only, and shares may be resold only to the Fund.
Class A shares may be sold at net asset value to these persons since such sales
require less sales effort and lower sales related expenses as compared with
sales to the general public.
Control Persons and Principal Holders of Securities
Control Persons
As of November 2, 1998, there was no person or persons who controlled the Fund,
either through significant ownership of Fund shares or any other means of
control.
Principal Holders
As of November2, 1998, MLPF&S For The Benefit Of Its Customers #974B3, Attn
Fund Administration, 4800 Deer Lake Drive East 3rd Floor, Jacksonville, FL 32246
owned of record 14.03% of the outstanding Class A shares of the Fund.
Management Ownership
Directors and officers of the Fund as a group owned 1% of the Fund's Class A
capital stock at November 2, 1998. As of that date, no Directors or officers
owned shares of the Fund's Class D capital stock.
At November 2, 1998, no Trustees or officers of the Fund owned any shares of any
class of the Fund.
-12-
<PAGE>
Investment Advisory and Other Services
Investment Adviser
J. & W. Seligman & Co. Incorporated (Seligman) manages the Fund. Seligman 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 Seligman was purchased by Mr. William C. Morris and a simultaneous
recapitalization of Seligman occurred. See Appendix C for further history of
Seligman.
All of the officers of the Fund listed above are officers or employees of
Seligman. Their affiliations with the Fund and with Seligman are provided under
their principal business occupations.
The Fund pays Seligman a management fee for its services, calculated daily and
payable monthly. The management fee is equal to .50% per annum of the Fund's
average daily net assets. For the fiscal years ended September 30, 1998, 1997,
and 1996, the Fund paid Seligman management fees in the amount of $315,590,
$325,747, and $356,576,respectively.
The Fund pays all of its expenses other than those assumed by Seligman,
including brokerage commissions, if any, shareholder services and distribution
fees, fees and expenses of independent attorneys and auditors, taxes and
governmental fees, including fees and expenses of qualifying the Funds and their
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 shareholders, expenses of
printing and filing reports and other documents with governmental agencies,
expenses of shareholders' meetings, expenses of corporate data processing and
related services, shareholder record keeping and shareholder account services,
fees and disbursements of transfer agents and custodians, expenses of disbursing
dividends and distributions, fees and expenses of directors of the Fund not
employed by or serving as a director of Seligman or its affiliates, insurance
premiums and extraordinary expenses such as litigation expenses. These expenses
are allocated between the Funds in a manner determined by the Trustees to be
fair and equitable.
The Management Agreement also provides that Seligman will not be liable to the
Fund 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 performing its duties under the
Management Agreement, except for willful misfeasance, bad faith, gross
negligence, or reckless disregard of its obligations and duties under the
Management Agreement.
The Management Agreement was unanimously approved by the Directors 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 in the manner
required by the 1940 Act (i.e., by a vote of a majority of the Directors or of
the outstanding voting securities of the Fund and by a vote of a majority of the
Directors who are not parties to the Management Agreement or interested persons
of any such party) and (2) Seligman shall not have notified the Fund at least 60
days prior to December 29 of each year that it does not desire such continuance.
The Management Agreement may be terminated by the Fund, without penalty, on 60
days' written notice to Seligman 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 Seligman's business.
Officers, directors and employees of Seligman are permitted to engage in
personal securities transactions, subject to Seligman's Code of Ethics. The Code
of Ethics proscribes certain practices with regard to personal securities
transactions and personal dealings, provides a framework for the reporting and
monitoring of personal securities transactions by Seligman's Compliance Officer,
and sets forth a procedure of identifying, for disciplinary action, those
individuals who violate the Code of Ethics. The Code of Ethics prohibits each of
the officers, directors and employees (including all portfolio managers)
-13-
<PAGE>
of Seligman from purchasing or selling any security that the officer, director,
or employee knows or believes (1) was recommended by Seligman for purchase or
sale by any client, including the Fund, within the preceding two weeks, (2) has
been reviewed by Seligman for possible purchase or sale within the preceding two
weeks, (3) is being purchased or sold by any client, (4) is being considered by
a research analyst, (5) is being acquired in a private placement, unless prior
approval has been obtained from Seligman's Compliance Officer, or (6) is being
acquired during an initial or secondary public offering. The Code of Ethics 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 Code of Ethics also prohibits (1) 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 (2) 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 Seligman'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.
Principal Underwriter
Seligman Advisors, Inc., (Seligman Advisors) an affiliate of Seligman, 100 Park
Avenue, New York, New York 10017, acts as general distributor of the shares of
the Fund and of the other mutual funds in the Seligman Group. Seligman Advisors
is an "affiliated person" (as defined in the 1940 Act) of Seligman, which is
itself an affiliated person of the Fund. Those individuals identified above
under "Management of the Fund" as trustees or officers of both the Fund and
Seligman Advisors are affiliated persons of both entities.
Services Provided by the Investment Adviser
Under the Management Agreement, dated December 29, 1988, subject to the control
of the Board of Directors, Seligman 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 their
business and other affairs. Seligman provides the Fund with such office space,
administrative and other services and executive and other personnel as are
necessary for Fund operations. Seligman pays all of the compensation of trustees
of the Fund who are employees or consultants of Seligman and of the officers and
employees of the Fund. Seligman also provides senior management for Seligman
Data Corp., the Fund's shareholder service agent.
Service Agreements
There are no other management-related service contracts under which services are
provided to the Fund.
Other Investment Advice
No person or persons, other than directors, officers, or employees of Seligman,
regularly advise the Fund with respect to its investments.
-14-
<PAGE>
Dealer Reallowances
Dealers and financial advisors receive a percentage of the initial sales charge
on sales of Class A shares of the Fund, as set forth below:
<TABLE>
<CAPTION>
Regular Dealer
Sales Charge Sales Charge Reallowance
as a % of as a % of Net As a % of
Amount of Purchase Offering Price(1) Amount Invested Offering Price
- ------------------ ----------------- --------------- --------------
<S> <C> <C> <C>
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 and over(2) 0 0 0
</TABLE>
(1) "Offering Price" is the amount that you actually pay for Fund shares; it
includes the initial sales charge.
(2) You will not pay a sales charge on purchases of $1 million or more, but you
will be subject to a 1% CDSC if you sell your shares within 18 months.
Rule 12b-1 Plan
The Fund has adopted an Administration, Shareholder Services and Distribution
Plan (12b-1 Plan) in accordance with Section 12(b) of the 1940 Act and Rule
12b-1 thereunder.
Under the 12b-1 Plan, the Fund may pay to Seligman Advisors an administration,
shareholder services and distribution fee in respect of Class A and Class D
shares. Payments under the 12b-1 Plan may include, but are not limited to: (1)
compensation to securities dealers and other organizations (Service
Organizations) for providing distribution assistance with respect to assets
invested in the Fund; (2) compensation to Service Organizations for providing
administration, accounting and other shareholder services with respect to Fund
shareholders; and (3) otherwise promoting the sale of shares of the Fund,
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 Seligman Advisors' costs incurred in
connection with its marketing efforts with respect to shares of the Fund.
Seligman, in its sole discretion, may also make similar payments to Seligman
Advisors from its own resources, which may include the management fee that
Seligman receives from the Fund.
Under the 12b-1 Plan, the Fund reimburses Seligman Advisors for its actual
expenses incurred with respect to Class A shares at an annual rate of up to .25%
of the average daily net asset value of 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 Seligman
Advisors. Such Service Organizations will receive from Seligman Advisors a
continuing fee of up to .25% on an annual basis, payable quarterly, of the
average daily net assets of 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 Trustees. In the event that Seligman Advisors is not fully
reimbursed for expenses or payments made to Service Organizations with respect
to Class A shares in any fiscal year, such unreimbursed amounts cannot be
carried over to be paid in any other fiscal year. The total amount paid to
Seligman Advisors for the year ended September 30, 1998 in respect of the Fund's
Class A shares pursuant to the 12b-1 Plan was $133,429, which was equal to an
annual rate of 0.22% of the Fund's average daily net assets.
Under the 12b-1 Plan, the Fund reimburses Seligman Advisors 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.
-15-
<PAGE>
Proceeds from the Class D fees 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 Class D shares attributable to particular
Service Organizations for providing personal service on shareholder accounts)
and will initially be used by Seligman Advisors to defray the expense of the
payment of 1% made by it to Service Organizations at the time of sale of Class D
shares. The total amount paid for the year ended September 30, 1998 by the
Fund's Class D shares pursuant to the 12b-1 Plan was 1% per annum of the average
daily net assets of Class D shares, or $16,974. The amounts expended by Seligman
Advisors in any one year upon the initial purchase of Class D shares may exceed
the amounts received by it from 12b-1 Plan payments retained. Expenses with
respect to Class D shares in one fiscal year of the Fund may be paid from Class
D 12b-1 Plan fees received from the Fund in any other fiscal year. For the
fiscal year ended September 30, 1998 there were $__________ of unreimbursed
expenses incurred under the 12b-1 Plan with respect to Class D shares. This
amount is equal to ___% of the net assets of Class D at September 30, 1997.
Fees paid by the Fund under the 12b-1 Plan with respect to any class of shares
may not be used to pay expenses incurred with respect to any other class, or any
other Seligman mutual fund. Expenses attributable the Fund as a whole will be
allocated to the Fund's Class A and Class D shares in accordance with a
methodology approved by the Trustees. The Fund may participate in joint
distribution activities with other Seligman mutual funds, and the expenses of
such activities will be allocated among such funds in accordance with a
methodology approved by the Trustees.
During the Fund's fiscal year ended September 30, 1998, the payments made by
each Fund to Seligman Advisors under the 12b-1 Plan were spent on the following
activities in the following amounts:
<TABLE>
<CAPTION>
Class A Class D
------- -------
<S> <C> <C>
Advertising
Printing and Mailing of Prospectuses to other than Current
Shareholders
Compensation to Service Organizations
Compensation to Sales Personnel
Interest, Carrying, or Other Finance Charges
Other
</TABLE>
The 12b-1 Plan was approved on January 12, 1988 by the Directors, including a
majority of the Directors 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 12b-1 Plan or in any agreement related to the 12b-1 Plan
(the "Qualified Directors") and was approved by shareholders of the Fund
December 16, 1988. Amendments to the Plan were approved in respect of the Class
D shares on November 18, 1993 by the Directors, including a majority of the
Qualified Directors, and became effective with respect to the Class D shares on
February 1, 1994. The 12b-1 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 Directors and the Qualified Directors, cast in person at a meeting
called for the purpose of voting on such approval. The 12b-1 Plan may not be
amended to increase materially the amounts payable under the terms of the 12b-1
Plan without the approval of a majority of the outstanding voting securities of
the Fund and no material amendment to the 12b-1 Plan may be made except with the
approval of a majority of both the Directors
-16-
<PAGE>
and the Qualified Directors in accordance with the applicable provisions of the
1940 Act and the rules thereunder.
The 12b-1 Plan requires that the Treasurer of the Fund shall provide to the
Directors, and the Directors shall review at least quarterly, a written report
of the amounts expended (and purposes therefor) made under the 12b-1 Plan. Rule
12b-1 also requires that the selection and nomination of Directors who are not
"interested persons" of the Fund be made by such disinterested Directors.
Seligman Services, Inc. (SSI), an affiliate of Seligman, is a limited purpose
broker/dealer. SSI acts as a broker/dealer of record for shareholder accounts
that do not have a designated financial advisor and receives compensation from
the Fund pursuant to the 12b-1 Plan for providing personal services and account
maintenance to such accounts and other distribution services. For the fiscal
years ended September 30, 1998, 1997, and 1996, SSI received distribution and
service fees of $10,296, $9,787, and $8,659, respectively, pursuant to the 12b-1
Plan.
Brokerage Allocation and Other Practices
Brokerage Transactions
Seligman will seek the most favorable price and execution in the purchase and
sale of portfolio securities of the Fund. When two or more of the investment
companies in the Seligman Group or other investment advisory clients of Seligman
desire to buy or sell the same security at the same time, the securities
purchased or sold are allocated by Seligman 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 readily obtainable or saleable.
In over-the-counter markets, the Fund deals with responsible primary market
makers unless a more favorable execution or price is believed to be obtainable.
The Fund may buy securities from or sell securities to dealers acting as
principal, except dealers with which its directors and/or officers are
affiliated.
For the fiscal years ended September 30, 1998, 1997, and 1996, no brokerage
commissions were paid by the Fund.
Commissions
For the fiscal years ended September 30, 1998, 1997, and 1996, the Fund did not
execute any portfolio transactions with, and therefore did not pay any
commissions to, any broker affiliated with either the Fund, Seligman, or
Seligman Advisors.
Brokerage Selection
Consistent with seeking the most favorable price and execution when buying or
selling portfolio securities, Seligman may give consideration to the research,
statistical, and other services furnished by brokers or dealers to Seligman for
its use, as well as the general attitude toward and support of investment
companies demonstrated by such brokers or dealers. Such services include
supplemental investment research, analysis, and reports concerning issuers,
industries, and securities deemed by Seligman to be beneficial to the Funds. In
addition, Seligman is authorized to place orders with brokers who provide
supplemental investment and market research and security and economic analysis
although the use of such brokers may result in a higher brokerage charge to the
Funds than the use of brokers
-17-
<PAGE>
selected solely on the basis of seeking the most favorable price and execution
and although such research and analysis may be useful to Seligman in connection
with its services to clients other than the Funds.
Directed Brokerage
During the Fund's fiscal year ended September 30, 1998 neither the Fund nor
Seligman directed any of the Fund's brokerage transactions to a broker because
of research services provided.
Regular Broker-Dealers
During the Fund's fiscal year ended September 30, 1998, the Fund did not acquire
securities of any of its regular brokers or dealers (as defined in Rule 10b-1
under the 1940 Act).
Capital Stock and Other Securities
Capital Stock
The Fund is authorized to issue 100,000,000 shares of capital stock, each with a
par value of $.001, divided into two classes, designated Class A and Class D
shares. Each share of the Fund's Class A and Class D capital stock 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 Maryland law. The Fund has adopted a
multiclass plan pursuant to Rule 18f-3 under the 1940 Act permitting the
issuance and sale of multiple classes of common stock. In accordance with the
Articles of Incorporation, the Board of Directors may authorize the creation of
additional classes of common stock 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. Each outstanding share is fully
paid and non-assessable, and each is freely transferable. There are no
liquidation, conversion, or preemptive rights.
Other Securities
The Fund has no authorized securities other than capital stock.
Purchase, Redemption, and Pricing of Shares
Purchase of Shares
Class A
Class A shares may be purchased at a price equal to the next determined net
asset value per share, plus an initial sales charge.
Purchases of Class A shares by a "single person" (as defined below) may be
eligible for the following reductions in initial sales charges:
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 charge, reaches
levels indicated in the sales charge schedule set forth in the Prospectus.
-18-
<PAGE>
The Right of Accumulation allows an investor to combine the amount being
invested in Class A shares of the Fund and shares of the other Seligman mutual
funds sold with an initial sales charge with the total net asset value of shares
of those mutual funds already owned that were sold with an initial sales charge
and the total net asset value of shares of Seligman Cash Management Fund which
were acquired through an exchange of shares of another Seligman mutual fund on
which there was an initial sales charge at the time of purchase to determine
reduced sales charges in accordance with the schedule in the prospectus. The
value of the shares owned, including the value of shares of Seligman Cash
Management Fund acquired in an exchange of shares of another Seligman mutual
fund on which there was an initial sales charge at the time of purchase will be
taken into account in orders placed through a dealer, however, only if Seligman
Advisors is notified by an investor or a dealer of the amount owned by the
investor 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 over a 13-month
period at reduced initial sales charges in accordance with the schedule in the
Prospectus, based on the total amount of Class A shares of the Fund that the
letter states the investor intends to purchase plus the total net asset value of
shares that were sold with an initial sales charge of the other Seligman mutual
funds already owned and the total net asset value of shares of Seligman Cash
Management Fund which were acquired through an exchange of shares of another
Seligman mutual fund on which there was an initial sales charge at the time of
purchase. Reduced sales charges 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.
CDSC Applicable to Class A Shares. Class A shares purchased without an initial
sales charge in accordance with the sales charge schedule in the Fund's
Prospectus, or pursuant to a Volume Discount, Right of Accumulation, or Letter
of Intent are subject to a CDSC of 1% on redemptions of such shares within
eighteen months of purchase. Employee benefit plans eligible for net asset value
sales (as described below) may be subject to a CDSC of 1% for terminations at
the plan level only, on redemptions of shares purchased within eighteen months
prior to plan termination. The 1% CDSC will be waived on shares that were
purchased through Dean Witter Reynolds, Inc. by certain Chilean institutional
investors (i.e. pension plans, insurance companies, and mutual funds). Upon
redemption of such shares within an eighteen-month period, Dean Witter will
reimburse Seligman Advisors a pro rata portion of the fee it received from
Seligman Advisors at the time of sale of such shares.
See "CDSC Waivers" below for other waivers which may be applicable to Class A
shares.
Persons Entitled To Reductions. Reductions in initial sales charges 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; 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, organizations tax exempt under Section 501(c)(3) or (13) of the
Internal Revenue 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 a Fund, to
receive in bulk and to distribute to each participant on a timely basis the Fund
prospectus, 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.
-19-
<PAGE>
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 charges in the Prospectus
applies to sales to "eligible employee benefit plans," except that the Fund may
sell shares at net asset value to "eligible employee benefit plans" which have
at least (1) $500,000 invested in the Seligman Group of mutual funds or (2) 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.
"Eligible employee benefit plan" means any plan or arrangement, whether or not
tax qualified, which provides for the purchase of Fund shares. Sales of shares
to such plans must be made in connection with a payroll deduction system of plan
funding or other system acceptable to Seligman Data Corp.
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 financial advisors or Seligman
Advisors.
Further Types of Reductions. Class A shares may also be issued without an
initial sales charge to any registered unit investment trust which is the issuer
of periodic payment plan certificates, the net proceeds of which are invested in
Fund 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 Seligman Advisors; to
financial institution trust departments; to registered investment advisers
exercising discretionary investment authority with respect to the purchase of
Fund shares; to accounts of financial institutions or broker/dealers that charge
account management fees, provided Seligman or one of its affiliates has entered
into an agreement with respect to such accounts; pursuant to sponsored
arrangements with organizations which make recommendations to, or permit group
solicitations of, its employees, members or participants in connection with the
purchase of shares of the Fund; to other investment companies in the Seligman
Group in connection with a deferred fee arrangement for outside directors; and
to "eligible employee benefit plans" which have at least (1) $500,000 invested
in the Seligman mutual funds or (2) 50 eligible employees to whom such plan is
made available.
Class D
Class D shares may be purchased at a price equal to the next determined net
asset value, without an initial sales charge. However, Class D shares are
subject to a CDSC of 1% if the shares are redeemed within one year of purchase,
charged as a percentage of the current net asset value or the original purchase
price, whichever is less.
Systematic Withdrawals. Class D shareholders who reinvest both their dividends
and capital gain distributions to purchase additional shares of the Fund, may
use the Fund's Systematic Withdrawal Plan to withdraw up to 10 of the value of
their accounts per year without the imposition of a CDSC. Account value is
determined as of the date the systematic withdrawals begin.
CDSC Waivers. The CDSC on Class D shares (and certain Class A shares, as
discussed above) will be waived or reduced in the following instances:
(1) on redemptions following the death or disability (as defined in Section
72(m)(7) of the Internal Revenue Code) of a shareholder or beneficial
owner;
-20-
<PAGE>
(2) in connection with (1) distributions from retirement plans qualified under
Section 401(a) of the Internal Revenue 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), (2) distributions from a custodial account under
Section 403(b)(7) of the Internal Revenue Code or an IRA due to death,
disability, minimum distribution requirements after attainment of age 70
1/2 or, for accounts established prior to January 1, 1998, attainment of
age 59 1/2, and (3) a tax-free return of an excess contribution to an IRA;
(3) in whole or in part, in connection with shares sold to current and retired
Directors of the Fund;
(4) 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 any registered investment
management company;
(5) in whole or in part, in connection with systematic withdrawals;
(6) in connection with participation in the Merrill Lynch Small Market 401(k)
Program.
If, with respect to a redemption of any Class A Class D shares sold by a dealer,
the CDSC is waived because the redemption qualifies for a waiver as set forth
above, the dealer shall remit to Seligman Advisors promptly upon notice, an
amount equal to the payment or a portion of the payment made by Seligman
Advisors at the time of sale of such shares.
Fund Reorganizations
Class A shares may be issued without an initial sales charge in connection with
the acquisition of cash and securities owned by other investment companies. Any
CDSC will be waived in connection with the redemption of shares of a Fund if the
Fund is combined with another Seligman mutual fund, or in connection with a
similar reorganization transaction.
Payment in Securities. In addition to cash, the Funds may accept securities in
payment for Fund shares sold at the applicable public offering price (net asset
value and, if applicable, any sales charge), although the Funds do not presently
intend to accept securities in payment for Fund shares. Generally, a Fund will
only consider accepting securities (l) to increase its holdings in a portfolio
security, or (2) if Seligman determines that the offered securities are a
suitable investment for the Fund and in a sufficient amount for efficient
management. Although no minimum has been established, it is expected that a Fund
would not accept securities with a value of less than $100,000 per issue in
payment for shares. A Fund may reject in whole or in part offers to pay for Fund
shares with securities, may require partial payment in cash for applicable sales
charges, and may discontinue accepting securities as payment for Fund shares at
any time without notice. The Funds will not accept restricted securities in
payment for shares. The Funds will value accepted securities in the manner
provided for valuing portfolio securities.
Offering Price
When you buy or sell Fund shares, you do so at the Class's net asset value (NAV)
next calculated after Seligman Advisors accepts your request. Any applicable
sales charge will be added to the purchase price for Class A shares.
NAV per share of each class of the Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time), on
each day that the NYSE is open for
-21-
<PAGE>
business. The NYSE is currently closed on New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day. The Fund will also determine NAV for
each class on each day in which there is a sufficient degree of trading in the
Fund's portfolio securities that the NAV of Fund shares might be materially
affected. NAV per share for a class is computed by dividing such class's 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 management fee, are accrued daily and taken
into account for the purpose of determining NAV.
The securities in which the Fund invests are traded primarily in the
over-the-counter market. Municipal securities and other short-term holdings
maturing in more than 60 days are valued on the basis of quotations provided by
an independent pricing service, approved by the Trustees, which uses information
with respect to transactions in bonds, quotations from bond dealers, market
transactions in comparable securities and various relationships between
securities in determining value. In the absence of such quotations, fair value
will be determined in accordance with procedures approved by the Trustees.
Short-term holdings 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, US Government securities, and money market instruments is substantially
completed each day at various times prior to the close of the NYSE. The values
of such securities used in determining the net asset value of a Fund's shares
are computed as of such times.
Specimen Price Make-Up
Under the current distribution arrangements between the Fund and Seligman
Advisors, Class A shares are sold with a maximum initial sales charge of 4.75%
and Class D shares are sold at NAV(1). Using each Class's NAV at September 30,
1998, the maximum offering price of the Fund's shares is as follows:
Class A
Net asset value per share .................................... $7.78
-----
Maximum sales charge (4.75% of offering price) ............... .39
-----
Offering price to public ..................................... $8.17
=====
Class D
Net asset value and offering price per share(1)............... $7.86
=====
- ----------
(1) Class D shares are subject to a CDSC of 1% on redemptions within one year
of purchase.
Redemption in Kind
The procedures for selling Fund shares under ordinary circumstances are set
forth in the Prospectus. In unusual circumstances, payment may be postponed, or
the right of redemption postponed for more than seven days, if the orderly
liquidation of portfolio securities is prevented by the closing of, or
restricted trading on, the NYSE during periods of emergency, or such other
periods as ordered by the Securities and Exchange Commission. Under these
circumstances, redemption proceeds may be made in securities. If payment is made
in securities, a shareholder may incur brokerage expenses in converting these
securities to cash.
-22-
<PAGE>
Taxation of the Fund
The Fund is qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code. For each
year so qualified, the Fund will not be subject to federal income taxes on its
net investment income and capital gains, if any, realized during any taxable
year, which it distributes to its shareholders, provided that at least 90% of
its net investment income and net short-term capital gains are distributed to
shareholders each year.
Qualification as a regulated investment company under the Internal Revenue Code
requires among other things, that (1) 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; (2) and 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, US Government securities and other securities limited in respect of any
one issuer to an amount not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
US Government securities).
Federal Income Taxes
If, at the end of each quarter of its taxable year, at least 50% of the Fund's
total assets is invested in obligations exempt from regular federal income tax,
the Fund will be eligible to pay dividends that are excludable by shareholders
from gross income for regular federal income tax purposes. The total amount of
such exempt interest dividends paid by the Fund cannot exceed the amount of
federally tax-exempt interest received by the Fund during the year less any
expenses allocable to the Fund.
Distributions of net capital gains (i.e., the excess of net long-term capital
gains over any net short-term losses) are taxable as long-term capital gain,
whether received in cash or invested in additional shares, regardless of how
long the shares have been held by a shareholder, 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 tax on distributions of net capital
gains at a maximum rate of 20% if designated as derived from the Fund's capital
gains from property held for more than one year. Net Capital gain of a corporate
shareholder is taxed at the same rate as ordinary income. Distributions from the
Fund's other investment income (other than exempt interest dividends) or from
net realized short-term gain will taxable to shareholders as ordinary income,
whether received in cash or invested in additional shares. Distributions
generally will not be eligible for the dividends received deduction allowed to
corporate shareholders. Shareholders receiving distributions in the form of
additional shares issued by the Fund 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
the Fund will not be deductible for federal income tax purposes to the extent
that the Fund's distributions are exempt from federal income tax.
Any gain or loss realized upon a sale or redemption of shares in the Fund by a
shareholder who is not a dealer in securities will generally be treated as a
long-term capital gain or loss if the shares have been held for more than one
year and otherwise as a short-term capital gain or loss. Individual shareholders
will be subject to federal income tax on net capital gains at a maximum rate of
20% in respect of shares held for more than one year. Net capital gain of a
corporate shareholder is taxed at the same rate as ordinary income. However, if
shares on which a long-term capital gain distribution has been received are
-23-
<PAGE>
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. In addition, no loss
will be allowed on the sale or other disposition of shares of the Fund 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 (including shares
acquired through dividend reinvestment) securities that are substantially
identical to the shares of the Fund.
In determining gain or loss on shares of the Fund 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 charge
incurred in acquiring such shares to the extent of any subsequent reduction of
the sales charge by reason of the Exchange or Reinstatement Privilege offered by
the Fund. Any sales charge 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 "substantial users" (or "related person" of substantial users) of
facilities financed by industrial development bonds or private activity bonds
should consult the tax advisors before purchasing shares of the Fund.
New Jersey Taxes
In the opinion of __________, 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 Fund 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 Internal Revenue
Code, cash and cash items, including receivables, invested in obligations issued
by New Jersey, or in obligations that are free from state or local taxation
under New Jersey and federal laws such as obligations issued by the governments
of Puerto Rico, Guam or the Virgin Islands ("Municipal Securities"). Interest
income and gains realized by the New Jersey Fund upon disposition of obligations
and distributed to the shareholders are exempt from the New Jersey personal
income tax to the extent attributable to Municipal Securities. Gains resulting
from the redemption or sale of shares of the New Jersey Fund would also be
exempt from the New Jersey personal income tax.
The New Jersey personal income tax is not applicable to corporations. For all
corporations subject to the New Jersey Corporation Business Tax, interest on
Municipal Securities is included in the net income tax base for purposes of
computing the corporation business tax. Furthermore, any gain upon the
redemption or sale of shares by a corporate shareholder is also included in the
net income tax base for purposes of computing the Corporation Business Tax.
The New Jersey Fund will notify shareholders by February 15 of each calendar
year as to the amounts of all such dividends and distributions which are exempt
from federal income taxes and New Jersey personal income tax and the amounts, if
any, which are subject to such taxes. Shareholders are, however, urged to
consult with their own tax advisors as to the federal, state or local tax
consequences in their specific circumstances.
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<PAGE>
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.
Underwriters
Distribution of Securities
The Fund and Seligman Advisors are parties to a Distributing Agreement dated
January 1, 1993 under which Seligman Advisors acts as the exclusive agent for
distribution of shares of the Fund. Seligman Advisors accepts orders for the
purchase of Fund shares, which are offered continuously. As general distributor
of the Fund's shares of beneficial interest, Seligman Advisors allows
reallowances to all dealers on sales of Class A shares, as set forth above under
"Dealer Reallowances." Seligman Advisors retains the balance of sales charges
and any CDSCs paid by investors.
Total sales charges paid by shareholders of Class A shares of the Fund for the
fiscal years ended September 30, 1998, 1997, and 1996 are shown below. Also
shown are the amounts of the sales charges that were retained by Seligman
Advisors, as well as the amount of CDSC on Class A shares that Seligman Advisors
retained.
<TABLE>
<CAPTION>
Total Sales Charges Paid Amount of Class A Sales Amount of Class A CDSC
by Shareholders Charges Retained by Retained
Fiscal Year on Class A Shares Seligman Advisors by Seligman Advisors
- ----------- ----------------- ----------------- --------------------
<S> <C> <C> <C>
1998
1997 $ 96,284 $11,430 --
1996 110,566 12,922 --
</TABLE>
For the fiscal years ended September 30, 1998, 1997, and 1996, Seligman Advisors
retained CDSC charges on Class D shares amounting to $__________, $260, and $91,
respectively.
Compensation
Seligman Advisors received the following commissions and other compensation from
the Fund during its fiscal year ended September 30, 1998:
<TABLE>
<CAPTION>
Net Underwriting Compensation on
Discounts and Redemptions and Brokerage Other
Commissions Repurchases Commissions Compensation(1)
----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
(1)
</TABLE>
SSI is eligible to receive commissions from certain sales of Fund shares. For
the Fund's fiscal years ended September 30, 1998, 1997, and 1996, SSI received
commissions of $__________, $2451, and $611, respectively.
-25-
<PAGE>
Other Payments
Seligman Advisors shall pay broker/dealers, from its own resources, a fee on
purchases of Class A shares of $1,000,000 or more (NAV sales), calculated as
follows: 1.00% of NAV 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," 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 purchases made on behalf of any other fiduciary or
individual account.
Seligman Advisors shall also pay broker/dealers, from its own resources, a fee
on assets of certain investments in Class A shares of the Seligman mutual funds
participating in an "eligible employee benefit plan" (as defined under "Purchase
of Shares--Eligible Employee Benefit Plans") that are attributable to the
particular broker/dealer. The shares eligible for the fee are those on which an
initial sales charge was not paid because either the participating eligible
employee benefit plan has at least (1) $500,000 invested in the Seligman mutual
funds or (2) 50 eligible employees to whom such plan is made available. Class A
shares representing only an initial purchase of Seligman Cash Management Fund
are not eligible for the fee. Such shares will become eligible for the fee once
they are exchanged for shares of another Seligman mutual fund. The payment is
based on cumulative sales for each Plan during a single calendar year, or
portion thereof. The payment schedule, for each calendar year, is as follows:
1.00% of sales up to but not including $2 million; .80% of sales from $2 million
up to but not including $3 million; .50% of sales from $3 million up to but not
including $5 million; and .25% of sales from $5 million and above.
Seligman Advisors 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 Seligman mutual funds. Seligman Advisors 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 registered representatives who have sold or may
sell a significant amount of shares of the Fund and/or certain other mutual
funds managed by Seligman 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 Seligman Advisors of such promotional activities and payments shall be
consistent with the rules of the National Association of Securities Dealers,
Inc., as then in effect.
Calculation of Performance Data
Class A
The annualized yield for the 30-day period ended September 30, 1998 for the
Fund's Class A shares was ___%. 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, 1998, which was
the last day of this period. The average number of Class A shares of the Fund
was __________, which was the average daily number of shares outstanding during
the 30-day period that were eligible to receive dividends. Income was computed
by totaling the interest earned on all debt obligations during the 30-day period
and subtracting from that amount the total of all recurring expenses incurred
during the period.
-26-
<PAGE>
The 30-day yield was then annualized on a bond-equivalent basis assuming
semi-annual reinvestment and compounding of net investment income.
The tax equivalent annualized yield for the 30-day period ended September 30,
1998 for the Fund's Class A shares was ___%. The tax equivalent annualized yield
was computed by first computing the annualized yield as discussed above. Then
the portion of the yield attributable to securities the income of which was
exempt for federal income tax purposes was determined. This portion of the yield
was then divided by one minus 39.6% (39.6% being the assumed maximum federal
income tax rate for individual taxpayers).
The average annual total return for the Fund's Class A shares for the one-year
period ended September 30, 1998 was ___%. The average annual total return for
the Fund's Class A shares for the five-year period ended September 30, 1998 was
___%. The average annual total return for the Fund's Class A shares for the
ten-year period ended September 30, 1998 was ___%. These returns were computed
by assuming a hypothetical initial payment of $1,000 in Class A shares of the
Fund. 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's Class A shares over the relevant time period were
reinvested. It was then assumed that at the end of the one-year period, the
five-year period, and the ten-year period of the Fund, the entire amount was
redeemed. The average annual total return was then calculated by determining 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).
Class D
The annualized yield for the 30-day period ended September 30, 1998 for the
Fund's Class D shares was ___%.. The annualized yield was computed as for Class
A shares 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) on September 30, 1998 which was the last day of this period. The average
number of Class D shares of the Fund was __________, which was the average daily
number of shares outstanding during the 30-day period that were eligible to
receive dividends. Income was computed by totaling the interest earned on all
debt obligations during the 30-day period and subtracting from that amount the
total of all recurring expenses incurred during the period. The 30-day yield was
then annualized on a bond-equivalent basis assuming semi-annual reinvestment and
compounding of net investment income.
The tax equivalent annualized yield for the 30-day period ended September 30,
1998 for the Fund's Class D shares was ___%. The tax equivalent annualized yield
was computed as discussed above for Class A shares.
The average annual total return for the Fund's Class D shares for the one-year
period ended September 30, 1998 was ___%. The average annual total return for
the Fund's Class D shares for the period since inception through September 30,
1998 was ___%. 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 the one-year period and
the period since inception of the Fund, the entire amount was redeemed,
subtracting the 1% CDSL, if applicable
The tables below illustrate the total returns on a $1,000 investment in the
Fund's Class A and Class D shares for the ten years ended September 30, 1998 or
from the Class's inception through September 30, 1998, assuming investment of
all dividends and capital gain distributions.
-27-
<PAGE>
<TABLE>
<CAPTION>
Class A
Value of Value of Total Value
Year Initial Capital Gain Value of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
-------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
9/30/89 $ $ $ $
9/30/90
9/30/91
9/30/92
9/30/93
9/30/94
9/30/95
9/30/96
9/30/97
9/30/98 %
<CAPTION>
Class D
Value of Value of Total Value
Year Initial Capital Gain Value of of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
-------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
9/30/94
9/30/95
9/30/96
9/30/97
9/30/98 %
</TABLE>
- ----------
(1) For the ten-year period ended September 30, 1998 for Class A shares; and
from commencement of operations for Class D shares on February 1, 1994.
(2) The "Value of Initial Investment" as of the date indicated reflects the
effect to the maximum sales load and CDSC, if applicable, assumes that all
dividends and capital gain distributions were taken in cash and reflects
changes in the net asset vale of the shares purchased with the hypothetical
initial investment. "Total Value of Investment" reflects the effect of the
CDSC, if applicable, and assumes investment of all dividends and capital
gain distributions.
(3) Total return for each Class of 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 CDSC, 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.
Seligman waived its fees and reimbursed certain expenses during some of the
periods above, which positively affected the performance results presented.
Financial Statements
The Fund's Annual Report to Shareholders for the fiscal year ended September 30,
1998 contains a schedule of the investments of the Fund as of September 30,
1998, as well as certain other financial information as of that date. The
financial statements and notes included in the Annual Report, and the
-28-
<PAGE>
Independent Auditors' Report thereon, are incorporated herein by reference. The
Annual Report will be furnished, without charge, to investors who request copies
of this SAI.
General Information
Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
by the provisions of the 1940 Act or applicable state law, or otherwise, to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Fund shall not be deemed to have been effectively acted upon
unless approved by the holders of a majority of the outstanding shares of each
class or series affected by such matter. Rule 18f-2 further provides that a
class or series shall be deemed to be affected by a matter unless it is clear
that the interests of each class or Series in the matter are substantially
identical or that the matter does not affect any interest of such class or
Series. However, the Rule exempts the selection of independent public
accountants, the approval of principal distributing contracts and the election
of directors from the separate voting requirements of the Rule.
Custodian. Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City,
Missouri 64105, serves as custodian for the Fund. It also maintains, under the
general supervision of Seligman, the accounting records and determines the net
asset value for the Fund.
Auditors. ____________________, independent auditors, have been selected as
auditors of the Fund. Their address is _____________________________.
-29-
<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.
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<PAGE>
Municipal Notes
Moody's ratings for municipal notes and other short-term loans are
designated Moody's Investment Grade (MIG). This distinction is in recognition of
the differences between short-term and long-term credit risk. Loans bearing the
designation MIG 1 are of the best quality, enjoying strong protection by
established cash flows of funds for their servicing or by established and
broad-based access to the market for refinancing. Loans bearing the designation
MIG 2 are of high quality, with margins of protection ample although not so
large as in the preceding group. Loans bearing the designation MIG 3 are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Market access for refinancing in
particular, is likely to be less well established. Notes bearing the designation
MIG 4 are 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.
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<PAGE>
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.
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.
-32-
<PAGE>
Appendix B
SPECIAL CONSIDERATIONS REGARDING INVESTMENTS IN
NEW JERSEY MUNICIPAL SECURITIES
Some of the significant financial considerations relating to the
investments of the Seligman New Jersey Municipal Fund are summarized below. The
following information constitutes only a brief summary, does not purport to be a
complete description and is largely based on information drawn from official
statements relating to securities offerings of New Jersey municipal obligations
available as of the date of this Statement of Additional Information. The
accuracy and completeness of the information contained in such offering
statements has not been independently verified.
State Finance/Economic Information. New Jersey is the ninth largest state
in population and the fifth smallest in land area. With an average of 1,077
people per square mile, it is the most densely populated of all the states. New
Jersey's economic base is diversified, consisting of a variety of manufacturing,
construction and service industries, supplemented by rural areas with selective
commercial agriculture. Historically, New Jersey's average per capita income has
been well above the national average, and in 1996 New Jersey ranked second among
the states in per capita personal income ($31,053).
By the beginning of the national recession (which officially started in
July 1990 according to the National Bureau of Economic Research), construction
activity had already been declining in New Jersey for nearly two years. The
onset of recession caused an acceleration of New Jersey's job losses in
construction and manufacturing, as well as an employment downturn in such
previously growing sectors as wholesale trade, retail trade, finance, utilities,
trucking and warehousing.
Reflecting the economic downturn, the rate of unemployment in New Jersey
rose from 3.6% during the first quarter of 1989 to a recessionary peak of 8.5%
during 1992. Since then, the unemployment rate fell to an average of 6.2% in
1996 and 5.5% for the six month period from January 1997.
For the recovery period as a whole, May 1992 to June 1997,
service-producing employment in New Jersey has expanded by 283,500 jobs. In the
manufacturing sector, employment losses slowed between 1992 and 1994. During
1995 and 1996, however, manufacturing job losses increased slightly to 10,100
and 13,900 respectively, reflecting a slowdown in national manufacturing
production activity. Conditions have slowly improved in the construction
industry, where employment has risen by 18,600 since its low in May 1992.
New Jersey's Budget and Appropriation System. New Jersey operates on a
fiscal year ending on June 30. The General Fund is the fund into which all New
Jersey revenues not otherwise restricted by statute are deposited and from which
appropriations are made. The largest part of the total financial operations of
New Jersey is accounted for in the General Fund, which includes revenues
received from taxes and unrestricted by statute, most federal revenues, and
certain miscellaneous revenue items. The Appropriation Acts enacted by the New
Jersey Legislature and approved by the Governor provide the basic framework for
the operation of the General Fund. The undesignated General Fund balance at year
end for fiscal year 1994 was $1,264.6 million, for fiscal year 1995 was $950.2
million and for fiscal year 1996 was $882.2 million. For fiscal year 1997, the
undesignated balance in the General Fund was $1,078.3 million, subject to change
upon completion of the year-end audit. The estimated undesignated balance for
fiscal year 1998 is $553.5 million, based on the amounts contained in the fiscal
year 1998 Appropriations Acts. The fund balances are available for appropriation
in succeeding fiscal years.
During the course of the fiscal year, the Governor may take steps to reduce
State expenditures if it appears that revenues have fallen below those
originally anticipated. There are additional means by which the Governor may
ensure that the State does not incur a deficit. Under the State Constitution, no
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<PAGE>
supplemental appropriation may be enacted after adoption of an appropriations
act except where there are sufficient revenues on hand or anticipated, as
certified by the Governor, to meet such appropriation.
General Obligation Bonds. New Jersey finances capital projects primarily
through the sale of its general obligation bonds. These bonds are backed by the
full faith and credit of New Jersey. Tax revenues and certain other fees are
pledged to meet the principal and interest payments required to pay the debt
fully.
The aggregate outstanding general obligation bonded indebtedness of New
Jersey as of June 30, 1997 was $3.437 billion. The appropriation for the debt
service obligation on outstanding indebtedness is $483.7 million for fiscal year
1998.
In addition to payment from bond proceeds, capital construction can also be
funded by appropriation of current revenues on a pay-as-you-go basis. For fiscal
year 1998, the amount appropriated to this purpose is $516.0 million.
Tax and Revenue Anticipation Notes. In fiscal year 1992 New Jersey
initiated a program under which it issued tax and revenue anticipation notes to
aid in providing effective cash flow management to fund balances which occur in
the collection and disbursement of the General Fund and Property Tax Relief Fund
revenues. There are presently $800 million of tax and revenue anticipation notes
outstanding. These notes mature on June 15, 1998. Such notes constitute special
obligations of New Jersey payable solely from moneys on deposit in the General
Fund and Property Tax Relief Fund and legally available for such payment.
Lease Financing. New Jersey has entered into a number of leases relating to
the financing of certain real property and equipment. New Jersey leases the
Richard J. Hughes Justice Complex in Trenton from the Mercer County Improvement
Authority (the "MCIA"). Under the lease agreements with the New Jersey Economic
Development Authority (the "EDA"), New Jersey leases (i) office buildings that
house the New Jersey Division of Motor Vehicles, New Jersey Network, a branch of
the United States Postal Service and a parking facility, (ii) approximately 13
acres of real property and certain infrastructure improvements thereon located
in the city of Newark, (iii) certain energy saving equipment which shall be
installed in various buildings around New Jersey and (iv) the New Jersey
Performing Arts Center Facility in the City of Newark. New Jersey also leases
several office buildings, facilities and improvements from the New Jersey
Building Authority (the "NJBA"). Rental payments under each of the foregoing
leases are sufficient to pay debt service on the related bonds issued by MCIA,
EDA and NJBA, and in each case are subject to annual appropriation by the New
Jersey Legislature.
Beginning in April 1984, New Jersey, acting through the Director of the
Division of Purchase and Property, entered into a series of lease purchase
agreements which provide for the acquisition of equipment, services and real
property to be used by various departments and agencies of New Jersey. To date,
New Jersey has completed eleven lease purchase agreements which have resulted in
the issuance of Certificates of Participation totaling $749,350,000. The
agreements relating to these transactions provide for semi-annual rental
payments. New Jersey's obligation to pay rentals due under these leases is
subject to annual appropriations being made by the New Jersey Legislature.
State Supported School and County College Bonds. Legislation provides for
future appropriations for New Jersey aid to local school districts equal to debt
service on a maximum principal amount of $280,000,000 of bonds issued by such
local school districts for construction and renovation of school facilities and
for New Jersey aid to counties equal to debt service on up to $80,000,000 of
bonds issued by counties for construction of county college facilities. The New
Jersey Legislature is not legally bound to make such future appropriations, but
has done so to date on all outstanding obligations issued under these laws.
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"Moral Obligation" Financing. The authorizing legislation for certain New
Jersey entities provides for specific budgetary procedures with respect to
certain obligations issued by such entities. Pursuant to such legislation, a
designated official is required to certify any deficiency in a debt service
reserve fund maintained to meet payments of principal of and interest on the
obligations, and a New Jersey appropriation in the amount of the deficiency is
to be made. However, the New Jersey Legislature is not legally bound to make
such an appropriation. Bonds issued pursuant to authorizing legislation of this
type are sometimes referred to as "moral obligation" bonds. There is no
statutory limitation on the amount of "moral obligation" bonds which may be
issued by eligible New Jersey entities.
The following table sets forth the "moral obligation" bonded
indebtedness issued by New Jersey entities as of June 30, 1997.
Maximum
Annual
Debt Service
Subject to
Moral
Outstanding Obligation
----------- ----------
New Jersey Housing and
Mortgage Finance Agency ............... $399,224,305.59 $ 37,344,151.04
South Jersey Port Corporation ......... 78,715,000.00 7,002,815.00
Higher Education Assistance
Authority ............................. 136,385,000.00 23,155,400.00
--------------- ---------------
$614,324,305.59 $ 67,502,366.04
=============== ===============
Higher Education Assistance Authority. The Higher Education Assistance
Authority ("HEAA") has issued $149,996,064 aggregate principal amount of revenue
bonds. It is anticipated that the HEAA's revenues will be sufficient to cover
debt service on its bonds.
New Jersey Housing and Mortgage Finance Agency. Neither the New Jersey
Housing and Mortgage Finance Agency nor its predecessors, the New Jersey Housing
Finance Agency and the New Jersey Mortgage Finance Agency, have had a deficiency
in a debt service reserve fund which required New Jersey to appropriate funds to
meet its "moral obligation." It is anticipated that this agency's revenues will
continue to be sufficient to cover debt service on its bonds.
South Jersey Port Corporation. New Jersey has periodically provided the
South Jersey Port Corporation (the "Port Corporation") with funds to cover all
debt service and property tax requirements, when earned revenues are anticipated
to be insufficient to cover these obligations. For calendar years 1986 through
1997, New Jersey has made appropriations totaling $49,560,536.25 which covered
deficiencies in revenues of the Port Corporation, for debt service and property
tax payments.
New Jersey Sports and Exposition Authority. On March 2, 1992, the New
Jersey Sports and Exposition Authority (the "Sports Authority") issued
$147,490,000 in New Jersey guaranteed bonds and defeased all previously
outstanding New Jersey guaranteed bonds of the Sports Authority. New Jersey
officials have stated the belief that the revenue of the Sports Authority will
be sufficient to provide for the payment of debt service on these obligations
without recourse to New Jersey's guarantee.
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Legislation enacted in 1992 authorizes the Sports Authority to issue bonds
for various purposes payable from New Jersey appropriations. Pursuant to this
legislation, the Sports Authority and the New Jersey Treasurer have entered into
an agreement (the "State Contract") pursuant to which the Sports Authority will
undertake certain projects, including the refunding of certain outstanding bonds
of the Sports Authority, and the New Jersey Treasurer will credit to the Sports
Authority Fund amounts from the General Fund sufficient to pay debt service and
other costs related to the bonds. The payment of all amounts under the State
Contract is subject to and dependent upon appropriations being made by the New
Jersey Legislature. As of June 30, 1997 there are approximately $458,890,000
aggregate principal amount of Sports Authority bonds outstanding, the debt
service on which is payable from amounts credited to the Sports Authority Fund
pursuant to the State Contract.
New Jersey Transportation Trust Fund Authority. In July 1984, New Jersey
created the New Jersey Transportation Trust Fund Authority (the "TTFA"), an
instrumentality of New Jersey organized and existing under the New Jersey
Transportation Trust Fund Authority Act of 1984, as amended (the "TTFA Act") for
the purpose of funding a portion of New Jersey's share of the cost of
improvements to New Jersey's transportation system. Pursuant to the TTFA Act,
the TTFA, the New Jersey Treasurer and the Commissioner of Transportation
executed a contract (the "TTFA Contract") which provides for the payment of
these revenues to the TTFA. The payment of all such amounts is subject to and
dependent upon appropriations being made by the New Jersey Legislature and there
is no requirement that the Legislature make such appropriation. On May 30, 1995,
the New Jersey Legislature amended the TTFA Act to provide, among other things,
for (i) the issuance of debt in an aggregate principal amount in excess of the
statutory debt limitation in effect prior to the enactment of the 1995
amendments, (ii) an increase in the amount of revenues available to the TTFA and
(iii) broadening the scope of transportation projects.
Pursuant to the Act, the aggregate principal amount of TTFA's bonds, notes
or other obligations outstanding at any one time may not exceed $700 million
plus amounts carried over from prior fiscal years. These bonds are special
obligations of the TTFA payable from payments made by New Jersey pursuant to the
TTFA Contract.
Economic Recovery Fund Bonds. Legislation enacted during 1992 by New Jersey
authorizes the EDA to issue bonds for various economic development purposes.
Pursuant to that legislation, EDA and the New Jersey Treasurer have entered into
an agreement (the "ERF Contract") through which EDA has agreed to undertake the
financing of certain projects and the New Jersey Treasurer has agreed to credit
to the Economic Recovery Fund from the General Fund amounts equivalent to
payments due to New Jersey under an agreement with the Port Authority of New
York and New Jersey. The payment of all amounts under the ERF Contract is
subject to and dependent upon appropriations being made by the New Jersey
Legislature.
State Pension Funding Bonds. Legislation enacted in June 1997 authorizes
the EDA to issue bonds to pay a portion of New Jersey's unfunded accrued pension
liability for New Jersey's retirement systems (the "Unfunded Accrued Pension
Liability"), which, together with amounts derived from the revaluation of the
pension assets pursuant to companion legislation enacted at the same time, will
be sufficient to fully fund the Unfunded Accrued Pension Liability. On June 30,
1997 the EDA issued $2,803,042,498.56 aggregate principal amount of State
Pension Funding Bonds, Series 1997A-1997C. The EDA and the New Jersey Treasurer
have entered into an agreement which provides for the payment to the EDA of
monies sufficient to pay debt service on the bonds. Such payments are subject to
and dependent upon appropriations being made by the New Jersey Legislature.
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SUMMARY OF OTHER NEW JERSEY RELATED OBLIGATIONS
AS OF JUNE 30, 1997
Type of Issue Outstanding
- ------------- -----------
Lease Financing
MCIA $ 86,980,000.00
EDA 178,945,202.20
NJBA 485,464,928.57
State COP 108,380,000.00
EFA 279,915,000.00
Market Transition Facility 705,270,000.00
State-Supported School and County College Bonds 96,615,172.70
Moral Obligation 614,324,305.59
Sports Authority 579,085,000.00
TTFA(1) 2,889,305,000.00
Economic Recovery Fund Bonds 228,227,868.90
State Pension Funding Bonds 2,803,042,498.56
-----------------
TOTAL $9,055,554,976.52
=================
Subsequent Issues Since
June 30, 1997 Par Amount Date of Issue
- ------------- ---------- -------------
NJBA(2) 224,630,000.00 9/17/97
Higher Education
Assistance Authority 10,000,000.00 10/6/97
Municipal Finance. New Jersey's local finance system is regulated by
various statutes designed to assure that all local governments and their issuing
authorities remain on a sound financial basis. Regulatory and remedial statutes
are enforced by the Division of Local Government Services (the "Division") in
the New Jersey State Department of Community Affairs.
Counties and Municipalities. The Local Budget Law (N.J.S.A. 40A:4-1 et
seq.) imposes specific budgetary procedures upon counties and municipalities
("local units"). Every local unit must adopt an operating budget which is
balanced on a cash basis, and items of revenue and appropriation must be
examined by the Director of the Division (the "Director"). The accounts of each
local unit must be independently audited by a registered municipal accountant.
New Jersey law provides that budgets must be submitted in a form promulgated by
the Division and further provides for limitations on estimates of tax collection
and for reserves in the event of any shortfalls in collections by the local
unit. The Division reviews all municipal and county annual budgets prior to
adoption for compliance with the Local Budget Law. The Director is empowered to
require changes for compliance with law as a condition of approval; to
disapprove budgets not in accordance with law; and to prepare the budget of a
local unit, within the limits of the adopted budget of the previous year with
suitable adjustments for legal compliance, if the local unit is unwilling to
prepare a budget in accordance with law. This process insures that every
municipality and county annually adopts a budget balanced on a cash basis,
within limitations on appropriations or tax levies, respectively, and making
adequate provision for principal of and interest on
- ----------
(1) Includes $347,655,000 grant anticipation notes issued by the New Jersey
Transit Corporation ("NJT"). To the extent these notes are not payable by
NJT, these notes are payable by the TTFA pursuant to a Standby Deficiency
Agreement entered into by the TTFA and the Trustee for the notes. The
Standby Deficiency Agreement was issued on a parity with all bonds issued
by the TTFA.
(2) Includes approximately $103,000,000 of refunding bonds issued to refund
certain of the NJBA's prior bonds.
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indebtedness falling due in the fiscal year, deferred charges and other
statutory expenditure requirements. The Director also oversees changes to local
budgets after adoption as permitted by law, and enforces regulations pertaining
to execution of adopted budgets and financial administration. In addition to the
exercise of regulatory and oversight functions, the Division offers expert
technical assistance to local units in all aspects of financial administration,
including revenue collection and cash management procedures, contracting
procedures, debt management and administrative analysis.
The Local Government Cap Law (N.J.S.A. 4OA:4-45.1 et seq.) (the "Cap Law")
generally limits the year-to-year increase of the total appropriations of any
municipality and the tax levy of any county to either 5 percent or an index rate
determined annually by the Director, whichever is less. However, where the index
percentage rate exceeds 5 percent, the Cap Law permits the governing body of any
municipality or county to approve the use of a higher percentage rate up to the
index rate. Further, where the index percentage rate is less than 5 percent, the
Cap Law also permits the governing body of any municipality or county to approve
the use of a higher percentage rate up to 5 percent. Regardless of the rate
utilized, certain exceptions exist to the Cap Law's limitation on increases in
appropriations. The principal exceptions to these limitations are municipal and
county appropriations to pay debt service requirements; to comply with certain
other New Jersey or federal mandates; appropriations of private and public
dedicated funds; amounts approved by referendum; and, in the case of
municipalities only, to fund the preceding year's cash deficit or to reserve for
shortfalls in tax collections and, amounts required pursuant to contractual
obligations for specified services. The Cap Law was re-enacted in 1990 with
amendments and made a permanent part of the municipal finance system.
New Jersey law also regulates the issuance of debt by local units. The
Local Budget Law limits the amount of tax anticipation notes that may be issued
by local units and requires the repayment of such notes within 120 days of the
end of the fiscal year (six months in the case of the counties) in which issued.
The Local Bond Law (N.J.S.A. 4OA:2-1 I.) governs the issuance of bonds and notes
by the local units. No local unit is permitted to issue bonds for the payment of
current expenses (other than Fiscal Year Adjustment Bonds described more fully
below). Local units may not issue bonds to pay outstanding bonds, except for
refunding purposes, and then only with the approval of the Local Finance Board.
Local units may issue bond anticipation notes for temporary periods not
exceeding in the aggregate approximately ten years from the date of first issue.
The debt that any local unit may authorize is limited to a percentage of its
equalized valuation basis, which is the average of the equalized value of all
taxable real property and improvements within the geographic boundaries of the
local unit, as annually determined by the Director of the Division of Taxation,
for each of the three most recent years. In the calculation of debt capacity,
the Local Bond Law and certain other statutes permit the deduction of certain
classes of debt ("statutory deductions") from all authorized debt of the local
unit ("gross capital debt") in computing whether a local unit has exceeded its
statutory debt limit. Statutory deductions from gross capital debt consist of
bonds or notes (i) authorized for school purposes by a regional school district
or by a municipality or a school district with boundaries coextensive with such
municipality to the extent permitted under certain percentage limitations set
forth in the School Bond Law (as hereinafter defined); (ii) authorized for
purposes which are self-liquidating, but only to the extent permitted by the
Local Bond Law; (iii) authorized by a public body other than a local unit the
principal of and interest on which is guaranteed by the local unit, but only to
the extent permitted by law; (iv) that are bond anticipation notes; (v) for
which provision for payment has been made; or (vi) authorized for any other
purpose for which a deduction is permitted by law. Authorized net capital debt
(gross capital debt minus statutory deductions) is limited to 3.5 percent of the
equalized valuation basis in the case of municipalities and 2 percent of the
equalized valuation basis in the case of counties. The debt limit of a county or
municipality, with certain exceptions, may be exceeded only with the approval of
the Local Finance Board.
Chapter 75 of the Pamphlet Laws of 1991, signed into law on March 28, 1991,
required certain municipalities and permits all other municipalities to adopt
the New Jersey fiscal year in place of existing calendar fiscal year.
Municipalities that change fiscal years must adopt a six month transition year
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budget funded by fiscal year adjustment bonds. Notes issued in anticipation of
fiscal year adjustment bonds, including renewals, can only be issued for up to
one year unless the Local Finance Board permits the municipality to renew them
for a further period of time. The Local Finance Board must confirm the actual
deficit experienced by the municipality. The municipality then may issue fiscal
year adjustment bonds to finance the deficit on a permanent basis.
There are 567 municipalities and 21 counties in New Jersey. During 1993,
1994 and 1995 no county exceeded its statutory debt limitations or incurred a
cash deficit in excess of 4 percent of its tax levy. Only two municipalities had
a cash deficit greater than 4 percent of their tax levies for 1994 and 1995. The
number of municipalities which exceeded statutory debt limits was six as of
December 31, 1994. No New Jersey municipality or county has defaulted on the
payment of interest or principal on any outstanding debt obligation since the
1930s.
School Districts. New Jersey's school districts operate under the same
comprehensive review and regulation as do its counties and municipalities.
Certain exceptions and differences are provided, but New Jersey supervision of
school finance closely parallels that of local governments.
All New Jersey school districts are coterminous with the boundaries of one
or more municipalities. They are characterized by the manner in which the board
of education, the governing body of the school district, takes office. Type I
school districts, most commonly found in cities, have a board of education
appointed by the mayor or the chief executive officer of the municipality
constituting the school district. In a Type II school district, the board of
education is elected by the voters of the district. Nearly all regional and
consolidated school districts are Type II school districts.
The New Jersey Department of Education has been empowered with the
necessary and effective authority to abolish an existing school board and create
a New Jersey-operated school district where the existing school board has failed
or is unable to take the corrective actions necessary to provide a thorough and
efficient system of education in that school district pursuant to N.J.S.A.
18A:7a-15 (the "School Intervention Act"). The New Jersey-operated school
district, operated under the direction of a New Jersey-appointed superintendent,
has all of the powers and authority of the local board of education and of the
local district superintendent. Pursuant to the authority granted under the
School Intervention Act, on October 4, 1989, the New Jersey Board of Education
ordered the creation of a New Jersey-operated school district in the city of
Jersey City. Similarly, on August 7, 1991, the New Jersey Board of Education
ordered the creation of a New Jersey-operated school district in the city of
Paterson and on July 5, 1995 ordered the creation of a New Jersey-operated
school district in the City of Newark.
School Budgets. In every school district having a board of school estimate,
the board of school estimate examines the budget request and fixes the
appropriate amounts of the next year's operating budget after a public hearing
at which the taxpayers and other interested persons shall have an opportunity to
raise objections and to be heard with respect to the budget. This board
certifies the budget to the municipal governing bodies and to the local board of
education. If the local board of education disagrees, it must appeal to the
Commissioner to request the changes.
In a Type II school district without a board of school estimate, the
elected board of education develops the budget proposal and, after public
hearing, submits it to the voters of such district for approval. Previously
authorized debt service is not subject to referendum in the annual budget
process. If approved, the budget goes into effect. If defeated, the governing
body of each municipality in the school district has until May 19 in any year to
determine the amount necessary to be appropriated for each item appearing in
such budget. Should the governing body fail to certify an amount determined by
the board of education to be necessary, the board of education may appeal the
action to the Commissioner.
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The state laws governing the distribution of state aid to local school
districts limit the annual increase of a school district's net current expense
budget. The Commissioner certifies the allowable amount of increase for each
school district but may grant a higher level of increase in certain limited
instances. A school district may also submit a proposal to the voters to raise
amounts above the allowable amount of increase. If defeated, such a proposal is
subject to further review or appeal only if the Commissioner determines that
additional funds are required to provide a thorough and efficient education.
In New Jersey-operated school districts the New Jersey District
Superintendent has the responsibility for the development of the budget subject
to appeal by the governing body of the municipality to the Commissioner and the
Director of the Division of Local Government Services in the New Jersey
Department of Community Affairs. Based upon his review, the Director is required
to certify the amount of revenues which can be raised locally to support the
budget of the New Jersey operated district. Any difference between the amount
which the Director certifies and the total amount of local revenues required by
the budget approved by the Commissioner is to be paid by the State in the fiscal
year in which the expenditures are made subject to the availability of
appropriations.
School District Bonds. School district bonds and temporary notes are issued
in conformity with N.J.S.A. 18A:24-1 et seq. (the "School Bond Law"), which
closely parallels the Local Bond Law (for further information relating to the
Local Bond Law, see "MUNICIPAL FINANCE-Counties and Municipalities" herein).
Although school districts are exempted from the 5 percent down payment provision
generally applied to bonds issued by municipalities and counties, they are
subject to debt limits (which vary depending on the type of school system
provided) and to New Jersey regulation of their borrowing. The debt limitation
on school district bonds depends upon the classification of the school district,
but may be as high as 4 percent of the average equalized valuation basis of the
constituent municipality. In certain cases involving school districts in cities
with populations exceeding 100,000, the debt limit is 8 percent of the average
equalized valuation basis of the constituent municipality, and in cities with
populations in excess of 80,000 the debt limit is 6 percent of the aforesaid
average equalized valuation.
School bonds are authorized by (i) an ordinance adopted by the governing
body of a municipality within a Type I school district; (ii) adoption of a
proposal by resolution by the board of education of a Type II school district
having a board of school estimate; (iii) adoption of a proposal by resolution by
the board of education and approval of the proposal by the legal voters of any
other Type II school district; or (iv) adoption of a proposal by resolution by a
capital project control board pursuant to N.J.S.A. 18A:7A-46.1 et seq. for
projects in a New Jersey operated school district. If school bonds will exceed
the school district borrowing capacity, a school district (other than a regional
school district) may use the balance of the municipal borrowing capacity. If the
total amount of debt exceeds the school district's borrowing capacity, the
Commissioner and the Local Finance Board must approve the proposed authorization
before it is submitted to the voters. All authorizations of debt in a Type II
school district without a board of school estimate require an approving
referendum, except where, after hearing, the Commissioner and the New Jersey
Board of Education determine that the issuance of such debt is necessary to meet
the constitutional obligation to provide a thorough and efficient system of
public schools. When such obligations are issued, they are issued by, and in the
name of, the school district.
In Type I and II school districts with a board of school estimate, that
board examines the capital proposal of the board of education and certifies the
amount of bonds to be authorized. When it is necessary to exceed the borrowing
capacity of the municipality, the approval of a majority of the legally
qualified voters of the municipality is required, together with the approval of
the Commissioner and the Local Finance Board. When such bonds are issued for a
Type I school district, they are issued by the municipality and identified as
school bonds. When bonds are issued by a Type II school district having a board
of school estimate, they are issued by, and in the name of, the school district.
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All authorizations of debt must be reported to the Division of Local
Government Services by a supplemental debt statement prior to final approval.
School District Lease Purchase Financings. In 1982, school districts were
given an alternative to the traditional method of bond financing capital
improvements pursuant to N.J.S.A. 18A:20-4.2(f) (the "Lease Purchase Law"). The
Lease Purchase Law permits school districts to acquire a site and school
building through a lease purchase agreement with a private lessor corporation.
The lease purchase agreement does not require voter approval. The rent payments
attributable to the lease purchase agreement are subject to annual appropriation
by the school district and are required, pursuant to N.J.A.C. 6:22A-1.2(h), to
be included in the annual current expense budget of the school district.
Furthermore, the rent payments attributable to the lease purchase agreement do
not constitute debt of the school district and therefore do not impact on the
school district's debt limitation. Lease purchase agreements in excess of five
years require the approval of the Commissioner and the Local Finance Board.
Qualified Bonds. In 1976, legislation was enacted (P.L. 1976, c.38 and
c.39) which provides for the issuance by municipalities and school districts of
"qualified bonds." Whenever a local board of education or the governing body of
a municipality determines to issue bonds, it may file an application with the
Local Finance Board and, in the case of a local board of education, the
Commissioner, to qualify bonds pursuant to P.L. 1976, c.38 or c.39. Upon
approval of such an application and after receipt of a certificate stating the
name and address of the paying agent for such bonds, the maturity schedule,
interest rates and payment dates, the New Jersey Treasurer shall, in the case of
qualified bonds for school districts, withhold from the school aid payable to
such municipality or school district and, in the case of qualified bonds for
municipalities, withhold from the amount of business personal property tax
replacement revenues, gross receipts tax revenues, municipal purposes tax
assistance fund distributions, New Jersey urban aid, New Jersey revenue sharing,
and any other funds appropriated as New Jersey aid and not otherwise dedicated
to specific municipal programs, payable to such municipalities, an amount
sufficient to cover debt service on such bonds. These "qualified bonds" are not
direct, guaranteed or moral obligations of New Jersey, and debt service on such
bonds will be provided by New Jersey only if the above-mentioned appropriations
are made by New Jersey. Total outstanding indebtedness for "qualified bonds"
consisted of $224,492,700 by various school districts as of June 30, 1995 and
$903,760,316 by various municipalities as of June 30, 1995.
New Jersey School Bond Reserve Act. The New Jersey School Bond Reserve Act
(N.J.S.A. 18A:56-17 et seq.) establishes a school bond reserve within the
constitutionally dedicated Fund for the Support of Free Public Schools. Under
this law the reserve is maintained at an amount equal to 1.5 percent of the
aggregate outstanding bonded indebtedness of counties, municipalities or school
districts for school purposes (exclusive of bonds whose debt service is provided
by New Jersey appropriations), but not in excess of monies available in such
fund. If a municipality, county or school district is unable to meet payment of
the principal of or interest on any of its school bonds, the trustee of the
school bond reserve will purchase such bonds at the face amount thereof or pay
the holders thereof the interest due or to become due. At June 30, 1995, the
book value of the Fund's assets aggregated $88,736,798 and the reserve, computed
as of June 30, 1995, amounted to $38,811,015. There has never been an occasion
to call upon this fund. New Jersey provides support of certain bonds of
counties, municipalities and school districts through various statutes.
Local Financing Authorities. The Local Authorities Fiscal Control Law
(N.J.S.A. 40A:5A-1 et seq.) provides for state supervision of the fiscal
operations and debt issuance practices of independent local authorities and
special taxing districts by the New Jersey Department of Community Affairs. The
Local Authorities Fiscal Control Law applies to all autonomous public bodies
created by counties or municipalities, which are empowered to issue bonds, to
impose facility or service charges, or to levy taxes in their districts. This
encompasses most autonomous local authorities (sewerage, municipal
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utilities, parking, pollution control, improvement, etc.) and special taxing
districts (fire, water, etc.). Authorities which are subject to differing New
Jersey or federal financial restrictions are exempted, but only to the extent of
that difference.
Financial control responsibilities over local authorities and special
districts are assigned to the Local Finance Board and the Director of the
Division of Local Government Services. The Local Finance Board exercises
approval power over the creation of new authorities and special districts as
well as their dissolution. The Local Finance Board also reviews, conducts public
hearings and issues findings and recommendations on any proposed project
financing of an authority or district, and on any proposed financing agreement
between an municipality or county and an authority or special district. The
Local Finance Board prescribes minimum audit requirements to be followed by
authorities and special districts in the conduct of their annual audits. The
Director reviews and approves annual budgets of authorities and special
districts.
Litigation. The following are cases presently pending or threatened in
which New Jersey has the potential for either a significant loss of revenue or a
significant unanticipated expenditure.
New Jersey Education Association et. al v. State of New Jersey et. al. This
case represents a challenge to amendments to the pension laws enacted on June
30, 1994 (P.L. 1994, Chapter 62), which concerned the funding of the Teachers
Pension and Annuity Fund ("TPAF"), the Public Employee's Retirement System
("PERS"), the Police and Fireman's Retirement System ("PFRS"), the New Jersey
Police Retirement System (CSPRS") and the Judicial Retirement System ("JRS").
The complaint was filed in the United States District Court of New Jersey on
October 17, 1994. The statute, P.L. 1994, Chapter 62 ("Chapter 62"), as enacted,
made several changes affecting these retirement systems including changing the
actuarial funding method to projected unit credit; continuing the prefunding of
post-retirement medical benefits but at a reduced level for TPAF and PERS;
revising the employee member contribution rate to a flat 5% for TPAF and PERS;
extending the phase in period for the revised TPAF actuarial assumptions;
changing the phase-in period for funding of cost-of-living adjustments and
reducing the inflation assumption for the Cost of Living Adjustment ("COLA") for
all retirement systems; and decreasing the average salary increase assumption
for all retirement systems. Plaintiffs allege that the changes resulted in lower
employer contributions in order to reduce a general budget deficit. The
complaint further alleges that certain provisions of Chapter 62 violate the
contract, due process, and taking clauses of the United States and New Jersey
Constitutions, and further constitute a breach of New Jersey 's fiduciary duty
to participants in TPAF and PERS. Plaintiffs seek to permanently enjoin New
Jersey from administering, enforcing or otherwise implementing Chapter 62. An
adverse determination against New Jersey would have a significant impact upon
the Fiscal Year 1997 and Fiscal Year 1998 budgets. New Jersey filed a motion to
dismiss and a motion for summary judgment.
On October 6, 1995, the Court issued its opinion in which it dismissed the
State of new Jersey as a party to the action. The only defendant is Treasurer
Clymer. The claims surviving the motion are: (1) breach of trust and fiduciary
duty (against the Treasurer in both his individual and official capacities); (2)
violation of Due Process (against the Treasurer in both his individual and
official capacities); and (3) a 42 U.S. C. ss. 1983 claim (against the Treasurer
in his individual capacity).
The State of New Jersey filed a motion for reconsideration or, in the
alternative, for certification to the Third Circuit Court of Appeals, of the
remaining claims. By order dated December 19, 1995, the District Court denied
the motion in all respects. On January 29, 1996, the State, on behalf of
Treasurer Clymer, filed a Petition for a Writ of Mandamus and a Motion for a
Stay of the Proceedings below, pending consideration and disposition of the
petition, with the Third Circuit Court of Appeals. In the petition, Treasurer
Clymer asked the Court of Appeals to direct the District Court to dismiss the
complaint or enter summary judgment in his favor. Alternatively, the Treasurer
asked the Court of Appeals to order the District Court to vacate its order
denying summary judgment and resolve that motion as a matter of law without
discovery or fact finding or to certify the issues for interlocutory appeal. The
Third Circuit Court of
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Appeals denied the motion and petition on February 20, 1996. The matter was
stayed pending the adoption of the Appropriations Act for Fiscal Year 1998 and
has been closed on a stipulation of dismissal entered by the court upon consent
of all the parties with no payment made by any of the parties.
Tort, Contract and Other Claims. At any given time, there are various
numbers of claims and cases pending against the State, State agencies and
employees, seeking recovery of monetary damages that are primarily paid out of
the fund created pursuant to the New Jersey Tort Claims Act (N.J.S.A. 59: 1-1,
et seq.). The State does not formally estimate its reserve representing
potential exposure for these claims and cases. The State is unable to estimate
its exposure for these claims and cases.
The State routinely receives notices of claim seeking substantial sums of
money. The majority of those claims have historically proven to be of
substantially less value than the amount originally claimed. Under the New
Jersey Tort Claims Act, any ton litigation against the State must be preceded by
a notice of claim, which affords the State the opportunity for a six-month
investigation prior to the filing of any suit against it. At any given time,
there are various numbers of claims and cases pending against the University of
Medicine and Dentistry and its employees, seeking recovery of monetary damages
that are primarily paid out of the Self Insurance Reserve Fund created pursuant
to the New Jersey Tort Claims Act (N.J.S.A. 59:1-1, et seq.). An independent
study estimated an aggregate potential exposure of $90,800,000 for tort and
medical malpractice claims pending as of June 30, 1997. In addition, at any
given time, there are various numbers of contract and other claims against the
University of Medicine and Dentistry, seeking recovery of monetary damages or
other relief which, if granted, would require the expenditure of funds. The
State is unable to estimate its exposure for these claims.
County of Passaic v. State of New Jersey. This action filed by the County
of Passaic, the Passaic County Utilities Authority, and the Passaic County
Pollution Control Financing Authority ("plaintiffs"), alleged tort and
contractual claims against the State of New Jersey ("State") and the New Jersey
Department of Environmental Protection ("NJDEP") associated with a resource
recovery facility which plaintiffs had once planned to build. The plaintiffs
alleged that the State and the NJDEP violated a 1984 consent order concerning
the construction of a resource recovery facility in Passaic County. Plaintiffs'
complaint alleged approximately $30 million in damages against the State and the
NJDEP. On March 17, 1995, the court granted the State's motion for summary
judgment, dismissing all counts of plaintiffs' complaint against the State and
the NJDEP, with prejudice. The court found that there was no legal obligation or
duty on the part of the State or the NJDEP concerning the project. Plaintiffs
have filed an appeal of the court's decision. On October 17, 1997, the Appellate
Division affirmed the lower court dismissal and the time for filing of a
petition for recertification has elapsed.
Interfaith Community Organization v. Shinn, et al. In late October, 1993,
the Interfaith Community Organization ("ICO") a coalition of churches and church
leaders in Hudson County, filed suit on behalf of the ICO's membership and the
citizens of Hudson County against the Governor, the Commissioner of the New
Jersey Department of Environmental Protection ("DEP"), Commissioner of the
Department of Health ("DOH"), and Lance Miller, Assistant Commissioner of DEP.
The multicount complaint alleged violations of numerous laws, allegedly
resulting from the existence of chromium contamination in the State-owned
Liberty State Park in Jersey City. It also asserted the alleged failure by DEP
and DOH to properly conduct remediation and health screens in Hudson County
concerning chromium contamination. No immediate relief was sought, but
injunctive and monetary relief was asked for.
In June 1994, ICO hired a law firm to represent it in this matter. The firm
filed amended complaints, naming only Commissioner Shinn of DEP and Governor
Whitman as defendants and alleges only Clean Water Act ("CWA") and Resource
Conservation Recovery Act ("RCRA") violations at Liberty State
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Park. Under the "citizen suit" provisions of these federal acts, plaintiff is
seeking remediation health studies and attorneys' fees. ICO has served the
defendants with a motion for a preliminary injunction requesting that the court
order the closure of Liberty State Park, security which will permit no entry to
the park, emergency dust suppression efforts and a plan to remediate the park.
The State has opposed the motion. The State is unable to estimate its exposure
for this claim. In March, 1995, ICO filed another lawsuit over the shipments of
soil from the 1-287 Wetlands Mitigation Project to Liberty State Park. The
defendants in that suit are Commissioner Shinn, Governor Whitman, Commissioner
Wilson of the Department of Transportation ("DOT"') and R. W. Vogel, Inc., the
transporter of the soil. The new suit seeks a declaration that the CWA is being
violated and demands cessation of all construction at Liberty State Park and
penalties against Vogel. The State intends to defend these suits vigorously.
American Trucking Associations, Inc. and Tri-State Motor Transit, Co. v.
State of New Jersey. The American Trucking Associations, Inc. ("ATA") and
Tri-State Motor Transit, Co. filed a complaint in the Tax Court on March 23,
1994 against the State of New Jersey and certain state officials challenging the
constitutionality of annual A-901 hazardous and solid waste licensure renewal
fees collected by the Department of Environmental Protection ("DEP"). A-901
refers to the Assembly bill number which was adopted in 1983 as an amendment to
the Solid Waste Management Act, N.J.S.A. 13AE-1 et seq., and codified at
N.J.S.A. 13:1E-126 et seq., establishing a requirement that all persons and
entities engaged in solid and hazardous waste activities in the State be
investigated prior to the issuance of a license. Plaintiffs are alleging that
the A-901 renewal fees discriminate against interstate commerce in violation of
the Commerce Clause of the United States Constitution; that the fees are not
used for the purposes for which they are levied; and that the fees do not
reflect the duration or complexity of the services rendered by the government
entities receiving the fees as required under the A-901 statute. Plaintiffs are
seeking a declaration that the fees are unconstitutional; a permanent injunction
enjoining the future collection of the fees; a refund of all annual A-901
renewal fees and all fines and penalties collected pursuant to enforcement of
these provisions; and attorneys' fees and costs. Plaintiffs have obtained a
class certification of their action. On October 2, 1997, oral argument was
conducted on the parties' cross motions for summary judgment in the Tax Court.
The DEP currently collects approximately $3.5 to $4 million in A-901 fees
annually. In previous years, the total amount of fees collected was higher
because the number of applicants and licensees subject to the fees was much
larger. It is presently unknown what portion of the A-901 fees are paid by
haulers engaged in interstate commerce, and what percentage of the monies are
renewal fees as opposed to initial application fees. Consequently, the State is
unable to estimate its exposure for this claim and intends to defend this suit
vigorously.
Abbott v. Burke. On January 6, 1997 the Education Law Center filed a motion
in aid of litigants' rights with the Supreme Court of New Jersey in Abbott v.
Burke. In 1994 the Supreme Court ruled in Abbott v. Burke that the State had to
enact a funding formula that would close the spending gap between poor urban
school districts and wealthy suburban districts by fiscal year 1998. On December
20, 1996 the Comprehensive Education Improvement and Financing Act ("CEIFA") was
enacted. CEIFA is a departure from the mechanisms of previous funding formulas.
The CEIFA is centered upon the Core Curriculum Content Standards - a
comprehensive description of what all students should know and be able to
accomplish upon completion of a thirteen year public education. The State
projects that special needs districts will be spending between 91% and 96% of
the wealthy suburban districts in the 1997-1998 school year under CEIFA.
Plaintiffs concede that, under CEIFA, special needs districts are projected to
be spending at 91% of the wealthy suburban districts in the 1997-1998 fiscal
year. In its motion, the Education Law Center requests, in part, relief in the
form of 100% spending parity or State aid in the amount of approximately $200
million dollars to be redistributed to the special needs districts. On May 14,
1997, the Supreme Court rendered a decision in Abbott v. Burke and held that
CEIFA was unconstitutional as applied to the 28 Abbott districts. The Court
ordered the State to appropriate additional funds, beginning in the 1997-98
school year, so that each Abbott district would be able to
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spend at the average of the wealthy suburban districts. In addition, the Court
remanded the matter to the Superior Court to oversee a directive to the
Commissioner of Education to study and report on the special educational needs
of students in the Abbott districts and the facilities needs in those districts.
The Superior Court is required to issue a final determination on those issues by
December 31, 1997. The Supreme Court retained jurisdiction of the matter.
Affiliated FM Insurance Company, et al. v. State of New Jersey, et al. The
plaintiffs in this action are insurers licensed or admitted to write property
and casualty insurance in the State of New Jersey pursuant to N.J.S.A. 17:17-1
et seq. and are all members of the New Jersey Property-Liability Insurance
Guaranty Association ("PLIGA"), a private; non-profit organization created to
cover claims against certain insolvent insurers. Plaintiffs have filed suit in
the Superior Court of New Jersey Chancery Division, Mercer County against the
State of New Jersey, the Commissioner of Banking and Insurance, the Department
of Banking and Insurance, the State Treasurer and PLIGA. Plaintiffs contend that
their assessments are being used to retire debt of the Market Transition Fund
("MTF"). The plaintiffs argue that they were never members of the MTF, are not
statutorily responsible for its losses, have not agreed to assume its losses and
did not relinquish any right to repayment of loan assessments to PLIGA. Under
the Fair Automobile Insurance Reform Act of 1990 ("FAIRA"), PLIGA is responsible
for assessing and collecting from its member insurers the amounts necessary to
make certain loans to the Automobile Insurance Guaranty Fund (the "Auto Guaranty
Fund"), a special nonlapsing fund create pursuant to FAIRA. Plaintiffs contend
that assessments dating back to 1990 are in dispute and challenge the
constitutionality of the assessments and legislation which allow the assessments
to be redirected to the MTF and request declaratory relief, an order that the
monies assessed since 1990 be returned, and an accounting. The State intends to
vigorously defend this action and has filed a motion to dismiss this case. In a
related matter, In the Matter of the 1997 Assessment Made by the New Jersey
Property Liability Insurance Guaranty Association pursuant to N.J.S.A. 17.30A4,
the American Insurance Association ("AIA") and the Alliance of American Insurers
("Alliance") filed an appeal of administrative action in Superior
Court-Appellate Division, seeking an emergent stay of their obligation to pay
assessments to PLIGA. These assessments were due on July 28, 1997. Pursuant to
N.J.S.A. 17:30A-8a(9), PLIGA assesses its members in order that PLIGA can then
loan these monies to the New Jersey Automobile Insurance Guaranty Association
("Auto Guaranty Fund") for use by the MTF to pay its unfunded liabilities. PLIGA
is required by N.J.S.A. 17:30A-8a(10) to make loans in the amount of $160
million per calendar year to the Auto Guaranty Fund. AIA and the Alliance allege
that the assessment of $160 million for calendar year 1997 is without statutory
authority. On July 28, 1997, the court denied plaintiff's application for
emergent relief, denied the State's motion for summary disposition, and granted
plaintiffs motion to accelerate. The State intends to vigorously defend this
action.
C.F., et al. v. Fauver, et al. This case is brought as a purported class
action consisting of prisoners with serious mental disorders who are confined
within the facilities of the Department of Corrections (the "Class") against the
Commissioner of the Department of Corrections and other officers of the
Department of Corrections. The Class alleges cruel and unusual punishment,
violation of the Americans with Disabilities Act of 1990, discrimination against
members of the Class, sex discrimination and violation of due process. The suit
was brought by the Class in the United States District Court of the District of
New Jersey. Through this action, the Class seeks injunctive relief in the form
of changes to the manner in which mental health services are provided to
inmates. The Class also seeks changes in the disciplinary process to the extent
that an inmate's mental health is taken into consideration by a hearing officer
when adjudicating a disciplinary charge. Discovery has commenced and is
continuing. The State intends to vigorously defend this action.
Cleary v. Waldman. This case involves the spousal impoverishment provisions
of the Medicare Catastrophic Coverage Act ("MCCA"). Under this provision, the
spouse of an institutionalized husband or wife, is allowed to have sufficient
funds to live in the community, called the monthly needs allowance.
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The State in determining a spouse's monthly needs allowance, uses a system
called the "income first" rule. If a community spouse does not have sufficient
funds to meet the monthly needs allowance, an institutionalized spouse is
allowed to shift his or her income to the community spouse to make up the
difference. If the institutionalized spouse's income is insufficient to meet the
monthly needs allowance, then the institutionalized spouse is allowed to shift
resources to the community spouse to generate income to make up the difference.
A class action was brought in federal court in which plaintiffs' argue that the
income first rule is disallowed under the MCCA. Rather plaintiffs claim that the
MCCA mandates the use of what is called the "resource-first" rule. Under this
scheme, before income is shifted from the institutionalized spouse to the
community spouse to meet the monthly needs allowance, resources must be shifted
first and income generated from these resources used to meet the monthly needs
allowance. Estimates of exposure if a court were to find that the MCAA only
allows the "resource-first rule has been estimated in the area of $50 million
per year from both State and Federal sources combined.
Plaintiffs filed for a preliminary injunction arguing that, under federal
law, only the resource first rule was allowed under the MCCA. The State opposed
the motion and the New Jersey Association of Health Care Facilities and the New
Jersey Association for Non-Profit Homes for the Aging moved for intervenor
status, opposing the plaintiffs' motion. The court granted the motion of
intervention and denied the motion for preliminary injunction, finding that
plaintiffs were unlikely to prevail on the merits since New Jersey's methodology
was at least a permissible application of the federal law. Subsequently,
plaintiffs filed for class certification which was granted on March 25, 1996. On
March 26, 1997, Plaintiffs filed a Notice of Appeal to the Court of Appeals for
the Third Circuit. Briefing on plaintiffs' application for preliminary
injunction has been completed and it is anticipated that the matter will be
argued during the first calendar quarter of 1998. The State intends to
vigorously defend this action.
United Hospitals et al. v. State of New Jersey and William Waldman. This
case represents a challenge by 18 New Jersey hospitals to Medicaid hospital
reimbursement since February 1995. The matter was filed in the Appellate
Division of the Superior Court of New Jersey in January, 1997. The hospitals
challenge all of the following: (i) whether the State complied with certain
federal requirements for Medicaid reimbursement; (ii) whether the State's
reimbursement regulations, N.J.A.C. 10:52-1 et. seq., are arbitrary, capricious
and unreasonable; (iii) whether the Department of Human Services (DHS)
incorrectly calculated the rates, (iv) whether DHS denied hospitals of a
meaningful appeal process; (v) whether the 1996-7 State Appropriations Act
(L.1996, c.42) violates the New Jersey Constitution with respect to the
provision for Medicaid reimbursement to hospitals; and (vi) whether DHS violated
the Medicaid State Plan, filed with the U.S. Department of Health and Human
Services, in implementing hospital rates in 1995 and 1996. The State intends to
vigorously defend this action.
Trump Hotels & Casino Resorts, Inc. ("Trump") v. Mirage Resorts
Incorporated, The State of New Jersey et al. An action was filed in Federal
District Court to enjoin and declare unlawful the actions of the Mirage Resorts
Incorporated ("Mirage"), the State of New Jersey, the New Jersey Department of
Transportation, the South Jersey Transportation Authority, the Casino
Reinvestment Development Authority ("CRDA") the New Jersey Transportation Trust
Fund Authority and certain officials of the aforesaid agencies and authorities
in their efforts to revitalize Atlantic City through the design and construction
of a highway and tunnel funded by Mirage, the New Jersey Transportation Trust
Fund Authority and $55,000,000 in bonds to be issued by the South Jersey
Transportation Authority and collateralized by future alternative investment
obligations of casinos to be located in the marina district of Atlantic City.
Plaintiffs claim that the highway and tunnel development funding violates a
provision of the New Jersey State Constitution that requires the State to
dedicate all State revenues derived from gambling to programs benefiting the
elderly and the disabled pursuant to the New Jersey State Constitution, Article
IV, Section 7, Paragraph 2. The plaintiffs further allege that (i) the failure
to disclose the constitutional infirmaties alleged in the financing for the
highway and tunnel project will be material omissions within the meaning of Rule
l0b-5 of the Securities and Exchanges Act of 1934; (ii) the defendants have
sought to avoid the federal requirements of the Clean Water Act, the Federal
Highway Act, and the Clean Air Act;
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and (iii) the defendants have sought to avoid the requirement of the New Jersey
Coastal Area Facility Review Act. The defendants filed a motion to dismiss the
federal action. In an opinion filed May 1, 1997. defendant's motion to dismiss
the federal suit was granted. The motion is now pending in the U.S. Court of
Appeals for the Third Circuit.
While the Trump v. Mirage action was pending, the State and CRDA filed a
declaratory judgment action in Superior Court of New Jersey, Law Division
- - Atlantic County, entitled, State of New Jersey and CRDA v. Trump Hotels &
Casino Resorts, Inc. In this action, the State and CRDA sought a declaratory
judgment that the alternative investment program established under N.J.S.A.
5:12-144.1 of the CRDA legislation and the use of parking fees and sales tax
revenues under the CRDA legislation to fund eligible projects do not violate the
New Jersey State Constitution. In an opinion filed May 14, 1997, declaratory
judgment was granted in favor of the State and CRDA. Trump's application for
direct certification of that decision to the New Jersey Supreme Court was
denied. The matter is now in the Appellate Division.
United Senior Alliance et al. v. State of New Jersey. This matter was filed
in the Superior Court of New Jersey and represents a similar challenge as the
Trump Hotels v. Mirage Resorts case described above. The case alleges that the
Casino Reinvestment Development Authority funding mechanisms are illegal
including the gross receipts tax, the parking tax and the Atlantic City fund.
The plaintiffs in this action have been denied a motion to intervene in the
Trump Hotels v. Mirage Resorts matter in the Appellate Division but have been
granted the right to appear and participate as an amicus. The Superior Court has
placed this matter on the inactive list.
Five additional cases have been filed in opposition to the road and tunnel
project which also contain related challenges. The five matters, Bryant et al.
v. New Jersey Department of Transportation et al, Merolla and Brady v. The
Casino Reinvestment Development Authority et al., Middlesex County v. The Casino
Reinvestment Development Authority et al., Gallagher et al. v. The Casino
Reinvestment Development Authority et al. and George Harms v. State of New
Jersey et al. are also being vigorously defended by the State. In three of these
cases ("Merolla", "Middlesex" and "Gallagher") the court granted summary
judgment in favor of the New Jersey Department of Transportation and the South
Jersey Transportation Authority on September 29, 1997. These plaintiffs have
filed an appeal.
Blecker v. State of New Jersey. This is a class action lawsuit filed in
Superior Court-Law Division, Atlantic County, on behalf of all providers of
Medicare Part B services to Qualified Medicare Beneficiaries (QMB's) seeking
reimbursement for Medicare co-insurance and deductibles not paid by the State
Medicaid program from 1988 to February 10, 1995. QMB's are persons who are
eligible for Medicare and Medicaid and from whom Medicaid pays the premiums for
Medicare Part B benefits. From 1988 until February 10, 1995 the State did not
pay providers for co-insurance and deductibles unless the Medicare rate plus the
co-insurance and deductibles was equal to or less than the Medicaid
reimbursement rate for the service. Plaintiff alleges a breach of the contract
between the State and Federal governments intended to benefit providers, and a
breach of a contract between the State Medicaid program and its providers, as
well as a claimed violation of federal civil rights law. Plaintiff is seeking
all co-insurance and deductibles for Medicare Part B benefits provided to all
QMB's for the period from 1988 to 1995. On August 11, 1997, the State filed a
motion to dismiss the matter and on September 15, 1997, the State filed a motion
for summary judgment. Arguments on the motions are scheduled for late November
or early December 1997. The State intends to vigorously defend this lawsuit.
Spadoro, v. New Jersey Economic Development Authority, Alan Steinberg,
Brian W. Clymer, Joseph Latoof and Elizabeth Randall. The Pension Bond Financing
Act of 1997 authorized the New Jersey Economic Development Authority (the
"Authority") to issue bonds to fund the accrued unfunded liability in the
State's pension funds. Bonds in the amount of $2,803,042,498.56 were issued by
the Authority on June 30, 1997 for the purposes set forth in the Pension Bond
Financing Act of 1997. This suit, a second
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attempt by this plaintiff to challenge the Pension Bond Act, was brought in July
1997 to challenge the validity of the Authority's resolution authorizing the
issuance of the bonds. Fundamentally, the plaintiff alleges that the resolution
is invalid because (i) the State Treasurer and the other ex officio members of
the Authority had a conflict of interest, (ii) the actions of the Authority
violated the public policy of the State, and (iii) there were various procedural
defects in the conduct of the meeting. On September 2, 1997, the defendants
filed a motion for summary judgment. Briefs have been filed and oral argument is
scheduled for January 9, 1998. The State and the Authority intend to vigorously
defend this action.
Camden County Energy Recovery Associates v. New Jersey Department of
Environmental Protection, Board of Chosen Freeholders of the County of Camden,
et al. Plaintiff, Camden County Energy Recovery Associates ("CCERA"), the owner
and operator of a resource recovery facility in South Camden since 1991 filed
suit on October 20, 1997 in Superior Court-Mercer County. Plaintiff CCERA sought
to have the county solid waste reprocurement process halted to clarify bid
specifications. On November 6, 1997, the court denied the claim to halt the
bidding process but did require that the bid specifications be clarified. In
responding to the complaint, the Pollution Control Financing Authority of Camden
County ("PCFFA") counterclaimed, seeking reformation of the contract between
CCERA and PCFFA. PCFFA has also cross-claimed against the State for contribution
and indemnification by the State to the extent PCFFA remains responsible for the
debt which was issued to finance the resource recovery facility. Pleadings are
being filed by the various parties. The State intends to vigorously defend this
action.
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Appendix C
HISTORY OF J. & W. SELIGMAN & CO. INCORPORATED
Seligman's beginnings date back to 1837, when Joseph Seligman, the oldest
of eight brothers, arrived in the United States from Germany. He earned his
living as a pack peddler in Pennsylvania, and began sending for his brothers.
The Seligmans became successful merchants, establishing businesses in the South
and East.
Backed by nearly thirty years of business success - culminating in the sale
of government securities to help finance the Civil War - Joseph Seligman, with
his brothers, established the international banking and investment firm of J. &
W. Seligman & Co. In the years that followed, the Seligman Complex played a
major role in the geographical expansion and industrial development of the
United States.
The Seligman Complex:
...Prior to 1900
o Helps finance America's fledgling railroads through underwritings.
o Is admitted to the New York Stock Exchange in 1869. Seligman remained a
member of the NYSE until 1993, when the evolution of its business made it
unnecessary.
o Becomes a prominent underwriter of corporate securities, including New York
Mutual Gas Light Company, later part of Consolidated Edison.
o Provides financial assistance to Mary Todd Lincoln and urges the Senate to
award her a pension.
o Is appointed U.S. Navy fiscal agent by President Grant.
o Becomes a leader in raising capital for America's industrial and urban
development.
...1900-1910
o Helps Congress finance the building of the Panama Canal.
...1910s
o Participates in raising billions for Great Britain, France and Italy,
helping to finance World War I.
...1920s
o Participates in hundreds of successful underwritings including those for
some of the Country's largest companies: Briggs Manufacturing, Dodge
Brothers, General Motors, Minneapolis-Honeywell Regulatory Company, Maytag
Company, United Artists Theater Circuit and Victor Talking Machine Company.
o Forms Tri-Continental Corporation in 1929, today the nation's largest,
diversified closed-end equity investment company, with over $2 billion in
assets, and one of its oldest.
...1930s
o Assumes management of Broad Street Investing Co. Inc., its first mutual
fund, today known as Seligman Common Stock Fund, Inc.
o Establishes Investment Advisory Service.
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...1940s
o Helps shape the Investment Company Act of 1940.
o Leads in the purchase and subsequent sale to the public of Newport News
Shipbuilding and Dry Dock Company, a prototype transaction for the
investment banking industry.
o Assumes management of National Investors Corporation, today Seligman Growth
Fund, Inc.
o Establishes Whitehall Fund, Inc., today Seligman Income Fund, Inc.
...1950-1989
o Develops new open-end investment companies. Today, manages more than 40
mutual fund portfolios.
o Helps pioneer state-specific, municipal bond funds, today managing a
national and 18 state-specific municipal funds.
o Establishes J. & W. Seligman Trust Company and J. & W. Seligman Valuations
Corporation.
o Establishes Seligman Portfolios, Inc., an investment vehicle offered
through variable annuity products.
...1990s
o Introduces Seligman Select Municipal Fund, Inc. and Seligman Quality
Municipal Fund, Inc., two closed-end funds that invest in high quality
municipal bonds.
o In 1991 establishes a joint venture with Henderson plc, of London, known as
Seligman Henderson Co., to offer global investment products.
o Introduces to the public Seligman Frontier Fund, Inc., a small
capitalization mutual fund.
o Launches Seligman Henderson Global Fund Series, Inc., which today offers
five separate series: Seligman Henderson International Fund, Seligman
Henderson Global Smaller Companies Fund, Seligman Henderson Global
Technology Fund, Seligman Henderson Global Growth Opportunities Fund and
Seligman Henderson Emerging Markets Growth Fund.
o Launches Seligman Value Fund Series, Inc., which currently offers two
separate series: Seligman Large-Cap Value Fund and Seligman Small-Cap Value
Fund.
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PART C. OTHER INFORMATION
-----------------
Item 23. Exhibits
- -------- --------
All Exhibits have been previously filed and are incorporated herein by
reference, except Exhibits marked with an asterisk (*) which will be
filed by amendment.
(a) Form of Amended and Restated Articles of Incorporation. (Incorporated
by reference to Registrant's Post-Effective Amendment No. 14, filed on
January 29, 1997.)
(b) Amended and Restated By-laws of Registrant. (Incorporated by reference
to Registrant's Post-Effective Amendment No. 14, filed on January 29,
1997.)
(c) Copy of Specimen Stock Certificate for Class A shares. (Incorporated by
reference to Registrant's Pre-Effective Amendment No. 1, filed on
January 11, 1988.)
(c)(1) Copy of Specimen Stock Certificate for Class D Shares. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 11, filed
January 31, 1994.)
(d) Management Agreement between the Registrant and J. & W. Seligman & Co.
Incorporated. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 14, filed on January 29, 1997.)
(e) Distributing Agreement between the Registrant and Seligman Financial
Services Inc. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 14, filed on January 29, 1997.)
(e)(1) Sales Agreement between Dealers and Seligman Financial Services, Inc.
(Incorporated by reference to Registrant's Post-Effective Amendment No.
14, filed on January 29, 1997.)
(f) Matched Accumulation Plan of J. & W. Seligman & Co. Incorporated.
(Incorporated by reference to Registrant's Post-Effective Amendment No.
14, filed on January 29, 1997.)
(f)(1) Deferred Compensation Plan for Directors of Seligman Group of Funds.
(Incorporated by reference to Registrant's Post-Effective Amendment No.
14, filed on January 29, 1997.)
(g) Custodian Agreement between Registrant and Investors Fiduciary Trust
Company. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 14, filed on January 29, 1997.)
(h) Not applicable.
(i) Opinion and Consent of Counsel. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 14, filed on January 29,
1997.)
(j) Consent of Independent Auditors.*
(j)(1) Opinion and Consent of New Jersey Counsel.*
(k) Not applicable.
(l) Copy of Purchase Agreement for Initial Capital for Class D shares.
(Incorporated by reference to Registrant's Post-Effective Amendment No.
14, filed on January 29, 1997.)
(m) Amended Administration, Shareholder Services and Distribution Plan and
Form of Agreement of Registrant. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 14, filed on January 29,
1997.)
(n) Financial Data Schedules meeting the requirements of Rule 483 under the
Securities Act of 1933.*
(o) Copy of Multiclass Plan entered into by Registrant pursuant to Rule
18f-3 under the Investment Company Act of 1940. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 14, filed on
January 29, 1997.)
<PAGE>
PART C. OTHER INFORMATION (continued)
-----------------
Other Exhibits: Powers of Attorney. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 15 filed on January 27, 1998.)
Item 24. Persons Controlled by or Under Common Control With Registrant - None.
- -------- -------------------------------------------------------------
Item 25. Indemnification
- -------- ---------------
Reference is made to the provisions of Articles Twelfth and
Thirteenth of Registrant's Amended and Restated Articles of
Incorporation filed as Exhibit 24(b)(1) and Article VII of
Registrant's Amended and Restated By-Laws filed as Exhibit 24(b)(2)
to Registrant's Post-Effective Amendment No. 14 to the Registration
Statement.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, 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 director, officer or controlling
person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser - J. & W.
- -------- ----------------------------------------------------------
Seligman & Co. Incorporated, a Delaware corporation ("Manager"), is
the Registrant's investment manager. The Manager also serves as
investment manager to seventeen associated investment companies.
They are Seligman Capital Fund, Inc., Seligman Cash Management Fund,
Inc., Seligman Common Stock Fund, Inc., Seligman Communications and
Information Fund, Inc., Seligman Frontier Fund, Inc., Seligman
Growth Fund, Inc., Seligman Henderson Global Fund Series, Inc.,
Seligman High Income Fund Series, Seligman Income Fund, Inc.,
Seligman Municipal Fund Series, Inc., Seligman Municipal Series
Trust, Seligman Pennsylvania Municipal Fund Series, Seligman
Portfolios, Inc., Seligman Quality Municipal Fund, Inc., Seligman
Select Municipal Fund, Inc., Seligman Value Fund Series, Inc. and
Tri-Continental Corporation.
The Manager has an investment advisory service division which
provides investment management or advice to private clients. The
list required by this Item 28 of officers and directors of the
Manager, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged
in by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D or Form ADV, filed by
the Manager pursuant to the Investment Advisers Act of 1940 (SEC
File No. 801-15798) on March 25, 1998.
Item 27. 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 Pennsylvania Municipal Fund Series
Seligman Portfolios, Inc.
Seligman Value Fund Series, Inc.
<PAGE>
PART C. OTHER INFORMATION (continued)
-----------------
(b) Name of each director, officer or partner of each
principal underwriter named in response to Item 21:
<TABLE>
<CAPTION>
Seligman Advisors, Inc.
-----------------------
As of October 31, 1998
----------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
---------------- ---------------- ---------------
<S> <C> <C>
WILLIAM C. MORRIS* Director
Chairman of the Board and
Chief Executive Officer
BRIAN T. ZINO* Director President and Director
RONALD T. SCHROEDER* Director Director
FRED E. BROWN* Director Director
WILLIAM H. HAZEN* Director None
THOMAS G. MOLES* Director None
DAVID F. STEIN* Director None
STEPHEN J. HODGDON* President and Director None
CHARLES W. KADLEC* Chief Investment Strategist None
LAWRENCE P. VOGEL* Senior Vice President, Finance Vice President
ED LYNCH* Senior Vice President, Director None
of Marketing
JAMES R. BESHER Senior Vice President, None
14000 Margaux Lane Divisional Sales Director
Town & Country, MO 63017
GERALD I. CETRULO, III Senior Vice President of Sales None
140 West Parkway
Pompton Plains, NJ 07444
JONATHAN G. EVANS Senior Vice President of Sales None
222 Fairmont Way
Ft. Lauderdale, FL 33326
T. WAYNE KNOWLES Senior Vice President, None
104 Morninghills Court Divisional Sales Director
Cary, NC 27511
JOSEPH LAM Senior Vice President, Regional None
Seligman International Inc. Director, Asia
Suite 1133, Central Building
One Pedder Street
Central Hong Kong
BRADLEY W. LARSON Senior Vice President of Sales None
367 Bryan Drive
Alamo, CA 94526
RICHARD M. POTOCKI Senior Vice President, Regional Director, None
Seligman International UK Limited Europe and the Middle East
Berkeley Square House 2nd Floor
Berkeley Square
London, United Kingdom W1X 6EA
BRUCE M. TUCKEY Senior Vice President of Sales None
41644 Chathman Drive
Novi, MI 48375
ANDREW S. VEASEY Senior Vice President of Sales None
14 Woodside
Rumson, NJ 07760
J. BRERETON YOUNG* Senior Vice President, None
National Accounts Manager
PETER J. CAMPAGNA Vice President, Regional Retirement None
1130 Green Meadow Court Plans Manager
Acworth, GA 30102
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART C. OTHER INFORMATION (continued)
- --------------------------------------
Seligman Advisors, Inc.
-----------------------
As of October 31, 1998
----------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
---------------- ---------------- ---------------
<S> <C> <C>
MATTHEW A. DIGAN* Vice President, Director of Mutual None
Fund Marketing
MASON S. FLINN Vice President, Regional Retirement None
159 Varennes Plans Manager
San Francisco, CA 94133
ROBERT T. HAUSLER* Vice President, Global Funds None
Marketing
MARSHA E. JACOBY* Vice President, Offshore None
Business Manager
WILLIAM W. JOHNSON* Vice President, Order Desk None
MICHELLE L. MCCANN* Vice President, Director of Retirement None
Plans
SCOTT H. NOVAK* Vice President, Director of Insurance None
Products
RONALD W. POND* Vice President, Portfolio Advisor None
TRACY A. SALOMON* Vice President, Retirement None
Marketing Manager
MICHAEL R. SANDERS* Vice President, Product Manager None
Managed Money Services
HELEN SIMON* Vice President, Sales None
Administration Manager
GARY A. TERPENING* Vice President, Director of Business None
Development
CHARLES L. VON BREITENBACH, II* Vice President, Director of None
Managed Money Services
JOAN M. O'CONNELL Vice President, Regional Retirement None
3707 5th Avenue #136 Plans Manager
San Diego, CA 92103
CHARLES E. WENZEL Vice President, Regional Retirement None
703 Greenwood Road Plans Manager
Wilmington, DE 19807
RICHARD B. CALLAGHAN Regional Vice President None
7821 Dakota Lane
Orland Park, IL 60462
BRADFORD C. DAVIS Regional Vice President None
255 4th Avenue, #2
Kirkland, WA 98033
CHRISTOPHER J. DERRY Regional Vice President None
2380 Mt. Lebanon Church Road
Alvaton, KY 42122
KENNETH DOUGHERTY Regional Vice President None
8640 Finlarig Drive
Dublin, OH 43017
EDWARD S. FINOCCHIARO Regional Vice President None
120 Screenhouse Lane
Duxbury, MA 02332
MICHAEL C. FORGEA Regional Vice President None
32 W. Anapamu Street # 186
Santa Barbara, CA 93101
DAVID L. GARDNER Regional Vice President None
2504 Clublake Trail
McKinney, TX 75070
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART C. OTHER INFORMATION (continued)
- --------------------------------------
Seligman Advisors, Inc.
-----------------------
As of October 31, 1998
----------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
---------------- ---------------- ---------------
<S> <C> <C>
CARLA A. GOEHRING Regional Vice President None
11426 Long Pine
Houston, TX 77077
MICHAEL K. LEWALLEN Regional Vice President None
908 Tulip Poplar Lane
Birmingham, AL 35244
JUDITH L. LYON Regional Vice President None
163 Haynes Bridge Road, Ste 205
Alpharetta, CA 30201
STEPHEN A. MIKEZ Regional Vice President None
11786 E. Charter Oak
Scottsdale, AZ 85259
TIM O'CONNELL Regional Vice President None
14872 Summerbreeze Way
San Diego, CA 92128
THOMAS PARNELL Regional Vice President None
5250 Greystone Drive #107
Inver Grove Heights, MN 55077
DAVID K. PETZKE Regional Vice President None
2714 Winding Trail Place
Boulder, CO 80304
NICHOLAS ROBERTS Regional Vice President None
200 Broad Street, Apt. 2225
Stamford, CT 06901
DIANE H. SNOWDEN Regional Vice President None
11 Thackery Lane
Cherry Hill, NJ 08003
STEVE WILSON Regional Vice President None
83 Kaydeross Park
Saratoga Springs, NY 12866
KELLI A. WIRTH-DUMSER Regional Vice President None
8618 Hornwood Court
Charlotte, NC 28215
FRANK J. NASTA* Secretary Secretary
AURELIA LACSAMANA* Treasurer None
JEFFREY S. DEAN* Assistant Vice President, Marketing None
SANDRA FLORIS* Assistant Vice President, Order Desk None
KEITH LANDRY* Assistant Vice President, Order Desk None
GAIL S. CUSHING* Assistant Vice President, None
National Accounts Manager
ALBERT A. PISANO* Assistant Vice President and None
Compliance Officer
JACK TALVY* Assistant Vice President, Internal None
Marketing Services Manager
JOYCE PERESS* Assistant Secretary None
</TABLE>
* The principal business address of each of these directors and/or officers is
100 Park Avenue, New York, NY 10017.
(c) Not Applicable.
<PAGE>
PART C. OTHER INFORMATION (continued)
- --------------------------------------
Item 28. Location of Accounts and Records
- -------- --------------------------------
Custodian: Investors Fiduciary Trust Company
801 Pennsylvania
Kansas City, Missouri 64105 AND
Seligman New Jersey Municipal Fund, Inc.
100 Park Avenue
New York, NY 10017
Item 29. Management Services - Not Applicable.
- -------- -------------------
Item 30. 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 has duly caused this
Post-Effective Amendment No. 16 to the 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 11th day of November, 1998.
SELIGMAN NEW JERSEY MUNICIPAL FUND, INC.
By: /s/ William C. Morris
-------------------------------------
William C. Morris, Chairman*
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 16 to the Registration Statement has been signed
below by the following persons in the capacities indicated on November 11, 1998.
Signature Title
--------- -----
/s/ William C. Morris Chairman of the Board (Principal
- --------------------------- executive officer) and Director
William C. Morris*
/s/ Brian T. Zino President and Director
- ---------------------------
Brian T. Zino
/s/ Thomas G. Rose Treasurer (Principal financial and
- --------------------------- and accounting officer)
Thomas G. Rose
John R. Galvin, Director )
Alice S. Ilchman, Director )
Frank A. McPherson, Director )
John E. Merow, Director )
Betsy S. Michel, Director ) /s/ Brian T. Zino
James C. Pitney, Director ) -------------------------------------
James Q. Riordan, Director ) * Brian T. Zino, Attorney-In-Fact
Richard R. Schmaltz, Director )
Robert L. Shafer, Director )
James N. Whitson, Director )
